UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT No. 2 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE ARIELLE CORP.
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(Name of small business issuer in its charter)
Delaware 11-3456837
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(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
26 Aerie Court, North Hills, New York 11030 (516) 621-8286
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(Address and telephone number of principal executive offices)
26 Aerie Court, North Hills, New York 11030
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(Address of Principal place of business or intended principal
Place of business)
Schonfeld & Weinstein, L.L.P., 63 Wall Street, Suite 1801, New York, NY
(212)344-1600
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(Name, address, and telephone number of agent for service)
Copies to:
Andrea I. Weinstein, Esq.
Schonfeld & Weinstein, L.L.P.
63 Wall Street, Suite 1801
New York, New York 10005
Phone: (212) 344-1600
Fax: (212) 480-0717
Jay Valinsky, Esq.
Kipnis, Tescher, Lippman and Valinsky, P.A.
100 NE 3rd Avenue, Suite 610
Fort Lauderdale, Florida 33301
Phone: (954) 467-1964
Fax: (954) 467-2264
Approximate date of proposed sale to the public as soon as practicable after the
effective date of this Registration Statement and Prospectus.
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The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933,(the "Securities Act") or until the registration
statement shall become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
CALCULATION OF REGISTRATION FEE
No registration fee is due on a Reconfirmation Offering under Rule 419.
Cross Reference Sheet
Showing the Location In Prospectus of
Information Required by Items of Form SB-2
Part I. Information Required in Prospectus
Item
No. Required Item Location or Caption
1. Front of Registration Statement Front of Registration
and Outside Front Cover of Statement and outside
Prospectus front cover of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus of Prospectus and Outside
Front cover Page of Prospectus
3. Summary Information and Risk Prospectus Summary;
Factors High Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Prospectus Summary -
Price Determination of Offering
Price; Risk Factors
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Not Applicable
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers, Management
Promoters and Control Persons
11. Security Ownership of Certain Principal Shareholders
Beneficial Owners and Management
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Part I Information Required in Prospectus Caption in Prospectus
12. Description of Securities Description of Securities
13. Interest of Named Experts and Legal Opinions; Experts;
Counsel
14. Disclosure of Commission Position Statement as to
on Indemnification for Securities Indemnification
Act Liabilities
15. Organization Within Last Management, Certain
Five Years Transactions
16. Description of Business Business
17. Management's Discussion and Management's Discussion and
and Analysis or Plan of Analysis
Operation
18. Description of Property Not Applicable
19. Certain Relationships and Related Certain Transactions
Transactions
20. Market for Common Stock and Prospectus Summary
Related Stockholder Matters
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
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PROSPECTUS
THE ARIELLE CORP.
(a Delaware corporation)
RECONFIRMATION OFFER
This prospectus relates to the reconfirmation offer of 100,000 shares of
common stock of The Arielle Corp. ("Arielle," "We" or "Us") sold in Arielle's
initial public offering. Pursuant to Rule 419 of the Securities Act of 1933,
shareholders representing at least 80% of Arielle's maximum offering proceeds
($28,000) must elect to reconfirm their investments (the "Reconfirmation
Offer"). Pursuant to Rule 419, each purchaser of common stock in Arielle's
initial public offering shall have no fewer than 20 business days and no more
than 45 business days from the effective date of the post-effective amendment to
notify Arielle in writing that the Rule 419 investor elects to remain an
investor. If Arielle has not recorded such written notification by the 20th
business day following the post- effective amendment, funds held in the escrow
account shall be sent by first class mail or other equally prompt means to the
Rule 419 investors within five business days. Once a Rule 419 investor has sent
his/her letter of reconfirmation to Arielle, such letter of reconfirmation may
not be revoked.
Pursuant to an Agreement and Plan of Merger between Arielle and Method
Products Corp. a corporation organized and existing under the laws of State of
Florida ("MPC"), dated January 12, 2000, MPC shall be merged into Arielle with
Arielle as the surviving entity. The merger must be consummated within eighteen
(18) months from the effective date of Arielle's initial public offering which
was April 6, 1999. On the effective date of the merger, all Arielle shareholders
shall become shareholders of Arielle. Thus, on the effective date of the merger,
all MPC shareholders shall become shareholders of Arielle as a result of the
merger. If the merger has not been consummated by October 5, 2000 (10 months
from the effective date of the prospectus), the deposited funds held in escrow
shall be returned to all investors on a pro rat basis within 5 business days by
first class mail or other equally prompt means, and the merger agreement shall
be declared null and void.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING
AT PAGE .
THE ARIELLE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
We have filed with the Commission a registration statement on Form SB-2
under the Securities Act with respect to the common shares subject to the
reconfirmation offer hereto. This prospectus does not contain all the
information set forth in the Registration Statement and its exhibits and
schedules. For further information with respect to Arielle and our securities,
we refer you to the Registration Statement, exhibits and schedules.
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Additional information about Arielle, is available upon request from
Schonfeld & Weinstein, L.L.P., 63 Wall Street, Suite 1801, New York, New York
10005. Additional information about MPC may be obtained by contacting Method
Products Corp., 1301 West Copans Road, Suite F-1. Pompano Beach, Florida. Attn:
Mark Antonucci, Chief Executive Officer.
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NO. OF SHARES OFFERING
SOLD IN INITIAL PRICE PER GROSS PROCEEDS PROCEEDS PAID NET
PUBLIC OFFERING SHARE TO THE COMPANY OUT FOR EXPENSES IN ESCROW(1)
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100,000 $.35 $35,000 $3,500 $31,500
(1) 10% of the offering proceeds of our initial public offering ($3,500) were
released to us pursuant to Rule 419.
The Date of this Prospectus is .
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The following were Arielle's expenses for its initial public offering(1):
Escrow Fee.......................................................$ 1,000
Securities and Exchange Commission Registration Fee..............$ 35
Legal Fees.......................................................$ 15,000
Accounting Fees..................................................$ 2,000
Printing and Engraving...........................................$ 500
Blue Sky Qualification Fees and Expenses.........................$ 750
Miscellaneous....................................................$ 1,650
Transfer Agent Fee...............................................$ 1,000
TOTAL............................................................$ 21,935(3)
The following are Arielle's estimated expenses for the reconfirmation offering
(2):
Securities and Exchange Commission Registration Fee.. ......$ 0
Legal Fees..................................................$50,000
Accounting Fees.............................................$10,000
Printing and Engraving......................................$ 5,000
Miscellaneous...............................................$ 500
Transfer Agent Fees.........................................$ 1,500
TOTAL.......................................................$67,000
(1) Have been paid by Arielle
(2) Have been/will be paid by MPC
(3) This amount was paid by funds received in our private placement which took
place between October 13, 1997 and March 30, 1998 and with the 10% expense
allowance allowed pursuant to Rule 419.
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TABLE OF CONTENTS
Page #
PROSPECTUS SUMMARY
INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION
UNDER RULE 419
RISK FACTORS
MERGER
USE OF PROCEEDS
SELECTED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BUSINESS
MANAGEMENT
DESCRIPTION OF SECURITIES
PRINCIPAL SHAREHOLDERS
CERTAIN TRANSACTIONS
LEGAL MATTERS
EXPERTS
THE ARIELLE CORP. FINANCIAL STATEMENTS
METHOD PRODUCTS CORP.FINANCIAL STATEMENTS
THE ARIELLE CORP. AND
METHOD PRODUCTS CORP. PROFORMA CONDENSED
BALANCE SHEET AND STATEMENT OF OPERATIONS
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PROSPECTUS SUMMARY
The following is a summary of certain information contained in this
prospectus and is qualified by the more detailed information and consolidated
financial statements (including notes thereto) appearing elsewhere in this
prospectus. Investors should carefully consider the information set forth under
the heading "Risk Factors". Unless otherwise indicated, the capital structure,
the number of shares outstanding and the per share data and information in this
Prospectus have been adjusted to give effect to the merger described herein.
The Arielle Corp.
Arielle was incorporated in the State of Delaware on October 6, 1997 for
the sole purpose of acquiring or merging with an unspecified operating business.
Arielle has no operating assets and has not engaged in any business activities,
other than to seek out and investigate other businesses for potential merger or
acquisition.
On April 7, 1999, Arielle commenced a "blank check" offering pursuant to
Rule 419 which generated $35,000 in gross proceeds from approximately 40
different investors. Pursuant to Rule 419, all of the gross proceeds from that
offering, less 10%, and the Arielle shares purchased by the Rule 419 investors,
are being held in escrow pending (i) distribution of a prospectus to each of
them describing any prospective business acquisition by Arielle and (ii) the
subsequent confirmation of at least 80% of the shares owned by the Rule 419
investors that they elect to remain investors.
The executive offices of Arielle are located at 26 Aerie Court, North
Hills, New York 11030. The telephone number is (516) 621-8286.
Method Products Corp.
MPC is a multi-service business communications systems company
specializing in the custom design, installation and service of total
communications network systems for businesses, with a focus on businesses
located in South Florida. MPC is involved with computer telephone integration,
fiber optic cabling and video conferencing, among other network systems.
Since 1990, MPC has operated as a full service communications systems
provider offering businesses a single source for services and equipment required
for communications systems. MPC's goal is to provide "one stop shopping" for its
clients' telecommunications needs. MPC is an authorized dealer for Fujitsu,
Nitsuko America, Panasonic and Sony Corporation, among others.
The executive offices of MPC are located at 1301 West Copans Road,
Suite F-1, Pompano Beach, Florida 33064. MPC's phone number is (954) 968-1913.
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Reconfirmation Offering Conducted in Compliance with Rule 419 Arielle is a
blank check company and, consequently, this reconfirmation Offering is being
conducted in compliance with the Commission's Rule 419. The Rule 419 investors
have certain rights and will receive the substantive protection provided by the
rule. To that end, the securities purchased by investors and the funds received
in our initial public offering are deposited and held in an escrow account
established pursuant to Rule 419, and shall remain in the escrow account until
an acquisition meeting specific criteria is completed. Before the acquisition
can be completed and before the deposited funds and deposited securities can be
released to Arielle and the Rule 419 investors, respectively we must take the
following steps:
- Update the registration statement with a post-effective amendment.
- Within five business days after the effective date of the post-effective
amendment, we must furnish the Rule 419 investors with the prospectus. This
prospectus must contain the terms of a reconfirmation offer and information
regarding the proposed acquisition candidate and its business, including audited
financial statements.
According to Rule 419, investors must have no fewer than 20 and no more
than 45 business days from the effective date of the post-effective amendment to
decide to reconfirm their investment and remain an investor or, alternately,
require the return of their investment, minus up to 10% of their investment.
Each Rule 419 investor shall have 20 business days from the date of this
prospectus to reconfirm his/her investment in Arielle. Any Rule 419 investor not
making any decision within this 20 business day period will automatically have
his/her investment funds returned. The rule further provides that if we do not
complete an acquisition meeting the specified criteria within 18 months of the
effective date of its initial public offering, all of the deposited funds in the
escrow account must be returned to Rule 419 investors.
RECONFIRMATION OFFER
This prospectus relates to a reconfirmation by Arielle shareholders of
their investments in Arielle. Rule 419 states that, the proceeds of our initial
public offering and the securities purchased in that offering, both of which are
currently held in escrow, will not be released from escrow account until:
(1) Arielle executes an agreement for an acquisition or merger meeting
certain criteria.
(2) a post-effective amendment which includes the terms of the reconfirmation
offer, as well as information about the merger agreement and audited financial
statements is filed.
(3) Arielle conducts a reconfirmation offer and shareholders representing 80% of
Arielle's initial public offering proceeds elect to reconfirm their investments.
This 80% shall be computed twenty (20) business days after the effective date of
this post-effective amendment.
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Once an investor has sent his/her letter of reconfirmation to Arielle,
such letter of reconfirmation may not be revoked. In the event the Rule 419
investors do not vote to reconfirm the offering, the deposited funds shall be
returned to investors on a pro rata basis. Such funds will be returned within 5
business days of failure to approve the merger.
TERMS OF THE MERGER AGREEMENT
The terms of the merger are set forth in the merger agreement and
consummation of the merger is conditioned upon, among other things, the
acceptance of the reconfirmation offer by holders of at least 80% of the shares
owned by the Rule 419 investors. As a result of the consummation of the merger,
MPC will be merged into Arielle, with Arielle as the Surviving Entity. Upon
consummation of the merger,
- Each shareholder who holds shares of Arielle's common stock registered
in the registration statement declared effective by the Securities and
Exchange Commission on April 6, 1999, and who accepts the
reconfirmation offer shall continue to hold his or her share
certificate(s) representing Arielle's registered common stock.
- Each holder of registered common stock who rejects the reconfirmation
offer will be paid his or her pro rata share of the amount in the
escrow account or approximately $.32 per share. In the event the
escrowed funds exceed $31,500 at the consummation of the merger, those
funds shall be distributed on a pro rata basis to those Arielle
shareholders who reject the reconfirmation offering. At the effective
date of the merger, 100% of the issued and outstanding shares of MPC
shall be canceled and Arielle will issue 7,135,521 shares of Arielle
common stock, representing 91.6% of the merged entity, to former MPC
shareholders in proportion to shares held in shares of common stock of
MPC. 156,000 shares, representing 2% of the merged entity, shall be
issued to Schonfeld &Weinstein, L.L.P. Arielle shareholders shall
continue to hold 500,000 shares of the merged entity, representing 6.5%
of the merged entity. Of the 7,135,521 shares to be held by former MPC
shareholders 779,152 shall be held in escrow and released only if MPC
achieves sales of at least $5,000,000 in the first fiscal year
following the merger.
RECENT DEVELOPMENTS
Our board of directors believes that the merger represents a good
investment opportunity for our shareholders and recommends that the Rule 419
investors elect to accept the reconfirmation offering. Our Board of Directors
recommends that Rule 419 investors, when determining whether or not to reconfirm
their investments, also consider, MPC's working capital and operating results.
The Merger Agreement was approved by the directors and shareholders of MPC
by written consent dated as of January 12, 2000. The merger agreement was
confirmed by the written consent of the directors of Arielle on February 4,
2000.
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ACCOUNTING TREATMENT
Although Arielle is the legal surviving corporation, for accounting
purposes, the merger is treated as a purchase business acquisition of Arielle by
MPC (a reverse acquisition) and a recapitalization of MPC. MPC is the acquirer
for accounting purposes because the former MPC stockholders will receive the
larger portion of the common stockholder interests and voting rights than those
retained by the former Arielle stockholders. Because MPC is the acquirer for
accounting purposes under APB Opinion No. 16, the Surviving Entity shall adopt
MPC's fiscal year end, June 30.
HIGH RISK FACTORS
Investments in the securities of Arielle are highly speculative, involve a
high degree of risk, and only persons who can afford the loss of their entire
investment should vote to reconfirm their investments.
USE OF PROCEEDS
In its initial public offering, Arielle generated $35,000 in proceeds.
10% ($3,500) of the deposited funds was released to Arielle prior to this
reconfirmation offering.
Arielle used this sum for expenses incurred in the offering, including,
but not limited to, accounting expenses, transfer agent fees, printing fees and
certificates of good standing. The remaining $31,500 will remain in the
interest-bearing escrow account maintained by Chase Manhattan Bank, which bank
acts as escrow agent. No portion of the deposited funds has been or will be
expended to merge MPC into Arielle. The deposed funds will be held in escrow
pending a business combination, at which time they will be released to the
merged entity. The merged entity may use the proceeds as it wishes.
CERTAIN INCOME TAX CONSEQUENCES
In management's opinion, the merger is intended to qualify as a "tax-free
reorganization" for purposes of the United States federal income tax so that
stockholders of Arielle and MPC subject to United States tax will not recognize
gain or loss from the transaction. In addition, the transaction is not intended
to result in the recognition of gain or loss to either MPC or Arielle in the
respective jurisdictions where each of them is subject to taxation. NO OPINION
OF COUNSEL NOR A RULING FROM THE INTERNAL REVENUE SERVICE HAS BEEN OBTAINED IN
REFERENCE TO THE FOREGOING. THE FOREGOING IS FOR GENERAL INFORMATION ONLY AND
ARIELLE STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER TRANSACTION TO THEM.
INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
DEPOSIT OF OFFERING PROCEEDS AND SECURITIES
Rule 419 requires that in a blank check offering, offering proceeds, after
deduction for underwriting commissions, underwriting expenses and dealer
allowances, and the securities purchased by investors in such an
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offering, be deposited into an escrow or trust account governed by an agreement
which contains certain terms and provisions specified by the rule. Under Rule
419, the deposited funds and deposited securities will be released to Arielle
and to the 419 investors, respectively, only after Arielle has met the following
three basic conditions:
- Arielle must execute an agreement(s) for an acquisition or merger
meeting certain prescribed criteria.
- Arielle must file a post-effective amendment to its registration
statement which includes the terms of a reconfirmation offer. The
post-effective amendment must also contain information regarding the
acquisition or merger candidate(s)and its business(es), including
audited financial statements.
- Arielle must conduct the reconfirmation offer and satisfy all of the
prescribed conditions, including the condition that a certain minimum
number of investors must elect to remain investors.
After Arielle submits a signed representation to the escrow agent that
the requirements of Rule 419 have been met, and after the acquisition or merger
is consummated, the escrow agent can release the deposited funds and deposited
securities.
Accordingly, Arielle has entered into an escrow agreement with Chase
Manhattan Bank as escrow agent which provides that:
(1) The proceeds are to be deposited into the escrow account maintained
by the escrow agent promptly upon receipt. Rule 419 permits 10% of the deposited
funds to be released to Arielle prior to the reconfirmation offering. The
deposited funds and any dividends or interest thereon, if any, are to be held
for the sole benefit of the investors and can only be invested in bank deposits,
in money market mutual funds or federal government securities or securities for
which the principal or interest is guaranteed by the federal government.
(2) All securities issued in connection with the offering and any other
securities issued with respect to such securities, including securities issued
with respect to stock splits, stock dividends or similar rights are to be
deposited directly into the escrow account promptly upon issuance. The identity
of the investors are to be included on the stock certificates or other documents
evidencing the deposited securities. The deposited securities held in the escrow
account are to remain as issued and are to be held for the sole benefit of the
investors' who retain the voting rights, if any, with respect to the deposited
securities held in their names. The deposited securities held in the escrow
account may not be transferred, disposed of nor any interest created therein
other than by will or the laws of descent and distribution, or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code of
1986 or Table 1 of the Employee Retirement Income Security Act.
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PRESCRIBED MERGER CRITERIA
Rule 419 requires that before the deposited funds and the deposited
securities can be released, Arielle must first execute an agreement to acquire
an acquisition candidate(s) or merge with a merger candidate(s) meeting certain
specified criteria. The agreement(s) must provide for the acquisition(s),
merger(s) of a business(es) or assets for which the fair value of the business
represents at least 80% of the maximum offering proceeds. The agreement(s) must
include, as a condition precedent to their consummation, a requirement that the
number of investors representing 80% of the maximum offering proceeds must elect
to reconfirm their investment. For purposes of the offering, the fair value of
the business(es) or assets to be acquired must be at least $28,000 (80% of
$35,000). Based on its financial statements for the nine months ended March 31,
2000, MPC has a fair value in excess of $28,000.
POST-EFFECTIVE AMENDMENT
Once the agreement(s) governing the acquisition(s), or merger(s) of a
business(es) meeting the above criteria has been executed, Rule 419 requires
Arielle to update the registration statement with a post-effective amendment.
The post-effective amendment must contain information about
- The proposed acquisition candidate(s) and its business(es), including
audited financial statements,
- the results of this Reconfirmation Offering and
- the use of the funds disbursed from the Escrow Account. The
post-effective amendment must also include the terms of the
reconfirmation offer mandated by Rule 419. The reconfirmation offer
must include certain prescribed conditions which must be satisfied
before the Deposited Funds and Deposited Securities can be released
from the Escrow Account.
RECONFIRMATION OFFERING
The reconfirmation offer must commence after the effective date of the
post-effective amendment. According to Rule 419, the terms of the reconfirmation
offer must include the following conditions:
(1) The prospectus contained in the post-effective amendment will be sent
to each Rule 419 investor whose securities are held in the escrow account within
5 business days after the effective date of the post-effective amendment.
(2) Each investor will have no fewer than 20 and no more than 45 business
days from the effective date of the post-effective amendment to notify Arielle
in writing that the investor elects to remain a Rule 419 investor. The
reconfirmations will be tabulated 20 business days from the effective date. Rule
419 investors who submit their letter of reconfirmation to Arielle shall not
have the right to revoke such letter.
(3) If Arielle does not receive written notification from an investor
within 20 business days following the effective date, the pro rata portion of
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the deposited funds (and any related interest or dividends) held in the escrow
account on such Rule 419 investor's behalf will be returned to the investor
within 5 business days by first class mail or other equally prompt means.
(4) The acquisition(s) will be consummated only if a minimum number of Rule
419 investors representing 80% of the maximum offering proceeds equaling $28,000
elect to reconfirm their investment.
(5) If a consummated acquisition has not occurred by October 6, 2000 (18
months from the date of original prospectus), the deposited funds held in the
escrow account shall be returned to all Rule 419 Investors on a pro rata basis
within 5 business days by first class mail or other equally prompt means.
Release of Deposited Securities and Deposited Funds
The deposited funds and deposited securities may be released to Arielle and
the Rule 419 investors, respectively, after:
(1) The escrow agent has received a signed representation from Arielle and
any other evidence acceptable by the escrow agent that:
(a) Arielle has executed an agreement for the acquisition of or
merger with a target business for which the fair market value of the business
represents at least 80% of the maximum offering proceeds and has filed the
required post-effective amendment;
(b) The post-effective amendment has been declared effective, the
mandated reconfirmation offer having the conditions prescribed by Rule 419 has
been completed and that Arielle has satisfied all of the prescribed conditions
of the reconfirmation offer.
(2) The acquisition of, or merger with, a business (including shareholder
approval of the merger or acquisition) with the fair value of at least 80% of
the maximum proceeds.
RISK FACTORS
Investment in the securities offered hereby involves a high degree of risk.
Prospective investors should carefully consider, together with the other
information appearing in this prospectus, the following factors, among others,
in evaluating MPC and its business before reconfirming their investments in
Arielle.
WE CAN ONLY MERGE WITH ONE COMPANY
If this merger is consummated, Arielle will be involved in no other
business combination. MPC's business is centered around essentially one
industry: telecommunications. This lack of diversification may subject our
shareholders to economic fluctuations within the industry in which MPC conducts
business. Any lack of demand for services to be rendered by MPC would have a
material adverse effect on MPC's business, operating results and financial
condition.
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MPC will rely on key existing and future personnel.
MPC's success will depend to a large degree upon the efforts and
abilities of its officers and key management employees, Mark V. Antonucci, Chief
Executive Officer and Chief Financial Officer, Mark I. Weitsman, President and
Chief Operating Officers, Michael R. Beaubien, Executive-Vice President and
Director of Information Service, and Michael Hartley, Vice-President of
Operations. The loss of the services of one or more of its key employees could
have a material adverse effect on MPC's business prospects and potential earning
capacity. MPC has entered into employment agreements with Mr. Antonucci, Mr.
Weitsman, Mr. Beaubien and Mr. Hartley. MPC has key person life insurance on Mr.
Antonucci and Mr. Weitsman. MPC will need to continue to recruit and retain
additional members of senior management to manage anticipated growth, but there
can be no assurance that MPC will be able to recruit or retain additional
members of senior management on terms suitable to MPC.
A high percentage of MPC's business is currently dependent on two
suppliers.
For the fiscal years ended June 30, 1999 and June 30, 1998,
approximately 27% and 65%, respectively, of MPC's total sales were attributable
to the sale of medium sized voice communication equipment manufactured by
Nitsuko America Telecom Division, and approximately 19% and 10%, respectively,
of MPC's total sales were attributable to the sale of large multimedia platform
based exchange system manufactured by Fujitsu Business Communication Systems.
Termination or change of MPC's business relationship with Nitsuko and/or Fujitsu
to reduce their reliance upon independent distributors such as MPC could have a
material adverse effect on MPC.
We may not be able to grow at a rapid pace.
We will be pursuing an aggressive growth strategy, the success of which
will depend in large part upon our ability to:
- develop and expand our business
- acquire existing technology companies involved in new segments of the
industry
- acquire experienced personnel.
Even if we are successful in enhancing profitability after acquiring
additional companies, there can be no assurance as to how long a period of time
accomplishing such profitability will take or the levels of future profitability
that can be achieved. Acquisitions involve a number of risks, including the
diversion of management's attention, issues related to the assimilation of the
operations and personnel of the acquired businesses, and potential adverse
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effects on operating results. There can be no assurance that MPC will find
attractive acquisition candidates in the future, that acquisitions can be
consummated on acceptable terms, that any acquired companies can be integrated
successfully into MPC's operations or that any such acquisitions will not have
an adverse effect on the MPC's financial condition or results of operations.
Successful achievement of MPC's expansion plans will depend in part
upon an ability to:
- Select and compete successfully in new markets
- Hire, train and retain qualified personnel
- Acquire existing businesses.
MPC may incur significant start-up costs in connection with entering
new markets. There can be no assurance that it will achieve its planned
expansion goals on a timely basis, if at all, or manage its growth effectively.
Failure to expand or manage its growth could have a material adverse effect on
its financial condition or results of operations.
Former MPC shareholders will own a majority of the shares after the merger.
After consummation of the merger, the current shareholders of Arielle will
control the vote of 91.6% of Arielle's issued and outstanding common shares. As
a result, the former MPC shareholders will have the ability to control the
outcome of substantially all issues submitted to shareholders of the merged
entity.
A confirmation of the investment in the common stock will result in an
immediate substantial dilution of the investor's investment.
The holders of the restricted common shares of Arielle have acquired their
interest in Arielle at an average cost per share which was significantly less
than that which the public investors paid for their securities. Consequently,
the public investors will bear the majority of the risk of any loss that may be
incurred in Arielle's operations.
There is no public market for our securities.
Prior to the closing of the merger, there will have been no public trading
market for Arielle's common stock. Given the small size of the initial public
offering, the relatively minimal public float, and lack of participation of a
professional underwriter, there is only a very limited likelihood of any active
and liquid public trading market developing for the shares. If such a market
does develop, the price of Arielle's common stock may be volatile. Thus,
investors run the risk that they will never be able to sell their shares. In any
event, there are additional state securities laws preventing resale
transactions. No potential market makers have been solicited by Arielle. There
can be no assurances that any broker will ever agree to make a market in
Arielle's securities.
17
<PAGE>
We may need additional financing.
MPC has no plans to seek loan financing. No officers, directors of
affiliates of MPC or Arielle have agreed to lend money to the company. However,
in order to achieve and maintain our planned growth rate after the merger, which
growth plan includes financing acquisitions, MPC may have to obtain additional
bank financing or sell additional debt or equity securities in public or private
financing. Any such financing could dilute the interest of current shareholders.
There can be no assurance that any such additional financing will be available
or, if it is available, that it will be in such amounts and on the terms as will
be satisfactory to MPC.
Our auditors have doubts as to whether MPC can continue as a going
concern.
As of June 30, 1999, MPC had a net stockholders' deficit of $67,277 and
a working capital deficit of $182,066. MPC management recognizes that MPC must
generate additional resources to enable it to pay its obligations as they come
due. Management is planning to obtain additional working capital from
operations, and/or other sources, including creditors and investors. However,
there is no guarantee that MPC will be able to obtain additional funds or
sustain profitable operations. Failure to do so could have a materially adverse
effect on MPC's operations.
We will face intense competition.
The market for companies involved in telecommunications is fragmented
and highly competitive, and competition is increasing substantially. MPC
competes with other telecommunications companies both regionally and nationally.
Other competitors, some of which may have greater financial and other resources
than MPC, may also enter the markets in which MPC currently operates or intends
to expand. There can be no assurance that MPC will be able to compete
successfully against these competitors.
We have not declared dividends and we do not anticipate doing so.
Arielle has not paid any dividends and does not contemplate or
anticipate paying any dividends on its common stock in the foreseeable future.
We arbitrarily set the offering price of the shares offered in our
initial public offering.
The price at which the Arielle's shares were offered to the public in
Arielle's initial public offering was arbitrarily determined by Arielle. There
is no relationship between the initial offering price of the shares to Arielle's
assets, book value, net worth or other economic or recognized criteria of value.
In no event should the offering price be regarded as an indication of any future
market price of the securities.
POSSIBLE FUTURE RULE 144 SALES
There are currently 500,000 Arielle common shares issued and outstanding.
400,000 of these shares are "restricted securities" as defined by Rule 144 of
the Securities Act. Under Rule 144, restricted securities which have been
beneficially owned for at least one year may be sold in brokers' transactions or
directly to market makers, subject to certain quantity and other limitations.
Generally, under Rule 144 a person may sell, in any three-month period, an
amount equal to the greater of (i) the average weekly trading volume, if any, of
the common stock during the four calendar weeks preceding the sale or (ii) 1% of
the company's outstanding common stock. After the merger Arielle will have
outstanding 7,791,521 shares of Common Stock, including 100,000 shares held in
escrow pursuant to Rule 419, and 779,152 held in escrow pursuant to the merger
agreement. Shares beneficially owned for two years by non-affiliates of Arielle
18
<PAGE>
may be sold without regard to these quantity or other limitations. The
possibility of sales of substantial amounts of such stock could have a
depressive effect on the price of the common stock in any market which may
develop.
Arielle is aware of a letter dated January 21, 2000 to Mr. Ken Worm,
Assistant Director OTC Compliance Unit of NASD Regulation, Inc. from Richard K.
Wulff, Chief of Office of Small Business. Because Arielle is a blank check
company with shares registered with the Securities and Exchange Commission, it
does not believe that such letter is directly applicable to Arielle or this
reconfirmation offering.
CONFLICTS OF INTEREST.
Arielle's officers and directors are engaged in various business ventures.
Thus, there may be conflicts of interest in the allocation of time between
Arielle's business and such other businesses. These activities may conflict with
the interests of Arielle. As a result of their other interests, they may
personally benefit from decisions or recommendations made with respect to the
business of Arielle. Whereas conflicts may arise, management is aware of its
fiduciary duty to Arielle and will act in good faith and endeavor on an
equitable basis to resolve any conflicts which may arise, on an equitable basis.
CAUTION TO PUBLIC INVESTORS.
For all of the aforesaid reasons, and others set forth herein, these
securities involve a high and substantial degree of risk. Any public investor
considering reconfirming his/her investment in Arielle should be aware of these
and other factors as set forth in this prospectus. No public investor
considering reconfirming his/her investment in Arielle should do so if he/she
anticipates a need for immediate return on his investment. Reconfirmation should
only be made by investors who can afford to absorb a total loss and have no need
for immediate return on their investments.
We will be depending on qualified personnel and key individuals.
Upon completion of the merger, Arielle's officers and directors will
resign, and new officers and directors will be appointed. Neither Arielle nor
MPC can assure current Arielle shareholders of the qualifications of such
persons to run a publicly owned company. MPC is dependent on certain key
officers, employees and directors. Additionally, the success of companies held
by MPC will be dependent in, large part, on individuals who manage those
companies. The loss of the services of any of such persons during this period
could adversely affect Arielle's prospects.
There was no independent valuation of the shares in the merger transaction.
The number of Arielle shares to be issued pursuant to the merger agreement
was determined by negotiation between MPC and Arielle and does not necessarily
bear any relationship to MPC's asset value, net worth or other established
criteria of value and should not be considered indicative of the actual value of
MPC. Furthermore, neither MPC nor Arielle has obtained either an appraisal of
MPC's or Arielle's securities or an opinion that the merger is fair from a
financial perspective.
Failure of sufficient number of investors to reconfirm their
investments will result in the merger not being consummated.
19
<PAGE>
The merger cannot be consummated unless the Rule 419 investors
representing 80% of the maximum offering proceeds elect to reconfirm their
investments. Rule 419 investors must affirmatively elect to reconfirm their
investments; no response within the twenty business day period Arielle must
grant its shareholders to reconfirm will be viewed as a vote not to reconfirm.
If, after completion of this reconfirmation offering, a sufficient number of
Rule 419 Investors do not reconfirm their investment, the merger will not be
consummated. In such event, none of the deposited securities held in escrow will
be issued and the deposited funds will be returned to Rule 419 Investors on a
pro rata basis. As a consequence, since Arielle expects to use the 10% allowed
to it pursuant to Rule 419, the Rule 419 investors will be returned only 90% of
their invested funds.
PENNY STOCK REGULATION
Broker-dealer practices in connection with transactions in "penny-stock"
are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the NASDAQ system, provided that current price
and volume information with respect to transactions in such securities is
provided by the exchange or system). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure regarding penny stocks and
the nature and level of risks in the penny stock market. The broker-dealer also
must provide the customer with current bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market value of each
penny stock held in the customer's account. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
such rules the broker-dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for a stock that becomes subject to the penny stock rules. If Arielle's
Common Stock becomes subject to the penny stock rules, investors in this
offering may find it more difficult to sell their shares.
MERGER
Background of the Merger Agreement
Arielle was organized on October 6, 1997 under the laws of the State of
Delaware in order to provide a vehicle to acquire or merge with a business or
company. On April 7, 1999, Arielle commenced a "blank check" offering pursuant
to Rule 419 promulgated under the Securities Act. The purpose of the offering
was to cause Arielle to become a publicly held reporting company under the
Securities Exchange Act of 1934. The offering was successful in raising $35,000
in gross proceeds from Rule 419 investors. Pursuant to Rule 419, $31,500 of the
net proceeds from that offering, and 100,000 Arielle shares purchased by the
Rule 419 investors, were placed in escrow pending
- distribution of a prospectus to each of the Rule 419 investors
describing any prospective business acquisition by Arielle and
- the subsequent reconfirmation by the holders of at least 80% of the
shares owned by the Rule 419 investors that they have elected to remain
investors.
In the event approval of the merger is not obtained from at least 80% of
the Rule 419 investors, then the shares deposited in the Rule 419 Escrow account
will not be released to the Rule 419 investors. Instead, the $31,500 net
offering proceeds in the Rule 419 Escrow will be released to the Rule 419
investors in proportion to their investment, at approximately $.32 per share. In
the event the escrowed funds exceed $31,500 at the consummation of the merger,
the excess funds shall be returned on a pro rata basis to those registered
common shareholders rejecting the reconfirmation offer. The Rule 419 Investors
paid $.35 per share in Arielle's initial public offering.
Pursuant to Rule 419, the value of MPC must represent at least 80% of the
maximum offering proceeds, or $28,000. Based upon its financial statements for
the nine months ended March 31, 2000, MPC has a business value of not less than
$28,000.
TERMS AND CONDITIONS OF MERGER AGREEMENT
STOCKHOLDERS OF ARIELLE WISHING TO OBTAIN A COPY OF THE MERGER AGREEMENT, WHICH
IS INCORPORATED INTO THIS PROSPECTUS BY REFERENCE, MAY OBTAIN ONE WITHOUT CHARGE
BY WRITING TO SCHONFELD & WEINSTEIN, L.L.P. ATTENTION: ANDREA WEINSTEIN, 63 WALL
STREET, SUITE 1801, NEW YORK, NEW YORK 10005.
Pursuant to the merger agreement, MPC will be merged into Arielle.
Consummation of the merger is conditioned upon, among other things,
reconfirmation by holders of at least 80% of the shares owned by the Rule 419
investors. Upon consummation of the merger, Arielle shall issue 7,135,521 shares
of the merged entity (representing 91.6%) to former MPC shareholders in
proportion to their holdings of MPC. Current Arielle shareholders shall retain
their 500,000 shares in Arielle, which amount represents 6.4% of the merged
entity. Additionally, Schonfeld & Weinstein, L.L.P. shall be issued 156,000
shares representing 2% of the merged entity. The shareholders of MPC have agreed
to place 779,152 of their shares in escrow to be released when MPC achieves
sales of a minimum of $5,000,000 in the first fiscal year following the merger.
In the event such sales are not achieved, the 779,152 escrowed shares shall be
returned to the company's treasury. MPC will merge into Arielle with Arielle as
the surviving entity. The merger is intended to be consummated in such a manner
as to be tax-free to all parties involved under Internal Revenue Code Section
368(a)(1)(A) Each Rule 419 investor who rejects the reconfirmation offer will be
paid his or her pro rata share of the amount in the escrow account of
approximately $.32 per share. Consummation of the merger is not subject to any
governmental approvals.
The result of the merger, assuming that 80% of the Arielle stockholders
reconfirm their investments, is that former MPC shareholders shall own 91.6% of
the surviving entity while current Arielle shareholders and their designees,
including Schonfeld & Weinstein, L.L.P., shall own 8.4% of the merged entity.
21
<PAGE>
Stockholders of Arielle wishing to accept the reconfirmation offer are
directed to sign the enclosed Letter of Reconfirmation form and return it to
Schonfeld & Weinstein, L.L.P., 63 Wall Street, Suite 1801, New York, New York
10005, attention: Andrea I. Weinstein, who will forward each Letter of
Reconfirmation to Chase Manhattan Bank, Arielle's escrow agent. Any Arielle
stockholder who fails to return his or her form so that it is received by Ms.
Weinstein by (20 business days from the date hereof) will be deemed to have
rejected the reconfirmation offer and will automatically be sent a check within
five business days representing his or her pro rata share of the funds in the
escrow account for the benefit of the Rule 419 investors.
CERTAIN INCOME TAX CONSEQUENCES
The merger is intended to qualify as a "tax-free reorganization" for
purposes of the United States federal income tax so that stockholders of Arielle
and MPC will not recognize gain or loss from the transaction. In addition, the
transaction is not expected to result in the recognition of gain or loss to
either Arielle or MPC in the respective jurisdictions where each of them is
subject to taxation. No opinion of counsel nor a ruling from the Internal
Revenue Service has been obtained in reference to the foregoing. The foregoing
is for general information only and Arielle stockholders should consult their
own tax advisors as to the specific tax consequences of the merger to them.
FEES AND EXPENSES
Shareholders of MPC shall bear all costs and expenses incurred in
connection with the merger and the reconfirmation offering, since the only funds
available to Arielle are the $31,500 in cash held in escrow pursuant to Rule
419, none of which may be used by either Arielle or MPC prior to the
consummation of the merger.
USE OF PROCEEDS
The gross proceeds of Arielle's initial public offering was $35,000.
Pursuant to Rule 15c2-4 under the Securities Exchange Act of 1934, all of those
proceeds must be held in escrow until all of the shares are sold. Pursuant to
Rule 419, after all of the shares are sold, 10% of the deposited funds ($3,500)
may be released from escrow to Arielle. Arielle requested the release of this
10%. Upon the consummation of the merger and the reconfirmation, which
reconfirmation offering must precede such consummation, pursuant to Rule 419,
$31,500 (plus any interest or dividends received, but less any portion disbursed
to Arielle pursuant to Rule 419(b)(2)(C)(vi) and any amount returned to
investors who did not reconfirm their investment pursuant to Rule 419 or
approximately $31,500)will be released to MPC.
22
<PAGE>
SUMMARY FINANCIAL INFORMATION- ARIELLE
The following is a summary of our Financial Statements for the years
ended April 30, 2000 and 1999, and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" and the Financial Statements including the notes thereto included in
this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
APRIL 30
--------
2000 1999
--------- -------
Statement of Operations Data:
<S> <C> <C>
Total revenues........................................... 376 -0-
Net loss................................................. (2,812) (4,325)
Net loss per share....................................... (0.0062) (0.0108)
========= =======
Weighted average number of common shares
Outstanding............................................ 457,104 400,000
========= =======
APRIL 30, 2000
--------------
ACTUAL
------
Balance Sheet Data:
Working capital (deficit)................................ (2,212)
Cash and cash equivalents................................ 3,433
Total assets............................................. 35,831
Total liabilities........................................ 5,645
Shareholders' equity..................................... 30,186
</TABLE>
23
<PAGE>
SUMMARY FINANCIAL INFORMATION- MPC
The following is a summary of our Financial Summary for the years ended
June 30, 1999 and 1998, and for the nine month periods ended March 31, 2000 and
1999, and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statement including the notes thereto included in this prospectus.
<TABLE>
<CAPTION>
9 MONTHS YEAR ENDED
MARCH 31 JUNE 30,
-------- --------
2000 1999 1999 1998
---- ---- ---- ----
Statement of Operation Data:
<S> <C> <C> <C> <C>
Total revenues................................2,144,682 1,874,140 2,950,178 2,246,665
Net income (loss)............................. (467,507) (37,464) 45,070 (68,134)
========== ========== ========= ==========
Net income (loss) per share................... (0.081) (0.007) 0.009 (0.065)
========== ========== ========= ==========
Weighted average number of
Common stock outstanding.....................5,760,916 5,155,555 5,187,890 1,051,027
========== ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 2000
--------------
ACTUAL
------
Balance Sheet Data:
<S> <C>
Working capital..............................................................$ 60,147
Cash and cash equivalents....................................................$ 293,887
Total assets.................................................................$ 982,901
Total liabilities............................................................$ 739,935
Shareholders' equity.........................................................$ 242,966
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE ARIELLE CORP.
General
Arielle was organized under the laws of the State of Delaware on October 6,
1997. Since inception, the primary activity of Arielle has been directed to
organizational efforts, and obtaining initial financing and conducting its
initial public offering pursuant to which Arielle offered and sold 100,000
shares of common stock at $.35 per share. According to Rule 419, the proceeds of
Arielle's initial public offering ($35,000) less 10% ($3,500) have been placed
in escrow pending consummation of a merger or acquisition. In the event no
merger or acquisition is consummated within eighteen (18) months from the
effective date of Arielle's initial public offering, Arielle shall return
investors' money, less $3,500, on a pro rata basis.
Arielle was organized for the purposes of creating a corporate vehicle
to seek, investigate and, if such investigation warranted, engaging in business
combinations presented to it by persons or firms who or which desire to employ
Arielle's funds in their business or to seek the perceived advantages of a
publicly-held corporation. Arielle's principal business objective is to seek
long-term growth potential in a business combination venture rather than to seek
immediate, short-term earnings.
Arielle does not currently engage in any business activities which provide
any cash flow. Arielle's business is sometimes referred to as a "blank check"
company because investors entrust their investment monies to Arielle's
management before they have a chance to analyze any ultimate use to which their
money may be put. Although substantially all of the deposited funds of this
offering are intended to be utilized generally to effect a business combination,
such proceeds are not otherwise being designated for any specific purposes.
Pursuant to Rule 419, prospective investors who invest in Arielle will have an
opportunity to evaluate the specific merits or risks of only the business
combination management decides to enter into.
Management anticipates that it may be able to effect only one potential
business combination, due primarily to Arielle's limited financing.
RESULTS OF OPERATIONS
Arielle's public offering was declared effective on April 6, 1999. Arielle
offered a total of 100,000 shares at an offering price of $.35 per share, for an
aggregate of $35,000. On October 5, 1999, Arielle closed on 100,000 shares for a
total gross proceeds of $35,000. Pursuant to Rule 419 of the Securities Act, net
proceeds of $31,500 together with all securities issued are being held in escrow
pending the consummation of an acquisition or merger. After the closing of the
merger, the business of Arielle will be the business of MPC. The resources of
MPC will be the resources available to Arielle to fulfill the business purpose
of serving as a reseller of telecommunication equipment, and provider of
telecommunication services. MPC believes the combined cash resources and
available credit of MPC and Arielle will be sufficient to run operations for at
least one year.
26
<PAGE>
At April 30, 2000, Arielle's current assets amounted to $3,433, while
current liabilities amounted to $5,645. In addition, Arielle's general and
administrative expenses amounted to $3,188 for the year ended April 30, 2000.
In the event approval of the merger is not obtained from at least 80%
of the Rule 419 investors, then the shares deposited in the Rule 419 escrow will
not be released to the Rule 419 investors. Instead, the $31,500 net offering
proceeds in the Rule 419 escrow will be released to the Rule 419 investors in
proportion to their investment, at approximately $.32 per share. In the event
the escrowed funds exceed $31,500 at the consummation of the merger, the excess
funds shall be returned on a pro rata basis to those registered common
shareholders rejecting the reconfirmation offer. The Rule 419 investors paid
$.35 per share in Arielle's initial public offering.
METHOD PRODUCTS CORP.
MPC was incorporated in the State of Florida on June 4, 1986 to serve as a
multi-service business communications systems company specializing in the custom
design, installation, and service of total communications network systems for
businesses. Method Products Corp., and its wholly owned subsidiary MPC
Integrated Technologies, Inc. are collectively referred as "MPC." MPC does
business as MPC Business Communications Systems. MPC's objective is to maximize
shareholder value by embarking upon a strategy to establish itself as a leader
in the telecommunications service industry. MPC intends to acquire other
telecommunications companies and hire key employees experienced in technology.
The following presentation of management's discussion and analysis of MPC's
financial condition should be read in conjunction with MPC's financial
statements and notes thereto, as well as other financial information contained
in this prospectus.
OVERVIEW
Incorporated in 1986, but inactive until 1990, MPC is a multi-service
business communications systems company focusing on custom design installation
and service of total communications network systems for businesses. To date,
most of MPC's sales revenues are a result of selling, servicing and maintaining
telephone systems. MPC also sells, services and maintains video equipment,
primarily to be used for video conferencing.
On June 22, 1999, MPC Integrated Technologies, Inc. was incorporated
pursuant to the laws of the State of Florida. On June 30, 1999, MPC transferred
all of its assets and liabilities to MPC Integrated Technologies, Inc. in
exchange for 100% of the issued and outstanding common stock of MPC Integrated
Technologies, Inc. Unless otherwise indicated, MPC and MPC Integrated
Technologies, Inc. are collectively referred to as "MPC."
MPC has entered into distributor agreements with such equipment
manufacturers as Fujitsu, Nitsuko America, Applied Voice Technology, Panasonic
and Sony, with most of its business derived from sales of Fujitsu and Nitsuko
America equipment. For the years ended June 30, 1999 and June 30, 1998, 27% and
65%, respectively, of MPC's total sales were attributable to the sale of medium
sized voice communication equipment manufactured by Nitsuko American Telecom
Division.
27
<PAGE>
MPC has agreements with Nitsuko and Fujitsu authorizing MPC to serve as
their non-exclusive reseller in the United States. The agreement with Nitsuko is
successive one year terms unless terminated by either party upon a minimum of
thirty days prior written notice. The agreement with Fujitsu may be terminated
upon sixty days prior written notice.
MPC sells telecommunications systems to its customers, installs such
systems, then services same. MPC does not create new technology or engage in
application development. MPC believes that acting as a reseller and service
provider allows it to best serve its client. By not being tied to any particular
product or service, MPC is able to analyze and evaluate a client's technology
needs, then offer it the products and services best suited to such client.
On October 7, 1997, MPC entered into a loan and security agreement with
a commercial lender. The agreement provides for a maximum revolving line of
credit of $50,000. Interest is a prime plus 1% and is due on demand. The loan is
secured by a blanket lien on all business assets. The amount outstanding at June
30, 1999 and 1998 was $49,169, respectively.
MPC had sales revenues of $2,950,178 and $2,246,665 for the years ended
June 30, 1999 and 1998, respectively. From December 1998 to February 1999, MPC
engaged in an offering of its securities pursuant to Rule 504 of Regulation D
under the Securities Act of 1933. $75,000 was raised in such offering. In August
1999, MPC offered stock pursuant to Section 4(2) of the Securities Act to one
accredited investor. From October 1999 to February 2000, MPC offered stock
pursuant to Rule 506 of Regulation D. MPC raised $47,500 in this offering. From
February 2000 to May 2000, MPC engaged in an offering of its securities pursuant
to Rule 506 of Regulation D under the Securities Act. $1,040,453 was raised in
such offering.
MPC believes its revenues are sufficient to sustain existing
operations, and that it will not have to raise additional capital in the next
twelve months. A key element of MPC's growth strategy is the acquisition of
additional telecommunications companies. MPC believes it will be able to acquire
such companies through the issuance of MPC shares. It is possible, however, that
certain acquisition candidates may also require cash to be acquired . In such an
event, MPC may required additional funding to finance such acquisition. Such
financing may be in the form of debt or equity. As of the date hereof no such
acquisition have occurred.
28
<PAGE>
Year ended June 30,1999 compared to year ended June 30, 1998.
<TABLE>
<CAPTION>
Year ended
June 30
1999 1998
---- -----
<S> <C> <C>
Net sales $2,950,178 $2,246,665
Cost of sales $1,674,714 $1,345,805
Selling, general,
and administrative expenses $1,194,452 $ 855,370
Income from operations $ 81,012 $ 45,490
</TABLE>
Net sales for the year ended June 30, 1999 were $2,950,178 compared to
$2,246,665 in 1998, an increase of $703,513 (31.3%). Cost of goods sold
increased by $328,909 (24.4%) from 1998 to 1999, and cost of goods sold as a
percentage of net sales decreased from 59.9% in 1998 to 56.8% in 1999 as a
result of structural change and internal growth.
Administrative expenses for the year ended June 30, 1999, 1999 were
$1,194,452, and $855,370 for the year ended June 30, 1998, an increase of
$339,082. Administrative expenses as a percentage of net sales increased from
38.1% in 1998 to 40.5% in 1999. This increase was attributed to the
implementation of middle management, increasing the sales and technical forces.
Income from operations increased from $45,490 in 1998 to $81,012 in
1999, an increase of 78.1%. Net income increased from a loss of $(68,134) in
1998 to $45,070 in 1999, as a result of improved gross margins. Other expenses
decreased from $113,424 to $12,412 for the years ended June 30,1998 and 1999
respectively as a result of payments for litigation settlements.
Nine months ended March 31, 2000 compared to nine months ended March
31, 1999.
<TABLE>
<CAPTION>
Nine Months Ended March 31,
2000 1999
--------------------------
(unaudited)
<S> <C> <C>
Net sales $2,144,682 $1,874,140
Cost of sales $1,205,615 $1,042,130
Selling, general and administrative
Expenses $1,393,438 $ 982,071
Loss from operations $ (454,371) $ (150,061)
</TABLE>
29
<PAGE>
For the nine month period ended March 31, 2000 and 1999, MPC had net
sales of $2,144,682 and $1,874,140, respectively, an increase of $270,542
(14.4%). Cost of goods sold was $1,205,615 for the nine months ended March 31,
2000 (56.2%), and $1,042,130 for the nine months ended March 31, 1999 (55.6%) as
a direct result of increased sales.
Loss from operations increased from $(150,061) for the nine months
ended March 31, 1999 to $(454,371) for the nine months ended March 31, 2000, a
loss increase of 202.8%. This was a result of an increase in MPC's management
and increase in sales force from two salespeople to ten, an increase of 400%. On
average it takes three to four months for a salesperson to produce revenues
sufficient to offset employment expenses for such person. MPC believes that the
hiring of eight additional sales people will result in increased sales over the
next twelve months, offsetting the current loss from operations.
For the nine months ended March 31, 2000 and 1999, net loss was
$(37,464) and $(467,507), respectively, an increased loss of 1147.9%. This was a
result of cost to operations from securities offerings, accounting and attorney
fees, operational expenses, and of hiring additional management and sales
personnel.
BUSINESS
THE ARIELLE CORP.
General
Arielle was organized under the laws of the State of Delaware on October 6,
1997. Since inception, the primary activity of Arielle has been directed to
organizational efforts, and obtaining initial financing and conducting its
initial public offering pursuant to which Arielle offered and sold 100,000
shares of common stock at $.35 per share. Pursuant to Rule 419, the proceeds of
Arielle's initial public offering ($35,000) less 10% ($3,500) have been placed
in escrow pending consummation of a merger or acquisition. In the event no
merger or acquisition is consummated within eighteen (18) months from the
effective date of Arielle's initial public offering April 6, 1999, Arielle shall
return investors' money, on a pro rata basis.
Arielle was organized for the purposes of creating a corporate vehicle to seek,
investigate and, if such investigation warranted, engaging in business
combinations presented to it by persons or firms who or which desire to employ
Arielle's funds in their business or to seek the perceived advantages of a
publicly-held corporation. Arielle's principal business objective is to seek
long-term growth potential in a business combination venture rather than to seek
immediate short-term earnings.
Arielle does not currently engage in any business activities which provide
any cash flow. Arielle's business is sometimes referred to as a "blank check"
company because investors entrust their investment monies to Arielle's
management before they have a chance to analyze any ultimate use to which their
money may be put. Although substantially all of the deposited funds of this
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<PAGE>
offering are intended to be utilized generally to effect a business combination,
such proceeds are not otherwise being designated for any specific purposes.
Pursuant to Rule 419, prospective investors who invest in Arielle will have an
opportunity to evaluate the specific merits or risks of only the business
combination management decides to enter into.
Management anticipates that it may be able to effect only one potential
business combination, due primarily to Arielle's limited financing.
METHOD PRODUCTS CORP.
General
MPC was incorporated pursuant to the laws of the State of Florida on June
4, 1986. The certificate of incorporation was amended on July 16, 1999 to
authorize 50,000,000 shares of common stock $.0001 par value, and 1,000,000
shares of preferred stock $.0001 par value per share.
Since 1990, MPC has served as a multi-service business communications systems
company specializing in the design, installation and service of total
communications network systems for business.
As of June 30, 1999, MPC had a net stockholders' deficit of $67,277,
and a deficit in working capital of $182,066. Management of MPC believes that
MPC must generate additional resources to enable it to pay its obligations as
they come due. Management of MPC is planning to obtain additional working
capital from operations, and/or other sources, including creditors and
investors. MPC's independent auditors have expressed concern as to whether MPC
can continue as a going concern.
MPC is in the process of negotiating a line of credit with GE Capital
Commercial Funding. MPC believes that the basic terms will be as follows:
The Arielle Corp/Nitsuko Agreement 8-15-00
" $600,000 line of credit;
" personal guarantees by Mark Antonucci, Michael Beaubien, and Mark Weitsman; "
the assets of MPC as security; " interest rate at 2 points over prime; " the
term of the loan is 2 years with a pre-payment penalty.
Telecommunications Industry
OVERVIEW
Until 1986, the communications industry was dominated by industry giants such as
AT&T. Competition was limited from penetrating mass markets by expensive
equipment costs, costly network fees and high site management costs.
Deregulation in 1986 opened the doors to competition and became the wellspring
for growth. Since that time, powerful trends related to lower costs and higher
quality technology have laid the foundation for growth throughout the industry.
Today, initial resistance to new technology has given way to interest and
utilization of multiple timesaving communication tools, creating unlimited
business opportunities for aggressive young companies. Some examples of advances
of telecommunication over the past fourteen years are:
- Facsimile, cellular telephone and the Internet. Neither Facsimile
nor wireless cellular communications were widely used even 14 years
ago. The Internet did not achieve acceptance as a means of
communication until the late 1990's.
- Videoconferencing. Videoconferencing conserves time. A two-day
trip can be reduced to a two-hour meeting by utilizing
videoconferencing.
The telecommunication service industry is a multi-billion dollar industry.
According to The Value Line Investment Survey, revenues in 1997 were $116
billion with net earnings of over $15.3 billion. Furthermore, the
telecommunications equipment industry captures a separate multi-billion dollar
market share. 1997 earnings for this sector exceed $1.7 billion on revenues of
$17.9 billion.
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<PAGE>
INDUSTRY TRENDS
Telecommunications Equipment Sales
While technologies advances are instigating changes in the telecommunications
services landscape, demand for equipment is increasing accordingly. Growth in
the sales and service of communications equipment is expected to continue well
into the 21st century.
Located in Broward County Florida, MPC provides equipment sales, installation
and service to Florida's national and international business community. Just as
the telecommunications industry is poised for aggressive growth, so has MPC
positioned itself to expand its business opportunities.
Videoconferencing
According to the Value Line Investment survey, the videoconferencing industry is
estimated at $1 billion: Videoconferencing is used with increasing frequency.
Development of the H.320 standards-based architecture for video communication
enables fully integrated communication between all videoconferencing systems,
regardless of the manufacturer, and radically limits the risk of functional
obsolescence much in the same manner that the Group 3 standard paved the way for
the explosive growth in facsimile communications.
The Internet
The proliferation of the Internet promises to have as profound an
effect on the telecommunications industry as the regulatory changes that are
sweeping the world. The Internet represents an inexpensive and efficient mode of
communication, particularly for data applications in an information-consuming
society.
According to a report in a recent article in the Wall Street Journal:
- Investment in information technology accounts for more than 45% of all
business-equipment investments.
- Commerce on the Internet could surpass $300 billion by 2002.
- The information technology industry employs 7.4 million Americans. The
Commerce Department estimates that an additional 1.3 million workers
will be needed by the next decade.
The report was supported by substantial anecdotal evidence to show the boom in
electronic commerce.
- On-Line traffic doubles every 100 days.
- The first Internet bookstore, Amazon.com, recorded 1997 sales of $148
million, up more that 835% from the previous year.
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<PAGE>
- In 1996, Auto-by-Tel, generated sales of $1.9 billion, with sales
projected to be $6.0 billion in 1998.
- General Electric Co. Expects to save $500 million over two years by
purchasing $5 billion in goods via the Internet.
One of the key drivers of bandwidth demand (transmission capacity) for the
Internet is manifested in the growing complexity of applications.
Growth Strategy
Currently, MPC is seeking to expand primarily through soliciting additional and
larger clients and the pursuit of strategic acquisitions which would allow it to
expand to additional telecommunications services including computer and
telephone integrations.
MPC will continue to make selected acquisitions that support its growth
strategy, and develop and enhance its presence in key markets. MPC will seek to
acquire businesses which develop and service Local Area Network (LAN) Systems,
Wide area Network (WAN) Systems, private line data frame relay, fractional T-1,
asynchronous transfer mode (ATM) and integrated services digital network (ISDN)
services and visual private networks which involve connecting WAN's through
Internet protocol.
Since 1990 MPC has engaged in the business of providing business communication
solutions for its clients. MPC seeks to expand its business through mergers,
acquisitions and strategic alliances. Through acquisitions of other companies,
MPC intends to expand its business to offer the following products and services:
- e-commerce and web service
Through strategic alliances, MPC expects to be able to help businesses
identify, design and implement e-commerce solutions.
- Internet/Telephony Gateways
MPC believes that the use of real-time voice, video and data
communications over packet networks such as Intranets and the Internet
will help businesses communicate more effectively with customers and
co-workers.
- Intelligent call centers
Intelligent call centers will provide agents with the information necessary to
properly assist callers (either telephony or web -based calls through the use of
various data integration methods such as screen pops, data base access and
interactive voice response.
- Unified Messages
Unified messaging provides access to all voice, fax and email messages
through the telephone or computer, providing a single point of access.
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<PAGE>
MPC currently customizes enterprise-wide communications solutions that
provide streamlined system administration and management for voice and
call processing, unified messaging, fax processing, call center and
customer service applications. Through strategic alliances or
acquisitions MPC expects to be able to further stream line services to
provide an even higher level of user interaction with speech-to-text,
and text-to-speech technology.
On April 26, 2000, MPC entered into a three year financial
advisory/investment banking agreement with Thornhill Group, Inc., a Florida
corporation. Pursuant to this agreement, Thornhill has agreed to provide
investment banking, advisory services and corporate finance expertise for MPC.
As consideration for such services, MPC has agreed to pay Thornhill a monthly
fee of $10,000 or 20,000 shares of MPC common stock. MPC paid Thornhill a
retainer of 60,000 shares upon execution of the agreement. MPC also issued
Thornhill options to purchase a total of 9.9% of the outstanding shares of MPC
as of April 30, 2002. Unless extended by MPC, the options are exercisable until
April 30, 2005 at $.75 per share. The number of shares subject to this option
will be adjusted to reflect any stock splits, stock dividends or
recapitalization affecting MPC's common stock.
Beside the agreement with Thornhill, MPC has no plans, proposals,
arrangements or understandings with respect to the sale or issuance of
additional securities by MPC in the near future.
There is no "present potential" that MPC may acquire or merge with a
company or business in which MPC promoters, management or their affiliates or
associates directly or indirectly have an ownership interest, nor are there any
preliminary agreements or understandings to acquire or merge with such company
at this time.
Competition
MPC is a telecommunications sales and service company. The telecommunications
industry is dominated by several large international corporations such as AT&T,
Lucent, Siemens, Bell Atlantic and Intertel. MPC will be competing with these as
well as smaller and mid size telecommunications companies, in addition to
companies that specialize in specific web-band or telephone services.
Facilities
MPC currently leases space for its main office and headquarters at 1301 West
Copans Road, Pompano Beach, Florida 33064 from The Mutual Life Insurance
Company of New York at a monthly base rate of $2,679.18. MPC has entered into a
new lease for premises located at 2101 NW 33rd Street, Pompano Beach, Florida
33069. These premises are currently under construction and should be available
for occupancy by October 1, 2000. The landlord for the new premises is WLAB
Limited Partnership. The base rent is $7,894.90 per month. This lease is for a
60 month period. MPC believes that these premises will be adequate for its
current needs and for the next two years of operation. MPC currently leases
space for its branch sales office at 4519 George Road, suite 150, Tampa, Florida
33634 from Carlyle/FR Investors, L.L.C., at a monthly base rate of $702.00
This lease expires April 2003.
Legal Proceedings
An entity related to MPC through common ownership, MPC Business Communications,
Inc. ("MBCI"), was involved in certain litigation with third parties. The
lawsuits arose from MBCI's separate business activities and were unrelated to
the operations of MPC. In February 1998, MBCI ceased its business operations and
MPC subsequently assumed the obligations to assist MBCI in resolving these
matters. Under an agreement effective April 1, 1998 between MPC and MBCI, MPC
assumed the debt from a previously settled lawsuit calling for future monthly
payments totaling $24,989 and the obligation for any settlement negotiated
pursuant to an ongoing lawsuit with WorldCom. In September 1998, the latter
lawsuit was settled for approximately $125,000.
MBCI assigned to MPC the right to use its trade name and all rights to sell its
customer list. The customer list was sold during fiscal year 1998 for $40,000
and the proceeds were escrowed with an attorney and ultimately used to reduce
the WorldCom debt.
Employees
MPC currently has 33 full time employees. MPC's employees do not belong to
any unions. Management of MPC enjoys good working relationships with its
employees.
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MANAGEMENT
Directors and Executive Officers
Set forth below is certain information regarding the directors and
executive officers of Arielle and MPC. The officers and directors of Arielle are
expected to resign upon consummation of the merger.
ARIELLE
Set forth below is information regarding the officers and directors of the
Arielle.
Name Age Position with Arielle
---- --- ---------------------
David Kass(1) 63 President, Director
26 Aerie Court
North Hills, New York 11030
David S. Jacobs(1) 54 Vice, President,
26 Court Street Director, Secretary
Brooklyn, New York 11242
John E. Vidaver 51 Director
49 Poplar Avenue
Oradell, New Jersey 07469
(1) May be deemed "Promoters" of Arielle, as that term is defined under the
Securities Act of 1933.
BIOGRAPHY
DAVID KASS, President and a director of the Company, was Vice president and
owner of Mobile Phone Radio Systems from 1974 to 1982. Since 1982, Mr. Kass
has been active in several organizations such as Fellow Radio Club of North
America, MENSA and Explorers Club. Mr. Kass is a graduate of the State
University of New York at Buffalo. Mr. Kass has been President and a
director of the Company since October 1997.
DAVID S. JACOBS, Vice President, Secretary and a director of the Company, has
been a partner in the law firm of Jacobs & Cohen, in Brooklyn, New York,
since 1994. Prior to that, he was a partner in the law firm of Jacobs, Katz
& Lurie, Brooklyn, New York. Mr. Jacobs is a graduate of Brooklyn College and
Brooklyn Law School. He has been secretary and a director of the Company
since October 1997.
JOHN E. VIDAVER, Director, has been a free-lance radio announcer and
voice-over artist for commercials and films since 1990. He has worked for
such radio stations as WQXR Radio, New York, NY, and WQCD Radio, New York,
NY. Mr. Vidaver is a graduate of Rutgers College (Rutgers University) of New
Jersey. Mr. Vidaver has been a director of the Company since July 7,
1998.
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<PAGE>
MPC
Set forth below is information regarding the officers and directors of MPC:
Name Age Position with the Company
---- --- -------------------------
Mark V. Antonucci 31 Chief Executive Officer, Chief Financial
1128 SW 26th Avenue Officer and Director
Boynton Beach, FL 33426
Mark I. Weitsman 32 President, Chief Operating Officer,
150 Mohigan Circle director
Boca Raton, FL 33487
Michael Beaubien 40 Executive Vice President, Director
9907 Moss Road Drive
Boca Raton, Fl 22487
Georges Karam 50 Director
8 Sloan Street
London SW1
London, UK
Biography
MARK V. ANTONUCCI, has been Chief Executive Officer, Chief Financial Officer and
a director of MPC since January 1, 1999. He has been an employee of MPC since
September 1998. He is responsible for MPC's financial activities and mergers and
acquisition. From April 1996 to August 1998, Mr. Antonucci was Chief Executive
Officer and President of Millennium Capital Consulting Corp., a financial
consulting company located in Boca Raton, Florida. From February 1992 to April
1996 he served as president of RAC Financial Services, where he was involved
with restructuring troubled companies. In October 1996, Mr. Antonucci filed for
protection pursuant to Chapter 7 of the U.S. Bankruptcy Code.
MARK I. WEITSMAN, has been President, Chief Operating Officer and a Director of
MPC since 1990, where he is responsible for running the company's day to day
operations. From 1986 through 1989, Mr. Weitsman was a U.S. Air Force Airman
First Class, during which time he completed 522 hours of technical school
training as a telecommunications design engineer and technician at Shepard Air
Force Base in Texas. Following education and training at Shepard, Mr. Weisman
was transferred t George Air Force Base in California as an Outside Plant and
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<PAGE>
Inside Plant Telecommunications Technician, where his responsibilities included
meeting with vendors to evaluate communication systems and identifying those
best suited for the missions of George Air Force Base. In May 1989 Mr. Weitsman
was selected to attend the Advanced Digital Technologies course at George Air
Force Base. From December 1989 until November 1990, he was a communication
technician with TIE Systems, Inc., of Miami Lakes, Florida.
MICHAEL R. BEAUBIEN, has been Vice President and a director of MPC since July
1990, where he is in charge of the company's technical services. From 1990 to
1992, he was a service technician with TIE Systems, Inc. of Miami Lakes,
Florida. From 1987 to 1990 he was a service technician with Intellicom Business
Communications in Ft. Lauderdale, Florida. From 1984 to 1987, Mr. Beaubien was
an installation and service technician with National Business Communications of
Pompano Beach, Florida.
GEORGES KARAM, has served as a director of MPC since July 1999. Since July 1996,
he has served as President and Chief Executive Officer of Karam Co., a financial
advising firm located in Lebanon. Mr. Karam started and managed a charter
airline service with revenues of over $10,000,000 per year when the company was
taken over in 1984. Mr. Karam was financial advisor for Knowledge Revolution for
all Americans non-profit organization. Mr. Karam worked directly with the
President, Ken Lloyd of the non-profit organization Knowledge Revolution for all
Americans and along with Ted Bell US Secretary of Education and Paul Simon US
Senate. Mr. Karam was also the Managing Director of the Economic Development
Establishment in Saudi Arabia and the Managing director for Boustany Corp.
Distributors in Saudi Arabia and South Africa for Toyota, Kelly and Yokohama's
Tires.
Executive Compensation
Arielle
Arielle has not compensated any officers, directors or employees to date.
MPC
The following summary compensation table sets forth compensation
information for services performed during the fiscal years ended June 30, 1998
and 1999 by MPC's executive officers.
SUMMARY COMPENSATION TABLE
Name and Principal Fiscal Annual
Position Year Compensation(1)
-------- ---- ---------------
Mark V. Antonucci 1998 N/A
1999 $53,000(2)
Mark I. Weitsman 1998 $52,729
1999 $78,192(3)
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Michael Beaubien 1998 $52,569(4)
1999 $79,615(4)
-----------------
(1) Includes salary and bonus.
(2) Excludes company car and cell phone valued at approximately $5,000 per year.
(3) Excludes company car and cell phone valued at approximately $8,500 per year.
(4) Excludes company car and cell phone valued at approximately $5,000 per year.
MPC has entered into employment agreements with Mr. Antonucci, Mr. Weitsman and
Mr. Beaubien.
Pursuant to MPC's three year employment agreement with Mr. Beaubien, Mr.
Beaubien shall receive an annual salary of $175,000, with an annual increase
based upon increase in cost of living which shall be based upon increase in the
Consumer Price Index as published by the U.S. Government multiplied by the then
existing salary every year commencing July 1, 1999 in an amount determined by
the Board of Directors in its discretion . Mr. Beaubien is eligible for an
annual bonus. Mr. Beaubien has also received a company car.
Pursuant to MPC's three year employment agreement with Mr. Antonucci, Mr.
Antonucci shall receive an annual salary of $125,000, with an annual cost of
living increase based upon an increase in the Consumer Price Index as published
by the U.S. Government multiplied by the then existing salary every year
commencing July 1, 1999. Through June 30, 2001, Mr. Antonucci shall be entitled
to receive MPC common stock equal to 10% of the then outstanding common stock of
MPC, with the result that on June 30, 2001, Mr. Antonucci shall own 10% of the
outstanding common stock of MPC. Mr. Antonucci also receives a company car from
MPC.
Pursuant to MPC's three year employment agreement with Mr. Weitsman, Mr.
Weitsman shall receive an annual salary of $175,000 with an annual increase
based upon the increase in cost of living which shall be based upon the increase
in the Consumer Price Index as published by the U.S. Government multiplied by
the then existing salary every year commencing July 1, 1999. Mr. Weitsman is
entitled to receive an annual bonus in an amount determined by the Board of
Directors in its discretion. Mr. Weitsman also receives a company car.
Description of Securities
ARIELLE
Common Stock
Arielle is authorized to issue twenty million (20,000,000) shares of
common stock, $.0001 par value per share, of which 500,000 shares are issued and
outstanding as of the date of this prospectus. Each outstanding share of common
stock is entitled to one vote, either in person or by proxy, on all matters that
may be voted upon by the owners thereof at meetings of the stockholders.
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<PAGE>
The holders of common stock (i) have equal ratable rights to dividends
from funds legally available therefore, when, as and if declared by the board of
directors of Arielle; (ii) are entitled to share ratably in all of the assets of
the Company available for distribution to holders of common stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights, or redemption or sinking
fund provision applicable thereto; and (iv) are entitled to one non-cumulative
vote per share on all matters on which stockholders may vote at all meetings of
stockholders.
All shares of common stock being reconfirmed are fully paid for and
non-assessable, with no personal liability attaching to the ownership thereof.
The holders of shares of common stock of Arielle do not have cumulative voting
rights, which means that the holders of more than 50% of such outstanding shares
voting for the election of directors can elect all of the directors of Arielle
if they so choose and, in such event, the holders of the remaining shares will
not be able to elect any of Arielle's directors.
Reports to stockholders
Arielle intends to furnish its stockholders with annual reports
containing audited financial statements as soon as practicable at the end of
each fiscal year. Arielle's fiscal year ends on April 30th. After the merger,
Arielle will adopt MPC's fiscal year end of June 30.
Dividends
Arielle was only recently organized, has no operating activities which
generate earnings, and has paid no dividends to date. Since the Company was
formed as a blank check company with its only intended business being the search
for an appropriate business combination, Arielle does not anticipate having any
earnings until such time that a business combination is reconfirmed by the
stockholders. However, there are no assurance that upon the consummation of a
business combination, Arielle will have earnings or issue dividends. Therefore,
it is not expected that cash dividends will be paid to stockholders until after
a business combination is reconfirmed.
Transfer Agent
Arielle has appointed Manhattan Transfer, Inc. as the Transfer Agent
for Arielle.
MPC
MPC is authorized to issue 50,000,000 shares of common stock, $.0001 par
value, of which 7,135,521 shares were issued and outstanding as of May 19, 2000.
Each outstanding share of common stock of MPC is entitled to one vote, either in
person or by proxy, on all matters that may be voted upon by the owners thereof
at meetings of the stockholders.
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<PAGE>
The holders of shares of MPC do not have cumulative voting rights, which
means that the holders of more than 50% of such outstanding shares, voting for
the election of directors, can elect all of the directors to be elected, if they
so chose. In such event, the holders of the remaining shares will not be able to
elect any of MPC's directors. MPC's current shareholders will own approximately
91.6% of the common shares outstanding after the merger.
Pursuant to an option agreement entered into by MPC and Mark Antonucci,
Chief Executive Officer and Chief Financial Officer of MPC, Mr. Antonucci has an
option to purchase common shares of MPC equal to ten percent (10 %) of MPC's
issued and outstanding common stock. This option may be exercised upon Mr.
Antonucci's securing debt and/or equity financing of a minimum of $1,000,000 for
MPC. Following such financing, MPC has agreed to issue additional shares of
common stock to Mr. Antonucci to allow him to maintain his ten percent (10%)
holding of MPC. This option agreement expires on the last day of his initial
employment agreement, but no sooner than June 20, 2001, and no later than April
15, 2003.
MPC intends to adopt an employee stock option plan after the merger
with Arielle.
Preferred Stock
MPC is authorized to issue 1,000,000 shares of preferred stock, $.0001
par value. The preferred stock may be issued in one or more series and with such
designations, rights, preference, privileges, qualifications, limitations and
restrictions as shall be stated and expressed in a resolution of the Board of
Directors providing for the creation and issuance of such preferred stock. There
are no shares of preferred stock issued or outstanding.
Dividends
MPC has paid no dividends to date.
Transfer Agent
MPC has appointed Nevada Agency and Trust as the Transfer Agent after the
merger.
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<PAGE>
Principal Shareholders
ARIELLE
The following table sets forth certain information regarding the beneficial
ownership of the Arielle's common stock as of the date of this Prospectus by (i)
each person known to Arielle to beneficially own 5% or more of Arielle's common
stock, (ii) each director of Arielle and (iii) all directors and executive
officers of Arielle as a group. All information with respect to beneficial
ownership has been furnished to Arielle by the respective director, executive
officer or 5% shareholder, as the case may be.
<TABLE>
<CAPTION>
Amount and Nature of Amount and Nature of
Beneficial Ownership Beneficial Ownership
Prior to the Merger(1) After the Merger (4)
---------------------- --------------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
David Kass (1) (2) 95,000 19.0% 95,000 1.2%
26 Aerie Court
North Hills, NY 11030
David S. Jacobs (1)(2) 95,000 19.0% 95,000 1.2%
26 Court Street
Brooklyn, NY 11242
John E. Vidaver (2) 0 0% 0 0%
49 Poplar Avenue
Oradell, NJ 07469
B. Alice Campos 95,000 19.0% 95,000 1.3%
3325 Dempster Street
Skokie, IL 60076
Schonfeld & Weinstein,
L.L.P. (3) 95,000 19.0% 95,000 1.2%
63 Wall Street
Suite 1801 New York, NY 10005
Allen S. Frenkel 20,000 4.0% 20,000 .3%
19 Rector Street
New York, NY
Total Officers
and Directors
(3 Persons) 190,000 38.0% 190,000 2.4%
<FN>
(1) May be deemed "Promoters" of Arielle, as that term is defined under the
Securities Act of 1933.
(2) Mr. Kass is the President and a director of Arielle. Mr. Jacobs is Vice
President, Secretary and a director of Arielle. Mr. Vidaver is a director of
Arielle.
(3) Excludes 156,000 shares to be issued to Schonfeld & Weinstein, L.L.P
upon the closing of the merger.
(4) Based on 7,791,521 shares to be outstanding after the merger.
</FN>
</TABLE>
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<PAGE>
MPC
The following table sets forth certain information regarding the beneficial
ownership of the MPC's common stock as of the date of this prospectus by (i)
each person known to MPC to beneficially own 5% or more of MPC's common stock,
(ii) each director of MPC and (iii) all directors and executive officers of MPC
as a group. All information with respect to beneficial ownership has been
furnished to MPC by the respective director, executive officer or 5%
shareholder, as the case may be.
AMOUNT AND NATURE OF AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE MERGER(1) AFTER THE MERGER (2)
---------------------- --------------------
PERCENT NUMBER PERCENT
------- ------ -------
NAME/ADDRESS
BENEFICIAL
OWNER
NUMBER OF SHARES
NAME AND ADDRESS OF
BENEFICIAL OWNER SHARES HELD
---------------- -----------
Mark I. Weitsman 2,350,000 33.0% 2,350,000 30%
1301 W. Copans Road
Suite F-1
Pompano Beach, FL 33064
Michael R. Beaubien 2,350,000 33.0% 2,350,000 30%
1301 W. Copans Road
Suite F-1
Pompano Beach, FL 33064
Mark V. Antonucci(1) 500,000 7.0% 500,000 6.4%
1301 W. Copans Road
Suite F-1
Pompano Beach, FL 33064
Georges Karam
8 Sloan Street
London SW1
London, UK 301,500 4.2% 301,500 3.9%
Dr. Anthony Ivankovich 735,000 10.3% 735,000 9.4%
526 Woodland Drive
Glenview, IL 60025
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<PAGE>
All Officers and Directors
as a Group (4 persons) 5,501,500 77.1% 5,501,500 70.6%
(1) Excludes an option for Mr. Antonucci to purchase shares representing
10% of the company. This option, which allows Mr. Antonucci to purchase shares
for par value, expires on the last day of Mr. Antonucci's initial employment
agreement, but no sooner than June 30, 2001, and no later than April 15, 2003.
(2) Based on 7,791,521 shares to be outstanding after the merger.
Certain Transactions
Arielle was incorporated in the State of Delaware on October 6, 1997.
Between October 13, 1997 and March 30, 1998 Arielle issued 400,000 shares to
four (4) shareholders at $.05 per share, for a total of $20,000. On April 15,
1998, three shareholders gifted 5,000 shares to Allen S. Frenkel, who, as a
result of such transfers, holds 15,000 shares of Arielle's common stock. These
shareholders relied upon Section 4(1) of the Securities Act when gifting such
shares. Mr. Frenkel has worked for J. Streicher and Co., an exchange specialist
firm, since 1991. Mr. Frenkel works with management of listed companies,
troubleshoots exchange problems on the companies' behalf, and works on new
business development for his firm. He also evaluates prospect companies for
possible listing on the American Stock Exchange. The shareholders of Arielle
believed that he would be a valuable addition in helping to evaluate potential
merger candidates once they have been identified by the officers and directors
of Arielle. Arielle will not pay Mr. Frenkel finders fees or consulting fees. On
April 6, 1999, Arielle's initial public offering was declared effective by the
Securities and Exchange Commission. Pursuant to this offering, 100,000 shares of
common stock were offered at $.35 per share on a "best efforts, all or nothing
basis." As a result of the public offering, $35,000.00 was raised. This offering
closed on October 5, 1999.
LEGAL MATTERS
An opinion as to the validity of the securities offered hereby has been
passed upon for Arielle by Schonfeld & Weinstein, L.L.P., 63 Wall Street, Suite
1801, New York, New York, counsel to Arielle. Schonfeld & Weinstein, L.L.P. is a
shareholder of Arielle. No proceeds of Arielle's initial public offering were
paid to Schonfeld & Weinstein, L.L.P.
EXPERTS
The balance sheets of Arielle as of April 30, 2000 and 1999, and the related
statements of operations, changes in stockholders' equity and cash flows for the
years ended April 30, 2000 and 1999, and for the period from October 6, 1997
(date of inception) through April 30, 2000 included in this prospectus and
incorporated by reference in the registration statement, have been audited by
Ahearn, Jasco + Company, P.A., independent auditors, as stated in their report
appearing in this prospectus and incorporated by reference in the registration
statement, and are included and incorporated by reference in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
43
<PAGE>
The balance sheets of MPC as of June 30, 1999 and 1998, and the related
statements of operations, changes in stockholders' equity (deficit) and cash
flows for the years then ended included in this Prospectus and incorporated by
reference in the registration statement, have been audited by Ahearn, Jasco +
Company, P.A., independent auditors, as stated in their report appearing in this
prospectus and incorporated by reference in the registration statement, and are
included and incorporated by reference in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information of MPC for the
three month and nine month periods ended March 31, 2000 which is incorporated
herein by reference, Ahearn, Jasco + Company, P.A., independent accountants,
have applied limited procedures in accordance with professional standards for a
review of such information. However, as stated in their reports included and
incorporated by reference herein, they did not audit and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restrict in light of the
limited nature of the review procedures applied. Ahearn, Jasco + Company, P.A.,
independent accountants, are not subject to the liability provisions of Section
11 of the Securities Act of 1933 for their reports on the unaudited interim
financial information because those reports are not "reports" on a "part" of the
registration statement prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Act.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The financial statements and other financial information appearing in
this Registration Statement were prepared by the management of Arielle and MPC,
which are responsible for the integrity and objectivity of the information for
their respective companies. The financial statements have been prepared in
conformity with generally accepted accounting principles consistently applied
and therefore include amounts that are based on information, judgments and
management's best estimates.
The management of each company maintains a system of internal
accounting controls and procedures, which management believes is adequate under
the circumstances. The system is intended to provide reasonable assurance, in
relation to reasonable cost, that transactions are executed in accordance with
management's authorization, are recorded properly and accurately, and that
accountability for assets is maintained. These controls are supported by
management's commitment to the integrity of the system.
The financial statements of MPC for the years ended June 30, 1999 and
1998, and the financial statements of Arielle for the years ended April 30, 2000
and 1999, have been audited by Ahearn, Jasco + Company, P.A., independent
certified public accountants, to the extent required by generally accepted
auditing standards. Their role is to form an independent judgment as to the
fairness with which the statements present the financial condition and the
results of its operations of each entity for the periods presented. While the
independent accountants make selective tests of procedures and controls, it is
neither practicable nor necessary for them to scrutinize all of an entity's
transactions. Their auditors' report appears with the respective financial
statements. The ultimate responsibility for the financial statements of Arielle
and MPC remains with management. The auditors responsibility is to express their
opinion on the overall financial statement presentation.
The financial statements of MPC as of and for the nine months periods
ended March 31, 2000 have been prepared by the management of the MPC, and are
not audited.
44
<PAGE>
LITIGATION
Arielle knows of no litigation pending, threatened or contemplated, or
unsatisfied judgments against it, or any proceedings in which it is a party.
Arielle knows of no legal actions pending or threatened or judgments entered
against Arielle's officer and directors in their capacity as such.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Articles of Incorporation of Arielle provide indemnification of
directors and officers and other corporate agents to the fullest extent
permitted pursuant to the laws of Delaware. The Articles of Incorporation also
limit the personal liability of Arielle's directors to the fullest extent
permitted by the Delaware Law. The Delaware General Corporations Law contains
provisions entitling directors and officers of Arielle to indemnification from
judgments, fines amounts paid in settlement and reasonable expenses, including
attorney's fees, as the result of an action or proceeding in which they may be
involved by reason of being or having been a director or officer of Arielle,
provided said officers or directors acted in good faith.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Arielle pursuant
to the foregoing provisions, or otherwise, Arielle has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by Arielle of expenses incurred or paid by a director, officer or
controlling person of Arielle 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, Arielle will, unless in the
opinion of its counsel, the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by itself against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
FURTHER INFORMATION
Arielle has filed with the Commission in Washington, D.C., a Registration
Statement under the Securities Act with respect to the Common Stock offered by
this prospectus. This prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to Arielle and this offering, reference is made to the
Registration Statement, including the exhibits filed therewith, copies of which
may be obtained at prescribed rates from the Commission at the public reference
facilities maintained by the Commission or at the Commission's web site:
www.sec.gov. Descriptions contained in this Prospectus as to the contents of any
contract or other document filed as an exhibit to the Registration Statement are
not necessarily complete and each such description is qualified by reference to
such contract or document.
45
<PAGE>
THE ARIELLE CORP.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGE
REPORT OF INDEPENDENT AUDITORS F-2
------------------------------
FINANCIAL STATEMENTS
--------------------
Balance Sheets F-3
Statements of Operations F-4
Statement of Changes in Stockholders' Equity F-5
Statements of Cash Flows F-6
NOTES TO FINANCIAL STATEMENTS F-7 through F-9
-----------------------------
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
To the Stockholders of
The Arielle Corp.
We have audited the accompanying balance sheets of The Arielle Corp. (the
"Company"), a development stage company, as of April 30, 2000 and 1999, and the
related statements of operations, changes in stockholders' equity, and cash
flows for the years ended April 30, 2000 and 1999, and for the period October 6,
1997 (date of incorporation) through April 30, 2000. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Arielle Corp. as of April
30, 2000 and 1999, and the related statements of operations, changes in
stockholders' equity, and cash flows for the years ended April 30, 2000 and
1999, and for the period October 6, 1997 (date of incorporation) through April
30, 2000, in conformity with generally accepted accounting principles.
/s/ Ahearn, Jasco + Company, P.A.
------------------------------------
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
May 25, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
THE ARIELLE CORP.
(A development stage company)
BALANCE SHEETS
APRIL 30, 2000 and 1999
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2000 1999
---- ----
ASSETS
------
<S> <C> <C>
CURRENT ASSET - Cash and cash equivalents $ 3,433 $ 1,442
RESTRICTED CASH 32,398 --
DEFERRED OFFERING COSTS -- 15,535
-------- --------
TOTAL $ 35,831 $ 16,977
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
ACCRUED EXPENSES $ 5,645 $ 3,444
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.0001 par value; 20,000,000 shares
authorized; shares issued and outstanding
500,000 in 2000 and 400,000 in 1999 50 40
Additional paid-in capital 39,415 19,960
Deficit accumulated during the development stage (9,279) (6,467)
-------- --------
STOCKHOLDERS' EQUITY, NET 30,186 13,533
-------- --------
TOTAL $ 35,831 $ 16,977
======== ========
See notes to financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE ARIELLE CORP.
(A development stage company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED APRIL 30, 2000 AND 1999,
AND FROM INCEPTION TO APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
From
Inception
Year ended Year ended Through
04/30/00 04/30/99 04/30/00
---------- ----------- ---------
<S> <C> <C> <C>
REVENUE, interest income $ 376 $ -- $ 376
GENERAL AND ADMINISTRATIVE EXPENSES 3,188 4,325 9,655
--------- --------- ---------
LOSS BEFORE INCOME TAX PROVISION (2,812) (4,325) (9,279)
PROVISION FOR INCOME TAXES -- -- --
--------- --------- ---------
NET LOSS $ (2,812) $ (4,325) $ (9,279)
========= ========= =========
PER SHARE AMOUNTS - basic and diluted:
Net loss per weighted average common share $ (0.0062) $ (0.0108)
========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 457,104 400,000
========= =========
See notes to financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE ARIELLE CORP.
(A development stage company)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 2000 AND 1999,
AND FROM INCEPTION TO APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
From
Inception
Year ended Year ended Through
04/30/00 04/30/99 04/30/00
---------- ---------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (2,812) $ (4,325) $ (9,279)
Items not affecting cash flow from operations:
Accrued expenses 1,679 3,344 5,123
Other -- 316 358
-------- -------- --------
NET CASH USED IN OPERATING ACTIVITIES (1,133) (665) (3,798)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITY:
Deferred offering costs incurred -- (535) (15,535)
Other 522 -- 164
-------- -------- --------
CASH USED IN INVESTING ACTIVITIES 522 (535) (15,371)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock 35,000 -- 55,000
Increase in restricted cash (32,398) -- (32,398)
-------- -------- --------
CASH USED IN FINANCING ACTIVITIES 2,602 -- 22,602
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,991 (1,200) 3,433
CASH AND CASH EQUIVALENTS, beginning of period 1,442 2,642 --
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of period $ 3,433 $ 1,442 $ 3,433
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ -- $ -- $ --
======== ======== ========
Cash paid for income taxes $ -- $ -- $ --
======== ======== ========
See notes to financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE ARIELLE CORP.
(A development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 2000 AND 1999,
AND FROM INCEPTION TO APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Common Additional Deficit Total
Stock Paid-in Accumulated
Capital during the
Development
Stage
----------------------------------------------
<S> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY, October 6, 1997 $ -- $ -- $ -- $ --
Sale of 400,000 shares of common stock 40 19,960 -- 20,000
Net loss for the year ended
April 30, 1998 -- -- (2,142) (2,142)
-------- -------- -------- --------
STOCKHOLDERS' EQUITY, April 30, 1998 40 19,960 (2,142) 17,858
Net loss for the year ended
April 30, 1999 -- -- (4,325) (4,325)
-------- -------- -------- --------
STOCKHOLDERS' EQUITY, April 30, 1999 40 19,960 (6,467) 13,533
Sale of 100,000 shares of common stock,
net of expenses of the offering 10 19,455 -- 19,465
Net loss for the year ended
April 30, 2000 -- -- (2,812) (2,812)
-------- -------- -------- --------
STOCKHOLDERS' EQUITY, April 30, 2000 $ 50 $ 39,415 $ (9,279) $ 30,186
======== ======== ======== ========
See notes to financial statements.
F-6
</TABLE>
<PAGE>
THE ARIELLE CORP.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000 AND 1999
AND FROM INCEPTION (OCTOBER 6, 1997) TO APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
-----------------------------------------------
The Arielle Corp. (the "Company"), a development stage company,
was organized in Delaware on October 6, 1997 as a "blank check" company
which plans to look for a suitable business to merge with or acquire.
Operations since incorporation have consisted primarily of obtaining the
first capital contribution by the insiders, coordination of activities
regarding the filing of an SEC registration statement, completing the
offering, and identifying a merger candidate.
The preparation of financial statements in conformity with
generally accepted accounting principles 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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
Deferred Offering Costs
-----------------------
Deferred offering costs, which were being incurred in
anticipation of the Company filing a Rule 419 registration statement, were
deferred until the sale of common shares. On October 5, 1999, when the
offering closed, these costs were charged to additional paid in capital.
Organization Costs
------------------
Organization costs were originally capitalized, and were being
amortized over a period of 60 months. In accordance with the American
Institute of Certified Public Accountants' SOP 98-5, the balance of the
organization costs were expensed in October 1998. The cumulative effect of
a change in accounting method disclosure is not presented as the amounts
involved are immaterial.
Income Taxes
------------
The Company accounts for income taxes in accordance with the
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," which requires the recognition of deferred tax liabilities
and assets at currently enacted tax rates for the expected future tax
consequences of events that have been included in the financial statements
or tax returns. A valuation allowance is recognized to reduce the net
deferred tax asset to an amount that is more likely than not to be
realized. The tax provision shown on the accompanying statement of
operations is zero since the deferred tax asset generated from the net
operating loss is offset in its entirety by a valuation allowance. State
minimum taxes are expensed as incurred.
Cash and Cash Equivalents, and Restricted Cash
----------------------------------------------
Cash and cash equivalents, if any, include all highly liquid debt
instruments with an original maturity of three months or less at the date
of purchase. Restricted cash represents the proceeds of the Rule 419
common stock offering, which are limited as to their use pursuant to this
Rule.
Fair Value of Financial Instruments
-----------------------------------
Cash and current liabilities are recorded in the financial
statements at cost, which approximates fair market value because of the
short-term maturity of those instruments.
F-7
<PAGE>
THE ARIELLE CORP.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000 AND 1999
AND FROM INCEPTION (OCTOBER 6, 1997) TO APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 3 - STOCKHOLDER'S EQUITY
-----------------------------
The Company, organized under the laws of the State of Delaware,
has authorized 20,000,000 shares of common stock at $0.0001 par value.
Through April 30, 1999, the Company raised $20,000 through a private
placement subscription agreement, and during fiscal 2000, raised an
additional $35,000 in connection with a Rule 419 offering (see Note 4
below).
NOTE 4 - RULE 419 REQUIREMENTS
------------------------------
Rule 419 requires that offering proceeds after deduction for
underwriting commissions, underwriting expenses and deal allowances issued
be deposited into an escrow or trust account (the "Deposited Funds" and
"Deposited Securities", respectively) governed by an agreement which
contains certain terms and provisions specified by the Rule. Under Rule
419, the Deposited Funds and Deposited Securities will be released to the
Company and to the investors, respectively, only after the Company has met
the following three basic conditions. First, the Company must execute an
agreement for an acquisition meeting certain prescribed criteria. Second,
the Company must file a post-effective amendment to the registration
statement which includes the terms of a reconfirmation offer that must
contain conditions prescribed by the rules. The post-effective amendment
must also contain information regarding the acquisition candidate and its
business, including audited financial statements. The agreement must
include, as a condition precedent to their consummation, a requirement
that the number of investors representing 80% of the maximum proceeds must
elect to reconfirm their investments. Third, the Company must conduct the
reconfirmation offer and satisfy all of the prescribed conditions,
including the condition that investors representing 80% of the Deposited
Funds must elect to remain investors. The post-effective amendment must
also include the terms of the reconfirmation offer mandated by Rule 419.
The reconfirmation offer must include certain prescribed conditions which
must be satisfied before the Deposited Funds and Deposited Securities can
be released from escrow. After the Company submits a signed representation
to the escrow agent that the requirements of Rule 419 have been met and
after the acquisition is consummated, the escrow agent can release the
Deposited Funds and Deposited Securities. Investors who do not reconfirm
their investments will receive the return of a pro-rata portion thereof;
and in the event investors representing less than 80% of the Deposited
Funds reconfirm their investments, the Deposited Funds will be returned to
the investors on a pro-rata basis.
The Company raised $35,000 through the sale of 100,000 shares of
common stock pursuant to Rule 419, and the Company closed this sale and
deposited the funds into an escrow account on October 5, 1999. Also
pursuant to Rule 419, 10% of these funds may be transferred to the Company
for expenses; accordingly, the Company transferred $3,500 to its operating
cash account in April 2000. As of May 25, 2000, a merger candidate has
been identified, and the Company is in the process of filing the
post-effective amendment, performing the reconfirmation offer, and
proceeding to close the merger with the acquisition candidate.
F-8
<PAGE>
THE ARIELLE CORP.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2000 AND 1999
AND FROM INCEPTION (OCTOBER 6, 1997) TO APRIL 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 5 - LOSS PER COMMON SHARE
------------------------------
The Company follows the provisions of SFAS No. 128, "Earnings per
Share," which requires entities to present both basic and diluted earnings
(loss) per share ("EPS") on the face of the statement of operations. Basic
EPS is calculated as income (loss) available to common stockholders
divided by the weighted average number of common shares outstanding during
the period. Diluted EPS is calculated using the "if converted" method for
convertible securities and the treasury stock method for options and
warrants. Net loss per common share, as shown on the statement of
operations, is the same for both basic and diluted as the Company has no
convertible or dilutive securities outstanding.
The Company, when it becomes applicable to its equity structure,
will use the treasury stock method for computing earnings per share. Under
the treasury stock method, the dilutive effect of outstanding stock
options and other convertible securities for determining primary earnings
per share is computed using the average market price during the fiscal
period, whereas the dilutive effect of outstanding stock options and
convertible securities for determining fully diluted earnings per share is
computed using the market price as of the end of the fiscal period, if
greater than the average market price.
The weighted average common shares for the year ended April 30,
2000 differ from the issued and outstanding shares solely because of the
effects of weighting, and result from the Company's sale of 100,000 shares
of common stock in October 1999.
NOTE 6 - RELATED PARTY TRANSACTIONS
-----------------------------------
Transactions with Shareholders
------------------------------
During 1998, the company advanced $15,000 to the law firm of
Schonfeld & Weinstein, LLP, who is also a shareholder of the company, for
legal fees to complete its SEC registration. These fees were recorded as
deferred offering costs (see Note 2), and were charged against the
offering proceeds.
Office Facilities
-----------------
Office space is provided by an officer of the Company at no
charge.
F-9
<PAGE>
METHOD PRODUCTS CORP. AND SUBSIDIARY
TABLE OF CONTENTS
-----------------
Page
----
INDEPENDENT AUDITORS' REPORT F-2
---------------------------- ---
FINANCIAL STATEMENTS
--------------------
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4 and F-5
Consolidated Statement of Changes in
Stockholders' Equity (Deficit) F-6
Consolidated Statements of Cash Flows F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8 to F-16
------------------------------------------
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors and Stockholders of
Method Products Corp. and subsidiary
We have audited the accompanying balance sheets of Method Products Corp. and
subsidiary (collectively, the "Company") as of June 30, 1999 and 1998, and the
related consolidated statements of operations, changes in stockholders' deficit,
and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Method Products
Corp. and subsidiary as of June 30, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has a net stockholders' deficit
and a working capital deficit at June 30, 1999. These factors raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Ahearn Jasco + Company, P.A.
---------------------------------
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
August 4, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
METHOD PRODUCTS CORP. AND SUBSIDIARY
BALANCE SHEETS
======================================================================================================================
March 31, June 30,
---------------------- -----------------
2000 1999 1999 1998
---- ---- ---- ----
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 293,887 $ 68,071 $ 219,896 $ 47,515
Accounts receivable, net 126,252 139,331 155,017 117,866
Inventories, net 238,245 7,070 135,569 12,188
Due from employees 14,124 8,297 6,834 6,976
Prepaid expenses and other 14,099 6,500 7,695 --
--------- --------- --------- ---------
TOTAL CURRENT ASSETS 686,607 229,269 525,011 184,545
PROPERTY AND EQUIPMENT, net 170,164 174,098 163,143 128,617
NOTES RECEIVABLE, shareholders 67,276 41,893 41,893 --
OTHER ASSETS 58,854 3,959 7,498 2,988
--------- --------- --------- ---------
TOTAL $ 982,901 $ 449,219 $ 737,545 $ 316,150
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Lines of credit $ 80,641 $ 49,169 $ 49,169 $ 49,169
Current portion of long-term debt 47,237 70,214 67,065 61,930
Accounts payable and accrued expenses 455,188 320,559 365,956 226,769
Customer deposits 22,909 11,434 190,587 13,376
Accrued litigation settlements -- 27,744 13,815 85,000
Income tax payable 20,485 200 20,485 200
--------- --------- --------- ---------
TOTAL CURRENT LIABILITIES 626,460 479,320 707,077 436,444
--------- --------- --------- ---------
LONG-TERM DEBT, less current portion 113,475 119,710 97,745 82,476
--------- --------- --------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, 1,000,000 shares authorized, $0.0001 par
value; no shares issued or outstanding -- -- -- --
Common stock, 50,000,000 shares authorized, $0.0001 par
value; 6,302,750 and 5,380,000 shares issued and outstanding
at March 31, 2000 and June 30, 1999, respectively 630 538 538 472
Additional paid-in capital 867,643 89,985 89,985 --
Subscription receivable -- -- -- (372)
Deficit (625,307) (240,334) (157,800) (202,870)
--------- --------- --------- ---------
STOCKHOLDERS' EQUITY (DEFICIT), NET 242,966 (149,811) (67,277) (202,770)
--------- --------- --------- ---------
TOTAL $ 982,901 $ 449,219 $ 737,545 $ 316,150
========= ========= ========= =========
See accompanying notes to consolidated financial statements
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
METHOD PRODUCTS CORP. AND SUBSIDIARY
STATEMENTS OF OPERATIONS
=========================================================================================================
Nine Months Ended March 31, Year Ended June 30,
---------------------------- ---------------------------
2000 1999 1999 1998
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
SALES $ 2,144,682 $ 2,002,600 $ 2,950,178 $ 2,246,665
COST OF SALES 1,205,615 1,042,130 1,674,714 1,345,805
----------- ----------- ----------- -----------
GROSS PROFIT 939,067 960,470 1,275,464 900,860
ADMINISTRATIVE EXPENSES 1,393,438 982,071 1,194,452 855,370
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (454,371) (21,601) 81,012 45,490
----------- ----------- ----------- -----------
OTHER (INCOME) EXPENSE:
Interest expense 17,931 15,863 27,412 13,435
Other income (4,795) -- (15,000) (40,000)
Provision for litigation settlements, net -- -- -- 139,989
----------- ----------- ----------- -----------
OTHER (INCOME) EXPENSE, NET 13,136 15,863 12,412 113,424
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (467,507) (37,464) 68,600 (67,934)
PROVISION FOR INCOME TAXES -- -- 23,530 200
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (467,507) $ (37,464) $ 45,070 $ (68,134)
=========== =========== =========== ===========
INCOME (LOSS) PER COMMON SHARE:
Basic and diluted $ (0.081) $ (0.007) $ 0.009 $ (0.065)
=========== =========== =========== ===========
Weighted average common shares outstanding 5,760,916 5,155,555 5,187,890 1,051,027
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
METHOD PRODUCTS CORP. AND SUBSIDIARY
STATEMENTS OF OPERATIONS
================================================================================
Three Months Ended March 31,
----------------------------
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
SALES $ 644,715 $ 934,116
COST OF SALES 338,054 578,791
----------- -----------
GROSS PROFIT 306,661 355,325
ADMINISTRATIVE EXPENSES 722,565 352,272
----------- -----------
LOSS FROM OPERATIONS (415,904) 3,053
OTHER (INCOME) EXPENSE:
Interest expense 4,613 7,718
Other income (4,795) --
----------- -----------
OTHER (INCOME) EXPENSE, NET (182) 7,718
----------- -----------
LOSS BEFORE INCOME TAXES (415,722) (4,665)
----------- -----------
PROVISION FOR INCOME TAXES -- --
----------- -----------
NET LOSS $ (415,722) $ (4,665)
=========== ===========
LOSS PER COMMON SHARE:
Basic and diluted $ (0.071) $ (0.001)
=========== ===========
Weighted average common shares outstanding 5,829,583 5,346,667
=========== ===========
See accompanying notes to consolidated financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
METHOD PRODUCTS CORP. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
==========================================================================================================================
Nine Months Ended March 31, Year Ended June 30,
---------------------------- -------------------
2000 1999 1999 1998
---- ---- ---- ----
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net (loss) income $(467,507) $ (37,464) $ 45,070 $ (68,134)
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization 48,540 52,549 70,065 38,889
Provisions for litigation settlements and other accruals -- -- -- 154,989
Gain on asset dispositions (5,183) -- -- --
Common stock issued for services 313,250 25,050 25,050 --
Changes in certain assets and liabilities, net of amounts from
acquisition:
Accounts receivable 28,765 (21,465) (37,151) 19,828
Inventories (102,676) 5,118 (123,381) (6,025)
Due from employees (7,290) (1,321) 142 (5,321)
Prepaid expenses and other (3,342) (6,500) (7,695) --
Accounts payable and accrued expenses 77,806 93,790 139,187 35,517
Customer deposits (167,678) (1,942) 177,211 13,376
Income tax payable -- -- 20,285 200
--------- --------- --------- --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (285,315) 107,815 308,783 183,319
--------- --------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (60,082) (98,030) (104,591) (29,241)
Issuance of notes receivable (25,383) (41,893) (41,893) --
Change in other assets (9,838) (971) (4,510) (665)
--------- --------- --------- --------
NET CASH USED IN INVESTING ACTIVITIES (95,303) (140,894) (150,994) (29,906)
--------- --------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in line(s) of credit -- -- -- (57,931)
Proceeds from long term debt 53,124 96,056 96,056 113,520
Payments on long term debt, (49,200) (50,538) (75,652) (27,131)
Payments on litigation settlements (13,815) (57,256) (71,185) (35,000)
Common stock issued for cash 464,500 65,373 65,373 --
S Corporation distributions -- -- -- (112,194)
--------- --------- --------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 454,609 53,635 14,592 (118,736)
--------- --------- --------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 73,991 20,556 172,381 34,677
CASH AND CASH EQUIVALENTS, Beginning of period 219,896 47,515 47,515 12,838
--------- --------- --------- --------
CASH AND CASH EQUIVALENTS, End of period $ 293,887 $ 68,071 $ 219,896 $ 47,515
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid in cash $ 17,931 $ 15,863 $ 27,412 $ 13,435
========= ========= ========= =========
Income taxes paid in cash $ -- $ -- $ 3,244 $ --
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
METHOD PRODUCTS CORP. AND SUBSIDIARY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
AND
NINE MONTHS ENDED MARCH 31, 2000 (Unaudited)
================================================================================================================================
Common Stock
------------------------ Additional Stockholders'
at Subscription Paid-in Equity
# of Shares par value Receivable Capital Deficit (Deficit), net
----------- --------- ---------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
STOCKHOLDERS' DEFICIT, June 30, 1997 1,000,000 $ 100 $ -- $ -- $ (22,542) $ (22,442)
Issuance of common stock 3,725,000 372 (372) -- -- --
S Corporation distributions -- -- -- -- (112,194) (112,194)
Net loss for the year ended June 30, 1998 -- -- -- -- (68,134) (68,134)
--------- -------- --------- --------- --------- ---------
STOCKHOLDERS' DEFICIT, June 30, 1998 4,725,000 472 (372) -- (202,870) (202,770)
Issuance of stock for cash 55,000 6 -- 64,995 -- 65,001
Issuance of stock for services 600,000 60 -- 24,990 -- 25,050
Collection of subscription receivable -- -- 372 -- -- 372
Net income for the year ended June 30, 1999 -- -- -- -- 45,070 45,070
--------- -------- --------- --------- --------- ---------
STOCKHOLDERS' DEFICIT, June 30, 1999 5,380,000 $ 538 $ -- $ 89,985 $(157,800) $ (67,277)
Issuance of stock for cash 609,500 61 -- 464,439 -- 464,500
Issuance of stock for services 313,250 31 -- 313,219 -- 313,250
Net loss for the nine months ended March 31, 2000 -- -- -- -- (467,507) (467,507)
--------- -------- --------- --------- --------- ---------
STOCKHOLDERS' EQUITY, March 31, 2000 6,302,750 $ 630 $ -- $ 867,643 $(625,307) $ 242,966
========= ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements.
F-7
</TABLE>
<PAGE>
METHOD PRODUCTS CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
ORGANIZATION AND BASIS OF PRESENTATION
--------------------------------------
Method Products Corp. was incorporated on June 4, 1986 in the State of
Florida and serves as a multi-service business communications systems
company specializing in the custom design, installation, and service of
total communications network systems for businesses. On June 22, 1999, MPC
Integrated Technologies, Inc was incorporated in the State of Florida and
on June 30, 1999 was re-organized to be a wholly owned subsidiary of
Method Products Corp. Method Products Corp. and its wholly owned
subsidiary MPC Integrated Technologies, Inc. are collectively referred to
as the Company. The Company operates under the trade name MPC Business
Communications.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
The unaudited consolidated March 31, 2000 and 1999 financial statements
presented herein have been prepared by the Company in accordance with the
rules and regulations of the Securities and Exchange Commission (the
"SEC") regarding interim financial reporting and, accordingly, they do not
include all the information and disclosures required by generally accepted
accounting principles. In the opinion of management, the interim
consolidated financial statements have been prepared on the same basis as
the audited consolidated financial statements and include all adjustments,
consisting mainly of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for the
periods shown. The interim consolidated financial statements for the nine
month period ended March 31, 2000 have been reviewed by an independent
public accountant pursuant to Rule 310(b) of SEC Regulation S-B and
following applicable standards for conducting such a review. The results
of operations for the nine months ended March 31, 2000 are not necessarily
indicative of the results for the full fiscal year.
GOING CONCERN CONSIDERATIONS
----------------------------
The Company's consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of
business. The Company has a net stockholders' deficit of $67,277 at June
30, 1999. In addition, the Company has a deficit in working capital of
$182,066 at June 30, 1999. Management recognizes that the Company must
generate additional resources to enable it to pay its obligations as they
come due. Management is planning to obtain additional working capital from
operations, and/or from other sources, including creditors and investors.
The realization of assets and satisfaction of liabilities in the normal
course of business is dependent upon the Company obtaining additional
working capital and sustaining profitable operations. However, no
assurances can be given that the Company will be successful in these
activities. Should any of these events not occur, the accompanying
consolidated financial statements will be materially affected.
USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
F-8
<PAGE>
METHOD PRODUCTS CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
---------------------------------------------------
REVENUE RECOGNITION AND CREDIT RISKS
------------------------------------
Revenue is recognized at the time the goods are shipped and/or installed.
Accounts receivable is primarily with businesses located in Florida. The
Company sells its products to various customers in different industries,
therefore, the Company believes that it does not have an abnormal
concentration of credit risk within any one market or any one geographic
area.
For the year ended June 30, 1999, one customer accounted for 19% of the
Company's total sales. Also, two vendors supplied 27% and 16% respectively
of the Company's total product purchases. For the year ended June 30,
1998, two customers accounted for 14% and 11% respectively of the
Company's total sales. Also, one vendor supplied 65% of the Company's
total product purchases.
INVENTORIES, NET
----------------
Inventories, consisting primarily of goods purchased for resale, are
recorded at the lower of cost (first in, first out method) or market. The
reported amounts are net of allowances for obsolescence.
PROPERTY AND EQUIPMENT
----------------------
Property and equipment is recorded at acquisition cost and depreciated
using the straight-line method over the estimated useful lives of the
assets. Useful lives range from five to seven years. Expenditures for
routine maintenance and repairs are charged to expense as incurred.
INTANGIBLE ASSETS
-----------------
The excess of investment cost over the fair value of net assets acquired
(goodwill) is being amortized using the straight-line method over a period
of three years. The goodwill, which totaled $43,348, arose from the
acquisition of Jack Nichols Telephone during the nine months ended March
31, 2000, and amortization of goodwill during this period was
approximately $1,830.
INCOME TAXES
------------
Through June 25, 1998, the Company, with the consent of its shareholders,
had elected under provisions of the Internal Revenue Code to be an S
corporation. In lieu of corporate income taxes, the shareholders of an S
corporation are taxed on their proportionate share of taxable income.
Therefore, no provision or liability for income is included in the
accompanying financial statements for results of operations through June
25, 1998. Effective that date, this election was terminated when the
Company issued common stock to a corporation. This S corporation status
termination results in the Company directly paying taxes on its earnings.
Effective June 26, 1998, the Company accounts for its income taxes in
accordance with the Statement of Financial Accounting Standards No. 109
(SFAS No 109), "Accounting for Income Taxes." Deferred tax liabilities and
assets are recognized for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely
than not some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects
of changes in tax laws and rates on the date of enactment. State minimum
taxes are generally expensed as paid.
F-9
<PAGE>
METHOD PRODUCTS CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
---------------------------------------------------
NET INCOME (LOSS) PER COMMON SHARE
----------------------------------
The Company has adopted SFAS No. 128, "Earnings Per Share." SFAS 128
requires companies with complex capital structures or common stock
equivalents to present both basic and diluted earnings per share ("EPS")
on the face of the income statement. Basic EPS is calculated as the income
or loss available to common stockholders divided by the weighted average
number of common shares outstanding during the period. Diluted EPS is
calculated using the "if converted" method for common share equivalents
such as convertible securities and options and warrants.
STOCK BASED COMPENSATION
------------------------
In October 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123
encourages, but does not require, companies to record compensation plans
at fair value. The Company has chosen, in accordance with the provision of
SFAS No. 123, to apply Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) for its stock plans.
Under APB No. 25, if the exercise price of the Company's stock options is
less than the market price of the underlying stock on the date of grant,
the Company must recognize compensation expense. SFAS No. 123 will be
adopted for disclosure purposes only and will not impact the Company's
financial position, annual operating results, or cash flows. For
transactions with other than employees, in which services were performed
in exchange for stock, the transactions are recorded on the basis of the
fair value of the services received or the fair value of the issued equity
instrument, whichever was more readily measurable.
CASH AND CASH EQUIVALENTS
-------------------------
Cash and cash equivalents include all highly liquid investments purchased
with an original maturity of three months or less. The Company
occasionally maintains cash balances in financial institutions in excess
of the federally insured limits.
FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Cash, receivables, and accounts payable and accrued expenses are reflected
in the financial statements at fair value due to the short-term maturity
of those instruments. The fair values of the Company's debt obligations
are the same as the recorded amounts because rates and terms approximate
current market conditions. Related party amounts are not subject to fair
value estimation because of their unique nature.
ADVERTISING
-----------
The costs of advertising, promotion, and marketing programs are charged to
operations in the period incurred. Advertising expense was $14,833 and
$26,666 for the years ended June 30, 1999 and 1998.
STATEMENT OF COMPREHENSIVE INCOME
---------------------------------
In accordance with SFAS No. 130, "Reporting Comprehensive Income", the
Company is required to report its comprehensive income. Other
comprehensive income refers to revenue, expenses, gains and losses that
under generally accepted accounting principles are included in
comprehensive income but are excluded from net income, as these amounts
are recorded directly as an adjustment to stockholders' equity. A
statement of comprehensive income is not presented since the Company has
no items of other comprehensive income. Comprehensive income is the same
as net income for the periods presented herein.
F-10
<PAGE>
METHOD PRODUCTS CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
---------------------------------------------------
RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Among other provisions, it requires
that entities recognize all derivatives as either assets or liabilities in
the statement of financial position and measure those instruments at fair
value. Gains and losses resulting from changes in fair values of those
derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. The effective date of this
standard was delayed to fiscal years beginning after June 15, 2000 via the
issuance of SFAS No. 137. The Company must adopt this standard for its
fiscal year beginning July 1, 2000. The Company does not expect the
adoption of this standard to have a material impact on results of
operations, financial position or cash flows.
RECLASSIFICATIONS
-----------------
Certain 1998 financial statement amounts were reclassified to conform to
the 1999 presentation.
NOTE 2 - RELATED PARTY TRANSACTIONS
-----------------------------------
LITIGATION AND OTHER OBLIGATIONS
--------------------------------
An entity related to the Company through common ownership, MPC
Business Communications, Inc. ("MPC") was involved in certain litigation
with third parties. The lawsuits arose solely from MPC's separate business
activities and were unrelated to the operations of the Company. In
February 1998, MPC ceased its business operations and the Company
subsequently assumed the obligations to assist MPC in resolving these
matters. Under an agreement effective April 1, 1998 between the Company
and MPC, the Company assumed the debt from a previously settled lawsuit
calling for future monthly payments totaling $24,989 (see Note 4) and the
obligation for any settlement negotiated pursuant to an on-going lawsuit
with WorldCom. In September 1998, the latter lawsuit was settled for
approximately $125,000.
MPC was also subject to a sales tax audit being conducted by the
State of Florida. As part of the agreement, the Company assumed this
obligation and accrued $15,000 during fiscal 1998 as management's estimate
of the potential sales tax liability. An additional $7,887 was accrued
during fiscal 1999 upon the settlement of the matter (see Note 5).
In exchange for the assumption of the liabilities, MPC made a
$10,000 cash payment to the Company. In addition, MPC assigned to the
Company the right to use its trade name and all rights to sell its
customer list. The customer list was sold during fiscal 1998 for $40,000,
the proceeds escrowed with an attorney, and the funds were ultimately used
to reduce the WorldCom debt.
DUE FROM EMPLOYEES
------------------
These advances are mainly comprised of travel, commissions, and other
reimbursable expenses and totaled $6,834 and $6,976 at June 30, 1999 and
1998, respectively.
NOTES RECEIVABLE, SHAREHOLDERS
------------------------------
On June 30, 1999, two shareholders entered into 8% notes, payable to the
Company, and due 60 days after a demand for payment is made. These notes
were issued to convert $41,893 of expenses and other advances previously
made to these shareholders. During the nine month period ended March 31,
2000 approximately $25,000 was advanced to shareholders, and subsequent to
March 31, 2000, approximately $40,000 has been repaid on the outstanding
balances of the notes receivable.
F-11
<PAGE>
METHOD PRODUCTS CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 3 - PROPERTY AND EQUIPMENT
-------------------------------
Property and equipment consists of the following at June 30, 1999 and
1998:
1999 1998
----------- ------------
Equipment $162,643 $137,227
Furniture and fixtures 8,270 11,381
Leased equipment 59,421 -
Vehicles 84,671 61,806
----------- ------------
Total cost 315,005 210,414
Less: Accumulated depreciation 151,862 81,797
----------- ------------
Property and equipment, net $163,143 $128,617
=========== ============
Depreciation expense (including amortization of leases) for the years
ended June 30, 1999 and 1998 was $70,065 and $38,889, respectively.
NOTE 4 - DEBT AND FINANCING AGREEMENTS
--------------------------------------
<TABLE>
<CAPTION>
Long-term debt consists of the following at June 30th of each year:
1999 1998
------------ ------------
<S> <C> <C>
Two vehicles notes payable to a financial institution, each secured by a
vehicle, payable in monthly installments of $756 including interest of
3.9% through January 2002. $ 22,947 $ 30,300
Vehicle note payable to a financial institution, secured by a vehicle, payable
in monthly installments of $376 including interest at 5.9% through
August 2003. 16,643 --
Note payable to a bank, secured by all business assets of the Company; payable
in monthly installments of $3,354 plus interest at 12.50% through
October 2000. 48,881 80,814
Three capital leases, secured by the leased equipment, payable in monthly
installments of $2,297 through May 2002, then $1,141 through April 2003, then
$809 through August 2003, including imputed interest from 15% to 22%.
71,103 13,303
Litigation settlement payable (see Note 2). -- 19,989
Other 5,236 --
------------ ------------
Total long-term debt 164,810 144,406
Less: Current portion (67,065) (61,930)
------------ ------------
Long-term debt, less current portion $ 97,745 $ 82,476
============ ============
</TABLE>
The remaining long-term portion of $97,745 is scheduled for repayment as
follows: $47,237 in 2001, $32,003 in 2002, $16,181 in 2003 and $2,324 in
2004.
F-12
<PAGE>
METHOD PRODUCTS CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 4 - DEBT AND FINANCING AGREEMENTS (continued)
--------------------------------------
The Company entered into a Loan and Security Agreement on October 7, 1997
with a commercial lender. This agreement provides for a maximum revolving
line of credit of $50,000. Interest is at prime plus 1% and is due on
demand. The loan is secured by a blanket lien on all business assets. The
amount outstanding under this line of credit at June 30, 1999 and 1998 was
$49,169, respectively.
During the nine month period ended March 31, 2000, the Company obtained an
additional revolving line of credit of $25,000 from a financial institution, and
it added limited purchase credit lines from equipment vendors. The balance
outstanding under all credit lines at March 31, 2000 totaled $80,641. .
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
-------------------------------------------------
<TABLE>
<CAPTION>
Accounts payable and accrued liabilities consist of the following:
Nine Months Ended March 31, Year Ended
June 30,
---------------------------- ---------------------------
2000 1999 1999 1998
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Accounts payable $ 396,960 $ 265,775 $ 268,443 $ 191,313
Accrued liabilities:
Sales taxes (see Note 2) 4,337 24,207 22,887 18,710
Payroll and related taxes 20,677 20,677 41,412 7,446
Warranty accrual 10,000 - 10,000 -
Vacation pay 23,214 9,900 23,214 9,300
-------------- ------------ ------------- ------------
Total $ 455,188 $ 320,559 $ 365,956 $ 226,769
============== ============ ============= ============
</TABLE>
NOTE 6 - INCOME TAXES
---------------------
As discussed in Note 1, the Company was taxed as an S corporation from
inception through June 25, 1998. Effective that date, the S corporation
status was terminated, and therefore, the Company must directly pay taxes
on its earnings. Upon such terminations, accounting principles require the
entity to establish deferred income tax assets and liabilities for the tax
bases of assets and liabilities that are different than those recognized
for financial reporting purposes. A deferred tax asset was established at
June 25, 1998 for certain accrued liabilities (primarily relating to the
litigation settlements) which are not deductible for tax purposes until
paid. No deferred tax liabilities were established for the Company at June
25, 1998 since the amounts were immaterial.
A summary of income taxes for the year ended June 30, 1999 and for the
period from June 26, 1998 through June 30, 1998 is as follows:
1999 1998
--------- --------
Currently payable:
Federal $ 19,800 $ 170
State 3,730 30
Deferred taxes 7,700 --
-------- --------
Income tax provision for the period 31,230 200
Deferred tax asset established June 25, 1998 -- (33,600)
Change in valuation allowance (7,700) 33,600
-------- --------
Total income tax provision $ 23,530 $ 200
======== ========
F-13
<PAGE>
METHOD PRODUCTS CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 6 - INCOME TAXES (continued)
---------------------
There are no significant deferred tax liabilities at June 30, 1999 or
1998. Deferred tax assets of $25,900 and $33,600 as of June 30, 1999 and
1998, respectively, arise from accrued liabilities and accounting reserves
not currently deductible for tax purposes and have been offset in their
entirety by a valuation allowance. The effective income tax rate for the
year ended June 30, 1999 varied from the statutory Federal tax rate as
follows:
Federal statutory rate 34%
State income taxes, net of federal income tax effect 4%
Other, including permanent differences, changes to the
valuation allowance, and effects of the surtax exemption (4%)
--------
Effective income tax rate 34%
========
A rate reconciliation has not been provided for the year ended June 30,
1998 since it is not meaningful in the circumstances.
There is no income tax benefit recorded for the nine month period ended
March 31, 2000, as any deferred tax asset generated by the net operating
loss for the period has been offset in its entirety by a deferred tax
asset valuation allowance.
NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------
PREFERRED STOCK
---------------
On June 30, 1999, the shareholders and directors voted to amend the
Company's articles of incorporation to create a class of preferred stock
comprised of 1,000,000 shares with a par value of $0.0001. The preferred
stock may be issued from time to time in one or more series and with such
designations, rights, preferences, privileges, qualifications,
limitations, and restrictions as shall be stated and expressed in a
resolution of the Board of Directors providing for the creation and
issuance of such preferred stock.
COMMON STOCK
------------
The Company was originally incorporated with 100 shares of $1 par value
common stock. On June 10, 1998, the shareholders and directors voted to
amend the Company's articles of incorporation to change the number of
authorized shares to 7,500,000 with a par value of $0.0001. The
outstanding shares of common stock were converted, on that date, into
1,000,000 shares of the new $0.0001 par value stock. The shares of the
Company have been restated to June 30, 1997, as well as other per share
amounts as if a stock split had occurred. On August 3, 1998 the article of
incorporation were further amended to increase the authorized shares from
1,000,000 to 50,000,000.
ISSUANCE OF COMMON STOCK
------------------------
On June 26, 1998, 25,000 shares of common stock were issued at par value
to a Corporation pursuant to an investment agreement; these shares were
subsequently reissued to 30 various investors and employees. These shares
were issued through a Regulation D, Rule 504 private placement offering.
Also on June 26, 1998, the existing shareholders subscribed for an
additional 3,700,000 shares at par value.
F-14
<PAGE>
METHOD PRODUCTS CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT) (continued)
---------------------------------------
During the year ended June 30, 1999, the Company sold 55,000 shares of
common stock pursuant to Rule 504 of Regulation D that resulted in net
proceeds of $65,001. Subsequent to June 30, 1999, the Company sold
additional 602,500 shares of common stock that resulted in net proceeds of
$464,500.
During the year ended June 30, 1999, the Company issued 600,000 shares of
common stock for services and management of the Company placed a value of
$25,050 on the services performed. Subsequent to June 30, 1999, the
Company issued additional 313,250 shares of common stock for services and
management of the Company placed a value of $313,250 on the services
performed.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
--------------------------------------
OFFICE LEASE
------------
The Company leases three vehicles and its office space. Rent expense for
the years ended June 30, 1999 and 1998 was $45,265 and $44,547,
respectively. Future minimum lease payments subsequent to June 30, 1999
under these operating leases are as follows:
Year Ending
June 30,
-----------------
2000 $ 53,141
2001 38,056
2002 7,870
----------
$ 99,067
==========
LITIGATION
----------
From time to time, the Company is exposed to claims and legal actions in
the normal course of business, some of which are initiated by the Company.
Management believes that any such outstanding issues will be resolved for
amounts already accrued and will not significantly impair the financial
condition of the Company. See Note 2 for a further description of
litigation.
NOTE 9 - NET INCOME (LOSS) PER COMMON SHARE
-------------------------------------------
For the year ended June 30, 1999 and 1998, basic and diluted weighted
average common shares include only common shares outstanding as there were
no common share equivalents. For 1998, the number of shares were restated
to reflect the number of shares issued upon the amendment of the articles
of incorporation as if a stock split had occurred (see Note 6). A
reconciliation of the number of common shares shown as outstanding in the
consolidated financial statements with the number of shares used in the
computation of weighted average common shares outstanding is shown below:
1999 1998
------------- ------------
Common shares outstanding at June 30th 5,380,000 4,725,000
Effect of weighting (192,110) (3,673,973)
------------- ------------
Weighted average common shares outstanding 5,187,890 1,051,027
============= ============
F-15
<PAGE>
METHOD PRODUCTS CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 10 - PRO FORMA INCOME TAXES
--------------------------------
As discussed in Note 1, having elected status as an S corporation, the
shareholders of the Company paid the federal income tax on the Company's
earnings through June 25, 1998. Additionally, the Company was exempt from
Florida income tax on its earnings during that period since Florida does
not separately tax S corporations. As a result, no income tax expense was
provided in the historical financial statements for taxable income through
June 25, 1998.
Below is a pro forma schedule for the year ended June 30, 1998 estimating
the benefit for income taxes, and the resulting loss after taxes, as if
the Company had not made the election to be taxed as an S corporation.
Loss before income taxes $(67,934)
Pro forma benefit for federal and state taxes 19,000
-----------
Net loss after pro forma tax provision $(48,934)
===========
The loss per common share, basic and diluted, on a proforma basis, is
$0.046.
F-16
<PAGE>
<TABLE>
<CAPTION>
METHOD PRODUCTS GROUP
PRO FORMA COMBINED BALANCE SHEET
=================================================================================================================
METHOD PRODUCTS
METHOD PRODUCTS ARIELLE CORP. PRO FORMA GROUP-COMBINED
6/30/99 4/30/00 ADJUSTMENTS(1) PRO FORMA
------- ------- ----------- ---------
ASSETS
------
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 219,896 $ 3,433 $ (100,000) $ 123,329
Cash-Restricted -- 32,398 -- 32,398
Accounts receivable, net 155,017 -- -- 155,017
Inventories, net 135,569 -- -- 135,569
Due from employees 6,834 -- -- 6,834
Prepaid expenses 7,695 -- -- 7,695
--------- --------- -------- ----------
TOTAL CURRENT ASSETS 525,011 35,831 -- 460,842
PROPERTY AND EQUIPMENT, net 163,143 -- -- 163,143
NOTES RECEIVABLE, shareholders 41,893 -- -- 41,893
OTHER ASSETS 7,498 -- -- 7,498
--------- --------- -------- ----------
TOTAL $ 737,545 $ 35,831 $ -- $ 673,376
========= ========= ======== =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
----------- -------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 365,956 $ 5,645 $ -- $ 371,601
Current portion of long-term debt 67,065 -- -- 67,065
Customer deposits 190,587 -- -- 190,587
Line of credit outstanding 49,169 -- -- 49,169
Other Current Liabilities 13,815 -- -- 13,815
Income tax payable 20,485 -- -- 20,485
--------- --------- -------- ----------
TOTAL CURRENT LIABILITIES 707,077 5,645 -- 712,722
--------- --------- -------- ----------
LONG-TERM DEBT, less current portion 97,745 -- -- 97,745
--------- --------- -------- ----------
STOCKHOLDERS' DEFICIT:
Common stock 588 50 16 604
Additional paid-in capital 89,985 39,415 (16) 129,384
Retained Earnings(Deficit) (157,800) (9,279) (100,000 (267,079)
STOCKHOLDERS' EQUITY (DEFICIT), NET (67,277) 30,186 -- (137,091)
--------- --------- -------- ----------
TOTAL $ 737,545 $ 35,831 $ -- $ 673,376
========= ========= ======== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
METHOD PRODUCTS GROUP
PRO FORMA COMBINED STATEMENT OF OPERATIONS
METHOD PRODUCTS ARIELLE CORP. METHOD PRODUCTS
YEAR ENDED YEAR ENDED PRO FORMA GROUP-COMBINED
6/30/99 4/30/00 ADJUSTMENTS(1) PRO FORMA
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
SALES $ 2,950,178 $ 376 $ -- $ 2,950,554
COST OF SALES 1,674,714 -- -- 1,674,714
----------- ----------- ---------- -----------
GROSS PROFIT 1,275,464 376 -- 1,275,840
ADMINISTRATIVE EXPENSES 1,194,452 3,188 $ 100,000 1,297,640
----------- ----------- ---------- -----------
INCOME FROM OPERATIONS 81,012 (2,812) -- (21,800)
----------- ----------- ---------- -----------
OTHER (INCOME) EXPENSE:
Interest expense 27,412 -- -- 27,412
Sale of customer list -- -- -- --
Other income (15,000) -- -- (15,000)
----------- ----------- ---------- -----------
OTHER EXPENSE, NET 12,412 -- -- 12,412
----------- ----------- ---------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 68,600 (2,812) -- (34,212)
PROVISION FOR INCOME TAXES 23,530 -- -- 23,530
----------- ----------- ---------- -----------
NET INCOME (LOSS) $ 45,070 $ (2,812) $ -- $ (57,742)
=========== =========== ========== ===========
INCOME (LOSS) PER COMMON SHARE:
Basic and diluted $ 0.009 $ (0.008)
=========== =========== ========== ===========
Weighted average common shares outstanding 5,187,890 7,135,521
=========== =========== ========== ===========
<FN>
(1)To record the expenses of the offering, estimated at $100,000 for both MPC
and Arielle, and record shares issued in the merger to Schonfeld & Weinstein,
LLP.
</FN>
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The Delaware General Corporation Law, as amended, provides for the
indemnification of the Company's officers, directors and corporate employees and
agents under certain circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE. - (a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstance of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such court shall deem
proper.
46
<PAGE>
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be paid
by the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized in this section. Such
expenses including attorneys' fees incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
including absorbed in a consolidation of merger which, if its separate existence
had continued, would have had power and authority to indemnify its directors,
officers and employees or agents so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect to
the resulting or surviving corporation as he would have with respect to such
constituent corporation doubled if its separate existence had continued.
47
<PAGE>
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors, and administrators of such person.
Article XI of the Company's By-laws provides for the indemnification of the
company's officers, directors, and corporate employees and agents under certain
circumstances as follows:
Article XI provides that the Company will hold harmless and will indemnify all
officers, directors, employees and agents of the Company against all expense,
liability and loss reasonably incurred or suffered by such person in its
connection as such with the Company. The Company shall indemnify any such person
seeking indemnification in connection with a proceeding initiated by such person
(except against the Company) only if such proceeding was authorized by the
Company's Board of Directors.
If a claim under the above paragraph is not paid in full by the Company within
30 days after a written claim has been received by the Company, the claimant may
at anytime thereafter bring suit against the Company to recover the unpaid
amount of the claim. If the claimant is successful, it is entitled to be paid
the expense of prosecuting such claim, as well.
Notwithstanding any limitations in other sections of the By-laws, the Company
will, to the fullest extend permitted by Section 145 of the General Corporation
Law of Delaware, indemnify any and all persons whom it has the power to
indemnify against any and all of the expense, liabilities and loss, and this
indemnification shall not be deemed exclusive of any other rights to which the
indemnities may be entitled under any By-law, agreement, or otherwise, both as
to action in his/her official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such persons.
48
<PAGE>
Arielle may, at its own expense, maintain insurance to protect itself and any
director, officer, employee or agent of Arielle against any such expense,
liability or loss, whether or not Arielle would have the power to indemnify such
person against such expense, liability or loss under the Delaware General
Corporation Law.
Item 25. EXPENSES OF ISSUANCE AND DISTRIBUTION
-------------------------------------
The other expenses payable by the Registrant in connection with the
issuance and distribution of the securities being reconfirmed were
approximately:
Escrow Fee $ 1,000
Securities and Exchange Commission
Registration Fee $ 305
Legal Fees $15,000
Accounting Fees $ 2,000
Printing and Engraving $ 500
Blue Sky Qualification Fees and Expenses$ $ 750
Miscellaneous $ 1,650
Transfer Agent Fee $ 1,000
TOTAL $21,935
49
<PAGE>
Item 26. RECENT SALES OF UNREGISTERED SECURITIES
Arielle issued 400,000 shares between October 13, 1997 and March 30, 1998 to its
initial stockholders for $20,000.
NAME/ADDRESS
CONSIDERATION SHARES
BENEFICIAL OF COMMON PRICE
OWNER STOCK PURCHASED(2) PAID
----- ------------------ ----
David Kass (1)(3) 100,000 $5,000
26 Aerie Court
North Hills, NY 11030
David S. Jacobs (1)(3) 100,000 $5,000
26 Court Street
Brooklyn, NY
B. Alicia Campos 100,000 $5,000
3325 Dempster Street
Skokie, IL 60076
Schonfeld & Weinstein,
L.L.P.(4) 100,000 $5,000
63 Wall Street
Suite 1801
New York, NY
-----------
(1) May be deemed "Promoters" of Arielle, as that term is defined under
the Securities Act of 1933.
(2) These Shares were sold under the exemption of Section 4(2) of the
Securities Act of 1933.
(3) Mr. Kass is President and a director of Arielle. Mr. Jacobs is
Vice President, Secretary and a director of Arielle.
(4) Joel Schonfeld and Andrea I. Weinstein are the principals of
Schonfeld & Weinstein, L.L.P., special counsel to Arielle.
Neither Arielle nor any person acting on its behalf offered or sold the
securities by means of any form of general solicitation or general advertising.
Each purchaser represented in writing that he/she acquired the securities for
his own account. A legend was placed on the certificates stating that the
securities have not been registered under the Act and setting forth the
restrictions on their transferability and sale. Each purchaser signed a written
agreement that the securities will not be sold without registration under the
Act or exemption therefrom.
On April 15, 1998, David Kass, David S. Jacobs, Alicia Campos and Schonfeld &
Weinstein, L.L.P. each transferred 5,000 shares to Allen S. Frenkel. As a result
of such transaction, Allen S. Frenkel holds 20,000 shares.
<PAGE>
EXHIBITS
Item 27.
2.0 Agreement and Plan of Merger**
3.1(a) Certificate of Incorporation of the Arielle Corp.*
3.1(b) Certificate of Incorporation of Method Products Corp.**
3.2(a) By-Laws of the Arielle Corp.*
3.2(b) By-Laws of Method Products Corp.**
4.1 Specimen Certificate of Common Stock.*
4.6 Form of Escrow Agreement.*
5.0 Opinion of Counsel.
15. Letter on Unaudited Interim Financial Information
23.2 Independent Auditor's Consent - Arielle
23.3 Independent Auditor's Consent - MPC
24.1 Counsel's Consent to Use Opinion.
99.0 Agreement Among Management.*
99.1 Employment Agreement for Mark Antonucci
99.2 Employment Agreement for Michael Beaubien
99.3 Employment Agreement for Mark Weitsman
99.4 Employment Agreement for Michael Hartley
99.5 Application for Distributorship Agreement for Nitsuko America
99.6 Non-Exclusive Distributorship Agreement with Fujitsu
99.7 Financial Advisory/Investment Banking Agreement with Thornhill Group,
Inc.
--------------------------------------------------------------------------------
* As filed with original registration statement on Form SB-2.
** As filed with Post-Effective Amendment No. 1.
Item 28.
UNDERTAKINGS
The registrant undertakes:
(1) To file, during any period in which offers or sales are being made,
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10 (a) (3) of the
Securities Act of 1933;
(ii) 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;
51
<PAGE>
(iii) 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, including
(but not limited to) any addition or deletion of managing underwriter;
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be treated as a new
registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) To deposit into the Escrow Account at the closing, certificates in such
denominations and registered in such names as required by the Company to permit
prompt delivery to each purchaser upon release of such securities from the
Escrow Account in accordance with Rule 419 of Regulation C under the Securities
Act. Pursuant to Rule 419, these certificates shall be deposited into an escrow
account, not to be released until a business combination is consummated.
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 any provisions contained in its Certificate of
Incorporation, or by-laws, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
52
<PAGE>
SIGNATURES
----------
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of New
York, State of New York, on
The Arielle Corp.
BY: /s/ DAVID KASS
-------------------------
David Kass, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
David Kass
----------------- Dated August 15, 200
DAVID KASS
President, Director
/S/ DAVID S. JACOBS
------------------- Dated August 15, 2000
David S. Jacobs
Vice President, Secretary, Director
----------------- Dated
JOHN E. VIDAVER
Director
53
<PAGE>
