Operating Highlights:

First-quarter 2009 shipments of PV cells from the new Bischofswerda, Germany plant amounted to 2.3 megawatt (MW) or CAD6.8 million, compared with shipments of 6.1 MW 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 around 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 (CEO) 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. 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 CAD7.2 million, compared with CAD0.2 million in the 2008 period. PV cells accounted for 94.8% of the sales in 2009 (CAD6.8 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 (CAD18.9 million with PV cells accounting for around 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 CAD10.2 million, compared with CAD17,182 in the 2008 period. The negative gross profit for the 2009 quarter was caused mainly by a CAD2.9 million write-down of raw material and finished goods inventory, a CAD6.0 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 CAD5.1 million, compared with CAD5.3 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 CAD1.7 million (net of government funding of CAD0.5 million) in the 2009 first quarter from CAD1.5 million in the 2008 period (net of CAD0.4 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 CAD2.5 million, compared with CAD3.1 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 CAD0.3 million, compared with CAD0.5 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 CAD0.5 million in the 2009 first quarter, compared with CAD0.1 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 CAD0.6 million, compared with interest income of CAD0.3 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 CAD53.5 million, compared with CAD17.5 million at the end of the 2008 first quarter (CAD36.7 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 CAD0.8 million, compared with a foreign exchange loss of CAD0.4 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.