Ariel Corporation Reports Preliminary Unaudited Third Quarter Results

    CRANBURY, N.J., Oct. 25 /PRNewswire/ -- Ariel Corp. (Nasdaq:   ADSP) today
 reported net sales of $2,180,597 for the third quarter ended September 30,
 2000 compared to net sales of $1,097,211 for the second quarter ended June 30,
 2000 and $2,869,593 for the third quarter ended September 30, 1999.
     Ariel reported a net loss of ($3,144,488) or ($0.24) basic and dilutive
 loss per share for the third quarter ended September 30, 2000 compared to a
 net loss of ($6,785,563) or basic and dilutive loss per share of ($.52) for
 the second quarter ended June 30, 2000 and a net loss for the third quarter
 ended September 30, 1999 of ($2,983,993) or basic and dilutive loss per share
 of ($.31).
     Gross margins were approximately 61% for both the third quarter and nine
 months ended September 30, 2000 before recording inventory reserves.   Gross
 margin percentages for the second quarter ended June 30, 2000 were also 61%
 before recording inventory reserves.  Gross margins for the third quarter were
 impacted by a write-down of approximately $395,000 in inventories as the
 Company continues to phase out low end products.  Gross Margins for the nine
 months ended September 30, 2000 were impacted by approximately $1.0 million of
 inventory write-downs.
     For the nine months ended September 30, 2000, net sales were $5,350,029,
 compared to net sales of $8,694,254 for the nine months ended September 30,
 1999.  Ariel reported a net loss of ($12,743,028) or ($1.01) basic and
 dilutive loss per share for the nine months ended September 30, 2000 compared
 to a net loss of ($9,258,737) or basic and dilutive loss per share of ($.95)
 for the nine months ended September 30, 1999.  Per share losses for the nine
 months ended September 30, 2000 were ($.82) prior to restructuring and other
 charges.
     For the third quarter ended September 30, 2000, operating expenses
 decreased $406,965 to $4,108,549 compared to $4,515,514 for the second quarter
 ended June 30, 2000. For the nine month period ended September 30, 2000
 operating expenses, before non-recurring restructuring charges, were
 $12,640,919.  This represents a decrease of $1,218,915 from $13,859,834 for
 the comparable period last year.
     Results for the current nine month period include non-recurring charges of
 $2.4 million for the impairment of goodwill related to the phase out of the
 Company's low end products as well as restructuring costs.  Approximately $2.0
 million of the $2.4 million are non-cash charges.
     Ariel recorded a backlog of $3.2 million as of September 30, 2000 compared
 to $1.7 million as of June 30, 2000. Ariel had working capital of $5.1 million
 as of September 30, 2000.
     "Ariel's sales growth over the previous quarter reflects the first full
 quarter of availability of the RS4200 and a greater mix of Internet
 infrastructure sales as we continue our shift to the ISP market.  We are
 optimistic about Ariel's future because of these improving results, the
 strengthening of our backlog position, the recent awards for the RS4200, OEM
 opportunities and the introduction and certification of our BypaSS7(R)
 products," said CEO and President, Dennis Schneider.
 
     More About Ariel
     Ariel Corp. (Nasdaq:   ADSP) is a leading provider of high-density remote
 access plug-in cards for applications such as Internet access, corporate
 Intranet/Extranet access, on-line services, telecommuting, transaction
 processing, and unified messaging. Ariel's remote access products make it easy
 for OEMs and system integrators targeting ISPs, corporate enterprises and
 other service providers to add high-density remote access to open systems
 platforms running a variety of popular operating systems, including Windows NT
 and Linux. Ariel's high-density remote access cards provide V.34, V.90-
 compatible 56K, and basic rate ISDN remote dial-in, LAN dial-out, and Internet
 back-haul.  Available in ISA, PCI and CompactPCI formats, the cards connect to
 T1, E1, ISDN, and POTS lines. Ariel's remote access products run Windows NT
 and Linux out of the box. An SDK is available for OEMs who want to use Ariel's
 remote access products with other operating systems.
     For more information on Ariel products, please contact Ariel Corporation
 at 2540 Route 130, Cranbury, NJ 08512. Phone 609-860-2900. Fax 609-860-1155.
 Email: info@ariel.com.  World Wide Web: http://www.ariel.com.
 
     Statements contained in this press release that are not historical facts
 are forward-looking statements that are made pursuant to the safe harbor
 provisions of the Private Securities Litigation Reform Act of 1995, as
 amended.  Forward-looking statements involve risks and uncertainties,
 including market acceptance of the Company's products by technical original
 equipment manufacturers and internet service providers, the timely development
 and acceptance of new products, the impact of competitive products and
 pricing, changing market conditions and the other risks detailed from time to
 time in the Company's filings with the SEC.  These risks and uncertainties
 could cause actual results to differ materially from those projected or
 currently expected.  These forward-looking statements represent the Company's
 judgment as of the date of this release.  The Company disclaims, however, any
 intent or obligation to update these forward-looking statements.
 
 
                               Ariel Corporation
                             Condensed Preliminary
                     Consolidated Statements of Operations
                                  (Unaudited)
 
                                               Three Months Ended
 
                                   Sept. 30,         June 30,     March  31,
                                     2000             2000          2000
 
     Sales                        $2,180,597      $1,097,211    $2,072,221
     Gross margin                  1,322,251         668,829     1,248,847
     Inventory reserves              395,000         593,000        45,000
     Operating expenses            4,108,549       4,515,514     4,016,856
     Restructuring and
      other charges                        0       2,356,656             0
     Loss From Operations        ($3,181,298)    ($6,796,341)  ($2,813,009)
     Other income                     36,810          10,778            32
     (Loss) before provision
       for income taxes          ($3,144,488)    ($6,785,563)  ($2,812,977)
     Provision for income taxes            0               0             0
     Net (loss)                  ($3,144,788)    ($6,785,563)  ($2,812,977)
 
     Basic per share data:
      Basic weighted average of
       common shares outstanding  13,073,920      13,073,920    11,703,359
      Basic (loss) per share          ($0.24)         ($0.52)       ($0.24)
 
 
                               Ariel Corporation
                             Condensed Preliminary
                     Consolidated Statements of Operations
                                  (Unaudited)
 
                              Three Months Ended      Nine Months Ended
                                 September 30,            September 30,
                             2000         1999        2000           1999
 
     Sales               $2,180,597    $2,869,593   $5,350,029    $8,694,254
     Gross margin         1,322,251     1,781,512    3,239,927     5,144,304
     Inventory reserves     395,000        45,000    1,033,000       105,000
     Operating expenses   4,108,549     4,252,424   12,640,919    13,859,834
     Restructuring and
      other
 charges               0       369,528    2,356,656       369,528
      loss from
      operations        ($3,181,298)  ($2,885,440)($12,790,648)  ($9,190,058)
     Net ineterest & other
      income/(expense)
       36,810       (98,553)      47,620       (68,679)
     (Loss) before provision
      for income taxes  ($3,144,488)  ($2,983,993)($12,743,028)  ($9,258,737)
     Provision for
      income taxes                0             0            0             0
     Net (loss)         ($3,144,488)  ($2,983,993)($12,743,028)  ($9,258,737)
 
     Basic per share data:
      basic weighted average of
      common shares
      outstanding        13,073,920
     9,760,150   12,610,958     9,760,150
     Basic (loss) per share  ($0.24)       ($0.31)      ($1.01)       ($0.95)
 
 
                               Ariel Corporation
                             Condensed Preliminary
                           Consolidated Balance Sheet
                                  (Unaudited)
 
                                                 September 30,    December 31,
       ASSETS                                         2000            1999
     Current Assets
      Cash and cash equivalents                     $3,915,528     $7,088,431
      Accounts receivable, net                       1,465,669      3,091,362
      Inventories                                    2,540,995      3,303,057
      Prepaid and other current assets                 967,697      1,159,619
                                                     8,889,889     14,642,469
 
     Equipment, net                                 1,269,793      1,387,128
 
     Goodwill, Intangible & Other assets            1,465,399      3,787,475
       Total assets                               $11,625,081    $19,817,072
 
       LIABILITIES & STOCKHOLDER'S EQUITY
 
     Liabilities                                   $5,371,216     $8,819,833
     Stockholder's equity                           6,253,865     10,997,239
       Total liabilities & stockholder's equity   $11,625,081    $19,817,072
 
 

SOURCE  Ariel Corporation