<PAGE> 1
As filed with the Securities and Exchange Commission on June 23, 2000
Registration No. 333-36922
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ARI NETWORK SERVICES, INC.
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1388360
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
330 EAST KILBOURN AVENUE
MILWAUKEE, WISCONSIN 53202-3149
(414) 278-7676
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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COPIES OF ALL COMMUNICATIONS TO:
Brian E. Dearing Larry D. Lieberman
330 East Kilbourn Avenue Godfrey & Kahn, S.C.
Milwaukee, Wisconsin 53202-3149 780 North Water Street
(414) 278-7676 Milwaukee, WI 53202
(Address, including zip code, and telephone (414) 273-3500
number, including area code, of agent for service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
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Proposed maximum Proposed maximum Amount of
Title of each class of Amount to offering price per aggregate offering registration
securities to be registered be registered unit(1) price(1) fee(2)
--------------------------- ------------- ------- -------- ------
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Common Stock, $0.001 par value per share
underlying principal of subordinated
debenture.................................. 1,000,000 $3 27/32 $3,843,750 $1,015
underlying interest on subordinated
debenture.................................. 210,000 $3 27/32 807,187 213
underlying investment options.............. 800,000 $3 27/32 3,075,000 812
underlying warrants........................ 600,000 $3 27/32 2,306,250 609
reserve for issuance pursuant to
antidilution and default provisions of the
securities................................ 652,500 $3 27/32 2,508,047 662
---------- ------------ -------
Total........................................ 3,262,500 $12,540,234 $3,311
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933 based on the
average of the high and low prices of the Common Stock on the Nasdaq
National Market on May 10, 2000.
(2) Paid on May 12, 2000.
-----------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
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THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER
TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS
NOT PERMITTED.
Subject to completion. Dated June 23, 2000
PROSPECTUS
ARI NETWORK SERVICES, INC.
3,262,500 SHARES OF COMMON STOCK
The selling shareholder identified in this prospectus may offer and
sell from time to time up to 3,262,500 shares of our common stock by using this
prospectus.
The shares of common stock covered by this prospectus may be offered
and sold in accordance with the Plan of Distribution described on page 11.
Our common stock trades on The Nasdaq Stock Market under the symbol
"ARIS." The last reported sale price of our common stock on June 22, 2000 was $3
1/4 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 1 OF THIS PROSPECTUS.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is June ____, 2000.
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TABLE OF CONTENTS
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Page
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The Company.......................................................................................................1
Risk Factors......................................................................................................1
Forward-Looking Statements........................................................................................5
Selling Shareholder...............................................................................................6
Plan of Distribution.............................................................................................11
Use of Proceeds..................................................................................................12
Legal Matters....................................................................................................12
Experts..........................................................................................................12
Where You Can Find More Information..............................................................................12
Documents Incorporated by Reference..............................................................................13
</TABLE>
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You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with different information. Neither
we nor the selling shareholder are making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information provided by this prospectus or any supplement is accurate as of any
date other than the date on the front of those documents.
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THE COMPANY
Unless the context requires otherwise, the terms "we," "our," "us" and
"ARI" refer to ARI Network Services, Inc. and its subsidiaries.
We are a provider of business-to-business e-commerce solutions to
manufacturers in selected industries with shared service networks and
distribution channels. We focus our sales and marketing on the U.S., Canadian,
European and Australian manufactured equipment industry, providing direct sales
and service in North America and operating through value-added sales and service
agents elsewhere. We also provide e-commerce services to certain non-equipment
industries, including the U.S. and Canadian agribusiness industry, the U.S. and
Canadian freight transportation industry and the U.S. non-daily newspaper
publishing industry.
We were founded in 1981 and are incorporated under the laws of the
State of Wisconsin. Our common stock is listed on The Nasdaq Stock Market under
the symbol "ARIS." Our executive offices are located at 330 East Kilbourn
Avenue, Milwaukee, Wisconsin 53202 (telephone: (414) 278-7676). We maintain a
website at http://www.arinet.com.(TM)
A more complete description of our business and its recent activities
can be found in the documents described in "Where You Can Find More
Information."
RISK FACTORS
Investing in our common stock involves a high degree of risk. Please
carefully consider the specific risk factors set forth below as well as other
information contained in, or incorporated by reference into, this prospectus
before purchasing our common stock.
WE MAY NOT HAVE INCOME IN THE FUTURE. Since our organization in 1981,
we have experienced net losses in each fiscal year resulting in an accumulated
deficit of $82,381,000 at January 31, 2000. During the fiscal years ended July
31, 1999, 1998 and 1997, we experienced net losses of $3,415,000, $2,140,000 and
$3,275,000, respectively. For the nine months ended April 30, 2000, we
experienced a net loss of $4,489,000. We require significant increases in
revenues to achieve a profitable level of operations. We do not anticipate
reporting net income for fiscal 2000 or fiscal 2001 and there can be no
assurance that we will be profitable after then.
WE MAY HAVE PROBLEMS RAISING MONEY IN THE FUTURE. We currently do not
generate sufficient cash to cover our operating costs and investment activities
and, therefore, may need to raise additional financing in the future. We have
funded our substantial network development costs, acquisitions and negative cash
flow from operations principally from the sale of securities. Our recent private
placement transaction with the selling shareholder raised $4 million. We may
need to raise additional financing in the future in order to continue to make
acquisitions or to increase our investments in areas such as marketing and new
product development. In this event, we may need to obtain additional financing
and issue securities to outside sources with greater rights than those currently
possessed by holders of our common stock. Any additional financing may be
dilutive to existing shareholders or may be on terms that are not favorable to
us.
WE ARE SUBJECT TO INTENSE COMPETITION. The market for e-commerce
products and services is highly competitive. Several companies offer electronic
commerce services or software products that are similar to those offered by us.
Moreover, companies within our target markets may develop and implement private
computer-to-computer networks, thereby reducing demand for our network services.
Because the market for Internet products and services lack significant barriers
to entry, new competitors could enter our market relatively easily. Our
competitive environment is characterized by rapid
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technological changes, dynamic customer demands and frequent product
enhancements and product introductions. The pace of technological changes, such
as developments in Internet commerce, is so great that new competitors may
emerge quickly based on new technologies. Many of our current and potential
competitors have greater financial, technical, operational and marketing
resources than us, and we may not be able to compete successfully against these
competitors.
OUR SUCCESS DEPENDS ON NEW PRODUCT DEVELOPMENT AND RESPONDING TO
TECHNOLOGICAL CHANGE. The market for our products and services is characterized
by technological advances, changes in customer requirements and frequent new
product introductions and enhancements. Our growth and future financial
performance will depend in part upon our ability to enhance existing products
and services and develop and introduce new products and services that meet
technological advances, respond to evolving customer requirements, respond to
competitive products or announcements and achieve market acceptance. There can
be no assurance that we will be successful in developing and marketing products
or services on a timely basis, or that our products and services will adequately
address the changing needs of the marketplace and achieve market acceptance. The
e-commerce industry in general is also characterized by evolving standards and
technology. Our ability to anticipate or guide these standards in our targeted
sectors and to fund advances in computer and telecommunications technology and
software will be a significant factor in our ability to grow and remain
competitive.
OUR SUCCESS DEPENDS GREATLY ON THE INTERNET. Our future success depends
greatly on more businesses using the Internet to transact business-to-business
electronic commerce in the future. Commercial use of the Internet is currently
at an early stage of development. It is unclear how popular various uses of the
Internet will be in the future. Because our products and services use the
Internet for data transport, user interfaces and data presentation, if
commercial use of the Internet does not grow in the future for any reason our
business will suffer. Furthermore, even if use of the Internet grows, businesses
using the Internet may not be interested in our products and services.
OUR OPERATING RESULTS FLUCTUATE FROM QUARTER TO QUARTER. We expect that
a significant portion of our revenue in the future will be derived from
non-recurring fee income, which consists primarily of revenues from professional
services such as software customization and training, software sales and
one-time network installation fees. The timing of receipt of this revenue is
dependent upon several factors that we cannot predict. These factors include:
- The time required to close large license fee and development
agreements. These agreements can be delayed due to customer
requirements and decision-making processes.
- The seasonality of certain sectors of the equipment industry
in which we operate.
- Delays in the introduction of new products or services and
their acceptance by customers.
- Delays in delivering customized software to our customers.
Recurring revenues are also difficult to estimate. Recurring revenues
from maintenance and subscription fees may be estimated based on the number of
subscribers to our services, but will be affected by the renewal rate which
cannot be determined in advance. Renewal revenues can vary based on:
- competitive technologies or procedures,
- specific economic conditions in e-commerce and in our target
markets,
- general economic conditions, and
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- delays in delivering customized software to our customers.
The emerging nature of commercial use of the Internet makes predictions
concerning our future revenues difficult. We believe that period-to-period
comparisons of our results of operations will not necessarily be meaningful and
should not be relied upon as indicative of our future performance. It is also
possible that in some future quarters our operating results will be below the
expectations of securities analysts and investors, although we do not have any
analysts following our stock at this time. In such circumstances, the price of
our stock may decline.
WE FACE RISKS IN ACCELERATING OUR GROWTH. Our ability to accelerate and
sustain significant revenue growth is affected by many factors including the
following:
- the growth rate of our selected markets;
- the positioning of our products and services in our selected
markets;
- variations in demand for and cost of customer services and
technical support;
- customer adoption of Internet applications and their
willingness to upgrade from client-server versions of
software;
- our ability to release new software applications and upgrades
on a timely basis;
- our ability to establish and maintain strategic alliances;
- our ability to continue to make acquisitions; and
- our ability to attract and retain a high-performance sales
team.
OUR PRICING MODELS MAY BE NEGATIVELY IMPACTED BY INCREASED COMPETITION.
The market in which we operate has been, and we believe will continue to be,
affected by competitors that sell products and services of very low prices in
order to increase their market share. We may have to lower our prices to levels
which would negatively affect our net income in order to compete with these
competitors and maintain our customer base. Alternatively, we may have to exit
certain market segments and/or product lines if we are unable to provide
products and services at competitive prices.
WE DEPEND ON MR. DEARING AND THE LOSS OF HIS SERVICES WOULD HARM OUR
BUSINESS. Mr. Dearing is our Chairman of the Board, Chief Executive Officer and
acting Chief Financial Officer. Following the resignation of our previous
Executive Vice President of Business Development and Administration, Mr. Dearing
is also now responsible for our business development program. If we lose the
services of Mr. Dearing, our business would be harmed substantially.
OUR ACQUISITION STRATEGY PRESENTS SPECIAL RISKS. We intend to continue
to expand through the acquisition of businesses, technologies, products and
services from other businesses. Acquisitions involve a number of special
problems, including:
- difficulty in integrating acquired technologies, operations
and personnel with our existing business;
- diversion of management attention in connection with
negotiating the acquisitions and integrating the assets;
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- strain on managerial and operational resources as we oversee
larger and/or more geographically diverse operations;
- exposure to unforeseen liabilities of acquired companies;
- the need to incur or assume additional debt;
- the requirement to record additional future operating costs
for the amortization of goodwill and other intangible assets,
which amounts could be significant; and
- the assumption of contracts which may be unfavorable to us
under which we are obligated to perform.
We may not be able to successfully address these problems. Moreover,
our future operating results will depend to a significant degree on our ability
to successfully manage internal growth and integrate new acquisitions.
We are actively recruiting for a Vice President of Mergers and
Acquisitions to lead our acquisition program but continued delays in hiring a
qualified candidate may delay or slow our acquisition activity.
WE MAY NEED TO MODIFY OUR BUSINESS MODEL. Today, our business model is
that of a services business: two-thirds of our yearly revenue is recurring
revenue and one-third is from new sales and services. As we move our products to
the Internet, we may need to modify our business model to focus more on initial
sales of our software and less on continuing service. This modification would
make our revenue streams more volatile and could significantly change our
financial performance.
WE FACE RISKS WITH OUR INTERNATIONAL STRATEGY. Our business strategy
includes increasing our presence in the non-U.S. equipment markets. This
strategy presents a number of special risks including:
- managing more geographically diverse operations;
- dealing with currency fluctuations;
- the increased costs of operation;
- only having a small number of employees in these markets;
- our dependence on value-added resellers and contractors to
sell and service our products;
- a much smaller and more concentrated current customer base;
and
- the assumption that U.S. international policy will remain
favorable towards the countries in which we sell our products
and services.
REVENUES FROM OUR NON-EQUIPMENT INDUSTRY BUSINESS ARE NOT INCREASING.
We believe that our non-equipment industry business revenues will not grow and
may gradually decline because we have almost reached saturation of the specific
market niches in which we participate. However, it is very possible that
revenues in the non-equipment businesses may decrease more rapidly due to
business combinations in these markets, new technology or substitutes for our
products and services.
OUR COSTS ARE NOT ENTIRELY PREDICTABLE. We are highly dependent on
software development to obtain new customers and maintain those we already have.
We may substantially underestimate the time
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and expense necessary to create the software we sell. Furthermore, competition
for skilled software developers may cause our employee costs to rise more
rapidly from planned.
OUR STOCK PRICE IS VOLATILE. The market price of our stock has been,
and is likely to continue to be, volatile, experiencing wide fluctuations.
In recent months the stock market has experienced significant price and
volume fluctuations which have particularly affected the market prices of equity
securities of many companies providing Internet-related products and services.
Some of these fluctuations appear unrelated or disproportionate to the operating
performance of such companies. Future market movements may adversely affect the
market price of our stock.
WE DO NOT PAY CASH DIVIDENDS. We do not anticipate paying any cash
dividends in the foreseeable future.
FORWARD-LOOKING STATEMENTS
In accordance with the Private Securities Litigation Reform Act of
1995, we can obtain a "safe-harbor" for forward-looking statements by
identifying those statements and by accompanying those statements with
cautionary statements which identify factors that could cause actual results to
differ materially from those in the forward-looking statements. Accordingly, the
following information contains or may contain forward-looking statements: (1)
information included or incorporated by reference in this registration statement
on Form S-3, including, without limitation, statements with respect to growth
plans, projected sales, revenues, earnings and costs, and product development
schedules and plans, (2) information included or incorporated by reference in
our future filings with the Commission including, without limitation, statements
with respect to growth plans, projected sales, revenues, earnings and costs, and
product development schedules and plans and (3) information contained in written
material, releases and oral statements issued by us, or on our behalf,
including, without limitation, statements with respect to growth plans,
projected sales, revenues, earnings and costs, and product development schedules
and plans. Generally, the words "anticipates," "believes," "expects," "intends"
and similar expressions identify forward-looking statements. Our actual results
may differ materially from those contained in the forward-looking statements
identified above. Factors which may cause such a difference to occur include,
but are not limited to, those factors set forth in the section entitled "Risk
Factors," above.
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SELLING SHAREHOLDER
The following information regarding the common stock offered hereby has
been provided to us by the selling shareholder identified below and reflects
information concerning beneficial ownership of common stock as of the date of
this prospectus.
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SHARES OWNED AFTER
COMPLETION
SHARES BENEFICIALLY SHARES WHICH OF THIS OFFERING
OWNED PRIOR TO ARE BEING ----------------
SELLING SHAREHOLDER OFFERING OFFERED HEREBY Number Percent
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RGC International Investors, LDC 3,262,500 3,262,500 0 -
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Under the terms of the debenture and the related investment options and
warrants, the debenture is convertible and the investment options and warrants
are exercisable by the holder only to the extent that the number of shares of
common stock issuable pursuant to such securities, together with the number of
shares of common stock owned by such holder and its affiliates generally would
not exceed 4.9% of our common stock that is outstanding at the time of
conversion or exercise. In certain circumstances where we have the right to
force conversion of the debenture and exercise of the investment options, the
selling shareholder's percentage ownership may exceed 4.9% but cannot exceed
9.9%. Accordingly, the number of shares of common stock set forth in the table
for the selling shareholder exceeds the number of shares of common stock that
the selling shareholder could own beneficially at any given time through its
ownership of the debenture, investment options and warrants. This limitation
does not act as a cap on the aggregate number of shares that the selling
shareholder may receive upon conversion or exercise of the debenture, investment
options and warrants but may limit the selling shareholder's right to convert or
exercise at certain times.
RGC International Investors, LDC is a party to an investment management
agreement with Rose Glen Capital Management, L.P., a limited partnership of
which the general partner is RGC General Partner Corp. Messrs. Wayne Bloch, Gary
Kaminsky and Steve Katznelson own all of the outstanding capital stock of RGC
General Partner Corp., are the sole officers and directors of RGC General
Partner Corp. and are parties to a shareholders' agreement pursuant to which
they collectively control RGC General Partner Corp. Through RGC General Partner
Corp., such individuals control Rose Glen Capital Management, L.P. Such
individuals disclaim beneficial ownership of our common stock that is owned by
the selling shareholder.
On April 27, 2000, the selling shareholder purchased from us for $4
million:
- a 3-year debenture in the principal amount of $4 million,
- warrants to purchase 600,000 shares of our common stock,
- an investment option to purchase 800,000 shares of our common
stock.
Each of these securities is described in more detail below.
6
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SHARES COVERED BY PROSPECTUS
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The shares covered by this prospectus can be summarized as follows:
Shares
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Conversion of principal of debenture................................. 1,000,000
Reserve for conversion of interest on debenture...................... 210,000
Investment options................................................... 800,000
Warrants............................................................. 600,000
Reserve for adjustment as a result of default provisions and
antidilution provisions of securities............................. 652,500
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Total................................................................ 3,262,500
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THE DEBENTURE
The debenture is in the principal amount of $4 million and is payable
in full on April 27, 2003, three years after issuance. Interest accrues at the
rate of 7% per annum and is payable at maturity.
Conversion
The selling shareholder can, at any time or from time to time, convert
the principal and accrued interest on the debenture into our common stock at a
fixed conversion price of $4 per share, subject to adjustment as described
below.
Commencing after October 27, 2000, subject to extension in certain
cases as set forth in the debenture, we can require the selling shareholder to
convert the debenture into our common stock if, among other things:
- the conversion date is at least ten (10) trading days after
the date we provide notice to the selling shareholder of our
election to require the selling shareholder to convert the
debenture into common stock,
- our closing stock price is greater than $6.60 for a period of
twenty consecutive trading days prior to our notice,
- our closing stock price is $6 or greater on the date of the
conversion, and
- the conversion would not result in the selling shareholder
holding more than 9.9% of our then outstanding common stock.
The conversion price is subject to adjustment as follows:
- If, prior to April 27, 2001, we sell our common stock at a
price that is less than the then current conversion price, the
conversion price on the debenture will be reduced to the price
at which we sold our stock. The April 27, 2001 date is
extended for specified events as described in the debenture.
After April 27, 2001, the conversion price is reduced on
weighted average basis if we sell common stock at a price that
is less than the then current exercise price. These
adjustments are also applicable if we issue options, warrants,
rights or convertible securities that are exercisable or
convertible into our common stock at a price that is less than
the then current exercise price. The following issuances,
however, are not covered by the above adjustments:
- options and warrants that were outstanding on April
27, 2000,
- stock or options granted or exercised under any of
our benefit plans, as long as the issuance is
approved by our independent directors,
- the issuance of securities in a firm commitment
underwritten public offering,
- the issuance of securities in connection with a
merger, consolidation or purchase of assets,
- the issuance of securities in connection with a
strategic alliance, relationship, partnership or
joint venture, the primary purpose of which is not to
raise equity capital, and
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- the issuance of securities in connection with our
disposition or acquisition of a business, product or
license.
- The conversion ratio is also subject to customary adjustment
provisions in the event of a stock split, stock dividend, or
similar event.
- In the event of a merger, consolidation, share exchange or
similar event as a result of which our stock is changed into
another class of stock of us or another entity, the selling
shareholder will have the right to receive upon conversion of
the debenture the securities or assets that the selling
shareholder would have received had the debenture been
converted in full immediately prior to the transaction.
In no event will we issue more than 1,232,987 shares of our common
stock pursuant to the debenture without shareholder approval. This amount
represents 19.99% of our outstanding stock on April 27, 2000 and is the maximum
number of shares we can issue under the rules of The Nasdaq Stock Market without
obtaining shareholder approval.
Following conversion of the debenture, if we fail to deliver the common
stock within two business days, we are required to pay $2,000 per day beyond a
two day grace period. At the selling shareholder's option, we must pay these
amounts in cash or our stock.
Mandatory Redemptions
If any of the events set forth below occurs, the selling shareholder
may accelerate the maturity date of the debenture. In that event, the selling
shareholder can require us to pay the greater of (1) 130% of the amount we
otherwise owe under the debenture or (2) the "parity value" of the debenture,
that is, the value of our stock issuable upon conversion of the debenture,
valued at the highest closing price of our stock from the occurrence of the
event until paid. This amount is payable in cash or in our stock, at the selling
shareholder's election. The events that give rise to a mandatory redemption
include the following:
- we fail to pay principal or interest on the debenture when
due,
- we fail to comply with specified covenants in the debenture,
- we fail to meet our registration requirements,
- we commit specified events of bankruptcy,
- we fail to maintain a Nasdaq, Nasdaq Small Cap, or American
Stock Exchange listing,
- we sell substantially all of our assets or we are acquired in
a merger or other business combination.
Covenants
As long as $500,000 or more principal amount of the debenture is
outstanding, we agreed not to:
- pay any dividends or make any other distribution on our common
stock, other than stock dividends and stock splits,
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- repurchase or redeem any shares of our capital stock, except
in exchange for common stock or preferred stock,
- incur or assume any liability for borrowed money, except (1)
our existing debt, (2) debt from a bona fide financial lending
institution, (3) indebtedness to trade creditors, (4)
borrowings used to repay the debenture, (5) indebtedness
assumed or incurred in connection with the acquisition of a
business, product, license or other asset, (6) refinancings of
any of the above, and (7) indebtedness that is subordinate to
the debenture,
- sell or otherwise dispose of assets outside the normal course
of business, except (1) the sale of a business, product,
license or other asset that our board of directors determines
is in the best interests of us and our shareholders, and (2)
sales of assets with a value not exceeding $500,000 in any
12-month period following the issuance of the debenture,
- lend money or make advances to any person not in the ordinary
course of business, except loans to subsidiaries or joint
ventures approved by a majority of our independent directors,
- guarantee another person's liabilities, except, among other
things, guarantees made in connection with the acquisition of
a business, product, license or other asset.
INVESTMENT OPTIONS
The investment options allow the selling shareholder to purchase up to
800,000 shares of our common stock at $6 per share. The investment option can be
exercised by the selling shareholder at any time or from time to time on or
prior to October 27, 2001.
The exercise price is reduced on a weighted average basis for the
issuance of securities at a price or with a conversion or exercise price of less
than $6, subject to the same exceptions as for the debenture. We have also
agreed with The Nasdaq Stock Market not to enter into any transaction that will
result in a reduction of the exercise price of the investment options and
warrants to $4.75 or less with respect to 1,232,987 shares or more, unless we
are either permitted (or not prohibited) by the applicable rules and regulations
of The Nasdaq Stock Market to do so or we obtain shareholder approval to do so.
Beginning April 27, 2001, we can require the selling shareholder to
exercise the investment options if, among other things:
- The registration statement of which this prospectus is a part
has been effective for at least 90 days,
- the closing bid price of our common stock exceeds $9.90 for 20
consecutive trading days,
- we provide at least 10 business days notice of our election to
require the selling shareholder to exercise the investment
options,
- we are not in possession of material nonpublic information
that would cause an increase in our common stock unless we
publicly disclose this information, and
- our average closing bid price from the date of our notice to
the date of exercise of the investment options is $9.00 or
more.
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WARRANTS
The warrants allow the selling shareholder to purchase up to 600,000
shares of our common stock at $6 per share. The warrants can be exercised by the
selling shareholder at any time or from time to time on or prior to April 27,
2005. The warrants are otherwise identical to the investment options, except we
cannot force the selling shareholder to exercise the warrants prior to the
expiration date of the warrants.
SECURITIES PURCHASE AGREEMENT
Pursuant to the securities purchase agreement with the selling
shareholder, we agreed, among other things, that until the date that is 180 days
after effectiveness of the registration statement of which this prospectus is a
part we will not conduct any equity financing, including debt financing with an
equity component, without the approval of the selling shareholder. In addition,
until 360 days after effectiveness of the registration statement of which this
prospectus is a part, we agreed to grant the selling shareholder a right of
first refusal with respect to our equity financings.
These restrictions do not apply to:
- issuances of securities in a firm commitment, underwritten
public offering,
- issuances of securities in connection with a merger,
consolidation or purchase of assets or in connection with a
strategic alliance, relationship, partnership or joint
venture, the primary purpose of which is not to raise equity
capital,
- issuances of securities in connection with the disposition or
acquisition of a business, product or license,
- issuances of up to 200,000 shares of common stock, including
warrants, to vendors and up to 400,000 shares in connection
with restructuring our accounts receivable sales facility,
provided the stock is sold or exercisable at $6.00 per share
or greater,
- securities issued under stock option, stock purchase or
restricted stock plans approved by our shareholders.
REGISTRATION RIGHTS AGREEMENT
Under a registration rights agreement with the selling shareholder, we
agreed, among other things, to file, obtain and maintain effectiveness of the
registration statement of which this prospectus is a part. If the registration
statement is not effective by August 25, 2000, we fail to maintain effectiveness
of the registration statement, or our common stock is not listed on an exchange
or Nasdaq, we must make a payment equal to 1% of the original amount of the
debenture for each of the first two calendar months and 2% for each subsequent
calendar month that the condition exists. We must pay this amount in cash or, in
the selling shareholder's election, by adding it to the amount of the debenture.
FINDER
In connection with the financing, we agreed to pay Crown Energy
Incorporated a finder's fee of 4% of all funds received from the selling
shareholder or $160,000. We also agreed to issue to the finder a 5-year warrant
for each $500 in funds received from the selling shareholder or a warrant for
8,000 shares of stock. The exercise price of the warrant will be $7.03, or 125%
of the closing price of our common stock on April 27, 2000.
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<PAGE> 14
The finder introduced us to the selling shareholder but did not engage
in any negotiations regarding the transaction, review or comment on the
documents pertaining to the financing, participate in the financing, or assist
us in any way in structuring or completing the financing.
PLAN OF DISTRIBUTION
The shares being offered by the selling shareholder or its respective
pledgees, donees, transferees or other successors in interest, will be sold from
time to time in one or more transactions (which may involve block transactions):
- on The Nasdaq Stock Market or on such other market on which
the common stock may from time to time be trading;
- in privately-negotiated transactions;
- through the writing of options on the shares;
- short sales; or
- any combination thereof.
The sale price to the public may be:
- the market price prevailing at the time of sale;
- a price related to such prevailing market price;
- at negotiated prices; or
- such other price as the selling shareholder determines from
time to time.
The shares may also be sold pursuant to Rule 144 under the Securities
Act. The selling shareholder shall have the sole and absolute discretion not to
accept any purchase offer or make any sale of shares if it deems the purchase
price to be unsatisfactory at any particular time.
The selling shareholder or its pledgees, donees, transferees or other
successors in interest may also sell the shares directly to market makers acting
as principals and/or broker-dealers acting as agents for themselves or their
customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling shareholder and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that the selling shareholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling shareholder cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling shareholder. The selling
shareholder and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus, may be deemed "underwriters" as that
term is defined under the Securities Act or the Exchange Act, or the rules and
regulations under such acts.
The selling shareholder and any other persons participating in the sale
or distribution of the shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations under such act, including, without
limitation, Regulation M. These provisions may restrict certain activities of,
and limit the timing of purchases and sales of any of the shares by, the selling
shareholder or any other such person. Furthermore, under Regulation M, persons
engaged in a distribution of securities are prohibited from
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<PAGE> 15
simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions, subject to specified exceptions or
exemptions. All of these limitations may affect the marketability of the shares.
We have agreed to indemnify the selling shareholder, or its transferees
or assignees, against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the selling shareholder or their
respective pledgees, donees, transferees or other successors in interest, may be
required to make in respect of such liabilities.
USE OF PROCEEDS
The proceeds from the sale of shares of common stock covered by this
prospectus are entirely for the benefit of the selling shareholder. We will not
receive any proceeds from the sale of shares of common stock by the selling
shareholder.
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been
passed upon by Godfrey & Kahn, S.C., Milwaukee, Wisconsin. In the opinion of
Godfrey & Kahn, S.C., the shares are duly and validly authorized, fully paid
and, subject to Section 180.0622(2)(b) of the Wisconsin Statutes, nonassessable.
Section 180.0622(2)(b) of the Wisconsin Statutes provides that shareholders of a
corporation may be assessed up to the par value of their shares to satisfy the
obligations of such corporation to its employees for services rendered, but not
exceeding six months' service in the case of any individual employee. Certain
Wisconsin courts have interpreted "par value" to mean the full amount paid by
the purchaser of shares upon issuance thereof.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements and schedule included in our Annual Report on Form 10-K for the year
ended July 31, 1999, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements and schedule are incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information requirements of the Exchange Act, and
in accordance therewith, file reports, proxy and information statements and
other information with the Commission. We have filed with the Commission a
registration statement on Form S-3 under the Securities Act with respect to the
common stock offered by this prospectus. This prospectus does not contain all
the information included or incorporated in the registration statement. Such
reports, proxy and information statements, registration statement and other
information filed by us may be inspected and, upon payment of prescribed fees,
copied at the public reference facilities of the Commission at 450 Fifth Street
N.W., Washington, D.C. 20549, and at the regional offices of the Commission at
Seven World Trade Center, New York, New York 10048, and at Citicorp Center, 500
West Madison Street, Chicago, Illinois 60661.
You may obtain information on the operation of the public reference
facilities by calling the Commission at 1-800-SEC-0330. Such information may
also be accessed electronically by means of the Commission's website on the
Internet at http://www.sec.gov.
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<PAGE> 16
In addition, our common stock is listed on the Nasdaq National Market,
and such reports, proxy and information statements, registration statement and
other information should be available for inspection and copying at the offices
of the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
DOCUMENTS INCORPORATED BY REFERENCE
The Commission allows us to "incorporate by reference" into this
prospectus the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information that we file later with the Commission will
automatically update and supercede this information. We incorporate by reference
the documents listed below and any future filings we will make with the
Commission under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act,
including any we make after the date we file the registration statement of which
this prospectus is a part and before the registration statement becomes
effective:
- our annual report on Form 10-K for the year ended July 31,
1999;
- our quarterly reports on Form 10-Q for the quarters ended
October 31, 1999, January 31, 2000 and April 30, 2000;
- our current reports on Form 8-K dated February 18, 2000 and
April 27, 2000;
- the description of our common stock contained in our
registration statement filed pursuant to Section 12 of the
Exchange Act, including any amendment or report filed for the
purpose of updating such description.
We will provide without charge to each person to whom a copy of this
prospectus has been delivered, upon written or oral request, a copy of any or
all of the incorporated documents, other than exhibits to such documents.
Requests for such copies should be directed to Corporate Secretary, ARI Network
Services, Inc., 330 East Kilbourn Avenue, Milwaukee, Wisconsin 53202; telephone
(414) 278-7676.
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<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred by
the Registrant in connection with the distribution of the securities being
registered hereby:
<TABLE>
<S> <C>
SEC registration fee............................................ $ 3,311
Nasdaq listing fee.............................................. 65,250
Accounting fees and expenses.................................... 4,000
Legal fees and expenses......................................... 9,000
Miscellaneous................................................... 3,439
----------
TOTAL.................................................. $ 85,000
==========
</TABLE>
All of the above expenses, other than the SEC registration fee, are
estimates. All of the expenses listed will be paid by the Registrant.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 180.0851 of the Wisconsin Business Corporation Law (the "WBCL")
requires a corporation to indemnify a director or officer, to the extent such
person is successful on the merits or otherwise in the defense of a proceeding,
for all reasonable expenses incurred in the proceeding, if such person was a
party to such proceeding because he or she was a director or officer of the
corporation. In cases where a director or officer is not successful on the
merits or otherwise in the defense of a proceeding, a corporation is required to
indemnify a director or officer against liability incurred by the director or
officer in a proceeding if such person was a party to such proceeding because he
or she is a director or officer of the corporation unless it is determined that
he or she breached or failed to perform a duty owed to the corporation and such
breach or failure to perform constitutes: (i) a willful failure to deal fairly
with the corporation or its shareholders in connection with a matter in which
the director or officer has a material conflict of interest; (ii) a violation of
criminal law, unless the director or officer had reasonable cause to believe his
or her conduct was lawful or no reasonable cause to believe his or her conduct
was unlawful; (iii) a transaction from which the director or officer derived an
improper personal profit; or (iv) willful misconduct.
Section 180.0858 of the WBCL provides that subject to certain
limitations, the mandatory indemnification provisions do not preclude any
additional right to indemnification or allowance of expenses that a director or
officer may have under a corporation's articles of incorporation or by-laws, a
written agreement between the director or officer and the corporation or a
resolution of the board of directors or the shareholders.
Unless otherwise provided in the articles of incorporation or by-laws,
or by written agreement between the director or officer and the corporation, an
officer or director seeking indemnification is entitled to indemnification if
approved in any of the following manners as specified in Section 180.0855 of the
WBCL: (i) by majority vote of a disinterested quorum of the board of directors,
or if such disinterested quorum cannot be obtained, by a majority vote of a
committee of two or more disinterested directors; (ii) by independent legal
counsel chosen by a quorum of disinterested directors or its committee (or if
unable to obtain such a quorum or committee, by a majority vote of the full
board of directors); (iii) by a panel of three arbitrators (one of which is
chosen by a quorum of disinterested directors); (iv) by the vote of the
shareholders; (v) by a court; or (vi) by any other method permitted in Section
180.0858 of the WBCL.
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Reasonable expenses incurred by a director or officer who is a party to
a proceeding may be reimbursed by a corporation, pursuant to Section 180.0853 of
the WBCL, at such time as the director or officer furnishes to the corporation
written affirmation of his or her good faith belief that he or she has not
breached or failed to perform his or her duties; and written confirmation to
repay any amounts advanced if it is determined that indemnification by the
corporation is not required.
Section 180.0859 of the WBCL provides that it is the public policy of
the State of Wisconsin to require or permit indemnification, allowance of
expenses and insurance to the extent required or permitted under Sections
180.0850 to 180.0858 of the WBCL for any liability incurred in connection with
any proceeding involving a federal or state statute, rule or regulation
regulating the offer, sale or purchase of securities.
As permitted by Section 180.0858, the Registrant has adopted
indemnification provisions in its by-laws which closely track the statutory
indemnification provisions with certain exceptions. In particular, Section 7.1
of the Registrant's by-laws, among other items, provides that (i) an individual
shall be indemnified unless it is proved by a final judicial adjudication that
indemnification is prohibited and (ii) payment or reimbursement of expenses,
subject to certain limitations, will be mandatory rather than permissive. The
Registrant has purchased directors' and officers' liability insurance which
insures the Registrant's officers and directors against certain liabilities
which may arise under the Securities Act of 1933.
ITEM 16. EXHIBITS.
See "Exhibit Index."
ITEM 17. UNDERTAKINGS.
*(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration Statement:
(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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
Registration Statement.
(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;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by
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<PAGE> 19
the Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
*(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in the Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
*(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, 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 such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
------------
* Paragraph references correspond to those of Item 512 of Regulations S-K.
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<PAGE> 20
SIGNATURES
Pursuant to 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 for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Milwaukee, State of Wisconsin, on June 22, 2000.
ARI NETWORK SERVICES, INC.
By: /s/ Brian E. Dearing
---------------------------------
Brian E. Dearing
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Brian E. Dearing Chairman and Chief Executive Officer,
--------------------------------------- Acting Chief Financial Officer and
Brian E. Dearing Acting Chief Accounting Officer
(Principal Executive Officer and Principal
Financial and Accounting Officer)
* Director
---------------------------------------
Gordon J. Bridge
Director
---------------------------------------
Francis Brzezinski
* Director
---------------------------------------
George D. Dalton
Director
---------------------------------------
Ted C. Feierstein
* Director
---------------------------------------
Richard W. Weening
</TABLE>
* Executed on June 22, 2000, by Brian E. Dearing, pursuant to a power of
attorney previously filed.
/s/ Brian E. Dearing
----------------------------------
Brian E. Dearing, attorney-in-fact
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<PAGE> 21
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
4.1 Securities Purchase Agreement dated as of April 25, 2000 by
and among the Registrant and RGC International Investors, LDC,
incorporated herein by reference to Exhibit 99.1 of the
Registrant's Current Report on Form 8-K dated April 27, 2000
4.2 Convertible Subordinated Debenture dated as of April 27, 2000,
incorporated herein by reference to Exhibit 99.2 of the
Registrant's Current Report on Form 8-K dated April 27, 2000
4.3 Stock Purchase Warrant dated as of April 27, 2000,
incorporated herein by reference to Exhibit 99.3 of the
Registrant's Current Report on Form 8-K dated April 27, 2000
4.4 Investment Option dated as of April 27, 2000, incorporated
herein by reference to Exhibit 99.4 of the Registrant's
Current Report on Form 8-K dated April 27, 2000
4.5 Registration Rights Agreement dated as of April 27, 2000 by
and among the Registrant and the Investor, incorporated herein
by reference to Exhibit 99.5 of the Registrant's Current
Report on Form 8-K dated April 27, 2000
5.1 Opinion of Godfrey & Kahn, S.C.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Godfrey & Kahn, S.C. (included in Exhibit 5.1)
24.1 Powers of Attorney (filed on May 12, 2000)
