ARC Capital Reports 54% Sales Increase and Record Quarterly Profits.

MEDFORD, Ore.--(BUSINESS WIRE)--Nov. 4, 1996--ARC Capital (NASDAQ:ARCCA), a leading designer, manufacturer and marketer of proprietary computer-aided vision defect detection and sorting systems, today reported its highest ever quarterly sales and profit figures for its third quarter ended Sept. 30, 1996.

Sales for the three months increased 54% to $10,097,000, up from $6,548,000 during the same period a year ago. The 1996 period includes $4,790,000 of sales from the inclusion of Pulsarr Holding b.v. and Ventek Inc., which were acquired in 1996. In the Sept. 30, 1996, quarter, the company reported a net profit of $985,000, or $.07 per share, compared to net income of $564,000, or $.06 per share, in the same quarter of last year. The increase was due to the addition of Ventek.

Sales for the first nine months of 1996 were $20,129,000, up 41% from the $14,252,000 experienced in the same period in 1995. The addition of Pulsarr and Ventek from their respective acquisition dates added $8,073,000 of sales in the current period. There was a net loss of $7,885,000 for the first nine months of 1996, compared to net income of $893,000 in the same period of 1995. The 1996 loss included two special charges: (1) a $6,088,000 write-off of in-process technology related to Pulsarr, and (2) a $647,000 charge for deferred royalty expenses. Excluding the special 1996 charges and a non-operational $732,000 gain from an arbitration matter in 1995, the 1996 net loss for the first nine months was $1,150,000, or $.11 per share, compared to income of $161,000, or $.02 per share, last year. Research and development expenditures for the first nine months of 1996 were $2,931,000, an increase of $1,564,000 over the $1,367,000 spent last year.

William J. Young, ARC's president and chief executive officer, said, "During the third quarter, ARC has concentrated on combining the sales and marketing channels of our SRC and Pulsarr subsidiaries and the integration of Ventek to take advantage of our proprietary technologies in new markets. Our goal is to capitalize on the combination of SRC, Pulsarr and Ventek capabilities to achieve sustained profitability."

Young also said, "We continue to believe that 1996 sales will be in excess of $30 million and that operating profitability (before special charges) will be achieved for all of 1996, even though 1996 research and development expenditures are expected to be $2 million higher than in 1995."

ARC's backlog as of Sept. 30, 1996, was $13,598,000 compared to $5,626,000 on Sept. 30, 1995. The 1996 number includes $4,947,000 related to Pulsarr and Ventek.

ARC's operations are comprised of three wholly-owned subsidiaries, SRC VISION, Pulsarr, and Ventek, who design, manufacture and distribute automated machine vision systems used in sorting and defect identification and removal processes. -0-

                         Summary Operating Results
                 (in thousands, except per share amounts)

                  3 Months Ended Sept. 30,   9 Months Ended Sept. 30,
                      1996       1995            1996        1995

Sales             $   10,097  $  6,548       $  20,129    $  14,252
                   ==========  ========       =========    =========
Income (loss)
 before special
 charges          $      985  $    617       $  (1,150)   $     183
Special (charges)
 income:
   In-process
    technology            --        --          (6,088)          --
   Royalty expense        --        --            (647)          --
   Gain on rescission of
    stock compensation    --        --              --          732
                   ----------  --------       ---------     --------
Net income (loss):
   Continuing
    operations            985       617          (7,885)        915
   Discontinued
    operations             --       (53)             --         (22)
                    ----------  --------       ---------     --------
     Total          $      985  $    564       $  (7,885)    $    893
                    ==========  ========       =========     ========
Earnings (loss)
 per common and
 common equivalent
 share:
   Continuing
    operations       $     .07   $   .07       $    (.72)    $    .09
   Discontinued
    operations              --      (.01)             --           --
                     ---------   -------        ---------     --------
     Total           $     .07   $   .06       $    (.72)    $    .09
                     =========   =======        =========     ========

Shares outstanding     10,889     9,887           10,889        9,887
                     =========   =======        =========     ========

Comments made above include "forward-looking statements," which are based on expectations of the company. However, there can be no assurance that such statements, or any projections included in such statements, will be achieved, due to general economic and company-specific factors or occurrences that may affect the results of operations.

Company-specific factors include ARC's ability to effectively integrate the Pulsarr and Ventek operations, to introduce the Advanced Vision Processor (currently in development) in a timely and cost effective fashion, and success in sustaining a positive cash flow and expanding sales in existing and new markets. There can be no assurance that the prior growth experienced by Pulsarr and Ventek will continue into the future.

Factors such as the impact of competitive products and pricing, technological obsolescence of current products and the inability to develop new products, the inability to protect the company's proprietary information, saturation of the market for Ventek's products, and the inability to identify and develop new markets could adversely affect the company's growth rate and profitability.

A more complete listing of cautionary statements and risk factors is contained in the company's forms 10-Q for the quarter ended Sept. 30, 1996, filed with the Securities and Exchange Commission.

CONTACT: ARC Capital

Alan Steel, 541/776-7700

or

The Wall Street Group Inc.

Ronald Stabiner, 212/888-4848