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As filed with the Securities and Exchange Commission on April 4, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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ARIEL CORPORATION
(Exact name of registrant as specified in charter)
----------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 3571 13-3137699
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
----------------------
2540 Route 130
Cranbury, NJ 08512
(609) 860-2900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------------
Jay H. Atlas
Chief Executive Officer and President
Ariel Corporation
2540 Route 130
Cranbury, NJ 08512
(609) 860-2900
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
----------------------
Copies to:
Harold Paul, Esq. Danielle Carbone, Esq.
Paul & Rosen Shearman & Sterling
420 Lexington Avenue 599 Lexington Avenue
New York, NY 10170 New York, NY 10022
(212) 661-2727 (212) 848-4000
----------------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective and from time to
time thereafter as determined by market conditions.
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, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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
under the Securities Act, please check the following box. |_|
<PAGE>
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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 Be Offering Price Aggregate Offering Registration
Securities to Be Registered Registered Per Share (2) Price (2) Fee
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<S> <C> <C> <C> <C> <C>
Common Stock, par value
$.001 per share(1)............... 4,486,850 shares $7.81 $35,042,299 $9,251
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</TABLE>
(1) Includes 2,335,850 shares of common stock issuable upon the exercise of
warrants to purchase common stock.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act and based upon the average
of the high and low trading price for the common stock on the Nasdaq
National Market on March 30, 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, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to such
Section 8(a), may determine.
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<PAGE>
PROSPECTUS
The information in this prospectus is not complete and may be changed. We have
filed a registration statement relating to these shares with the Securities and
Exchange Commission. We cannot sell these shares until the registration
statement becomes effective. This prospectus is not an offer to sell these
shares and we are not soliciting offers to buy these shares in any state where
such offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated April 4, 2000
4,486,850 Shares
[GRAPHIC OMITTED]
Common Stock
The selling stockholders identified in this prospectus may offer from
time to time an aggregate of up to 4,486,850 shares of Ariel Corporation's
common stock. We will not receive any of the proceeds from the sale of shares.
The selling stockholders may offer their shares through public or
private transactions, on or off the Nasdaq National Market, at prevailing market
prices or at privately negotiated prices.
Our common stock trades on the Nasdaq National Market under the symbol
"ADSP". On March 31, 2000, the last reported sale price of our common stock on
the Nasdaq National Market was $8 1/8 per share.
----------
Investing in our common stock involves risks which are described in the
"Risk Factors" section beginning on page 4 of this prospectus.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------
The date of this prospectus is , 2000
<PAGE>
TABLE OF CONTENTS
Page
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Special Note Regarding Forward-looking Statements.............................1
Where You Can Find More Information...........................................1
Incorporation of Information We File with the SEC.............................2
Ariel.........................................................................3
Risk Factors..................................................................4
Use of Proceeds..............................................................13
Selling Stockholders.........................................................13
Plan of Distribution.........................................................16
Description of Capital Stock.................................................17
Legal Matters................................................................20
Experts......................................................................20
------------------------------------
"Ariel" and "PowerPOP" are our trademarks. All other trademarks or
service marks appearing in this prospectus are trademarks and service marks of
the respective companies that use them.
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not, and the selling stockholders have
not, authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not, and the selling stockholders are not, making an offer to
sell our common stock in any jurisdiction except where the offer or sale is
permitted. You should not assume that the information contained or incorporated
by reference in this prospectus is accurate as of any date other than the date
on the front cover of this prospectus or the date of such other documents.
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements including, without
limitation, statements concerning the future of the industry, product
development, business strategy, financial estimates, continued acceptance of our
products and dependence on significant distributors and customers. In some
cases, you can identify forward-looking statements by terminology such as "may",
"will", "should", "expects", "plans", "anticipates", "believes", "estimated",
"predicts", "potential", "continue" or the negative of such terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties, and other factors that may cause our actual
results, levels of activity, performance, or achievements to be materially
different from any future results, levels of activity, performance, or
achievements expressed or implied by such forward-looking statements. These
factors include, among other things, those listed under the heading "Risk
Factors" and in our Form 10-K for the fiscal year ended December 31, 1999, which
is incorporated by reference herein.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, or achievements. We are under no duty to update
any of the forward-looking statements after the date of this prospectus to
conform to actual results.
WHERE YOU CAN FIND MORE INFORMATION
We are a public company and file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any document we file at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
regional offices located at Seven World Trade Center, New York, New York 10007
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can
request copies of these documents by writing to the SEC and paying a fee for the
copying cost. Please call the SEC at 1-800-SEC-0330 for more information about
the operation of the public reference room. Our SEC filings are also available
to the public at the SEC's web site at http://www.sec.gov. In addition, you can
read and copy our SEC filings at the office of the National Association of
Securities Dealers, Inc. at 1735 K Street, Washington, D.C. 20006.
We have filed a registration statement on Form S-3 with the SEC
covering the common stock offered by this prospectus. We refer you to this
registration statement and its exhibits for additional information about us and
our common stock. Copies of the registration statement may be obtained at the
above referenced SEC offices or on the SEC's web site at http://www.sec.gov.
<PAGE>
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file
with them, which means:
o Incorporated documents are considered part of the prospectus,
o We can disclose important information to you by referring you to
those documents, and
o Information that we file with the SEC will automatically update and
supersede this prospectus.
We incorporate by reference the documents listed below which were filed
with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act"):
o Annual Report on Form 10-K for the fiscal year ended December 31,
1999, and
o Current Report on Form 8-K filed March 10, 2000.
We also incorporate by reference each of the following documents that
we will file with the SEC after the date of this prospectus but before all the
common stock offered by this prospectus has been sold:
o Reports filed under Sections 13(a) and (c) of the Exchange Act,
o Definitive proxy or information statements filed under Section 14
of the Exchange Act in connection with any subsequent stockholders'
meeting, and
o Any reports filed under the Section 15(d) of the Exchange Act.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address:
Ariel Corporation
Attention: Jay H. Atlas
2540 Route 130
Cranbury, NJ 08512
(609) 860-2900
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ARIEL
We are a leading provider of open systems-based digital remote access
equipment to Internet service providers ("ISPs"). Our remote access equipment is
compatible with open systems platforms running a variety of popular operating
systems, including Windows NT and Linux, and enables ISPs to build reliable,
scalable and easy to manage networks at a cost that is significantly below other
available alternatives.
Remote access equipment enables a user dialing in over a standard
telephone line to connect to a computer network. Because of the increasing
number of Internet users, ISPs are faced with the challenge of providing access
to a growing number of subscribers, including those subscribers who are staying
connected to the Internet for longer periods of time. In addition, ISPs must
also find cost effective ways to expand their networks and computer systems to
provide additional services such as Internet telephony, fax and voice over the
Internet and unified messaging. Our products enable ISPs to use standard PC
systems to build remote access server concentrators, which is the equipment used
to connect multiple users simultaneously to the Internet.
We recently introduced a new family of dial-up Internet access
solutions we call PowerPOP(TM) architecture, which leverages industry standard
hardware, software and applications. Using a standard PC system to build a
remote access server concentrator, our remote access solutions enable ISPs to
enhance their network performance while significantly reducing their capital
costs. A typical ISP network architecture is based on a central network
operations center, where servers run the services that the ISP provides,
connected to a number of "dumb" points of presence ("POPs"). Our PowerPOP
architecture, by taking advantage of the increasing performance and low prices
of PC-based systems, allows ISPs to provide key network services at the POP. By
installing intelligence and processing capability at the POP, ISPs can
significantly reduce network traffic which results in a faster response time and
improved customer satisfaction. We sell our products to ISPs primarily through
one distributor.
We recently launched our fourth generation of remote access products
that add SS7 signaling, including voice and fax over the Internet protocol
features, to our PowerPOP architecture. We are currently developing a next
generation product that will extend the PowerPOP architecture into the customer
premises of business enterprises.
We have historically provided and will continue to provide remote
access and digital signal processing ("DSP") products to original equipment
manufacturers ("OEMs") who integrate our components into their products. Because
integration of our complex components involves a significant amount of technical
development and testing by the OEM, our products are generally used for the
duration of the OEM's product-life. We sell our products to OEMs through our
direct sales force. We intend to continue to offer all our component products to
OEMs, including those OEMs who sell products in the ISP market.
Corporate Information
Our principal executive offices are located at 2540 Route 130,
Cranbury, New Jersey 08512 and our telephone number is (609) 860-2900. Our
e-mail address is [email protected] and our website can be accessed at
www.ariel.com. The reference to our website address does not constitute
incorporation by reference of the information contained at the website.
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RISK FACTORS
Before you invest in our common stock, you should be aware that there
are risks, including those described below which may affect our business,
financial condition or results of operations. You should consider carefully
these risk factors together with all of the other information included in or
incorporated by reference in this prospectus before you decide to purchase
shares of our common stock.
Risks Relating to Our Business
We have incurred substantial operating losses and an accumulated deficit. We
expect to continue to have operating losses and a growing accumulated deficit in
the future.
Our business operations have generated operating losses since 1993. For
the year ended December 31, 1999, our business operations generated operating
losses of $12,474,160. We had an accumulated deficit of $26,137,692 at December
31, 1999. We expect to continue to generate net operating losses while we
continue to launch new products and penetrate the ISP market. We can not assure
you that we will obtain a customer base sufficient to support the costs of our
operations.
We cannot assure you that we will become profitable or that our cash
flow will become positive at any time in the foreseeable future, or at all, or
that we will generate sufficient cash flow from product sales to liquidate
liabilities as they become due. In the event that we are unable to liquidate our
liabilities, we may delay or eliminate some expenditures and we may scale back
our planned operations. We may need additional funds to meet our planned
obligations, and we will seek to raise such amounts through a variety of
options, including future cash from operations, borrowings and proceeds from
equity financings. Additional funding may not be available when needed or on
terms acceptable to us, which could have a material adverse effect on our
business, financial condition and results of operations. In addition, if we
raise additional funds through the issuance of equity, equity-linked or debt
securities, those securities may have rights, preferences or privileges senior
to those of the rights of our common stock and our stockholders may experience
additional dilution.
We have substantial debt and debt service requirements and this may adversely
affect our financial and operating flexibility.
We have a significant amount of indebtedness. At December 31, 1999, we
had $3.7 million of outstanding indebtedness under our credit agreement, of
which $1.2 million is due on June 12, 2000. The amount of indebtedness we have
could have important consequences to our stockholders. For example, it could:
o make it more difficult for us to meet our obligations;
o increase our vulnerability and limit our ability to react to
general adverse economic and industry conditions;
o limit our ability to use operating cash flow to fund operating
expenses, working capital, research and development and other
general corporate purposes because we must dedicate a substantial
portion of our cash flow to make payments on our debt;
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o place us at a competitive disadvantage compared to some of our
competitors that have less debt; and
o limit our ability to borrow additional funds.
Our ability to pay interest under our credit facility or to refinance
our indebtedness and to satisfy our other debt obligations will depend upon our
future operating performance, which in turn depends upon the successful
implementation of our new business strategy and upon financial, competitive,
regulatory, technical and other factors, many of which are beyond our control.
If we are not able to generate sufficient cash from operations to make
payments under our credit agreement or to meet any other debt service
obligations, we will need to refinance our indebtedness. If such refinancing is
not possible, we could be forced to dispose of assets at unfavorable prices or
default on our debt obligations. Even if we obtain such financing, we cannot
assure you that it would be on terms that are favorable to us.
We have recently changed our business strategy to focus on a new class of
products for the ISP market. This represents a new market for us and we have had
limited experience selling our products in this market.
Our ability to successfully execute our new business strategy is
critical to the future performance of our business. During the second quarter of
1999, we changed our business strategy to focus on the ISP market following the
decline of the enterprise remote access market. Historically, we have derived,
and expect to continue to derive in the near term, substantially all of our
revenues from product sales to OEMs and PC manufacturers. As we focus our
efforts on the ISP market, we expect sales to OEMs to represent a declining
percentage of our total revenue in the future if our new business strategy is
successful. Because the ISP market is a new market for us and the equipment we
have developed for that market has only recently been introduced, we have had
limited experience in selling our products. Currently, only a limited number of
ISPs have purchased our products.
Successful execution of our new business strategy will depend on our
ability to:
o penetrate the ISP market;
o achieve market acceptance of our products;
o successfully develop and introduce new products;
o identify, recruit and retain qualified engineers and sales
personnel;
o provide adequate customer care and technical support;
o manage our growth; and
o secure adequate financing.
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We cannot assure you that we will be successful in executing our new
business strategy and, if we are not, our business, financial condition and
results of operations could be adversely affected and the price of our common
stock will likely decline.
Our PowerPOP architecture is new and may not be accepted by our target market.
The market success of our ISP products depends significantly upon the
acceptance of our PowerPOP architecture by the small to mid-sized ISPs we are
targeting. The PowerPOP architecture represents a different approach to
addressing ISP remote access equipment needs. Our approach uses a standard PC
system running Windows NT or Linux to build remote access server concentrators,
in contrast to traditional products that are custom-built for this purpose. ISPs
may not be willing to use our approach which would significantly hinder our
growth potential and would negatively affect our business.
Our OEM sales are concentrated among a small number of customers and in 1998,
our most significant OEM customer discontinued products that used our
components.
Substantially all of our revenue is derived from sales to OEMs. Our
sales are concentrated among a small number of OEM customers. For the year ended
December 31, 1999, approximately 45% of our revenue was generated by three of
our customers. The loss of any of these customers would negatively impact our
revenues. For example, following the decline of the enterprise remote access
market in late 1998, our most significant OEM customer, Compaq, representing 25%
of our total revenue for the year ended December 31, 1998, and a number of other
customers discontinued their networking groups. As a result, revenues from
Compaq declined from $4.4 million for the year ended December 31, 1998 to zero
for the year ended December 31, 1999. Until we are able to penetrate the ISP
market, we expect that a small number of OEM customers will continue to account
for a substantial portion of our revenue.
We are highly dependent on KeyLink Systems to distribute our products to ISPs
and the ISP market is a new market for KeyLink.
We are highly dependent on KeyLink Systems to distribute our products
to ISPs. Our direct sales efforts have focused principally on OEM customers and
we do not have a direct sales force that focuses on sales to ISPs. Our
arrangement with KeyLink is not set out in a written agreement and does not
include specific commitments undertaken by KeyLink. As a result, KeyLink is not
required to meet any performance criteria or to commit any specific level of
resources to the marketing of our products and is not prohibited from selling
products that compete with ours. In addition, KeyLink has no previous experience
as a distributor in our target market. Any failure by KeyLink to support sales
of our products or failure by KeyLink to establish itself as a distributor in
the ISP market would have a material adverse affect on our ability to penetrate
the ISP market and on the future performance of our business.
If we fail to establish and maintain strategic distribution, marketing or other
collaborative relationships with industry-leading companies, we may not be able
to build our ISP customer base.
Our success depends on our ability to continue to establish and
maintain strategic distribution, marketing and other collaborative relationships
with industry-leading hardware manufacturers, distributors, software vendors and
enterprise solutions providers. These relationships allow us to offer our
products and services to a much larger customer base than we would otherwise be
able to through our direct sales and marketing efforts. Most of our existing
relationships can be terminated on short notice by any party. We cannot assure
you that we will be able to maintain these relationships or replace them on
attractive terms.
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In addition, our existing strategic relationships do not, and any
future strategic relationships may not, afford us any exclusive marketing or
distribution rights. As a result, the companies with which we have strategic
relationships are free to pursue alternative technologies and to develop
alternative products and services in addition to or in lieu of our products and
services, either on their own or in collaboration with others, including our
competitors. Moreover, we cannot guarantee that the companies with which we have
strategic relationships will distribute our products effectively or continue to
devote the resources necessary to provide us with effective sales, marketing and
distribution.
We must accurately forecast our customer demand for our plug-in cards. If there
is unexpected fluctuation in demand for our products, we may incur inventory
write-downs, excessive operating costs or lose product revenues.
We must forecast and place purchase orders for components of our
products several months before we receive purchase orders from our own
customers. This forecasting and order lead time requirements limit our ability
to react to unexpected fluctuations in demand for our products. These
fluctuations can be unexpected and may cause us to have excess inventory, or a
shortage, of a particular product. In the event that our forecasts are
inaccurate, we may need to write down excess inventory. For example, we were
required to write down inventory in the fourth quarter of 1998 in connection
with the termination of our sales to Compaq and a reduction in sales to other
OEM customers. Significant write-downs of excess inventory or declines in
inventory value in the future could adversely affect our financial results.
Similarly, if we fail to purchase sufficient supplies on a timely basis, we may
incur additional rush charges or we may lose product revenues if we are not able
to meet a purchase order. These failures could also adversely affect our
customer relations.
Undetected errors or defects found in our products may result in loss of
customers or delay in market acceptance of our products.
Despite testing by us and by our customers, errors may be found in new
products after commencement of commercial shipments, resulting in loss of
customers, delay in market acceptance of our products and damage to our
reputation. In addition, if errors are discovered, we may have to spend a
significant amount of money to eliminate them and yet may not be able to
successfully correct them in a timely manner, or at all.
Failures in our products may also cause system failures for our
customers who could then assert warranty and other claims for damages against
us. Although our customer agreements typically contain provisions designed to
limit our exposure to potential product liability claims, it is possible that
these provisions may not be effective or enforceable under the laws of some
jurisdictions. Our insurance policies may not adequately limit our exposure to
this type of claim. These claims, even if unsuccessful, could be costly and time
consuming to defend and could divert management's attention from our business.
We cannot assure you that the occurrence of any of these events would not have a
material adverse effect on our business, financial condition and results of
operations.
Average selling prices of our products may decrease which could hurt our
operating results.
The average selling prices for our products may be lower than expected
as a result of competitive pricing pressures, technological advances,
promotional programs and customers who negotiate price reductions. The pricing
of products depends on the specific features and functions of the product, the
extent to which the product can be integrated within ISPs' and OEMs' existing
hardware and software operating
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systems, purchase volumes and the level of sales and service support.
Historically, the trend in our industry has been for prices to decrease as
technological innovations become widespread. We expect this trend and price
competition to continue and possibly increase in the future, both in the OEM and
the ISP remote access equipment markets, and anticipate that the average selling
prices of our current products will decrease. We cannot assure you that we will
be successful in developing and introducing on a timely basis new products with
enhanced features that can be sold at our projected selling prices.
We depend on a limited number of third-party suppliers some of which are the
sole suppliers of the product we purchase from them.
We purchase digital signal processing chips and certain other
components from Texas Instruments, Conexant Systems, Lucent Technologies and
Analog Devices, each of which manufactures and is the sole supplier of the
digital signal processing chips upon which our products have been developed. We
do not have long-term agreements with any of these suppliers. Any reduction or
interruption in supply or manufacturing from these third party contractors would
adversely affect our ability to continue to deliver our products. We also depend
upon development, supply, marketing, licensing and other relationships with
third parties for complementary technologies incorporated in our products. These
cooperative relationships, many of which have been in place for a number of
years, are with hardware and software developers pursuant to which we each make
our technology available to the other for the purpose of achieving compatible
products. Some of these relationships are based upon annually renewable license
agreements under which we obtain technology necessary to produce our products.
These relationships are generally non-exclusive and terminable, in some cases on
short notice or at any time, and there can be no assurance that we will be able
to maintain these relationships or to initiate similar additional relationships.
The loss of certain cooperative relationships, particularly with any of the
digital signal processing chip suppliers, may have a material adverse effect on
our business.
The market for remote access equipment is highly competitive and we compete with
large, well-established companies. If we are unable to compete effectively, the
demand for, or prices of, our products may be reduced.
The remote access equipment market is intensely competitive. We may not
be able to compete successfully against current or potential competitors and our
failure to do so could seriously harm our business, operating results and
financial condition.
In the ISP market, we compete directly with other small companies that
sell remote access equipment as well as large well-established companies such as
Ascend/Lucent, Cisco, and 3Com. These and many of our current and potential
competitors have significantly greater financial, selling and marketing,
technical, manufacturing and other resources than we have. As a result, these
competitors may be able to devote greater resources toward the development,
promotion, sale and support of their products than we can. These companies may
introduce additional products that compete with ours or enter into strategic
relationships to offer complete solutions which we do not currently offer.
In addition, we recently introduced our PowerPOP architecture to the
market and we have not had enough experience selling the product to fully assess
its competitiveness. If we find that our new products are not competitive, our
business could be materially harmed.
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Our financial results may fluctuate from period to period as a result of several
factors which could adversely affect our stock price.
Because of the change in our business strategy, the loss of a major OEM
customer, the sale of our communications systems group and other factors, we
believe that period to period comparisons of our operating results may not be a
good indication of our future performance. It is possible that in some future
periods our operating results may be below the expectations of public market
analysts and investors. In this event, the price of our common stock may fall.
In the past, we have experienced fluctuations in our revenue and operating
results and our revenue and operating results may continue to vary significantly
from period to period due to a number of factors, many of which are beyond our
control. These factors include:
o fluctuations in demand for our products and services;
o variations in the timing of orders and shipments of our products;
o the timing of new product and service introductions by us or our
competitors;
o the mix of products sold and the mix of distribution channels
through which they are sold;
o our ability to obtain sufficient supplies of sole or limited
sourced components for our products;
o unfavorable changes in the prices of the components we purchase;
o our ability to achieve cost reductions;
o our ability to maintain quality levels for our products;
o our ability to integrate new technologies we develop or acquire
into our products; and
o timing of acquisitions and dispositions of businesses and assets.
The amount and timing of our operating results generally will vary from
quarter to quarter depending on the level of actual and anticipated business
activities and as we develop and launch new products. We have experienced
sharply increased revenue in periods that involved new product introductions and
significant sales to OEMs, with equally sharp decreases in revenue in subsequent
periods as distributors and OEMs complete their inventory build-up process.
Furthermore, we have a limited backlog of orders and revenue for any future
quarter is difficult to predict. Supply, manufacturing or testing constraints
could result in delays in the delivery of our products. Any delay in the product
deployment schedule of one or more of our new products would likely adversely
affect our operating results for a particular period.
Our technology is not patented and we will not be protected by patent laws.
We believe that our success is dependent upon our proprietary
technology. However, since we have not in the past actively pursued patent
protection on our products and do not hold patents on any of our current
products, we will not be protected by patent laws in the event competitors are
able to create substantially similar or duplicate products. We principally rely
upon copyright, trade secret and contract law to protect our proprietary
technology. We cannot assure you that we will be able to prevent
misappropriation
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of our technology or that our competitors will not independently develop
technologies that are substantially equivalent or superior to our technology.
Intellectual property claims against us could be costly and result in the loss
of significant rights.
The telecommunications industry is characterized by the existence of a
large number of patents and frequent litigation based on allegations of patent
infringement or other violations of intellectual property rights. Patent,
trademark and other intellectual property rights are important to us and other
technology companies. Many companies devote significant resources to developing
patents that could affect many aspects of our business. Other parties may assert
infringement or unfair competition claims against us that could relate to any
aspect of our technologies or other intellectual property. We may also be
subject to claims relating to components we purchase from our suppliers and
integrate into our products. We cannot predict whether third parties will assert
claims of infringement against us, the subject matter of any of these claims or
whether these assertions or prosecutions will harm our business. If we are
forced to defend ourselves against any of these claims whether they are with or
without merit or are determined in our favor, then we may face costly
litigation, diversion of technical and management personnel, inability to use
our current technology or product shipment delays. As a result of a dispute, we
may have to develop non-infringing technology or enter into royalty or
licensing agreements. These royalty or licensing agreements, if required, may be
unavailable on terms acceptable to us, or at all. If there is a successful claim
of patent infringement against us and we are unable to develop non-infringing
technology or license the infringed or similar technology on a timely basis, our
business and competitive position may be adversely affected.
We do not have our own manufacturing facilities and we depend on a limited
number of outside companies to manufacture substantially all the equipment we
sell.
We do not have our own manufacturing facilities and we rely on
K-Byte/Hibbing Manufacturing and JRE Inc. in the United States, and to a lesser
extent on FEDD in France, to manufacture substantially all of our equipment.
These agreements can be terminated on short notice by any party. We cannot
assure you that we will be able to maintain these relationships or replace them
on attractive terms. There are risks associated with our relationship with these
third parties, including reduced control over:
o delivery schedules;
o quality assurance;
o manufacturing costs;
o capacity during periods of excess demand; and
o availability of access to process technologies.
We depend on our key personnel and we may be unable to replace key executives if
they leave. Our failure to attract, assimilate and retain other highly qualified
personnel in the future could seriously harm our business.
Our success is largely dependent upon the personal efforts of our
executive officers as well as other key personnel and our future success is also
dependent on our ability to recruit and retain additional experienced
engineering and sales personnel. We intend to appoint additional senior
management personnel
10
<PAGE>
as well as to hire additional engineering, sales and support personnel in the
future. Competition for personnel, especially engineers and sales personnel in
New Jersey, is intense. There can be no assurance that we will be able to retain
or hire other necessary personnel. Loss of the services of, or failure to
recruit, key personnel could materially harm our business.
Our management team may not be able to successfully implement our business
strategy because it has only recently begun to work together.
Our business is highly dependent on the ability of our management to
work together effectively to execute our business strategy. Several members of
our senior management have been employed by us for a relatively short period of
time and we are in the process of recruiting additional senior management. These
individuals have not previously worked together as a management team. In
addition, the members of our management team who have been with us for a longer
period have had only limited experience within our new target markets. The
failure of our management team to work together effectively could prevent
efficient decision making by our executive team, affecting product development
and sales and marketing efforts, which would negatively impact our results of
operations.
Risks Relating to Our Industry
We must keep pace with rapid technological change to remain competitive.
The telecommunications industry is subject to rapid technological
change and frequent new product introductions and enhancements, particularly in
the area of equipment for remote access and related network services. We believe
that our success will depend upon our ability to continuously develop new
products and product enhancements as well as provide quality technical support
services and be in a position to promptly introduce our products and services to
the market. We may experience difficulties that could delay or prevent the
successful development, introduction or marketing of new products and
enhancements, or our new products and enhancements may not adequately meet the
requirements of the marketplace and achieve market acceptance. Announcements of
currently planned or other new product offerings by us or our competitors may
cause customers to defer or cancel the purchase of our existing products. Our
inability to develop on a timely basis new products or enhancements to existing
products, or the failure of our new products or enhancements to achieve market
acceptance, could have a material adverse effect on our business, financial
condition and results of operations.
The development of new, technologically advanced products is a complex
and uncertain process requiring the accurate anticipation of technological and
market trends. The introduction of new or enhanced products also requires us to
manage the transition from older products in order to minimize disruption in
customer ordering patterns, avoid excessive levels of older product inventories
and ensure that adequate supplies of new products can be delivered to meet
anticipated customer demand. We cannot assure you that we will be able to
successfully develop, introduce or manage the transition to new products.
There can also be no assurance that our competitors will not develop
future generations of competitive products that will offer superior price,
features or performance advantages which would render our products
uncompetitive. There are currently competing technologies that offer alternative
solutions which allow for faster Internet access compared to dial-up access.
These competing technologies include digital subscriber line, wireless and
cable. We cannot assure you that, in order to remain competitive, we will be
successful in developing and introducing on a timely basis new products and
technologies.
11
<PAGE>
Our success in the ISP market depends on the continued growth and use of
Internet and dial-up access technologies.
Demand for our ISP remote access solutions is being driven by the
increase in the use of the Internet. Our future performance depends
substantially upon the continued widespread acceptance and use of the Internet
and other online services. Rapid growth in the use of the Internet and other
online services is a relatively recent phenomenon, and we cannot assure you that
acceptance and use will continue to develop or that a sufficiently broad base of
consumers will adopt, and continue to use, the Internet and other online
services as a medium of communication and commerce. The emergence of alternative
technologies may substantially reduce our potential markets. If dial-up access
technologies become obsolete, we would have to develop and market new products
in order to continue our operations. We cannot be certain that we will succeed
in adapting our product strategies to compete effectively with these alternative
technologies.
Risks Relating to our Common Stock
Exercise of our outstanding warrants and options may affect the price of our
common stock.
As of March 31, 2000, there were outstanding options to purchase
1,811,313 shares of common stock and outstanding warrants to purchase 2,435,850
shares of common stock, including 2,335,850 warrants, the underlying shares of
which are being registered in this offering. The exercise of the outstanding
stock options and warrants will dilute the percentage ownership of our
stockholders. Any sales in the public market of shares of our common stock
underlying the stock options and warrants may adversely affect prevailing market
prices for our common stock.
Our restated certificate of incorporation and bylaws, our rights plan and
Delaware law contain provisions that could discourage a third party from
acquiring us or limit the price third parties would be willing to pay for our
common stock.
We have an authorized class of 2,000,000 shares of preferred stock
which may be issued by the board of directors with such terms and such rights,
preferences and designations as the board may determine and without any vote of
the stockholders. Our bylaws contain provisions which provide that the board of
directors is divided into three classes, which may have the effect of delaying
or preventing changes in control or changes in our management because less than
a majority of the board of directors can be elected at each annual meeting.
These provisions impose various procedural and other requirements which could
delay or prevent stockholders from effecting corporate actions such as a merger,
asset sale or other change of control and could limit the price that some
investors would be willing to pay in the future for shares of our common stock.
We also have a stockholder rights plan in place. The rights which have been
granted under the plan are exercisable on the occurrence of specified events,
including if a person acquires 15% or more of our outstanding stock, and allow a
holder of rights to acquire shares of our common stock and dilute the percentage
holding of any purchaser of our common stock.
We are subject to the provisions of section 203 of the Delaware General
Corporation Law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner.
12
<PAGE>
USE OF PROCEEDS
All of the net proceeds from the sale of the common stock of Ariel
covered by this prospectus will go to the stockholders who offer and sell their
shares. Accordingly, we will not receive any of the proceeds from the sales of
the common stock. Ariel receives net proceeds only upon sales from warrant
conversions and not from the sale of the shares offered by the selling
stockholders. The warrants held by the selling stockholders are exercisable at
$6.875 per share, subject to adjustment on the one year anniversary of the date
of issuance of the warrant. If all warrants are exercised, Ariel will receive
proceeds of $16,058,969 which would be used for general corporate purposes.
SELLING STOCKHOLDERS
Under a Common Stock Purchase Agreement dated February 24, 2000, we
agreed to register the shares of our common stock issued to the selling
stockholders and the shares issuable upon exercise of warrants held by these
stockholders. We have agreed to keep the registration statement effective for
two years, or until all of the registered shares are sold, whichever comes
first. Our registration of the common stock held by the selling stockholders and
the shares issuable upon exercise of warrants held by the selling stockholders
does not necessarily mean that the selling stockholders will sell all or any of
their shares.
The prospectus covers the offer and sale by each selling stockholder of
common stock owned by the selling stockholder. Set forth below are (i) the names
of each selling stockholder, (ii) the nature of any position, office or other
material relationship that the selling stockholder has had within the past three
years with us, (iii) the number of shares of common stock and (if one percent or
more) the percentage of common stock beneficially owned as of February 24, 2000
by each selling stockholder, (iv) the number of shares that may be offered and
sold by or on behalf of each selling stockholder hereunder, and (v) the amount
and (if one percent or more) the percentage of common stock to be owned by each
selling stockholder upon the completion of the offering if all shares offered by
such selling stockholder are sold. Any or all of the shares listed below under
the heading "Shares to be Sold" may be offered for sale by or on behalf of the
selling stockholder.
13
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to the Owned After the
Offering (1) Offering (2)
------------ ------------
Shares Which
Selling Stockholders Number Percent May be Offered Number Percent
- -------------------- ------ ------- -------------- ------ -------
<S> <C> <C> <C> <C> <C>
Ben Joseph Partners 50,000 * 50,000 50,000 *
Robert A. Berlacher 50,000 * 50,000 50,000 *
Eric Blachno 12,500 * 12,500 12,500 *
Thomas O. Lloyd-Butler 2,500 * 2,500 2,500 *
CavDevil Investments LLC 20,000 * 20,000 20,000 *
Dawn Dobras 1,250 * 1,250 1,250 *
Amir L. Ecker 75,000 * 75,000 75,000 *
The Ecker Family Partnership 25,000 * 25,000 25,000 *
EDJ Limited 50,000 * 50,000 50,000 *
David Gencarella 12,500 * 12,500 12,500 *
Richard Gibbs 25,000 * 25,000 25,000 *
Gruber & McBaine International 60,000 * 60,000 60,000 *
John D. Gruber TTEE FBO
Lindsay D. Gruber Dtd 12/27/96 4,000 * 4,000 4,000 *
Jon D. Gruber TTEE FBO
Jonathan Wyatt Gruber 4,000 * 4,000 4,000 *
Jon D. Gruber 32,000 * 32,000 32,000 *
Richard W. Hubbert 20,000 * 20,000 20,000 *
Clifford J. Kalista, Jr. and
Phyllis D. Kalista JTTEN 12,500 * 12,500 12,500 *
Anthony J. Kirincic 62,500 * 62,500 62,500 *
Peconic Fund Ltd. 225,000 1.7% 225,000 225,000 1.7%
Pennsylvania Merchant Group
401(k) Plan FBO Phyllis Kalista 12,500 * 12,500 12,500 *
Lagunitas Partners LP 200,000 1.5% 200,000 200,000 1.5%
Lancaster Investment Partners, LP 125,000 * 125,000 125,000 *
Phillip R. Leicht and
Pamela A Leicht JTTEN 12,500 * 12,500 12,500 *
David O. Lindner 50,000 * 50,000 50,000 *
J. Patterson McBaine 20,000 * 20,000 20,000 *
Harry Mittelman, TTEE
The Harry Mittelman Revocable Living
Trust Dtd 10/22/96 75,000 * 75,000 75,000 *
Needham & Company, Inc.(3) - * - 87,010 *
Parec Realty Partners 12,500 * 12,500 12,500 *
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to the Owned After the
Offering (1) Offering (2)
------------ ------------
Shares Which
Selling Stockholders Number Percent May be Offered Number Percent
- -------------------- ------ ------- -------------- ------ -------
<S> <C> <C> <C> <C> <C>
Parec Portfolio Partners, LP 12,500 * 12,500 12,500 *
Pennsylvania Merchant Group, Inc.(3) - * - 97,840 *
Eric Petersen and Ellen Petersen JTTEN 25,000 * 25,000 25,000 *
Porter Partners, LP 50,000 * 50,000 50,000 *
Peter S. Rawlings 25,000 * 25,000 25,000 *
Charles M. Robins 6,250 * 6,250 6,250 *
Leonid M. Roytman 12,500 * 12,500 12,500 *
Eric B. Swergold 1,250 * 1,250 1,250 *
Special Situations, LLC 450,000 3.4% 450,000 450,000 3.4%
VFT Special Ventures, Ltd. 48,500 * 48,500 48,500 *
Elizabeth R. Watkinson Cust FBO
Kurt J. Watkinson UGMA PA 6,250 * 6,250 6,250 *
A. Morris Williams, Jr. and
Ruth W. Williams JTTEN 25,000 * 25,000 25,000 *
Carolyn Wittenbraker 12,500 * 12,500 12,500 *
Zeke, L.P. 225,000 1.7% 225,000 225,000 1.7%
</TABLE>
----------------------
(1) In connection with a private placement of our common stock in February
2000, each purchaser was issued a warrant to purchase a number of shares of
common stock equal to the number of shares the selling stockholder
purchased in the private placement. These warrants may not be exercised
until September 1, 2000 and will expire on March 1, 2005. The exercise
price of the warrants is $6.875. The exercise price will be reset to the
average market price for the five trading days preceding the one year
anniversary date of the issuance of the warrant provided the average price
is less than $6.875. The number of shares beneficially owned prior to the
offering does not include the 2,335,850 shares of our common stock issuable
upon exercise of the warrants.
(2) Includes shares issuable upon exercise of the warrants. Warrants are not
exercisable until September 1, 2000.
(3) The warrants were issued as partial compensation for acting as placement
agent for the private placement and are exercisable at $6.875 per common
share.
15
<PAGE>
PLAN OF DISTRIBUTION
We are registering shares of our common stock on behalf of the selling
stockholders. As used in this prospectus, "selling stockholders" includes donees
and pledgees selling shares received from a named selling stockholder after the
date of this prospectus. We will pay for all costs, expenses and fees in
connection with the registration of the shares. The selling stockholders will
pay for all selling discounts and commissions, if any. The selling stockholders
may offer and sell their shares from time to time in one or more of the
following types of transactions (including block transactions):
o on the Nasdaq National Market
o in the over-the-counter market,
o in privately negotiated transactions,
o through put or call options transactions relating to the shares,
o through short sales of shares, or
o a combination of such methods of sale.
The selling stockholders may sell their shares at prevailing market
prices, or at privately negotiated prices. Such transactions may or may not
involve brokers or dealers. The selling stockholders have advised us that they
have not entered into any agreements, understanding or arrangements with any
underwriters or broker-dealers regarding the sale of their shares, nor is there
an underwriter or coordinating broker acting in connection with the proposed
sale of shares by the selling stockholders.
The selling stockholders may offer and sell their shares directly to
purchasers or to or through broker-dealers, which may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the selling stockholders and/or the
purchasers of shares.
We have agreed to indemnify each selling stockholder against certain
liabilities, including liabilities arising under the Securities Act.
Selling stockholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act of
1933, provided they meet the criteria and conform to the requirements of such
rule.
Certain of the underwriters, brokers, dealers or agents and their
associates may engage in transactions with and perform other services for Ariel
in the ordinary course of their business for which they receive customary
compensation.
16
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock is 22,000,000 shares, consisting of
20,000,000 shares of common stock, $.001 par value per share, and 2,000,000
shares of preferred stock, $.001 par value per share. As of March 31, 2000,
13,088,920 shares of common stock were outstanding, and there were 127 holders
of record. In addition, as of March 31, 2000, there were outstanding stock
options for the purchase of 1,811,313 shares of common stock and outstanding
warrants for the purchase of 2,435,850 shares of common stock. No shares of
preferred stock are currently outstanding.
Common Stock
The holders of shares of common stock are entitled to one vote for each
share held of record on any matters to be voted on by stockholders. The election
of directors requires a plurality vote of those shares of common stock
represented at any stockholders meeting. Upon the notice of one or more
stockholders that the stockholder intends to cumulate his votes, and in
accordance with the conditions contained in our bylaws, every stockholder
entitled to vote at an election for directors shall have the right to cumulate
his votes. If cumulative voting is effected, each stockholder will be entitled
to give one candidate a number of votes equal to the number of votes to which
the stockholder's shares are normally entitled, or to distribute the
stockholder's votes among as many candidates as the stockholder sees fit. The
holders of common stock are entitled to receive dividends when, as and if
declared by the board of directors out of legally available funds. We have never
paid cash dividends on our common stock and do not plan to do so in the
foreseeable future. In the event of liquidation, dissolution or winding up, the
holders of common stock are entitled to share ratably in all assets remaining
available for distribution to them after payment of liabilities and after
provision has been made for each class of stock, if any, having preference over
the common stock. Holders of shares of common stock, as such, have no
redemption, preemptive or other subscription rights, and there are no conversion
provisions applicable to the common stock. All of the outstanding shares of our
common stock are fully paid and nonassessable.
Preferred Stock
Our authorized shares of preferred stock may be issued in one or more
series and the board of directors is authorized, without further action by the
stockholders, to designate the rights, preferences, limitations of, and
restrictions upon, shares of each series, including dividend, voting, redemption
and conversion rights. We believe that the availability of preferred stock
issuable in series provides increased flexibility for structuring possible
future financings and acquisitions, if any, and in meeting other corporate
needs. We cannot describe the actual effects the issuance of any series of
preferred stock would have on the rights of holders of common stock until the
board of directors determines the specific terms, rights and preferences of a
series of preferred stock. However, such effects might include, among other
things, restricting dividend payments on the common stock, diluting the voting
power of the common stock or impairing the liquidation rights of the common
stock. In addition, the issuance of preferred stock may have the effect of
facilitating, as well as impeding or discouraging, a merger, tender offer, proxy
contest, the assumption of control by a holder of a large block of our
securities or the removal of incumbent management. The market price of the
common stock could also be adversely affected by the issuance of preferred
stock.
17
<PAGE>
Pursuant to our rights plan the board of directors declared a dividend
of one preferred share purchase right for each outstanding share of common
stock. Until the occurrence of certain triggering events, the rights will be
evidenced by the outstanding common stock certificates on our books and records
maintained by our transfer agent and will not be separately issued.
Warrants
At March 31, 2000, Transamerica Business Credit Corporation owned
100,000 warrants exercisable at $3.763 per share that were issued as
consideration for certain waivers and amendments to our credit agreement.
On February 24, 2000 we entered into an agreement with a number of
investors to sell 2,151,000 shares of our common stock at a purchase price of
$4.00 per share in a private placement. We also issued 2,151,000 warrants to
purchase common stock with an exercise price of $6.875. The warrants are not
exercisable until September 1, 2000. The exercise price of the warrants will be
reset to the average market price for the five trading days preceding the one
year anniversary date of the issuance of the warrant provided the average market
price is less than $6.875.
In connection with this private placement, we issued to the placement
agents an aggregate of 184,850 warrants to purchase common stock with an
exercise price of $6.875 as partial compensation for their services.
Delaware Law and Certain Charter and By-Law Provisions and Antitakeover Effects
Delaware Law. We are subject to Section 203 of the Delaware General
Corporation Law, which prevents an "interested stockholder" (defined in Section
203, generally, as a person owning 15% or more of a corporation's outstanding
voting stock) from engaging in a "business combination" with a publicly held
Delaware corporation for three years following the date such person became an
interested stockholder, unless: (i) before such person became an interested
stockholder, the board of directors of the corporation approved the transaction
in which the interested stockholder became an interested stockholder or approved
the business combination; (ii) upon consummation of the transaction that
resulted in the interested stockholder becoming an interested stockholder, the
interested stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (subject to certain
exceptions); or (iii) following the transaction in which that person became an
interested stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by
affirmative vote of the holders of 66% of the outstanding voting stock of the
corporation not owned by the interested stockholder. A "business combination"
includes mergers, stock or asset sales and other transactions resulting in a
financial benefit
18
<PAGE>
to the interested stockholder. The provisions of Section 203 could have the
effect of delaying, deferring or preventing a change of control.
Certificate of Incorporation and Bylaws. Our restated certificate of
incorporation provides for the division of the board of directors into three
classes with staggered three-year terms. These provisions result in an increase
in the time required for stockholders to change the composition of the board,
and consequently may impede a change of control.
Stockholders Rights Plan. On October 9, 1998, our board of directors
approved and adopted a stockholders rights plan for the newly created series A
of preferred stock, par value $.001 per share. Under the rights plan, each
stockholder of record at October 22, 1998 received a dividend of one preferred
share purchase right per share of common stock owned. Each right entitles the
holder to purchase one one-hundredth of a share of series A preferred stock, par
value $.001 per share, for a price of $25, subject to adjustment. The rights are
not redeemable or exercisable until a person or group acquires 15% or more of
our common stock or announces a tender offer for 15% or more of the common
stock. If either of these events occurs, each right entitles a holder to
purchase, at the right's exercise price, a number of shares of common stock
having a market value at the time of exercise of twice the right's exercise
price. The rights expire on October 9, 2008, and we may redeem them at any time
at $.01 per right. The right automatically attaches to the common shares being
offered in this prospectus.
Shares of preferred stock purchasable upon exercise of the rights will
not be redeemable at the election of holders. Each holder of a share of
preferred stock will be entitled, when and if declared by our board of
directors, to a minimum preferential quarterly dividend payment of $1.00 per
share or an aggregate dividend of 100 times the divided declared per share of
common stock, if any. In the event of our liquidation, dissolution or winding
up, the holders of the preferred stock will be entitled to a minimum
preferential payment of $1.00 per share, plus any accrued but unpaid dividends,
or an aggregate payment of 100 times the payment made per share of common stock.
Each share of preferred stock will have 100 votes, voting together with the
common stock and not as a class. Finally, in the event of any consolidation,
merger or other transaction in which outstanding shares of common stock are
converted or exchanged, each share of preferred stock will be entitled to an
aggregate dividend of 100 times the dividend declared per share of common stock.
These rights are protected by customary anti-dilution provisions.
Transfer Agent, Warrant Agent and Registrar
The transfer agent and registrar for our common stock is Continental
Stock Transfer & Trust Company, New York, New York.
19
<PAGE>
LEGAL MATTERS
The validity of the common stock offered with this prospectus has been
passed upon for Ariel by Paul & Rosen LLP, New York, New York.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-K for the year ended December 31, 1999 have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
20
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Common Stock
-------------------
P R O S P E C T U S
-------------------
, 2000
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses expected to be incurred in connection with the issuance
and distribution of the securities being registered, other than underwriting
compensation, are as set forth below. Except for the registration fee payable to
the Securities and Exchange Commission, all such expenses are estimated:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee........................... $ 9,251
Printing and engraving expenses............................................... 12,000
Legal fees and expenses....................................................... 100,000
Accounting fees and expenses.................................................. 15,000
Total....................................................................... $136,251
</TABLE>
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware, as
amended, provides that under certain circumstances 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, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or is
or was serving at its request in such capacity in another corporation or
business association, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person 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 such person's
conduct was unlawful.
The Restated Certificate of Incorporation of Ariel provides in effect
that, subject to certain limited exceptions, Ariel shall indemnify its directors
and officers to the full extent authorized or permitted by law. The directors
and officers of Ariel are insured under policies of insurance, subject to the
limits of the policies, against certain losses arising from any claim made
against them by reason of being or having been such directors or officers.
Item 16. Exhibits.
See Exhibit Index.
Item 17. Undertakings.
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-1
<PAGE>
(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 the prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent 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 1(a) and 1(b) do not apply if the
Registration Statement is on Form S-3 or S-8 and the information
required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to
the Commission by the Company pursuant to Section 13 or Section 15(d)
of the Exchange Act 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.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant
to Section 13(a) or 15(d) of the Exchange Act 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.
(5) 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 Item 15 of this
registration statement, 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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant hereby 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 New York, State of New York on April 4, 2000.
ARIEL CORPORATION
By: /s/ Jay H. Atlas
------------------------------
Name: Jay H. Atlas
Title: Chief Executive Officer
and President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Harold W. Paul and Anthony M. Agnello, or
either of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign and file (1) any and all amendments (including
post-effective amendments) to this Registration Statement, with all exhibits
thereto, and other documents in connection therewith and (2) a registration
statement, and any and all amendments thereto, relating to the offering covered
hereby filed pursuant to Rule 462(b) under the Securities Act, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact, agent, or their substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on April 4, 2000.
Signature Title
/s/ Jay H. Atlas
- -----------------------------
Jay H. Atlas Chief Executive Officer,
President and Director
/s/ John R. Loprete
- -----------------------------
John R. Loprete Vice President, Finance
and Chief Accounting Officer
/s/ Anthony M. Agnello
- -----------------------------
Anthony M. Agnello Chairman of the Board
of Directors
<PAGE>
/s/ Esmond T. Goei
- ----------------------------
Esmond T. Goei Director
/s/ Edward D. Horowitz
- ----------------------------
Edward D. Horowitz Director
/s/ Harold W. Paul
- -----------------------------
Harold W. Paul Director
/s/ Charles Strauch
- -----------------------------
Charles Strauch Director
<PAGE>
INDEX TO EXHIBITS
Exhibits
*4.1 Common Stock Purchase Agreement dated February 24, 2000
*4.2 Form of Warrant (included as an exhibit to the Common Stock Purchase
Agreement found in Exhibit 4.1)
5.1 Opinion of Paul & Rosen LLP on the validity of the common stock
registered hereby
23.1 Consent of Paul & Rosen LLP (included in the opinion delivered under
Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers
24.1 Powers of Attorney
- -----------------------------
* To be filed by amendment.
<PAGE>
PAUL & ROSEN, LLP
ATTORNEYS AT LAW
420 LEXINGTON AVENUE
NEW YORK, N.Y. 10170
(212) 661-2727
CONNECTICUT OFFICE
125 MAIN STREET
April 3, 2000 WESTPORT, CT 06880
(203) 226-5101
FAX: (203) 226-4820
Ariel Corporation
2540 Route 130
Cranbury, NJ 08512
Gentleman:
Reference is made to the Registration Statement on Form S-3 ("Registration
Statement") filed by Ariel Corporation ("Company") under the Securities Act of
1933, as amended ("Act"), with respect to an aggregate of 4,302,000 shares of
common stock, per value $.001 per share ("Common Stock").
We have examined such documents and considered such legal matters as we
have deemed necessary and relevant as the basis for the opinion set forth
below. With respect to such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as reproduced
or certified copies, and the authenticity of the originals of those latter
documents. As to questions of fact material to this opinion, we have, to the
extent deemed appropriate, relied upon certain representations of certain
officers and employees of the Company.
Based upon the foregoing, it is our opinion that the shares of Common Stock
currently outstanding and owned by the Selling Stockholders and being registered
on the Registration Statement have been duly authorized and legally issued, and
are fully paid and non-assessable and the shares of Common Stock underlying the
warrants held by the Selling Stockholders have been duly authorized and will be
legally issued, fully paid and non-assessable.
In giving this opinion, we have assumed that all certificates for the
Company's shares of Common Stock have been duly executed on behalf of the
Company by the Company's transfer agent and registered by the Company's
registrar, if necessary, and will conform, except as to denominations, to
specimens which we have examined.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, to the use of our name as your counsel, and to all
references made to us in the Registration Statement and in the Prospectus
forming a part thereof.
Sincerely,
/s/ Paul & Rosen, LLP
------------------------
PAUL & ROSEN, LLP
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of Ariel Corporation of our report dated February 24, 2000
relating to the consolidated financial statements, which appears in Ariel
Corporation's Annual Report on Form 10-K for the year ended December 31, 1999.
We also consent to the reference to us under the headings "Experts" in such
Registration Statement.
/s/ PricewaterhouseCoopers
- ------------------------------
PricewaterhouseCoopers, LLP
Florham Park, New Jersey
April 4, 2000
