<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: September 1, 1998
---------------------------------
ARIEL CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-25236 13-3137699
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(Commission File Number) (I.R.S. Employer Identification No.)
2540 Route 130, Cranbury, New Jersey 08512
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(Address of Principal Executive Offices) (Zip Code)
(609) 860-2900
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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TABLE OF CONTENTS
FORM 8-K
September 1, 1998
Item Page
Item 2. Acquisition or Disposition of Assets. 1
Item 7. Financial Statements and Exhibits. 2
Signature 3
Exhibits E-1
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Item 2. Acquisition or Disposition of Assets.
Consummation of Sale of the Communications Systems Group
Ariel Corporation announced September 1, 1998 that it has closed the
sale of the assets of its DSLAM group to Cabletron Systems, Inc. of Rochester,
New Hampshire. With the closing, Ariel has received approximately 33.5 million
in cash. The sale allows Ariel to better focus its efforts on its core
business and to significantly reduce its operating expenses. Ariel's
strengthened financial position enables the Company to invest in technology,
people and strategic partnerships, positioning it for growth in the emerging
open remote access market.
Matters discussed herein, including any discussion of or impact, expressed or
implied, on Ariel's anticipated operating results and future earnings per
share contain forward-looking statements that involve risks and uncertainties.
Ariel's results may differ significantly from the results indicated by such
forward-looking statements. Additionally, Ariel's operating results may be
affected by many factors, including but not limited to, the timely development
and acceptance of new products, the impact of competitive products and
pricing, the development of OEM relationships, and changing market conditions.
These and other risks are detailed from time to time in Ariel's SEC reports,
including its Form 10-K for the year ended December 31, 1997 and its Form 10-Q
for the quarter ended June 30, 1998.
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Item 7. Financial Statements and Exhibits.
a. Financial statements of businesses acquired.
Not applicable.
b. Pro forma financial information.
Unaudited pro forma balance sheet of Ariel Corporation as of
June 30, 1998 reflecting the disposition of the Communications Systems Group
as if the transaction had occurred as of June 30, 1998. Unaudited pro forma
statements of operations for the six months ended June 30, 1998 and for the
year ended December 31, 1997 as if the transaction had occurred at the
beginning of the periods indicated.
c. Exhibits.
The following exhibits are filed with this report:
Exhibit No. Description
----------- -----------
99a Pro forma Financial Statements
99b Press Release
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Ariel Corporation
Dated: September 15, 1998 By:/s/ Anthony Agnello
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Anthony Agnello
Chairman and Chief Executive Officer
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EXHIBIT INDEX
Exhibit
No. Title
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99a Pro forma Financial Statements
99b Press Release
E-1
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Exhibit 99a
ARIEL CORPORATION
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1998
----------------------------------------------
As Proforma
Reported Adjustments Proforma
------------ ---------------- ------------
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and Cash Equivalents........................... $ 683,222 $27,782,048 28,465,270
Accounts Receivable, Net of Allowance for Doubtful
Accounts of $217,433 in 1996 and $187,446 in 1997.. 3,536,680 3,536,690
Other Receivables................................... 542,013 (174,120) 367,893
Inventories......................................... 4,251,893 (146,655) 4,105,238
Prepaid Expenses.................................... 443,238 (30,062) 413,176
----------- ----------- ----------
Total Current Assets............................. 9,457,056 27,431,211 36,888,267
Equipment, Net of Accumulated Depreciation
and Amortization.................................... 2,084,865 (642,399) 1,442,466
Other Assets......................................... 749,086 (32,986) 716,100
----------- ----------- ----------
Total Assets..................................... $12,291,007 $26,755,826 39,046,833
=========== =========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable.................................... $ 936,167 936,167
Accrued Expenses.................................... 2,053,227 2,053,227
Notes Payable - Current Portion of Long-Term Debt... 4,858,603 (2,000,000) 2,858,603
Royalties Payable................................... 72,879 72,879
----------- ----------- ----------
Total Current Liabilities........................ 7,920,876 (2,000,000) 5,920,876
Notes Payable - Long Term............................ 2,475,914 2,475,914
Stockholders' Equity
Preferred Stock, $.001 Par Value:
Authorized - 2,000,000 Shares
Issued and Outstanding - None
Common Stock, $.001 Par Value:
Authorized - 20,000,000 Shares
Issued and Outstanding - 9,720,750 at June 30, 1998
and 9,234,250 at December 31, 1997................ 9,721 9,721
Additional Paid-In Capital........................... 32,831,481 32,831,481
Unearned Compensation................................ (55,409) (55,409)
Retained Earning/(Accumulated Deficit)............... (30,891,574) 28,755,826 (2,135,748)
----------- ----------- ----------
Total Stockholders' Equity........................ 1,894,219 28,755,826 30,650,045
----------- ----------- ----------
Total Liabilities & Stockholders' Equity............. $12,291,007 $26,755,826 39,046,833
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these
proforma financial statements.
<PAGE>
ARIEL CORPORATION
PROFORMA STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For The Six Months Ended June 30, 1998
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As Proforma
Reported Adjustments Proforma
------------ ---------------- ------------
<S> <C> <C> <C>
Sales................................................ $10,387,807 ($13,000) $10,374,807
Cost of Goods Sold................................... 6,313,622 (263) 6,313,359
----------- ----------- -----------
Gross Profit..................................... 4,074,185 (12,737) 4,061,448
Expenses:
Sales and Marketing................................. 2,872,422 (61,399) 2,811,023
General and Administrative.......................... 1,828,610 (252,136) 1,576,474
Research and Development............................ 4,365,804 (1,829,984) 2,535,820
----------- ----------- -----------
Total Operating Expenses......................... 9,066,838 (2,143,519) 6,923,317
----------- ----------- -----------
Loss from Operations............................. (4,992,655) 2,130,782 (2,861,869)
Interest Income...................................... 40,208 0 40,208
Interest Expense..................................... (277,402) 81,276 (196,126)
Other Income (Expense)............................... 52,655 0 52,655
----------- ----------- -----------
Loss Before Income Taxes......................... (5,177,191) 2,212,058 (2,965,132)
Income Taxes..................................... 0 0 0
----------- ----------- -----------
Net Loss......................................... ($5,177,191) $ 2,212,058 ($2,965,132)
=========== =========== ===========
Basic and Diluted Per Share Data:
Weighted Average Number of Common
Shares Outstanding.................................. 9,514,482 9,514,482 9,514,482
=========== =========== ===========
Net Loss Per Share................................... $ (0.54) $ 0.23 $ (0.31)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
proforma financial statements.
<PAGE>
ARIEL CORPORATION
PROFORMA STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For The Year Ended December 31, 1997
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As Proforma
Reported Adjustments Proforma
------------ ---------------- ------------
<S> <C> <C> <C>
Sales................................................ $13,201,916 ($33,930) $13,167,986
Cost of Goods Sold................................... 7,506,277 (25,121) 7,481,156
----------- ----------- -----------
Gross Profit..................................... 5,695,639 (8,809) 5,686,830
Expenses:
Sales and Marketing................................. 4,881,107 (211,507) 4,669,600
General and Administrative.......................... 4,208,378 (549,657) 3,658,721
Research and Development............................ 9,312,937 (3,051,665) 6,261,272
Restructuring Charge................................ 379,454 0 379,454
----------- ----------- -----------
Total Operating Expenses......................... 18,781,876 (3,812,829) 14,969,047
----------- ----------- -----------
Loss from Operations............................. (13,086,237) 3,804,020 (9,282,217)
Interest Income...................................... 333,465 0 333,465
Interest Expense..................................... (240,450) 0 (240,450)
Other Income (Expense)............................... 231,823 0 231,823
----------- ----------- -----------
Loss Before Income Taxes......................... (12,761,399) 3,804,020 (8,957,379)
Income Taxes..................................... 0 0 0
----------- ----------- -----------
Net Loss......................................... ($12,761,399) $ 3,804,020 ($8,957,379)
=========== =========== ===========
Basic and Diluted Per Share Data:
Weighted Average Number of Common
Shares Outstanding.................................. 9,161,758 9,161,758 9,161,758
=========== =========== ===========
Net Loss Per Share................................... $ (1.39) $ 0.42 $ (0.98)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
proforma financial statements.
<PAGE>
Notes to Unaudited Proforma Financial Statements
1. As described in item 5, on September 1, 1998, Ariel Corporation completed
the sale of its Computer Systems Group (CSG) located in Piscataway, New
Jersey. Ariel's historical financial statements have been restated on a
proforma basis to reflect this transaction. These proforma financial
statements should be read in conjunction with the historical financial
statements and notes thereto of Ariel. Additionally, the proforma financial
statements are not necessarily indicative of the results that would have
been achieved had the transaction occurred on those dates, nor are they
necessarily indicative of future results.
2. All summary balance sheet proforma adjustments assume the transaction
described in Item 5 was consummated on the balance sheet date. The proforma
balance sheet adjustment gives effect for the disposition of substantially
all tangible assets related to the CSG.
3. All summary statement of operations proforma adjustments assume the sale of
the CSG giving rise to these adjustments was consummated immediately prior
to the first day of the period presented; accordingly, the gain from this
transaction is not reflected in these statements of operations for the
periods presented.
The proforma statements of operations gives effect for the following
unaudited proforma adjustments:
(i) Elimination of the results of operations associated with the CSG's
operations for the periods presented.
(ii) Elimination of interest expense based on the assumed reduction in
debt.
(iii) Calculation of the proforma tax provision using statutory rates for
the periods presented. In accordance with generally accepted
accounting principals, loss carry forwards resulting from operating
losses have been valued at zero in the tax provision.
<PAGE>
Exhibit 99b
Ariel and Cabletron Close Sale of DSLAM Unit
Ariel to Focus on Opportunities in Emerging Open Remote Access Market
CRANBURY, N.J., September 1, 1998 -- Ariel Corp. (NASDAQ: ADSP) announced
today that it has closed the sale of the assets of its DSLAM group to
Cabletron Systems, Inc. of Rochester, New Hampshire (NYSE: CS). With the
closing, Ariel has received approximately 33.5 million in cash. The sale
allows Ariel to better focus its effort on its core business. It will also
lead to a significant reduction in operating expenses. This strengthens
Ariel's financial position and enables the Company to invest in technology,
people and strategic partnerships, positioning it for growth in the emerging
open remote access market.
Anthony Agnello, Ariel's Chief Executive Officer said "Finalizing this sale is
a timely realization of the value of our two year DSLAM investment. Beyond
validating our vision, completing this transaction serves our key mission of
sharpening our focus and harvesting our non-core products -- Ariel is now one
hundred percent focused on the open remote access market."
"The Proceeds from this transaction", continued Agnello, "give us a strong
balance sheet and improve Ariel's ability to develop products and technology,
and to establish our brand. We will also be able to better develop
partnerships, obtain complimentary products, and create more effective sales
channels to grow revenues from OEM design wins and enterprise product sales."
Matters discussed herein, including any discussion of or impact, expressed or
implied, on Ariel's anticipated operating results and future earnings per
share contain forward-looking statements that involve risks and uncertainties.
Ariel's results may differ significantly from the results indicated by such
forward-looking statements and may be affected by many factors, including but
not limited to, the timely development and acceptance of new products, the
impact of competitive products and pricing, the development of OEM
relationships, and changing market conditions. These and other risks are
detailed from time to time in Ariel's SEC reports, including its Form 10-K for
the year ended December 31, 1997 and its Form 10-Q for the quarter ended June
30, 1998.
