Hoku Scientific, Inc. Reports First Quarter Fiscal Year 2008 Results

Market Wire, July, 2007

Highlights:

--  Hoku signs major polysilicon sales contract with Suntech Power
    Holdings Co., Ltd.
--  Hoku signs major polysilicon sales contract with Solar-Fabrik AG
    subsidiary
--  Hoku wins right to negotiate with Hawaiian Electric Company for solar
    energy purchase agreement
--  Hoku announces plans to increase size of polysilicon plant
--  Hoku announces focused solar strategy
    

Hoku Scientific, Inc. (NASDAQ: HOKU), a materials science company focused on clean energy technologies, today announced its financial results for its first quarter ended June 30, 2007 and provided a general update on its business.

Revenue for the quarter ended June 30, 2007 was $1.1 million from contracts with the U.S. Navy compared to $1.2 million for the same quarter in 2006 comprised principally of $992,000 from contracts with Nissan Motor Co., Ltd. Total deferred revenue was $178,000 as of June 30, 2007 compared to $990,000 as of March 31, 2007. As of June 30, 2007, all of the deferred revenue was attributable to contracts with the U.S. Navy. As of March 31, 2007, deferred revenue was primarily attributable to contracts with the U.S. Navy of $929,000.

Net loss, computed in accordance with U.S. generally accepted accounting principles, or GAAP, for the quarter ended June 30, 2007 was $653,000, or $0.04 per diluted share, compared to GAAP net income of $313,000, or $0.02 per diluted share, for the same quarter in 2006.

Non-GAAP net loss for the quarter ended June 30, 2007 was $340,000, or $0.02 per diluted share, compared to non-GAAP net income of $481,000, or $0.03 per diluted share, for the same quarter in 2006. Non-GAAP net loss for the quarter ended June 30, 2007 and net income for the quarter ended June 30, 2006 excludes non-cash stock-based compensation of $313,000 and $168,000, 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 couldn't be happier with the strides made in our polysilicon and solar businesses over the past several months. Without question, the most significant news is the signing of polysilicon supply agreements with Suntech and Solar-Fabrik. These contracts along with our contract with SANYO may result in aggregate payments to us of up to approximately $1.2 billion over ten years."

"Based on these agreements, we intend to increase the planned size of our polysilicon plant by up to 1,000 additional metric tons of annual capacity. We expect that the cost will be greater than $260 million, which was the estimated cost for a 2,000 metric ton per year polysilicon plant, but we have not yet determined an estimated cost. We intend to use the over $211 million in advance payments from our polysilicon agreements to contribute to the financing of the construction, subject to our achievement of various polysilicon production and quality milestones. We plan to cover the remaining construction costs through debt and/or the issuance of equity securities.

"Significant steps have also been made in our Hoku Solar business. In June 2007, we announced a focused strategy where we will either sell a turnkey solar PV system to the end user, or provide clean solar energy through a power purchase agreement, and we will exit the solar module manufacturing business. We have seen consistent reductions in solar module pricing, and believe that we can offer better pricing and service to our customers by purchasing solar modules through third-party vendors instead of producing solar modules ourselves. Since we became a licensed electrical contractor in the State of Hawaii in December 2006, we have signed several installation contracts, including Bank of Hawaii, Hardware Hawaii and Paradise Beverages. In May 2007, Hawaiian Electric Company selected us to enter into negotiations for the installation of a 167 kilowatt PV system and for our sale to Hawaiian Electric Company of the power generated by that system over a 20-year period. If this system were installed today, this system would be considered one of the larger solar PV systems in Hawaii.

"In regards to our fuel cell business, we continue to successfully demonstrate our Hoku MEA for the U.S. Navy in IdaTech's fuel cell systems and have not seen any unrecoverable failure of Hoku MEA during this demonstration. The U.S. Navy is our only significant source of revenue at this time. Once the contract is completed, which we expect to be in August 2007, we anticipate that our only source of revenue will be from our PV system installations, until we begin delivering polysilicon. As mentioned before, there is uncertainty in the timing of significant revenue growth in the fuel cell industry and we have significantly scaled-back our investments in our fuel cell business.

Our strategy to purchase solar modules from third-party vendors and not enter the solar module manufacturing business means that we will not generate incremental revenue through the sale of solar modules to distributors and contractors who integrate PV modules into solar power systems as previously anticipated. However, we believe that there is an increasing amount of interest from potential customers for power purchase agreements. These potential agreements would result in revenue being recognized over the term of the power purchase agreement, which could be as long as 20 years, rather than upon the completion of the PV system installation. As a result, we are revising our fiscal year ending March 31, 2008 revenue projections to be in the range of $3.0 to $6.0 million from our prior guidance of $7.0 to $10.0 million.