Hoku Scientific, Inc. (NasdaqGM:HOKU), which calls itself a materials science company focused on clean energy technologies, announced its financial results for its second quarter ended September 30, 2007 and provided a general update on its business.
Revenue was down for the quarter. It dropped to $239,000 compared to $1.9 million for same quarter last year. Hoku says the decrease is due to completed projects with deferred revenue.
Net loss was $1.0 million, or $0.06 per diluted share, compared to GAAP net income of $303,000, or $0.02 per diluted share, for the same quarter in 2006.
Based on its current outlook, Hoku expects revenue for the third quarter ending December 31, 2007 to be in the range of $1-$1.4 million. It expects that it will need to increase its efforts in supporting a polysilicon manufacturing and PV system installation service business, develop its products and expand its corporate infrastructure. As a result the Company expects its costs to continue to increase significantly and expects to continue to incur losses for the foreseeable future including for the third quarter ending December 31, 2007.
During the period, Hoku:
– signed engineering, procurement, and construction management contracts for its polysilicon plant
— signed an agreement with Bank of Hawaii for photovoltaic system installation
— and successfully completed a U.S. Navy fuel cell demonstration
CEO Dustin Shindo says, “The engineering and construction contracts signed with Stone & Webster, a subsidiary of The Shaw Group, and JH Kelly, give us added confidence that we can meet our polysilicon delivery dates in 2009. We also received letters of credit of $25 million and $45 million for two of our polysilicon customers, Global Expertise Wafer Division, a subsidiary of Solar-Fabrik Group, and Suntech, respectively, to secure their prepayment obligations to us if we achieve various milestones in the construction and operation of our planned polysilicon plant.
We believe these developments move us closer towards securing financing to help pay for the construction and procurement of our polysilicon plant. We also amended our polysilicon supply contract with SANYO to move our financing deadline to December 31, 2007.
While our intention is to obtain financing as soon as we can, extending the financing deadline provides us with added flexibility to negotiate our planned financing. Our $13 million line of credit with Bank of Hawaii has allowed us to commit capital to the design and engineering of our plant, to purchase long lead-time items such as the reactors, and to stay on schedule for our planned 2009 product deliveries.
In October, we signed a trichlorosilane, or TCS, process engineering and technology transfer contract with Dynamic Engineering Inc., to enable us to produce our own TCS, the primary material used to produce polysilicon in a Siemens reactor, rather than relying on a third-party vendor. We believe that this will provide us with a consistent supply of TCS and more importantly allow us to reduce our costs to produce polysilicon.
“We have refined our estimates on the annual capacity of our polysilicon plant to being between 2,000 and 2,500 metric tons per year. Based on this capacity, we believe our annualized revenue based on our existing supply agreements when we are running at full capacity will be in the range of $120 million to $140 million per year and gross margins in the range of 45% to 55%.
“Significant steps have also been made in our Hoku Solar business. In July 2007 we entered into an agreement with Bank of Hawaii to install a photovoltaic, or PV, system on Bank of Hawaii’s historic Kohala branch, and signed a non-binding letter of intent to explore additional turnkey PV system installations for Bank of Hawaii’s other facilities on the islands neighboring Oahu. In July and September 2007, we sold our solar module production line and inventory of solar cells, respectively, providing us with $4 million in cash.
Finally, in our Hoku Fuel Cells business, we successfully completed the demonstration of our Hoku MEA for the U.S. Navy in IdaTech’s fuel cell systems. We are very pleased with the success of the project and the performance of Hoku MEA under field operating conditions. We intend to continue to selectively pursue U.S. and foreign patent applications in order to protect our technology, and believe that there is the possibility of future market opportunities for our fuel cell products; however, we are not currently pursuing new fuel cell contracts.”
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