<TABLE>
<CAPTION>
<S> <C>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------
Form 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997 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)
--------------------------------------------
Indicate by 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 9,169,325 shares outstanding
as of June 30, 1997
Documents Incorporated by Reference: None
</TABLE>
<PAGE>
Ariel Corporation
Index
Part I. Financial Information
- -------------------------------
Item 1. Financial Statements (Unaudited)
--------------------
A. Balance sheets - June 30, 1997 and December 31, 1996
B. Statements of operations for the three and six months
ended June 30, 1997 and 1996.
C. Statements of cash flows for the six months ended
June 30, 1997 and 1996.
D. Notes to financial statements
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
---------------------
Part II. Other Information
- ----------------------------
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM I. - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARIEL CORPORATION
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1997 1996
------------ ------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS ................................................................... $ 6,141,333 $ 4,626,583
MARKETABLE SECURITIES ....................................................................... 1,075,000 5,999,377
ACCOUNTS RECEIVABLE, NET OF ALLOWANCE FOR DOUBTFUL
ACCOUNTS OF $212,678 AT JUNE 30, 1997 AND DECEMBER 31, 1996 ........................... 1,833,900 3,199,542
OTHER RECEIVABLES ........................................................................... 69,779 190,023
INVENTORIES ................................................................................. 3,781,134 3,528,252
PREPAID EXPENSES ............................................................................ 360,787 156,005
------------ ------------
TOTAL CURRENT ASSETS ................................................... 13,261,933 17,699,782
EQUIPMENT, NET OF ACCUMULATED DEPRECIATION
AND AMORTIZATION ....................................................................... 2,517,278 2,036,897
OTHER ASSETS ....................................................................................... 833,328 366,385
============ ============
TOTAL ASSETS ................................................................................ $ 16,612,539 $ 20,103,064
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE ............................................................................ $ 440,709 $ 1,840,986
ACCRUED EXPENSES ............................................................................ 1,750,135 1,826,591
NOTES PAYABLE - CURRENT PORTION OF LONG-TERM DEBT ........................................... 450,000 0
NOTES PAYABLE, RELATED PARTIES .............................................................. 0 154,021
ROYALTIES PAYABLE ........................................................................... 67,706 82,571
------------ ------------
TOTAL CURRENT LIABILITIES .............................................. 2,708,550 3,904,169
NOTES PAYABLE - LONG TERM .......................................................................... 2,550,000 0
STOCKHOLDERS' EQUITY
PREFERRED STOCK, $.001 PAR VALUE:
AUTHORIZED - 2,000,000 SHARES
ISSUED AND OUTSTANDING - NONE
COMMON STOCK, $.001 PAR VALUE:
AUTHORIZED - 20,000,000 SHARES
ISSUED AND OUTSTANDING - 9,169,325 AT JUNE 30, 1997
AND 8,949,975 AT DECEMBER 31, 1996 ................................ 9,169 8,950
ADDITIONAL PAID-IN CAPITAL .................................................................. 30,541,482 29,321,748
UNEARNED COMPENSATION ....................................................................... (89,408) (178,819)
ACCUMULATED DEFICIT ......................................................................... (19,107,254) (12,952,984)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ............................................. 11,353,989 16,198,895
============ ============
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ..................................................... $ 16,612,539 $ 20,103,064
============ ============
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ARIEL CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
=========== =========== =========== ===========
SALES .................................................................. $ 2,540,036 $ 3,660,669 $ 7,059,562 $ 5,183,048
COST OF GOODS SOLD ..................................................... 1,547,971 1,877,816 3,940,742 2,697,533
----------- ----------- ----------- -----------
GROSS PROFIT .................................................... 992,065 1,782,853 3,118,820 2,485,515
EXPENSES:
SALES AND MARKETING ............................................... 1,276,788 999,204 2,425,248 1,948,463
GENERAL AND ADMINISTRATIVE ........................................ 979,366 1,281,386 2,130,799 2,112,951
RESEARCH AND DEVELOPMENT .......................................... 2,588,341 1,378,769 5,046,008 2,474,436
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES ...................................... 4,844,495 3,659,359 9,602,055 6,535,850
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS ............................................ (3,852,430) (1,876,506) (6,483,235) (4,050,335)
INTEREST INCOME ........................................................ 93,067 144,968 211,424 313,668
INTEREST EXPENSE ....................................................... (24,759) (9,629) (28,733) (19,067)
OTHER INCOME ........................................................... 147,749 4,467 146,274 19,216
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES ........................................ (3,636,373) (1,736,700) (6,154,270) (3,736,518)
INCOME TAXES ..................................................... 0 0 0 0
=========== =========== =========== ===========
NET LOSS ........................................................ ($3,636,373) ($1,736,700) ($6,154,270) ($3,736,518)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING ............................................... 9,169,325 7,285,416 9,118,091 7,079,120
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE ............................................... ($ 0.40) ($ 0.24) ($ 0.67) ($ 0.53)
=========== =========== =========== ===========
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARIEL CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
1997 1996
=========== ============
Cash flows from operating activities:
Net loss ............................................................................................ ($6,154,270) ($ 3,736,518)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ....................................................... 541,265 242,438
Amortization of discount on royalties payable ....................................... 2,998 15,953
Loss on sale of marketable securities ............................................... 7,507 0
Provision for doubtful accounts ..................................................... 0 15,000
Provision for inventory obsolescence ................................................ 30,000 15,000
Non-cash compensation expense ....................................................... 89,408 0
(Increase) decrease in assets:
Accounts receivable and other receivables ........................................... 1,485,885 (1,446,104)
Inventories ......................................................................... (282,882) (857,515)
Other assets ........................................................................ (349,915) 83,336
Increase (decrease) in liabilities:
Accounts payable and accrued expenses ............................................... (1,476,734) 526,629
Royalties payable ................................................................... (14,866) 4,810
Notes payable, related parties ...................................................... (154,021) 0
----------- ------------
Net cash used in operating activities ................................. (6,275,625) (5,136,971)
----------- ------------
Cash flows from investing activities:
Proceeds from the sale and maturity of investments .................................. 4,913,759 0
Purchase of equipment ............................................................... (1,021,530) (961,557)
----------- ------------
Net cash provided by (used in) investing activities ................... 3,892,229 (961,557)
----------- ------------
Cash flows from financing activities:
Proceeds from debt financing ........................................................ 3,000,000 0
Proceeds from exercise of warrants and common stock
options, net of expenses ...................................................... 898,145 5,482,176
----------- ------------
Net cash provided by financing activities .............................. 3,898,145 5,482,176
----------- ------------
Net increase (decrease) in cash ...................................................................... 1,514,749 (616,352)
Cash and cash equivalents, beginning of year ......................................... 4,626,583 13,979,009
=========== ============
Cash and cash equivalents, end of period .............................................................. $ 6,141,333 $ 13,362,657
=========== ============
Supplemental Cash Flow Information:
- ----------------------------------
Other assets includes an increase of $316,445 representing the theoretical value of 83,333 warrants issued as part of the fees
associated with the acquisition of a credit facility.
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
Ariel Corporation
Notes to Financial Statements
(Unaudited)
1. 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-K for the year ended December 31, 1996. The year end
balance sheet data was derived from audited financial statements but does not
include all disclosures required by generally accepted accounting principles.
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 June 30, 1997 and the results of operations for the three and six
months ended June 30, 1997 and 1996. The results for interim periods are not
necessarily indicative of results for the full year.
<TABLE>
<CAPTION>
<S> <C> <C>
2. Inventories, net of allowance:
Inventories, net of allowance, consists of the following:
June 30, December 31,
1997 1996
----------- --------------
Component Materials..................................... $1,866,913 $1,313,092
Work-in process......................................... 459, 423 620,367
Finished Goods.......................................... 1,454,798 1,594,793
------------ -------------
$3,781,134 $3,528,252
============= =============
</TABLE>
3. Credit Facility
On June 12, 1997, the Company completed a $10 million credit facility with
the Technology Finance Division of Transamerica Business Credit Corporation with
the following terms and provisions:
$6 million, five year term loan:
Payments of principal and interest are due in arrears in twenty consecutive
quarterly installments, payable on the first day of each calendar quarter
commencing October 1, 1997.
Interest rate is based on the weekly average yield on five-year U.S.
Treasury Securities plus 5.75 percent, fixed for five years as of the date of
advance.
$3 million, is outstanding at June 30, 1997. Interest rate in effect at
June 30, 1997 was 12.23%.
$3 million available upon attainment of any one of certain milestones, such
as profitability, minimum net proceeds of $7 million from the sale of common
stock, or achievement of a significant strategic partner relationship. As of
June 30, 1997, this facility has not been utilized.
$4 million, three-year revolving credit facility, which can be extended for
two additional one-year periods:
This revolving credit facility can be increased to $7 million in the event
that the Company achieves one of the milestones, referred to under the term
loan but elects not to draw the second advance under the term loan.
Interest rate is based on the prime rate plus 2.50 percent as of the date
the revolver is utilized.
Available line of credit based on a formula of eligible accounts receivable
and inventory.
As of June 30, 1997, this facility has not been utilized.
Under terms of the credit agreement, the Company must maintain agreed upon
levels of financial performance, including the maintenance of cash on hand
through December 31, 1997 of $3 million. The Company anticipates achievement of
all financial covenants.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------
RESULTS OF OPERATIONS.
---------------------
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 Six months ended
June 30, June 30,
1997 1996 1997 1996
--------- --------- ----------- ---------
Sales 100% 100% 100% 100%
Cost of goods sold 61 51 56 52
----------- ---------- ---------- ---------
Gross Profit 39 49 44 48
Expenses:
Sales and marketing 50 27 34 38
General and administrative 39 35 30 41
Research and development 102 38 72 48
----------- ---------- ---------- ---------
Total Operating Expenses 191 100 136 127
Loss from operations (152) (51) (92) (78)
Interest Income 4 4 3 6
Interest Expense (1) * * *
Other (expense) Income 6 * 2 *
----------- ---------- ---------- ---------
Loss before income taxes (143) (47) (87) (72)
Income taxes - - - -
----------- ---------- --------- ----------
Net Loss (143)% (47)% (87)% (72)%
=========== ========== ========== =========
* Total less than 1%
</TABLE>
<PAGE>
Three months ended June 30, 1997 as Compared to three months ended June 30, 1996
- --------------------------------------------------------------------------------
Net Sales
Worldwide sales were $2,540,036 for the three months ended June 30, 1997, a
decrease of $1,120,633 or 31% compared to net sales of $3,660,669 for the three
months ended June 30, 1996. Domestic sales decreased by $989,018 from $3,188,252
for the three months ended June 30, 1996 to $2,199,234 for the three months
ended June 30, 1997. This decrease in domestic sales is solely attributable to
no additional shipments of a digital signal processing ("DSP") OEM product to
one customer that accounted for 32% of sales in the second quarter of 1996. All
outstanding purchase orders for this customer were completed during the first
quarter of 1997. Export sales were $340,802 for the three months ended June 30,
1997 compared to $472,417 for the three months ended June 30, 1996.
Gross Profit
Gross profit decreased by $790,788 or 44% to $992,065 for the three months
ended June 30, 1997 from $1,782,853 for the three months ended June 30, 1996.
Gross profit margin decreased to 39% for the three months ended June 30, 1997
compared to 49% for the three months ended June 30, 1996. The decrease in gross
margin for the second quarter of 1997 compared to the second quarter of 1996
reflects a shift in product mix from sales of higher margin DSP OEM products to
initial shipments of the Company's T1 Modem products which carried lower margins
in order to seed the targeted markets. Additionally, in the month of June 1997,
the Company began shipments of its Rascal product to several customers under a
beta program in which the selling price equated the Company's cost to produce.
Sales and marketing
Sales and marketing expenses were $1,276,788 or 50% of sales for the three
months ended June 30, 1997 compared to $999,204 or 27% of sales for the three
months ended June 30, 1996. The increase of $277,584 or 28% includes an increase
of approximately $186,000 for trade show expenses related to the Company's
first-time attendance at two trade shows: the Networld-Interop show at which the
Company introduced its Rascal product line and the Supercom show at which the
Company's Asymmetrical Digital Subscriber Line ("ADSL") carrier class DSLAM
product was introduced. Additionally, advertising expenses increased by $62,000
reflecting expenditures related to the Company's VME and T1 Modem products. Such
increases were partially offset by a decrease in sales commissions reflecting
lower sales volume for the second quarter of 1997.
General and administrative
General and administrative expenses were $979,366 or 39% of sales for the
three months ended June 30, 1997 compared to $1,281,386 or 35% of sales for the
three months ended June 30, 1996, a decrease of $302,020 or 24%. The second
quarter of 1996 included approximately $235,000 for non-recurring severance
expense related to certain management personnel.
Research and Development
Research and development expenditures were $2,588,341 or 102% of sales for
the three months ended June 30, 1997 compared to $1,378,769 or 38% of sales for
the three months ended June 30, 1996, an increase of $1,209,572. Salaries and
wages increased by approximately $291,000 reflecting principally the hiring of
additional engineering staff to meet the demands for internal product
development in the Data Communications and Communications Systems Group ("CSG").
Additionally, expenses related to outside contract labor for certain research
and development projects related to forward looking technologies increased by
approximately $253,000. The Company incurred approximately $91,000 related to
the use of outside consultants in conjunction with its CSG Group. There was also
an increase in the amount of overhead allocated to research and development as a
result of the increase in engineering headcount. The Company anticipates that
research and development expense will begin to decline starting in the latter
part of the third quarter through the remainder of calendar year 1997.
For the foregoing reasons, the Company incurred a net loss of $3,636,373
for the three months ended June 30, 1997 compared to a net loss of $1,736,700
for the three months ended June 30, 1996.
<PAGE>
Six months ended June 30, 1997 as compared to six months ended June 30, 1996
- ---------------------------------------------------------------------------
Net sales
Worldwide sales were $7,059,562 for the six months ended June 30, 1997, an
increase of $1,876,514 or 36% compared to worldwide sales of $5,183,048 for the
six months ended June 30, 1996. Domestic sales were $6,461,655 for the six
months ended June 30, 1997 compared to $4,280,446 for the six months ended June
30, 1996. The increase in domestic sales for the six months ended June 30, 1997
reflects increased shipments of one DSP OEM product to a single customer that
accounted for 35% of total sales for the six months ended June 30, 1997 compared
to 25% of total sales for the six months ended June 30, 1996. Additionally,
modem products did not begin shipments until the second half of 1996 while
shipments of such product for the first six months of 1997 were approximately
$1,356,000. Export sales were $597,907 for the six months ended June 30, 1997
compared to $902,602 for the six months ended June 30, 1996. Backlog at June 30,
1997 was $5,972,245.
Gross Profit
Gross profit increased $633,305 or 26% from $2,485,515 to $3,118,820. Gross
profit margin as a percentage of sales decreased from 48% for the six months
ended June 30, 1996 to 44% for the six months ended June 30, 1997. The decrease
represents a shift in product mix from DSP OEM product mix to initial shipments
of the Company's data communications products.
Sales and Marketing
Sales and marketing expenses were $2,425,248 or 34% of sales for the six
months ended June 30, 1997 compared to $1,948,463 or 38% of sales for the six
months ended June 30, 1996. The increase of $476,785 reflects an increase of
approximately $195,000 for trade show expenses related to first-time attendance
at two trade shows: The Networld Interop Show at which the Company introduced
its RASCAL product line and the Supercom Show at which the Company's ADSL
carrier class DSLAM product was introduced. Advertising expenses increased by
approximately $120,000, which was related to the Company's VME and T1 Modem
products.
General and Administrative
General and administrative expenses were $2,130,799 or 30% of sales for the
six months ended June 30, 1997 compared to $2,112,951 or 41% of sales for the
six months ended June 30, 1996, an increase of $17,848. The six months ended
June 30, 1996 included approximately $235,000 of non-recurring severance
expenses related to certain management personnel.
Research and Development
Research and development expenditures were $5,046,008, or 72% of sales for
the six months ended June 30, 1997 compared to $2,474,436, or 48% for the six
months ended June 30, 1996. The increase of $2,571,572 reflects an increase of
approximately $811,000 in salaries and related benefits reflecting principally
the hiring of additional engineering staff to meet the demands for internal
product development in the Data Communications and CSG product groups.
Additionally, expenses related to outside contract labor for projects related to
forward looking technologies increased by approximately $814,000.
<PAGE>
Liquidity and Capital Resources
On June 12, 1997, the Company announced it had completed a $10 million
credit facility with Transamerica Business Credit Corporation's Technology
Finance Division, of Farmington, Connecticut. This facility provides a
five-year, $6.0 million term loan and a three-year, $4.0 million revolving
credit facility ("Revolver"). The term loan provides for an immediate advance of
$3.0 million and a second advance of $3.0 million upon achievement of any one of
certain milestones such as profitability, net proceeds of at least $7 million
from the sale of common stock, or achievement of a significant strategic partner
relationship. The Revolver provides for up to $4.0 million in advances based on
a formula of eligible accounts receivable and inventory. This Revolver can be
increased to $7.0 million in the event that the Company achieves one of the
milestones, but elects not to draw the second advance under the term loan.
Additionally, the Revolver can be extended for two additional one-year periods.
As of June 30, 1997, there was $3.0 million outstanding under the term loan and
there were no outstanding advances under the Revolver. Payments of principal and
interest are due in arrears in twenty consecutive quarterly installments,
payable on the first day of each calendar quarter commencing October 1, 1997.
The interest rate under the term loan is based on the weekly average of the
interest rate on five year U.S. Treasury Securities for stated periods plus an
agreed upon number of additional basis points. At June 30, 1997, the interest
rate in effect was 12.23%. The interest rate in effect under the Revolver is
based on the prime rate plus 2.5%.
During the six months ended June 30, 1997, there was a net increase in cash
and cash equivalents of $1,514,750, including a net amount of $4,913,759 in
proceeds from the maturity and sale of investments in marketable securities
which were used to fund operations. On June 13, 1997 the Company received gross
proceeds of $3,000,000 under the above referenced term loan. At June 30, 1997,
cash and cash equivalents amounted to $6,141,333 and marketable securities
amounted to $1,075,000. Working capital amounted to $10,553,382 at June 30, 1997
compared to $13,795,613 at December 31, 1996, a decrease of $3,242,231.
Net cash used in operating activities for the six months ended June 30,
1997 amounted to $6,275,625. The negative cash flow from operations was
primarily the result of the Company's net loss of $6,154,270. Additionally,
trade accounts payable and accrued expenses decreased by $1,476,734 during the
six months ended June 30, 1997. Trade accounts receivable decreased by
$1,485,885 reflecting lower shipments during the second quarter of 1997. Net
cash used in operating activities for the six months ended June 30, 1996
amounted to $5,136,971, reflecting principally the Company's net loss of
$3,736,518 and increases in trade accounts receivable of $1,357,372 and
inventories of $857,515 offset by increased accounts payable and accrued
expenses of $526,629.
Net cash provided by investing activities for the six months ended June 30,
1997 amounted to $3,892,229. This included net proceeds of $4,913,759 from the
maturity and subsequent sale of high quality government agency securities.
Capital expenditures of $1,021,530 reflected purchases of computer and
peripheral equipment related to engineering staff and final test and assembly in
manufacturing and also office furniture related to the Company's relocation of
its CSG group to Piscataway, New Jersey in January, 1997. Net cash used in
investing activities for the six months ended June 30, 1996 amounted to $961,557
and reflected purchases of computer and peripheral equipment to support the
increase in engineering and professional staff, office equipment and furniture
related to the Company's relocation to its corporate headquarters in Cranbury,
New Jersey.
Net cash provided by financing activities for the six months ended June 30,
1997 amounted to $3,898,145, reflecting a draw down of $3,000,000 under the
Transamerica term loan and $898,145 in proceeds from the exercise of common
stock options. Net cash provided from financing activities for the six months
ended June 30, 1996 amounted to $5,482,176. The Company received proceeds of
$4,723,660 from the exercise of 1,349,617 warrants and $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.
Statements contained in this Form 10-Q 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. Forward looking
statements involve risks and uncertainties, including the timely development and
acceptance of new products, the impact of competitive products and pricing,
changing market conditions and the other risks detailed in the Company's
prospectus and from time to time in other filings. Actual results may differ
materially from those projected. These forward looking statements represent the
Company's judgment as of the date of this document. The Company disclaims,
however, any intent or obligation to update these forward looking statements.
<PAGE>
Impact of the Adoption of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128. "Earnings per Share" ("SFAS 128"),
which simplifies existing computational guidelines, revises disclosure
requirements and increases the comparability of earnings per share data on an
international basis. The Company is currently evaluating the impact of the new
statement. This statement is effective for financial statements for periods
ending after December 15, 1997 and requires restatement of all prior-period
earnings per share data presented.
<PAGE>
Part II. Other Information
- ------------------------------
Item 4. Submission of matters to a vote of Security Holders
---------------------------------------------------
a.) The Company held its annual meeting of stockholders, through the
solicitation of proxies, on June 13, 1997.
b.) Robert Ranalli and Edward Horowitz were re-elected as directors at
the meeting. Mesrs. Anthony Agnello, Harold Paul, Etienne Perold
and Jeffrey Sasmor continued as directors.
c.) In addition, the stockholders voted to amend the Company's 1995
Stock Option Plan, increasing the number of shares authorized under
the Plan from 600,000 to 1,200,000. The stockholders also voted to
ratify the selection of Coopers & Lybrand, LLP as the Company's
auditors for the fiscal year ending December 31, 1997.
The voting totals were as follows:
(i) Election of Robert Ranalli
For 7,609,280; Against 0; Withheld 455,050;
(ii) Election of Edward Horowitz
For 7,609,280; Against 0; Withheld 455,050;
(iii)Amendment of 1995 Stock Option Plan
For 2,672,514; Against 700,327; Abstain 48,300;
Withheld 4,643,189;
(iv)Proposal to ratify the appointment of Coopers & Lybrand, LLP
as Independent Public Accountants for the Company for the
fiscal year ending December 31, 1997
For 8,045,675; Against 8,455; Abstain 10,200;
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits -
Exhibit 11 - Statement of Computation of Per Share Amounts
Exhibit 27 - Financial Data Schedule (filed electronically)
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: December 24, 1997
<PAGE>
<TABLE>
EXHIBIT 11
<CAPTION>
<S> <C> <C> <C> <C>
ARIEL CORPORATION
STATEMENT OF COMPUTATION OF PER SHARE AMOUNTS
For the Three Months and Six Months Ended June 30, 1997 and 1996
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
Primary:
Net loss for the period .................................... ($ 3,636,373) ($ 1,736,700) ($ 6,154,270) ($ 3,736,518)
============ ============ ============ ============
Weighted average number of shares of common
stock outstanding ........................................ 9,169,325 7,285,416 9,118,091 7,079,120
Shares issuable upon exercise of outstanding
options and warrants ..................................... 0 0 0 0
Shares assumed to be acquired in accordance
with the treasury stock method ........................... 0 0 0 0
------------ ------------ ------------ ------------
Shares used in computing per share loss ..................... 9,169,325 7,285,416 9,118,091 7,079,120
============ ============ ============ ============
Net loss per share .......................................... ($ 0.40) ($ 0.24) ($ 0.67) ($ 0.53)
============ ============ ============ ============
Fully Diluted:
Net loss for the period .................................... ($ 3,636,373) ($ 1,736,700) ($ 6,154,270) ($ 3,736,518)
============ ============ ============ ============
Weighted average number of shares of common
stock outstanding ........................................ 9,169,325 7,285,416 9,118,091 7,079,120
Shares issuable upon exercise of outstanding
options and warrants ..................................... 1,820,308 2,857,586 1,983,446 3,064,882
Shares assumed to be acquired in accordance
with the treasury stock method ........................... (1,049,002) (2,575,748) (979,373) (2,575,748)
------------ ------------ ------------ ------------
Shares used in computing per share loss ..................... 9,940,631 7,567,254 10,122,164 7,568,254
============ ============ ============ ============
Net loss per share .......................................... ($ 0.37) ($ 0.23) ($ 0.61) ($ 0.49)
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000911167
<NAME> ARIEL CORPORATION
<S> <C>
<PERIOD-TYPE> 6-MOS
<PERIOD-END> JUN-30-1997
<FISCAL-YEAR-END> DEC-31-1997
<CASH> 6,141,333
<SECURITIES> 0
<RECEIVABLES> 2,116,357
<ALLOWANCES> 212,678
<INVENTORY> 3,781,134
<CURRENT-ASSETS> 13,261,933
<PP&E> 4,708,847
<DEPRECIATION> 2,181,756
<TOTAL-ASSETS> 16,612,539
<CURRENT-LIABILITIES> 2,708,550
<BONDS> 0
0
0
<COMMON> 9,169,325
<OTHER-SE> 11,344,820
<TOTAL-LIABILITY-AND-EQUITY> 16,612,539
<SALES> 7,059,562
<TOTAL-REVENUES> 7,059,562
<CGS> 3,940,742
<TOTAL-COSTS> 3,940,742
<OTHER-EXPENSES> 9,602,055
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,733
<INCOME-PRETAX> (6,154,270)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,154,270)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,154,270)
<EPS-PRIMARY> (0.67)
<EPS-DILUTED> (0.61)
</TABLE>
