SOURCE:
Hoku Scientific, Inc.
2008-07-16 15:15:00
KAPOLEI, HI–(EMWNews – July 16, 2008) – Hoku Scientific, Inc. (
materials science company focused on clean energy technologies, today
announced its financial results for its first quarter ended June 30, 2008
and provided a general update on its business.
Financial Results
Revenue for the quarter ended June 30, 2008 was $2.2 million from
photovoltaic, or PV, system installation and related service contracts
compared to $1.1 million from fuel cell contracts with the U.S. Navy in the
same period in fiscal 2008. As of June 30, 2008 and March 31, 2008,
deferred revenue of $24,000 and $36,000, respectively, was attributable to
a PV system installation and related service contracts.
Net income, computed in accordance with U.S. generally accepted accounting
principles, or GAAP, for the quarter ended June 30, 2008 was $178,000, or
$0.01 per diluted share compared to a net loss of $653,000, or $0.04 per
diluted share, for the same period in fiscal 2008. Net income was
primarily due to unrealized gains related to foreign currency forward
contracts.
Non-GAAP net income for the quarter ended June 30, 2008 was $646,000 or
$0.03 per diluted share, compared to non-GAAP net loss of $340,000, or
$0.02 per diluted share, for the same period in fiscal 2008. Non-GAAP net
income for the quarter ended June 30, 2008 and non-GAAP net loss for the
quarter ended June 30, 2007 excludes non-cash stock-based compensation of
$468,000 and $313,000, respectively. The accompanying schedules provide a
reconciliation of net income (loss) and net income (loss) per share
computed on a GAAP basis to net income (loss) and net income (loss) per
share computed on a non-GAAP basis.
Dustin Shindo, chairman, president and chief executive officer of Hoku
Scientific, said, “We were able to meet our revenue guidance for the first
quarter ended June 30, 2008 and believe we remain on track to meet our
fiscal year 2009 guidance of $15 million to $18 million. As we previously
stated, we expect to see losses as we increase our efforts in supporting
polysilicon manufacturing and PV systems installation service businesses;
however, we are excited that we were able to reduce our losses compared to
the same period in the prior year and achieve profitability.”
Business Updates
Polysilicon Plant Construction Update
Hoku Scientific, through its wholly owned subsidiary Hoku Materials, Inc.,
is currently building a polysilicon production facility in Pocatello,
Idaho, where it plans to produce up to 3,500 metric tons of polysilicon per
year for the solar industry. Hoku Materials has substantially completed
the technology integration engineering phase, the excavation and
installation of the foundations for underground utility racks, the reactor
building, and the vent gas recovery system have been completed, and the
erection of structural steel is in progress.
In addition, Hoku Materials is on schedule to receive its first polysilicon
reactor shipment in August, and is focusing on the reactor demonstration
tests scheduled for the fourth quarter of calendar year 2008. Hoku
Materials remains on track to begin operating the facility and producing
polysilicon in the first half of calendar year 2009, prior to the plant’s
final completion date.
“We continue to make progress in the engineering, procurement and
construction of our polysilicon production plant. The next significant
construction milestone is the first delivery of the polysilicon reactors in
August, which we believe puts us in position to complete our pilot
demonstration in the fourth quarter of calendar year 2008,” said Dustin
Shindo.
Polysilicon Plant Financing Update
Hoku Materials estimates that it will cost approximately $390 million to
engineer, procure and construct its planned 3,500 metric ton per annum
polysilicon production plant, which will be funded through a combination of
$240 million in customer product prepayment commitments, Hoku Scientific’s
available cash and debt and/or equity financing.
Hoku Materials believes it will need to make payments of $111 million for
engineering, procurement and construction in order to complete pilot
production in the fourth quarter of calendar year 2008. As of June 30,
2008, the amount contributed to the project was at $58 million, and Hoku
Materials plans to fund the remaining $53 million of the $111 million it
believes it needs to complete pilot production, through Hoku Scientific’s
available cash, proceeds from sales of common stock under the Equity
Distribution Agreement with UBS Securities LLC, or UBS, equipment leasing
and other debt financing, and with potential additional prepayments from
new customers who may sign long-term contracts for the remaining 300-500
metric tons per annum of unallocated polysilicon production. If the pilot
production demonstration is successful, Hoku Materials would thereafter
commence one or more subsequent debt or equity offerings to raise an
additional $56 million, which together with the release of the remaining
customer commitments, is expected to be sufficient to complete the
construction of its polysilicon plant.
Hoku Materials currently has polysilicon supply contracts with Sanyo
Electric Co. Ltd., or Sanyo, Wuxi Suntech Power Co., Ltd., or Suntech,
Global Expertise Wafer Division, or GEWD, and Solarfun Power Hong Kong
Limited, or Solarfun for the delivery of polysilicon over a seven to
ten-year period. The future revenue of these contracts is up to
approximately $1.7 billion in the aggregate over their respective periods.
Hoku Materials has amended its polysilicon supply contracts with Suntech
and Solarfun, to revise the financing deadline to December 31, 2008, and to
reduce the amount of capital that it is required to be raised by that date
to $75 million, including the $25 million previously raised through our
private placement of our common stock. While Hoku Materials has not amended
the financing deadlines in its polysilicon agreements with Sanyo and GEWD,
which deadlines expired on May 31, 2008, Hoku Materials maintains an open
dialogue with each of these parties; as such, Hoku Materials does not
currently plan to terminate either of these contracts, and believes that
neither Sanyo nor GEWD will terminate their respective contracts. However,
Hoku Materials cannot guarantee that either it, Sanyo or GEWD will not
terminate these contracts. If any of the contracts with Sanyo, GEWD,
Suntech or Solarfun are terminated, Hoku Materials’s business will be
materially harmed. In addition, Hoku Materials will be required to return
any deposits and advance payments received up to the date of the
termination, which is $17 million in aggregate for the four supply
agreements and it will need to secure new funds in order to finance the
construction of its polysilicon production plant.
“In June 2008, we entered into an Equity Distribution Agreement with UBS,”
said Dustin Shindo. “The agreement provides that we may offer and sell
shares of our common stock at market price having an aggregate offering
amount of up to $54,000,000 through UBS, as sales agent. Common stock
sales under the program began on June 12, 2008, with aggregate sales
through June 30, 2008 of 527,815 shares, resulting in gross proceeds to
Hoku Scientific of $3.3 million. Beginning on July 1, 2008, we suspended
the program until the announcement of our financial and other information
related to the quarter ended June 30, 2008. We expect to begin selling
shares under the program within the next two weeks.
“We want to make it clear that we closely monitor the dilutive effect that
this program has and are not taking the approach to maximize our proceeds
as evident by the number of shares sold. The most important takeaways are
that we have a financing plan in place that we believe will allow us to
generate the cash necessary to meet our goal of pilot production in the
fourth quarter of calendar year 2008 and that we are looking towards
alternative non-equity financing options to reduce the number of shares
sold. We have recently announced the acceptance of an offer of $5.8
million for the purchase of our land and building in Kapolei, Hawaii, and
are in discussions to finance the acquisition of certain production
equipment, which we did not previously plan on acquiring through a
financing arrangement. We are also in discussions for the sale of our
unallocated polysilicon production capacity which could generate additional
prepayments for the construction of our plant.”
Hoku Solar Update
Hoku Scientific’s wholly owned subsidiary, Hoku Solar, Inc., markets, sells
and installs turnkey photovoltaic, or PV, power systems in Hawaii.
Dustin Shindo said, “In June, we completed an over 250 kilowatt PV system
installation for Paradise Beverages. We also have substantially completed
the detailed design and engineering work and expect to begin the
installation in August of a 218 kilowatt PV system in which we will sell
the power generated by that system over a 20-year period to Hawaiian
Electric Company. We expect to complete the Hawaiian Electric Company
installation during the quarter ended September 30, 2008, along with
residential installations related to our program with D.R. Horton-Schuler
Division, a wholly owned subsidiary of D.R. Horton, Inc. at the Kahiwelo at
Makakilo Development in Kapolei, Hawaii.”
Summary
“In summary, we believe we have taken great strides in the quarter ended
June 30, 2008,” said Dustin Shindo. “We continued to make progress in the
construction of our polysilicon plant and set in place a path to complete
the necessary financing. We also continue to successfully install PV
systems in Hawaii and expect to sign new installation contracts during the
remainder of this fiscal year.”
Forward Guidance
The Company’s general policy is to provide revenue guidance for the next
fiscal quarter. Fluctuations in revenue are expected to continue in future
periods due to uncertainty regarding the level and the timing of
photovoltaic system installations, and our ability to obtain third party
financing for our power purchase contracts. Based on its current outlook,
the Company expects revenue for the second quarter ending September 30,
2008 to be in the range of $1.6 million to $2.0 million. In addition, the
Company expects that it will need to increase its efforts in supporting a
polysilicon manufacturing and PV systems 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 incur losses for the foreseeable future. Except as required by
law, the Company assumes no obligation to update these
forward-looking statements publicly, or to update the reasons actual
results could differ materially from those anticipated in these
forward-looking statements, even if new information becomes available in
the future.
Conference Call Information
Hoku Scientific has scheduled a conference call on Wednesday, July 16, 2008
at 5:00 p.m., Eastern Time, to discuss results for the Company’s first
quarter fiscal year 2009 ended June 30, 2008 and the Company’s business
outlook. All interested parties are invited to call-in. To participate,
please call (719) 325-4911. A live webcast can also be accessed by going
directly to the Company’s web site at www.hokuscientific.com and electing
the conference call link on the home page. A playback of the webcast will
be available on the Company’s website until the Company’s conference call
to discuss its financial results for its third quarter fiscal 2009.
About Hoku Scientific, Inc.
Hoku Scientific (
company with three business units: Hoku Materials, Hoku Solar and Hoku Fuel
Cells. Hoku Materials plans to manufacture, market and sell polysilicon for
the solar market from its plant currently under construction in Pocatello,
Idaho. Hoku Solar markets and installs turnkey photovoltaic systems and
related services in Hawaii. Hoku Fuel Cells has developed proprietary fuel
cell membranes and membrane electrode assemblies for stationary and
automotive proton exchange membrane fuel cells. For more information visit
Hoku, Hoku Solar, and the Hoku Scientific logo are trademarks of Hoku
Scientific, Inc., and Hoku Materials is the trademark of Hoku Materials,
Inc., all rights reserved. All other trademarks, trade names and service
marks appearing in this press release are the property of their respective
holders.
Forward-Looking Statements
This press release contains forward-looking statements that involve many
risks and uncertainties. These statements relate to Hoku Materials’s
ability to successfully raise sufficient funds to establish a polysilicon
manufacturing facility within the time required in its contracts with Sanyo
Electric Co., Ltd., Global Expertise Wafer Division Ltd., Wuxi Suntech
Power Co., Ltd., and Solarfun Power Hong Kong Limited or at all; whether or
not Hoku Materials or Global Expertise Wafer Division Ltd. terminate their
polysilicon supply agreement, whether or not Hoku Materials or Sanyo
Electric Co., Ltd., terminate their polysilicon supply agreement, the cost
to engineer, procure and construct Hoku Materials’s planned polysilicon
facility; its ability to engineer and construct a production plant for
polysilicon; Hoku Materials’s ability to manufacture polysilicon; Hoku
Materials’s forecasted revenue from the potential future sale of
polysilicon, and its ability to secure additional prepayments from the
sale of 300-500 metric tons of annual unallocated production capacity; Hoku
Materials’s ability to meet the delivery schedules in its customer
contracts; its ability to successfully achieve the milestones in its
contracts with Sanyo Electric, Co., Ltd., Global Expertise Wafer Division
Ltd., Wuxi Suntech Power Co., Ltd. and Solarfun Power Hong Kong Limited;
the ability of its vendors, contractors and consultants to meet the
delivery schedules in their respective agreements with Hoku Materials; Hoku
Materials’s costs to manufacture polysilicon, and its ability to offer
pricing that is competitive with competing products; and Hoku Materials’
plans for future expansion of its polysilicon production facilities. These
statements also relate to Hoku Solar’s ability to successfully complete PV
system installations; its ability to obtain third party financing for Hoku
Solar’s power purchase agreement with Hawaiian Electric Company; the
performance and durability of Hoku Solar’s PV systems; the cost to procure
and install the PV systems, its ability to offer pricing that is
competitive with competing products and expected future revenue from the PV
systems installation business. These statements also relate to Hoku
Scientific, Hoku Materials and Hoku Solar’s future financial performance,
including revenue and gross margin projections; Hoku Scientific, Hoku
Materials and Hoku Solar’s business strategies and plans; and objectives of
management for future operations. In some cases, you can identify
forward-looking statements by terms such as “anticipate,” “believe,” “can,”
“continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,”
“potential,” “predict,” “project,” “should,” “will,” “would” and similar
expressions intended to identify forward-looking statements. These
statements involve known and unknown risks, uncertainties and other factors
that may cause actual results, performance, time frames or achievements to
be materially different from any future results, performance, time frames
or achievements expressed or implied by the forward-looking statements.
Given these risks, uncertainties and other factors, you should not place
undue reliance on these forward-looking statements. In evaluating these
statements, you should specifically consider the risks described in Hoku
Scientific’s filings with the Securities and Exchange Commission. Except as
required by law, Hoku Scientific assumes no obligation to update these
forward-looking statements publicly, or to update the reasons actual
results could differ materially from those anticipated in these
forward-looking statements, even if new information becomes available in
the future.
Use of Non-GAAP Financial Information
To supplement Hoku Scientific’s financial statements presented on a GAAP
basis, the Company uses non-GAAP measures of net income and net income per
share, which are each adjusted to exclude expenses relating to non-cash
stock-based compensation, which the Company believes is appropriate to
enhance an overall understanding of its past financial performance and its
future prospects. As the Company uses SFAS No. 123(R) to calculate its
non-cash stock-based compensation expense, it believes that it is useful to
investors to understand how the expenses associated with the application of
SFAS No. 123(R) are reflected on its statements of operations. The Company
further believes that where the adjustments used in calculating non-GAAP
net income and non-GAAP net income per share are based on specific,
identified charges that impact different line items in the statements of
operations (including cost of service and license revenue, research and
development, sales, general and administrative expense), that it is useful
to investors to know how these specific line items in the statements of
operations are affected by these adjustments. For its internal budgets and
forecasting, the Company uses financial statements that do not include
non-cash stock-based compensation expense. The presentation of this
additional information is not meant to be considered in isolation or as a
substitute for net income or net income per share prepared in accordance
with GAAP. Whenever the Company uses such non-GAAP financial measures, it
provides a reconciliation of non-GAAP financial measures to the most
closely applicable GAAP financial measure. Investors are encouraged to
review the related GAAP financial measures and the reconciliation of these
non-GAAP financial measures to their most directly comparable GAAP
financial measure.
HOKU SCIENTIFIC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per share data)
Three Months Ended
June 30,
----------------------
2008 2007
---------- ----------
Service and license revenue $ 2,208 $ 1,098
Cost of service and license revenue (1) 1,524 758
---------- ----------
Gross margin 684 340
Operating expenses:
Selling, general and administrative (1) 1,244 1,168
Research and development (1) -- 43
---------- ----------
Total operating expenses 1,244 1,211
---------- ----------
Loss from operations (560) (871)
Interest and other income 738 218
---------- ----------
Net income (loss) $ 178 $ (653)
========== ==========
Basic net income (loss) per share $ 0.01 $ (0.04)
========== ==========
Diluted net income (loss) per share $ 0.01 $ (0.04)
========== ==========
Shares used in computing basic net income (loss)
per share 19,711,917 16,541,166
========== ==========
Shares used in computing diluted net income (loss)
per share 20,055,606 16,541,166
========== ==========
----------------------------------------
(1) Includes stock-based compensation as
follows:
Cost of service and license revenue $ 4 $ 30
Selling, general and administrative 464 247
Research and development -- 36
---------- ----------
Total $ 468 $ 313
========== ==========
HOKU SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
=========================
June 30,
2008 March 31,
(unaudited) 2008
=========== ===========
Assets
Cash and cash equivalents $ 5,255 $ 27,768
Short-term investments 2,993 1,992
Inventory 1,669 803
Accounts receivable 944 113
Costs of uncompleted contracts 42 54
Property and equipment held for sale 4,918 29
Other current assets 2,595 3,787
---------- ----------
Total current assets 18,416 34,546
Property, plant and equipment, net 57,734 33,563
---------- ----------
Total assets $ 76,150 $ 68,109
========== ==========
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses $ 8,705 $ 3,258
Deferred revenue 24 36
Deposits 4,000 4,000
Other current liabilities 751 1,820
---------- ----------
Total current liabilities 13,479 9,114
Deposits 13,000 13,000
---------- ----------
Total liabilities 26,480 22,114
---------- ----------
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $0.001 par value. Authorized
5,000,000 shares; no shares issued and
outstanding as of June 30, 2008 and March 31,
2008. -- --
Common stock, $0.001 par value. Authorized
100,000,000 shares; issued and outstanding
20,390,931 and 19,786,420 shares as of June
30, 2008 and March 31, 2008, respectively. 20 20
Additional paid-in capital 61,764 58,182
Accumulated deficit (12,114) (12,207)
---------- ----------
Accumulated other comprehensive loss -- --
Total stockholders' equity 49,670 45,995
---------- ----------
Total liabilities and stockholders' equity $ 76,150 $ 68,109
========== ==========
HOKU SCIENTIFIC, INC.
Reconciliations from GAAP Net Income (Loss) and GAAP Net Income (Loss)
per share to Non-GAAP Net Income (Loss) and Non-GAAP Net Income
(Loss) per share
(Unaudited)
(in thousands, except share and per share data)
Three Months Ended
June 30,
------------------
2008 2007
-------- --------
GAAP net income (loss) $ 178 $ (653)
Stock-based compensation expense 468 313
-------- --------
Non-GAAP net income (loss) $ 646 $ (340)
======== ========
GAAP basic net income (loss) per share $ 0.01 $ (0.04)
Basic stock-based compensation expense per share 0.02 0.02
-------- --------
Non-GAAP basic net income (loss) per share $ 0.03 $ (0.02)
======== ========
GAAP diluted net income (loss) per share $ 0.01 $ (0.04)
Diluted stock-based compensation expense per share 0.02 0.02
-------- --------
Non-GAAP diluted net income (loss) per share $ 0.03 $ (0.02)
======== ========
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