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As filed with the Securities and Exchange Commission on September 22, 1999.
Registration No. 333-67401
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 5 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
- ---------------------------- ------------------------------
(State or other jurisdiction IRS Employer Identification
of incorporation Number
or organization)
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
(303) 527-3230
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(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Clifford C. Thygesen
American Educational Products, Inc.
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
(303) 527-3230
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(Name, address, including zip code, and telephone number of
agent for service of process)
Copies to:
Clifford L. Neuman, Esq.
David H. Drennen, Esq.
Neuman & Drennen, LLC
1507 Pine Street
Boulder, Colorado 80302
(303) 449-2100
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of the registration
statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
Proposed Proposed
Title of Each Maximum Maximum
Class of Amount to Offering Aggregate Amount of
of Securities to be Price per Offering Registration
be Registered Registered Share(1) Price(2) Fee
--------------------------- --------- ---------- ------------
Common Stock,
$.05 par value: 75,757(2) $10.00(3) $757,570 $229.57
- ----------------- ---------- ---------- ---------- -----------
TOTAL: $757,570 $229.57
================= ========= =========== ========== ===========
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Reflects 75,757 shares of common stock issuable upon exercise of
the warrants.
(3) Based upon the $10.00 per share exercise price of the warrants.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
</TABLE>
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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
cover of Prospectus page of Prospectus
2. Inside front and outside back Inside front and outside back
cover 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 Indemnification
Position on Indemnification for
Securities Act Liabilities
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<PAGE>
Prospectus
AMERICAN EDUCATIONAL PRODUCTS, INC.
75,757 Shares
$.05 par value Common Stock
The Warrant Dividend
- We are registering 75,757 shares of Common Stock. Those shares are
issuable upon the exercise of warrants that we will issue as a
dividend to our common stockholders of record on June 5, 1997, who
sold their shares during the period commencing on June 5, 1997 and
ending December 5, 1997.
- Each warrant is exercisable for three years to purchase one share of
our common stock at an exercise price of $10.00 per share. The
warrants expire December 1, 2000.
- The warrants are redeemable by us upon thirty 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 consecutive trading
days.
-----------------------------------
Investing in our securities involves risks. Please read the risk factors
beginning on page 4 before making a decision to invest in our securities.
-----------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. It is illegal for any person to
tell you otherwise.
----------------------------------------
Nasdaq SmallCap Market Trading Symbols -
Common Stock - AMEP
Warrants - AMEPW
-----------------------------------------
The Date of This Prospectus is September ___, 1999.
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<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 wholly-owned subsidiaries: Scott Resources,
Inc.; Hubbard Scientific, Inc.; and SL Distribution, Inc. which is doing
business as "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.
National Teaching develops, manufactures, and markets science products for
the K-12 market. During April and May 1998, the operations of National
Teaching 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. The warrant dividend and June 5,
1997 record date were publicly announced in a press release. 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. On December 5, 1997, the warrants were distributed
and began trading on the Nasdaq Small Cap Market under the symbol AMEPW.
However, when we tried to distribute the warrant dividend, we discovered
that the Nasdaq Stock Market had unilaterally declared an ex-dividend date
of December 5, 1997. 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. Nasdaq declared the ex-
dividend date of December 5, 1997, because it had failed to enter the June
5, 1997 ex-dividend date in its system, and, as a result, after June 5,
1997, their brokers continued to trade our common stock with the warrant
dividend entitlement. Consequently, brokers were operating under the
mistaken belief that anyone purchasing shares of our common stock during
the period commencing on June 5, 1997 and ending before December 5, 1997,
also acquired the right to receive 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 participate, pro-
rata, in the warrant dividend. However, some of the record owners of our
common stock on June 5, 1997 sold their shares of common stock after June
5, 1997 and before December 5, 1997. As a result, these stockholders did
not receive their pro-rata warrant dividend they were entitled to receive
by virtue of their ownership of our common stock on June 5, 1997. Instead,
those shareholders of record on December 5, 1997, including those
shareholders who purchased their shares of common stock after June 5, 1997,
and before December 5, 1997, received the warrant dividend. This
prospectus covers 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 to those holders of record of our common stock on June 5, 1997,
but who sold that stock before December 5, 1997.
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<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 June 30, 1999, we had working capital of $3,725,000 based upon
current assets of $7,404,000 and current liabilities of $3,679,000. Of
current liabilities, approximately $1,851,000 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, 2002, 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 years ended December 31, 1997 and 1998, we reported net
income of $514,000 and $850,000, respectively, and have reported net income
for the first six months of 1999 of $505,000. We attribute the improved
results to an increased market demand for our products and to a
reorganization that significantly reduced operating costs. Even with these
improvements, there can be no assurance that we can continue our profitable
performance.
Exercise Price of Warrants Arbitrarily Determined. The exercise price of
the warrants is considerably higher than our per share net tangible book
value, the warrants may never be profitable to shareholders.
We were responsible for setting the exercise price of the warrants.
The exercise price and other terms of the warrants are identical to the
warrants we issued and that began trading on Nasdaq on December 5, 1997.
The exercise price bears no direct relationship to our assets, book value,
net worth, or operations. The exercise price of the warrants is $4.70 per
share greater than our June 30, 1999, per share net tangible book value.
As a result, the warrants may never be profitable to shareholders.
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 June 30, 1999, we had sold or issued 1,076,030 shares of common
stock at an average cost per share of approximately $6.73, which is $3.27
per share less than the warrant exercise price. At June 30, 1999, we had a
net tangible book value of $5,704,000 or $5.30 per share of common stock
outstanding, based on 1,076,030 shares issued and outstanding. The $10.00
per share exercise price of the warrants is $4.70 per share greater than
our $5.30 per share net tangible book value at June 30, 1999. As a result,
in exercising warrants, you may sustain an immediate substantial dilution
of your exercise price per share of $10.00.
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.
Intense competition and extensive research and development efforts
characterize the industry in which we compete. 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 National
Teaching 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 National Teaching 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.
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. If we are unable to attract and retain
key personnel, we will be unable to succeed in our business plan.
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 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.
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
per share, subject to 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, if the
issuer has been in continuous operation for three years; or
2. Net tangible assets of at least five million dollars, if the
issuer has been in continuous operation for less than three
years; or
3. An average annual revenue of at least six million dollars, if the
issuer has been in continuous operation for less than three
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 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 per share.
Our common stock and warrants will, as of the date of this prospectus,
be outside the definitional scope of a penny stock, since the market price
of the common stock is in excess of five dollars per share, and our common
stock and warrants are listed on Nasdaq. However, 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 June 30, 1999, 1,076,030 shares of our
common stock were issued and outstanding. 366,590 of these shares are
"restricted securities" and under some circumstances may, in the future, be
under 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 other conditions, a person who has beneficially
owned restricted shares of common stock for at least one year is entitled
to sell, within any three-month period, a number of shares that:
1. Does not exceed the greater of one percent 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 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 months immediately preceding a sale and who
has beneficially owned the shares of common stock for at least one 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 under our incentive stock option
plan. We have registered for sale all shares issuable upon exercise of the
options granted under our incentive stock option plan. As a result, when
the options are exercised, the shares issued will be free-trading, except
for 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 142,701 shares of common stock at a weighted
average exercise price of $5.73 per share, and outstanding warrants
exercisable to purchase up to 916,298 shares of common stock at a weighted
average exercise price of $10.00 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."
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
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.
Additional Information
We file annual, quarterly and special reports, proxy statements, and
other information with the Securities and Exchange 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, 1998.
(c) Proxy Statement for the annual meeting of shareholders held on
July 21, 1999.
(d) Quarterly reports on Form 10-QSB for the quarters ended March 31,
1999 and June 30, 1999.
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.
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 reverse stock split that occurred on April 22, 1997.
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 upon 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.
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. The warrant dividend and June 5, 1997 record date were publicly
announced in a press release. After we declared the warrant dividend, the
Nasdaq Stock Market unilaterally declared an ex- dividend date of December
5, 1997. 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. Nasdaq declared the ex-
dividend date of December 5, 1997, because Nasdaq had failed to enter the
June 5, 1997 ex-dividend date in its system, and, as a result, after June
5, 1997, their brokers continued to trade our common stock with the warrant
dividend entitlement. Consequently, brokers were operating under the
mistaken belief that anyone purchasing shares of our common stock during
the period commencing on June 5, 1997 and ending before December 5, 1997,
also acquired the right to receive the warrant dividend.
The ex-dividend date was intended to be June 5, 1997, and all of our
stockholders of record on June 5, 1997 were entitled to participate, pro-
rata, in the warrant dividend. However, some of the record owners of our
common stock on June 5, 1997 sold their shares of common stock after June
5, 1997 and before December 5, 1997. As a result, these stockholders did
not receive their pro-rata warrant dividend they were entitled to receive
by virtue of their ownership of our common stock on June 5, 1997. Instead,
shareholders of record on December 5, 1997, including those shareholders
who purchased their shares of common stock after June 5, 1997, and before
December 5, 1997, received the warrant dividend.
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 we will be issuing will carry terms, which are
identical to the warrants we issued and that began trading on Nasdaq on
December 5, 1997. The warrants will be distributed 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 under Rule 415 under the
Securities Act.
We are offering 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 some forms of liability, including liability 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 under 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.
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 Stock
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 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. Any
such action by us would be 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. 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 December 1, 2000. In the event the warrants are not exercised
within such period, all unexercised warrants will expire and be void and of
no further force or effect. We may extend the warrant exercise period upon
thirty 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 Corporate Stock
Transfer, Inc., as warrant agent, and us. In our option, we may redeem the
warrants upon 30 days notice, 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
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 tradable. 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.
Legal Matters
The law firm of Neuman & Drennen, LLC, Temple-Bowron House, Boulder,
Colorado will issue an opinion regarding the legality of the warrants. We
will pay the firm of Neuman & Drennen, 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, 1998, 1997
and 1996 and for each of the years in the three-year period ended December
31, 1998, 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 reference
or provided in this prospectus. We
have not authorized anyone to provide
you with different information. We are
not making an offer of these securities AMERICAN EDUCATIONAL
in any state where the offer would not PRODUCTS, INC.
be permitted. You should not assume
that the information contained in this
prospectus is accurate as of any date
other than the date on the front of 75,757 Shares
this document or the date of documents $.05 par value Common Stock
incorporated by reference.
TABLE OF CONTENTS
Page
----
American Educational Products, Inc. 2
Introduction to the Warrant dividend. 2
Risk Factors. 4
Additional Information 11
Forward-looking Statements. 12
Capital Stock Information. 13 PROSPECTUS
Use of Proceeds 13 ----------
Determination of Offering Price 13
Plan of Distribution 13
Indemnification 15
Description of Securities 15 , 1999
Legal Matters 17 ---------------
Experts 17
<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:
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
__________________________
* 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 under Item 601 of Regulation SB:
Exhibit No. Title
- ---------- -----
* 4.1 Form of Warrant Agreement (including form of warrant
certificate)
* 5.1 Opinion of Neuman & Drennen, LLC
* 24.1 Consent of Hein + Associates, LLP
* 24.2 Consent of Neuman & Drennen, LLC
________________________________
* 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 under 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 security holders that is
incorporated by reference in the Prospectus and furnish under 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. 5
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 22nd day of September, 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. 5 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, 9/22/99
- ------------------------ Director, Secretary
Robert A. Scott
/s/ Clifford C. Thygesen President, CEO, Director 9/22/99
- ------------------------
Clifford C. Thygesen
/s/ Frank L. Jennings Chief Financial Officer, 9/22/99
- ------------------------- Assistant Secretary
Frank L. Jennings
/s/ John J. Crawford Director 9/22/99
- -------------------------
John J. Crawford
/s/ Stephen G. Calandrella Director 9/22/99
- --------------------------
Stephen G. Calandrella
/s/ Wayne R. Kirschling Director 9/22/99
- --------------------------
Wayne R. Kirschling
/s/ Richard J. Ciurczak Director 9/22/99
- --------------------------
Richard J. Ciurczak
/s/ Clifford L. Neuman Director 9/22/99
- --------------------------
Clifford L. Neuman
