<PAGE>
As filed with the Securities and Exchange Commission on November 20, 1997.
Registration No. 333-35205
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
AMERICAN EDUCATIONAL PRODUCTS, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED ON ITS CHARTER)
Colorado 84-1012129
- --------------------------------- ----------------------
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
(303) 527-3230
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(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
Clifford C. Thygesen
American Educational Products, Inc.
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
(303) 527-3230
-----------------------------------------------------------
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER OF
AGENT FOR SERVICE OF PROCESS)
Copies to:
Clifford L. Neuman, Esq.
David H. Drennen, Esq.
Neuman & Drennen, LLC
1507 Pine Street
Boulder, Colorado 80302
(303) 449-2100
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
- -----------------------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum
Each Class Offering Aggregate Amount of
of Securities Amount to be Price Per Offering Registration
Registered Registered Share (1) Price (1) Fee
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
$.05 par value 916,298 (2) $10.00 (3) $9,162,980 $2,776.67
- -----------------------------------------------------------------------------
Total: $9,162,980 $2,776.67
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Reflects 916,298 shares of Common Stock issuable upon exercise of
outstanding Common Stock Purchase Warrants (the "Warrants" ) that
will be issued by the Company as a dividend to its Common
Stockholders of record on June 5, 1997. The Warrants will be issued
immediately after the effective date of this Registration Statement.
(3) Based upon the $10.00 per share exercise price of the Warrants.
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.
<PAGE>
<PAGE>
AMERICAN EDUCATIONAL PRODUCTS, INC.
Item No. and Heading
In Form S-3 Location
Registration Statement In Prospectus
---------------------- --------------
1. Forepart of the Registration Statement Forepart of Registration
and outside front cover of Prospectus Statement outside front
cover page of Prospectus
2. Inside front and outside back cover Inside front and outside
pages of Prospectus back cover page of
Prospectus
3. Summary Information, Risk Factors and Risk Factors
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Determination of Offering
Price
6. Dilution Dilution
7. Plan of Distribution Plan of Distribution
8. Description of Securities to be Description of Securities
Registered
9. Interest of Named Experts and Counsel Legal Matters
10. Material Changes Recent Developments
11. Incorporation of Certain Information Incorporation of Certain
by Reference Information by Reference
12. Disclosure of Commission Position on Indemnification
Indemnification for Securities Act
Liabilities
<PAGE>
<PAGE>
PROSPECTUS
AMERICAN EDUCATIONAL PRODUCTS, INC.
__________________
916,298 Shares
$.05 par value Common Stock
This Prospectus relates to the offer and sale by American Educational
Products, Inc., a Colorado corporation (the "Company"), of 916,298 shares
of its $.05 par value common stock (the "Common Stock") which are issuable
by the Company pursuant to the exercise of Common Stock Purchase Warrants
(the "Warrants") that will be issued by the Company as a dividend to its
Common Stockholders of record on June 5, 1997 (the "Warrantholders"). The
"Warrant Dividend" was declared by the Company's Board of Directors in
response to a public investor accumulating approximately 30% of the
Company's total issued and outstanding shares. The Warrants will be issued
immediately after the effective date of this Registration Statement. Each
Warrant is exercisable for three (3) years to purchase one (1) share of the
Company's Common Stock at an exercise price of $10.00 per share, subject to
adjustment under circumstances. The Warrants are redeemable by the Company
upon thirty (30) days notice at a redemptions price of $.01 per warrant if
the last sale price for the Company's Common Stock exceeds 110% of the then
current exercise price for twenty (20) consecutive trading days. Upon
exercise of the Warrants, the Warrantholders may offer all 916,298 shares
of the Company's Common Stock in transactions in the over-the-counter
market at prices obtainable at the time of sale, or in privately negotiated
transactions at prices determined by negotiation. The Warrantholders may
effect such transactions by selling the shares to or through securities
broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions, or commissions from the Warrantholders,
and/or the purchasers of the shares for whom such broker-dealers may act as
agent or to whom they sell as principal, or both (which compensation as to
a particular broker-dealer may be in excess of customary commissions). (See
"PLAN OF DISTRIBUTION.")
Assuming the Warrantholders exercise all Warrants to purchase 916,298
shares, the Company will receive gross proceeds of $9,162,980. The Company
will not receive any of the proceeds from the resale of the shares by the
Warrantholders. The Company has agreed to pay all of the expenses incurred
in connection with the registration of the shares, which are estimated to
be $30,000.
The Company's Common Stock is traded on the Nasdaq SmallCap Market
under the symbol AMEP. On November 10, 1997, the closing price was $6.50
per share as reported by Nasdaq.
------------------------
FOR DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED IN
EVALUATING AN INVESTMENT IN THE COMPANY, SEE "RISK FACTORS" COMMENCING AT
PAGE 10 HEREOF.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSIONS, NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Price to Underwriting Proceeds to
Warrantholders(1) Discount(2) Company(3)
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Per Share: $10.00 * $10.00
Total $9,162,980 * $9,162,980
- ---------------------------------------------------------------------
</TABLE>
The Date of This Prospectus is November ____, 1997.
(1) Reflects the exercise by the Warrantholders of all outstanding Warrants
to purchase an aggregate of 916,298 shares of Common Stock at an
exercise price of $10.00 per share. (see "DESCRIPTION OF SECURITIES-
Warrants.")
(2) The Warrantholders may reoffer their shares in transactions in the
over-the-counter market at prices obtainable at the time of sale or in
privately negotiated transactions at prices determined by negotiation.
The Warrantholders may effect transactions by selling to or through
securities broker-dealers and such broker-dealers may receive
compensation in the form of discounts, concessions, or commissions from
the Warrantholders. While it is impracticable to determine the precise
amount that the Warrantholders will incur, it is anticipated that any
such discounts, selling concessions or commissions will be consistent
with those customarily charged by broker-dealers who are members of the
National Association of Security Dealers, Inc. ("NASD").
(3) Consists of proceeds to the Company from the exercise by the
Warrantholders of all Warrants which are exercisable to purchase
916,298 shares of the Company's Common Stock at an exercise price of
$10.00 per share. Does not reflect deduction of expenses of the
Offering for printing, legal, accounting, transfer agent and
miscellaneous expenses of the Offering, the total of which is estimated
at $30,000, which the Company has agreed to pay. See "USE OF PROCEEDS."
No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those 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 to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction,
or in any jurisdiction in which the person making such offer or
solicitation is not qualified to do so.<PAGE>
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance with the Exchange Act files periodic reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information concerning
the Company can be inspected and copied (at prescribed rates) at the
Commission's Public Reference Section, Room 1024, 450 Fifth Street, N.W.
Judiciary Plaza, Washington, D.C. 20549, as well as at the following
Regional Offices: Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material also may be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549, and are publicly available through the Commission's website at
http:\\www.sec.gov.
The Company has filed a Registration Statement on Form S-3 with the
Commission, Washington, D.C., in accordance with the provisions of the Act.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information pertaining to the shares of Common Stock offered hereby and the
Company, reference is made to the Registration Statement, including the
exhibits and financial statements incorporated therein by reference.
Reference also should be made to the Annual Report to Shareholders and
Annual Report on Form 10-KSB for the year ended December 31, 1996, the
Company's definitive Proxy Statement, and the Company's Quarterly Reports
on Form 10-QSB for the quarters ended March 31, 1997, June 30, 1997 and
September 30, 1997, incorporated by reference into this Prospectus.
Statements herein contained concerning the provisions of any document are
not necessarily complete and, in each instance, reference is made to the
copy of such document filed as an Exhibit to the Registration Statement.
Each such statement is qualified in its entirety by such reference. The
Registration Statement may be obtained from the Commission upon payment of
the fees prescribed therefor and may be examined at the principal office of
the Commission in Washington, D.C.
<PAGE>
Page>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the SEC pursuant to
the Securities Exchange Act of 1934, as amended, are incorporated herein by
reference:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996, SEC File No. 0-16310.
(b) The Company's definitive Proxy Statement for the Annual Meeting of
Shareholders held on June 2, 1997, SEC File No. 0-16310.
(c) The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1997 as filed with the Commission on May 15, 1997, SEC File
No. 0-16310.
(d) The Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1997 as filed with the Commission on August 18, 1997, SEC
File No. 0-16310.
(e) The Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997 as filed with the Commission on November 17, 1997,
SEC File No. 0-16310.
All documents filed by the Company with the Commission pursuant to
Section 13a, 13c, 14 or 15d of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering covered by this
Prospectus will be deemed incorporated by reference into this Prospectus
and to be a part hereof from the date of filing of such documents.
Any statement contained in the above-referenced documents shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in this Prospectus modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
A copy of the documents incorporated by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by
reference to this Prospectus), may be obtained at no charge by a written or
oral request to Clifford C. Thygesen, President, American Educational
Products, Inc., 6550 Gunpark Drive, Suite 200, Boulder, Colorado 80301
(303) 527-3230. In addition, such materials filed electronically by the
Company with the Commission are available at the Commission's worldwide
website at http://www.sec.gov/edgarhp/htm.
<PAGE>
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995 and are thus prospective. Such statements are subject to
risks, uncertainties and other factors which could cause actual results to
differ materially from future results expressed or implied by such
forward-looking statements. Such risks and uncertainties include, but are
not limited to, competitive pressures, changing economic conditions and
other factors, some of which will be outside of the control of the Company.
CAPITAL STOCK INFORMATION
All information with regard to the Common Stock of the Company contained
in this Prospectus, including share and per share information, gives effect
to a one-for-five (1-for-5) reverse stock split effected by the Company on
April 22, 1997.
<PAGE>
<PAGE>
THE COMPANY
The Company is engaged in the manufacture, development, marketing and
distribution of both proprietary and non-proprietary supplemental
educational materials and instructional programs through its two (2)
wholly-owned subsidiaries: Scott Resources, Inc. ("Scott Resources"); and
Hubbard Scientific, Inc. ("Hubbard Scientific"). The executive offices of
the Company are located at 6550 Gunpark Drive, Suite 200, Boulder, Colorado
80301. Its telephone number at that address is (303) 527-3230.
Scott Resources, a wholly-owned subsidiary, manufactures, develops and
markets both proprietary and non-proprietary supplemental educational
materials and instructional programs in the fields of science and
mathematics at its principal manufacturing facility located at 401 Hickory
Street, Fort Collins, Colorado 80524. Its telephone number at that address
is (970) 484-7445.
Hubbard Scientific, another wholly-owned subsidiary, manufactures,
develops and markets both proprietary and non-proprietary supplemental
educational and instructional materials in the field of science. Hubbard
Scientific maintains its principal manufacturing facility at 1120 Halbleib
Road, Chippewa Falls, Wisconsin 54729.
<PAGE>
<PAGE>
RISK FACTORS
Prospective investors should review carefully the following investment
considerations in evaluating the Company and its business:
LIMITED LIQUIDITY AND CAPITAL RESOURCES. At September 30, 1997, the
Company had limited working capital of $1,518,000 based upon current assets
of $4,598,000 and current liabilities of $3,080,000. Of current
liabilities, $2,296,000 represented the principal balance under a revolving
line of credit pursuant to a loan agreement. Although the loan agreement
has a scheduled maturity date of April 30, 2000, it also contains a demand
provision under which the lender has the right to demand repayment of the
entire balance at any time. Even though the Company does not expect to
repay the entire debt within the next twelve months, it is required to
classify the entire loan as a current liability. If the lender did demand
repayment in full during the next twelve months, it would have significant
adverse impact on the Company. Furthermore, the Company experienced
deficits during each of the three years ended December 31, 1996. Those
deficits significantly decreased the Company's liquidity and capital
resources. The Company's liquidity shortfall has adversely affected
operations during 1997. Actions were taken to mitigate the impact of the
liquidity shortfall and those actions were effective during the first nine
months of 1997. Nevertheless, there are no guarantees that the Company can
continue to improve its liquidity.
LACK OF OPERATING PROFITS. For the year ended December 31, 1996, the
Company reported a net loss of $1,095,000. The Company also reported net
losses for each of the two preceding years. For the first nine months of
1997, the Company reported net income of $605,000, an improvement over the
net loss of $(643,000) reported for the first nine months of 1996. The
Company attributes the improved results to an increased market demand for
its products, to a reorganization that significantly reduced operating
costs, and to the sale of an unprofitable division. There are no
guarantees that the Company can continue its profitable performance.
LIMITED FUNDS AVAILABLE FOR OPERATIONS. The Company's Common Stock is
currently trading in a range between $6.00 and $7.00 and per share. It is
unlikely that any of the Warrants will be exercised unless the share price
increases substantially. Accordingly, it is not likely that proceeds of
any warrant exercise will ameliorate the Company's working capital shortage
in the foreseeable future.
EXERCISE PRICE OF WARRANTS. The exercise price of the Warrants was
determined by the Company and bears no direct relationship to the Company's
assets, book value, net worth or operations. The $10.00 per share exercise
price of the Warrants is $5.05 per share greater than the $4.95 per share
net tangible book value of the Company at September 30, 1997.
NO ASSURANCE OF WARRANT EXERCISE. The Warrantholders are under no
obligation to exercise the warrants, and can be expected to do so only if
it is economically reasonable for them to do so. Typically, publicly
traded warrants are not exercised unless exercise is forced, either by the
Company calling them for redemption, or because they are scheduled to
expire; and then they will be exercised only if the exercise price is less
than the market price of the Common Stock. Accordingly, there is no
assurance that the Warrants will be exercised during the Exercise Period.
UNSPECIFIED USE OF PROCEEDS. The monies received by the Company upon
exercise of the Warrants have been allocated generally by the Company to
provide working capital for operations. As such, the Company will utilize
funds as they are received for such purposes and in such proportions as
management deems advisable. While management will apply the proceeds of the
Offering in a manner consistent with their fiduciary duty and in a manner
consistent with the best interests of the Company, there can be no
assurance that the monies received will result in any present or future
improvement in the Company's results of operations.
COMPETITION. The Company faces competition from businesses with
greater resources and larger current market shares. The development of new
products can give a competitor significant market advantage. There can be
no assurance that the Company will be able to acquire and develop new
products or increase its portfolio of products to the extent necessary to
keep it competitive. Due to the Company's lack of operating profits, the
Company has been required to reduce its spending on product development
which could have a material adverse impact upon the Company's future
operations.
PRODUCT PROTECTION. The Company relies on copyrights, trademarks and
trade secrets for protection of its products. Although believed to be
adequate by the Company, this protection is limited, and it is possible for
competitors of the Company to imitate some of the Company's manipulatives
and models, none of which are patented. There can be no assurance that such
limitations, if significant in number and degree, would not have a material
adverse effect on the operations of the Company.
EDUCATIONAL FUNDING. The sale or distribution of the Company's
products is highly dependent upon public funding for elementary, middle and
secondary school systems. As a result, the continued viability of those
markets for the Company's products is dependent upon continued support and
funding for public education.
LIMITED LIQUIDITY IN TRADING MARKET OF SHARES. Prior to the Offering,
the Company's Common Stock has been thinly traded on the NASDAQ SmallCap
Market. Continuation of low volume trading may adversely affect the
liquidity of large holdings and may contribute to high volatility of the
price of the Company's Common Stock.
NASDAQ SYSTEM MAINTENANCE REQUIREMENTS; POSSIBLE DELISTING OF
SECURITIES FROM NASDAQ SYSTEM; RISKS OF LOW-PRICED STOCKS. The Securities
and Exchange Commission (the "Commission") has approved rules imposing more
stringent criteria for the listing of securities on NASDAQ, including
standards for maintenance of such listing. If the Company is unable to
satisfy NASDAQ's maintenance criteria in the future, its securities could
be de-listed, and trading, if any, would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or the "Electronic
Bulletin Board" of the National Association of Securities Dealers, Inc.
("NASD"). As a consequence of such de-listing, an investor could find it
more difficult to dispose of, or to obtain accurate quotations as to the
price of, the Company's securities.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks, in
connection with trades in any stock defined as a penny stock. The
Commission recently adopted regulations that generally define a penny stock
to be any equity security that has a market price of less than Five Dollars
($5.00) per share, subject to certain exceptions. Such exceptions include
any equity security listed on NASDAQ and any equity security issued by an
issuer that has (i) net tangible assets of at least Two Million Dollars
($2,000,000), if such issuer has been in continuous operation for three (3)
years, (ii) net tangible assets of at least Five Million Dollars
($5,000,000), if such issuer has been in continuous operation for less than
three (3) years, or (iii) an average annual revenue of at least Six Million
Dollars ($6,000,000), if such issuer has been in continuous operation for
less than three (3) years. Unless an exception is available, the
regulations require the delivery, prior to any transaction involving a
penny stock, of a disclosure schedule explaining the penny stock market and
the risks associated therewith.
If the Company's securities are not quoted on NASDAQ, or the Company
does not have Two Million Dollars ($2,000,000) in net tangible assets,
trading in the Company's securities would be covered by Rules 15g-1 through
15g-6 promulgated under the Exchange Act for non-NASDAQ and non-exchange
listed securities. Under such rules, broker-dealers who recommend such
securities to persons other than established customers and accredited
investors must make a special written suitability determination that the
penny stock is a suitable investment for the purchaser and receive a
purchaser's written agreement to the transaction. Securities are exempt
from these rules if the market price of the Common Stock is at least Five
Dollars ($5.00) per share.
Although the Company's Common Stock will, as of the date of this
Prospectus, be outside the definitional scope of a penny stock, as it will
be listed on NASDAQ, in the event the Common Stock was subsequently to
become characterized as a penny stock, the market liquidity for the
Company's securities could be severely affected. In such an event, the
regulations on penny stocks could limit the ability of broker-dealers to
sell the Company's securities and adversely affect the ability of
purchasers of the Company's securities to sell their securities in the
secondary market.
DIVIDEND. No dividend has been paid on the Company's Common Stock
since 1990, nor, by reason of its present financial status, its
contemplated financial requirements and restrictive covenants in its
revolving loan agreement, does the Company contemplate or anticipate paying
any dividends upon its Common Stock in the foreseeable future. (See
"DESCRIPTION OF SECURITIES.")
SHARES ELIGIBLE FOR FUTURE SALE. As of September 30, 1997, 917,872
shares of the Company's $.05 par value Common Stock, were issued and
outstanding, 78,000 of which are "restricted securities" and under certain
circumstances may, in the future, be sold pursuant to a registration under
the Securities Act or in compliance with Rule 144 adopted under the
Securities Act. In general, under Rule 144, subject to the satisfaction of
certain other conditions, a person, including an affiliate of the Company,
who has beneficially owned restrictive shares of Common Stock for at least
one (1) year is entitled to sell, within any three-month (3-month) period,
a number of shares that does not exceed the greater of one percent (1%) of
the total number of outstanding shares of the same class, or if the Common
Stock is quoted on NASDAQ or a stock exchange, the average weekly trading
volume during the four (4) calendar weeks immediately preceding the sale.
A person who presently is not and who has not been an affiliate of the
Company for at least three (3) months immediately preceding a sale and who
has beneficially owned the shares of Common Stock for at least two (2)
years is entitled to sell such shares under Rule 144 without regard to any
of the volume limitations described above. The Company also may grant
options to purchase an additional 87,600 shares of Common Stock pursuant to
the Incentive Stock Option Plan (the "Plan"). The Company plans to
register for sale under the Act all shares issuable upon exercise of the
options granted pursuant to the Plan, such that when the options are
exercised and the shares issued, they will be free-trading, except for
certain limitations imposed upon directors, officers and affiliates who
exercise options granted under such Plan. No prediction can be made as to
the effect, if any, that sales of shares of Common Stock or the
availability of such shares for sale will have on the market prices
prevailing from time-to-time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely effect prevailing prices for the Common Stock and could impair
the Company's ability to raise capital in the future through the sale of
equity securities. Actual sales or the prospect of future sales of shares
of Common Stock under Rule 144 may have a depressive effect upon the price
of the Common Stock and the market therefor.
FUTURE SALES OF PREFERRED STOCK. The Company's Articles of
Incorporation, as amended, authorize the issuance of up to 50,000,000
shares of preferred stock. The Board of Directors has been granted the
authority to fix and determine the relative rights and preferences of
preferred shares, as well as the authority to issue such shares, without
further stockholder approval. As a result, the Board of Directors could
authorize the issuance of a series of preferred stock which would grant to
holders preferred rights to the assets of the Company upon liquidation, the
right to receive dividend coupons before dividends would be declared to
common stockholders, and the right to the redemption of such shares,
together with a premium, prior to the redemption of Common Stock. Common
stockholders have no redemption rights. In addition, the Board could issue
large blocks of voting stocks to fend against unwanted tender offers or
hostile takeovers without further shareholder approval. (See "DESCRIPTION
OF SECURITIES.")
FUTURE SALES OF ADDITIONAL SHARES. The Company's Board of Directors
has the authority to issue additional shares of Common Stock and to issue
options and warrants to purchase shares of the Company's Common Stock
without shareholder approval. Future issuance of Common Stock could be at
values substantially below the exercise price of the Warrants, and
therefore could represent further substantial dilution to investors in this
Offering. In addition, the Board could issue large blocks of voting stock
to fend off unwanted tender offers or hostile takeovers without further
shareholder approval. The Company has outstanding options exercisable to
purchase up to 151,700 shares of Common Stock at a weighted average
exercise price of $4.35 per share; warrants exercisable to purchase up to
78,000 shares of Common Stock at weighted average exercise price of $4.50
per share. Exercise of the warrants and options could have a further
dilutive effect on existing stockholders and investors in this Offering.
(See "DESCRIPTION OF SECURITIES.")
DILUTION. As of September 30, 1997, the Company had sold or issued the
outstanding 917,872 shares of Common Stock at an average cost per share of
approximately $7.11, which is $2.89 per share less than the Warrant
exercise price. At September 30, 1997, the Company had a net tangible book
value of $4,544,000 or $4.95 per share of Common Stock outstanding, based
on 917,872 shares issued and outstanding. Investors in this Offering
exercising Warrants may sustain an immediate substantial dilution of their
exercise price per share of $10.00.
NEED FOR CURRENT PROSPECTUS. The Warrants may not be exercised unless
the Company maintains with the Commission a current and effective
Registration Statement and Prospectus covering the shares of Common Stock
issuable upon their exercise. While the Company has undertaken to do so
and plans to do so, there can be no assurance that a current Registration
Statement and Prospectus will be in effect when any of the Warrants are
attempted to be exercised.
MARKET OVERHANG FROM WARRANTS AND OPTIONS. Immediately prior to the
Offering, the Company had outstanding 245,700 warrants and options. To the
extent that such stock options or warrants are exercised, dilution to the
interests of the Company's stockholders may occur. Exercise of these
options or warrants, or even the potential of their exercise or conversion,
may have an adverse effect on the trading price and market for the
Company's Common Stock. The holders of the options or warrants are likely
to exercise at times when the market price for the shares of Common Stock
exceeds the exercise price of the options or warrants. Accordingly, the
issuance of shares of Common Stock upon exercise of the options or warrants
may result in dilution of the equity represented by the then outstanding
shares of Common Stock held by other shareholders. Holders of the options
or warrants can be expected to exercise them at a time when the Company,
would, in all likelihood, be able to obtain any needed capital on terms
which are more favorable to the Company than the exercise terms provided by
such options or warrants. (See "DESCRIPTION OF SECURITIES.")
<PAGE>
<PAGE>
DILUTION
The net tangible book value of the Company at September 30, 1997 was
$4,544,000, or $4.95 per share, based upon 917,872 shares outstanding. Net
tangible book value per share is determined by dividing the number of
outstanding shares of Common Stock into the net tangible book value of the
Company (total assets less total liabilities and intangible assets).
If any outstanding Warrants are exercised, the number of Common Shares
outstanding will increase and the Company's net tangible book value will
increase. The exercise of any Warrants at a time when the exercise price is
greater than the Company's net tangible book value per share will increase
the net tangible book value per share of shares held by the then current
shareholders and decrease the net tangible book value per share of the
shares purchased pursuant to the Warrant exercise. Dilution is the
reduction of value of the purchaser's investment measured by the difference
between the Warrant exercise price and the net tangible book value per
share after the Offering. The dilution per share will decrease with the
exercise of each additional Warrant because the proceeds from each such
exercise will increase the Company's net tangible book value.
<PAGE>
<PAGE>
USE OF PROCEEDS
If all of the 916,298 shares offered hereby are purchased upon
exercise of the Warrants, then the Company will receive gross proceeds of
up to $9,162,980, from which the Company will pay the expenses which will
be incurred in connection with the registration of the shares, which are
estimated to be $30,000. The Warrantholders will not pay any of the
expenses which are expected to be incurred in connection with the
registration of the shares, but will pay all commissions, discounts and
other compensation to any securities broker-dealers through whom they sell
any of the shares.
The Company will utilize the net proceeds, if any, realized from the
exercise of the Warrants for working capital and for general corporate
purposes, at the discretion of management. Actual expenditures, however,
may vary substantially depending upon economic conditions and opportunities
the Company is able to identify. Due to an inability to precisely forecast
events, the Company is unable to predict the precise period for which this
Offering will provide financing.
DETERMINATION OF OFFERING PRICE
The Offering Price of the 916,298 shares offered pursuant to the
exercise of the Warrants is $10.00 per share. The exercise price per share
was determined by the Company and bears no relationship to the market price
of the Company's Common Stock, the prevailing market conditions, operating
results of the Company in recent periods, the book value of the Company, or
other recognized criteria of value.
PLAN OF DISTRIBUTION
The Warrants entitle the holders to acquire 916,298 shares of Common
Stock at an exercise price of $10.00 per share. The Company issued the
Warrants as a dividend to all of its shareholders of record on June 5,
1997.
The shares of Common Stock to be issued upon exercise of the Warrants
are offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
The Company is offering shares of Common Stock underlying the
Warrants. No underwriter or placement agent has been engaged to assist the
Company in this regard and no commissions or similar compensation will be
paid to any person. The Warrantholders may resell the shares offered hereby
from time to time in transactions (which may include block transactions) in
the over-the-counter market, in negotiated transactions, through the
writing of options on the Common Stock or a combination of such methods of
sale, at fixed prices that may be changed, at market prices prevailing at
the time of sale, or at negotiated prices. The Warrantholders may effect
such transactions by selling the Common Stock directly to purchasers or
through broker-dealers that may act as agents or principals. Such broker-
dealers may receive compensation in the form of discount, concessions or
commissions from the Warrantholders and/or the purchasers of the shares of
Common Stock for whom such broker-dealers may act as agents or to whom they
sell as principals, or both (which compensation as to a particular-broker
dealer might be in excess of customary commissions).
The Warrantholders and any broker-dealers that act in connection with
the sale of the shares of Common Stock as principals may be deemed to be
"Underwriters" within the meaning of Section 2(11) of the Securities Act
and any commissions received by them and any profit on the resale of the
shares of Common Stock as principals might be deemed to be underwriting
discounts and commissions under the Securities Act. The Warrantholders may
agree to indemnify any agent, dealer, or broker-dealer that participates in
transactions involving sales of the shares of Common Stock against certain
liabilities, including liabilities arising under the Securities Act. The
Company will not receive any proceeds from the sales of shares of Common
Stock by the Warrantholders. Sales of the shares of Common Stock by the
Warrantholders or even the potential of such sales, may have an adverse
effect on the market price of the Common Stock.
The Company has agreed to pay all expenses incurred in connection with
the registration of the shares offered hereby. The Warrantholders shall be
exclusively liable to pay any and all commissions, discounts and other
payments to broker-dealers incurred in connection with their sale of the
Shares.
INDEMNIFICATION
The By-Laws of the Company provide for the indemnification of Officers
and Directors to the maximum extent allowable under Colorado law. Insofar
as the indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to Directors, Officers or persons
controlling the Company pursuant to such provisions, the Company has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
<PAGE>
<PAGE>
DESCRIPTION OF SECURITIES
The Company's authorized capital consists of 100,000,000 shares of
Common Stock, $.05 par value per share, and 50,000,000 shares of preferred
stock,$.01 par value per share.
The shares of Common Stock covered by this Prospectus will be fully
paid and nonassessable.
COMMON STOCK
Each holder of Common Stock of the Company is entitled to one vote for
each share held of record. Voting rights in the election of directors are
not cumulative, and, therefore, the holders of more than 50% of the Common
Stock of the Company could, if they chose to do so, elect all of the
directors.
The shares of Common Stock are not entitled to preemptive rights and
are not subject to redemption or assessment. Subject to the preferences
which may be granted to holders of preferred stock, each share of Common
Stock is entitled to share ratably in distributions to shareholders and to
receive ratably such dividends as may be declared by the Board of Directors
out of funds legally available therefor. Upon liquidation, dissolution or
winding up of the Company, subject to prior liquidation or other preference
rights of holders of preferred stock, if any, the holders of Common Stock
are entitled to receive pro rata the assets of the Company which are
legally available for distribution to shareholders. The issued and
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable.
PREFERRED SHARES
The Articles of Incorporation of the Company authorize issuance of a
maximum of 50,000,000 Preferred Shares. The Articles of Incorporation vest
the Board of Directors of the Company with authority to divide the class of
Preferred Shares into series and to fix and determine the relative rights
and preferences of the shares of any such series so established to the full
extent permitted by the laws of the State of Colorado and the Articles of
Incorporation in respect of, among other things, (1) the number of
Preferred Shares to constitute such series, and the distinctive
designations thereof; (b) the rate and preference of dividends, if any, the
time of payment of dividends, whether dividends are cumulative and the date
from which any dividend shall accrue; (c) whether Preferred Shares may be
redeemed and, if so, the redemption price and the terms and conditions of
redemption; (d) the liquidation preferences payable on Preferred Shares in
the event of involuntary or voluntary liquidation; (e) sinking fund or
other provisions, if any, for redemption or purchase of Preferred Shares;
(f) the terms and conditions by which Preferred Shares may be converted, if
the Preferred Shares of any series are issued with the privilege of
conversion; and (g) voting rights, if any.
In the event of a proposed merger, tender offer, proxy contest or
other attempt to gain control of the Company not approved by the Board of
Directors, it would be possible for the Board of Directors, subject to any
limitations imposed by applicable law, the Company's Articles of
Incorporation, the terms and conditions of any outstanding class or series
of preferred shares and the applicable rules of any securities exchanges
upon which securities of the Company are at any time listed or of other
markets in which securities of the Company are at any time listed, to
authorize the issuance of one or more series of Preferred Stock with voting
rights or other rights and preferences which would impede the success of
the proposed merger, tender offer, proxy contest or other attempt to gain
control of the Company. The issuance of Preferred Stock may have an adverse
effect on the rights (including voting rights) of holders of Common Stock.
WARRANTS
The shares of Common Stock offered hereby are issuable upon the
exercise of Common Stock Purchase Warrants that will be issued to the
Warrantholders immediately after the effectiveness of the Registration
Statement of which this Prospectus is a part. The Warrants entitle the
holders thereof to purchase 916,298 shares of Common Stock at an exercise
price of $10.00 per share. The Warrants are exercisable for a period
commencing upon the effective date of the Registration Statement of which
this Prospectus forms a part and ending three (3) years from the date of
such effectiveness. In the event the Warrants are not exercised within such
three-year period, all unexercised Warrants will expire and be void and of
no further force or effect. The Warrant exercise period may be extended by
the Company at the sole discretion of the Board of the Directors upon
thirty (30) days' notice to the Warrantholders. The Warrants will expire,
become void and be of no further force or effect upon conclusion of the
applicable exercise period, or any extension thereof.
The Warrants will be governed by the terms of a Warrant Agreement
between the Company and Corporate Stock Transfer, Inc., as Warrant Agent.
The Warrants are redeemable upon 30 days notice, at the option of the
Company, at a redemption price of $.01 per Warrant, if the last sale price
for the Company's Common Stock exceeds 110% of the then current warrant
exercise price for 20 consecutive trading days. The exercise price, number
and kind of common shares to be received upon exercise of the Warrants are
subject to adjustment on the occurrence of certain events, such as stock
splits, stock dividends or recapitalization of the Company. In the event of
liquidation, dissolution or winding up of the Company, the holders of the
Warrants will not be entitled to participate in the distribution of the
assets of the Company. Additionally, holders of the Warrants have no
voting, pre-emptive, liquidation or other rights of shareholders, and no
dividends will be declared on the Warrants or the shares underlying the
Warrants.
The Warrants will be issued to the Warrantholders as a dividend to
Common Shareholders of the Company, and upon issuance will be freely
tradeable in reliance upon an exemption from the Registration Requirements
of the Securities Act. Prior to this Offering, there exists no public
trading market for the Warrants. The Company has applied to have the
Warrants listed on the NASDAQ SmallCap Market under the symbol "AMEPW."
There can be no assurance that a public trading market for the warrants
will develop.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed on for
the Company by Neuman & Drennen, LLC, Temple-Bowron House, 1507 Pine
Street, Boulder, Colorado 80302, which has served as legal counsel to the
Company since its inception in 1986. For their services in connection with
the preparation of the Registration Statement and related Offering, and the
issuance of their legal opinion, the Company will pay the firm of Neuman &
Drennen, LLC a fee, estimated to be $10,000. Clifford L. Neuman, a member
of the firm, has been a member of the Company's Board of Directors since
November 1990, and its Audit Committee since April, 1991, and is also the
beneficial owner of 13,000 shares of the Company's Common Stock and options
exercisable to purchase, in the aggregate, an additional 12,000 shares of
Common Stock.
EXPERTS
The consolidated financial statements of the Company as of December
31, 1996, 1995 and 1994 and for each of the years in the three-year period
ended December 31, 1996, have been incorporated by reference herein and in
the Registration Statement and Prospectus in reliance upon the report of
HEIN + ASSOCIATES, LLP, Independent Certified Public Accountants,
incorporated by reference and upon the authority of said firm as experts in
accounting and auditing.
<PAGE>
<PAGE>
================================= ====================================
No person is authorized to
give any information or to make any
representation other than those
contained in this Prospectus, and if
made such information or
representation must not be relied AMERICAN EDUCATIONAL PRODUCTS, INC.
upon as having been given or
authorized. This Prospectus does 916,298 Shares
not constitute an offer to sell or a
solicitation of an offer to buy any
securities other than the Securities
offered by this Prospectus or an
offer to sell or a solicitation of
an offer to buy the Securities in
any jurisdiction to any person to
whom it is unlawful to make such
offer or solicitation in such
jurisdiction.
The delivery of this
Prospectus shall not, under any
circumstances, create any
implication that there has been no
changes in the affairs of the
Company since the date of this
Prospectus. However, in the event
of a material change, this
Prospectus will be amended or
supplemented accordingly.
TABLE OF CONTENTS
Page
---- -----------------------------------
Available Information . . . . . . 3
Incorporation by Reference. . . . 4 PROSPECTUS
The Company . . . . . . . . . . . 5
Risk Factors. . . . . . . . . . . 6 -----------------------------------
Dilution. . . . . . . . . . . . . 11
Use of Proceeds . . . . . . . . . 13
Determination of Offering Price . 13
Plan of Distribution. . . . . . . 14
Indemnification . . . . . . . . . 14
Description of Securities . . . . 15
Legal Matters . . . . . . . . . . 16
Experts . . . . . . . . . . . . . 16
Financial Statements. . . . . . . F-1 ______________, 1997
====================================== ==================================<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering, all of which are to be
borne by the Company, are as follows:
<TABLE>
<S> <C> <C>
SEC Filing Fee $ 2,776.67
NASDAQ Fees 7,500.00
Printing Expenses* 1,200.00
Accounting Fees and Expenses* 2,500.00
Legal Fees and Expenses* 10,000.00
Blue Sky Fees and Expenses* 1,500.00
Registrar and Transfer Agent Fee 1,500.00
Miscellaneous* 3,023.33
----------
Total* $30,000.00
______________________________
* Estimated
</TABLE>
<PAGE>
<PAGE>
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, bylaw, contract, or other
arrangement under which any controlling person, director or officers of the
Registrant is insured or indemnified in any manner against any liability
which he may incur in his capacity as such, is as follows:
a. Sections 7-109-101 through 7-109-110 of the Colorado
Corporation Code provide for the indemnification of a corporation's
officers and directors under certain circumstances.
* * *
b. Article XII of Registrant's Articles of Incorporation provide
that the corporation may indemnify each director, officer, and any employee
or agent of the corporation, his heirs, executors and administrators,
against expenses reasonably incurred or any amounts paid by him in
connection with any action, suit or proceeding to which he may be made a
party by reason of his being or having been a director, officer, employee
or agent of the corporation to the extent permitted by the law as recited
above in subparagraph (a).
c. Article XII of Registrant's Articles of Incorporation
provides, in part:
"e. To the maximum extent permitted by law or by public policy,
directors of this Corporation are to have no personal liability
for monetary damages for breach of fiduciary duty as a director."
d. The Company currently pays for and maintains an insurance
policy in the amount of $1,000,000 that covers directors' and officers'
liability.
Item 16. EXHIBITS.
a. The following Exhibits are filed as part of this Registration
Statement pursuant to Item 601 of Regulation SB:
Exhibit No. Title
- ----------- -----
4.1 Form of Warrant Agreement (including form of warrant
certificate)
5.1 Opinion of Neuman & Drennen, LLC
24.1 Consent of Hein + Associates LLP
24.2 Consent of Neuman & Drennen, LLC
<PAGE>
<PAGE>
Item 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel that the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
4. To provide, upon effectiveness, certificates in such
denominations and registered in such names as are required to permit prompt
delivery to each purchaser.
The undersigned registrant hereby undertakes to deliver or to cause
to be delivered with the Prospectus to each person to whom the prospectus
is sent or given the latest annual report to securityholders that is
incorporated by reference in the Prospectus and furnish pursuant to and
meeting the requirements of Rule 14a-3 or 14c-3 under the Securities
Exchange Act of 1934; and where interim financial information required to
be presented by Article 3 of Regulation S-X are not set forth in the
Prospectus, to deliver or cause to be delivered to each person to whom the
Prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the Prospectus to provide such
interim financial information.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Pre-Effective Amendment No. 2
to Form S-3 Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized. In the City of Boulder, State of
Colorado on the 20th of November, 1997.
AMERICAN EDUCATIONAL PRODUCTS, INC.
By: /s/ Clifford C. Thygesen
----------------------------------
Clifford C. Thygesen, President
Pursuant to the requirements of the Securities Exchange Act of 1933,
this Pre-Effective Amendment No. 2 to Registration Statement has been
signed by the following persons in the capacities with American Educational
Products, Inc. and on the dates indicated.
Signature Title Date
- --------- ----- --------
/s/ Robert A. Scott Chairman of the Board, 11/20/97
- -------------------------- Director, Secretary
Robert A. Scott
/s/ Clifford C. Thygesen President, Director 11/20/97
- --------------------------
Clifford C. Thygesen
/s/ Frank L. Jennings Vice President, 11/20/97
- -------------------------- Chief Financial Officer
Frank L. Jennings
/s/ Steven B. Lapin Director 11/20/97
- --------------------------
Steven B. Lapin
/s/ Stephen G. Calandrella Director 11/20/97
- --------------------------
Stephen G. Calandrella
/s/ Wayne R. Kirschling Director 11/20/97
- --------------------------
Wayne R. Kirschling
/s/ Clifford L. Neuman Director 11/20/97
- --------------------------
Clifford L. Neuman
<PAGE>
EXHIBIT 24.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference of our report dated February
6, 1997 accompanying the financial statements of American Educational
Products, Inc. and Subsidiaries in Amendment No. 1 to the Form S-3
Registration Statement of American Educational Products, Inc. and to the use
of our name and the statements with respect to us, as appearing under the
heading "Experts" in the Registration Statement.
HEIN + ASSOCIATES LLP
Denver, Colorado
November 17, 1997
