NOTES TO FINANCIAL STATEMENTS
Note 1: Description of the Company
Advanced
Environmental Recycling Technologies, Inc. (the Company, AERT, we,
our or us), founded in 1988, recycles polyethylene plastic and
develops, manufactures, and markets composite building materials
that are used in place of traditional wood or plastic products for
exterior applications in building and remodeling homes and for
certain other industrial or commercial building purposes. The
Company’s products are made primarily from approximately
equal amounts of waste wood fiber, which have been cleaned, sized
and reprocessed, and recycled polyethylene plastics that have been
cleaned, processed, and reformulated utilizing our patented and
proprietary technologies. Our products have been extensively
tested, and are sold by leading companies such as Lowe’s
Companies, Inc. (Lowe’s), BlueLinx Corp. (BlueLinx), Cedar
Creek LLC (Cedar Creek), and CanWel Building Materials Ltd.
(CanWel), our Canadian distributor for Lowe’s Canada. The
Company’s products are primarily used in renovation and
remodeling by consumers, homebuilders, and contractors as an
exterior environmentally responsible building alternative for
decking, railing, and trim products.
AERT
currently manufactures all of our composite products at extrusion
facilities in Springdale, Arkansas, and we operate a plastic
recycling, blending and storage facility in Lowell, Arkansas, where
we also lease warehouses and land for inventory storage. We
currently operate a plastic recycling, cleaning and reformulation
facility in Watts, Oklahoma where we clean, reformulate, and
recycle polyethylene plastic scrap as a means to reduce the
Company’s costs of recycled plastics.
Note 2: Summary of Significant Accounting
Policies
Revenue Recognition
The
Company recognizes revenue when the title and risk of loss have
passed to the customer, there is persuasive evidence of an
arrangement, shipment has occurred or services have been rendered,
the sales price is determinable and collectability is reasonably
assured. The Company typically recognizes revenue at the time
product is shipped or when segregated and billed under a bill and
hold arrangement. For sales to Lowe’s, we recognize revenue
when the product is delivered to Lowe’s in accordance with
their agreement. The following table sets forth the amount of
discounts, rebates and returns for the periods indicated (in
thousands):
Estimates of
expected sales discounts are calculated by applying the appropriate
sales discount rate to all unpaid invoices that are eligible for
the discount. The Company’s sales prices are determinable
given that the Company’s sales discount rates are fixed and
given the predictability with which customers take sales
discounts.
Shipping and Handling
The
Company records shipping fees billed to customers in net sales and
records the related expenses in cost of goods sold.
Operating Costs
The
cost of goods sold line item in the Company’s statements of
operations includes costs associated with the manufacture of our
products, such as labor, depreciation, repairs and maintenance,
utilities, leases, and raw materials, including the costs of raw
material delivery, warehousing and other distribution related
costs. The selling and administrative costs line item in the
Company’s statements of operations includes costs associated
with sales, marketing, and support activities like accounting and
information technology. The types of costs incurred in those areas
include labor, advertising, travel, commissions, outside
professional services, leases, and depreciation.
Statements of Cash Flows
In
order to determine net cash provided by (used in) operating
activities, net income (loss) has been adjusted by, among other
things, changes in current assets and current liabilities,
excluding changes in cash, current maturities of long-term debt and
current notes payable. Those changes, shown as an (increase)
decrease in current assets and an increase (decrease) in current
liabilities, are as follows (in thousands):
|
|
|
|
|
|
|
Receivables
|
$
(506
)
|
$
(193
)
|
Inventories
|
2,513
|
(6,652
)
|
Prepaid
expenses
|
(218
)
|
390
|
Accounts
payable
|
(247
)
|
1,631
|
Accrued
liabilities
|
$
(815
)
|
$
573
|
Change in current
assets and liabilities
|
$
727
|
$
(4,251
)
|
Cash paid for
interest.
|
$
756
|
$
729
|
Cash paid for
income taxes
|
$
-
|
-
|
Supplemental Disclosures of Non-Cash Investing and Financing
Activities (
in
thousands
)
|
|
|
|
|
|
|
|
Notes
payable for financing manufacturing equipment
|
$
375
|
$
2,322
|
Notes
payable for financing insurance policies
|
$
-
|
$
817
|
Notes
payable for debt issuance costs
|
$
-
|
$
1,119
|
Buildings and Equipment
Buildings and
equipment are stated at cost and depreciated over the estimated
useful life of each asset using the straight-line method. Estimated
useful lives are: buildings — 15 to 30 years,
leasehold improvements — 2 to 6 years, and
machinery and equipment — 3 to 10 years.
Depreciation expense recognized by the Company for each of the
years ended December 31, 2016 and 2015 was $4.9 million
and $4.7 million, respectively. Assets under capital leases are
reported in buildings and equipment and office equipment and
amortized over the shorter of the primary lease term or estimated
future lives.
Gains
or losses on sales or other dispositions of property are credited
or charged to income in the period incurred. Repairs and
maintenance costs are charged to income in the period incurred,
unless it is determined that the useful life of the respective
asset has been extended. Interest costs incurred during periods of
construction of facilities are capitalized as part of the project
cost. There was no capitalized interest for the years ended
December 31, 2016 and 2015.
The
Company assesses the recoverability of its investment in long-lived
assets to be held and used in operations whenever events or
circumstances indicate that their carrying amounts may not be
recoverable. Such assessment requires that the future cash flows
associated with the long-lived assets be estimated over their
remaining useful lives. An impairment loss may be required when the
future cash flows are less than the carrying value of such
assets.
During
2016, management evaluated the economics of increasing the
recycling capacity at the Lowell plant as a means of consolidating
all plastic recycling operations at the facility. This evaluation,
consisting of a series of tests, was completed in the fourth
quarter of 2016. We evaluated the results and management decided to
move production from our Watts, Oklahoma facility to the Lowell
facility in 2017. As of the filing date of this Form 10-K, there
have been no changes to our manufacturing process as it relates to
the Watts facility.
However,
future plans involve temporarily idling the Watts facility, at
which time we will segregate the land and building on the balance
sheet. Should we determine the period of idleness to be more than
temporary, we will transfer the land and building to other assets
and cease depreciation in accordance with ASC 320. In addition, the
significant change in operations at Watts may impact compliance
with covenants on the associated debt obtained in the construction
of the facility, which may render that debt due and payable upon
the facility becoming idle. Such debt is expected to be repaid in
full pursuant to the terms of the Merger Agreement (as defined in
Note 12).
As
a result of the anticipated change in usage of the Watts land and
building, management determined it necessary to assess the
associated assets for impairment. We performed a recoverability
test for those assets and determined that impairment of the
building was necessary. We estimated the current fair value of the
facility using the cost approach which resulted in a charge of $2.8
million being recognized during the fourth quarter of
2016.
Inventories
Inventories are
stated at the lower of cost (first-in, first-out method) or market.
Material, labor, and factory overhead necessary to produce the
inventories are included in cost. Inventories consisted of the
following at December 31 (in thousands):
|
|
|
Raw
materials
|
$
4,873
|
$
5,541
|
Work in
progress
|
2,032
|
1,979
|
Finished
goods.
|
11,550
|
13,448
|
|
$
18,455
|
$
20,968
|
Reclassification
We
adopted Accounting Standards Update (ASU) 2015-03,
Interest–Imputation of Interest
(Subtopic 835-30): Simplifying the Presentation of Debt Issuance
Costs
during the first quarter of 2016. Accordingly, we have
reclassified unamortized debt issuance costs between current and
long-term debt based on guidance in ASU 2015-03, that allowed LOC
fees to stay in other assets, and have restated our long-term
obligations in our previously reported balance sheet as of December
31, 2015, as follows (in thousands):
|
As
presented
December 31,
2015
|
|
As
adjusted
December 31,
2015
|
Other Assets - Debt
issuance costs, net
|
|
|
|
of
accumulated amortization
|
$
1,149
|
$
(729
)
|
$
420
|
Long-term debt,
less unamortized debt
|
|
|
|
issuance
costs and current maturities
|
$
37,020
|
$
(729
)
|
$
36,291
|
Accounts Receivable
Accounts receivable
are uncollateralized customer obligations due under normal trade
terms generally requiring payment within thirty days from the
invoice date. Trade accounts are stated at the amount management
expects to collect from outstanding balances. Payments of accounts
receivable are allocated to the specific invoices identified on the
customers’ remittance advice.
Accounts receivable
are carried at original invoice amounts less an estimated reserve
provided for returns and discounts based on a review of historical
rates of returns and expected discounts. The carrying amount of
accounts receivable is reduced, if needed, by a valuation allowance
that reflects management’s best estimate of the amounts that
will not be collected. Management individually reviews all overdue
accounts receivable balances and, based on an assessment of current
creditworthiness, estimates the portion, if any, of the balance
that will not be collected. Management provides for probable
uncollectible amounts through a charge to earnings and a credit to
an allowance account based on its assessment of the current status
of the individual accounts. Balances which remain outstanding after
management has used reasonable collection efforts are written off
through a charge to the valuation allowance and a credit to trade
accounts receivable. Recoveries of trade receivables previously
written off are recorded when received.
On
February 20, 2015, the Company entered into an accounts receivable
purchase agreement (Lowe’s Companies, Inc. Supply Chain
Financing Program) with a third party financial institution to sell
selected accounts receivable from Lowe’s. The Company, at its
sole option, may offer to sell to the financial institution all or
part of the Company’s accounts receivable from Lowe’s.
The financial institution, upon acceptance of the offer, advances
to the Company 95% of the balance due within 15 days of the invoice
date with the remaining 5% being paid under agreed upon terms. AERT
pays interest on advanced amounts at an agreed-upon rate (1.66% per
annum), at December 31, 2016. The Lowe’s accounts receivables
are sold without recourse. The accounts receivable purchase
agreement may be terminated by either party with 30-days’
notice. As of December 31, 2016 and 2015, the amount due from the
financial institution was $280,000 and $93,000,
respectively.
The
table below presents a roll forward of our allowance for sales
returns and bad debts for 2016 and 2015 (in
thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
$
239
|
258
|
-
|
297
|
$
200
|
2015
|
$
48
|
497
|
-
|
306
|
$
239
|
|
|
|
|
|
|
1
Charges
to the accounts are for the purposes for which the reserve was
created.
|
Warranty Estimates
The
Company offers a limited warranty on its products. Estimates of
expected warranty claims are recorded as liabilities and charged to
income in the period revenue is recognized. Amounts accrued for
warranty claims totaled $0.56 million at December 31, 2016 and
$0.65 million at December 31, 2015.
Earnings per Share
The
Company utilizes the two-class method for computing and presenting
earnings per share (EPS). The Company currently has one class of
Common Stock and one class of cumulative participating Preferred
Stock, Series E. Holders of the Series E Preferred Stock are
entitled to receive per share dividends equal to 6% per annum of
the “stated value of $1,000 per share of the Series E
Preferred Stock”, and accrued and unpaid dividends, when
declared by the Company's Board of Directors. Accrued and unpaid
dividends on the Series E Preferred Stock totaled $8.4 million and
$6.8 million at December 31, 2016 and 2015, respectively. In
addition, holders of the Preferred Stock are entitled to
participate in any dividends declared on shares of the Company's
Common Stock on an as-converted basis. Therefore, the Series E
Preferred Stock is considered a participating security requiring
the two-class method for the computation and presentation of net
income per share ñ basic.
The
two-class computation method for each period segregates basic
earnings per common and participating share into two categories:
distributed EPS (i.e., the Series E Preferred Stock stated
dividend) and undistributed EPS, which allocates earnings after
subtracting the Series E Preferred Stock dividend to the total of
weighted average common shares outstanding plus equivalent
converted common shares related to the Series E Preferred Stock.
Basic earnings per common and participating share exclude the
effect of Common Stock equivalents, and are computed using the
two-class computation method.
In
computing diluted EPS, only potential common shares that are
dilutive—those that reduce EPS or increase loss per
share—are included. The exercise of options or conversion of
convertible securities is not assumed if the result would be
antidilutive, such as when a loss from continuing operations is
reported. As a result, if there is a loss from continuing
operations, diluted EPS would be computed in the same manner as
basic EPS is computed, even if an entity has net income after
adjusting for discontinued operations or the cumulative effect of
an accounting change.
The
following presents the two-class method calculation of EPS for the
years ended December 31, 2016 and 2015:
BASIC
AND DILUTED EARNINGS PER SHARE
(In thousands, except share and per share data)
|
|
|
|
|
Net
income (loss) applicable to common stock
|
$
2,189
|
$
(856
)
|
Preferred
stock dividend
|
1,675
|
1,578
|
Net
income before dividends
|
3,864
|
722
|
|
|
|
Per
share information:
|
|
|
Basic
earnings (losses) per common and participating share:
|
|
|
Distributed
earnings (losses) per share:
|
|
|
Common
|
$
0.00
|
$
0.00
|
Preferred
|
$
0.00
|
$
0.00
|
|
|
|
Earned,
unpaid dividends per share:
|
|
|
Preferred
|
$
81.62
|
$
76.90
|
|
|
|
Undistributed
earnings (losses) per share:
|
|
|
Common
|
$
0.00
|
$
(0.01
)
|
Preferred
|
86.06
|
-
|
|
|
|
Total
basic earnings (losses) per common and participating
share:
|
|
|
Common
|
$
0.00
|
$
(0.01
)
|
Preferred
|
$
167.68
|
$
76.90
|
|
|
|
Basic
weighted average common shares:
|
|
|
Common
weighted average number of shares
|
89,631,162
|
89,631,162
|
Participating
preferred shares - if converted*
|
374,132,593
|
-
|
Total
weighted average number of shares
|
463,763,755
|
89,631,162
|
|
|
|
Total
weighted average number of preferred shares
|
20,524
|
20,524
|
*
Although not included in the basic EPS
calculation under the two-class method due to a period of loss, the
Company had 363,974,428 shares of common stock issuable upon
conversion of the Series E Preferred Stock outstanding at December
31, 2015.
Disclosure about Fair Value of Financial Instruments
The
fair value of the Company’s long-term debt has been estimated
by the Company based upon each obligation’s characteristics,
including remaining maturities, interest rate, credit rating, and
collateral and amortization schedule. The carrying amount
approximates fair value at December 31, 2016 and 2015.
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America (U.S.
GAAP) requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
Advertising Costs
Advertising costs
are expensed in the period incurred. Advertising expense was $1.3
million for the year ended December 31, 2016 and $1.2 million for
the year ended December 31, 2015.
Research and Development Costs
Expenditures for
research activities relating to product development and improvement
are charged to expense as incurred. Such expenditures amounted to
$0.7 million for the year ended December 31, 2016 and $0.6 million
for December 31, 2015, and are included within selling and
administrative costs on the statements of operations.
Concentration Risk
Credit Risk and Major Customers
The
Company’s revenues are derived principally from national and
regional building products dealers and distributors. The Company
extends unsecured credit to its customers. The Company’s
concentration in the building materials industry has the potential
to impact its exposure to credit risk because changes in economic
or other conditions in the construction industry may similarly
affect the Company’s customers.
The
Company has significant customer concentration. Cedar Creek
represented approximately 43% and UPM-Kymmene represented
approximately 16% of our accounts receivable at December 31,
2016.
For the
year ended December 31, 2016, Lowe’s represented
approximately 46% of the Company’s revenue compared to 40%
for the year ended December 31, 2015. Our next largest customer,
BlueLinx, accounted for approximately 10% of the Company’s
revenue for the year ended December 31, 2016, compared to
approximately 15% for the year ended December 31,
2015.
Cash
The Company
maintains bank accounts that are insured by the Federal Deposit
Insurance Corporation (FDIC) up to $250,000. At times, cash
balances may be in excess of the FDIC insurance limit. The Company
believes no significant concentrations of risk exist with respect
to its cash.
Recent Accounting Pronouncements
In August 2015, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update (ASU)
2015-14,
Revenue from Contracts with
Customers (Topic 606): Deferral of the Effective
Date,
which defers the
effective date of ASU 2014-09 for all entities by one year. This
update is effective for public business entities for annual
reporting periods beginning after December 15, 2017, including
interim periods within those reporting periods. Earlier application
is permitted only as of annual reporting periods beginning after
December 15, 2016, including interim reporting periods within that
reporting period. ASU 2015-14 defers our effective date until
January 2018 which is when we plan to adopt this standard. The ASU
permits two methods of adoption: retrospectively to each prior
reporting period presented (full retrospective method), or
retrospectively with the cumulative effect of initially applying
the guidance recognized at the date of initial application (the
cumulative catch-up transition method). The ASU also requires
expanded disclosures relating to the nature, amount, timing, and
uncertainty of revenue and cash flows arising from contracts with
customers.
Additionally,
qualitative and quantitative disclosures are required about
customer contracts, significant judgments and changes in judgments,
and assets recognized from the costs to obtain or fulfill a
contract. While we are still in the process of evaluating the
effect of adoption on our financial statements and are currently
assessing our contracts with customers, we do not expect a material
impact on our results of operations, cash flows or financial
position. We anticipate we will expand our financial statement
disclosures in order to comply with the new ASU. We have not yet
determined our transition method upon adoption, but plan to select
a transition method by the middle of 2017.
During
the fourth quarter of the year ended December 31, 2015, the FASB
issued a new accounting standard which is intended to simplify the
subsequent measurement of inventory, (ASU No. 2015-11,
Inventory (Topic 330): Simplifying the
Measurement of Inventory
). The new standard replaces the
current lower of cost or market test with a lower of cost and net
realizable value test. Under the current guidance, market could be
replacement cost, net realizable value or net realizable value less
an approximately normal profit margin. Net realizable value is the
estimated selling prices in the ordinary course of business, less
reasonably predictable costs of completion, disposal and
transportation. This guidance should be applied on a prospective
basis and is effective for the Company for the year ended 2017.
We believe ASU 2015-11 will have no impact on our financial
statements.
In
February, 2016, the FASB issued ASU No. 2016-02,
Leases
, which relates to the accounting
of leasing transactions. This standard requires a lessee
to record on the balance sheet the assets and liabilities for the
rights and obligations created by leases with lease terms of more
than 12 months. In addition, this standard requires both
lessees and lessors to disclose certain key information about lease
transactions. This standard will be effective for fiscal
years beginning after December 15, 2018, including interim periods
within those fiscal years. We are evaluating the impact
the adoption of ASU 2016-02 will have on our financial
statements.
In
March 2016, the FASB issued ASU No. 2016-09, “
Compensation – Stock Compensation (Topic
718
)”. The pronouncement was issued to simplify the
accounting for share-based payment transactions, including income
tax consequences, the classification of awards as either equity or
liabilities, and the classification on the statement of cash flows.
This pronouncement is effective for reporting periods beginning
after December 15, 2016. At this time, the Company has no
outstanding stock compensation and is not expected to issue any
stock awards during the coming year.
In June 2016, the FASB issued
ASU No. 2016-13,
Financial Instruments -
Credit Losse
s
(Topic
326)
. The new standard changes
the impairment model for most financial assets and certain other
instruments. Entities will be required to use a model that will
result in the earlier recognition of allowances for losses for
trade and other receivables and other instruments. For
available-for-sale debt securities with unrealized losses, the
losses will be recognized as allowances rather than as reductions
in the amortized cost of the securities.
The amendments in this standard are
effective for fiscal years beginning after December 15, 2019,
including interim periods within those fiscal
years.
The Company is
currently evaluating the impact of the provisions of this new
standard on its financial statements.
In August, 2016, the FASB issued ASU
2016-15,
Statement of Cash Flows (Topic
230).
The new standard
addresses the classification of cash flows related to certain cash
receipts and cash payments. Additionally, the standard clarifies
how the predominance principle should be used when cash receipts
and cash payments have aspects of more than one class of cash
flows. First, an entity will apply the guidance in Topic 230 and
other applicable topics. If there is not guidance for those cash
receipts and cash payments, an entity will determine each
separately identifiable source or sue and classify the receipt or
payment based on the nature of the cash flow. If a receipts or
payment has aspects for more than one class of cash flows and
cannot be separated, the classification will depend on the
predominant source or use. The standard is effective for annual
periods, and for interim periods within those annual periods,
beginning after December 15, 2017. The Company is currently
evaluating the impact of the provisions of this new standard on its
financial statements.
Note 3: Related Party Transactions
Advisory Services Agreement
The Company
entered into an Advisory Services Agreement with H.I.G. Capital,
L.L.C. (the Advisory Services Agreement) on March 18, 2011, that
provides for an annual monitoring fee between $250,000 and $500,000
and reimbursement of all other out-of-pocket fees and expenses
incurred by H.I.G. Capital, L.L.C. For the year ended December 31,
2016, the Company recognized $250,000 for the annual monitoring fee
compared to $375,000 for the year ended December 31,
2015.
Other
We
accrued board of directors’ fees of $29,000 at December 31,
2016 and 2015, respectively.
Note 4: Line of Credit
On
October 30, 2015, we signed a five-year Credit and Security
Agreement (the WBCC Agreement) with Webster Business Credit
Corporation (WBCC), a state banking institution organized under the
laws of the State of Connecticut. The WBCC Agreement is an
asset-based revolver loan capped at $8.5 million for the period
June 1 to December 31 of each calendar year and capped at $15.0
million for the five months ended May 31 of each calendar year
(WBCC Revolver Loan) and other long-term debt as described in
Note 5
below
.
The WBCC Revolver Loan is secured by
amounts (less reserves) equal to 85% of the qualifying accounts
receivable balance and 85% of the net orderly liquidation value of
the inventory.
AERT
borrows on the WBCC Revolver Loan at the domestic base rate set
forth in the WBCC Agreement (Domestic Base Rate), which at December
31, 2016 was 3.75% plus an applicable margin. At its option, the
Company may convert the WBCC Revolver advances to short-term (30 to
90 day) loans at LIBOR plus an applicable margin. Conversion of
advances at domestic base rate plus an applicable margin to
short-term loans at the LIBOR rate plus an applicable margin must
be made in minimum increments of $250,000 and convert back to
original terms of the advances upon maturity.
As of
December 31, 2016, the outstanding balances, rates and availability
remaining on the WBCC Revolver Loan are as follows (dollars in
thousands):
|
|
|
Total
availability
|
$
8,500
|
|
|
|
|
Domestic
Base Rate loans
|
$
-
|
4.75
%
|
LIBOR
rate loans
|
-
|
3.27
%
|
Total
outstanding
|
$
-
|
|
|
|
|
Remaining
availability
|
$
8,500
|
|
Note 5: Long-Term Debt
Long-term debt at December 31, 2016 and 2015,
consisted of the following
(in
thousands)
:
|
|
|
|
|
|
|
3%
note payable to Oklahoma Department of
|
|
|
Commerce;
secured by assets constructed with
|
|
|
the
loan proceeds; matures April 1, 2027
|
$
2,196
|
$
2,377
|
H.I.G.
Series A Note (a); matures on April 30, 2021
|
15,678
|
14,591
|
H.I.G.
Series B Note (b); matures on April 30, 2021
|
7,783
|
7,102
|
WBCC
M&E Loan (c)(d); matures on October 30, 2020
|
4,638
|
5,422
|
WBCC
RE Loan (c)(d); matures on October 30, 2020
|
6,810
|
7,170
|
WBCC
Term Loan (c)(d); matures on October 30, 2020
|
1,175
|
1,475
|
Other
|
734
|
929
|
Total
|
39,014
|
39,066
|
Less
current maturities
|
(2,022
)
|
(2,046
)
|
Long-term
debt, less current maturities
|
$
36,992
|
$
37,020
|
__________________
|
|
|
|
|
(a) Cash interest of 4% plus 3.25% PIK interest added quarterly to
principal. Additions occur after
|
quarter-end.
To date, all cash interest that would have been payable on H.I.G.
Series A note has
|
|
been
added to the principal.
|
|
|
|
|
(b) Cash interest of 4% plus 5.25% PIK interest added quarterly to
principal. Additions occur after
|
quarter-end.
To date, all cash interest that would have been payable on H.I.G.
Series B note
|
|
has
been added to the principal.
|
|
|
|
|
(c) Secured by a continuing security interest in all of the
Company's assets.
|
|
|
|
(d) This note has two interest features; receive advances at prime
+ margin, which may be converted
|
by
the borrower in $250 thousand traunches to LIBOR + margin. See
additional detail below.
|
|
Current Maturity of Long-Term Debt
|
|
Year
|
|
2017
|
$
2,022
|
2018
|
1,870
|
2019
|
1,721
|
2020
|
8,522
|
2021
|
23,671
|
Thereafter
|
1,208
|
Total
|
$
39,014
|
Oklahoma Energy Program Loan
On July
14, 2010, we entered into a loan agreement with the Oklahoma
Department of Commerce (ODOC) whereby ODOC agreed to a 15-year,
$3.0 million loan to AERT at a fixed interest rate of 3.0% (the
ODOC Loan). The ODOC Loan was made pursuant to the American
Recovery and Reinvestment Act State Energy Program for the State of
Oklahoma, and funded the second phase of AERTís recycling
facility in Watts, Oklahoma. Payments on the loan began May 1,
2012. The balance on the ODOC Loan at December 31, 2016 was $2.2
million.
ODOC,
under award number 14215 SSEP09, advanced $3.0 million to AERT
throughout 2010, 2011 and 2012. As of December 31, 2012, a total of
$3.0 million was spent on contract labor, contract materials, and
equipment. In addition, as of December 31, 2012, matching funds of
$9.2 million were contributed (in-kind) to the project by
AERT.
H.I.G. Long Term Debt
In
connection with the recapitalization of March 2011, the Company
entered into a Securities Exchange Agreement with H.I.G. (the
Exchange Agreement), and a Credit Agreement with H.I.G. (the Credit
Agreement), each dated March 18, 2011. Pursuant to the Exchange
Agreement and the Credit Agreement, in exchange for the
Company’s debt, H.I.G. was issued:
●
a Series A Term
Note (Series A Note) in the aggregate principal amount of
$10,000,000,
●
a Series B Senior
Term Note (Series B Note, and collectively with the Series A Note,
the Notes) in the aggregate principal amount of $9,000,000 (or such
lesser amount as is actually borrowed thereunder),
●
and 20,524.149
shares of Series E Convertible Preferred Stock, par value $0.01 per
share, of the Company (the Series E Preferred Stock).
The
Company issued the Notes and Series E Preferred Stock to H.I.G. in
exchange for the following:
●
$6,806,656 of
principal plus accrued interest owed under the Allstate Promissory
Note, dated July 1, 2009, issued by the Company,
●
$13,281,084 of
principal plus accrued interest owed under the Adair County
Industrial Authority Solid Waste Recovery Facilities Revenue Bonds
issued in 2007,
●
$10,436,409 of
principal plus accrued interest owed under the City of Springdale
Arkansas, Industrial Development Refunding Revenue Bonds issued in
2008,
●
$2,096,667 of
principal plus accrued interest owed under the Secured Promissory
Note (2010 Note) issued on December 20, 2010, and
●
H.I.G. making
approximately $6.9 million in additional new capital available to
the Company.
In
addition, immediately prior to the closing of the foregoing
transactions, the Company and the holders of the Company’s
convertible preferred stock, Series D (the “Series D
Preferred Stock”) consummated the exchange of 748,772 shares
of Series D Preferred Stock and warrants exercisable for 3,787,880
shares of Common Stock for 36,313,377 shares of Common
Stock.
As a
result, upon consummation of the foregoing transactions on March
18, 2011 (the Closing), H.I.G. held $17,596,667 outstanding
principal of senior secured debt of the Company and owned
approximately 80% of the outstanding common equity securities of
the Company on a fully diluted, as converted basis. Pursuant to the
Exchange Agreement, until such time as H.I.G. no longer owns at
least 20% of the Company’s outstanding Common Stock on a
fully diluted basis, H.I.G. has the right to purchase securities in
any subsequent issuance or sale of securities by the Company in an
amount equal to the greater of (i) H.I.G.’s ownership
percentage as of the business day prior to its receipt of notice of
the proposed issuance or sale by the Company or (ii)
51%.
Pursuant to the
Credit Agreement, the Company issued to H.I.G. the Notes, which are
secured by a grant of a security interest in all of the
Company’s assets in accordance with the terms of a Security
Agreement, Patent Security Agreement, Copyright Security Agreement
and Trademark Security Agreement, each dated March 18, 2011. The
Series A Note matures on April 30, 2021, (as amended by the Fourth
Amendment to the Credit Agreement) and currently bears cash
interest at 7.25% per annum. Payment of cash interest, however, has
been waived until March 31, 2017, and in lieu of such cash
interest, payment in kind (PIK) interest is accrued and added to
the principal of the Series A Note quarterly.
Upon
the Closing, H.I.G. converted the $2,000,000 principal amount of
the 2010 Note and accrued interest thereon into borrowings under
the Series B Note. In addition, an additional $5.5 million was
funded and drawn under the Series B Note at Closing.
The
Series B Note matures on April 30, 2021, (as amended by the Fourth
Amendment to the Credit Agreement) and, at the Company’s
option, either (i) bears cash interest at 9.25% per annum or (ii)
bears cash interest at 4.00% per annum, plus a rate of interest
equal to 5.25% per annum payable in kind and added to the
outstanding principal amount of the Series B Term Note. The Series
B Note ranks
pari passu
to
the Series A Note. Payment of cash interest, however, has been
waived until March 31, 2017, and in lieu of such cash interest
payment in kind (PIK) interest is accrued and added to the
principal of the Series B Note quarterly. On October 30, 2015, we
used proceeds received from WBCC from the WBCC Agreement to make an
$11.0 million partial payment of the Series B Note.
The
Credit Agreement contains provisions requiring mandatory payments
upon the Notes equal to 50% of the Company’s “Excess
Cash Flow” (as defined in the Credit Agreement) and equal to
100% of proceeds from most non-ordinary course asset dispositions,
additional debt issuances or equity issuances (subject to certain
exceptions in each case or as H.I.G. otherwise agrees), and
contains covenant restrictions on the incurrence of additional
debt, liens, leases or equity issuances (subject to certain
exceptions in each case or as H.I.G. otherwise
agrees).
On May
23, 2011, AERT and H.I.G. amended the Credit Agreement to allow
loans once repaid or prepaid to be re-borrowed at the sole
discretion of the Administrative Agent (First Amendment). On
October 20, 2011, AERT and H.I.G. amended (Second Amendment) the
Credit Agreement to provide the Company with an additional $3.0
million to be drawn, as needed. The Company drew down $1.0 million
on May 23, 2011, $2.0 million on October 21, 2011, and $1.0 million
on November 18, 2011 to help fund operations. A Third Amendment to
the agreement was executed on November 15, 2012, which allowed
AloStar Bank of Commerce first priority in liens and updated the
H.I.G. debt covenants.
On
October 30, 2015, the Company and H.I.G. entered into the Fourth
Amendment to the Credit Agreement. The Fourth Amendment addressed
the following changes:
1.
The maturity date
of the Credit Agreement was extended to April 30,
2021,
2.
Series A Note PIK
interest rate was reduced to 3.25%, cash interest remains
4%
3.
Series B Note PIK
interest rate was reduced to 5.25%, cash interest remains
4%
4.
Debt covenant
requirements were restated as follows:
a.
Leverage ratio was
amended from 3.0:1.0 to 7.50:1.0 for the year ended December 31,
2015. The leverage ratio will continue to decline in periods
thereafter,
b.
Fixed charge
coverage ratio was amended form 1.5:1.0 to 1.05:1.0 for the year
ended December 31, 2015 and periods thereafter,
c.
Minimum EBITDA was
amended from $10 million to $5.6 million for the year ended
December 31, 2015 and periods thereafter,
d.
Capital
expenditures ceiling was amended from $2.5 million to $4.0 million
for the year ended December 31, 2015 and periods
thereafter.
5.
WBCC is given first
priority in liens.
The
Fourth Amendment excepted the WBCC loans discussed below from
negative covenants regarding future indebtedness restrictions
placed on the Company.
Webster Business Credit Corporation
On
October 30, 2015, AERT entered into the WBCC Agreement for the WBCC
Revolver Loan, a $5.5 million machinery and equipment loan (WBCC
M&E Loan), a $7.2 million real estate loan (WBCC RE Loan), a
$1.5 million asset-based loan (WBCC Term Loan) and a prospective
$1.2 million capital expenditure loan (WBCC CAPEX
Loan).
The
purpose of the WBCC Agreement was to refinance a portion of the
Company’s senior and subordinated debt, to cover the costs
and expenses associated with the loan transactions and to provide
working capital to fund business operations. The WBCC Agreement
expires on October 30, 2020. The WBCC Agreement requires that WBCC
hold first security interest on the majority of AERT’s
property, plant, equipment and real estate. The uses of the funds
received under the WBCC Agreement at closing were as
follows:
|
|
AloStar
Revolver Loan (retired)
|
$
7,538
|
H.I.G.
Series B Note (partial payoff)
|
11,000
|
Banc
of America Leasing & Capital LLC
|
755
|
Deferred
financing costs
|
1,119
|
Total
use of funds
|
$
20,412
|
Payments on the
principal portion of the WBCC M&E Loan, WBCC RE Loan and WBCC
Term Loan commenced on December 1, 2015 and will be made in 60
equal monthly installments of $0.12 million plus interest. The
final installment of $7.0 million is due and payable on October 30,
2020.
AERT
borrows under the WBCC Agreement at the domestic base rate, which
at December 31, 2016 was 3.75% plus an applicable margin. At its
option, the Company may convert any of the loans under the WBCC
Agreement to a LIBOR rate plus an applicable margin loan. Domestic
base rate conversions to LIBOR rate loans must be made in minimum
increments of $250,000.
As of
December 31, 2016, outstanding Domestic Base Rate loans and LIBOR
rate loans were (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Domestic
Base Rate loans
|
$
66
|
5.00
%
|
$
30
|
5.25
%
|
$
25
|
6.00
%
|
LIBOR
rate loans
|
4,572
|
3.52
%
|
6,780
|
3.77
%
|
1,150
|
4.52
%
|
Total
|
$
4,638
|
|
$
6,810
|
|
$
1,175
|
|
|
|
|
|
|
|
|
Only
ten LIBOR rate loans may be outstanding at any time. Loan interest
periods are available for one, two or three months. The applicable
margin for each loan is as follows:
Loan
|
|
|
WBCC
Revolver Loan
|
1.00
%
|
2.50
%
|
WBCC
M&E Loan
|
1.25
%
|
2.75
%
|
WBCC
CAPEX Loan
|
1.25
%
|
2.75
%
|
WBCC
RE Loan
|
1.50
%
|
3.00
%
|
WBCC
Term Loan
|
2.25
%
|
3.75
%
|
Advances on the
WBCC CAPEX Loan will be subject to an amount equal to 80% of the
hard cost of the equipment to be purchased and must be greater than
$25,000. There were no borrowings outstanding on the WBCC CAPEX
Loan at December 31, 2016.
Loans
under the WBCC Agreement are subject to the following debt
covenants: (a) fixed charge coverage ratio of greater than
1.10:1.0, and (b) maximum capital expenditures annually of $4.0
million.
Pursuant to the
terms of the Merger Agreement, all of the Company's outstanding
indebtedness under the ODOC Loan, the WBCC Agreement and the H.I.G.
Credit Agreement (including the indebtedness under the Series A
Note and the Series B Note) will be repaid in connection with the
consummation of the Merger.
Note 6: Equity
Series E Preferred Stock
Pursuant to the
Exchange Agreement, the Company issued 20,524.149 shares of newly
authorized Series E Preferred Stock to H.I.G. at the Closing. The
Series E Preferred Stock was authorized by the filing of a
Certificate of Designations, Preferences and Rights of the Series E
Convertible Preferred Stock of the Company filed on March 17, 2011
with the Delaware Secretary of State (the Series E Designation).
Pursuant to the Series E Designation, holders of the Series E
Preferred Stock are entitled to receive per share dividends equal
to 6% per annum of the stated value of $1,000 per share of Series E
Preferred Stock when declared by the Company’s Board of
Directors. In addition, holders of the Series E Preferred Stock are
entitled to participate in any dividends declared on shares of the
Common Stock on an as-converted basis. Shares of the Series E
Preferred Stock and all accrued dividends thereon are convertible
at any time at the holder’s election into shares of the
Common Stock (the conversion Shares) at a conversion price of
$0.075 per share, subject to customary anti-dilution adjustments.
The Series E Preferred Stock ranks senior to all other equity
securities of the Company. Holders of the Series E Preferred Stock
have the right to vote their ownership interests in the Series E
Preferred Stock on an as-converted basis. In addition, holders of
the Series E Preferred Stock also have the right to elect four of
the Company’s seven directors while they hold outstanding
shares of Series E Preferred Stock representing at least 20% of the
outstanding shares of Common Stock on an as-converted basis. If the
outstanding shareholding of Series E Preferred Stock at any time
represents less than 20% of the outstanding shares of Common Stock
on an as-converted basis, the holders of the Series E Preferred
Stock will have the right to elect one of the Company’s seven
directors. The Series E Designation contains customary protective
voting provisions and other rights customarily granted to holders
of preferred equity securities.
The
Series E Preferred Stock is not redeemable except under certain
conditions which may be out of the control of the Company. An event
of default under the Series A and B Notes, for example, the failure
to meet specified financial covenants, may trigger a redemption
right to the holders of the Series E Preferred Stock. As a result,
the carrying value of the Series E Preferred Stock is reported in
temporary equity.
On
December 31, 2016, H.I.G., the holder of all of the issued and
outstanding shares of Series E Preferred Stock, waived the
specified events of default as a result of AERT failing to pay the
cash interest on the Series A and B term loans. In addition, on
December 31, 2016, H.I.G. waived its right to deliver a triggering
event redemption notice on the Series E Preferred stock solely as a
result of the specified events of default.
The
initial conversion price of the Series E Preferred Stock is fixed
and will remain the conversion price subject to the anti-dilution
adjustments described below. The conversion price of the Series E
Preferred Stock is subject to customary weighted-average
anti-dilution adjustments, which will be made (subject to certain
exceptions) in the event that AERT:
●
issues or sells
shares of the Common Stock for consideration per share less than a
price equal to the current market price in effect immediately prior
to such issue or sale;
●
pays dividends or
other distributions on the Common Stock in shares of the Common
Stock;
●
subdivides, splits
or combines the shares of Common Stock;
●
subject to certain
exceptions and limitations, issues options, rights or warrants
entitling the holders to purchase shares of the Common Stock at
less than the then-current market price (as defined in the
certificate of designations for the Series E Preferred
Stock);
●
issues or sells any
securities that are convertible into or exercisable or exchangeable
for common stock and the lowest price per share for which one share
of the Common Stock is issuable upon the conversion, exercise or
exchange thereof is less than the then-current market
price;
●
makes changes to
the terms of outstanding options, warrants, or convertible
securities (including those that were outstanding as of March 18,
2011, the original issue date of the Series E Preferred Stock) and
that would result in a dilutive effect on the Series E Preferred
Stock; in general, in such event the adjustment shall be calculated
as if the changed terms had been in effect from the initial
issuance of such securities and such securities issued before March
18, 2011 shall be treated as if newly issued as of the date of such
change; provided that no adjustment will be made in such case if
such adjustment would result in an increase in the conversion price
then in effect; or
●
takes any action
that would result in dilution of the Series E Preferred Stock but
is not specifically provided for in the Series E Designations
(including granting of stock appreciation rights, phantom stock
rights or other rights with equity features), in which case the
Company’s Board of Directors shall in good faith determine
and implement an appropriate adjustment in the conversion price so
as to protect the rights of the holders of the Series E Preferred
Stock, subject to certain qualifications.
Common Stock
There
have been no changes to the Common Stock during 2016.
Note 7: Equity Incentive Plan
The
Company’s 2012 Stock Incentive Plan (2012 Plan) is an
equity-based incentive compensation plan that is used to distribute
awards to qualified employees. The 2012 Plan was approved by our
Board of Directors on March 3, 2012 and our Stockholders at the
2012 annual meeting of stockholders held in Springdale, Arkansas on
June 27, 2012.
As of
December 31, 2016, no awards have been made.
Note 8: Leases
At
December 31, 2016, the Company was obligated under various
operating leases covering certain buildings and equipment that
expire between 2017 and 2019. Operating lease expense was $1.2
million for the year ended December 31, 2016 as compared to $1.6
million for the year ended December 31, 2015.
Future
minimum lease payments required under operating leases as of
December 31, 2016, are as follows (in thousands):
Year
|
|
2017
|
$
349
|
2018
|
47
|
2019
|
4
|
Total
minimum payments required:
|
$
400
|
Note 9: Income Taxes
Deferred income
taxes reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax
purposes.
The
Company recorded an income tax provision of $105,000 for the year
ended December 31, 2016, related to alternative minimum tax. There
was no income tax provision for state and federal income for the
year ended December 31, 2015.
The
income tax provisions for 2016 and 2015 differ from the amounts
computed by applying the US federal statutory rate of 34% to income
as a result of the following (in thousands):
|
|
|
|
|
|
|
|
Income
tax at the U.S. federal statutory rate
|
$
1,350
|
34.0
|
$
245
|
34.0
|
Permanent
differences
|
17
|
0.4
|
16
|
2.2
|
Change
in valuation allowance
|
(1,262
)
|
(31.8
)
|
(261
)
|
(36.2
)
|
Income
tax provision
|
$
105
|
2.6
|
$
-
|
0.0
|
The tax
effects of significant temporary differences representing deferred
tax assets and liabilities were as follows (in
thousands):
|
|
|
|
|
|
|
|
Deferred tax assets —
|
|
|
|
|
Net
operating loss carryforwards
|
$
-
|
$
7,500
|
$
-
|
$
9,520
|
Accrued
expenses
|
558
|
-
|
930
|
-
|
Valuation
allowance
|
(285
)
|
(6,479
)
|
(816
)
|
(8,440
)
|
Other
|
367
|
42
|
440
|
45
|
Total
deferred tax assets
|
640
|
1,063
|
554
|
1,125
|
Deferred tax liability —
|
|
|
|
|
Depreciation
|
-
|
1,063
|
-
|
1,125
|
Prepaid
expenses
|
640
|
-
|
554
|
-
|
Total
deferred tax liabilities
|
640
|
1,063
|
554
|
1,125
|
Net
deferred tax
|
$
-
|
$
-
|
$
-
|
$
-
|
As of
December 31, 2016, the Company had net operating loss (NOL)
carryforwards for federal and state income tax purposes of $52.0
million which are available to reduce future taxable income. If not
utilized, the NOL carryforwards will expire between 2017 and
2031.
In
March 2011, H.I.G. AERT, LLC acquired a controlling interest in the
Company, which resulted in a significant restriction on the
utilization of the Company’s NOL carryforwards. It is
estimated that the utilization of future NOL carryforwards will be
limited per Section 382 of the Internal Revenue Code of 1986, as
amended (IRC 382), to approximately $0.8 million per year for the
next 17 years. The impact of this limitation is that approximately
$27.3 million in NOLs will expire before the Company can use them.
Of the remaining $24.3 million in NOLs, $15.2 million is subject to
the IRC 382 restriction and $9.0 million is available to reduce
taxable income for the year ended December 31, 2016 and subsequent
years. The Company anticipates that 2016 taxable income will reduce
the available current carryforward to approximately $3.9
million.
As
there is insufficient evidence that the Company will be able to
generate adequate future taxable income to enable it to realize its
NOL carryforwards prior to expiration, the Company maintains a
valuation allowance to recognize its deferred tax assets only to
the extent of its deferred tax liabilities.
Based
upon a review of its income tax filing positions, the Company
believes that its positions would be sustained upon an audit and
does not anticipate any adjustments that would result in a material
change to its financial position. Therefore, no reserves for
uncertain income tax positions have been recorded. The Company
recognizes interest related to income taxes as interest expense and
recognizes penalties as operating expense. The Company is subject
to routine audits by various taxing jurisdictions. The Company is
no longer subject to income tax examinations by taxing authorities
for years before 2013, except in the States of California and
Colorado, for which the 2012 tax year is still subject to
examination.
Note 10: Commitments and Contingencies
Legal Proceedings
AERT is
involved from time to time in litigation arising in the normal
course of business that is not disclosed in its filings with the
SEC. In management's opinion, the Company is not involved in any
litigation that is expected to materially impact the Company's
results of operations or financial condition.
Note 11: 401(k) Plan
The
Company sponsors the A.E.R.T. 401(k) Plan (the Plan) for the
benefit of all eligible employees. The Plan provides that the
Company may elect to make discretionary-matching contributions
equal to a percentage of each participant’s voluntary
contribution. The Company may also elect to make a profit sharing
contribution to the Plan. For the year ended December 31, 2016, the
Board of Directors approved a discretionary match of 37.5% of the
first 4% of salary voluntarily contributed, which was
$75,000.
Note 12: Subsequent Event
On
March 16, 2017, the Company entered into an Agreement and Plan of
Merger (the Merger Agreement) with Oldcastle Architectural, Inc., a
Delaware corporation (Parent), and Oldcastle Ascent Merger Sub,
Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent (Merger Sub), under which Merger Sub will merge with and
into the Company (the Merger) with the Company continuing as the
surviving corporation and a wholly-owned subsidiary of Parent.
Pursuant to the Merger Agreement, at the effective time of the
Merger, each issued and outstanding share of common stock, par
value $0.01 per share, of the Company (the Common Stock) will be
converted into the right to receive $0.135936 in cash, less any
required withholding taxes, if any, and each issued and outstanding
share of preferred stock, par value $0.01 per share, of the Company
(the Preferred Stock) will be converted into the right to receive
$2,603.483278 in cash, less any required withholding taxes, if any,
in each case other than any shares of Common Stock and Preferred
Stock owned by the Company (which will automatically be canceled
with no consideration paid therefor) and those shares of Common
Stock with respect to which stockholders properly exercised
appraisal rights and have not effectively withdrawn or lost their
appraisal rights.
Also,
on March 17, 2017, following the execution and delivery of the
Merger Agreement, H.I.G. AERT, LLC, holder of approximately 85% of
the voting power of the issued and outstanding shares of the
Company's stock, executed a written consent adopting the Merger
Agreement and approving the Merger. No further approval of the
stockholders of the Company is required to adopt the Merger
Agreement or approve the Merger. Consummation of the Merger is
subject to satisfaction or waiver of certain customary closing
conditions. The Merger is expected to close during the second
quarter of 2017.
If the
Merger is not completed, we may be required to pay a termination
fee of approximately $4.7 million under certain circumstances set
forth in the Merger Agreement. We estimate transaction costs
relating to the Merger, including transaction bonuses, will range
from approximately $12 million to $13 million. If the Merger is not
completed, the majority of these transaction costs will not be
incurred by the Company.
Exhibit
|
INDEX TO
EXHIBITS
|
|
No.
|
Description of
Exhibit
|
|
|
|
|
|
2.1
|
|
Securities
Exchange Agreement dated as of March 18, 2011 by and among the
Company and H.I.G. AERT, LLC, incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed with the SEC on March 22, 2011
|
|
|
|
|
|
2.2
|
|
Series
D Preferred Stock Exchange Agreement dated as of March 18, 2011 by
and among the Company and H.I.G. AERT, LLC, incorporated herein by
reference to Exhibit 10.2 to the Company’s Current Report on
Form 8-K filed with the SEC on March 22, 2011
|
|
|
|
|
|
|
|
Agreement and Plan
of Merger, dated as of March 16, 2017, by and among the Company,
Oldcastle Architectural, Inc. and Oldcastle Ascent Merger Sub, Inc.
(Schedules have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Company hereby undertakes to furnish
supplementally copies of the omitted schedules upon request by the
SEC.)
|
|
|
|
|
|
3.1
|
|
Certificate
of Incorporation of the Company, as amended, incorporated herein by
reference to Exhibit 3.1 to the Company’s Annual Report on
Form 10-K filed with the SEC on March 10, 2016
|
|
|
|
|
|
3.2
|
|
Bylaws
of the Company, as amended, incorporated herein by reference to
Exhibit 3.2 to the Company’s Annual Report on Form 10-K filed
with the SEC on March 10, 2016
|
|
|
|
|
|
|
|
Amendment to Bylaws
of the Company
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4.1
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Certificate
of Designations, Preferences and Rights of the Series E Convertible
Preferred Stock of the Company, incorporated herein by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K filed with
the SEC on March 22, 2011.
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Amendment to
Certificate of Designations, Preferences and Rights of the Series E
Convertible Preferred Stock of the Company
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10.1
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Loan
Agreement dated July 1, 2010 by and between the Company and the
Oklahoma Department of Commerce, incorporated herein by reference
to Exhibit 10.17 to the Company’s Annual Report on Form 10-K
filed with the SEC on March 30, 2012
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10.2
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Promissory
Note issued by the Company to the Oklahoma Department of Commerce
dated July 1, 2010, incorporated herein by reference to Exhibit
10.18 to the Company’s Annual Report on Form 10-K filed with
the SEC on March 30, 2012
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10.3†
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Indemnity
Agreement dated as of March 18, 2011 by and between the Company and
Michael Phillips, incorporated herein by reference to Exhibit 10.5
to the Company’s Current Report on Form 8-K filed with the
SEC on March 22, 2011
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10.4
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Advisory
Services Agreement dated as of March 18, 2011 by and between the
Company and H.I.G. Capital, L.L.C., incorporated herein by
reference to Exhibit 10.3 to the Company’s Current Report on
Form 8-K filed with the SEC on March 22, 2011
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10.5
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Registration
Rights Agreement dated as of March 18, 2011 by and among the
Company and H.I.G. AERT, LLC, incorporated herein by reference to
Exhibit 10.12 to the Company’s Current Report on Form 8-K
filed with the SEC on March 22, 2011
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10.6
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Credit
Agreement dated as of March 18, 2011 among the Company, the lenders
party thereto and H.I.G. AERT, LLC, incorporated herein by
reference to Exhibit 10.6 to the Company’s Current Report on
Form 8-K filed with the SEC on March 22, 2011
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10.7
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Security
Agreement dated as of March 18, 2011 by and between the Company and
H.I.G. AERT, LLC, incorporated herein by reference to Exhibit 10.9
to the Company’s Current Report on Form 8-K filed with the
SEC on March 22, 2011
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10.8
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Series
A Term Note issued by the Company to H.I.G. AERT, LLC dated March
18, 2011, incorporated herein by reference to Exhibit 10.7 to the
Company’s Current Report on Form 8-K filed with the SEC on
March 22, 2011
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10.9
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Amended
and Restated Series B Term Note issued by the Company to H.I.G.
AERT, LLC dated October 20, 2011, incorporated herein by reference
to Exhibit 10.15 to the Company’s Current Report on Form 8-K
filed with the SEC on October 24, 2011
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10.10
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First
Amendment to Credit Agreement dated as of May 23, 2011 among the
Company, the lenders party thereto and H.I.G. AERT, LLC,
incorporated herein by reference to Exhibit 10.10 to the
Company’s Annual Report on Form 10-K filed with the SEC on
March 10, 2016
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10.11
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Second
Amendment to Credit Agreement dated as of October 20, 2011 among
the Company, the lenders party thereto and H.I.G. AERT, LLC,
incorporated herein by reference to Exhibit 10.11 to the
Company’s Annual Report on Form 10-K filed with the SEC on
March 10, 2016
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10.12
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Third
Amendment to Credit Agreement dated as of November 15, 2012 among
the Company, the lenders party thereto and H.I.G. AERT, LLC,
incorporated herein by reference to Exhibit 10.12 to the
Company’s Annual Report on Form 10-K filed with the SEC on
March 10, 2016
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10.13
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Fourth
Amendment to Credit Agreement dated as of October 30, 2015 among
the Company, the lenders party thereto and H.I.G. AERT, LLC,
incorporated herein by reference to Exhibit 10.13 to the
Company’s Annual Report on Form 10-K filed with the SEC on
March 10, 2016
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10.14†
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Employment
Agreement dated January 1, 2012 between the Company and Tim
Morrison, incorporated herein by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed with the SEC on
March 15, 2012
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10.15†
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Employment
Agreement dated January 1, 2012 between the Company and Brian
Hanna, incorporated herein by reference to Exhibit 10.3 to the
Company’s Current Report on Form 8-K filed with the SEC on
March 15, 2012
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10.16†
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Advanced
Environmental Recycling Technologies, Inc. 2011 Stock Incentive
Plan, incorporated herein by reference to Exhibit 10.18 to the
Company’s Annual Report on Form 10-K filed with the SEC on
March 10, 2016
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10.17
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Accounts
Receivable Purchase Agreement dated February 20, 2015 between the
Company and the Bank of Montreal, incorporated herein by reference
to Exhibit 10.4 of the Company’s Quarterly Report on Form
10-Q filed with the SEC on August 11, 2015
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10.18
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Credit
and Security Agreement dated as of October 30, 2015 between the
Company and the Webster Business Credit Corporation, incorporated
herein by reference to Exhibit 10.20 to the Company’s Annual
Report on Form 10-K filed with the SEC on March 10,
2016
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10.19
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Amendment No. 1 to
the Credit and Security Agreement dated as of March 25, 2016
between the Company and the Webster Business Credit Corporation,
incorporated herein by reference to the Company’s Quarterly
Report on Form 10-Q filed with the SEC on May 13, 2016
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10.20
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Waiver of Series A
& B Interest dated January 20, 2016, incorporated herein by
reference to Exhibit 10.22 to the Company’s Annual Report on
Form 10-K filed with the SEC on March 10, 2016
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10.21
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Waiver
of Triggering Event Redemption Notice dated January 20, 2016,
incorporated herein by reference to Exhibit 10.23 to the Company's
Annual Report on Form 10-K filed with the SEC on March 10,
2016
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10.22
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Waiver
of “Special Events Default” per Series A & B Term
Loan Interest dated April 13, 2016, incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q filed with
the SEC on May 13, 2016
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10.23
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Waiver
of “Special Events Default” per Series A & B Term
Loan Interest dated July 1, 2016 incorporated herein by reference
to the Company's Quarterly Report on Form 10-Q filed with the SEC
on August 11, 2016
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10.24
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Waiver
of “Special Events Default” per Series A & B Term
Loan Interest dated September 30, 2016 incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q filed with
the SEC on November 14, 2016
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Waiver
of Series A & B Interest dated December 31, 2016
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Waiver of
Triggering Event Redemption Notice dated December 31,
2016
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Advanced
Environmental Recycling Technologies, Inc. Key Employee Incentive
Plan for Transaction Bonuses, as amended and restated
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Consent
of Independent Registered Public Accounting Firm
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Certification
per Sarbanes-Oxley Act of 2002 (Section 302) by the Company’s
chief executive officer and director
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Certification
per Sarbanes-Oxley Act of 2002 (Section 302) by the Company’s
chief financial officer and principal accounting
officer
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Certification
per Sarbanes-Oxley Act of 2002 (Section 906) by the Company’s
chief executive officer and director
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Certification
per Sarbanes-Oxley Act of 2002 (Section 906) by the Company’s
chief financial officer and principal accounting
officer
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Press Release,
dated March 17, 2017
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101.DEF
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XBRL
Taxonomy Extension Definition Linkbase Document
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101.LAB
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XBRL
Taxonomy Extension Label Linkbase Document
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101.PRE
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XBRL
Taxonomy Extension Presentation Linkbase Document
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101.DEF
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XBRL
Taxonomy Extension Definition Linkbase Document
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101.LAB
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XBRL
Taxonomy Extension Label Linkbase Document
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101.PRE
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XBRL
Taxonomy Extension Presentation Linkbase Document
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†
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Management
contract or compensatory plan or arrangement
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