During the second half of 2008 there were a number of fundamental changes in the economics of the entire photovoltaic (PV) industry. The global economic recession and financial crisis coupled with severe weather conditions in the core PV market resulted in inventory build-ups, production overcapacity and rapid deterioration of average selling prices across the value chain. Weak sales, slowing demand and gross margin compression have been widespread throughout the solar sector and have been reflected in numerous negative earnings reports and announcements over the past several weeks.

"There is little doubt that 2008 presented a number of operating challenges that affected our company alongside the rest of the industry," said George Rubin, president of Day4 Energy. "Our objectives in managing through the current shakeout in the sector are to continue to evolve the business strategically and conserve cash so that our differentiated technology and low capital intensity business model reaches its potential to bring future value to our shareholders."

Industry experts agree that the reduction in prices accelerate the path to grid parity. While in the interim the price reductions pose challenges for companies they have driven up the returns for capital investments in PV projects to nearly all time high levels and will eventually be beneficial to the sector as a whole. The pricing phenomena coupled with the increased political will for renewable energy technologies and accompanying subsidy programs currently being implemented all around the world suggest a positive long-term outlook for the industry.

"The low capital cost models with technological differentiation and a strong downstream position are going to be critical to success during these difficult times. Our long-term manufacturing supply partnership with Jabil Circuit Inc., a global electronic solutions company, will help to reduce our working capital requirements and allow us to concentrate our capital and management attention on our two core business objectives: technological leadership and sales and marketing. We now have market presence in eight different geographic markets and our R&D group has made significant progress in the development of our breakthrough Generation II solar cell technology," he concluded.

Fourth quarter revenues of $16.6 million represent a 48 percent decrease from the prior quarter revenues of $31.7 million and up 141 percent from $6.9 million for the same period in 2007. While seasonality is typical for this sector in the fourth quarter the early and persistent snowfall in our primary market (Germany) combined with the economic downturn slowed deliveries to a greater extent than expected in November and December. Global sales for the full year 2008 were $76.8 million, a nearly four-fold increase from the prior year sales of $21.0 million.

Gross Margins

The gross loss of 45 percent for the fourth quarter compared to a loss of 1.4 percent in the third quarter 2008 and a loss of 26.3 percent for the same period in 2007.