<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2000
[ ] 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.
(Name of small business issuer in its charter)
NEVADA 95-4307525
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1017 SOUTH MOUNTAIN AVENUE, MONROVIA, CA. 91016
(Address of principal executive offices) (zip code)
Issuer's telephone number: (626) 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 / /
As of June 12, 2000, the registrant had 44,214,778 shares of Common Stock
outstanding.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 Consolidated Financial Statements
Consolidated Balance Sheets
as of April 30, 2000 and July 31, 1999 3
Consolidated Statements of Operations
for the Three and Nine Months ended April 30, 2000 and 1999 5
Consolidated Statements of Cash Flows
for the Nine Months ended April 30, 2000 and 1999 6
Notes to the Consolidated Financial Statements 7
ITEM 2 Management's Discussion and Analysis 12
PART II OTHER INFORMATION
ITEM 2 Changes in Securities 14
ITEM 6 Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
FORWARD-LOOKING STATEMENTS
IN ADDITION TO HISTORICAL INFORMATION, THIS QUARTERLY REPORT CONTAINS
FORWARD-LOOKING STATEMENTS WHICH WE BELIEVE ARE WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, AND THE COMPANY DESIRES TO
TAKE ADVANTAGE OF THE "SAFE HARBOR" PROVISIONS THEREOF. THEREFORE THE COMPANY IS
INCLUDING THIS STATEMENT FOR THE EXPRESS PURPOSE OF SUCH SAFE HARBOR WITH
RESPECT TO ALL SUCH FORWARD-LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS
IN THIS REPORT REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS
AND FINANCIAL PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES, INCLUDING THOSE DISCUSSED HEREIN AND IN OTHER
REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR THOSE
ANTICIPATED. IN THIS REPORT, THE WORDS "ANTICIPATES", "BELIEVES", "INTENDS",
"FUTURE", AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS CONTAINED
HEREIN, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO
OBLIGATION TO PUBLICLY REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS
OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE HEREOF.
2
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AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2000 AND JULY 31, 1999
<TABLE>
<CAPTION>
ASSETS April 30, July 31,
2000 1999
--------------------- ---------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,982 $ 710,175
Accounts receivable, net of allowance for doubtful
accounts of $10,000 at April 30, 2000 and
July 31, 1999, respectively 58,644 47,130
Inventories, net 218,774 180,538
Other current assets 82,486 24,800
--------------------- ---------------------
Total current assets 363,886 962,643
--------------------- ---------------------
Property and equipment, net of accumulated
depreciation and amortization of $690,386 and $577,418
at April 30, 2000 and July 31, 1999, respectively 1,148,132 1,261,100
Notes receivable, net of imputed interest
of $708,953 and $824,000 at April 30, 2000
and July 31, 1999, respectively 1,791,047 1,676,000
Technology rights, net of accumulated
amortization of $1,100,000 and $800,000
at April 30, 2000 and July 31, 1999, respectively 100,000 400,000
Intangible assets, net of accumulated
amortization of $399,340 and $349,788
at April 30, 2000 and July 31, 1999, respectively 167,663 217,215
Other assets 175,955 176,609
Assets held for sale 70,000 107,885
--------------------- ---------------------
$ 3,816,683 $ 4,801,452
===================== =====================
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
3
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AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS-CONTINUED
APRIL 30, 2000 AND JULY 31, 1999
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT April 30, July 31,
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 715,467 $ 602,728
Accrued interest payable 400,853 227,801
Accrued payroll and related liabilities 266,016 190,171
Accrued professional fees 278,908 162,382
Other accrued liabilities 175,633 162,387
Amounts due to related parties 578,418 556,358
Current portion of notes payable 1,687,957 1,675,894
Current portion of convertible debentures 75,000 75,000
------------------ ------------------
Total current liabilities 4,178,252 3,652,721
Convertible debentures, net of current portion 2,225,000 2,750,000
------------------ ------------------
Total liabilities 6,403,252 6,402,721
------------------ ------------------
Commitments and contingencies
Stockholders' deficit:
Series A convertible preferred stock, $.001 par value;
10,000,000 shares authorized; 378,061 shares
Issued and outstanding 378 378
Series B convertible preferred stock, $.001 par value;
500,000 shares authorized; liquidation value at $8.00
per share; none issued and outstanding - -
Series C convertible preferred stock, $.001 par value;
2,000 shares authorized; liquidation value at $1,000
per share; none issued and outstanding - -
Common stock, $.001 par value; 100,000,000 shares
authorized; 38,500,871 and 29,373,523 shares issued
and outstanding at April 30, 2000 and July 31, 1999,
respectively 38,501 29,374
Additional paid in capital 49,329,965 46,122,777
Stock subscriptions 84,250 196,820
Prepaid consulting expenses (51,667) (590,233)
Accumulated deficit (51,987,996) (47,360,385)
------------------ ------------------
Total stockholders' deficit (2,586,569) (1,601,269)
------------------ ------------------
$ 3,816,683 $ 4,801,452
================== ==================
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
4
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AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended April 30, Nine Months Ended April 30,
2000 1999 2000 1999
------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Technology products $ 22,901 $ 107,880 $ 150,351 $ 204,360
Other 14,294 33,355 48,849 222,386
------------------- ------------------ ------------------ ------------------
Total operating revenues 37,195 141,235 199,200 426,746
------------------- ------------------ ------------------ ------------------
Operating Expenses:
General and administrative 565,577 1,755,884 2,533,013 4,005,850
Marketing and product development 65,475 112,278 263,319 647,518
Research and development 102,275 169,286 344,181 519,943
Mining operations 16,560 35,495 59,419 117,570
Loss on impairment of assets held for sale - 200,000 - 1,200,000
Amortization of technology rights 100,000 100,000 300,000 300,000
------------------- ------------------ ------------------ ------------------
Total operating expenses 849,887 2,372,943 3,499,932 6,790,881
------------------- ------------------ ------------------ ------------------
Other (Expense) Income:
Interest expense, net (296,393) (108,281) (1,326,879) (845,396)
Loss on investment in a joint venture - - - (39,341)
------------------- ------------------ ------------------ ------------------
(296,393) (108,281) (1,326,879) (884,737)
------------------- ------------------ ------------------ ------------------
Net loss from continuing operations before
discontinued operations (1,109,085) (2,339,989) (4,627,611) (7,248,872)
Loss on discontinued operations - (24,368) - (201,943)
Gain on disposal of discontinued operations - 230,200 - 230,200
------------------- ------------------ ------------------ ------------------
- 205,832 - 28,257
------------------- ------------------ ------------------ ------------------
Net loss attributable to common stockholders $ (1,109,085) $ (2,134,157) $ (4,627,611) $ (7,220,615)
=================== ================== ================== ==================
Basic and fully diluted net loss per common share:
Continuing operations $ (0.03) $ (0.09) $ (0.14) $ (0.29)
Discontinued operations - 0.01 - 0.00
=================== ================== ================== ==================
Net Loss $ (0.03) $ (0.08) $ (0.14) $ (0.29)
=================== ================== ================== ==================
Weighted average number of
common shares outstanding 37,627,099 26,850,333 33,830,141 25,070,103
=================== ================== ================== ==================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED APRIL 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended April 30,
2000 1999
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (4,627,611) $ (7,220,615)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 424,807 431,623
Write-off of advances to officers and shareholders - 136,698
Stock issued and subscribed as consideration for services 137,393 47,879
Stock issued for convertible debenture interest 5,390 -
Amortization of prepaid consulting 616,066 1,697,167
Imputed interest for notes payable and capital leases - 42,502
Imputed interest income on notes receivable (115,047) -
Imputed interest expense on convertible debentures 1,125,656 624,121
Gain on disposal of discontinued operations - (230,200)
Stock options issued to consultants 298,035 -
Loss on impairment of assets held for sale 46 1,200,000
Loss on investment in joint venture - 39,341
Changes in operating assets and liabilities:
Accounts receivable 14,486 (16,608)
Inventories (38,236) (29,774)
Other current assets (7,480) 8,482
Accounts payable and accrued liabilities 491,408 1,213,801
Amounts due to related parties 37,060 -
----------------- -----------------
Net cash used in operating activities (1,638,027) (2,055,583)
----------------- -----------------
Cash flows from investing activities:
Other - (184)
----------------- -----------------
Net cash used in investing activities - (184)
----------------- -----------------
Cash flows from financing activities:
Advances from/to officers/shareholders, net (15,000) 166,451
Proceeds from issuance of convertible debentures 934,771 1,405,913
Proceeds from notes payable 30,250 325,000
Payments on notes payable (18,187) (11,947)
Payments on capital lease obligation - (50,000)
Deposit on sale of discontinued operations - 201,000
----------------- -----------------
Net cash provided by financing activities 931,834 2,036,417
----------------- -----------------
Net cash flows from discontinued operations - 7,235
Net change in cash and cash equivalents (706,193) (12,115)
Cash and cash equivalents, beginning of period 710,175 60,563
----------------- -----------------
Cash and cash equivalents, end of period $ 3,982 $ 48,448
================= =================
Supplemental disclosure of non-cash investing
and financing activities:
Conversion of debentures $ 1,525,000 $ -
================= =================
Stock issued for deposit on sale of discontined operations $ - $ 1,272,500
================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
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AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited 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 and nine month periods ended
April 30, 2000 are not necessarily indicative of the results that may
be expected for the year ended July 31, 2000. For further information,
please refer to the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year
ended July 31, 1999.
2. ORGANIZATION, LINE OF BUSINESS AND SIGNIFICANT BUSINESS RISKS
a. ORGANIZATION AND LINE OF BUSINESS
American Technologies Group, Inc. (the "Company" or "ATG"), a Nevada
corporation, is engaged in the development, commercialization and sale
of products and systems using its patented and proprietary
technologies. The resulting products are intended to offer
cost-effective solutions to reduce, and in some cases eliminate,
hazardous chemical by-products or emissions resulting from industrial
and combustion processes.
b. SIGNIFICANT BUSINESS RISKS
Since its inception, the Company has incurred significant operating
losses. The ability of the Company to operate as a going concern is
dependent upon its ability to (1) obtain sufficient additional capital
and (2) generate significant revenues through its existing assets and
operating business. The Company plans to raise additional working
capital through private offerings of debt and equity. 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 execute its business plans or generate positive
operating results. These issues, among others, raise substantial doubt
about the ability of the Company to continue as a going concern. The
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the
amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
c. NET LOSS PER SHARE
Net loss per common share is based upon the weighted average number of
common shares outstanding during the fiscal year under the provisions
of Statement of Financial Accounting Standards ("FAS") No. 128,
"EARNINGS PER SHARE." Common share equivalents were not considered as
they would be anti-dilutive and had no impact on earnings per share for
any periods presented. However, the impact under the treasury method of
dilutive stock options would have been incremental shares of 472,504
and 69,127 for the nine months ended April 30, 2000 and 1999,
respectively.
7
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d. RECLASSIFICATIONS
Certain amounts in the April 30, 1999 consolidated financial statements
have been reclassified to conform to current year presentation.
3. DEBENTURES
In September 1999, the Company issued a $500,000 secured convertible
debenture bearing interest at prime rate plus 0.5% per year, (8.75% as
of the date of issuance), maturing December 31, 2003. The conversion
price is fixed at $0.25 per share and the conversion feature vests
January 1, 2000. This convertible debenture plus another debenture in
the principal amount of $1,000,000 issued in July 1999 is secured by
the catalyst technology of the Company. The debenture agreement for
these debentures also contains anti-dilution provisions and certain
non-financial covenants. In connection with the discount conversion
feature, the Company has recorded imputed interest of $662,000 included
in interest expense in the accompanying Statements of Operations.
In January 2000, the Company issued $250,000 of 7% convertible
debentures, maturing January 14, 2003. Accrued interest on these
convertible debentures is due on the earlier of conversion or maturity.
The conversion price is equal to the lower of $0.23 or 72.5% of the
average of the lowest three trading prices during the ten trading day
period prior to conversion. Included with these convertible debentures
were 500,000 detachable stock warrants to acquire common stock at an
exercise price of the lower of $0.174 or 72.5% of the average of the
lowest three trading prices during the ten trading days immediately
prior to exercise of the warrants. The conversion feature and the
warrants vest immediately. In connection with the discount conversion
feature and the fair value of the warrants per FAS 123, the Company has
recorded imputed interest of $197,828 included in interest expense in
the accompanying Statements of Operations.
In February 2000, the Company issued $250,000 of 7% convertible
debentures, maturing February 18, 2003. Accrued interest on these
convertible debentures is due on the earlier of conversion or maturity.
The conversion price is equal to the lower of $0.345 or 72.5% of the
average of the lowest three trading prices during the ten trading day
period prior to conversion. Included with these convertible debentures
were 500,000 detachable stock warrants to acquire common stock at an
exercise price of the lower of $0.23 or 72.5% of the average of the
lowest three trading prices during the ten trading days immediately
prior to exercise of the warrants. The conversion feature and the
warrants vest immediately. In connection with the discount conversion
feature and the fair value of the warrants per FAS 123, the Company has
recorded imputed interest of $250,828 included in interest expense in
the accompanying Statements of Operations.
During the nine months ended April 30, 2000, certain debenture holders
converted $1,050,000 of the 6% convertible debentures into 5,812,009
shares of common stock of the Company. The conversion price was based
on the average of the market price for the five trading days prior to
the conversion, discounted 25%, as provided in the debenture
agreements. In the same period, certain other debenture holders
converted $325,000 of the 7% convertible debentures and $3,673 of
debenture interest into 1,441,195 shares of common stock of the
Company. The conversion price was based on the average of the lowest
three trading prices during the ten trading days prior to the
conversion, discounted 27.5%, as provided in the debenture agreements.
In addition, during January 2000, debenture holders with 3% convertible
debentures converted $150,000 into 300,000 shares of common stock of
the Company. The conversion price was fixed at $0.50 as provided in the
debenture agreements.
4. TECHNOLOGY RIGHTS
In fiscal year 1998, in exchange for 500,000 shares of common stock
valued at $1,200,000, the Company acquired all remaining interests and
royalty rights of Robert W. Carroll and BWN Oil Investments
Corporation, a Nevada corporation, to the Clean Air Pac which is used
by the Company
8
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in The Force(R) airborne fuel treatment. The technology rights are
amortized based on the straight-line basis over a period of three
years. The Consolidated Statements of Operations include amortization
of technology rights of $100,000 and $300,000 for the three and nine
month periods ended April 30, 2000 and 1999, respectively.
5. CAPITAL STOCK
a. COMMON STOCK
During October 1999, the Company entered into a consulting agreement
for services. Under the terms of the agreement, the Company issued
100,000 shares of ATG's common stock valued at $31,000 based on the
common stock price on the date of the agreement.
During December 1999, the Company entered into consulting agreements
for services. Under the terms of the agreements, the Company issued
224,000 shares of ATG's common stock valued at $53,144 based on the
common stock prices on the dates of the agreements.
During fiscal 1999 and for nine months ended April 30, 2000, the
Company entered into several consulting agreements for services. Under
the terms of the agreements, the Company issued shares of common stock
for services, the value of which was recorded to prepaid consulting
expenses and was amortized on a straight-line basis over the terms of
the agreements. General and Administrative expenses include prepaid
consulting amortization expense of $25,833 and $847,050 for the three
months ended April 30, 2000 and 1999, respectively, and $616,066 and
$1,697,167 for the nine months ended April 30, 2000 and 1999,
respectively, in the accompanying Consolidated Statements of
Operations.
b. STOCK SUBSCRIPTIONS
During the nine months ended April 30, 2000, the Company issued 646,000
shares of common stock valued at $196,820 which amount was included
within stock subscriptions as of July 31, 1999 and recorded
subscription for services of 365,000 shares valued at $130,750 based on
the common stock price on the date of the agreement. During the nine
months ended April 30, 2000, the Company issued 100,000 shares of
common stock, valued at $46,500, out of the 365,000 subscribed shares
referred above. As of April 30, 2000, the Company had not issued
265,000 shares of common stock owed for services, valued at $84,250.
This amount has been included within stock subscriptions in the
accompanying Consolidated Balance Sheets.
c. OPTIONS AND WARRANTS
During the nine months ended April 30, 2000, the Company recognized
$298,035 of expense for stock options issued in prior years as the
vesting extended into the nine month period ended April 30, 2000.
6. ASSETS HELD FOR SALE
Included in assets held for sale at April 30, 2000 in the accompanying
Consolidated Balance Sheets is the mining property referred to as the
Tempiute property with a remaining book value of $70,000, net of
impairment of $324,847 recognized during fiscal year 1999 (based on the
estimated realizable value as indicated in non-binding offer to buy
this property).
During fiscal year 1999, the Company sold its interest in the Manhattan
mill and the remaining gold mining property to Western Mine Development
for a non-interest-bearing note of $2,500,000 payable in installments
from January 2002 to January 2008. The accompanying Consolidated
Balance Sheets include a note receivable of $1,791,047 net of discount
of $708,953 as of April 30, 2000 and
9
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$1,676,000 net of discount of $824,000 as of July 31, 1999. The
amortization of the note discount of $115,047 is included with
interest expense in the accompanying Statements of Operations.
7. RELATED PARTY TRANSACTIONS
During the nine months ended April 30, 2000, the Company borrowed from
an officer a short term loan of $50,000 and made payment of $65,000 due
to an officer on a short term borrowing.
8. SUBSEQUENT EVENTS
Subsequent to the end of the quarter, in a private transaction in
consideration of $272,500 in cash, the Company issued 1,758,334 shares
of common stock and warrants to purchase a total of 1,583,334 shares of
common stock at an exercise price of $0.25 per share. In addition, a
total of 135,828 shares of common stock were issued upon exercise of
stock options at exercise prices of $0.19 and $0.195 per share,
1,890,695 shares of common stock were issued upon conversion of
$175,000 in principal amount of convertible debentures and 1,929,050
shares of common stock were issued for services.
9. SEGMENT INFORMATION
The Company's principal remaining business segment is Technology
Products (The Force, among others).
Financial information about industry segments as of and for the nine
months ended April 30, 2000 and 1999, is as follows:
<TABLE>
<CAPTION>
Nine Months Ended April 30,
2000 1999
------------------- -------------------
<S> <C> <C>
Operating revenues:
Technology products $ 150,351 $ 204,360
Corporate 43,435 164,454
Mining 5,414 57,932
------------------- -------------------
Total operating revenues $ 199,200 $ 426,746
=================== ===================
Operating Loss:
Technology products, including research
and development $ 607,500 $ 1,167,461
Mining, including impairment 59,419 1,317,570
Corporate expenses 2,833,013 4,305,850
------------------- --------------------
Net operating loss $ 3,300,732 $ 6,364,135
=================== ===================
Identifiable assets:
Technology products $ 804,160 $ 1,244,363
Mining assets held for sale 70,000 2,710,845
Corporate and other 2,942,523 1,243,708
------------------- -------------------
Total $ 3,816,683 $ 5,198,916
=================== ===================
</TABLE>
Operating loss is revenues minus operating expenses.
Identifiable assets by segment are assets used in or otherwise
identifiable with the Company's operations in each segment.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Management continued its efforts to refocus the Company's activities on its core
technologies, along with new product development and commercialization.
Management anticipates these efforts will result in significant revenue
commencing in the fourth quarter of fiscal 2000, although there can be no
assurance to this effect.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
APRIL 30, 2000 AND 1999
Total operating revenue decreased by $104,000 from $141,200 to $37,200 for the
three months ended April 30, 1999 and April 30, 2000, respectively, due to a
decrease in technology products of $85,000 and other income of $19,000.
Operating expenses decreased by $1,523,000 from $2,372,900 to $849,900 for the
three months ended April 30, 1999 and April 30, 2000, respectively. The decrease
was principally due to decreased general and administrative expenses of
$1,190,300, marketing and product development expenses of $46,800 and research
and development of $67,000. In addition, the three months ended April 30, 1999
included non-recurring expenses of $200,000 related to the impairment of certain
mining assets. The decrease in general and administrative expenses was
principally the result of a decrease in amortization of prepaid consulting
expense of $821,200.
ATG's net loss decreased by $1,025,100 from $2,134,200 to $1,109,100 for the
three months ended April 30, 1999 and April 30, 2000, respectively, principally
due to decreased operating expenses of $1,523,000, partially offset by a
decrease in revenue of $104,000 and an increase in interest expense of $188,100.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED
APRIL 30, 2000 AND 1999
Revenue decreased by $227,500 from $426,700 to $199,200 for the nine months
ended April 30, 1999 and April 30, 2000, respectively, principally due to a
decrease in lease income of $50,000, licensing and other income of $123,500 and
technology products of $54,000.
Operating expenses decreased by $3,291,000 from $6,790,900 to $3,499,900 for the
nine months ended April 30, 1999 and April 30, 2000, respectively. The decrease
was principally due to decreased general and administrative expenses of
$1,472,800, marketing and product development expenses of $384,200 and research
and development of $175,800. In addition, the nine months ended April 30, 1999
included non-recurring expenses of $1,200,000 related to the impairment of
certain mining assets. The decrease in general and administrative expenses was
principally the result of a decrease in amortization of prepaid consulting
expense of $1,081,100.
Other expenses for the nine months ended April 30, 2000 increased by $442,200 to
$1,326,900 from $884,700 for the corresponding period of fiscal 1999 due to an
increase in interest expense.
ATG's net loss decreased by $2,593,000 from $7,220,600 to $4,627,600 at April
30, 1999 and April 30, 2000, respectively, principally due to decreased
operating expenses of $3,291,000, partially offset by a decrease in revenues of
$227,500 and an increase in other expense of $442,200.
11
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LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has incurred significant operating losses. The
ability of the Company to operate as a going concern is dependent upon its
ability to (1) obtain sufficient additional capital and (2) generate significant
revenues through its existing assets and operating business. The Company plans
to raise additional working capital through private offerings of debt and
equity. 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 execute its business plans or generate positive operating
results. These issues, among others, raise substantial doubt about the ability
of the Company to continue as a going concern.
Total assets decreased by $984,800 from $4,801,500 to $3,816,700 at July 31,
1999 and April 30, 2000, respectively. This decrease was the principal result of
a decrease in cash of $706,200 and an increase in accumulated depreciation and
amortization of $413,000, offset by an increase in inventory of $38,200 and
other current assets of $57,700.
Total liabilities remained the same at about $6,403,000 at July 31, 1999 and
April 30, 2000. However, there was an issuance of $1,000,000 principal amount of
convertible debentures and an increase in current liabilities of $525,500,
offset by the conversion of convertible debentures of $1,525,000.
The Company decreased the cash used in operations by $417,600 from $2,055,600 to
$1,638,000 for the nine months ended April 30, 1999 and April 30, 2000,
respectively. The principal source of working capital during the nine months
ended April 30, 2000 was the issuance of $1,000,000 of principal amount of
convertible debentures. During the comparable period in 1999, the principal
source of working capital was the issuance of $1,600,000 of principal amount of
convertible debentures, deposit of $200,000 on the sale of ATG Media, Inc. and
loans from related parties of $325,000.
In May 2000, the Company received $272,500 from the sale of stock and warrants
in a private transaction. Additional cash requirements for the remainder of the
fiscal year, in the absence of sales revenue, may be satisfied by the calling of
warrants issued in May, 2000. Further, the Company has entered into a letter of
intent for a $12 million equity line of credit.
Statements included in this Management's Discussion and Analysis and elsewhere
in this Form 10-QSB, in future filings by the Company with the Securities and
Exchange Commission and in the Company's press releases and oral statements made
with the approval of authorized executive officers, if the statements are not
historical or current facts, should be considered "forward-looking statements"
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
wishes to caution the reader not to place undue reliance on any such
forward-looking statements, which speak only as of the date made.
12
<PAGE>
PART II
OTHER INFORMATION
ITEM 2 CHANGES IN SECURITIES
(a) Not applicable.
(b) Not applicable.
(c) During February 2000, the Company sold $250,000 principal amount of 7%
convertible debentures to two sophisticated investors. The debentures are
convertible at the rate of the lower of $0.345 or 72.5% of the average of the
lowest three trading prices during the ten trading day period prior to
conversion. In addition, the investors each received warrants to purchase
250,000 shares of common stock at the lower of $0.23 or the average of the
lowest three trading prices during the ten trading day period prior to
conversion. A finder also received a warrant to purchase 50,000 shares of common
stock on the same term.
The foregoing transaction is claimed to be exempt from registration under the
Securities Act of 1933, as amended, pursuant to Section 4(2) thereof, as a
transaction not involving a public offering, in that the purchasers had full
access to all material information concerning the Company and were acquiring the
securities for investment and not with a view to distribution. There were no
underwriting discounts or commissions paid in connection with the transactions
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.
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
None.
13
<PAGE>
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/ LAWRENCE J. BRADY
---------------------
Lawrence J. Brady
Chairman of the Board and
Chief Executive Officer
Date: June 14, 2000
By: /s/ YAN LIN
-----------
Yan Lin
Acting Chief Financial Officer
Date: June 14, 2000
14
