Arel Communications and Software Receives Nasdaq Delisting Notification.

Business Editors/High-Tech Writers

Arel to appeal Nasdaq decision

Arel Announces Share Buy-Back Program

Arel Communications and Software Ltd. (Nasdaq:ARLC), a leading provider of interactive distance learning (IDL) solutions, received a Nasdaq Staff Determination that its ordinary shares are to be delisted from the Nasdaq National Market.

Arel is not in compliance with the Nasdaq National Market minimum bid price requirement of $1.00 per share. Arel will request a hearing before a Nasdaq Listing Qualifications Panel to review the Staff's Determination. In accordance with market regulations, Arel's shares will continue to trade on the Nasdaq National Market pending the outcome of the appeal. There can be no assurance that the Panel will grant Arel's request for continued listing. Should the appeal not be accepted, Arel will apply to list its shares on the Nasdaq SmallCap Market. The Company believes that it meets the requirements for the transfer of its shares to the Nasdaq SmallCap Market.

Arel also announced today that its Board of Directors has authorized management to repurchase of up to $750,000 of its shares. The purchases will be made at management's discretion in the open market at prevailing prices, or in privately negotiated transactions at then-prevailing prices. While the Board has authorized the buy-back program, implementation of the program will under Israeli law require approval of Arel's shareholders and an order of an Israeli court. The Company stated that it is unable to predict how long the receipt of such approvals will take. In addition, market conditions prevailing at the time all of the approvals have been received may affect the timing of the implementation of the buy-back program.

Commenting on the buy-back program, Mr. Gross - Chairman of Arel stated, "We believe that our business is at the cutting-edge of IDL and e-learning technology, and that there is no connection between our current share price and our real business potential. The repurchase of our shares may enable us to regain compliance with the Nasdaq listing requirements and reward our shareholders after the faith that they have shown in the Company over many years. We believe that the Company is in a position where it can pursue this plan to enhance shareholder value."

Certain statements made herein that are not historical are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. The words "estimate", "project", "intend", "expect", "believe", "hopeful" and similar expressions are intended to identify forward-looking statements. 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 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.