<PAGE>
As filed with the Securities and Exchange Commission on June 20, 1996
Registration No. 333-656
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
Amendment No. 1
to
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------------
AMERICAN RESOURCES OF DELAWARE, INC.
(Exact name of registrant as specified in charter)
Delaware 86-0713506
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
Mr. Rick G. Avare
160 Morgan Street President
Post Office Box 87 American Resources of
Versailles, Kentucky 40383 Delaware, Inc.
(606) 873-5455 160 Morgan Street
(Address, including zip Post Office Box 87
code, and telephone number, Versailles, Kentucky 40383
including area code, of (606) 873-5455
registrant's principal (Name, address, including zip
executive offices) code, and telephone number,
including area code, of agent
for service)
Copy to:
Harry S. Stahl, Esq.
McKenna & Stahl
2603 Main Street, Suite 1010
Irvine, California 92714-6232
(714) 752-2800
This Form S-3 consists of 43 pages (including exhibits). The index to
exhibits is set forth on sequential page 35.
[Page 1 of Facing Page]
<PAGE>
Approximate date of commencement of proposed sale to public: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or investment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 ("Securities Act"), other than securities offered in connection with
dividend or investment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Offering Aggregate Amount of
Shares to be Amount to be Price Per Offering Registration
Registered Registered (1) Share (2) Price (2) Fee (2)
- ------------ -------------- --------- --------- ------------
Common Stock 1,953,144 $ 3.975 $7,763,748 $2,678
($.00001 Par
Value)
TOTAL DUE $2,678
------
------
(1) Of the 1,953,144 shares of Common Stock being registered hereby (a) 411,668
shares of Common Stock, $.00001 par value ("Common Stock"), of American
Resources of Delaware, Inc., a Delaware corporation ("Company") which were
issued to purchasers in the Company's November 1995 private placement ("November
Private Placement") of 41.16 Units; (b) 205,834 shares represents shares which
may be sold by certain selling
2
<PAGE>
stockholders that may be acquired upon exercise of the Company's Class A Common
Stock Purchase Warrants which were issued to purchasers in the Company's
November Private Placement; (c) 205,834 shares represents shares which may be
sold by certain selling stockholders that may be acquired upon exercise of the
Company's Class B Common Stock Purchase Warrants which were issued to purchasers
in the Company's November Private Placement; (d) 225,300 shares of Common Stock
were issued in connection with asset purchase transactions; (e) 187,500 shares
represents shares of Common Stock which may be sold by certain selling
stockholders that may be acquired upon conversion of the Company's 1993 8%
Convertible Preferred Stock ("Preferred Stock") issued in connection with an
asset purchase transaction; (f) 50,000 common shares were issued to Morgan Lang
Limited on exercise of warrants granted pursuant to a Services Agreement dated
June 16, 1995; (g) 150,000 common shares were issued to AMC Consumer Services on
exercise of warrants granted pursuant to a Services Agreement dated June 16,
1995; (h) 292,008 shares of Common Stock were issued on conversion of 73,276
shares of the Company's 6% Series B Cumulative Convertible Preferred Stock; and
(i) 225,000 shares of Common Stock were issued in connection with the
acquisition of oil and gas properties, equipment and pipelines from AKS Energy
Corporation. No other shares of the Company's Common Stock are being registered
pursuant to this offering.
(2) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(c) of the Securities Act of 1933, as amended, (the "Act"),
the registration fee has been calculated based upon a price of $3.975 per share,
the average of the closing bid and asked prices as reported by NASDAQ Small Cap
for the Company's Common Stock on March 29, 1996.
(3) Pursuant to Rule 416 of the Act, there are also being registered
hereunder such additional shares as may be issued to the selling stockholders
because of future stock dividends, stock distributions, stock splits or similar
capital readjustments.
The Company hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Company shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
SEE "RISK FACTORS" AT PAGE 15
3
<PAGE>
AMERICAN RESOURCES OF DELAWARE, INC.
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
Showing Location in Prospectus of Information
Required by Items of Form S-3
Form S-3 Item Caption or Location
Number and Caption in Prospectus
------------------ -------------------
1. Forepart of the Registration
Statement and Front Cover
Page of Prospectus...... Forepart of the Registration
Statement; Outside Front Cover
2. Inside Front and Outside
Back Cover Pages of
Prospectus ............. Inside Front and Outside Back
Cover Pages of Prospectus
3. Summary Information, Risk
Factors and Ratio of
Earnings to Fixed
Charges................. The Company; Summary of the
Offering; Risk Factors (see
page 15)
4. Use of Proceeds ........... Use of Proceeds
5. Determination of Offering
Price................... Not Applicable
6. Dilution .................. Dilution
7. Selling Security Holders... Selling Stockholders
8. Plan of Distribution ...... Plan of Distribution
9. Description of Securities to
be Registered........... Not Applicable
10. Interests of Named Experts
and Counsel............. Not Applicable
11. Material Changes .......... Recent Developments (see page 11)
and Risk Factors (see page 15);
Incorporation of Certain
Information by Reference
12. Incorporation of Certain Incorporation of Certain
Information by Reference Information by Reference
13. Disclosure of Commission
Position on
Indemnification for
Securities Act
Liabilities ............ Not Applicable
4
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be acccepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be a sale of these securities in
any State in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
<PAGE>
- --------------------------------------------------------------------------------
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION
DATED __________, 1996
- --------------------------------------------------------------------------------
AMERICAN RESOURCES OF DELAWARE, INC.
COMMON STOCK
($.00001 PAR VALUE)
1,953,144 SHARES OF COMMON STOCK
This Prospectus relates to: (a) 411,668 shares of Common Stock, $.00001 par
value ("Common Stock"), of American Resources of Delaware, Inc., a Delaware
corporation ("Company") which were issued to purchasers in the Company's
November 1995 private placement ("November Private Placement") of 41.16 Units;
(b) 205,834 shares representing shares which may be sold by certain selling
stockholders that may be acquired upon exercise of the Company's Class A Common
Stock Purchase Warrants which were issued to purchasers in the Company's
November Private Placement; (c) 205,834 shares representing shares which may be
sold by certain selling stockholders that may be acquired upon exercise of the
Company's Class B Common Stock Purchase Warrants which were issued to purchasers
in the Company's November Private Placement; (d) 225,300 shares of Common Stock
which were issued in connection with asset purchase transactions; (e) 187,500
shares representing shares of Common Stock which may be sold by certain selling
stockholders that may be acquired upon conversion of the Company's 1993 8%
Convertible Preferred Stock ("Preferred Stock") issued in connection with an
asset purchase transaction; (f) 50,000 common shares were issued to Morgan Lang
Limited on exercise of warrants granted pursuant to a Services Agreement dated
June 16, 1995; (g) 150,000 common shares were issued to AMC Consumer Services on
exercise of warrants granted pursuant to a Services Agreement dated June 16,
1995; (h) 292,008 shares of Common Stock were issued on conversion of 73,276
shares of the Company's 6% Series B Cumulative Convertible Preferred Stock; and
(i) 225,000 shares of Common Stock were issued in connection with the
acquisition of oil and gas properties, equipment and pipelines from AKS Energy
Corporation. No other shares of the Company's Common Stock are being registered
pursuant to this offering.
Unless the context otherwise requires, all of the persons referred to above
shall be referred to collectively as the "Selling Stockholders".
5
<PAGE>
The Common Stock may be offered from time to time by the Selling
Stockholders through ordinary brokerage transactions in the over-the-counter
market, in negotiated transactions or otherwise, at market prices prevailing at
the time of sale or at negotiated prices. The Company will not realize any
proceeds from the sale of the Common Stock by the Selling Stockholders. See
"Selling Stockholders" and "Plan of Distribution".
The Company's Common Stock is traded in the over-the-counter market and is
quoted on the small cap section of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") under the symbol "GASS". On March
29, 1996, as quoted on the NASDAQ Small Cap, the closing price for the Common
Stock in the over-the-counter market was $3.975.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD NOT BE
PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS" AT PAGE 15
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
6
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 7
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . 8
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
RECENT DEVELOPMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 11
SUMMARY OF THE OFFERING. . . . . . . . . . . . . . . . . . . . . . . . 13
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MARKET FOR COMMON EQUITY . . . . . . . . . . . . . . . . . . . . . . . 23
SELLING STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 24
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . 26
RIGHTS OF CERTAIN HOLDERS OF COMMON STOCK. . . . . . . . . . . . . . . 26
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
----------------------
THE DATE OF THIS PROSPECTUS IS _______________, 1996
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements, and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 5th Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices located at 13th Floor, Seven World
Trade Center, New York, New York 10048; 10960 Wilshire Boulevard, Suite 1710,
Los Angeles,
7
<PAGE>
California 90024, and 14th Floor, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material may be obtained from the Commission at 450 5th
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
reports, proxy statements and other information concerning the Company may be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "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 made to
the Registration Statement.
-------------------
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission (File No.
0-21472) under the Exchange Act are incorporated in this Prospectus by
reference:
1. Annual Report on Form 10-KSB for the fiscal year ended December 31,
1995;
2. Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1994
and 1996, respectively;
3. Current Reports on Form 8-K dated September 30, 1994, November 29,
1995, and February 26, 1996, respectively, and Form 8-K/A dated February 26,
1996 amending Form 8-K dated February 26, 1996;
4. The description of the Company's $.00001 par value Common Stock
contained in the Company's Registration Statement on Form 10-SB (filed with the
Commission on August 19, 1993), including any amendments or reports filed for
the purpose of updating such description;
5. The description of the Company's Series 1993 8% convertible preferred
stock and Series B 6% junior convertible preferred stock contained in the
Company's Registration Statement on Form 10-SB (filed with the Commission on
August 19, 1993), including any amendments or reports filed for the purpose of
updating such description.
6. 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.
8
<PAGE>
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
request of such person, a copy of any or all of the documents which are
incorporated by reference herein, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference therein). Written or
telephone requests should be directed to American Resources of Delaware, Inc.,
160 Morgan Street, Post Office Box 87, Versailles, Kentucky 40383, Attention:
Karen M. Underwood; telephone (606) 873-5455.
[LEFT BLANK INTENTIONALLY]
9
<PAGE>
THE COMPANY
The Company is a fully-integrated oil and gas company engaged in the
exploration, development and acquisition of oil and natural gas properties
located in Kentucky, Michigan and the Gulf of Mexico and the marketing and
transportation of natural gas. A substantial portion of the Company's
operations are conducted through its subsidiary, Southern Gas Company of
Delaware, Inc. ("Southern Gas"), which the Company formed in February 1994 to
acquire substantially all the assets and to assume certain liabilities of
Southern Gas Company, Inc., an independent Kentucky-based natural gas
production, pipeline and gas marketing company. Southern Gas operates primarily
in the Appalachian region of Kentucky and has natural gas reserves, gathering
systems, compressors, and dedicated pipeline capacity with transportation
companies and contracts to sell its product to end-users. The expansion of the
Company's operations into the Gulf of Mexico commenced in October 1994, when the
Company entered into an agreement with Settle Oil and Gas Company relating to
certain of Settle's operations in the Gulf of Mexico.
The Company's strategy is to continue to expand its reserve base and
increase its cash flow through exploration, acquisition of oil and natural gas
properties and development of its properties. The Company seeks a balance
between its exploration program and the acquisition of proved properties. The
Company emphasizes the following elements in implementing this strategy:
- Reserve growth through high potential exploratory drilling
- Balance between exploration and acquisitions of proved properties
- Control of operations and costs
- Use of 3-D seismic and other advanced technology made available by
third parties
- Equity ownership and other incentives to retain and attract employees
The Company believes that the expansion of its focus to the federal waters
of the Gulf of Mexico, offshore Louisiana, is the foundation of its continued
growth. The Gulf of Mexico is a prolific oil and gas province, accounting for
approximately 25% of domestic natural gas production. The Company holds a 50%
working interest in the 5,000 acre Ship Shoal 150 block, exclusive of 546 acres
in the southwest corner of the block. Two successful producing wells have been
drilled on the block, and, based on 3-D seismic interpretation, the Company has
identified at least two additional well locations. There is a significant
amount of seismic and other geologic data available at a reasonable cost. Also,
the shallow waters of the Gulf of Mexico have a substantial existing
infrastructure, including gathering systems, platforms,
10
<PAGE>
pipelines and drilling and service companies, which facilitate cost effective
operations and the timely development of discoveries.
The Company's principal executive offices are located at 160 Morgan Street,
Versailles, Kentucky 40383 and its telephone number is (606) 873-5455. The
Company also maintains an administrative office at 7150 East Camelback Road,
Suite 195, Scottsdale, Arizona 85251 and its telephone number is (602) 945-9195.
RECENT DEVELOPMENTS
Effective January 1, 1996, the Board of Directors announced the appointment
of Jonathan B. Rudney as President and Chief Executive Officer of the Company.
Mr. Rudney replaced Andrew J. Kacic, the founder of the Company, who will
continue to serve on the Company's Board of Directors. Mr. Rudney brings with
him more than 15 years of management experience in the oil and gas industry.
Immediately prior to his appointment with the Company, Mr. Rudney was President
and C.E.O. and a major shareholder of Century Oil Company and a major
shareholder of Century Offshore Management Corporation, both with principal
offices located in Lexington, Kentucky. On May 9, 1996, Mr. Rudney resigned as
President and Chief Executive Officer of the Company. Rick G. Avare, who was
currently serving as the Company's Chief Operating Officer, assumed the position
of Acting President and Chief Executive Officer at that time.
On February 26, 1996, the Company acquired oil and gas properties,
equipment and pipelines from AKS Energy corporation (AKS). As consideration for
the assets, the Company paid $2,909,010 in cash, assumed $125,000 of AKS's
severance tax obligations, issued 225,000 shares of the Company's Common Stock
at a value of $3.59 per share and issued warrants with an estimated value of
$348,525 to purchase an additional 225,000 shares of the Company's Common Stock
with an exercise price of $5.00 per share and an expiration date of December 31,
1998. The cash included in the purchase price was made available from
borrowings under the Company's credit facility with its primary lender.
The Company also entered into an agreement to participate with AKS in the
joint development of leases in Southeastern Kentucky gas fields wherein the
Company will have the right to earn 50% of the remaining undeveloped acreage.
On May 22, 1996, the Company, through its wholly owned subsidiary Southern
Gas Co. of Delaware, Inc. conveyed a volumetric production payment in
Appalachian Wells recently purchased from AKS through a facility sponsored by
Williams Energy Services Company, a subsidiary of the Williams Companies, Inc.
and structured by NationsBank. The Company received $4,300,000 for the
production
11
<PAGE>
payment, which has an anticipated six year term. Of the funds received,
$2,500,000 was used to reduce the Company's credit facility with its primary
lender. The Company plans to use the remainder of the funds for working capital
and further acquisition and development activities in the Gulf Coast region.
In May 1996, the Company and Century Offshore Management Corporation
entered into preliminary discussions to explore the possibility of a merger.
The Company and Century Offshore Management Corporation have decided to suspend
further discussions in this regard.
In 1996, the Company purchased an overriding royalty interest in the Ship
Shoal B-3 well from Rick G. Avare, an officer and director of the Company, for
$125,000.
[LEFT BLANK INTENTIONALLY]
12
<PAGE>
SUMMARY OF THE OFFERING
The following summary information is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus or which is
incorporated herein by reference.
Securities Offered ............ 1,953,144 shares of Common Stock
Shares of Common Stock
Outstanding (1) .......... 5,929,460 shares
Use of Proceeds ............... The Company will not receive any of the
proceeds from the sale of stock by the
Selling Stockholders.
There can be no assurance that any or a
substantial portion of the Warrants will
be exercised.
Risk Factors.................. The securities offered hereby involve a
high degree of risk and should not be
purchased by investors who cannot afford
the loss of their entire investment. See
"Risk Factors".
NASDAQ symbol (2)............. GASS
- --------------
(1) Outstanding as of March 31, 1996. Does not include: (a) 2,000,000 shares
of Common Stock reserved for issuance upon exercise of stock options granted
under the Company's 1994 Compensatory Stock Option Plan; (b) 379,000 shares of
Common Stock reserved for issuance under the Company's 1994 Employee Stock
Compensation Plan; (c) 950,000 shares of Common Stock reserved for future grant
under the Company's Incentive Stock Option Plan; (d) 268,851 shares of Common
Stock reserved for issuance upon conversion of the Company's Series 1993 8%
convertible preferred stock, (e) 74,700 shares of Common Stock reserved for
issuance upon conversion of the Company's Series B 6% junior convertible
preferred stock; (f) 262,296 shares of Common Stock reserved for issuance upon
exercise of the Company's publicly traded warrants; (g) 1,451,320 shares of
Common Stock reserved for issuance upon exercise of non-plan stock options and
warrants; and (h) 411,668 shares of Common Stock reserved for issuance upon
exercise of Class A and Class B Common Stock Warrants which were issued to
purchasers in the Company's November Private Placement.
13
<PAGE>
(2) Continued inclusion in NASDAQ is subject to certain maintenance criteria.
The failure to meet these maintenance criteria in the future may result in the
discontinuance of the inclusion of the Company's Common Stock in NASDAQ, which
may have an adverse effect on the market for the Common Stock. See "Risk
Factors - Maintenance Criteria for NASDAQ Securities".
[LEFT BLANK INTENTIONALLY]
14
<PAGE>
RISK FACTORS
The securities offered hereby involve a high degree of risk, including, but
not necessarily limited to, the risk factors described below. Each prospective
investor should carefully consider the following risk factors inherent in and
affecting the business of the Company and this offering before making an
investment decision.
1. LIMITED OPERATING HISTORY. The Company was formed in August 1992 to
acquire the assets and assume certain liabilities of Standard Oil and
Exploration of Delaware, Inc. ("Standard Oil"), a gas and oil company operating
under Chapter 11 bankruptcy protection at that time. Since the consummation of
the Standard Oil transaction in April 1993, the Company has taken a number of
steps to become a fully integrated gas and oil company and to enhance its
financial position on a prospective basis.
While the Company believes its activities to date have formed the
foundation for continued growth and profitability, the Company notes that its
revenue, profitability and future rate of growth are substantially dependent
upon prevailing prices for natural gas, oil and condensate which are dependent
upon numerous factors beyond the Company's control such as economic, political
and regulatory developments and competition from other sources of energy. The
energy markets have historically been very volatile, and there can be no
assurance that gas and oil prices will not be subject to wide fluctuations in
the future. A substantial or extended decline in gas and oil prices could have
a material adverse effect on the Company's financial position, results of
operations, quantities of gas and oil reserves that may be economically produced
and access to capital, all as further described below.
2. DEPENDENT ON GAS AND CRUDE OIL. The success of the Company will be
materially dependent upon the success of its acquisition and exploratory
drilling program. Exploratory drilling is subject to numerous risks, including
the risk that no commercially productive natural gas and crude oil reservoirs
will be encountered. The cost of drilling, completing and operating wells is
often uncertain, and drilling operations may be curtailed, delayed or canceled
as a result of a variety of factors, including unexpected formations and
drilling conditions, pressure or mechanical irregularities, informations and
equipment failures or accidents, as well as weather conditions, compliance with
governmental requirements and shortages or delays in the delivery of equipment.
15
<PAGE>
3. VOLATILITY OF GAS AND OIL PRICES; MARKETABILITY OF PRODUCTION. The
Company's revenues, profitability and future rate of growth are substantially
dependent upon prevailing prices for gas and crude oil. Gas and crude oil
prices have been extremely volatile in recent years and are affected by many
factors outside the control of the Company. These external factors and the
volatile nature of the energy markets make it difficult to estimate future
prices of gas and oil. Any substantial decline in the price of gas and oil will
likely lead to substantial reductions in cash flow. The marketability of the
Company's production depends in part upon the availability, proximity and
capacity of gathering systems, pipelines and processing facilities. Federal and
state regulation of gas and oil production and transportation, general economic
conditions, tax and energy policies, changes in supply and changes in demand all
could adversely affect the Company's ability to produce and market its gas and
oil. If market factors were to change dramatically, the financial impact on the
Company could be substantial. The availability of markets and the volatility of
product prices are beyond the control of the Company and thus represent a
significant risk.
4. REPLACEMENT OF PROPERTIES. The Company's future success depends upon
its ability to find, develop or acquire additional gas and oil properties or
interests in properties that are economically recoverable. The proved reserves
of the Company will generally decline as reserves are depleted, except to the
extent that the Company conducts successful exploration or development
activities or acquires properties containing proved reserves, or both. To
increase reserves and production, the Company must continue its exploratory
drilling program or undertake other replacement acquisition activities. There
can be no assurance, however, that the Company's planned exploratory projects or
other replacement acquisition activities will result in significant additional
reserves or that the Company will have continuing success drilling or acquiring
productive wells at low finding, acquisition and development costs.
Furthermore, although the Company's revenues may increase if prevailing gas and
oil prices increase significantly, the Company's finding and acquisition costs
for additional reserves could also increase.
5. UNCERTAINTY OF ESTIMATES OF GAS AND OIL RESERVES. There are numerous
uncertainties inherent in estimating quantities of proved reserves, including
many factors beyond the control of the Company. Petroleum engineering is not an
exact science. Information relating to the Company's proved gas and oil
reserves is based upon engineering estimates. Estimates of economically
recoverable gas and oil reserves and of future net cash flows necessarily depend
upon a number of variable factors and assumptions, such as historical production
from the area compared with production from other producing areas, the assumed
effects of regulations by governmental agencies and assumptions concerning
future gas and oil prices, future operating costs, severance and
16
<PAGE>
excise taxes, capital expenditures and workover and remedial costs, all of which
may in fact vary considerably from actual results. For these reasons, estimates
of the economically recoverable quantities of gas and oil attributable to any
particular group of properties, classifications of such reserves based on risk
of recovery and estimates of the future net cash flows expected therefrom
prepared by different engineers or by the same engineers at different times may
vary substantially. Actual production, revenues and expenditures with respect
to the Company's reserves will likely vary from estimates, and such variances
may be material.
6. OPERATING HAZARDS AND UNINSURED RISKS. The Company's operations are
subject to the hazards and operating risks inherent in drilling for and
production of gas and oil, including the risk of fire, explosions, blow-outs,
pipe failure, abnormally pressured formations and environmental hazards such as
oil spills, gas leaks, ruptures or discharges of toxic gases. The occurrence of
any of these events could result in substantial losses to the Company due to
injury or loss of life, severe damage to or destruction of property, natural
resources and equipment, pollution or other environmental damage, clean-up
responsibilities, regulatory investigation and penalties and suspension of
operations. In accordance with customary industry practice, the Company
maintains insurance against some, but not all, of these risks. There can be no
assurance that any insurance will be adequate to cover any losses or
liabilities. The Company cannot predict the continued availability of
insurance, or its availability at premium levels that justify its purchase.
7. GOVERNMENTAL REGULATION. The Company's gas and oil operations are
subject to various federal, state and local governmental regulations which may
be changed from time to time in response to economic or political conditions.
Matters subject to regulation include discharge permits for drilling operations,
drilling bonds, reports concerning operations, the spacing of wells, unitization
and pooling of properties and taxation. From time to time, regulatory agencies
have imposed price controls and limitations on production by restricting the
rate of flow of gas and oil wells below actual production capacity to conserve
supplies of gas and oil. In addition, the production, handling, storage,
transportation and disposal of gas and oil, by-products thereof and other
substances and materials produced or used in connection with gas and oil
operations are subject to regulation under federal, state and local laws and
regulations primarily relating to protection of human health and the
environment. These laws and regulations have continually imposed increasingly
strict requirements for water and air pollution control and solid waste
management. To date, expenditures related to compliance with these laws and
remediation of existing environmental contamination have not been significant in
relation to the results of operations of
17
<PAGE>
the Company. The Company believes the trend of more expansive and stricter
environmental legislation and regulations will continue.
8. COMPETITION. The Company operates in a highly competitive
environment. The Company competes with major and independent gas and oil
companies, many of whom have financial and other resources substantially in
excess of these available to the Company. These competitors may be better
positioned to take advantage of industry opportunities and to withstand changes
affecting the industry, such as fluctuations in gas and oil prices and
production, the availability of alternative energy sources and the application
of government regulation.
9. CONTROL BY EXISTING STOCKHOLDERS. Officers and directors of the
Company beneficially own or control approximately 43.81% of the outstanding
Common Stock. Such individuals, if acting together, would be able to
effectively elect a majority of the Board of Directors as well as approve most
matters submitted to the stockholders for approval.
10. DEPENDENCE ON KEY EXECUTIVE OFFICERS AND OTHER QUALIFIED PERSONNEL.
The Company is highly dependent on certain key executive officers. The loss of
one or more key executive officers could have a material adverse effect on the
Company's business, financial condition and result of operations. In 1993 the
Company entered into five-year employment agreements with Douglas L. Hawthorne,
Rick Avare, and Leonard Nave.
The recruitment, retention and motivation of skilled executives, sales and
technical personnel and other employees are important to the Company's
operations. Although the Company has not experienced significant problems in
recruiting and retaining qualified personnel, there can be no assurance that it
will not encounter such problems in the future.
11. NO DIVIDENDS AND RESTRICTIONS ON DIVIDENDS. To date, the Company has
not paid any dividends on its Common Stock and does not intend to declare any
dividends in the foreseeable future. The Company intends to retain earnings, if
any, for the future operation and development of its business. In addition, the
payment of such dividends is prohibited by the term of the Company's credit
facility.
12. SHARES ELIGIBLE FOR FUTURE SALE; RESTRICTIONS ON TRANSFER. As of
March 31, 1996 the Company had a total of 5,929,460 shares of Common Stock
outstanding. If all options, warrants, and conversion privileges outstanding as
at March 31, 1996 were exercised, the Company would have 10,379,204 shares of
Common stock outstanding. Of these shares, 1,253,976 shares of Common Stock
offered hereby (1,853,144 shares if all warrants are exercised) will be freely
tradable without restriction by persons other than "affiliates" of the Company,
as defined under the
18
<PAGE>
Securities Act of 1933, as amended (the "Securities Act"). Of the remaining
4,675,484 shares of Common Stock outstanding as at March 31, 1996, 1,179,318
shares are "restricted shares" as that term is defined by Rule 144 as
promulgated under the Securities Act. Approximately 994,000 of these restricted
shares are eligible for sale under Rule 144.
As of March 31, 1996, options to purchase a total of 2,624,897 shares of
Common Stock, all of which have been registered under the Securities Act, were
outstanding with a weighted average exercise price of $4.90 per share, of which
options to purchase 2,459,230 shares were exercisable as of March 31, 1996. An
additional 969,090 shares of Common Stock were available for future option
grants under the Company's stock option plans.
Pursuant to a number of consulting agreements, the Company has granted non-
plan options to purchase shares of Common Stock. As of March 31, 1996, non-plan
options to purchase a total of 182,333 shares of Common Stock were outstanding
and immediately exercisable, with a weighted average exercise price of $3.91 per
share.
The Company has also granted warrants to purchase shares of Common Stock.
As of March 31, 1996, warrants to purchase 1,298,963 shares of Common stock were
outstanding, with a weighted average exercise price of $4.45 per share. Of the
shares to be issued upon exercise of these outstanding warrants, 411,668 shares
of Common Stock offered hereby will be freely tradable without restriction by
persons other than "affiliates" of the Company. Of the remaining 887,295 shares
of Common Stock to be issued upon exercise of these warrants, 625,000 shares
will be "restricted shares" as that term is defined by Rule 144 as promulgated
under the Securities Act.
13. NO ASSURANCE OF PROCEEDS. A major source of potential capital to
the Company is the proceeds from the exercise of the Warrants. The Company,
however, has received no firm commitment for the exercise of the Warrants.
Thus, there can be no assurances that the Company will realize material
proceeds, if any, from the exercise of such Warrants.
14. POSSIBLE DILUTION. The Company is authorized to issue 20,000,000
shares of Common Stock, of which 5,929,460 shares were outstanding as of March
31, 1996. Assuming full exercise of all outstanding warrants and options and
conversions of preferred shares, 10,379,204 shares will be outstanding.
Furthermore, in connection with other business matters deemed appropriate by the
Company's management, there can be no assurances that the Company will not, in
fact, undertake the issuance of more shares of Common Stock without notice to
then existing stockholders. This may be done in order to, among other things,
facilitate a business combination, acquire assets or stock of another business,
generate debt or equity financing, reward employees or consultants, or for
19
<PAGE>
other valid business reasons in the discretion of the Company's Board of
Directors.
15. POSSIBLE STATE AND FEDERAL RESTRICTIONS ON EXERCISE OF WARRANTS.
Holders of Warrants will be able to sell the underlying Common Stock issuable
upon exercise of the Warrants only if a current registration statement relating
to such underlying Common Stock is then in effect and on file with the
Securities and Exchange Commission and only if such Common Stock is qualified
for sale or exempt from qualification under the applicable securities laws of
the states in which the various holders of Warrants reside. The warrant
agreements relating to the Warrants contain certain provisions requiring the
Company to file for and endeavor to secure, such current and effective
registration of the shares of Common Stock issuable upon exercise of the
Warrants. If such shares are not registered, it is unlikely that the holders of
Warrants will exercise the Warrants, in which case the Company would not receive
any funds.
16. EFFECT OF OUTSTANDING OPTIONS AND WARRANTS. As of March 31, 1996,
the Company had outstanding options and warrants ("Outstanding Options") to
purchase 4,106,193 shares of Common Stock upon exercise of the Outstanding
Options. To the extent that the shares underlying the Outstanding Options enter
the market, the price of the Common Stock in the market may be substantially
reduced. Moreover, for the term of the Outstanding Options, the holders thereof
are given an opportunity to profit from a rise in the market price of the
Company's Common Stock, with a resulting dilution in the interest of the other
stockholders. Further, the terms on which the Company may obtain additional
financing during that period may be adversely affected by the existence of such
Outstanding Options. The holders of such Outstanding Options may exercise them
at a time when the Company might be able to obtain additional capital through a
new offering of securities on terms more favorable than those provided therein.
17. LIMITED MARKET AND POSSIBLE ILLIQUIDITY OF SHARES. The market price
for the Company's securities may be significantly affected by such factors as
the Company's financial results, the acquisition of new gas and oil properties
and interests in such properties, and various factors affecting the gas and oil
industry generally. Additionally, in recent years, the stock market has
experienced a high level of price and volume volatility and market prices for
many companies, particularly small and emerging growth companies the common
stock of which trade in the over-the-counter market, have experienced wide
fluctuations not necessarily related to the operating performance of such
companies. Also, the market price for the Company's Common Stock may be
affected by general stock market volatility.
20
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1996.
Long-Term debt,
excluding current maturities: $15,391,230
Stockholders' Equity:
Series 1993 8% convertible
preferred stock, par value
$12.00 per share 2,181,819
Series B 6% junior cumulative
convertible preferred stock,
par value $.00001 per share 0
Common stock, par value $.00001
per share; 20,000,000 shares
authorized; 5,929,460 shares
issued and outstanding 59
Additional paid-in capital $15,660,994
Retained earnings 1,766,866
-----------
Total stockholders' equity 19,609,738
-----------
Total capitalization $35,000,968
-----------
-----------
21
<PAGE>
USE OF PROCEEDS
The Company will not realize any proceeds from the sale of shares of Common
Stock by the Selling Stockholders. See "Selling Stockholders."
The gross proceeds which may be realized by the Company upon the exercise
of one hundred percent (100%) of the Warrants will be $1,749,589. 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 Warrants will be exercised.
Management cannot predict with any certainty the amount of proceeds, if
any, which may be generated from the exercise of Warrants. The net proceeds
which may be realized by the Company, if any, upon the exercise of the Warrants
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. Based upon
this strategy, assuming that proceeds, net of costs of this offering, are
realized by the Company upon the exercise of Warrants within a period of twenty-
four (24) months, management would reasonably expect to utilize such proceeds in
the following relative proportions and orders of priority:
Application of Funds % of Funds
-------------------- ----------
Working Capital 25%
Oil and gas exploration 75%
The amounts actually expended for the purposes described above could vary
significantly depending on, among other things, the Company's ability to obtain
capital from other sources. In addition, if each class of Warrant is not
exercised at the same time, the proceeds from the Warrants which are exercised
piecemeal will likely be contributed to the Company's working capital.
22
<PAGE>
MARKET FOR COMMON EQUITY
MARKET INFORMATION
On September 30, 1993, the Company's Common Stock began trading under the
symbol "GASS" on the small cap section of NASDAQ. The following table sets
forth the average closing high and low bid prices of the Common Stock for the
periods indicated, as reported by NASDAQ. These prices are believed to be
representative inter-dealer quotations, without retail mark-up, mark-down or
commissions and may not represent prices at which actual transactions occurred.
<TABLE>
<CAPTION>
1993 Bid (1) 1994 Bid 1995 Bid
- ----------------------------------------------------------------------------------------------------
High Low High Low High Low
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First Quarter $ N/A $ N/A $ 3.25 $ 2.00 $ 7 3/16 $ 4 3/8
Second Quarter N/A N/A $ 6.00 $ 1.44 $ 4 7/8 $ 1 3/4
Third Quarter N/A N/A $ 8.25 $ 3.75 $ 4 1/2 $ 3 3/16
Fourth Quarter $ 3.50 $ 1.56 $ 8.13 $ 5.75 $ 4 1/4 $ 2 7/8
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
1996 First Qtr. $ 4 1/4 $ 2 3/16
</TABLE>
HOLDERS
At March 31, 1996, there were approximately 310 record holders of Common
Stock, 16 record holders of Series 1993 8% Preferred Stock and one record holder
of Series B 6% Preferred Stock.
[LEFT BLANK INTENTIONALLY]
- ------------------------
(1) Reflects information from September 30, 1993, the day the Company's Common
Stock began trading on the small cap section of the NASDAQ.
23
<PAGE>
SELLING STOCKHOLDERS
The shares of Common Stock of the Company offered by this Prospectus are
being sold for the account of the persons named herein ("Selling Stockholders").
The shares of Common Stock offered by the Selling Stockholders may be
offered for sale from time to time at market prices prevailing at the time of
sale or at negotiated prices, and without payment of any underwriting discounts
or commissions except for usual and customary selling commissions paid to
brokers or dealers.
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of May 31, 1996, and as adjusted
to reflect the sale of the securities offered hereby, by the Selling
Stockholders.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Number of Number of Number of
Shares of Shares of Shares of
Common Common Common
Stock held Stock to be Stock owned
before sold in the after the
Name of Selling Stockholder Offering Offering Offering*
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arnold Bernstein 20,000 20,000 0
Clarence E. Miller 60,000 60,000 0
Trust Family Trust &
Ada M. Miller Trust
Southwest Marketing 20,000 20,000 0
Delaware Charter Cust FBO 10,000 10,000 0
Jesse Miller IRA
Roger Zufferey 10,000 10,000 0
Don G. Henry 20,000 20,000 0
Delaware Charter Cust FBO 20,000 20,000 0
R. J. Godfrey
Walter J. Schultz 10,000 10,000 0
Michael J. Skinner 10,000 10,000 0
Gerard J. McLain 10,000 10,000 0
Hattem Family Trust 20,000 20,000 0
Walter C. Shiller 20,000 20,000 0
Delaware Charter GTY & 80,000 80,000 0
Trust Co IRA FBO Henry
Myatake
Frank L. Leyba & Kay 10,000 10,000 0
D. Leyba
Barbara V. Schiller 40,000 40,000 0
Ronald Iannelli 20,000 20,000 0
Charles Smith 40,000 40,000 0
Star Construction Company 40,000 40,000 0
- --------------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ronald K. Setzkorn 20,000 20,000 0
AKS Energy 225,000 225,000 0
Howard C. Chiten & 20,000 20,000 0
Charlotte D. Chiten
Jimmy D. Moore (IRA) 20,000 20,000 0
Harris Partnership J. 20,000 20,000 0
Andrews Harris, G.P.
Pro-Systems Fab, Inc. 20,000 20,000 0
James S. Sanders 10,000 10,000 0
R. Marc Voit 10,000 10,000 0
Wesley D. Mitchell 20,000 20,000 0
Robert W. Tobin 10,000 10,000 0
The McKay Restated 20,000 20,000 0
Revocable Living Trust
UTA dated March 23,
1994 Horace F. McKay,
Jr. Elmyra K. McKay or
their successor(s) in
office Trustees
Roger O. Zufferey 10,000 10,000 0
Walter Hines & Mary Hines 20,000 20,000 0
David Baum & Hiam Baum 10,000 10,000 0
Hans Mulyapatera & 10,000 10,000 0
Benita Mulyapatera
Gregory G Ebbitt 20,000 20,000 0
Paul R. Eberle 56,668 56,668 0
Henry Bookspan 66,668 66,668 0
Howard Settle 210,000 210,000 0
AMC Consumer Services 150,000 150,000 0
Morgan Lang Limited 50,000 50,000 0
Sequa Financial Corporation 202,800 202,800 0
Prima Capital, LLC 146,004 146,004 0
Andrew J. Kacic (1) 29,201 29,201 0
Douglas L. Hawthorne (1) 29,201 29,201 0
Donald Schellpfeffer (1) 29,201 29,201 0
Leonard K. Nave (1) 29,200 29,200 0
Rick G. Avare (1) (2) 29,201 29,201 0
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
* In each case represents less than 1% of the outstanding Common Stock.
Sequa Financial Corporation's holdings represent approximately 4% of the
outstanding Common Stock.
(1) Director of the Company
(2) Officer of the Company
25
<PAGE>
PLAN OF DISTRIBUTION
The Common Stock to be sold by the Selling Stockholders may be sold from
time to time as market conditions permit in the over-the-counter market, or
otherwise, at prices and terms then prevailing or at prices related to the then-
current market price, or in negotiated transactions. The shares of Common Stock
offered hereby may be sold by one or more of the following methods, without
limitation: (a) a block trade in which a 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 as principal and resale by such broker or dealer for its account pursuant
to this Prospectus; (c) ordinary brokerage transactions and transactions in
which the broker solicits Purchasers; and (d) face-to-face transactions between
sellers and Purchasers without a broker-dealer. In effecting sales, brokers or
dealers engaged by the Selling Stockholders may arrange for other brokers or
dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act") in connection with such sales. In addition, any securities
covered by this Prospectus that qualify for sale pursuant to Rule 144
promulgated thereunder might be sold under Rule 144 rather than pursuant to this
Prospectus.
The Selling Stockholders will comply with Rule 10b-6 promulgated under the
Securities Exchange Act of 1934, as amended, in connection with all resales of
Common Stock offered hereby.
RIGHTS OF CERTAIN HOLDERS OF COMMON STOCK
The agreements under which certain shareholders privately purchased their
Common Stock provide that in certain instances these shareholders have the right
to: (i) require that the Company file a registration statement under the
Securities Act covering their shares; and (ii) include their shares in a
registration statement filed by the Company under such Act. The purchasers of
the November Units are participating in this offering pursuant to such
agreements.
EXPERTS
The financial statements of American Resources of Delaware, Inc. as of
December 31, 1995 and for the years ended December 31, 1995 and 1994 have been
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP
covering the December 31, 1994 financial statements refers to a change in the
method of accounting for income taxes.
26
<PAGE>
The statements of revenues and direct operating expenses of the Arakis
Properties purchased by American Resources of Delaware, Inc. for each of the
years in the two year period ended December 31, 1995, have been incorporated by
reference herein and in the registration statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing. The report of KPMG Peat Marwick LLP covering the
statements of revenues and direct operating expenses contain an explanatory
paragraph that states that the statements were prepared for the purpose of
complying with certain rules and regulations of the Securities and Exchange
Commission ("SEC") for inclusion in certain SEC regulatory reports and filings
and are not intended to be a complete financial presentation.
The financial statements of American Resources of Delaware, Inc. as of
December 31, 1993 have been incorporated by reference herein and in the
registration statement in reliance upon the report of William D. Briggs, CPA,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The reserve report of Richard Russell & Associates of the proved reserves
and future net revenues attributable to the Company's properties in Kentucky
included in the Company's Form 10-KSB for the fiscal year ended December 31,
1995 has been so included in reliance upon the authority of such firm as an
expert in petroleum engineering.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon by
McKenna & Stahl, 2603 Main Street, Suite 1010, Irvine, California, Irvine,
92714.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-3
(herein, together with all amendments, if any, thereto, called the "Registration
Statement") under the Securities Act, with respect to the shares of Common Stock
offered by this Prospectus. For further information with respect to the Company
and such shares of Common Stock, reference is made to the Registration Statement
and to the exhibits, if any, filed therewith which are available for inspection
at the office of the Commission, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such documents may be obtained therefrom at
prescribed rates and a copy of the Registration Statement may be obtained from
the principal office of the Commission, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
27
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (1)
Securities and Exchange Commission filing
fee.................................... $ 2,678
Transfer Agent's and Registrar's Fees..... -0-
Legal fees and expenses................... 15,000
Accounting fees and expenses.............. 2,500
Miscellaneous ............................ 500
-------
Total................................. $20,678
-------
-------
All amounts estimated except for Securities and Exchange Commission filing
fee.
- ---------------------
(1) As required by agreements between the Company and the Selling
Stockholders, all of these expenses of issuance and distribution will be paid by
the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Restated Certificate of Incorporation and Amended and Restated Bylaws
of the Company and Sections 145 of the General Corporation Law of the State of
Delaware provide for indemnification of directors and officers under certain
conditions and subject to certain limitations.
Section 145 of the General Corporation Law of the State of Delaware
empowers the Company to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by reason of the fact that he is or was a director, officer,
employee or agent of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation or
enterprise, against expenses, judgments, fines and amounts paid in settlement
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful except that, in the case of an action or suit by or in the
right of the Company, no indemnification may be made in respect of any claim,
issue or matter as to which such person
II-1
<PAGE>
shall have been adjudged to be liable to the Company unless the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
of the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such other court
shall deem proper. Article Seventh of the Certificate of Incorporation and
Article VII of the Amended and Restated Bylaws of the Company provide for
indemnification of persons to the fullest extent authorized by the General
Corporation Law of the State of Delaware.
In accordance with the General Corporation Law of the State of Delaware,
the Company has adopted a provision in its Certificate of Incorporation to limit
the personal liability of its directors for violations of their fiduciary duty.
The provision eliminates each director's liability to the Company or its
stockholders for monetary damages except (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under the section of the Delaware law providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions, or (iv) for any transaction from which a director derived an
improper personal benefit.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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.
II-2
<PAGE>
ITEM 16. LIST OF EXHIBITS
3.1 Certificate of Incorporation of American Resources of Delaware, Inc.
dated August 14, 1992 (1)
3.2 Certificate of Amendment to Certificate of Incorporation of American
Resources of Delaware, Inc. dated March 3, 1993 (2)
3.3 Certificate of Amendment to Certificate of Incorporation of American
Resources of Delaware, Inc. dated March 26, 1993 (2)
3.4 Certificate of Amendment to Certificate of Incorporation of American
Resources of Delaware, Inc. dated April 5, 1993 (2)
3.5 Certificate of Correction to Certificate of Incorporation of American
Resources of Delaware, Inc. dated February 24, 1994 (2)
3.6 Certificate of Correction to Certificate of Incorporation of American
Resources of Delaware, Inc. dated February 24, 1994 (2)
3.7 Certificate of Correction to Certificate of Incorporation of American
Resources of Delaware, Inc. dated February 24, 1994 (2)
3.8 Certificate of Correction to Certificate of Incorporation of American
Resources of Delaware, Inc. dated September 9, 1994 (3)
3.9 Bylaws of the Company, as amended (2)
4.1 Specimen Common Stock Certificate (4)
4.2 Specimen Preferred Stock Certificate (4)
4.3 Specimen Warrant Certificate and Agreement (4)
4.4 Certificate of Designations of 6% Junior Cumulative Convertible
Preferred Stock, Series B of American Resources of Delaware, Inc. (5)
4.5 Warrant Agreement dated as of October 6, 1994 between American
Resources of Delaware, Inc. and GFL Ultra Fund, Ltd. (6)
II-3
<PAGE>
4.6 Warrant Agreement dated as of November 10, 1994 between American
Resources of Delaware, Inc. and GFL Ultra Fund, Ltd. (7)
4.7 Specimen Company's October 1995 Private Placement Subscription
Agreement and Warrant *
5 Opinion of McKenna & Stahl as to the legality of securities being
registered
10.1 1994 Compensatory Stock Option Plan, as amended *
10.2 1994 Employee Stock Compensation Plan *
24.1 Consent of KPMG Peat Marwick LLP
24.2 Consent of William D. Briggs, CPA
24.3 Consent of McKenna & Stahl (included in Exhibit 5)
24.4 Consent of Richard Russell & Associates
25 Power of Attorney *
- --------------------------
* Previously filed.
(1) Incorporated by reference to Exhibit 3.1 in the Company's Registration
Statement on Form 10-SB, File No. 0-21472, declared effective on August 19,
1993 (the "Form 10-SB").
(2) Incorporated by reference to Exhibit 3.2 to the Company's Form 10-SB.
(3) Incorporated by reference to Exhibit 3 to the Company's Form 10-QSB for the
quarterly period ended September 30, 1994 (the "September 1994 Form 10-
QSB").
(4) Incorporated by reference to identical exhibit number to the Company's Form
10-SB.
(5) Incorporated by reference to Exhibit 4.0 to the Company's September 1994
Form 10-QSB.
(6) Incorporated by reference to Exhibit 4.1 of the Company's September 1994
Form 10-QSB.
(7) Incorporated by reference to identical exhibit number in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1994.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS.
A. RULE 415 UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement or the most recent post-
effective amendment thereof which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the Company pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities herein, and the offering
of such securities at that time shall be deemed to be the initial bona fide
offering thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
B. SUBSEQUENT EXCHANGE ACT FILINGS UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
II-5
<PAGE>
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
C. INCORPORATED ANNUAL AND QUARTERLY REPORTS UNDERTAKINGS.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the Prospectus, to deliver, or
cause to be delivered to each person to whom the Prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the Prospectus.
D. INDEMNIFICATION UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 15 above, or otherwise,
the Registrant has been advised 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. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted against the Registrant by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lexington, State of Kentucky, on the 18th day of
June, 1996.
AMERICAN RESOURCES OF DELAWARE, INC.
By: /s/ RICK G. AVARE
------------------------
Rick G. Avare
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ DOUGLAS L. HAWTHORNE * Chairman of the Board _______, 1996
- ------------------------------
Douglas L. Hawthorne
/s/ RICK G. AVARE President and Chief June 18, 1996
- ------------------------------ Executive Officer
Rick G. Avare
/s/ JEFFREY J. HAUSMAN Director and Chief June 18, 1996
- ------------------------------ Financial Officer
Jeffrey J. Hausman Principal Accounting
Officer)
/s/ ANDREW J. KACIC * Director ________, 1996
- ------------------------------
Andrew J. Kacic
/s/ LEONARD K. NAVE * Director ________, 1996
- ------------------------------
Leonard K. Nave
/s/ DONALD L. SCHELLPFEFFER * Director ________, 1996
- ------------------------------
Donald L. Schellpfeffer
*By: /s/ RICK G. AVARE
----------------------
Rick G. Avare
Attorney-in-Fact
II-7
<PAGE>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
3.1 Certificate of Incorporation of American
Resources of Delaware, Inc. dated
August 14, 1992 (1)
3.2 Certificate of Amendment to Certificate
of Incorporation of American Resources
of Delaware, Inc. dated March 3, 1993 (2)
3.3 Certificate of Amendment to Certificate
of Incorporation of American Resources
of Delaware, Inc. dated March 26, 1993 (2)
3.4 Certificate of Amendment to Certificate
of incorporation of American Resources
of Delaware, Inc. dated April 5, 1993 (2)
3.5 Certificate of Correction to Certificate
of Incorporation of American Resources
of Delaware, Inc. dated February 24, 1994 (2)
3.6 Certificate of Correction to Certificate
of Incorporation of American Resources
of Delaware, Inc. dated February 24, 1994 (2)
3.7 Certificate of Correction to Certificate
of Incorporation of American Resources
of Delaware, Inc. dated February 24, 1994 (2)
3.8 Certificate of Correction to Certificate
of Incorporation of American Resources
of Delaware, Inc. dated September 9, 1994 (3)
3.9 Bylaws of the Company, as amended (2)
4.1 Specimen Common Stock Certificate (4)
4.2 Specimen Preferred Stock Certificate (4)
4.3 Specimen Warrant Certificate and Agreement (4)
II-8
<PAGE>
4.4 Certificate of Designations of 6%
Junior Cumulative Convertible Preferred
Stock, Series B of American Resources
of Delaware, Inc. (5)
4.5 Warrant Agreement dated as of October 6,
1994 between American Resources of
Delaware, Inc. and GFL Ultra Fund, Ltd. (6)
4.6 Warrant Agreement dated as of November
10, 1994 between American Resources
of Delaware, Inc. and GFL Ultra Fund, Ltd. (7)
4.7 Specimen Company's October 1995 Private
Placement Subscription Agreement
and Warrant *
5 Opinion of McKenna & Stahl as to the
legality of securities being registered
10.1 1994 Compensatory Stock Option Plan,
as amended *
10.2 1994 Employee Stock Compensation Plan *
24.1 Consent of KPMG Peat Marwick LLP
24.2 Consent of William D. Briggs, CPA
24.3 Consent of McKenna & Stahl
(included in Exhibit 5)
24.4 Consent of Richard Russell & Associates
25 Power of Attorney *
- -----------------------
* Previously filed.
(1) Incorporated by reference to Exhibit 3.1 in the Company's Registration
Statement on Form 10-SB, File No. 0-21472, declared effective on August 19,
1993 (the "Form 10-SB").
(2) Incorporated by reference to Exhibit 3.2 to the Company's Form 10-SB.
(3) Incorporated by reference to Exhibit 3 to the Company's Form 10-QSB for the
quarterly period ended September 30, 1994 (the "September 1994 Form 10-
QSB").
II-9
<PAGE>
(4) Incorporated by reference to identical exhibit number to the Company's Form
10-SB.
(5) Incorporated by reference to Exhibit 4.0 to the Company's September 1994
Form 10-QSB.
(6) Incorporated by reference to Exhibit 4.1 of the Company's September 1994
Form 10-QSB.
(7) Incorporated by reference to identical exhibit number in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1994.
II-10
<PAGE>
EXHIBIT 5
June 18, 1996
American Resources of Delaware, Inc.
160 Morgan Street
Versailles, Kentucky 40383
Re: REGISTRATION STATEMENT NO. 333-656
Gentlemen:
This opinion is furnished to you in connection with the Registration
Statement on Form S-3 (File No. 333-656) which has been filed with the
Securities and Exchange Commission ("SEC") registering 1,953,144 shares of the
common stock, $.00001 par value per share ("Shares") of American Resources of
Delaware, Inc. ("Company").
In our capacity as counsel to the Company, we have assisted in the
preparation of such Registration Statement. In addition, we have examined the
original, certified, conformed or photostatic copies of all Exhibits to such
Registration Statement, and all such agreements and certificates of public
officials, certificates of officers and representatives of the Company and
others, and such other documents as we have deemed necessary or relevant as a
basis for the opinions herein expressed. In all such examinations we have
assumed the genuineness of all signatures on original or certified documents and
the conformity to original or certified documents of all copies submitted to us
as conformed or photostatic copies. As to various questions of fact material to
such opinion, we have relied upon statements or certificates of officers and
representatives of the Company and others.
Based upon the foregoing, in our opinion the Shares have been duly
authorized and, when issued, will be validly issued, fully paid and
nonassessable.
<PAGE>
American Resources of Delaware, Inc.
June 18, 1996
Page 2
We hereby consent to the filing of this opinion as an Exhibit to the
aforesaid Registration Statement on Form S-3 which has been filed by the Company
with the SEC under the Securities Act of 1933, as amended, and we further
consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus which constitutes a part thereof.
Very truly yours,
Harry S. Stahl
HSS:pk
<PAGE>
Exhibit 24.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
American Resources of Delaware, Inc. and Subsidiary:
We consent to the use of our report dated March 22, 1996 on the consolidated
financial statements of American Resources of Delaware, Inc. and Subsidiary as
of December 31, 1995 and for the years ended December 31, 1995 and December 31,
1994 incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the prospectus.
Our report refers to a change in the method of accounting for income taxes.
/s/ KPMG Peat Marwick LLP
Houston, Texas
June 10, 1996
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
American Resources of Delaware, Inc.:
We consent to the use of our report dated April 30, 1996 on the statements of
revenues and direct operating expenses of the Arakis Properties purchased by
American Resources of Delaware, Inc. for each of the years in the two-year
period ended December 31, 1995 incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
Our report contains an explanatory paragraph that states that the statements
were prepared for the purpose of complying with certain rules and regulations of
the Securities and Exchange Commission (SEC) for inclusion in certain SEC
regulatory reports and filings and are not intended to be a complete financial
presentation.
/s/ KPMG Peat Marwick LLP
Houston, Texas
June 10, 1996
<PAGE>
Exhibit 24.2
[LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANT
We hereby consent to the use in the Registration Statement on Form S-3, and any
amendments thereto, and in any related Prospectus, covering the registration of
1,853,144 additional shares of common stock, to be filed by American Resources
of Delaware, Inc. of our auditor's report dated April 11, 1994 (except with
respect to notes 1 and 10, which are as of March 28, 1995) accompanying the
financial statements of American Resources of Delaware, Inc. as of December 31,
1993 and 1992.
/s/ William Briggs & Company
Lake Bluff, Illinois
June 11, 1996
<PAGE>
Exhibit 24.4
[LETTERHEAD]
CONSENT OF INDEPENDENT RESERVE ESTIMATOR
We consent to the use of our report dated February 2, 1996 on the estimated
reserves ad present values of oil and gas properties owned by American
Resources, Inc. and Southern Gas Company of Delaware, Inc. as of January 1, 1996
incorporated herein by reference and to the reference of our firm under the
heading "Experts" in the prospectus.
/s/ Richard M. Russell & Associates, Inc.
Brentwood, Tennessee
June 10, 1996
