<PAGE>
As filed with the Securities and Exchange Commission on January 21, 1999.
Registration No. 333-67401
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
AMERICAN EDUCATIONAL PRODUCTS, INC.
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(Exact name of Registrant as specified on its Charter)
Colorado 84-1012129
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(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
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(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
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. [ ]
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<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 $.00
Common Stock,
$.05 par value: 75,757 (3) $10.00 (4) $757,570 $229.57
Total $757,570 $229.57
</TABLE>
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(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 us
as a dividend to certain of our 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
The Warrant Dividend -
- --------------------
* We are registering 75,757 warrants that will be issued as a dividend to
our common stockholders of record on June 5, 1997 who sold their shares
of our common stock during the period commencing on June 5, 1997 and
ending December 5, 1997. See "Plan of Distribution."
* 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 our common stock at an exercise price of $10.00 per share.
* The warrants are redeemable by us upon thirty (30) days notice at a
redemption price of $.01 per warrant but only if the last sale price for
our common stock exceeds $11.00 for twenty (20) consecutive trading days.
See "Plan of Distribution."
The Common Stock Offering -
- -------------------------
* This Prospectus also covers our offer and sale of 75,757 shares of $.05
par value common stock which are issuable upon the exercise of the
warrants. See "Plan of Distribution."
Proceeds of the Offerings and Expenses -
- --------------------------------------
* We will not receive any consideration in connection with the issuance of
the warrants.
* We could receive up to $757,570 in gross proceeds if all 75,757 warrants
are exercised.
* We will not receive any proceeds from the resale of the warrants and/or
common stock.
* We have agreed to pay all of the expenses incurred in connection with the
registration of the warrants and common sock, which are estimated to be
$12,000.
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Nasdaq SmallCap Market Trading Symbols-
Common Stock - AMEP
Warrants - AMEPW
-------------------------------------------------
The Date of This Prospectus is January ____, 1999.
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See "risk factors" beginning at page 6 for a description of certain matters
that you should consider in evaluating an investment in our securities.
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Neither the securities and exchange commission nor any state securities
commission has approved or disapproved of the securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
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<PAGE>
<PAGE>
Additional Information
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
You may read and copy any document we file at the Commission's Public
Reference Rooms in Washington, D.C., New York, New York, and Chicago,
Illinois. Please call the Commission at 1-800-SEC-0330 for further
information on the Public Reference Rooms. You can also obtain copies of our
Commission filings by going to the Commission's website at http://www.sec.gov.
The Commission allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference
is considered to be part of this Prospectus, and later information that we
file with the Commission will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934. This Prospectus is part of a
Registration Statement we filed with the Commission.
(a) Registration Statement on Form S-3, SEC File No. 333-43717.
(b) Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997.
(c) Proxy Statement for the Annual Meeting of Shareholders held on June
9, 1998.
(d) Quarterly Reports on Form 10-QSB for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998.
You may request a copy of these filings 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, you can obtain these filings electronically at the Commission's
worldwide website at http://www.sec.gov/edgarhp/htm.
You should rely only on the information incorporated by reference or provided
in this Prospectus or any supplement to this Prospectus. We have not
authorized anyone else to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this Prospectus or
any supplement to this Prospectus is accurate as of any date other than the
date on the front of those documents.
<PAGE>
<PAGE>
Forward-Looking Statements
This Prospectus contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 that are prospective.
These statements are subject to risks, uncertainties and other factors which
could cause actual results to differ materially from the information contained
in the forward-looking statements. We cannot control many of those risks and
uncertainties which include competitive pressures, changing economic
conditions and other factors.
Capital Stock Information
All information with regard to our common stock contained in this Prospectus,
including share and per share information, gives effect to a one-for-five (1-
for-5) reverse stock split that occurred on April 22, 1997.
<PAGE>
<PAGE>
American Educational Products, Inc.
We manufacture, develop, market and distribute educational products to
parents, teachers, principals, public and private schools, and school
districts throughout the United States and in some selected international
locations. Generally, our products can be classified as supplemental
instructional aids, that is, products that present educational content in a
format different than traditional textbooks. Specifically, we produce
manipulative products that students can physically touch, examine and
manipulate to gain additional understanding. Our operations are primarily
conducted through our three (3) wholly-owned subsidiaries: Scott Resources,
Inc. ("Scott Resources"); Hubbard Scientific, Inc. ("Hubbard Scientific"); and
SL Distribution, Inc. which is doing business as "Summit Learning" ("Summit
Learning"). Our executive offices are located at 6550 Gunpark Drive, Suite
200, Boulder, Colorado 80301. Our 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.
Summit Learning, which we bought in August 1998, distributes supplemental
educational products through the direct mailing of catalogs. Summit
Learning's operations are conducted at its facilities in Fort Collins,
Colorado.
Introduction to the Warrant Dividend
On June 2, 1997, we declared a warrant dividend payable to our common
stockholders of record on June 5, 1997. After declaring the warrant dividend,
we filed a registration statement on Form S-3, SEC File No. 333-35205, which
was declared effective by the Commission on December 4, 1997. However, when
we tried to distribute the warrant dividend, the Nasdaq Stock Market
unilaterally declared an ex-dividend date of December 5, 1997 because they had
failed to notify brokers of the earlier record date. The ex-dividend date is
the date after which a sale of our common stock does not carry with it the
seller's right to receive his proportionate share of the warrant dividend.
The ex-dividend date should have been June 5, 1997, and all of our
stockholders of record on June 5, 1997 were entitled to receive their
proportionate share of the warrant dividend. However, some of the record
owners of our common stock on June 5, 1997 sold their shares common stock
during the period commencing on June 5, 1997 and ending on December 5, 1997.
As a result, these stockholders did not receive the warrant dividend they were
entitled to receive by virtue of their ownership of our common stock on June
5, 1997. This Prospectus covers our offer and sale of 75,757 warrants that we
will be issuing as a dividend to those common stockholders of record on June
5, 1997 who sold their shares of our common stock after June 5, 1997 and
before December 5, 1997. We are also registering the offer and sale of 75,757
shares of common stock issuable by us upon the exercise of the 75,757 warrants
we are issuing as a dividend.
<PAGE>
<PAGE>
Risk Factors
You should consider carefully the following risk factors in addition to the
other information contained in this prospectus:
Limited Liquidity And Capital Resources.
- ---------------------------------------
You should not rely on our current liquidity or the recent reduction in our
accumulated deficit as an indicator of our future performance.
At September 30, 1998, we had working capital of $2,171,000 based upon current
assets of $6,791,000 and current liabilities of $4,620,000. Of current
liabilities, approximately $1,700,000 was 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 we do not expect to repay the entire debt within the
next twelve months, we are 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 us. Furthermore, we
experienced deficits during the years ended December 31, 1995 and December 31,
1996, which significantly decreased our liquidity and capital resources. We
took actions during 1997 to mitigate the impact of the liquidity shortfall
which resulted in a reduction in our accumulated deficit during fiscal 1997
and the first nine months of fiscal 1998. However, there are no guarantees
that we can continue to reduce our accumulated deficit and/or further improve
our liquidity.
Historical Lack of Operating Profits.
- ------------------------------------
You should not rely on our recent profits as an indication of future
profitability.
For the year ended December 31, 1996, we reported a net loss of $1,095,000.
We also reported net losses for each of the two preceding years. For the year
ended December 31, 1997, we reported net income of $514,000, and have reported
net income for the first nine months of 1998 of $967,000. We attribute the
improved results to an increased market demand for our products, to a
reorganization that significantly reduced operating costs, and to the sale of
an unprofitable division. Even with our recent improvements, there can be no
assurance that we can continue our profitable performance.
Exercise Price of Warrants Arbitrarily Determined.
- -------------------------------------------------
Standard valuation criteria were not used to determine the exercise price of
the warrants.
We were responsible for setting the exercise price of the warrants. The
exercise price bears no direct relationship to our assets, book value, net
worth or operations. The exercise price of the warrants is $5.45 per share
greater than our September 30, 1998 per share net tangible book value. See
"Risk Factors - Risk of Substantial Dilution."
Risks Associated with Inability to Force Warrant Exercise.
- ---------------------------------------------------------
We cannot predict the number of warrants, if any, that will be exercised, or
the proceeds that we will receive from the exercise of warrants.
Those stockholders who receive warrants as part of the warrant dividend 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 us
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 our common stock underlying the warrants. Accordingly, there is no
assurance that the warrants will be exercised during the period they are
exercisable, or that we will receive any proceeds from the exercise of the
warrants.
Unspecified Use of Proceeds.
- ---------------------------
We will have broad discretion to allocate any proceeds we receive from the
exercise of warrants. We cannot guarantee that the monies received will
improve our operations.
The monies that we may receive from the exercise of the warrants have been
allocated generally to provide working capital for operations. As such, we
will use funds as they are received for such purposes and in such proportions
as we deem advisable. While we will apply the proceeds in a manner consistent
with our fiduciary duty and in a manner consistent with our best interests, we
cannot assure you that the monies received will result in any present or
future improvement in our results of operations.
Intense Competition.
- -------------------
We are in an extremely competitive industry that is dominated by several
companies which have significantly greater financial, technical, and marketing
resources than we have.
The industry in which we compete is characterized by intense competition, and
extensive research and development efforts. New product developments, and
enhancements of existing products, are expected to continue and we cannot
assure you that discoveries by others will not render our products
non-competitive. Sales of technology related products such as computers and
other electronic products are growing at a faster rate than sales of
manipulatives and videos. We do not manufacture technology related products
and have no such products currently under development.
There are many companies, both public and private, that develop products for
the same applications as we pursue. 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 we have and represent substantial long-term competition for us. These
companies may succeed in developing products that are more effective or less
costly than any products that we may currently own or be developing 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 our products. While we can provide our
customers with better delivery schedules and more comprehensive teacher
manuals, foreign competition may still have an adverse effect on us.
Risk of Inability to Integrate Recently Acquired Businesses.
- -----------------------------------------------------------
We may not be able to integrate our recently acquired businesses in a manner
that is beneficial to us, or that results in additional profits.
We believe that our ultimate success and profitability turns, in part, on our
ability to expand our product base and strengthen our market position via
acquisition. As a result, we actively seek acquisition opportunities that
complement our existing business. By expanding our product base, we believe
that we will be better able to more fully address the diverse and growing
requirements of the education industry. To this end, we believe that the
acquisitions of Summit Learning and NTA will allow us to provide a more
complete and useful product offering within the educational industry.
However, we cannot assure you that the integration of Summit Learning and/or
NTA with our 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.
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 our attention
from our day-to-day business operations.
Risk of Inability to Manage Growth.
- ----------------------------------
Our failure to manage growth properly could have a material adverse effect
upon our business, financial condition and results of operations.
The educational products industry is a very fragmented industry. Thus, the
ability to timely deliver a variety of educational products and to provide
meaningful customer support for a diverse product offering is indispensable.
For this reason, we have adopted a long term growth strategy to develop our
product lines and strengthen our market position via acquisition. However,
our ability to manage our growth, if any, will require us to continue to
improve and expand our management, operational and financial systems and
controls. Any measurable growth in business will result in additional demands
on customer support, sales, marketing, administrative and technical resources
and will place significant strain on our management, administrative,
operation, financial and technical resources and increase demand upon our
systems and controls. We cannot assure you that we will be able to
successfully address these additional demands, or that our operating and
financial control systems will be adequate to support our future operations
and anticipated growth. See also "Risk Factors - Risk of Inability to
Integrate Recently Acquired Businesses."
Risks Associated With Our Ability to Make Unspecified Acquisitions.
- ------------------------------------------------------------------
Additional acquisitions, if consummated, could adversely affect our
operations.
In furtherance of our goal to implement and maintain a strategic plan of
expansion of our product base through acquisitions we have sought, and may
continue to seek, potential acquisitions of products, technologies and
businesses in the education industry that could complement or expand our
current product offering and business. In the event we identify additional
appropriate acquisition candidates, we cannot assure you that we will be able
to successfully negotiate, finance or integrate the acquired products,
technologies or businesses. Furthermore, such an acquisition could cause a
diversion of our time and resources. We cannot assure you that a given
acquisition, when consummated, would not materially adversely affect our
business and results of operations. See also "Risk Factors - Risk of
Inability to Manage Growth."
Dependence Upon Key Personnel.
- -----------------------------
Our success will depend on our ability to attract and retain key personnel.
Our future success is dependent on the continued service of our key technical,
marketing, sales, and management personnel and on our ability to continue to
attract, motivate, and retain highly qualified employees. Except for a one
year agreement with our President, Mr. Thygesen, we currently do not have in
place any employment agreements with our key employees. As a result, our key
employees may voluntarily terminate their employment 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 our strategy is often lengthy. Accordingly, the loss of the services
of key personnel could have a material adverse effect upon our operations and
our development efforts.
Inability to Adequately Protect Our Products.
- --------------------------------------------
We may be unable to prevent the unauthorized use of our products or
unauthorized disclosure of our proprietary information. Any unauthorized use
or disclosure could have a material adverse effect on our business and
operations.
We rely on copyrights and trademarks for protection of our products. Where
registrations of trademarks have not been issued, we claim common law
trademark rights to those names. Notwithstanding the foregoing, we cannot
assure you that we will obtain additional registrations for any of our
trademarks. We may be subject to opposition, cancellation or infringement
proceedings based upon the use of those trademarks. If we lose the use of any
one or more of our trademarks, it could have a material adverse effect upon
our ability to profitably market our products.
We also rely on trade secret protection for our unpatented proprietary
technology. However, trade secrets are difficult to protect. We cannot
assure you that others will not independently develop substantially equivalent
manipulatives and models or otherwise gain access to our trade secrets, that
such trade secrets will not be disclosed or that we can effectively protect
our rights to unpatented trade secrets. Despite our precautions, unauthorized
parties may attempt to design, copy or obtain and use our products and other
information we consider proprietary. We cannot assure you that the
precautions we have taken will provide meaningful protection for our products
or other proprietary information in the event of unauthorized use or
disclosure of this information.
Potential Adverse Outcome of Pending Litigation.
- -----------------------------------------------
Our failure to prevail in pending copyright and trademark infringement
litigation may prevent us from selling the products involved and may require
us to pay significant damages to the Plaintiff. Additionally, the cost of
defending the action could be significant.
In August, 1998, we 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. In this litigation, Lakeshore has asserted
claims against us based upon alleged copyright and trademark infringement and
common law unfair competition related to certain products developed by Hubbard
Scientific. Based upon our preliminary investigation, we believe that the
claims are without merit and we have engaged legal counsel to provide a
vigorous defense in the action. We cannot assure you that we will be able to
successfully defend the infringement claims made by Lakeshore. If Lakeshore
prevails in this litigation, we may be permanently enjoined from selling the
products involved and may be obligated to pay significant damages to the
Plaintiff. Even if we are successful in our defense of this litigation, the
cost of mounting a defense could be substantial and we may be required to
devote a substantial amount of time to our defense of the action.
Potential Adverse Effects From Decreases in Educational Funding.
- ---------------------------------------------------------------
A material reduction in funding for public education would adversely effect
our profitability.
The principal markets for our 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 our 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 our products, which, in turn,
would adversely effect our operations and profitability.
Management's Lack of Voting Influence.
- -------------------------------------
Our officers and directors do not own a majority of our common stock and
therefore cannot assure you that they will be able to implement our business
plans and strategies.
All of our 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, as a group they would exercise voting control over only 15.8%
of our outstanding shares of common stock following completion of this
offering. As a result of this lack of voting influence as stockholders, we
cannot assure you that our officers and directors will be able to implement
our 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.
Risks Related to Limited Liquidity in Trading Markets of Our Securities.
- -----------------------------------------------------------------------
The trading market for our securities is limited and sporadic.
Prior to this offering, our 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
our securities, the prices are subject to high degrees of volatility and we
cannot assure you that the market will improve in the future. Factors
discussed in this Prospectus may have a significant impact on the market
prices of our common stock and warrants. See "Description of Securities."
Nasdaq Maintenance Requirements; Possible Delisting From Nasdaq System.
- -----------------------------------------------------------------------
If our securities are de-listed from Nasdaq, information about, and the
liquidity of, our securities will be adversely affected.
The Commission has approved rules imposing more stringent criteria for the
listing of securities on Nasdaq, including standards for maintenance of these
listings. If we are unable to satisfy Nasdaq's maintenance criteria in the
future, our 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. As a consequence of being de-listed from Nasdaq, you
could find it more difficult to find relevant and timely information about us
and to sell, or to get accurate quotations of, our securities.
Risks of Low-priced Stocks.
- --------------------------
If our securities are de-listed from Nasdaq, it may be more difficult for you
to sell your common stock and/or warrants.
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. These exceptions include any equity security listed on
Nasdaq and any equity security issued by an issuer that has:
1. net tangible assets of at least Two Million Dollars ($2,000,000), if
the issuer has been in continuous operation for three (3) years; or
2. net tangible assets of at least Five Million Dollars ($5,000,000),
if the issuer has been in continuous operation for less than three
(3) years; or
3. an average annual revenue of at least Six Million Dollars
($6,000,000), if the 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 with it.
If our securities are not quoted on Nasdaq, or we do not have Two Million
Dollars ($2,000,000) in net tangible assets, trading in our 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 these 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 our 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
our common stock and warrants are listed on Nasdaq, in the event the common
stock and/or warrants were subsequently to become characterized as penny
stocks, the market liquidity for our securities could be severely affected. In
such an event, the regulations on penny stocks could limit the ability of
broker-dealers to sell our securities and adversely affect your ability to
sell our securities in the secondary market.
Potential Adverse Effects of Future Sales.
- -----------------------------------------
The market price of our securities could be adversely affected by sales of
restricted securities.
Actual sales or the prospect of future sales of shares of our common stock
under Rule 144 may have a depressive effect upon the price of, and market for,
our common stock. As of September 30, 1998, 1,034,323 shares of our common
stock were issued and outstanding. 330,391 of these shares 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 who has beneficially
owned restricted 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:
1. does not exceed the greater of one percent (1%) of the total number
of outstanding shares of the same class; or
2. 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 one of our affiliates for
at least three (3) months immediately preceding a sale and who has
beneficially owned the shares of common stock for at least one (1) year is
entitled to sell these shares under Rule 144 without regard to any of the
volume limitations described above. We may grant options to purchase an
additional 9,600 shares of common stock pursuant to our incentive stock option
plan. We have registered for sale all shares issuable upon exercise of the
options granted pursuant to our incentive stock option plan. As a result,
when the options are exercised, the shares issued will be free-trading, except
for certain limitations imposed upon directors, officers and affiliates who
exercise options granted under the plan. We cannot predict what effect, if
any, that sales of shares of common stock, or the availability of these 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 our
common stock and could impair our ability to raise capital in the future
through the sale of equity securities.
Potential Adverse Effects of Preferred Stock.
- --------------------------------------------
We may authorize the issuance of our Preferred Stock without shareholder
approval.
Our Articles of Incorporation, as amended, authorize the issuance of up to
50,000,000 shares of preferred stock. We can fix and determine the relative
rights and preferences of preferred shares and may issue these shares, without
further stockholder approval. As a result, we could authorize the issuance of
a series of preferred stock which would:
1. grant to holders preferred rights to our assets upon liquidation;
2. grant to holders the right to receive dividend coupons before
dividends would be declared to common stockholders; and
3. grant to holders the right to the redemption of those shares,
together with a premium, prior to the redemption of common stock.
Common stockholders have no redemption rights. In addition, we 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 And Other Adverse Effects From Future Sales of Additional
Shares.
- ---------------------------------------------------------------------------
The exercise of outstanding options and warrants and/or our ability to issue
additional securities without shareholder approval could have substantial
dilutive and other adverse effects on existing stockholders and investors in
this Offering.
We have the authority to issue additional shares of common stock and to issue
options and warrants to purchase shares of our 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 you as an investor in this Offering.
In addition, we could issue large blocks of voting stock to fend off unwanted
tender offers or hostile takeovers without further shareholder approval. We
have outstanding options exercisable to purchase up to 171,250 shares of
common stock at a weighted average exercise price of $5.57 per share, and
outstanding warrants exercisable to purchase up to 926,765 shares of common
stock at a weighted average exercise price of $9.94 per share. Holders of the
options or warrants can be expected to exercise them at a time when we would,
in all likelihood, be able to obtain any needed capital on terms which are
more favorable to us than the exercise terms provided by such options or
warrants. Exercise of these warrants and options could have a further
dilutive effect on existing stockholders and you as an investor in this
Offering. See "Description of Securities."
Risk of Substantial Dilution.
- ----------------------------
Upon exercising warrants, you may sustain an immediate substantial dilution of
your exercise price per share of $10.00.
As of September 30, 1998, we had sold or issued 1,034,323 shares of common
stock at an average cost per share of approximately $6.79, which is $3.21 per
share less than the warrant exercise price. At September 30, 1998, we had a
net tangible book value of $4,710,000 or $4.55 per share of common stock
outstanding, based on 1,034,323 shares issued and outstanding. The $10.00 per
share exercise price of the warrants is $5.45 per share greater than our $4.55
per share net tangible book value at September 30, 1998. As a result, in
exercising warrants, you may sustain an immediate substantial dilution of your
exercise price per share of $10.00.
Potential Adverse Effect of Warrant Redemption.
- ----------------------------------------------
Our redemption of the warrants could force you to exercise the warrants at a
time when it may be disadvantageous for you to do so.
We have the right to redeem the warrants at a price of $0.01 per warrant upon
30 days' notice, mailed after the closing bid price of our common stock has
equaled or exceeded $11.00 for a period of twenty (20) consecutive trading
days. You may exercise the warrants until the close of the business day
preceding the date fixed for redemption. Redemption of the warrants could:
1. force you to exercise the warrants and pay the exercise price at a
time when it may be disadvantageous for you to do so;
2. force you to sell the warrants at the then current market price when
you might otherwise wish to hold the warrants; or
3. force you 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."
Dilution
Our net tangible book value at September 30, 1998 was $4,710,000, or $4.55 per
share, based upon 1,034,323 shares outstanding. Net tangible book value per
share is determined by dividing the number of outstanding shares of common
stock into our net tangible book value (total assets less total liabilities
and intangible assets).
If any outstanding warrants are exercised, the number of common shares
outstanding will increase and our net tangible book value will increase. The
exercise of any warrants at a time when the exercise price is greater than our
net tangible book value per share will increase the net tangible book value
per share of shares held by our 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 exercise will increase our 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 we will receive gross proceeds of up to $757,570, from which we
will pay the expenses which will be incurred in connection with the
registration of the shares, which are estimated to be $12,000. You 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 you sell any
of the shares.
We will utilize the net proceeds, if any, realized from the exercise of the
warrants for working capital and for general corporate purposes, at our
discretion. Actual expenditures, however, may vary substantially depending
upon economic conditions and opportunities we are able to identify. Due to an
inability to precisely forecast events, we are 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 us and bears no relationship to the market price of our common stock, the
prevailing market conditions, our operating results in recent periods, our
book value 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 our total issued and outstanding shares, we declared a warrant dividend
payable to our common stockholders of record on June 5, 1997. After we
declared the warrant dividend, the Nasdaq Stock Market unilaterally declared
an ex-dividend date of December 5, 1997 because they had failed to notify
brokers of the June 5, 1997 record date. The ex-dividend date is the date
after which a sale of our common stock does not carry with it the seller's
right to receive his proportionate share of the warrant dividend. The ex-
dividend date should have been June 5, 1997, and all of our stockholders of
record on June 5, 1997 were entitled to receive their proportionate share of
the warrant dividend. However, some of the record owners of our common stock
on June 5, 1997 sold their shares common stock during the period commencing on
June 5, 1997 and ending on December 5, 1997. As a result, these stockholders
did not receive the warrant dividend they were entitled to receive by virtue
of their ownership of our common stock on June 5, 1997.
We have agreed to issue additional warrants as a dividend to those
shareholders of record on June 5, 1997 who sold their shares of our common
stock during the period commencing on June 5, 1997 and ending December 5,
1997. The warrants will be issued immediately after the effective date of
this Registration Statement. The warrants entitle the holders to purchase 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.
We are offering the warrants and the shares of common stock underlying the
warrants. No underwriter or placement agent will be involved and no
commissions or similar compensation will be paid to any person. You may
resell the warrants and/or shares of common stock from time to time in
transactions (which may include block transactions)on the Nasdaq SmallCap
Market, in negotiated transactions, or through other methods of sale, at
market prices prevailing at the time of sale, or at negotiated prices. You
may sell 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
you and/or the purchasers of the warrants and/or shares of common stock.
You and any broker-dealers that act as a principal in connection with the sale
of the warrants and/or shares of common stock 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 might be deemed to be underwriting discounts and
commissions under the Securities Act. You 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. We will not receive
any proceeds from the issuance of the warrant dividend or from the sales of
warrants or shares of common stock by you. Transactions involving the
warrants and/or shares of common stock or even the potential of such sales,
may have an adverse effect on the market price of the warrants and/or our
common stock.
We have agreed to pay all expenses incurred in connection with the
registration of the securities we are offering. You will be responsible to
pay any and all commissions, discounts and other payments to broker-dealers
incurred in connection with your sale of the warrants and/or common stock.
Indemnification
Our By-Laws 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 us pursuant to such
provisions, we have 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
We are authorized to issue up to 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 our common stock 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 our common stock 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 we may declare. Upon our liquidation, dissolution or winding up,
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 those assets 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
- ----------------
Our Articles of Incorporation authorize issuance of a maximum of 50,000,000
preferred shares. Our Articles of Incorporation vest us 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 our Articles of Incorporation in respect of, among other things:
1. the number of preferred shares to constitute such series, and the
distinctive designations thereof;
2. 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;
3. whether preferred shares may be redeemed and, if so, the redemption
price and the terms and conditions of redemption;
4. the liquidation preferences payable on preferred shares in the event
of involuntary or voluntary liquidation;
5. sinking fund or other provisions, if any, for redemption or purchase
of preferred shares;
6. 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
7. voting rights, if any.
In the event of a proposed merger, tender offer, proxy contest or other
attempt to gain control of American Educational Products, Inc. which we have
not approved, it would be possible for us, subject to any limitations imposed
by applicable law, our 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 our securities are at any time listed
or of other markets on which our securities 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 us. The issuance of preferred stock may have an adverse effect on the
rights (including voting rights) of holders of common stock.
Warrants
- --------
We are authorized to issue up to 992,055 warrants, including the issuance of
the warrants that will be issued to you after the effectiveness of the
Registration Statement. 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 beginning the
effective date of the Registration Statement 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 us upon thirty (30) days' notice to our 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 us
and Corporate Stock Transfer, Inc., as Warrant Agent. The warrants are
redeemable upon 30 days notice, at our option, at a redemption price of $.01
per warrant, if the last sale price for our 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. In the event of
our liquidation, dissolution or winding up, the holders of the warrants will
not be entitled to participate in the distribution of our assets.
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 you as part of a dividend to our common
shareholders, and upon issuance will be freely tradeable. Prior to this
Offering, our 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 our warrants.
Additionally, we cannot assure you that a public trading market for the
warrants will continue.
<PAGE>
<PAGE>
Legal Matters
The law firm of Neuman, Drennen & Stone, LLC, Temple-Bowron House, Boulder,
Colorado will issue an opinion regarding the legality of the warrants. We
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 our
Board of Directors since November 1990, and our Audit Committee since April,
1991, and also owns 13,800 shares of our common stock, warrants to purchase an
additional 13,000 shares of common stock and options exercisable to purchase
an additional 16,200 shares of common stock.
Experts
Our consolidated financial statements 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>
- ----------------------------------- -----------------------------------
You should rely only on the
information incorporated by . AMERICAN EDUCATIONAL
reference or provided in this PRODUCTS, INC.
Prospectus. We have not
authorized anyone to provide you
with different information. We
are not making an offer of these 75,757
securities in any state where Common Stock Purchase
the offer would not be permitted. Warrants
You should not assume that the
information contained in this 75,757 Shares
Prospectus is accurate as of any
date other than the date on the
front of this document or the
date of documents incorporated
by reference.
Table of Contents
Page
----
Available Information. . . . 2
American Educational
Products, Inc.. . . . . . . 4
Risk Factors . . . . . . . . 6 ------------------------------
Dilution . . . . . . . . . .13 Prospectus
Use of Proceeds. . . . . . .14 ------------------------------
Determination of Offering
Price. . . . . . . . . . . .14
Plan of Distribution . . . .15
Indemnification. . . . . . .16
Description of Securities. .17
Legal Matters. . . . . . . .18
Experts. . . . . . . . . . .18 _______________, 1998
- ---------------------------------------------------------------------------
<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 us, 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. We currently pay for and maintain 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
- --------------------------------
* Previously filed
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:
a. To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
b. 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;
c. 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 the Pre-Effective Amendment No. 2 to Form
S-3 Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized. In the City of Boulder, State of Colorado on the
21st of January, 1999.
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 Pre-
Effective Amendment No. 2 to Registration Statement on 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, 01/21/99
- ---------------------------- Director, Secretary
Robert A. Scott
/s/ Clifford C. Thygesen President, CEO, Director 01/21/99
- ----------------------------
Clifford C. Thygesen
/s/ Frank L. Jennings Chief Financial Officer, 01/21/99
- ---------------------------- Assistant Secretary
Frank L. Jennings
/s/ Steven B. Lapin Director 01/21/99
- ----------------------------
Steven B. Lapin
/s/ Stephen G. Calandrella Director 01/21/99
- ----------------------------
Stephen G. Calandrella
/s/ Wayne R. Kirschling Director 01/21/99
- ----------------------------
Wayne R. Kirschling
/s/ Richard J. Ciurczak Director 01/21/99
- ----------------------------
Richard J. Ciurczak
/s/ Clifford L. Neuman Director 01/21/99
- ----------------------------
Clifford L. Neuman
<PAGE>
Neuman, Drennen & Stone, LLC
1507 Pine Street
Boulder, CO 80302
(303) 449-2100 (telephone)
(303) 449-1045 (facsimile)
January 20, 1999
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>
HEIN + ASSOCIATES LLP
717 Seventeenth Street, Suite 1600
Denver, CO 80203
(303) 298-9600 (telephone)
(303) 298-8118 (facsimile)
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
January 20, 1999
<PAGE>
Neuman, Drennen & Stone, LLC
1507 Pine Street
Boulder, CO 80302
(303) 449-2100 (telephone)
(303) 449-1045 (facsimile)
January 20, 1999
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
