<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               AMENDMENT NO. 1 TO
                                   FORM 10-QSB


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

                 For the quarterly period ended January 31, 1999


         [ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

            For the transition period from __________ to ____________


                         Commission file number 0-23268
                                                -------

                        AMERICAN TECHNOLOGIES GROUP, INC.
                 ---------------------------------------------
                 (Name of small business issuer in its charter)

              NEVADA                                        95-4307525
              ------                                        ----------
  (State or other jurisdiction of                          (IRS Employer
  incorporation or organization)                        Identification No.)

                 1017 SOUTH MOUNTAIN AVENUE, MONROVIA, CA. 91016
               ---------------------------------------------------
               (Address of principal executive offices) (zip code)

                    Issuer's telephone number: (626) 357-5000


         Check whether the issuer (1) filed all reports to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes __X__ No ____


         As of March 15, 1999, the registrant had 26,846,987 shares of Common
Stock outstanding.


<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                   PAGE
PART I          FINANCIAL INFORMATION
<S>             <C>                                                                                <C>
ITEM 1          Condensed Consolidated Financial Statements

                Condensed Consolidated Balance Sheets
                as of January 31, 1999 and July 31, 1998                                               3

                Condensed Consolidated Statements of Operations
                for the Three and Six Months ended January 31, 1999 and 1998                           5

                Condensed Consolidated Statements of Cash Flows
                for the Six Months ended January 31, 1999 and 1998                                     6

                Notes to the Condensed Consolidated Financial Statements                               7

ITEM 2          Management's Discussion and Analysis                                                   11


PART II         OTHER INFORMATION


ITEM 6          Exhibits and Reports on Form 8-K                                                       14

                Signatures                                                                             15
</TABLE>


                           FORWARD-LOOKING STATEMENTS

IN ADDITION TO HISTORICAL INFORMATION, THIS QUARTERLY REPORT CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995, AND THE COMPANY DESIRES TO TAKE ADVANTAGE OF THE
"SAFE HARBOR" PROVISIONS THEREOF. THEREFORE THE COMPANY IS INCLUDING THIS
STATEMENT FOR THE EXPRESS PURPOSE OF SUCH SAFE HARBOR WITH RESPECT TO ALL SUCH
FORWARD-LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS IN THIS REPORT
REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL
PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES, INCLUDING THOSE DISCUSSED HEREIN AND IN OTHER REPORTS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM HISTORICAL RESULTS OR THOSE ANTICIPATED. IN THIS REPORT,
THE WORDS "ANTICIPATES", "BELIEVES", "INTENDS", "FUTURE", AND SIMILAR
EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, WHICH SPEAK
ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY
REVISE THESE FORWARD-LOOKING STATEMENTS TO RELFECT EVENTS OR CIRCUMSTANCES THAT
MAY ARISE AFTER THE DATE HEREOF.


                                      Page 2
<PAGE>

               AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

        CONSOLIDATED BALANCE SHEETS - JANUARY 31, 1999 AND JULY 31, 1998

                                     ASSETS

<TABLE>
<CAPTION>
                                                                               January 31,                July 31,
                                                                                  1999                      1998
                                                                           --------------------     ---------------------
                                                                               (Unaudited)
<S>                                                                        <C>                      <C>
CURRENT ASSETS:
      Cash and cash equivalents                                              $         119,056          $         60,563
      Accounts receivable, net of allowance for
          doubtful accounts of $10,000 and $28,811
          at January 31, 1999 and July 31, 1998,  respectively                          31,363                    46,029
      Inventories, net                                                                 178,127                   149,658
      Due from officers/shareholders                                                     1,720                   138,198
      Notes receivable, net                                                             49,450                         -
      Other current assets                                                                   -                     8,482
                                                                           --------------------     ---------------------
           Total current assets                                                        379,716                   402,930
                                                                           --------------------     ---------------------


PROPERTY AND EQUIPMENT                                                               1,837,406                 1,837,406
      Less--Accumulated depreciation and
          amortization                                                                (500,254)                 (421,767)
                                                                           --------------------     ---------------------
                                                                                     1,337,152                 1,415,639
                                                                           --------------------     ---------------------


NOTES RECEIVABLE, net of current portion                                             1,218,100                         -

TECHNOLOGY RIGHTS, net of accumulated
          amortization of $600,000 and $400,000
          at January 31, 1999 and July 31, 1998, respectively                          600,000                   800,000

OTHER ASSETS                                                                           397,126                   432,909

ASSETS HELD FOR DISPOSAL                                                             1,643,030                 3,925,051

ASSETS OF DISCONTINUED OPERATIONS                                                      127,602                   134,401
                                                                           --------------------     ---------------------

                                                                           $         5,702,726       $         7,110,930
                                                                           ====================     =====================


              The accompanying notes are an integral part of these condensed consolidated balance sheets.
</TABLE>
                                      3
<PAGE>


               AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

        CONSOLIDATED BALANCE SHEETS - JANUARY 31, 1999 AND JULY 31, 1998

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                   January 31,             July 31,
                                                                                      1999                   1998
                                                                                ------------------     ------------------
                                                                                   (Unaudited)
<S>                                                                             <C>                    <C>
CURRENT LIABILITIES:
      Accounts payable                                                          $         877,774      $         360,028
      Accrued liabilities                                                                 228,918                145,770
      Accrued professional fees                                                           224,740                243,600
      Amounts due to related parties                                                      559,288                264,345
      Current portion of notes payable                                                    388,900                372,824
      Current portion of capital lease obligations                                         22,344                 22,344
      Convertible debentures                                                            1,375,000                 75,000
      Liabilities of discontinued operations                                              374,961                356,366
      Deposit on sale of discontinued operations                                          500,000                300,000
                                                                                ------------------     ------------------
           Total current liabilities                                                    4,551,925              2,140,277

NOTES PAYABLE, net of current portion                                                   1,586,625              1,587,955
CAPITAL LEASES OBLIGATIONS, net of current portion                                        246,990                283,084
                                                                                ------------------     ------------------

           Total liabilities                                                            6,385,540              4,011,316
                                                                                ------------------     ------------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
      Series A Convertible Preferred Stock:
          Par value--$.001,
          Authorized--10,000,000 shares
          Issued and outstanding--378,061 shares                                              378                    378
      Series B Convertible Preferred Stock:
          Par value--.001,
          Authorized--500,000 shares
           Liquidation value--$8.00 per share
          None issued and outstanding                                                           -                      -
      Series C Convertible Preferred Stock:
          Par value--.001,
          Authorized--2,000 shares
          Liquidation value--$1,000 per share
          None issued and outstanding                                                           -                      -
      Common Stock:
          Par value--$.001, Authorized--100,000,000 shares Issued and
          outstanding -- 26,824,987 and 22,704,368 shares at January 31, 1999
          and July 31, 1998, respectively                                                  26,825                 22,704
      Additional paid in capital                                                       42,898,104             39,569,941
      Stock subscriptions                                                                  46,320                 63,440
      Prepaid consulting                                                               (2,011,133)                     -
      Deficit                                                                         (41,643,308)           (36,556,849)
                                                                                ------------------     ------------------
           Total stockholders' equity                                                    (682,814)             3,099,614
                                                                                ------------------     ------------------

                                                                                $       5,702,726      $       7,110,930
                                                                                ==================     ==================


              The accompanying notes are an integral part of these condensed consolidated balance sheets.
</TABLE>
                                      4
<PAGE>


               AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

          FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 1999 AND 1998

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                       For Three Months Ended January 31,         For Six Months Ended January 31,
                                                          1999                   1998                1999                   1998
                                                      ----------------    ----------------     ---------------     ---------------
<S>                                                   <C>                 <C>                  <C>                    <C>
REVENUES:
      Technology products                              $       55,548     $       107,875      $       96,480     $       538,900
      Rental income                                            13,500              50,000              77,000              50,000
      Other                                                    50,708              17,764             112,031              73,326
                                                      ----------------    ----------------     ---------------    ----------------
         Total operating revenues                             119,756             175,639             285,511             662,226
                                                      ----------------    ----------------     ---------------    ----------------

OPERATING EXPENSES
      General and administrative                            1,448,727             691,915           2,249,967           1,261,345
      Marketing and product development                       416,565             204,995             535,239             512,054
      Research and development                                181,439             287,305             350,657             646,421
      Mining operations                                        54,526              27,108              82,076             122,969
      Loss on impairment of assets held for sale            1,000,000                   -           1,000,000                   -
      Amortization of technology rights                       100,000             200,000             200,000             200,000
                                                      ----------------    ----------------     ---------------     ---------------
           Total operating expenses                         3,201,257           1,411,323           4,417,939           2,742,789
                                                      ----------------    ----------------     ---------------     ---------------

OTHER (EXPENSE) INCOME
      Interest expense, net                                  (563,159)           (419,860)           (737,115)         (1,527,381)
      Loss on investment in a joint venture                         -                   -             (39,341)                  -
                                                      ----------------    ----------------     ---------------     ---------------
                                                             (563,159)           (419,860)           (776,456)         (1,527,381)
                                                      ----------------    ----------------     ---------------     ---------------

NET LOSS FROM CONTINUING OPERATIONS
          BEFORE DISCONTINUED OPERATIONS                   (3,644,660)         (1,655,544)         (4,908,884)         (3,607,944)


DISCONTINUED OPERATIONS (NOTE 6)                             (100,831)            (86,381)           (177,575)           (260,084)
                                                      ----------------    ----------------     ---------------     ---------------


NET LOSS                                              $    (3,745,491)    $    (1,741,925)     $   (5,086,459)     $   (3,868,028)
                                                      ================    ================     ===============     ===============


BASIC AND DILUTED NET LOSS PER SHARE
      Continuing operations                           $         (0.15)    $         (0.08)     $        (0.20)     $        (0.17)
      Discontinued operations                                   (0.00)              (0.00)              (0.01)              (0.01)
                                                      ----------------    ----------------     ---------------     ---------------
          Net Loss                                    $         (0.15)    $         (0.08)     $        (0.21)     $        (0.18)
                                                      ================    ================     ===============     ===============

WEIGHTED AVERAGE NUMBER OF
       COMMON SHARES OUTSTANDING                           25,036,944          21,317,082          24,217,235          21,100,134
                                                      ================    ================     ===============     ===============


              The accompanying notes are an integral part of these condensed consolidated balance sheets.
</TABLE>
                                      5
<PAGE>

               AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

               FOR THE SIX MONTHS ENDED JANUARY 31, 1999 AND 1998

                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                       Six Months Ended January 31,
                                                                                       1999                      1998
                                                                                -------------------       ------------------
<S>                                                                             <C>                       <C>
CASH FLOW FROM OPERATING ACTIVITIES:
      Net Loss                                                                   $      (5,086,459)        $     (3,868,028)
      Adjustments to reconcile net loss to net cash used
            in operating activities:
          Depreciation and amortization                                                    287,958                  279,312
          Write-off of advances to officers and shareholders                               136,698                        -
          Stock issued as consideration for services                                       897,996                    4,235
          Imputed interest expense for notes payable and capital lease                      36,478                   37,766
          Interest and financing costs on convertible debt                                 600,121                1,471,771
          Loss on impairment of assets held for sale                                     1,000,000                        -
          Loss on investment in joint venture                                               39,341                        -
          Loss on disposal of equipment                                                          -                   10,161
      Changes in assets and liabilities:
          Accounts receivable                                                               14,666                  332,737
          Inventories                                                                      (28,469)                   7,063
          Other current assets                                                               8,482                        -
          Accounts payable and accrued liabilities                                         582,034                 (469,687)
          Amounts due to related parties                                                   152,443                        -
                                                                                -------------------       ------------------
               Net cash used in operating activities                                    (1,358,711)              (2,194,670)
                                                                                -------------------       ------------------

CASH FLOW FROM INVESTING ACTIVITIES:
          Purchase of property and equipment                                                     -                 (188,117)
          Other assets                                                                      (3,557)                (210,997)
                                                                                -------------------       ------------------
               Net cash used in investing activities                                        (3,557)                (399,114)
                                                                                -------------------       ------------------

CASH FLOW FROM FINANCING ACTIVITIES:
          Advances to shareholders/officers                                                   (220)                 (73,848)
          Advances from related parties                                                    142,500                        -
          Net proceeds from issuance of convertible debt                                 1,105,913                2,834,880
          Proceeds from notes receivable                                                     5,000                        -
          Payments on notes payable                                                         (7,826)                 (45,853)
          Payments on capital lease obligation                                             (50,000)                 (50,000)
          Deposit on sale of discontinued operations                                       200,000                        -
          Net proceeds from issuance of stock                                                    -                   82,017
                                                                                -------------------       ------------------
               Net cash provided by financing activities                                 1,395,367                2,747,196
                                                                                -------------------       ------------------

NET CASH FLOWS FROM DISCONTINUED OPERATIONS                                                 25,394                   (7,019)

NET INCREASE IN CASH AND CASH EQUIVALENTS                                                   58,493                  146,393

CASH AND CASH EQUIVALENTS, beginning of period                                              60,563                1,025,076
                                                                                -------------------       ------------------

CASH AND CASH EQUIVALENTS, end of period                                         $         119,056         $      1,171,469
                                                                                ===================       ==================

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
       AND FINANCING ACTIVITIES:

          Stock issued for technology rights                                     $               -         $      1,200,000
                                                                                ===================       ==================
          Convertible debenture issued for commission                            $               -         $        225,000
                                                                                ===================       ==================
          Notes issued for mining properties                                     $               -         $        200,000
                                                                                ===================       ==================
          Conversion of debentures                                               $               -         $        500,000
                                                                                ===================       ==================
          Sale of assets held for disposal for notes receivable, net             $       1,272,500         $              -
                                                                                ===================       ==================


              The accompanying notes are an integral part of these condensed consolidated balance sheets.
</TABLE>
                                      6
<PAGE>

               AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (unaudited)

1.       BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
         have been prepared in accordance with generally accepted accounting
         principles for interim financial information and with the instructions
         to Rule 10-01 of Regulation S-X. Accordingly, they do not include all
         of the information and notes required by generally accepted accounting
         principles for complete financial statements. In the opinion of
         management, all adjustments (consisting of normal recurring
         adjustments) considered necessary for a fair presentation have been
         included. Operating results for the three and six month periods ended
         January 31, 1999 are not necessarily indicative of the results that may
         be expected for the year ended July 31, 1999. For further information,
         please refer to the consolidated financial statements and notes thereto
         included in the Company's Annual Report on Form 10-KSB/A for the fiscal
         year ended July 31, 1998.

2.       ORGANIZATION, LINE OF BUSINESS AND SIGNIFICANT BUSINESS RISKS

         a.       ORGANIZATION AND LINE OF BUSINESS

         American Technologies Group, Inc. (the Company or ATG), a Nevada
         corporation, is engaged in the development, commercialization and sale
         of products and systems using its patented and proprietary
         technologies. ATG also is involved in research and development of
         proprietary energy and environmental systems and services which offer
         cost-effective solutions to reduce, and in some cases eliminate,
         hazardous chemical by-products or emissions resulting from industrial
         production and combustion processes.

         b.       SIGNIFICANT BUSINESS RISKS

         Since its inception, the Company has incurred significant operating
         losses. The ability of the Company to operate as a going concern is
         dependent upon its ability to (1) obtain sufficient additional capital,
         (2) generate significant revenues through its existing assets and
         operating business, and (3) overcome significant product development
         issues. The Company plans to raise additional working capital through
         private offerings of debt and equity. The successful outcome of future
         activities cannot be determined at this time and there are no
         assurances that if achieved, the Company will have sufficient funds to
         execute its business plans or generate positive operating results.
         These issues, among others, raise substantial doubt about the ability
         of the Company to continue as a going concern. The financial statements
         do not include any adjustments relating to the recoverability and
         classification of asset carrying amounts or the amount and
         classification of liabilities that might result should the Company be
         unable to continue as a going concern.

         c.       NET LOSS PER SHARE

         Net loss per common share is based upon the weighted average number of
         common shares outstanding during the fiscal year. The Company has
         adopted the provisions of SFAS No. 128, "Earnings Per Share" issued in
         February 1997. Common share equivalents were not considered as they
         would be anti-dilutive and had no impact on earnings per share for any
         periods presented. However, the impact under the treasury method of
         dilutive stock options would have been incremental shares of 32,746 and
         1,435,793 for the six months ended January 31, 1999 and 1998,
         respectively.


                                      Page 7
<PAGE>

         d.       RECLASSIFICATIONS

         Certain amounts in the January 31, 1998 consolidated financial
         statements have been reclassified to conform to current year
         presentation.

3.       DEBENTURES

         During the six months ended January 31, 1999, the Company issued
         pursuant to subscription agreements $1,050,000, in the aggregate, of 6
         percent subordinated convertible debentures, maturing November 1, 2003.
         Interest is due semi-annually commencing May 1, 1999 or upon
         conversion. The principal and accrued interest are convertible into
         shares of ATG's Common Stock at the lower of a fixed conversion price
         of $0.62 or a variable conversion price equal to 75 percent of the
         average closing bid price of ATG's Common Stock during the five trading
         days preceding the date of conversion. The debentures include warrants
         to purchase 105,000 shares of Common Stock at $0.75 per share. The
         Company anticipates that all of the debentures (including interest)
         will be converted into ATG's Common Stock. Imputed interest of $350,000
         and financing costs of $194,087 were recorded as interest expense in
         connection with the $1,050,000 of debentures in the accompanying
         Consolidated Statements of Operations for the three and six month
         periods ended January 31, 1999.

         In December 1998, the Company issued under a separate subscription
         agreement $250,000, in the aggregate, of 3 percent subordinated
         convertible debentures, maturing December 1, 2003. Interest is due upon
         the maturity date. The principal and accrued interest are convertible
         into 431,035 shares of ATG's Common Stock at a fixed conversion price
         of $0.58. Imputed interest of $56,034 was recorded as interest expense
         in connection with the $250,000 of debentures in the accompanying
         Consolidated Statements of Operations for the three and six month
         periods ended January 31, 1999.

         In connection with the 6 percent subordinated convertible debentures,
         the Company placed 2,500,000 shares of ATG's Common Stock in escrow to
         be released to the extent due upon conversion of these debentures.

4.       CAPITAL STOCK

         a.       COMMON STOCK

         During August 1998, the Company entered into two separate consulting
         agreements for services. Under the terms of the agreements, the Company
         issued 1,000,000 shares of ATG's Common Stock valued at $781,250 for
         services which is amortized on a straight line basis over the terms of
         the agreements expiring May 31, 1999 and July 31, 1999. During December
         1998, the Company entered into three separate consulting agreements for
         services. Under the terms of the agreements, the Company issued
         3,000,000 shares of ATG's Common Stock valued at $2,080,000 for
         services which is amortized on a straight line basis over the terms of
         the agreements expiring July, 1999, September, 1999 and November 1999.
         General and Administrative expenses include amortization expense of
         $636,055 and $850,117 for the three and six month periods ended January
         31, 1999 in the accompanying Consolidated Statements of Operations. As
         of January 31, 1999, the remaining unamortized cost of $2,011,133 is
         included in prepaid consulting under stockholders' equity in the
         accompanying Consolidated Balance Sheets.

         During November 1998, the Company issued 100,000 shares of Common Stock
         valued at $40,000 to a consultant for a special project relating to
         trading activity of the Company's Common Stock on the OTC Bulletin
         Board.


                                      Page 8
<PAGE>

         b.       STOCK SUBSCRIPTIONS

         During the six months ended January 31, 1999, the Company issued 20,619
         shares of Common Stock valued at $25,000 which were included within
         stock subscriptions as of July 31, 1998 and recorded a subscription of
         services for 4,000 shares valued at $7,879. As of January 31, 1999, the
         Company had not issued (i) 6,000 shares of Common Stock owed for
         services rendered through January 31, 1999, valued at $11,820 and (ii)
         22,500 shares of Common Stock sold under private placement for an
         aggregate of $34,500 in cash received prior to July 31, 1997. These
         amounts have been included within stock subscriptions in the
         accompanying Consolidated Balance Sheets.

5.       JOINT VENTURE

         In February, 1998, the Company formed a joint venture with
         approximately 25% ownership interest, which will be accounted for in
         accordance with the equity method. The joint venture markets various
         personal and home care products containing the Company's proprietary
         IE(TM) crystals. Sales of these products commenced in June, 1998. The
         Company made an initial investment of $124,100 in the joint venture.
         The Company's share of net loss from this joint venture was
         approximately $39,341 for the six months ended January 31, 1999. The
         net assets of the joint venture were approximately $787,000 as of
         December 31, 1998.

         As of January 31, 1999, the Company had approximately $10,000 in
         accounts receivable due from the joint venture. Included in the
         Consolidated Statements of Operations is $7,500 and $15,000 of rental
         income relating to the joint venture during the three and six months
         ended January 31, 1999.

6.       DISCONTINUED OPERATIONS

         On June 23, 1998, the Company entered into an agreement with a former
         officer-shareholder to sell the stock of ATG Media, Inc. for $500,000.
         The closing date was initially set as August 15, 1998, but has been
         extended by the parties. The sale is contingent on the sale of
         2,250,000 shares of the former officer's Common Stock to an unrelated
         third party for proceeds of at least $2,000,000. If the former
         officer's stock is not purchased, the Company is obligated to return
         the amount of purchase price paid in cash or shares of ATG's Common
         Stock valued at $0.89 per share. As of January 31, 1999, the Company
         has received $500,000 of the purchase price, which is included in
         current liabilities in the accompanying Consolidated Balance Sheets.

         Included in assets of discontinued operations are inventories and
         accounts receivable. Included in liabilities of discontinued operations
         are accounts payable and deferred subscription revenue.

         Loss from operations of discontinued operations are $100,831 and
         $86,381 for the three months ended January 31, 1999 and 1998,
         respectively, and $177,575 and $260,084 for the six months ended
         January 31, 1999 and 1998, respectively. The Company estimates that the
         sales price less the carrying value and costs of disposal will not
         result in a loss on the disposal.

7.       ASSETS HELD FOR SALE

         Included in assets held for sale in the accompanying Consolidated
         Balance Sheets are the Tempiute property of $560,000 and the Manhattan
         gold property of $2,083,030. The Company no longer plans to develop
         these properties but plans to sell, lease or otherwise dispose of its
         investment. The Manhattan gold property has been leased to Royal Gold,
         Inc.

         On January 5, 1999, the Company completed the sale of its Manhattan,
         Nevada mill properties and equipment to NewGold, Inc. for $1,450,000
         payable over a period of five years. The


                                      Page 9
<PAGE>

         accompanying Consolidated Balance Sheets as of January 31, 1999
         includes a note receivable of $1,445,000 net of discount of
         $177,450. At January 31, 1996, the date of its last audited balance
         sheet, NewGold had a significant working capital deficiency. The
         report of NewGold's independent accountants on its January 31, 1996
         financial statements contained a statement expressing doubt about
         the ability of NewGold continuing as a going concern.

8.       RELATED PARTY TRANSACTIONS

         Included in amounts due to related parties in the accompanying
         Consolidated Balance Sheets is $142,500 in short term borrowings from
         related parties as of January 31, 1999. In consideration of these
         borrowings, the Company granted an option to purchase 75,000 shares of
         ATG's Common Stock at $0.40 per share.

         The Company wrote off $136,700 of loans due from officers/shareholders
         which amount has been recorded as compensation expense. The loans were
         originally provided for various reasons with approximately 75% of the
         aggregate loan amount incurred in 1997 as a means by former officers to
         attract or retain certain personnel. The majority of the remaining
         amount was incurred on behalf of an officer in connection with legal
         fees relating to the particle beam technology.

9.       SUBSEQUENT EVENT

         During February, 1999, the Company issued a 3 percent subordinated
         convertible debenture, maturing December 1, 2003 in the principal
         amount of $300,000. Interest is due on the maturity date. The principal
         and accrued interest are convertible into 600,000 shares of ATG's
         Common Stock at a fixed conversion price of $0.50 per share. The
         debentures include warrants to purchase 55,000 shares of Common Stock
         at $0.75 per share. In addition, the Company received an 8 percent
         interest bearing loan with principal of $175,000 in March 1999 and
         issued 25,000 warrants in connection with this loan.

         In November 1997, the Company entered into a Mining Lease and Option to
         Purchase Agreement with Royal Gold, Inc. In April, 1999, Royal Gold
         advised the Company that it was exercising its right to terminate the
         agreement. In addition, in April, 1999, the Company was advised that
         NewGold, Inc. was unable to fulfill its obligations regarding the
         purchase of the Manhattan gold mill. In July, 1999, the Company sold
         the Manhattan gold mill and properties to Western Mine Development for
         the assumption of the notes due (approximate total of $956,000) on the
         property and the payment of $2,500,000 plus interest over nine years
         against a 2% net smelter royalty. The Company wrote down $1,000,000 of
         estimated impairment on these properties based on the net realizable
         value from the sale.


                                      Page 10
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS

Management continues its efforts to refocus the Company's activities on its core
technologies, along with new product development, including new applications for
its IE(TM) technology, and commercialization of those applications which were
already perfected.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
JANUARY 31, 1999 AND 1998

Revenue decreased by $55,800 from $175,600 to $119,800 for the three months
ended January 31, 1998 and January 31, 1999, respectively, principally due to
the continuing transition from pure research and development to
commercialization and sales of products.

Reflecting the implementation of the strategic direction set by the Board of
Directors during the prior fiscal year, operating expenses increased by
$1,790,000 from $1,411,300 to $3,201,300 for the three months ended January 31,
1998 and January 31, 1999, respectively. The increase was due to increases of
$756,800 in general and administrative expense (due to additional consulting
expenses including prepaid services), $211,600 in marketing and product
development, $27,400 in mining expense and $1,000,000 in impairment loss on
mining properties partially offset by decreases of $105,900 in research and
development and $100,000 in amortization of technology rights.

ATG's net loss for the second quarter of fiscal 1999 increased by $2,003,600 to
$3,745,500 from $1,741,900 for the second quarter of fiscal 1998. The increase
is due to increased operating and other expenses of $1,933,300, an increase of
$14,500 in losses from discontinued operations and a decrease in revenues of
$55,800.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED
JANUARY 31, 1999 AND 1997

Revenue decreased by $376,700 from $662,200 to $285,500 for the six months ended
January 31, 1998 and January 31, 1999, respectively, principally due to the
Company's decision to stop selling IE crystals for use in laundry products by
TradeNet Marketing Inc. and the continuing transition from pure research and
development to commercialization and sales of products.

Reflecting the implementation of the strategic direction set by the Board of
Directors during the prior fiscal year, operating expenses increased by
$1,675,100 from $2,742,800 to $4,417,900 for the six months ended January 31,
1998 and January 31, 1999, respectively. The increase was due to increases of
$988,700 in general and administrative expense (due to additional consulting
expenses including prepaid services), $23,100 in marketing and product
development and $1,000,000 in impairment loss on mining properties partially
offset by decreases of $295,700 in research and development and $40,900 in
mining expense.

Other expenses for the six months ended January 31, 1999 decreased by $750,900
to $776,500 from $1,527,400 for the corresponding period of fiscal 1998 due to a
decrease in interest expense.

ATG's net loss for the six months ended January 31, 1999 increased by $1,218,500
to $5,086,500 from $3,868,000 for the corresponding period of fiscal 1998. The
increased loss is principally due to increased operating expenses of $1,675,100
and a decrease in revenues of $376,700 partially offset by decreases in other
expenses of $750,900 and losses from discontinued operations of $82,500.


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LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has incurred significant operating losses. The
ability of the Company to operate as a going concern is dependent upon its
ability to (1) obtain sufficient additional capital, (2) generate significant
revenues through its existing assets and operating business, and (3) overcome
significant product development issues. The Company plans to raise additional
working capital through private offerings of debt and equity. The successful
outcome of future activities cannot be determined at this time and there are no
assurances that if achieved, the Company will have sufficient funds to execute
its business plans or generate positive operating results. These issues, among
others, raise substantial doubt about the ability of the Company to continue as
a going concern.

Total assets decreased by $1,408,200 from $7,110,900 at July 31, 1998 to
$5,702,700 at January 31, 1999. This decrease was principally the net result of
decreases in accounts receivable of $14,600, write-off of amounts due from
officers/shareholders of $136,700, other assets of $35,800, unamortized
technology rights of $200,000 and assets held for disposal of $2,282,100
partially offset by increases in cash of $58,500, net inventories of $28,500,
notes receivable of $1,267,600. The increase in notes receivable reflects the
completion of the sale of the Manhattan, Nevada mill to NewGold, Inc. In
accordance with SFAS Number 121, the Company has recorded an impairment loss of
$1,000,000 associated with the subsequent sale of Manhattan properties. The
amounts written off from officers represents the aggregate amount previously due
from 5 people and has been recorded as compensation expense. The loans were
originally provided for various reasons with approximately 75% of the aggregate
loan amount incurred in 1997 as a means by former officers to attract or retain
certain personnel. The majority of the remaining amount was incurred on behalf
of an officer in connection with legal fees relating to the particle beam
technology. Due to the Company's cash shortage, its ability to remunerate
employees is limited. The Board agreed to forgive the loans as a means to
compensate the following individuals without the expenditure of additional cash:
Lawrence J. Brady, Shui-Yin Lo, Harold Rapp, John M. Dab and Alex Nicolson.

Total liabilities increased by $2,374,200 from $4,011,300 to $6,385,500 at July
31, 1998 and January 31, 1999, respectively. This increase was due principally
to increases in accounts payable of $517,800, accrued liabilities of $83,100,
amounts due to related parties of $295,000, convertible debentures of $1,300,000
and deposits of $200,000.

The Company's working capital deficiency at January 31, 1999 increased by
$2,434,800 to $4,172,200 from $1,737,400 at July 31, 1998. This increase is
principally the result of increases in convertible debentures of $1,300,000,
accounts payable of $517,800, amounts due to related parties of $295,000 and
deposit on sale of subsidiaries of $200,000. The Company anticipates that
$1,300,000 in convertible debentures will be converted into Common Stock during
fiscal 1999. In such event, the Company's working capital position will improve
as will the amount of shareholders' equity.

The principal source of working capital during the six month period ending
January 31, 1999 was the sale of $1,300,000 of principal amount of convertible
debentures. During the comparable period in 1998, the principal source of
working capital was the sale of $3,225,000 of principal amount of convertible
debentures.

Subsequent to January 31, 1999, the Company continued to finance its operations
with debt. As of March 15, 1999, the Company had sold an additional $300,000 of
principal amount of convertible debentures and received a $175,000 loan bearing
interest at 8 percent per annum. In connection with these debt instruments, the
Company issued an aggregate of 80,000 warrants to purchase ATG's Common Stock at
$0.75 per share. In addition, negotiations are ongoing for a bridge loan with
net proceeds of $1,300,000 leading to a secondary private or public offering of
undetermined securities of the Company for $10,000,000, both in connection with
the Company's proposed merger with Commodore Separation Technologies Inc. The
proposed transaction with Commodore Separation Technologies is discussed


                                      Page 12
<PAGE>

below. The Company's continued operations are dependent upon obtaining some
financing, of which there can be no assurance.

In January, 1999, the Company signed a letter of intent which effectuates its
acquisition of Commodore Separation Technologies, although the transaction is
structured as a merger. Commodore Separation Technologies is commercializing a
proprietary separation technology and recovery system known as SLiM(TM). SLiM
stands for Supported Liquid Membrane. SLiM can selectively remove from water
valuable substances for reuse or toxic materials for safe disposal.

If the transaction is completed as proposed, the existing shareholders of
American Technologies would own approximately 80.1 percent of the surviving
company and the shareholders of Commodore Separation Technologies would own
approximately 19.9 percent of the surviving company. In addition, the Commodore
Separation Technologies shareholders will receive one third of the after tax
profit of the existing business of Commodore Separation Technologies.

Statements included in this Management's Discussion and Analysis or Plan of
Operation and elsewhere in this Form 10-QSB, in future filings by the Registrant
with the Securities and Exchange Commission and in the Registrant's press
releases and oral statements made with the approval of authorized executive
officers, if the statements are not historical or current facts, should be
considered "forward-looking statements" made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. Registrant wishes to caution the reader not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made.


                                      Page 13
<PAGE>

                                     PART II

                                OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)      EXHIBITS.

         4.6  Form of 3% Convertible Debenture *

         27   Financial Data Schedule

------------------------------
* Previously filed as Exhibit 4.3 to Amendment No. 1 to the Company's
Registration Statement of Form S-3 filed with the Securities and Exchange
Commission on February 10, 1999.

(b)      REPORTS ON FORM 8-K.

         A report on Form 8-K was filed during the period covered by this
quarterly report. The form 8-K was dated January 5, 1999 and reported an event
under Item 2.


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                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                            AMERICAN TECHNOLOGIES GROUP, INC.


                                            By: /S/ LAWRENCE J. BRADY
                                                -------------------------
                                                 Lawrence J. Brady
                                                 Chairman of the Board and
                                                 Chief Executive Officer

                                            Date:  September 7, 1999


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