<PAGE>
<TABLE>
<CAPTION> <S> <C>
Securities and Exchange Commission
Washington, DC 20549
----------------------------------
Form 10-Q
Quarterly Report pursuant to Section 13 or 15(d)
of the securities exchange act of 1934
For the quarterly period ended March 31, 1999 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 9,775,150 shares outstanding
as of March 31, 1999
Documents Incorporated by Reference: None
</TABLE>
<PAGE>
<TABLE>
<CAPTION> <S> <C>
Ariel Corporation
Index
Part I. Financial Information
Item 1. Consolidated Financial Statements (Unaudited)
A. Consolidated balance sheets as of March 31, 1999 and December 31, 1998
B. Consolidated statements of operations for the three
months ended March 31, 1999 and 1998.
C. Consolidated statements of cash flows for the three months
ended March 31, 1999 and 1998.
D. Notes to consolidated financial statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Part II. Other Information
</TABLE>
<PAGE>
<TABLE>
<CAPTION> <S> <C> <C>
PART I. - FINANCIAL INFORMATION
ITEM 1. - CONSOLIDATED FINANCIAL STATEMENTS
ARIEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1999 1998
---- ----
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS ............................................. $ 12,858,830 $ 17,996,575
ACCOUNTS RECEIVABLE, NET OF ALLOWANCE FOR DOUBTFUL
ACCOUNTS OF $1,554,055 IN 1999 AND $1,460,855 IN 1998 ........... 2,910,536 3,593,709
OTHER RECEIVABLES ..................................................... 1,164,533 1,378,781
INVENTORIES, NET ...................................................... 2,260,737 2,857,326
PREPAID EXPENSES ...................................................... 354,875 449,691
------- -------
TOTAL CURRENT ASSETS ............................. 19,549,511 26,276,082
EQUIPMENT, NET OF ACCUMULATED DEPRECIATION
AND AMORTIZATION ................................................. 1,392,443 1,365,354
INTANGIBLE ASSETS ............................................................ 890,944 997,225
GOODWILL ..................................................................... 3,789,866 4,344,374
OTHER ASSETS ................................................................. 659,111 699,345
------- -------
TOTAL ASSETS .......................................................... $ 26,281,875 $ 33,682,380
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE ...................................................... $ 1,705,529 $ 2,679,548
ACCRUED EXPENSES ...................................................... 2,595,065 5,388,661
CURRENT PORTION OF LONG-TERM DEBT ..................................... 5,243,386 5,480,430
ROYALTIES PAYABLE ..................................................... 48,610 95,410
------ ------
TOTAL CURRENT LIABILITIES ........................ 9,592,590 13,644,049
LONG-TERM DEBT ............................................................... 270,086 332,834
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 - 9,755,150 AT MARCH 31, 1999
AND 9,760,150 AT DECEMBER 31, 1998 .......... 9,760 9,760
ADDITIONAL PAID-IN CAPITAL ............................................ 33,302,342 33,302,342
UNREALIZED GAIN / (LOSS) ON FOREIGN CURRENCY TRANSLATION .............. (245,909) 31,272
ACCUMULATED DEFICIT ................................................... (16,646,994) (13,637,877)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ....................... 16,419,199 19,705,497
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY .............................. $ 26,281,875 $ 33,682,380
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<Caption. <S> <C> <C>
ARIEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
1999 1998
---- ----
SALES ........................................................................................... $ 3,073,529 $ 6,276,617
COST OF GOODS SOLD .............................................................................. 1,393,598 3,680,378
--------- ---------
GROSS PROFIT ............................................................................. 1,679,931 2,596,239
EXPENSES:
SALES AND MARKETING ........................................................................ 1,524,903 1,102,077
GENERAL AND ADMINISTRATIVE ................................................................. 1,826,855 1,356,051
RESEARCH AND DEVELOPMENT ................................................................... 1,352,127 1,849,137
--------- ---------
TOTAL OPERATING EXPENSES ............................................................... 4,703,885 4,307,265
--------- ---------
LOSS FROM OPERATIONS ..................................................................... (3,023,954) (1,711,026)
INTEREST INCOME ................................................................................. 160,832 16,803
INTEREST EXPENSE ................................................................................ (142,961) (97,163)
OTHER INCOME / (EXPENSE) ........................................................................ (2,734) (7,544)
------ ------
LOSS BEFORE INCOME TAXES ................................................................. (3,008,817) (1,798,930)
INCOME TAXES .............................................................................. 0 0
----------- -----------
NET LOSS ................................................................................. ($3,008,817) ($1,798,930)
----------- -----------
OTHER COMPREHENSIVE INCOME / (LOSS), NET OF TAX:
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS .................................................. (182,939) 0
-------- --------
COMPREHENSIVE INCOME / (LOSS) ................................................................... (3,191,756) (1,798,930)
========== ==========
BASIC AND DILUTED PER SHARE DATA:
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING ....................................... 9,755,150 9,380,293
========= =========
NET LOSS PER SHARE ....................................................................... (0.31) (0.19)
========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION> <S> <C> <C>
ARIEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For The Three Months Ended March 31,
1999 1998
---- ----
Cash flows from operating activities:
Net Loss ........................................................................................... ($ 3,008,817) ($ 1,798,930)
Adjustments to reconcile net loss to net cash used
operating activities:
Depreciation and amortiz ........................................................ 226,765 313,651
Amortization of goodwill & intangibles .......................................... 357,182 0
Amortization of debt issuance costs ............................................. 16,089 16,089
Provision for doubtful accounts ................................................. 206,248 15,000
Provision for inventory obsolescence ............................................ 25,861 55,000
Non-Cash compensation expense ................................................... 0 27,705
(Increase) decrease in assets:
Accounts receivable ............................................................. 467,739 (3,522,666)
Other receivables ............................................................... 190,834 420
Inventories ..................................................................... 562,645 (1,653,746)
Other assets .................................................................... 65,583 (202,085)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses ........................................... (3,592,153) 1,775,887
Royalties payable, related parites .............................................. (46,800) (21,146)
---------- ----------
Net cash (used in) operating activiities......................................................... (4,528,826) (4,994,821)
---------- ----------
Cash flows from investing activities:
Purchase of equipment ........................................................... (321,162) (223,372)
-------- --------
Net cash (used in) investing activities.......................................................... (321,162) (223,372)
-------- --------
Cash flows from financing activities:
Proceeds from debt financing .................................................... 0 2,000,000
Principal payments on long-term debt ............................................ (269,463) (69,710)
Proceeds from exercise of common stock options and warrants ..................... 0 1,628,552
-------- ---------
Net cash provided by (used in) financing activities.............................................. (269,463) 3,558,842
-------- ---------
Effect of exhange rate changes on cash ............................................................. (18,294) 0
Net increase (decrease) in cash .................................................................... (5,137,745) (1,659,351)
Cash and cash equivalents, beginning of year .................................... 17,996,575 2,645,864
---------- ----------
Cash and cash equivalents, end of period ........................................................... $ 12,858,830 $ 986,513
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<PAGE>
<PAGE>
Ariel Corporation
Notes to Consolidated 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, 1998.
As of March 31, 1999, the Company had working capital of $9,956,921,
including cash and cash equivalents of $12,858,830. The Company expects to incur
costs and expenses in excess of expected revenues as the Company continues to
execute its business strategy.
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 March 31, 1999 and the results of operations for the three months
ended March 31, 1999 and 1998. 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:
March 31, December 31,
1999 1998
---- ----
Component Materials................................................... $ 673,631 $1,040,115
Work-in process...........................................................1,312,108 1,536,870
Finished Goods............................................................ 274,998 280,341
------- -------
$2,260,737 $2,857,326
========== ==========
</TABLE>
<PAGE>
3. Debt
As of March 31, 1999 the Company had total debt of $5,513,472 consisting of
notes due to Transamerica Business Credit Corporation's Technology Finance
Division of Farmington Connecticut of $5,004,788 and acquired foreign debt of
$508,684.
Under its credit facility with Transamerica, outstanding debt of $5,004,788
as of March 31,1999 consisted of the following: a $2,504,788 Term Loan payable
quarterly in arrears over twenty consecutive quarters commencing October 1,
1997, and $2,500,000 drawn against a Revolver which matures on June 12, 2000 but
can be extended for two additional one year periods. The interest rate in effect
under the Revolver is based on prime rate plus 2.50% and is payable monthly in
arrears. The interest rate in effect on the term loan at March 31, 1999 was
12.099%.
On May 14, 1999 the Company executed an amendment to its agreement with
Transamerica that included a waiver for certain financial covenants the Company
was not in compliance with as of December 31, 1998 and March 31, 1999 and
amended covenants for 1999 and 2000. With the execution of this amendment all
previous financial covenants have been waived. Amended covenants consist of the
following:
o As of June 30, 1999 working capital shall be no less than $8,000,000. The
ratio of current assets to current liabilities shall not be less than 1.50
to 1.00. Tangible net worth shall not be less than $7,000,000.
oAs of September 30, 1999 working capital shall be no less than $6,000,000.
The ratio of current assets to current liabilities shall not be less than
1.50 to 1.00. Tangible net worth shall not be less than $5,000,000.
o As of December 31, 1999 working capital shall be no less than $8,000,000.
The ratio of current assets to current liabilities shall not be less than
1.75 to 1.00. Tangible net worth shall not be less than $6,500,000.
o Gross Profit Margins for the year ending December 31, 1999 shall not be less
than 35%.
o Net losses before taxes for the year ending December 31, 1999 are not to
exceed $10,000,000.
o Net losses before taxes for the year ending December 31, 2000 are not to
exceed $ 0.
<PAGE>
4. Segment Data
Segments are comprised of European and North American operations. The
accounting policies of the segments are the same as those described in the
"Summary of Significant Accounting Policies" in Note 1 of the Company's Form
10-K. Segment profit includes operating expenses directly attributable to the
segment including administrative, selling, marketing, research and development
costs and taxes. Certain expenses managed outside the reportable segments are
excluded. Costs excluded from segment profit include charges for in-process
technology and costs related to mergers and acquisitions. The Company does not
include intercompany transfers between segments for management reporting
purposes.
On November 23, 1998 the Company acquired all of the outstanding stock of
SCii Telecom, SA, in Paris France. As a result of the acquisition, the Company
now reports segments on a geographic basis. European operations did not qualify
as a reportable segment as of December 31, 1998, therefore, there is no
comparable segment information presented.
<TABLE>
<CAPTION> <S> <C>
Summary information by segment as of and for the three months ending March 31,
1999 is as follows:
NORTH AMERICA:
Revenues from external customers $2,919,974
Intersegment revenues 5,250
Segment profit / (loss) (2,162,827)
Segment assets 24,268,657
EUROPE:
Revenues from external customers $153,555
Intersegment revenues -0-
Segment profit / (loss) (843,715)
Segment assets 6,472,523
A reconciliation of the Company's segment losses to the corresponding consolidated amounts for the three months
ending March 31, 1999 is as follows:
Segment profit / (loss) ($3,006,542)
Profit margins on intersegment revenues (2,275)
=================
Net loss ($3,008,817)
=================
</TABLE>
<PAGE>
<TABLE>
<CAPTION> <S> <C> <C>
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.
Three months ended
March 31,
1999 1998
Sales 100% 100%
Cost of goods sold 45 59
----------- ----------
Gross profit 55 41
Expenses
Sales and marketing 50 18
General and administrative 59 22
Research and development 44 29
----------- ----------
Total Operating Expenses 1.53 69
Loss from operations (98) (27)
Interest Income 5 *
Interest Expense (5) (2)
Other (expense) Income * *
----------- ----------
Loss before income taxes (98) (29)
Income taxes - -
=========== ==========
Net Loss (98)% (29)%
=========== ==========
o Total is less than 1%
</TABLE>
<PAGE>
Three months ended March 31, 1999 as Compared to three months ended March 31,
1998
Net Sales
Worldwide sales were $3,073,529 for the three months ended March 31, 1999,
a decrease of $3,203,088 compared to net sales of $6,276,617 for the three
months ended March 31, 1998. Domestic sales were $2,682,539 for the three months
ended March 31, 1999 compared to $5,592,581 for the three months ended March 31,
1998, a decrease of $2,910,042. Approximately $2.1 million of this decrease is
attributable to a decrease in T1-Modem+ sales to Compaq, a major PC Integrator
customer. Compaq has discontinued its networking group and as a result, the
Company expects 1998 sales to PC integrators to be a significant part of its
1999 sales variances from the previous year. Other domestic decreases include a
reduction in RS1000 product sales to technical original equipment manufacturers
(TOEM). International sales were $390,990 for the first quarter of 1999
including U.S. exports of $237,435 and sales from European operations of
$153,555. This as compared to $684,036 for the first quarter of 1998. The
decrease of $293,046 in international sales is a result of a decrease in sales
of RS1000 and T1-Modem+ due to the introduction of the RS2000 product in
September of 1998. Such decreases were partially offset by revenues from the
Company's European subsidiary, SCii Telecom, SA which was acquired in November
1998.
Gross Profit
Gross profit decreased by $916,308 or 35% to $1,679,931 for the three
months ended March 31, 1999 from $2,596,238 for the three months ended March 31,
1998. Gross profit margin was 55% for the three months ended March 31, 1999
compared to 41% for the three months ended March 31, 1998. Margin differences
were due to a reduction in sales that was partially offset by higher gross
margin rates. The 14% increase in gross profit margin as a percent of sales
reflects the shift in markets from lower margin sales to PC Integrators in the
first quarter of 1998 to shipments to TOEM customers which carry higher gross
margins.
Sales and marketing
Sales and marketing expenses were $1,524,903 or 50% of sales for the three
months ended March 31, 1999 compared to $1,102,077 or 18% of sales for the three
months ended March 31,1998. The increase of $422,826 or 38% reflects an increase
in salaries and related expenses. These increases resulted from the acquisition
of the Company's European subsidiaries, hiring a Senior Marketing Vice President
and transferring the former President to the Vice President of Sales position in
the fourth quarter of fiscal 1998. Such increases were partially offset by a
reduction in commissions due to lower sales and reduced costs for product
demonstration equipment.
<PAGE>
General and administrative
General and administrative expenses were $1,826,855 for the three months
ended March 31, 1999 compared to $1,356,051 for the three months ended March 31,
1998. The increase of $470,804 reflects amortization of goodwill and other
intangibles of $265,679 realized in the Company's November 1998 acquisition of
SCii Telecom, SA. General and administrative expenses of SCii also contributed
$129,481 in the quarter ending March 31, 1999. Allowances for doubtful accounts
constituted a $191,248 increase as compared to the first quarter of the prior
year. Such increases were partially offset by decreases in consulting and other
administrative expenses related to the Company's Communications Systems Group
(CSG). The CSG was sold to Cabletron in September 1998.
Research and Development
Research and development expenses were $1,352,127 for the three months
ended March 31, 1999 compared to $1,849,137 for the three months ended March 31,
1998, a decrease of $497,010. Research and development expenses increased as a
percent to sales from 29% in the first quarter of 1998 to 44% in the same
quarter of 1999. CSG research and development expenses incurred in the quarter
ending March 31, 1998 were $886,373. As a result of the sale of the CSG, there
were no expenses related to this group in 1999. Increases in expenses were
comprised primarily of research and development of the foreign subsidiary of
$214,815 and bonuses paid to certain engineers in conjunction with employment
contracts of approximately $213,000.
<PAGE>
Liquidity and Capital Resources
The Company has a credit facility with Transamerica Business Credit
Corporation's Technology Finance Division, of Farmington, Connecticut. Currently
the Company has a five-year, $3 million term loan and a $4 million revolving
credit facility ("Revolver"). As of March 31, 1999, there was $2,504,788
outstanding under the term loan and $2,500,000 under the Revolver. (See Note 3
to the Financial Statements.)
The Company took down the term loan on June 12, 1997 when it signed the
agreement. 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. 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 September 30, 1998, the interest rate in effect was 12.099%.
The Revolver provides for up to $4.0 million in advances based on a formula
of eligible accounts receivable and inventory. Amounts drawn under the Revolver
mature on June 12, 2000. Eligibility is computed monthly and amounts drawn that
are not supported by the formula are to be repaid at that time. Accordingly, the
Revolver balance is reflected as a current liability on the balance sheet. The
interest rate in effect under the Revolver is based on the prime rate plus 2.50%
and is payable monthly in arrears.
In addition, the credit agreement includes a material adverse effect
clause, whereby Transamerica can accelerate the due date of the loan if certain
changes in conditions (financial or otherwise) are deemed to have a material
adverse effect on the Company or its ability to meet its obligations.
The Company was not in compliance with certain financial covenants as of
December 31, 1998 and March 31, 1999. Such covenants, as amended, are as
follows: minimum gross profit margin of 35% for the fiscal year ending December
31, 1998; and accounts receivable collection period of 55 days. On May 14, 1999
the Company executed an amendment to its agreement with Transamerica that
included a waiver for noncompliance with the above mentioned covenants and
amended covenants for 1999 and 2000. With the execution of this amendment all
previous financial covenants have been waived. Amended covenants consist of the
following:
o As of June 30, 1999 working capital shall be no less than $8,000,000. The
ratio of current assets to current liabilities shall not be less than 1.50
to 1.00. Tangible net worth shall not be less than $7,000,000. o As of
September 30, 1999 working capital shall be no less than $6,000,000. The
ratio of current assets to current liabilities shall not be less than 1.50
to 1.00. Tangible net worth shall not be less than $5,000,000. o As of
December 31, 1999 working capital shall be no less than $8,000,000. The
ratio of current assets to current liabilities shall not be less than 1.75
to 1.00. Tangible net worth shall not be less than $6,500,000. o Gross
Profit Margins for the year ending December 31, 1999 shall not be less than
35%. o Net losses before taxes for the year ending December 31, 1999 are
not to exceed $10,000,000. o Net losses before taxes for the year ending
December 31, 2000 are not to exceed $ 0.
<PAGE>
During the three months ended March 31, 1999, there was a net decrease in
cash and cash equivalents of $5,137,745. At March 31, 1999, cash and cash
equivalents amounted to $12,858,830. Working capital amounted to $9,956,921 at
March 31, 1999 compared to $12,632,033 at December 31, 1998.
Net cash used in operating activities for the three months ended March 31,
1999 amounted to $4,528,826. The negative cash flows from operations were the
due, in part, to the Company's net loss of $3,008,817 which was offset by
non-cash expenditures related to depreciation, amortization, reserves and
allowances of $832,145. Other operating cash uses included decreases in accounts
payable and accrued liabilities of $3,592,153 as the Company paid down
obligations of its subsidiary and accrued costs related to the sale of the CSG.
Such decreases were partially offset by increases in operating cash due to
reduced inventory and accounts receivable of $562,645 and $467,739,
respectively.
Net cash used in investing activities for the three months ended March 31,
1999 amounted to $321,162 due mostly to the purchases of computer and peripheral
equipment related to engineering staff and final test and assembly in
manufacturing.
Net cash used in financing activities for the three months ended March 31,
1999 amounted to $269,463, reflecting principal payments on debt.
Readiness for Year 2000
Until recently, many computer programs were written using two digits as a
space saving measure rather than four digits to define the applicable year in
the twentieth century. Such software may recognize a date using "00" as the year
1900 rather than the year 2000. The Company is in the process of defining,
assessing and converting, or replacing various internal computer programs and
systems to ensure that these Information Technologies will be Year 2000 (Y2k)
compliant. Implementation is expected to be completed before September 30, 1999
at which time the Company expects to have completed its plans to test Y2k
compliance of critical systems. While the estimated Y2k costs of these efforts
are not expected to be material to the Company's financial position or any
year's results of operations, there can be no assurance to this effect.
Non-Information Technology systems, which include embedded technology such
as micro-controllers used in fax machines, photocopiers, telephone switches,
security systems, and other common devices may also be affected by the Y2k
Problem. The Company is currently assessing the potential effect, if any, and
the cost of remediating the Y2k Problem with respect to its office and
facilities equipment.
While the Company continues to test its products, it believes these
products, which do not utilize date codes, are Y2k compliant. However, the fact
that these products interact with other third party vendor products and operate
on computer systems which are not under the Company's control, it is not
possible to be completely certain that all of the Y2k problems have been
foreseen.
In addition, the Company has initiated communications with third party
suppliers to determine that the supplier's operations and the products and
services they provide are Y2k compliant. Where practicable the Company will
attempt to mitigate its risks with respect to the failure of suppliers to be Y2k
ready. A survey of the Company's major suppliers has revealed that 82% have Y2K
compliance programs in place and are, or will be, Y2k compliant in a timely
manner. In the event that these third parties are not Y2k compliant, the Company
will seek alternative sources of supplies. However, such failures remain a
possibility and could have an adverse impact on the Company's results of
operations or financial condition.
Recovery under existing insurance policies should be available depending
upon the circumstances of a Y2k related event and the type of facility involved.
Generally, no recovery would be available in the event of an orderly shutdown
which does not result in damage to a facility. Potential recoveries in the event
of facility damage, including business interruption, would be subject to
deductibles in place under these policies.
The above expectations are subject to uncertainties. For example, if we are
unsuccessful in identifying or fixing all Y2k problems in our critical
operations, or if we are affected by the inability of suppliers or major
customers to continue operations due to such a problem, our results of
operations could be materially impacted."
<PAGE>
Part II. Other Information
None
Item 6.Exhibits and Reports on Form 8-K
a) Exhibits - Exhibit 27 Schedule of Financial Data (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/ John R. Loprete
--------------------------------
John R. Loprete
Vice President of Finance and
Principal Accounting Officer
Date: May 17, 1999
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000911167
<NAME> Ariel Corporation
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Mar-31-1999
<EXCHANGE-RATE> 1
<CASH> 12,858,830
<SECURITIES> 0
<RECEIVABLES> 4,464,591
<ALLOWANCES> 1,554,055
<INVENTORY> 2,260,737
<CURRENT-ASSETS> 19,549,511
<PP&E> 5,019,381
<DEPRECIATION> 3,626,938
<TOTAL-ASSETS> 26,281,875
<CURRENT-LIABILITIES> 9,592,590
<BONDS> 0
0
0
<COMMON> 9,775,150
<OTHER-SE> 16,500,942
<TOTAL-LIABILITY-AND-EQUITY> 26,281,875
<SALES> 3,073,529
<TOTAL-REVENUES> 3,073,529
<CGS> 1,393,598
<TOTAL-COSTS> 1,393,598
<OTHER-EXPENSES> 4,703,885
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142,961
<INCOME-PRETAX> (3,008,817)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,008,817)
<DISCONTINUED> 0
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