Working Capital Position Improves Significantly Over Previous Year
WATERLOO REGION, ON, March 7 /CNW/ - ARISE Technologies Corporation
(TSX-V: APV) (ADAX: A3T) announced today its financial results for the quarter
ended December 31, 2006 and the year ended December 31, 2006. The net loss for
the fourth quarter of fiscal 2006 was $902,892 compared to $469,700 for the
same period in 2005. The net loss for the year ended December 31, 2006 was
$2,896,941 compared to a net loss of $1,808,244 for fiscal 2005. The increased
loss was due to higher administrative, corporate development, and research and
development expenses as the company added management resources, partially
offset by reduced interest expenses.
"Fiscal 2006 was a strategically important year in the evolution of
ARISE, during which we significantly improved our working capital position,
primarily as a result of capital raised during the year", said Ian MacLellan,
President and Chief Executive Officer. "As a result of new funding, we made
solid progress towards advancing our growth objectives in all three
operations: Photovoltaic (PV) Technology, Silicon Feedstock and Systems.
Highlights for the year included new partnerships, alliances and funding
agreements with government, investors, research and development groups and
potential customers, as well as several key new hires that will help take
ARISE to its next stage of development," MacLellan continued.
PV Technology Research and Development Status
The PV Technology operation is developing a high-efficiency (18%+)
thin-film on silicon wafer heterojunction photovoltaic (PV) solar cell based
on current proprietary patented process technology with plans to commence
shipping to PV module makers in 2008. ARISE owns a U.S. manufacturing process
patent (DC saddle-field deposition) related to depositing thin-films on
substrates. Demand currently outstrips supply for PV cells worldwide and this
imbalance is expected to continue for some time.
ARISE PV cells are currently under development and have yet to be
commercialized. ARISE is currently commissioning the pilot equipment needed to
produce full size working prototypes and expects to continue making progress
towards showcasing fully operational cells in the 18%+ efficiency range prior
to starting production. The R&D work is being done in collaboration with the
University of Toronto (U of T) by its Electrical Engineering Department, which
has entered into an R&D collaboration agreement with ARISE.
In May 2006, ARISE entered into discussions with the Industrial
Investment Council (IIC), an entity established by the German government
regarding an incentive program to locate manufacturing facilities in eastern
Germany. German government grants and tax incentives are available to finance
up to 50% of the capital expenditures required to build and equip
manufacturing facilities. In October 2006, ARISE completed its application for
government funding from the Saechsische Aufbaubank GmbH ("SAB"). On
December 21, 2006 ARISE's application for funding from the SAB was approved in
connection with its proposed EUR50 million PV cell manufacturing facility
project. ARISE will receive an incentive grant of EUR12.4 million payable over
the term of the project, and will be eligible to receive refundable tax
credits in connection with its funding of the project in the amount of
EUR12.15 million over the term of the project, resulting in total government
funding of EUR24.55 million. ARISE has up to three years to complete the
project and currently expects to have it completed in the middle of 2008. The
funding will be used to build a $70 million (EUR50 million), 80MW photovoltaic
production facility in Bischofswerda, approximately 40 km east of Dresden
Germany. ARISE is initially planning to install two production lines, with
room in the first building for a third line. As at the date of this release,
an engineering firm and equipment vendors have been selected. It is expected
that construction of the facility will commence in the third quarter of 2007
and that the facility will be operational by the second quarter of 2008.
ARISE has entered into non-binding letters of intent with four companies
which, if supply agreements are finalized with such companies, would account
for 60MW of this capacity. ARISE will focus its sales and marketing efforts
specifically on the top 100 solar module manufacturers.
ARISE's manufacturing strategy is to initially build two lines. The first
line will use turnkey, "off the shelf" technology. This line will be designed
to produce 35MW of PV cells per annum with a targeted average cell efficiency
of 15%. It is expected to be operational in the second quarter of 2008. The
second line is designed to produce, on an annual basis, PV cells with an
electricity generating capacity of 45MWs. Cells produced on this second line
will be based on ARISE's proprietary technology with a targeted efficiency of
18%. It is expected to be operational by the fourth quarter of 2008.
On January 9, 2007, the Company fulfilled its funding obligations under
the Research Collaboration Agreement with the U of T and CMM when it submitted
its final payment of $21,667 plus GST. As a result of the Company fulfilling
its commitment, EMK has agreed to match the ARISE cash contribution of
$284,748 as announced on August 1, 2006. The additional funding has increased
the CMM/EMK contribution to the U of T PV Research Program from $450,000 to
$620,849 since the inception of the program in 2002.
On August 3, 2006, the Company announced that it had secured a $450,000
funding commitment from the Ontario Centres of Excellence ("OCE") Centre for
Energy for phase two of its PV cell research program being carried out in
collaboration with U of T. Upon execution of a Research Collaboration
Agreement, ARISE will commit to $750,000 of cash contributions and $640,000 of
in-kind support over a 36 month period. The OCE funding of $450,000 will be
subject to a yearly review verifying that milestones and deliverables have
been met and delivered for each project.
Solar Grade Silicon Research and Development Status
ARISE is conducting research and development on a process to produce
silicon which is of sufficient purity to be used in the production of PV cells
("solar grade silicon"). ARISE's technology strategy for solar grade silicon
production (the "Solar Grade Silicon Development Project") is as follows:
- Focus the silicon process on PV technology
- Pre-treat the quartzite to improve metallurgical grade silicon
material for the Company's PV silicon process
- Produce trichlorosilane ("TCS") utilizing a lower cost, potentially
- Convert TCS into either rods or granular PV silicon
- Create innovations in rod processes to make it more energy efficient
During the second quarter of 2006, the Company provided initial seed
funding to a Canadian university professor to carry out the laboratory work to
reach the first major technical milestone of the Solar Grade Silicon
Development Project. On June 23, 2006, the Company announced that it had
reached this technical milestone by demonstrating in the laboratory a new
approach for refining high purity solar grade silicon. ARISE has been working
on this project with a consortium which includes Ebner Gesellschaft M.B.H.,
Topsil Semiconductor Materials A/S, the University of Toronto and the
University of Waterloo.
On July 6, 2006, ARISE announced that it had secured a commitment from
Sustainable Development Technology Canada ("SDTC") to provide $6.5 million of
funding for ARISE's $19.8 million Solar Grade Silicon Development Project. The
SDTC contribution will be leveraged by a $13.3 million cash and in-kind
commitment from the consortium led by ARISE. The non-repayable $6.5 million
SDTC contribution will be disbursed over a three year period once a final
Contribution Agreement has been executed and specific project milestones have
been met. On August 1, 2006, ARISE and SDTC signed a term sheet outlining the
provisions of the Contribution Agreement. ARISE has also commenced the process
of finalizing Consortium Agreements which must be in place before the
Contribution Agreement is signed with SDTC. The Company intends to complete
this contracting process by the end of the first quarter of 2007.
ARISE intends to finance the majority of the Solar Grade Silicon
Development Project with the balance coming in cash from the SDTC contribution
and in-kind support from consortium partners. In order for ARISE to fulfill
its funding commitment, the Company will need to raise additional capital.
Systems Operation Status
On March 21, 2006 the Ontario government announced a Standard Offer
Contract to provide producers of PV generated electricity a feed-in tariff of
$0.42 per kWh. This program is expected to be implemented in 2007 and
represents a potential opportunity for ARISE. The regulations were announced
in November 2006 and the Company expects the program to be operational in the
spring of 2007. This has taken the government more time to implement than the
Company originally expected.
Since March 31, 2006, ARISE has received several shipments of PV modules
and its inventory position is now stronger than it has been for 2 years. As a
result of the improved inventory position and regular shipments of PV modules,
the Company has been able to start rebuilding its Systems business. Sales in
2006 were lower than 2005 because the Company is changing its business model
to focus more on the Standard Offer Contract program.
TEAM Project Status
The Company has received assistance in connection with its research and
development activities and the TEAM Project. Investment tax credits resulting
from claims filed by the Company are shown on the statement of loss and
On March 26, 2002, ARISE entered into an "Efficiency and Alternative
Energy Program Contribution Agreement" (the "TEAM Agreement") with the
Canadian Department of Natural Resources ("NRCan") pursuant to which NRCan has
committed to provide up to $924,800 in funding as contributions towards the
Company's project for the demonstration of the viability of solar homes in
Canada (the "TEAM Project"). The Canadian federal government, under the
Technology Early Action Measures ("TEAM") component of the Climate Change
Action Fund, and NRCan, is partially sponsoring the program. The total
budgeted cost of the TEAM Project for the Company, together with its project
participants, NRCan and homebuyers, is $1,994,190. A final report on this
project was submitted on January 31, 2007.
The NRCan contributions are repayable in the form of a royalty from
future product sales. The royalty equals 1% on revenue from integrating and
installing building integrated photovoltaic systems and 2% on sales of
components developed under the TEAM Project and is payable from April 1, 2006
until the earlier of March 31, 2010 or the date upon which all of the NRCan
funding has been repaid. As at December 31, 2006, no amounts have been paid or
are due under the royalty formula.
The net loss for the fourth quarter of fiscal 2006 was $902,892 compared
to $469,700 for the same period in 2005. The net loss for the year ended 2006
was $2,896,941 compared to a net loss of $1,808,244 for fiscal 2005. The
increased loss was due to higher administrative, corporate development, and
research and development expenses as the company added management resources,
partially offset by reduced interest expenses. The Company has not paid cash
dividends since inception.
Sales for the year ended December 31, 2006 were $730,147, representing a
33.8% decrease from the same period in 2005. Sales for the quarter ended
December 31, 2006 were $150,931 compared to $252,337 in the same period in
2005, representing a 40.2% decrease. The decrease in sales is a result of the
Company's weakened cash position and its inability to obtain sufficient PV
modules in the first half of the year. The Company's cash position
strengthened in the second quarter of 2006 and the Company has been preparing
for the emerging grid connected market which the Company expects to be the
largest solar opportunity in Canada.
Gross profit for the year ended December 31, 2006 was $138,205 compared
to $269,248 for the fiscal year 2005. Gross profit for the quarter ended
December 31, 2006 was $25,700 compared to $101,226 in the same period in 2005.
Gross margin (gross profit divided by sales) declined from 24.4% in fiscal
2005 to 18.9% in fiscal 2006. Gross margin declined in the quarter ended
December 31, 2006 compared to the same period in 2005 from 40.1% to 17.0%. The
Company expects to increase gross margin levels in the coming fiscal year as
recent capital raising activities provide the cash to buy inventory in larger
quantities and obtain better pricing from suppliers for such inventory.
Operating expenses for the year ended December 31, 2006 were $2,897,990
compared to $1,730,412 for fiscal 2005. Operating expenses in the quarter
ended December 31, 2006 were $921,338 compared to $461,066 in the same period
in 2005. The Company's focus in 2006 has been to continue its commitment to
the U of T PV Research Program, initiate the Solar Grade Silicon Development
Program and raise additional capital to sustain operations.
Research and development expenses were $578,639 in the fiscal year 2006
compared to $497,925 for the prior fiscal year. Research and development
expenses increased to $228,673 in the quarter ended December 31, 2006 from
$97,702 in the same period in 2005. The Company has now fulfilled its cash
funding obligations under the Research Collaboration Agreement with the U of T
and CMM resulting in lower expenses related to that program in spite of
increased activity levels since May 2006. Expenses in the current quarter are
primarily for the initial funding of the Solar Grade Silicon Development
Program in advance of completing the Contribution Agreement with SDTC. The
Company has also hired additional resources to advance the U of T PV Research
General and administrative expenses for the fiscal year 2006 were
$2,065,063 compared to $1,038,015 in fiscal 2005. General and administrative
expenses for the quarter ended December 31, 2006 were $629,335 compared to
$317,332 in the same period in 2005. The increase was a result of higher
payroll and consulting costs related to strengthening the management team, the
introduction of an incentive bonus program for all staff, increased travel
expenses and higher stock based compensation costs. The stock based
compensation costs of the options granted in 2006 were $601,642. These costs
related to the second and third quarters in 2006, $147,054 and $149,763
respectively, were not included in the quarterly statements originally
released but were included in the restated financial statements and Management
Discussion & Analysis released on March 7, 2007.
Selling and marketing expenses were $251,729 in the fiscal year 2006
compared to $188,907 for last year. Selling and marketing expenses in the
quarter ended December 31, 2006 were $62,726 compared to $47,475 in the same
period in 2005.
Other Income and Expenses
Interest expense was $95,354 for the fiscal year ended December 31, 2006
compared to $242,959 in fiscal 2005. Interest expense for the quarter ended
December 31, 2006 was $17,628 compared to $66,861 in the same period in 2005.
The decline is a result of cash repayment and conversion of high interest debt
to equity and the cash repayment of notes payable in the first and second
quarters of 2006. The settlement of a lawsuit with a vendor in the fourth
quarter of 2006 resulted in a net recovery of $50,573. This is a one-time item
that is not expected to recur.
As part of its ongoing investment to build and enhance its senior
management team, the Company's Board of Directors approved the appointments of
Steve Vaccaro, Vice President, Corporate Development and Chris Waters, Vice
President, Photovoltaic Business Development, as officers of the Company
effective March 2, 2007.
"Looking ahead, we are particularly excited by our planned PV cell
production facility in Bischofswerda, Germany and investments in our Solar
Grade Silicon Development Program. We look forward to sourcing the additional
capital required to advance these initiatives through equity markets in 2007,"
The Company will soon move its head office, research and development and
distribution operations to a new, 16,000 square foot facility located in
Waterloo, Ontario. ARISE will hold its Annual General Meeting for 2006 on
May 3, 2007 at its new facility.
ARISE Technologies is dedicated to accelerating the use of solar energy
in mainstream markets. The Company's shares are listed on the TSX Venture
Exchange under the symbol APV and on the Frankfurt Open Market Exchange under
the symbol A3T. Additional information, including a complete copy of the
Company's Financial Statements and Management Discussion and Analysis for 2006
is available at www.arisetech.com and www.sedar.com. Certain statements
contained in this press release may be considered forward-looking. Such
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from estimated or implied results.
The TSX Venture Exchange has neither approved nor disapproved the contents of
this news release.
For further information:
For further information: Ian MacLellan, President & CEO, (519) 725-2244
x222, firstname.lastname@example.org; David Ward, Director, Communications and
Investor Relations, (416) 953-7638, email@example.com