AERT Announces Litigation Update.

Business Editors

SPRINGDALE, Ark.--(BUSINESS WIRE)--May 23, 2002

Advanced Environmental Recycling Technologies Inc. (Nasdaq:AERTA) announces that in an opinion and order delivered today, the U.S. District Court for the Western District of Texas held Advanced Environmental Recycling Technologies Inc. ("AERT") liable for breaching an agreement to pay royalties for production from AERT's plant in Junction, Texas, during the period from May 1996 through December 2001.

AERT had disputed the existence of an agreement. The court found AERT liable to Three H Enterprises L.L.C. for past damages in the amount of $820,998 plus an undetermined amount in prejudgment and post-judgment interest and attorney fees.

The court declined to enter a declaratory judgment requested by the plaintiff requiring AERT to pay a royalty on a monthly basis in the future on AERT's products. As to this point, the court noted that the plaintiffs had not properly sought a declaratory judgment from a procedural standpoint and also took note that the changes to the initial process developed over the years by AERT have brought AERT's manufacturing operations farther away from the plaintiff's technology.

AERT had already planned for the contingency of an adverse ruling in the case and intends to appeal the judgment, when entered, to the U.S. Court of Appeals for the Fifth Circuit.

Additional information will be forthcoming in the near future.

The statements in this press release regarding the Company's possible pending liability resulting from such litigation are "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. Additional information that could cause the Company's actual operating results to differ materially along with other risks and uncertainties is contained in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended Dec. 31, 2001.