17.11.2006: Meldung: Arise Technologies Corp.: third quarter 2006 results
Wednesday November 15, 5:49 pm ET
Waterloo Region, Ontario, Nov. 15 / Arise Technologies Corporation, announced today its financial results for the three months and nine months ended September 30, 2006. As a result of closing a major financing during the second quarter, Arise significantly improved its cash and working capital positions. As at September 30, 2006, the Company had positive working capital of $490,999 compared to a working capital deficit of $2,402,217 at December 31, 2005.
During the quarter, the Company has primarily focused on the process of establishing manufacturing operations in Germany, along with continued development of the Company"s proprietary photovoltaic cell technology and its proprietary silicon refining process. The net loss for the third quarter of 2006 was $501,156 ($0.02 per share) compared to a net loss of $576,251 ($0.04 per share) for the same period last year. The reduced loss was due to lower research and development expenses and reduced interest and deferred finance costs offset by higher administrative and corporate development expenses as the company added management and engineering resources. The net loss for the nine months ended September 30, 2006 was $1,697,232 compared to a net loss of $1,338,544 for the same period last year. The increased loss was due to reduced revenue in the first quarter and higher administrative and corporate development expenses, and selling and marketing expenses. This was partially offset by a decline in research and development expenses and lower interest and deferred finance costs.
Ian MacLellan, President and CEO commented "I am pleased that we continue to make good progress on our high efficiency, heterojunction PV cell and related silicon refining technology. In the third quarter, the focus on our plans for a manufacturing facility in Germany has been a very exciting new development. In addition, the SDTC $6.5 million funding commitment in July and the Letter of Intent with Germany"s Industrial Investment Council in August in respect of possible incentive grants will provide significant assistance in implementing our business plan provided that we raise the additional capital required by the plan. We are also looking forward to the Ontario Standard Offer Contract being implemented shortly which we expect will provide opportunities for Arise to supply more solar energy systems and components into the Ontario market."
Arise Technologies Corporation provides a range of solar energy solutions from small portable plug and play systems through to turnkey solar energy solutions. The Company provides solar energy design and consulting services and installation of custom solar energy systems primarily in the Ontario market. Products are also offered on a retail and wholesale basis through www.solarsense.com.
In addition, the Company is funding research and development of a high-efficiency heterojunction photovoltaic ("PV") cell in conjunction with the University of Toronto ("U of T"), the Centre for Materials and Manufacturing ("CMM"), and the Emerging Materials Knowledge Network ("EMK"). The Company has also commenced development of new technology related to the production of solar grade silicon feedstock in conjunction with its consortium partners and Sustainable Development Technologies Canada ("SDTC").
PV Technology Research and Development Status
Arise, in conjunction with its research and development partner U of T, is developing a high-efficiency PV cell using a proprietary thin-film deposition process (the "U of T PV Research Program").
The U of T PV Research Program completed the "proof of principle" milestone in September 2004 with a demonstration scale PV cell producing 13.5% conversion efficiency. Based on these results and unprecedented worldwide demand for PV cells, Arise has increased its emphasis on the U of T PV Research Program and related technology. The U of T PV Research Program has recently produced a one square inch prototype PV cell with efficiency exceeding 15.5% and an open circuit voltage exceeding 600 milli-volts. Arise believes that with additional process steps, the proprietary process to produce thin-film heterojunction silicon PV cells could achieve an efficiency of greater than 18%.
The next technical milestone for the U of T PV Research Program is the production of full size prototype PV cells. The Company expects to meet this technical milestone in 2006. The Company"s goal is to begin shipping PV cells to module manufacturers within 12 months of having the full funding for the factory in place. In order to achieve this goal, the Company needs to achieve several technical milestones, finalize its manufacturing plan and raise additional capital before the end of 2006. In addition, the Company will need to secure a supply of silicon wafers from internal and external sources.
On April 25, 2006, 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 $284,748 plus GST. As a result of the Company fulfilling its commitment, EMK 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.
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 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. Funding is expected to commence under this program in early 2008. 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.
On August 15, 2006 the Company entered into a Letter of Intent with the Industrial Investment Council (IIC) of Germany to explore the possibility of establishing a PV cell manufacturing facility in eastern Germany. The IIC is assisting the Company with potential site selection, developing strategic partnerships, accessing German federal and state investment incentive programs and with reviewing possible local financing options. On September 5, 2006, Arise signed a non-binding Letter of Intent, subject to the Company obtaining the required government incentive grants, for the purchase of 8 hectares of land from the city of Bischofswerda in the State of Saxony, Germany. This transaction is expected to close in 2007. The Company selected Germany as the potential location for its PV cell manufacturing facility because it is the largest solar market in the world, it has a high concentration of solar technology companies and has access to skilled technical labour. Target annual production capacity of the potential facility will be 80 megawatts.
Government grants of up to 50% of the capital cost of plant and equipment are available from the German federal and state governments to a maximum investment of (euro)50 million. These grants are available in the form of investment grants and refundable tax credits for expenditures incurred by the end of June 2008. The Company submitted its application for government funding to Sachsische Aufbaubank GmbH (SAB) on October 26, 2006 and expects to complete the submission of final documentation by the November 17, 2006 deadline. As part of the application process, the Company is currently under a due diligence review by a German bank for the purposes of assessing the viability of the project for the SAB and to assess the creditworthiness of the project for possible loans.
In order to move forward with any proposed manufacturing plan and receive the maximum grant levels of 50%, the Company would need to raise additional capital before the end of 2006. The maximum German grant levels reduce to 43% on January 1, 2007. There is no guarantee that the Company will reach an acceptable agreement for the establishment of a manufacturing facility in Germany.
Solar Grade Silicon 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 on a silicon process for PV technology only
- 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 approximately $13.3 million of cash and in-kind support from a 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 is currently finalizing the Consortium Agreements which must be in place before the Contribution Agreement is signed with SDTC. The Company intends to complete the Consortium Agreements by the end of 2006 and enter into negotiations with SDTC on the Contribution Agreement in 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 Division Status
Since March 31, 2006, Arise has received several shipments of PV modules and its inventory position is now stronger than it has been for 18 months. As a result of the improved inventory position and regular shipments of PV modules, the Company has been able to increase its quote activity, including prototype solar systems designs for specific customer use applications. Sales in the third quarter of 2006 exceeded the same quarter last year but are down from second quarter 2006.
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 was expected to be implemented in early 2006 and represents a potential opportunity for Arise. Management believes that some potential customers have been delaying their purchase decision until the regulations governing the Ontario Standard Offer Contract were released. The governing regulations were released on November 8, 2006, with applications available for submission after November 22, 2006. It is expected that the sales activity resulting from the availability of the Standard Offer Contract will now occur in 2007. Management expects it will take some time for the Company to re-establish its presence in the Ontario marketplace.
Sales for the three months ended September 30, 2006 were $203,205, representing a 30.7% increase over the same period in 2005; however, sales declined by 32.9% from second quarter 2006. The increase in sales from 2005 is a result of the Company"s improved cash position and its ability to obtain PV modules. Sales declined in the third quarter of 2006 compared to second quarter 2006 as the TEAM project was substantially completed by June 30. Management also believes that some potential customers have been delaying their purchase decision until the governing regulations for the Ontario Standard Offer Contract are released. The regulations were released on November 8, 2006 but will take some time to be fully implemented by local utilities.
Gross profit for the three months ended September 30, 2006 was $32,661 compared to $50,825 for the same period in 2005. Gross margin (gross profit divided by sales) declined from 32.7% in third quarter 2005 to 16.1% in 2006. The decline is primarily the result of the sales mix of business with fewer TEAM homes being completed in 2006. On a year-to-date basis, gross margins have declined slightly from 19.8% in 2005 to 19.4% in 2006.
Expenses for the three months ended September 30, 2006 were $516,951 compared to $535,976 for the same period in 2005 and $494,405 in the second quarter of 2006. 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 in order to sustain operations. During the third quarter of 2006, the primary focus has been on the process of establishing manufacturing operations in Germany and negotiating agreements and planning for the Solar Grade Silicon Development Program.
Research and development expenses were $60,438 in the third quarter of 2006 compared to $132,792 for the same period last year and $95,141 for the second quarter of 2006. The Company has now fulfilled its cash funding obligations under the Research Collaboration Agreement with U of T and CMM resulting in lower expenses related to that program in spite of increased activity levels since May 2006. The Company has hired additional engineering resources to advance the U of T PV Research Program. Management expects research and development expenses to return to a higher level once the next Research Collaboration Agreement with U of T and OCE is put in place.
General and administrative expenses for the third quarter of 2006 were $403,730 compared to $354,041 in 2005, and $344,495 in second quarter 2006. The increase over 2005 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.
Selling and marketing expenses were $52,131 in the third quarter of 2006 compared to $46,807 for last year and $54,118 in the second quarter of 2006.
Interest expense was $16,866 for the three months ended September 30, 2006 compared to $57,858 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 half of 2006.
Liquidity and Capital Resources
As at September 30, 2006, the Company had positive working capital of $490,999 consisting of current assets of $1,291,330 and current liabilities of $800,331. The positive working capital is a significant improvement from December 31, 2005, when the Company had a working capital deficit of $2,402,217.
Arise had $651,880 of cash and cash equivalents at September 30, 2006, an increase of $649,358 since December 31, 2005.
The improvement in the Company"s working capital position is a result of capital raising activities in the first half of 2006. Since January 1, 2006, the Company has raised $3,967,347 of cash less share issuance costs of $230,395, through three private placements of common shares plus $368,975 of cash from the exercise of warrants. The Company used the net proceeds of the private placements and warrants to retire $846,817 of secured debt, repay unsecured notes payable, settle unpaid wages and government withholding taxes and for working capital purposes. In addition, $537,859 of secured convertible debentures have converted to capital stock since January 1, 2006. As at September 30, 2006, the Company is current with all trade vendors except those with amounts in dispute.
As of September 30, 2006, Arise was in default under an unsecured promissory note held by Hilldon Trading Limited ("Hilldon"). On April 24, 2006, the Company repaid the remaining outstanding principal on the promissory note and $100,000 of accrued interest. Arise is currently in discussions with Hilldon regarding the settlement of the remaining accrued interest.
As of November 14, 2006, the Company had cash and cash equivalents of $480,635. Management believes that with its current working capital position, the Company will be able to meet its near term working capital requirements. To build PV cell production and invest in the Solar Grade Silicon Development Program over the next 12 months will require additional capital investment by the Company. The Company anticipates that the additional capital will be sourced through the equity markets.
The Company"s interim financial statements and management discussion and analysis containing a more complete discussion of annual results can be found with the Company"s public documents on SEDAR (www.sedar.com) and on the Company"s website (www.arisetech.com).
Arise Technologies is dedicated to accelerating the use of solar energy in mainstream North American 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 is available at www.arisetech.com and www.sedar.com. Certain statements contained in this press release may be considered as 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.
TSX Venture Exchange Symbol: APV
For further information
Arise Technologies Corporation, 321 Shoemaker Street, Kitchener, Ontario, Canada, N2E 3B3, Tel. (519) 725-2244, Fax: (519) 725-8907, www.arisetech.com
Ian MacLellan, President & CEO, (519) 725-2244 x222, email@example.com
Source: Arise Technologies Corporation