Hoku Scientific, Inc. (Revenue for the quarter ended December 31, 2007 was $1.3 million compared to $1.1 million for the quarter ended December 31, 2006. Revenue for the nine months ended December 31, 2007 was $2.6 million compared to $4.2 million for the nine months ended December 31, 2006. The decrease in revenue for the nine months ended December 31, 2007 compared to the same period in 2006 was primarily due to the completion of the Nissan Motor Co., Ltd. contracts in 2006 and no similar contracts in 2007. The decrease was offset by the recognition of revenue from photovoltaic, or PV, systems installations during the three months ended December 31, 2007. Deferred revenue of $355,000 at December 31, 2007 was attributable to contracts related to PV systems installations while deferred revenue of $990,000 at March 31, 2007 was attributable to contracts with the U.S. Navy, which were completed in August 2007.
Net loss, computed in accordance with U.S. generally accepted accounting principles, or GAAP, for the quarter ended December 31, 2007 was $538,000, or $0.03 per diluted share, compared to $1.3 million, or $0.08 per diluted share, for the same quarter in 2006. Net loss, computed in accordance with GAAP, for the nine months ended December 31, 2007 was $2.2 million, or $0.13 per diluted share, compared to $635,000, or $0.04 per diluted share, for the same period in 2006.
Non-GAAP net loss for the quarter ended December 31, 2007 was $274,000, or $0.01 per diluted share, compared to $1.0 million, or $0.06 per diluted share, for the same quarter in 2006. The non-GAAP net losses for the quarters ended December 31, 2007 and 2006 exclude non-cash stock-based compensation of $264,000 and $212,000, respectively. Non-GAAP net loss for the nine months ended December 31, 2007 was $1.3 million, or $0.08 per diluted share, compared to non-GAAP net income of $0, or $0.00 per diluted share, for the same period in 2006. Non-GAAP net loss for the nine months ended December 31, 2007 and net income for the nine months ended December 31, 2006 exclude non-cash stock-based compensation of $876,000 and $635,000, respectively. The accompanying schedules provide a reconciliation of net loss and net loss per share computed on a GAAP basis to net loss and net loss per share computed on a non-GAAP basis.
Dustin Shindo, chairman, president and chief executive officer of Hoku Scientific, said, "We continue to make steady progress in our Hoku Solar and Hoku Materials businesses. To begin with, we signed a new polysilicon sales contract with Solarfun for approximately $306 million in polysilicon product shipments. We now have contracted future revenue with four leading solar companies from the sale of up to $1.5 billion of polysilicon over a seven to ten year period.
"Primarily due to the new contract with Solarfun, we have decided to increase the annual capacity of Phase I of our planned polysilicon facility from the previously announced 2,500 metric tons per year to 3,500 metric tons per year. Once our plant is operating at full capacity, we will be able to meet the annual delivery requirements in our four existing polysilicon sales contracts, and we will have some additional polysilicon available for sale. Although we have increased the size of the first phase of our polysilicon facility, we still plan to have a Phase II expansion. We believe we have sufficient space to expand our polysilicon production to up to 8,000 metric tons per year on our existing 67-acre property; however the expansion size will primarily be determined based on new polysilicon sales contracts that we may sign.
"We estimate the cost of our planned 3,500 metric tons per year facility to be approximately $400 million. We intend to use the $240 million in advance payment commitments from our polysilicon customer agreements to contribute to the financing of the construction and we have signed a non-binding letter of intent with Merrill Lynch to help finance the remaining construction costs. We intend to borrow approximately $185 million from Merrill Lynch, subject to our satisfying certain conditions, including the completion by Merrill Lynch of its due diligence and our ability to provide approximately $35 million for use in the construction of the planned polysilicon plant.
"Although we have increased the size our polysilicon facility, we expect to deliver polysilicon in the first half of calendar year 2009. However, due to our additional contract with Solarfun, we now believe our annualized revenue based on our existing supply agreements and polysilicon that is available for sale when we are running at our full 3,500 metric ton capacity will be in the range of $180 million to $200 million per year. Our gross margins are still expected to be in the range of 45% to 55%.
"Significant steps have also been made in our Hoku Solar business. During the quarter ended December 31, 2007, we completed residential and commercial PV system installations, including two installations for Paradise Beverages, the Hawaii distributor for Coors, Heineken, Corona, and Miller products, and one installation for Bank of Hawaii. In addition, Hawaiian Electric Company has submitted our contract to the Hawaii Public Utilities Commission for approval of the sale by us to Hawaiian Electric Company of electricity generated by a PV system that we would install, own and operate. If approved, we will install a 167 kilowatt PV system and sell the power generated by that system over a 20-year period to Hawaiian Electric Company. We also entered into a non-binding agreement with The James Campbell Company to plan the Kapolei Sustainable Energy Park, which includes a PV installation that would be capable of generating approximately 1.5 megawatts of photovoltaic power, which would be the largest PV facility on Oahu.
"In summary, this was another great quarter for Hoku Scientific. We were able to sign a new polysilicon sales agreement and are working with Merrill Lynch to secure financing. We also continue to make progress in the engineering and construction of our polysilicon production plant, which has allowed us to expand the expected size of the first phase of our planned polysilicon facility to 3,500 metric tons per year. Our solar installation business is continuing to grow and the potential of this business is becoming evident."
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