SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996 Commission file number:0-25326
Ariel Corporation
(exact name of registrant as specified in its charter)
Delaware 13-3137699
(State of incorporation) (IRS employer identification number)
2540 Route 130
Cranbury, New Jersey 08512
(Address of principal executive offices)
609-860-2900
(Telephone number, including area code)
--------------------------------------------
Check mark whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes ( X ) No ( )
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Common Stock, $.001 par value 8,905,075 shares outstanding
as of September 30, 1996
Documents Incorporated by Reference: None
<PAGE>
Ariel Corporation
Form 10-QSB for Quarter Ended September 30, 1996
Index
Part I. Financial Information
Item 1. Financial Statements
A. Unaudited Balance Sheet as of September 30, 1996
B. Unaudited Statements of Operations for the three and
nine months ended September 30, 1996 and 1995.
C. Unaudited Statements of Cash Flows for the nine months
ended September 30, 1996 and 1995.
D. Unaudited Notes to Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation.
Part II. Other Information
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
ARIEL CORPORATION
BALANCE SHEET
As of September 30, 1996
(Unaudited)
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS ...................................... $ 13,847,764
ACCOUNTS RECEIVABLE, NET OF ALLOWANCE FOR DOUBTFUL
ACCOUNTS OF $197,678 ..................................... 2,624,061
OTHER RECEIVABLES .............................................. 166,815
INVENTORIES .................................................... 3,003,136
PREPAID EXPENSES ............................................... 201,165
---------
TOTAL CURRENT ASSETS ................................ 19,842,941
EQUIPMENT, NET OF ACCUMULATED DEPRECIATION
AND AMORTIZATION .......................................... 1,487,627
OTHER ASSETS .......................................................... 387,917
=========
TOTAL ASSETS ................................................... $ 21,718,485
=========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE ............................................... $ 1,116,287
ACCRUED EXPENSES ............................................... 1,174,859
NOTES PAYABLE - CURRENT, NET OF DISCOUNT OF $8,595 ............. 266,188
ROYALTIES PAYABLE .............................................. 80,742
---------
TOTAL CURRENT LIABILITIES ........................... 2,638,076
STOCKHOLDERS' EQUITY
PREFERRED STOCK, $.001 PAR VALUE; 2,000,000 SHARES
AUTHORIZED; SHARES ISSUED AND OUTSTANDING - NONE
COMMON STOCK, $.001 PAR VALUE; 20,000,000 SHARES
AUTHORIZED; 8,905,075 SHARES ISSUED AND OUTSTANDING .... 8,905
ADDITIONAL PAID-IN CAPITAL ..................................... 28,724,691
ACCUMULATED DEFICIT ............................................ (9,653,187)
---------
TOTAL STOCKHOLDERS' EQUITY .......................... 19,080,409
---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ....................... $ 21,718,485
=========
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ARIEL CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SALES ................................................................ $ 3,760,367 $ 2,462,287 $ 8,943,415 $ 6,737,249
COST OF GOODS SOLD ................................................... 1,886,051 1,121,252 4,583,584 3,334,136
----------- ----------- ----------- -----------
GROSS PROFIT ........................................ 1,874,316 1,341,035 4,359,831 3,403,113
EXPENSES:
SALES AND MARKETING ............................................. 1,024,198 750,216 2,972,661 1,977,163
GENERAL AND ADMINISTRATIVE ...................................... 1,045,844 769,854 3,158,795 2,080,644
RESEARCH AND DEVELOPMENT ........................................ 1,806,204 729,903 4,280,640 1,816,742
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS ............................................ (2,001,930) (908,938) (6,052,265) (2,471,436)
INTEREST INCOME ...................................................... 205,919 49,121 519,587 148,090
INTEREST EXPENSE ..................................................... (9,773) (8,544) (28,840) (26,158)
OTHER INCOME ......................................................... 40,642 4,402 59,858 17,992
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAX .......................................... (1,765,142) (863,959) (5,501,660) (2,331,512)
INCOME TAX ...................................................... 0 0 0 0
=========== =========== =========== ===========
NET LOSS .......................................... ($1,765,142) ($ 863,959) ($5,501,660) ($2,331,512)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING ............................................ 8,813,487 4,758,625 7,660,248 4,611,681
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE ..................................... ... ($ 0.20) ($ 0.18) ($ 0.72) ($ 0.51)
=========== =========== =========== ===========
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ARIEL CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
1996 1995
<CAPTION>
<S> <C> <C>
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS .................................................................................... $ (5,501,660) $ (2,331,512)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED IN OPERATING ACTIVITIES:
DEPRECIATION & AMORTIZATION ................................................................. 392,457 193,423
AMORTIZATION OF DISCOUNT ON ROYALTIES PAYABLE .............................................. 24,026 21,984
PROVISION FOR DOUBTFUL ACCOUNTS ............................................................. 30,000 54,044
PROVISION FOR INVENTORY OBSOLESCENCE ........................................................ 30,000 30,000
(INCREASE) DECREASE IN ASSETS:
ACCOUNTS RECEIVABLE ................................................................... (1,260,918) (497,354)
INVENTORIES ........................................................................... (772,377) (1,035,121)
PREPAID EXPENSES ...................................................................... (97,343) (236,690)
SECURITY DEPOSITS ..................................................................... 73,028 (211,412)
INCREASE (DECREASE) IN LIABILITIES:
ACCOUNTS PAYABLE ...................................................................... 612,035 182,355
ACCRUED EXPENSES ...................................................................... 127,976 21,637
ROYALTIES PAYABLE, RELATED PARTIES .................................................... 4,234 (50,076)
NOTES PAYABLE ......................................................................... (78,509) --
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES ............................................ (6,417,051) (3,858,722)
------------ ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
PURCHASE OF EQUIPMENT ....................................................................... (1,307,159) (334,594)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES ............................................ (1,307,159) (334,594)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS [NET] FROM SALE OF COMMON STOCK .................................................... -- 5,610,528
PROCEEDS [NET] FROM EXERCISE OF WARRANTS .................................................... 6,529,528 --
PROCEEDS [NET] FROM EXERCISE OF OPTIONS ..................................................... 295,437 --
PROCEEDS [NET] FROM EXERCISE OF UNDERWRITERS
PURCHASE OPTION ........................................................................ 768,000 --
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ........................................ 7,592,965 5,610,528
------------ ------------
NET (DECREASE) INCREASE IN CASH ................................................................... (131,245) 1,417,212
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR ................................................................................. 13,979,009 313,189
============ ============
CASH AND CASH EQUIVALENTS, END OF PERIOD .......................................................... $ 13,847,764 $ 1,730,401
============ ============
<FN>
See accompanying notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>
Ariel Corporation
Notes to Financial Statements
(Unaudited)
Basis of Presentation
The financial statements included herein have been prepared by the
Company, pursuant to the Rules and Regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes, however, that the disclosure contained herein
is adequate to make the information presented not misleading. The financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-KSB for the year ended December 31,
1995. Certain prior period amounts have been reclassified in order to conform to
the current period presentation.
In the opinion of the management of the Company, the accompanying
unaudited financial statements contain all adjustments, consisting of normal
recurring accruals, which are necessary to present fairly the financial position
of the Company as of September 30, 1996 and the results of operations for the
three and nine months ended September 30, 1996 and 1995 and the statements of
cash flows for the nine months ended September 30, 1996 and 1995, respectively.
The results for interim periods are not necessarily indicative of results for
the full year.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
COMPARISON OF RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship that certain items of the Company's results of operations bear to
total sales.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Sales .......................................................................... 100% 100% 100% 100%
Cost of goods sold ............................................................. 50 46 51 49
---- ---- ---- ----
Gross profit .............................................................. 50 54 49 51
Expenses
Sales and marketing ....................................................... 27 30 33 29
General and administrative ................................................ 28 31 35 31
Research and development .................................................. 48 30 48 27
---- ---- ---- ----
Loss from operations ........................................................... (53) (37) (67) (36)
Interest Income ................................................................ 5 2 6 2
Interest Expense ............................................................... -- -- -- --
Other Income ................................................................... 1 -- -- --
---- ---- ---- ----
Loss before income tax benefit (provision) ..................................... (47) (35) (61) (34)
Income tax benefit (provision) ................................................. -- -- -- --
==== ==== ==== ====
Net Loss ...................................................... (47)% (35)% (61)% (34)%
==== ==== ==== ====
</TABLE>
<PAGE>
Three months ended September 30, 1996 as Compared to three months ended
September 30, 1995
Net Sales
Net sales were $3,760,367 for the three months ended September 30,
1996, an increase of $1,298,080 or 53% compared to net sales of $2,462,287 for
the three months ended September 30, 1995. The increase in net sales for the
current quarter compared to the prior year quarter was the result of initial
shipments of the Company's computer telephony integration ("CTI") modem products
and shipments of the Company's OEM digital signal processing ("DSP") boards. One
customer accounted for approximately 36% of third quarter 1996 net sales.
Gross Profit
Gross profit increased by $533,281 or 40% to $1,874,316 for the three
months ended September 30, 1996 compared to $1,341,035 for the three months
ended September 30, 1995. Gross profit margin decreased to 50% for the three
months ended September 30, 1996 compared to 54% for the three months ended
September 30, 1995. The Company's mix of products sold during the third quarter
of 1996 included a high volume of orders from one customer for the Company's OEM
DSP boards which contained a somewhat lower gross profit margin compared to the
prior year third quarter.
Sales and marketing
Sales and marketing expenses were $1,024,198 or 27% of sales for the
three months ended September 30, 1996 compared to $750,216 or 30% of sales for
the three months ended September 30, 1995, an increase of $273,982 or 37%.
Salaries and wages increased by approximately $72,000 as the Company increased
headcount in the sales support area to meet the increase in sales volume. Direct
sales force commissions increased by approximately $61,000 reflecting the
significant increase in sales. Marketing and advertising expenses increased by
approximately $95,000 reflecting increased expenditures for print advertising,
brochures and marketing programs associated with the introduction of certain new
products on OEM DSP and CTI, and also expenses incurred in conjunction with the
establishment of the Company's home page on the Internet.
General and administrative
General and administrative expenses were $1,045,844 or 28% of sales for
the three months ended September 30, 1996 compared to $769,854 or 31% of sales
for the three months ended September 30, 1995, an increase of $275,990 or 36%.
Recruitment expenses increased by approximately $111,000 reflecting progress
payments for two administrative searches and significant print ad expenditures
for recruitment of engineers and support staff. Rent expense increased by
$63,000 primarily due to the Company's occupancy of its 30,000 square foot
Corporate Headquarters in January 1996. Depreciation expense increased by
approximately $46,000 reflecting a significant increase in purchases of computer
equipment related to the increase in headcount and furniture and fixtures needs
related to the Company's move to a larger facility in January 1996. Commercial
Insurance expense increased by $22,000 reflecting an increase in premium expense
due to an increase in coverage for Directors and Officers Liability insurance.
Research and Development
Research and development expenditures were $1,806,204 or 48% of sales
for the three months ended September 30, 1996 compared to $729,903 or 30% of
sales for the three months ended September 30, 1995, an increase of $1,076,301.
Salaries and wages increased by approximately $256,000 reflecting the continued
hiring in 1996 of engineering staff to meet the demands for internal product
development in the CTI and Communications Systems Group ("CSG"). Additionally,
the Company incurred an increase of approximately $384,500 in consulting
expenses related to product development projects, and approximately $185,000 for
various product prototypes.
For the foregoing reasons, the Company incurred a net loss of
$1,765,142 for the three months ended September 30, 1996 compared to a net loss
of $863,959 for the three months ended September 30, 1995.
.
<PAGE>
Nine months ended September 30, 1996 as compared to nine months ended September
30, 1995
Net Sales
Net sales were $8,943,415 for the nine months ended September 30, 1996,
an increase of $2,206,166 or 33% compared to net sales of $6,737,249 for the
nine months ended September 30, 1995. The increase in sales for the first nine
months of 1996 is a result of shipments of Ariel's OEM DSP products. One
customer accounted for approximately 29% of total sales. Additionally, the
Company began initial shipments of the Company's high-density computer telephony
modems, a significant portion of which was shipped during the third quarter of
1996. The Company began calendar year 1996 with a historically low backlog but
after a low bookings month in January 1996, it has experienced significantly
higher bookings through September 30, 1996. Bookings for the nine months ended
September 30, 1996 have increased by approximately 97% compared to the first
nine months of 1995.
Gross Profit
Gross profit increased $956,718 or 28% from $3,403,113 or 51% of sales
to $4,359,831 or 49% of sales. The Company's mix of products sold during the
first nine months of 1996 included a high volume of orders from one customer for
the Company's OEM DSP boards which contained a somewhat lower gross profit
margin compared to the first nine months of 1995. Sales of certain computer
telephony modem products carried higher gross profit margins that somewhat
offset this effect.
Sales and Marketing
Sales and marketing expenses were $2,972,661 or 33% of sales for the
nine months ended September 30, 1996 compared to $1,977,163 or 29% of sales for
the nine months ended September 30, 1995. The increase of $995,498 or 50%
includes an increase of approximately $307,000 in salaries and wages reflecting
additions to the field sales force in San Francisco, California, and one-time
severance costs associated with closing the Company's liaison office in Paris,
France, as well as an increase in headcount for its sales support area to meet
the increase in sales volume. Direct sales force commissions increased by
approximately $144,800 reflecting the significant increase in sales for the nine
months ended September 30, 1996. Advertising and marketing expenses increased by
approximately $268,000 reflecting increased expenditures for print advertising,
brochures and marketing programs associated with the introduction of certain new
products focused on OEM and CTI markets as well as certain expenses incurred in
conjunction with the establishment of the Company's home page on the Internet.
General and Administrative
General and administrative expenses were $3,158,795 or 35% of sales for
the nine months ended September 30, 1996 compared to $2,080,644 or 31% of sales
for the nine months ended September 30, 1995, an increase of $1,078,151 or 52%.
Salaries and wages increased by approximately $452,000 reflecting non-recurring
severance expense of $284,000 related to certain management personnel, and the
addition of a full time human resource manager. Depreciation expense increased
throughout the company, and by approximately $117,000 in general and
administrative expense, reflecting a significant increase in purchased computer
equipment related to the increase in headcount and furniture and fixture needs
related to the Company's move to a larger facility in January, 1996. Relocation
expense increased by approximately $140,000 reflecting the relocation of a
senior executive and the closing of the Company's liaison office in Paris,
France. Recruitment expense increased by approximately $166,000 reflecting
completed searches for human resource and accounting positions, progress
payments on two administrative searches in progress, and expenses incurred to
date on print ads for recruitment of engineers and support staff. Rent expense
increased by approximately $211,000 reflecting principally, the Company's
occupancy of its 30,000 square foot Corporate Headquarters in January 1996.
Research and Development
Research and development expenditures were $4,280,640 or 48% of sales
for the nine months ended September 30, 1996 compared to $1,816,742 or 27% of
sales for the nine months ended September 30, 1995. Salaries and wages increased
by approximately $826,000 reflecting a significant increase in hiring of
engineering staff to meet the demand of internal product development in both CTI
and CSG groups. Additionally, the Company incurred an increase in consulting
expenses of approximately $452,700 related to certain product development
projects and approximately $393,000 for product prototypes.
For the foregoing reasons, the Company incurred a net loss of
$5,501,660 for the nine months ended September 30, 1996 compared to a net loss
of $2,331,512 for the nine months ended September 30, 1995.
<PAGE>
Liquidity and Capital Resources
On December 20, 1995, the Company completed a secondary offering of its
securities pursuant to which it sold 2,040,000 common shares at $7.50 per share.
After payment of certain expenses associated with the offering, the Company
received net proceeds of approximately $14 million.
On January 1, 1996, 1,725,000 publicly traded warrants were
outstanding. Each warrant entitled the holder to purchase one share of the
Company's common stock at a per share price of $3.50. Effective January 24,
1996, each warrant was eligible for exercise and under certain circumstances,
could be called for redemption by the Company at a price per warrant of $0.01.
On May 22, 1996, the Company notified all registered holders of warrants that it
had elected to redeem on or after June 28, 1996 all warrants outstanding on the
redemption date. Each holder of a warrant called for redemption could within 30
days, elect to preempt the redemption by exercising the warrant and purchasing
one share of common stock of the Company at the exercise price of $3.50. Through
September 30, 1996, the Company received net proceeds of approximately
$6,530,000 with respect to the exercise of such warrants.
For the nine months ended September 30, 1996, net cash used in
operating activities amounted to approximately $6,417,100. The negative cash
flow from operations was the result of Company's net loss of $5,501,660 for the
nine months ended September 30, 1996. Additionally, trade accounts receivable
increased by approximately $1,260,900 from December 31, 1995 reflecting the
significant increase in sales volume during the third quarter of 1996. Also,
inventories increased by approximately $772,400 as a result of the Company's
decision to order certain key raw material components in ample quantity to meet
anticipated shipment of its CTI products which began shipping in the third
quarter of 1996.
Cash used in investing activities for the nine months ended September
30, 1996 amounted to approximately $1,307,200 and reflected purchases of
computer and peripheral equipment to support the increase in engineering and
professional staff and office equipment and furniture related to the Company's
relocation to a larger facility in January 1996.
Cash flow from financing activities amounted to approximately
$7,593,000 for the nine months ended September 30, 1996. As previously
discussed, the Company received $6,530,000 from the exercise of outstanding
warrants. Additionally, the Company has received $768,000 resulting from the
exercise of 150,000 unit purchase options issued to the Company's Underwriters
in conjunction with its Initial Public Offering. Such options entitled the
holder to purchase for an aggregate consideration of $768,000, 150,000
Underwriter Units. Upon exercise, each Underwriter Unit entitles the holder to
one share of common stock and one warrant. Through the nine months ended
September 30, 1996, the Company received approximately $295,000 from the
exercise of outstanding stock options.
<PAGE>
Impact of the Adoption of Recently Issued Accounting Standards
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of" ("SFAS 121") in March 1995,
effective January 1, 1996. SFAS 121 requires companies to review their
long-lived assets and certain identifiable intangibles (collectively,
"Long-Lived Assets") for impairment whenever events or changes in circumstances
indicate that the carrying value of a Long-Lived Asset may not be recoverable.
Impairment is measured using the lower of a Long-Lived Asset's book value or
fair value, as defined. The Company believes that, based upon current operations
and prospects, SFAS 121 will not have a material impact on the Company's
financial position or results of operations.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123") in October 1995, effective January 1, 1996. SFAS 123 requires companies to
estimate the fair value of common stock, stock options, or other equity
instruments ("Equity Instruments") issued to employees using pricing models
which take into account various factors such as current price of the common
stock, volatility and expected life of the Equity Instrument. SFAS 123 permits
companies to either provide pro forma note disclosure, or adjust operating
results, for the amortization of the estimated value of the Equity Instrument
over the vesting period of the Equity Instrument. The Company has elected to
continue to account for stock options under Accounting Principles Board Opinion
No. 25.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits - Exhibit 11
- Exhibit 27
B) Reports on Form 8-K - None.
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ariel Corporation
------------------------------------
Registrant
/S/ Gerard E. Dorsey
----------------------------------
Gerard E. Dorsey
Chief Financial Officer and Principal
Accounting Officer
Date: November 12, 1996
<PAGE>
<TABLE>
Exhibit 11
ARIEL CORPORATION
STATEMENT OF COMPUTATION OF PER SHARE AMOUNTS
For the Three Months and Nine Months Ended September 30, 1996 and 1995
Three Months Ended September 30, Nine Months Ended September 30,
<CAPTION>
<S> <C> <C> <C> <C>
1996 1995 1996 1995
----------- ----------- ----------- ------------
Primary:
Net loss for the period ................................... $(1,765,142) $ (863,959) $ (5,501,660) $ (2,331,512)
----------- ----------- ----------- ------------
Weighted average number of shares of common
stock outstanding ....................................... 8,813,487 4,758,625 7,660,248 4,611,681
Shares issuable upon exercise of outstanding
options and warrants .................................... -- -- -- --
Shares assumed to be acquired in accordance
with the treasury stock method .......................... -- -- -- --
Shares used in computing per share loss .................... 8,813,487 4,758,625 7,660,248 4,611,681
----------- ----------- ----------- ------------
Net loss per share ......................................... $ (0.20) (0.18) (0.72) (0.51)
Fully Diluted:
Net loss for the period ................................... $(1,765,142) $ (710,232) $ (5,501,660) $(2,206,974)
----------- ----------- ----------- ------------
Weighted average number of shares of common
stock outstanding ....................................... 8,813,487 4,758,625 7,660,248 4,611,681
Shares issuable upon exercise of outstanding
options and warrants .................................... 1,329,515 3,228,542 2,482,754 2,838,315
Shares assumed to be acquired in accordance
with the treasury stock method .......................... (2,356,535) (951,725) (2,356,535) (951,725)
----------- ----------- ----------- ------------
Shares used in computing per share loss .............................. 7,786,467 7,035,442 7,786,467 6,498,271
----------- ----------- ----------- ------------
Net loss per share ......................................... $ (0.23) (0.10) (0.71) (0.34)
----------- ----------- ----------- ------------
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000911167
<NAME> ARIEL CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 13,847,764
<SECURITIES> 0
<RECEIVABLES> 2,988,554
<ALLOWANCES> 197,678
<INVENTORY> 3,003,136
<CURRENT-ASSETS> 19,842,941
<PP&E> 1,487,627
<DEPRECIATION> 1,310,604
<TOTAL-ASSETS> 21,718,485
<CURRENT-LIABILITIES> 2,638,076
<BONDS> 0
0
0
<COMMON> 8,905
<OTHER-SE> 19,071,504
<TOTAL-LIABILITY-AND-EQUITY> 21,718,485
<SALES> 8,943,415
<TOTAL-REVENUES> 8,943,415
<CGS> 4,583,584
<TOTAL-COSTS> 4,583,584
<OTHER-EXPENSES> 6,081,105
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,840
<INCOME-PRETAX> (5,501,660)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,501,660)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,501,660)
<EPS-PRIMARY> (0.72)
<EPS-DILUTED> (0.71)
</TABLE>
