<PAGE>
Filed Pursuant to Rule 424(b)3
Registration No. 333-26347
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
31,139,360 Shares of Common Stock
offered by certain Selling Security Holders, subject to
adjustment as described herein.
_______________________
This Prospectus relates to the sale of 31,139,360 shares, subject to
adjustment as described under "SELLING SECURITY HOLDERS" below, of common stock,
$.001 par value per share (the "Common Stock"), of North American Technologies
Group, Inc. (the "Company"), all of which are offered by the holders thereof
identified as "Selling Security Holders" in this Prospectus including 20,138,105
shares being offered by certain directors, executive officers and principal
stockholders. The shares of Common Stock offered hereby include: (i)
5,102,396 outstanding shares of Common Stock; (ii) 11,655,687 shares of Common
Stock, subject to adjustment, which may be issued upon the conversion, if at
all, of the Company's outstanding Cumulative Convertible Preferred Stock, Series
F (the "Series F Shares"); (iii) 3,644,444 shares of Common Stock, subject to
adjustment, which may be issued upon conversion, if at all, of the Company's
outstanding Cumulative Convertible Preferred Stock, Series G, Subseries I (the
"Series G Shares"); (iv) 10,403,500 shares of Common Stock which may be issued,
if at all, upon the exercise of certain outstanding options and warrants (the
"Options"); and (v) 333,333 shares of Common Stock which may be issued upon the
conversion, if at all, of a $500,000 principal amount convertible promissory
note (the "Convertible Note"). The shares of Common Stock, Series F Shares,
Series G Shares, Options and Convertible Note were previously issued by the
Company in private placement transactions. See "SELLING SECURITY HOLDERS" and
"DESCRIPTION OF SECURITIES."
The Shares of Common Stock may be offered by the Selling Security Holders
identified in this Prospectus or by donees, pledgees, transferees, or other
successors in interest, for sale from time to time by the holders in regular
brokerage transactions on NASDAQ, either directly or through brokers or to
dealers, in private sales or negotiated transactions, or otherwise, at prices
related to then prevailing market prices. The Company will not receive any of
the proceeds of the sale of Shares of Common Stock by the Selling Security
Holders. All expenses of the registration of such securities will be borne by
the Company. The Selling Security Holders, and not the Company, will pay or
assume all applicable brokerage commissions or other costs of sale as may be
incurred in the sale of such securities. See "SELLING SECURITY HOLDERS."
The Company will assume no responsibility for the sale of the shares of
Common Stock of the Selling Security Holders, nor can there be any assurances
that a liquid trading market will exist for the sale of the shares of Common
Stock to be offered by the Selling Security Holders. See "RISK FACTORS."
The Company's Common Stock is included on the NASDAQ SmallCap Market/SM/
under the symbol "NATK." The closing price of the Company's Common Stock as
reported by NASDAQ on May 13, 1997 was $.71875.
No person is authorized to give any information or to make any
representations, other than as contained herein, in connection with the offer
made in this Prospectus, and any information or representation not contained
herein must not be relied upon as having been authorized by the Company or the
Selling Security Holders. This Prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any security other than the Common Stock
offered by this Prospectus, nor does it constitute an offer to sell or a
solicitation of any offer to buy any shares of Common Stock offered hereby to
any person in any jurisdiction where it is unlawful to make such an offer or
solicitation to such person. Neither the delivery of this Prospectus nor any
sale hereunder shall under any circumstances create any implication that
information contained herein is correct as of any time subsequent to the date
hereof.
________________________
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS.
________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
________________________
<TABLE>
<CAPTION>
Price to Underwriting Discounts Proceeds to the Selling
Class of Security Public and Commissions Security Holders
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares of Common Stock $ .71875 (1) $ 22,381,415(2)
==========================================================================================
</TABLE>
(1) Does not give effect to ordinary brokerage commissions or other costs of
sale that will be borne solely by the Selling Security Holders.
(2) Represents the anticipated sale by the Selling Security Holders at $.71875,
the closing price on May 13, 1997. There can be no assurances,
however, that the Selling Security Holders will be able to sell their
shares of Common Stock at this price, or that a liquid market will exist
for the Company's Common Stock. The Company will realize no proceeds upon
the sale of shares of Common Stock by the Selling Security Holders.
_____________________
The date of this Prospectus is May 13, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Copies of these reports may be inspected and copied at the
Public Reference Facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at 7 World Trade Center, Suite 1300, New York, New York 10048 and at Northwest
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such materials can be obtained upon written request addressed
to the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission, including the Company. The Common Stock is
listed on NASDAQ and reports and other information concerning the Company may
also be inspected at the offices of the National Association of Securities
Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
In addition, the Company will provide without charge to each person to whom
this Prospectus is delivered, upon either the written or oral request of such
person, a copy of any or all of the documents incorporated herein by reference,
other than exhibits to such documents. See "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE." Such requests should be directed to Mr. Tim B. Tarrillion, Chief
Executive Officer, North American Technologies Group, Inc., 4710 Bellaire Blvd.,
Suite 301, Bellaire, Texas 77401, telephone (713) 662-2699.
The Company has filed with the Commission a registration statement (herein,
together with all amendments and exhibits, referred to as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act").
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement.
PRIVATE SECURITIES LITIGATION
REFORM ACT SAFE HARBOR STATEMENT
When used in or incorporated by reference into this Prospectus, the words
"estimate," "project," "intend," "expect" and similar expressions are intended
to identify forward-looking statements regarding events and financial trends
which may affect the Company's future operating results and financial position.
Such statements are subject to risks and uncertainties that could cause the
Company's actual results and financial position to differ materially. Such
factors are described in detail below under "RISK FACTORS" and in the Company's
reports filed with the Commission under the Exchange Act which are incorporated
herein by reference. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date made. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements to reflect events or circumstances after the
date made or to reflect the occurrence of unanticipated events.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996 filed on March 24, 1997 by the Company with the Commission
(file No. 0-16217 pursuant to the Exchange Act is incorporated herein by
reference.
All other documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock by the Selling
Security Holders shall be deemed to be incorporated by reference in this
Prospectus.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any document subsequently filed with the Commission which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will furnish without charge to each person, including any
beneficial owner, to which a copy of this Prospectus is delivered, on the
written or oral request of such person to the Company, 4710 Bellaire Blvd.,
Suite 301, Bellaire, Texas 77401, telephone (713) 662-2699, Attention: Mr. Tim
B. Tarrillion, Chief Executive Officer, a copy of any or all of the documents
described above and incorporated herein by reference (not including exhibits
thereto unless such exhibits are specifically incorporated by reference into the
information that the Registration Statement incorporates).
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements (including the notes thereto) appearing
elsewhere in or incorporated by reference into this Prospectus.
THE COMPANY
North American Technologies Group, Inc. ("NATK" or the "Company")
conducts business through five principal business groups: EET, Inc.
(manufactures, distributes and uses chemical extraction products for the
environmental decontamination of buildings and equipment, removal of stains from
concrete, and the descaling of industrial deposits utilizing EET's patented
TECHXTRACT technology), Industrial Pipe Fittings, Inc. (manufactures and
distributes transition fittings for high-density polyethylene ("HDPE") pipe),
GAIA Technologies, Inc. (manufactures and distributes products made from
recycled plastics and rubber), Riserclad International, Inc. (formulates and
markets a corrosion protection system for steel structures in marine
applications), and other businesses/technologies owned by NATK but not separated
into distinct subsidiaries (development of a proprietary hydrocarbon upgrading
technology and other environmentally related technologies). Unless the context
requires otherwise, the term "Company" refers to North American Technologies
Group, Inc. and its subsidiaries and affiliates. The Company was organized as
Mail Boxes Coast to Coast, Inc. as of December 24, 1986 under the laws of the
State of Delaware and in 1993 changed its name to its present name following
divestiture of its predecessor business. The principal executive offices of
the Company are located at 4710 Bellaire Boulevard, Suite 301, Bellaire, Texas
77401, telephone (713) 662-2699.
THE OFFERING
Securities Being Offered: This Prospectus relates to the sale of
31,139,360 shares, subject to adjustment as
described under "SELLING SECURITY HOLDERS"
below, of common stock, $.001 par value per
share (the "Common Stock"), of the Company, all
of which are offered by the holders thereof
identified as "Selling Security Holders" in
this Prospectus, including 20,138,105 shares
being offered by certain directors, executive
officers and principal stockholders. The shares
of Common Stock offered hereby include: (i)
5,102,396 outstanding shares of Common Stock;
(ii) 11,655,687 shares of Common Stock, subject
to adjustment, which may be issued upon the
conversion, if at all, of the Company's
Cumulative Convertible Preferred Stock, Series
F (the "Series F Shares"); (iii) 3,644,444
shares of Common Stock, subject to adjustment,
which may be issued upon the conversion, if at
all, of the Company's Cumulative Convertible
Preferred Stock, Series G, Subseries I (the
"Series G Shares"); (iv) 10,403,500 shares of
Common Stock which may be issued , if at all,
upon the exercise of certain outstanding
options and warrants (the "Options"); and (iv)
333,333 shares of Common Stock which may be
issued upon the
4
<PAGE>
conversion of a $500,000 principal amount
convertible promissory note (the "Convertible
Note"). The shares of Common Stock, Series F
Shares, Series G Shares, Options and
Convertible Note were previously issued by the
Company in private placement transactions. See
"SELLING SECURITY HOLDERS" and "DESCRIPTION OF
SECURITIES."
The shares of Common Stock offered by the
Selling Security Holders may be offered for
sale from time to time by the holders thereof
in regular brokerage transactions, either
directly or through brokers or to dealers, in
private sales or negotiated transactions, or
otherwise, at prices related to then prevailing
market prices. The Company will not receive any
proceeds from the sale of shares of Common
Stock by the Selling Security Holders. All
expenses of the registration of such securities
are, however, being borne by the Company. The
Selling Security Holders, and not the Company,
will pay or assume such brokerage commissions
and transaction costs as may be incurred in the
sale of their securities.
The Common Stock is traded on the NASDAQ
SmallCap Market/SM/ under the symbol "NATK." On
May 13, 1997, the closing bid price on NASDAQ
was $.71875.
Number of shares of
Common Stock outstanding 28,102,618
Number of shares of Common Stock
which may be issued upon the conversion
of the Series F Shares, Series G Shares and Convertible
Note and exercise of the Options 26,036,964/(2)/
Total number of shares of Common Stock
outstanding assuming the conversion of the
Series F Shares, Series G Shares and Convertible Note and
exercise of the Options 54,139,582/(2)/
Total number of shares of
Common Stock being offered
by Selling Security Holders 31,139,360/(1)/
_____________________
/(1)/ The number of shares issuable upon the conversion of the Series F Shares
and Series G Shares may be subject to increase based upon adjustment and
payment-in-kind dividend features contained within the instrument. See
"SELLING SECURITY HOLDERS - Adjustment Features of the Series F Shares,
Series G Shares and Series F Warrants."
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<PAGE>
(2) Does not include approximately 1,000,000 shares of Common Stock issuable
upon the conversion, if at all, of shares of the Company's outstanding
Series E Convertible Preferred Stock (See "DESCRIPTION OF SECURITIES"),
whose resale is not covered by this Prospectus. Also does not include
approximately 6,600,000 shares of Common Stock issuable upon the exercise,
if at all, of additional common stock options and warrants (See
"DESCRIPTION OF SECURITIES"), whose resale is also not covered by this
Prospectus.
______________________
6
<PAGE>
Use of Proceeds: The Company will not receive any of the
proceeds of the sale of any of the shares of
Common Stock by the Selling Security Holders.
The net proceeds realized by the Company upon
the exercise of the Options will be used to
offset the general working capital requirements
of the Company. Inasmuch as the Company has
received no firm commitments for the exercise
of the Options, however, there can be no
assurances as to the amount of the net proceeds
to be realized by the Company.
Risk Factors: The Common Stock offered hereby involves a high
degree of risk. See "RISK FACTORS."
Trading Symbol: Common Stock-NATK
7
<PAGE>
RISK FACTORS
An investment in the Common Stock involves a high degree of risk. Prior to
making an investment decision with respect to the Common Stock offered by this
Prospectus, prospective investors should carefully consider, along with the
other matters discussed in or incorporated by reference into this Prospectus,
the following risk factors:
1. LACK OF OPERATING REVENUE AND PROFITS. Until the acquisitions in 1995
of EET, Inc. ("EET") Industrial Pipe Fittings, Inc. ("IPF") and GAIA
Technologies, Inc. ("GAIA"), the Company remained a development-stage company
with limited revenues and substantial losses. Although the Company believed that
most of its technologies were sufficiently developed so as to permit commercial
sales, the management of the Company is in the process of reevaluating the
Company's product portfolio. Substantially all of the Company's revenues
generated prior to the acquisition of EET and IPF were from demonstration
projects resulting in no material commercial sales. Furthermore, management's
prior expectations of commercial sales during 1994 were not met, and the Company
realized no revenues during fiscal 1994 and fiscal 1995 from non-EET and IPF
products. While it is anticipated that the operations of EET, IPF, GAIA, and
Riserclad will begin to generate operating profits during fiscal 1997, such
operating profits are unlikely to result in profitable operations of the Company
on a consolidated basis in the short term.
The Company has incurred an accumulated deficit from its inception to
December 31, 1996 of $25,902,116. Further, until the Company is able to
generate material revenues from the commercialization of its technologies, there
can be no assurances that profitable operation can be attained or maintained in
the short term, if at all. Should losses continue at their historic rate, there
can be no assurances that the Company can remain viable as a going concern for
more than the short term.
2. CAPITAL NEEDS; GOING CONCERN EXPLANATORY PARAGRAPH. Through the
year ended December 31, 1996, the Company incurred operating losses which
could continue for the near term at expected levels of between
$200,000 and $300,000 per month. The Company has historically met its
working capital requirements through the license of its technologies, issuance
of convertible debentures and financing transactions involving the private
placement of equity securities or equity equivalents. Operating revenues have
not historically provided a meaningful source of working capital for the
Company. In April 1997, the Company obtained $1,640,000 in additional financing
which it expects will be sufficient to fund its operating requirements until it
can achieve profitable operations. However, if management's expectations are
incorrect and the losses continue at historic rates, the Company will likely
need to secure additional capital. There can be no assurance that such capital
will be available, if at all, on terms attractive to the Company. Due to these
uncertainties, the report of the Company's independent auditors for the year
ended December 31, 1996 contains an explanatory paragraph as to the substantial
doubt about the Company's ability to continue as a going concern. The Company's
long-term viability and growth will depend upon the successful commercialization
of its technologies and its ability to obtain adequate financing, as to which
there can be no assurances.
3. SUBSTANTIAL DILUTION FROM CONVERTIBLE SECURITIES. The Company is
presently authorized to issue 100,000,000 shares of Common Stock, of which
28,102,618 shares are outstanding as of the date of this Prospectus. The Company
may in the future be caused to issue up to approximately 35 million additional
shares
8
<PAGE>
of its Common Stock upon the conversion of its outstanding Series E Convertible
Preferred Stock (the "Series E Shares"), and Series F Shares, the Series G
Shares and Convertible Note and upon the exercise of its outstanding options and
warrants. See "DESCRIPTION OF SECURITIES." This could conceivably result in an
increase in the Company's outstanding shares of Common Stock from 28,102,618 to
63,102,618. Issuance of this many shares is likely to have an extremely dilutive
effect upon the existing stockholders. Furthermore, sales of substantial amounts
of the Company's common stock in the public market (made possible by the resale
of 26,036,964 additional shares permitted by this Prospectus) could have an
adverse effect upon the market price of the Company's Common Stock and make it
more difficult for the Company to sell its equity securities in the future and
at prices its deems appropriate.
4. VOLATILITY OF SHARE PRICE - RECENT DECLINE IN MARKET VALUE. The market
prices of securities of technology companies, including those of the Company,
have been historically volatile. Future announcements concerning the Company or
its competitors, including the results of testing, technological innovations or
commercial products, government regulations, developments concerning proprietary
rights, litigation and public concern as to the safety of the Company's products
may have a significant impact on the market price of the shares of the Company
Common Stock. In addition, the Company's share price may be affected by sales
by existing stockholders. See "Shares Eligible for Future Sale." Although it
is impossible to predict market influences and prospective values of securities,
it is possible that, in and of itself, the substantial increase in the number of
shares available for sale upon the registration of the shares of Common Stock
under this Prospectus may have a depressive effect upon the market value of the
Company's Common Stock. Because of these factors, the market price of the
Company's Common Stock following the date of this Prospectus may be highly
volatile.
5. EFFECT OF OUTSTANDING PREFERRED SHARES, OPTIONS AND WARRANTS. The
holders of the Series E Shares, Series F Shares and Series G Shares and
outstanding options and warrants thereof are given an opportunity to profit from
a rise in the trading price of the Company's Common Stock, with a resulting
dilution in the interest of the other stockholders. The holders of such
preferred stock may choose to exercise their rights of conversion and the
holders of such options and warrants may chose to exercise these instruments,
each at prices below the current trading price of the Company's Common Stock and
at a time when the Company might be able to obtain additional capital through a
new offering of securities at prevailing market prices. The terms on which the
Company may obtain additional financing during this period may be adversely
affected by the existence of such below market convertible securities.
6. COMPETITION AND RISK OF TECHNOLOGICAL OBSOLESCENCE. The industries in
which the Company participates, particularly the environmental remediation
industry, are highly competitive and subject to rapid and significant
technological change. Others may independently develop technologies similar or
superior to those of the Company, which may result in the Company's processes or
systems becoming less competitive or obsolete. Competition from other
companies, as well as universities, research institutions and others may
increase as advances in technology are made. Most of the Company's competitors
have substantially greater financial and marketing resources and capabilities
than the Company. In addition, some competitors due to a broader product line
may be able to offer a more complete solution to a client's problems than the
Company will be able to offer.
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<PAGE>
7. RELIANCE ON ENVIRONMENTAL REGULATION. Federal, state and local
legislation and regulations that require substantial expenditures to meet
minimum environmental quality standards and that impose penalties for
noncompliance are and will continue to be a principal factor affecting demand
for some of the systems and services being developed or offered by the Company.
In addition, the level of enforcement activities by federal, state and local
environmental protection agencies will also affect demand. To the extent that
the scope or enforcement of such laws and regulations may be eased, some of the
businesses of the Company could be materially and adversely affected.
8. TECHNOLOGY RIGHTS. Although the Company owns or has the right to
several patents on its technologies, the Company intends to rely primarily on
confidentiality agreements to maintain the proprietary nature of its technology.
In addition, the Company may also seek patent protection in certain situations
in the future, but the Company does not believe that patents are critical to the
successful development of commercially viable processes. In general, the
application of the patent laws to the Company's potential products is a
developing and evolving process, and due to the difficulty and expense of
enforcing patents, the Company may not be able to protect those patents which
have been issued. If the Company is unable to maintain the proprietary nature of
its technologies, the Company's financial condition and results of operations
could be materially and adversely affected.
In addition, the Company may seek licenses to other party's technology
in order to develop, manufacture and market certain technologies in the future.
However, the Company may not be able to obtain necessary licenses or such
licenses may not be available on commercially acceptable terms. Even if such
licenses are available, the patents or proprietary rights underlying the
licenses may prove to be invalid or unenforceable.
9. GOVERNMENTAL REGULATIONS AND APPROVALS. Technologies and products under
development by the Company and the application of such may be subject to
regulation by various federal, state and local agencies either in general or on
a project-by-project basis. Such regulation applies to all stages of field
testing and to the manufacture and use of the Company's technologies and
products. Prior to the manufacture, sale and use of its technologies, the
Company may be required to conduct extensive testing to demonstrate safety and
environmental effectiveness. The regulatory process may be costly and time
consuming and may delay or prevent production or marketing of the Company's
technologies. Failure to comply with environmental or other related laws could
result in the Company facing fines or penalties which could be material in
amount or injunctive relief which could materially and adversely affect the
business of the Company. Furthermore, the Company may encounter objections to
the use of its technologies and products by special interest groups which could
deter governmental agencies from granting the requisite approvals or doing so on
a timely basis or otherwise might adversely affect the Company's ability to
field test and market its services and products.
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<PAGE>
10. DEPENDENCE ON THIRD PARTIES; MANUFACTURING DIFFICULTIES. The Company,
at times, is dependent on third parties for the production of its products,
equipment and the production of certain enzymes/chemicals used in its
technologies. There can be no assurance that these parties will meet the
Company's requirements for quality, quantity and timeliness, or that the Company
would be able to find substitutes if necessary. The Company has had particular
difficulty in identifying manufacturers for its A/C pad business.
11. SALES AND MARKETING. The Company intends to market certain products in
the United States as well as other parts of the world. To do so, the Company
must either develop a substantial sales force with technical expertise or
license distribution rights to third parties with such expertise. There can be
no assurance that the Company will be able to build such a sales force or find
appropriate licensees or that sales and marketing efforts will be successful.
Until recently, the management of the Company has had very limited experience in
sales, marketing and distribution. However, within the last two years the
Company has added management personnel with extensive experience in sales and
marketing.
12. PROPOSED REVISIONS TO NASDAQ LISTING STANDARDS; POSSIBLE RESTRICTIONS
ON TRADING ACTIVITIES. On November 6, 1996, NASDAQ approved changes to its
listing standards which may adversely affect the Company's continued listing on
the NASDAQ Small Cap Market/SM./. If these rules go into effect as proposed and
the Company's shares fail to maintain a minimum bid price of $1.00, the Company
could be subject to delisting and would instead trade in the less liquid OTC
Electronic Bulletin Board and trading in the Common Stock would be subject to
certain rules under the Exchange Act which apply to lower-priced securities,
otherwise defined as "penny stocks."
To the extent the Company's securities constitute "penny stocks", Rule
15g-9 promulgated under the Exchange Act will impose limitations upon trading
activities which would make sale of the shares more difficult than in the case
of securities which were not "penny stocks." Rule 15g-9 restricts the
solicitation of sales of "penny stocks" by broker-dealers unless first the
broker: (i) obtains from the purchaser information concerning his financial
situation, investment experience and investment objectives; (ii) reasonably
determines that the purchaser has sufficient knowledge and experience in
financial matters that the person is capable of evaluating the risks of
investing in "penny stocks"; and (iii) delivers and receives back from the
purchaser a manually signed written statement acknowledging the purchaser's
investment experience and financial sophistication.
Furthermore, Rules 15g-2 through 15g-6 promulgated under the Exchange
Act provide a series of additional rules requiring broker-dealers engaging in
transactions in "penny stocks" to first provide to their customers a series of
disclosures and documents, including: (i) a standardized risk disclosure
document identifying the risks inherent in investing in "penny stocks"; (ii) all
compensation received by the broker-dealer in connection with the transaction;
(iii) current quotation prices and other relevant market data; and (iv) monthly
account statements reflecting the fair market value of the securities.
"Penny stocks" are defined at Rule 3a51-1 as a security other than a
security that: (i) is listed on any national securities exchange or The NASDAQ
Stock Market/TM/; (ii) has a price of $5.00 or more per share or whose issuer is
not a "blank check" company; or (iii) whose issuer has net tangible assets in
excess of
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$2,000,000, (if the issuer has been in business for at least three (3) years) or
$5,000,000 (if the issuer has been in business for less than three (3) years).
Under the Securities Act, and the regulations thereunder, any person
engaged in a distribution of the shares offered hereby may not simultaneously
engage in market making activities with respect to the Common Stock of the
Company during the applicable "cooling off" periods prior to the commencement of
such distribution. In addition, and without limiting the foregoing, each
stockholder will be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder including, without limitation, Rule 15g-9, and
Rules 10b-6 and 10b-7, which provisions may limit the timing of purchases and
sales of Common Stock by stockholders.
13. DEPENDENCE ON KEY PERSONNEL. To a material extent, the Company's
future success is dependent upon the continued efforts of its Chief Executive
Officer, Mr. Tim B. Tarrillion, and other executive officers. While the Company
currently has employment agreements with certain executive officers, including
Mr. Tarrillion, the loss of their services would likely have a material adverse
effect on the Company's business. The Company maintains keyman life insurance
naming the Company as the beneficiary on Mr. Tarrillion and certain other key
individuals.
14. DIVIDEND POLICY. To date, the Company has paid no dividends on its
shares of Common Stock and does not intend to pay dividends in the foreseeable
future.
15. CLASSIFIED BOARD; DELAWARE ANTI-TAKEOVER LAW. The Company has
classified the Board of Directors into three classes, with the members of one
class (or one-third of the Board) elected each year to serve a three-year term.
A director may be removed only for cause by a vote of the holders of two-thirds
of the voting power of the Company's outstanding securities. The classified
Board of Directors makes it more difficult to change majority control of the
Board, which may discourage attempts by third parties to make a tender offer or
otherwise obtain control of the Company, even if such attempt would be
beneficial to the Company and its stockholders.
The Company is governed by the provisions of Section 203 of the
General Corporation Law of the State of Delaware (the "GCL"), an anti-takeover
law. In general, the law prohibits a public Delaware corporation from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. "Business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with its affiliates and
associates, owns (or, within three years, did own) 15% or more of the
corporation's voting stock. The supermajority voting provisions in the
Company's bylaws and the provisions regarding certain business combinations
under the GCL could have the effect of delaying, deferring or preventing a
change in control of the Company or the removal of existing management. A
takeover transaction frequently affords stockholders the opportunity to sell
their shares at a premium over current market prices. See "DESCRIPTION OF
SECURITIES."
12
<PAGE>
16. AUTHORIZATION AND DISCRETIONARY ISSUANCE OF PREFERRED STOCK. The
Company's Certificate of Incorporation authorizes the issuance of up to an
aggregate of 10,000,000 shares of "blank check" preferred stock with such
designations, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which would adversely affect the
voting power or other rights of the holders of the Company's Common Stock. In
the event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company, which could have the effect of discouraging bids for the
Company and thereby prevent stockholders from receiving the maximum value for
their shares. The Company has no present agreement to issue any additional
shares of its preferred stock. However, there can be no assurance that the
preferred stock of the Company will not be issued at some time in the future.
USE OF PROCEEDS
The Company will not realize any proceeds from the sale of shares of Common
Stock by the Selling Security Holders. Other than with respect to ordinary
brokerage commissions or other costs of sale, the costs of this offering,
including among others, printing, blue sky and professional fees, estimated at
$35,000, will be borne entirely by the Company. See "SELLING SECURITY HOLDERS."
Of the 31,139,360 shares covered by this Prospectus, 10,403,500 of such
shares are issuable, if at all, upon the exercise of the Options. Although the
Company will not realize any proceeds from the resale of the shares by the
Selling Security Holders, gross proceeds will be realized by the Company to the
extent that such shares have been issued upon the exercise of outstanding
Options. The gross proceeds which may be realized by the Company upon the
exercise of one hundred (100%) percent of the Options will be $9,849,000.
Inasmuch as the Company has received no firm commitments for their exercise,
there can be no assurance that any or a substantial portion of the Options will
be exercised.
Management cannot predict with any certainty the amount of proceeds, if
any, which may be generated from the exercise of the Options. The net proceeds
which may be realized by the Company, if any, upon the exercise of the Options
will not be utilized for any specific purpose other than to contribute to the
Company's working capital and be used to continue the operations of the Company
in accordance with the business strategy identified by management from time to
time.
13
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 100,000,000 shares of Common Stock, of
which 28,102,618 were outstanding as of the date of this Prospectus.
Holders of Common Stock have equal rights to receive dividends when and if
declared by the Board of Directors, out of funds legally available therefor.
Holders of Common Stock have one vote for each share held of record and do not
have cumulative voting rights.
Holders of Common Stock are entitled upon liquidation of the Company to
share ratably in the net assets available for distribution, subject to the
rights, if any, of holders of any preferred stock then outstanding. Shares of
Common Stock are not redeemable and have no pre-emptive or similar rights. All
outstanding shares of Common Stock are fully paid and non-assessable.
PREFERRED STOCK
Within the limits and restrictions contained in the Certificate of
Incorporation, the Board of Directors has the authority, without further action
by the stockholders, to issue up to 10,000,000 shares of preferred stock, $.001
par value per share (the "Preferred Stock"), in one or more series. As of the
date of this Prospectus, 13 Series E Shares, 101,404 Series F Shares, and 16,400
Series G Shares were outstanding.
Shares of Preferred Stock issued by the Board of Directors could be
utilized, under certain circumstances, to make an attempt to gain control of the
Company more difficult or time consuming. For example, shares of Preferred
Stock could be issued with certain rights which might have the effect of
diluting the percentage of Common Stock owned by a significant stockholder or
issued to purchasers who might side with management in opposing a takeover bid
which the Board of Directors determines is not in the best interest of the
Company and its stockholders. This provision may be viewed as having possible
anti-takeover effects. A takeover transaction frequently affords stockholders
the opportunity to sell their shares at a premium over current market prices.
SERIES E SHARES
In February and March 1996, the Company received net proceeds of $1,218,750
from the issuance of 50 shares of Series E Convertible Preferred Stock ("Series
E Shares"). The holders of the Series E Shares have certain liquidation
preferences and are not entitled to any dividends. At the option of the holder,
the Series E Shares may be converted into the Company's Common Stock using a
conversion rate computed as the lesser of (a) a calculated value utilizing a
discount to the market price, as defined, of the Company's Common Stock, or (b)
$1.50 per share. At March 31, 1997, 13 Series E Shares remained outstanding.
These become available for conversion in May 1997.
14
<PAGE>
SERIES F SHARES AND SERIES G SHARES
During April and May, 1996, the Company issued 92,500 Series F Shares and
warrants to acquire 9,250,000 shares of the Company's Common Stock (the "Series
F Warrants"). Cash proceeds of $6,500,000 were received for 65,000 of the
Series F Shares and 6,500,000 Series F Warrants. The remaining 27,000 Series F
Shares and 2,700,000 Series F Warrants were issued in exchange for the surrender
of previously issued notes and note warrants. The Series F Warrants have an
exercise price of $1.00 per share, subject to certain adjustments, and expire
during April and May, 2004.
In March 1997, the Board of Directors designated shares of Preferred Stock
as Cumulative Convertible Preferred Stock, Series G (the "Series G Preferred
Stock"), which are issuable in subseries with terms substantially identical to
the Series F Shares, except for the initial conversion rate. At the same time,
the Board designated shares of Series G Preferred Stock as Series G Shares. At
the same time, the Board designated 60,000 shares of Series G Preferred Stock as
Series G Shares. In April 1996 the Company issued 16,400 Series G Shares for
cash proceeds of $1,640,000.
Dividends accrue on the Series F Shares and Series G Shares at a per annum
rate of $13.50 per share and are payable semi-annually. The Company may elect
to defer and accrue dividend payments until April 1999 in which case, each
holder may elect to receive payment of the dividend in the form of additional
Series F Shares or Series G Shares, as the case may be. The holders of the
Series F Shares and Series G Shares have certain liquidation preferences. The
Series F Shares and Series G Shares may be converted into Company Common Stock
at the option of the holder using a conversion rate, subject to certain
adjustments, of $1.00 per share and $.45 per share, respectively. On or after
April 8, 2001, the Series F Shares and Series G Shares can be converted at the
holder's option at the lower of (a) the then-current conversion price, or (b) a
calculated value utilizing a discount to the market price of the Company' s
Common Stock. The Company may redeem the Series F Shares and Series G Shares at
face value on or after April 8, 2004.
Each Series F Share and Series G Share entitles the holder thereof to the
number of votes equal to the number of shares of Common Stock into which such
Share may be converted from time to time. In addition, the Company has agreed
to cause its Board of Directors to consist of eight positions, four of which may
be filled by nominees selected by the holders of the Series F Shares and the
Series G Shares.
The agreements relating to the purchase of the Series F Shares and the
Series G Shares (the "Purchase Agreements") and the Certificates of Designation
for the Series F Shares and Series G Shares contain covenants which, if breached
by the Company, provide for certain remedies. Certain of these covenants are
considered outside of the Company's control. These covenants include, among
other things, that the Company obtain a minimum net worth, as defined in the
Purchase Agreements, by December 31, 2000. For breach of these covenants that
are outside of the Company's control the remedy allows the Series F and Series G
holders to convert their shares into the Company's Common Stock using a
conversion rate computed as the lesser of (a) the conversion price, as adjusted;
or (b) a calculated value utilizing a discount to the market price, as defined.
Also, the Purchase Agreements contain certain covenants that are considered
within the control of the Company. These covenants, among other things, require
the delivery of financial information and restrict the Company from incurring
additional debt if, immediately upon incurrence of such debt, the Company's debt
to equity ratio exceeds a certain ratio, as defined by the agreement. For
breach of these covenants that are within the
15
<PAGE>
Company's control the remedies allow the Series F and Series G holders to elect
a majority of the Company's Board of Directors and to either (1) convert their
shares into the Company's Common Stock using a conversion rate computed as the
lesser of (a) the conversion price, as adjusted: or (b) a calculated value
utilizing a discount to the market price, as defined; or (2) request the Company
to redeem their shares. If the Series F and Series G holders elect redemption,
the shares will be redeemed at the greater of (a) the fair market value, as
defined; or (b) the initial purchase price, plus unpaid dividends and interest,
if any. At the Company's option, the shares may be redeemed with cash or a three
year promissory note.
As a condition precedent to the closing of the sale of the Series F Shares
and Series G Shares under the Purchase Agreements, certain of the Company's
directors and officers and holders of the Series F Shares and Series G Shares
entered into a Stockholders' Agreement which regulated the resale of shares of
Common Stock issued or issuable to these holders. See "PLAN OF DISTRIBUTION."
CONVERTIBLE SECURITIES
CONVERTIBLE INDEBTEDNESS
During 1994, the Company issued and sold in a private placement transaction
a $500,000 convertible Promissory Note (the "Convertible Note") that matures on
August 8, 1999. Interest is payable on a semi-annual basis at the rate of 8%
per annum. At the option of the lender (the "Lender"), the Convertible Note is
convertible at any time prior to the maturity date into shares of Common Stock
of the Company at the rate of $1.50 per share.
OPTIONS AND WARRANTS
The Company currently has outstanding 17,003,916 options and warrants that
were issued in connection with a variety of financing and acquisition
transactions, as well as to employees, former employees and consultants for
services rendered. The shares of Common Stock issuable upon the exercise, if at
all, of 10,403,500 of these options and warrants (the "Options") are covered by
this Prospectus and are subject to the following terms:
POSSIBLE
EXPIRATION EXERCISE SHARES PROCEEDS
ISSUE DATE DATE PRICE ISSUABLE TO THE COMPANY
- --------------------------------------------------------------------------------
April - May 1996 April - May, 2004 $ 1.00/(1)/ 9,250,000 $ 8,047,500
- --------------------------------------------------------------------------------
March 1995 December 31, 1999 $ 1.50 71,000 $ 106,500
- --------------------------------------------------------------------------------
July 1995 July 1998 $ 1.50 127,500 $ 191,250
- --------------------------------------------------------------------------------
September 1995 September 1998 $ .75 130,000 $ 97,500
- --------------------------------------------------------------------------------
December 1996 April 2004 $ 1.00/(1)/ 100,000 $ 100,000
- --------------------------------------------------------------------------------
May 1992 November 30, 1997 $ 1.50 300,000 $ 450,000
- --------------------------------------------------------------------------------
May 1992 November 30, 1997 $ 2.50 300,000 $ 750,000
- --------------------------------------------------------------------------------
September 1994 December 31, 1998 $ 1.00 50,000 $ 50,000
/(2)/
- --------------------------------------------------------------------------------
September 1994 September 1999 $ .75 75,000 $ 56,250
- --------------------------------------------------------------------------------
Total 10,403,500 $ 9,849,000
- --------------------------------------------------------------------------------
16
<PAGE>
/(1)/ Subject to price protection features that have, to date, resulted in a
reduction of the exercise price to $.87, and may result in further
reductions to the exercise price. See "SELLING SECURITY HOLDERS -
Adjustment Features of the Series F Shares and Warrants."
/(2)/ The later of December 31, 1998 or two years from the date of this
Prospectus.
_____________________________
Of the Options identified in the foregoing table, 71,000 were issued in
conjunction with the Company's acquisition of EET, Inc. during March 1995;
9,250,000 were issued in conjunction with the Series F Shares; 127,500 were
issued in consideration for certain consulting services rendered; 100,000 were
paid in connection with advising on certain aspects of the transaction that
resulted in the issuance of the Series F Shares; 130,000 were issued in
conjunction with a private placement investment made during August and
September, 1995; and 725,000 were issued in conjunction within certain debt
placements.
RESERVATION OF SHARES
The Company has reserved a total of 35,000,000 shares of Common Stock
issuable upon the conversion of the Convertible Note, as well as exercise of
outstanding Series E Shares, Series F Shares and Series G Shares conversion
rights, and all outstanding options and warrants.
TRANSFER AGENT
Continental Stock Transfer and Trust Company of New York, New York, serves
as transfer agent for the Common Stock.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION, THE BY-LAWS AND
DELAWARE LAW.
The Company has a classified Board of Directors pursuant to which the
Board is divided into three classes. The term of office of one class expires in
each year.
The Company is governed by the provisions of Section 203 of the General
Company Law of the State of Delaware (the "GCL"), an anti-takeover law. In
general, the law prohibits a public Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
"Business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the stockholder. An "interested
stockholder" is a person who, together with its affiliates and associates, owns
(or within three years, did own) fifteen percent or more of the Company's voting
stock.
The classified Board of Directors, the provisions authorizing the Board to
issue Preferred Stock without stockholder approval, and the provisions regarding
certain business combinations in the Certificate of Incorporation and under the
GCL could have the effect of delaying, deferring or preventing a change in
control of the Company or the removal of existing management. A takeover
transaction frequently affords stockholders the opportunity to sell their shares
at a premium over current market prices.
17
<PAGE>
The Company has adopted the provisions of Section 102(b)(7) of the GCL
which eliminate or limit the personal liability of a director to the Company or
its stockholders for monetary damages for breach of fiduciary duty under certain
circumstances. Furthermore, under Section 145 of the GCL, the Company may
indemnify each of its directors and officers against his expenses (including
reasonable costs, disbursements and counsel fees) in connection with any
proceeding involving such person by reason of his having been an officer or
director to the extent he acted in good faith and in a manner reasonably
believed to be in, or not opposed to the best interest of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The determination of whether indemnification is
proper under the circumstances, unless made by a court, shall be determined by
the Board of Directors.
18
<PAGE>
SELLING SECURITY HOLDERS
The shares of Common Stock of the Company offered by this Prospectus are
being sold for the account of the selling security holders identified in the
following table (the "Selling Security Holders").
The Selling Security Holders are offering for sale outstanding shares of
Common Stock as well as shares of Common Stock to be issued upon conversion, if
at all, of the Series F Shares and Series G Shares and/or Convertible Note, and
exercise, if at all of the Options.
The following table sets forth the number of shares of Common Stock being
held of record or beneficially (to the extent known by the Company) by such
Selling Security Holders and provides (by footnote reference) any material
relationship between the Company and such Selling Security Holder, all of which
is based upon information currently available to the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES TO NUMBER OF SHARES PERCENTAGE BEFORE PERCENTAGE AFTER
BEFORE BE OFFERED AFTER OFFERING/(1)/ OFFERING/(2)/ OFFERING/(2)/
OFFERING/(1)/ IN OFFERING/(1)/
<S> <C> <C> <C> <C> <C>
Antonoff, Robert B. 40,000 40,000 0 * 0
Aucion, Donald 10,000 10,000 0 * 0
Bakkum, Gene 30,000 30,000 0 * 0
Bell, William Reed , Jr. 10,000 10,000 0 * 0
Bonem, Joe M. and Diane R. 13,000 13,000 0 * 0
Bonem, Michael W./(3)/ 238,500 238,500 0 * 0
Borah, Ronald E. and 165,000 165,000 0 * 0
Margaret R./(3)/
Borenstein, Lawrence 30,000 30,000 0 * 0
CCG Charitable Remainder 2,030,101 2,030,101 0 6.7 0
Unitrust #1/(4)/
R. Chaney & Partners - 3,383,501 3,383,501 0 10.8 0
1993 L.P. /(5)/
Childree, Hugh Wayne & 10,000 10,000 0 * 0
Mardi
Clark, Mark D. 350,000 350,000 0 1.2 0
Cureton, Stewart Jr. 60,000 60,000 0 * 0
Daniels, David M. /(6)/ 1,115,164 600,000 515,164 3.9 1.8
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES TO NUMBER OF SHARES PERCENTAGE BEFORE PERCENTAGE AFTER
BEFORE BE OFFERED AFTER OFFERING/(1)/ OFFERING/(2)/ OFFERING/(2)/
OFFERING/(1)/ IN OFFERING/(1)/
<S> <C> <C> <C> <C> <C>
Dwyer, Thomas 25,000 25,000 0 * 0
EET, Inc. Profit Sharing 390,225 338,525 51,700 1.4 *
Plan
Evans, Katherine S. 224,986 224,986 0 * 0
Farr, Norman 75,000 75,000 0 * 0
George, Carolyn 15,000 15,000 0 * 0
George, Marshall and Joyce 20,000 20,000 0 * 0
Green Bay Southern, L.P. 10,572 10,572 0 * 0
Greenlee, Robert 224,986 224,986 0 * 0
Gouldin, Edmund N., Sr. 215,100 180,000 35,100 * 0
Gouldin, Edmund N., Jr. 54,000 50,000 4,000 * 0
Haar, Natalie Z. 135,340 135,340 0 * 0
Harrison Interests, 1,353,400 1,353,400 0 4.6 0
Ltd./(7)/
Hedge Trading Fund Limited 90,000 90,000 0 * 0
Partners, ltd.
Helis, William G., Estate of 135,340 135,340 0 * 0
GAIA Holdings, Inc./(12)/ 555,556 555,556 0 2 0
Heptagon Investments Ltd. 554,479 554,479 0 2 0
Jones, III, Robert D. 350,000 350,000 0 1.2 0
Jones, Thomas N. 5,000 5,000 0 * 0
Kohanchi, Chiam 25,000 25,000 0 * 0
Lightner, Scott 21,000 21,000 0 * 0
Loosemore, Rodney 10,000 10,000 0 * 0
Malcolm Waddell and 52,632 52,632 0 * 0
Suzanne Bruce
Mansfield, Charles 25,000 25,000 0 * 0
NationsBanc Capital 13,534,004 13,534,004 0 32.5 0
Corporation/(8)/
Novelli, Michael E. and 21,052 21,052 0 * 0
Mary O.
The Parade Fund 224,986 224,986 0 * 0
Pecaut Capital Investors,L.P. 1,082,720 1,082,720 0 3.7 0
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES TO NUMBER OF SHARES PERCENTAGE BEFORE PERCENTAGE AFTER
BEFORE BE OFFERED AFTER OFFERING/(1)/ OFFERING/(2)/ OFFERING/(2)/
OFFERING/(1)/ IN OFFERING/(1)/
<S> <C> <C> <C> <C> <C>
Pecaut Partners, A Limited 270,680 270,680 0 * 0
Partnership
Profit Sharing Plan and 124,000 99,000 25,000 * 0
Trust for Employees of
Jim Pardick Real Estate,
Inc.
Rosenwasser, Jerry 12,500 12,500 0 * 0
Roser Partnership II, Ltd. 1,124,928 1,124,928 0 3.8 0
/(9)/
Schuchard, Charles, 10,000 10,000 0 * 0
Custodian for Charles S.
Schuchard under the UGMA,
Texas
Schuchard, Charles, 10,000 10,000 0 * 0
Custodian for Mary M.
Schuchard under the UGMA,
Texas
Schuchard, Charles and 10,000 10,000 0 * *
Robbie - Joint Tenant
Shields, Bruce K. and 217,500 10,000 207,500 * *
Judith Knight/(10)/
Tarrillion, Charles and 11,000 11,000 0 * 0
Marion, Revocable Living
Trust
Tarrillion, Madeline 17,000 17,000 0 * 0
McNeil - 1989 Trust
Tarrillion, Margot Leigh - 17,000 17,000 0 * 0
1989 Trust
Tarrillion, Marion 17,000 17,000 0 * 0
Michelle - 1989 Trust
Tarrillion, Tim B./(11)/ 981,630 580,500 401,130 3.4 1.4
Thor Ventures, L.C./(12)/ 1,111,111 1,111,111 0 4 0
Tyree, Warren M. 6,000 6,000 0 * 0
Universal Remediation 910,125 600,000 310,125 3.2 1.0
Services, Inc.
Weckstein, Donnie 30,000 30,000 0 * 0
Wehner, Mark 10,000 10,000 0 * 0
Wilen, Ron 408,333 408,333 0 1.4 0
Wright, William E. 78,948 78,948 0 * 0
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES TO NUMBER OF SHARES PERCENTAGE BEFORE PERCENTAGE AFTER
BEFORE BE OFFERED AFTER OFFERING/(1)/ OFFERING/(2)/ OFFERING/(2)/
OFFERING/(1)/ IN OFFERING/(1)/
<S> <C> <C> <C> <C> <C>
Wilwerding, Joe/(13)/ 210,000 100,000 110,000 * *
Zampino, Ana 12,500 12,500 0 * 0
Zampino, Sarah 12,500 12,500 0 * 0
Zinn, Robert L. 270,680 270,680 0 * 0
TOTAL 31,139,360
</TABLE>
___________________________________
* Less than 1%.
(1) As to each holder, includes outstanding shares of Common Stock, as well as
shares of Common Stock issuable upon conversion of the Series F Shares,
Series G Shares or Convertible Note, and shares of Common Stock issuable
upon exercise of the Options.
(2) Based upon the total of 28,102,618 shares of Common Stock outstanding and
26,036,964 shares of Common Stock subject to conversion rights and Options
as of the date of this filing.
(3) Officer
(4) Mark E. Leyerle is a director of the Company and is a principal of CCG
Venture Partners, LLC which provides investment management services to CCG
Charitable Remainder Unitrust #1. Mark E. Leyerle disclaims any beneficial
ownership of these shares.
(5) Robert H. Chaney is a director of the Company and is the beneficial owner
of these shares.
(6) David Daniels is a director and officer of the Company. Includes 600,000
shares of Common Stock received by Mr. Daniels in conjunction with a merger
transaction in June 1995. Includes 10,164 shares of Common Stock owned
through a profit sharing plan for the benefit of Mr. Daniels and options to
purchase 340,000 shares of Common Stock. Does not include options to
purchase 60,000 shares which do not commence vesting until January 1, 1998
or options to purchase 100,000 shares that do not commence vesting until
March 31, 1998.
(7) Edwin H. Knight is a director of the Company and is the "general manager"
of Harrison Interests, Ltd. Mr. Knight is not deemed the beneficial owner
of these shares.
(8) Douglas C. Williamson is a director of the Company and is a senior vice-
president of NationsBanc Capital Corporation, however, Mr. Williamson is
not deemed the beneficial owner of these shares.
(9) Christopher Roser is a former director of the Company and is the
general partner of the identified Selling Security Holder.
(10) Judith Knight Shields is the Chief Financial Officer of the Company.
Includes 10,000 shares received by Ms. Shields and her husband in
connection with a merger transaction in March 1995 and options to purchase
200,000 shares of Common Stock. Does not include options to purchase
100,000 shares that do not commence vesting until March 31, 1998.
22
<PAGE>
(11) Tim B. Tarrillion is a director and Chief Executive Officer of the Company.
Includes 530,500 shares of Common Stock and 50,000 common stock purchase
warrants received by Mr. Tarrillion in conjunction with a merger
transaction in March 1995. Includes 81,130 shares owned through a profit
sharing plan for the benefit of Mr. Tarrillion and options to purchase
300,000 shares of Common Stock. Does not include options to purchase
200,000 shares which do not commence vesting until March 31, 1998. Also
does not include 51,000 shares received by trusts on behalf of Mr.
Tarrillion's minor children which are held by an independent trustee as to
which Mr. Tarrillion disclaims any beneficial ownership.
(12) The shares of the Thor Ventures, L.C. ("Thor") and GAIA Holdings, Inc.
("GHI") may be deemed beneficially owned by William T. Aldrich and Henry W.
Sullivan. Mr. Aldrich is the a principal executive officer of Thor and GHI
By virtue of his personal and family holdings in Thor and GHI, Mr. Aldrich
and his family have a direct pecuniary interest in an aggregate of 397,633
shares of Common Stock and disclaims beneficial ownership of all remaining
shares. Dr. Sullivan is a principal executive officer of Thor and GHI. Dr.
Sullivan has a direct pecuniary interest in 527,889 shares of Common Stock
and disclaims beneficial ownership of all remaining shares.
(13) Includes options to purchase 100,000 shares of Common Stock.
___________________________________
ADJUSTMENT FEATURES OF THE SERIES F SHARES, SERIES G SHARES AND SERIES F
WARRANTS.
The Series F Shares and Series F Warrants contain certain price protection
and adjustment features which, during the terms of such instruments, are likely,
in the case of the Series F Shares and Series G Shares to result in the issuance
of additional securities upon conversion, and in the case of the Series F
Warrants, result in a reduction in the exercise price.
The price protection features require the Company to reduce the conversion
ratio of the Series F Shares and Series G Shares and reduce the exercise price
of the Series F Warrants, in the event that following the issue date thereof,
the Company issues additional securities for consideration per share less than
the then existing conversion price or exercise price.
The price protection features have already resulted in an increase in the
number of shares issuable upon the conversion of the Series F Shares by virtue
of a reduction in the conversion price from $1.00 to $.87, and a similar
reduction in the exercise price of the Series F Warrants from $1.00 to $.87.
Additional reductions in the conversion price and exercise price are
possible upon certain covenant defaults contained within the Purchase Agreement
and Certificate of Designation. See "DESCRIPTION OF SECURITIES - PREFERRED
STOCK - SERIES F SHARES."
The number of Series F Shares and Series G Shares may be subject to
increase since accrued and deferred dividends are to be paid to the holders "in
kind" in the form of additional Series F Shares and Series G Shares, as the case
may be. Since the date of issuance, 8,904 additional Series F Shares have been
issued as a dividend "in kind."
23
<PAGE>
PLAN OF DISTRIBUTION
Subject to the stockholder arrangements discussed below, the Common Stock
may be sold from time to time by the Selling Security Holders or by their
pledgees, donees, transferees or other successors in interest. Such sales may
be made on NASDAQ, on the over-the-counter market or otherwise at prices and at
terms then prevailing or at prices related to the then current market price, or
in negotiated transactions. The Common Stock may be sold by one or more of the
following: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction; (b) purchases by a broker or
dealer for its account pursuant to this Prospectus; and (c) ordinary brokerage
transactions and transactions in which the broker solicits purchases. In
effecting sales, brokers or dealers engaged by the Selling Security Holders may
arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from Selling Security Holders in amounts to be
negotiated immediately prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In addition, any
securities covered by this Prospectus which qualify for sale pursuant to Rule
144 may be sold under Rule 144 rather than pursuant to this Prospectus. The
Company will not receive any of the proceeds from the sale of these shares,
although it has paid the expenses of preparing this Prospectus and the related
Registration Statement. The Selling Security Holders have been advised that
they are subject to the applicable provisions of the Exchange Act, including
without limitation, Regulation M thereunder.
The Company will use its best efforts to file, during any period in which
offers or sales are being made, one or more post-effective amendments to the
Registration Statement of which this Prospectus is a part to describe any
material information with respect to the plan of distribution not previously
disclosed in this Prospectus or any material change to such information in this
Prospectus.
In conjunction with the transaction that resulted in the issuance of the
Series F Shares and Series G Shares, certain of the Company's directors and
officers (the "Management Stockholders") and holders of the Series F Shares and
Series G Shares (the "Series F and G Holders") entered into a Stockholders'
Agreement with the Company pursuant to which each of the Management Stockholders
and Series F and G Holders agreed to certain mutual rights of first refusal and
rights of co-participation in connection with future transfers or sales of their
shares of the Company's Common stock. Rights of co-participation are not
effective upon a "public market transaction," defined as a public sale executed
in a "brokers' transaction" or in a transaction directly with a "market maker"
covered by Rule 144(f), promulgated under the Securities Act.
Without prior written consent of the holders of a majority-in-interest of
the shares issued or issuable to the Series F and G Holders, during the term of
the Stockholders' Agreement, no Management Stockholder may sell in any one year
the greater of 15% of their common stock holdings at the beginning of such year
or 30,000 shares, but in no event more than 50% on a cumulative basis of such
Management Stockholder's shares during the term of the Agreement. Only shares
owned by the Management Stockholders as of April 5, 1996 are subject to the
Stockholders' Agreement. The Stockholders' Agreement shall terminate upon the
earliest to occur of:
(i) an agreement in writing by the Company, Management Stockholders,
Series F Holders and Series G Holders;
24
<PAGE>
(ii) the consolidation, merger or sale of substantially all of the assets
of the Company;
(iii) 2004; or
(iv) as to each Management Stockholder only, upon the termination of his
employment with the Company.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Buchanan Ingersoll Professional Corporation, Eleven Penn Center, 14th
Floor, 1835 Market Street, Philadelphia, Pennsylvania 19103.
STATEMENT OF INDEMNIFICATION
The Company has adopted the provisions of Section 102(b)(7) of the Delaware
General Corporation Act (the "Delaware Act") which eliminates or limits the
personal liability of a director to the Company or its stockholders for monetary
damages for breach of fiduciary duty under certain circumstances. Furthermore,
under Section 145 of the Delaware Act, the Company may indemnify each of its
directors and officers against his expenses (including reasonable costs,
disbursements and counsel fees) in connection with any proceeding involving such
person by reason of his having been an officer or director to the extent he
acted in good faith and in a manner reasonably believed to be in, or not opposed
to the best interest of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
determination of whether indemnification is proper under the circumstances,
unless made by a court, shall be determined by the Board of Directors. Insofar
as indemnification for liabilities arising under the Act may be permitted to
directors, officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
EXPERTS
The financial statements of the Company for the fiscal years ended
December 31, 1996 and 1995 which are incorporated by reference into this
Prospectus from the Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996, have been audited by BDO Seidman, LLP, independent certified
public accountants, to the extent and for the periods set forth in their report
incorporated herein by reference, and is incorporated herein in reliance upon
such report given upon the authority of said firm as experts in accounting and
auditing. The report of the BDO Seidman, LLP on the foregoing financial
statements contains an explanatory paragraph that states that the Company's
recurring losses from operations raise substantial doubt about the Company's
ability to continue as going concern. The financial statements do not include
any adjustments that might result from the outcome of that uncertainty.
25
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-3 with respect to the Common Stock being
registered hereby. This Prospectus does not contain all the information
contained in such Registration Statement, as permitted by the Rules and
Regulations of the Securities and Exchange Commission. The Registration
Statement, including exhibits thereto, may be inspected without charge, and
copies of all or any part thereof may be obtained from the Commission's
principal office in Washington, D.C. at Room 1024, 450 Fifth Street N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Northwest Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such materials can be obtained upon written request addressed to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company. For further information with respect to the
Company, the Common Stock being registered hereby and the contents of any
contract or document referred to herein, reference is made to the Registration
Statement and the exhibits filed as a part thereof.
26
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH
THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR
THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
______________________
TABLE OF CONTENTS 31,139,360 SHARES OF COMMON
STOCK OFFERED BY CERTAIN
PAGE SELLING STOCKHOLDERS, (SUBJECT
---- TO ADJUSTMENT AS DESCRIBED
HEREIN)
AVAILABLE INFORMATION.............. 2
THE COMPANY........................ 4
RISK FACTORS....................... 8
USE OF PROCEEDS.................... 13 NORTH AMERICAN TECHNOLOGIES
SELLING SECURITY HOLDERS........... 19 GROUP, INC.
PLAN OF DISTRIBUTION............... 24
LEGAL MATTERS...................... 25
STATEMENT OF INDEMNIFICATION....... 25
EXPERTS............................ 25
INCORPORATION OF DOCUMENTS BY ____________________
REFERENCE......................... 3
ADDITIONAL INFORMATION............. 25 PROSPECTUS
____________________
MAY 13, 1997
