ARISE Technologies Reports First-Quarter 2009 Results



    
    -   First-quarter financial results affected by weaker market conditions
        that began in late 2008 causing significant decline in shipments of
        PV cells
    -   Positive developments in company's PV Cell, Silicon, and Systems
        divisions
    -   Discussions with potential partners for completion of Kitchener
        silicon plant proceeding well
    -   Conference call and webcast to be held Thursday, April 30, 8:30am
        (Eastern)
    

    WATERLOO, ON, April 29 /CNW/ - ARISE Technologies Corporation (TSX: APV
and Frankfurt: A3T), which is dedicated to becoming a leader in
high-performance, cost-effective solar technology, today reported its
financial results for the first quarter ended March 31, 2009. Financial
results conform to Canadian generally accepted accounting principles (GAAP)
and all currency amounts are in Canadian dollars.
    "Our first-quarter financial results reflect a continuation of the
economic and solar energy market conditions that began to adversely affect our
performance late in 2008," said Vern Heinrichs, President and Chief Executive
Officer. "While we are managing through a difficult period, we are encouraged
by positive developments in each of our three operating areas - PV
(photovoltaic) Cell manufacturing, Silicon, and Systems - including the
progress that we are making toward enabling us to benefit from our ability to
vertically integrate these capabilities.
    "The PV Cell Division currently is generating most of our company's
revenues. ARISE is being impacted by the weakening of industry pricing for PV
cells, but we are likewise going to benefit from the even greater decline of
costs for silicon wafers. We continue to discuss pricing and volume
requirements with both our customers and suppliers," Mr. Heinrichs said. "In
the short term, the global decline in pricing has caused us in the 2008 fourth
quarter and in the 2009 first quarter to take valuation write-downs related to
our PV cells inventory and pre-payments made for silicon wafers last year when
supplies were short and prices were significantly higher.
    "Reflecting our customers' revised short-term needs, our results in the
2009 first quarter were affected by significantly lower shipments of PV cells,
compared with the fourth quarter of 2008. As worldwide industry demand for
solar systems and modules began slumping late last year, our customers
deferred taking shipments of our PV cells.
    "Industry observers have indicated that they expect demand for PV cells
will increase in the second quarter with further strengthening in the second
half of the year. This is consistent with the feedback that we are getting
from our customers. We also are seeing increased requests from potential new
customers to discuss possible supply contracts, although there cannot be any
certainty as to when or whether additional agreements will be signed," said
Mr. Heinrichs.

    
    Operating Highlights

    -   First-quarter 2009 shipments of PV cells from the new Bischofswerda,
        Germany plant amounted to 2.3MW or $6.8 million, compared with
        shipments of 6.1MW in the fourth quarter. The level of shipments in
        the 2009 quarter was well below the company's production capacity,
        reflecting the softening in demand that began late in 2008.

    -   On March 10, 2009, ARISE announced that it had produced on schedule
        its first PV cells on Line 2 at the Bischofswerda plant. Line 2 is
        producing mono-crystalline PV cells that are expected to achieve
        efficiencies of up to 18%, when the line is fully optimized. Initial
        production on Line 2 is currently at an average efficiency of
        approximately 16.2%. ARISE expects to complete the Site Acceptance
        Test for Line 2 during the 2009 second quarter. Commercial production
        will then commence and ramp up at a rate dependent on demand from the
        company's customers.

    -   On January 28, ARISE announced that its Board had appointed its
        Chairman, Vern Heinrichs, to serve as interim President and Chief
        Executive Officer following the resignation of Bart Tichelman from
        those positions and as a Director. Subsequently, the Board has
        determined that the search for a new President and CEO should be
        deferred until at least later this year.

    -   ARISE signed an agreement with McMaster University that gives the
        company full ownership of a promising new technology to boost the
        efficiency levels of PV cells. In February 2008, ARISE agreed to
        become McMaster's industry partner in a high-efficiency solar
        technology development project. The project is being jointly funded
        over three years by ARISE (a combination of cash and in-kind
        funding), and by the Ontario Centres of Excellence Inc. (OCE) and
        McMaster. The project is based on a discovery by McMaster engineering
        professors Rafael Kleiman and John Preston that silicon-based, multi-
        junction technology offers a method of applying single crystal layers
        of compound semiconductors on a silicon substrate. The expectation is
        that this technology can convert sunlight into electricity at twice
        the efficiency as other PV cell methods commonly in use. The
        technology uses existing solar cell manufacturing processes that are
        expected to result in competitive production costs for the more
        efficient PV cells.

        The project is currently entering the proof-of-principle phase and is
        expected to then scale up during the next several years. Multi-
        junction cell development is one of the key elements in ARISE's
        strategy and technology roadmap to develop, manufacture, and market
        advanced, high-efficiency PV cells at competitive cost and pricing.
        The company believes that this project has the potential to more than
        double traditional PV cell efficiencies.

    -   With respect to ARISE's silicon program, the company accomplished
        more than a 25% improvement in deposition rate and filed patents for
        the core technology.
    

    Financial Highlights

    ARISE's financial results reflect the manufacturing start-up and
commencement of commercial shipments of PV cells to its customers in June
2008.
    First-quarter 2009 sales amounted to $7.2 million, compared with $0.2
million in the 2008 period. PV cells accounted for 94.8% of the sales in 2009
($6.8 million) with the balance generated by the company's PV systems
division. In the 2008 first quarter, PV systems accounted for all sales. Sales
in the 2009 first quarter were 61.9% lower than recorded in the 2008 fourth
quarter ($18.9 million with PV cells accounting for approximately 99% of the
total). As previously reported, in late 2008, demand for solar products and
systems declined sharply as the result of the effects of the global economic
recession impacting the industry. This caused customers to defer their
purchases of PV cells. As well, the drop in demand resulted in a marked
decline in the pricing of both PV cells and silicon wafers.
    Gross profit for the first quarter of 2009 was a negative $10.2 million,
compared with $17,182 in the 2008 period. The negative gross profit for the
2009 quarter was caused mainly by a $2.9 million write-down of raw material
and finished goods inventory, a $6.0 million write-down of prepayments made on
silicon wafer purchases, and scrap costs related to the start-up of PV cell
production. The company wrote-down certain inventory to its net realizable
value in view of the deferral of purchases by customers and the continued
global decline in pricing of PV cells and silicon during the 2009 first
quarter. The unexpected further decline in silicon wafer prices required the
write-down of the prepayments that had been made for silicon wafers. During
the 2009 first quarter, the company achieved a further 16% reduction in its
scrap rate, following a 20% improvement in the 2008 fourth quarter, bringing
its operations closer to the average for the industry. The company continues
to focus on achieving further improvements in its scrap level as its
manufacturing operations mature.
    Operating expenses for the 2009 first quarter were $5.1 million, compared
with $5.3 million in the 2008 period. Operating expenses comprise research and
development, general and administrative, selling and marketing, and
depreciation and amortization. R&D increased 15.3% to $1.7 million (net of
government funding of $0.5 million) in the 2009 first quarter from $1.5
million in the 2008 period (net of $0.4 million of government funding).
ARISE's R&D programs are aimed at advancing its PV silicon and PV cell
capabilities. General and administrative (G&A) expenses declined 18.4% to $2.5
million, compared with $3.1 million in the 2008 first quarter mainly due to
reduced stock-based compensation costs as fewer options were granted and many
previous grants had fully vested. Selling and marketing expenses for the 2009
quarter were $0.3 million, compared with $0.5 million a year earlier. The 2009
first-quarter selling and marketing expenses were 19.5% lower than in the 2008
fourth quarter mainly as the result of the company's focus on containing
costs.
    Depreciation of capital assets (exclusive of depreciation included in
cost of goods sold) and amortization of intangible assets was $0.5 million in
the 2009 first quarter, compared with $0.1 million in the prior-year period.
The increase was largely attributable to newly acquired R&D equipment.
    Interest expense (net) for 2009 first quarter was $0.6 million, compared
with interest income of $0.3 million in the 2008 period. The increase in
interest expense is the result of higher borrowing from Commerzbank AG in
Germany. At March 31, 2009, the company had bank loans and long-term debt
totaling $53.5 million, compared with $17.5 million at the end of the 2008
first quarter ($36.7 million at the 2008 year-end). Interest expense in the
2009 first quarter was virtually unchanged from the 2008 fourth-quarter level
as the effect of increased borrowing for the start-up operations in Germany
was offset by lower interest rates. All third-party debt of ARISE is subject
to floating interest rates and is denominated in Euros.
    Other income and expenses for the 2009 first quarter included a foreign
exchange gain of $0.8 million, compared with a foreign exchange loss of $0.4
million in the 2008 period. The largest component of the foreign exchange gain
and loss amounts has resulted from the translation into Canadian dollars of
financial liabilities of ARISE Germany which are denominated in Euros.
    ARISE recorded a net loss for the first-quarter 2009 of $14.7 million (a
loss of $0.12 per basic and diluted share), compared with a net loss $5.4
million (a loss of $0.05 per basic and diluted share) in the 2008 quarter.

    Liquidity and Capital Resources

    As at March 31, 2009, ARISE had negative working capital of $11.1 million
consisting of current assets of $52.7 million less current liabilities of
$63.8 million. This compares with positive working capital at the end of 2008
of $2.2 million (current assets of $59.3 million and current liabilities of
$57.1 million). The decline in working capital reflects the write-downs taken
in the 2009 first quarter, decreased cash, and increased liabilities.
    Cash and cash equivalents and restricted cash at the end of the 2009
first quarter totaled $7.2 million, a decrease of $15.4 million since the 2008
year-end. Restricted cash, which comprises funds held in escrow for the
completion of leasehold improvements for the Kitchener silicon plant, amounted
to $0.6 million at the end of the 2009 first quarter ($1.5 million at the 2008
year-end). Current liabilities include deferred revenue of $8.6 million, which
primarily represents customer deposits ($8.2 million at December 31, 2008). As
at April 28, 2009, the company had cash and cash equivalents of approximately
$6.3 million ($556,790 of which was restricted).
    The decrease in cash and cash equivalents during the 2009 first quarter
primarily is the result of funding the operating loss, increasing working
capital items, and funding capital expenditures related to the Silicon plant
and PV cell production Line 2, which were offset by increased bank loans and
long-term debt.
    As announced following the 2008 year-end, with the continuation of the
global economic recession and its adverse impact on demand for solar products
and systems, as well as the instability of capital markets and difficulty in
obtaining funding, ARISE has been reviewing all of its planned capital
expenditures and expansion plans, as well as of all its manageable costs.
    "We are in discussions on several options to obtain additional capital,
including possible partnerships. Based on our current view of our markets,
pricing, expenses, cost-reduction measures, and available financial resources,
we believe that ARISE has sufficient funds to finance our operations into the
latter part of 2009," said Dave Chornaby, Chief Financial Officer.
    On April 29, 2009, ARISE announced that, with the completion of its PV
cell manufacturing plant in Germany, it has revised its credit facilities with
Commerzbank AG. This revision will result in a reduction of standby fees
during the balance of 2009 by approximately $170,000. In 2008, ARISE incurred
$234,006 in standby and commitment fees. The total credit facilities with
Commerzbank amounting to (euro)56.05 million have been reduced to (euro)39.05
million with no changes to maturity terms or interest rates.

    Outlook

    In view of the uncertain economic climate in general and demand and
pricing within the solar energy industry in particular, ARISE does not believe
that it can provide reliable guidance regarding its financial or operating
expectations for the balance of 2009.
    "Industry analysts have commented that the global decline in industry
pricing for PV cells and for silicon wafers has a silver lining for the
longer-term opportunities in the worldwide solar energy industry," Mr.
Heinrichs said. "The decline in pricing reduces the costs of solar modules and
systems. That is bringing solar energy closer to grid parity with the costs of
conventional electricity generating systems. We agree with those who believe
that this should prime the solar energy industry for faster growth than had
been forecast by many.
    "With respect to our PV cells business, we continue to improve the
operating performance of Line 1, and are reducing scrap to near industry
levels. We are moving on schedule to bring Line 2 to readiness for commercial
production. We expect that our shipments and sales of PV cells will increase
during 2009 as demand from our current customers improves. Further, we are in
discussion with potential additional customers," Mr. Heinrichs said.
    "As we have previously reported, we delayed completion of the 50-tonnes
silicon plant in Kitchener, Ontario in the interest of conserving capital and
securing a potential partner for this strategically exciting and important
project. Discussions with possible partners continue. Our ongoing development
of silicon refining equipment and process has been progressing well. We have
demonstrated more than a 25% improvement in deposition rate, samples have been
shipped to potential partners for ingot tests, and we have filed patents for
the core technology," Mr. Heinrichs reported.
    "Our Systems Division has a renewed sense of optimism and activity
following the introduction by the Ontario government of its planned Green
Energy Act, including a proposed Feed-in-Tariff (FIT). If adopted, we expect
the Act should improve payback and make the economics of solar systems far
more attractive in Ontario. Ontario's proposed FIT program is the first of its
kind in North America. The benefit of such support has been demonstrated in
several European countries. The provision of long-term price guarantees by the
Government of Ontario is expected to increase investor confidence and access
to financing. This should smooth the way for numerous projects that have been
on the drawing board for some time as well as many new ones," Mr. Heinrichs
said.
    "Even while the proposed Act is going through the standard consultation
and legislative process, we have seen a significant increase in interest
ranging from small residential and commercial rooftop projects to large
utility-scale solar farms. We were able to discuss the Green Energy Act and
its potential benefits in some detail with Ontario's Deputy Premier and
Minister of Energy & Infrastructure, George Smitherman, when he visited our
Waterloo facilities on April 2," he continued.
    "The Green Energy Act will help to solidify our ability to take advantage
of ARISE's vertical integration capabilities. From producing silicon to
manufacturing PV cells, we will be able to take the next step of becoming one
of our own best customers by working with partners to include our technology
in modules for our systems installations. This can provide us with significant
supply-chain economics across our business. We are in discussions with
suppliers and possible OEM partners to execute on this vertical integration
strategy as our systems business moves forward," Mr. Heinrichs said.

    Conference Call and Webcast

    ARISE will hold a conference call for analysts and investors at 8:30 a.m.
(Eastern) on April 30. The company will file its financial statements, and
Management Discussion and Analysis with SEDAR and these documents will be
available on ARISE's website prior to the conference call. Vern Heinrichs,
Chairman, and President and Chief Executive Officer, and Dave Chornaby, Chief
Financial Officer, will be available to answer questions during the call.
    To participate in the call, please dial (416) 644 3415 or 1-800 594 3790
(Canada and the U.S. only) at least five minutes prior to the start of the
call.
    A live audio webcast of the conference call will be available at
www.newswire.ca and www.arisetech.com.
    An archived recording of the call will be available at 416-640-1917 or
1-877-289-8525 (Canada and the U.S. only) (Passcode 21295528 followed by the
number sign) from 10:30 a.m. on April 30 to 11:59 p.m. on May 8, 2009.

    About ARISE Technologies

    ARISE Technologies Corporation, based in Waterloo, Ontario, is dedicated
to becoming a leader in high-performance, cost-effective solar technology. The
company operates through three divisions. The PV Cell Division manufactures PV
(photovoltaic) cells at its first manufacturing plant opened in April 2008 in
Bischofswerda, Germany. The division is developing proprietary technology with
a target of achieving a step-by-step progression to a high-efficiency level of
greater than 20%. The PV Silicon Division is using a proprietary method to
produce silicon at 7N+ high-purity (99.99999% purity) for PV cell
applications, based on a simplified chemical vapor deposition process. The
division is focusing on scaling up its process to provide ARISE with control
over its supply, costs, and quality. The PV Systems Division provides complete
turnkey PV solutions for solar farms and rooftop installations under the
Ontario standard offer program.
    The company's shares are listed on the Toronto Stock Exchange under the
symbol APV and on the Frankfurt Open Market Exchange under the symbol A3T.
Additional information is available at www.arisetech.com and www.sedar.com.

    Forward-Looking Statements and Risk Factors

    Certain statements in this news release may be considered to be
forward-looking. Such statements are based on management's current
expectations, estimations, and assumptions based on experience, trends, and
other factors that are subject to the significant risks and uncertainties
described in our regulatory filings. Please refer to these. Such risks and
uncertainties may include, but are not limited to, the effects of general
economic conditions, changing foreign exchange rates, actions by government
authorities, the requirement for additional capital, risks associated with
manufacturing, industry supply levels, competitive pricing pressures and
misjudgements in the course of preparing forward-looking statements.
    Risk factors relating to ARISE are discussed in the Risk Factors section
of ARISE's Annual Information Form and under the headings Liquidity and
Capital Resources and Risk and Uncertainties in ARISE's year-end Management's
Discussion and Analysis which are or will be available at www.sedar.com. These
factors should be considered carefully, and readers should not place undue
reliance on ARISE's forward-looking statements.
    ARISE assumes no obligation to update any forward-looking statements or
to update the reasons why actual results could differ from those reflected in
the forward-looking statements.


    
                       ARISE Technologies Corporation
                         Consolidated Balance Sheets
                                  Unaudited


                                                    As at          As at
                                                   March 31,    December 31,
                                                     2009           2008
                                                -------------- --------------
                                   Assets

    Current assets
      Cash and cash equivalents                  $  6,687,640   $ 21,119,152
      Restricted cash                                 556,790      1,508,671
      Accounts receivable                           5,757,611      7,591,738
      Inventories                                  17,635,842     13,344,927
      Government assistance receivable             17,321,604     10,189,721
      Other receivables                             1,338,113        529,333
      Prepaid expenses                              3,432,859      5,013,496
    -------------------------------------------------------------------------
                                                   52,730,459     59,297,038

    Capital assets, net                            49,605,662     40,914,106
    Long term deposits                             28,562,154     32,951,968
    Intangible assets, net                            185,888        168,382
    -------------------------------------------------------------------------
                                                 $131,084,163   $133,331,494
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                 Liabilities

    Current liabilities
      Bank loans                                 $ 33,743,823   $ 22,618,283
      Accounts payable and accrued liabilities     17,172,506     21,311,303
      Deferred revenue                              8,571,617      8,223,066
      Unearned government assistance                  158,081        632,325
      Current portion of long term debt             4,194,210      4,278,546
    -------------------------------------------------------------------------
                                                   63,840,237     57,063,523
    -------------------------------------------------------------------------

    Long term deferred revenue                      3,762,576      4,727,912
    Long term debt                                 15,591,113      9,822,298
    -------------------------------------------------------------------------
                                                   19,353,689     14,550,210
    -------------------------------------------------------------------------

                             Shareholders' Equity

    Capital stock                                 119,127,644    119,127,644
    Contributed surplus                             9,017,192      8,085,301
    Deficit                                       (80,254,599)   (65,495,184)
    -------------------------------------------------------------------------
                                                   47,890,237     61,717,761
    -------------------------------------------------------------------------
                                                 $131,084,163   $133,331,494
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Approved by the board

    (signed) Vern Heinrichs.............Director
    (signed) Harold H. Alexander........Director



                       ARISE Technologies Corporation
           Consolidated Statements of Loss and Comprehensive Loss
                                  Unaudited

                                                   3 months ended March 31,
                                                      2009           2008
                                                -------------- --------------

    Sales                                        $  7,219,085   $    175,377
    Cost of goods sold                              8,563,488        158,195
    Valuation write-down of inventory
     related assets                                 8,864,292              -
    -------------------------------------------------------------------------
    Gross (loss) profit                           (10,208,695)        17,182
    -------------------------------------------------------------------------

    Expenses
      Research and development                      1,743,184      1,511,984
      General and administrative                    2,538,430      3,109,707
      Selling and marketing                           340,595        544,173
      Depreciation and amortization                   450,155        114,965
    -------------------------------------------------------------------------
                                                    5,072,364      5,280,829
    -------------------------------------------------------------------------

    Operating loss                                (15,281,059)    (5,263,647)
    -------------------------------------------------------------------------

    Other expenses (income)
      Interest expense (income), net                  592,221       (275,560)
      Foreign exchange (gain) loss                   (768,360)       387,933
      Other (income) expense                         (345,505)         1,632
    -------------------------------------------------------------------------
                                                     (521,644)       114,005
    -------------------------------------------------------------------------

    Net loss                                      (14,759,415)    (5,377,652)
    Other comprehensive loss                                -              -
    -------------------------------------------------------------------------
    Comprehensive loss                            (14,759,415)    (5,377,652)

    Deficit, beginning of period                  (65,495,184)   (23,186,311)
    -------------------------------------------------------------------------

    Deficit, end of period                       $(80,254,599)  $(28,563,963)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss per share - basic and diluted           $      (0.12)  $      (0.05)
    -------------------------------------------------------------------------



                       ARISE Technologies Corporation
                    Consolidated Statements of Cash Flows
                                  Unaudited

                                                   3 months ended March 31,
                                                      2009           2008
                                                -------------- --------------

    Cash flows from operating activities
      Net loss for the period                    $(14,759,415)  $ (5,377,652)
      Items which do not involve cash:
        Valuation write-down of inventory
         related assets                             8,864,292              -
        Depreciation and amortization               1,101,415        114,993
        Employee stock option compensation            899,172      1,395,745
        Non-employee stock option compensation         45,576         99,879
    -------------------------------------------------------------------------
                                                   (3,848,960)    (3,767,035)
    Changes in working capital items from
     operations
      Decrease in accounts receivable               1,834,126        108,835
      Increase in inventories                      (7,143,218)   (26,679,283)
      Increase in other receivables                  (808,780)      (901,047)
      Increase in prepaid expenses                 (1,620,355)    (2,490,094)
      (Decrease) increase in accounts payable
       and accrued liabilities                     (4,151,655)     5,472,534
      (Decrease) increase in deferred revenue        (616,784)     2,273,660
    -------------------------------------------------------------------------
                                                  (16,355,626)   (25,982,430)
    -------------------------------------------------------------------------

    Cash flows from financing activities
      Exercise of warrants and options                      -      1,853,717
      Proceeds from bank loans                     11,125,541     16,386,582
      Issuance of long term debt                    5,684,477              -
    -------------------------------------------------------------------------
                                                   16,810,018     18,240,299
    -------------------------------------------------------------------------

    Cash flows from investing activities
      Decrease in restricted cash                     951,881              -
      Purchase of capital assets                  (16,756,608)   (15,223,110)
      Purchase of intangible assets                   (26,963)        (4,222)
      Change in long term deposits                  1,578,816     (7,428,566)
      Government assistance                          (633,030)      (917,644)
    -------------------------------------------------------------------------
                                                  (14,885,904)   (23,573,542)
    -------------------------------------------------------------------------
    Net cash flow                                 (14,431,512)   (31,315,673)

    Cash and cash equivalents, beginning
     of period                                     21,119,152     37,908,430
    -------------------------------------------------------------------------

    Cash and cash equivalents, end of period     $  6,687,640   $  6,592,757
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental disclosures of cash flows:
    Interest and stand-by fees paid              $    470,690   $     48,232
    -------------------------------------------------------------------------
    Income taxes paid                            $          -   $          -
    -------------------------------------------------------------------------
    

    %SEDAR: 00017494E




For further information:

For further information: ARISE Technologies Corporation, 65 Northland
Road, Waterloo, Ontario, Canada, N2V 1Y8; Dave Chornaby, Chief Financial
Officer, (519) 772-5732, Dave.Chornaby@arisetech.com, www.arisetech.com

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