<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission File Number: 0-16217
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 33-0041789
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
4710 BELLAIRE BOULEVARD, SUITE 301, BELLAIRE, TEXAS 77401
(Address of principal executive offices) (Zip Code)
(713) 662-2699
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required 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
--- ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes ________ No ________
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of the issuer's classes of common equity,
as of the latest practicable date: 28,102,618 common shares outstanding as of
April 30, 1997.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
(CHECK ONE):
Yes No X
--------- ---------
<PAGE>
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets 3
March 31, 1997 (unaudited) and December 31, 1996
Consolidated Statements of Loss 4
Three months ended March 31, 1997 and 1996 (unaudited)
Consolidated Statements of Stockholders' Equity 5
Three months ended March 31, 1997 and 1996 (unaudited)
Consolidated Statements of Cash Flows 6
Three months ended March 31, 1997 and 1996 (unaudited)
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 9
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 2. CHANGES IN SECURITIES 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
</TABLE>
2
<PAGE>
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARCH 31 DEC. 31
1997 1996
UNAUDITED AUDITED
------------- -------------
ASSETS
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents...................................... $ 1,965,334 $ 1,126,912
Accounts receivable, less allowance for
doubtful accounts of $131,062 and $125,000.................... 1,175,621 997,411
Inventories.................................................... 588,386 585,615
Prepaid expenses and other..................................... 351,467 270,200
------------ ------------
Total Current Assets.......................................... 4,080,808 2,980,138
Notes receivable................................................ 1,497,202 1,374,843
Property and equipment, less accumulated depreciation of
$404,842 and $375,158.......................................... 1,020,681 1,060,705
Patents and purchased technologies, less accumulated
amortization of $365,027 and $320,853.......................... 1,371,552 1,412,739
Goodwill, less accumulated amortization of $349,617
and $264,890................................................... 2,906,566 2,991,293
Other intangible assets, less accumulated
amortization of $91,448 and $79,570............................ 212,324 224,202
Other........................................................... 233,213 277,799
------------ ------------
$ 11,322,346 $ 10,321,719
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term debt........................... 181,500 79,288
Accounts Payable............................................... 479,384 586,418
Accrued expenses............................................... 455,546 287,950
------------ ------------
Total current liabilities..................................... 1,116,430 953,656
Long-term debt, less current maturities......................... 701,280 821,631
------------ ------------
Total Liabilities............................................. 1,817,710 1,775,287
------------ ------------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $.001 par value, 10,000,000 shares
authorized; 117,817 and 101,429 shares issued................. 12,105,447 10,765,447
Common stock, $.001 par value, 100,000,000 shares authorized;
28,102,618 and 27,111,497 shares issued....................... 28,105 27,114
Additional paid-in capital..................................... 24,394,010 23,809,619
Deficit........................................................ (26,867,344) (25,902,116)
Less notes receivable for sale of stock........................ (155,582) (153,632)
------------ ------------
Total Stockholders' Equity.................................... 9,504,636 8,546,432
------------ ------------
$ 11,322,346 $ 10,321,719
============ ============
</TABLE>
3
<PAGE>
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF LOSS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
MARCH 31 MARCH 31
1997 1996
------------------- -----------
<S> <C> <C>
Revenues...................................... $1,173,455 $ 862,999
Cost of revenues.............................. (727,581) (595,854)
---------- ----------
Gross profit............................. 445,874 267,145
Selling, general and administrative expenses.. 1,121,920 1,064,306
---------- ----------
Operating loss........................... (676,046) (797,161)
Other Income (Expense):
Interest income........................... 31,316 16,335
Interest expense.......................... (24,997) (162,303)
Other..................................... (10,119) 6,291
---------- ----------
Total Other Income (Expense).................. (3,800) (139,677)
---------- ----------
Net Loss...................................... $ (679,846) $ (936,838)
========== ==========
Net Loss Per Share............................ $ (.04) $ (.04)
========== ==========
Weighted average number of common shares
outstanding.................................. 27,551,995 22,301,669
========== ==========
</TABLE>
4
<PAGE>
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THREE MONTHS ENDED MARCH 31, 1997 AND 1996
UNAUDITED
<TABLE>
<CAPTION>
Preferred Common Stock Additional Treasury Stock
-------------------- -------------------- Paid-In -------------------
Shares Amount Shares Amount Capital Deficit Shares Amount
------- --------- -------- -------- ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1996 101,429 $ 10,765,447 27,111,497 $ 27,114 $ 23,809,619 $(25,902,116) - -
Issuance of common stock
upon conversion of Series
E preferred stock (12) (300,000) 991,121 991 299,009 - - -
Issuance of Series G
preferred stock 16,400 1,640,000 - - - - - -
Interest on notes receivable
from stockholders - - - - - - - -
Deemed dividends on preferred
stock - - - - 285,382 (285,382) - -
Net loss for the period - - - - - (679,846) - -
------- ------------ ---------- -------- ------------ ------------ ------- --------
Balance March 31, 1997 117,817 $ 12,105,447 28,102,618 $ 28,105 $ 24,394,010 $(26,867,344) - -
======= ============ ========== ======== ============ ============ ======= ========
Balance December 31, 1995 30 $ 750,000 23,927,285 $ 23,927 $ 20,270,015 $(19,794,812) 450,000 $(16,488)
Stock issued for services
or settlement of liability - - 300,000 300 223,610 - - -
Issuance of common stock upon
conversion of convertible note
and accrued interest thereon - - 248,131 249 157,935 - - -
Issuance of common stock upon
conversion of 10 shares of
Series D preferred stock (10) (250,000) 414,800 415 249,585 - - -
Issuance of Series E preferred
stock 50 1,218,750 - - - - - -
Interest on notes receivable
from stockholders - - - - - - - -
Net loss for the period - - - - - (936,838) - -
------- ------------ ---------- -------- ------------ ------------ ------- --------
Balance March 31, 1996 70 $ 1,718,750 24,890,216 $ 24,891 $ 20,901,145 $(20,731,650) 450,000 $(16,488)
======= ============ ========== ======== ============ ============ ======= ========
Notes
Receivable
Stockholder Total
------------ ------------
<S> <C> <C>
Balance December 31, 1996 $ (153,632) $ 8,546,432
Issuance of common stock
upon conversion of Series
E preferred stock - -
Issuance of Series G
preferred stock - 1,640,000
Interest on notes receivable
from stockholders (1,950) (1,950)
Deemed dividends on preferred
stock - -
Net loss for the period - (679,846)
------------ ------------
Balance March 31, 1997 $ (155,582) $ 9,504,636
============ ============
Balance December 31, 1995 $ (145,832) $ 1,086,810
Stock issued for services
or settlement of liability - 223,910
Issuance of common stock upon
conversion of convertible note
and accrued interest thereon - 158,184
Issuance of common stock upon
conversion of 10 shares of
Series D preferred stock - -
Issuance of Series E preferred
stock - 1,218,750
Interest on notes receivable
from stockholders (1,950) (1,950)
Net loss for the period - (936,838)
------------ ------------
Balance March 31, 1996 $ (147,782) $ 1,748,866
============ ============
</TABLE>
5
<PAGE>
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
UNAUDITED
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
MAR. 31 MAR. 31
1997 1996
----------- -----------
<S> <C> <C>
Net cash used in operating activities......................... $ (653,783) $(1,058,402)
---------- -----------
Cash flows from investing activities:
Increase in note receivable................................. (122,359) (190,232)
Payment of patent costs..................................... (2,987) (10,042)
Purchase of property and equipment.......................... (4,310) (379,191)
---------- -----------
Net cash used in investing activities................... (129,656) (579,465)
---------- -----------
Cash flows from financing activities:
Issuance of preferred stock................................. 1,640,000 1,218,750
Issuance of notes payable and long-term debt................ -- 250,000
Repayment of notes payable and long-term debt............... (18,139) (9,800)
---------- -----------
Net cash provided by financing activities............... 1,621,861 1,458,950
---------- -----------
Net increase (decrease) in cash............................... 838,422 (178,917)
Cash and cash equivalents, beginning of period................ 1,126,912 333,326
---------- -----------
Cash and cash equivalents, end of period...................... $1,965,334 $ 154,409
========== ===========
</TABLE>
6
<PAGE>
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The interim financial information of North American Technologies Group, Inc. and
its subsidiaries (the "Company") which is included herein is unaudited and has
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB. In the
opinion of management, these interim financial statements include all the
necessary adjustments to fairly present the results of the interim periods, and
all such adjustments are of a normal recurring nature. The interim financial
statements should be read in conjunction with the audited financial statements
for the two years in the period ended December 31, 1996. The report of the
Company's independent auditors for the year ended December 31, 1996 contains an
explanatory paragraph as to the substantial doubt of the Company's ability to
continue as a going concern. No adjustments have been made to the accompanying
financial statements to give effect to this uncertainty. The interim results
reflected in the accompanying financial statements are not necessarily
indicative of the results of operations for a full fiscal year.
The loss per common share is computed by dividing the loss from operations, plus
the dividends on preferred stock, by the weighted average number of common
shares outstanding and common stock equivalents, if dilutive. Preferred stock
dividends include (i) dividends stated in the respective certificates of
designation, and (ii) dividends deemed to have been issued by virtue of a
conversion price that is computed at the date of conversion using a discount to
the market price of the Company's common stock. The deemed dividends are
included in the earnings per share calculation in order to comply with the SEC's
position regarding the accounting treatment of preferred stock issued with
certain conversion features.
2. STOCKHOLDERS' EQUITY
In February 1997, twelve shares of Series E Convertible Preferred Stock were
converted into 991,121 shares of the Company's common stock. The remaining
thirteen shares become available for conversion in May 1997.
In March 1997, the Company issued 16,400 shares of Series G- Subseries I
Cumulative Convertible Preferred Stock ("Series G Shares") for cash proceeds of
$1,640,000. Dividends accrue on the Series G Shares at a per annum rate of
$13.50 per share and are payable semi-annually. The Company may elect to defer
the dividend payments until April 1999, in which case each holder may elect to
either (i) have such deferred dividends accrue interest at a per annum rate of
13.5%, or (ii) receive payment of the dividends in the form of additional Series
G Shares. The holders of the Series G Shares have certain liquidation
preferences. The Series G Shares may be converted into the Company's common
stock at the option of the holder at an initial conversion price, subject to
certain adjustments, of $.45 per share. On or after April 8, 2001, the Series G
Shares can be converted at the holder's option
7
<PAGE>
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
using the lesser of (a) the current conversion price; or (b) a calculated value
utilizing a discount to the market price of the Company's common stock, as
defined. Subject to certain conversion rights, the Company may redeem the Series
G Shares at their face value of $100 per share on or after April 8, 2004.
8
<PAGE>
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for historical information, the material contained in Management's
Discussion and Analysis of Financial Condition and Results of Operations is
forward-looking. For the purpose of the safe harbor provisions for forward-
looking statements of the Private Securities Litigation Reform Act of 1995,
readers are urged to review the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1996 for a list of certain important factors that may
cause actual results to differ materially from those described below.
RESULTS OF OPERATIONS
Revenues
Revenues increased $310,456 for the three months ended March 31, 1997,
representing an increase of 36% over revenues in the same period of the previous
year. This revenue increase is the result of the operations of Riserclad, which
was acquired in June 1996, increased sales from IPF, and to a lesser extent
increased sales from EET. These increases were partially offset by a decrease
in revenues from GAIA's porous pipe operations, caused by two projects that
shipped in the first quarter of 1996 and were not replaced during the first
quarter of 1997.
Sales of GAIA's air conditioner base support pads continued to lag during the
first quarter due to the change in the manufacturer for this product in early
1997. While the Company has obtained a temporary source of supply for the AC
pads, as of the date of this report the Company is still evaluating its options
with regard to a long-term resolution of the manufacturing arrangement.
Revenue growth was also limited in the first quarter by seasonal demand factors
in Riserclad's and IPF's businesses, which should be reversed over the next two
quarters. In addition, management expects revenues from EET to increase
significantly over the next two quarters due to a recently signed contract for
$1.2 million for the restoration of concrete surfaces at one of Houston's
municipal airports. See additional discussion below.
Gross profit
The gross profit percentage for the three months ended March 31, 1997 increased
to 38% from 31% for the same period of the previous year, reflecting improved
margins at EET and IPF, and the addition of Riserclad's operations. The gross
profit percentage for the first quarter of 1997 was essentially the same as that
experienced in the fourth quarter of 1996 on about the same level of revenues.
Selling, general and administrative
Selling, general and administrative expense for the three months ended March 31,
1997 increased $57,614 as compared with the same period of the previous year.
This is primarily the result of the
9
<PAGE>
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
selling, general and administrative expenses of Riserclad which were not
included in the financial statements of the Company for the first quarter of
1996 since this acquisition occurred on June 18, 1996, and was accounted for
using the purchase method. The increase in Riserclad's expenses were partially
offset by reductions in corporate, research and development, and subsidiary SG&A
expenses.
Other income and expense
Other expense decreased $135,876 for the three months ended March 31, 1997 as
compared with the same period of the previous year. This is primarily the result
of interest expense incurred in the prior year from the $2,700,000 convertible
subordinated debenture and the $1,050,000 note incurred from the acquisition of
GAIA. These debt instruments were repaid early in the second quarter of 1996.
The convertible subordinated debentures and related warrants were surrendered on
April 8, 1996 in exchange for 27,000 shares of Series F convertible preferred
stock and warrants to purchase 2,700,000 shares of Company common stock, while
the $1,050,000 was repaid in April 1996 from the proceeds received from the
issuance of the Series F preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
Through the year ended December 31, 1996, the Company incurred operating losses
which could continue in the near term at expected levels of between $200,00 and
$300,000 per month. The Company has historically met its working capital
requirements through financing transactions involving the private placement of
equity securities or equity equivalents, the issuance of convertible debentures,
and through the license of its technologies. Operating revenues have not
historically provided a meaningful source of working capital for the Company.
In March 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 assurances 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.
The Company's cash increased $838,422 from December 31, 1996 to a balance of
$1,965,334 at March 31, 1997. This increase in cash was comprised of net cash
provided from financing activities of $1,621,861, offset by net cash used in
operating activities of $653,783 and net cash used in investing activities of
$129,656. See also the Consolidated Statements of Cash Flows for the
10
<PAGE>
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
components of each of the preceding categories.
In March 1997, the Company issued 16,400 Series G Shares for cash of
$1,640,000. Dividends accrue on the 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 the dividend payments until April 1999, in which case, each holder
may elect to receive payment of the dividend in the form of additional Series G
Shares.
The Company is continuing to seek a replacement for the short-term manufacturing
arrangement currently in effect for GAIA's air conditioner support pads.
Management is exploring several different options, including the possibility of
selling the business to a company with existing manufacturing capabilities for
the right to future royalties. As of the date of this report, no definitive
agreement has been reached regarding either a replacement for the existing
short-term manufacturing arrangement or any possible sale of the business. In
the event the Company concludes a sale of GAIA's business, it would not have a
material effect on the liquidity of the Company since the consideration would
more than likely be paid over time, and any decrease in revenue and gross profit
would be offset by a reduction in selling, general and administrative expense.
In April 1997, EET entered into an agreement with an aviation company at one of
Houston's municipal airports for the restoration of approximately 90 acres of
concrete surfaces using the TechXTract chemical extraction process. The
contract has a value in excess of $1.2 million, and should be completed during
the second and third quarters of 1997. The payment terms provide that 50% of
the contract value will be paid before work commences.
11
<PAGE>
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The Company is a party to legal proceedings that have been reported in its
Annual Report on Form 10-KSB for the year ended December 31, 1996.
During the quarter ended March 31, 1997, there were no material changes in
the status of these legal proceedings.
ITEM 2: CHANGES IN SECURITIES:
Pursuant to a Certificate of Designation filed with the Secretary of State
of Delaware on March 31, 1997, the Company created a new series of
preferred stock consisting of 60,000 shares designated as Cumulative
Convertible Preferred Stock, Series G (the "Series G Preferred Stock").
The Series G Preferred Stock is issuable in Subseries pursuant to separate
Certificates of Designation of Subseries (a "Designation of Subseries") to
be filed with the Secretary of State of Delaware.
Each share of Series G Preferred Stock has a face value of $100.00 per
share, is convertible into shares of the Company's common stock as provided
in the applicable Designation of Subseries, has voting rights on an "as
converted into common stock basis" and has a preference over the common
stock in the event of a liquidation or dissolution of the Company.
Dividends accrue on the Series G Preferred Stock at a per annum rate of
$13.50 per share and are payable semi-annually. The Company may elect to
defer and accrue the dividend payments until April 1999, in which case,
each holder may elect to receive payment of the dividend in the form of
additional shares of Series G Preferred Stock.
Holders of a majority of the outstanding shares of Series G Preferred Stock
and the outstanding shares of Cumulative Convertible Preferred Stock,
Series F (the "Series F Shares"), taken together as a group, have the right
to nominate four (4) of the Company's eight (8) directors, subject to
adjustment.
Concurrent with the designation of the Series G Preferred Stock, the
Company designated 21,000 shares as the Series G Shares. The Series G
Shares may be converted into Company common stock at the option of the
holder at an initial conversion price, subject to certain adjustments, of
$.45 per share. On or after April 8, 2001, the 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, as defined, of the Company's common stock.
On March 31, 1997, the Company issued 16,400 Series G Shares for cash
proceeds of
12
<PAGE>
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
PART II: OTHER INFORMATION
$1,640,000 to nine (9) accredited investors in a private placement exempt
from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to Section 4(2) of the Securities
Act and/or Rule 506 of regulation D promulgated thereunder, as a
transaction not involving a public offering. In this connection, each
purchaser was required to execute a securities purchase agreement
containing detailed representations and warranties regarding their status
as an accredited investor and their purchasing the Series G Shares for
investment intent and not with a view to distribution.
The preferred stock purchase agreement (the "Agreement") and the
certificate of designation for the Series G Preferred Stock contain
covenants which, if breached by the Company, provide for certain remedies.
Certain of these covenants are considered outside the Company's control.
These covenants include, among other things, that the Company obtain a
minimum net worth, as defined in the Agreement, by December 31, 2000. For
breach of these covenants that are outside of the Company's control, the
remedy allows the 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, of the Company's common stock.
The Agreement also contains certain covenants that are considered within
the control of the Company. These covenants require, among other things,
the delivery of financial information and restrict the Company from
incurring additional debt if, immediately upon the 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 Company's
control the remedies allow the holders of a majority of the outstanding
Series G and Series F Shares, taken together as a group, to elect a
majority of the Company's Board of Director's and to either (i) convert
their shares into the Company's common stock using a conversion rate
computed as the lower of (a) the conversion price, as adjusted; or (b) a
calculated value utilizing a discount to the market price, as defined; or
(ii) request the Company to redeem their shares. If the 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.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES: None
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
Effective as of March 31, 1997, the holders of the Company's Series F
Shares unanimously consented to the creation of the Series G Preferred
Stock and the sale of the Series G Shares with liquidation and voting
rights ranking parri passu with Series F Shares, and to conforming changes
to the shareholders' agreement among the Company, the holders of the
13
<PAGE>
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
PART II: OTHER INFORMATION
Series F Shares, and certain management stockholders.
ITEM 5: OTHER INFORMATION: None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
27) Financial Data Schedule
(B) REPORTS ON FORM 8-K: None
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
North American Technologies Group, Inc.
Date: May 1, 1997 /s/ Judith Knight Shields
----------------------------------------------------
Judith Knight Shields
Chief Financial Officer and Chief Accounting Officer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,965,334
<SECURITIES> 0
<RECEIVABLES> 1,306,683
<ALLOWANCES> 131,062
<INVENTORY> 588,386
<CURRENT-ASSETS> 4,080,808
<PP&E> 1,425,523
<DEPRECIATION> 404,842
<TOTAL-ASSETS> 11,322,346
<CURRENT-LIABILITIES> 1,116,430
<BONDS> 701,280
28,105
0
<COMMON> 12,105,447
<OTHER-SE> (2,628,916)
<TOTAL-LIABILITY-AND-EQUITY> 11,322,346
<SALES> 1,173,455
<TOTAL-REVENUES> 1,173,455
<CGS> 727,581
<TOTAL-COSTS> 727,581
<OTHER-EXPENSES> 1,121,920
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,997
<INCOME-PRETAX> (679,846)
<INCOME-TAX> 0
<INCOME-CONTINUING> (679,846)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (679,846)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
