<PAGE>
As filed with the Securities and Exchange Commission
on November 17, 1998.
Registration No. _______________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
-----------------------------------------
(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.
Nathan L. Stone, Esq.
Neuman, Drennen & Stone, 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 pursu-
ant 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>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered Per Share (1) Price (1) Fee
- ---------------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Common Stock
Purchase
Warrants: 75,757(2) $ 0.00 $ 0.00 $ 0.00
Common Stock,
$.05 par
value: 75,757(3) $ 10.00(4) $ 757,570 $ 229.57
TOTAL: $ 757,570 $ 229.57
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Reflects 75,757 Common Stock Purchase Warrants that will be issued by the
Company as a dividend to certain of its Common Stockholders of record on
June 5, 1997. The Warrants will be issued immediately after the effective
date of this Registration Statement.
(3) Reflects 75,757 shares of Common Stock issuable upon exercise of the
Warrants.
(4) 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
Registration Statement Location in Prospectus
----------------------- ----------------------
1. Forepart of the Registration Forepart of Registration
Statement and outside front Statement and outside front
cover of Prospectus cover page of Prospectus
2. Inside front and back cover Inside front and outside back
pages of Prospectus cover pages of Prospectus
3. Summary Information, Risk Factors Risk Factors
and 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 Legal Matters
Counsel
10. Material Changes Recent Developments
11. Incorporation of Certain Incorporation of Certain
Information by Reference Documents by Reference
12. Disclosure of Commission Position Indemnification
on Indemnification for Securities
Act Liabilities
<PAGE>
<PAGE>
PROSPECTUS
AMERICAN EDUCATIONAL PRODUCTS, INC.
--------------------------------------------
75,757
Common Stock Purchase Warrants
75,757 Shares
$.05 par value Common Stock
This Prospectus relates to the offering of securities of American
Educational Products, Inc., a Colorado corporation (the "Company" or "AEP").
On June 2, 1997, the Company's Board of Directors declared a warrant
dividend ("Warrant Dividend") payable to the Company's Common Stockholders of
record on June 5, 1997 (the "Dividend Record Date"). Subsequent to
declaration of the Warrant Dividend, the Company filed a Registration
Statement on Form S-3, SEC File No. 333-35205 (the "Dividend Registration")
which was declared effective by the Commission on December 4, 1997. However,
upon distribution of the Warrant Dividend, the NASDAQ Stock Market ("NASDAQ")
unilaterally declared the Ex-Dividend Date of December 5, 1997. As a result,
record owners of Company Common Stock on June 5, 1997, the Dividend Record
Date, who sold or otherwise disposed of their shares of Company Common Stock
prior to December 5, 1997, did not receive the Warrant Dividend they were
entitled to receive by virtue of their ownership of Company Common Stock on
June 5, 1997.
The Company is registering 75,757 Common Stock Purchase Warrants
("Warrants") that will be issued by the Company as a dividend to those Company
Common Stockholders of record on the Dividend Record Date who disposed of
their shares of Company Common Stock prior to the Ex-Dividend Date of December
5, 1997 (the "Shareholders") and, as a result, did not receive the Warrant
Dividend they were entitled to receive by virtue of their ownership of Company
Common Stock on the Dividend Record Date. 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 certain 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
receipt of the Warrants, the Shareholders may offer all 75,757 Warrants in
transactions on the NASDAQ SmallCap Market at prices obtainable at the time of
sale, or in privately negotiated transactions at prices determined by
negotiation. The Shareholders may effect such transactions by selling the
Warrants to or through securities broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Shareholders, and/or the purchasers of the Warrants for whom such broker-
dealers may act as agent or to whom they sell as principals, or both (which
compensation as to a particular broker/dealer may be in excess of customary
commissions). See "PLAN OF DISTRIBUTION." The Shareholders and the broker-
dealers through whom sales of the Warrants are made may be deemed to be
"Underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"). If any broker-dealers are used by the Shareholders,
any commissions paid to broker-dealers, and if broker-dealers purchase any
Warrants as principals, any profits received by such broker-dealers on the
resales of the Warrants, may be deemed to be underwriting discounts or
commissions under the Securities Act. In addition, any profits realized by
the Shareholders may be deemed to be underwriting compensation.
This Prospectus also relates to the offer and sale by the Company, of
75,757 shares of its $.05 par value common stock (the "Common Stock") which
are issuable by the Company pursuant to the exercise of the Warrants by the
Shareholders. Upon exercise of the Warrants, the Shareholders may offer all
75,757 shares of the Company's Common Stock in transactions on the NASDAQ
SmallCap Market at prices obtainable at the time of sale, or in privately
negotiated transactions at prices determined by negotiation. The Shareholders
may effect such transactions by selling the Common Stock to or through
securities broker-dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the Shareholders,
and/or the purchasers of the Common Stock for whom such broker-dealers may act
as agent or to whom they sell as principals, or both (which compensation as to
a particular broker/dealer may be in excess of customary commissions). See
"PLAN OF DISTRIBUTION." The Shareholders and the broker-dealers through whom
sales of the Common Stock are made may be deemed to be "Underwriters" within
the meaning of the Securities Act of 1933, as amended (the "Securities Act").
If any broker-dealers are used by the Shareholders, any commissions paid to
broker-dealers, and if broker-dealers purchase any Common Stock as principals,
any profits received by such broker-dealers on the resales of the Common Stock
may be deemed to be underwriting discounts or commissions under the Securities
Act. In addition, any profits realized by the Shareholders may be deemed to
be underwriting compensation.
Except as set forth above, the Company does not have the right to
compel the exercise of the Warrants, and the Shareholders have not committed
to exercise any of the Warrants. Accordingly, there can be no assurance of
the number, if any, of shares of Common Stock which may be issued to the
Shareholders upon the exercise of the Warrants under this Prospectus.
The Company will not receive any consideration in connection with the
issuance of the Warrant Dividend. Assuming the Shareholders exercise all
Warrants to purchase 75,757 shares of Common Stock, the Company will receive
gross proceeds of $757,570. The Company will not receive any of the proceeds
from the resale of the Warrants and/or Common Stock by the Shareholders. The
Company has agreed to pay all of the expenses incurred in connection with the
registration of the Warrants and Common Stock, which are estimated to be
$12,000.
The Company's Common Stock and Warrants are traded on the NASDAQ
SmallCap Market under the symbols AMEP and AMEPW, respectively. On October
15, 1998, the closing prices were $9.875 per share of Common Stock and $1.375
per Warrant, respectively, as reported by NASDAQ. There can be no assurance
that a market for the Warrants and/or Common Stock will continue in the
future. The Company has no arrangements with broker-dealers concerning the
maintenance of a trading market for the Warrants and/or Common Stock. As a
result, the ability of a purchaser of the Company's Warrants or Common Stock
to resell the securities may be severely limited and the purchaser may be
required to hold the securities for an indefinite period of time.
---------------------------------------
FOR DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED IN
EVALUATING AN INVESTMENT IN THE COMPANY, SEE "RISK FACTORS" COMMENCING AT PAGE
9 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.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Shareholders (1) Discount (2) Company (3)
---------------- ------------- ------------
<S> <C> <C> <C>
Per Share: $10.00 * $10.00
Total $757,570 * $757,570
</TABLE>
The Date of This Prospectus is November ____, 1998.
(1) Reflects the exercise by the Shareholders of all outstanding Warrants to
purchase an aggregate of 75,757 shares of Common Stock at an exercise
price of $10.00 per share. (see DESCRIPTION OF SECURITIES-Warrants.")
(2) The Shareholders may reoffer their shares in transactions on the NASDAQ
SmallCap Market at prices obtainable at the time of sale or in privately
negotiated transactions at prices determined by negotiation. The
Shareholders 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 Shareholders.
While it is impracticable to determine the precise amount that the
Shareholders 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 Shareholders
of all Warrants which are exercisable to purchase 75,757 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 $12,000, 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/edgarhp.htm.
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 Warrants and 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 Company's Registration
Statement on Form S-3, SEC File No. 333-43717, the Company's Annual Report to
Shareholders and Annual Report on Form 10-KSB for the year ended December 31,
1997, the Company's definitive Proxy Statement, the Company's Quarterly
Reports on Form 10-QSB for the quarters ended March 31, 1998, and June 30,
1998, the Company's Current Report on Form 8-K dated April 17, 1998, as
amended by the Company's Current Report on Form 8-K/A, dated April 17, 1998
and filed with the Commission on June 30, 1998, and the Company's Current
Report on Form 8-K dated August 4, 1998, all of which are 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 Registration Statement on Form S-3, SEC File No.
333-43717, declared effective by the Commission on January 9,
1998;
(b) The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997, SEC File No. 0-16310, filed with the Commission
on April 4, 1998;
(c) The Company's definitive Proxy Statement for the Annual Meeting of
Shareholders held on June 9, 1998, SEC File No. 0-16310, filed with
the Commission on April 29, 1998;
(d) The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1998, SEC File No. 0-16310, filed with the Commission on
May 15, 1998;.
(e) The Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1998, SEC File No. 0-16310, filed with the Commission on
August 19, 1998;
(f) The Company's Current Report on Form 8-K dated April 17, 1998, SEC
File No. 0-16310, filed with the Commission on April 29, 1998;
(g) The Company's Current Report on Form 8-K/A dated April 17, 1998, SEC
File No. 0-16310, filed with the Commission on June 30, 1998;
(h) The Company's Current Report on Form 8-K dated August 4, 1998, SEC
File No. 0-16310, filed with the Commission on August 17, 1998.
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.
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 three (3) wholly-owned
subsidiaries: Scott Resources, Inc. ("Scott Resources"); Hubbard Scientific,
Inc. ("Hubbard Scientific"); and SL Distribution, Inc. d/b/a "Summit Learning"
("Summit Learning"). 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 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 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.
Effective April 17, 1998, Hubbard Scientific acquired all of the outstanding
stock of Learning and Leisure, Inc., a New York corporation, and its wholly
owned subsidiary, National Teaching Aids, Inc. ("NTA"). NTA develops,
manufactures, and markets science products for the K-12 market. During April
and May, 1998, the operations of NTA were relocated to Hubbard Scientific's
facility in Chippewa Falls, Wisconsin.
Acquired by the Company effective August 4, 1998, Summit Learning is
involved in the distribution of supplemental educational products through the
direct mailing of catalogs. Summit Learning's operations are being conducted
from its facilities in Fort Collins, Colorado.
<PAGE>
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree
of risk. Prospective investors should carefully consider the possibility of
the loss of their entire investment in the Company's securities and, along
with each of the following factors, consider the information set forth
elsewhere in this Prospectus.
LIMITED LIQUIDITY AND CAPITAL RESOURCES. At June 30, 1998, the Company
had working capital of $1,971,000 based upon current assets of $5,655,000 and
current liabilities of $3,684,000. Of current liabilities, $2,362,000
represented the principal balance due and owing under a revolving line of
credit. Although the line of credit 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 a significant adverse impact on the Company. Furthermore, the
Company experienced deficits during the years ended December 31, 1995 and
December 31, 1996, which significantly decreased the Company's liquidity and
capital resources. Actions were taken by the Company during fiscal 1997 to
mitigate the impact of the liquidity shortfall which resulted in a reduction
in the Company's accumulated deficit during fiscal 1997 and the first six
months of fiscal 1998. Nevertheless, there are no guarantees that the Company
can continue to reduce its accumulated deficit and/or further improve its
liquidity.
HISTORICAL 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 year ended
December 31, 1997, the Company reported net income of $514,000, and has
reported net income for the first six months of 1998 of $331,000. 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. Notwithstanding the Company's recent
improvements, there can be no assurance that the Company can continue its
profitable performance.
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 $6.05 per share greater than the $3.95 per share net
tangible book value of the Company at June 30, 1998.
NO ASSURANCE OF WARRANT EXERCISE. The Shareholders 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 underlying the Warrants. 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 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.
INTENSE COMPETITION. The industry in which the Company competes is
characterized by intense competition, and extensive research and development
efforts. New product developments and enhancements of existing products are
expected to continue and there can be no assurance that discoveries by others
will not render the Company's products non-competitive. To this end, sales of
technology related products are growing at a faster rate than sales of
manipulatives and videos. The Company does not manufacture technology related
products and has no such products currently under development.
There are many companies, both public and private, that are engaged in
the development of products for the same applications being pursued by the
Company. The products manufactured by these competitors range from textbooks
to manipulatives and models. Many of these entities publish catalogs in
addition to listing their products in dealer catalogs. Some of these
companies have substantially greater financial, research and development,
manufacturing and marketing experience and resources than the Company and
represent substantial long-term competition for the Company. Such companies
may succeed in developing products that are more effective or less costly than
any products that may currently be owned or which may be developed by the
Company in the future.
Additionally, during the last three years, there has been increasing
competition from foreign manufacturers of educational products. These
products are often priced less than the Company's products. While the Company
can provide its customers with better delivery schedules and more
comprehensive teacher manuals, foreign competition may have future adverse
consequences to the Company.
INTEGRATION OF RECENTLY ACQUIRED BUSINESSES. There can be no assurance
that the integration of Summit Learning and/or NTA with and into the Company's
operations will be completed in a manner that is efficient, effective and
timely enough to achieve the anticipated benefits of the acquisitions, or that
the acquisitions will result in additional profits to the Company. Integrating
the companies will require the timely, efficient and effective combination of
management, sales and marketing and development and manufacturing teams that
prior to the acquisitions operated in different geographic locations, under
varying management philosophies. Integration of the companies also will
require the combination of differing product lines, product development plans
and marketing approaches. Additionally, the time-consuming task of
integrating the companies may distract attention from the day-to-day business
operations of the Company and each of the acquired companies.
MANAGEMENT OF GROWTH; UNSPECIFIED ACQUISITIONS. The Company's ability to
manage its growth, if any, will require it to continue to improve and expand
its management, operational and financial systems and controls. Any measurable
growth in the Company's business will result in additional demands on its
customer support, sales, marketing, administrative and technical resources and
will place significant strain on the Company's management, administrative,
operation, financial and technical resources and increase demand upon its
systems and controls. There can be no assurance that the Company will be able
to successfully address these additional demands. There also can be no
assurance that the Company's operating and financial control systems will be
adequate to support its future operations and anticipated growth. Failure to
manage the Company's growth properly could have a material adverse effect upon
the Company's business, financial condition and results of operations. The
Company has sought, and may continue to seek, potential acquisitions of
products, technologies and businesses that could complement or expand the
Company's current product offering and business. In the event the Company
were to identify an appropriate acquisition candidate, there is no assurance
that the Company would be able to successfully negotiate, finance or integrate
such acquired products, technologies or businesses. Furthermore, such an
acquisition could cause a diversion of management's time and resources. There
can be no assurance that a given acquisition, when consummated, would not
materially adversely affect the Company's business and results of operations.
See also "RISK FACTORS -Integration of Recently Acquired Businesses."
DEPENDENCE UPON KEY PERSONNEL. The Company's future success is dependent
on the continued service of its key technical, marketing, sales, and
management personnel and on its ability to continue to attract, motivate, and
retain highly qualified employees. Except for a one year agreement with its
President, Mr. Thygesen, the Company currently does not have in place any
employment agreements with its key employees. As a result, the Company's key
employees may voluntarily terminate their employment with the Company at any
time. Competition for such employees is intense and the process of locating
technical and management personnel with the combination of skills and
attributes required to execute the Company's strategy is often lengthy.
Accordingly, the loss of the services of key personnel could have a material
adverse effect upon the Company's operations and its development efforts.
PRODUCT PROTECTION. The Company relies on copyrights and trademarks for
protection of its products. Where registrations of trademarks have not been
issued, the Company claims common law trademark rights to those names.
Notwithstanding the foregoing, there can be no assurance that the Company will
obtain additional registrations for any of its trademarks or that the Company
will not be subject to opposition, cancellation or infringement proceedings
based upon the use of such trademarks. The loss of the use of any one or more
of the trademarks could have a material adverse effect upon the Company's
ability to profitably market the associated products.
The Company also relies on trade secret protection for its unpatented
proprietary technology. However, trade secrets are difficult to protect.
There can be no assurance that others will not independently develop
substantially equivalent manipulatives and models or otherwise gain access to
the Company's trade secrets, that such trade secrets will not be disclosed or
that the Company can effectively protect its rights to unpatented trade
secrets. Despite precautions taken by the Company, unauthorized partes may
attempt to design, copy or obtain and use its products and other information
the Company considers proprietary. There can be no assurance, however, that
the precautions taken by the Company will provide meaningful protection for
the Company's trade secrets or other proprietary information in the event of
unauthorized use or disclosure of such information
PENDING LITIGATION. In August, 1998, the Company and its subsidiaries
were named as Defendants in a civil action brought in the United States
District Court for the Central District of California by Lakeshore Learning
Materials (the "Lakeshore Litigation"). In the Lakeshore Litigation, claims
have been asserted against the Company and its subsidiary based upon alleged
copyright and trademark infringement and common law unfair competition related
to certain manipulative kits developed by Hubbard Scientific. Based upon the
Company's preliminary investigation, the Company believes that the claims are
without merit and has engaged legal counsel to provide a vigorous defense in
the action. Nevertheless, there can be no assurance that the Company will be
able to successfully defend the infringement claims made by Lakeshore. If
Lakeshore prevails in this litigation, the Company may be permanently enjoined
from selling the manipulative kits involved and may be obligated to pay
significant damages to the Plaintiff. Even if the Company is successful in
its defense of the Lakeshore Litigation, the cost of such defense could be
substantial and the Company's management may be required to devote a
substantial amount of time to such defense.
EDUCATIONAL FUNDING. The principal markets for the Company's products are
elementary, middle and secondary school systems. Most, if not all, of these
potential customers rely upon federal and state funding in order to support
their activities. The ability of these institutions to purchase the Company's
products is dependent upon continued support and funding for public education.
A reduction or withdrawal of such support could result in a diminished demand
for the Company's products, which, in turn, would adversely effect Company
operations and profitability.
MANAGEMENT'S LACK OF VOTING INFLUENCE. All of the Company's officers and
directors as a group own only 50,551 shares of Common Stock, and vested
options exercisable to acquire an additional 128,400 shares of Common Stock.
Even giving effect to the exercise of their outstanding and vested options,
the Company's officers and directors as a group would exercise voting control
over only 15.8% of the Company's outstanding shares of Common Stock following
completion of this offering. As a result of this lack of voting influence as
stockholders, there can be no assurance that the Company's officers and
directors will be able to implement the Company's business plans and
strategies. Further, it is possible that stockholders with greater voting
influence could initiate actions which could be adverse to those plans or
hostile to current management.
LIMITED LIQUIDITY IN TRADING MARKET OF SHARES AND/OR WARRANTS. Prior to
the Offering, the Company's Common Stock and Warrants have been thinly traded
on the NASDAQ SmallCap Market under the symbols AMEP and AMEPW, respectively.
While there currently exists a limited and sporadic public trading market for
the Company's securities, the prices are subject to high degrees of volatility
and there can be no assurance that such a market will improve in the future.
As a result, there can be no assurances that an investor will be able to
liquidate his investment without considerable delay, if at all. Factors
discussed herein may have a significant impact on the market prices of the
Company's Common Stock and Warrants. See "DESCRIPTION OF SECURITIES."
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 find relevant and
timely information about the Company and 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 has 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 and Warrants will, as of the date of
this Prospectus, be outside the definitional scope of a penny stock, as the
market price of the Common Stock is in excess of Five Dollars ($5.00) per
share, and the Company's Common Stock and Warrants will be listed on NASDAQ,
in the event the Common Stock and/or Warrants were subsequently to become
characterized as penny stocks, 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. With the exception of the Warrant Dividend which 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, 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.")
POTENTIAL ADVERSE EFFECTS OF SHARES ELIGIBLE FOR FUTURE SALE. As of June
30, 1998, 1,005,606 shares of the Company's $.05 par value Common Stock, were
issued and outstanding, 330,391 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
9,600 shares of Common Stock pursuant to the Incentive Stock Option Plan (the
"Plan"). The Company has registered for sale under the Act all shares
issuable upon exercise of the options granted pursuant to the Plan. As a
result of said registration, 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.
POTENTIAL ADVERSE EFFECTS OF 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.")
POSSIBLE DILUTION FROM 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 187,116 shares of Common Stock at a weighted average exercise
price of $5.76 per share; warrants exercisable to purchase up to 937,365
shares of Common Stock at weighted average exercise price of $9.88 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.")
SUBSTANTIAL DILUTION. As of June 30, 1998, the Company had sold or
issued the outstanding 1,005,606 shares of Common Stock at an average cost per
share of approximately $6.93, which is $3.07 per share less than the Warrant
exercise price. At June 30, 1998, the Company had a net tangible book value
of $3,970,000 or $3.95 per share of Common Stock outstanding, based on
1,005,606 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 1,124,481 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.")
POTENTIAL ADVERSE EFFECT OF WARRANT REDEMPTION. The Warrants may be
redeemed by the Company at a price of $0.01 per Warrant upon 30 days' notice,
mailed after the closing bid price of the Common Stock has equaled or exceeded
$11.00 for a period of twenty (20) consecutive trading days. Shareholders
shall have exercise rights until the close of the business day preceding the
date fixed for redemption. Redemption of the Warrants could force the holders
to exercise the Warrants and pay the Exercise Price at a time when it may be
disadvantageous for holders to do so, to sell the Warrants at the then current
market price when they might otherwise wish to hold the Warrants, or to accept
the redemption price, which is likely to be substantially less than the market
value of the Warrants at the time of redemption. See "DESCRIPTION OF
SECURITIES."
<PAGE>
<PAGE>
DILUTION
The net tangible book value of the Company at June 30, 1998 was
$3,970,000, or $3.95 per share, based upon 1,005,606 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 75,757 shares offered hereby are purchased upon exercise of
the Warrants, then the Company will receive gross proceeds of up to $757,570,
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
$12,000. The Shareholders 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 75,757 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.
<PAGE>
<PAGE>
PLAN OF DISTRIBUTION
On June 2, 1997, in response to a public investor accumulating
approximately 30% of the Company's total issued and outstanding shares, the
Company's Board of Directors declared a Warrant Dividend payable to the
Company's Common Stockholders of record on June 5, 1997 (the "Dividend Record
Date"). Subsequent to declaration of the Warrant Dividend, NASDAQ
unilaterally declared the Ex-Dividend Date to be December 5, 1997. As a
result, record owners of Company Common Stock on June 5, 1997, the Dividend
Record Date, who sold or otherwise disposed of their shares of Company Common
Stock prior to December 5, 1997, did not receive the Warrant Dividend they
were entitled to receive by virtue of their ownership of Company Common Stock
on June 5, 1997.
The Company has agreed to issue the Warrants as a dividend to those
shareholders of record on June 5, 1997 who disposed of their shares of Company
Common Stock prior to December 5, 1997. The Warrants will be issued
immediately after the effective date of this Registration Statement. The
Warrants entitle the holders to acquire up to 75,757 shares of Common Stock at
an exercise price of $10.00 per share.
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 the Warrants and the 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 Shareholders may resell the
Warrants and/or shares of Common Stock offered hereby from time to time in
transactions (which may include block transactions)on the NASDAQ SmallCap
Market, in negotiated transactions, through the writing of options on the
Warrants and/or 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 Shareholders may effect such transactions
by selling the Warrants and/or 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 Shareholders and/or the purchasers of the Warrants and/or 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 Shareholders and any broker-dealers that act in connection with the
sale of the Warrants and/or 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
Warrants and/or shares of Common Stock as principals might be deemed to be
underwriting discounts and commissions under the Securities Act. The
Shareholders may agree to indemnify any agent, dealer, or broker-dealer that
participates in transactions involving sales of the Warrants and/or shares of
Common Stock against certain liabilities, including liabilities arising under
the Securities Act. The Company will not receive any proceeds from the
issuance of the Warrant Dividend or from the sales of shares of Common Stock
by the Shareholders. Sales of the Warrants and/or shares of Common Stock by
the Shareholders or even the potential of such sales, may have an adverse
effect on the market price of the Warrants and/or Common Stock.
The Company has agreed to pay all expenses incurred in connection with
the registration of the securities offered hereby. The Shareholders 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
Warrants and/or Common Stock.
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 Warrants and 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 Company has authorized the issuance of up to 992,055 warrants,
including the issuance of the Warrants that will be issued to the Shareholders
immediately after the effectiveness of the Registration Statement of which
this Prospectus is a part. The Warrants covered by this Prospectus entitle the
holders thereof to purchase 75,757 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
Shareholders. 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 Shareholders as part of 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, the Company's Warrants have 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 Warrants.
Additionally, there can be no assurance that a public trading market for the
Warrants will continue.
<PAGE>
<PAGE>
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed on for the
Company by Neuman, Drennen & Stone, 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 & Stone, LLC a fee, estimated to be $6,000. 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 17,000 shares
of Common Stock.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997, 1996 and 1995 and for each of the years in the three-year period ended
December 31, 1997, 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
upon as having been given or
authorized. This Prospectus does AMERICAN EDUCATIONAL
not constitute an offer to sell PRODUCTS, INC.
or a solicitation of an offer to
buy any securities other than the
Securities offered by this
Prospectus or an offer to sell or 75,757 Common Stock
a solicitation of an offer to buy Purchase Warrants
the Securities in any jurisdiction
to any person to whom it is
unlawful to make such offer or 75,757 Shares
solicitation in such jurisdiction.
The delivery of this Prospectus
shall not, under any circumstances,
create any implication that there
has been no change 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
Available Information. . . . . .5
Incorporation by Reference . . .6
The Company. . . . . . . . . . .8
Risk Factors . . . . . . . . . .9 -------------------------
Dilution . . . . . . . . . . . 16 PROSPECTUS
Use of Proceeds. . . . . . . . 17 -------------------------
Determination of
Offering Price . . . . . . . 17
Plan of Distribution . . . . . 18
Indemnification. . . . . . . . 19 _______________, 1998
Description of Securities. . . 20
Legal Matters. . . . . . . . . 22
Experts. . . . . . . . . . . . 22
- ----------------------------------- -----------------------------------
<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:
SEC Filing Fee $ 229.57
Printing Expenses* 600.00
Accounting Fees and Expenses* 2,000.00
Legal Fees and Expenses* 6,000.00
Blue Sky Fees and Expenses* 1,000.00
Registrar and Transfer Agent Fee* 1,000.00
Miscellaneous* 1,170.43
-------------
Total* $12,000.00
- -----------------------
* Estimated
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 & Stone, LLC
24.1 Consent of Hein + Associates, LLP
24.2 Consent of Neuman, Drennen & Stone, LLC
- --------------------------------
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 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 17th of November, 1998.
AMERICAN EDUCATIONAL PRODUCTS, INC., a Colorado
corporation
By: /s/ Clifford C. Thygesen
---------------------------------------
Clifford C. Thygesen, President
Pursuant to the requirements of the Securities Exchange Act of 1933, this
Registration Statement of Form S-3 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, 11/17/98
- ---------------------------- Director, Secretary
Robert A. Scott
/s/ Clifford C. Thygesen President, CEO, Director 11/17/98
- ----------------------------
Clifford C. Thygesen
/s/ Frank L. Jennings Chief Financial Officer, 11/17/98
- ---------------------------- Assistant Secretary
Frank L. Jennings
/s/ Steven B. Lapin Director 11/17/98
- ----------------------------
Steven B. Lapin
/s/ Stephen G. Calandrella Director 11/17/98
- ----------------------------
Stephen G. Calandrella
/s/ Wayne R. Kirschling Director 11/17/98
- ----------------------------
Wayne R. Kirschling
/s/ Richard J. Ciurczak Director 11/17/98
- ----------------------------
Richard J. Ciurczak
/s/ Clifford L. Neuman Director 11/17/98
- ----------------------------
Clifford L. Neuman
<PAGE>
Each Warrant entitles the Warrant Holder to purchase one share of Common
Stock. The Warrants may only be exercised when either (a) a current
registration statement under the Securities Act of 1933, as amended, is
effective or (b) an exemption from such registration is available to the
Company, in either case, without undue expense or hardship. Additionally,
Warrants are only exercisable when such exercise, and the issuance of the
underlying Common Stock, can be effected in compliance with applicable state
Blue Sky laws. The Warrants are subject to redemption and may not be
exercised after the redemption date.
W-_____ __________ Warrants
CUSIP ____________
WARRANT CERTIFICATE
American Educational Products, Inc.
(a Colorado corporation)
This Warrant Certificate certifies that _______________ or
registered assigns (the "Warrant Holder"), is the registered owner of the
above-indicated number of Warrants ("Warrants") expiring at 5:00 p.m., Denver,
Colorado, local time, on _______________ (the "Expiration Date"). Each
Warrant entitles the Warrant Holder to purchase from American Educational
Products, Inc. (the "Company"), a Colorado corporation, at any time before the
Expiration Date, one fully paid and non-assessable share of Common Stock of
the Company at a purchase price of $__________ per share (the "Exercise
Price") upon surrender of this Warrant Certificate, with the exercise form
hereon duly completed and executed, with payment of the Exercise Price, at the
principal office of the Company, but only subject to the conditions set forth
herein and in the Warrant Agreement. In addition, the Warrant Holder has the
right to convert the Warrants evidenced by this Certificate into shares of
Common Stock as provided in of the Warrant Agreement. All unexercised
Warrants may be redeemed by the Company (i) upon 30 calendar days prior
written notice to registered Warrant Holders and (ii) under certain conditions
set forth in the Agreement between the Company and Corporate Stock Transfer,
Inc.] as the Warrant Agent (the "Warrant Agreement"). No Warrant may be
exercised or converted after such 30-day period. The Exercise Price, the
number of shares purchasable upon exercise or conversion of each Warrant, the
number of Warrants outstanding and the Expiration Date are subject to
adjustments upon the occurrence of certain events set forth in the Warrant
Agreement. Reference is hereby made to the other provisions of this Warrant
Certificate and the provisions of the Warrant Agreement, all of which are
hereby incorporated by reference herein and made a part of this Warrant
Certificate and which shall for all purposes have the same effect as though
fully set forth at this place.
Upon due presentment for registration of transfer of this Warrant
Certificate at the office of the Company a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants, subject to any adjustments made in accordance with the Warrant
Terms, shall be issued to the transferee in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement.
The Warrant Holder of the Warrants evidenced by this Warrant
Certificate may exercise all or any whole number of such Warrants in the
manner stated hereon and in the Warrant Agreement. The Exercise Price shall
be payable in lawful money of the United States of America in cash or by
certified or cashier's check or bank draft payable to the order of the
Company. Upon any exercise of any Warrants evidenced by this Warrant
Certificate in an amount less than the number of Warrants so evidenced, there
shall be issued to the Warrant Holder a new Warrant Certificate evidencing the
number of Warrants not so exercised. No adjustment shall be made for any
dividends on any shares issued upon exercise of this Warrant.
No Warrant may be exercised after 5:00 p.m., Colorado time, on the
Expiration Date, and any Warrant not exercised by such time shall become void.
COPIES OF THE WARRANT AGREEMENT, WHICH DEFINES THE RIGHTS,
RESPONSIBILITIES AND OBLIGATIONS OF THE COMPANY AND THE WARRANT HOLDERS, ARE
ON FILE WITH THE WARRANT AGENT. ANY WARRANT HOLDER MAY OBTAIN A COPY OF THE
WARRANT AGREEMENT, FREE OF CHARGE, BY A REQUEST TO THE PRINCIPAL OFFICE OF THE
WARRANT AGENT.
This Warrant Certificate, when surrendered to the Warrant Agent, in
person or by attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement,
without payment of a charge, except for any tax or other governmental charge
imposed in connection with such exchange, for another Warrant Certificate or
Warrant Certificates of like tenor and evidencing a like number of Warrants,
subject to any adjustment made in accordance with the Warrant Agreement.
The Company may deem and treat the registered holder hereof as the
absolute owner of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone) for all purposes and the
Company shall not be affected by any notice to the contrary. No Warrant
Holder, as such, shall have the rights of a stockholder of the Company, either
at law or in equity, and the rights of the Warrant Holder, as such, are
limited to those rights expressly provided in the Warrant Agreement and in the
Warrant Certificates.
The Company shall not be required to issue fractions of Warrants
upon any such adjustment or to issue fractions of shares upon the exercise of
any Warrants after any such adjustment, but the Company, in lieu of issuing
any such fractional interest, shall pay an amount in cash equal to such
fraction times the current market value of one Warrant or one share, as the
case may be, determined in accordance with the Warrant Agreement.
Unless the amendment is able to be effected by the Company in
accordance with the Warrant Agreement, the Warrant Agreement is subject to
amendment only upon the approval of holders of not less than a majority of the
outstanding Warrants, except that no such amendment shall accelerate the
Expiration Date or increase the Exercise Price without the approval of all the
holders of all outstanding Warrants. A copy of the Warrant Agreement shall be
available at all reasonable times at the principal office of the Warrant Agent
for inspection for any Warrant Holder. As a condition of such inspection, the
Company may require any Warrant Holder to submit his Warrant Certificate for
inspection.
IMPORTANT: The Warrants represented by this Certificate may not be
exercised by a Warrant Holder unless at the time of exercise the underlying
shares of Common Stock are qualified for sale, by registration or otherwise,
in the state where the Warrant Holder resides or unless the issuance of the
shares of Common Stock would be exempt under the applicable state securities
laws. Although the underlying shares of Common Stock were qualified for sale
in the states in which the Warrants were originally sold, the Company may not
continue such qualifications for the life of the Warrants. Moreover, the
Company may not qualify the underlying shares of Common Stock in any other
states. Further, a registration statement under the Securities Act of 1933,
as amended, covering the exercise of the Warrants must be in effect and
current at the time of exercise unless the issuance of shares of Common Stock
upon any exercise is exempt from the registration requirements of the
Securities Act of 1933, as amended. Notwithstanding the provisions hereof,
unless such registration statement and qualification are in effect and current
at the time of exercise, or unless exemptions are available, the Company may
decline to permit the exercise of the Warrants and the holder hereof would
then only have the choice of either attempting to sell the Warrants, if a
market existed therefor, or letting the Warrants expire.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be signed by its President and by its Secretary, each by a facsimile of
said officers' signatures, and has caused a facsimile of its corporate seal to
be imprinted hereon.
Dated: _____________________ AMERICAN EDUCATIONAL PRODUCTS, INC.
a Colorado corporation
By_____________________________ By: ________________________________
Robert A. Scott, Secretary Clifford D. Thygesen, President
<PAGE>
<PAGE>
ASSIGNMENT
(Form of Assignment to be Executed if the Warrant Holder
Desires to Transfer Warrants Evidenced Hereby)
FOR VALUE RECEIVED, ____________________________ hereby sells,
assigns and transfers to _________________________________________________.
(Please print name and address including zip code)
Please insert social security, federal
tax ID number or other identifying
number:
____________________________________
____________________ Warrants represented by this Warrant Certificate and does
hereby irrevocably constitute and appoint ___________________________,
Attorney, to transfer said Warrants on the books of the Company with full
power of substitution.
Dated:__________________ ____________________________________
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this Warrant
Certificate.)
SIGNATURE GUARANTEED:
______________________________
Note: Any transfer or assignment of this Warrant Certificate is subject to
compliance with the restrictions on transfer imposed under the
Warrant Agreement.
<PAGE>
<PAGE>
EXERCISE
(Form of Exercise to be Executed if the Warrant Holder
Desires to Exercise Warrants Evidenced Hereby)
TO THE COMPANY:
The undersigned hereby irrevocably elects to exercise ____________
Warrants represented by this Warrant Certificate and to purchase thereunder
the full number of shares of Common Stock issuable upon exercise of said
Warrants and enclose $__________ as the purchase price therefor, and requests
that certificates for such shares shall be issued in the name of, and cash for
any fractional shares shall be paid to,
Please insert Social Security Number
or other identifying number:
________________________________________
___________________________________________________________________________
(Please print name and address, including zip code)
and, if said number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate for the unexercised
number of Warrants may be assigned under the form of Assignment appearing
hereon.
Dated:__________________ Signature:
____________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of this
Warrant Certificate)
SIGNATURE GUARANTEED:
______________________________
IMPORTANT: Signature guarantee must be made by a participant of STAMP or
another signature guarantee program acceptable to the Securities and Exchange
Commission, the Securities Transfer Association and the Transfer Agent of the
Company or the Company.
<PAGE>
November 13, 1998
American Educational Product, Inc.
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
Re: S.E.C. Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to American Educational Products, Inc. (the
"Company") in connection with a Registration Statement to be filed with the
United Stated Securities and Exchange Commission, Washington, D.C., pursuant
to the Securities Act of 1933, as amended, covering the registration of an
aggregate of 75,757 warrants being distributed as a dividend and 75,757 shares
of the Company's $0.05 par value common stock (the "Common Stock") pursuant to
the exercise of those Warrants. In connection with such representation of the
Company, we have examined such corporate records, and have made such inquiry
of government officials and Company officials and have made such examination
of the law as we deemed appropriate in connection with delivering this
opinion.
Based upon the foregoing, we are of the opinion as follows:
1. The Company has been duly incorporated and organized under the laws
of the State of Colorado and is validly existing as a corporation in good
standing under the laws of that state.
2. The Company's authorized capital consists of one hundred million
(100,000,000) shares of Common Stock having a par value of $0.05 each and
fifty million (50,000,000) shares of Preferred Stock having a par value of
$.01 each.
3. The 75,757 warrants and 75,757 shares of Common Stock being
registered for sale and offered by the Company will, upon the valid exercise
of the Warrant and payment of the Warrant exercise price, be lawfully and
validly issued, fully paid and non-assessable shares of the Company's Common
Stock.
Sincerely,
/s/ Clifford L. Neuman
CLN:gg
<PAGE>
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference of our report dated February 10,
1998 accompanying the financial statements of American Educational Products,
Inc. and Subsidiaries in the Form S-3 Registration Statement of American
Educational Products, Inc.
HEIN + ASSOCIATES LLP
Denver, Colorado
November 11, 1998
<PAGE>
November 13, 1998
American Educational Products, Inc.
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
Re: S.E.C. Registration Statement on Form S-3
Ladies and Gentlemen:
We hereby consent to the inclusion of our opinion regarding the legality
of the securities being registered by the Registration Statement to be filed
with the United Stated Securities and Exchange Commission, Washington, D.C.,
pursuant to the Securities Act of 1933, as amended, by American Educational
Products, Inc., a Colorado corporation, (the "Company") in connection with the
offering described therein of 75,757 warrants as a dividend and up to 75,757
shares of its Common Stock, $.05 par value, pursuant to the exercise of
certain warrants, as proposed and more fully described in such Registration
Statement.
We further consent to the reference in such Registration Statement to our
having given such opinions.
Sincerely,
/s/ Clifford L. Neuman
CLN:gg
