ARC Capital reports 91% sales increase and record quarterly profits.

MEDFORD, Ore.--(BUSINESS WIRE)--Feb. 18, 1997--ARC Capital (Nasdaq:ARCCA), a leading designer, manufacturer and marketer of proprietary computer-aided vision defect detection and sorting systems, today confirmed its previously reported record fourth quarter sales and pr the inclusion of Pulsarr Holding b.v. and Ventek, Inc., which were acquired in 1996. In the December 31, the same quarter of last year. The Company sd in 1995. Sales in the current year include g 1996, the Company recorded two special charges: (1) a $4,915,000 write-off of in-process technology related to Pulsarr, and (2) a $647,000 charge for deferred royalty expenses, resulting in a net loss of $5,260,000 for 1996, compared to net income of $942,000 in 1995. Excluding the special 1996 charges and a non-operational $732,000 gain from an arbitration matter in 1995, ARC earned a profit of $302,000 in 1996, or $.03 per share, compared to income of $210,000, or $.02 per share last year. Research and development expenditures for 1996 were $4,038,000, an increase of $2,051,000 over the $1,987,000 spent last year.

William J. Young, ARC's President and Chief Executive Officer, said "During 1996, the Company began to realize the benefits of its extensive investment in research and development. ARC will continue to focus on machine vision applications that offer higher margins and growth opportunities."

ARC's backlog as of December 31, 1996 was $7,578,000 compared to $2,307,000 on December 31, 1995.

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

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

                             3 Months Ended       Year Ended
                                Dec. 31,            Dec. 31
                           1996       1995      1996      1995

Sales                    $  9,809   $  5,142  $ 29,938  $ 19,394
Income (loss) before
  special charges        $  1,452   $    200  $    302  $    383
Special (charges) income:
 In-process technology         --         --    (4,915)/a     --
 Royalty  expense              --         --      (647)       --
 Gain on rescission
  of stock compensation        --         --        --       732
Net income (loss):
 Continuing operations      1,452        200    (5,260)    1,115
 Discontinued operations       --       (151)       --      (173)
   Total                 $  1,452   $     49  $ (5,260) $    942

Earnings (loss) per common and
   common equivalent share:
 Continuing operations   $    .08   $    .03  $   (.46) $    .12
 Discontinued operations       --       (.02)       --      (.02)
   Total                 $    .08   $    .01  $   (.46) $    .10

Shares outstanding         11,250      9,423    11,250     9,423

/a During the fourth quarter of 1996, an independent

valuation of Pulsarr's in-process technologies, existing

technologies and business and other intangible assets was

completed resulting in a reduction in the $6,088,000

charge taken for in-process technology in the first

quarter of 1996 to $4,915,000. For financial reporting

purposes, the difference will be treated as a positive

adjustment to first quarter 1996 earnings.

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 ecning 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 will be contained in the Company's form 10-K for the year ended December 31, 1996, to be filed with the Securities and Exchange Commission by March 30, 1997

CONTACT: ARC Capital

Alan Steel, 541/776-7700

or

The Wall Street Group, Inc.

Ronald Stabiner, 212/888-4848