**UNITED
        STATES**
 **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 October 31, 2005
 
 **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
              P.O.
                  BOX 90, MONROVIA, CA 91016
              95-4307525(State
                  or other jurisdiction of incorporation or organization)
              (Address
                  of principal executive offices) (zip code)
              (IRS
                  Employer Identification No.)
 
 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 Noo
 
 **APPLICABLE
        ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**
 **PROCEEDINGS
        DURING THE PRECEDING FIVE YEARS**
 
 Check
        whether the registrant filed all documents and reports required to be filed
        by
        Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
        under a plan confirmed by a court. Yes o Noo
 
 **APPLICABLE
        ONLY TO CORPORATE ISSUERS**
 
 State
        the
        number of shares outstanding of each of the registrant's classes of common
        equity, as of the latest practicable date: As of December 19, 2005 the
        registrant had 2,775,935 shares of Common Stock outstanding.
 
 Transitional
        Small Business Disclosure Format (Check one): Yes o No x
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act) Yes o No x
  
  TABLE
                    OF CONTENTSPART
                    I
                FINANCIAL
                    INFORMATIONITEM
                    1
                Financial
                    StatementsCondensed
                    Consolidated Balance Sheets as of October 31, 2005 (unaudited)
                1Condensed
                    Consolidated Statements of Operations (unaudited) for the threemonths
                    ended October 31, 2005 and October 31, 2004
                2Condensed
                    Consolidated Statements of Cash Flows (unaudited) for the threemonths
                    ended October 31, 2005 and October 31, 2004
                3Condensed
                  Consolidated Statement of Stockholders' Equity (unaudited)
                  for the
                  three months ended October 31, 2005
                4Notes
                    to Condensed Consolidated Financial Statements (unaudited)
                5ITEM
                    2
                Management's
                    Discussion and Analysis or Plan of Operation
                22ITEM
                    3
                Controls
                    and Procedures
                30PART
                    II
                OTHER
                    INFORMATIONITEM
                    1
                Legal
                    Proceedings
                31ITEM
                    2
                Unregistered
                    Sales of Equity Securities and Use of Proceeds
                31ITEM
                    3
                Defaults
                    Upon Senior Securities
                32ITEM
                    4
                Submission
                    of Matters to a Vote of Security Holders
                32ITEM
                    5
                Other
                    Information
                32ITEM
                    6
                Exhibits
                32SIGNATURES
                33
  
 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.
 
 **PART
        I. FINANCIAL INFORMATION**
 
 **ITEM
        1. FINANCIAL STATEMENTS**
  AMERICAN
        TECHNOLOGIES GROUP, INC.
 CONDENSED
          CONSOLIDATED BALANCE SHEET
 OCTOBER
          31, 2005
 (Unaudited)
 ASSETSCurrent
                      assets:Cash
                      and cash equivalents
                  
                  $
                  5,368,305Accounts
                        receivable, net of allowance for doubtfulaccounts
                        of $52,292
                  
                  
                  5,888,612Inventory
                  
                  
                  1,396,066Cost
                      and estimated earnings in excess of billings
                  
                  
                  170,354Prepaid
                      expenses
                  
                  
                  290,206Deferred
                      tax assets
                  
                  
                  83,324Total
                      current assets
                  
                  
                  13,196,867Cash
                      surrender value of officers life insurance
                  
                  
                  101,412Property
                      and equipment, net
                  
                  
                  2,561,731Prepaid
                      pension cost
                  
                  
                  1,325,635Goodwill
                  
                  
                  1,366,637Total
                      assets
                  
                  $
                  18,552,282LIABILITIES
                      AND STOCKHOLDERS' EQUITYCurrent
                      liabilities:Accounts
                      payable
                  
                  $
                  3,295,400Accrued
                      expenses
                  
                  
                  11,240,556Billings
                      in excess of costs and estimated earnings
                  
                  
                  2,165,169Notes
                        payable, current portion, net ofdiscount
                        of $11,735,796
                  
                  
                  764,204Payable
                      to related parties
                  
                  
                  130,800Total
                      current liabilities
                  
                  
                  17,596,129Deferred
                      income taxes
                  
                  
                  484,856Total
                      liabilities
                  
                  
                  18,080,985Stockholders'
                      equity:Preferred
                      stock, series A
                  
                  
                  378Preferred
                      stock, series E
                  
                  
                  2Common
                      Stock
                  
                  
                  2,788Stock
                      subscription
                  
                  
                  6,750Additional
                      paid-in capital
                  
                  
                  70,141,518Accumulated
                      deficit
                  
                  
                  (69,680,139
                  )Total
                      stockholders' equity
                  
                  
                  471,297Total
                      liabilities and stockholders' equity
                  
                  $
                  18,552,282
 The
          accompanying footnotes are an integral part of these unaudited condensed
          consolidated financial statements.
   1
 AMERICAN
                TECHNOLOGIES GROUP, INC.
 CONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR
                THE
                THREE MONTHS  ENDED OCTOBER 31, 2005 AND 2004
 (Unaudited)
 2005
                
                2004Net
                    sales
                
                $
                3,992,505
                
                $
                3,611Cost
                    of sales
                
                
                3,551,564
                
                
                1,649Gross
                    profit
                
                
                440,941
                
                
                1,962Selling,
                    general and administrative expenses
                
                
                7,332,047
                
                
                26,374Operating
                    income
                
                
                (6,891,106
                )
                
                (24,412
                )Other
                    income (expense)Interest
                    income
                
                
                22,751
                
                
                —Interest
                    expense
                
                
                (1,136,418
                )
                
                (87,142
                )Financing
                    costs
                
                
                (3,450,150
                )
                
                —Total
                    other income (expense)
                
                
                (4,563,817
                )
                
                (87,142
                )Loss
                    before income taxes
                
                
                (11,454,923
                )
                
                (111,554
                )Provision
                    for income taxes
                
                
                4,405
                
                
                0Net
                    loss
                
                $
                (11,459,328
                )
                $
                (111,554
                )Loss
                    per share, basic and diluted
                
                $
                (8.27
                )
                $
                (0.34
                )Weighted
                    average shares outstanding
                
                
                1,385,112
                
                
                332,589
 The
        accompanying footnotes are an integral part of these unaudited condensed
        consolidated financial statements.
  2


AMERICAN
      TECHNOLOGY GROUP, INC.


CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR
        THE
        THREE MONTHS  ENDED OCTOBER 31, 2005 AND 2004
 (Unaudited)


2005
            
            2004CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                (loss) income
            
            $
            (11,459,328
            )
            $
            (111,554
            )Adjustments
                  to reconcile net loss to net cashused
                  in operating activities:Depreciation
                and amortization
            
            
            28,109
            
            
            —Amortization
                of discount
            
            
            764,204
            
            
            —Interest
                paid through debt financing
            
            
            58,500
            
            
            —Stock
                issued for services
            
            
            12,995
            
            
            —Changes
                in operating assets and liabilities:(Increase)
                decrease in:Accounts
                receivable
            
            
            (2,546,576
            )
            
            —Inventory
            
            
            354,869
            
            
            1,445Costs
                and earnings in excess of billings
            
            
            1,441,308
            
            
            —Prepaid
                expenses
            
            
            (44,229
            )
            
            —Increase
                (decrease) in:Accounts
                payable and accrued expenses
            
            
            10,672,181
            
            
            87,142Billings
                in excess of costs
            
            
            553,762
            
            
            —Net
                cash used in operating activities
            
            
            (164,205
            )
            
            (22,967
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Cash
                paid for acquisition
            
            
            (204,570
            )
            
            —Cash
                received through acquisition
            
            
            5,587,017
            
            
            —Purchases
                of property and equipment
            
            
            (38,601
            )
            
            —Net
                cash provided by investing activities
            
            
            5,343,846
            
            
            —CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from issuance of notes
            
            
            200,000
            
            
            —Proceeds
                of loans
            
            
            3,731
            
            
            26,276Payments
                on notes
            
            
            (28,020
            )
            
            —Net
                cash provided by financing activities
            
            
            175,711
            
            
            26,276Net
                increase in cash
            
            
            5,355,352
            
            
            3,309Cash
                and cash equivalents, beginning of year
            
            
            12,953
            
            
            5,531Cash
                and cash equivalents, end of year
            
            $
            5,368,305
            
            $
            8,840Cash
                paid for interest
            
            $
            68,917
            
            $
            —


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




3


AMERICAN
        TECHNOLOGIES GROUP, INC.
 CONDENSED
        CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
 FOR
        THE
        THREE MONTHS ENDED OCTOBER 31, 2005
 (Unaudited)


Common
                StockPreferred
                Stock
              Series
                A
            
            Preferred
                Stock
              Series
                E
            
            Common
                Stock
            
            To
                be Issued
            
            Additional
            
            Stock
            
            AccumulatedShares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            Amount
            
            Paid
                in Capital
            
            Subscriptions
            
            Deficit
            
            Total**Balance,**
              **July
                31, 2005, as restated**
            
            
            378,061
            
            $
            378
            
            
            —
            
            $
            —
            
            
            332,589
            
            $
            332
            
            
            13,719
            
            $
            14
            
            $
            53,044,913
            
            $
            6,750
            
            $
            (58,070,811
            )
            $
            (5,018,424
            )Sale
                of series E preferred stock
            
            
            —
            
            
            
            
            
            150,000
            
            
            2
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            149,998
            
            
            —
            
            
            —
            
            
            150,000Shares
                issued in settlement of payables
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            75,143
            
            
            75
            
            
            
            
            
            
            
            
            537,549
            
            
            
            
            
            
            
            
            537,624Shares
                  issued in settlement of debt andaccrued interest
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,364,124
            
            
            2,364
            
            
            
            
            
            
            
            
            3,746,066
            
            
            
            
            
            
            
            
            3,748,430Shares
                issued for services
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,208
            
            
            3
            
            
            
            
            
            
            
            
            12,992
            
            
            
            
            
            
            
            
            12,995Warrants
                issued with debt
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            —
            
            
            —
            
            
            
            
            
            
            
            
            12,500,000
            
            
            
            
            
            
            
            
            12,500,000Beneficial
                conversion feature of preferred stock
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            150,000
            
            
            
            
            
            
            
            
            150,000Preferred
                dividend
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            —
            
            
            
            
            
            (150,000
            )
            
            (150,000
            )Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (11,459,328
            )
            
            (11,459,328
            )**Balance,
                October****31,
                2005**
            
            
            378,061
            
            $
            378
            
            $
            150,000
            
            $
            2
            
            $
            2,775,064
            
            $
            2,774
            
            
            13,719
            
            $
            14
            
            $
            70,141,518
            
            $
            6,750
            
            $
            (69,680,139
            )
            $
            471,297


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




4


**AMERICAN
        TECHNOLOGIES GROUP, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **OCTOBER
        31, 2005**
 **(Unaudited)**




**NOTE
          1 - ORGANIZATION, LINE OF BUSINESS AND SIGNIFICANT BUSINESS RISKS**
  General
  The
        accompanying unaudited condensed consolidated financial statements have been
        prepared in accordance with the instructions to Form 10-QSB, and therefore,
        do
        not include all the information necessary for a fair presentation of financial
        position, results of operations and cash flows in conformity with generally
        accepted accounting principles.
  In
        the
        opinion of management, all adjustments (consisting of normal recurring accruals)
        considered necessary for a fair presentation have been included. Accordingly,
        the results from operations for the three-month period ending October 31,
        2005
        are not necessarily indicative of the results that may be expected for the
        year
        ended July 31, 2006. The unaudited consolidated financial statements should
        be
        read in conjunction with the consolidated July 31, 2005 financial statements
        and
        footnotes thereto included in the Company's SEC Form 10-KSB.
 **Organization
          and Line of Business**
  American
Technologies
          Group, Inc. (the "Company" or "ATG"), 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, the
          Company
          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.
 
 To
          date,
          the Company has been unable to generate significant cash flows from its
          business
          operations. As a result, they have funded their operations through investor
          financing, including sales of common stock and the exercise of warrants
          and
          options. The Company has also used debt to fund their operations. Until
          such
          time as they are able to generate significant cash flows from operations
          through
          increased sales of their products, they will be required to continue their
          reliance on investor financing and debt to fund their operations.
 
 On
          September 7, 2005, the Company, 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 SFAS No.141, “Business Combinations.” The results of operations
          for North Texas have been included in the unaudited condensed consolidated
          statements of operations since the date of acquisition.
 
 North
          Texas fabricates structural steel from two locations in Fort Worth, Texas.
          It
          contracts with and grants credit to customers in the southwest.
  5
 **NOTE
          2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Recognition
          of Income on Long-term Construction Contracts**
 
 For
          financial reporting purposes, the Company uses the percentage of completion
          method of reporting profits on major construction contracts. Under this
          method,
          revenues are recognized based on the percentage of costs incurred to date
          to
          estimated total cost for each contract. Revisions in estimated contract
          profits
          are made in the year in which circumstances requiring the revisions become
          known. These estimates are subject to change in the near-term and could
          significantly impact the financial statements. Provision for estimated
          losses on
          uncompleted contracts are made in the period in which such losses are
          determined. Contract costs include all direct material and labor costs
          and those
          indirect costs related to contract performance, such as indirect labor,
          supplies, tools and repairs. Selling, general and administrative costs
          are
          charged to expense as incurred.
  On
          contracts where costs and estimated earnings are in excess of billings,
          the
          excess is treated as a current asset. Where billings are in excess of costs
          and
          estimated earnings, the excess is treated as a current liability.
  These
          amounts are reflected in the accompanying balance sheet as follows:
 2005Costs
                      and estimated earnings onuncompleted
                      contracts in excess of billings
                  
                  $
                  170,354Billings
                      on uncompleted contracts inexcess
                      of costs and estimated earnings
                  
                  
                  (2,165,169
                  )$
                  (1,994,815
                  )
 **Inventory**
 
 Inventory,
          consisting of raw materials not yet included in contracts in process, is
          valued
          at the lower of cost or market on average cost basis.
 
 6
 **Income
          Taxes**
 
 In
          accordance with Statement of Financial Accounting Standards ("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.
 
 **Long-Lived
          Assets**
 
 The
          Company reviews, as circumstances dictate, the carrying amount of its property
          and equipment and patents. The purpose of these reviews is to determine
          whether
          the carrying amounts are recoverable. Recoverability is determined by examining
          and comparing respective carrying amounts versus expected revenue streams
          from
          the related businesses. The amount of impairment, if any, is measured based
          on
          the excess of the carrying value over the fair value.
  **Property
          and Equipment**
 
 Property
          and equipment are stated at cost. Depreciation is computed principally
          by the
          straight-line and accelerated methods at rates based on estimated useful
          lives
          as follows:
  Transportation
                      equipment
                  
                  
                  3
                      -
                      6 yearsOffice
                      furniture and equipment
                  
                  
                  5
                      -
                      10 yearsBuildings
                      and improvements
                  
                  
                  5
                      -
                      40 yearsMachinery
                      and equipment
                  
                  
                  3
                      -
                      12 years
  **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 collectibility of accounts receivable, the realizability of
          inventories, the amounts due under accounts payable and the valuation allowance
          of deferred tax assets. Actual results could differ from those estimates.
 
 **Research
          and Development Activities**
 
 All
          costs
          of new technology acquisition and research and development are charged
          to
          operations as incurred.
 
 **Non-Monetary
          Exchanges**
 
 Accounting
          for the transfer or distribution of non-monetary assets or liabilities
          is based
          on the fair value of the assets or liabilities received or surrendered,
          whichever is more clearly evident. Where the fair value of the non-monetary
          asset received or surrendered cannot be determined with reasonable accuracy,
          the
          recorded book value of the non-monetary assets are used.
 
 7
 **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 under the provisions of
          SFAS
          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.
  **Stock-Based
          Compensation**
 
 The
          Company accounts for non-employee stock-based compensation under SFAS No.
          123,
          Accounting For Stock-Based Compensation. SFAS No. 123 defines a fair value
          based
          method of accounting for stock-based compensation. However, SFAS No. 123
          allows
          an entity to continue to measure compensation cost related to stock and
          stock
          options issued to employees using the intrinsic method of accounting prescribed
          by Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting for
          Stock
          Issued to Employees. Under APB 25, compensation cost, if any, is recognized
          over
          the respective vesting period based on the difference, on the date of grant,
          between the fair value of the Company's common stock and the grant price.
          Entities electing to remain with the accounting method of APB 25 must make
          pro
          forma disclosures of net income and earnings per share, as if the fair
          value
          method of accounting defined in SFAS No.123 had been applied.
 
 In
          December 2002, SFAS No. 148, Accounting for Stock-Based Compensation -
          Transition and Disclosure, was issued. SFAS No. 148 amends SFAS No. 123
          to
          provide alternative methods of transition for a voluntary change to the
          fair
          value based method of accounting for stock-based employee compensation.
          In
          addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123
          to
          require prominent disclosures in both annual and interim financial statements
          about the method of accounting for stock-based employee compensation and
          the
          effect of the method used on reported results. The provisions of SFAS No.
          148
          are effective for financial statements for fiscal years ending after December
          15, 2002. The Company adopted the disclosure provisions of SFAS No. 148
          in these
          financial statements. The Company does not anticipate adopting the fair
          value
          based method of accounting for stock-based compensation.
 
 In
          December 2004, the FASB issued SFAS No.123 (revised 2004), “ *Share-Based
          Payment* ”.
          SFAS
          123(R) will provide investors and other users of financial statements with
          more
          complete and neutral financial information by requiring that the compensation
          cost relating to share-based payment transactions be recognized in financial
          statements. That cost will be measured based on the fair value of the equity
          or
          liability instruments issued. SFAS 123(R) covers a wide range of share-based
          compensation arrangements including share options, restricted share plans,
          performance-based awards, share appreciation rights, and employee share
          purchase
          plans. SFAS 123(R) replaces FASB Statement No. 123, “ *Accounting
          for Stock-Based Compensation* ”,
          and
          supersedes APB Opinion No. 25, “ *Accounting
          for Stock Issued to Employees* ”.
          SFAS
          123, as originally issued in 1995, established as preferable a fair-value-based
          method of accounting for share-based payment transactions with employees.
          However, that statement permitted entities the option of continuing to
          apply the
          guidance in Opinion 25, as long as the footnotes to financial statements
          disclosed what net income would have been had the preferable fair-value-based
          method been used. Public entities (other than those filing as small business
          issuers) will be required to apply SFAS 123(R) as of the first interim
          or annual
          reporting period that begins after June 15, 2005. SFAS 123(R) is applicable
          for
          the Company effective the first interim period that starts after December
          15,
          2005. The Company has evaluated the impact of the adoption of SFAS 123(R),
          and
          believes that the impact may be significant to the company's future overall
          results of operations and financial position.
 
 8
 At
          October 31, 2005, the Company has two stock-based employee compensation
          plans.
          The Company accounts for those plans under the recognition and measurement
          principles of APB 25, and related interpretations. During the three month
          periods ended October 31, 2005 and 2004, no stock-based employee compensation
          cost is reflected in the accompanying statements of operations, as all
          options
          granted under those plans had exercise prices equal to or greater than
          the
          market value of the underlying common stock on the date of grant. Had
          compensation cost for the Company's plans been determined consistent with
          the
          provisions of SFAS No. 123, the Company's net loss would not have changed.
  **Derivative
          Instruments**
 
 The
          Company accounts for freestanding derivative financial instruments potentially
          settled in its own common stock under Emerging Issues Task Force ("EITF")
          Issue
          No. 00-19, Accounting for Derivative Financial Instruments Indexed to,
          and
          Potentially Settled in, a Company's Own Stock. As of October 31, 2005,
          the
          Company potentially did not have sufficient authorized shares available
          to
          settle its open stock-based contracts. Pursuant to EITF
          Issue No. 00-19, the Company is required to recognize the initial fair
          value of
          the applicable contracts (consisting primarily of non-employee stock warrants
          and options to purchase common stock) as an asset or liability, and subsequently
          measure the change in the fair value (based on a Black-Scholes computation),
          with gains and losses included in a statement of operations. The Company
          has
          determined that there is no fair value associated with the freestanding
          derivatives.
 
 **Fair
          Value of Financial Instruments**
 
 The
          carrying amounts of the Company's cash, trade payables, accrued expenses,
          and
          notes payable approximate their estimated fair value due to the short-term
          nature of those financial instruments. The estimated fair value of amounts
          due
          related parties is not ascertainable as the underlying transactions were
          between
          related parties. Also, the estimated fair value of convertible debentures
          is not
          determinable as equivalent financial instruments are not easily identifiable.
  **Segment
            Information**
  Statement
            of Financial Accounting Standards No. 131, "Disclosures about Segments
            of an
            Enterprise and Related Information" ("SFAS 131") establishes standards
            for
            reporting information regarding operating segments in annual financial
            statements and requires selected information for those segments to be
            presented
            in interim financial reports issued to stockholders.  SFAS 131
            also
            establishes standards for related disclosures about products and services
            and
            geographic areas.  Operating segments are identified as components
            of an
            enterprise about which separate discrete financial information is available
            for
            evaluation by the chief operating decision maker, or decision-making
            group, in
            making decisions how to allocate resources and assess performance. 
            The
            information disclosed herein materially represents all of the financial
            information related to the Company's principal operating segment.
  **Reclassifications**
  Certain
            reclassifications have been made in prior year's financial statements
            to conform
            to classifications used in the current year.
  **NOTE
          3 - ACQUISITION**
 
 On
          September 7, 2005, the Company, 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 were exchanged
          for
          $11,000,000 in cash. The Company also incurred costs directly attributable
          to
          the acquisition of $1,593,370. The
          transaction is accounted for using the purchase method of accounting in
          accordance with SFAS No.141, “Business Combinations.” The results of operations
          for North Texas have been included in the unaudited condensed consolidated
          statements of operations since the date of acquisition.The total
          acquisition price of $12,593,370 has been allocated as follows:
  Cash
                  
                  $
                  5,587,017Other
                      current assets
                  
                  
                  7,032,333Property
                      and equipment
                  
                  
                  2,551,239Other
                      assets
                  
                  
                  1,427,048Goodwill
                  
                  
                  1,366,637Current
                      liabilities
                  
                  
                  (4,886,048
                  )Other
                      liabilities
                  
                  
                  (484,856
                  )Total
                  
                  $
                  12,593,370
  The
          Company is in the process of completing third party valuations of
          certain
          tangible and intangible assets acquired with North Texas. Therefore the
          allocation of the purchase price to the acquisition is subject to
          revision.
 9
 Pro
          forma
          unaudited financial information, assuming that the acquisition had occurred
          as
          of August 1, 2004 is as follows:
 Three
                    months ended October
                    31,2005
                
                2004Revenue
                
                $
                9,491,788
                
                $
                4,546,637Net
                    loss
                
                $
                (1,492,512
                )
                $
                (11,830,044
                )Loss
                    per share
                
                $
                (.54
                )
                $
                (4.26
                )
  The
            unaudited pro forma amounts are not necessarily indicative of the results
            that
            would have accrued in the acquisition of north Texas had been completed
            on the
            date indicated.
  **NOTE
          4 - CONTRACT RECEIVABLES**
  At
            October 31, 2005 trade accounts receivable consist of the following :
 2005Currently
                      receivable on contracts
                  
                  $
                  4,585,279Retainage
                      on uncompleted contracts
                  
                  
                  1,355,6255,940,904Less
                      allowance for doubtful accounts
                  
                  
                  52,292$
                  5,888,612
 10
 **NOTE 5
          - PROFIT SHARING PLAN**
 
 The
          Company has a  profit sharing and savings plan covering substantially
          all
          employees of North Texas. The Company's contribution to the plan is determined
          annually by the Board of Directors. The Company has made no contributions
          to the
          plan for the three month periods ended October 31, 2005 and 2004, respectively.
 
 
 **NOTE 6
          - PENSION PLAN**
  In
          connection with the acquisition of North Texas, the
          Company has elected to close the non contributing defined benefit plan
          to new
          participants and benefit accruals have been discontinued. Management is
          currently in the process of terminating the pension plan pursuant to the
          terms
          of the North Texas Steel/Omaha Holdings Pension Plan Joint Account Agreement
          dated September 7, 2005.
  11
 **NOTE 7
          - CONCENTRATIONS**
 
 Financial
          instruments which potentially subject the Company to concentrations of
          credit
          risk consist principally of cash, cash investments and accounts receivable.
 
 The
          Company maintains its 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. The Company believes it is not exposed to any
          significant credit risk on cash and cash equivalents.
 
 Concentration
          of credit risk with respect to accounts receivable is limited due to the
          geographic distribution of the entities comprising the Company's customer
          base.
          The Company's revenues earned on contracts for the three month periods
          ended
          October 31, 2005 and 2004 were comprised of 79% (four customers) and 80%
          (four
          customers), respectively. The Company purchases materials from major suppliers
          totaling 46% (three suppliers) and 38% (two suppliers) for the three month
          periods ended October 31, 2005 and 2004, respectively .
 
 12
 **NOTE 8
          - ACCOUNTS PAYABLE AND ACCRUED PAYROLL LIABILITIES**
 
 During
          2002 through 2005, the Company entered into settlement agreements with
          certain
          employees, note holders and vendors. During the three months ended October
          31,
          2005, $289,045 and $248,579 of liability was settled through the issuance
          of
          31,770 and 43,372 shares of common stock related to accounts payable
          and
          accrued payroll liabilites, respectively.
 
 **NOTE 9
          - CONVERTIBLE DEBENTURES**
 
 In
          connection with the closing of the North Texas acquisition, Keshet Fund,
          L.P.,
          Keshet L.P., Nesher Ltd. and Talbiya B. Investment Ltd. (collectively,
          the
          "Existing Debt Holders"), converted all debt owed including interest to
          the
          Existing Debt Holders in the approximate amount of $1,405,236
          into 1,884,902 shares of common stock. Further, Dr. Gary Fromm,
          the
          Company's Chairman of the Board of Directors agreed to forgive debt
          owed to
          him by our company in the amount of $1,162,732 in consideration of our
          company
          issuing 479,221shares of common stock and the Existing Debt Holders
          transferring 702,840 shares of common stock of our company to Dr.
          Fromm.
 
 13
 **Laurus
          Financings**
 
 The
          Company entered into agreements with Laurus Master Funds, Ltd., a Cayman
          Islands
          corporation ("Laurus"), pursuant to which the Company sold convertible
          debt, an
          option and a warrant to purchase common stock to Laurus in a private offering
          pursuant to exemption from registration under Section 4(2) of the Securities
          Act
          of 1933, as amended. The securities sold to Laurus include the following:
 
 ·
                a
                    secured revolving note with a principal amount of $7,000,000;
 ·
                a
                    secured convertible term note A with a principal amount of $3,000,000;
 ·
                a
                    secured convertible term note B with a principal amount of $2,000,000;
 ·
                a
                    common stock purchase warrant to purchase 2,865,116 shares
                    of common
                    stock at a purchase price of $.99 per share, exercisable until
                    September
                    6, 2012; and
 ·
                an
                    option to purchase 10,340,000 shares of common stock, at a purchase
                    price
                    of $.003 per share.
  Each
          of
          the securities issued to Laurus are convertible into shares of Series D
          Preferred Stock, and the Series F Preferred Stock with respect to the secured
          convertible term note B, until such time that we amend our certificate
          of
          incorporation to provide for available shares of common stock and the shares
          of
          Series D Convertible Preferred Stock and the Series F Convertible Preferred
          Stock are only convertible into shares of common stock as long as there
          are no
          available shares for conversion.
 
 The
          Company is permitted to borrow an amount based upon its eligible accounts
          receivable, as defined in the agreements with Laurus. The Company must
          pay
          certain fees for any unused portion of the credit facility or in the event
          the
          facility is terminated prior to expiration. The Company's obligations under
          all
          notes are secured by all of the assets of the Company, including but not
          limited
          to inventory, accounts receivable and a pledge of the stock of Omaha and
          North
          Texas. The minimum borrowing notes, the secured revolving notes and the
          secured
          convertible term note A mature on September 6, 2008. Annual interest on
          the
          minimum borrowing notes, the secured revolving notes and the secured convertible
          term note A is equal to the "prime rate" published in The Wall Street Journal
          from time to time, plus 2.0%, provided, that, such annual rate of interest
          may
          not be less than 8.25%, subject to certain downward adjustments resulting
          from
          certain increases in the market price of the Company's common stock. Interest
          on
          the minimum borrowing notes, the secured revolving notes and the secured
          convertible term note A is payable monthly in arrears on the first day
          of each
          month, commencing on October 1, 2005.
 
 The
          principal amount of the secured convertible minimum borrowing note, together
          with accrued interest thereon is payable on September 7, 2008. The secured
          convertible minimum borrowing note may be redeemed by the Company in cash
          by
          paying the holder 120% of the principal amount, plus accrued interest.
          The
          holder of the secured convertible minimum borrowing note may require the
          Company
          to convert all or a portion of the term note, together with interest and
          fees
          thereon at any time. The number of shares to be issued shall equal the
          total
          amount to be converted, divided by $.333, subject to adjustment as described
          below.
 
 The
          principal amount of the secured convertible term note A is repayable at
          the rate
          of $50,000 per month together with accrued but unpaid interest, commencing
          on
          January 1, 2006, which such principal payment increases to $98,275 on April
          1,
          2006. The monthly amounts shall automatically convert into shares of common
          stock in the event that there is an effective registration statement, the
          average market price for the five days preceding the payment date is equal
          to or
          greater than 120% of the fixed conversion price and the amount of such
          conversion does not exceed 25% of the aggregate dollar trading volume of
          the
          Company's common stock for the 22 trading days immediately preceding the
          prepayment date (the "Laurus Trading Volume Limit"). In the event that
          the
          conversion exceeds the Laurus Trading Volume Limit, then Laurus will only
          be
          required to convert the portion of the secured convertible term note A
          up to the
          Laurus Trading Volume Limit and the Company will be required to pay off
          the
          remaining balance of the monthly amount. The secured convertible term note
          A may
          be redeemed by the Company in cash by paying the holder 120% of the principal
          amount, plus accrued interest. The holder of the term note may require
          the
          Company to convert all or a portion of the secured convertible term note
          A,
          together with interest and fees thereon at any time. If paid in shares
          of common
          stock the number of shares to be issued shall equal the total amount due,
          divided by $.99, subject to adjustment as described below.
 
 15
 The
          principal amount of the secured convertible term note B is repayable in
          full on
          March 6, 2007. Interest on the secured convertible term note B accrues
          at the
          rate of 12% during the first year outstanding and 18% thereafter until
          maturity.
          On the maturity date, all principal and interest shall automatically convert
          into shares of common stock in the event that there is an effective registration
          statement, the average market price for the five days preceding the payment
          date
          is equal to or greater than 120% of the fixed conversion price and the
          amount of
          such conversion does not exceed 25% of the Laurus Trading Volume Limit.
          In the
          event that the conversion exceeds the Laurus Trading Volume Limit, then
          Laurus
          will only be required to convert the portion of the secured convertible
          term
          note A up to the Laurus Trading Volume Limit and the Company will be required
          to
          pay off the remaining balance of the monthly amount. The secured convertible
          term note B may be redeemed by the Company in cash by paying the holder
          100% of
          the principal amount, plus accrued interest. The holder of the secured
          convertible term note B may require the Company to convert all or a portion
          of
          the secured convertible term note B, together with interest and fees thereon
          at
          any time. If paid in shares of common stock the number of shares to be
          issued
          shall equal the total amount due, divided by $.333.
 
 Upon
          an
          issuance of shares of common stock below the fixed conversion price, the
          fixed
          conversion price of the notes will be reduced accordingly. The conversion
          price
          of the secured convertible notes may be adjusted in certain circumstances
          such
          as if we pay a stock dividend, subdivide or combine outstanding shares
          of common
          stock into a greater or lesser number of shares, or take such other actions
          as
          would otherwise result in dilution.
 
 **Gryphon
          Financing**
 
 On
          September 7, 2005, in connection with the acquisition of North Texas, we
          entered
          into Security Agreements (the "Security Agreements") with GSSF Master Fund,
          L.P.
          ("GSSF") and Gryphon Master Fund L.P. ("GMF") for the sale of an aggregate
          of
          (i) $500,000 in convertible term notes (the "Gryphon Term Notes"), (ii)
          common
          stock purchase warrants to purchase 5,999,880 shares of common stock
          (the
          "Gryphon Warrants") and (iii) options to purchase 935,000 shares of common
          stock
          (the "Gryphon Options"). GSSF and GMF are hereinafter collectively referred
          to
          as "Gryphon". The Gryphon Notes, the Gryphon Warrants and the Gryphon Options
          are convertible into shares of Series F Preferred Stock until such time
          we
          amends our certificate of incorporation to provide for available shares
          of
          common stock and the shares of Series F Convertible Preferred Stock are
          only
          convertible into shares of common stock as long as there are available
          shares
          for conversion.
 
 Each
          of
          the securities issued to GSSF and GMF are convertible into shares of Series
          E
          Preferred Stock until such time that the Company amends its certificate
          of
          incorporation to increase its authorized shares of common stock to
          15,000,000,000 and the shares of Series E Convertible Preferred Stock are
          only
          convertible into shares of common stock as long as there are available
          shares
          for conversion.
 
 The
          Gryphon Notes bear interest at 12%, mature one year from the date of issuance,
          and are convertible into the Company's common stock, at Gryphon's option,
          at a
          conversion price of $.333. Based on this conversion price, the Gryphon
          Notes in
          the amount of $500,000 excluding interest, are convertible, upon the Company
          increasing its authorized shares of common stock, into 1,501,501
          shares of
          the Company's common stock. On the maturity date of the Gryphon Notes,
          the
          Gryphon Notes shall automatically convert into shares of common stock in
          the
          event that the average market price for the five days preceding the maturity
          date is equal to or greater than 120% of the fixed conversion price and
          the
          amount of such conversion does not exceed 25% of the aggregate dollar trading
          volume of the Company's common stock for the 22 trading days immediately
          preceding the maturity date (the "Trading Volume Limit"). In the event
          that the
          conversion exceeds the Trading Volume Limit, then Gryphon will only be
          required
          to convert the portion of the Gryphon Notes up to the Trading Volume Limit
          and
          the Company will be required to pay off the remaining balance.
  16
 The
          Company may prepay the Gryphon Notes. In addition, the Company has granted
          Gryphon a security interest in substantially all of the Company's assets
          as well
          as registration rights. Gryphon's rights to any security interest are
          subordinated to that of Laurus Master Fund, Ltd.
 
 The
          Gryphon Warrants are exercisable from the date of issuance through February
          28,
          2007 at an exercise price of $.333 per share. The Gryphon Options are
          exercisable at an exercise price of $.003 per share.
 
 **Discount
          on Debt**
 
 The
          Company has valued the warrants and options issued with the Laurus and
          Gryphon
          financings using the Black Sholes pricing model. The value has been recorded
          at
          $12,500,000, the proceeds of the debt. The resulting discount of $12,500,000
          is
          being amortized over the term of the debt instruments.
  **Pending
            Laurus registration rights
            amendment:**
  The
            terms
            of the Registration Rights Agreements dated September 7, 2005 entered
            with three
            investors in conjunction with the Company's acquisition of North Texas
            required
            the Company to register shares of the Company's Common Stock. Such Common
            Stock
            would be issuable to the holders of the Revolving Loans evidenced by
            a Minimum
            Borrowing Note and various term notes. The original documents provided
            for a
            Registration Statement with respect to such shares to be filed with the
            Securities and Exchange Commission within 45 days of the issuance of
            the Minimum
            Borrowing Note and the term notes. The Registration Rights Agreement
            specified
            liquidated damages amounting to 1% of the outstanding balance for the
            initial 30
            days, 1.5% for the second 30 days and 2% thereafter if the Registration
            Statement was not timely filed. In October 2005, Laurus Master Funds,
            Ltd., the
            holder of the Minimum Borrowing Note and a majority of the term notes,
            verbally
            agreed to defer the deadline for filing the Registration Statement. The
            details
            formalizing the postponement are currently subject to negotiation and
            finalization. The Company does not consider itself subject to any liquidated
            damage liability, and has therefore not recorded any provision related
            to the
            registration rights during the three months ended October 31, 2005. The
            other
            note holder Gryphon has not wiaved  their rights under their Registration
            Rights Agreement. Any liquidated damage liability accruing through October
            31,
            2005 is insignificant.
  **NOTE
          10 - STOCKHOLDERS' EQUITY**
 
 **Common
          Stock**
  The
          Company has authorized 1,000,000,000 shares of common stock, with a par
          value of
          $.001 per share. On December 5, 2005 the Company effected a one (1) for
          three
          hundred (300) reverse stock split of its issued and outstanding shares
          of common
          stock, $.001 par value. Total authorized shares and par value remain unchanged.
          All references to the financial statements and notes for financial statements,
          numbers of shares and share amounts have been retroactively restated to
          reflect
          the reverse split.
  **Luther
          Consulting Agreement**
 
 In
          connection with the closing of the acquisition of North Texas, we entered
          into a
          consulting agreement with Luther Capital Management, Inc. ("Luther Capital")
          Pursuant to the consulting agreement, in consideration for providing valuable
          services to our company in connection with the acquisition of North Texas,
          we
          have agreed to issue Luther Capital and its designees, an aggregate
          of 5,580,280 shares (the "Luther Shares") of common stock. The issuance
          of
          the Luther Shares are subject to the Company filing an amendment to its
          certificate of incorporation to provide for an adequate amount of authorized
          but
          unissued shares of common stock. The Luther Shares have been valued at
          $6,863,745 and have been recorded as an accrued expense in the financial
          statements at October 31, 2005.
 
 **Collateral**
 
 In
          connection with the provision of collateral utilized to secure the financing
          provided by Laurus, we agreed, upon amending our certificate of incorporation
          to
          provide for authorized but unissued shares, to issue 420,750 shares of
          common
          stock to Thomas E. Durkin, III and 420,750 shares of common stock to Luther
          Capital Management, Inc. and 1,963,500 shares of common stock to
          Charles
          and Patricia Matteson. These shares have been valued at $3,450,150 and
          have been
          recorded as an accrued expense in the financial statements at October 31,
          2005.
  **Preferred
          Stock**
 
 The
          Company authorized 50,000,000 shares of preferred stock with a par value
          of
          $0.001 per share. The preferred stock may be issued from time to time in
          series
          having such designated preferences and rights, qualifications and to such
          limitations as the Board of Directors may determine.
 
 17
 The
          Company has authorized 10,000,000 shares of Series A Convertible Preferred
          Stock
          ("Series A Stock"). The Series A Stock receives a 10% higher dividend than
          the
          common stock, is entitled to one vote per share, shares equally with the
          common
          stock upon liquidation and is convertible into one share of common stock
          at any
          time at least five years after issuance upon the payment of $3.00 per share.
          As
          of July 31, 2005, 378,061 shares of Series A Stock were outstanding with
          no
          shares having been converted.
 
 The
          Company has authorized 500,000 shares of Series B Convertible Preferred
          Stock
          ("Series B Stock"). The Series B Stock has a liquidation preference of
          $8.00 per
          share, is entitled to one vote per share and is convertible upon holders
          request
          without the payment of any additional consideration during the first year
          following issuance into the number of shares of common stock equal to the
          quotient of $8.00 per share and the market value per share for the ten
          trading
          days immediately preceding conversion and in subsequent years into one
          share of
          common stock for each share of Series B Stock. As of October 31,
          2005,
          there is no Series B Stock issued and outstanding.
 
 The
          Company has authorized 2,000 shares of Series C Convertible Preferred Stock
          ("Series C Stock"). The Series C Stock has a liquidation preference of
          $1,000
          per share, an eight percent coupon payable at the time of conversion, converts
          to common stock at a 30% discount from the fair market value at the date
          of
          conversion, is non-voting and is convertible upon holders request without
          the
          payment of any additional consideration. As of October 31, 2005,
          there is
          no Series C Stock issued and outstanding.
 
 The
          Company has authorized 900,000 shares of Series D Convertible Preferred
          Stock
          ("Series D Stock"). The Series D Stock has a liquidation preference of
          $11.1111
          per share, an eight percent coupon payable at the time of conversion, converts
          to common stock at a 30% discount from the fair market value at the date
          of
          conversion, is non-voting and is convertible upon holders request without
          the
          payment of any additional consideration. As of October 31, 2005, there
          is no
          Series D Stock issued and outstanding.
 
 The
          Company has authorized 25,000 shares of Series E Convertible Preferred
          Stock
          ("Series E Stock"). The Series E Stock has a liquidation preference of
          $100 per
          share, an eight percent coupon payable at the time of conversion, converts
          to
          common stock at a 30% discount from the fair market value at the date of
          conversion, is non-voting and is convertible upon holders request without
          the
          payment of any additional consideration. As of October 31, 2005, there
          are 1,500
          shares of Series E Stock issued and outstanding.
 
 The
          Company has authorized 900,000 shares of Series F Convertible Preferred
          Stock
          ("Series F Stock"). The Series F Stock has a liquidation preference of
          $2.2223
          per share, an eight percent coupon payable at the time of conversion, converts
          to common stock at a 30% discount from the fair market value at the date
          of
          conversion, is non-voting and is convertible upon holders request without
          the
          payment of any additional consideration. As of October 31, 2005, there
          is no
          Series F Stock issued and outstanding.
  On
          September 7, 2005, Nite Capital LP ("Nite") purchased 1,500 shares of Series
          E
          Convertible Preferred Stock for an aggregate purchase price of $150,000.
          Each
          shares of Series E Convertible Preferred Stock shall be convertible into
          shares
          of common stock equal to the stated value of $100 divided by the conversion
          price of $.0011. The shares of Series E Preferred Stock are not convertible
          until such time that the Company has increased its authorized shares of
          common
          stock to 15,000,000,000. The holders of the Series E Preferred Stock are
          entitled to receive dividends upon the declaration of a dividend to the
          common
          stock holders. However, the payments of such dividend are subject to the
          payment
          of dividends on the Series D Convertible Preferred Stock. Upon any liquidation,
          dissolution or winding up of the Company, the holders of the Series E Preferred
          Stock shall be entitled to receive payments prior to any other securities
          except
          that the Series D Preferred Stock shall rank senior to that of the Series
          E
          Preferred Stock. The holders of Series E Preferred Stock have no voting
          rights
          unless such vote directly impacts the rights of the holders of the Series
          E
          Preferred Stock.
 
 18
 **NOTE
          11 - RELATED PARTY TRANSACTIONS**
  In
          November 2001, the Company signed an unsecured
          promissory note for borrowings of up to $400,000 with a third party who
          has
          since become the Company's Chairman of the Board of Directors, which was
          later
          amended and increased to $800,000. The note was due August 8, 2002. As
          of July
          31, 2005, the Company has a balance of $959,121 under the promissory note.
          Borrowings bear interest at 9% per annum with interest payments due monthly.
          During the three months ended October 31, 2005 an additional $9,117 of
          interest
          was accrued, and the Company received an additional $3,731 in advances
          and
          repaid $28,020 in cash. The remaining principal balance of $934,832 plus
          accrued
          interest of $263,671 was settled through the issuance of 1,182,062
          shares
          of common stock.
 
 The
          Company has $130,800 in unsecured non-interest bearing notes payable
          to
          related parties that are due on demand.
 
 On
          March
          1, 1994, the Company entered into a license agreement with BWN Nuclear
          Waste
          Elimination Corporation ("NWEC"), a Nevada corporation partially owned
          by Robert
          W. Carroll, for the sublicense to exploit all rights to certain technologies
          relating to helium cluster beams and other coherent particle beams ("Baser")
          in
          their application to the rendering of nuclear waste non-radioactive. At
          such
          time as the Company receives an offer to purchase any application of the
          Baser
          technology for commercial use, the Company will issue up to 1,700,000 shares
          of
          Series A Convertible Preferred Stock to NWEC. NWEC will also be entitled
          to a
          ten percent royalty on the Company's net sales from exploitation of Baser
          technology. In the event the Company does not spend at least $100,000 on
          the
          development of Baser technology during each fiscal year, the agreement
          will
          terminate. There have been no shares granted under this agreement through
          October 31, 2005. On April 30, 2001, NWEC filed a lawsuit seeking unspecified
          damages alleging breach of contract relating to the license agreement.
          As of
          October 31, 2005, no provision has been made in the financial statements
          as the
          outcome is not probable or estimable.
 
 During
          fiscal 1997, the Company completed payments of $150,000 to Dr. Lo (a former
          officer/shareholder) to purchase an option for the rights to certain Baser
          technology. Additionally, should the Company receive an offer to purchase
          the
          Baser technology for commercial use, the Company is required to issue 1,700,000
          shares of Series A Convertible Preferred Stock and pay quarterly royalties
          of 7
          1/2 % of net profits (as defined) to Dr. Lo. The exercise price for the
          option
          acquired by the Company is 10,000 shares of Common Stock, a royalty of
          five
          percent of the Company's net profits, if any, from the exploitation of
          Baser
          through July 21, 1999, and issuance of the Series A Convertible Preferred
          Stock
          as discussed above. There have been no options exercised or shares granted
          through October 31, 2005 in conjunction with this agreement. The acquired
          option
          expires one year after evidence of unencumbered title to the Baser technology
          is
          provided by the Company.
 
 19
 **NOTE
          12 - COMMITMENTS AND CONTINGENCIES**
 
 **Litigation**
 
 The
          Company is involved in various lawsuits arising in the normal course of
          business. Management believes that any financial responsibility that may
          be
          incurred in settlement of such claims and lawsuits would either be covered
          by
          insurance or would not be material to the Company's financial position
          or
          results of operations.
  **Indemnities
          and Guarantees**
 
 During
          the normal course of business, the Company has made certain indemnities
          and
          guarantees under which it may be required to make payments in relation
          to
          certain transactions. The duration of these indemnities and guarantees
          varies
          and, in certain cases, is indefinite. The majority of these indemnities
          and
          guarantees do not provide for any limitation of the maximum potential future
          payments the Company could be obligated to make. Historically, the Company
          has
          not been obligated to make significant payments for these obligations and
          no
          liabilities have been recorded for these indemnities and guarantees in
          the
          accompanying balance sheet.


20


**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF
      OPERATION**




**MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF**
 **FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS**
  The
        following discussion and analysis should be read in conjunction with our
        financial statements. This discussion should not be construed to imply that
        the
        results discussed herein will necessarily continue into the future, or that
        any
        conclusion reached herein will necessarily be indicative of actual operating
        results in the future.
 
 **SUMMARY
        of RECENT TRANSACTIONS**
 
 **North
        Texas Transaction**
 
 On
        September 7, 2005, through Omaha, our wholly owned subsidiary, we entered
        into
        the Agreement with the shareholders (the "North Texas Shareholders") of North
        Texas. Under the terms of the agreement, Omaha acquired 100% of the common
        stock
        of North Texas in exchange for the payment of the Purchase Price. North Texas
        is
        engaged in the business of steel fabrication and is based in Fort Worth,
        Texas.
        We completed the acquisition of North Texas on September 7, 2005. The Purchase
        Price was paid as follows:
 
 ·
              $9,150,000
                  was paid to the North Texas Shareholders;
 ·
              $1,350,000
                  was paid to an account designated pursuant to the terms of the
                  North Texas
                  Steel/Omaha Holdings Pension Plan Joint Account Agreement dated
                  September
                  7, 2005 (the "Pension Plan Agreement"); and
 ·
              $500,000
                  was paid to an account designated pursuant to the terms of the
                  North Texas
                  Steel/Omaha Holdings Indemnity Joint Account Agreement dated September
                  7,
                  2005 (the "Indemnity Agreement").
 
 Each
        of
        the North Texas Shareholders, in connection with the acquisition, have entered
        into standard non-compete/non-solicitation arrangements.
 
 Concurrently
        with the acquisition of North Texas, we entered into the following
        agreements:
 
 **Laurus
        Financings**
 
 We
        entered into agreements with Laurus Master Funds, Ltd., a Cayman Islands
        corporation ("Laurus"), pursuant to which the Company sold convertible debt,
        an
        option and a warrant to purchase common stock to Laurus in a private offering
        pursuant to exemption from registration under Section 4(2) of the Securities
        Act
        of 1933, as amended. The securities sold to Laurus include the following:
 
 ·
              a
                  secured revolving note with a principal amount of $7,000,000;
 ·
              a
                  secured convertible term note A with a principal amount of $3,000,000;
 ·
              a
                  secured convertible term note B with a principal amount of $2,000,000;
 ·
              a
                  common stock purchase warrant to purchase 2,865,116 shares of common
                  stock
                  at a purchase price of $.90 per share, exercisable until September
                  6,
                  2012; and
 ·
              an
                  option to purchase 10,340,000 shares of common stock, at
                  a purchase
                  price of $.003 per share.
 
 Each
        of
        the securities issued to Laurus are convertible into shares of Series D
        Preferred Stock, and the Series F Preferred Stock with respect to the secured
        convertible term note B, until such time that we amend our certificate of
        incorporation to provide for available shares of common stock and the shares
        of
        Series D Convertible Preferred Stock and the Series F Convertible Preferred
        Stock are only convertible into shares of common stock as long as there are
        no
        available shares for conversion.
 
 **Gryphon
        Financing**
 
 On
        September 7, 2005, in connection with the acquisition of North Texas, we
        entered
        into Security Agreements (the "Security Agreements") with GSSF Master Fund,
        L.P.
        ("GSSF") and Gryphon Master Fund L.P. ("GMF") for the sale of an aggregate
        of
        (i) $500,000 in convertible term notes (the "Gryphon Term Notes"), (ii) common
        stock purchase warrants to purchase 5,999,880 shares of common stock
        (the
        "Gryphon Warrants") and (iii) options to purchase 935,000 shares of common
        stock
        (the "Gryphon Options"). GSSF and GMF are hereinafter collectively referred
        to
        as "Gryphon". The Gryphon Notes, the Gryphon Warrants and the Gryphon Options
        are convertible into shares of Series F Preferred Stock until such time we
        amends our certificate of incorporation to provide for available shares of
        common stock and the shares of Series F Convertible Preferred Stock are only
        convertible into shares of common stock as long as there are available shares
        for conversion.
 
 21
 **Nite
        Capital Financing**
 
 On
        September 7, 2005, Nite Capital LP ("Nite") purchased 1,500 shares of Series
        E
        Convertible Preferred Stock for an aggregate purchase price of $150,000.
        Each
        share of Series E Convertible Preferred Stock shall be convertible into shares
        of common stock equal to the stated value of $100 divided by the conversion
        price of $.0011. The shares of Series E Preferred Stock are not convertible
        until such time that we have increased our authorized shares of common stock
        to
        provide for authorized but unissued shares of common stock. The holders of
        the
        Series E Preferred Stock are entitled to receive dividends upon the declaration
        of a dividend to the common stock holders. However, the payments of such
        dividend are subject to the payment of dividends on the Series D Convertible
        Preferred Stock. Upon any liquidation, dissolution or winding up of the Company,
        the holders of the Series E Preferred Stock shall be entitled to receive
        payments prior to any other securities except that the Series D Preferred
        Stock
        shall rank senior to that of the Series E Preferred Stock. The holders of
        Series
        E Preferred Stock have no voting rights unless such vote directly impacts
        the
        rights of the holders of the Series E Preferred Stock.
 
 **Existing
        Debt Conversions**
 
 In
    connection with the closing of the North Texas acquisition, Keshet Fund, L.P.,
    Keshet L.P., Nesher Ltd. and Talbiya B. Investment Ltd. (collectively, the
    "Existing Debt Holders"), converted all debt owed including interest to the
    Existing Debt Holders in the approximate amount of $1,405,236 into 1,182,062
    shares of common stock. Further, Dr. Gary Fromm agreed to forgive debt owed
    to him by our company in the amount of $1,162,732 in consideration of our
    company issuing 479,221 shares of common stock and the Existing Debt
    Holders transferring 702,840 shares of common stock of our company to
    Dr. Fromm.
 
 **Fromm
        Consulting Agreement**
 
 On
        September 6, 2005, we entered into a consulting agreement with Dr. Fromm
        which
        is for a term of six months and which provides a monthly fee of $15,000.
        On
        November 15, 2005 William Plamondon became the CEO with Dr. Fromm remaining
        as
        Chairman of ATG as well as becoming Chairman of the Audit Committee (without
        change in his total compensation of $15,000 monthly).” The consulting
        arrangement shall automatically renew for six month periods unless either
        party
        provides notice 30 calendar days prior to the end of consulting period that
        it
        is terminating the consulting arrangement.
 
 **Luther
        Consulting Agreement**
 
 In
        connection with the closing of the acquisition of North Texas, we entered
        into a
        consulting agreement with Luther Capital Management, Inc. ("Luther Capital").
        Pursuant to the consulting agreement, in consideration for providing valuable
        services to our company in connection with the acquisition of North Texas,
        we
        have agreed to issue Luther Capital and its designees, an aggregate
        of 5,580,280 shares (the "Luther Shares") of common stock. The issuance
        of
        the Luther Shares are subject to our filing an amendment to our certificate
        of
        incorporation to provide for an adequate amount of authorized but unissued
        shares of common stock. In addition to other designations, Luther Capital
        agreed
        to transfer 479,295 shares of common stock to Dr. Fromm, 794,361 shares
        of
        common stock to Thomas E. Durkin, III, 158,872 shares of common stock
        to
        D&D Investments, LLC, a limited liability company of which Mr. Durkin owns
        25% of the outstanding membership interests, and 794,361 shares of
        common
        stock to RI Heller Co. LLC, a limited liability company of which Mr.
        William N. Plamondon, III owns a majority of the outstanding membership
        interests. Messrs. Plamondon, Durkin and Fromm are executive officers and/or
        directors of our company.
 
 **GENERAL
        OVERVIEW**
 
 From
        February 2002 through its acquisition of North Texas in September 2005, the
        Comapny largely had ceased its historical operations and incurred
        nominal
        operating expenses, primarily related to the maintenance of its corporate
        existence.
 
 The
        following analysis of the consolidated results of operations
        includes the Company and its wholly-owned subsidiaries
        Omaha
        Holdings Corporation and North Texas.
  22
 **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. General and administrative costs are
        charged
        to expense as incurred. Revenue from discontinued operations was recognized
        when
        persuasive evidence of an arrangement existed, the price was fixed, title
        had
        transferred, collection of resulting receivables was probable, no customer
        acceptance requirements existed and there were no remaining significant
        obligations.
 
 **Allowance
        For Doubtful Accounts**
 
 We
        are
        required to estimate the collectibility 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 collectibility 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, credit ratings 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, 2005 to the Quarter Ended October 31,
        2004**
 
 **Results
        of Operations**
 
 **North
        Texas Steel Corporation**
  For
          the
          period up to the acquisition of North Texas on September 7, 2005, the Company
          had limited operations.  Since the acquisition was accounted for
          in
          accordance with the purchase method of accounting and its results of operations
          are included in the accompanying statements of operations from the date
          of
          acquisition.  As a result of the acquisition, the North Texas operations
          became the Company's primary operating segment.  Accordingly, period
          to
          period comparisons are not meaningful.


23
 **Revenues**
 
 Revenues
        for the quarter ended October 31, 2005 were heavily influenced by the
        acquisition of North Texas Steel and accordingly period to period comparisons
        are not meaningful. From the date of acquisition through October 31,
        2005.  North Texas’ revenues were approximately $ 3,992,000.
The
        increase in revenues resulted from North Texas bidding and successfully being
        awarded contracts in 2005. Approximately 50% of the increase in revenues
        exceeded North Texas’ manufacturing capacity and resulted in the need to
        subcontract the manufacturing with third parties.
  **Cost
        of Sales**
 
 The
        cost
        of sales for the quarter ended October 31, 2005  was approximately
        $3,551,000. The Company's gross margin was $440,000 or 11% of
        revenues.
 
 The
        cost
        of sales predominantly consists of the cost of labor, raw materials, outsourcing
        costs and absorbed indirect manufacturing costs.
 
 **Selling,
        General and Administrative Expenses**
 
 For
        the
        quarter ended October 31, 2005 selling , general and administrative expenses
        were approximately $7,332,000, which consist of marketing costs and the costs
        of
        non-employee equity compensation to consultants aggregating $6,900,000.
 
 As
        a
        result of our recapitalization from a privately-held to publicly-held company,
        our future selling, general and administrative expenses will increase
        significantly as a result of complying with various federal and state regulatory
        filing requirements.
  As
        the
        direct result of acquiring North Texas and the related financing the Company
        incurred the following non-operating charges in the quarter ended October
        31,
        2005:
 
 ·
              Amortization
                  of discount of $764,000. This non-cash charge is the periodic recognition
                  of the discount related to the issuance of the convertible notes
                  payable.
 ·
                Financing
                    cost recognized in connection with the acquisition amounted to
                    approximated $3,450,000. Such amount is the fair value of the
                    warrants and
                    options granted to advisors and consultants in connection
                    with the
                    acquisition of North Texas Steel.
 ·
                Consulting
                  fee of approxiamtely  $6,900,000, to be paid in
                  stock.
 
 **Liquidity
        and Capital Resources**
  As
        of
        June 30, 2005, ATG had $ 5.368 million in cash and equivalents but its current
        working capital was a deficiency of $4.623 million. While in prior periods,
        we
        have had sufficient cash on hand to meet its obligations, as a result of
        the
        recapitalization, we will not have funds to meet its future working capital
        and
        financing needs. As a result, additional financing will be required in order
        to
        meet our current and projected cash flow deficits from operations and
        development. Although the Company is seeking financing to support its working
        capital needs, the Company has no commitments or assurances that it will
        be
        successful in raising the funds required.
 
 We
        believe that we will be successful in meeting the working capital needs to
        fund
        the current level of operating activities, capital expenditures and debt
        and
        other obligations through the next 12 months. However, if during that period
        or
        thereafter, the Company is not successful in generating sufficient capital
        resources, on terms acceptable to the Company, this could have a material
        adverse effect on the Company's business, results of operations liquidity
        and
        financial condition.
 
 If
        in the
        future, if we are not capable of generating sufficient revenues from operations
        and its capital resources are insufficient to meet future requirements, we
        may
        have to raise funds to continue our operations.
 While
          the Company has continued to raise capital to
          meet its working capital requirements, additional financing is required
          in order
          to meet future needs. There are no assurances the Company will be successful
          in
          raising the funds required and any equity raised would be substantially
          dilutive
          to existing shareholders.
  The
          Company's independent certified public
          accountants have stated in their report included in the Company's July
          31, 2005
          Form 10-KSB, that the Company has incurred operating losses in the last
          two
          years, and that the Company is dependent upon management's ability to develop
          profitable operations. These factors among others may raise substantial
          doubt
          about the Company's ability to continue as a going
          concern.
 Concurrent
        with our aquisition of North Texas in September 2005, we entered
        into
        a series of financing agreements, which are summarized as follows:
  
 24
 **Laurus
        Financings**
 
 Concurrently
        with the closing of the acquisition of North Texas, we entered into agreements
        with Laurus pursuant to which we sold convertible debt, an option and a warrant
        to purchase common stock to Laurus in a private offering pursuant to exemption
        from registration under Section 4(2) of the Securities Act of 1933, as amended.
        The securities sold to Laurus include the following:
 
 ·
              a
                  secured revolving note with a principal amount not to exceed $7,000,000;
 ·
              a
                  secured convertible term note A with a principal amount of $3,000,000;
 ·
              a
                  secured convertible term note B with a principal amount of $2,000,000;
 ·
              a
                  common stock purchase warrant to purchase 2,865,116 shares of common
                  stock, at a purchase price of $.99 per share, exercisable until
                  September
                  6, 2012; and
 ·
              an
                  option to purchase 10,340,000 shares of common stock, at a purchase
                  price
                  of $.003 per share.
 
 Each
        of
        the securities issued to Laurus are convertible into shares of Series D
        Preferred Stock, and the Series F Preferred Stock with respect to the secured
        convertible term note B, until such time that we amend our certificate of
        incorporation to provide authorized but unissued shares of common stock and
        the
        shares of Series D Convertible Preferred Stock and the Series F Convertible
        Preferred Stock are only convertible into shares of common stock as long
        as
        there are available shares for conversion.
 
 We
        are
        permitted to borrow an amount based upon its eligible accounts receivable,
        as
        defined in the agreements with Laurus. We must pay certain fees for any unused
        portion of the credit facility or in the event the facility is terminated
        prior
        to expiration. Our obligation under all notes are secured by all of the assets
        of our company, including but not limited to inventory, accounts receivable
        and
        a pledge of the stock of Omaha and North Texas. The minimum borrowing notes,
        the
        secured revolving notes and the secured convertible term note A mature on
        September 6, 2008. Annual interest on the minimum borrowing notes, the secured
        revolving notes and the secured convertible term note A is equal to the "prime
        rate" published in The Wall Street Journal from time to time, plus 2.0%,
        provided, that, such annual rate of interest may not be less than 8.25%,
        subject
        to certain downward adjustments resulting from certain increases in the market
        price of our common stock. Interest on the minimum borrowing notes, the secured
        revolving notes and the secured convertible term note A is payable monthly
        in
        arrears on the first day of each month, which commenced on October 1, 2005.
  The
        principal amount of the secured convertible minimum borrowing note, together
        with accrued interest thereon is payable on September 6, 2008. The secured
        convertible minimum borrowing note may be redeemed by us in cash by paying
        the
        holder 120% of the principal amount, plus accrued interest. The holder of
        the
        secured convertible minimum borrowing note may require us to convert all
        or a
        portion of the term note, together with interest and fees thereon at any
        time.
        The number of shares to be issued shall equal the total amount to be converted,
        divided by $.99, subject to adjustment as described below.
 
 The
        principal amount of the secured convertible term note A is repayable at the
        rate
        of $50,000 per month together with accrued but unpaid interest, commencing
        on
        January 1, 2006, which such principal payment increases to $98,275 on April
        1,
        2006. The monthly amounts shall automatically convert into shares of common
        stock in the event that there is an effective registration statement, the
        average market price for the five days preceding the payment date is equal
        to or
        greater than 120% of the fixed conversion price and the amount of such
        conversion does not exceed 25% of the aggregate dollar trading volume of
        the
        Company's common stock for the 22 trading days immediately preceding the
        prepayment date (the "Laurus Trading Volume Limit"). In the event that the
        conversion exceeds the Laurus Trading Volume Limit, then Laurus will only
        be
        required to convert the portion of the secured convertible term note A up
        to the
        Laurus Trading Volume Limit and we will be required to pay off the remaining
        balance of the monthly amount. The secured convertible term note A may be
        redeemed by our company in cash by paying the holder 120% of the principal
        amount, plus accrued interest. The holder of the term note may require our
        company to convert all or a portion of the secured convertible term note
        A,
        together with interest and fees thereon at any time. If paid in shares of
        common
        stock the number of shares to be issued shall equal the total amount due,
        divided by $0.0033, subject to adjustment as described below.
 
 The
        principal amount of the secured convertible term note B is repayable in full
        on
        March 6, 2007. Interest on the secured convertible term note B accrues at
        the
        rate of 12% during the first year outstanding and 18% thereafter until maturity.
        On the maturity date, all principal and interest shall automatically convert
        into shares of common stock in the event that there is an effective registration
        statement, the average market price for the five days preceding the payment
        date
        is equal to or greater than 120% of the fixed conversion price and the amount
        of
        such conversion does not exceed 25% of the Laurus Trading Volume Limit. In
        the
        event that the conversion exceeds the Laurus Trading Volume Limit, then Laurus
        will only be required to convert the portion of the secured convertible term
        note A up to the Laurus Trading Volume Limit and we will be required to pay
        off
        the remaining balance of the monthly amount. The secured convertible term
        note B
        may be redeemed by our company in cash by paying the holder 100% of the
        principal amount, plus accrued interest. The holder of the secured convertible
        term note B may require our company to convert all or a portion of the secured
        convertible term note B, together with interest and fees thereon at any time.
        If
        paid in shares of common stock the number of shares to be issued shall equal
        the
        total amount due, divided by $.333.
 
 25
 Upon
        an
        issuance of shares of common stock below the fixed conversion price, the
        fixed
        conversion price of the notes will be reduced accordingly. The conversion
        price
        of the secured convertible notes may be adjusted in certain circumstances
        such
        as if we pay a stock dividend, subdivide or combine outstanding shares of
        common
        stock into a greater or lesser number of shares, or take such other actions
        as
        would otherwise result in dilution.
 
 Laurus
        has contractually agreed to restrict its ability to convert the convertible
        notes would exceed the difference between the number of shares of common
        stock
        beneficially owned by the holder or issuable upon exercise of the warrant
        and
        the option held by such holder and 4.99% of the outstanding shares of common
        stock of our company which such restriction shall automatically become null
        and
        void following notice to us upon occurrence of an event of default under
        the
        agreements with Laurus or upon 75 days prior notice to our company.
 
 We
        are
        obligated to file a registration statement registering the resale of shares
        of
        our common stock issuable upon conversion of the convertible notes, exercise
        of
        the warrant and exercise of the option. If the registration statement is
        not
        filed by October 21, 2005, or declared effective by January 4, 2006, or if
        the
        registration is suspended other than as permitted, in the registration rights
        agreement between us and Laurus, we are obligated to pay Laurus certain fees
        and
        the obligations may be deemed to be in default.
 
 We
        may
        prepay the notes held by Laurus. In addition, we have granted Laurus a security
        interest in substantially all of our assets and our subsidiaries' assets.
        Further, Laurus has a first lien on North Texas' property located at 412
        West
        Bolt Street, Fort Worth Texas and 4410 Marsalis Street, Forth Worth, Texas
        and
        Laurus has obtained a first lien on real property owned by Patricia and Charles
        Matteson located at 160 Rose Hill Road, Southport, Connecticut in connection
        with the secured convertible term note B.
 
 **Gryphon
        Financing**
 
 On
        September 7, 2005, in connection with the acquisition of North Texas, we
        entered
        into the Security Agreements with GSSF and GMF for the sale of an aggregate
        of
        the following:
 
 ·
              $500,000
                  in the Gryphon Term Notes;
 ·
              common
                  stock purchase warrants to purchase 5,997,547 shares of
                  common stock;
                  and
 ·
              options
                  to purchase 935,000 shares of common stock (the "Gryphon Options").
 
 The
        Gryphon Notes, the Gryphon Warrants and the Gryphon Options are convertible
        into
        shares of Series F Preferred Stock until such time that we amend our certificate
        of incorporation to provide for authorized and unissued shares of common
        stock
        and the shares of Series F Convertible Preferred Stock are only convertible
        into
        shares of common stock as long as there are available shares for conversion.
 
 The
        Gryphon Notes bear interest at 12%, mature one year from the date of issuance,
        and are convertible into our common stock, at Gryphon's option, at a conversion
        price of $.333. Based on this conversion price, the Gryphon Notes in the
        amount
        of $500,000 excluding interest, are convertible, upon our implementing the
        reverse stock split, into 1,501,501 shares of our common stock. On
        the
        maturity date of the Gryphon Notes, the Gryphon Notes shall automatically
        convert into shares of common stock in the event that the average market
        price
        for the five days preceding the maturity date is equal to or greater than
        120%
        of the fixed conversion price and the amount of such conversion does not
        exceed
        25% of the aggregate dollar trading volume of our common stock for the 22
        trading days immediately preceding the maturity date (the "Trading Volume
        Limit"). In the event that the conversion exceeds the Trading Volume Limit,
        then
        Gryphon will only be required to convert the portion of the Gryphon Notes
        up to
        the Trading Volume Limit and we will be required to pay off the remaining
        balance.
 
 We
        may
        prepay the Gryphon Notes. In addition, we have granted Gryphon a security
        interest in substantially all of our assets as well as registration rights.
        Gryphon's rights to any security interest are subordinated to that of Laurus
        Master Fund, Ltd.
 
 The
        Gryphon Warrants are exercisable from the date of issuance through February
        28,
        2007 at an exercise price of $.333 per share. The Gryphon Options are
        exercisable at an exercise price of $.003 per share.
 
 26
 Gryphon
        has contractually agreed to restrict their ability to convert or exercise
        the
        Gryphon Notes, the Gryphon Warrants and Gryphon Options and receive shares
        of
        our common stock such that the number of shares of our common stock held
        by them
        and their affiliates after such conversion or exercise does not exceed 4.99%
        of
        our then issued and outstanding shares of common stock.
 
 In
        accordance with Emerging Issues Task Force Issue 98-5, Accounting for
        Convertible Securities with a Beneficial Conversion Features or Contingently
        Adjustable Conversion Ratios ("EITF 98-5") and Emerging Issues Task Force
        Issue
        00-27, Application of Issue No. 98-5 to Certain Convertible Instruments ("EITF
        -
        0027"), we shall recognize an imbedded beneficial conversion feature present
        in
        the Laurus and Gryphon financings, along with the values attributed to the
        warrants issued . We will allocate a portion of the proceeds equal to the
        intrinsic value of that feature and the warrants to additional paid-in capital.
        We will recognize and measure an aggregate of $12,500,000 of the proceeds,
        which
        is equal to the intrinsic value of the imbedded beneficial conversion feature,
        to additional paid-in capital and a discount against the Convertible Notes.
        The
        debt discount attributed to the beneficial conversion feature will amortized
        over the Convertible Notes' maturity period (12 to 30 months) as interest
        expense, approximating $1,250,000 per quarter.
 
 **Nite
        Capital Financing**
 
 On
        September 7, 2005, Nite purchased 1,500 shares of Series E Convertible Preferred
        Stock for an aggregate purchase price of $150,000. Each shares of Series
        E
        Convertible Preferred Stock shall be convertible into shares of common stock
        equal to the stated value of $100 divided by the conversion price of $.0011.
        The
        shares of Series E Preferred Stock are not convertible until such time that
        the
        Company has increased its authorized shares of common stock to 15,000,000,000.
        The holders of the Series E Preferred Stock are entitled to receive dividends
        upon the declaration of a dividend to the common stock holders. However,
        the
        payments of such dividend are subject to the payment of dividends on the
        Series
        D Convertible Preferred Stock. Upon any liquidation, dissolution or winding
        up
        of our company, the holders of the Series E Preferred Stock shall be entitled
        to
        receive payments prior to any other securities except that the Series D
        Preferred Stock shall rank senior to that of the Series E Preferred Stock.
        The
        holders of Series E Preferred Stock have no voting rights unless such vote
        directly impacts the rights of the holders of the Series E Preferred Stock.
 
 **Existing
        Debt Conversions**
 
 In
        connection with the closing of the North Texas acquisition, Keshet Fund,
        L.P.,
        Keshet L.P., Nesher Ltd. and Talbiya B. Investment Ltd. (collectively, the
        "Existing Debt Holders"), converted all debt owed including interest to the
        Existing Debt Holders in the approximate amount of $1,405,236
        into 1,884,902 shares of common stock. Further, Dr. Gary Fromm agreed
        to
        forgive debt owed to him by our company in the amount of $1,162,732 in
        consideration of our company issuing 479,221 shares of common stock
        and the
        Existing Debt Holders transferring 702,840 shares of common stock
        of our
        company to Dr. Fromm.
 
 **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.
 
 **Recent
        Accounting Pronouncements**
 
 SFAS
        123R. On March 31, 2004 the Financial Accounting Standards Board ("FASB")
        issued
        its exposure draft, "Share-Based Payments", which is a proposed amendment
        to
        SFAS 123. The exposure draft would require all share-based payments to
        employees, including grants of employee stock options and purchases under
        employee stock purchase plans, to be recognized in the statement of operations
        based on their fair value. The FASB issued the final standard in December
        2004
        that is effective for public companies for interim and annual periods beginning
        after December 15, 2005. The Company has not yet assessed the impact of adopting
        this new standard.
 
 27
 FAS
        129-1. In April 2004, the FASB issued FASB Staff Position (FSP) 129-1,
        "Disclosure Requirements under SFAS 129, "Disclosure of Information about
        Capital Structure," Relating to Contingently Convertible Securities." The
        FSP
        interprets how the disclosure provisions of SFAS 129 apply to contingently
        convertible securities and their potentially dilutive effect on earnings
        per
        share. We are in a loss position for the three and nine months ended October
        2,
        2004, therefore, adoption of this FSP did not have a material effect on the
        Company's financial position, results of operations, or cash flows.
 
 EITF
        04-08. In September 2004, the Emerging Issues Task Force issued EITF 04-08
        "The
        Effect of Contingently Convertible Debt on Diluted Earnings Per Share." EITF
        04-08 requires companies to include in diluted earnings per share, on the
        if-converted method, any shares of our common stock into which debt of the
        Company may be converted, regardless of whether the conversion threshold
        has
        been met. We adopted this standard as of September 2004. We have reported
        per
        share losses for all periods contained in this report. Since inclusion of
        additional shares would be anti-dilutive, no change to our historical results
        is
        required, therefore, adoption of this EITF did not have a material effect
        on our
        financial position, results of operations, or cash flows.
 
 SFAS
        151.
        In November 2004, the Financial Accounting Standards Board (FASB) issued
        SFAS
        151, Inventory Costs-- an amendment of ARB No. 43, Chapter 4. This Statement
        amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify
        the accounting for abnormal amounts of idle facility expense, freight, handling
        costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4,
        previously stated that ". . . under some circumstances, items such as idle
        facility expense, excessive spoilage, double freight, and re-handling costs
        may
        be so abnormal as to require treatment as current period charges. . . ."
        This
        Statement requires that those items be recognized as current-period charges
        regardless of whether they meet the criterion of "so abnormal." In addition,
        this Statement requires that allocation of fixed production overheads to
        the
        costs of conversion be based on the normal capacity of the production
        facilities. This Statement is effective for inventory costs incurred during
        fiscal years beginning after June 15, 2005. We do not anticipate that the
        implementation of this standard will have a material impact on its financial
        position, results of operations or cash flows.
 
 SFAS
        152.
        In December 2004, the FASB issued SFAS No.152, "Accounting for Real Estate
        Time-Sharing Transactions--an amendment of FASB Statements No. 66 and 67"
        ("SFAS
        152) The amendments made by Statement 152 This Statement amends FASB Statement
        No. 66, Accounting for Sales of Real Estate, to reference the financial
        accounting and reporting guidance for real estate time-sharing transactions
        that
        is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real
        Estate Time-Sharing Transactions. This Statement also amends FASB Statement
        No.
        67, Accounting for Costs and Initial Rental Operations of Real Estate Projects,
        to state that the guidance for (a) incidental operations and (b) costs incurred
        to sell real estate projects does not apply to real estate time-sharing
        transactions. The accounting for those operations and costs is subject to
        the
        guidance in SOP 04-2. This Statement is effective for financial statements
        for
        fiscal years beginning after June 15, 2005. with earlier application encouraged.
        The Company does not anticipate that the implementation of this standard
        will
        have a material impact on its financial position, results of operations or
        cash
        flows.
 
 SFAS
        153.
        On December 16, 2004, FASB issued Statement of Financial Accounting Standards
        No. 153, Exchanges of Non-monetary Assets, an amendment of APB Opinion No.
        29,
        Accounting for Non-monetary Transactions (" SFAS 153"). This statement amends
        APB Opinion 29 to eliminate the exception for non-monetary exchanges of similar
        productive assets and replaces it with a general exception for exchanges
        of
        non-monetary assets that do not have commercial substance. Under SFAS 153,
        if a
        non-monetary exchange of similar productive assets meets a commercial-substance
        criterion and fair value is determinable, the transaction must be accounted
        for
        at fair value resulting in recognition of any gain or loss. SFAS 153 is
        effective for non-monetary transactions in fiscal periods that begin after
        June
        15, 2005. We do not anticipate that the implementation of this standard will
        have a material impact on its financial position, results of operations or
        cash
        flows.
  28
 **update**





**ITEM
      3. CONTROLS AND PROCEDURES**





As
      of the end of the period covered by this report, we conducted an evaluation,
      under the supervision and with the participation of our chief executive officer
      and chief financial officer of our disclosure controls and procedures (as
      defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon
      this evaluation, our chief executive officer and chief financial officer
      concluded that our disclosure controls and procedures are effective to ensure
      that information required to be disclosed by us in the reports that we file
      or
      submit under the Exchange Act is recorded, processed, summarized and reported,
      within the time periods specified in the Commission's rules and forms. There
      was
      no change in our internal controls or in other factors that could affect these
      controls during our last fiscal quarter that has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting.




29


**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. Except
      for the following, 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:




On
      November 17, 2005, Lawrence J. Brady, filed a complaint with the Superior Court
      of the State of California, County of Los Angeles. Mr. Brady is alleging a
      breach of contract and a breach of statutory duty. Mr. Brady is seeking damages
      in the approximate amount of $312,000 in connection with the alleged breach
      of
      his employment agreement and the related termination agreement. The Company
      believes it has meritorious defenses and intends to vigorously defend against
      this action.




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





**Laurus
      Financings**





We
      entered into agreements with Laurus Master Funds, Ltd., a Cayman Islands
      corporation ("Laurus"), pursuant to which the Company sold convertible debt,
      an
      option and a warrant to purchase common stock to Laurus in a private offering
      pursuant to exemption from registration under Section 4(2) of the Securities
      Act
      of 1933, as amended. The securities sold to Laurus include the following:





·
            a
                secured revolving note with a principal amount of $7,000,000;


·
            a
                secured convertible term note A with a principal amount of $3,000,000;


·
            a
                secured convertible term note B with a principal amount of $2,000,000;


·
            a
                common stock purchase warrant to purchase 2,865,116 shares of common
                stock
                at a purchase price of $0.99 per share, exercisable until September
                6,
                2012; and


·
            an
                option to purchase 10,340,000 shares of common stock, at a purchase
                price
                of $0.003 per share.





**Gryphon
      Financing**





On
      September 7, 2005, in connection with the acquisition of North Texas, we entered
      into Security Agreements (the "Security Agreements") with GSSF Master Fund,
      L.P.
      ("GSSF") and Gryphon Master Fund L.P. ("GMF") for the sale of an aggregate
      of
      (i) $500,000 in convertible term notes (the "Gryphon Term Notes"), (ii) common
      stock purchase warrants to purchase 5,999,880 shares of common stock (the
      "Gryphon Warrants") and (iii) options to purchase 935,000 shares of common
      stock
      (the "Gryphon Options"). GSSF and GMF are hereinafter collectively referred
      to
      as "Gryphon".





**Nite
      Capital Financing**





On
      September 7, 2005, Nite Capital LP ("Nite") purchased 1,500 shares of Series
      E
      Convertible Preferred Stock for an aggregate purchase price of $150,000. Each
      share of Series E Convertible Preferred Stock shall be convertible into shares
      of common stock equal to the stated value of $100 divided by the conversion
      price of $0.33. The holders of the Series E Preferred Stock are entitled to
      receive dividends upon the declaration of a dividend to the common stock
      holders. However, the payments of such dividend are subject to the payment
      of
      dividends on the Series D Convertible Preferred Stock. Upon any liquidation,
      dissolution or winding up of the Company, the holders of the Series E Preferred
      Stock shall be entitled to receive payments prior to any other securities except
      that the Series D Preferred Stock shall rank senior to that of the Series E
      Preferred Stock. The holders of Series E Preferred Stock have no voting rights
      unless such vote directly impacts the rights of the holders of the Series E
      Preferred Stock.





**Existing
      Debt Conversions**





In
      connection with the closing of the North Texas acquisition, Keshet Fund, L.P.,
      Keshet L.P., Nesher Ltd. and Talbiya B. Investment Ltd. (collectively, the
      "Existing Debt Holders"), converted all debt owed including interest to the
      Existing Debt Holders in the approximate amount of $1,405,236 into 1,884,902
      shares of common stock. Further, Dr. Gary Fromm agreed to forgive debt owed
      to
      him by our company in the amount of $1,162,732 in consideration of our company
      issuing 479,221 shares of common stock and the Existing Debt Holders
      transferring 702,840 shares of common stock of our company to Dr. Fromm.





**Luther
      Consulting Agreement**





In
      connection with the closing of the acquisition of North Texas, we entered into
      a
      consulting agreement with Luther Capital Management, Inc. ("Luther Capital").
      Pursuant to the consulting agreement, in consideration for providing valuable
      services to our company in connection with the acquisition of North Texas,
      we
      have agreed to issue Luther Capital and its designees, an aggregate of 5,580,280
      shares (the "Luther Shares") of common stock. In addition to other designations,
      Luther Capital agreed to transfer 479,295 shares of common stock to Dr. Fromm,
      794,361 shares of common stock to Thomas E. Durkin, III, 158,872 shares of
      common stock to D&D Investments, LLC, a limited liability company of which
      Mr. Durkin owns 25% of the outstanding membership interests , and 794,361 shares
      of common stock to RI Heller LLC, a limited liability company of which Mr.
      William N. Plamondon, III owns a majority of the outstanding membership
      interests. Messrs. Plamondon, Durkin and Fromm are executive officers and/or
      directors of our company.





30


**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





None.





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





The
      Company filed a Certificate of Amendment to its Certificate of Incorporation
      ("Amendment") with the Secretary of State of the State of Nevada that was
      effective December 5, 2005. The Amendment was filed to effect a reverse split
      of
      the issued and outstanding common shares of the Company whereby every 300 shares
      of common stock held were exchanged for one share of common stock. Any
      shareholder that holds a fractional shares as a result of the reverse split
      will
      receive a whole share in lieu of a fractional share. As a result, the issued
      and
      outstanding shares of common stock were reduced from 832,520,612 ** prior
      to
      the reverse split to approximately 2,775,069 following the reverse stock split
      and the Company’s quotation symbol on the OTC Bulletin Board changed from “ATEG”
      to “ATGR”. The authorized capital of the Company will remain at 1,000,000,000
      shares of common stock and 50,000,000 shares of preferred stock. The reverse
      split was approved by the written consent by stockholders of the Company holding
      a majority of the outstanding shares of common stock of the Company, dated
      as of
      September 28, 2005.





**ITEM
      5. OTHER INFORMATION**





None.





**ITEM
      6. EXHIBITS**





(a)
      Exhibits.


31.1
            Certification by Chief Executive Officer
              pursuant to Sarbanes-Oxley Section 30231.2
            Certification by Chief Financial Officer
              pursuant to Sarbanes-Oxley Section 30232.1
            Certification by Chief Executive Officer
              pursuant to 18 U.S. C. Section 135032.2
            Certification by Chief Financial Officer
              pursuant to 18 U.S. C. Section
              1350




31


**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/
                William N. Plamondon, III**William N. Plamondon, III**CHIEF EXECUTIVE
                  OFFICER*
  *BY:*
              */S/
                Frank Jackson**Frank
                Jackson**CHIEF
                  FINANCIAL OFFICER and PRINCIPAL*
                *ACCOUNTING OFFICER**DATE: December 20,
                2005*






32