ARISE Technologies Reports Third-Quarter 2009 Results

    
    On November 2, 2009, ARISE issued a release commenting on preliminary
    third-quarter 2009 results and providing management's outlook for the
    fourth quarter. The release is available at www.sedar.com or
    www.arisetech.com
    

WATERLOO, ON, Nov. 11 /CNW/ - ARISE Technologies Corporation (TSX: APV and Frankfurt: A3T), which is dedicated to becoming a leader in high-performance, high-quality, cost-effective solar technology, today reported its financial results for the third quarter and nine months ended September 30, 2009. Financial results conform to Canadian generally accepted accounting principles and all currency amounts are in Canadian dollars unless otherwise noted. These results are substantially the same as the preliminary results released on November 2, 2009.

    
    Third Quarter Highlights:

    -   Received Letter of Intent from Germany's NRW for up to
        (euro) 9.54 million
    -   Announced creation of ARISE Technology Centre
    -   Ranked 15th on the Deloitte Technology Fast 50(TM) list of Canadian
        companies
    -   Welcomed the launch of Ontario's Feed-in Tariff ("FIT") program
    -   Produced first PV cells using ARISE 7N+ silicon
    -   Signed installation agreement with QuickContractors.com
    -   Entered agreement in respect of $10 million equity facility
    -   Conference call and webcast to be held Thursday, November 12,
        8:30 am (ET)
    

"The third quarter of 2009 was an important period for ARISE. After working through the downturn in the solar industry, we began to see positive signs of increased demand in the marketplace. As we announced earlier this month in our preliminary results release, we are also beginning to see improvement across all of our businesses. Third-quarter shipments, production output, and PV cell manufacturing metrics all improved, compared with the second quarter of this year," said Vern Heinrichs, ARISE's President and Chief Executive Officer.

"We expect fourth-quarter shipments to be about 7 MW, which should help us to exceed our target of 15 MW in shipments by the end of 2009."

"We continue to face working capital issues but have undertaken a number of initiatives in an effort to resolve them," stated Mr. Heinrichs. "We remain focused on driving towards profitability in each of our Divisions and diversifying our revenue streams through the growth of our Systems Division. We believe the Ontario Green Energy Act's FIT program has the potential to be a catalyst for significant growth for our Systems business. We also expect to increase our PV cell production at our German plant early in 2010."

"This has been a challenging time for ARISE but we remain committed to our vision and strategy for the company. We have emerged from a nearly unprecedented period of economic turmoil and believe that the future is bright for the solar industry. We are addressing our near-term challenges and expect to begin 2010 well-positioned to reach our long-term goals," added Mr. Heinrichs.

Financial Overview

Third quarter 2009 sales amounted to $6.6 million, compared with $15.9 million in the 2008 period. Sales for the first nine months of 2009 were $20.4 million, compared with $16.8 million in the first nine months of 2008. PV cells accounted for 98.3% of 2009 third-quarter sales and 97.5% for the first nine months of the year, with the balance in both periods being generated by the Company's Systems Division. Sales declines in the quarter were largely attributable to significant industry-wide PV cell price reductions, deferral of purchases by customers, and a manufacturing yield issue affecting ARISE PV cells produced late in the third quarter. The yield issue has since been resolved. ARISE believes the purchase reductions are a temporary result of the global recession.

Gross loss for the third quarter of 2009 was $2.0 million, compared with a loss of $2.6 million in the 2008 period. The gross loss was largely realized by the PV Cell Division which reported a loss of $2.0 million for the period. Also included in the gross loss for the quarter is a $945,000 provision reported by the PV Cell Division against the inventory affected by the yield issue noted above. For the first nine months of 2009, gross loss was $20.3 million, compared with a loss of $3.9 million in the first nine months of 2008. The significant increase in gross loss is mainly due to a $14.9 million valuation write-down of inventory related assets.

ARISE continues to focus on tightly managing its costs. Operating expenses for the 2009 third quarter were $4.5 million, compared with $5.0 million in the 2008 period. For the first nine months of 2009, operating expenses were $15.3 million, down from $16.0 million in the 2008 period. Operating expenses are comprised of research and development, general and administrative, selling and marketing, and depreciation and amortization.

R&D expenses decreased marginally to $1.4 million in the 2009 third quarter from $1.5 million in the same period in 2008. For the nine months ended September 30, 2009, R&D expenses increased to $5.7 million from $4.5 million in the first nine months of 2008.

General and administrative (G&A) expenses declined to $2.2 million in the 2009 third quarter compared with $2.5 million in the 2008 third quarter, mainly due to decreased stock-based compensation expense. For the nine months ended September 30, 2009, G&A expenses were $7.0 million, down from $9.1 million for the same period the prior year.

Selling and marketing expenses for the 2009 third quarter were $426,000, compared with $569,000 in the third quarter of 2008. For the nine months ended September 30, 2009, selling and marketing expenses were $1.2 million, compared with $1.6 million in the same period in 2008. For both 2009 periods, the decrease was predominately due to reduced consulting and feasibility expenses.

Net interest expense for the third quarter was $518,000, compared with $704,000 in the 2008 period. Despite increased borrowing from Commerzbank AG, interest expense decreased as a result of lower EONIA and EURIBOR interest rates. For the nine months ended September 30, 2009, net interest expense was $1.7 million, compared with $749,000 for the first nine months of 2008.

Other income and expenses in the 2009 third quarter, includes a foreign exchange gain of $1.6 million, compared with a foreign exchange gain of $238,000 in the same quarter of 2008. Other income and expenses in the first nine months of 2009 includes a foreign exchange gain of $2.9 million, compared with a foreign exchange gain of $713,000 in the 2008 period. The largest component of the foreign exchange gain resulted from the translation into Canadian dollars of financial liabilities of the company's wholly owned subsidiary, ARISE Technologies Deutschland GmbH, ("ARISE Germany"), which are denominated in Euros.

ARISE recorded a net loss for the third quarter 2009 of $5.4 million (a loss of $0.04 per basic and diluted share), compared with a net loss $8.2 million (a loss of $0.06 per basic and diluted share) in the 2008 quarter. The decreased net loss for the quarter is due to improved gross profit, decreased operating expenses, and a significant foreign exchange gain. For the first nine months of 2009, the net loss amounted to $33.8 million (a loss of $0.27 per basic and diluted share), compared with a net loss of $20.1 million (a loss of $0.17 per basic and diluted share) in the 2008 first nine months. On a year-to-date basis, net loss increased largely due to a $14.9 million valuation write-down of an inventory asset.

Liquidity and Capital Resources

As at September 30, 2009, ARISE had negative working capital of $38.9 million consisting of current assets of $25.3 million less current liabilities of $64.2 million. This compares with negative working capital at June 30, 2009 of $27.1 million consisting of current assets of $35.6 million less current liabilities of $62.6 million. The increase in negative working capital reflects the reclassification of long term debt as a current liability and increased prepaid expenses and decreased deferred revenue offset by decreased cash and cash equivalents. In order for debt to be classified as "long-term" debt covenants are required to be met at the balance sheet date and must be expected to be met over the upcoming twelve months. Given that ARISE may not meet its covenants with Commerzbank AG, long term debt has been reclassified as a current liability on the balance sheet at September 30, 2009.

Cash and cash equivalents and restricted cash at September 30, 2009 totaled $461,000, a decrease of $2.6 million since June 30, 2009. Restricted cash, which comprises funds held in escrow for the completion of leasehold improvements for the Silicon pilot plant totaled $250,000 at September 30, 2009 and June 30, 2009. Current liabilities include deferred revenue of $5.7 million which represents customer deposits received by ARISE ($8.9 million at June 30, 2009).

Subsequent Events

As previously announced, on October 2, 2009, the Company received a receipt for its (final) base shelf prospectus with respect to the potential issuance of up to $50 million in ARISE securities. As previously announced, the Company has entered into a $10 million Committed Equity Facility Agreement with Haverstock Master Fund, Ltd. ("Haverstock"). The filing of the (final) base shelf prospectus was one prerequisite to the Company being able to draw down on the Facility. Other requirements include Haverstock's completion of its due diligence process and the obtaining of necessary regulatory exemptive relief and approvals. The Company and Haverstock continue to work towards receiving the necessary regulatory exemptive relief and approvals to allow for the drawdown on the Facility.

On Oct. 29, 2009, the Company received an unsecured bridge loan for $250,000 for its Canadian operations. The bridge loan bears interest of 20% per annum and matures on December 29, 2009.

On November 2, 2009, ARISE filed a preliminary prospectus supplement under its base shelf prospectus with respect to a proposed non-brokered offering of units consisting of one share and one share purchase warrant for gross proceeds of up to $1 million. Closing of such offering is subject to the approval of the Toronto Stock Exchange and the entering into of binding subscription agreements.

On November 6, 2009, the Company entered into a loan arrangement in respect of $500,000 and issued a $500,000 unsecured promissory note to MacLellan Management Ltd., a corporation controlled by Ian MacLellan,a director and officer of the Company. The 60 day loan bears interest at 8% per annum in addition to a $5,000 arrangement fee.

The Company continues discussions with Commerzbank AG, ("Commerzbank") with respect to the CAPEX and Working Capital Facility Agreements for the German cell production entity, ARISE Germany. The Company expects these discussions, which are aimed at restructuring the financing to reflect the current market environment, to be finalized by the end of December 2009. If ARISE cannot meet certain existing covenants, the bank would be in a position to demand the immediate repayment of its credit facility and enforce on its security. ARISE is continuing to renegotiate covenants with Commerzbank.

In addition, ARISE continues to explore a number of possible small private-placement financings.

Conference Call and Webcast

ARISE will hold a conference call for analysts and investors at 8:30 a.m. (Eastern) on Thursday, November 12. 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) 644-3421 or 1-800-814-4861 (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) (Pass code 4171959 followed by the number sign) from 10:30 a.m. on November 12, to 11:59 p.m. on November 19, 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 has been providing PV solutions for solar farms and rooftop installations since 1996 throughout North America. ARISE is planning to expand its Systems business in Ontario under the Ontario FIT (Feed-In Tariff) 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

                                                 3 months ended September 30,
                                                       2009          2008
                                                      As at         As at
                                                  September 30,  December 31,
                                                       2009          2008
                                                 -------------- -------------
                                        Assets
    Current assets
      Cash and cash equivalents                   $    210,500   $21,119,152
      Restricted cash                                  250,420     1,508,671
      Accounts receivable                            1,610,670     7,591,738
      Inventories                                   10,884,833    13,344,927
      Government assistance receivable               6,069,985    10,189,721
      Other receivables                                 34,003       529,333
      Prepaid expenses                               6,081,626     5,013,496
      Other assets                                     174,236             -
    -------------------------------------------------------------------------
                                                    25,316,273    59,297,038

      Property, plant and equipment, net            49,658,511    40,914,106
      Long term deposits                            24,979,815    32,951,968
      Intangible assets, net                           160,065       168,382
    -------------------------------------------------------------------------
                                                  $100,114,664  $133,331,494
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                 Liabilities

     Current liabilities
      Bank loans                                  $ 20,602,514   $22,618,283
      Accounts payable and accrued liabilities      19,368,230    21,311,303
      Deferred revenue                               5,704,353     8,223,066
      Unearned government assistance                   872,325       632,325
      Current portion of long term debt             17,636,987     4,278,546
    -------------------------------------------------------------------------
                                                    64,184,409    57,063,523
    -------------------------------------------------------------------------
      Long term deferred revenue                     6,193,379     4,727,912
      Long term debt                                         -     9,822,298
    -------------------------------------------------------------------------
                                                     6,193,379    14,550,210
    -------------------------------------------------------------------------
    Commitments and contingencies

                             Shareholders' Equity

    Capital stock                                  119,127,644   119,127,644
    Contributed surplus                              9,866,387     8,085,301
    Deficit                                        (99,257,155)  (65,495,184)
    -------------------------------------------------------------------------
                                                    29,736,876    61,717,761
    -------------------------------------------------------------------------
                                                  $100,114,664  $133,331,494
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Approved by the board

    (signed) Vern Heinrichs .......... Director

    (signed) Garry West .............. Director


                       ARISE Technologies Corporation
           Consolidated Statements of Loss and Comprehensive Loss
                                  Unaudited

                            3 months ended              9 months ended
                             September 30,               September 30,
                          2009          2008          2009          2008
                     ------------- ------------- ------------- -------------

    Sales             $  6,586,012  $ 15,871,758  $ 20,430,472  $ 16,792,483
    Cost of goods
     sold                8,032,509    18,517,216    25,795,336    20,721,381
    Valuation write-
     down of inventory
     related assets        510,453             -    14,887,157             -
    -------------------------------------------------------------------------
    Gross profit
     (loss)             (1,956,950)   (2,645,458)  (20,252,021)   (3,928,898)
    -------------------------------------------------------------------------
    Expenses
      Research and
       development       1,442,140     1,525,517     5,747,692     4,537,772
      General and
       administrative    2,220,753     2,500,272     7,037,002     9,085,849
      Selling and
       marketing           425,620       569,243     1,168,754     1,608,348
      Depreciation
       and amortization    455,588       444,166     1,354,090       802,862
    -------------------------------------------------------------------------
                         4,544,101     5,039,198    15,307,538    16,034,831
    -------------------------------------------------------------------------

    Operating loss      (6,501,051)   (7,684,656)  (35,559,559)  (19,963,729)
    -------------------------------------------------------------------------

    Other expenses
     (income)
      Interest expense,
       net                 517,525       703,742     1,692,019       748,528
      Foreign exchange
       (gain) loss      (1,589,121)     (237,693)   (2,943,796)     (713,426)
      Other (income)
       expense              20,991        20,689      (545,811)       57,547
    -------------------------------------------------------------------------
                        (1,050,605)      486,738    (1,797,588)       92,649
    -------------------------------------------------------------------------

    Net loss            (5,450,446)   (8,171,394)  (33,761,971)  (20,056,378)
    Other
     comprehensive
     loss                        -             -             -             -
    -------------------------------------------------------------------------
    Comprehensive loss  (5,450,446)   (8,171,394)  (33,761,971)  (20,056,378)

    Deficit, beginning
     of period         (93,806,709)  (35,071,295)  (65,495,184)  (23,186,311)
    -------------------------------------------------------------------------

    Deficit, end of
     period           $(99,257,155) $(43,242,689) $(99,257,155) $(43,242,689)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss per share -
     basic and
     diluted          $      (0.04) $      (0.06) $      (0.27) $      (0.17)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                       ARISE Technologies Corporation
                    Consolidated Statements of Cash Flows
                                  Unaudited

                             3 months ended              9 months ended
                              September 30,               September 30,
                           2009          2008          2009          2008
                      ------------- ------------- ------------- -------------
    Cash flows
     (used in) from
     operating
     activities
      Net loss for
      the period      $ (5,450,446) $ (8,171,394) $(33,761,971) $(20,056,378)
      Items which do
       not involve
       cash:
        Valuation
         write-down
         of inventory
         related
         assets            510,453            -     14,887,157            -
        Foreign
         exchange       (1,340,610)   (1,959,314)   (3,466,940)      773,873
        Depreciation
         and
         amortization    1,654,835     1,111,106     3,929,237     1,469,802
        Employee
         stock based
         compensation      317,190     1,127,206     1,801,510     3,882,963
        Non-employee
         stock based
         compensation       16,110         3,806       114,399       179,642
    -------------------------------------------------------------------------
                        (4,292,468)   (7,888,590)  (16,496,608)  (13,750,098)

      Changes in
       working capital
       items from
       operations
        Decrease
        (increase)
         in accounts
         receivable       (200,403)   (7,915,465)    5,981,068    (8,378,612)
        Decrease
        (increase) in
         inventories      (551,376)    9,344,646    (6,415,073)  (17,005,823)
        Decrease
        (increase) in
         other
         receivables       469,831     6,460,382       495,330     1,211,006
        Decrease
        (increase) in
         prepaid
         expenses       (1,543,958)   (4,884,105)   (4,269,121)   (6,983,712)
        Decrease
        (increase) in
        other assets      (174,236)            -      (174,236)            -
       (Decrease)
         increase in
         accounts
         payable and
         accrued
         liabilities       475,929     5,106,094    (2,077,897)    5,214,618
       (Decrease)
         increase in
         deferred
         revenue           103,699     3,210,209      (901,378)    7,223,283
    -------------------------------------------------------------------------
                        (5,712,982)    3,433,171   (23,857,915)  (32,469,338)
    -------------------------------------------------------------------------
    Cash flows (used in)
     from financing
     activities
      Issuance of
       capital stock
       for cash                  -        (1,956)            -    45,098,044
      Share issuance
       costs                     -             -             -    (2,518,652)
      Exercise of
       warrants and
       options                   -        90,146             -     2,625,622
      Net proceeds
      (repayment) of
       bank loans       (8,894,923)   (1,893,482)     (229,500)   21,465,415
      Net proceeds
      (repayment) of
       long term debt    1,758,894     2,170,568     5,064,946     8,717,214
    -------------------------------------------------------------------------
                        (7,136,029)      365,276     4,835,446    75,387,643
    -------------------------------------------------------------------------
    Cash flows from
     (used in)
     investing
     activities
      Decrease in
       restricted cash           -              -    1,258,251             -
      Purchase of
       capital assets   (1,307,962)  (10,643,218)  (21,280,865)  (37,844,430)
      Purchase of
       intangible
       assets              (12,787)      (15,446)      (20,849)      (39,086)
      Change in long
       term deposits     1,994,071   (13,526,584)    5,161,156   (27,443,869)
      Government
       assistance        9,592,707        32,082    12,996,124     6,330,350

    -------------------------------------------------------------------------
                        10,266,029   (24,153,166)   (1,886,183)  (58,997,035)
    -------------------------------------------------------------------------
    Net cash outflow    (2,582,982)  (20,354,719)  (20,908,652)  (16,078,730)

    Cash and cash
     equivalents,
     beginning of
     period              2,793,482    42,184,419    21,119,152    37,908,430
    -------------------------------------------------------------------------

    Cash and cash
     equivalents,
     end of period    $    210,500  $ 21,829,700  $    210,500  $ 21,829,700
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental
     disclosures of
     cash flows:
    Interest and
     stand-by
     fees paid        $    517,945  $    796,512  $  1,739,800  $  1,328,378
    -------------------------------------------------------------------------
    Income taxes paid $          -  $          -  $          -  $          -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE ARISE TECHNOLOGIES CORPORATION

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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