<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549

                                   FORM 10-Q

(Mark One)
[X]            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934
                                    OR
[_]            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended:  SEPTEMBER 30, 1995

Commission File Number:   0-16217



                    NORTH AMERICAN TECHNOLOGIES GROUP, INC.
            (Exact name of registrant 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)

                                (713) 662-2699
             (Registrant's telephone number, including area code)



          Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 ________
    --------             


          Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

    21,633,843 Shares of Common Stock, $.001 par value at November 7, 1995
<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
               September 30, 1995 (unaudited), and                             
               December 31, 1994                                               
                                                                               
             Consolidated Statements of Operations                                                             5
               Nine months ended September 30, 1995 and 1994 (unaudited)       
                                                                               
               Three months ended September 30, 1995 and 1994 (unaudited)                                      6 
                                                                               
             Consolidated Statements of Cash Flows                                                             7
               Nine months ended September 30, 1995 and 1994 (unaudited)       
                                                                               
             Notes to Consolidated Financial Statements                                                        8
 
          ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF                                                   13
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PART II.  OTHER INFORMATION

          ITEM 1.   LEGAL PROCEEDINGS                                                                         19

          ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                                                          19
</TABLE> 

                                       2
<PAGE>
 
                                         NORTH AMERICAN TECHNOLOGIES GROUP, INC.

                                                     CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE> 
<CAPTION> 
                                                          September 30,      December 31,
                                                                   1995              1994
                                                                                         
Assets                                                      (Unaudited)                  
-------------------------------------------------------------------------------------------

<S>                                                       <C>                <C> 
Current                                                                                  
  Cash                                                         $1,837,641      $3,266,518
  Accounts receivable, less allowance for                                                
    doubtful accounts of $32,606 in 1995                                                 
    and $30,000 in 1994                                           755,113         501,328
  Inventory                                                       188,497          64,254
  Accrued interest receivable                                     216,218             -  
  Notes receivable, current portion                               572,313             -  
  Prepaids and other current assets                               213,719         101,476
                                                                ---------       --------- 
                                                                                         
Total current assets                                            3,783,501       3,933,576
                                                                                         
Notes receivable                                                3,680,421       2,800,763 
 
Property and equipment, net of accumulated depreciation
  of $235,979 in 1995 and $140,696 in 1994                        504,152         592,858
 
Investment in joint venture                                       192,494             -
 
Goodwill, net of accumulated amortization
  of $49,600 in 1995 and $31,744 in 1994                          426,565         444,421
 
Purchased technologies, patents and patent rights, net of
  accumulated amortization of $133,183 in 1995 and
  $76,032 in 1994                                                 214,649         191,498
 
Other intangible assets, net of accumulated amortization
  of $32,455 in 1995 and $16,698 in 1994                          151,316          62,627
 
Other assets                                                      289,890         164,933
                                                                ---------       ---------
 
                                                               $9,242,988      $8,190,676
                                                                =========       =========
</TABLE>



                See Notes to Consolidated Financial Statements.

                                       3
<PAGE>
 
                                         NORTH AMERICAN TECHNOLOGIES GROUP, INC.

                                                     CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>                                                             
<CAPTION>                                             
                                                                    September 30,          December 31,     
                                                                             1995                  1994      
                                                                                                             
Liabilities and Stockholders' Equity                                 (Unaudited)                              
-------------------------------------------------------------------------------------------------------

<S>                                                                 <C>                    <C>        
Current                                                                                                 
 Line of credit                                                        $    -                $  300,000 
 Current portion of long-term debt                                        411,332               562,500 
 Notes payable to officers                                                120,308               213,302 
 Accounts payable                                                         581,525               692,998 
 Accrued expenses                                                         762,472               580,121 
                                                                        ---------             --------- 
                                                                                                        
Total current liabilities                                               1,875,637             2,348,921 
                                                                                                        
Long-term debt                                                          3,257,406               500,000 
                                                                                                        
Minority interest                                                          16,488               334,312 
                                                                                                        
Commitment and contingencies                                                                            
                                                                                                        
Stockholders' equity                                                                                    
 Preferred stock, $.001 par value;                                                                      
  10,000,000 shares authorized; 80 issued in 1994                             -                         
 Common stock, $.001 par value; 50,000,000 shares                                                       
  authorized; 22,056,051 and 18,692,489 issued                             22,056                18,692 
 Additional paid-in capital                                            19,726,897            17,613,667 
 Deficit                                                              (15,495,040)          (12,454,572)
                                                                      ------------          ------------ 
                                                                        4,253,913             5,177,787 
                                                                                                        
Less treasury stock, at cost - 450,000 and 803,000 shares                 (16,488)              (32,312)
Less notes receivable for purchase of stock                              (143,968)             (138,032)
                                                                         ---------             --------- 
                                                                                                        
Total stockholders' equity                                              4,093,457             5,007,443 
                                                                        ---------             --------- 
                                                                                                        
                                                                       $9,242,988            $8,190,676 
                                                                        =========             =========  
</TABLE>



                See Notes to Consolidated Financial Statements.

                                       4
<PAGE>
 
                                         NORTH AMERICAN TECHNOLOGIES GROUP, INC.

                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                     (UNAUDITED)
================================================================================

 
<TABLE> 
<CAPTION> 
                                                          Nine months ended           
                                                            September 30,               
                                                          1995        1994          
                                                          ----        ----          
<S>                                               <C>              <C>                   
Revenues                                          $ 1,981,620      $ 1,404,447           
                                                                                         
Cost of revenues                                    1,273,103          819,006           
                                                    ---------        ---------           
                                                                                         
Gross margin                                          708,517          585,441           
                                                    ---------        ---------           
                                                                                         
Selling, general and administrative                 3,223,369        2,326,410           
                                                                                         
Research and development                              524,540          908,936           
                                                    ---------        ---------           
                                                                                         
Total expenses                                      3,747,909        3,235,346           
                                                    ---------        ---------           
                                                                                         
Operating loss                                     (3,039,392)      (2,649,905)          
                                                   ----------       ----------
                                                                                         
Other income (expense):                                                                  
                                                                                         
  Investment income                                        -           512,312           
                                                                                         
  Interest income                                     245,530           57,629           
                                                                                         
  Interest expense                                    (74,537)         (68,371)          
                                                                                         
  Equity in net loss of joint venture                (176,892)              -            
                                                                                         
  Minority interest in net (income)                                                      
    of subsidiary                                      (5,432)              -            
                                                                                         
  Equity in net income of affiliate                        -            50,000           
                                                                                         
  Other income (expense)                               10,257            6,868           
                                                     --------        ---------           
                                                                                         
                                                       (1,074)         558,438           
                                                    ---------        ---------           
                                                                                         
Loss from continuing operations                    (3,040,466)      (2,091,467)          
                                                   ----------       ----------
Discontinued operations:                                                                 
                                                                                         
   Revenues                                                -           291,618           
                                                                                         
   Cost of revenues                                        -           367,690           
                                                  -----------          -------           

Loss from discontinued operations                          -           (76,072)          
                                                  -----------          -------
                                                                                         
Net Loss                                          $(3,040,466)     $(2,167,539)          
                                                  ===========      ===========           
                                                                                         
Loss per common and                                                                      
  common share equivalent                         $    (.17)     $    (.16)          
                                                                                         
Weighted average number of                                                               
  common shares outstanding                        18,202,928       13,415,711            
</TABLE>



                See Notes to Consolidated Financial Statements.

                                       5
<PAGE>
 
                                         NORTH AMERICAN TECHNOLOGIES GROUP, INC.

                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                     (UNAUDITED)
================================================================================

<TABLE> 
<CAPTION> 
                                                     Three months ended
                                                        September 30,
                                                        1995     1994
                                                        ----     ----

<S>                                           <C>            <C>            
Revenues                                       $   809,047     $ 732,937        
                                                                                
Cost of revenues                                   487,374       399,426        
                                                 ---------      --------        
                                                                            
Gross margin                                       321,673       331,511        
                                                 ---------      --------        
                                                                                
Selling, general and administrative              1,257,097       695,813        
                                                                                
Research and development                           112,300       269,406        
                                                 ---------      --------        
                                                                                
Total expenses                                   1,369,397       965,219        
                                                 ---------      --------        
                                                                                
Operating loss                                  (1,047,724)     (633,708)       
                                                -----------     ---------   
Other income (expense):                                                         
                                                                                
 Interest income                                    77,238        28,408        
                                                                                
 Interest expense                                  (26,069)      (25,943)       
                                                                                
 Equity in net loss of joint venture               (44,894)          -        
                                                                                
 Equity in net income of affiliate                                50,000    
                                                                                
 Other income (expense)                              3,552         6,868        
                                                 ---------      --------        
                                                                                
                                                     9,827        59,331        
                                                 ---------      --------        
                                                                                
Loss from continuing operations                 (1,037,896)     (574,377)       
                                                ----------      ---------   
Discontinued operations:                                                        
                                                                            
 Revenues                                              -          54,011    
                                                                                
 Cost of revenues                                      -          83,285    
                                                 ---------      ---------        
                                                                            
Loss from discontinued operations                      -         (29,274)   
                                                 ---------      ---------   
                                                                                
Net Loss                                       $(1,037,896)  $  (603,651)       
                                                ===========     =========    
Loss per common and                                                             
 common share equivalent                       $   (.05)     $     (.04)      
                                                                                
Weighted average number of                                                      
 common shares outstanding                      19,715,763    13,622,330    
</TABLE>



                See Notes to Consolidated Financial Statements.

                                       6
<PAGE>
 
                                         NORTH AMERICAN TECHNOLOGIES GROUP, INC.

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                     (UNAUDITED)
================================================================================

<TABLE> 
<CAPTION> 
                                                                       Nine months ended
                                                         September 30, 1995   September 30, 1994  
                                                         ------------------   ------------------   


<S>                                                      <C>                  <C> 
NET CASH USED IN OPERATING ACTIVITIES                       $(3,476,907)         $(3,040,533)   
                                                             -----------          -----------    
                                                                                                
INVESTING ACTIVITIES                                                                            
                                                                                                
 Payments received from finance lease                       $    58,860               14,092      
 Payments relating to patent and patent rights                  (80,302)             (11,136)     
 Purchase of property and equipment                            (226,577)             (67,464)     
 Payment for non-compete agreements                            (105,000)                -      
 Increase in note receivable                                 (1,451,971)            (268,101)     
 Increase in note receivable - stockholders                        -                 (55,000)     
 Cash invested in joint venture                                (169,386)                -      
 Increase in organizational costs                                  -                 (29,635)     
                                                             -----------          -----------     
                                                                                                  
Net cash used in investing activities                        (1,974,376)            (417,244)    
                                                             -----------          -----------     
                                                                                                  
FINANCING ACTIVITIES                                                                              
 Issuance of common stock                                     2,119,594            2,353,819      
 Redemption of preferred stock                                 (305,000)                -      
 Payment of dividends on preferred stock of                                                       
  subsidiary                                                     (5,432)                -      
 Proceeds from notes payable to shareholders                      7,006              210,746      
 Proceeds from issuance of preferred stock                                            15,000      
 Repayment of line of credit                                   (300,000)                -      
 Proceeds from long term debt                                 2,918,738              768,974      
 Repayments of long term debt                                  (412,500)                -      
                                                             -----------           ----------     
                                                                                                  
Net cash used in financing activities                         4,022,406            3,348,539     
                                                             -----------           ----------     
                                                                                                  
Increase (decrease) in cash                                  (1,428,877)            (109,238)    
Cash at beginning of period                                   3,266,518              286,904     
                                                              ----------           ----------     
                                                                                                  
Cash at end of period                                       $ 1,837,641            $ 177,666     
                                                              ==========           ==========      
</TABLE>



                See Notes to Consolidated Financial Statements.

                                       7
<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-Q and Rule
10-01 of Regulation S-X.  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 years ended December 31, 1994 and 1993.
Certain reclassifications have been made to the accompanying 1994 financial
statements to conform them 1995 consolidated financial statement presentation.
The interim results reflected in the accompanying financial statements are not
necessarily indicative of the results of operations for a full fiscal year.

The accompanying financial statements have been restated retroactively to
include the historical financial results of EET, Inc. ("EET") which was acquired
on March 7, 1995, and Industrial Pipe Fittings, Inc. ("IPF") which was acquired
on June 30, 1995.  Both of these transactions are accounted for as a pooling-of-
interests. Accordingly, the consolidated financial statements for all periods
prior to the acquisitions have been restated to combine the previously separate
entities. See also Note 2.

The loss per common share is computed by dividing the loss applicable to common
stock by the weighted average number of shares outstanding and common stock
equivalents, if dilutive.

2. ACQUISITION OF EET, INC. AND INDUSTRIAL PIPE FITTINGS, INC.

On March 7, 1995 the Company acquired EET, Inc., a Texas corporation, pursuant
to an Agreement and Plan of Merger dated February 7, 1995. On June 30, 1995, the
Company acquired Industrial Pipe Fittings, Inc., a Texas corporation, pursuant
to an Agreement and Plan of Merger dated June 22, 1995.  In each transaction, a
newly formed subsidiary of the Company acquired the respective entity by merger
in consideration for the issuance of newly issued shares of the Company's common
stock and, in the case of EET, warrants.  To effect these acquisitions, the
Company issued an aggregate of  3,070,729 shares of the Company's common stock
and warrants to purchase up to 71,000 shares of the Company's common stock.  The
newly formed subsidiaries have continued as the surviving corporations with the
names of EET, Inc. and Industrial Pipe Fittings, Inc., respectively. The
transactions meet the requirements of a pooling-of-interests, and as such the
financial statements of the Company have been restated retroactively to include
the historical financial results of EET and IPF.

EET had revenues of $1,426,748 and $269,073 for the years ended December 31,
1994 and 1993,

                                       8
<PAGE>
 
                    NORTH AMERICAN TECHNOLOGIES GROUP, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


respectively.  IPF had revenues of $505,407 for its first year of operations in
1994. Combined with the previously reported revenues of North American
Technologies Group, Inc., the pro forma revenues for 1994 and 1993 would have
been $1,945,697 and $351,794.  EET reported losses before discontinued
operations of  $764,405 and $133,201 for the years ended December 31, 1994 and
1993, respectively.  IPF reported net income of $24,221 for 1994. Combined with
the previously reported losses of North American Technologies Group, Inc., the
pro forma losses before discontinued operations for 1994 and 1993 would have
been $4,797,381 and $1,510,880.

As part of the acquisition of IPF, the Company entered into non-compete
agreements with the three shareholders of IPF.  All three shareholders are
active in the on-going operations of IPF. The non-compete agreements provide for
a one-time payment of $35,000 per individual and provide for non-competition
during the term of each individual's employment and for a three year period
thereafter. The total amount paid of $105,000 has been included as an intangible
asset on the balance sheet at September 30, 1995, less the amortization based on
seven and one-half years.

3. RELATED  PARTY TRANSACTIONS

At September 30, 1995 the Company had a note receivable of $60,000 outstanding
to a corporate joint venture partner.  The note bears interest at 10% and has a
term of less than one year.

The notes receivable included in the equity section of $143,968 and $138,032 at
September 30, 1995 and December 31, 1994, respectively, include the unpaid
portion of the original EET shareholders' capital contributions from the
formation of  EET, and from new shares issued in 1994 in exchange for notes
receivable.  Additionally, the balances include approximately $13,000 and $8,000
in accrued interest income at September 30, 1995 and December 31, 1994,
respectively.  The notes bear interest at 6% per annum and are due upon one of
the following events: (i) EET pays dividends to its shareholders, but only to
the extent of the dividends, (ii) the maker sells his or her shares, or (iii)
there is a payment from a defined bonus pool, but only to the extent of such
bonus.

Included in notes payable to officers at September 30, 1995 and December 31,
1994, is $120,308 and $113,302, respectively, that is payable to an officer and
director of the Company who was also a shareholder of IPF prior to its
acquisition by the Company.  The officer advanced money to IPF under the terms
of a note agreement, and subsequent to the acquisition this note remains in
effect. Interest is accrued monthly at 8% and the full amount is due and payable
on or before December 31, 1995. The remaining balance in notes payable to
officers at December 31, 1994, relates to amounts owed to the former
shareholders of EET who became officers of the Company in March 1995. Those
notes were repaid as part of the acquisition of EET.

Effective July 28, 1995, John W. Parrott resigned from his position as Chairman
of the Board of Directors and as a director of North American Technologies
Group, Inc.  Mr. Parrott will continue

                                       9
<PAGE>
 
                    NORTH AMERICAN TECHNOLOGIES GROUP, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


to serve the Company in the capacity of an independent consultant pursuant to a
short-term consulting agreement that provides him with, among other things, a
payment in settlement of his five-year employment contract of $250,000 due no
later than December 31, 1995.  An accrual to record the $250,000 in general and
administrative expenses was made in the three months ended September 30, 1995.

4. INVESTMENT IN JOINT VENTURE

During the first nine months of 1995 the Company contributed equipment valued at
$200,000 and cash of $169,000 to its joint venture with a private company.  The
Company uses the equity method to record its share of the earnings and losses of
the joint venture, and accordingly has recognized $176,892 as its share of the
joint venture's losses for the first nine months of 1995 on its statement of
operations and as a reduction of the Company's investment in the joint venture.

5.  DISCONTINUED OPERATIONS

Effective July 29, 1994,  EET entered into a formal plan to dispose of its
analytical services operations.  On July 29, 1994, EET entered into a direct
financing lease to sell the fixed assets and the analytical division to a third
party.  All remaining assets and liabilities, which consisted of accounts
receivable and accrued liabilities, were retained by EET.  The results of such
discontinued operations have been separated from the continuing operations on
the income statement. The balance sheet reflects the current and non-current
balance on the financing lease receivable.

6.  MINORITY INTEREST

EET issued 305,000 shares of preferred stock in 1994 for $305,000 which has been
reflected as minority interest on the consolidated balance sheet at December 31,
1994.  The preferred stock was redeemed in March 1995 in connection with the
acquisition by the Company of EET, and dividends of $5,432 were paid.  The
dividends have been reflected as minority interest in net income of subsidiary
on the accompanying consolidated statement of operations for the nine months
ended September 30, 1995.

7.  STOCKHOLDERS' EQUITY

During the nine months ended September 30, 1995, the Company:

(i)    issued 3,070,729 shares of common stock for the acquisition of EET and
       IPF;
(ii)   issued 424,506 shares of common stock upon the conversion of the
       remaining 80 shares of the Company's Series A, Series B and Series C
       convertible preferred stock;
(iii)  issued 2,929,713 shares of common stock for net proceeds to the
       Company of $2,120,000;

                                       10
<PAGE>
 
                    NORTH AMERICAN TECHNOLOGIES GROUP, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(iv)   issued from treasury stock 350,000 shares that had been reserved for
       the conversion of preferred stock of a subsidiary of the Company.

8.  NOTES RECEIVABLE

Pursuant to the terms of a letter of intent to acquire assets of GAIA
Technologies, Inc., a Delaware corporation, and certain of its affiliates
(collectively, "GAIA"), the Company has entered into a note agreement with GAIA
whereby the Company will loan up to $2,100,000 to GAIA for working capital and
other purposes.  Such advances bear interest at 10%, are due not later than July
1, 1998, and are collateralized by certain assets of GAIA.  Upon the closing of
the purchase of the assets of GAIA by the Company in accordance with the terms
of the letter of intent, the Company will forgive the amounts advanced under
such note agreement.  As of September 30, 1995, the Company had advanced
$1,339,000 under the note agreement.  Since September 30, 1995, and through
November 4, 1995, the Company advanced an additional $154,000 thereunder.

Since the interest on the amounts advanced is to be forgiven in the event the
closing of the purchase of the GAIA assets occurs, interest income on the note
agreement is not accrued in the accompanying financial statements.  All amounts
are included in the non-current portion of notes receivable at September 30,
1995.

The Company currently anticipates entering into another agreement with certain
affiliates of GAIA in connection with which the Company will loan additional
amounts for working capital, equipment purchases and other operating purposes
relating to the development of certain railroad crosstie technology.

9.  LONG-TERM DEBT

In September 1995 the Company received cash proceeds of $2,700,000 from the
placement of its convertible subordinated notes and warrants to acquire
2,700,000 shares of the Company's common stock.  The notes bear interest at 13
1/2 % per annum, which is payable semi-annually but may be deferred during the
first three years at the option of the Company.  The principal amount of the
notes, and any deferred interest, is convertible at the option of the holders
into shares of the Company's common stock at an exercise price of $1.00 per
share, subject to certain adjustments, at any time after September 22, 1996 and
prior to their maturity on September 22, 2000.  Repayment of the unconverted
portion of the principal amount of the notes is due in one balloon payment on
September 22, 2000.  The indebtedness evidenced by the Notes is subordinated to
certain existing and future indebtedness of the Company.

The warrants permit the holders thereof to purchase an aggregate of 2,700,000
shares of the Company's common stock at an exercise price of $1.00 per share,
subject to certain adjustments,

                                       11
<PAGE>
 
                    NORTH AMERICAN TECHNOLOGIES GROUP, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


during a four year period beginning after September 22, 1996. Under certain
circumstances, the Company may require the holders to exercise up to 40% of the
warrants, and if not exercised, such portion of the warrants would expire.

                                       12
<PAGE>
 
                    NORTH AMERICAN TECHNOLOGIES GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
OPERATIONS

RESULTS OF OPERATIONS

The results of operations for the nine months ended September 30, 1995 and 1994,
have been restated to include the historical financial results of EET, Inc.
("EET") and Industrial Pipe Fittings, Inc. ("IPF"). These companies were
acquired on March 7, 1995 and June 30, 1995, respectively, in transactions
accounted for as poolings-of-interests. See also the Notes to the Consolidated
Financial Statements.

Revenues
--------

Revenues increased $577,000 for the nine-month period ended September 30, 1995,
and $76,000 for the three-month period ended September 30, 1995, compared to
same periods of the previous year.  These increases of 41% and 10%,
respectively, are the result of increased sales volume by both IPF and EET.
IPF'S growth in monthly shipments is reflected in their revenue increases of
$333,000 and $25,000 for the nine months and three months ended September 30,
1995.  EET contributed to the balance of the revenue growth by increasing sales
of its services $244,000 and $52,000 for the nine months and three months ended
September 30, 1995.


<TABLE> 
<CAPTION> 
Gross margin
------------

     <S>                                                          <C> 
     Gross margin for the three months ended September 30, 1995   40%
     Gross margin for the three months ended September 30, 1994   45%

     Gross margin for the nine months ended September 30, 1995    36%
     Gross margin for the nine months ended September 30, 1994    42%
</TABLE> 

Gross margins decreased from 45% for the three months ended September 30, 1994,
to 40% for the three months ended September 30, 1995, due primarily to lower
margins experienced by IPF.  IPF's decrease in margin was due primarily to costs
incurred in preparing personnel and the manufacturing facilities for new
equipment that is expected to contribute positively to margins in future
quarters. In addition, although the gross margin for the Company of 40% for the
three months ended September 30, 1995 was lower than the same period of the
prior year, it was higher than the first quarter 1995 margin of 34% and the
second quarter 1995 margin of 32%.  Also, the dollar volume of gross profit of
$321,673 for the third quarter 1995 was 66% higher than the gross profit for the
first quarter of $193,000 and the second quarter of  $194,000.

Gross margins decreased from 42% to 36% for the nine months ended September 30,
1994, compared to the nine months ended September 30, 1995, due  primarily to
lower margins experienced earlier in the year by EET which resulted from higher
than anticipated out-of-town

                                       13
<PAGE>
 
                    NORTH AMERICAN TECHNOLOGIES GROUP, INC.
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
                                  OPERATIONS

expenses and contract labor costs on certain projects undertaken and completed
by EET in 1995 as compared with 1994.

Selling, general and administrative
-----------------------------------

Selling, general and administrative expenses for the nine-month period ended
September 30, 1995, increased $897,000 over the same period for the previous
year, primarily as a result of the Company's acquisition program (including the
acquisitions of EET and IPF) and management restructuring.  This increase
represents (i) an increase of $300,000 in legal and accounting fees, (ii) a
$250,000 accrual for amounts owed to the former Chairman of the Company (see
Notes to Consolidated Financial Statements); and (iii) an increase in salaries
and related benefits of approximately $200,000 relating to the addition of new
management members.  There were no significant increases in selling expenses.

The majority of these increased expense were incurred in the second and third
quarters of 1995, accounting for the increase for the three-month period ended
September 30, 1995 of $561,000.

The legal and professional fees for the nine-month period ended September 30,
1995 include approximately $145,000 relating to the acquisition of EET and IPF.
Since each acquisition was accounted for as a pooling-of-interest, all related
expenses were expensed in the current financial statements.  In addition,
included in the professional fees for the first nine months are the accounting
and legal fees associated with the audit and the preparation of Form 10-K for
the year ended December 31, 1994. Other increased legal fees are the result of
management actively pursuing the resolution of several outstanding lawsuits,
including the arbitration hearings that have occurred and are continuing
relating to Biotrace International Inc. and the activity relating to the lawsuit
against a former officer and director of the Company.  It is management's
intention to resolve as many of these issues as prudently as possible during the
current fiscal year without prejudicing the Company's rights in these matters.

Research and development
------------------------

Research and development expense for the nine-month period ended September 30,
1995 decreased $384,000 from the same period of the previous year.  This is
primarily the result of decreased lab testing fees and chemical costs, and the
termination or completion of various consulting arrangements. Many of these
consulting arrangements were terminated or completed during the first quarter of
1995.

Other income and expense
------------------------

                                       14
<PAGE>
 
                    NORTH AMERICAN TECHNOLOGIES GROUP, INC.
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
                                  OPERATIONS


Other income and expense decreased from income of $558,438 for the nine months
ended September 30, 1994 to expense of $1,074 for the nine months ended
September 30, 1995.  This was primarily due to a decrease in investment income
from $512,312 to $0 for the same periods.  Investment income had been derived
from the investment of the proceeds of a note receivable executed by Euro Scotia
Funding Limited ("ESF") in various market transactions.  In April 1994, the
Company instructed ESF to invest in less speculative investments, and thereafter
the Company has recognized only interest income from the note receivable.

Effective December 31, 1994, the Company and ESF entered into a new note
agreement which provides for repayment over a five-year period with interest at
10%.  The new note agreement allowed ESF to prepay its first payment and a
portion of its second payment by offsetting the amount that the Company owed to
ESF under a previous line of credit arrangement.  The outstanding principal
balance on the note at December 31, 1994, after these offsets was $2,800,763.
Interest income of approximately $212,000 has been recognized for the nine
months ended September 30, 1995.

The brokerage firm which holds the collateral for the ESF note and an affiliate 
of ESF have been recently named as defendants in a lawsuit filed by the Florida 
Department of Insurance. The Company is uncertain at this time what effect, if 
any, the results of this litigation may have upon the note receivable from ESF
and the related collateral. The Company has no knowledge at this time of any
impairment in value to the ESF note or the collateral.

The equity in loss from joint venture represents the Company's share of the
losses for the nine month and three-month period ended September 30, 1995 in its
joint venture arrangement with a privately owned company.  The Company
contributed equipment valued at $200,000 and cash of $169,000 for the first nine
months of 1995.  See also the Notes to the Consolidated Financial Statements.
The Company's share of the joint venture's losses is $176,892 and $44,894 for
the nine months and three months ended September 30, 1995. The joint venture has
substantially completed a demonstration project for a major landfill facility in
South Texas.  The joint venture has entered into discussions with the
representatives of this facility regarding the results of the demonstration
project, and pricing arrangements for future processing using related
technologies at the current facility or at another facility owned by the same
company.  Under the terms of the joint venture agreement, profits and losses are
shared equally.

Discontinued operations
-----------------------

Discontinued operations for the nine months and three months ended September 30,
1994 reflect the results of operations for the analytical services division of
EET, Inc. which was discontinued in July 1994.  See also the Notes to
Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

General
-------

Through the quarter ended September 30, 1995, the Company incurred operating
losses that are

                                       15
<PAGE>
 
                    NORTH AMERICAN TECHNOLOGIES GROUP, INC.
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
                                  OPERATIONS

anticipated to continue for the near term, notwithstanding recent increases in
revenues.  The operations of IPF, which have been profitable, and EET, each of
which is currently experiencing increases in demand for its core products and
services, will also require additional short-term infusions of capital to
finance equipment purchases and other operating needs.  Management currently
anticipates the Company's operating cash needs to continue during the short term
at levels in the range of $200,000 to $250,000 per month, not including certain
legal and other professional fees and expenses.  These estimates also do not
include additional amounts needed to fund the proposed acquisition of the assets
of GAIA (as defined hereafter) and the operation of its related businesses.

Since its inception, the Company has financed its operations primarily through
private placements of its equity securities and convertible debentures, short
term loans and proceeds received upon the exercise of its warrants and options
to acquire its securities.  The Company's long-term viability and growth will
depend upon a combination of the successful commercialization of its
technologies and products, and its ability to continue to obtain adequate
financing (whether debt or equity).  There can be no assurances that the Company
will be able to continue to secure sources of working capital from financing
transactions or sources other than operations for an indefinite period.  In the
event the financings are completed, they may be at per share prices that are
lower than the current market price of the Company's common stock, and they may
contain provisions for future contingent consideration in the event the market
price of the Company's common stock changes over a period of time. If adequate
funds are not available and operating losses continue at current rates, the
Company would be unlikely to continue as a going concern for more than the short
term.  The Company's independent auditors have noted in their report on the
Company's consolidated financial statements for the year ended December 31,
1994, that these factors raise substantial doubt about the Company's ability to
continue as a going concern.

In September 1995, the Company completed the sale of $2,700,000 of its 13 1/2%
convertible subordinated notes due September 22, 2000, and warrants to acquire
2,700,000 shares of the Company's common stock.  See Notes to Consolidated
Financial Statements.  Management of the Company is continuing to explore
several financing arrangements and believes that continued financing of the
Company's development and operations will be made available for the foreseeable
future, primarily through the issuance and sale of additional debt and equity
securities of the Company.  In that regard, the Company has engaged Hambro
Resource Development Incorporated to provide certain investment banking services
and to assist in creating a long-term capital plan for the Company.  In
addition, certain personnel and other changes have been made in order to
streamline management and reduce long-term corporate overhead, and management
intends to continue to explore methods of decreasing administrative and other
overhead expenses.

                                       16
<PAGE>
 
                    NORTH AMERICAN TECHNOLOGIES GROUP, INC.
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
                                  OPERATIONS


Analysis of Nine Months ended September 30, 1995
------------------------------------------------

The Company's cash decreased $1,428,877 from December 31, 1994 to September 30,
1995 to a balance of $1,837,641. This decrease in cash was comprised of the
following: (i) net cash used in operating activities of $3,476,907,  (ii) net
cash used in investing activities of $1,974,376 and (iii) net cash provided by
financing activities of $4,022,406.  See also Consolidated Statements of Cash
Flows for the components of each of the preceding categories.

From January through September 30, 1995 the Company issued 2,929,713 shares of
the Company's common stock for cash proceeds, net of all fees and expenses, of
$2,120,000.

In connection with the merger of EET in March 1995, the Company advanced cash to
EET for it to repay (i) an outstanding  line of credit obligation of $300,000,
(ii) debt obligations of $212,500,  (iii) notes payable to certain former
shareholders of EET of $100,000, and (iv) certain accounts payable and other
accrued expenses.  In addition, EET redeemed its outstanding preferred stock of
$305,000 and paid preferred stock dividends of $5,432.

In May 1995 the Company renegotiated the maturity of its $250,000 outstanding
note.  This note is now due on June 15, 1996.

In connection with the merger of Industrial Pipe Fittings, Inc. in June 1995,
the Company entered into non-compete agreements with the three former
shareholders of IPF, all of whom continue to be active in the on-going
operations of IPF.  These non-compete agreements required a one-time payment of
$35,000 per individual, and provide for non-competition during the term of each
individual's employment and for a three-year period thereafter.

IPF recently secured certain exclusive rights to market and sell in the United
States, Mexico and Canada products of an Italian manufacturing concern.  In
connection therewith, in October 1995 the Company caused a letter of credit to
be issued securing certain of its payment obligations, and posted a $200,000
certificate of deposit as collateral therefor.  In addition, IPF has outstanding
purchase orders for manufacturing equipment of approximately $250,000 which is
scheduled for delivery in November 1995.

Pursuant to the terms of a letter of intent to acquire assets of GAIA
Technologies, Inc., a Delaware corporation, and certain of its affiliates
(collectively, "GAIA"), the Company has entered into a note agreement with GAIA
whereby the Company will loan up to $2,100,000 to GAIA for working capital and
other purposes.  Such advances bear interest at 10%, are due not later than July
1, 1998, and are collateralized by certain assets of GAIA.  Upon the closing of
the purchase of the assets of GAIA by the Company in accordance with the terms
of the letter of intent, the Company will forgive

                                       17
<PAGE>
 
                    NORTH AMERICAN TECHNOLOGIES GROUP, INC.
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
                                  OPERATIONS


the amounts advanced under the note agreement.  As of September 30, 1995, the
Company had advanced $1,339,000 under the note agreement.  Since September 30,
1995, and through November 4, 1995, the Company advanced an additional $154,000
thereunder.  See also Notes to Consolidated Financial Statements.

The Company currently anticipates entering into another agreement with certain
affiliates of GAIA in connection with which the Company will loan additional
amounts for working capital, equipment purchases and other operating purposes
relating to the development of certain railroad crosstie technology.

The Company entered into an agreement with its former Chairman of the Board in
July 1995 which provides for, among other things, a payment of $250,000 in
settlement of his five-year employment contract due no later than December 31,
1995.  See also Notes to Consolidated Financial Statements.

The Company is a defendant in several legal actions which, if decided against
the Company, could have a material adverse effect on the financial condition of
the Company.  The Company has not established a reserve for any losses that
might result from these lawsuits.

                                       18
<PAGE>
 
                    NORTH AMERICAN TECHNOLOGIES GROUP, INC.
                          PART II: OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

       The Company is a party to several material legal proceedings that have
       been reported on its Annual Report on Form 10-K for the year ended
       December 31, 1994. During the quarter ended September 30, 1995, there
       were no material changes to the status of these legal proceedings.

 
ITEM 2: CHANGES IN SECURITIES: None
 
ITEM 3: DEFAULTS UPON SENIOR SECURITIES: None
 
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None
 
ITEM 5: OTHER INFORMATION
 
       Management is not aware of any events required to be reported hereunder.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

       (A) EXHIBITS:
 
       4(v) Investment Agreement entered into September 22, 1995

      27    Financial Data Schedule

       (B) REPORTS ON FORM 8-K: None
 

                                       19
<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: November 13, 1995     /s/  Judith Knight Shields
                            ---------------------------------------------------
 
                            Judith Knight Shields
                            Chief Financial Officer and Chief Accounting Officer

                                       20
<PAGE>
 
                    NORTH AMERICAN TECHNOLOGIES GROUP, INC.
                                 EXHIBIT INDEX



EXHIBIT 4(v)                  

EXHIBIT 27