<PAGE>
As filed with the Securities and Exchange Commission on February 10, 1999
Registration No. 333-68327
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
Amendment No. 1 to
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------
AMERICAN TECHNOLOGIES GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Nevada 95-4307525
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1017 South Mountain Avenue
Monrovia, California 91016
(626) 357-5000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
American Technologies Group, Inc.
1017 South Mountain Avenue
Monrovia, California 91016
(626) 357-5000
(Name, Address, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
JOHN M. DAB, ESQ.
General Counsel
American Technologies Group, Inc.
1017 South Mountain Avenue
Monrovia, California 91016
(626) 357-5000
Telecopy: (626) 357-4464
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] If delivery of the prospectus is expected to be made
pursuant to Rule 434 please check the following box.[ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum Amount of
Amount to be Offering Aggregate Registration
Title of Securities to Registered Price per Offering Fee
be Registered Share (1) Price (1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 2,500,000 shares $0.65 $ 1,625,000.00 $451.75 (5)
par value (2)
- -----------------------------------------------------------------------------------------------
Common Stock, $0.001 440,000 shares $0.58 $ 255,219.72 $70.95
par value (3)
- -----------------------------------------------------------------------------------------------
Common Stock, $0.001 157,500 shares $0.75 $ 118,125.00 $ 32.84 (6)
par value (4)
- -----------------------------------------------------------------------------------------------
Total 3,097,500 shares $ 1,998,344.70 $555.54 (7)
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c).
(2) Issuable upon the conversion of the 6% Convertible Debentures, which is
estimated based on conversion terms of the Debentures and is subject to
adjustment and could be materially more or less than such estimated amount
depending upon factors that cannot be predicted by the Company at this time,
including, among others, the future market price of the Common Stock. This is
not intended to constitute a prediction as to the number of shares of Common
Stock into which the Debentures will be converted. In addition to the shares
set forth in the table, pursuant to Rule 416 under the Securities Act of 1933,
as amended, this Registration Statement also covers an indeterminate number of
additional shares of Common Stock as may become issuable as a result of stock
splits, stock dividends and antidilution provisions.
(3) Issuable upon the conversion of the 3% Convertible Debentures, which is
estimated based on conversion terms of the Debentures and is subject to
adjustment and could be materially more or less than such estimated amount
depending upon factors that cannot be predicted by the Company at this time,
including, among others, the future market price of the Common Stock. This is
not intended to constitute a prediction as to the number of shares of Common
Stock into which the Debentures will be converted. In addition to the shares
set forth in the table, pursuant to Rule 416 under the Securities Act of 1933,
as amended, this Registration Statement also covers an indeterminate number of
additional shares of Common Stock as may become issuable as a result of stock
splits, stock dividends and antidilution provisions.
(4) Issuable upon exercise of warrants evidencing the right to purchase
shares of Common Stock.
(5) $226.97 of this amount was paid with the original filing of this
Registration Statement
(6) $20.33 of this amount was paid with the original filing of this
Registration Statement
(7) $247.30 of this amount was paid with the original filing of this
Registration Statement An additional fee of $308.24 is paid herewith to cover
an additional 1,743,961 shares of Common Stock.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
securities act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said section 8(a),
may determine.
<PAGE>
3,097,500 SHARES OF COMMON STOCK
AMERICAN TECHNOLOGIES GROUP INC.
The 3,097,500 shares of common stock being offered by this prospectus are
being offered by the holders of $1,300,000 principal amount of convertible
debentures and the holders of 157,500 warrants to purchase common stock. See
"Selling Securityholders" on page 12. These shares are issuable upon conversion
of the debentures, payment of interest on the debentures and exercise of the
warrants.
The selling securityholders may offer these shares from time to time in
transactions on the NASD OTC Bulletin Board or in privately negotiated
transactions. These sales may take place at market prices prevailing at the
time of sale or at other negotiated prices. See "Plan of Distribution" on page
15.
The selling securityholders will receive all proceeds from the sale of
the shares and will pay all brokerage fees and commissions and similar
sale-related expenses. We will not receive any of the proceeds. When the
selling securityholders exercise their warrants, they will pay us the
exercise price. We are paying the expenses of the registration of the shares
with the SEC.
Our common stock is quoted on the NASD OTC Bulletin Board under the
symbol "ATEG." On February 9, 1999, the closing sale price of the common stock
on the NASD OTC Bulletin Board was $0.67.
INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus is February 10, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ABOUT AMERICAN TECHNOLOGIES...............................3
Business Summary...................................3
Current Financing..................................4
RISK FACTORS..............................................5
Financial Risk Factors....................................5
We Have a History of Losses........................5
Poor Financial Position ...........................5
Our Sales of Securities Convertable into Common
Stock at a Discount to the Market Price Places
Downward Pressure on the Market Value of Our
Common Stock.....................................6
Illiquidity of Trading Market......................6
We May Become a Penny Stock........................7
Uncertain Availability of Operating Funds..........7
Business Risk Factors.....................................7
Uncertain Customer Acceptance of Products..........8
Scientific Acceptance..............................8
Regulatory Impediments.............................8
Intellectual Property Protection...................9
WHERE YOU CAN FIND MORE INFORMATION......................10
FORWARD-LOOKING STATEMENTS...............................11
USE OF PROCEEDS FROM SALE OF COMMON STOCK................11
USE OF PROCEEDS FROM SALE OF DEBENTURES..................11
USE OF PROCEEDS FROM EXERCISE OF WARRANTS................12
SELLING SECURITYHOLDERS..................................12
PLAN OF DISTRIBUTION.....................................15
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES...........16
EXPERTS..................................................16
LEGAL MATTERS............................................16
</TABLE>
2
<PAGE>
ABOUT American Technologies
Business Summary
American Technologies develops and sells products based upon on our
patented and proprietary technologies. The goal of our efforts is to develop
products that have a positive impact on the environment. Our address and
telephone number are: 1017 South Mountain Avenue, Monrovia, California 91016,
(626) 357-5000.
We concentrate on technology discovery and development efforts in
three areas:
I(E)-TM- Technology
Water Purification
Particle Beams
Our I(E) Technology refers to a proprietary process which produces
water solutions containing water clusters that are stable at room
temperature. We can produce different kinds of water solutions for different
applications.
Tests indicate that these water clusters improve the performance of
various chemical, physical and biological processes. Independent researchers
observe these water clusters by different standard research tools including:
Laser autocorrelation
Electron microscope
Atomic force microscope
UV spectroscopy
American Technologies sells these water solutions for use in several
product lines including household cleaning products and cosmetics. We also
use them in our combustion enhancers. During the fiscal year ended July 31,
1998, revenue from the sale of these water solutions for use in products
manufactured by others was approximately $117,000 and revenue from the sale
of The Force-Registered Trademark- combustion enhancer was $591,000.
Kinetics Technology International Corporation has conducted field tests on
the use of I(E) Technology as a coke formation suppresser. Kinetics
Technology has funded the testing and, if the testing is successful, will
have financial responsibility for commercialization of the final product.
There can be no assurance
3
<PAGE>
that the I(E) Technology can successfully and economically function in this
capacity.
In the water purification area, our low pressure vacuum distillation
system is undergoing tooling design for a home use version for introduction
to the marketplace in mid-1999. Our vacuum distiller utilizes a proprietary
method to provide the advantages of vacuum distillers without the need for
expensive and noisy vacuum pumps.
The third technology is the particle beam project which produces a beam
of heavy particles. As a beam of particles, it functions in much the same way
as the common laser. The important difference is that it is composed of heavy
particles rather than light.
The development of the particle beam is being conducted through an
American Technologies sponsored research program with the California Institute
of Technology. The development of this technology is likely to require a
minimum of three to five years and expenditure of substantial sums of money,
likely to be in excess of $10,000,000, on research and development. We
submitted a proposal to the Department of Energy for a $5,000,000 joint venture
grant to produce a small pilot plant based on the current prototype located at
CalTech. The proposal describes the potential of our particle beam to turn
harmful nuclear waste into harmless components. The DOE is reviewing the
proposal.
According to Dr. Lo's particle beam theories, the proposed particle beam
may be able to break down molecules or even atoms and their nuclei, or be used
for rock drilling, medical surgery or precision cutting of metals without
distortion or excessive heat. No evidence exists to substantiate these
potential applications.
Current Financing
From October, 1998, through January, 1999, we sold to 8 investors
$1,300,000 principal amount of debentures in a private placement. We are
currently negotiating for a commitment from International Investment Group to
purchase additional debentures in the aggregate principal amount of up to
$5,000,000. Further, in connection with the proposed merger of American
Technologies with Commodore Separation Technologies, Inc., we may receive
certain bridge financing in the amount of $1,300,000. There can be no
assurance that we will obtain the commitment from International Investment
Group or complete the merger with Commodore and receive the bridge financing.
4
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.
If any of the following risks actually occur, our business, financial condition
or results of operations could be materially adversely affected. In such case,
the trading price of our common stock could decline, and you may lose all or
part of your investment.
Financial Risk FACTORS
WE HAVE A HISTORY OF LOSSES
We have operated at a loss throughout our history. Net losses for the
fiscal year ended July 31, 1998 were approximately $9.44 million. Net losses
for the fiscal year ended July 31, 1997 were approximately $9.64 million. At
July 31, 1998 we had an accumulated deficit of $36.56 million.
While we anticipate that we will reduce the level of our operating losses by
the end of the fiscal year ending July 31, 1999, there can be no guarantees
that this will occur. The amount of net losses and the time required to
reach profitability are uncertain. There can be no assurance that we will
ever be able to generate sufficient revenue from our products now ready for
market or those under development to achieve profitability on a sustained
basis. See the Management's Discussion and Analysis section of Amendment No.
2 to our Form 10-KSB/A.
POOR FINANCIAL POSITION
American Technologies has been experiencing difficulty in maintaining sufficient
working capital needed to insure stability and continued existence. Only a
small portion of the capital expended to date has come from actual revenue
generation, and we find it increasingly difficult to raise investment capital.
We are at a critical juncture in our history. It is absolutely essential to
begin to generate significant revenues in order to maintain our existence.
While plans are in place and being executed directed at accomplishing this end,
there can be no guarantee that these plans will prove to be successful.
5
<PAGE>
Our monthly operating expenses are approximately $330,000. If we do not
sell any additional securities and sales do not increase significantly, we will
be out of money by April, 1999.
Our auditors' report on our financial statements for the fiscal year ending
July 31, 1998 contains an explanatory paragraph indicating that there were
operating losses which raised substantial doubt about the ability of American
Technologies to continue as a going concern. This going concern
qualification may adversely affect our perception by prospective customers
and suppliers.
OUR SALES OF SECURITIES CONVERTIBLE INTO COMMON STOCK AT A DISCOUNT TO THE
MARKET PRICE PLACES DOWNWARD PRESSURE ON THE MARKET VALUE OF OUR COMMON STOCK
As a result of our poor financial condition, several times over the past
few years we have sold securities that are convertible into our common stock at
a discount to the market price for the common stock. This has resulted in the
issuance of a significant amount of additional shares of common stock at prices
below market. It is possible that this method of financing operations has
contributed to the decline in the market price of the common stock. If we need
to obtain financing in the future in the same manner, this may again have an
adverse affect on the market price for our common stock.
The additional financing currently under discussion with the
International Investment Group is for the sale of up to an additional $5,000,000
of debentures. The sale of such debentures may have an adverse affect on the
market price for the common stock.
ILLIQUIDITY OF TRADING MARKET
Our common stock is quoted on the NASD OTC Bulletin Board system. The NASD OTC
Bulletin Board generally supports quotations for companies that do not meet the
NASDAQ SmallCap Market listing requirements. As a result, investors may find it
more difficult to dispose of or to obtain accurate price quotations of our
common stock than they would if the stock were quoted on the SmallCap Market.
In addition, quotation on the bulletin board depends on the willingness of
broker-dealers to make a market in our common stock. There can be no assurance
that the stock will continue to be quoted on the bulletin board or that there
will continue to be a market for the buying and selling of our common stock.
6
<PAGE>
WE MAY BECOME A PENNY STOCK
If our net tangible assets fall below $2 million at July 31, 1999 or if we
otherwise fail to meet certain criteria of the Commission, the common stock
becomes subject to so-called "penny stock" rules that impose additional sales
practice and market making requirements on broker-dealers who sell and/or make a
market in such securities. These rules may discourage the ability or
willingness of broker-dealers to sell and/or make a market in our common stock.
UNCERTAIN AVAILABILITY OF OPERATING FUNDS
We expect that our current cash, existing financing agreements and minimum
expected sales revenue will be sufficient to fund our operations through
April, 1999. During this time it is essential that we obtain additional
financing or be successful in the commercialization of our products, and
there is no guarantee that this will occur. Revenues during the fiscal year
ended July 31, 1998 were approximately $916,700 and revenues for the quarter
ended October 31, 1998 were approximately $166,000. In order to achieve
viability, management currently estimates that revenues will have to increase
to at least $4.2 million annually, based upon our anticipated working capital
and cash flow requirements. We believe that this minimum level of sales will
not be sufficient to achieve current profitability, but will allow us to
continue operations without obtaining immediate additional debt or equity
financing.
Our exact future capital requirements depend on numerous factors, including the
amount of revenues generated from operations, cost of sales and marketing
activities and the progress of our research and development activities. We are
currently negotiating for a commitment from International Investment Group to
purchase additional debentures in the aggregate principal amount of up to
$5,000,000. There can be no assurance that such funding will be available on
acceptable terms, or at all, when it is required. If additional funding is not
available when needed, it is possible that we would have to reduce or suspend
operations, seek an acquisition partner, or sell securities on terms that might
be highly dilutive or otherwise disadvantageous to investors.
BUSINESS RISK FACTORS
As American Technologies is engaged in the development and marketing of products
based on new technologies, there are significant risks associated with its
potential success.
7
<PAGE>
UNCERTAIN CUSTOMER ACCEPTANCE OF PRODUCTS
None of our current products enjoy widespread distribution or customer
acceptance. While we do have a number of products that are past the
development stage, we have yet to establish major, stable markets for them.
Although we believe we have the expertise to commercialize these products,
any or all of our products may fail to prove to have widespread customer
appeal. Various marketing strategies and alliances are now in place. To
assist in the marketing of The Force and other products we have established a
relationship with Comtrad Industries. The marketing of certain household
cleaning products and cosmetics containing I(E) water solutions is being
conducted by 21st Century Global Network, LLC. We are a founding member of
21st Century. Kinetics Technology is doing the field tests, and if
successful, will market an I(E) water solution product as a coke formation
suppressor.
SCIENTIFIC ACCEPTANCE
Our technologies have not received broad acceptance by the general scientific
community. To a great extent, scientific validation of our technologies is
essential to acceptance of the products by the marketplace. Historically,
the scientific community has been resistant to new ideas and technologies,
and, although we believe that we have been successful in establishing working
relationships with many scientists at prestigious academic institutions,
there is no guarantee that this will lead to acceptance of our technologies
by the scientific community as a whole. Failure to achieve such acceptance
could be materially detrimental to our efforts to establish markets for our
products.
Validation of our I(E) Technology has been done by Dr. Selim Senkan of
UCLA who has tested the effect of the I(E) water solutions on coke formation
in the steam cracking of ethane and propane. His results show very
significant reductions. Similarly, Dr. Simon Parsons at the University of
Cranfield in England has tested the effect of an I(E) water solution on
calcium scale formation. He found that it significantly reduced scale.
Other scientists have also successfully tested products of the new technology
in their field of expertise, such as: Professor B. Bonavida of UCLA, Dr. M.
E. Lidstrom of the University of Oklahoma and Dr. A. P. Sinitsyn of the
University of Moscow.
REGULATORY IMPEDIMENTS
Most of our current products are being sold directly to the consumer in
markets that are not generally regulated by government agencies. In the case of
consumer products for enhancing engine performance, such as The Force or the
F420 fuel
8
<PAGE>
additive, registration of these products with CARB (California Air Resources
Board) and EPA (Environmental Protection Agency) is required and has been done.
Since the F420 additive's chemical contents fall within the restrictions
of the EPA regulations, there are no known impediments to maintaining this
registration. We have also registered The Force airborne combustion enhancer as
an add-on device with CARB. There is no known reason why CARB would withdraw
that registration.
In the case of bulk fuel additives, there are strong industry
regulations. Extensive testing is required to meet these industry regulations
prior to sale of the additive and there is no guarantee that our bulk additive
products can meet all of these industry regulations.
INTELLECTUAL PROPERTY PROTECTION
Our success will depend, in part, on whether we can obtain patent and
trademark protection for our technologies and products. We cannot guarantee
that we will be able to secure these protections. If we fail to do so, there is
no guarantee that our technologies will not be subject to copying by other
entities. This would result in a level of competition which could well prevent
us from being successful. Although we have taken steps, including entering into
confidentiality agreements with our employees and third parties to protect our
trade secrets and unpatented know-how, other third parties may still be able to
obtain such information.
We have applied for a number of patents on our particle beam and I(E)
technologies. Some have been approved. The status is as follows:
- Particle Beam Approved Patents
There are 8 approved U.S. patents and 9 foreign patents issued on particle beam
technology. There are 3 additional U.S. patent applications pending.
- I(E) Technology
There is 1 granted U.S. patent, not yet issued, on the I(e) Technology and 10
other U.S. patent applications in various stages of prosecution.
- Vacuum Distiller
There are 3 U.S. patent applications pending on the vacuum distiller technology.
Foreign applications to protect the
9
<PAGE>
technology are also in process. No patents have been granted yet.
All of our products currently offered for sale are protected by patents
in the U.S. The group of patent applications currently in process have
sufficient overlap to offer protection to our current commercial applications.
We file applications with the U.S. Patent and Trademark Office once we perceive
a new significant commercial application, and prior to public disclosure of the
application.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from our web site at www.ateg.com or at the SEC's web site at www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the selling securityholders sell all the shares.
This prospectus is part of a registration statement we filed with the SEC
(Registration No. 333-6827).
The following documents are hereby incorporated by reference in this
Registration Statement:
- Amendment Number 1 to our Annual Report on Form 10-KSB/A for the year
ended July 31, 1998.
- Amendment Number 1 to our Quarterly Report on Form 10Q-SB for the three
months ended October 31, 1998.
- Current Report of Form 8-K dated January 5, 1999.
10
<PAGE>
- The section of our Registration Statement on Form 10, filed on January
24, 1994, entitled "Description of Securities," as amended by Amendment
Nos. 1, 2, 3 and 4.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
Corporate Secretary
American Technologies Group, Inc.
1017 South Mountain Avenue
Monrovia, California 91016
(626) 357-5000
You should rely only on the information incorporated by reference or provided in
this prospectus or any supplement. We have not authorized anyone else to
provide you with different information. The selling securityholders will not
make an offer of these shares in any state where the offer is not permitted.
You should not assume that the information in this prospectus or any supplement
is accurate as of any date other than the date on the front of such documents.
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus and in the
documents that are incorporated by reference. Forward-looking statements are
subject to risks and uncertainties and include information concerning possible
or assumed future results of our operations. When we use words such as
"believes," "expects," "anticipates" or similar expressions, we are making
forward-looking statements. You should note that an investment in our
securities involves certain risks and uncertainties that could affect our future
financial results. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in "Risk Factors" and elsewhere in this prospectus.
USE OF PROCEEDS FROM SALE OF COMMON STOCK
American Technologies will not receive any of the proceeds from the sale
of the shares of common stock by the selling security holders.
USE OF PROCEEDS FROM SALE OF DEBENTURES
We have received $1,300,000 from the sale of the debentures.
11
<PAGE>
We have used and will continue to use the net proceeds from the sale of the
debentures for working capital and the payment of existing liabilities.
USE OF PROCEEDS FROM EXERCISE OF WARRANTS
If all of the warrants are exercised, we will receive $118,125. We
intend to use these funds for working capital and the payment of existing
liabilities.
SELLING SECURITYHOLDERS
Selling Securityholders
The following table identifies the selling securityholders along with the
principal amount of debentures and the number of warrants they own.
<TABLE>
<CAPTION>
Principal
AMOUNT OF NUMBER OF
NAME DEBENTURES WARRANTS
---- ---------- ---------
<S> <C> <C>
International Investment $ 200,000 20,000
Group Equity Fund, NV
Venezuela Recovery Fund $ 50,000 5,000
Britannia Associates Limited $ 375,000 37,500
JRT Holdings $ 25,000 2,500
Cinzia Santa Rossa $ 250,000 25,000
Intermediazioni $ 50,000 5,000
Internazionali S.A.
Spiga Limited $ 100,000 62,500
Gaines P. Campbell, Jr. $ 250,000 -
</TABLE>
12
<PAGE>
Conversion of Debentures
The selling securityholders may convert or exchange their debentures
for shares of our common stock by giving written notice to us. $1,050,000 of
the debentures are convertible at a variable conversion price depending upon
the market price for our common stock on the date of conversion. There is a
maximum conversion price of $0.62 but no minimum conversion price. The
remaining $250,000 of debentures have a fixed conversion price of $0.58.
Variable Conversion Price
The variable conversion price is the lesser of
$0.62; or
75% of the average closing bid price for the common stock during the five
trading days ending one day prior to conversion of the debenture.
Estimate of Shares Issuable Upon Conversion
If all of the debentures were converted on February 4, 1999, the variable
conversion price would be $0.528 and the total number of shares of common stock
issued would be 2,577,170. This does not include any shares of common stock
issued as interest due on the debentures. $1,050,000 in principal amount of the
debentures bear interest at 6% per annum and $250,000 in principal amount of the
debentures bear interest at 3% per annum.
The following table contains the names of the selling securityholders,
the number of shares of common stock owned beneficially by each of the selling
securityholders as of February 4, 1999, and the number of shares which may be
offered for resale under this prospectus. For the purpose of stating the number
of shares of common stock beneficially owned by the selling securityholders in
the following table, the number of shares of common stock calculated to be
issuable in connection with the conversion of the debentures assumes the
debentures were converted on February 4, 1999. This calculation results in an
estimate of the number of shares of common stock issuable upon conversion of the
debentures.
The information included in the following table is based upon information
provided by the selling securityholders. Because the selling securityholders
may offer all, some or none of their common stock, no definitive estimate as to
the number of shares that will be held by the selling securityholders after the
offering can be provided and the following table has been
13
<PAGE>
prepared on the assumption that all shares of common stock offered under this
prospectus will be sold.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
BENEFICIALLY SHARES OF BENEFICIALLY
NAME AND OWNED PRIOR TO COMMON STOCK OWNED AFTER
ADDRESS OFFERING (1)(2) BEING OFFERED OFFERING (3)
- ------- --------------- ------------- -------------
<S> <C> <C> <C>
Int'l Investment (4) 398,788 398,788 0
Group Equity Fund
Venezuela Fund (4) 99,697 99,697 0
Britannia Associates(4) 747,727 747,727 0
JRT Holdings 49,848 49,848 0
c/o Astor Capital
9300 Wilshire Blvd.,
Suite 308
Beverly Hills, CA 90212
Cinzia Santa Rossa 498,485 498,485 0
Via Martiri/
Villa Liberta 45
Prato di Pordenone 33080
Pordenone, Italia
Intermediazioni 99,697 99,697 0
Internazionali S.A.
Pasea Estate, Road Town
Tortola BVI
Spiga Ltd. 251,894 251,894 0
Skelton Building
Road Town, Tortola BVI
Gaines P. Campbell, Jr. 431,034 431,034 0
1341 Birmingham Highway
Chattanoga, TN 37419
</TABLE>
(1) Each of the parties listed has sole voting and investment power for all of
the shares of common stock indicated.
(2) As required by the regulations of the SEC, the number of shares shown as
beneficially owned includes shares which can be purchased within 60 days after
February 4, 1999. The actual number of shares shown is subject to adjustment
and could be materially less or more than the estimated amount indicated
depending upon factors which we cannot predict such as the market price of the
common stock on the actual date of conversion of the debentures.
(3) Assumes the sale of all shares offered.
(4) The address of each of these selling securityholders is c/o International
Investment Group, 17 State Street, NY, NY 10004
14
<PAGE>
Registration Rights
The subscription agreements for the sale of the debentures require us to
register with the SEC the public offering of the shares of common stock issuable
on conversion of the debentures and exercise of the warrants. We are also
obligated to register and qualify the shares under such state securities laws as
the selling securityholders may request.
We are obligated to use our best efforts to cause the registration
statement to become effective and to keep the registration statement effective
for two years or until the selling securityholders may sell all registerable
securities under Rule 144 or until the selling securityholders no longer own any
shares, whichever occurs first.
The subscription agreements provide for liquidated damages to the selling
securityholders if we are unable to have the registration statement declared
effective by the SEC within 90 days from the date of sale of the debentures. We
have passed this deadline as to $650,000 in principal amount of debentures. The
amount due in liquidated damages is $13,000 payable in cash or common stock
valued at the lower of current market value or $0.62.
In connection with our private placement of $1,050,000 principal amount
of debentures, we issued warrants to purchase 105,000 shares of Common Stock to
certain of the selling securityholders and warrants to purchase 52,500 shares of
common stock to Spiga Ltd., our selling agent, at $0.75, all for a period of 5
years. Spiga also purchased $100,000 principal amount of debentures.
PLAN OF DISTRIBUTION
The selling securityholders may offer the shares of common stock received
upon conversion of the debentures or exercise of the warrants at various times
in transactions:
- in the over-the-counter market;
- on any exchange where our common stock is then listed;
- with broker-dealers or third parties other than in the over-the-counter
market or on an exchange, including block sales; or
- involving a combination of such methods or other methods.
15
<PAGE>
The selling securityholders may sell their shares at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, at fixed prices or at a combination of such
prices.
The selling securityholders may use dealers, agents or underwriters to
sell their shares. If this happens, the dealers, agents or underwriters may
receive compensation in the form of discounts or commissions from the selling
securityholders or from the purchasers of shares or from both. The compensation
to a particular broker may be in excess of customary compensation.
The selling securityholders and any dealers, agents or underwriters that
participate with the selling securityholders in the distribution of the shares
may be deemed to be "underwriters" as this term is defined in the Securities
Act. Any commissions paid or any discounts or concessions allowed to any such
persons, and any profits received on the resale of the shares of our common
stock offered by this prospectus, may be deemed to be underwriting commissions
or discounts under the Securities Act.
Broker-dealers may agree with a selling securityholder to sell a
specified number of shares at a stipulated price, and, to the extent the
broker-dealer is unable to do so acting as agent for the selling
securityholder, to purchase as principal any unsold shares at the price
required to fulfill the broker-dealer's commitment to the selling
securityholder. Broker-dealers who acquire shares as principal may
thereafter resell the shares in transactions on the NASD OTC Bulletin Board,
in negotiated transactions or otherwise at market prices prevailing at the
time of sale or at negotiated prices. These transactions may involve crosses
and block transactions or sales to and through other broker-dealers. In
connection with these resales broker-dealers may pay to or receive
commissions from the purchasers of the shares.
We will pay most expenses related to the offer and sale of the shares
offered by the selling securityholders using this prospectus. The selling
securityholders, however, will pay any underwriting discounts and selling
commissions and the fees of their own attorneys.
Any shares covered by this prospectus which qualify for sale under Rule
144 of the Securities Act may be sold under that Rule rather than under this
prospectus.
16
<PAGE>
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Amended Bylaws provide that we shall indemnify our directors and officers to
the fullest extent permitted by Nevada law, including circumstances in which
indemnification is otherwise discretionary under Nevada law.
In addition, American Technologies and each selling securityholder have agreed
to indemnify each other against certain liabilities, including certain
liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons, we been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
EXPERTS
Our audited financial statements as of and for the years ended July 31, 1998
and 1997 incorporated by reference in this prospectus and elsewhere in this
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and
are incorporated herein by reference in reliance upon the authority of said
firm as experts in giving said reports. Reference is made to said report,
which includes an explanatory paragraph with respect to the uncertainty
regarding our ability to continue as a going concern as discussed in Note 1
to the financial statements.
LEGAL MATTERS
For the purpose of this offering, John M. Dab, our General Counsel, is
giving his opinion on the validity of the shares.
17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<TABLE>
<S> <C>
SEC Registration Fee $ 247.30
Accountant's Fees and Expenses $ 6,000.00
Financial Printers $ 4,000.00
Miscellaneous $ 500.00
Total $10,747.30
----------
----------
</TABLE>
- ----------------
* Represents expenses relating to the distribution by the selling
securityholders under this prospectus prepared in accordance with the
requirements of Form S-3. These expenses will be borne by us on behalf of
the selling securityholders. All amounts are estimates except for the SEC
Registration Fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 78.751 of the Nevada General Corporation Law,
Article VI of our Amended Bylaws provides for the indemnification by American
Technologies, including suits brought by or on behalf of American Technologies,
of each director, officer, employee or agent thereof to the fullest extent
permitted by Nevada law.
As permitted by the Nevada General Corporation Law and Article VI of our
Amended Bylaws, maintains director's and officer's liability for its directors
and officers against certain liabilities.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Numbers Description
- ------- -----------
<S> <C>
4.1 Form of 6% Convertible Debenture issued to certain Selling Securityholders.*
4.2 Form of Warrant issued to certain Selling Securityholders.*
4.3 Form of 3% Convertible Debenture issued to a Selling Securityholder.
5.1 Opinion of John M. Dab.
23.1 Consent of John M. Dab (included in Exhibit 5.1).
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney*
</TABLE>
- ---------------
* Previously filed as an exhibit to the Company's Registration Statement on
Form S-3 filed with the Securities and Exchange Commission on December 3, 1998.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at the time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be an initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Nevada Revised Statutes, the Certificate of
Incorporation of the Registrant, the Bylaws of the Registrant, Indemnification
Agreements entered into between the Registrant and it officers and directors, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such
19
<PAGE>
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by the controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of the such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Monrovia, State of California, on this 9th day of
February, 1999.
AMERICAN TECHNOLOGIES GROUP, INC.
By: /s/Lawrence J. Brady
-------------------------
Lawrence J. Brady
Chairman of the Board and
Chief Executive Officer
20
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Lawrence J. Brady Chairman of the Board, February 9, 1999
- -------------------------- Chief Executive Officer
Lawrence J. Brady
/s/Harold Rapp Chief Operating Officer February 9, 1999
- -------------------------- Treasurer (Principal
HAROLD RAPP Financial and Accounting
Officer)
/s/Shui Yin Lo Director of Research and February 9, 1999
- -------------------------- Development and a Director
SHUI YIN LO
/s/Charles McCarthy* Director February 9, 1999
- --------------------------
CHARLES MC CARTHY
/s/William Odom* Director February 9, 1999
- --------------------------
WILLIAM ODOM
- -------------------------- Director
TERRY WACHSNER
*By: /s/Lawrence J. Brady
----------------------
Lawrence J. Brady
Attorney-in-Fact
</TABLE>
21
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Numbers Description
- ------- -----------
<S> <C>
4.1 Form of 6% Convertible Debenture issued to the Selling Securityholders.*
4.2 Form of Warrant issued to the Selling Securityholders.*
4.3 Form of 3% Convertible Debenture issued to a Selling Securityholders.
5.1 Opinion of John M. Dab.
23.1 Consent of John M. Dab (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney*
</TABLE>
- ---------------
* Previously filed as an exhibit to the Company's Registration Statement
on Form S-3 filed with the Securities and Exchange Commission on December 3,
1998.
22
<PAGE>
EXHIBIT 4.3
AMERICAN TECHNOLOGIES GROUP, INC.
3% CONVERTIBLE SUBORDINATED DEBENTURE
DUE DECEMBER 1, 2003
Number: 1
Principal: $250,000
Original Issue Date: December 17, 1998
Registered Holder(s): Gaines P. Campbell, Jr.
American Technologies Group, Inc., a Nevada corporation (the "Company")
with principal offices at 1017 South Mountain Avenue, Monrovia, California
91016, for value received, hereby promises to pay the registered holder hereof
(the "Holder") the principal sum set forth above on December 1, 2003 (the
"Maturity Date"), in such coin or currency of the United States of America as at
the time of payment shall be the legal tender for the payment of public and
private debts, and to pay interest, less any amounts required by law to be
deducted or withheld, computed on the basis of a 360-day year, on the unpaid
principal balance hereof from the date hereof (the "Original Issue Date"), at
the rate of 3% per year, until such principal sum shall have become due and
payable, provided the Debenture has not been converted by the Holder pursuant to
Section 5. Interest payments shall be paid on the Maturity Date. All
references herein to dollar amounts refers to U.S. dollars.
By acceptance and purchase of this Debenture, the registered holder hereof
agrees with the Company that the Debenture shall be subject to the following
terms and conditions:
1. AUTHORIZATION OF DEBENTURES. The Company has authorized the issue and
sale of this 3% Convertible Subordinated Debentures due December 1, 2003 (the
"Debenture," such term includes any debentures which may be issued in exchange
or in replacement thereof).
2. TRANSFER OR EXCHANGE. Prior to due presentation to the Company for
transfer of this Debenture, the Company and any agent of the Company may treat
the person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes. The Debenture may not be offered,
sold, pledged or otherwise transferred unless and until registered under the
Securities Act of 1933, as amended (the "Act") or unless the Company has
received an opinion of counsel that such registration is not required.
3. CURRENT MARKET PRICE.
3.1 For purposes of this Debenture, "Current Market Price" of the
Common stock means:
(a) If traded on a securities exchange, the closing price of the
Common Stock on such exchange;
<PAGE>
(b) If traded over the counter, the high closing bid price reported
by Bloomberg from the NASDAQ OTC Bulletin Board; or
In all other events, the market price determined by the Board of
Directors of the Company in good faith.
4. OPTIONAL REDEMPTION OF DEBENTURE.
4.1 OPTIONAL REDEMPTION OF DEBENTURE. Subject to section 5, the
Company may redeem the Debentures at any time, in whole or in part, pro rata,
upon written notice given not less than five (5) nor more than ten (10) business
days prior to the redemption date for 120% of the principal amount of the
Debenture, plus any accrued interest.
5. CONVERSION OF DEBENTURES.
5.1 RIGHT TO CONVERT THE DEBENTURE. Subject to Section 4 above,
the record holder of this Debenture shall be entitled, on or after the Date
of Original Issuance until two (2) business days prior to the redemption date
at the option of the Holder, to convert this Debenture, in whole or in part,
into four hundred thirty-one thousand, thirty-five (431,035) fully-paid and
non-assessable shares of Common Stock based on a Conversion Price of $0.58
per share.
5.2 EXERCISE OF CONVERSION PRIVILEGE. In order to exercise the
conversion privilege, the Holder shall surrender such Debenture, together with
the Notice of Conversion annexed hereto as Exhibit 1 appropriately endorsed to
the Company at its principal office, accompanied by written notice to the
Company (a) stating that the Holder elects to convert the Debenture or a portion
thereof, and if a portion, the amount of such portion in multiples of $1,000 in
principal amount, and (b) setting forth the name or names (with address) in
which the certificate or certificates for shares of Common Stock issuable upon
such conversion shall be issued. Provided the Debenture is received properly
endorsed promptly by the Company, the date of conversion of such Debenture shall
be deemed to be the date of receipt of Notice of Conversion, even if the
Company's stock transfer books are at that time closed, and the converting
Holder shall be deemed to have become, on the date of conversion, the record
holder of the shares of Common Stock deliverable upon such conversion. If the
Debenture is not received, properly endorsed by the fifth business day following
the date the Company receives Notice of Conversion, the date of conversion shall
be deemed to be the date the Debenture is received, provided that such later
receipt will not lower the Conversion Price stated in the Notice of Conversion.
Within three business days after the date of conversion, the Company
shall issue and deliver to such converting Holder a certificate or certificates
for the number of shares of Common Stock due on such conversion. No adjustments
in respect of interest or cash dividends shall be made upon the conversion of
any Debenture or Debentures.
Upon conversion of the Debenture in part, the Company shall execute
and deliver to the Holder thereof, at the expense of the Company, a new
Debenture, in aggregate principal amount equal to the unconverted portion of
such Debenture. such new Debenture shall have the same terms and provisions
other than the principal amount as the Debenture or Debentures surrendered for
conversion.
2
<PAGE>
5.3 DURATION OF CONVERSION PRIVILEGE. The right to subscribe for and
purchase shares of Common Stock pursuant to the conversion privilege granted
herein shall commence on the Original Issue Date and shall expire at 5:00 p.m.,
New York time on December 1, 2003.
5.4 STOCK FULLY PAID; NOT RESTRICTED. The Company covenants and
agrees that:
(a) all shares which may be issued upon the exercise of the
conversion privilege granted herein will, upon issuance in
accordance with the terms hereof, be fully paid, nonassessable,
and free from all taxes, liens and charges (except for taxes, if
any, upon the income of the Holder) with respect to the issue
thereof, and that the issuance thereof shall not give rise to any
preemptive rights on the part of the stockholders;
(b) all shares issued after the effective date of the Registration
Statement (defined below) which will be issued upon the
conversion privilege granted herein will be free of all
restrictions under the Securities Act of 1933; and will not bear
any legends or be the subject of any stop transfer restrictions;
and
(c) the failure of the Company to issue shares upon the conversion of
the Debenture will cause the holder immediate irreparable harm.
5.5 ANTIDILUTION PROVISIONS. The following provisions apply to the
Debenture:
(a) In case the Company shall (i) pay a dividend or make a
distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of
shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock,
(iv) make a distribution on its Common Stock in shares of its
capital stock other than Common Stock, or (v) issue by
reclassification of its Common Stock other securities of the
Company, the conversion privilege of the Debenture and the
Conversion Price then in effect immediately prior thereto shall
be adjusted so that the Holder shall be entitled to receive the
kind and number of shares of Common Stock and other securities of
the Company which it would have owned or would have been entitled
to receive after the happening of any of the events described
above, had the Debenture been converted immediately prior to the
happening of such event or any record date with respect thereto.
Any adjustment made pursuant to this paragraph (a) shall become
effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) In case the Company shall issue rights, options, warrants or
convertible securities to all holders of its Common Stock,
without any charge to such holders, entitling them to subscribe
for or to purchase shares of Common Stock at a price per share
which is lower at the record date mentioned below than the then
current Conversion Price, the Conversion Price thereafter shall
be determined by multiplying the then current conversion
3
<PAGE>
Price by a fraction (but in no event greater than 1), of which
the denominator shall be (i) the number of shares of the common
stock outstanding immediately prior to the issuance of such
rights, options, warrants or convertible securities plus (ii) the
number of additional shares of Common Stock offered for
subscription or purchase, and of which the numerator shall be (x)
the number of shares of Common Stock outstanding immediately
prior to the issuance of such rights, options, warrants or
convertible securities plus (y) the number of shares which the
aggregate offering price of the total number of shares offered
would convert at the higher of the then current Market Price, or
then current Conversion Price. Such adjustment shall be made
whenever such rights, options, warrants or convertible securities
are issued, and shall become effective immediately and
retroactively after the record date for the determination of
stockholders entitled to receive such rights, options, warrants
or convertible securities.
(c) In case the Company shall distribute to all holders of its shares
of Common Stock (i) debt securities or other evidences of its
indebtedness which are not convertible into Common Stock or (ii)
assets (excluding cash dividends or distributions out of
earnings), then the Conversion Price shall be determined by
dividing the then current Conversion Price by a fraction, of
which the numerator shall be the higher of the then Current
Market Price, or the Conversion Price on the date of such
distribution, and of which the denominator shall be such Current
Market Price, or such Conversion Price on such date minus the
then fair value of the portion of the assets or evidences of
indebtedness so distributed applicable to one share of Common
Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective on the date of
distribution retroactive to the record date for the determination
of stockholders entitled to receive such distribution. The fair
value of such assets shall be determined in good faith by the
Board of Directors of the Company.
(d) To the extent not covered by paragraphs (b) or (c) hereof, in
case the Company shall sell or issue shares of Common Stock, or
rights, options, warrants or convertible securities containing
the right to subscribe for or purchase shares of Common Stock, at
a price per share (determined, in the case of such rights,
options, warrants or convertible securities, by dividing (i) the
total amount received or receivable by the Company in
consideration of the sale or issuance of such rights, options,
warrants or convertible securities, plus the total consideration
payable to the Company upon exercise or conversion thereof, by
(ii) the total number of shares covered by such rights, options,
warrants or convertible securities) lower than the Conversion
Price in effect immediately prior to such sale or issuance, then
the Conversion Price shall be reduced to a price (calculated to
the nearest cent) determined by dividing (I) an amount equal to
the Conversion Price multiplied by the sum of (A) the number of
shares of Common Stock outstanding immediately prior to such sale
or issuance plus (B) the number of shares which could have been
purchased at the Conversion Price with the consideration received
by the Company upon such sale or issuance by (II)
4
<PAGE>
the total number of shares of Common Stock outstanding
immediately after such sale or issuance. For the purposes of
such adjustments, the shares of Common Stock, which the
holders of any such rights, options, warrants or convertible
securities shall be entitled to subscribe for or purchase,
shall be deemed issued and outstanding as of the date of such
sale or issuance and the consideration received by the Company
therefor shall be deemed to be the consideration received by
the Company for such rights, options, warrants or convertible
securities, plus the consideration or premiums stated in such
rights, options, warrants or convertible securities to be paid
for the shares of Common Stock covered thereby. In case the
Company shall sell or issue shares of Common Stock, or rights,
optios, warrants or convertible securities containing the
right to subscribe or purchase shares of Common Stock for a
consideration consisting, in whole or in part, of property
other than cash or its equivalent, then in determining the
"price per share" of shares of Common Stock, any underwriting
discounts or commissions shall not be deducted from the price
received by the Company for sales of securities registered
under the Act.
(e) No adjustment in the Conversion Price shall be required in the
following events:
(i) If the amount of such adjustment would be less than $.05
per share; provided, however, that any adjustment which by
reason of this paragraph 5.5(e)(i) is not required to be
made immediately shall be carried forward and taken into
account in any subsequent adjustment; or
(ii) The issuance of options under the Company's existing stock
option plans and future stock option plans approved by the
Company's shareholders.
(f) When the number of shares of Common Stock or the Conversion Price
is adjusted as herein provided, the Company shall cause to be
promptly mailed to the Holder by first class mail, postage
prepaid, notice of such adjustment or adjustments and a
certificate from the Company's Chief Financial Officer setting
forth the number of shares of Common Stock and the Conversion
Price after such adjustment, a brief statement of the facts
requiring such adjustment and the computation by which such
adjustment was made.
(g) For the purpose of this Section 5.5, the following shall apply:
(i) The term "Common Stock" shall mean (A) the class of stock
designated as the Common Stock of the Company at the date
of this Debenture or (B) any other class of stock
resulting from successive changes or reclassification of
such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par
value to par value. In the event that at any time, as a
result of
5
<PAGE>
an adjustment made pursuant to this Section 5.5, the
Holder shall become entitled to receive any securities
upon conversion of the Company other than shares of
Common Stock thereafter the number of such other
securities and the Conversion Price of such securities
shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Common Stock
contained in this Section 5.5.
(ii) If the Common Stock is traded on a securities exchange or
over the counter, the "Current Market Price" for purposes
of this section 5.5 shall mean the average of the Current
Market Prices for the five consecutive trading days
immediately prior to the date of the event which
necessitates an adjustment to the Conversion Price.
(h) Upon the expiration of any unexercised rights, options, warrants
or conversion privileges, the Conversion Price shall be
readjusted and shall thereafter be such as it would have been had
it been originally adjusted (or had the original adjustment not
been required, as the case may be) on the basis of (i) the fact
that the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the exercise
of such rights, options, warrants or conversion rights and (ii)
the fact that such shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company upon
such exercise plus the consideration, if any, actually received
by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion rights whether or not
exercised; provided. however, that no such readjustment shall
have the effect of increasing the Conversion Price by an amount
in excess of the amount of the adjustment initially made in
respect of the issuance, sale or grant of such rights, options,
warrants or conversion privileges.
5.6 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section 5.5,
no adjustment in respect to any dividends paid shall be made during the term of
the Debenture or upon the exercise of the Debenture.
5.7 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION
CONSOLIDATION. ETC. In the case of any consolidation of the Company with or
merger of the Company into another corporation or in the case of any sale or
conveyance to another corporation of all or substantially all of the property,
assets or business of the Company, the Company or such successor or purchasing
corporation, as the case may be, shall provide that the Holder shall have the
right thereafter upon payment of the Conversion Price in effect immediately
prior to such action to purchase upon conversion of the Debenture the kind and
amount of shares and other securities and property which the Holder would have
owned or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had the Debenture been converted
immediately prior to such action. such agreement shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 5. The provisions of this Section 5.7 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
6
<PAGE>
5.8 PAR VALUE OF COMMON STOCK. Before taking any action which
would cause an adjustment reducing the Conversion Price below the then par
value of the shares of Common Stock issuable upon conversion of the
Debenture, the Company will take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Conversion Price.
5.9 STATEMENT ON DEBENTURE CERTIFICATES. Irrespective of any
adjustments in the Conversion Price or the number of securities convertible,
this Debenture certificate or any certificates hereafter issued may continue to
express the same price and number of securities as are stated in this Debenture
certificate. However, the Company may at any time in its sole discretion (which
shall be conclusive) make any change in the form of the Debenture certificate
that it may deem appropriate and that does not affect the substance thereof; and
any Debenture certificate thereafter issued, whether upon registration or
transfer of, or in exchange or substitution for, an outstanding Debenture
certificate, may be in the form so changed.
6. REGISTRATION RIGHTS. The Company shall amend its Registration
Statement on Form S-3 (the "Registration Statement") currently on file with the
Securities and Exchange Commission (the "Commission") to cover the resale of the
shares of Common Stock issuable upon conversion of the Debenture. The Company
shall pay all expenses of registration (other than underwriting fees and
discounts in respect of shares of Common Stock offered and sold under such
Registration Statement by the Purchaser, if any).
7. FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any conversion hereunder but in lieu of such
fractional shares, the Company shall make a cash payment therefor equal in
amount to the product of the applicable fraction multiplied by the Conversion
Price then in effect.
8. SUBORDINATION. Any right of the Holder to payment of principal or
interest from the Company shall be subordinated to the claims and rights of the
holders of the Senior Debt ("Senior Debt Holders"). "Senior Debt" means all
Indebtedness of the Company other than this Debenture or other outstanding
convertible debentures or subsequently issued convertible debentures, whether
outstanding on the date of execution of this Debenture or thereafter created,
incurred or assumed, except (x) any such Indebtedness that by the terms of the
instrument or instruments by which such Indebtedness was created, assumed or
incurred expressly provides that it (i) is junior in right of payment to the
Debentures or (ii) ranks PARI PASSU in right of payment with the Debentures and
(y) any amendments, modifications or supplements to, or any renewals,
extensions, deferrals, refinancing and refunding of, any of the foregoing. Any
cash payment of principal or interest to the Holder shall be collected, enforced
or received by the Holder as trustee for the Senior Debt Holders and paid over
to the Senior Debt Holders. The Holder agrees that in the event of any payment
of principal or interest by the Company to the Holder by reason of any
receivership, insolvency or bankruptcy proceeding, or proceeding for
reorganization or readjustment of the Company or its properties, or otherwise,
then, in any such event, the Senior Debt Holders shall be preferred in the
payment of their claims over the claim of the Holder to payment of principal or
interest against the Company or its properties, and the claims of the Senior
Debt Holders shall be first paid and satisfied in full before any payment or
distribution of any kind or character, whether in cash or property, shall be
made to the Holder. Provided,
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however, that this Section 7 shall not apply to any payment of principal or
interest made to the Holder while the Company is solvent and not in default
with respect to its Senior Debt.
9. REPLACEMENT OF DEBENTURE CERTIFICATE. Upon receipt of evidence
satisfactory to the Company of the certificate loss, theft, destruction or
mutilation of the Debenture certificate and, in the case of any such loss, theft
or destruction, upon delivery of a bond of indemnity satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of the Debenture certificate, the Company will issue a new Debenture
certificate, of like tenor, in lieu of such lost, stolen, destroyed or mutilated
Debenture certificate.
10. COVENANTS OF THE COMPANY. So long as any of the Debentures remain
outstanding, the Company shall not, without the consent of the holder hereof,
which consent will not be unreasonably withheld:
(a) At all times keep reserved the total number of shares of Common
Stock necessary for the conversion of all of the then outstanding
Debentures at the then current Conversion Rate;
(b) Not pay any dividends in cash and/or property or other assets of
the Company in respect of its Common Stock or otherwise; and
(c) Not enter into a loan secured by the property and/or assets of
the Company or any of its subsidiaries with (i) any director,
officer or 5% stockholder of the Company, (ii) any entity in
which a director, officer or 5% stockholder has an interest as an
officer, director, partner, beneficiary of a trust or is a 5% or
more equity holder of such entity, or (iii) any parent, spouse,
child or grandchild of an officer, director or 5% stockholder of
the Company upon terms no less favorable to the Company than
those which could be obtained from an "arms-length" lender.
11. DEFAULT. If any of the following events (herein called "Events of
Default") shall occur:
(a) if the Company shall make an assignment for the benefit of
creditors or shall be unable to pay its debts as they become due;
or
(b) if the Company shall dissolve; terminate its existence; become
insolvent on a balance sheet basis; commence a voluntary case
under the federal bankruptcy laws or under any other federal or
state law relating to insolvency or debtor's relief; permit the
entry of a decree or order for relief against the Company in an
involuntary case under the federal bankruptcy laws or under any
other applicable federal or state law relating to insolvency or
debtor's relief; permit the appointment or consent to the
appointment of a receiver, trustee, or custodian of the Company
or of any of the Company's property; make an assignment for the
benefit of creditors; or admit in writing to be failing generally
to pay its debts as such debts become due;
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(c) if the Company shall default in the performance of or compliance
with any agreement, condition or term contained in this Debenture
or any of the other Debentures and such default shall not have
been cured within 30 days after such default,
(d) Any of the representations or warranties made by the Company
herein, in the Subscription Agreement, or in any certificate or
financial or other statements heretofore or hereafter furnished
by or on behalf of the Company in connection with the execution
and delivery of this Debenture or the Subscription Agreement
shall be false or misleading in any material respect at the time
made; or ?
(e) Any money judgment, writ or warrant of attachment, or similar
process not covered by insurance in excess of Two Hundred Fifty
Thousand Dollars ($250,000) in the aggregate shall be entered or
filed against the Company or any of its properties or other
assets and shall remain unpaid, unvacated, unbonded or unstayed
for a period of thirty (30) days or in any event later than ten
(10) days prior to the date of any proposed sale thereunder; or
(f) The Company shall have its Common Stock suspended from an
exchange or over-the-counter market,
then and in any such event the Holder of this Debenture shall have the option
(unless the default shall have theretofore been cured) by written notice to
the Company to declare the Debenture to be due and payable, whereupon the
Debenture shall forthwith mature and become due and payable, at the
applicable prepayment price on the date of such notice, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived, anything contained in this Debenture to the contrary
notwithstanding. Upon the occurrence of an Event of Default, the Company
shall promptly notify the Holder of this Debenture in writing setting out the
nature of the default in reasonable detail.
12. REMEDIES ON DEFAULT. In case any one or more of the Events of Default
shall occur, the Holder may proceed to protect and enforce his rights by a suit
in equity, action at law or other appropriate proceeding, whether, to the extent
permitted by law, for the specific performance of any agreement of the Company
contained herein or in aid of the exercise of any power granted hereby.
13. CHANGES, WAIVERS. ETC. Neither this Debenture nor any provisions
hereof may be changed, waived, discharged or terminated orally, but only by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
14. ENTIRE AGREEMENT. This Debenture embodies the entire agreement and
understanding between the Holder and the Company and supersedes all prior
agreements and understandings relating to the subject matter hereof.
16. GOVERNING LAW, JURISDICTION, ETC.
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(a) It is the intention of the parties that the laws of the State of
California govern the validity of this Debenture, the
construction of its terms and the interpretation of the rights
and duties of the parties.
(b) In the case of any dispute, question, controversy or claim
arising among the parties hereto which shall arise out of or in
connection with this Debenture, the same shall be submitted to
arbitration before a panel of three arbitrators in Los Angeles,
California, in accordance with the rules of the American
Arbitration Association. One arbitrator shall be appointed by
the party or parties bringing the claims ("Claimant") and one
arbitrator shall be appointed by the party or parties defending
the claim ("Respondent"). The arbitrators selected by such
parties shall be selected within thirty (30) days after
notification by the Claimant to the Respondent that it has
determined to submit such dispute, question, controversy or claim
to arbitration. The two arbitrators so selected shall select a
third arbitrator within thirty (30) days after the selection of
the arbitrator selected by such parties. Should a party fail to
select an arbitrator within the specified time period, or should
the arbitrators selected by the parties fail to select a third
arbitrator, the missing arbitrator or arbitrators shall be
appointed by the Los Angeles, California office of the American
Arbitration Association. The decision of the panel shall be
final and binding on the parties and enforceable in any court of
competent jurisdiction. The costs of the arbitration will be
imposed upon the Claimant and Respondent as determined by the
arbitration panel or, failing such determination, will be borne
equally by the Claimant and the Respondent. The successful or
prevailing party or parties shall be entitled to recover
reasonable attorneys fees in addition to any other relief to
which it may be entitled.
(c) In the event of any dispute, question, controversy or claim
arising among the parties hereto which shall arise out of or in
connection with this Debenture, the parties shall keep the
proceeding related to such controversy in strict confidence and
shall not disclose the nature of said dispute, the status of the
proceeding or any testimony, documents or information obtained or
exchanged in the course of said proceeding without the express
written consent of all parties to such dispute.
AMERICAN TECHNOLOGIES GROUP, INC.
By:
--------------------------------
Lawrence Brady, CEO
ATTEST:
By
-----------------------------------
John M. Dab, Secretary
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EXHIBIT 1
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $______________ of the
above Debenture No. _____ into ____________ shares of Common Stock of
American Technologies Group, Inc. (the "Company") according to the
conditions set forth in such Debenture, as of the date written below.
The undersigned confirms the representations and warranties set forth in the
Subscription Agreement.
------------------------------------------
Date of Conversion*
------------------------------------------
Applicable Conversion Price
$
------------------------------------------
------------------------------------------
Signature
------------------------------------------
Name
------------------------------------------
Address
------------------------------------------
* The original Debenture and this Notice of Conversion must be received by
the Company within five business days following the date of Conversion.
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EXHIBIT 5.1
February 10, 1999
Board of Directors
American Technologies Group, Inc.
1017 S. Mountain Ave.
Monrovia, California 91016
Gentlemen:
As General Counsel for American Technologies Group, Inc. (the
"Company"), in connection with the Registration Statement on Form S-3 (the
"Registration Statement") to be filed with the Securities and Exchange
Commission on or about February 10, 1999 intended to register 3,097,500 shares
of the common stock of the Company issuable upon the conversion of $1,300,000
principal amount of its convertible debentures and 157,500 shares of common
stock of the Company issuable upon the exercise of its common stock purchase
warrants (the "Shares"), as more fully described in the Registration
Statement, I have examined such corporate records and other documents and
such questions of law as I have considered necessary or appropriate for the
purposes of this opinion and, on the basis of such examination, advise you
that in my opinion the Shares will be, when issued as specified in the
Registration Statement, validly issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement. This consent is not to be construed as an admission
that I am a person whose consent is required to be filed with the Registration
Statement under the provisions of the Securities Act of 1933, as amended.
Very truly yours,
/s/ John M. Dab
John M. Dab
General Counsel
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Technologies Group, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-3 registration statement of our report dated
November 10, 1998 included in the Company's Form 10-KSB for the year ended
July 31, 1998 and to all references to our Firm included in this registration
statement.
/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP
Los Angeles, California
February 10, 1999
