<PAGE>
As filed with the Securities and Exchange Commission on November 12, 1997.
Registration No. 333-35205
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
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 and June 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.
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., 5350 Manhattan Circle, Suite 210, Boulder, Colorado 80303
(303) 543-0123. 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
21, 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 5350 Manhattan Circle, Suite 210, Boulder, Colorado 80303. Its
telephone number at that address is (303) 543-0123.
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 Halbib 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 June 30, 1997, the Company
had limited working capital of $935,000 based upon current assets of
$4,669,000 and current liabilities of $3,734,000. Of current liabilities,
$2,780,000 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 six 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 six months of 1997,
the Company reported net income of $248,000, an improvement over the net loss
of $(931,000) reported for the first six 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 $5.48 per share greater than the $4.52 per share net
tangible book value of the Company at June 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 June 30, 1997, 916,298 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
153,100 shares of Common Stock at a weighted average exercise price of $4.29
per share; warrants exercisable to purchase up to 102,000 shares of Common
Stock at weighted average exercise price of $8.62 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 June 30, 1997, the Company had sold or issued the
outstanding 916,298 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 June 30, 1997, the Company had a net tangible book value of
$4,141,000 or $4.52 per share of Common Stock outstanding, based on 916,298
shares issued and outstanding. If 100% of the Warrants are exercised, after
deduction of expenses of the Offering, the Company will have a net tangible
book value of approximately $7.24 per share. Under this scenario, investors
in this Offering exercising Warrants will sustain an immediate substantial
dilution of $2.76 or 28% of their exercise price per share.
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 255,100 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 June 30, 1997 was
$4,141,000, or $4.52 per share, based upon 916,298 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 and schedules 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. 1 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
11th 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. 1 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, 11/11/97
- -------------------------- Director, Secretary
Robert A. Scott
/s/ Clifford C. Thygesen President, Director 11/11/97
- --------------------------
Clifford C. Thygesen
/s/ Frank L. Jennings Vice President, 11/11/97
- -------------------------- Chief Financial Officer
Frank L. Jennings
/s/ Steven B. Lapin Director 11/11/97
- --------------------------
Steven B. Lapin
/s/ Stephen G. Calandrella Director 11/11/97
- --------------------------
Stephen G. Calandrella
/s/ Wayne R. Kirschling Director 11/11/97
- --------------------------
Wayne R. Kirschling
/s/ Clifford L. Neuman Director 11/11/97
- --------------------------
Clifford L. Neuman
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 4, 1997
