<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 11, 2000
REGISTRATION NO. 333-93763
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.
(exact name of registrant as specified in charter)
DELAWARE 71-0675758
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
914 N. JEFFERSON STREET
SPRINGDALE, ARKANSAS 72764
(501) 756-7400
(address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
JOE G. BROOKS
914 N. JEFFERSON STREET
SPRINGDALE, ARKANSAS 72764
(501) 756-7400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement depending on market
conditions.
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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> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A common stock 13,126,282 $2.9375 (1) $38,558,453 $10,179 paid previously
Class A common stock 101,436 $2.1875 (3) $ 221,891 $59
Total 13,227,718 Balance due: $59
============================================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(c) solely for the purpose of determining
the registration fee, based on the average high and low sales price per
share, as reported by NASDAQ SmallCap Market System on December 22, 1999.
(2) Represents additional shares issued or to be issued as interest payments on
promissory notes.
(3) Calculated pursuant to Rule 457(c) solely for the purpose of determining
the registration fee, based on the average high and low sales price per
share, as reported by NASDAQ SmallCap Market System on July 7, 2000.
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 THE 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 SECTION 8(A), MAY
DETERMINE.
<PAGE> 3
SUBJECT TO COMPLETION, DATED JULY 11, 2000
PROSPECTUS
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT SELL THESE SECURITIES
UNTIL THE REGISTRATION STATEMENT IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.
SECURITIES TO BE OFFERED:
UP TO 13,227,718 SHARES OF CLASS A COMMON STOCK
PRINCIPAL EXECUTIVE OFFICE:
914 N. Jefferson Street
Springdale, Arkansas 72764
(501) 756-7400
The shares of Class A common stock offered in this prospectus are being
sold from time to time by 55 selling stockholders, all of whom are named under
the caption "SELLING STOCKHOLDERS." We will not receive any of the proceeds from
the sale of the shares by the selling stockholders.
Our Class A common stock is traded on the Nasdaq SmallCap Market under
the symbol "AERTA." On July 6, 2000, the last reported sale price of the Class A
common stock was $2.13 per share, as reported by the Nasdaq SmallCap Market
System.
THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" ON PAGE 2 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
JULY 11, 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
ABOUT ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC..............1
RISK FACTORS..........................................................2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.....................8
RECENT DEVELOPMENTS ..................................................9
USE OF PROCEEDS......................................................11
SELLING STOCKHOLDERS.................................................11
DESCRIPTION OF SECURITIES............................................18
PLAN OF DISTRIBUTION.................................................19
LEGAL MATTERS........................................................20
EXPERTS..............................................................20
WHERE YOU CAN FIND MORE INFORMATION..................................20
</TABLE>
<PAGE> 5
ABOUT ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.
We manufacture and market composite building materials that can be used
as an alternative to traditional wood products for exterior applications in
building and remodeling homes. We use waste wood fibers and reclaimed
polyethylene plastics as our raw materials. Our products are comprised of
approximately equal amounts of wood and plastic and have been extensively tested
and used by several leading national companies, such as the Weyerhaeuser Company
and Therma Tru Corporation. Our products are marketed under the LIFECYCLE(R),
MoistureShield(R) and ChoiceDek(R) tradenames. We recently introduced a new
decking line called DreamWorks(TM). We primarily targeT the following markets:
(a) exterior door, window, trim and fascia components, and
(b) commercial and residential decking surface components.
We currently operate two manufacturing and recycling facilities. We
recently expanded into nationwide decking distribution with Weyerhaeuser. Our
decking components and a limited amount of door and window components are
currently manufactured by our facility in Junction, Texas. We are currently
expanding our manufacturing capabilities by increasing extrusion/production
capacity at our second composite manufacturing and plastic reclamation facility
in Springdale, Arkansas. Because of increased demand from our principal
customers, we plan to start construction on a second plastic recycling facility
and a third composite extrusion facility adjacent to our existing Springdale,
Arkansas facility later in the 2000 fiscal year, subject to the availability of
financing from either the proceeds of our industrial development bond financing
currently held in escrow or from other debt or equity financing, of which there
can be no assurance in either case. See "Risk Factor - We Require Additional
Financing to Satisfy Current Debt Obligations and Meet Our Business Plan
Objectives".
<PAGE> 6
RISK FACTORS
This offering involves a high degree of risk. You should carefully
consider the risks described below and other information contained in this
prospectus before deciding to invest in shares of our Class A common stock.
Investors should seek professional advice in analyzing this offering.
WE HAVE A WORKING CAPITAL DEFICIT AND MAY SUFFER CONTINUED LOSSES
AGGREGATE SALES REVENUES AND CUMULATIVE LOSSES
<TABLE>
<CAPTION>
TIME PERIOD AGGREGATE SALES REVENUES NET LOSSES
----------- ------------------------ ----------
<S> <C> <C>
December 2, 1988 $ 65,514,333 $ 25,524,775
(our inception date)
through March 31, 2000
Three Months Ended $ 6,269,244 $ 314,211
March 31, 2000
Fiscal Year 1999 $ 19,917,133 $ 1,763,736
</TABLE>
The success of our operations is largely dependent upon our ability to
improve operating efficiencies and increase overall production capacity. Our
success also depends on our ability to generate and maintain substantial sales
revenues, increased margins and adequate cash flows from operations. We cannot
give any assurance that we have such abilities. At March 31, 2000, we had a
working capital deficit of $5,893,469.
WE REQUIRE ADDITIONAL FINANCING TO SATISFY CURRENT DEBT OBLIGATIONS AND MEET OUR
BUSINESS PLAN OBJECTIVES
We have expended substantially all of the proceeds from our private
placements and public financings, including warrant and option exercises, in
1997, 1998 and 1999, which aggregated approximately $9.55 million, excluding the
tax-exempt bond financing discussed below. In addition, $1.8 million of
short-term indebtedness incurred in those private placements matures on August
31, 2000. Accordingly, if we cannot generate sufficient cash flows from existing
operations, do not satisfy or obtain a waiver of the conditions to the release
of escrowed proceeds of a tax-exempt bond financing, and the lenders whose notes
currently mature on August 31, 2000 do not agree to extend the maturity of such
obligations, we could be dependent in the near future on successfully raising
additional debt or equity financing to satisfy our current debt obligations, to
sustain our operations and to pursue our growth plans, as to which there can be
no assurance. The independent public accountants' report on our financial
statements for the year ended December 31, 1999, contains an explanatory
paragraph regarding our ability to continue as a going concern as we have
incurred net losses since inception, have a working capital deficit and are
subject to certain claims in litigation. See the Report of Independent Public
Accountants contained in, and Notes 2 and 12 to, our Financial Statements for
the year ended December 31, 1999, which is incorporated by reference in this
prospectus (see "WHERE YOU CAN FIND MORE INFORMATION"). Should we be unable to
secure additional financing, our operations and our ability to further expand
and pay existing debt obligations would be materially adversely affected. Our
operations may be delayed or discontinued until such time, if ever, as funds are
generated in order to resume operations. There can be no assurance that current
or prospective creditors and purchasers of our products would accept any such
delay or that such purchasers would not locate alternative supply sources. There
is no assurance that required additional financing can be obtained on
satisfactory terms.
<PAGE> 7
In October 1999, in order to preserve a previously granted allocation
from the Arkansas Development Finance Authority, we closed into escrow a
tax-exempt industrial development bond financing through the City of Springdale,
Arkansas with an institutional investor in the amount of approximately $16.5
million bearing interest at 5.25% per annum. The proceeds of such bond financing
have been required by such institutional investor to be reinvested in guaranteed
investment contracts and will not be available for our corporate purposes until
we achieve consistent positive operating cash flow and profitability, or satisfy
other operating performance standards to the satisfaction of that investor, of
which there can be no assurance. Alternatively, we may attempt to re-market the
bonds in stages in the second half of 2000 as operating and financial conditions
warrant, at which time the proceeds of such issuance would be released from
escrow to finance further capital expenditures at our Springdale location. We
must meet certain performance criteria to have the bonds released from escrow
and subsequently re-marketed. These conditions currently include delivering to
the current holder and bond trustee satisfactory evidence that for any
consecutive 12 month period commencing on or after the date of the issuance of
the bonds, the long-term debt service coverage ratio, as defined, has been not
less than 2 to 1, and the projected long-term debt service coverage ratio for
the 24 month period subsequent to the first disbursal shall be not less than 2
to 1. There is no assurance we will be successful in meeting the standards
required to receive the bond financing proceeds or in obtaining necessary
financial resources from other sources. We do not intend to further expand and
continue construction beyond the third extrusion line in Springdale without the
successful re-marketing of the bonds, of which there can be no assurance.
WE MAY HAVE LIMITED SOURCES OF FINANCING
We have met most of our working capital and capital improvement needs
for the preceding three years with proceeds from equity financings of
approximately $5.4 million during 1997 through 1999, and from bridge loan
placements during 1997 and 1998 of $3.16 million placed through the Zanett
Securities Corporation. In addition, we have been primarily dependent, until
recently, on receivables factoring and other financing from Marjorie S. Brooks,
but there is no assurance that such support will continue. Under a placement
agreement of October 31, 1997, The Zanett Securities Corporation has rights to
approve and participate in our future debt or equity financings, except for
bank, equipment leasing and institutional debt financing, for a term expiring
the latter of October 30, 2001 and the final payment date of the outstanding
bridge notes. Such rights could have an adverse effect on our ability to obtain
additional financing. In the event that Zanett exercises its option to offer and
place additional notes, Zanett will be entitled to receive a 10% placement agent
fee and 3% nonaccountable expense allowance based on our aggregate gross
proceeds from the sale of the additional notes, and Zanett and its affiliates
will be entitled to receive additional warrants for up to as many as 726,178
shares of Class A common stock at an exercise price of $.375 per share, if all
of such additional notes were sold.
OUR LIMITED MANUFACTURING CAPABILITIES COULD RESTRAIN OUR BUSINESS GROWTH
Although we have substantially completed development of our commercial
manufacturing processes at our Junction, Texas facility and initial phases of
our new manufacturing plant in Springdale, Arkansas, the long-term success of
our operations will depend upon the manufacture of our composite products on a
substantially greater commercial scale than we have engaged in to-date or have
the current production capacity to engage in. We currently have one composite
manufacturing facility in Junction, Texas and a second composite manufacturing
facility in Springdale, Arkansas, but plan to increase production capacity at
both facilities. Our plans to increase production capacity at the Arkansas plant
beyond a third production line are subject, in the short-term, to the release
from escrow of proceeds of our industrial development bond financing. There can
be no assurance that we will be able to expand our operations to the extent
required or achieve improved operational efficiencies, resulting in lower
operating costs as a percentage of revenues, in order to realize profitable
operations, even assuming the availability of adequate financing and customer
demand for our products. Our primary customers and markets are large, and
<PAGE> 8
continued increased sales growth will require significant capital expenditures.
There can be no assurance that financing can be obtained to add production
equipment or build additional manufacturing facilities or that, if obtained,
they will become operational in a timely manner.
CERTAIN PENDING LEGAL PROCEEDINGS COULD ADVERSELY AFFECT OUR PATENTS OR
OPERATIONS
In June 1992, Mobil Oil Corporation commenced an action against us in
the United States District Court for the District of Delaware. In the complaint,
Mobil sought entry of a declaratory judgment that certain of our patents were
invalid and unenforceable.
In February 1994, the court held that four of our patents on composite
product technology were invalid and that Mobil had not infringed the patents. In
1995, we filed a motion with the Court alleging prejudicial misconduct by Mobil
prior to the trial and an appeal with the U.S. Court of Appeals. In June 1996,
the U. S. Court of Appeals reversed a portion of the earlier ruling which had
held that two of the patents were invalid, but nevertheless ruled that Mobil did
not infringe such patents. We did not further appeal this ruling.
In February 2000, Mobil appealed the denial of its motion to recover
$2.7 million in attorneys' fees from us. We subsequently filed a cross-appeal on
the dismissal of our prejudicial misconduct motion. We now await a hearing date
before the U.S. Court of Appeals. Mobil is no longer in the composite products
business.
We were also sued in May 2000 in federal court in Texas for back
royalty payments allegedly due to a successor to a licensor of firelog extrusion
technology. That licensor licensed technology to a firelog manufacturing company
operated by our founders in 1986-1987. A dispute and lawsuit arose at that time
between our founders and that licensor that was settled by an agreement that our
founders and their affiliates would pay the licensor a royalty of $10.00 per ton
of material, if any produced using the licensor's technology. As described in
our December 1989 IPO prospectus and for many years thereafter, we have always
contended that we did not use such technology and no royalty was paid nor, prior
to this year, did that licensor ever pursue any claim for such royalties. We
believe numerous defenses are available and intend to vigorously defend
ourselves against what we consider a matter related to the current suit in
Delaware. Mobil was also a successor and licensee from affiliates of that
firelog technology licensor.
DECLINES IN CONSTRUCTION ACTIVITY MAY ADVERSELY AFFECT OUR BUSINESS
Our engineered composites have been marketed primarily to companies
that manufacture products for use by the construction industry in new home
construction and home improvement work. Increases in long-term interest rates
can have a negative effect on us by slowing housing starts due to increased
financing costs. The construction industry is subject to significant
fluctuations in activity and to periodic downturns caused by general economic
conditions. Reductions in construction activity could have an adverse effect on
the demand for our composites in the door and window market, which could
decrease our revenues and adversely affect our operations.
WE ARE DEPENDENT ON CERTAIN KEY CUSTOMERS
We could be materially adversely affected if we were to lose one or
more of our large existing customers. If we were unable to locate new customers
to purchase our products or increase sales to existing customers, the loss of
one or more of our large customers could cause a substantial decline in our
revenues. Most of our key customers are not contractually obligated to purchase
a substantial amount of additional products.
We have limited our initial marketing to major industrial companies
with large market shares nationwide in the building material, door, and window
construction industries. Since inception, a few large door and window
construction companies have historically purchased substantially our entire
MoistureShield(R) product line. Our principal marketing and distribution channel
for our decking material is Weyerhaeuser, which accounted for 69% of
<PAGE> 9
our first quarter 2000 sales and 50% of 1999 sales. Therma-Tru Corporation
accounted for 16% of first quarter 2000 sales and 21% of our 1999 sales.
CHANGES IN GOVERNMENT REGULATION COULD ADVERSELY AFFECT OUR BUSINESS
We are currently able to incorporate a large portion of the waste
plastic feedstocks that we receive into our composite materials manufacturing
and plastic reclamation processes without significant waste disposal problems of
our own. However, our current supply sources are relatively homogeneous and
consistent. There can be no assurance that, in the future, continuing
regulations will not adversely affect our operations or require the introduction
of costly additional manufacturing pollution control or waste disposal
processes.
Certain customers have expressed interest in our products because use
of our products could reduce the sawdust or other solid waste generated by such
customers' operations. We believe that the demand for our products and
technology could be decreased if there is a lessening of public concern or
government pressure on private industries and municipal solid waste disposal
authorities to deal with solid waste disposal problems.
WE COULD BE UNSUCCESSFUL IN OUR EFFORTS TO MEET COMPETITION
Competition from other companies could impede our sales growth and
increase the prices we pay for raw materials. In seeking to market our
composites as alternative building materials to high-grade western pine and
other woods, aluminum, high-performance plastics and other construction
materials, we compete with major forestry product companies and aluminum
fabricating companies. The conventional material manufacturers with which we
must compete have, in many cases, long-established ties to the building and
construction industry and have proven well-accepted products. Many of our larger
competitors also have research and development budgets, marketing staffs and
financial and other resources, which far surpass our resources. Several large
forestry product companies, including Georgia Pacific and Louisiana Pacific,
have recently announced plans to begin marketing composite decking. We must also
compete in the building materials market with certain other plastics recyclers
currently manufacturing recycled materials intended for similar building
material applications, including decking and fencing.
Trex(R), a principal composite building materials competitor, has
received building code approval rating on its decking products. This may give
Trex(R) a marketing advantage in certain places. We have recently submitted our
building code approval rating application. Failure to receive a building code
approval rating on our decking products could slow or impede our sales growth.
FIRE DISRUPTIONS MAY ADVERSELY AFFECT OUR BUSINESS
We experienced a series of fires several years ago, which severely
disrupted our manufacturing operations. In 1996, we experienced two fires at our
Rogers, Arkansas plastic reclamation facility, which were ruled arson by
authorities. The pattern of fires caused our fire insurance to be cancelled. We
were able to renew our fire insurance, but at a substantially higher rate. We
have increased security, increased fire protection equipment and added armed
guards at our facilities. Our Springdale facility had an extensive fire
sprinkler system installed. However, another major fire or similar disruption
could occur and materially adversely affect our operations and our ability to
continue as a going concern.
WE ARE DEPENDENT UPON MANAGEMENT AND OUTSIDE TECHNICAL ASSISTANCE
We are substantially dependent upon the personal efforts and abilities
of Joe G. Brooks, our Co-Chief Executive Officer and Chairman; J. Douglas
Brooks, our Vice President of Recycled Plastics; Edward J. Lysen, our Chief
Financial Officer; and a limited number of corporate and technical staff who
devote all of their business time to the affairs of the Company. The loss of the
services of one or more of these persons could have a material adverse effect
upon our activities. We are also dependent upon the continuing availability of
capable outside
<PAGE> 10
engineering services and other technical assistance and there is no assurance
that we will be able to locate, maintain, and/or obtain such necessary technical
assistance from time to time.
OUR CURRENT MANAGEMENT MAY EXERCISE VOTING CONTROL
At March 31, 2000, our directors and officers in the aggregate
beneficially owned approximately 31.2%, 93.9% and 27.6% of the Class A common
stock, Class B common stock, and Series B preferred stock, respectively (which
includes shares underlying currently exercisable outstanding options and
warrants). These amounts constituted approximately 40.5% of our combined general
voting power. Accordingly, our current officers and directors may be able to
elect our directors and otherwise control the Company. Holders of Class A common
stock, Class B common stock and Series B preferred stock will generally vote
together as a single class upon matters submitted to a vote of stockholders,
though the holders of Class B common stock will be entitled to five votes per
share of Class B common stock and the holders of Series B preferred stock will
be entitled to 2,500 votes per share of Series B preferred stock, while holders
of Class A common stock will be entitled to only one vote per share. The Class B
common stockholders have entered into a right of first refusal agreement among
themselves granting such stockholders a right to purchase Class B common stock
on a pro rata basis from any Class B common stockholder desiring to sell such
shares.
OUR COMMON STOCK COULD BE DILUTED OR OTHERWISE ADVERSELY AFFECTED BY ADDITIONAL
ISSUANCES OF PREFERRED STOCK
We are authorized to issue up to 5,000,000 shares of preferred stock,
2,900 shares of which are outstanding. Our board of directors is empowered to
fix the terms of the preferred stock without stockholder approval, which terms
may adversely affect the rights of holders of the Class A common stock.
In 1998, we sold 2,900 shares of Series A, B and C convertible
preferred stock for $1,000 per share. The 900 shares of Series B preferred stock
were sold to companies controlled by Marjorie S. Brooks and to certain other
persons have voting rights of 2,500 votes per share of Series B preferred stock,
which votes together with holders of Class A common stock and Class B common
stock on matters submitted to a stockholder vote.
WE COULD BE REQUIRED TO REDEEM OR PAY LIQUIDATED DAMAGES ASSOCIATED WITH THE
OUTSTANDING PREFERRED STOCK
A total of 2,900 shares of Series A, B and C convertible preferred
stock are outstanding, with a total stated value of $2,900,000. The preferred
stock has a 10% per annum accreting premium for conversion, redemption and
liquidation purposes. Although the preferred stock is not mandatorily
redeemable, we could be required to either redeem such preferred stock or, at
our option, pay as liquidated damages an amount equal to 10% of the stated value
of the preferred stock if our shares are not listed on at least one of the
Nasdaq SmallCap Market, Nasdaq National Market, New York Stock Exchange or
American Stock Exchange for 10 days or more in any nine month period. The
liquidated damages amount is payable at the Company's option in either cash or
shares of Class A common stock. The preferred stock is also redeemable in the
event we default under certain obligations with respect to the preferred stock.
The redemption price is generally equal to the greater of (a) the aggregate
market value of the Class A common stock into which the preferred stock could be
converted and (b) 115% of the sum of (i) the stated value, (ii) the 10% per
annum premium, and (iii) any unpaid conversion default payment.
POTENTIAL DROP IN STOCK PRICE DUE TO FLOATING CONVERSION FEATURE OF CONVERTIBLE
PREFERRED STOCK
Because we failed to meet certain financial performance milestones
during the six months ended June 30, 1999, the convertible preferred stock is
convertible into common stock at the holder's option at any time at a conversion
price equal to the lower of a fixed $1.20 conversion price or the 10-trading day
average closing bid price immediately prior to the date of conversion. If the
preferred stock is not previously redeemed or converted, it
<PAGE> 11
automatically converts into Class A common stock on the seventh anniversary of
the issue date at a conversion price equal to the lower of a fixed $1.20
conversion price or the 5-trading day average closing bid price immediately
prior to the date of conversion. Based on these conversion price formulae, if
the market price of the common stock declines below $1.20, the convertible
preferred stock will be convertible into a proportionately greater number of
shares of common stock. The number of shares we could be required to issue in
payment of the premium on the preferred stock would also increase if the market
price of the common stock declines below $1.20. In that event, the lower the
price of our common stock at the time of conversion, the more shares into which
the convertible preferred stock will be convertible. These increases in the
number of shares issuable upon conversion of the convertible preferred stock and
upon payment of the premium on the preferred stock could result in a substantial
dilution to other holders of Class A common stock and adversely affect the
market price of the Class A common stock. In addition, substantial sales by the
selling stockholders, including the holders of the convertible preferred stock,
could place further downward pressure on our stock price and permit them to
convert additional shares at a lower price.
FUTURE SALES OF SHARES COULD BE DILUTIVE AND IMPAIR OUR ABILITY TO RAISE CAPITAL
At March 31, 2000, we had reserved approximately 27,643,080 shares of
Class A common stock for issuance upon conversion of outstanding stock and upon
exercise of outstanding warrants and options. 8,397,330 of the reserved shares
are covered by other registration statements and can be sold from time to time.
This prospectus covers the potential sale from time to time of up to 13,227,718
of such reserved shares of Class A common stock. The conversion of a significant
number of these equity instruments into Class A common stock could adversely
affect the market price of the stock.
The exercise or conversion of such securities will result in a dilution
in interest for our other security holders. Such securities, whether converted
into stock or not, could impair our ability to obtain additional capital. Also,
the holders of such securities may be expected to exercise their rights at a
time when we would in all likelihood be able to obtain needed capital through a
new offering of our securities on terms more favorable than those provided by
the outstanding securities.
WE ARE NOT LIKELY TO PAY DIVIDENDS
We have not paid any cash dividends in the past and expect to retain
any future earnings for expansion of our business rather than to pay cash
dividends in the foreseeable future.
<PAGE> 12
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made statements in this prospectus, including statements under
"About Advanced Environmental Recycling Technologies, Inc.," "Risk Factors," and
"Recent Developments" which constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements are subject to
a number of risks, uncertainties and assumptions, including, among other things:
o our ability to refinance existing indebtedness or obtain
additional debt and equity financing to satisfy existing debt
obligations, provide working capital and support our growth
strategy;
o our expectations and estimates concerning future financial
performance, financing plans and the impact of competition;
o general economic and business conditions;
o anticipated trends in our business;
o existing and future regulations affecting our business; and
o other risk factors described in the section entitled "Risk
Factors" in this prospectus supplement.
You can identify these forward-looking statements by forward-looking
words such as "believe," "may," "could," "will," "estimate,"
"continue," "anticipate," "intend," "seek," "plan," "expect," "should,"
"would" and similar expressions in this prospectus supplement.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. In light of these risks and uncertainties,
the forward-looking events and circumstances discussed in this
prospectus may not occur and actual results could differ materially
from those anticipated or implied in the forward-looking statements.
<PAGE> 13
RECENT DEVELOPMENTS
WE HAVE AN INCREASED PURCHASE COMMITMENT FROM WEYERHAEUSER FOR THE YEAR 2000
AERT entered into a purchase agreement with Weyerhaeuser for 1,200
trucks of its residential and commercial decking products, which are marketed
under the brand name ChoiceDek(R), for the year 2000. This will approximate
$22,000,000 in gross sales for the year, providing that we can reach this volume
of production. That sales amount is an increase in 2000 decking sales over 1999
of approximately 108%, or more than double 1999 decking sales. AERT will also be
increasing distribution of decking through Weyerhaeuser into Canada during the
summer of 2000. This increase in sales opportunities for AERT is driven
primarily by the increasing market acceptance of low maintenance decking
materials by consumers over traditional decking materials like wood that require
maintenance and can rot, splinter and warp over time when exposed to external
environments.
WE HAVE INTENSIFIED OUR ADVERTISING AND PROMOTION EFFORTS
Additionally, in the first half of 2000, AERT and Weyerhaeuser started
a national TV advertising campaign on TNN outdoors. The ads run four times per
week with an exposure to over 72 million households. These ads are to build
product identification and brand awareness. Beginning in September 2000, we will
also be advertising on the Outdoor Channel. In addition, our decking products
are also being advertised in several nationwide homebuilding publications,
including the Journal of Light Construction, Builder Remodeler and Fine
Homebuilding, as well as some regional publications. For 2000, the anticipated
amount to be expended for national and regional advertising and promotion on
decking is approximately $900,000.
WE ARE SEEKING BUILDING CODE CERTIFICATIONS WHICH MAY INCREASE THE SALES
POTENTIAL OF OUR PRODUCTS
We have applied for building code approval from the Building Officials
and Code Administration (BOCA) for our decking products, but these products may
require additional testing before we achieve this approval. We are also testing
products and applying for international building code approval from the
International Conference of Building Officials. Further sales increases and
market acceptance of our decking products are our expected results from
achieving these building code approvals.
<PAGE> 14
USE OF PROCEEDS
Approximately $1,050,000 of the $2.9 million in proceeds to us from the
sales of convertible preferred stock in 1998 were used to pay down outstanding
bridge notes, and the remainder of the proceeds were used for capital
expenditures, primarily for the construction of additional extrusion lines and
related capital improvements, and working capital purposes.
We will not receive any of the proceeds from the sale of shares of
Class A common stock by the selling stockholders. We would receive proceeds from
any exercise of the warrants exercisable for an aggregate of 5,545,303 shares of
Class A common stock covered by this prospectus. Those warrants are exercisable
at fixed exercise prices (subject to customary anti-dilution adjustments)
ranging from $0.31 to $3.00. If all were exercised, proceeds of approximately
$11 million could be received by AERT. Any such proceeds received by us upon
exercise of a warrant will be used for general corporate and working capital
purposes.
SELLING STOCKHOLDERS
This prospectus covers the resale of shares of Class A common stock
issued or issuable upon exercise of warrants, conversion of preferred stock or
payment of interest obligations in connection with certain financing
transactions described hereunder.
JUNE 1996-MAY 1997: CLASS I WARRANTS
Between June 1996 and May 1997, 393,344 Class I warrants were issued in
connection with the private placement of 3,884,478 shares of Class A common
stock for proceeds of $2,079,000, pursuant to Regulation S under the Securities
Act. Since the original issuance of the Class I warrants, 42,866 Class I
warrants have expired, 40,478 have been exercised and 310,000 remain exercisable
until two years from the effective date of this registration statement, at
exercise prices ranging from $0.31 to $1.125. Each Class I warrant is
exercisable for one share of Class A common stock.
DECEMBER 1996-NOTE: CLASSES J AND K WARRANTS
In December 1996, in connection with a note payable of $100,000 to Ike
Tull, we authorized and issued two sets of warrants, Class J for 200,000 shares
and Class K for 150,000 shares. Each Class J and Class K warrant is exercisable
for one share of Class A common stock. Each Class J warrant is exercisable at
$0.50 per share and each Class K warrant is exercisable at $0.75 per share. Both
Class J and Class K warrants expire in December 2001, five years from their date
of issuance.
OCTOBER 1997, FEBRUARY 1998, APRIL 1998, JUNE 1998 AND AUGUST 1998-PRIVATE
PLACEMENT: 12% PROMISSORY NOTES
Under an October 1997 placement agreement, we issued a series of 12%
promissory notes to certain of the selling stockholders as follows:
<TABLE>
<CAPTION>
ORIGINAL DATE OF ORIGINAL AGGREGATE CURRENT AGGREGATE DATE TO WHICH MATURITY
DATE OF ISSUE MATURITY PRINCIPAL AMOUNT PRINCIPAL AMOUNT WAS EXTENDED
-------------------- --------------------- ---------------------- ---------------------- ----------------------------
<S> <C> <C> <C> <C>
October 1997 July 27, 1998 $1,300,000 $0 August 31, 2000
February 1998 November 2, 1998 $800, 000 $750,000 August 31, 2000
April 1998 January 2, 1999 $410,000 $410,000 August 31, 2000
June 1998 February 28, 1999 $359,963 $359,963 August 31, 2000
August 1998 May 18, 1999 $287,500 $287,500 August 31, 2000
</TABLE>
<PAGE> 15
Quarterly interest on all of the 12% notes is payable in shares of
common stock, valued at the average closing bid price over the ten trading days
prior to each such interest payment date, or cash, at our option.
Pursuant to a placement agreement executed at the time of the October
1997 note purchase agreement, we granted our placement agent, The Zanett
Securities Corporation, a two-year option to offer and place on our behalf an
additional $2,200,000 in aggregate principal amount of promissory notes.
$1,857,463 of these additional notes were issued and sold in February, April,
June and August 1998, as shown in the table above.
The placement warrants and consulting warrants may be exercised for a
period of five years from the date of issuance at a price per share of $0.375.
The warrant shares issuable upon exercise of the placement warrants and
consulting warrants are required to be registered under registration rights
agreements executed with Zanett and Mr. Guazzoni.
Concurrently with the note purchase agreements, we issued warrants to
Zanett. 318,895 warrants were outstanding under the placement agency agreements
as of June 30, 2000. All of the placement warrants are exercisable at a price of
$0.375 per share, for a five-year term, and are subject to customary
anti-dilution provisions for stock splits, stock dividends, reverse stock
splits, mergers or consolidations, below-market stock issuances and similar
events.
Also, in October 1997, we entered into a consulting agreement with
Bruno Guazzoni, under which he will provide investment banking and general
financial and strategic advisory services during a five-year term. Under the
terms of the consulting agreement, we are required to issue to Mr. Guazzoni two
consulting warrants for every dollar of qualified financing in which he
participates in the offer and sale of the promissory notes. In connection with
such financings, we have issued 6,254,926 consulting warrants. All of the
consulting warrants are exercisable at a price of $0.375 per share for a
five-year term and are subject to customary anti-dilution adjustments similar to
the placement agent warrants.
<PAGE> 16
SEPTEMBER-NOVEMBER 1998: SERIES A, B AND C PREFERRED STOCK
In 1998, we sold 2,900 shares of Series A, B and C convertible
preferred stock for $1,000 per share. The 900 shares of Series B preferred
stock, which were sold to companies controlled by Marjorie S. Brooks and to
certain other persons, have voting rights of 2,500 votes per share and the
holders of Series B preferred stock vote together with holders of Class A common
stock and Class B common stock on matters submitted to a stockholder vote. The
preferred stock has a 10% per annum accreting premium for conversion, redemption
and liquidation purposes. The convertible preferred stock is convertible into
common stock at the holder's option at any time at a conversion price equal to
the lower of a fixed $1.20 conversion price or the 10-trading day average
closing bid price immediately prior to the date of conversion. The alternative
floating conversion price became applicable because we failed to meet certain
financial performance milestones during the six months ended June 30, 1999. If
the preferred stock is not previously redeemed or converted, it automatically
converts into Class A common stock on the seventh anniversary of the issue date
at a conversion price equal to the lower of a fixed $1.20 conversion price or
the 5-trading day average closing bid price immediately prior to the date of
conversion. Series X and Y warrants were issued in connection with the preferred
stock and are exercisable at $1.20 and $2.50 per warrant, respectively, for an
aggregate of up to 2,416,664 and 1,021,539 shares of Class A common stock,
respectively. Each of the warrants has cashless exercise features. Series X
warrants are exercisable at any time through November 10, 2005, provided that
each holder cannot exercise the Series X warrants for more than a specified
increasing percentage of the shares subject to such warrant until March 9, 2000,
whereupon the Series X warrants become fully exercisable. The Series Y warrants
are exercisable at any time from November 10, 2000 through November 10, 2005.
JUNE 1998 - FEBRUARY 1999: BONUS WARRANTS
In connection with the exercise of Class B warrants between June 1998
and February 1999, 1,312,664 bonus warrants were issued. Each bonus warrant is
exercisable at a price of $3.00 for one share of Class A common stock, and
expires in February 2001.
SELLING STOCKHOLDERS
The following table sets forth the names of the selling stockholders,
the number of shares of common stock owned beneficially by each of the selling
stockholders as of June 30, 2000, and the number of shares which may be offered
for sale pursuant to this prospectus. Information set forth herein with respect
to each selling stockholder's beneficial ownership of common stock has been
provided by such selling stockholder. Although the selling stockholders may
offer all, some or none of their Class A common stock, the following table has
been prepared on the assumption that all shares of common stock covered by this
prospectus will be sold. Unless otherwise indicated, the persons and entities
named in the table have sole voting and sole investment power with respect to
all shares beneficially owned, subject to community property laws where
applicable.
<PAGE> 17
<TABLE>
<CAPTION>
Name and Address of Number of Shares Number of Shares % Beneficially Owned
Selling Stockholder Beneficially Owned to be Offered Following Completion
of Offering (1)
<S> <C> <C> <C>
Zanett Lombardier, Ltd. (2)(3) 2,515,445(4) 1,725,183(4) 4.99
Harlow Enterprises, Inc. (2)(3) 145,944(5) 93,752(5) *
Parkland Limited (2)(3) 267,729(6) 222,363(6) *
Samuel L. Milbank (2)(3) 523,427(7) 390,101(7) 1.0
Bruno Guazzoni (2)(3) 2,515,445(8) 1,201,000(8) 4.99
Claudio Guazzoni (2)(3) 433,320(9) 359,704(9) *
David McCarthy (2)(3) 536,153(10) 350,998(10) 1.1
Heriot Holdings, Ltd. (2)(3) 334,223(11) 137,922(11) *
Emral Investment Limited (2)(3) 422,277(12) 446,617(12) *
Telcom Mondial (2)(3) 30,473(13) 32,298(13) *
Goldman Sachs
Performance Partners L.P.(3) 747,592(14) 1,759,537(14) 1.5
Goldman Sachs
Performance Partners (Offshore) L.P.(3) 606,741(15) 1,428,030(15) 1.2
Peter S. Lau 79,715(16) 29,715(16) *
David Cooperberg 10,763(17) 10,763(17) *
Ryan McCarthy 8,571(18) 8,571(18) *
Joseph Petrellese, Jr. 4,000(19) 4,000(19) *
Ike Tull 586,666(20) 614,999(20) 1.2
Michael Tull 922,666(21) 1,059,999(21) 1.8
Razorback Farms 764,308(22) 423,999(22) 1.5
Allen & Co. 206,666(23) 264,999(23) *
Robert Andrew Mackie 1,170,000(24) 1,095,000(24) 2.3
Millenco, L.L.P. 206,666(25) 264,999(25) *
RA Mackie & Co. LP 309,600(26) 309,600(26) *
Allen & Company Incorporated 440,000(26) 440,000(26) *
Kenneth J. Forrester & Deloris A. Forrester 500(26) 500(26) *
M. Bernard Siegel 7,700(26) 7,700(26) *
Richard Read Allen & Silke Hufnagel Allen 300(26) 300(26) *
William F. Harrison TTEE, Fayetteville Women's Clinic 600(26) 600(26) *
Robert K. Wall or Betty J. Wall TTEE 1,000(26) 1,000(26) *
Alan J. & Patricia A. Giolin 50(26) 50(26) *
Paine Webber Inc. 9,120(26) 9,120(26) *
IRA for Brenda J. Lazenby 1,000(26) 1,000(26) *
Sam Lazenby C/F Daniel G. Lazenby 8,000(26) 8,000(26) *
Betty Mayer 1,500(26) 1,500(26) *
Forest Global Converting Fund 7,500(26) 7,500(26) *
Joseph Molloy 2,000(26) 2,000(26) *
Bear Stearns Intl 6,000(26) 6,000(26) *
LLT Limited 1,500(26) 1,500(26) *
R. A. Mackie 75,000(26) 75,000(26) *
Lee Ziedman 2,700(26) 2,700(26) *
Peter J. Urdanick 1,400(26) 1,400(26) *
Keith J. & Cathy E. Goulet 1,500(26) 1,500(26) *
Albert & Patricia M. Green 300(26) 300(26) *
Patricia C. Morgan 300(26) 300(26) *
Julianna Carroll 100(26) 100(26) *
Sam Lazenby 10,000(26) 10,000(26) *
Delbert Allen 160,000(26) 160,000(26) *
Bargo Engineering 75,000(26) 75,000(26) *
Fritz Friday 100,000(26) 100,000(26) *
Marjorie S. Brooks Trust 3,000(26) 3,000(26) *
Brooks Children's Trust 38,250(26) 38,250(26) *
Kenna Katelyn Brooks 1,500(26) 1,500(26) *
Andrew McMahon 1,875(26) 1,875(26) *
Stephen Rinnert & Molly Rinnert 1,500(26) 1,500(26) *
PetePat Trust 34,374(26) 34,374(26) *
13,227,718
</TABLE>
* Beneficially owns less than 1%
<PAGE> 18
(1) Assumes the sale of all shares offered hereby.
(2) Address: c/o The Zanett Securities Corporation, 135 E. 57th St., 15th
Floor, New York, NY 10022.
(3) Except under certain circumstances, none of such selling stockholders
is entitled to hold common stock and exercisable securities to the
extent that the selling stockholder would beneficially own more than
4.99% of our total outstanding common stock. Therefore the number of
shares listed and which a selling stockholder may sell pursuant to
this prospectus may exceed the number of shares such selling
stockholder may be deemed to beneficially own as determined pursuant
to Section 13(d) of the Exchange Act.
(4) Beneficially owns 2,447,683 shares as of the date of this prospectus.
AERT has been advised by Zanett Lombardier, Ltd. that the individual
with sole voting and sole investment powers with respect to the
holdings of Zanett Lombardier, Ltd. is Oskar Lewnowski. The number of
shares to be offered represents:
o up to 575,000 consulting warrant shares which may be acquired
upon exercise of consulting warrants issued on August 21, 1998,
at an exercise price of $0.375 per share,
o up to 118,913 interest shares, of which 23,707 have been issued
and of which 95,206 may be issued pursuant to notes in the
amounts of $21,153.85, $626,892, and $287,500, acquired October
30, 1997, February 5, 1998, and August 21, 1998, respectively;
assuming the notes will be fully paid by December 31, 2000, and a
pro forma conversion price of $2.12 per share on the unissued
interest shares, equal to the 10-business day average closing
stock price prevailing as of June 28, 2000,
o up to 661,854 shares which may be acquired upon the conversion of
275 shares of Series A preferred stock issued at a purchase price
of $275,000 in November 1998,
o up to 160,416 shares which may be issued in payment of a 10%
premium on the Series A preferred stock, and
o up to 209,000 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the purchase of the Series A
preferred stock.
(5) Beneficially owns 145,944 shares as of the date of this prospectus.
The number of shares to be offered represents:
o up to 60,169 shares which may be acquired upon the conversion of
25 shares of Series A preferred stock issued at a price of
$25,000 in November 1998,
o up to 14,583 shares which may be issued in payment of a 10%
premium on the Series A preferred stock, and
o up to 19,000 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the purchase of the Series A
preferred stock.
(6) Beneficially owns 267,729 shares as of the date of this prospectus.
The number of shares to be offered represents:
o up to 119,963 consulting warrant shares, which may be acquired
upon exercise of consulting warrants issued on June 3, 1998, at
an exercise price of $0.375 per share,
o up to 8,648 interest shares, of which 1,822 have been issued and
of which 6,826 may be issued pursuant to notes in the amounts of
$1,923.07 and $59,981.50, acquired October 30, 1997 and June 3,
1998, respectively; assuming the notes will be fully paid by
December 31, 2000, and a pro forma conversion price of $2.12 per
share on the unissued interest shares, equal to the 10-business
day average closing stock price prevailing as of June 28, 2000,
o up to 60,169 shares which may be acquired upon the conversion of
25 shares of Series A preferred stock issued at a purchase price
of $25,000 in November 1998,
o up to 14,583 shares which may be issued in payment of a 10%
premium on the Series A preferred stock, and
o up to 19,000 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the purchase of the Series A
preferred stock.
<PAGE> 19
(7) Beneficially owns 523,427 as of the date of this prospectus. The
number of shares to be offered represents:
o up to 80,000 consulting warrant shares which may be acquired upon
exercise of consulting warrants issued on June 3, 1998 at an
exercise price of $.375 per share,
o up to 14,024 interest shares, of which 5,922 have been issued and
of which 8,102 may be issued pursuant to notes in the amounts of
$1,153.85, $34,667, and $40,000, acquired October 30, 1997,
February 5, 1998, and June 3, 1998, respectively; assuming the
notes will be fully paid by December 31, 2000, and a pro forma
conversion price of $2.12 per share on the unissued interest
shares, equal to the 10-business day average closing stock price
prevailing as of June 28, 2000,
o up to 19,423 private placement warrant shares which may be
acquired upon exercise of private placement warrants issued on
June 3, 1998 and August 21, 1998, at an exercise price of $0.375,
o up to 36,101 shares which may be acquired upon the conversion of
15 shares of Series A preferred stock issued at a purchase price
of $15,000 in November 1998,
o up to 8,750 shares which may be issued in payment of a 10%
premium on the Series A preferred stock,
o up to 154,301 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the purchase of the Series A
preferred stock, and
o up to 77,502 shares issuable upon exercise of Class I warrants.
(8) Beneficially owns 2,447,683 shares as of the date of this prospectus.
The number of shares to be offered represents:
o up to 38,476 interest shares, of which 8,249 have been issued and
of which 30,227 may be issued pursuant to notes in the amounts of
$23,846.15, $103,774, and $280,000 acquired October 30, 1997,
February 5, 1998, and April 6, 1998, respectively; assuming the
notes will be fully paid by December 31, 2000, and a pro forma
conversion price of $2.12 per share on the unissued interest
shares, equal to the 10-business day average closing stock price
prevailing as of June 28, 2000,
o up to 746,091 shares which may be acquired upon the conversion of
310 Shares of Series A preferred stock issued at a purchase price
of $310,000 in November 1998,
o up to 180,833 shares which may be issued in payment of a 10%
premium on the Series A preferred stock, and o up to 235,600
shares issuable upon exercise of Series X and Y warrants acquired
in connection with the purchase and placement of the Series A
preferred stock.
(9) Beneficially owns 433,320 shares as of the date of this prospectus.
The number of shares to be offered represents:
o up to 29,136 private placement warrant shares which may be
acquired upon exercise of private placement warrants issued on
June 3, 1998 and August 21, 1998, at an exercise price of $0.375
per share,
o up to 214,319 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the placement of the Series
A preferred stock, and
o up to 116,249 shares issuable upon exercise of Class I warrants.
(10) Beneficially owns 536,153 shares as of the date of this prospectus.
The number of shares to be offered represents:
o up to 29,136 private placement warrant shares which may be
acquired upon exercise of private placement warrants issued on
June 3, 1998 and August 21, 1998, at an exercise price of $0.375
per share,
o up to 3,865 interest shares which may be issued pursuant to notes
in the amounts of $34,667 and $15,000, acquired February 5, 1998
and April 5, 1998, respectively; assuming the notes will be fully
paid by December 31, 2000, and a pro forma conversion price of
$2.12 per
<PAGE> 20
share on the unissued interest shares, equal to the 10-business
day average closing stock price prevailing as of June 28, 2000,
o up to 214,319 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the placement of the Series
A preferred stock, and
o up to 103,678 shares issuable upon exercise of Class I warrants.
(11) Beneficially owns 334,223 shares as of the date of this prospectus.
The number of shares to be offered represents:
o up to 119,963 consulting warrant shares which may be acquired
upon exercise of consulting warrants issued on June 3, 1998, at
an exercise price of $0.375 per share and
o up to 17,959 interest shares, of which 1,822 have been issued and
of which 16,137 may be issued pursuant to notes in the amounts of
$100,000 and $59,981.50, acquired April 6, 1998 and June 3, 1998,
respectively; assuming the notes will be fully paid by December
31, 2000, and a pro forma conversion price of $2.12 per share on
the unissued interest shares, equal to the 10-business day
average closing stock price prevailing as of June 28, 2000.
(12) Beneficially owns 422,277 shares as of the date of this prospectus.
The number of shares to be offered represents:
o up to 400,000 consulting warrant shares which may be acquired
upon exercise of consulting warrants issued on June 3, 1998, at
an exercise price of $0.375 per share and
o up to 46,617 interest shares, of which 22,277 have been issued
and of which 24,340 may be issued pursuant to a $200,000 note
acquired June 3, 1998; assuming the note will be fully paid by
December 31, 2000, and a pro forma conversion price of $2.12 per
share on the unissued interest shares, equal to the 10-business
day average closing stock price prevailing as of June 28, 2000.
(13) Beneficially owns 30,473 shares as of the date of this prospectus. The
number of shares to be offered represents:
o up to 30,000 consulting warrant shares which may be acquired upon
exercise of consulting warrants issued in connection with an
April 6, 1998 note, at an exercise price of $0.375 per share and
o up to 2,298 interest shares, of which 473 have been issued and of
which 1,825 may be issued pursuant to a $15,000 note originally
dated April 6, 1998; assuming the note will be fully paid by
December 31, 2000, and a pro forma conversion price of $2.12 per
share on the unissued interest shares, equal to the 10-business
day average closing stock price prevailing as of June 28, 2000.
(14) Beneficially owns 747,592 shares as of the date of this prospectus.
The number of shares to be offered represents:
o up to 1,129,245 shares which may be acquired upon the conversion
of 469.2 shares of Series A preferred stock issued at a purchase
price of $469,200 in November 1998,
o up to 273,700 shares which may be issued in payment of a 10%
premium on the Series A preferred stock, and
o up to 356,592 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the purchase of the Series A
preferred stock.
(15) Beneficially owns 606,741 shares as of the date of this prospectus.
The number of shares to be offered represents:
o up to 916,489 shares which may be acquired upon the conversion of
380.8 shares of Series A preferred stock issued at a purchase
price of $380,800 in November 1998,
o up to 222,133 shares which may be issued in payment of a 10%
premium on the Series A preferred stock, and
o up to 289,408 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the purchase of the Series A
preferred stock.
<PAGE> 21
(16) Beneficially owns 79,715 shares as of the date of this prospectus. The
number of shares to be offered represents up to 29,715 shares issuable
upon exercise of Class I warrants.
(17) Beneficially owns 10,763 shares as of the date of this prospectus. The
number of shares to be offered represents up to 10,763 shares issuable
upon exercise of Class I warrants.
(18) Beneficially owns 8,571 shares as of the date of this prospectus. The
number of shares to be offered represents up to 8,571 shares issuable
upon exercise of Class I warrants.
(19) Beneficially owns 4,000 shares as of the date of this prospectus. The
number of shares to be offered represents up to 4,000 shares issuable
upon exercise of Class I warrants.
(20) Beneficially owns 586,666 shares as of the date of this prospectus.
The number of shares to be offered includes:
o up to 83,333 shares which may be acquired upon the conversion of
100 shares of Series B preferred stock issued at a purchase price
of $100,000 in September 1998,
o up to 58,333 shares which may be issued in payment of a 10%
premium on the Series B preferred stock,
o up to 123,333 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the purchase of the Series B
preferred stock,
o up to 200,000 shares issuable upon exercise of Class J warrants,
and o up to 150,000 shares issuable upon exercise of Class K
warrants.
(21) Beneficially owns 922,666 shares as of the date of this prospectus.
The number of shares to be offered includes:
o up to 333,333 shares which may be acquired upon the conversion of
400 shares of Series B preferred stock issued at a purchase price
of $400,000 in November 1998,
o up to 233,333 shares which may be issued in payment of a 10%
premium on the Series B preferred stock,
o up to 493,333 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the purchase of the Series B
preferred stock.
Sales of stock by Mr. Tull, as a director of AERT, are currently
restricted under a lock-up agreement and may not be sold without the
approval of the Zanett Securities Corporation until all bridge notes
are repaid, sufficient liquidity is maintained by AERT, and the
ownership of AERT securities by Zanett is below 25% of its original
amount.
(22) Beneficially owns 764,308 shares as of the date of this prospectus.
The number of shares to be offered includes:
o up to 133,333 shares which may be acquired upon the conversion of
160 shares of Series B preferred stock issued at a purchase price
of $160,000 in September 1998,
o up to 93,333 shares which may be issued in payment of a 10%
premium on the Series B preferred stock, and
o up to 197,333 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the purchase of the Series B
preferred stock.
Razorback Farms is controlled by Marjorie S. Brooks and sales of stock
owned by it are currently restricted under a lock-up agreement and may
not be sold without the approval of the Zanett Securities Corporation
until all bridge notes are repaid, sufficient liquidity is maintained
by AERT, and the ownership of AERT securities by Zanett is below 25%
of its original amount.
(23) Beneficially owns 206,666 shares as of the date of this prospectus.
The number of shares to be offered includes:
o up to 83,333 shares which may be acquired upon the conversion of
100 shares of Series C preferred stock issued at a purchase price
of $100,000 in September 1998,
o up to 58,333 shares which may be issued in payment of a 10%
premium on the Series C preferred stock, and
<PAGE> 22
o up to 123,333 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the purchase of the Series C
preferred stock.
(24) Beneficially owns 1,170,000 shares as of the date of this prospectus.
The number of shares to be offered includes:
o up to 250,000 shares which may be acquired upon the conversion of
300 shares of Series C preferred stock issued at a purchase price
of $300,000 in November 1998,
o up to 175,000 shares which may be issued in payment of a 10%
premium on the Series C preferred stock,
o up to 370,000 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the purchase of the Series C
preferred stock, and
o up to 300,000 shares issuable upon exercise of warrants.
(25) Beneficially owns 206,666 shares as of the date of this prospectus.
The number of shares to be offered includes:
o up to 83,333 shares which may be acquired upon the conversion of
100 shares of Series C preferred stock issued at a purchase price
of $100,000 in November 1998,
o up to 58,333 shares which may be issued in payment of a 10%
premium on the Series C preferred stock, and
o up to 123,333 shares issuable upon exercise of Series X and Y
warrants acquired in connection with the purchase of the Series C
preferred stock.
(26) Represents shares issuable upon exercise of bonus warrants.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 75,000,000 shares of Class A
common stock, $.01 par value, 7,500,000 shares of Class B common stock, $.01 par
value, and 5,000,000 shares of preferred stock, $1.00 par value.
DESCRIPTION OF CLASS A COMMON STOCK
The holders of shares of Class A common stock are entitled to receive
dividends out of legally available funds when and in such amounts as the board
of directors may from time to time determine. Each share of Class A common stock
entitles the holder to one vote on all matters submitted to a vote of our
stockholders. Upon liquidation or dissolution, holders of Class A common stock
are entitled to share equally with holders of Class B common stock in our assets
legally available for distribution to stockholders after satisfaction of claims
of creditors and liquidation preferences of preferred stock. Shares of Class A
common stock are not redeemable and have no preemptive, conversion or cumulative
voting rights. All outstanding shares of our Class A common stock are fully paid
and nonassessable. Any additional Class A common stock covered by this
prospectus that we issue upon the exercise of warrants in accordance with the
terms of the warrants or upon the conversion of convertible securities in
accordance with the terms of the convertible securities will also, upon
issuance, be fully paid and nonassessable.
American Stock Transfer & Trust Company serves as transfer agent for
our Class A common stock.
DESCRIPTION OF CLASS B COMMON STOCK
Each share of our Class B common stock will convert at any time at the
option of the holder into one share of our Class A common stock. Each share of
Class B common stock will convert automatically into one share of Class A common
stock upon its sale or transfer to any person other than another holder of Class
B common stock, and upon the death of the holder if not transferred by request
or inheritance to another holder of our Class B common stock. The Class B common
stock is identical in all other respects
<PAGE> 23
to our Class A common stock except that on every matter submitted to a vote of
our stockholders each share of Class A common stock entitles the registered
holder to one vote, while each share of Class B common stock entitles the
registered holder to five votes. Upon liquidation or dissolution, holders of
Class B common stock are entitled to share equally with holders of Class A
common stock in our assets legally available for distribution to stockholders
after satisfaction of any claims of creditors and liquidation preferences of
preferred stock. Shares of Class B common stock are not redeemable and have no
preemptive, conversion or cumulative voting rights. All outstanding shares of
Class B common stock are fully paid and nonassessable. The holders of Class B
common stock have entered into a right of first refusal agreement among
themselves granting such stockholders a right to purchase Class B common stock
on a pro rata basis from any Class B stockholder desiring to sell such shares.
DESCRIPTION OF PREFERRED STOCK
Series A, B and C Preferred Stock
Our 2,900 outstanding shares of Series A, B and C convertible preferred
stock have a liquidation preference of $1,000 per share. The 900 shares of
Series B preferred stock have voting rights of 2,500 votes per share, and the
holders of Series B preferred stock vote together with holders of Class A common
stock and Class B common stock on matters submitted to a stockholder vote. The
Series A and Series C preferred stock do not generally vote on matters submitted
for a vote of stockholders. The preferred stock has a 10% per annum accreting
premium for conversion, redemption and liquidation purposes. The convertible
preferred stock is convertible into common stock at the holder's option at any
time at a conversion price equal to the lower of a fixed $1.20 conversion price
or the 10-trading day average closing bid price immediately prior to the date of
conversion. The alternative floating conversion price became applicable because
we failed to meet certain financial performance milestones during the six months
ended June 30, 1999. If the preferred stock is not previously redeemed or
converted, it automatically converts into Class A common stock on the seventh
anniversary of the issue date at a conversion price equal to the lower of a
fixed $1.20 conversion price or the 5-trading day average closing bid price
immediately prior to the date of conversion.
Authorized, Unissued Preferred Stock
Our shares of authorized but unissued preferred stock may be issued in
one or more series with such designations, powers, preferences, and relative,
optional, participating or other rights and qualifications, limitations and
restrictions (including number of votes for each share of preferred stock) as
are fixed by resolution of our board of directors subject to Delaware
corporation law.
DESCRIPTION OF WARRANTS
The exercise prices, expiration dates and other material terms of our
outstanding warrants for which the underlying shares of Class A common stock may
be offered by this prospectus, are as described in "Selling Stockholders." The
warrants provide for adjustment of the exercise price and for a change in the
number of shares issuable upon exercise to protect holders against dilution in
the event of a stock dividend, stock split, combination or reclassification of
the Class A common stock or, under certain circumstances, upon issuance of
shares of Class A common stock at prices lower than the then current market
price, other than issuances upon exercise of options granted to our employees
and directors. Additionally, an adjustment would be made upon the sale of all or
substantially all of our assets so as to enable holders of warrants to purchase
the kind and number of shares of stock or other securities or property
(including cash) receivable in such event by a holder of the number of shares of
Class A common stock that might otherwise have been purchased upon exercise of
such warrants. No adjustment for previously paid cash dividends, if any, will be
made upon exercise of the warrants.
The warrants do not confer upon the holder any voting rights or any
other rights of a stockholder. Upon notice to the warrantholders, we have the
right to reduce the exercise price or extend the expiration date of the
warrants.
<PAGE> 24
The warrants may be exercised upon surrender of the warrant certificate
on or prior to its expiration date at our corporate offices, with the form of
"election to purchase" on the warrant certificate completed and executed as
indicated, accompanied by payment of the full exercise price for the number of
warrants being exercised.
DELAWARE ANTI-TAKEOVER LAW
We are governed by the provisions of Section 203 of the General
Corporation Law of the State of Delaware. In general, the law prohibits a public
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. "Business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the stockholder. An "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of the corporation's voting stock.
PLAN OF DISTRIBUTION
This prospectus covers the resale of shares of Class A common stock by
the selling stockholders and their pledgees, donees, assignees and other
successors in interest. The selling stockholders may sell their shares on the
Nasdaq SmallCap Market, in the over-the-counter market or through any other
facility on which the shares are traded, or in private transactions. These sales
may be at market prices or at negotiated prices. The selling stockholders may
use the following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker or dealer solicits purchasers;
o block trades in which the broker or dealer attempts to sell the
shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker dealer as principal and resale by the
broker or dealer for its account pursuant to this prospectus;
o privately negotiated transactions;
o any combination of these methods of sale; or
o any other legal method.
The selling stockholders may engage in short sales of the Class A
common stock and deliver shares to close out their short positions. The selling
stockholders may also enter into put or call options or other transactions with
broker-dealers or others which require delivery to those persons of shares
covered by this prospectus.
Brokers, dealers or other agents participating in the distribution of
the shares of Class A common stock may receive compensation in the form of
discounts or commissions from the selling stockholders, as well as the purchaser
if they act as agent for the purchaser. The discount or commission in a
particular transaction could be more than the customary amount. We know of no
existing arrangements between any selling stockholder and any underwriter,
broker, dealer or agent relating to the sale or distribution of the shares.
The selling stockholders and any brokers or dealers that participate in
the sale of the shares may be deemed to be "underwriters" within the meaning of
the Securities Act. Any discounts, commissions or other compensation received by
these persons and any profit on the resale of the shares by them as principals
might be deemed to be underwriters' compensation. The selling stockholders may
agree to indemnify any broker, dealer or agent that participates in the sale of
the shares against various liabilities, including liabilities under the
Securities Act.
<PAGE> 25
At the time a particular offer of shares is made, to the extent
required we will file a supplement to this prospectus which identifies the
number of shares being offered, the name of the selling stockholders, the name
of any participating broker or dealer, the amount of discounts and commissions,
and any other material information.
The selling stockholders and any other person participating in a
distribution will be subject to the applicable provisions of the Exchange Act
and its rules and regulations. For example, the anti-manipulative provisions of
Regulation M may limit the ability of the selling stockholders or others to
engage in stabilizing and other market making activities.
The selling stockholders may also sell their shares pursuant to Rule
144 under the Securities Act, rather than pursuant to this prospectus, so long
as they meet the criteria and conform to the requirements of the rule.
We will not receive any of the proceeds from the sale of the shares by
the selling stockholders. We will pay the registration and other offering
expenses related to this offering, but the selling stockholders will pay all
underwriting discounts and brokerage commissions incurred in connection with the
offering. We have agreed to indemnify the selling stockholders against various
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Our outside counsel, Akin, Gump, Strauss, Hauer & Feld, L.L.P., San
Antonio, Texas has issued a legal opinion about the validity of the shares
offered by this prospectus.
EXPERTS
The audited financial statements for the years ended December 31, 1999,
1998 and 1997, incorporated by reference in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the said firm as experts in accounting and
auditing in giving said reports. Reference is made to said report, which
includes an explanatory paragraph with respect to the uncertainty regarding the
Company's ability to continue as a going concern and litigation uncertainties as
discussed in Notes 2 and 12, respectively, to the financial statements.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document that we file
at the SEC's public reference rooms in Washington, D.C., New York and Chicago.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public at the SEC's
web site at http://www.sec.gov. In addition, reports, proxy statements and other
information concerning AERT can be inspected and copied at the offices of
Nasdaq, Report Section, 1735 K Street, N.W., Washington, D.C. 20006.
We have filed with the SEC a registration statement on Form S-3 under
the Securities Act covering the shares of Class A common stock to be sold under
this prospectus. The SEC permits us to omit from this prospectus certain
information, exhibits, and undertakings contained in the registration statement.
THE SEC ALLOWS US TO "INCORPORATE BY REFERENCE" THE INFORMATION THAT WE
FILE WITH THEM, WHICH MEANS THAT WE CAN DISCLOSE IMPORTANT INFORMATION TO YOU BY
REFERRING YOU TO THOSE DOCUMENTS INSTEAD OF HAVING TO REPEAT THE INFORMATION IN
THIS PROSPECTUS. THE INFORMATION INCORPORATED BY REFERENCE IS CONSIDERED TO BE
PART OF THIS PROSPECTUS, AND LATER INFORMATION THAT WE FILE WITH THE SEC WILL
AUTOMATICALLY UPDATE AND SUPERSEDE THIS INFORMATION. WE INCORPORATE BY REFERENCE
THE DOCUMENTS LISTED BELOW AND ANY FUTURE FILINGS MADE WITH THE SEC UNDER
SECTIONS 13(a), 13(c), 14 OR
<PAGE> 26
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNTIL THE SELLING STOCKHOLDERS SELL
ALL THE SHARES.
o Annual Report on Form 10-K for the fiscal years ended December 31, 1999,
1998 and 1997;
o Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
You may request a copy of these documents, without their exhibits,
unless specifically incorporated by reference, free of charge upon request to:
Joe G. Brooks, Chairman of the Board
Advanced Environmental Recycling Technologies, Inc.
914 North Jefferson Street
Springdale, Arkansas 72764
(501) 756-7400
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS OR ANY SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE
ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE SELLING STOCKHOLDERS WILL
NOT MAKE AN OFFER OF THESE SHARES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY SUPPLEMENT
IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS.
THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT THAT WE FILED WITH
THE SEC (REGISTRATION NO. 333-93763). MORE INFORMATION ABOUT THE SHARES SOLD BY
THE SELLING STOCKHOLDERS IS CONTAINED IN THAT REGISTRATION STATEMENT AND THE
EXHIBITS FILED ALONG WITH THE REGISTRATION STATEMENT. YOU MAY READ AND COPY THE
FULL REGISTRATION STATEMENT AND ITS EXHIBITS AT THE SEC'S PUBLIC REFERENCE ROOMS
OR THEIR WEB SITE.
<PAGE> 27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses payable by the
Company in connection with the offering described in this Registration
Statement. No such expenses will be borne by the selling stockholders.
<TABLE>
<S> <C>
Securities and Exchange Commission
Registration fees $ 10,237
Legal fees 28,000
Accountant's fees 27,500
Miscellaneous expenses 10,000
--------
TOTAL $ 75,737
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits the
Registrant to indemnify directors, officers, employees or agents against
judgments, fines, amounts paid in settlement, and reasonable costs, expenses and
counsel fees paid or incurred in connection with any proceeding, other than an
action by or in the right of the Registrant, to which such director, officer or
employee or his legal representative may be a party, provided such director,
officer or employee shall have acted in good faith and shall have reasonably
believed (a) in the case of a civil proceeding, that his conduct was in or not
opposed to the best interests of the Registrant, or (b) in the case of a
criminal proceeding, that he had no reasonable cause to believe his conduct was
unlawful. In connection with an action by or in the right of the Registrant
against a director, officer, employee or agent, the Registrant has the power to
indemnify such director, officer, employee or agent for reasonable expenses
incurred in connection with such suit (a) if such person acted in good faith and
in a manner not opposed to the best interest of the Registrant, and (b) if found
liable to the Registrant, only if ordered by a court of law. Section 145
provides that such section is not exclusive of any other indemnification rights
granted by the Registrant to directors, officers, employees or agents.
The Certificate of Incorporation of the Registrant provides for
mandatory indemnification of directors, officers and employees to the fullest
extent permitted by Section 145, unless the Registrant proves that the person
seeking indemnification did not meet the standard set forth above. The
Certificate permits the Registrant to indemnify agents to the extent authorized
from time to time by the Board of Directors. The right to indemnification is a
contract right and includes the right to be paid by the Registrant the expenses
incurred in defending any such proceeding in advance of our final disposition,
provided that the indemnitee undertakes to repay all amounts so advanced if it
is ultimately determined that such indemnitee is not entitled to be indemnified
for such expenses.
The Certificate of Incorporation of the Registrant also contains a
provision eliminating the liability of a director to the Registrant or our
stockholders for monetary damages for breach of fiduciary duty as a director,
other than liability for (a) breach of the director's duty of loyalty to the
Corporation or our stockholders, (b) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) unlawful
payment of a dividend or unlawful stock purchase or redemption, or (d) any
transaction from which the director derived an improper personal benefit.
Inasmuch as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, or otherwise, the Company has
been informed that, in the opinion of the Securities and Exchange
<PAGE> 28
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by any such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of our
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
4.1 Certificate of Incorporation (incorporated by reference from
Registration Statement on Form S-1, No. 33-29595, filed with the
Commission on June 28, 1989 and Exhibit to Amendment No. 1 to
Registration Statement on Form S-1, No. 33-29595, filed with the
Commission on August 24, 1989)(b)
4.2 Certificate of Amendment of Certificate of Incorporation dated
October 12, 1999(b)
4.3 Certificate of Designation for Series A, Series B and Series C
Preferred Stock(b)
4.4 Bylaws of Registrant (incorporated by reference from Exhibit to
Registration Statement on Form S-1, No. 33-29595, filed with the
Commission on June 28, 1989)(b)
4.5 Form of Class A Common Certificate (incorporated by reference from
Exhibit to Amendment No. 2 to Registration Statement on Form S-1,
No. 33-29595, filed with the Commission on November 8, 1989)(b)
5 Opinion and Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.(b)
10.1 Private Placement Agreement(b)
10.2 Consulting Agreement(b)
10.3 October 1997 Note Purchase Agreement(b)
10.4 February 1998 Note Purchase Agreement(b)
10.5 April 1998 Note Purchase Agreement(b)
10.6 June 1998 Note Purchase Agreement(b)
10.7 August 1998 Note Purchase Agreement(b)
10.8 Form of Notes(b)
10.9 Form of Private Placement Warrants(b)
10.10 Form of Consulting Warrants(b)
10.11 Form of X Warrants(b)
10.12 Form of Y Warrants(b)
10.13 Form of I, J, K Warrants(b)
10.14 Form of Bonus Warrants(b)
10.15 Amendment 1 to Preferred Stock Designations(b)
10.16 Amendment 2 to Preferred Stock Designations(b)
10.17 Amendment 3 to Preferred Stock Designations(b)
<PAGE> 29
23.1 Consent of Arthur Andersen LLP(a)
23.2 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
Exhibit 5)(b)
(a) Filed herewith
(b) Incorporated by reference from Registration Statement on Form S-1, No.
33-29595 and/or previously filed as an exhibit to this Registration
Statement on Form S-3.
ITEM 17. UNDERTAKINGS.
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, unless the information required to be included in
such post-effective amendment is contained in a periodic report filed by
registrant pursuant to Section 13 or Section 15 (d) of the Securities
Exchange Act of 1934 and incorporated herein by reference;
(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, unless the information required to be included in
such post-effective amendment is contained in a periodic report filed by
registrant pursuant to Section 13 or Section 15 (d) of the Securities
Exchange Act of 1934 and incorporated herein by reference; and
(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. That, for purposes of determining liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section 13 (a)
or Section 15 (d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement 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.
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 referred to in Item 15
above, 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 our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
or not such indemnification by us 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 to deliver or 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 furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 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
<PAGE> 30
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> 31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement on Form S-3 to be signed on our behalf by the
undersigned, thereunto duly authorized, in the County of Washington, State of
Arkansas, on July 10, 2000.
ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.
(Registrant)
By: /s/ Joe G. Brooks By: /s/ Edward J. Lysen
------------------------------- ---------------------------
JOE G. BROOKS EDWARD J. LYSEN
Chairman of the Board Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ JOE G. BROOKS Chairman of the Board and July 10, 2000
-------------------------- Co-Chief Executive Officer
JOE G. BROOKS
* /s/ SAL MIWA Vice-Chairman July 10, 2000
-------------------------- of the Board
SAL MIWA
/s/ STEPHEN W. BROOKS Co-Chief Executive July 10, 2000
-------------------------- Officer and Director
STEPHEN W. BROOKS
/s/ MARJORIE S. BROOKS Secretary, Treasurer July 10, 2000
-------------------------- and Director
MARJORIE S. BROOKS
* /s/ JERRY B. BURKETT Director July 10, 2000
--------------------------
JERRY B. BURKETT
* /s/ PETER S. LAU Director July 10, 2000
--------------------------
PETER S. LAU
* /s/ JAMES H. CULP Director July 10, 2000
--------------------------
JAMES H. CULP
* /s/ MICHAEL M. TULL Director July 10, 2000
---------------------------
MICHAEL M. TULL
* /s/ THOMAS J. HAIRSTON Director July 10, 2000
---------------------------
THOMAS J. HAIRSTON
* /s/ JOE G. BROOKS July 10, 2000
---------------------------
(As applicable)
By: JOE G. BROOKS, as attorney-in-fact
<PAGE> 32
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.1 Certificate of Incorporation (incorporated by reference from
Registration Statement on Form S-1, No. 33-29595, filed with the
Commission on June 28, 1989 and Exhibit to Amendment No. 1 to
Registration Statement on Form S-1, No. 33-29595, filed with the
Commission on August 24, 1989)(b)
4.2 Certificate of Amendment of Certificate of Incorporation dated
October 12, 1999(b)
4.3 Certificate of Designation for Series A, Series B and Series C
Preferred Stock(b)
4.4 Bylaws of Registrant (incorporated by reference from Exhibit to
Registration Statement on Form S-1, No. 33-29595, filed with the
Commission on June 28, 1989)(b)
4.5 Form of Class A Common Certificate (incorporated by reference from
Exhibit to Amendment No. 2 to Registration Statement on Form S-1,
No. 33-29595, filed with the Commission on November 8, 1989)(b)
5 Opinion and Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.(b)
10.1 Private Placement Agreement(b)
10.2 Consulting Agreement(b)
10.3 October 1997 Note Purchase Agreement(b)
10.4 February 1998 Note Purchase Agreement(b)
10.5 April 1998 Note Purchase Agreement(b)
10.6 June 1998 Note Purchase Agreement(b)
10.7 August 1998 Note Purchase Agreement(b)
10.8 Form of Notes(b)
10.9 Form of Private Placement Warrants(b)
10.10 Form of Consulting Warrants(b)
10.11 Form of X Warrants(b)
10.12 Form of Y Warrants(b)
10.13 Form of I, J, K Warrants(b)
10.14 Form of Bonus Warrants(b)
10.15 Amendment 1 to Preferred Stock Designations(b)
10.16 Amendment 2 to Preferred Stock Designations(b)
10.17 Amendment 3 to Preferred Stock Designations(b)
23.1 Consent of Arthur Andersen LLP(a)
23.2 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
Exhibit 5)(b)
</TABLE>
(a) Filed herewith
(b) Incorporated by reference from Registration Statement on Form S-1, No.
33-29595 and/or previously filed as an exhibit to this Registration
Statement on Form S-3.
