Arel Communications and Software Ltd 1999 Fourth Quarter &Year End Revenues Rise 60% &72%, Respectively;.Business Editors YAVNE, Israel--(BUSINESS WIRE)--Feb. 1, 2000 Eighth Straight Quarter of Revenue Growth; Continued Major Contract Wins for Distance Learning; Arelnet Coming Into its Own, Company Split on the Horizon Arel communications and Software Limited (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on NMS See NetWare Management System. :ARLCF) announced today the results for the fourth quarter and the year ended December 31, 1999. Annual revenues from sales and services rose 72% to $14,002,000 in 1999 from $8,140,000 in 1998. Gross profit for the full year of 1999 was $8,121,000, an increase of 120% over the 1998 total gross profit of $3,683,000. Net profit in 1999 was $1,770,000 ($1,239,000 excluding a gain on dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. of interest in subsidiary of $531,000) in comparison to a net loss of $(2,564,000) in 1998. Earnings per share climbed to $0.26 basic and fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. , compared to 1998 loss per share of $(0.44) basic and $(0.44) fully diluted. Revenues from sales and services for the fourth quarter of 1999 increased 60.6% to $4,420,000, from 1998 fourth quarter total revenues of $2,751,000. Gross profit for the fourth quarter of 1999 was $2,307,000, an increase of 112.8% over fourth quarter 1998 gross profit of $1,084,000. Net profit for the last quarter of 1999 was $439,000 in comparison to a net loss of $(682,000) in the same quarter of 1998. The Company's Interactive Distance Learning Strategic Business Unit (IDL (1) (Interface Definition Language) A language used to describe the interface to a routine or function. For example, objects in the CORBA distributed object environment are defined by an IDL, which describes the services performed by the object and how the data ), continuing to build up its presence in the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. Market, contributed a net profit of $577,000 in the fourth quarter of 1999, and a total of $1,945,000 for 1999. The Company expended ex·pend tr.v. ex·pend·ed, ex·pend·ing, ex·pends 1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend. 2. $2,814,000 in Research and Development activities in 1999, compared with $2,876,000 for 1998. Research and Development expenses in the fourth quarter of 1999 decreased by 8% to $778,000 (includes $353,000 net CSO (Chief Security Officer) The person in charge of all staff members who are responsible for promulgating, enforcing and administering security policies for all systems within an enterprise or division. Participation) from $842,000 in the same quarter of 1998. Izhak Gross, Chairman and Chief Executive Officer of Arel commented, &uot;This has truly been a major year for both Arel and Arelnet. Our Interactive Distance Learning systems continue to be adopted by major corporate and organizational entities including Anheiser Busch, Volkswagen of America Volkswagen of America (VWoA) is the U.S. subsidiary of the Volkswagen automobile company in Germany. Formed in April 1955 in Englewood Cliffs, New Jersey to standardize dealership service in the United States, it grew to 909 Volkswagen dealers in the United States by 1965 under the , a major European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. Bank, Bob Jones University and The Evangelical Lutheran Good Samaritan Good Samaritan man who helped half-dead victim of thieves after a priest and a Levite had “passed by.” [N.T.: Luke 10:33] See : Helpfulness Good Samaritan Society, a healthcare network. In November, we launched our Arel Spotlight product which enables online Interactive Distance Learning for participants at their desktops via the Internet or corporate intranets. In the past year, IDL sales reached a total of $8,812,000 and contributed $1,945,000 to net income. We are currently in various stages of negotiations with numerous major companies planning to adopt our IDL technologies. We expect 2000 will be a year of major growth in sales and adoption of our systems. Similarly, 1999 was a very significant year for both the IP telephony The two-way transmission of voice over a packet-switched IP network, which is part of the TCP/IP protocol suite. The terms "IP telephony" and "voice over IP" (VoIP) are synonymous. industry and especially for Arelnet in this market. On the strategic alliance level, Keppel Communications, a subsidiary of Singapore giant Keppel Telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. &Transportation Ltd., took up to a 14% equity stake in Arel's 64% owned subsidiary, joining Nortel and Elron Electronics as equity shareholders. As a key player in services and systems integration of wireless, cellular and computer-telephony products, we expect their partnership to prove very important to Arelnet in both sales and next generation product development. On the customer level, Arelnet products continued to gain acceptance by leading customers including France Cables et Radio, a subsidiary of France Telecom; PostCom, part of Deutsche Post Deutsche Post AG (ISIN: DE0005552004, LSE: DPO) is a German post, logistics and courier headquartered in Bonn, previously the German state-owned mail monopoly. It has 520,000 employees in more than 220 countries and territories worldwide and generated revenue of € 60. ; and Community Internet plc., a U.K. based ISP (1) See in-system programmable. (2) (Internet Service Provider) An organization that provides access to the Internet. Connection to the user is provided via dial-up, ISDN, cable, DSL and T1/T3 lines. . On the technology level, we added enhanced service Enhanced service is service offered over commercial carrier transmission facilities used in interstate communications, that employs computer processing applications that act on the format, content, code, protocol, or similar aspects of the subscriber's transmitted information; and features to our popular i-Tone IP gateway, and then in September introduced the i-Tone Enterprise, a new business proposition for carriers and ISPs that generates IP traffic directly from the enterprises to the carrier backbone.&uot; Mr. Gross continued, &uot;The past year has seen the IP telephony industry blossom. This development demands that Arelnet now fully implement its business plan to secure its position in this market. Arelnet plans to significantly ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale its activities, dedicating even greater efforts and resources to marketing and sales, R& and technical support. Arelnet will focus its efforts on product awareness and acceptance, market share, superior technology, and total customer responsiveness. Arelnet is expanding its management team with experts in both technology and marketing, who will be supported by an organizational structure  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. geared to responding rapidly and competently. Until now, Arelnet has been a subsidiary of Arel, and the operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. of Arelnet have decreased the profitability of the company. As announced earlier, we undertook to split the Company into two independent entities and thereby create greater value for our shareholders.We expect this split to go into effect before the end of the second quarter, subject to receipt of regulatory approvals. In terms of organization and management we will shortly announce steps we are currently taking to implement this strategy. In anticipation of this split, Arelnet will now begin to be run as if a totally separate entity. This will involve considerable increases in expenditures, including marketing and research and development. At the time of its separation from Arel, the new entity will assume its losses. However, on a financial basis, until that time, the costs will accrue To increase; to augment; to come to by way of increase; to be added as an increase, profit, or damage. Acquired; falling due; made or executed; matured; occurred; received; vested; was created; was incurred. to Arel on a consolidated basis. Thus, we expect the results of the first quarter to reflect this technical artifact A distortion in an image or sound caused by a limitation or malfunction in the hardware or software. Artifacts may or may not be easily detectable. Under intense inspection, one might find artifacts all the time, but a few pixels out of balance or a few milliseconds of abnormal sound , and this may result in a paper loss on a consolidated basis. The second quarter should partially reflect this as &uot;discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. .&uot; Management firmly believes that the net effect will soon result in significantly greater shareholder value, as shareholders will have an interest in both entities.&uot; About Arelnet Ltd. ArelNet Ltd. is a leading provider of IP telephony solutions including i-Tone. New services are being added continuously to ensure that i-Tone customers maintain a leading edge in the IP market. The i-Tone system, which is used by the world's largest carriers, telecommunications companies See telecom company. , Internet service providers Internet service provider (ISP) Company that provides Internet connections and services to individuals and organizations. For a monthly fee, ISPs provide computer users with a connection to their site (see data transmission), as well as a log-in name and password. (ISPs) and value-added telecommunications service providers A Telecommunications Service Provider or TSP is a type of Communications Service Provider that has traditionally provided telephone and similar services. This category includes ILECs, CLECs, and mobile wireless companies. , is the only product that handles both real-time communications as well as enhanced fax and voice value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. using a single platform. About Arel Communications and Software Arel Communications and Software, Ltd., Yavne, Israel, and its Atlanta-based U.S. subsidiary, Arel Communications and Software, Inc., market the IDEAL family of interactive distance learning products including its new PC-based Spotlight application. The company's ArelNet Ltd. subsidiary designs, develops, produces and markets value-added communication and IP telephony products for telephone carriers, Internet Service Providers (ISPs) and other network operators worldwide. Certain statements made herein that are not historical are forward-looking within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. The words &uot;estimate,&uot; &uot;project,&uot; &uot;intend,&uot; &uot;expect,&uot; &uot;believe,&uot; &uot;hopeful&uot; and similar expressions are intended to identify forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . These forward-looking statements involve known unknown risks and uncertainties. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, inability to maintain market acceptance to the Company's products, inability to timely develop and introduce new technologies, products and applications, rapid changes in the market for the Company's products, loss of market share and pressure on prices resulting from competition, introduction of competing products by other companies, inability to manage growth and expansion, loss of key partners, inability to attract and retain qualified personnel, inability to protect the Company's proprietary technology and risks associated with the Company's international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. and its location in Israel. For additional information regarding these and other risks and uncertainties associated with the Company's business, reference is made to the Company's reports filed from time to time with the Securities and Exchange Commission. This release, and prior releases, are available on the KCSA KCSA Krannert Center Student Association KCSA Kentucky Crushed Stone Association (Frankfort, KY) KCSA Kyiv City State Administration KCSA Kalamazoo Christian School Association KCSA Kentucky-Canadian Studies Association Public Relations public relations, activities and policies used to create public interest in a person, idea, product, institution, or business establishment. By its nature, public relations is devoted to serving particular interests by presenting them to the public in the most Worldwide website at www.kcsa.com.
AREL COMMUNICATIONS AND SOFTWARE LTD.
(An Israeli Corporation)
CONSOLIDATED BALANCE SHEETS
December 31
1999 1998
U.S. dollars
A s s e t s
CURRENT ASSETS (note10):
Cash and cash equivalents (note 1I) 3,015,714 2,804,552
Short-term investments (note 2) 10,016,739 4,110,140
Accounts receivable (note 11a):
Trade 5,437,593 2,767,934
Other 2,719,827 1,169,626
Inventories (note 1d) 1,296,200 772,946
Total current assets 22,486,073 11,625,198
LONG-TERM LOAN TO AN EMPLOYEE, net
of current maturity
(notes 3 and 10) 56,078 59,794
PLANT AND EQUIPMENT (note 4):
Cost 2,963,408 2,509,178
Less - accumulated depreciation
and amortization 1,550,197 1,191,035
Total assets 23,955,362 13,003,135
December 31
1999 1998
U.S. dollars
Liabilities and shareholders' equity
CURRENT LIABILITIES (note 10):
Short-term bank credit (note 11b) 142,094 11,024
Accounts payable and accruals:
Trade 952,174 1,141,518
Other (note 11c) 1,956,198 1,781,151
Total current liabilities 3,050,466 2,933,693
LONG-TERM LIABILITIES:
Accrued employee rights upon
retirement, net of amount
funded (note 6) 362,951 211,542
Bank loan, net of current
maturities (note 5) 5,544
Total long-term liabilities 368,495 211,542
COMMITMENTS AND CONTINGENT LIABILITIES
(note 7)
Total liabilities 3,418,961 3,145,235
MINORITY INTEREST 2,694,413 1,940,278
--------- ---------
6,113,374 5,085,513
SHAREHOLDERS' EQUITY (note 8):
Share capital - Ordinary Shares of
NIS 0.001 par value (authorized -
December 31, 1999 and 1998 -
10,000,000 shares; issued and
outstanding:
December 31, 1999 7,869,392 shares;
December 31, 1998 -
6,095,347 shares) 2,400 1,990
Capital surplus 17,069,412 10,015,096
Warrants and options 1,392,348 292,348
Accumulated deficit (622,172) (2,391,812)
--------- ---------
Total shareholders' equity 17,841,988 7,917,622
Total liabilities
and shareholders' equity 23,955,362 13,003,135
AREL COMMUNICATIONS AND SOFTWARE LTD.
(An Israeli Corporation)
CONSOLIDATED STATEMENTS OF LOSS
Year ended December 31
1999 1998 1997
U.S.dollars
REVENUES FROM SALES AND
SERVICES (note 12a) 14,002,166 8,140,411 3,125,521
COST OF SALES AND SERVICES
(note 12b) 5,880,561 4,457,617 1,677,658
GROSS PROFIT 8,121,605 3,682,794 1,447,863
RESEARCH AND DEVELOPMENT
EXPENSES 2,813,770 2,876,238 1,875,157
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
(note 12c) 5,015,761 3,921,523 4,132,787
OPERATING INCOME (LOSS) 292,074 (3,114,967) (4,560,081)
FINANCIAL INCOME - net
(note 12e) 599,761 156,457 207,673
GAIN ON DILUTION OF INTEREST
IN A SUBSIDIARY (note 1a(3)) 531,270 2,783,132
INCOME (LOSS) BEFORE TAXES
ON INCOME 1,423,105 (2,958,510) (1,569,276)
TAXES ON INCOME (note 9) 62,074
INCOME (LOSS) AFTER TAXES
ON INCOME 1,361,031 (2,958,510) (1,569,276)
MINORITY INTEREST IN LOSS
OF SUBSIDIARY 408,609 394,918 362,010
NET INCOME (LOSS) 1,769,640 (2,563,592) (1,207,266)
NET INCOME (LOSS) PER
SHARE - (note 1k):
Basic and diluted 0.26 (0.44) (0.22)
WEIGHTED AVERAGE NUMBER OF
SHARES USED IN COMPUTATION
OF THE NET INCOME (LOSS)
PER SHARE (note 1k): 9,601,853 5,891,429 5,400,000
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