Summary of AMERICAN TECHNOLOGIES GROUP INC

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

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Discussions of certain matters in this Quarterly Report on Form 10-Q may contain forward-looking statements which relate to future events or our future financial performance. In this Form 10-Q, forward-looking statements are generally identified by the words "anticipate", "plan", "believe", "expect", "estimate", and the like. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors, including the risks in the section entitled "Risk Factors" in the Company's Annual Report, Form 10-K, filed for the year ended July 31, 2008.

The following discussion is intended to provide a better understanding of the significant changes in trends relating to the Company's financial conditions and results of operations. Management's Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes thereto.

GENERAL OVERVIEW

General

We are a Nevada corporation. We were formed on September 27, 1988. Prior to 2001 we engaged in the development, commercialization and sale of products and systems using patented and proprietary technologies including catalyst technology and water purification.

We largely ceased operations during 2001 and began focusing efforts on restructuring and refinancing. In fiscal year ended July 31, 2005, we successfully continued these efforts by settling various pending law suits and reducing outstanding liabilities. In September 2005, we entered into various financing transactions and acquired North Texas Steel Company Inc. ("North Texas").

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

Overview

THE DISCUSSION BELOW REFLECTS THE FACT THAT THE COMPANY OWNED 100% OF OMAHA HOLDINGS INCLUDING THE OPERATING ASSETS OF, NORTH TEXAS AND WHITCO THROUGH OCTOBER 20, 2008, BUT SHOULD BE READ WITH CAUTION AS THE COMPANY NO LONGER OWNS ANY INTEREST IN THE OPERATING BUSINESSES OF NORTH TEXAS OR WHITCO.

North Texas is an AISC (American Institute of Steel Construction) Certified structural steel fabrication company based in Fort Worth, Texas. North Texas is certified by AISC to have the personnel, organization, experience, capability and commitment meeting the requirements of Conventional Steel Building Structures, Complex Steel Building Structures, Simple Steel Bridges and Major Steel Bridges categories as set forth in the AISC Certification Program. North Texas provides fabrication and detailing of structural steel components for commercial buildings, office buildings, convention centers, sports arenas, airports, schools, churches and bridges. Customers are general construction contractors who are building projects for owners, developers and government agencies.

The trade of steel fabrication is closely connected with both construction and industrial trades in the pre-fabricating of frames, plates, girders and chutes to be used later in the assembly or erection process. The work is conducted primarily indoors, in small fabricating shops or large factories. A structural steel fabricator works from drawings and sketches to perform the following functions to both ferrous and non-ferrous metals:

· Lay out steel for cutting

· Burn the metal

· Saw, cut, shear and punch holes in metal using drills and other power tools

· Shape, form and straighten metal with the use of heat and flame

· Fit and ream metal to specifications

· Rivet, bolt and grind metal

· Weld, with both electric arc and oxyacetylene welding equipment

· Prepare, prime and paint structural pieces and plates of steel.

North Texas' customers are general contractors who build large commercial buildings and other structures requiring precision-engineered components. Projects developed by North Texas include commercial buildings, office buildings, convention centers, sports arenas, airports, schools, churches and bridges.

Past North Texas projects include The American Airlines Center, DFW Airport Expansion, Dallas Convention Center Expansion, the sky boxes (suites) in the Texas Stadium, the bridges over the 1-35/1-20 Interchange in Fort Worth, Texas and the People Mover at DFW Airport. Recently completed projects include the Dallas Market Center Expansion, Advanced Micro Devices Office Complex, LCRA Redbud Center, Almetris Duren Residence Hall / University of Texas, Samsung C.U.B., Brewer High School/WSISD. Current projects include LockheedMartin STOVL, Trinity Terrace Expansion , Omni Hotel , Ft Worth, Red Oak Ranch, TCU Stadium Expansion, Alamo Community College Lakeside Campus, WSISD Stadium, JW Marriott, San Antonio, Hall D2 Office Building, BNSF Bridge, .80 Rehab, Kansas City, Holcim Cement, and Bexar & Wise County TxDOT Bridges.

North Texas sells to large general contractors. The North Texas customer list includes most of the leading contractors in northern Texas such as Austin Commercial, Inc., Thomas S. Byrne, Inc and Hensel Phe1ps. North Texas also works closely over the years with engineering firms such as Carter Burgess, Inc., HKS, Inc., Datum Engineering, L.A. Fuess Partners and Freese & Nichols.

North Texas considers its current general market area to be Texas and the four contiguous states of New Mexico, Oklahoma, Arkansas and Louisiana. North Texas' focus has generally focused on the Fort Worth area due to the positive dynamics of the Dallas-Fort Worth metropolitan area and North Texas' very close relationships with the leading contractors in the area. The Company's focus is naturally is in its own backyard. In the past year North Texas has expanded into the Austin & San Antonio areas by working closely with its contractor base.

North Texas owns 17.8 acres of land in an industrial area that is transitioning to retail and residential.

Operations/Processes

North Texas pursues potential customer projects on both a bid and negotiated basis. In either case, North Texas is invited by the general contractor for the project to present its proposal. North Texas' management believes that its reputation for fabricating complex structures and delivering projects on time is the key to being a contender for new projects in its market area.

The production capacity of North Texas depends on the complexity and mix of projects coming through the plant. Generally speaking, North Texas can produce approximately 12,000 tons of production output per year. Typically, projects of 1,000 tons or less are completed within 12 months whereas larger, more complex projects may take considerably longer. Pricing is typically "lump sum, firm" and includes transportation to the job site and erection, which is performed by an erection subcontractor.

Industry and Market

The structural steel fabrication industry is made up of many well-established, often family run, businesses that concentrate on specialized segments of the industry, i.e. commercial, industrial, bridges, etc. While some of the companies do business throughout the United States, and a few export, the most common market approach is to focus on a geographical area of about 500 miles radius of their plant facility. Production capacity and certifications play an all-important role in the size and nature of projects that are pursued by a fabricator. The health of the general economy, the level of commercial building activity and the general economic growth of the region drive demand for structural steel components. North Texas is known as the leading heavy structural steel fabricator in the Dallas-Ft. Worth Market.

Whitco Transaction

On April 25, 2006, we purchased certain assets of Whitco Company, LP, a business conducting the sale and distribution of steel and aluminum lighting poles throughout the globe, in exchange for 3,750,000 common stock purchase warrants, valued at $1,875,000. In addition, we made cash payments totaling $465,253 to Whitco Company, LP's creditors and incurred $70,000 in other costs related to the transaction. The Whitco assets are held in a separate subsidiary called Whitco Poles, Inc. The integration of the Whitco assets has gone well, but we have not fully realized the sales we originally projected.

Critical Accounting Policies

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

Revenue Recognition

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

Allowance For Doubtful Accounts

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

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

Selling, General and Administrative Expenses

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

Interest Expense

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

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

Income from Discontinued Operations

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

Gain on Sale of Assets, net of taxes

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

Liquidity and Capital Resources

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

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

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

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

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

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

Off- Balance Sheet Arrangements

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

Inflation

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