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Hoku Scientific has
expanded beyond their initially vision of being
a leader in the fuel cell industry into being a leader in clean energy technology which
Hoku Scientific, Inc.
1075 Opakapaka Street
Kapolei, HI 96707
Darryl S. Nakamoto
Chief Financial Officer
Interview conducted by:
Lynn Fosse, Senior Editor
Published - November 24, 2006
Darryl S. Nakamoto, Chief Financial Officer
Darryl has been Hoku Scientific's Chief Financial Officer since January 2005, and is
responsible for managing all of the company's finance, accounting and public company
reporting functions. Prior to joining Hoku Scientific, Darryl was the Finance Analyst at
Frito-Lay where his responsibilities included budgeting and forecasting for selling
expense, along with manufacturing and distribution cost centers. The position also
involved advisory over product supply and coordination of other finance matters. Before
that Darryl was the Sales and Marketing Executive for Syntera Solutions, a division of
Profitability of Hawaii (POH), a software development/digital imaging company Prior to
POH, Darryl was the Regional Director of Activitymax, a software company that develops
reservation software for the travel industry. Prior to Activitymax, Darryl began his
career at KPMG, LLP where he earned his CPA and planned and executed multiple audit
engagements in various fields including insurance, hospitality, and government.
Darryl earned his BA in Accounting and Finance from the University of Washington.
Founded in 2001, Hoku Scientific (NASDAQ: HOKU) is a materials science company focused on
clean energy technologies. The Company has historically focused its efforts on the design
and development of fuel cell technologies, including membrane, catalyst and unitization
technologies. In May 2006, the Company announced its plans to form an integrated
photovoltaic, or PV, module business (Hoku Solar), and its plans to manufacture
polysilicon (Hoku Materials), a primary material used in the manufacture of PV modules.
Hoku Scientifics entry into the solar and polysilicon industry demonstrates its
continued commitment to clean energy technologies while further strengthening the
CEOCFO: Mr. Nakamoto, what attracted you to Hoku
Mr. Nakamoto: What attracted me to
Hoku Scientific was the opportunity to be part of the leadership team of a business that
was relatively new; especially from the standpoint of something that would help the
environment. There was an opportunity to make money and be successful, but ultimately we
are making things that help the earth, which was of great interest to me.
What was the vision of the company when you arrived and where are you in fulfilling that
Mr. Nakamoto: Our vision initially was
to be a leader in the fuel cell industry but we have expanded to become a leader in clean
energy technologies which now includes solar. We are positioning ourselves to be a leader
in both of these industries; however, in the fuel cell business there have been delays in
the revenue ramp-up. Although we have the capability to mass-produce our product, the
sales that we initially anticipated, are a bit slower than expected. We knew that this was
a possibility, which is why we have maintained a high cash balance in order to sustain our
business until the industry does kick-off. For the solar business, we recently announced
plans to construct polysilicon and solar facilities. Our plans are to fund the
construction through customer prepayments and debt.
Will you tell us about the clean air technology industry in general?
Mr. Nakamoto: I think there are people
excited about the industry and are looking for new opportunities. The cost of oil and
government subsidies will be a big part of moving clean air technologies forward. The
subsidies will allow economies of scale to occur which will make these technologies
affordable. Clean air technology will not go away and continue to gain momentum over the
Will you tell us about the two areas you are going into and the competition and why do you
feel you will be successful in the endeavors?
Mr. Nakamoto: On the solar side we
believe we will be successful because we are filling a need. The demand for polysilicon is
much higher than the supply. It is not necessarily expensive or difficult to manufacture
polysilicon, but it is expensive to build a facility. We believe there will be a shortage
anywhere from the next three to five years and we are taking advantage of this
opportunity. We will also be making solar modules, and our ability to our solar module
business from our polysilicon business will give us a significant competitive
Are there any special challenges as you are based in Hawaii and your plant will be in Idaho?
Mr. Nakamoto: First of all, being in Hawaii
was a strategic initiative, when it came to the fuel cell business. The State of Hawaii
provided us with incentives to remain in Hawaii. It also is the closest location to Japan
while still being in the United States. In the fuel cell industry, our biggest customers
were Nissan and Sanyo and Japan is considered the leader when it comes to fuel cell
Idaho also has provided us with many incentives for
our polysilicon and solar facilities that the State of Hawaii could not provide.
Furthermore, we will be using proven technologies and have exceptional people in place,
which should eliminate any challenges of having multiple locations for our businesses.
Will you tell us about the financial picture of the company today?
Mr. Nakamoto: As of the quarter ended
September 30, 2006, we had over $21 million in cash and cash equivalents and our revenues
this past quarter was almost $2 million. Our main source of revenue for the foreseeable
future is driven from our contract with the United States Navy. We are profitable with our
fuel cell business today and have had seven consecutive profitable quarters. I am not sure
if there are any other publicly traded fuel cell companies that can claim that.
We have started to scale back on our expenditures and
investment from the fuel cell business and are beginning to focus more on the solar and
silicon business. The reason for this is our solar businesses will provide the nearer term
revenue opportunities. We have purchased $2.8 million in solar cells from Taiwan and
expect to generate revenue from these cells during the first half of 2007.
What caused Spire Corporation (NASDAQ: SPIR) to go with you for their solar module
assemble; what is special about Hoku that puts you in demand?
Mr. Nakamoto: At cant speak for
Spire; however we do have a track record of success. We believe that Companies are willing
to work with us based on leadership, vision and strong financials.
Why should potential investors be interested in Hoku now?
Mr. Nakamoto: We went public in August
of 2005 and have only been around since March of 2001. In a very short period, we have
been able to execute on a business plan and turn a profit in an industry that is notorious
for losing money. With the team that we have, we are able to execute on new and innovative
things quickly and successfully. Everybody is looking for alternative energy sources and
fuel cells and solar are both viable technologies for the future. We already have a
foothold in these industries and with our experience; we believe we can be a success in
both our fuel cell and solar businesses.
What would you like readers to remember about Hoku?
Mr. Nakamoto: We are not a hype
company, what we do is execute on our plans. I believe that one of the main reasons for
our success is that we work harder than any other company out there does. Our people are
willing to put out the effort. Everybody here is just excited about the opportunity to
make a difference and our products provide us the ability to do so.
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