<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 January 31, 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 March 14, 2000, the registrant had 37,436,959 shares of Common
Stock outstanding.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 Consolidated Financial Statements
Consolidated Balance Sheets
as of January 31, 2000 and July 31, 1999 3
Consolidated Statements of Operations
for the Three and Six Months ended January 31, 2000 and 1999 5
Consolidated Statements of Cash Flows
for the Six Months ended January 31, 2000 and 1999 6
Notes to the Consolidated Financial Statements 7
ITEM 2 Management's Discussion and Analysis 11
PART II OTHER INFORMATION
ITEM 2 Changes in Securities 13
ITEM 6 Exhibits and Reports on Form 8-K 13
Signatures 14
</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 RELFECT EVENTS
OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE HEREOF.
Page 2
<PAGE>
AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 2000 AND JULY 31, 1999
<TABLE>
<CAPTION>
ASSETS January 31, July 31,
2000 1999
--------------------- ---------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 59,828 $ 710,175
Accounts receivable, net of allowance for doubtful
accounts of $10,000 at January 31, 2000 and
July 31, 1999, respectively 68,854 47,130
Inventories, net 213,159 180,538
Other current assets 57,225 24,800
--------------------- ---------------------
Total current assets 399,066 962,643
--------------------- ---------------------
Property and equipment, net of accumulated
depreciation and amortization of $654,272 and $577,418
at January 31, 2000 and July 31, 1999, respectively 1,184,246 1,261,100
Notes receivable, net of imputed interest
of $752,993 and $824,000 at January 31, 2000
and July 31, 1999, respectively 1,747,007 1,676,000
Technology rights, net of accumulated
amortization of $1,000,000 and $800,000
at January 31, 2000 and July 31, 1999, respectively 200,000 400,000
Intangible assets, net of accumulated
amortization of $382,822 and $349,788
at January 31, 2000 and July 31, 1999, respectively 184,181 217,215
Other assets 168,622 176,609
Assets held for sale 98,414 107,885
--------------------- ---------------------
$ 3,981,536 $ 4,801,452
===================== =====================
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
Page 3
<PAGE>
AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS-CONTINUED
JANUARY 31, 2000 AND JULY 31, 1999
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT January 31, July 31,
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 645,274 $ 602,728
Accrued interest payable 350,137 227,801
Accrued payroll and related liabilities 148,225 190,171
Accrued professional fees 231,052 162,382
Other accrued liabilities 148,895 162,387
Amounts due to related parties 573,136 556,358
Current portion of notes payable 1,665,568 1,675,894
Current portion of convertible debentures 75,000 75,000
------------------ ------------------
Total current liabilities 3,837,287 3,652,721
Convertible debentures, net of current portion 2,300,000 2,750,000
------------------ ------------------
Total liabilities 6,137,287 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 creferred 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; 36,252,481 and 29,373,523 shares issued
and outstanding at January 31, 2000 and July 31, 1999,
respectively 36,252 29,374
Additional paid in capital 48,500,905 46,122,777
Stock subscriptions 185,625 196,820
Prepaid consulting expenses - (590,233)
Accumulated deficit (50,878,911) (47,360,385)
------------------ ------------------
Total stockholders' deficit (2,155,751) (1,601,269)
------------------ ------------------
$ 3,981,536 $ 4,801,452
================== ==================
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
4
<PAGE>
AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended January 31, Six Months Ended January 31,
2000 1999 2000 1999
---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Technology products $ 63,496 $ 55,548 $ 127,450 $ 96,480
Other 14,250 64,208 34,555 189,031
---------------- --------------- --------------- ---------------
Total operating revenues 77,746 119,756 162,005 285,511
---------------- --------------- --------------- ---------------
Operating Expenses:
General and administrative 952,680 1,448,727 1,967,436 2,249,967
Marketing and product development 101,986 416,565 197,844 535,239
Research and development 132,643 181,439 241,906 350,657
Mining operations 19,519 54,526 42,859 82,076
Loss on impairment of assets held for sale - 1,000,000 - 1,000,000
Amortization of technology rights 100,000 100,000 200,000 200,000
---------------- --------------- --------------- ---------------
Total operating expenses 1,306,828 3,201,257 2,650,045 4,417,939
---------------- --------------- --------------- ---------------
Other (Expense) Income:
Interest expense, net (497,789) (563,159) (1,030,486) (737,115)
Loss on investment in a joint venture - - - (39,341)
---------------- --------------- --------------- ---------------
(497,789) (563,159) (1,030,486) (776,456)
---------------- --------------- --------------- ---------------
Net loss from continuing operations before
discontinued operations (1,726,871) (3,644,660) (3,518,526) (4,908,884)
Discontinued operations - (100,831) - (177,575)
---------------- --------------- --------------- ---------------
Net loss attributable to common stockholders $ (1,726,871) $ (3,745,491) $ (3,518,526) $ (5,086,459)
================ =============== =============== ===============
Basic and fully diluted net loss per common share:
Continuing operations $ (0.05) $ (0.15) $ (0.11) $ (0.20)
Discontinued operations - (0.00) - (0.01)
---------------- --------------- --------------- ---------------
Net Loss $ (0.05) $ (0.15) $ (0.11) $ (0.21)
================ =============== =============== ===============
Weighted average number of
common shares outstanding 34,265,055 25,036,944 31,972,934 24,217,235
================ =============== =============== ===============
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
5
<PAGE>
AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JANUARY 31, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended January 31,
2000 1999
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,518,526) $ (5,086,459)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 286,325 287,958
Write-off of advances to officers and shareholders - 136,698
Stock issued and subscribed as consideration for services 137,393 47,880
Amortization of prepaid consulting 590,233 850,116
Imputed interest for notes payable and capital leases - 36,478
Imputed interest income on notes receivable (71,007) -
Imputed interest expense on convertible debentures 874,828 600,121
Stock options issued to consultants 198,690 -
Loss on impairment of assets held for sale - 1,000,000
Loss on investment in joint venture - 39,341
Changes in operating assets and liabilities:
Accounts receivable (21,724) 14,666
Inventories (32,621) (28,469)
Other current assets 8,596 8,482
Accounts payable and accrued liabilities 178,114 582,034
Amounts due to related parties 31,778 152,443
----------------- -----------------
Net cash used in operating activities (1,337,921) (1,358,711)
----------------- -----------------
Cash flows from investing activities:
Other - (3,557)
----------------- -----------------
Net cash used in investing activities - (3,557)
----------------- -----------------
Cash flows from financing activities:
Advances from/to officers/shareholders, net (15,000) 142,280
Proceeds from issuance of convertible debentures 712,900 1,105,913
Proceeds from notes receivable - 5,000
Payments on notes payable (10,326) (7,826)
Payments on capital lease obligation - (50,000)
Deposit on sale of discontinued operations - 200,000
----------------- -----------------
Net cash provided by financing activities 687,574 1,395,367
----------------- -----------------
Net cash flows from discontinued operations - 25,394
Net change in cash and cash equivalents (650,347) 58,493
Cash and cash equivalents, beginning of period 710,175 60,563
----------------- -----------------
Cash and cash equivalents, end of period $ 59,828 $ 119,056
================= =================
Supplemental disclosure of non-cash investing
and financing activities:
Conversion of debentures $ 1,200,000 $ -
================= =================
Sale of assets held for disposal for notes receivable, net $ - $ 1,272,500
================= =================
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
6
<PAGE>
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 six month periods ended
January 31, 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 270,000
and 32,746 for the six months ended January 31, 2000 and 1999,
respectively.
Page 7
<PAGE>
d. Reclassifications
Certain amounts in the January 31, 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. As part of the agreement, the Company may at its
discretion redeem the debentures at 135% of the principal amount owed
plus accrued interest. 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.
For the six months ended January 31, 2000, certain debenture holders
converted $1,050,000 of the 6% convertible debentures into 5,812,009
shares of common stock of the Company, 692,042 of which were issued in
February 2000. The conversion price was based on the average of the
market price for the five days prior to the conversion, discounted 25%,
as provided in the debenture agreements.
In January 2000, debenture holders with 3% convertible debenture
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 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 $200,000 for the
three and six month periods ended January 31, 2000 and 1999,
respectively.
Page 8
<PAGE>
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 agreement, 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, 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 $157,433 and $636,055 for the three months ended January 31, 2000
and 1999, respectively, and $590,233 and $850,116 for the six months
ended January 31, 2000 and 1999, respectively, in the accompanying
Consolidated Statements of Operations.
b. STOCK SUBSCRIPTIONS
During the six months ended January 31, 2000, the Company issued
588,500 shares of common stock valued at $182,445 which amount was
included within stock subscriptions as of July 31, 1999 and recorded
subscription for services of 115,000 shares valued at $53,250 based on
the common stock price on the date of the agreement. During the six
months ended January 31, 2000, the Company issued 50,000 shares of
common stock, valued at $32,000, out of the 115,000 shares referred to
above. As of January 31, 2000, the Company had not issued (i) 65,000
shares of common stock owed for services rendered through January 31,
2000, valued at $21,250, and (ii) 57,500 shares of common stock sold
for an aggregate of $14,375 cash received prior to July 31, 1999, and
(iii) 692,042 shares of common stock due in connection with the
conversion of a debenture in the principal amount of $150,000. These
amounts have been included within stock subscriptions in the
accompanying Consolidated Balance Sheets.
c. OPTIONS AND WARRANTS
During the six months ended January 31, 2000, the Company recognized
$198,690 of expense for stock options issued in prior years as the
vesting extended into the six month period ended January 31, 2000.
6. ASSETS HELD FOR SALE
Included in assets held for sale at January 31, 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), and one vehicle with a net
book value of $28,414.
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 $1,747,007 net of discount
of $752,993 as of January 31, 2000 and $1,676,000 net of discount of $
824,000 as of July 31, 1999. The amortization of the note discount of
$71,007 is included with interest expense in the accompanying
Statements of Operations.
Page 9
<PAGE>
7. RELATED PARTY TRANSACTIONS
During the six months ended January 31, 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, the Company issued additional
$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 $0.345 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 lower of $0.23 or the
average of the lowest three trading prices during the ten trading day
period prior to exercise. The conversion feature and the warrants vest
immediately.
9. SEGMENT INFORMATION
The Company's principal remaining business segment is Technology
Products (The Force and among others).
Financial information about industry segments as of and for the six
months ended January 31, 2000 and 1999, is as follows:
<TABLE>
<CAPTION>
Six Months Ended January 31,
2000 1999
---------- ----------
<S> <C> <C>
Operating revenues:
Technology products $ 127,450 $ 96,480
Corporate 29,141 138,599
Mining 5,414 50,432
---------- ----------
Total operating revenues $ 162,005 285,511
========== ==========
Operating Loss:
Technology product, including research
and development $ 512,300 $ 989,416
Mining, including impairment 37,445 1,031,644
Corporate expenses 1,938,295 2,111,368
---------- ----------
Net operating loss $2,488,040 $4,132,428
========== ==========
Identifiable assets:
Technology products $ 915,016 $1,353,805
Assets of discontinued operations - 127,602
Mining assets held for sale 98,414 1,643,030
Corporate and other 2,968,106 2,577,839
---------- ----------
Total 3,981,536 5,702,276
========== ==========
</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.
Page 10
<PAGE>
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 third or fourth quarters of fiscal 2000, although there can be
no assurance to this effect.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
Total operating revenue decreased by $42,000 from $119,800 to $77,800 for the
three months ended January 31, 1999 and January 31, 2000, respectively, due to a
decrease in lease income of $50,000 from Royal Gold, which terminated the
agreement with New Concept Mining in fiscal 1999, partially offset by an
increase in revenue of $8,000 from technology products.
Operating expenses decreased by $1,894,500 from $3,201,300 to $1,306,800 for the
three months ended January 31, 1999 and January 31, 2000, respectively. The
decrease was principally due to decreased general and administrative expenses of
$496,000 and marketing and product development expenses of $314,600. In
addition, the three months ended January 31, 1999 included a non-recurring
expenses of $1,000,000 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 $478,600.
ATG's net loss decreased by $2,018,600 from $3,745,500 to $1,726,900 for the
three months ended January 31, 1999 and January 31, 2000, respectively,
principally due to decreased operating expenses of $1,894,500 and interest
expense of $65,400.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JANUARY 31, 2000 AND 1999
Revenue decreased by $123,500 from $285,500 to $162,000 for the six months ended
January 31, 1999 and January 31, 2000, respectively, principally due to a
decrease in lease income of $50,000 and licensing and other income of $104,500,
partially offset by an increase in technology products of $31,000.
Operating expenses decreased by $1,767,900 from $4,417,900 to $2,650,000 for the
six months ended January 31, 1999 and January 31, 2000, respectively. The
decrease was principally due to decreased general and administrative expenses of
$282,500 and marketing and product development expenses of $337,400. In
addition, the six months ended January 31, 1999 included a non-recurring
expenses of $1,000,000 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 $259,900.
Other expenses for the six months ended January 31, 2000 increased by $254,000
to $1,030,500 from $776,500 for the corresponding period of fiscal 1999 due to
an increase in interest expense.
ATG's net loss decreased by $1,568,900 from $5,086,500 to $3,518,500 at January
31, 1999 and January 31, 2000, respectively, principally due to decreased
operating expenses of $1,767,900 and discontinued operations of $177,600, offset
by a decrease in revenues of $123,500 and an increase in other expense of
$254,000.
Page 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 $819,900 from $4,801,500 to $3,981,600 at July 31,
1999 and January 31, 2000, respectively. This decrease was the principal result
of a decrease in cash of $650,300 and an increase in accumulated depreciation
and amortization of $276,900, offset by an increase in inventory of $32,600 and
other current assets of $32,400.
Total liabilities decreased by $265,400 from $6,402,700 to $6,137,300 at July
31, 1999 and January 31, 2000, respectively. This decrease was principally due
to the conversion of convertible debentures of $1,200,000, offset by issuance of
$750,000 convertible debentures and an increase in current liabilities of
$184,600.
The Company decreased the cash used in operations by $20,800 from $1,358,700 to
$1,337,900 for the six months ended January 31, 1999 and January 31, 2000,
respectively. The principal source of working capital during the six months
ended January 31, 2000 was the issuance of $750,000 of principal amount of
secured convertible debentures. During the comparable period in 1999, the
principal source of working capital was the issuance of $1,300,000 of principal
amount of convertible debentures, deposit of $200,000 on the sale of ATG Media,
Inc. and loans from related parties of $142,500.
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.
Page 12
<PAGE>
PART II
OTHER INFORMATION
ITEM 2 CHANGES IN SECURITIES
(a) Not applicable.
(b) Not applicable.
(c) During January 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 $0.23 or 72.5% of the average of the
lowest three trading prices during the ten trading day period prior to
conversion.
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.
The Company filed one Report on Form 8-K dated August 30, 1999
reporting under Item 4.
Page 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: March 16, 2000
By: /s/ YAN LIN
-----------------------
Yan Lin
Acting Chief Financial Officer
Date: March 16, 2000
Page 14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 59,828
<SECURITIES> 0
<RECEIVABLES> 68,854
<ALLOWANCES> 0
<INVENTORY> 213,159
<CURRENT-ASSETS> 399,066
<PP&E> 1,184,246<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,981,536
<CURRENT-LIABILITIES> 3,837,287
<BONDS> 2,300,000
0
378
<COMMON> 36,252
<OTHER-SE> (2,192,381)
<TOTAL-LIABILITY-AND-EQUITY> 3,981,536
<SALES> 127,450
<TOTAL-REVENUES> 162,005
<CGS> 0<F1>
<TOTAL-COSTS> 2,650,045
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,030,486
<INCOME-PRETAX> (3,518,526)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,518,526)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,518,526)
<EPS-BASIC> (0.11)
<EPS-DILUTED> (0.11)
<FN>
<F1> Not calculated
<F2> Net of depreciation and amortization
</TABLE>
