ARISE Technologies Corporation
TSX VENTURE : APV

ARISE Technologies Corporation

May 30, 2006 10:00 ET

ARISE Announces First Quarter 2006 Results

WATERLOO REGION, ONTARIO--(CCNMatthews - May 30, 2006) - ARISE Technologies Corporation (TSX VENTURE:APV), announced today its financial results for the three months ended March 31, 2006. The net loss for the first quarter was $760,771 ($0.05 per share) compared to a net loss of $393,563 ($0.03 per share) in the first quarter of 2005. As at March 31, 2006, the Company had positive working capital of $755,836 compared to a working capital deficit of $2,402,217 at December 31, 2005.

Ian MacLellan, Vice-Chairman and CEO commented "This was a watershed quarter for ARISE with new cash investment, share subscriptions and warrants exercised during the quarter and in the first month of the second quarter totaling $3,977,347 and the conversion of $509,959 of existing debt into common shares. This has allowed the Company to get past its cash problems and start focusing on developing its business. We now have more cash in the bank than we have ever had in the Company's history and have eliminated most of our debt. With most of these funds being invested at the end of the quarter or shortly after quarter end, there was little opportunity to impact on our disappointing operating results. We have recently received several shipments of PV modules which will provide the opportunity to improve our results. I am very pleased that we were able to demonstrate to our shareholders that not only did we have the persistence to get through the most challenging of financial circumstances but also significantly increase shareholder value by the end of the quarter."

Overview

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 photovoltaic ("PV") cell in conjunction with the University of Toronto ("U of T") and the Centre for Materials and Manufacturing ("CMM"), a division of Ontario Centres of Excellence. The Company has also commenced research on solar grade silicon feedstock.

PV Technology Research and Development Status

ARISE, in conjunction with its research and development partners, U of T and Komag Inc. ("Komag"), is developing a high-efficiency PV cell using a proprietary thin-film deposition process (the "U of T PV Research Program").

In July 2005, the U of T PV Research Program achieved another technology milestone. The program received a custom designed vacuum deposition system produced in collaboration with Komag, which is expected to permit the production of full size prototype photovoltaic cells. ARISE believes that this equipment will allow the program to produce cells with the targeted efficiency. ARISE expects to meet a key technical demonstration milestone in the summer of 2006. The Company's target is to begin shipping PV cells to module manufacturers in 2007. In order to achieve this target, the Company needs to achieve several technical milestones, finalize its manufacturing program and have a secure source of silicon wafers before the end of 2006. ARISE has started discussions with various module manufacturers about the possibility of ARISE supplying high efficiency solar cells and is pleased with their interest.

On April 25, 2006, the Company fulfilled its obligations under the Research Collaboration Agreement when it submitted its final payment of $284,749 plus GST of $19,933. Fulfillment of this commitment is expected to result in CMM fulfilling its remaining funding commitments and is expected to result in the U of T PV Research Program moving forward at an accelerated pace.

Solar Silicon Research and Development Status

In April 2006, the Company's CEO presented its silicon feedstock strategy at a solar silicon conference in Munich, Germany which was attended by over 700 people. At the conference, the Company announced that it had signed a non-binding Letter of Intent with the University of Waterloo to potentially build a silicon feedstock pilot plant at the University of Waterloo's Research & Technology Park.

The Company also presented its technology strategy for solar feedstock production as set out below:

- Focus on a silicon process for only 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 patentable process

- Convert TCS into either rods or granular PV silicon

- Create innovations in rod processes to make it more energy efficient

In May 2006, the Company provided seed funding to a Canadian university to carry out the laboratory work to reach the first major technical milestone building on successful laboratory work in January 2006. Over the last two years, the Company has assembled a part time team of advisors, and has identified three industrial partners and potential Canadian government funding.

Systems Division Status

The worldwide industry shortage of PV modules since the middle of 2004 has been a major challenge for the Company. On May 31, 2004 the Company entered into a distribution agreement with EMJ Data Systems ("EMJ") whereby EMJ would acquire and manage the ARISE solar products inventory and provide logistic services. ARISE was responsible to select, market and support the solar products. On September 17, 2004 Synnex Corporation acquired EMJ. In spite of Synnex's financial strength, ARISE was not able to acquire solar products to meet its business plan. ARISE and Synnex have not renewed the distribution agreement that expired on December 31, 2005. The lack of solar products has also hindered ARISE's ability to develop other strategic partnerships.

Since March 31, 2006, ARISE has received several shipments of modules and its inventory position is now stronger than it has been for 15 months.

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 2006 and represents a potential opportunity for ARISE.

Financial Results

Revenues

Sales for the three months ended March 31, 2006 were $73,036, representing an 83.0% decline over the same period in 2005 at $428,686. The decline in sales was due to ARISE's negative working capital position and lack of cash which caused suppliers to only supply ARISE on a cash-on-delivery ("COD") basis. This resulted in lower sales in all product lines sold by the Company.

Gross Profit

Gross profit for the three months ended March 31, 2006 was $1,228 compared to $41,626 for the same period in 2005. Gross margin (gross profit divided by sales) declined from 9.7% in 2005 to 1.7% in 2006. Although the Company's gross margin percentage had improved throughout 2005, it declined in the first quarter of 2006 as the Company faced price increases from certain suppliers due to its restricted cash position. The Company expects that gross margins will improve over the balance of 2006 as recent capital raising activities provide the cash to buy in larger quantities and obtain better pricing from suppliers.

Expenses

Expenses for the three months ended March 31, 2006 were $668,479 compared to $364,303 for the same period in 2005, an increase of 83.5% or $304,176. The Company's focus in 2006 has been to maintain its commitment to the U of T PV Research Program, initiate the Solar Silicon Research and Development Program and raise additional capital in order to sustain operations.

Research and development expenses increased from $136,681 for the first quarter of 2005 to $194,387 in 2006. This was due to the addition of resources to the Company's PV and Solar Silicon Research Programs and the accrual of incentive bonuses for professors and associates involved in the programs. The bonus accruals were settled for shares of the Company in April 2006.

General and administrative expenses for the first quarter of 2006 were $390,686 compared to $180,985 in 2005, an increase of $209,701. This increase was a result of higher payroll and consulting costs related to strengthening the management team, bonus accruals primarily for payroll delays in January and March and stock compensation expense related to options. The majority of the bonus accruals were settled for shares of the Company in April 2006. Company policy is to pay a bonus for missed or delayed payroll.

Selling and marketing expenses increased from $44,301 for the first quarter of 2005 to $82,754 in 2006. The increase was a result of bonus accruals for payroll delays in January and March 2006. The bonus accruals were settled for shares of the Company in April 2006.

Other Expenses

Interest expense was $39,384 for the three months ended March 31, 2006 compared to $56,758 in 2005. The decline is a result of the conversion of high interest debt to equity in the first quarter of 2006.

Liquidity and Capital Resources

As at March 31, 2006, the Company had positive working capital of $755,836 consisting of current assets of $3,076,101 and current liabilities of $2,320,265. The positive working capital is a significant improvement from December 31, 2005, when the Company had a working capital deficit of $2,402,217. The Company had $50,975 of cash at March 31, 2006, an increase of $48,453 for the quarter.

With the low cash position throughout the quarter, the Company has been on a tight operating basis which resulted in a reduction in revenues. The Company is on a cash-on-delivery (COD) basis with most suppliers until outstanding amounts are reduced. The Company has been forced to extend payment terms with various suppliers and has not been able to maintain inventory at a desired level. The improvement in the Company's working capital position will allow it to reduce trade payables and increase inventory in the second quarter.

The improvement in the working capital position is a result of capital raising activities in the first quarter. A February 2006 private placement raised $130,698 net of share issuance costs. The March 2006 private placements resulted in cash of $841,548 and subscriptions receivable of $2,895,404 net of share issuance costs. The Company used the net proceeds of the private placements to retire $601,844 of secured debt, repay some unsecured notes payable, settle unpaid wages and government withholding taxes and for working capital purposes.

As of March 31, 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 a portion of the accrued interest and is currently in discussions with Hilldon regarding converting the remaining unpaid interest into common shares.

As of May 25, 2006, the Company had cash and short term securities of $1,586,399. Negotiations are continuing with several creditors to settle outstanding amounts that are under dispute.

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).

About ARISE

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.

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