AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON APRIL 21, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------------------------------
FORM SB-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------------------------------------
AEI ENVIRONMENTAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
COLORADO 05-0499525
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBER)
ORGANIZATION
</TABLE>
AEI ENVIRONMENTAL, INC.
215 Bluegrass Road, Suite C
Franklin KY 42135
877-586-8688
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CHUHAK & TECSON, P.C.
225 WEST WASHINGTON STREET, SUITE 1300
CHICAGO, IL 60606-3418
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
WITH COPIES TO:
<TABLE>
<S> <C>
NADEAU & SIMMONS, P.C. BERSCH ACCOUNTING
1250 TURKS HEAD BUILDING 633 W. WISCONSIN AVENUE
PROVIDENCE, RI 02903 SUITE 610
401-272-5800 MILWAUKEE, WI 53203
414-272-8800
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF
PROPOSED SALE TO THE PUBLIC:
As soon as practicable after approval.
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, as amended (the "Securities Act"), check the following box. [X]
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement number 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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,
check the following box. [ ] _________________
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant 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.
Disclosure alternative used (check one):
Alternative 1 ( ) Alternative 2 (X)
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CALCULATION OF REGISTRATION FEE
Proposed(1)(2) Proposed(2)(3)
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(4) Per Share Price Fee (3)
- ------------ ---------- ------------- ---------- -----------------
Common Stock 2,400,000 $ 0.0038 $ 9,120 $ 3.15
(1) The securities registered hereunder are shares of the registrant's
common stock, $.001 par value.
(2) Estimated for purpose of calculating the registration fee.
(3) The fee with respect to these shares has been calculated pursuant
to Rules 457(h) and 457(c) under the Securities Act of 1933,
as amended, and based upon the book value of the Registrant's Common
Stock on a date within five (5) days prior to the date of filing of
this Registration Statement (Since no quote is now published, it was
assumed at $0.0038 for purposes only of calculating the filing fee).
- ------------------------------------------------------------------------------
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 ACCEPTED 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 ANY 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.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT 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.
Subject to Completion Dated April 21, 2000
AEI ENVIRONMENTAL, INC.
2,400,000 SHARES
COMMON STOCK
This Prospectus relates to up to 2,400,000 shares of common stock, no par value
(the "Common Stock") of AEI Environmental (the "Company" or "Registrant"),
whose corporate address is 215 Bluegrass Road, Suite C, Franklin KY 42135,
877-586-8688. All of the shares (collectively the "Shares") of the Company
offered hereby are to be sold for the accounts of the selling shareholders set
forth herein (the "Selling Shareholders"). The Company will not receive any of
the proceeds from the sale of the Shares by the Selling Shareholders. The
Company estimates that total expenses of the offering will be approximately
$75,000 in connection with this offering ("Offering") of the Shares. (See
"Selling Shareholders" and "Plan of Distribution").
The Company is subject to the reporting requirements of Section 13 and 15(d)
of the Exchange Act and is presently current in its filed reports with the
Securities and Exchange Commission.
INVESTMENTS IN THE SECURITIES INVOLVE A HIGH DEGREE OF RISK (SEE "RISK
FACTORS"). THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
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Prospectus Summary ....................................................
Risk
Factors................................................................
Year 2000 Problems May Have an Adverse Effect
Competition
Potential Fluctuations in Quarterly Operating Results
Limited Operating History
Dependence on Third-Party Suppliers
Patents, Trademarks and Proprietary Information
Rapid Technological Changes
Expansion
Government Regulation
Dependence on Key Personnel
Control by Principal Shareholders, Officers and Directors
Issuance of Preferred Stock
Trading Market; Volatility of Stock Price
Possible Need for Additional Financing
Indemnification of Officers and Directors
Dependence Upon Outside Advisors
Rule 144 Sales
Use of Proceeds.............................................................
Dilution ...................................................................
Dividend Policy ............................................................
Business ...................................................................
Management's Discussion and Analysis of Financial Condition and
Results of Operations .....................................................
Management .................................................................
Certain Transactions .......................................................
Principal Shareholders .....................................................
Description of Capital Stock ...............................................
Plan of Distribution .......................................................
Agreements with Armstrong ..................................................
Investor Relations Arrangements ............................................
Legal Matters ..............................................................
Experts ....................................................................
Additional Information .....................................................
Financial Statements .......................................................F-1
</TABLE>
CROSS REFERENCE PAGE REQUIRED BY
REGULATION S-K ITEM 501(b)
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CAPTION OR LOCATION
ITEM IN FORM SB-1 IN PROSPECTUS
----------------------------------------- -------------------
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1. Information Required by Item 501 of Regulation S-B.... Front Cover
2. Information Required by Item 502 of Regulation S-B.... Inside Front Cover
3. Information Required by Item 503 of Regulation S-B.... Prospectus Summary;
Risk Factors
4. Use of Proceeds....................................... Prospectus Summary;
Use of Proceeds
5. Determination of Offering Price....................... Risk Factors;
Plan of Distribution
6. Dilution.............................................. Dilution
7. Selling Security Holders..............................
8. Plan of Distribution.................................. Plan of Distribution
9. Description of the Securities to be Registered........ Description of
Securities
10. Interest of Named Experts and Counsel................. Legal Matters
11. Information with Respect to the Registrant............
11(a)Information Required by Item 101 of Regulation S-B.... Description of
Business
11(b)Information Required by Item 102 of Regulation S-B.... Description of
Property
11(c)Information Required by Item 103 of Regulation S-B.... Litigation
11(d)Information Required by Item 201 of Regulation S-B.... Price Range of
Common Stock
11(e)Information Required Under Regulation S-B............. Financial Statements
11(f)Information Required by Item 301 of Regulation S-B.... Description of
Securities
11(g)Information Required by Item 302 of Regulation S-B.... N/A
11(h)Information Required by Item 303 of Regulation S-B.... Management's
Discussion
and Analysis
11(i)Information Required by Item 304 of Regulation S-B.... Experts
11(j)Information Required by Item 401 of Regulation S-B.... Management
11(k)Information Required by Item 402 of Regulation S-B.... Executive
Compensation
11(l)Information Required by Item 403 of Regulation S-B.... Principal
Stockholders
11(m)Information Required by Item 404 of Regulation S-B.... Certain
Transactions
12. Information Required by Item 510 of Regulation S-B.... Indemnification of
Officers and
Directors
</TABLE>
<PAGE> 1
PART I
NARRATIVE INFORMATION REQUIRED IN PROSPECTUS
ITEM 1. INSIDE FRONT AND OUTSIDE BACK COVER PAGES OF
PROSPECTUS
See front and back cover pages of this Prospectus.
ITEM 2. SIGNIFICANT PARTIES
(a) The Company's directors:
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The directors of the Company are as follows:
Name and Beneficially
Address Age Owned Shares
_______________________ ___ ______________
<S> <C> <C>
Ed McMillan 52 3.62%
11578 Trail Ridge Place
Zionville, IN
Thomas F. Taft, Sr. 49 18.75%
P.O. Box 1766
Greenville, NC
Mark Margason 43 13.64%
105 E. First Street
Hinsdale, IL
Greg Ransdell 43 4.56%
215 Bluegrass Road,
Suite C
Franklin, KY
John T. Zick 55 5.02%
708 E. Woodland Avenue
Hinsdale, IL
</TABLE>
(b) The Company's officers:
The officers of the Company are as follows:
Name Title Address
__________________ _________________________ ___________________________
Greg Ransdell Chief Executive Officer 215 Bluegrass Road, Suite C
Franklin, KY
Mark A. Margason Secretary; 105 E. First St.
Treasurer Hinsdale, IL
(c) The Company's general partners: None.
(d) Record owners of 5 percent or more of any class of the
Company's equity securities (common stock): See response to
Item 2(e) below.
<PAGE> 3
(e) Beneficial owners of 5 percent or more of any class of the
Company's equity securities (common stock):
Shares of AEI
Common Stock to be
Beneficially Owned Percent
Name and as of the of
Address Filing Date Class
______________________ ________________________ _________
Ed McMillan 336,649 3.62%
11578 Trail Ridge Place
Zionville, IN
Thomas F. Taft, Sr. 1,741,623 18.75%
P.O. Box 1766
Greenville, NC
Mark Margason 1,267,338 13.64%
105 E. First Street
Hinsdale, IL
Greg Ransdell 423,729 4.56%
215 Bluegrass Road
Suite C, Franklin, KY
John T. Zick 466,500 5.02%
708 E. Woodland Avenue
Hinsdale, IL
All Officers and
Directors as a Group 4,262,420 45.88%
Management of AEI has advised that they may acquire additional shares of AEI
Common Stock from time to time in the open market at prices prevailing at the
time of such purchases.
See also the information set forth under the heading "Principal
Shareholders" appearing elsewhere in this Prospectus.
(f) Promoters of the Company: See response to Item 2(a) above.
(g) Affiliates of the Company: See Items 2(a), (b), (d) and (f)
above.
(h) Counsel to the Company with respect to the proposed offering:
Nadeau & Simmons, P.C.
1250 Turks Head Building
Providence, RI 02903
(i) Each underwriter with respect to the proposed offering:
Not applicable.
(j) The underwriter's directors:
Not applicable.
(k) The underwriter's officers:
Not applicable.
(l) The underwriter's general partners:
Not applicable.
(m) Counsel to the underwriter:
Not applicable.
<PAGE> 4
ITEM 3. RELATIONSHIP WITH ISSUER OF EXPERTS NAMED IN
REGISTRATION STATEMENT
No expert named in this prospectus was paid on a contingent basis or had a
material interest in the Company or any of its subsidiaries or was connected
with the Company or any of its subsidiaries as a promoter, underwriter,
voting trustee, director, officer or employee.
ITEM 4. LEGAL PROCEEDINGS
Neither the Registrant nor any of its affiliates are a party, nor is any of
their property subject, to material pending legal proceedings or material
proceedings known to be contemplated by governmental authorities.
ITEM 5. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM 6. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The Company's Articles of Incorporation provide that a director of the Company
shall not be personally liable to the Company or any of its shareholders for
monetary damages for breach of fiduciary duty as a director, except liability
for the following:
(a) any breach of the director's duty of loyalty to the Company or its
shareholders;
(b) acts or omissions not in good faith or which involve gross negligence
intentional misconduct or a knowing violation of law;
(c) any unlawful distribution as set forth in the General Corporation Law
of the State of Colorado; or
(d) any transaction from which the director derived an improper personal
benefit.
These provisions may have the effect in certain circumstances of reducing the
likelihood of derivative litigation against directors. While these provisions
may eliminate the right to recover monetary damages from directors in various
circumstances, rights to seek injunctive or other non-monetary relief are not
eliminated.
The Company's By-laws provide for indemnification of the Company's directors to
the fullest extent permitted by law. The Company's Bylaws also permit the
Company, through action of the Board of Directors, to indemnify the Company's
officers or employees to the fullest extent permitted by law.
<PAGE> 5
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "1933 Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission (the "Commission") such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expensesincurred or paid by a director, officer or controlling
person of the Company in the successfuldefense of any action, suit or
proceeding) is asserted by such director, officer or controllingperson in
connection with the securities being registered, the Company 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 1933 Act
and will be governed by the final adjudication of such issue.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and should
be read in conjunction with, the more detailed information and the financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus.
THE COMPANY
This Summary of Business describes the overall operational plan for the Company
with respect to its development and operation of power plant systems.
Company Description
AEI ENVIRONMENTAL INC. (the "Company") provides proprietary computerized
operating systems and product lines in swine, dairy, and poultry livestock
regarding waste treatment systems, cooling and odor control systems, and data
management control systems to economically manage the livestock environment.
The Company's principal assets consist of: proprietary livestock waste
treatment technology; proprietary cooling systems that economically reduce
and manage livestock barn temperatures for greater production efficiencies;
proprietary natural odor control technology that neutralizes odors; and
proprietary farm management software and hardware technologies that control
all of the company's product lines providing real time data for maximum
environmental control.
The Company was incorporated in April of 1998 and acquired its waste
treatment proprietary technologies in August of that year. During the company's
first fiscal year of operations ending June 30, 1999, the company spent
considerable Research and Development monies finishing the prototypes for its
proprietary waste treatment technologies, cooling system technologies and odor
control technologies. A new biological waste treatment system has been
developed in partnership with Parsons Engineering in Atlanta, Georgia. The
cooling technologies have been installed and are currently in operation at a
Choctaw Maid poultry facility in Mississippi and a Hanor facility in Kentucky.
The odor control technologies are currently in operation at the following
locations: a municipal waste treatment facility in Wisconsin, a swine facility
at a Hanor in Kentucky, and a poultry facility in Mississippi.
Prior to recently initiating commercial operations the Company was engaged in
organizational start-up and development stage activities, including operational
staffing, completion of technology development, establishment of strategic
"teaming" relationships and the initial introduction of its products and
services to its intended markets. Prior to the incorporation and acquisition
of proprietary technologies by the Company, many years of research and
development had been devoted to specific operating systems by individuals and
corporations who have now brought their independent work into the Company. The
synergies of these different operating systems and applications will create a
dynamic force in the livestock industry.
The Company's corporate headquarters are located at 215 Bluegrass Road, Suite C,
Franklin, KY 42135, (877) 586-8688. The Company's transfer agent is American
Securities Transfer, Inc., 1825 Lawrence Street, Ste 444 Denver, CO 80020,
(303) 298-5370.
<PAGE> 6
THE OFFERING
The offering to which this Prospectus relates (the "Offering") consists of
2,400,000 shares of Common Stock.
RISK FACTORS
The securities offered hereby are speculative, involve a high degree of risk and
immediate and substantial dilution, and should not be purchased by investors who
cannot afford the loss of their entire investment. See "Risk Factors."
Forward-Looking Information
THIS FORM SB-1 AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY
AEI ENVIRONMENTAL, INC. OR ITS REPRESENTATIVES CONTAIN STATEMENTS
WHICH MAY CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
THE SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FIFTEEN
U.S.C.A. SECTIONS 77Z-2 AND 78U-5 (SUPP. 1996). THOSE STATEMENTS INCLUDE
STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF
AEI ENVIRONMENTAL, INC. AND MEMBERS OF ITS MANAGEMENT TEAM AS WELL AS THE
ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED. PROSPECTIVE INVESTORS ARE
CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF
FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING
STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING STATEMENTS
ARE SET FORTH IN THE SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING
STATEMENTS INCLUDED AS EXHIBIT 99.1 TO THIS FORM SB-1 AND ARE HEREBY
INCORPORATED HEREIN BY REFERENCE. THE COMPANY UNDERTAKES NO OBLIGATION TO
UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO REFLECT CHANGED ASSUMPTIONS,
THE OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES TO FUTURE OPERATING RESULTS
OVER TIME.
<PAGE> 7
YEAR 2000 PROBLEMS MAY HAVE AN ADVERSE EFFECT ON OPERATIONS
The Company utilizes a significant number of computer software programs and
operating systems across its entire organization. To the extent the Company's
software applications contain source codes that were unable to appropriately
interpret the calendar year 2000, some level of modification, or even possibly
replacement of such applications was necessary.
The Company intends to continue its efforts to seek reassurances regarding the
Year 2000 compliance of vendors, joint venture partners and content partners.
The costs incurred by the Company through December 1999 to address Year 2000
compliance were approximately $10,000.
The Company has not specifically tested software, including licensed software,
shareware, and freeware, obtained from third parties, but it has sought
assurances from its vendors that licensed software is Year 2000 Compliant.
The Company funded its Year 2000 plan from operating cash flows. We estimate
that costs incurred through December 31, 1999 in connection with Year 2000
compliance projects have not been material.
COMPETITION
At this time, the Company is in a highly competitive market with brand name
operators. It's success, therefore, must rely solely on the effective and
efficient promotion, operational support and sales of its services. The company
is engaged in a business with a high public profile and is directly competitive
with manufacturers and distributors of power plant systems.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's business and prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development. Such risks for the Company include, but are not limited
to, an evolving and unpredictable business model, management of growth, the
Company's ability to anticipate and adapt to a developing market and unforeseen
changes and developments in the Company's strategic partners' activities and
direction. To address these risks, the Company must, among other things,
implement and successfully execute its business strategy, continue to develop
and upgrade its technology, provide superior client service, respond to
competitive developments and attract, retain and motivate qualified personnel
and meet the expectations of its strategic partners. There can be no assurance
that the Company will be successful in addressing such risks, and the failure to
do so could have a material adverse effect on the Company's business, prospects,
financial condition and results of operations.
<PAGE> 8
LIMITED OPERATING HISTORY
As a result of the Company's limited operating history and the emerging nature
of the markets in which it competes, the Company may not be able to accurately
predict its revenues. The Company expects to experience significant fluctuations
in its future quarterly operating results due to a variety of factors, many of
which are outside the Company's control. Factors that may adversely affect the
Company's quarterly operating results include (i) the Company's ability to
retain and attract clients, (ii) the level of competition in the power plant
industry, (iii) the Company's ability to upgrade and develop its systems and
infrastructure and attract new personnel in a timely and effective manner,
(iv) the amount and timing of operating costs and capital expenditures relating
to expansion of the Company's business, operations and infrastructure, (v)
governmental regulation, and (vi) general economic conditions and economic
conditions specific to the power plant industry.
PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION
The Company may apply for United States patents related to its business. The
Company also has applied for trademark protection in the United States for the
name AEI ENVIRONMENTAL, INC. There can be no assurance as to the breadth
or degree of protection which existing or future patents or trademarks, if any,
may afford the Company, that any patent or trademark applications will result
in issued patents or trademarks, that the Company's patents or trademarks will
be upheld, if challenged, or that competitors will not develop similar or
superior methods or products outside the protection of any patent issued to the
Company. Although the Company believes that its potential patent and trademarks
and the Company's products do not and will not infringe patents or trademarks or
violate the proprietary rights of others, it is possible that the Company's
existing patent or trademark rights may not be valid or that infringement of
existing or future patents, trademarks or proprietary rights may occur. Failure
to do any of the foregoing could have a material adverse effect upon the
Company. In addition,there can be no assurance that the Company will have the
financial or other resources necessaryto enforce or defend a patent or trademark
infringement or proprietary rights violation action which may be brought against
it. Moreover, if the Company's products infringe patents, trademarks or
proprietary rights of others, the Company could, under certain circumstances,
become liable for damages, which also could have a material adverse effect on
the Company.
EXPANSION
The Company's proposed expansion will also require the implementation of
enhanced operational and financial systems and will require additional
management, operational and financial resources. Failure to implement these
systems and add these resources could have a material adverse effect on the
Company's results of operations and financial condition. There can be no
assurance that the Company will be able to manage its expanding operations
effectively or that it will be able to maintain or accelerate its growth. In
addition, there can be no assurance of the viability of the Company's
products in new geographic regions or particular local markets.
<PAGE> 9
GOVERNMENT REGULATION
The Company must comply with state laws and a wide range of other state and
local rules and regulations applicable to their businesses. See "Company
Business--Government Regulation." Continued compliance with this broad federal,
state and local regulatory network is essential and costly, and the failure
to comply could have a material adverse effect on the Company. Violations of
laws and/or state laws and regulations governing substantive aspects of doing
business in a particular state could subject the Company and its affiliates
to rescission offers, monetary damages, penalties, imprisonment and/or
injunctive proceedings.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends in large on part of the continued service
of its key marketing and management personnel and on its ability to continue
to attract an retain qualified employees. The competition for such personnel is
intense, and the loss of key employees could have a material effect on the
Company's financial condition and results of operations.
CONTROL BY PRINCIPAL SHAREHOLDERS, OFFICERS AND DIRECTORS
The Company's principal shareholders, officers and directors will beneficially
own approximately forty-six percent (46%) of the Company's Common Stock. As
a result, such persons may have the ability to control the Company and direct
its affairs and business. Such concentration of ownership may also have the
effect of delaying, deferring or preventing change in control of the Company.
See "Principal Stockholders."
ISSUANCE OF PREFERRED STOCK MAY ADVERSELY AFFECT HOLDERS OF
COMMON STOCK OR DELAY OR PREVENT CORPORATE TAKE-OVER
The Company's Articles of Incorporation provide that preferred stock may be
issued by the Company from time to time in one or more series. The Board of
Directors of the Company is authorized to determine the rights, preferences,
privileges and restrictions granted to and imposed upon any wholly unissued
series of preferred stock and the designation of any such shares, without any
vote or action by the Company's shareholders. The Board of Directors may
authorize and issue Preferred stock with voting power or other rights that could
adversely affect the voting power or other rights of the holders of Common
Stock. In addition, the issuance of preferred stock could have the effect of
delaying, deferring or preventing a change in control of the Company, because
the terms of preferred stock that might be issued could potentially prohibit the
Company's consummation of any merger, reorganization, sale of substantially all
of its assets, liquidation or other extraordinary corporate transaction without
the approval of the holders of the outstanding shares of the preferred stock.
<PAGE> 10
TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
There has been no market for the Common Stock, and there can be no
assurance that an active trading market will develop or be sustained. At a
future date, provided a public market for the stock does develop, the market
price of the shares of Common Stock is likely to be highly volatile and may be
significantly affected by factors such as fluctuations in the Company's
operating results, announcements of technological innovations or new products
and/or services by the Company or its competitors, governmental regulatory
action, developments with respect to patents or proprietary rights and general
market conditions. In addition, the stock market has from time-to-time
experienced significant price and volume fluctuations that are unrelated to
the operating performance of particular companies.
POSSIBLE NEED FOR ADDITIONAL FINANCING
The ultimate success of the Company may depend upon its ability to raise
additional capital. The Company has not investigated the availability, source,
or terms that might govern the acquisition of additional capital and will not
do so until it determines a need for additional financing. If additional
capital is needed, there is no assurance that funds will be available from any
source or, if available, that they can be obtained on terms acceptable to the
Company. If not available, the Company's operations will be limited to those
that can be financed with its modest capital.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Articles of Incorporation provide for the indemnification of its
directors, officers, employees, and agents, under certain circumstances, against
attorney's fees and other expenses incurred by them in any litigation to which
they become a party arising from their association with or activities on behalf
of the Company. The Company will also bear the expenses of such litigation
for any of its directors, officers, employees, or agents, upon such person's
promise to repay the Company therefor if it is ultimately determined that any
such person shall not have been entitled to indemnification. This
indemnification policy could result in substantial expenditures by the Company
which it will be unable to recoup.
DEPENDENCE UPON OUTSIDE ADVISORS
To supplement the business experience of its officers and directors, the Company
may be required to employ consultants or advisors. It is anticipated that such
persons may be engaged on an "as needed" basis without a continuing fiduciary
or other obligation to the Company.
RULE 144 SALES
Certain of the outstanding shares of Common Stock held by present stockholders
are "restricted securities" within the meaning of Rule 144 under the
Securities Act of 1933, as amended.
<PAGE> 11
As restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act and as required under applicable
state securities laws. Rule 144 provides in essence that a person who has held
restricted securities for a prescribed period may, under certain conditions,
sell every three months, in brokerage transactions, a number of shares that does
not exceed the greater of 1.0% of a company's outstanding common stock or the
average weekly trading volume during the four calendar weeks prior to the sale.
As a result of revisions to Rule 144 which became effective on or about
April 29, 1997, there will be no limit on the amount of restricted securities
that may be sold by a nonaffiliate after the restricted securities have been
held by the owner for a period of two years. A sale under Rule 144 or under
any other exemption from the Act, if available, or pursuant to subsequent
registrations of shares of Common Stock of present stockholders, may have a
depressive effect upon the price of the Common Stock in any market that may
develop.
FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Amounts affected by these estimates include, but are not limited to,
the estimated useful lives, related amortization expense and carrying values of
the Company's intangible assets and capitalized software development costs.
Changes in the status of certain matters or facts or circumstances underlying
these estimates could result in material changes to these estimates, and actual
results could differ from these estimates.
DISCLOSURE RELATING TO LOW-PRICED STOCKS
As long as the trading price of the Common Stock is less than US$5.00 per share,
trading in the Common Stock in the US secondary market is subject to certain
rules promulgated under the Securities Exchange Act of 1934, which rules require
additional disclosure by broker-dealers in connection with any trades involving
a stock defined as a "penny stock" (generally, any non-NASDAQ equity security
that has a market price of less than US$5.00 per share, subject to certain
exceptions). Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith, and impose various sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors. For these types of transactions, the broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transactions prior to sale. The
additional burdens imposed upon broker-dealers by such requirements may
discourage broker-dealers from effecting transactions in the Common Stock, which
could severely limit the market liquidity of the Common Stock and the ability
of stockholders to sell the Common Stock in the US secondary market.
<PAGE> 12
USE OF PROCEEDS
The Company will not realize any of the proceeds of their Offering.
CAPITALIZATION
The following is the capitalization of the Company as of April 18, 2000.
<TABLE>
<CAPTION>
AMOUNT TO BE
AMOUNT AMOUNT OUTSTAND. UPON
TITLE OF CLASS AUTHORIZ. OUTSTAND. ISSUANCE OF ALL
SHARES
- ----------------------------- --------- --------- ---------------
<S> <C> <C> <C>
Common Stock no par value 40,000,000 9,289,535 9,289,535
Preferred Stock 10,000,000 0 0
</TABLE>
DILUTION
The Company's shareholders will not realize any dilution from this Offering.
SELLING SHAREHOLDERS
THE OFFERING
An aggregate of up to 2,400,000 Shares of the Company's Common Stock, no par
value per share, may be offered by the Selling Shareholders who had
previously been issued "restricted" shares by the Company and who will be
entitled to sell up to 2,400,000 Shares of the Company's Common Stock offered
herein by this Prospectus.
The following table sets forth certain information with respect to the Selling
Shareholders, persons or entities for whom the Company is registering for
resale to the public, either the Shares of the Company's Common Stock which
such persons or entities own.
The following table reflects such person's or entities' ownership as of
April 18, 2000.
<PAGE> 13
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL MAX.
NAME OF OWNER. OF PERCENT NO. TO
HOLDERS SHARES OF CLASS BE SOLD
- --------------- ----------- --------------- -------
<S> <C> <C> <C>
Lawrence & Lori Abrams
1206 Sandhurst Drive
Buffalo Grove IL 60069 25,000
Hovey E. Aiken, III
400 South Front Street
New Bern NC 28563 37,276
Auer Revocable Trust
6214 E. Horseshoe Road
Paradise Valley AZ 85253 50,000
AWN LLC
Attn Steve Niemeyer
1650 Military Cut-Off Rd #200
Wilmington NC 28403 5,000
Jim Baffa
611 Peterson Avenue
Glendale Heights IL 60139 1,628
Anthony L. Basso
13 Augusta Dr.
Galena IL 61036 12,500
Jim Beznik
P.O. Box 11766
Chicago IL 60611 60,000
Edward Blevin
Blevin Management Group
P.O. Box 7391
Wilmington NC 28406 2,500
Leland C. Bourn Trust UAD
Leland C. Bourn TTE
850 Joliet Road
LaGrange IL 60525 1,000
Brennan & Dyer L.L.C.
735 Broad Street Suite 800
Chattanooga TN 37402 100,000
Herbert Brown
1401 Thornwood
Downers Grove IL 60516 20,000
Campbell Limited Partnership
121 S. Elm Street
Hinsdale IL 60521 40,000
Campbell Limited Partnership
121 S. Elm Street
Hinsdale IL 60521 25,000
Frankie Cash-Langley
CF Sarah Ashleigh Langley
106 Scales Pl. Apt B8
Greenville NC 27834 500
Anton Cech Trustee
Anton Cech Revocable Trust,
U/A DTD 06/13/96
6421 Pershing Road # 404
Stickney IL 60402 3,125
Edwin Clark
3602 Highway 264 East
Greenville NC 27834 100,000
Thomas P. & Kathleen M. Coyle
488 Blodgett Court
Naperville IL 60568 12,500
Curtis Dean
333 Fayetteville Street Mall
Raleigh NC 27601 5,000
Carlo DiCarlo
6 Lochinvar Lane
Oak Brook IL 60523 12,500
John & Hazel Early
Security Research Assoc.
80 East Sir Francis Drake Blvd.
Wood Island 3F
Lakespur CA 94939 25,000
David F. Edstrom
633 South Washington
Hinsdale IL 60521 17,500
Anderson Ekern
1337 W. Melrose
Chicago IL 60657 25,000
Mark Fitchett
11061 Century Lane
Overland Park KS 66210 20,000
Russell Fleming
Cape Point Dev. Co.
304-C SE Greenville Blvd.
Greenville NC 27858 7,500
William Garner
4014 Handwick Ct.
Greenville NC 27836 25,000
Kenneth E. Haigler
1524 S. 16th Street
Wilmington NC 28401 12,500
Lauren Haigler
c/o Kenneth Haigler
1524 South 16th Street
Wilmington, NC 28406 12,500
Patrick Hillegass
141 W. Jackson Blvd
Chicago IL 60604 50,000
David J. & Diane Hogan
17270 Bryant Rd.
Lake Oswego OR 97035 12,500
Wendell Holmes
214 Grape St.
Denver CO 80220 3,125
Thirl A. & Lorrell C. Hornbrook
3900 Neyrey Dr.
Metairie LA 70002-4426 10,000
Edmund P. Karam
P.O. Box 63
Guilford CT 6437 25,000
Kitsap Trust
1553 Pennsylvania
Bremerton WA 98337 47,650
Kottke Associates, Inc.
141 W. Jackson, Suite 1636
Chicago IL 60604 50,000
John H. Laesch
340 E. Westleigh Road
Lake Forest IL 60045 25,000
Dr. John Leonard
2325 Stantonburg Rd
Greenville NC 27834 25,000
Margason Family Limited Partnership
c/o Joseph Zvonkob
1360 Montezuma Road
Colorado Springs CO 80920 100,000
Peter McDonnell
30 S. Wacker, Ste. 2206
Chicago IL 60606 16,700
Edward & Judith McMillan
11578 Trail Ridge Place
Zionville IN 46007 28,249
MPI Venture Management
105 E. First St.
Hinsdale IL 60521 405,397
Dean Painter
3001 Spring Forest Road
Raleigh NC 27616 62,500
Pequet Family Limited Partnership
105 East First Street
Hinsdale IL 60521 100,000
Fred & Kathy Pickard
200 East 9th Ct.
Hinsdale Il 60521 22,500
April S. Pozulp Declaration of Trust
717 South Stough Street
Hinsdale IL 60521 12,500
Greg Ransdell
C/O AEI Environmental, Inc.
105 East First Street, Suite 101
Hinsdale, IL 60521 100,000
Donald G. Schmidt
815 S. Bruner
Hinsdale, IL 60521 12,500
Loretta C. Sengstock
24 Arthur Ave.
Clarendon Hills IL 60514 6,250
Margie Stafford
2217 Stantonsburg Road
Greenville NC 27835 5,000
Michael Steele
221 Commerce Street
Greenville NC 27836 5,000
Kenneth A. Stein
1943 W. Addison Street
Chicago IL 60613 25,000
Rico A. Stroemer, Sr.
Alpha Consult, Inc.
256 Surfsong Road
Kiawah Island SC 29455 12,500
Dr. Richard Taft
101 Bethesda Drive
Greenville NC 27834 10,000
Thomas F. Taft Sr.
P.O. Box 1766
Greenville NC 27835 100,000
Mark T. Thatcher
125 Gideon Lawton Lane
Portsmouth, RI 02871 140,000
Randall Veselik
8 South 141 Aintree Drive
Naperville IL 60540 30,000
Walter Williams
207 Crown Point
Greenville NC 27858 20,000
S. Dillon Wooten Jr.
P.O. Box 858
Goldsboro NC 27533 20,000
Zenith Holdings
P.O. Box 216
Kohler, WI 53044 20,000
John T. Zick
708 E. Woodland Ave.
Hinsdale IL 60521 46,500
John T. Zick
708 E. Woodland Ave.
Hinsdale IL 60521 70,000
Elisabeth Alofsin
C/O Peter J. Alofsin
275 Promenade Street,
Ste. 300
Providence RI 02908 500
Peter J. Alofsin
275 Promenade Street,
Ste. 300
Providence RI 02908 500
Timothy Alsheimer
Four Winds Bellevue Ave
Newport RI 02840 100
Vince Arcello
651 W. Main Rd.
Middletown RI 02842 100
Terry Badger
85 Summer Street
Oakland ME 04963 500
Mark Beall
12790 Atlantic Avenue
Lakewood, CO 80228 500
David Donner
51 Marland Road
Colorado Springs, CO 80906 1,000
Meredith Donner
51 Marland Road
Colorado Springs, CO 80906 1,000
Robert J. Beuchler
The Principal Group
102 S. Tejon Street,
Ste. 300
Colorado Springs CO
80903 500
<PAGE> 14
David J. Binkowski
Bink, Inc.
3808 South Sherman Street
Englewood CO 80110 500
Thomas H. Blaney II
201 Line Road
Bellemead NJ 08502 100
Robert Borday
4 Wolcott Avenue
Jamestown RI 02835 100
Thomas Darrell Carico
C/O Ricky D. Wolfe
322 Savannah Ave.
Statesboro GA 30458 2,000
John H. Cox
The Provident
5613 DTC Parkway, Ste. 150
Englewood CO 80111 500
<PAGE> 16
Michael L. Ebert
Ebert & Rehorn
4455 E. Camelback, Ste. E-180
Phoenix AZ 85018 500
Charles Ellsworth
1158 Eudora Street
Denver CO 80209 500
Jack W. Eversull
The Eversull Group
5728 LBJ Freeway,
Ste. 200
Dallas TX 75240 100
Arthur Frank
30 Mongenais St.
Providence RI 02909 100
Amy Hand
2965 S. Williams
Denver CO 80210 500
David Hand
2965 S. Williams
Denver CO 80210 500
Craig Hart
7014 E. Camelback Rd.
No. 580
Scottsdale AZ 85251 100
Margaret Heath
357 Harris Hill Rd.
Poland ME 04274 500
<PAGE> 17
Don Hejmanowski
2013 Torwood Circle
Plainfield IL 60544 100
Constance Holland
P.O. Box 250
Mystic, CT 3,000
Chuck Holland
245 Taragona Way
Daytona Beach, FL 3,000
Roger Huglion
255 W. 84th St. Apt. 3B
New York NY 10024 100
James W. Johnson
1225 E. Commodore Place
Tempe AZ 85283 500
Robert B. Johnson
California Federal
1225 E. Commodore Place
Tempe AZ 85283 500
Ning Luh
12925 Creamery Hill Drive
Germantown MD 20874 100
Pasquale Maiorino
c/o Platz Associates
Two Great Falls Plaza
Auburn ME 04210 2,000
<PAGE> 18
Steven Merrell
C/O Lewis F. Merrell
3313 Riley
Plano TX 75025 500
Amanda Merrell
C/O Lewis F. Merrell
3313 Riley
Plano TX 75025 500
Matthew Merrell
C/O Lewis F. Merrell
3313 Riley
Plano TX 75025 500
Lewis F. Merrell
3313 Riley
Plano TX 75025 4,400
Joyce Merrell
3313 Riley
Plano TX 75025 4,400
Lane G. Neville
3300 N. Central, Ste. 750
Phoenix AZ 85012 500
<PAGE> 19
Hunter Pell
C/O Lewis F. Merrell
3313 Riley
Plano TX 75025 500
Jessica Pell
C/O Lewis F. Merrell
3313 Riley
Plano TX 75025 500
Peter Pescosolido
374 Commonwealth Rd.
Wayland MA 01778 1,000
John Petruney
66 Haskell St.
Beverly Farms MA 01915 100
Michael G. Pfalmer
Rampart Distribution
Colorado Springs CO 80909 500
Thomas Platz
c/o Platz Associates
Two Great Falls Plaza
Auburn ME 04210 2,000
Dyer Powell
R.J. Steichen Securities
10 Division Arcade
Buffalo MN 55313 500
Paul Raducha
Exercycle Corporation
667 Providence Street
Woonsocket RI 02895 100
<PAGE> 20
Richard Reavis
651 W. Main Rd.
Middletown RI 02842 100
Jeff Revious
761 Garfield
Denver CO 80206 500
Romeo Rubitaille
53 Slade St.
Pawtucket RI 02688 100
Jack Santos
466 Great Rd.
Lincoln RI 02865 100
James R. Simmons
Nadeau & Simmons
1250 Turks Head Building
Providence RI 02903 1,000
Amy Simmons
C/O Jim Simmons
1250 Turks Head Building
Providence RI 02903 1,000
Andy Small
39 School St.
Newport RI 02840 100
David Smith
3 Restmere Terrace
Middletown RI 02842 100
Glen Smith
1 Sunset Hill RD.
Middletown RI 02842 100
<PAGE> 21
Sean Sullivan
7 Colonial Dr.
Middletown RI 02840 100
Stephanie Thatcher
C/O Thomas S. Thatcher
2321 Juniper Lane
Amarillo TX 79109 500
Steven B. Thatcher
85 Newbury Street
Boston MA 02116 500
Michael T. Thatcher
C/O John J. Wallace, Jr.
17 W. Cheyenne Mtn. Blvd.
Colorado Springs CO 80906 500
Seth T. Thatcher
C/O Thomas S. Thatcher
2321 Juniper Lane
Amarillo TX 79109 500
JoAnn Thatcher
2321 Juniper Lane
Amarillo TX 79109 1,000
Thomas S. Thatcher
2321 Juniper Lane
Amarillo TX 79109 1,000
Mills T. Thatcher
125 Gideon Lawton Lane
Portsmouth RI 02871 5,000
Grayson S. Thatcher
125 Gideon Lawton Lane
Portsmouth RI 02871 5,350
Jennifer M. Thatcher
125 Gideon Lawton Lane
Portsmouth RI 02871 6,000
<PAGE> 22
Meredith Wallace
17 W. Cheyenne Mtn. Blvd.
Colorado Springs CO 80906 4,400
John J. Wallace, Jr.
17 W. Cheyenne Mtn. Blvd.
Colorado Springs CO 80906 4,400
Jay Weibel
29 Bowens Wharf
Newport RI 02840 600
Johanna Werner
2123 Stanford Avenue
St. Paul MN 55105 3,000
Patrick J. Werner
903 St. Clair
St. Paul MN 53105 3,000
Anthony M. Werner
3701 E. Cactus Creek Court
Highlands Ranch CO 80126 3,000
Kevin Werner
3175 Limerick Lane
Sheboygan WI 53080 5,000
Mary Belle Werner
2620 N. 40th Street
Sheboygan, WI 53083 6,300
Christopher Anthony Werner
924 South Monroe Street
Hinsdale IL 60522 10,500
<PAGE> 23
Mary Elizabeth Werner
924 South Monroe Street
Hinsdale IL 60522 10,850
Paula Werner-Kletzein
2026 N. 6th Street
Sheboygan WI 53083 3,000
Gretchen Werner-Schuttey
9704 Old Barn Rd.
Meqoun WI 53072 3,000
Adeline Wolfe
322 Savannah Avenue
Statesboro GA 30458 1,000
Grant Wolfe
322 Savannah Avenue
Statesboro GA 30458 1,000
Ricky D. Wolfe
322 Savannah Avenue
Statesboro GA 30458 2,000
Camille Wolfe
322 Savannah Avenue
Statesboro GA 30458 2,000
Totals 2,400,000
</TABLE>
<PAGE> 24
DIVIDEND POLICY
The Company expects to retain its earnings to finance further growth and, when
appropriate, retire existing debt. As a result, the Directors of the Company
expect that, for the foreseeable future, the Company will not declare or pay
any dividends on any of its shares.
BUSINESS
GENERAL
AEI ENVIRONMENTAL INC. (the "Company") provides proprietary computerized
operating systems and product lines in swine, dairy, and poultry livestock
regarding waste treatment systems, cooling and odor control systems,
and data management control systems to economically manage the livestock
environment. The Company's principal assets consist of: proprietary livestock
waste treatment technology; proprietary cooling systems that economically
reduce and manage livestock barn temperatures for greater production
efficiencies; proprietary natural odor control technology that neutralizes
odors; and proprietary farm management software and hardware technologies
that control all of the company's product lines providing real time data for
maximum environmental control.
The Company was incorporated in April of 1998 and acquired its waste treatment
proprietary technologies in August of that year. During the company's first
fiscal year of operations ending June 30, 1999, the company spent considerable
Research and Development monies finishing the prototypes for its proprietary
waste treatment technologies, cooling system technologies and odor control
technologies. A new biological waste treatment system has been developed
in partnership with Parsons Engineering in Atlanta, Georgia. The cooling
technologies have been installed and are currently in operation at a Choctaw
Maid poultry facility in Mississippi and a Hanor facility in Kentucky. The
odor control technologies are currently in operation at the following
locations: a municipal waste treatment facility in Wisconsin, a swine facility
at a Hanor in Kentucky, and a poultry facility in Mississippi.
Prior to recently initiating commercial operations the Company was engaged in
organizational start-up and development stage activities, including operational
staffing, completion of technology development, establishment of strategic
"teaming" relationships and the initial introduction of its products and
services to its intended markets. Prior to the incorporation and acquisition
of proprietary technologies by the Company, many years of research and
development had been devoted to specific operating systems by individuals and
corporations who have now brought their independent work into the Company.
The synergies of these different operating systems and applications will create
a dynamic force in the livestock industry.
The principal executive offices of the Company are currently located at AEI
ENVIRONMENTAL INC., 215 Bluegrass Road, Suite C, Franklin Kentucky, with
regional offices in Goldsboro, North Carolina.
<PAGE>
Selected Proforma Financial Data
The following table sets forth the Company's projected income statement for
the first four fiscal years following the closing of the Offering. The company
has recently changed its fiscal year end to June 30th to more accurately reflect
a startup year of Research and Development for its operations during the fiscal
year ending June 30th, 1999. During the fiscal year the company The financial
forecasts presented herein have been prepared on the basis of an June 30 to
June 30 fiscal year to reflect the Company's predicted operating results for
the twelve month fiscal period following the completion of the Offering.
12 Month Fiscal Period Following Funding
ProForma Income Statement Data
(in 000s)
Calendar Year ending December 31.
Yr. 1 Yr. 2 Yr. 3 Yr. 4
(1/0-12/00) (1/01-12/01) 1/02-12/02) (1/03-12/03)
Revenue $10,054 $22,942 $37,738 $52,939
Cost of Sales $ 5,831 $13,306 $21,888 $30,705
Gross Profit $ 4,223 $ 9,636 $15,850 $22,234
Gross Profit Margin 42% 42% 42% 42%
Sell, Gen. & Adm. $ 1,830 $ 2,537 $ 4,147 $ 5,823
EBITDA $ 2,393 $ 7,099 $11,703 $16,411
EBITDA Margin 24% 30% 30% 30%
Net Income $ 1,675 $ 4,969 $ 8,192 $11,488
Proforma Balance Sheet Data (as of 12/31)
Current Assets $ 2,904 $ 8,736 $17,028 $26,885
Total Assets $ 3,119 $ 9,971 $20,516 $32,391
Current Liabilities $ 188 $ 2,071 $ 4,424 $ 4,811
Long Term Debt $ 0 $ 0 $ 0 $ 0
Stockholders Equity $ 2,931 $ 7,900 $16,092 $27,580
**Startup Year Note: The startup year ending June 30, 1999, for the companies
product lines will include approximately $2,000,000 of capitalized assets for
Research and development and $700,000 of Administrative and General expenses.
The product lines including waste treatment and cooling systems were
purchased, reengineered, and tested at swine and poultry facilities. The
commercialization of the product lines will be through the sales and marketing
of the product lines during the company's first fiscal year of
commercial operations starting June 30, 1999 ending April 30, 2000.
<PAGE>
THE BUSINESS
General
The Company provides environmental operating systems and proprietary product
lines for livestock and industrial applications. The product lines provide
waste treatment systems, delivery and cooling systems, and data management
control systems to economically manage the livestock environment. Management
believes that the Company has a strong competitive advantage due to its
proprietary software, hardware, and equipment technologies. The primary
industries that may benefit from the Company's current and expanding services
include livestock (swine, chicken, turkey, beef, and diary), manufacturing
facilities, industrial warehouses and municipalities.
The Company's corporate headquarters is located in Franklin, Kentucky. The
Company has also established regional sales offices in Hinsdale, Illinois,
Goldsboro, North Carolina, and Fresno, California.
Company History
The Company's founding shareholders were Greg Ransdell and MPI Venture
Management (MPI). The founding shareholders developed a business plan to
purchase odor control products and waste treatment system technology
designed for the livestock industries along with a computer controlled cooling
technology to form a fully integrated environmental operating system. The
Company believes its operating system is a proprietary state of the art system
that economically manages the livestock environment.
AgTech Industries, Inc. (a predecessor of the Company) was formed in April 1998
to launch the technology. It soon became evident that the name AgTech
Industries did not adequately describe the purpose of the business, which was
to manage the environment and provide a cleaner environment for the contract
livestock grower. Lagoons constitute a liability to the contract grower due
to leakage, spillage, and odor leading to a government moratorium on new
lagoons in North Carolina and approximately 13 other states. Lagoons require
approximately 50% of the contract grower's land and often eliminate or restrict
the future expansion of a contract farm due to the lagoon moratorium.
The Company decided that further development of both the waste treatment
system and the cooling system was required before the technologies could be
successfully introduced into the livestock niche markets which had been
identified (swine, chicken, turkey, beef, and diary), along with manufacturing
facilities, warehouses, and municipalities. The company has recently changed
its name to AEI ENVIRONMENTAL INC. to accurately reflect the nature of its
business. The Company has spent the last twelve months acquiring the
technologies and cooling technologies and developing the operating system.
The operating system run by the Environmental Management System controller
monitors livestock barn temperatures, humidity, ammonia, odor, and waste
treatment systems giving the manager or owner of the farm the ability to
automatically reduce temperature levels, odor levels, and ammonia levels in
the barn through its cooling delivery system. The software and controller is
proprietary to the Company. The cooling technology is a water evaporative
oscillating fan component of the system that AgTech will initially purchase
from outside vendors and manufacture as orders increase. The ability to
control the cooling system, odor control delivery system and its odor control
and waste treatment technologies are proprietary to AgTech and will be patented
as a turnkey Environmental Management System.
From April 1998 to the present, the Company has been engaged in "start-up"
and "development stage" activities. Such activities included research and
development for its lagoon-less waste treatment system, the delivery (cooling)
system, the controller application software, and the integration of these
technologies into commercially viable products and services which address
specific needs within the Company's target niche markets. The Company has
already upgraded and enhanced its original waste treatment technology with a
second generation that was developed with the engineering sciences division of
Parsons Engineering, a world leader in waste treatment engineering,
headquartered in Atlanta, GA.
AEI ENVIRONMENTAL INC. hired Greg Ransdell as President and CEO in July 1998 and
completed its operational staffing and prototype systems development in
September 1998. The Company has entered into exclusive "teaming" arrangements
with major engineering partners, which management believes will assist the
Company in penetrating its designated industry target markets. During this
period, the Company arranged for required to fund (i) the acquisition of the
technology assets, (ii) the Company's development stage activities and
(iii) advancement of the Company's business development prior to the
proposed merger into the public company.
Proposed contracts currently under discussion aggregate $35.0 million over
the next three years. The Company expects a large portion of these contracts
to be finalized over the next twelve months. The Company can give no
assurance that the contracts under discussion will be finalized, although the
Company believes that these are extremely good prospects.
Business Strategy
The Company's mission is to become the largest provider of fully integrated
Environmental Management Systems controlling proprietary product line
technologies for livestock including but not limited to waste treatment, odor
control, and cooling equipment and services in North America. The Company
intends to be the technology leader in developing related proprietary data
analysis service tools for the large integrators who are consolidating the
livestock industries. The Company's mission statement is to be the
leading integrator of technologies for Environmental Management Systems using
its core product lines as the basis for future expansion through the acquisition
of technologies with its public stock. The Company's proprietary controller,
application software and fully integrated environmental and operational
equipment provide the Company with competitive advantages. AgTech sees two
distinct target markets and has devised strategies to penetrate these markets.
Livestock Operations.
The agricultural market in the U.S. is undergoing significant changes. These
changes are due in part to the rapid shift from the family farm to the factory
farm. Livestock farms that raised less than 1,000 animals in the recent past
now raise as many as 100,000 animals on the same amount of land. The
agricultural industry's moves toward factory farms is perceived as both an
economic opportunity to increase revenues and profits, and as a potential
source of significant operational and environmental concern.
Most major livestock operations would prefer to sell more animals as a means
of increasing revenues and profitability by spreading fixed and variable
expenses to a greater number of animals. However, these livestock operations
are often unable to increase animal numbers because of the operational and
environmental problems that have been and are caused by rapid growth in
constantly changing legislative, regulatory and political frameworks.
Additionally, agricultural lenders are hesitant to make new loans and have
increasing reservations about existing livestock loans because of the political
and regulatory hurdles, threats and uncertainties plaguing the factory farm
system.
The agricultural industry has come to the same crossroads that all complex
and large-scale enterprises eventually face. They must acquire critical real
time information about there manufacturing processes and costs to be able to
make timely responses to ensure overall profitability and future growth of
their enterprises. Agricultural management has enormous information gathering
deficiencies in certain aspects of its production processes. Currently, farm
managers are unable to effectively control livestock environments, thus
negatively affecting production and profitability. AgTech has devised
solutions for these conditions so that the Company's product lines can
substantially enhance farm growth and profitability.
Closely related to this is the enormous and growing issue of governmental
regulation of the livestock industry due to perceived and real environmental
issues, including odor control and waste management. In addition, ground and
surface water contamination, and the airborne release of ammonia and nitrogen
have resulted in prohibitions or moratoria on increased livestock production
in thirteen states. Looming as an even greater threat is the recent inspections
and regulations of the U. S. Environmental Protection Agency regulating
waste management and odor control in the livestock industry. Recently the EPA
has begun inspecting the larger integrators who are liable for full reporting
on waste management and odor control. The large integrators do not have the
systems currently installed to adequately monitor and withstand an audit.
The EPA has announced that if integrators are found to be negligent that there
may be criminal prosecution.
AEI's products and services are intended to effectively manage all environmental
systems and provide detailed accurate reporting integrators to be in compliance
with the EPA regulations. AEI's product lines provide the integrator the
ability to: (1) eliminate odors, abolish lagoons and their related problems of
overflow and ground and surface water contamination, (2) reduce and control
ammonia and nitrogen levels, and (3) provide livestock operations with a cost-
effective means of gathering accurate data and managing their systems to
minimize environmental impact.
Management believes that the Company will not only be able to provide livestock
operations with a cost effective means of gathering highly accurate data, but
that the Company's proprietary controller and application software will also
serve as a "seamless bridge" from data collection to government regulation.
AEI data collection technologies are intended to gather highly accurate
environmental and operational data, and process that data into a useable form
which can be easily analyzed by the customer's operational and environmental
management staffs. This data becomes the basis for the livestock operations
management to set the preferences for the Company's operational and
environmental systems.
Management believes that there is currently no other company that has these
unique data processing capabilities for the livestock market. The Company's
products can measure temperature, humidity, and ammonia and automatically
maintain desired levels to create a consistent growing environment. The
Company's products can also identify and illustrate present and potential
"critical" situations that can significantly reduce mortality rates of
livestock and run off of hazardous animal waste treatment problems.
The Company's unique data processing capabilities have been developed to
address fundamental unfilled needs in the agricultural marketplace, which in
turn, will allow livestock operations to increase revenues and profits by
allowing the owners to monitor and have real-time control over their
ideal growing conditions. The Company's integrated data capture and data-
processing capability removes much of the unknown from the operational and
environmental analysis.
Environmental Cooling Systems (ECS). The exceptional cooling ability of the
misting cooling system is a significant breakthrough for high heat industrial
applications, warehouses, nurseries, greenhouses, athletic and other outdoor
events. In addition, the Company's cooling system is an effective tool
to disperse the Company's odor control product.
The misting cooling system can move 6000 cubic feet of air per minute and
can cool up to 70 linear feet in a 90-degree arch of approximately 3800 square
feet of area. Fan units operated in tandem by the controller can reduce the
ambient temperature of an area by up to 20 degrees Fahrenheit while
administering the odor control product. These industrial strength-cooling
units will cool an area at a fraction of the cost of conventional air
conditioning.
The product lines for the Industrial Environmental Conditioning systems will
concentrate on the livestock industry as its primary market for the cooling
system technology. The initial tests of the prototype cooling system with a
major integrator have resulted in preliminary test results that have the
following major benefits: (a) cooling livestock lowers mortality rates,
(b) using our odor control product line with the cooling system lowers
ammonia levels which increases the growth rate of livestock, (c) the cooling
system lowers the barn temperature during the hot months of the year which
allows the livestock to maintain a balanced eating program increasing the
number of production turns.
The Company has entered into discussions with a manufacturer in Iowa to
manufacture the fans for the Company, which the manufacturer could exclusively
distribute in the rental marketplace. The manufacturer has a strong market
niche providing power washers to 5400 rental stores in the United States.
The fans would be an additional product line for the rental industry and the
Company would provide all engineering services required for a collapsible
fan design.
Acquisition Candidates
AEI has signed a Letter of Intent to purchase the assets of Agri-VISIONS, Inc.
as part of its rollup strategy to consolidate industry players that add value
to the product lines and services of AEI. Agri-VISIONS, Inc. was established
in 1993 as a division of Farmer Boy, AG and became independent in 1996 to
become the premiere builder and farm service vendor in the mid-south region
of the US. Their current customer list includes Tyson Poultry, Purdue Poultry,
Seaboard Poultry (now ConAgra), numerous Dairies and Hog facilities within the
region. Agri-VISIONS 1999 gross sales were approximately 4 million dollars
with 2000 expected to gross 4.5 million, both years showing a modest profit.
AEI has agreed to pay $375,000 for the company in the form of AEI stock and
cash.
For AEI, the opportunity to merge the strengths of Agri-VISIONS will enhance
the company's position in the industry and allow us to impact our market
faster. AEI will immediately utilize Agri-VISIONS systems for inventory
control, product costing, and product installation. Their location in Cadiz,
KY, only 70 miles from Franklin, and their ability to mobilize anywhere in the
US, make this transition very smooth. We will also place AEI product
manufacturing within the Agri-VISIONS operation allowing us to build value in
them as a manufacturer while reducing cost for our basic product line
materials. Agri-VISIONS also brings a tremendous buying power as they have
relationships with every major livestock equipment manufacturer in the US.
AEI will see immediate results with their buying power as a distributor for
these companies.
Finally, the management staff that comes with Agri-VISIONS adds greatly to
what is already a strong presence in Agriculture. Their reputation for quality
and the contacts they possess will only strengthen our market presence. All of
the sales staff we have placed are both familiar with and excited to see
AgriVISION become the support for AEI in serving their customers.
Proprietary Technologies
The original animal waste treatment system utilizes a proprietary aerobic
process that allows for solid separation and liquid clarification. Because of
this distinction, the Company believes that its waste treatment system will
eliminate North Carolina's moratorium on expansion for new construction of
swine facilities. There is currently a North Carolina provision of the law
that permits expansion of livestock facilities using an animal waste treatment
system or technology that is sufficiently innovative to avoid the environmental
problems associated with the current lagoon based treatment systems.
For effective environmental systems management the livestock farmer needs
temperature, humidity, ammonia, odor, and waste treatment monitoring. Because
of health and environmental concerns, monitoring of a facility's interior
conditions has become very important to the profitable operation of a
facility. The Company's controllers have the ability to monitor, log, and
transmit sensor information back to any PC or mainframe for data interpretation
and to modify system operation.
The Company uses several fully integrated remote sensing devices to conduct
accurate data compilation. The sensing devices transmit data to a PC, local
or wide area network using hard wire, telephone, cellular telephone, VHF/UHF
radio, satellite, infrared, microwave, or spread spectrum radio. The
sensors are designed for harsh environments and the controls are solid-state
smart controllers that offer reliable monitoring even during power outages.
The odor control product is a proprietary mix of natural food-grade essential
oils that is non-toxic, non-hazardous, non-flammable and biodegradable. The
odor control product line is currently the only atomized product that has been
proven by North Carolina State University to neutralize odors and reduce
ammonia in livestock and similar facilities. The Company believes that there
are no other competitive technologies now available that solve these problems.
Patents
In August 1998, the Company filed a provisional patent application for the
new waste treatment system. In December of 1998, the company filed its
permanent patent application under "Method of Treating Animal Waste". The
Company will also file for a patent on its newly developed cooling system
and its odor control product line. The Company expects to protect its
intellectual property vigorously.
Marketing
Target Markets.
The Company has targeted the livestock industries as its primary target
markets (swine, chicken, turkey, beef, and diary) and industrial applications
as its secondary target markets (manufacturing and warehousing). The Company
has had multiple discussions with Vall, Premium Standard Farms, Triumph,
Hanor, Tyson Foods, and Seaboard, Farmland, Peco, Choctaw Maid, B.C. Rogers,
and Foster Farms, and expects to meet its sales projections for the fiscal
year end.
The company has recently finished the development of its cooling system
installed its first system in the poultry industry. The system has been
installed into Choctaw Maids poultry barns in Mississippi in March 1999. The
system will provide cooling and odor control for a 40' by 450' foot poultry
barn. The system was installed into three of Choctaw 's barns using one of the
barns as a control site for analysis of the two other facilities. The system
has our controller that monitors temperature, humidity, ammonia levels, and
odor control. The future of the system will include testing of pharmacologicals
for disease prevention and inoculation. The company is in discussions with a
large pharmaceutical firm for testing its products in the poultry industry.
The company has completed is development of a new odor control delivery system
for application in the Municipal waste treatment industry. The system was
originally installed by Numan Industries at a Wisconsin municipal waste
treatment plant and has proven to be a viable product for the waste treatment
market. The new odor control delivery system was installed at the Wisconsin
Municipal waste treatment plant in March 1999. Several states have implemented
mandatory odor control programs for the year 2000.
The Company believes that the estimated potential size of the North American
market for the Company's products and services within the livestock industry
is in the range of $1 billion to $1.5 billion. In addition to these primary
markets, sizable secondary markets also exist for the Company's products and
services.
Strategic Teaming Relationships
The Company has entered into strategic partnering relationships with several
major industry participants to significantly broaden its sales reach within
its target market. Several of these key relationships are summarized below.
PARSONS ENGINEERING SCIENCES.
Parsons is ranked in the top five engineering companies in the world. The
company is a leader in engineering procurement and construction management
companies. Parsons has developed the largest environmental engineering company
through its infrastructure division, which handles water, waste, and sewer
engineering sciences. The company also has a large petrochemical division
that builds refineries and petro-chemical plants. Parsons has been retained
to engineer the wastewater treatment facilities and monitor the systems through
construction and steady state production. AEI will continue to improve and
upgrade its waste systems for both swine and dairy through Parsons Engineering.
Agri-Waste.
Agri-Waste is an environmental engineering firm headquartered in Raleigh-Durham
N.C. Agri-Waste has signed an exclusive agreement with AgTech to provide
engineering services for lagoon-less technologies. Agri-Waste has positioned
itself as the industry leader in assisting large corporate clients such as PIC
in evaluating and engineering lagoon technology. Agri-Waste understands that
the future of the industry is lagoon-less technology and has partnered with
AgTech to implement its product sales and marketing strategies.
A-Tek.
A-Tek is an engineering company that provides solutions for monitoring and
controlling physical parameters through computer software applications since
1972. A-Tek performs precision monitoring of various physical parameters such
as: humidity, temperature, pressure, water level, weight, power on/off, air
quality, water quality, and air velocity. An exclusive engineering and teaming
agreement with A-Tek provides that the A-Tek will provide operational and
environmental monitoring and control systems for AEI's cooling system and odor
control delivery system.
FarmPro.
The Company has an agreement with FarmPro to provide installation and service
for the Company's waste treatment systems. FarmPro is located in Guyman, OK
and is one of the country's largest builders of livestock facilities.
Management believes that the strategic relationship with FarmPro will provide
AgTech with the necessary installation capabilities to fulfill large order
quantities.
Competition
The Company competes with operational and environmental companies, including
Osbourne Industries, Bion Technologies, and Monsanto. Some of these
competitors have greater resources than the Company and have been operating
for longer periods of time than the Company. However, Management believes
that the Company's products and services have significant proprietary advantages
including state of the art technologies that the management is confident will
give AEI the ability to capture adequate market share to meet its projections.
Operations and Facilities
Technical Operations.
The Company's technical operations can be divided into two distinct
operational phases: Animal Waste Treatment, and Indoor Environmental Quality.
Animal Waste Treatment represents the processing of animal waste in an
environmentally acceptable and economical fashion. This consists of detailed
engineering to determine size, location, and controls needed
to create a secondary profit center for the livestock operation.
Indoor Environmental Quality represents the cooling and atomization of the
Company's odor control product within livestock facilities and Municipal waste
treatment plants. Detailed engineering and data collection is essential in
determining the precise temperature, humidity levels, and quantity of
product to be used in the neutralization of odors and reduction of ammonia.
Furthermore, the Company is currently developing procedures to distribute such
other products as sanitizers and pharmaceuticals via the atomization system.
Facilities.
The Company's corporate headquarters and technical operations (i.e. data
production, evaluation and analysis) are located in Franklin, Kentucky, which
is 30 miles north of Nashville Tennessee. The Company leases approximately
2,500 square foot in an office building for senior management. The
headquarters will house the Company's marketing, financial and administrative
operations. The Company also leased a research and development technical
center in Goldsboro, North Carolina of approximately 1,200 square feet. All
of the Company's technical operations including its data processing and systems
integration technology will be performed in the Franklin, Kentucky facility.
Data Management.
This software takes the controller data measuring temperatures and ammonia
levels and automatically adjusts the temperature and odor control levels on a
real time basis to provide the cooling controls that will maximize production
on the livestock farm. The farm manager controls the information management
initially from a PC. The PC information is sent back to the corporate
information services department, which creates growing standards in its
environmental management.
Sensor and Performance Controls.
This software monitors all sensors, which will include the feed system, water
system, power system, CO2 air quality systems, and waste treatment system.
This program automatically adjusts the levels of these systems. The purpose of
the sensors is to provide a tool for the farm manager to determine causes of
production problems. The program will determine optimal ranges for all of
the sensors and sends an alert back to the farmer that there is a problem that
needs his attention. If the sensor parameters stay in their optimum ranges, the
farm should have lower mortality rates, higher turnover rates, and more
management control over production. Management believes that this software
provides the Company with strong competitive advantages.
Software Interface.
AgTech's software is Windows 98 compatible and offers 2-D graphical
representation of real time data and historical data for comparison studies.
The language is visual basic and offers compatibility with other graphical
interfaces. The Company will offer a touch screen for ease of use.
Data Transmission Interfaces.
The farm controllers can be linked into a farm network where data is
transmitted with twisted pair wire through telephone, radio, Internet, or
satellite. The network provides a large integrator the ability to manage
production at multiple locations more efficiently.
Legal Proceedings
The Company has no outstanding litigation and is not aware of any threatened
litigation. The Company is expected to be involved from time to time in
various claims, actions and lawsuits incidental to its business. The Company
believes the ultimate liability there under, if any, will not have a
material affect on the financial condition of the Company.
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
December 31, 1999
=====================================
SIX MONTHS ENDING DECEMBER 31, 1999
=====================================
Except for historical information, the discussion in this Form SB-1 contains
forward-looking statements that involve risks and uncertainties. These
statements may refer to the Company's future plans, objectives, expectations
and intentions. These statements may be identified by the use of words such as
"expect", "anticipate", "believe", "intend", "plan" and similar expressions.
The Company's actual results could differ materially from those anticipated in
such forward-looking statements. Factors that could contribute to these
differences include, but are not limited to, the risks discussed in the section
titled "Market Risks and other Business Factors" later in this Form SB-1.
Completion of the Merger
Oak Brook Capital I, Inc. ("Oak Brook") was incorporated under the laws of the
State of Colorado on May 15, 1998. It was incorporated as a "blind pool" or
"blank check" company for the purpose of seeking to acquire one or more
properties or businesses. Oak Brook elected to voluntarily file a registration
statement in order to become a reporting company under the Securities Exchange
Act of 1934, as amended (the "34 Act").
On September 19 1999, Oak Brook's sole officers and directors executed a Plan of
Merger Agreement (the "Plan') with the Company whereby the Company's
shareholders agreed to receive one (1) share of Oak Brook common stock for
every one (1) share they held.. The transaction with Oak Brook was a private
placement transaction in reliance upon an exemption from registration under
the Securities Act of 1933.
The transaction resulted in a change in control of Oak Brook because following
its exchange of the Shares, the Company's shareholders owned approximately
97.039% of the issued and outstanding Common Stock of the Company.
<PAGE> 28
RESULTS OF OPERATIONS
MARKET RISKS AND OTHER BUSINESS FACTORS
In passing the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"), 15 U.S.C.A. Sections 77z 2 and 78u 5 (Supp. 1996), Congress encouraged
public companies to make "forward looking statements" by creating a safe
harbor to protect companies from securities law liability in connection with
forward looking statements. The Company intends to qualify both its written
and oral forward looking statements for protection under the Reform Act and
any other similar safe harbor provisions.
"Forward looking statements" are defined by the Reform Act. Generally, forward
looking statements include expressed expectations of future events and the
assumptions on which the expressed expectations are based. All forward looking
statements are inherently uncertain as they are based on various expectations
and assumptions concerning future events and they are subject to numerous known
and unknown risks and uncertainties which could cause actual events or results
to differ materially from those projected. Due to those uncertainties and risks,
the investment community is urged not to place undue reliance on written or oral
forwardlooking statements of the Company. The Company undertakes no obligation
to update or revise this Safe Harbor Compliance Statement for Forward Looking
Statements (the "Safe Harbor Statement") to reflect future developments. In
addition, the Company undertakes no obligation to update or revise forward
looking statements to reflect changed assumptions, the occurrence of
unanticipated events or changes to future operating results over time.
The Company provides the following risk factor disclosure in connection with its
continuing effort to qualify its written and oral forward looking statements for
the safe harbor protection of the Reform Act and any other similar safe harbor
provisions. Important factors currently known to management that could cause
actual results to differ materially from those in forward looking statements
include the disclosures incorporated herein by reference and set forth in Item
5, Other Information, Business Plan, of Form 8-K/A, filed on December 6, 1999
with the Securities and Exchange Commission ("SEC") and also include the
following:
<PAGE> 29
Liquidity
The Company is considering the sale of equity in connection with a secondary
offering later in 2000. The Company does not have any underwriting commitments
for such sale of equity. There can be no assurance that any such sale will close
by such date or at all or that the Company will continue to consider such an
offering.
Litigation And Government Investigations
Numerous federal and state civil and criminal laws govern agricultural and
environmental development and operation activities. In general, these laws
provide for various fines, penalties, multiple damages, assessments and
sanctions for violations.
Evolving Industry Standards; Rapid Technological Changes
The Company's success in its business will depend in part upon its continued
ability to enhance its existing products and services, to introduce new products
and services quickly and cost effectively to meet evolving customer needs, to
achieve market acceptance for new product and service offerings and to respond
to emerging industry standards and other technological changes. There can be no
assurance that the Company will be able to respond effectively to technological
changes or new industry standards. Moreover, there can be no assurance that
competitors of the Company will not develop competitive products, or that any
such competitive products will not have an adverse effect upon the Company's
operating results.
Moreover, management intends to continue to implement "best practices" and other
established process improvements in its operations going forward. There can be
no assurance that the Company will be successful in refining, enhancing and
developing its operating strategies and systems going forward, that the costs
associated with refining, enhancing and developing such strategies and systems
will not increase significantly in future periods or that the Company's existing
software and technology will not become obsolete as a result of ongoing
technological developments in the marketplace.
Volatility Of Stock Price
The Company believes factors such as the Company's liquidity and financial
resources, quarter to quarter and year to year variations in financial results
could cause the market price of the Company's common stock to fluctuate
substantially. Any adverse announcement with respect to such matters or any
shortfall in revenue or earnings from levels expected by management could have
an immediate and material adverse effect on the trading price of the Company's
common stock in any given period. As a result, the market for the Company's
common stock may experience material adverse price and volume fluctuations and
an investment in the Company'scommon stock is not suitable for any investor who
is unwilling to assume the risk associated with any such price and volume
fluctuations.
<PAGE> 30
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded operations primarily through cash from operations and
equity and debt investment, since inception.
Debt Financing
The Company received no debt instrument financing during the six months
ended December 31, 1999.
Secondary Offering of Common Stock
The Company is considering the sale of equity in connection with a secondary
offering prior to the end of 2000. The Company has not received any commitment
for such an offering, and no assurance can be provided that the Company will
receive any such commitment, or that any such offering, if undertaken, will
be successful.
Sufficiency of Cash Flows
The Company believes that current cash balances and any cash generated from
operations and from available debt or equity financing will be sufficient to
meet its cash needs for working capital and capital expenditures for at least
the next twelve months. Thereafter, if cash generated from operations is
insufficient to satisfy the Company's liquidity requirements, management may
seek to sell additional equity or obtain credit facilities. The sale of
additional equity could result in additional dilution to the Company's
shareholders. A portion of the Company's cashmay be used to acquire or invest in
complementary businesses or products or to obtain the right to use complementary
technologies. From time to time, in the ordinary course of business, the
Company evaluates potential acquisitions of such businesses, products or
technologies.
<PAGE> 31
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND SENIOR MANAGEMENT
Management
The directors and officers of AEI Environmental, Inc. are as follows:
Executive Officers and Directors
Name Position
Ed McMillan Chairman of the Board of Directors
John Zick Vice Chairman, and Director
Greg Ransdell CEO, President, and Director
Robert Wagner Vice-President Sales
Mark Margason Secretary and Treasurer
Thomas F. Taft, Sr. Director
The following is a brief description of the recent business experience of
the Company's executive officers and directors.
Ed McMillan, Chairman of the Board. Mr. McMillan is the retired President
and CEO of Purina Mills, Inc., the largest manufacturer and distributor of
animal nutrition products in the United States. Mr. McMillan joined Purina
Mills in 1969 and held various positions in Marketing, Business Development,
and Diversified Business Management before being named Vice President for
Product Research in 1986. Mr. McMillan is a prominent leader in the animal
nutrition industry serving as Chairman of the Board of Directors for the
American Feed Industry Association and the Prescription Feed Task Force.
Mr. McMillan has received distinguished industry honors as the Agri-Marketer
of the Year for the National Agri-Marketing Association; the Distinguished
Service Award from the American Agricultural Editor's Association; the
Distinguished Service Award from the American Feed Association. Mr. McMillan
received a Bachelor of Science degree in Agricultural Science from the
University of Illinois and is a graduate of the Credit Research Foundation.
Mr. McMillan is a Senior Consultant for Agribusiness Group with a primary
focus on business alliance creation and merger and acquisition management,
and advisor to the University of Illinois College of Agriculture.
John T. Zick, Director. Mr. Zick is a retired executive with Continental
Grain Company, a world leader in grain, cotton, and corn production and
trading. Continental also owns Premium Standard Farms, a major producer of
swine and poultry livestock in the United States. Mr. Zick retired as Senior
Vice President and General Manger, North American Grain Division, Continental
Grain Company, and President of Conti Carriers and Terminals, and General
Manager of Conti Cotton Division. Mr. Zick was directly responsible for all
grain origination and export activity in North America, Chicago, IL. Mr. Zick
was a longstanding member of the Chicago Board of Trade. Mr. Zick received a
Bachelors of Arts, 1965 University of Illinois, and a Masters of Business
Administration, 1967, University of Illinois.
Greg Ransdell, President, CEO, and Director. Mr. Ransdell, a co-founder of
the Company, was the General Manager of U.S. operations for Vall, Inc., the
25th largest swine grower in the United States. Mr. Ransdell is the past
General Manager of Prestage Farms, a privately held feed mill and swine
integrator with 15,000 sows in Mississippi. Mr. Ransdell was a Director of
Production Services for Choctaw Maid Farms, a vertically integrated poultry
grower and processor of 2 million birds per week. Mr. Ransdell has served as
Senior Vice President of Valley Grain Products of Kentucky, a manufacturer of
corn-based products. Mr. Ransdell received a B.S. in accounting from
California State University. Mr. Ransdell is leading the day-to-day
management of the Company and will have responsibility for its profitability.
Robert Wagner, Vice-President of Sales. Mr. Wagner is a co-founder of the
Company. Mr. Wagner is the past President of Numan Industries, Inc., and the
developer of the Company's odor control product, NC 2000. Mr. Wagner brings
substantial industry contacts through the Numan odor control product line.
Mark Margason, Director. Mr. Margason is a co-founder of the Company and
has been an investment banker and commercial banker for 20 years with Mellon
Bank and Citicorp North America. Mr. Margason was a Vice President of the
Leveraged Capital business unit of Citicorp responsible for the defensive
takeover strategy of Pillsbury, and the LBO of Kroger Foods. Mr. Margason has
been involved as a Director and Chief Financial Officer of several venture
capital companies raising equity for early stage high tech venture companies.
Mr. Margason is a partner in MPI Investment Management and MPI Venture
Management Fund. Mr. Margason received a B.S.B.A and an M.B.A in Finance
from the University of Denver.
Thomas F. Taft, Sr., Director. Mr. Taft is a private investor, business
executive and attorney in Greenville, North Carolina. He is the Chairman and
founder of Hardware Supplies of America, Inc., the premier wholesale provider
of door and exit hardware to contract hardware houses, retail building chains
such as Home Depot and Lowe's, buying groups for retail lumber yards and
hardware store chains through its seven distribution centers across the country.
Mr. Taft has served three terms in the North Carolina State Senate and was
Chairman of the Senate Agriculture Committee. He was a former member of
the Southern Growth Policies Board, Chairman of the North Carolina State Ports
Authority Board of Directors for eight years, a member of the Board of Regents
of the University of North Carolina and served as legal counsel to now Governor
Jim Hunt when he was Lieutenant Governor. Mr. Taft maintains various
investments in U.S. real estate and technology start-up companies in Israel.
Mr. Taft provides insight and strategic direction both business and political.
He is a founding investor of AgTech and was a source of early seed capital.
Beneficial Ownership
The following table sets forth the beneficial ownership of the ownership of
AEI Environmental, Inc. outstanding common stock on April 18, 2000 by
(i) each director and executive officer of the Company, (ii) all directors and
executive officers of the Company as a group, and (iii) each shareholder who was
known by the Company to be the beneficial owner of more than five percent (5%)
of the outstanding shares of AEI Environmental, Inc.:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Number of Shares Owned Percentage of Ownership
Shares of AEI
Common Stock to be
Beneficially Owned Percent
Name and as of the of
Address Filing Date Class
______________________ ________________________ _________
Ed McMillan 336,649 3.62%
11578 Trail Ridge Place
Zionville, IN
Thomas F. Taft, Sr. 1,741,623 18.75%
P.O. Box 1766
Greenville, NC
Mark Margason 1,267,338 13.64%
105 E. First Street
Hinsdale, IL
Greg Ransdell 423,729 4.56%
215 Bluegrass Road
Suite C, Franklin, KY
John T. Zick 466,500 5.02%
708 E. Woodland Avenue
Hinsdale, IL
All Officers and
Directors as a Group 4,262,420 45.88%
Management of AEI has advised that they may acquire additional shares of AEI
Common Stock from time to time in the open market at prices prevailing at the
time of such purchases.
</TABLE>
<PAGE> 33
Management has advised that they may acquire additional shares of the Company's
Common Stock from time to time in the open market at prices prevailing at the
time of such purchases.
The Company's key personnel bring a broad range of private and public
management, corporate finance and technical skills to the Company.
BOARD OF DIRECTORS
Colorado provides that a corporation's board of directors may be divided into
various classes with staggered terms of office. The Company's directors are
elected for a term of three years and until their successors are elected and
qualified.
NUMBER OF DIRECTORS
The Company's board of directors currently consists of five directors. The
number of directors on the Company's board may only be changed by a vote of a
majority of the directors, subject to the rights of the holders of any
outstanding series of the Company's preferred stock to elect additional
directors.
REMOVAL OF DIRECTORS
The Company's directors, or the entire board, may be removed for cause by the
affirmative vote of the holders of at least 50% of the outstanding shares of
capital stock of the Company entitled to vote in the election of directors,
voting as a single class and subject to the rights of the holders of any
outstanding series of the Company's preferred stock.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Any newly created directorships in either of our boards of directors, resulting
from any increase in the number of authorized directors or any vacancies, may be
filled by a majority of the remaining members of such board of directors, even
though less than a quorum, or in the case of the Company, by a sole remaining
director, subject to the rights of holders of any outstanding series of
preferred stock.
Newly created directorships or decreases in directorships in either of our
boards of directors are to be apportioned among the classes of directors so as
to make all classes as nearly equal in number as practicable, provided that no
decreases in the number of directors in either of our boards of directors may
shorten the term of any director then in office.
<PAGE> 34
To the extent reasonably possible, any newly created directorship will be added
to the class of directors whose term of office is to expire at the latest date
following the creation of that directorship, unless otherwise provided for by
resolution of the majority of the directors then in office. Any newly eliminated
directorship will be subtracted from the class whose office is to expire at the
earliest date following the elimination of the directorship, unless otherwise
provided for by resolution of the majority of the directors then in office.
ABILITY TO CALL SPECIAL MEETINGS
Special meetings of the Company's stockholders may be called by the Company's
board of directors, by affirmative vote of a majority of the total number of
authorized directors at that time, regardless of any vacancies, or by the
chief executive officer.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND PROPOSALS
The Company's bylaws allow stockholders to nominate candidates for election to
the board of directors at any annual or any special stockholder meeting at which
the board of directors has determined that directors will be elected. In
addition, the bylaws allow stockholders to propose business to be brought before
any annual stockholder meeting. However, nominations and proposals may only be
made by a stockholder who has given timely written notice to the Secretary of
the Company before the annual or special stockholder meeting.
Under the Company's bylaws, to be timely, notice of stockholder nominations or
proposals to be made at an annual stockholder meeting must be received by the
Secretary of the Company no less than 60 days nor more than 90 days before the
first anniversary of the preceding year's annual stockholder meeting. If the
date of the annual meeting is more than 30 days before or more than 60 days
after the anniversary of the preceding year's annual stockholder meeting, notice
will also be timely if delivered within 10 days of the date on which public
announcement of the meeting was first made by the Company.
In addition, if the number of directors to be elected is increased and no public
announcement is made by the Company naming all of the nominees or specifying the
size of the increased board of directors at least 70 days before the first
anniversary of the preceding year's annual meeting, or, if the date of the
annual meeting is more than 30 days before or 60 days after the anniversary of
the preceding year's annual meeting, at least 70 days before the annual meeting,
a stockholder's notice will be considered timely, with respect to the nominees
for any newpositions created by the increase, if it is delivered to the
Secretary of the Company within 10days of the date on which public announcement
of the meeting was first made by the Company.
<PAGE> 35
Under the Company's bylaws, to be timely, notice of a stockholder nomination to
be made at a special stockholder meeting must be received no less than 60 days
nor more than 90 days before a special meeting at which directors are to be
elected or within 10 days of the date on which public announcement of the
special meeting was first made by the Company.
A stockholder's notice to the Company must set forth all of the following:
- all information required to be disclosed in solicitations of proxies for
election of directors, or information otherwise required by applicable
law, relating to any person that the stockholder proposes to nominate for
election or reelection as a director, including that person's written
consent to being named in the proxy statement as a nominee and to serving
as a director if elected
- a brief description of the business the stockholder proposes to bring
before the meeting, the reasons for conducting that business at that
meeting and any material interest of the stockholder in the business
proposed
- the stockholder's name and address as they appear on the Company's
books and the class and number of shares which are beneficially owned
by the stockholder
The chairman of the Company's stockholder meeting will have the power to
determine whether the nomination or proposal was made by the stockholder in
accordance with the advance notice procedures set forth in the Company's
bylaws.
If the chairman determines that the nomination or proposal is not in compliance
with the Company's advance notice procedures, the chairman may declare that
the defective proposal or nomination will be disregarded.
DIRECTOR COMPENSATION
The directors of the Company, who are all executive officers of the Company
as well, are not compensated for serving as directors of the Company.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Articles of Incorporation provide that a director of the Company
shall not be personally liable to the Company or any of its shareholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its shareholders, (ii) for acts or omissions not in good faith or which involve
gross negligence, intentional misconduct or a knowing violation of law, (iii)
for any unlawful distribution as set forth in the Colorado Model Business
Corporation Act of Colorado (the "CMBCA") or (iv) for any transaction from which
the director derived an improper personal benefit. These provisions may have
the
<PAGE> 36
effect in certain circumstances of reducing the likelihood of derivative
litigation against directors. While these provisions may eliminate the right to
recover monetary damages from directors in various circumstances, rights to seek
injunctive or other non-monetary relief is not eliminated.
EXECUTIVE COMPENSATION
The following executive compensation was paid for the fiscal years ended
December 31, 1999, to the Company's Directors, Officers or Affiliates or
other persons who were executive officers of the Company as at December 31,
1999.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation
Compensation Awards
---------- -------- ------------- ---------------
Securities
Name and Principal Other Annual Underlying All Other
Position Salary Compensation Options/(1)/ Compensation
($) ($) (#) ($)-
- ------------------ ---------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Mark Margason 35,000
105 E. First Street (Consulting)
Hinsdale, IL
Greg Ransdell 125,000
215 Bluegrass Road (1999)
Suite C,
Franklin, KY
Robert J. Wagner 84,000
105 E.Fist Street (1999)
Hinsdale, IL
</TABLE>
[FN]
____________________________
<PAGE> 37
Director Compensation
The Company does not reimburse directors for expenses incurred, if any, in
attending meetings of the Board of Directors. The Company does not pay director
fees to directors for their service on the Board.
Options Granted To Executive Officers
The following options to purchase Common Shares were granted to the Named
Executive Officers as of March 1, 2000, pursuant to the Company's Stock
Option Plan. See "Stock Option Plan".
<TABLE>
<CAPTION>
Security Common % of Total Exercise Expir. Date Market Value
Holder Shares Under Options Price Per of Securities
Option Granted In Share1 Underlying
(#) Financial Options on
Year Date of Grant
($/Securities)
<S> <C> <C> <C> <C> <C>
</TABLE>
Notes:
1. The exercise price was determined on the basis of the then transaction
price of the Common Shares. See "Prior Sales".
Compensation of Directors
The directors of the Company are currently compensated for serving as a director
on the basis of options. See "Options Granted to Named Executive Officers".
<PAGE> 38
Directors' and Officers' Insurance
The Company intends to purchase liability insurance for the directors and
officers of the Company. No part of this premium will be paid by the
directors or officers of the Company.
STOCK OPTION PLAN
The Company maintains a stock option plan (the "Stock Option Plan") designed to
provide incentives to directors, executive officers and employees of the Company
or its subsidiaries and companies wholly owned by these individuals in order to
permit those persons to participate in the growth and success of the Company.
Under the terms of the Company's Stock Option Plan, the Company is authorized to
set aside as options a maximum of 5,000,000 of the Company's Common Shares
outstanding from time to time, for the benefit of directors, officers and full
time employees of the Company or its subsidiaries and companies wholly owned by
these individuals. The Stock Option Plan does not permit any one individual to
hold as options more than 5% of the Common Shares outstanding from time to
time.
Any options so granted will be exercisable at the exercise price and for such
period of time as may be determined by the board of directors of the Company and
approved pursuant to the requirements of the applicable stock exchange, or if
the Company's securities are not listed on a stock exchange, then in accordance
with the conditions established by the board of directors of the Company.
Any stock options will be non-transferable and terminate on the earlier of the
expiration date or the 30th day following the day on which the director, officer
or employee, as the case may be, ceases to be either a director, officer or
employee of the Company or any of its subsidiaries.
OPTIONS
As at the date of this filing the following options have been granted or
allocated to executive officers and directors, current and previous employees,
and advisors to the Company, pursuant to the Stock Option Plan:
<PAGE> 39
INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS AND PROMOTERS
No director, senior officer, promoter or other member of management or their
respective associates or affiliates have been indebted to the Company at any
time during the period ended December 31, 1999 or since that date.
CERTAIN TRANSACTIONS
Other than their employment agreements with the Company (refer to "Management-
Employment Contracts" above), no material transactions involving the directors,
senior officers or principal holders of the Company's securities have occurred
since the Company was incorporated except for several loans previously made
to the Company by the Company's principals.
PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of the ownership of
AEI Environmental, Inc. outstanding common stock on April 18, 2000 by
(i) each director and executive officer of the Company, (ii) all directors and
executive officers of the Company as a group, and (iii) each shareholder who was
known by the Company to be the beneficial owner of more than five percent (5%)
of the outstanding shares of AEI Environmental, Inc.:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Number of Shares Owned Percentage of Ownership
Shares of AEI
Common Stock to be
Beneficially Owned Percent
Name and as of the of
Address Filing Date Class
______________________ ________________________ _________
Ed McMillan 336,649 3.62%
11578 Trail Ridge Place
Zionville, IN
Thomas F. Taft, Sr. 1,741,623 18.75%
P.O. Box 1766
Greenville, NC
Mark Margason 1,267,338 13.64%
105 E. First Street
Hinsdale, IL
Greg Ransdell 423,729 4.56%
215 Bluegrass Road
Suite C, Franklin, KY
John T. Zick 466,500 11.35%
708 E. Woodland Avenue
Hinsdale, IL
All Officers and
Directors as a Group 4,262,420 45.88%
Management of AEI has advised that they may acquire additional shares of AEI
Common Stock from time to time in the open market at prices prevailing at the
time of such purchases.
</TABLE>
Management has advised that they may acquire additional shares of the Company's
Common Stock from time to time in the open market at prices prevailing at the
time of such purchases.
<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
As of the date hereof, the authorized share capital of the Company consists of
forty million (40,000,000) Common Shares of which 9,289,535 Common Shares are
issued and outstanding, and ten million (10,000,000) Preferred Shares 2,725,000
of which is designated as Series A Preferred Stock (the "Series A Shares") of
which 0 Series A Convertible Shares are issued and outstanding. The following
is a summary of the principal attributes of the share capital of the Company.
COMMON SHARES
The rights, privileges, restrictions and conditions attached to the Common
Shares are as follows:
Voting
Holders of Common Shares shall be entitled to receive notice of and to attend
and vote at all meetings of shareholders of the Company, except meetings of
holders of another class of shares. Each Common Share shall entitle the
holder thereof to one vote.
Dividends
Subject to the preferences accorded to holders of Series A Shares and any other
shares of the Company ranking senior to the Common Shares from time to time with
respect to the payment of dividends, holders of Common Shares shall be entitled
to receive, if, as and when declared by the Board of Directors, such dividends
as may be declared thereon by the Board of Directors from time to time.
Liquidation, Dissolution or Winding-Up
In the event of the voluntary or involuntary liquidation, dissolution or
winding-up of the Company, or any other distribution of its assets among its
shareholders for the purpose of winding-up its affairs (such event referred
to herein as a "Distribution"), holders of Common Shares shall be entitled,
subject to the preferences accorded to holders of the Series A Shares and any
other shares of the Company ranking senior to the Common Shares from time to
time with respect to payment on a Distribution, to share equally, share for
share, in the remaining property of the Company.
PREFERRED SHARES
The Company's articles of incorporation provides that the board of directors is
authorized to provide for the issuance of shares of un-designated preferred
stock in one or more series, and to fix the designations, powers, preferences
and rights of the shares of each series and any qualifications, limitations
or restrictions thereof.
The number of authorized shares of the Company un-designated preferred stock may
be increased by the affirmative vote of the holders of a majority of the
Company's common stock, without a vote of the holders of preferred stock, unless
their vote is required pursuant to the terms of any preferred stock then
outstanding. The number of authorized shares of un-designated preferred stock of
the Company may be reduced or eliminated by the affirmative vote of the holders
of 80% of the outstanding capital stock of the Company entitled to vote in the
election ofdirectors, voting together as a single class.
Attributes
Subject to the filing of Articles of Amendment in accordance with the Act, the
Board of Directors may from time to time fix, before issuance, the designation,
rights, privileges, restrictions and conditions attached to each series of
Preferred Shares including, without limiting the generality of the foregoing,
the amount, if any, specified as being payable preferentially to such series on
a Distribution; the extent, if any, of further participation on a Distribution;
voting rights, if any; and dividend rights (including whether such dividends
be preferential, cumulative or non-cumulative), if any.
<PAGE> 41
Liquidation
In the event of a Distribution, holders of each series of Preferred Shares shall
be entitled, in priority to holders of Common Shares and any other shares of the
Company ranking junior to the Preferred Shares from time to time with respect to
payment on a Distribution, to be paid rateably with holders of each other series
of Preferred Shares the amount, if any, specified as being payable
preferentially to the holders of such series on a Distribution.
Dividends
The holders of each series of Preferred Shares shall be entitled, in priority to
holders of Common Shares and any other shares of the Company ranking junior to
the Preferred Shares from time to time with respect to the payment of dividends,
to be paid rateably with holders of each other series of Preferred Shares, the
amount of accumulated dividends, if any, specified as being payable
preferentially to the holder of such series.
The Company has never paid any dividends on its Common Shares. The Company
intends to retain its earnings to finance the growth and development of its
business and does not expect to pay dividends in the near future. The Board of
Directors of the Company will review this policy from time to time having regard
to the Company's financing requirements, its financial condition and other
factors considered relevant.
RESTRICTIONS ON TRANSFER
"Affiliates" of the Company under the Securities Act of 1933, as amended (the
"Securities Act") are persons who generally include individuals or entities that
control, are controlled by, or are under common control with the Company and may
include certain officers and directors of the Company as well as principal
stockholders of the Company. Persons who are affiliates of the Company will be
permitted to sell their shares of the Company only pursuant to an effective
registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act, such exemptions afforded by
Section 4(1) or 4(2) of the Securities Act or Rule 144 thereunder.
CERTAIN PROTECTIVE PROVISIONS
General
The Articles and Bylaws of the Company and the CMBCA contain certain provisions
designed to enhance the ability of the Board of Directors to deal with
attempts to acquire control of the Company. These provisions may be deemed to
have an anti-takeover effect and may discourage takeover attempts which have
not been approved by the Board of Directors (including potential takeovers
which certain shareholders may deem to be in their best interest) and may
adversely effect the price that a potential purchaser would be willing to pay
for the Company's stock. These provisions also could discourage or make more
difficult a merger, tender offer or proxy contest, even though such
transaction may be favorable to the interests of shareholders, and could
potentially adversely effect the price of the Common Stock.
<PAGE> 42
The following briefly summarizes protective provisions contained in the
Articles, the Bylaws and the CMBCA. This summary is necessarily general
and is not intended to be a complete description of all the features and
consequences of these provisions, and is qualified in its entirety by
reference to the Articles, the Bylaws and the provisions of the CMBCA.
The Company has one class of common stock issued and outstanding. Holders of
the Company's common stock are each entitled to one vote for each share held.
AMENDMENT OF ARTICLES OF INCORPORATION
Under Colorado law, articles of incorporation of a Colorado corporation may
be amended by approval of the board of directors of the corporation and the
affirmative vote of the holders of a majority of the outstanding shares
entitled to vote for the amendment, unless a higher vote is required by the
corporation's articles of incorporation.
The Company's articles of incorporation provides that the affirmative vote of
the holders of at least 50% of the outstanding shares of capital stock of the
Company entitled to vote in the election of directors, voting together as a
single class, will be required to reduce or eliminate the number of
authorized shares of the Company's common stock or preferred stock, or to
amend, repeal or adopt any provision inconsistent with the provisions of the
Company's articles of incorporation which deal with the following:
-undesignated preferred stock
-matters relating to the board of directors, including the number of
members, board classification, vacancies and removal
-the powers and authority expressly conferred upon the board of directors
-the manner in which stockholder action may be effected
-amendments to bylaws
-business combinations with interested stockholders of the Company
-indemnification of officers and directors of the Company
-the personal liability of directors to the Company or its stockholders
for breaches of fiduciary duty
-the amendment of the Company's articles of incorporation
AMENDMENT OF BYLAWS
Under Colorado law, stockholders entitled to vote have the power to adopt,
amend or repeal bylaws. In addition, a corporation may, in its articles of
incorporation, confer such power upon the board of directors. The
stockholders always have the power to adopt, amend or repeal bylaws, even
though the board may also be delegated such power.
The Company's board of directors is expressly authorized to adopt, amend and
repeal the Company's bylaws by an affirmative vote of a majority of the total
number of authorized directors at that time, regardless of any vacancies.
<PAGE> 43
The Company's bylaws may also be adopted, amended and repealed by the
affirmative vote of the holders of at least 50% of the outstanding shares of
capital stock of the Company entitled to vote in the election of directors,
voting together as a single class.
LIMITATION OF LIABILITY OF DIRECTORS
The CMBCA permits a corporation to include a provision in its articles of
incorporation eliminating or limiting the personal liability of a director or
officer to the corporation or its stockholders for damages for a breach of
the director's fiduciary duty, subject to certain limitations. Our respective
articles of incorporation include such a provision to the maximum extent
permitted by law.
While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate
that duty. Accordingly, these provisions will have no effect on the
availability of equitable remedies such as an injunction or rescission based
on a director's breach of his duty of care.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The CMBCA permits a corporation to indemnify officers and directors for
actions taken in good faith and in a manner they reasonably believed to be
in, or not opposed to, the best interests of the corporation, and with
respect to any criminal action, which they had no reasonable cause to
believe was unlawful.
Our articles of incorporation and bylaws provide that any person who was or
is a party or is threatened to be a party to or is involved in any action,
suit, or proceeding, whether civil, criminal, administrative or
investigative, because that person is or was a director or officer, or is
or was serving at the request of either of us as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, will be indemnified against expenses, including
attorney's fees, and held harmless by each of us to the fullest extent
permitted by the CMBCA. The indemnification rights conferred by each of us are
not exclusive of any other right to which persons seeking indemnification may be
entitled under any statute, our articles of incorporation or bylaws, any
agreement, vote of stockholders or disinterested directors or otherwise. In
addition, each of us is authorized to purchase and maintain insurance on
behalf of its directors and officers.
Additionally, each of us may pay expenses incurred by our directors or
officers in defending a civil or criminal action, suit or proceeding because
that person is a director or officer, in advance of the final disposition of
that action, suit or proceeding. However, such payment will be made only if
we receive an undertaking by or on behalf of that director or officer to
repay all amounts advanced if it is ultimately determined that he or she is
not entitled to be indemnified by us, as authorized by our articles of
incorporation and bylaws.
<PAGE> 46
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent of the Company is American Securities
Transfer, Inc, at its principal office in Lakewood, Colorado.
PLAN OF DISTRIBUTION
The shares of Common Stock registered hereunder could be sold, if desired, by
the Selling shareholder on the Over-the-Counter Bulletin Board.
The Selling Shareholders Shares (the "Securities"), being offered hereby: (i)
through dealers or in ordinary brokers' transactions, in the over-the-counter
market or otherwise; (ii) at the market or through market makers or into an
existing market for the securities; or (iii) in other ways not involving
market makers or established trading markets, including direct sales to
purchasers or effective through agents, or (iv) in combinations of any of
such methods of sale. The Securities will be sold at market prices prevailing
at the time of sale or at negotiated prices.
If a dealer is utilized in the sale of the Securities in respect of which the
Prospectus is delivered, the Selling Security Holders will sell such
Securities to the dealer, as principal. The dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale.
Sales of Securities "at the market" and not at a final price, which are made
into an existing market for the Securities, will be made by the Selling
Security Holders to or through a market maker, acting as principal or as
agent. Other sales may be made, directly or through an agent, to purchasers
outside existing trading markets. A selling broker may act as agent or may
acquire the Securities or interests therein as principal or pledgee and may,
from time to time, effect distributions of such Securities and interests.
The Securities offered hereby are eligible for sale only in certain states,
and, in some of those states, may be offered or sold only to "institutional
investors", as defined under applicable state securities law. No sales or
distributions, other than as described herein, may be effected after this
Prospectus shall have been appropriately amended or supplemented.
<PAGE> 47
LEGAL MATTERS
The validity of the Common Stock offered hereby has been passed upon for the
Company by Nadeau & Simmons, P.C., 1250 Turks Head Building, Providence,
Rhode Island.
EXPERTS
Bersch Accounting, independent auditors, have audited the financial
statements of the Company included for the year ended June 30, 1999, which
are incorporated by reference into this prospectus and registration
statement. These financial statements are incorporated by reference in
reliance on their reports, given on their authority as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-1 (the "Registration Statement") under the Securities Act, with respect to
the shares of Common Stock offered hereby. This prospectus constitutes a
part of the Registration Statement and does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted from this prospectus as permitted by the rules and regulations of the
commission. Statements contained in this prospectus as to the contents of
any contract, agreement or other document referred to herein are not
necessarily complete and, where such agreement or other document is an
exhibit to the Registration Statement, each such statement is qualified in
all respects by the provisions of such exhibit, to which reference is hereby
made for a full statement of the provisions thereof. For further information
with respect to the Company and the Common Stock, reference is hereby made
to the Registration Statement and to the exhibits thereto.
<PAGE> 48
The Registration Statement and the exhibits may be inspected, without charge,
and copies may be obtained, at prescribed rates, at the public reference
facilities of the Commission maintained at Judiciary Plaza, 450 Fifth Street,
N.W., room 1024, Washington, DC 20549, or on the Internet at
http://www.sec.gov. Copies of the Registration Statement and the exhibits may
also be inspected, without charge, at the Commission's regional offices at
7 World Trade Center, Suite 1300, New York, New York 10048, and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. In addition, copies of
the Registration Statement and the exhibits may be obtained by mail, at
prescribed rates, from the Public Reference Branch of the Commission at
450 Fifth Street, N.W., Washington, DC 20549.
In connection with this offering, the Company continues to be subject to the
information and periodic reporting requirements of the Exchange Act, and, in
accordance therewith, will file periodic reports, proxy statements and other
information with the Commission. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the public
reference facilities and regional offices referred to above. The Company
intends to furnish its shareholders with annual reports containing audited
financial statements certified by independent public accountants and with
quarterly reports containing unaudited financial statements for the first
three quarters of each fiscal year.
<PAGE>
AGTECH Environmental, Inc.
Financial Statements
June 30, 1999
Contents
Page
Independent Auditor's Report 2
FINANCIAL STATEMENTS:
Exhibit A - Balance Sheet 3-4
Exhibit B - Statement of Operations and Deficit
Accumulated During the Development
Stage 5
Exhibit C - Statement of Changes in Shareholders' Equity 6
Exhibit D - Statement of Cash Flows 7
Notes to Financial Statements 8-18
<PAGE> 2
Bersch Accounting s.c.
Certified Public Accountants
633 W. Wisconsin Ave., Suite 610
Milwaukee, Wisconsin 53203
Tel: 414-272-8800
www.berschaccounting.com
Fax: 414-223-4070
email: [email protected]
INDEPENDENT AUDITOR'S REPORT
November 17, 1999
To the Board of Directors and Stockholders
Agtech Environmental, Inc.
We have audited the accompanying Balance Sheet of Agtech Environmental, Inc.,
(a development stage company), as of June 30, 1999 and the related Statement of
Operations and Deficit Accumulated During the Development Stage, Statement of
Changes in Shareholders' Equity, and Statement of Cash Flows, for the fourteen
months then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Agtech Environmental, Inc.
as of June 30, 1999 and the results of its operations and its cash flows for
the fourteen months then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the company
will continue as a going concern. As shown in the financial statements, the
Company has incurred considerable cost in organizing its business and
establishing itself in the marketplace during the development stage.
Its ability to remain viable depends on its ability to develop and refine
its products in such a way that they will be marketable and that the company
will develop sales revenue sufficient to cover product costs and operating
expenses before exhausting its present investment stake and/or its ability to
obtain additional capital through investments or borrowing sufficient to
operate as a going concern until profitable operations are achieved.
Management's plans in regard to these matters are described in Note #8.
The financial statements do not contain any adjustments which may result
from the outcome of this uncertainty.
/s/ Bersch Accounting S.C.
Milwaukee, Wisconsin
<PAGE> 3
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents (Exhibit D) $ 64,952
Accounts Receivable 10,444
Due from Employee/Shareholders (Note #5) 95,142
Recoverable costs and earnings in excess of
billings on contracts in progress 16,892
Prepaid Expenses 19,103
Total Current Assets $ 206,533
PROPERTY AND EQUIPMENT (Note #1)
Furniture and Fixtures $ 35,651
Computer Equipment and Software 20,458
Leasehold Improvements 25,819
$ 81,928
Less: Accumulated Depreciation (23,203)
Net Property and Equipment 58,725
OTHER ASSETS
Patents (Note #1) $ 77,719
Non-Compete Agreement (Net of Amortization expense
of $16,621) (Note #1) 83,379
Goodwill (Net of Amortization expense
of $22,449) (Note #1) 652,872
Other Intangible Asset (Net of Amortization expense
of $1,055) (Note #1) 33,945
Restricted Cash (Note # 6) 50,000
Due from Employees/Shareholders (Note #5) 75,000
Prepaid Deposits 6,033
Total Other Assets 978,948
TOTAL ASSETS $ 1,244,206
<PAGE> 4
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current Portion - Capital Lease Obligations (Note #4) $ 8,266
Accounts Payable 163,030
Accrued Expenses 52,039
Total Current Liabilities $ 223,335
LONG-TERM LIABILITIES
Long-term Portion - Capital Lease Obligations (Note #4) 7,301
Total Liabilities $ 230,636
SHAREHOLDERS' EQUITY (Exhibit C) (Note #9)
Class A
Common Stock, $.01 par value; Authorized 9,000,000
shares Issued and Outstanding 3,202,412 $ 32,024
Additional Paid-in-Capital 1,749,674
Class B
Common Stock, $.01 par value; Authorized 18,000,000
shares Issued and Outstanding 2,387,080 23,871
Additional Paid-in-Capital 791,129
Class C
Common Stock, $.01 par value; Authorized 3,000,000
shares Issues and Outstanding 4,824,100 48,241
Additional Paid-in-Capital 157,301
$ 2,802,240
(Deficit) Accumulated during the Development Stage
(Exhibit B) (1,788,670)
Total Shareholders' Equity 1,013,570
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,244,206
<PAGE> 5
STATEMENT OF OPERATIONS AND DEFICIT ACCUMULATED
DURING THE DEVELOPMENT STAGE
For the fourteen months ended June 30, 1999
EXPENSES
Research and Development Expenses $ 1,057,509
Loss on Contract 59,341
Officers Salaries 153,042
Office Salaries 43,610
Rent 34,924
Insurance 52,737
Depreciation 23,202
Amortization 40,125
Auto Expense 29,946
Travel 66,323
Telephone 28,497
Office Expense 34,914
Advertising 10,437
Taxes 33,768
Organization expenses 39,308
Miscellaneous 16,023
Outside Services & Professional 82,667
Total Deficit Accumulated before Interest $ (1,806,373)
Other Income/(Expense)
Miscellaneous Income $ 28,176
Interest Expense (10,473)
Total Other Income/(Expense) 17,703
Net Loss Before Income Taxes $ (1,788,670)
Income Tax Expense (Note #2) 0
Net Loss $ (1,788,670)
(Exhibit A)
Net loss per share: (0.24)
(Note #12)
Fully Diluted net loss per share (0.17)
(Note #12)
<PAGE> 6
<TABLE>
<CAPTION>
For the fourteen months ended June 30, 1999
$.01 Par $.01 Par $.01 Par
Value,Class Add'l Value,Class Add'l Value,Class Add'l
A Common Paid-in-Cap B Common Paid-in-Cap C Common Paid-in-Cap Retained
Stock Class A Stock Class B Stock Class C Earnings Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance April 30, 1998 $ $ $ $ $ $ $ $
Shares granted to founders 3,965 (3,965) 19,825 (19,825) 0
Shares granted to employees
of MPI 871 (871) 0
Issuance of shares as
incentive bonus 15,000 15,000
Shares issued in connection
with business acquisition 8,000 792,000 800,000
Sale of capital stock 22,904 1,422,684 28,416 177,126 1,651,130
Exercise of stock options 700 700
Issuance of shares relating
to consulting agreements 700 34,300 35,000
Conversion of shares from
debt agreement 3,755 296,655 300,410
Net
(Loss) (1,788,670) (1,788,670)
Balance June 30, 1999 $ 32,024 $ 1,749,674 $ 23,871 $ 791,129 $ 48,241 $ 157,301$(1,788,670)$ 1,013,570
(Exhibit A)
<PAGE> 7
For the fourteen months ended June 30, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $ (1,788,670)
Adjustments to reconcile net (loss) to net cash
(used) by operating activities:
Depreciation and Amortization $ 63,327
Accrued Penalties and Interest in relation
to Debt Conversion 25,409
(Increase) in:
Increase in Interest Receivable (5,142)
Increase in Accounts Receivable (10,444)
Increase in Excess of Costs over Billings (16,892)
Increase in Prepaid Expenses (19,103)
Increase in:
Increase in Accounts Payable 163,030
Increase in Accrued Expenses 52,039
Total Adjustments 252,224
Net cash (used) by operating activities $ (1,536,446)
CASH FLOWS FROM INVESTING ACTIVITES:
Purchase of Fixed Assets $ (28,971)
Patent Development (77,719)
Deposits (6,033)
Net cash (used) by investing activities (112,723)
CASH FLOWS FROM FINANCING ACTIVITES:
Loan Advances to Employees $ (150,000)
Capital Contributions (Net of negotiation
fees of $305,000) 1,926,831
Capital Lease Repayments (12,710)
Increase in Restricted Cash (50,000)
Net cash provided by financing activities 1,714,121
Net Increase in cash and equivalents $ 64,952
Cash and equivalents, beginning of period 0
Cash and equivalents, end of period $ 64,952
(Exhibit A)
<PAGE> 8
Note #1 Nature of Business and Summary of Significant Accounting Policies
Description of Development Stage Activities
The Company has been in the development stage since its formation on April 30,
1998. It expects to design, manufacture, and install waste treatment and
cooling systems for dairy and livestock operations and to supply necessary
chemical products to system users.
The Company expects to negotiate contracts with commercial livestock
operations for the installation of these systems and may finance these
contracts through a series of progress payments from the customer or by
granting credit to the customer until the system begins operating.
The Company is relying on its own estimates of the size of the potential
market for its products based on trends showing increases in the size of
livestock and dairy operations, the growing environmental sensitivity and
resulting economic stimuli to deal with waste products in a safe and
controlled manner, and its assumption that productivity increases brought
about by its products will create economic advantages which will justify
their costs.
The Company expects to evolve from the development stage to the operating
stage with the continuing refinement of its product lines and to commence
delivering systems under contracts in the second quarter of its next fiscal
year.
Method of Accounting
Assets, liabilities, revenues, and expenses are recognized on the accrual
method of accounting, with revenues and costs of installation to be recognized
under the percentage-of-completion method of accounting for contracts.
Accordingly, income is recognized in the ratio that the cost incurred bears to
the estimated total cost. Adjustments to cost estimates are made periodically,
and expected losses incurred on contracts in progress are charged to
operations in the period such losses are determined. The aggregate of costs
incurred and income recognized on uncompleted contracts in excess of related
billings is shown as a current asset, and billings in excess of cost and
income recognized are shown as a current liability.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Basis for Assigning amounts to Equity Securities Issued For Other Than Cash
Shares of common stock issued for other than cash have been assigned amounts
equivalent to the fair value of the service or assets received in the
exchange.
<PAGE> 9
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
short-term investments in interest-bearing accounts, securities, and other
instruments with an original maturity of three months or less, to be
equivalent to cash.
Allowance for Doubtful Accounts
Accounts receivable are reviewed periodically by management to determine the
adequacy of the allowance for doubtful accounts. Based upon management's
evaluation as of June 30, 1999, an allowance for doubtful trade accounts was
not considered necessary, and amounts due from related parties are considered
in relation to their individual agreements.
Fixed Assets
Fixed assets, including capitalized equipment acquired by leases, are stated
at cost. Depreciation is computed using the straight-line method over the
following estimated useful lives:
Years
Furniture and Fixtures 5-10
Computer Equipment and Software 3-10
Leasehold improvements 3-9
Amortization expense on assets acquired under capitalized leases is included
with depreciation expense of owned assets. Depreciation expense for the
fourteen months ended June 30, 1999 was $23,202.
Organizational Expenses
In April, 1998 the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-5, Reporting on the Costs of Start-up
Activities, which requires costs relating to start-up activities and
organizational expenses to be expensed as incurred. The company has adopted
this SOP during its development stage and accordingly these costs have been
expensed for the fourteen months ended June 30, 1999 in the amount of $61,358.
Covenant not to Compete
In December 1998, the Company purchased substantially all of the assets and
other intangibles of Numan Industries, Inc in exchange for 800,000 shares of
Class B common stock. In connection with this purchase, the Company entered
into a covenant not to compete with the owners (Covenantors) of the Seller.
The Covenantors have agreed that for a period of three years they will not
directly or indirectly service any customer of the Company or engage in any
business competitive with the Company. The intangible asset is being
amortized over the term of the agreement. Amortization expense on the
covenant not to compete for the fourteen months ended June 30, 1999 was
$16,621. Accumulated amortization on the covenant not to compete at June 30,
1999 was $16,621.
Goodwill
The asset, "Goodwill" relates to the purchase of Numan Industries, Inc as
described above and is being amortized over fifteen years. Amortization
expense on goodwill for the fourteen months ended June 30, 1999 was $22,449.
<PAGE> 10
Accumulated amortization on goodwill at June 30, 1999 was $22,449.
Patents
The Company has capitalized its expenditures relating to patent search and the
development of a prototype of its livestock cooling technology. Although the
company had not yet applied for a patent for its cooling technology at June
30, 1999, it is the intent of management to patent the system upon completion
of testing of the final prototype.
Other Intangible Assets
On September 1, 1998 the Company entered into an agreement with an agency to
assist in acquiring state and Federal funding for the Company's research
activities. Class A common stock valued at $12,500 was issued in exchange
for these services.
During 1999, the Company exchanged Class A common stock valued at $22,500 for
consulting services.
Amortization expense on other intangible assets for the fourteen months ended
June 30, 1999, is $1,055. Accumulated amortization of other intangible
assets at June 30, 1999 is $1,055.
Significant Non-Cash Transactions
On December 31, 1998 the company purchased all of the assets of Numan
Industries, Inc in exchange for 800,000 shares of Class B Stock for $1 per
share. This purchase included all assets, and intellectual property thereby
creating intangible assets to the Company as described above. The assets
purchased from Numan Industries, Inc. are as follows:
Office Equipment $ 7,830
Plant Equipment 16,849
Goodwill (Customer list, secret formulas for odor control) 675,321
Covenant not to Compete 100,000
Total $ 800,000
Research and Development
Research and development costs incident to new product development are charged
to the respective expense category when the costs are incurred.
Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
Note#2 Income Taxes
Income Taxes
Generally accepted accounting principles require an asset and liability
approach to financial accounting and reporting for income taxes. The
<PAGE> 11
difference between the financial statement and tax basis of assets and
liabilities is determined annually. Deferred income tax assets are computed
for those differences that have future tax consequences using the currently
enacted tax laws and rates that apply to the periods in which they are
expected to affect taxable income. Valuation allowances are established, if
necessary, to reduce the deferred tax asset to the amount that will more
likely than not be realized.
The Company's total deferred tax assets, and deferred tax asset valuation
allowance are as follows at June 30, 1999:
Total deferred tax asset $ 715,468
Less valuation allowance (715,468)
$ 0
The deferred tax asset results from a net operating loss carryforward.
The valuation allowance was established to reduce the deferred tax asset to
the amount that will more likely than not be realized. This reduction is
necessary due to uncertainty of the Company's ability to utilize all of the
net operating loss carryforwards before they expire.
The income tax provision consists of the following:
Current $ 0
Deferred 715,468
Less valuation allowance (715,468)
Total $ 0
The income tax provision differs from the expense that would result from
applying federal statutory tax rates to income before income taxes because
certain investment income is not taxable, and a valuation allowance has been
provided to reduce deferred tax assets to the amount that is more likely than
not to be realized. Deferred income taxes are based on average tax rates and
reflect the increased expense due to enacted tax rate increases.
At June 30, 1999 the Company has available for future periods a net operating
loss carryforward for tax purposes of $1,788,670. No income taxes were paid
for the year ended June 30, 1999.
Note #3 Contracts in Progress
As described in Note #1, the Company accounts for it long-term contracts under
the percentage of completion method of accounting. As of June 30, 1999 the
Company had one contract that had recoverable costs in excess of billings as
follows:
Costs minus estimated losses incurred on uncompleted contracts $56,892
Less: Billings on uncompleted contracts 40,000
Recoverable costs and earnings in excess of billings $16,892
<PAGE> 12
Note #4 Capitalized Lease Obligations
The Company leases certain office furniture and transportation equipment under
obligations that have been classified as capital leases. The equipment leased
has been recorded as fixed assets and is being depreciated over the economic
life of those assets. Net book values of the leased equipment is as follows
as of June 30, 1999:
Equipment $28,277
Less: Accumulated amortization 9,703
Net Leased Property Under Capitalized Leases $18,574
Amortization of capitalized lease assets included in depreciation expense for
the fourteen months ended June 30, 1999 was $9,703.
The future minimum lease payments required by the above-capitalized leases
together with the present value of the net minimum lease payments are as
follows for the years ended June 30:
2000 $ 8,816
2001 4,416
2002 3,225
Total minimum lease payments $16,457
Less: Amount representing interest 890
Present value of net minimum lease payments $15,567
Amount due currently (Exhibit A) $ 8,266
Amount due after one year (Exhibit A) $ 7,301
Capitalized lease obligations of $15,567 were incurred during the fourteen
months ended June 30, 1999.
Note #5 Related Party Transactions
Notes Receivable
The Company has two unsecured notes receivable due from the President and CEO
of the Company. A one-year $15,000 note dated May 1, 1998 bearing no stated
interest was outstanding at June 30, 1999. A second note for $75,000 dated
January 1, 1998, due July 1, 2001, bearing interest at 5% was outstanding as
of June 30, 1999. Interest income accrued relating to these notes at June
30, 1999 was $3,625.
The Company has two unsecured notes receivable from the Vice-President of
Sales. A three year note dated January 15, 1999 for $45,000 bearing interest
at 5% is outstanding as of June 30, 1999. A three year note for $30,000 dated
March 1, 1998 bearing interest at 5% was also
<PAGE> 13
outstanding as of June 30, 1999. Interest income accrued relating to these
notes at June 30, 1999 was $1,517.
The following is a summary of notes receivable as of June 30:
Total Notes Receivable $165,000
Less: current maturities 90,000
Amount due after one year $ 75,000
Management fees described in Note 12 includes $128,775 paid to Applied Power
Holdings, a company owned by related parties.
Note #6 Commitments
Operating Lease Obligations
The Company leases operating facilities in Franklin, Kentucky under an
operating lease originally dated August 24, 1998 and expiring on September 1,
1999. Terms of the lease require annual rent of $12,960 plus payment of all
operating expenses of the leased facilities. The Company leased additional
operating facilities under an operating lease dated November 1, 1998 and
expiring on October 31, 2000. Terms of this additional lease require rent of
$16,560 plus payment of all operating expenses of the leased facilities.
These two leases are renewable for an additional one-year term with an
additional rental increase on September 1, 1999 and October 31, 2000 that
will be tied to the increase in the Consumer Price Index.
The Company leases operating facilities in Goldsboro, North Carolina from
Wooten Oil Company Assigns under an operating lease originally dated February
8, 1999 and expiring on February 8, 2000. Terms of the lease require annual
rent of $9,000 plus payment of all operating expenses of the building. The
lease is renewable for an additional one-year term with an additional rental
increase on February 8, 2000, which will be tied to the increase in the
Consumer Price Index.
The future minimum lease payments required, not including potential increases
in the Consumer Price Index, for the two leases are as follows for the years
ending June 30:
2000 $ 38,520
2001 38,520
2002 38,520
2003 38,520
After 2003 38,520
Total $ 192,600
<PAGE> 14
The Company has various leases with non-related entities under lease
agreements beginning in 1998 and expiring in 2000. The minimum annual rental
payments required under these leases, having initial or remaining
non-cancelable terms in excess of one year, are as follows for the years
ending June 30:
2000 $ 15,829
2001 12,701
2002 5,128
Total $ 33,658
Rent expense for these leases for the fourteen months ended June 30, 1999 was
$11,180.
Employment and other Service Agreements
The Company has employment and independent contractor agreements with
officers, employees, and stockholders that were entered into in 1998 and
expiring in 2001. These employment agreements automatically renew for two
additional years. Each agreement specifies the amount of compensation to be
paid and the fringe benefits to which the officer or employee or stockholder
is entitled.
Additionally, each agreement provides an option to purchase class B common
stock at par in a vesting schedule stipulated in the agreement.
Note #7 Contingencies
Cash
The Company had at times during the year funds on deposit at one financial
institution that exceeded the federally insured limit.
Under an exclusive four year agreement dated June 22, 1998 and amended
December 11, 1998, the Company agreed to utilize A-TEK Technologies
exclusively for the development of hardware and software related to Agtech's
cooling and waste treatment systems, in exchange for a maximum of 160,000
shares of Agtech class B common stock as well as progress billings for time
and efforts expended. As of June 30, 1999, none of the stock had been issued
to A-TEK Technologies.
Under a three-year agreement dated September 1, 1998, the company agreed to
utilize Pearce Research Associates, Inc. to strategize and to market Agtech's
lagoon-less technology in order to obtain state and federal grants to be
utilized in refining the lagoon-less technologies developed by Agtech. In
exchange for Pearce's services, the company issued 25,000 shares of Class B
common stock with obligations for the following:
Annual compensation of 12,500 shares of Class B common stock issued
September 1, 1999 and September 1, 2000.
<PAGE> 15
5,000 shares of Class B common stock for every $100,000 in state or
Federal grants received by Agtech up to a maximum of 50,000 shares
Note #8 Subsequent Events
The Company management personnel's efforts to address the question of the
viability of the Company and its abilities to and eventually emerge as a
profitable going concern are directed on two fronts.
- -On March 29, 1999, the Company arranged to acquire the controlling interest
in Oak Brook Capital I, a "shell", or "blank check" company registered with
the Securities and Exchange Commission. The express purpose of the existence
of such a company is to acquire a company with operations with which to merge
and enhance financial operations by providing accessibility to public capital
markets. The intended merger had not yet take place at balance sheet date.
The reverse merger was closed on October 5 prior to the end of audit
fieldwork.
- -The Company continues to develop and refine its products and expects revenue-
producing contracts to be in place before the end of the second quarter of its
next fiscal year. The Company was negotiating contracts for the delivery of
a livestock cooling and pharmaceutical delivering system for $114,000 at an
expected cost of $14,000, and a lagoon-less dairy waste treatment system of
a similar scale. Contracts had not been signed at the completion of audit
field work on October 17, 1999.
Note #9 Capital Stock
The following schedule summarizes the share activity of the capital stock
from inception through June 30, 1999:
$.01 Par $.01 Par $.01 Par
Value,Class Value,Class Value,Class
A Common B Common C Common
Stock Stock Stock
___________ ___________ ___________
Shares granted to founders 396,500 1,982,500
Shares granted to employees of MPI 87,080
Issuance of shares as incentive bonus 1,500,000
Shares issued in connection with business
Acquisition 800,000
Sale of capital stock 2,290,400 2,841,600
Exercise of stock options 70,000
Issuance of shares relating to consulting
Agreements 70,000
Conversion of shares from debt agreement 375,512 0 0
Balance June 30, 1999 3,202,412 2,387,080 4,824,100
<PAGE> 16
Stock Classifications
The capital stock of the Company is described as follows:
Class A Common Stock: 9,000,000 shares authorized, $.01 par value,
Entitled to elect one member of the board,
1 vote per share,
Shares equally in dividends with class B and C stock,
Preference upon liquidation to receive par value as well
as 100% of additional paid-in capital before Class B and
Class C stock participates.
Class B Common Stock 18,000,000 shares authorized, $.01 par value
Entitled to elect one member of the board
1 vote per share
Shares equally in dividends with class A and C stock
Class C Common Stock 3,000,000 shares authorized
Entitled to elect two members of the board
1 vote per share
Shares equally in dividends with Class A and B Stock
May not be diluted below 10% of all shares issued and
outstanding before August 8, 2000
Note # 10 Debt Exchanged for Stock
On March 9, 1999, the Company executed convertible notes in the amount of
$275,000 due June 9, 1999 with two shareholders, each bearing an interest rate
of 8.75%. Each note also contained a penalty clause charging the maker of the
note 11.75% interest on all outstanding principal and interest as well as an
additional 10,000 shares each of Class A common stock for every 30 day period
the note has not been paid. The holder of the each note may convert the
outstanding principal, and accrued interest into Class A common stock at a
conversion price of $.80 share. Attached to each note is a stock warrant for
100,000 shares of Class A Common stock at par. This stock warrant is
exercisable within five years of the date of the related note.
On June 30, 1999, the shareholder's converted their notes as follows:
# 1 # 2
Principal $ 137,500 $ 137,500
Accrued Interest @ 8% 3,002 3,002
Accrued Interest @ 11.75% 1,697 1,697
Total principal and accrued interest $ 142,204 $ 142,204
Total number of shares exchanged 177,756 177,756
Additional Class A Shares issued due
to note past due 10,000 10,000
Total shares converted into Common Stock 187,756 187,756
<PAGE> 17
Note #11 Shares Reserved for a Specific Purpose
In order to attract initial investors, specialized contractors and other
unique individuals needed for product development, financing, or management
the company has reserved Class B common stock as of June 30, 1999:
Options granted to independent contractor agreements
for goods and services 4,496,602
Warrants granted relating to issuance of debt 200,000
Options exercised (700)
Total stock warrants, grants and
options of class B common stock outstanding 4,695,902
shares
Note #12 Earnings per share
Basic earnings per share are computed by dividing earnings available to common
shareholders by the weighted average number of common shares outstanding
during the period. Diluted earnings per share reflect per share amounts that
would have resulted if dilutive potential common stock had been converted to
common stock. The following reconciles amounts reported in the financial
statements:
For the fourteen months ended June 30, 1999
Income Shares Per-share
(Numerator) (Denominator) Amount
Loss from continuing operationsand
allocated to common shareholders-
basic earning per share $ (1,788,670) 7,419,519 $ (.24)
Effect of dilutive securities
Stock Options 2,857,887
Loss allocated to common
shareholders - fully diluted
earnings per share $ (1,788,670) 10,277,406 $ (.17)
<PAGE> 18
Note #13 Research and Development stage expeses
As of June 30, 1999 the company is in the development stage. Accordingly, the
company has incurred research and development expenses for the eighteen months
ended June 30, 1999 as follows:
Consultant Expense $ 741,790
Management Fees - APH 128,775
R&D - Miscellaneous 59,844
R&D - Salaries 127,100
Total $ 1,057,509
(b) Pro Forma Financial Information.
The pro forma financial statement required by this Item 7(b) is set forth
below.
Pursuant to Rule 11-02b(2) of Regulation S-X of the Act, we herewith submit
the following:
On October 6, 1999 this 8-K was filed to report on the combination of AEI
Environmental, Inc. and Oak Brook Capital I, Inc. Oak Brook Capital I, Inc.
was the surviving corporation and changed its name to AEI Environmental, Inc.
Since Oak Brook Capital I was a "blank check" company prior to the
transaction, and had no assets, one liability, and negative equity according
to the Amended Form 10QSB filed October 19, 1999, and those items were all of
insignificant materiality, the pro forma information necessary to complete the
requirements of Section 7a will be almost identical to the June 30, 1999
audit report.
Balance Sheets
Pro-forma Combined
Oak Brook AEI Environ- Surviving
Capital I mental, Inc. Corp. Renamed
6-30-99 6-30-99 @6-30-99
ASSETS
Cash & cash equiv. - $ 64,952 64,952
Accounts Rec. - 10,444 10,444
Prepaid Expenses - $ 19,103 $ 19,103
LIABILITIES
Accounts payable $ 7,725 $ 163,030 $ 170,755
EQUITY
Common Stock $ 4,200 $ 104,136 $ 108,336
Accumulated Deficit (11,925) (1,778,670) (1,790,595)
Total Equity (7,725) 1,013,570 1,005,845
Total Liabilities & Equity $ - $ 1,244,206 $ 1,244,206
Operating Statements
From Inception to 6-30-99
Oak Brook AEI Environ- Pro-forma
Combined
Capital I mental, Inc. Surviving
Inception Corp. Renamed
5-15-98 14 Month @6-30-99
Revenue $ - $ - $ -
Expenses Incurred during
the development stage 11,925 1,806,373 1,818,298
Net Loss 11,925 1,788,670 1,800,595
AEI ENVIRONMENTAL, INC.
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
DECEMBER 31, 1999
<PAGE>
EXHIBIT A
AEI Environmental, Inc.
(A Development Stage Company)
BALANCE SHEET
December 31, 1999
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 1,291
Due from Affiliate 10,000
Interest Receivable 5,297
Costs and Estimated Earnings
In Excess of Billings 50,000
Prepaid Expenses 66,054
Total Current Assets $ 132,642
PROPERTY AND EQUIPMENT
Furniture and Fixtures 52,069
Computer Equipment and Software 20,458
Leasehold Improvements 25,819
_______
98,346
Less: Accumulated Depreciation (36,107)
_______
Net Property and Equipment $ 62,239
OTHER ASSETS
Patents 77,719
Non-Compete Agreement (Net of
Accumulated Amortization of $33,379) 66,621
Goodwill (Net of Accumulated Amortization
of $45,083) 630,238
Other Intangible Asset (Net of Accumulated
Amortization of $6,920) 28,080
Loans Receivable 150,000
Deposits 3,633
_______
Total Other Assets 956,291
TOTAL ASSETS $1,151,172
<PAGE>
EXHIBIT A
AEI Environmental, Inc.
(A Development Stage Company)
BALANCE SHEET
December 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank Overdraft $ 46,916
Current Portion - Capital Lease Obligations 4,246
Loans Payable-Related Party 79,407
Accounts Payable 303,271
Accrued Expenses 235,713
Total Current Liabilities $ 669,553
LONG-TERM LIABILITIES
Long-Term Portion - Capital Lease Obligations 5,597
STOCKHOLDERS' EQUITY
Common Stock, No Par Value
40,000,000 Shares Authorized;
8,957,035 Shares Issued and Outstanding 3,751,540
Preferred Stock, $100 Par Value,
10,000,000 Shares Authorized; 0 Shares
Issued and Outstanding -
Stock Subscriptions Receivable (1,000)
Retained Deficit (3,274,518)
__________
Total Stockholders' Equity 476,022
_______
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,151,172
<PAGE>
EXHIBIT B
AEI Environmental, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the Six Months ended December 31, 1999
Six Months
ended
December 31, 1999
___________________
Expenses
Research and Development Expenses $ 566,907
Loss on Contract -
Operating Expenses 919,071
Total Expenses 1,485,978
Loss From Development Stage Activities (1,485,978)
___________________
Other Income/(Expense)
Miscellaneous Income 5,147
Interest Expense (817)
___________________
Total Other Income/(Expense) 4,330
___________________
NET LOSS $ (1,481,648)
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT C
AEI Environmental, Inc.
Statements of Changes in Stockholders' Equity and
Retained Deficit Accumulated During the Development Stage
For the Nine Months Ended December 31, 1999
Agtech Environmental, Inc. AEI Environ. Deficit
Class A Class B Class C (F/K/A Oak Accum.
$.01 Par Add'l $.01 Par Add'l $.01 Par Add'l Brook Cap. I, During the Stock
Date ofValue Paid-in Value Paid-in Value Paid-in Inc., No Par Development Subscrip. Stockhold.
Trans. Common Capital Common Capital Common Capital Value Common Stage Receiv. Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance July
1, 1999 32,024 1,749,674 23,871 791,129 48,241 157,301 4,200 (1,792,870) 0 1,013,570
Sale of stock 5,400 534,600 540,000
Subscriptions
of Stock Sept.,
1999 4,100 36,900 (41,000) 0
Exercise of
stock
options Sept.,
1999 1,000 2,000 3,000
Common Stock
Retired at
Time of Merger09/13 (42,524)(2,321,174) (25,871) (791,129) (48,241) (157,301) (3,386,240)
Common Stock
(no par value)
Issued at Time
of Merger
09/13 3,386,240 3,386,240
Sale of
Stock 361,100 40,000 401,100
Net loss for
the Six
Months Ended
December 31,
1999
12/31 (1,481,648) (1,481,648)
Balance
December 31,
1999 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $3,751,540 $(3,274,518) $ (1,000) $ 476,022
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT D
AEI Environmental, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Six Months ended December 31, 1999
<S> <C>
Six Months
End
December 31, 1999
Cash Flows from Operating Activities
Net Loss $ (1,481,648)
Adjustments to Reconcile Net Loss to
Net Cash (Used) by Operating Activities:
Depreciation and Amortization 58,161
Change in Accounts Receivable 10,444
Change in Interest Receivable (155)
Change in Costs and Estimated
Earnings in Excess of Billings (33,108)
Change in Prepaid Expenses (46,951)
Change in Bank Overdraft 46,916
Change in Accounts Payable 140,241
Change in Accrued Expenses 183,674
Total Adjustments 359,222
Net Cash (Used) by Operating Activities (1,122,426)
Cash Flows From Investing Activities:
Purchase of Property and Equipment (16,418)
Deposits 2,400
Net Cash Provided (Used) by Investing Activities (14,018)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT D
AEI Environmental , Inc.
STATEMENT OF CASH FLOWS
For the Six Months ending December 31, 1999
<S> <C>
Six Months
Ended
December 31, 1999
CASH FLOW FROM FINANCING ACTIVITIES:
Repayments on Loans Receivable $ 15,000
Advance to Affiliate (10,000)
Proceeds from Related Party Loans 79,407
Capital Contributions (Net of Negotiation Fees
of $305,000 944,100
Repayments of Capital Lease Obligations (5,724)
Change in Restricted Cash 50,000
Net Cash Provided by Financing Activities 1,072,783
Net Increase (Decrease) in Cash and Cash
Equivalents (63,661)
Cash and Cash Equivalents, Beginning 64,952
Cash and Cash Equivalents, Ending $ 1,291
Supplemental Disclosures:
Interest Paid $ 817
Income Taxes Paid $ 0
</TABLE>
<PAGE>
<PAGE>
AEI Environmental, Inc.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Development Stage Activities
The Company has been in the development stage since its formation
on April 30, 1998. It expects to design, manufacture, and
install waste treatment and cooling systems for dairy and
livestock operations and to supply necessary chemical products to
system users.
The Company expects to negotiate contacts with commercial
livestock operations for the installation of these systems and
may finance these contracts through a series of progress payments
from the customer or by granting credit to the customer until the
system begins operating.
The Company is relying on its own estimates of the size of the
potential market for its products based on trends showing
increases in size of livestock and dairy operations, the growing
environmental sensitivity and resulting economic stimuli to deal
with waste products in a safe and controlled manner, and its
assumption that productivity increases brought about by its
products will create economic advantages which will justify their
costs.
The Company expects to evolve from the development stage to the
operating stage with the continuing refinement of its product
lines and to commence delivering systems under contracts in the
second quarter of this fiscal year.
(b) Method of Accounting
Assets, liabilities, revenues and expenses are recognized on the
accrual method of accounting, with revenues and costs of
installation to be recognized under the percentage-of-completion
method of accounting for contracts. Under the percentage of
completion method, income is recognized in the ratio that the
cost incurred bears to the estimated total cost. This method is
used because management considers total cost to be the best
available measure of progress on contracts. Because of inherent
uncertainties in estimating costs, it is at least reasonably
possible that the estimates used will change within the near
term. Adjustments to cost estimates are made periodically, and
expected losses incurred on contracts in progress are charged to
operations in the period such losses are determined. The
aggregate of costs incurred and income recognized on uncompleted
contracts in excess of related billings is shown as a current
asset, and billings in excess of cost and income recognized are
shown as a current liability.
<PAGE>
AEI Environmental, Inc.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) Use of Estimates
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
(d) Basis for Assigning Amounts to Equity Securities Issued for Other
Than Cash
Shares of common stock issued for other than cash have been assigned
amounts equivalent to the fair value of the service or assets
received in the exchange.
(e) Cash and Cash Equivalents
The Company considers all short-term investments in interest-bearing
accounts, securities, and other instruments with an original
maturity of three months or less, to be equivalent to cash.
(f) Allowance for Doubtful Accounts
Accounts receivable are reviewed periodically by management to
determine the adequacy of the allowance for doubtful accounts.
Amounts due from related parties are considered in relation to
their individual agreements. Based upon management's evaluation
as of December 31, 1999, an allowance for doubtful trade accounts
was not considered necessary.
(g) Fixed Assets
Fixed assets, including capitalized equipment acquired by leases,
are stated at cost. Depreciation is computed using the straight-
line and accelerated methods, over the following estimated useful
lives:
Years
Furniture and Fixtures 5
Computer Equipment and Software 5
Leasehold Improvements 5
<PAGE>
2. GOING CONCERN
These financial statements have been prepared under the assumption the
Company will continue its development stage activities and eventually
emerge as a going concern. This assumption is conditioned on the
Company's ability to generate revenue before exhausting its original
capital stake, and/or attracting additional capital. Although no
revenue producing contracts have been signed, management is in the final
stages of negotiations on four separate contracts for the cooling system.
In addition, marketing and sales efforts related to the odor control
product are expected to commence shortly after January 1, 2000. As
described in Note 5, management has also taken steps to attract
additional capital.
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN
THE COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, 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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary ..............................................
Risk Factors.....................................................
Year 2000 Problems May Have an Adverse Effect
Competition
Potential Fluctuations in Quarterly Operating Results
Limited Operating History
Dependence on Third-Party Suppliers
Patents, Trademarks and Proprietary Information
Rapid Technological Changes
Expansion
Government Regulation
Dependence on Key Personnel
Control by Principal Shareholders, Officers and Directors
Issuance of Preferred Stock
Trading Market; Volatility of Stock Price
Possible Need for Additional Financing
Indemnification of Officers and Directors
Dependence Upon Outside Advisors
Rule 144 Sales
Use of Proceeds....................................................
Dilution ..........................................................
Dividend Policy ...................................................
Business ..........................................................
Management's Discussion and Analysis of Financial Condition and
Results of Operations ...........................................
Management ........................................................
Certain Transactions ..............................................
Principal Shareholders ............................................
Description of Capital Stock ......................................
Plan of Distribution ..............................................
Agreements with Armstrong International, Inc.......................
Investor Relations Arrangements ...................................
Legal Matters .....................................................
Experts ...........................................................
Additional Information ............................................
Financial Statements .............................................. F-1
</TABLE>
-------------------------------
<PAGE>
UNTIL ____________________, 2000 (45 DAYS AFTER THE DATE OF THIS
PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE SHARES OF
COMMON STOCK OFFERED HEREUNDER MAY BE REQUIRED TO DELIVER A
PROSPECTUS.
=====================================================================
=====================================================================
AEI ENVIRONMENTAL, INC.
---------------------------------
2,400,000 SHARES
---------------------------------
COMMON STOCK
--------------------------------
PROSPECTUS
-------------------------------
April 18, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Model Business Corporation Act of the State of Colorado ("CMBCA")
provides, in general, that a corporation shall have the power 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, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation), because the person is or was a director or officer
of the corporation. Such indemnity may be against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by the person in connection with such action, suit
or proceeding, if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and if, with respect to any criminal action or proceeding, the
person did not have reasonable cause to believe the person's conduct was
unlawful.
The CMBCA provides, in general, that a corporation shall have the power 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 or suit by or in the
right of the corporation to procure a judgment in its favor because the
person is or was a director or officer of the corporation, against any
expenses (including attorneys' fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such action or suit if
the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation.
The CMBCA provides, in general, that a corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director or officer of the corporation against any liability asserted against
the person in any such capacity, or arising out of the person's status as
such, whether or not the corporation would have the power to indemnify the
person against such liability under the provisions of the law.
The Company's Articles of Incorporation (incorporated by reference herein)
provides for indemnification of directors, officers and other persons as
follows:
To the fullest extent permitted by the CMBCA as the same now exists or may
hereafter be amended, the Corporation shall indemnify, and advance expenses to,
its directors and officers and any person who is or was serving at the
request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise.
The Corporation, by action of its board of directors, may provide
indemnification or advance expenses to employees and agents of the
Corporation or other persons only on such terms and conditions and to the
<PAGE>
extent determined by the board of directors in its sole and absolute
discretion.
The indemnification and advancement of expenses shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any By-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
The Corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to
indemnify him against such liability.
The indemnification and advancement of expenses, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors
and administrators of such officer or director. The indemnification and
advancement of expenses that may have been provided to an employee or
agent of the Corporation by action of the board of directors, shall, unless
otherwise provided when authorized or ratified, continue as to a person who
has ceased to be an employee or agent of the Corporation and shall inure to
the benefit of the heirs, executors and administrators of such a person,
after the time such person has ceased to be an employee or agent of the
Corporation, only on such terms and conditions and to the extent determined
by the board of directors in its sole discretion.
The Company's By-Laws (incorporated by reference herein) provides that:
Right to Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative,
because he is or was a director or an officer of the Corporation or is or
was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee
benefit plan (hereinafter an "Indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the CMBCA, as the same
exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide before such amendment), against all expense, liability and loss
(including attorney's fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
Indemnitee in connection therewith; provided, however, that, except as
provided in the section "Right of Indemnitees to Bring Suit" with respect to
proceedings to enforce rights to indemnification, the Corporation shall
<PAGE>
indemnify any such Indemnitee in connection with a proceeding (or part
thereof) initiated by such Indemnitee only if such proceeding (or part
thereof) was authorized by the board of directors of the Corporation.
Right to Advancement of Expenses. The right to indemnification conferred in
the section "Right to Indemnification" of this Article shall include the
right to be paid by the Corporation the expenses (including attorney's fees)
incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the CMBCA requires, an advancementof
expenses incurred by an Indemnitee in his capacity as a director or officer
(and not in any other capacity in which service was or is rendered by such
Indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking,
by or on behalf of such Indemnitee, to repay all amounts so advanced if it
shall ultimately be determined by final judicial decision from which there is
no further right to appeal that such Indemnitee is not entitled to be
indemnified for such expenses under this section or otherwise. The rights to
indemnification and to the advancement of expenses conferred in this section
and the section "Right to Indemnification" of this Article shall be contract
rights and such rights shall continue as to an Indemnitee who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of
the Indemnitee's heirs, executors and administrators. Any repeal or
modification of any of the provisions of this Article shall not adversely
affect any right or protection of an Indemnitee existing at the time of such
repeal or modification.
Right of Indemnitees to Bring Suit. If a claim under the section "Right to
Indemnification" or "Right to Advancement of Expenses" of this Article is not
paid in full by the Corporation within sixty (60) days after a written claim
has been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
(20) days, the Indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole
or in part in any such suit, or in a suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking,
the Indemnitee shall also be entitled to be paid the expenses of prosecuting
or defending such suit. In (1) any suit brought by the Indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by the
Indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (2) in any suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final
adjudication that, the Indemnitee has not met any applicable standard for
indemnification set forth in the CMBCA. Neither the failure of the
Corporation (including its board of directors, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of
such suit that indemnification of the Indemnitee is proper in the
circumstances because the Indemnitee has met the applicable standard of
conduct set forth in the CMBCA, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or its
stockholders) that the Indemnitee has not met such applicable standard of
conduct, shall create a presumption that the Indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee
to enforce a right to indemnification or to an advancement of expenses
hereunder, or brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving that
the Indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Article or otherwise shall be on the Corporation.
<PAGE>
Non-Exclusivity of Rights. The rights to indemnification and to the advancement
of expenses conferred in this Article shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, the
Corporation's Articles of Incorporation as amended from time to time, these
By-Laws, any agreement, any vote of stockholders or disinterested directors
or otherwise.
Insurance. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or
loss under the CMBCA.
Indemnification of Employees and Agents of the Corporation. The Corporation
may, to the extent authorized from time to time by the board of directors,
grant rights to indemnification and to the advancement of expenses to any
employee or agent of the Corporation to the fullest extent of the provisions
of this Article with respect to the indemnification and advancement of
expenses of directors and officers of the Corporation.
The directors and officers of the Company are covered by a policy of
liability insurance.
ITEM 2. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the sale of the Shares are estimated as
follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........... $ 3,350
Legal fees and expenses....................................... 60,000
Accounting fees and expenses.................................. 10,000
Miscellaneous................................................. 4,880
---------
TOTAL....................................................... $ 75,000
</TABLE>
<PAGE>
ITEM 3. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) that, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated
by reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof;
(2) that before any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the meaning
of Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition
to the information called for by the other items of the applicable form;
(3) that every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes 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 offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof;
(4) to respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form SB-1
under the Securities Act of 1933, within one business day of receipt of any
such request, and to send the incorporated documents by first class mail or
other equally prompt means, including information contained in documents filed
after the effective date of the registration statement through the date of
responding to such request; and
(5) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
<PAGE>
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to irectors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20 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 Securities Act and is therefore unenforceable. If
a claim of 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 a successful defense of any action,
suit or proceeding) is asserted 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 Securities Act and will be governed by the final
adjudication of such issue.
ITEM 4. UNREGISTERED SECURITIES ISSUED OR SOLD WITHIN ONE YEAR.
Oak Brook Capital I, Inc. ("Oak Brook") was incorporated under the laws of
the State of Colorado on May 15, 1998. It was incorporated as a "blind pool"
or "blank check" company for the purpose of seeking to acquire one or more
properties or businesses. The Company elected to voluntarily file a
registration statement in order to become a reporting company under the
Securities Exchange Act of 1934, as amended (the "34 Act").
The Plan of Merger was duly adopted by the Boards of Directors of the
respective corporations on September 13, 1999, and approved by the Board of
Directors and majority vote of the shareholders of the Company on September
13, 1999, and by the shareholders of AEI on September 13, 1999, in the manner
prescribed by the Delaware General Corporation Law. The number of shares
voted for the Plan of Share Merger was, with respect to each corporation,
sufficient for approval as set forth below.
CONVERSION OF SHARES IN THE MERGER
The mode of carrying into effect the Merger provided in the Plan of
Merger, and the manner and basis of converting the shares of AEI into shares
of the Company are as follows:
The Company Common Stock. No Shares of Common Stock, no par
value, of the Company issued and outstanding at the effective time of the
Merger were converted as a result of the Merger, and all of such shares
shall remained issued shares of Common Stock of the Company.
AEI Common Stock. At the effective time of the Merger, (i) each
share of $0.01 par value Class A Common Stock of AEI issued and outstanding
was converted into and became one (1) share of Common Stock of the
Company; (ii) each share of $0.01 par value Class B Common Stock of AEI issued
and outstanding was converted into and became 0.28249 shares of Common
Stock of the Company; and (iii) each share of $0.01 par value Class C Common
Stock of AEI issued and outstanding was converted into and became two
thirds (2/3) shares of Common Stock of the Company. Each holder of
outstanding Common Stock of AEI surrendered shares of Common Stock of AEI,
regardless of class, for shares of the Company, upon the ratios set forth
above.
EFFECT OF THE MERGER
At the effective time of the Merger, AEI succeeded to, without other
transfer, possess and enjoy, all the rights, privileges, immunities,
powers and franchises both of a public and a private nature, and became subject
to all the restrictions, disabilities and duties of the Company, and all the
rights, privileges, immunities, powers and franchises of the Company on
whatever account, for stock subscriptions as well as for all other things in
action or belonging to the Company.
<PAGE>
ITEM 5. EXHIBITS.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
EXHIBITS
TO
FORM SB-1
REGISTRATION STATEMENT FILED PURSUANT TO
THE SECURITIES ACT OF 1933
---------------------------
AEI ENVIRONMENTAL, INC.
EXHIBIT INDEX
Exhibit No. Exhibit
__________ _______
x 2.1 Articles of Merger between Oak Brook Capital I, Inc.
and AEI Environmental, Inc., dated September 29, 1999;
x 2.2 Plan of Merger dated September 15, 1999;
# 3(a) Articles of Incorporation
# 3(b) Bylaws
# 4(a) Agreements Defining Certain Rights of Shareholders
# 4(b) Specimen Stock Certificate
x 5.1 Opinion of Mark T. Thatcher, P.C. regarding the legality
of the securities being offered hereby.
7 Not applicable
<PAGE>
Exhibit No. Exhibit
___________ _______
9 Not applicable
x 10.1 Issuance of Restricted Shares from Authorized Shares
x 10.2 Opinion to Transfer Agent Authorizing Issuance of
Restricted Shares from Authorized Shares
11 Not applicable
14 Not applicable
16 Not applicable
x 20.1 Board of Director's Resolution's authorizing merger and
name change from Oak Brook Capital I, Inc. to AEI
Environmental, Inc.;
21 Not applicable
x 23.1 Consent of Counsel
(contained in Exhibit 5.1)
x 24.1 Consent of Dennis W. Bersch, CPA.
27 Financial Data Schedule
28 Not applicable
# 99.1 Safe Harbor Compliance Statement
____________________________
x incorporated herein by reference from Registrant.s Amendment
To Form 8-K, filed December 6, 1999
# incorporated herein by reference from Registrant's Third
Amendment to Form 10SB12G, filed July 29, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned hereunto duly authorized.
AEI ENVIRONMENTAL, INC.
By: /s/ Mark A. Margason
________________________________
MARK A. MARGASON
Secretary and Treasurer
Date: April 21, 2000
Pursuant to the requirements of the Securities Act of 1933, this
report has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
________________ ______________ _________________
/s/Mark Margason Secretary April 21, 2000
& Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Mark Margason, his true and lawful attorneys-
in-fact and agents with full power of substitution and re-substitution, for
then and in their name, place and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
registration statement and to file the same with all exhibits thereto, and
all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
they might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
This power of attorney may be executed in counterparts.
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.
April 18, 2000
CONFIDENTIAL
Office of Small Business Policy
Division of Corporation Finance
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: AEI Environmental, Inc.-
Opinion re Legality of Securities to be Issued
Ladies and Gentlemen:
We have acted as special counsel for AEI Environmental, Inc., a Colorado
corporation (the "Registrant"), in connection with the execution and delivery
of a registration statement on Form SB-1 (the "Registration Statement"),
filed pursuant to the Securities Act of 1933 on behalf of the Registrant
and certain Selling Shareholders.
In connection with this matter, we have examined the originals or copies
certified or otherwise identified to my satisfaction of the following:
(a) Articles of Incorporation of the Registrant, as amended to date;
(b) By-laws of the Registrant, as amended to date;
(c) Certificate from the Secretary of State of the State of Colorado,
dated as of a recent date, stating that the Registrant is duly
incorporated and in good standing in its state of incorporation;
(d) Certificate from the Secretary of State of the State of Colorado,
dated as of a recent date, stating that the Registrant is duly qualified
to do business and is in good standing in its state of
incorporation and has filed all required reports and paid
all taxes due;
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(e) Executed copy of the Registration Statement;
In addition to the foregoing, we have also relied as to matters of fact upon
the representations made by the Registrant in compliance with due diligence
requirements submitted by my office and related certificates and upon
representations made by the Registrant. Based upon and in reliance upon the
foregoing, and after examination of such corporate and other records,
certificates and other documents and such matters of law as we have deemed
applicable or relevant to this opinion, it is our opinion that:
1. The Registrant has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Colorado and
has full corporate power and authority to own its properties and conduct
its businesses; the Registrant is duly qualified as a foreign corporation
and is in good standing in Illinois and in each other jurisdiction in
which the ownership or leasing of property requires such qualification
(except for those jurisdictions in which the only material consequence of
a failure to be so qualified, other than potential penalties not individually
or in the aggregate material to the Registrant taken as a whole, is that
actions may not be brought in the courts of such jurisdictions by the
Registrant until its failure to so qualify, if required, has been cured);
2. The authorized capital stock of the Registrant consists of 40,000,000
shares of Common Stock, .001 par value, of which there are outstanding
10,653,119 shares. Proper corporate proceedings have been taken validly to
authorize such authorized capital stock; all the outstanding shares of such
capital stock (including the Shares) have been duly and validly issued and are
fully paid and nonassessable; the shareholders of the Registrant have no
preemptive rights with respect to the Common Stock of the Registrant;
3. The Registrant timely files reports and is current with respect to all
reports required to be filed on behalf of the Registrant, pursuant to Section
12, 13 and/or 15 of the Securities Exchange Act of 1934 (the "Exchange Act")
and, to the best of my knowledge, no stop order suspending the effectiveness
of any registration statement, Exchange Act filing, or suspending or
preventing trading on the Over-the-Counter ("OTC") Bulletin Board is in effect
and no proceedings for that purpose have been instituted or are pending or
contemplated by the N.A.S.D.;
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4. The Registrant's reports (except as to the financial statements contained
therein, as to which we express no opinion) comply as to form in all material
respects with the requirements of the Exchange Act and with the rules and
regulations of the Securities and Exchange Commission thereunder;
5. On the basis of information developed and made available to us, the
accuracy or completeness of which has not been independently verified by us,
we have no reason to believe that the Registration Statement or the Exchange
Act reports (except as to the financial statements contained therein, as to
which we express no opinion) contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading;
6. The information required to be set forth in the Registration Statement is,
to the best of our knowledge, accurately and adequately set forth therein in
all material respects or no response is required with respect to such items,
and, to the best of my knowledge, the description of the Registrant's plans and
agreements granted thereunder accurately and fairly represents the information
required to be shown with respect to said plans, agreements, and reports by
the Exchange Act and the rules and regulations of the Securities and Exchange
Commission thereunder;
7. The terms and provisions of the capital stock of the Registrant conform to
the description thereof contained in all filed reports under the caption
"Description of Common Stock" and have been reviewed by me and insofar as
such statements constitute a summary of the law or documents referred to
therein, are correct in all material respects, and the forms of certificates
evidencing the Common Stock comply with the Colorado law;
8. The descriptions in the filed reports and Registration Statement of material
contracts and other material documents are fair and accurate in all material
respects; and we do not know of any franchises, contracts, leases, licenses,
documents, statutes or legal proceedings, pending or threatened, which in our
opinion is of a character required to be described in the filed reports and
Registration Statement or to be filed as exhibits to the reports or
Registration Statement, which are not described and filed as required;
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9. The Shares have been duly authorized, executed, and delivered by
the Registrant and constitute the valid and legally binding obligation of the
Registrant except as the indemnity provisions thereof may be limited by the
principles of public policy;
10. To the best of our knowledge and belief after due inquiry, there are no
holders of Common Stock or other securities of the Registrant having
registration rights with respect to such securities on account of the filing
of a registration statement who have not effectively waived such rights; and
11. No consent, approval, authorization, or order of any court or
governmental agency or body is required for the consummation by the
Registrant of the transactions on its part contemplated by the Registration
Statement, except such as have been obtained under the Exchange Act
and such as may be required under state or other securities or blue sky
laws in connection with the distribution of the Shares to the Selling
Shareholders.
In addition, we have participated in conferences with representatives and
accountants of the Registrant at which the contents of the Registration
Statement were discussed. Although we have not verified the accuracy or
completeness of the statements contained in the Registration Statement
(other than the caption "Description of Common Stock"), we advise you that
on the basis of foregoing, we have no reason to believe that the Registration
Statement, as of the effective date, contained any untrue statements of
a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading (except
in each such case for the financial statements or other financial data
contained in the Registration Statement as to which we are not called upon
to and do not express any opinion).
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This letter is furnished to you as for filing purposes on behalf of the
Registrant, and is solely for the benefit of the United States Securities and
Exchange Commission.
Respectfully,
/s/ Nadeau & Simmons, P.C.
NADEAU & SIMMONS, P.C.
CONSENT OF COUNSEL
We hereby consent to the use of our name as legal counsel in the Registration
Statement filed on Form SB-1 pursuant to the Securities Act of 1933 (the
("Act") by AEI Environmental, Inc..
NADEAU & SIMMONS, P.C.
/S/ Nadeau & Simmons, P.C.
By:_____________________________
Providence, RI
April 18, 2000
CONSENT OF BERSCH ACCOUNTING, S.C.,
INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Prospectus of AEI Environmental, Inc. that is made a part of the Registration
Statement (Form SB-1) of AEI Enviornmental, Inc. for the registration of
approximately 2,000,000 shares of its common stock and to the incorporation by
reference therein of our report dated June 30, 1999, with respect to the
financial statements and schedules of AEI Environmental, Inc., as amended, filed
with the Securities and Exchange Commission.
/s/ Bersch Accounting
Milwaukee, Wisconsin
April 18, 2000
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT FOR
FORWARD LOOKING STATEMENTS
MARKET RISKS AND OTHER BUSINESS FACTORS
In passing the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"), 15 U.S.C.A. Sections 77z 2 and 78u 5 (Supp. 1996), Congress encouraged
public companies to make "forward looking statements" by creating a safe
harbor to protect companies from securities law liability in connection with
forward looking statements. AEI Environmental, Inc. ("the "Company")
intends to qualify both its written and oral forward looking statements for
protection under the Reform Act and any other similar safe harbor provisions.
"Forward looking statements" are defined by the Reform Act. Generally,
forward looking statements include expressed expectations of future events
and the assumptions on which the expressed expectations are based. All
forward looking statements are inherently uncertain as they are based on
various expectations and assumptions concerning future events and they are
subject to numerous known and unknown risks and uncertainties which could
cause actual events or results to differ materially from those projected.
Due to those uncertainties and risks, the investment community is urged not
to place undue reliance on written or oral forward looking statements of the
Company. The Company undertakes no obligation to update or revise this Safe
Harbor Compliance Statement for Forward Looking Statements (the "Safe Harbor
Statement") to reflect future developments. In addition, the Company
undertakes no obligation to update or revise forward looking statements to
reflect changed assumptions, the occurrence of unanticipated events or
changes to future operating results over time.
The Company provides the following risk factor disclosure in connection with
its continuing effort to qualify its written and oral forward looking
statements for the safe harbor protection of the Reform Act and any other
similar safe harbor provisions. Important factors currently known
to management that could cause actual results to differ materially from
those in forward looking statements include the disclosures incorporated
herein by reference and set forth in Item 5, Other Information, Business
Plan, of Form 8-K/A, filed on December 6, 1999 with the Securities and
Exchange Commission ("SEC") and also include the following:
Liquidity
The Company is considering the sale of equity in connection with a secondary
offering later in 2000. The Company does not have any underwriting
commitments for such sale of equity. There can be no assurance that any such
sale will close by such date or at all or that the Company will continue to
consider such an offering.
Litigation And Government Investigations
Numerous federal and state civil and criminal laws govern power plant
operations, development and ancillary activities. In general, these laws
provide for various fines, penalties, multiple damages, assessments and
sanctions for violations.
Evolving Industry Standards; Rapid Technological Changes
The Company's success in its business will depend in part upon its continued
ability to enhance its existing techniques and services, to introduce new
techniques and services quickly and cost effectively to meet evolving client
needs and to respond to emerging industry standards and other technological
changes. There can be no assurance that the Company will be able to respond
effectively to new industry standards. Moreover, there can be no assurance
that competitors of AEI Environmental, Inc. will not develop
competitive techniques, or that any such competitive techniques will not have
an adverse effect upon the Company's operating results.
Moreover, management intends to continue to implement "best practices" and
other established process improvements in its operations going forward. There
can be no assurance that the Company will be successful in refining,
enhancing and developing its operating strategies and systems going forward,
that the costs associated with refining, enhancing and developing such
strategies and systems will not increase significantly in future periods.
Volatility Of Stock Price
The Company believes factors such as liquidity and financial resources and
quarter to quarter and year to year variations in financial results could
cause the market price of the Company's common stock to fluctuate
substantially. Any adverse announcement with respect to such matters or any
shortfall in revenue or earnings from levels expected by management could have
an immediate and material adverse effect on the trading price of the Company's
common stock in any given period. As a result, the market for the Company's
common stock may experience material adverse price and volume fluctuations
and an investment in the Company's common stock is not suitable for any
investor who is unwilling to assume the risk associated with any such price
and volume fluctuations.
