UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q




x
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period ended October 31, 2008




o
            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
      Employerincorporation
      or organization)
              
              Identification
      No.)





412 W
Bolt St.


Ft.
Worth, TX 76113


(Address
of principal executive offices) (zip code)





Issuer's
telephone number: (817) 927-5333







Securities
registered under Section 12(b) of the Exchange Act:





Title of
each class Name of exchange on which registered





None





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during
the preceding 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.  xYes   ̈No





Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer  ̈
                  Accelerated
      filer  ̈
                  Non-accelerated
      filer  ̈
                  Smaller
      reporting company x(Do
      not check if a smaller reporting
company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


 ̈Yes xNo





AMERICAN
TECHNOLOGIES GROUP, INC.





INDEX





PagePart I
                                    
                                    Financial
      InformationItem
      1.
                                    Financial
      Statements (unaudited)Condensed
      Consolidated Balance Sheets as of October 31, 2008 and July 31,
      2008
                                    3Condensed
      Consolidated Statements of Operations for the Three Months Ended October
      31, 2008 and 2007
                                    4Condensed
      Consolidated Statements of Stockholders' Equity for the Year Ended July
      31, 2008 and the Three Months Ended October 31, 2008
                                    5Condensed
      Consolidated Statements of Cash Flows for the Three Months Ended October
      31, 2008 and 2007
                                    6Notes
      to Condensed Consolidated Financial Statements
                                    7Item
      2.
                                    Management's
      Discussion and Analysis of  Financial Condition and Results of
      Operations
                                    14Item
      3.
                                    Quantitative
      and Qualitative Disclosures About Market Risk
                                    18Item
      4.
                                    Controls
      and Procedures
                                    18Part II
                                    
                                    Other
      InformationItem
      1.
                                    Legal
      Proceedings
                                    19Item
      4.
                                    Submission
      of Matters to a Vote of Security Holders
                                    19Item
      6.
                                    Exhibits
                                    19Signatures
                                    20





PART
I. FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS





IN
ADDITION TO HISTORICAL INFORMATION, THIS QUARTERLY REPORT CONTAINS
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





AMERICAN
TECHNOLOGIES GROUP, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS


(UNAUDITED)





October
      31,
                    
                    
                    July
      31,2008
                    
                    
                    2008ASSETSCurrent
      assets:Cash
      and cash equivalents
                    
                    $
                    16,862
                    
                    
                    $
                    4,541Current
      assets from discontinued operations
                    
                    
                    -
                    
                    
                    
                    11,455,960Total
      Current Assets
                    
                    
                    16,862
                    
                    
                    
                    11,460,501Other
      long-term assets from discontinued operations
                    
                    
                    -
                    
                    
                    
                    5,892,535TOTAL
      ASSETS
                    
                    $
                    16,862
                    
                    
                    $
                    17,353,036LIABILITIES
      AND DEFICIENCY IN STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                    
                    $
                    508,579
                    
                    
                    $
                    508,579Accrued
      expenses
                    
                    
                    1,882,963
                    
                    
                    
                    5,552,591Convertible
      notes payable, current portion
                    
                    
                    -
                    
                    
                    
                    10,262,532Current
      liabilities from discontinued operations
                    
                    
                    -
                    
                    
                    
                    6,942,359Total
      Current Liabilities
                    
                    
                    2,391,542
                    
                    
                    
                    23,266,061Total
      liabilities
                    
                    
                    2,391,542
                    
                    
                    
                    23,266,061Deficiency
      in Stockholders' Equity:Preferred
      stock, series A; 10,000,000 shares authorized; 376,794 shares issued and
      outstanding
                    
                    
                    377
                    
                    
                    
                    377Preferred
      stock, series B; 500,000 shares authorized; no shares issued and
      outstanding
                    
                    
                    -
                    
                    
                    
                    -Preferred
      stock, series C; 2,000 shares authorized; no shares issued and
      outstanding
                    
                    
                    -
                    
                    
                    
                    -Preferred
      stock, series D; 900,000 shares authorized; no shares issued and
      outstanding
                    
                    
                    -
                    
                    
                    
                    -Preferred
      stock, series E; 25,000 shares authorized; 1,500 shares issued and
      outstanding
                    
                    
                    2
                    
                    
                    
                    2Preferred
      stock, series F; 900,000 shares authorized; no shares issued and
      outstanding
                    
                    
                    -
                    
                    
                    
                    -Preferred
      stock; 50,000,000 shares authorized; no shares issued and
      outstanding
                    
                    
                    -
                    
                    
                    
                    -Common
      stock; 1,000,000,000 shares authorized $.001 par value; 9,883,406 shares
      issued and outstanding
                    
                    
                    9,883
                    
                    
                    
                    9,883Common
      stock to be issued
                    
                    
                    14
                    
                    
                    
                    14Stock
      subscription
                    
                    
                    6,750
                    
                    
                    
                    6,750Additional
      paid-in capital
                    
                    
                    78,562,994
                    
                    
                    
                    78,562,994Accumulated
      deficit
                    
                    
                    (80,954,700
                    )
                    
                    
                    (84,493,045
                    )Total
      Deficiency in Stockholders' Equity
                    
                    
                    (2,374,680
                    )
                    
                    
                    (5,913,025
                    )TOTAL
      LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
                    
                    $
                    16,862
                    
                    
                    $
                    17,353,036





The
accompanying footnotes are an integral part of these unaudited condensed
consolidated financial statements.





3





AMERICAN
TECHNOLOGIES GROUP, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


FOR THE
QUARTERS ENDED OCTOBER 31, 2008 AND 2007


(UNAUDITED)





2008
                    
                    
                    2007Net
      sales
                    
                    $
                    -
                    
                    
                    $
                    48Cost
      of sales
                    
                    
                    -
                    
                    
                    
                    -Gross
      profit
                    
                    
                    -
                    
                    
                    
                    48Selling,
      general and administrative expenses
                    
                    
                    366,269
                    
                    
                    
                    177,262Operating
      income
                    
                    
                    (366,269
                    )
                    
                    
                    (177,214
                    )Other
      income (expense):Interest
      income
                    
                    
                    196,553
                    
                    
                    
                    1,684Interest
      expense
                    
                    
                    (155,385
                    )
                    
                    
                    (325,072
                    )Financing
      costs
                    
                    
                    -
                    
                    
                    
                    (587,825
                    )Total
      other income (expense)
                    
                    
                    41,168
                    
                    
                    
                    (911,213
                    )Loss
      from continuing operations before income taxes
                    
                    
                    (325,101
                    )
                    
                    
                    (1,088,427
                    )Provision
      for income taxes
                    
                    
                    -
                    
                    
                    
                    -Net
      loss from continuing operations
                    
                    
                    (325,101
                    )
                    
                    
                    (1,088,427
                    )Discontinued
      operations:Income
      from discontinued operations
                    
                    
                    324,165
                    
                    
                    
                    322,088Gain
      on sale of assets, net of taxes
                    
                    
                    3,542,281
                    
                    
                    
                    -Net
      income from discontinued operations
                    
                    
                    3,866,446
                    
                    
                    
                    322,088Net
      income (loss)
                    
                    
                    3,541,345
                    
                    
                    
                    (766,339
                    )Preferred
      dividend
                    
                    
                    3,000
                    
                    
                    
                    3,000Net
      income (loss) attributable to common shareholders
                    
                    $
                    3,538,345
                    
                    
                    $
                    (769,339
                    )Net
      income (loss) per share, basic and diluted:Continuing
      operations
                    
                    $
                    (0.02
                    )
                    
                    $
                    (0.07
                    )Discontinued
      operations
                    
                    
                    0.02
                    
                    
                    
                    0.02Gain
      from divestiture of discontinued operations
                    
                    
                    0.26
                    
                    
                    
                    -Net
      income (loss) per share
                    
                    $
                    0.26
                    
                    
                    $
                    (0.05
                    )Weighted
      average shares outstanding - basic and diluted
                    
                    
                    13,557,480
                    
                    
                    
                    14,399,885





The
accompanying footnotes are an integral part of these unaudited condensed
consolidated financial statements.


4


AMERICAN
TECHNOLOGIES GROUP, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY


FOR THE
YEAR ENDED JULY 31, 2008 AND THE QUARTER ENDED OCTOBER 31, 2008







Preferred
      Stock
                    
                    
                    Preferred
      Stock
                    
                    
                    
                    
                    
                    
                    
                    
                    Common
      StockSeries
      A
                    
                    
                    Series
      E
                    
                    
                    Common
      Stock
                    
                    
                    To
      be Issued
                    
                    
                    Additional
                    
                    
                    Stock
                    
                    
                    AccumulatedShares
                    
                    
                    Amount
                    
                    
                    Shares
                    
                    
                    Amount
                    
                    
                    Shares
                    
                    
                    Amount
                    
                    
                    Shares
                    
                    
                    Amount
                    
                    
                    Paid
      in Capital
                    
                    
                    Subscriptions
                    
                    
                    Deficit
                    
                    
                    TotalBalance,
      July 31, 2007
                    
                    
                    376,794
                    
                    
                    $
                    377
                    
                    
                    
                    1,500
                    
                    
                    $
                    2
                    
                    
                    
                    9,701,166
                    
                    
                    $
                    9,701
                    
                    
                    
                    13,719
                    
                    
                    $
                    14
                    
                    
                    $
                    78,562,994
                    
                    
                    $
                    6,750
                    
                    
                    $
                    (79,004,799
                    )
                    
                    $
                    (424,961
                    )Exercise
      of Stock Options
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    182,240
                    
                    
                    
                    182
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    182Preferred
      dividend
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (12,000
                    )
                    
                    
                    (12,000
                    )Net
      loss
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (5,476,246
                    )
                    
                    
                    (5,476,246
                    )Balance,
      July 31, 2008
                    
                    
                    376,794
                    
                    
                    
                    377
                    
                    
                    
                    1,500
                    
                    
                    
                    2
                    
                    
                    
                    9,883,406
                    
                    
                    
                    9,883
                    
                    
                    
                    13,719
                    
                    
                    
                    14
                    
                    
                    
                    78,562,994
                    
                    
                    
                    6,750
                    
                    
                    
                    (84,493,045
                    )
                    
                    
                    (5,913,025
                    )Preferred
      dividend
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (3,000
                    )
                    
                    
                    (3,000
                    )Net
      income
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    3,541,345
                    
                    
                    
                    3,541,345Balance,
      October 31, 2008
                    
                    
                    376,794
                    
                    
                    $
                    377
                    
                    
                    
                    1,500
                    
                    
                    $
                    2
                    
                    
                    
                    9,883,406
                    
                    
                    $
                    9,883
                    
                    
                    
                    13,719
                    
                    
                    $
                    14
                    
                    
                    $
                    78,562,994
                    
                    
                    $
                    6,750
                    
                    
                    $
                    (80,954,700
                    )
                    
                    $
                    (2,374,680
                    )





The
accompanying footnotes are an integral part of these unaudited
condensed consolidated financial statements.


5





AMERICAN
TECHNOLOGIES GROUP, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR THE
QUARTERS ENDED OCTOBER 31, 2008 AND 2007







2008
                
                
                2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
                
                $
                3,541,345
                
                
                $
                (766,339
                )Adjustments
      to reconcile net income (loss) to net cash (used in) provided by operating
      activities:Gain
      from divestiture of discontinued operations
                
                
                (3,542,281
                )
                
                
                -Net
      income from discontinued operations, net of tax
                
                
                (324,165
                )
                
                
                (322,088
                )Changes
      in accounts payable and accrued expenses
                
                
                (82,881
                )
                
                
                (15,528
                )Amortization
      of discount
                
                
                39,782
                
                
                
                587,825Net
      cash used in operating activities - continuing operations
                
                
                (368,200
                )
                
                
                (516,130
                )Net
      income from discontinued operations, net of tax
                
                
                3,866,446
                
                
                
                322,088Gain
      from divestiture of discontinued operations
                
                
                (3,542,281
                )
                
                
                -Net
      cash used by discontinued operations
                
                
                (448,050
                )
                
                
                569,352Net
      cash (used in) provided by operating activities - discontinued
      operations
                
                
                (123,885
                )
                
                
                891,440Net
      cash (used in) provided by operating activities
                
                
                (492,085
                )
                
                
                375,310CASH
      FLOWS FROM INVESTING ACTIVITIES:Cash
      paid on sale of assets - discontinued operations
                
                
                (1,059,986
                )
                
                
                -Purchases
      of property and equipment
                
                
                (18,387
                )
                
                
                (19,347
                )Net
      cash used in investing activities
                
                
                (1,078,373
                )
                
                
                (19,347
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      proceeds on revolving line of credit
                
                
                374,406
                
                
                
                -Payments
      on notes
                
                
                (200,000
                )
                
                
                (606,508
                )Net
      cash provided by (used in) financing activities
                
                
                174,406
                
                
                
                (606,508
                )Net
      decrease in cash
                
                
                (1,396,052
                )
                
                
                (250,545
                )Cash
      and cash equivalents, beginning of year
                
                
                1,412,914
                
                
                
                710,121Cash
      and cash equivalents, end of year
                
                $
                16,862
                
                
                $
                459,576Cash
      paid for:Interest
                
                $
                224,898
                
                
                $
                317,264SUPPLEMENTAL
      DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:Assets
      sold in exchange for relief of notes payable
                
                $
                10,515,813
                
                
                $
                -





The
accompanying footnotes are an integral part of these unaudited
condensed consolidated financial statements.


6


AMERICAN
TECHNOLOGIES GROUP, INC.





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





October
31, 2008 and 2007





(UNAUDITED)




NOTE
1 - ORGANIZATION AND LINE OF BUSINESS





American
Technologies Group, Inc. (the "Company", "ATG", “we”, “us”, “our”), a Nevada
corporation, was 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. The Company's proprietary catalyst
technology may improve many commercial products including detergents and
cosmetics.





The
Company largely ceased operations during 2001 and had begun focusing efforts on
restructuring and refinancing. In fiscal year ended July 31, 2005, we
successfully continued these efforts to settle various pending lawsuits, reduce
outstanding liabilities, acquire an equity funding facility to finance
acquisition of new products, entities and technologies, and otherwise strengthen
the business.





On
September 7, 2005, ATG, through a newly formed wholly owned subsidiary, Omaha
Holdings Corp. ("Omaha"), entered into a Share Purchase Agreement ("Agreement")
with the stockholders of North Texas Steel Company, Inc. ("North Texas"), a
privately-held company. Effective with the Agreement, all previously outstanding
common stock owned by North Texas's shareholders was exchanged for $11,000,000.
The transaction is accounted for using the purchase method of accounting in
accordance with Statement of Financial Accounting Standards (SFAS) No.141,
“Business Combinations.” The results of operations for North Texas have been
included in the audited consolidated statements of operations since the date of
acquisition.




North
Texas Steel Company, Inc., is an American Institute of Steel Construction
certified structural steel fabrication company and provides fabrication and
detailing of structural steel components for commercial buildings, office
buildings, convention centers, sports arenas, airports, schools, churches and
bridges. North Texas fabricates structural steel from two locations in Fort
Worth, Texas. It contracts with and grants credit to customers primarily located
in southwestern United States.





On April
25, 2006, ATG, through a newly formed wholly owned subsidiary, Whitco Poles,
Inc. (“Whitco”), acquired certain assets of Whitco Company, LP. The transaction
is accounted for using the purchase method of accounting in accordance with SFAS
No.141, “Business Combinations.” The results of operations for the Whitco
Company, LP assets have been included in the audited consolidated statements of
operations since the date of acquisition.





Whitco
Company has been a provider of light poles to commercial and industrial markets
worldwide. Whitco provides marketing expertise and engineering knowledge to a
nationwide contracted lighting representative base as well as Original Equipment
Manufacturer (OEM) customers.





On
October 20, 2008, at a special meeting of shareholders, we received the approval
of our shareholders to sell substantially all of the assets of Omaha Holdings
Corp., to a subsidiary of Laurus Master Fund as described in our Definitive
Proxy of September 16, 2008. The transaction as described in the Definitive
Proxy was closed on October 21, 2008. As a result of the transaction, the
Company is without operating assets. The accompanying financial statements
present on a consolidated basis the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.





The
accompanying unaudited condensed consolidated financial statements present
on a consolidated basis the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.





A summary
of the significant accounting policies applied in the preparation of the
accompanying unaudited condensed consolidated financial statements
follows.


7


AMERICAN TECHNOLOGIES GROUP,
INC.
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 October
31, 2008 and 2007
 
 (UNAUDITED)
  Basis
of Presentation
  The
accompanying unaudited condensed consolidated financial statements as of October
31, 2008 and for the three month periods ended October 31, 2008 and 2007 have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission, including Form 10Q. The information
furnished herein reflects all adjustments (consisting of normal recurring
accruals and adjustments), which are, in the opinion of management, necessary to
fairly present the operating results for the respective periods. Certain
information and footnote disclosures normally present in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted pursuant to such rules and
regulations. The Company believes that the disclosures provided are adequate to
make the information presented not misleading. These unaudited
condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and explanatory notes for the
year ended July 31, 2008 as disclosed in the company's 10-K for that year as
filed with the SEC, as it may be amended.
  The
results of the three months ended October 31, 2008 are not necessarily
indicative of the results to be expected for the pending full year ending July
31, 2009.
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Basis of
Consolidation
 
 Our
unaudited condensed consolidated financial statements and the accompanying
notes, which are prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”), include American Technologies Group, Inc. and all
subsidiaries. We consolidate all majority-owned and controlled subsidiaries as
well as variable interest entities in which we are the primary beneficiary as
defined by Financial Accounting Standards Board (“FASB”) Interpretation
No. 46R, “Consolidation of Variable Interest Entities, an interpretation of
ARB No. 51.”  We did not participate in any variable interest entities
for the period presented.
 
 The
accompanying unaudited condensed consolidated financial statements present
on a consolidated basis the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
 
 Liquidity
  As shown
in the accompanying unaudited condensed consolidated financial statements,
the Company incurred net loss from continuing operations of $325,101 and
$1,088,427 for the quarters ended October 31, 2008 and 2007, respectively. The
Company's current liabilities, on a consolidated basis, exceeded its current
assets by $2,374,680 as of October 31, 2008.
  Income
Taxes
 
 In
accordance with SFAS No. 109, deferred income taxes are the result of the
expected future tax consequences of temporary differences between the financial
statement and tax bases of assets and liabilities. Generally, deferred income
taxes are classified as current or non-current in accordance with the
classification of the related asset or liability. Those not related to an asset
or liability are classified as current or non-current depending on the periods
in which the temporary differences are expected to reverse. A valuation
allowance is provided against deferred income tax assets in circumstances where
management believes the recoverability of a portion of the assets is not
reasonably assured.
  8
  AMERICAN TECHNOLOGIES GROUP,
INC.
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 October
31, 2008 and 2007
 
 (UNAUDITED)
  Cash
Flows Presentation
 
 For
purposes of the statement of cash flows, time deposits that mature in three
months or less are considered cash and cash equivalents.
 
 Use
of Estimates
 
 In the
normal course of preparing financial statements in conformity with accounting
principles generally accepted in the United States of America, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates made by management
include the collectability of accounts receivable, the realizability of
inventories, the amounts due under accounts payable, the valuation allowance of
deferred tax assets and the fair value of our equity instruments. Actual results
could differ from those estimates.
 
 Basic
and Diluted Income (Loss) Per Share
 
 Basic and
diluted loss per common share is based upon the weighted average number of
common shares outstanding during the fiscal year computed under the provisions
of SFAS No. 128, Earnings Per Share. Common share equivalents were not
considered in 2007 as they would be anti-dilutive. The number of shares
outstanding in the computation of loss per share is comprised of the
following:
  2008
                                            
                                            
                                            2007Common
      shares outstanding
                                            
                                            
                                            9,883,406
                                            
                                            
                                            
                                            9,714,885Options
      shares deemed outstanding
                                            
                                            
                                            3,674,074
                                            
                                            
                                            
                                            4,685,000Total
      basic shares outstanding for computation
                                            
                                            
                                            13,557,480
                                            
                                            
                                            
                                            14,399,885Common
      share equivalents
                                            
                                            
                                            -Total
      diluted shares outstanding for computation
                                            
                                            
                                            13,557,480
 
 Reclassifications
 
 Certain
reclassifications have been made in prior year's financial statements to conform
to classifications used in the current year.
  9
  AMERICAN TECHNOLOGIES GROUP,
INC.
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 October
31, 2008 and 2007
 
 (UNAUDITED)
  NOTE
3 – FINANCIAL CONDITION AND GOING CONCERN
 
 To date,
ATG has been unable to generate significant cash flows from operations. As a
result, we have funded our operations through investor financing, including
sales of common stock and the exercise of warrants and options. The Company has
also used debt to fund its operations. Until such time as we are able to
generate significant cash flows from operations through increased sales of our
products, we will be required to continue our reliance on investor financing and
debt to fund our operations.
 
 Our
unaudited condensed consolidated financial statements have been presented
on the basis that we are a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. As
shown in the consolidated financial statements, during the quarter ended October
31, 2008, we incurred a net loss from continuing operations of $325,101. Since
its inception, the Company has incurred significant operating losses totaling in
excess of $80 million. These factors, among others, raise substantial doubt
about our ability to continue as a going concern.
  The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should we be unable to
continue as a going concern. Our continuation as a going concern is dependent
upon our ability to generate sufficient cash flow to meet our obligations on a
timely basis, to obtain additional financing, and ultimately to attain
successful operations. Management is continuing its efforts to obtain additional
funds so that we can meet our obligations and sustain operations. Management
continues to focus on improving the Company’s results of operations by
increasing sales and decreasing its cost structure to improve cash flows from
operations.
  NOTE 4
- CONCENTRATIONS
 
 Financial
instruments which potentially subject us to concentrations of credit risk
consist principally of cash, and cash equivalents and accounts
receivable.
 
 We
maintain our cash and cash equivalents in bank deposit accounts which, at times,
exceed federally insured limits. The Company has not experienced any losses in
these accounts. ATG believes it is not exposed to any significant credit risk on
cash and cash equivalents.
  10
  AMERICAN TECHNOLOGIES GROUP,
INC.
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 October
31, 2008 and 2007
 
 (UNAUDITED)
  NOTE 5
- CONVERTIBLE DEBENTURES AND OTHER NOTES PAYABLE
 
 TRIGGERING
EVENTS THAT ACCELERATE OR INCREASE A DIRECT FINANCIAL OBLIGATION
 
 As a
result of our failure to timely pay our current obligations due to Laurus Master
Fund, Ltd. ("Laurus") under our Secured Convertible Term B Note in the amount of
$2,000,000, we received notification on January 31, 2008 from Laurus that
certain events of default had occurred and are continuing beyond any applicable
cure or grace period with respect to all of our secured obligations due to
Laurus. We also received a letter from LV Administrative Services, Inc. ("LV
Administrative Services"), acting in the capacity of administrative and
collateral agent for Laurus, that demands the immediate payment of all past due
amounts owed to Laurus by February 1, 2008. The amounts demanded totaled
$13,580,810 ($10,350,000 in principal amortization, $96,777 in accrued interest,
and $3,134,033 in Default Fees). We did not make such payments, and,
accordingly, Laurus may take all steps it deems necessary to protect Laurus'
interests, including the enforcement and exercise of any and all of its rights,
remedies, liens and security interests available to it.
 
 In
connection with our financing with Laurus, we executed a pledge agreement in
favor of Laurus granting them a first priority security interest in the common
stock of each of our subsidiaries. We also executed a security agreement that
granted Laurus a first priority security interest in all the respective goods,
inventory, contractual rights and general intangibles, receivables, documents,
instruments, chattel paper, intellectual property owned by us and each of our
subsidiaries. The security agreement and stock pledge agreement state that if an
"event of default" occurs under any agreement with Laurus, it has the right to
take possession of the collateral, to operate our business using the collateral,
and has the right to assign, sell, lease or otherwise dispose of and deliver all
or any part of the collateral, at public or private sale or otherwise to satisfy
its obligations under these agreements. As a consequence of our default, Laurus
has the right to pursue any of the remedies set forth in the pledge and security
agreements. Likewise, GMF and GSSF have similar remedies available to
them.
  As a
result of our default and ongoing losses, our Board and management has
determined that it is advisable and in the best interests of the Company and its
stockholders to sell all or substantially all of the assets of Omaha Holdings
Corp., a wholly owned subsidiary of Company to a subsidiary of Laurus Master
Fund, which assets consist primarily of the issued and outstanding stock of two
wholly owned subsidiaries of Omaha Holdings Corp. (“Sale”). Thus, on April 4,
2008, the Board approved the Sale by majority vote and resolved to refer the
matter to our stockholders for their approval.
 
 On
October 20, 2008, at a special meeting of shareholders, we received the approval
of our shareholders to sell substantially all of the assets of Omaha Holdings
Corp., to a subsidiary of Laurus Master Fund as described in our Definitive
Proxy of September 16, 2008. The transaction as described in the Definitive
Proxy was closed on October 21, 2008 resulting in the satisfaction of
$13,580,810 plus accrued interest and fees payable to Laurus Fund and/or its
affiliates and the satisfaction of the outstanding Gryphon
Debt.
  11
  AMERICAN TECHNOLOGIES GROUP,
INC.
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 October
31, 2008 and 2007
 
 (UNAUDITED)
  NOTE
6 – DIVESTITURE
 
 On
October 21, 2008, the Company completed the sale of all the assets of Omaha
Holdings Corp. including the operating assets of North Texas and Whitco to a
subsidiary of Laurus Master Fund as described in the Definitive Proxy dated
September 16, 2008.  As a result of the transaction, the Company is
without operating assets.  The Omaha Holdings Corp., North Texas and
Whitco businesses are accounted for as discontinued operations in accordance
with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets.”  Accordingly, the Omaha Holdings Corp., North Texas and
Whitco businesses are reflected as discontinued operations in the unaudited
condensed consolidated financial statements and related notes for all periods
presented.   The net revenues of North Texas and Whitco for the
three-month period ended October 31, 2008 and 2007 amounted to $8,629,272 and
$8,737,272, respectively.  The income from operations of North Texas
and Whitco for the three-month period ended October 31, 2008 and 2007 amounted
to $324,165 and $322,088, respectively.
 
 The sales
proceeds used to compute the gain on sale of assets are as follows:
 
 Principal
      due on revolving line of credit
                                
                                $
                                7,349,438Principal
      due on term loans
                                
                                
                                2,787,500Liability
      assumed for Gryphon note
                                
                                
                                300,000Default
      fees
                                
                                
                                3,434,033Total
      sales proceeds
                                
                                $
                                13,870,971
 
 The basis
of net assets sold totaled $10,328,690.  The resulting amount of
$3,542,281 is reflected as a gain from divestiture of discontinued
operations.
 
 The major
classes of discontinued assets and liabilities included in the unaudited
condensed consolidated balance sheet at October 31, 2008 are shown
below.
  July 31, 2008AssetsCash
                            
                            $
                            1,408,373Accounts
      receivable, net
                            
                            
                            4,766,652Retainage
      receivable
                            
                            
                            1,862,934Inventory
                            
                            
                            3,192,419Cost
      and estimated earnings
                            
                            
                            126,224Prepaid
      expenses
                            
                            
                            99,358Current
      assets
                            
                            
                            11,455,960Property,
      plant and equipment, net
                            
                            
                            2,502,165Goodwill
                            
                            
                            3,390,370Total
      assets of Discontinued Operations
                            
                            $
                            17,348,495LiabilitiesAccounts
      payable
                            
                            $
                            3,856,554Accrued
      expenses
                            
                            
                            1,011,467Billings
      in excess of cost
                            
                            
                            2,074,338Total
      Liabilities of Discontinued Operations
                            
                            $
                            6,942,359
 12
  AMERICAN TECHNOLOGIES GROUP,
INC.
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 October
31, 2008 and 2007
 
 (UNAUDITED)
 
 NOTE
7 – WARRANTS
 
 The
following table summarizes the changes in warrants outstanding at October 31,
2008:
  Warrants Outstanding
                    
                    
                    Warrants ExercisableExercise Prices
                    
                    
                    Number
                      Outstanding
                    
                    
                    Weighted
                      Average
                      Remaining
                      Constractual
                      Life (Years)
                    
                    
                    Weighted
                      Average
                      Exercise Price
                    
                    
                    Number
                      Exercisable
                    
                    
                    Weighted
                      Average
                      Exercise Price$
                    0.001
                    
                    
                    
                    3,051,482
                    *
                    
                    
                    N/A
                    
                    
                    $
                    0.001
                    
                    
                    
                    3,051,482
                    
                    
                    $
                    0.001
  *Warrant issued does not have a
contractual life.
 
 For the
three months ended October 31, 2008, transactions involving the Company’s
warrants are summarized as follows:
  Number of Shares
                                      
                                      
                                      Weighted Average
                                        Price Per ShareOutstanding
      at July 31, 2008
                                      
                                      
                                      18,382,876
                                      
                                      
                                      $
                                      0.342Expired
                                      
                                      
                                      (1,610,000
                                      )
                                      
                                      
                                      (0.006
                                      )Canceled
      due to divestiture of discontinued operations
                                      
                                      
                                      (13,721,394
                                      )
                                      
                                      
                                      (0.457
                                      )Outstanding
      at October 31, 2008
                                      
                                      
                                      3,051,482
                                      
                                      
                                      $
                                      0.001
  13
  ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION
 
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  Discussions
of certain matters in this Quarterly Report on Form 10-Q may contain
forward-looking statements which relate to future events or our future financial
performance. In this Form 10-Q, forward-looking statements are generally
identified by the words “anticipate”, “plan”, “believe”, “expect”, “estimate”,
and the like. These statements are only predictions and involve known and
unknown risks, uncertainties, and other factors, including the risks in the
section entitled “Risk Factors” in the Company’s Annual Report, Form 10-K, filed
for the year ended July 31, 2008.
 
 The
following discussion is intended to provide a better understanding of the
significant changes in trends relating to the Company’s financial conditions and
results of operations. Management’s Discussion and Analysis should be read in
conjunction with the accompanying Condensed Consolidated Financial Statements
and Notes thereto.
  GENERAL
OVERVIEW
  General
  We are a
Nevada corporation. We were formed on September 27, 1988. Prior to 2001 we
engaged in the development, commercialization and sale of products and systems
using patented and proprietary technologies including catalyst technology and
water purification.
  We
largely ceased operations during 2001 and began focusing efforts on
restructuring and refinancing. In fiscal year ended July 31, 2005, we
successfully continued these efforts by settling various pending law suits and
reducing outstanding liabilities. In September 2005, we entered into various
financing transactions and acquired North Texas Steel Company Inc. (“North
Texas”).
 
 On
October 20, 2008, at a special meeting of shareholders, we received the approval
of our shareholders to sell substantially all of the assets of Omaha Holdings
Corp., to a subsidiary of Laurus Master Fund as described in our Definitive
Proxy of September 16, 2008. The transaction as described in the Definitive
Proxy was closed on October 21, 2008 resulting in the satisfaction of
$13,580,810 plus accrued interest and fees payable to Laurus Fund and/or its
affiliates and the satisfaction of the outstanding Gryphon Debt. As a result of
the transaction, the Company is without operating assets.
  Overview
  THE
DISCUSSION BELOW REFLECTS THE FACT THAT THE COMPANY OWNED 100% OF OMAHA HOLDINGS
INCLUDING THE OPERATING ASSETS OF, NORTH TEXAS AND WHITCO THROUGH OCTOBER 20,
2008, BUT SHOULD BE READ WITH CAUTION AS THE COMPANY NO LONGER OWNS ANY INTEREST
IN THE OPERATING BUSINESSES OF NORTH TEXAS OR WHITCO.
 
 North
Texas is an AISC (American Institute of Steel Construction) Certified structural
steel fabrication company based in Fort Worth, Texas. North Texas is certified
by AISC to have the personnel, organization, experience, capability and
commitment meeting the requirements of Conventional Steel Building Structures,
Complex Steel Building Structures, Simple Steel Bridges and Major Steel Bridges
categories as set forth in the AISC Certification Program. North Texas provides
fabrication and detailing of structural steel components for commercial
buildings, office buildings, convention centers, sports arenas, airports,
schools, churches and bridges. Customers are general construction contractors
who are building projects for owners, developers and government
agencies.
  The trade
of steel fabrication is closely connected with both construction and industrial
trades in the pre-fabricating of frames, plates, girders and chutes to be used
later in the assembly or erection process. The work is conducted primarily
indoors, in small fabricating shops or large factories. A structural steel
fabricator works from drawings and sketches to perform the following functions
to both ferrous and non-ferrous metals:
  ·
                    Lay
      out steel for cutting
  ·
                    Burn
      the metal
  ·
                    Saw,
      cut, shear and punch holes in metal using drills and other power
      tools
  ·
                    Shape,
      form and straighten metal with the use of heat and
  flame
  14
 
 ·
                    Fit
      and ream metal to specifications
  ·
                    Rivet,
      bolt and grind metal
  ·
                    Weld,
      with both electric arc and oxyacetylene welding
  equipment
  ·
                    Prepare,
      prime and paint structural pieces and plates of
  steel.
  North
Texas' customers are general contractors who build large commercial buildings
and other structures requiring precision-engineered components. Projects
developed by North Texas include commercial buildings, office buildings,
convention centers, sports arenas, airports, schools, churches and
bridges.
  Past
North Texas projects include The American Airlines Center, DFW Airport
Expansion, Dallas Convention Center Expansion, the sky boxes (suites) in the
Texas Stadium, the bridges over the 1-35/1-20 Interchange in Fort Worth, Texas
and the People Mover at DFW Airport. Recently completed projects include the
Dallas Market Center Expansion, Advanced Micro Devices Office Complex, LCRA
Redbud Center, Almetris Duren Residence Hall / University of Texas, Samsung
C.U.B., Brewer High School/WSISD. Current projects include LockheedMartin STOVL,
Trinity Terrace Expansion , Omni Hotel , Ft Worth, Red Oak Ranch, TCU Stadium
Expansion, Alamo Community College Lakeside Campus, WSISD Stadium, JW Marriott,
San Antonio, Hall D2 Office Building, BNSF Bridge, .80 Rehab, Kansas City,
Holcim Cement, and Bexar & Wise County TxDOT Bridges.
  North
Texas sells to large general contractors. The North Texas customer list includes
most of the leading contractors in northern Texas such as Austin Commercial,
Inc., Thomas S. Byrne, Inc and Hensel Phe1ps. North Texas also works closely
over the years with engineering firms such as Carter Burgess, Inc., HKS, Inc.,
Datum Engineering, L.A. Fuess Partners and Freese & Nichols.
  North
Texas considers its current general market area to be Texas and the four
contiguous states of New Mexico, Oklahoma, Arkansas and
Louisiana.  North Texas' focus has generally focused on the Fort Worth
area due to the positive dynamics of the Dallas-Fort Worth metropolitan area and
North Texas' very close relationships with the leading contractors in the
area.  The Company's focus is naturally is in its own backyard. In the
past year North Texas has expanded into the Austin & San Antonio areas by
working closely with its contractor base.
  North
Texas owns 17.8 acres of land in an industrial area that is transitioning to
retail and residential.
  Operations/Processes
  North
Texas pursues potential customer projects on both a bid and negotiated basis. In
either case, North Texas is invited by the general contractor for the project to
present its proposal. North Texas' management believes that its reputation for
fabricating complex structures and delivering projects on time is the key to
being a contender for new projects in its market area.
  The
production capacity of North Texas depends on the complexity and mix of projects
coming through the plant. Generally speaking, North Texas can produce
approximately 12,000 tons of production output per year. Typically, projects of
1,000 tons or less are completed within 12 months whereas larger, more complex
projects may take considerably longer. Pricing is typically "lump sum, firm" and
includes transportation to the job site and erection, which is performed by an
erection subcontractor.
 
 Industry
and Market
  The
structural steel fabrication industry is made up of many well-established, often
family run, businesses that concentrate on specialized segments of the industry,
i.e. commercial, industrial, bridges, etc. While some of the companies do
business throughout the United States, and a few export, the most common market
approach is to focus on a geographical area of about 500 miles radius of their
plant facility. Production capacity and certifications play an all-important
role in the size and nature of projects that are pursued by a fabricator. The
health of the general economy, the level of commercial building activity and the
general economic growth of the region drive demand for structural steel
components. North Texas is known as the leading heavy structural steel
fabricator in the Dallas-Ft. Worth Market.
  Whitco
Transaction
  On April
25, 2006, we purchased certain assets of Whitco Company, LP, a business
conducting the sale and distribution of steel and aluminum lighting poles
throughout the globe, in exchange for 3,750,000 common stock purchase warrants,
valued at $1,875,000. In addition, we made cash payments totaling
$465,253 to Whitco Company, LP’s creditors and incurred $70,000 in other
costs related to the transaction. The Whitco assets are held in a
separate subsidiary called Whitco Poles, Inc. The integration of the Whitco
assets has gone well, but we have not fully realized the sales we originally
projected.
  15




Critical
Accounting Policies




The
preparation of our financial statements in conformity with accounting principles
generally accepted in the United States requires us to make estimates and
judgments that affect our reported assets, liabilities, revenues, and expenses,
and the disclosure of contingent assets and liabilities. We base our estimates
and judgments on historical experience and on various others assumptions we
believe to be reasonable under the circumstances. Future events, however, may
differ markedly from our current expectations and assumptions. While there are a
number of significant accounting policies affecting our consolidated financial
statements; we believe the following critical accounting policies involve the
most complex, difficult and subjective estimates and judgments:




Revenue Recognition




Significant
portions of North Texas' revenues are derived from construction and service
projects. Revenues from fixed-price, cost-plus-fee, time and material and
unit-price contracts are recognized using the percentage-of-completion method of
accounting which recognizes income as work on a contract progresses. Recognition
of revenues and profits generally are related to costs incurred in providing the
services required under the contract. Earned revenue is the amount of cost
incurred on the contract in the period plus the proportional amount of gross
profit earned during the same period. This method is used because management
considers total cost to be the best available measure of completion of
construction contracts in progress. Provisions for estimated losses on
construction contracts in progress are made in their entirety in the period in
which such losses are determined without reference to the percentage complete.
Changes in job performance, job conditions and estimated profitability,
including those arising from contract penalty provisions and final contract
settlements, may result in revisions to revenue and costs, and are recognized in
the period in which the revisions are determined. Claims for additional revenue
are not recognized until the period in which such claims are allowed. Direct
contract costs include all direct labor, direct materials and some estimating
costs and shop and equipment costs. Whitco revenues and product costs are
recognized as the products are shipped to their customers.




Allowance
For Doubtful Accounts




We
estimate the collectability of our trade receivables. A considerable amount of
judgment is required in assessing the realization of these receivables including
the current creditworthiness of each customer and related aging of the past due
balances. In order to assess the collectability of these receivables, we perform
ongoing credit evaluations of our customers' financial condition. Through these
evaluations we may become aware of a situation where a customer may not be able
to meet its financial obligations due to deterioration of its financial
viability or bankruptcy. The reserve requirements are based on the best facts
available to us and are reevaluated and adjusted as additional information is
received. Our reserves are also based on amounts determined by using percentages
applied to certain aged receivable categories. These percentages are determined
by a variety of factors including, but are not limited to, current economic
trends, historical payment and bad debt write-off experience. We are not able to
predict changes in the financial condition of our customers and if circumstances
related to our customers deteriorate, our estimates of the recoverability of our
receivables could be materially affected and we may be required to record
additional allowances. Alternatively, if we provided more allowances than are
ultimately required, we may reverse a portion of such provisions in future
periods based on our actual collection experience.




Comparison of the Quarter
Ended October 31, 2008 to the Quarter Ended October 31, 2007




Selling,
General and Administrative Expenses




For the
quarter ended October 31, 2008, selling, general and administrative
expenses from continuing operations totaled approximately $366,000, consisting
primarily of administrative expenses and other expenses. For the quarter ended
October 31, 2007, selling, general and administrative expenses totaled
approximately $177,000, consisting primarily of administrative expenses and
other expenses.  The $189,000 increase from 2007 is primarily due to
professional fees related to the restructuring.




Interest
Expense




As the
result of acquiring North Texas and Whitco in a highly leverage transaction the
Company’s interest expenses are significant.





Interest expense decreased by $170,000
for the quarter ended October 31, 2008 to $155,000 when compared to the quarter
ended October 31, 2007. There were no financing expenses during the three months
ended October 31, 2008,as  compared to $588,000 for the quarter ended
October 31, 2007. Included in financing expenses was non-cash amortization
related to notes payable discount of $588,000 for the quarter ended October 31,
2007.




Income
from Discontinued Operations





Income
from discontinued operations remained consistent at $324,000 for the quarter
ended October 31, 2008 as compared to $322,000 for the quarter ended October 31,
2007.


16


Gain
on Sale of Assets, net of taxes





During
the quarter ended October 31, 2008, the Company recorded a gain on sale of
assets in the amount of $3,542,000 in connection with its October 21, 2008 sale
of its Omaha Holdings Corp. assets to a subsidiary of Laurus Master
Fund.  See Note 6 of the Notes to Condensed Consolidated Financial
Statements for further information on this gain.





Liquidity
and Capital Resources




The
Company’s current operations are insufficient to service its existing debt and
pay the administrative expenses incurred in connection with being a public
enterprise, including legal and accounting services.





As a
result of our failure to timely pay our current obligations due to Laurus Master
Fund, Ltd. ("Laurus") under our Securied Convertible Term B Note in the amount
of $2,000,000, we received notification on January 31, 2008 from Laurus that
certain events of default had occurred and are continuing beyond any applicable
cure or grace period with respect to all of our secured obligations due to
Laurus. We also received a letter from LV Administrative Services, Inc. ("LV
Administrative Services"), acting in the capacity of administrative and
collateral agent for Laurus, that demands the immediate payment of all past due
amounts owed to Laurus by February 1, 2008. The amounts demanded totaled
$13,580,810 ($10,350,000 in principal amortization, $96,777 in accrued interest,
and $3,134,033 in Default Fees). We did not make such payments, and,
accordingly, Laurus (as well as Gryphon Master Fund, LTD ("GMF"), and GSSF
Master Fund, LP ("GSSF")) may take all steps it deems necessary to protect their
interests, including the enforcement and exercise of any and all of its rights,
remedies, liens and security interests available to it.





In
connection with our financing with Laurus, we executed a pledge agreement in
favor of Laurus granting them a first priority security interest in the common
stock of each of our subsidiaries. We also executed a security agreement that
granted Laurus a first priority security interest in all the respective goods,
inventory, contractual rights and general intangibles, receivables, documents,
instruments, chattel paper, intellectual property owned by us and each of our
subsidiaries. The security agreement and stock pledge agreement state that if an
"event of default" occurs under any agreement with Laurus, it has the right to
take possession of the collateral, to operate our business using the collateral,
and has the right to assign, sell, lease or otherwise dispose of and deliver all
or any part of the collateral, at public or private sale or otherwise to satisfy
its obligations under these agreements. As a consequence of our default, Laurus
has the right to pursue any of the remedies set forth in the pledge and security
agreements. Likewise, GMF and GSSF have similar remedies available to
them.





As a
result of our default and ongoing losses, our Board and management has
determined that it is advisable and in the best interests of the Company and its
stockholders to sell all or substantially all of the assets of Omaha Holdings
Corp., a wholly owned subsidiary of Company to a subsidiary of Laurus Master
Fund, which assets consist primarily of the issued and outstanding stock of two
wholly owned subsidiaries of Omaha Holdings Corp. (“Sale”). Thus, on April 4,
2008, the Board approved the Sale by majority vote and resolved to refer the
matter to our stockholders for their approval.





The
purpose of the Sale is to eliminate in excess of $13.5 principal amount of
indebtedness and accrued and unpaid interest thereon owed by us to Laurus Master
Fund, as well as over $800,000 of indebtedness due to Gryphon Fund for a total
value of indebtedness of approximately $14.3 million as of June 1, 2008. We have
not generated adequate revenues with which to service such debt and we have no
realistic independent ability to do so. Absent the Sale, we would have faced a
foreclosure proceeding which would have put a further strain on our otherwise
very limited available financial resources.





On
October 20, 2008, at a special meeting of shareholders, we received the approval
of our shareholders to sell substantially all of the assets of Omaha Holdings
Corp., to a subsidiary of Laurus Master Fund as described in our Definitive
Proxy of September 16, 2008. The transaction as described in the Definitive
Proxy was closed on October 21, 2008 resulting in the satisfaction of
$13,580,810 plus accrued interest and fees payable to Laurus Fund and/or its
affiliates and the satisfaction of the outstanding Gryphon Debt. As a result of
the transaction, the Company is without operating assets.


The
independent auditor's report on the Company's July 31, 2008 financial statements
included in our Annual Report states that the Company's recurring losses raise
substantial doubts about the Company's ability to continue as a going
concern. The accompanying financial statements have been prepared assuming
that the Company continues as a going concern that contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.
However, the ability of the Company to continue as a going concern on a
longer-term basis will be dependent upon its ability to generate sufficient cash
flow from operations to meet its obligations on a timely basis, to obtain
additional financing, and ultimately, attain profitability.




Off-
Balance Sheet Arrangements





We do not
maintain off-balance sheet arrangements nor do we participate in non-exchange
traded contracts requiring fair value accounting treatment.





Inflation





The
effect of inflation on our revenue and operating results was not significant.
Our operations are located in North America and there are no seasonal aspects
that would have a material effect on our financial condition or results of
operations.


17


ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Fair
Value of Financial Instruments — The estimated fair values of financial
instruments have been determined by the Company using available market
information and appropriate valuation methodologies.




The
Company has not entered into, and does not expect to enter into, financial
instruments for trading or hedging purposes. The Company does not currently
anticipate entering into interest rate swaps and/or similar
instruments.





The
Company's carrying values of cash, marketable securities, accounts receivable,
accounts payable and accrued expenses are a reasonable approximation of their
fair value.




ITEM
4.  CONTROLS AND PROCEDURES




a)
            Disclosure controls
      and procedures.  As of the end of the Company’s most
      recently completed fiscal quarter covered by this report, the Company
      carried out an evaluation, with the participation of the Company’s
      management, including the Company’s chief executive officer and vice
      president of finance, of the effectiveness of the Company’s disclosure
      controls and procedures pursuant to Securities Exchange Act Rule
      13a-15.  Based upon that evaluation, the Company’s chief
      executive officer and vice president of finance concluded that the
      Company’s disclosure controls and procedures were ineffective in ensuring
      that information required to be disclosed by the Company in the reports
      that it files or submits under the Securities Exchange Act is recorded,
      processed, summarized and reported, within the time periods specified in
      the SEC’s rules and forms.





b.)
            Changes in internal
      controls over financial reporting:  There have been no
      changes in the Company's internal controls over financial reporting that
      occurred during the Company's last fiscal quarter to which this report
      relates that have materially affected, or are reasonable likely to
      materially affect, the Company’s internal control over financial
      reporting.




18




PART
II





OTHER
INFORMATION




ITEM
1. LEGAL PROCEEDINGS




From time
to time, the Company may become involved in various lawsuits and legal
proceedings which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm the Company’s business. The
Company is currently not aware of nor has any knowledge of any such legal
proceedings or claims that we believe will have, individually or in the
aggregate, a material adverse affect on our business, financial condition
or operating results.




ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.





None.




ITEM
3. DEFAULTS ON SENIOR SECURITIES





None.




ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





On
October 20, 2008, at a special meeting of shareholders, we received the approval
of our shareholders to sell substantially all of the assets of Omaha Holdings
Corp., to a subsidiary of Laurus Master Fund as described in our Definitive
Proxy of September 16, 2008.  The transaction as described in the
Definitive Proxy was closed on October 21, 2008.  As a result of the
transaction, the Company is without operating assets.  The votes at
the October 20, 2008 special meeting of the shareholders were cast as
follows:




For
                
                Against
                
                Abstain5,455,115
                
                1,030
                
                303




ITEM
5. OTHER INFORMATION





None.




ITEM
6. EXHIBITS





(a)
            Exhibits.




31.1
                      Certification
      by Principal Officer and Chief Financial Officer pursuant to
      Sarbanes-Oxley Section 30232.1
                      Certification
      by Principal Officer and Chief Financial Officer pursuant to 18 U.S. C.
      Section
1350




19




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./s/
      Thomas E. Durkin, IIIPresident




DATE:
December 22, 2008


20




EXHIBIT
INDEX




Exhibit
31.1 - Certification by Principal Officer and Chief Financial Officer pursuant
to Sarbanes-Oxley Section 302


Exhibit
32.1 - Certification by Principal Officer and Chief Financial Officer pursuant
to 18 U.S. C. Section 1350


21