UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~DECEMBER 3031, 2011

o¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ~~________~~_____ TO ~~________~~_____ .

Commission File Number: 000-51458

HOKU CORPORATION

(Exact name of Registrant as specified in its Charter)

Delaware (State or other jurisdiction of incorporation or organization)	99-0351487 (I.R.S. Employer Identification No.)
Delaware		99-0351487
1288 Ala Moana Blvd., Ste. 220 Honolulu, Hawaii 96814 (Address of principal executive offices, including zip code)
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
(808) 682-7800 (Registrant’s telephone number, including area code)

~~Indicate~~1288 byAla ~~check~~Moana mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports)Blvd., ~~and (2) has been subject to such filing requirements for the past 90 days~~Ste. ~~x Yes o No~~ 220

~~Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site~~Honolulu, ifHawaii any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No96814

(Address of principal executive offices, including zip code)

(808) 682-7800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

o¨ Large accelerated filer o ¨ Accelerated filer x Non-accelerated filer (Do not check if a smaller reporting company) o ¨ Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~o Yes~~ ¨ Yes x No

Common Stock, par value $0.001 per share, outstanding as of ~~October~~January 31, ~~2011~~2012: 54,911,~~863~~860

~~TABLE~~ Table OFof ~~CONTENTS~~Contents

		Page

PART I. FINANCIAL INFORMATION 1		1

Item 1.	FINANCIAL STATEMENTS (unaudited)	1

Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	17

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	28

Item 4.	CONTROLS AND PROCEDURES	28

PART II. OTHER INFORMATION II-1		II-1

Item 1.	LEGAL PROCEEDINGS	II-1

ITEM 1A.	RISK FACTORS	II-1

Item 6.	EXHIBITS	II-16

SIGNATURES		II-18

-i-

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (unaudited)

HOKU CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	September 30, 2011			March 31, 2011
	December 31, 2011			March 31, 2011
Assets
Cash and cash equivalents	$	3,~~201~~238		$	18,355
Restricted cash		~~758~~757			–
Accounts receivable		23,~~752~~811			548
Inventory		1,~~670~~400			758
Costs of uncompleted contracts		~~1,548~~815			128
Prepaid expenses		~~638~~5,726			531
Total current assets		1015,~~567~~747			20,320
Deferred cost of financing		~~580~~585			792
Property, plant and equipment, net		~~579~~635,~~491~~142			481,481
Total assets	$	~~590~~651,~~638~~474		$	502,593
Liabilities and Equity
Accounts payable and accrued liabilities	$	4776,~~008~~590		$	27,149
Deferred revenue		21,~~467~~059			72
Customer deposits		8195,~~222~~227			25,278
Related party notes payable, net – current		47,064			–
Notes payable – current		63,300			–
Other current liabilities		~~758~~580			467
Total current liabilities		~~241~~236,~~819~~756			52,966
Related party notes payable, net		–48,958			43,593
Notes payable		~~209~~251,~~750~~388			194,295
Long-term customer deposits		5844,~~758~~533			114,922
Total liabilities		~~510~~581,~~327~~635			405,776
Commitments and Contingencies
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value. Authorized 5,000,000 shares; no shares issued and outstanding as of September 30, 2011 and March 30, 2011.		-			-
Preferred stock, $0.001 par value. Authorized 5,000,000 shares; no shares issued and outstanding as of December 31, 2011 and March 31, 2011.		-			-
Common stock, $0.001 par value. Authorized 100,000,000 shares; issued and outstanding 54,911,864 and 54,970,255 shares as of September 30, 2011 and March 30, 2011, respectively.		55			55
Common stock, $0.001 par value. Authorized 100,000,000 shares; issued and outstanding 54,911,861 and 54,970,255 shares as of December 31, 2011 and March 31, 2011, respectively.		55			55
Warrants for 11,196,581 and 10,000,000 shares of common stock as of September 30, 2011 and March 30, 2011, respectively.		14,269			12,884
Warrants for 11,196,581 and 10,000,000 shares of common stock as of December 31, 2011 and March 31, 2011, respectively.		14,269			12,884
Additional paid-in capital		115,~~803~~977			115,500
Accumulated deficit		(5061,~~555~~142	)		(32,438	)
Total Hoku Corporation stockholders’ equity		7969,~~572~~159			96,001
Noncontrolling interest		~~739~~680			816
Total equity		8069,~~311~~839			96,817
Total liabilities and equity	$	~~590~~651,~~638~~474		$	502,593

See accompanying notes to consolidated financial statements.

-1-

HOKU CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

	Three Months Ended September 30,						Six Months Ended September 30,
	Three Months Ended December 31,						Nine Months Ended December 31,
	2011			2010			2011			2010
Service and license revenue	$	15,~~888~~500		$	1,~~185~~242		$	27,~~220~~720		$	23,~~115~~357
Product revenue		–1,583			–			~~154~~1,737			–
Total revenue		17,~~888~~083			1,~~185~~242			29,~~374~~457			23,~~115~~357
Cost of service and license revenue		14,~~714~~992			~~852~~948			16,~~907~~898			12,~~417~~365
Cost of product revenue		–1,390			–			~~150~~1,541			–
Total cost of revenue		16,~~714~~382			~~852~~948			28,~~057~~439			12,~~417~~365
Gross margin		~~174~~701			~~333~~294			~~317~~1,018			~~698~~992
Operating expenses:
Selling, general and administrative (1)		811,~~043~~274			23,~~250~~344			1829,~~367~~640			58,~~456~~801
Total operating expenses		811,~~043~~274			23,~~250~~344			1829,~~367~~640			58,~~456~~801
Loss from operations		(710,~~869~~573	)		(13,~~917~~050	)		(1828,~~050~~622	)		(47,~~758~~809	)
Interest and other income (loss)		–			(48	)		1			138
Interest and other income		–			27			–			166
Net loss		(710,~~869~~573	)		(13,~~965~~023	)		(1828,~~049~~622	)		(47,~~620~~643	)
Net income attributable to the noncontrolling interest		(4813	)		(4623	)		(6882	)		(7497	)
Net loss attributable to Hoku Corporation	$	(710,~~917~~586	)	$	(23,~~011~~046	)	$	(1828,~~117~~704	)	$	(47,~~694~~740	)
Basic net loss per share attributable to Hoku Corporation	$	(0.1419	)	$	(0.0406	)	$	(0.3352	)	$	(0.0914	)
Diluted net loss per share attributable to Hoku Corporation	$	(0.1419	)	$	(0.0406	)	$	(0.3352	)	$	(0.0914	)
Shares used in computing basic net loss per share		54,~~872~~886,~~029~~650			54,~~659~~724,~~425~~354			54,~~868~~872,~~400~~287			54,~~620~~641,~~643~~657
Shares used in computing diluted net loss per share		54,~~872~~886,~~029~~650			54,~~659~~724,~~425~~354			54,~~868~~872,~~400~~287			54,~~620~~641,~~643~~657
(1) Includes stock-based compensation and non-cash expense from issuance of warrant as follows:
Selling, general and administrative		~~158~~173			~~259~~175			1,~~699~~872			~~580~~755

See accompanying notes to consolidated financial statements

-2-

HOKU CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended
	Nine Months Ended
	September 30,
	December 31,
	2011			2010
Cash flows from operating activities:
Net loss	$	(1828,~~049~~622	)	$	(47,~~620~~643	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		~~127~~308			~~101~~172
Stock-based compensation		~~314~~487			~~587~~755
Non-cash expense from issuance of warrant		1,385			–
Changes in operating assets and liabilities:
Accounts receivable		(23,~~204~~263	)		16(550	)
Costs of uncompleted contracts		(~~1,420~~687	)		(~~329~~344	)
Inventory		(~~912~~642	)		(3233	)
Prepaid expenses		(~~108~~5,195	)		~~502~~547
Accounts payable and accrued liabilities		47,~~156~~843			~~673~~338
Deferred revenue		~~2,395~~987			~~355~~59
Other current liabilities		~~281~~102			(~~102~~144	)
Net cash used in operating activities		(1427,~~035~~297	)		(26,~~820~~577	)
Cash flows from investing activities:
Payment of property, plant and equipment expenditures		(78106,~~505~~203	)		(73141,~~184~~372	)
Net cash used in investing activities		(78106,~~505~~203	)		(73141,~~184~~372	)
Cash flows from financing activities:
Distributions to noncontrolling interest		(~~145~~218	)		(2,679	)
Net proceeds from notes payable		78120,~~668~~178			73140,~~300~~800
Payment of financing costs		(~~159~~380	)		–
Costs related to Tianwei investment		–			(88	)
Exercise of common stock options		–			13
Customer deposits received (refunded)		(~~220~~440	)		913,~~900~~200
Increase in restricted cash		(~~758~~757	)		–
Net cash provided by financing activities		77118,~~386~~383			80151,~~434~~236
Net increase (decrease) in cash and cash equivalents		(15,~~154~~117	)		43,~~430~~287
Cash and cash equivalents at beginning of period		18,355			6,962
Cash and cash equivalents at end of period	$	3,~~201~~238		$	1110,~~392~~249
Supplemental disclosure of non-cash activities:
Amortization of debt discount and deferred financing cost capitalized as property, plant and equipment	$	35,~~817~~927		$	24,~~981~~564
Acquisition of property and equipment through accounts payable and accrued liabilities, including accrued capitalized interest		1541,~~703~~597			279,~~318~~010

See accompanying notes to consolidated financial statements.

-3-

HOKU CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies and Practices

(a) Description of Business

Hoku Corporation is a solar energy products and services company. The Company was incorporated in Hawaii in March 2001, as Pacific Energy Group, Inc. In July 2001, the Company changed its name to Hoku Scientific, Inc. In December 2004, the Company was reincorporated in Delaware. In March 2010, the Company changed its name from Hoku Scientific, Inc. to Hoku Corporation.

The Company originally focused its efforts on the design and development of fuel cell technologies, including its Hoku membrane electrode assemblies, or MEAs, and Hoku Membranes. In May 2006, the Company announced its plans to form an integrated photovoltaic, or PV, module business, and its plans to manufacture polysilicon, a primary material used in the manufacture of PV modules, at its polysilicon manufacturing plant in Pocatello, Idaho, or the Polysilicon Plant. In fiscal 2007, the Company reorganized its business into three business units: Hoku Materials, Hoku Solar and Hoku Fuel Cells. In February and March 2007, the Company incorporated Hoku Materials, Inc. and Hoku Solar, Inc., respectively, as wholly owned subsidiaries to operate its polysilicon and solar businesses, respectively. In September 2010, the Company elected to discontinue the operations of Hoku Fuel Cells; however, it will maintain ownership of its intellectual property, including its patents. In October 2011, the Company incorporated Tianwei Solar USA, Inc., or Tianwei Solar, as a wholly owned subsidiary to serve as the primary, direct reseller of Tianwei New Energy Holdings Co., Ltd., or Tianwei, photovoltaic modules in the Americas.

(b) Liquidity

The Company has incurred operating losses in recent years as the Company has redirected its efforts to focus on the development of its polysilicon and solar businesses. The Company's current operating plan anticipates raising cash over the next year through a combination of debt and/or equity offerings and possibly new customer contracts to enable the continued construction of the Polysilicon Plant. Tianwei, the Company’s majority shareholder has committed to provide the Company financial support for its ongoing operations, planned capital expenditures and debt service requirements until at least April 1, 2012. In addition, Tianwei has provided standby letters of credit as collateral for the Company’s third party debt with a principal amount of $314.7 million at December 31, 2011.

~~The~~Under the terms of all of the Company's ~~has~~supply ~~incurred~~agreements, ~~operating~~the ~~losses~~failure into ~~recent~~deliver ~~years~~polysilicon asby the ~~Company~~stated ~~has~~delivery ~~redirected~~dates ~~its~~will ~~efforts~~allow the customers to ~~focus~~terminate onthe supply agreements, require the ~~development~~repayments of ~~its~~the ~~polysilicon~~deposits ~~and~~under ~~solar~~the ~~businesses~~agreements, which in the aggregate amount to $139. ~~The~~8 ~~Company's~~million ~~current~~at ~~operating~~December ~~plan~~31, ~~anticipates~~2011, ~~raising~~and ~~cash~~which ~~over~~in ~~the~~turn ~~next~~could ~~year~~result ~~through~~in aan ~~combination~~event of ~~debt~~default ~~and/or~~under ~~equity~~the ~~offerings~~Company's ~~and~~existing ~~possibly~~credit ~~new~~agreements ~~customer~~with ~~contracts~~its tothird ~~enable~~party ~~the~~lenders. ~~continued~~The ~~construction~~event of default under the ~~Polysilicon~~Company's ~~Plant. Tianwei~~existing ~~New~~credit ~~Energy~~agreements ~~Holdings~~could ~~Co.,~~result ~~Ltd.,~~in orits ~~Tianwei,~~lenders accelerating repayment of the Company’'s ~~majority~~third ~~shareholder~~party ~~has~~debt, ~~committed~~which ~~to provide~~ the Company ~~financial~~does ~~support~~not ~~for~~have ~~its~~the ~~ongoing~~wherewithal ~~operations,~~to ~~planned~~repay. ~~capital~~To ~~expenditures~~the ~~and~~extent ~~debt~~that ~~service~~the ~~requirements~~third ~~until~~party atlenders ~~least~~accelerate ~~April~~repayment 1,of ~~2012. In addition~~the debt, Tianwei has provided ~~standby~~a ~~letters~~letter of ~~credit~~commitment asto ~~collateral~~the ~~for~~Company that it would not demand repayment from the Company’s ~~third~~until ~~party~~the ~~debt~~original ~~with~~due adates ~~principal~~of ~~amount~~the ofthird ~~$273~~party ~~million~~credit atagreement ~~September~~ranging ~~30,~~from ~~2011~~May 2012 through February 2017.

Under the terms of all of the Company's supply agreements, the failure to deliver polysilicon by the stated delivery dates will allow the customers to terminate the supply agreements, require the repayments of the deposits under the agreements, which in the aggregate amount to $140 million at September 30, 2011, and which in turn could result in an event of default under the Company's existing credit agreements with its third party lenders. The event of default under the Company's existing credit agreements could result in its lenders accelerating repayment of the Company's third party debt, which the Company does not have the wherewithal to repay. To the extent that the third party lenders accelerate repayment of the debt, Tianwei has provided a letter of commitment to the Company that it would not demand repayment from the Company until the original due dates of the third party credit agreement ranging from May 2012 through October 2016.

If the Company is unable to generate revenue or secure additional financing, the Company will be forced to curtail construction of the Polysilicon Plant.

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, after elimination of significant intercompany amounts and transactions, and Hoku Solar Power I LLC, or Power I, because the Company has the controlling financial interest of Power I. As of ~~September~~December 3031, 2011 and March 31, 2011, the total assets of Power I were $5.98 million and $6.0 million, respectively, and were mainly comprised of cash, accounts receivable, and property, plant and equipment. As of ~~September~~December 3031, 2011 and March 31, 2011, the total liabilities of Power I were $~~873~~862,000 and $882,000, respectively, and were mainly comprised of accounts payable and accrued liabilities. These balances are reflected in the consolidated financial statements with intercompany transactions eliminated.

(d) Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles, or U.S. GAAP, requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an on-going basis, the Company evaluates its estimates, including those related to revenue recognition, accounts receivable, the carrying amounts of property, plant and equipment and inventory, income taxes and the valuation of deferred tax assets and stock options. These estimates are based on historical facts and various other assumptions that the Company believes are reasonable.

-4-

(e) Revenue Recognition

Revenue from polysilicon and PV system installations is recognized when there is evidence of an arrangement, delivery has occurred or services have been rendered, the arrangement fee is fixed or determinable, and collectability of the arrangement fee is reasonably assured. PV system installation contracts may have several different phases with corresponding progress billings.

The Company applies the percentage-of-completion method of revenue recognition for its PV system contracts for which it can make reasonably dependable estimates of costs. Under the percentage-of-completion method, revenue and related costs are deferred and subsequently recognized based on the progress of the installation and an estimate of remaining costs to complete the installation. Estimated losses on PV system contracts are recognized in the period in which those losses become evident. For contracts entered into prior to April 1, 2010, the Company recognized revenue under the completed contract method, in which revenue and related costs are deferred and then subsequently recognized only upon completion of the contract, for all contracts for which reasonably dependable estimates of costs are not available.

The Company entered the PV system installation business in fiscal year 2008. Prior to April 1, 2010, due to the short period of time the Company was in the PV system installation business, the Company did not have the historical experience or the procedures in place to develop reasonably dependable estimates of costs and therefore utilized the completed contract method to record revenue for PV contracts. Subsequent to this startup period, the Company has developed history and reliable processes and procedures of projecting and tracking contract fulfillment costs, in order to develop reasonably dependable estimates which are required to use the percentage of completion method. In applying the percentage-of-completion method, the Company determines the percentage of contract completion on the basis of engineering, labor, subcontractor and other installation costs and excludes material and other non-installation contract costs which are not considered the primary cost determinants in gauging the progress of the PV system contract. Revenue and related costs are recognized proportionately based on the completion percentage of each project and considering the current estimate of remaining costs required to complete the project.

Revenue from the sale of electricity generated from the Company’s PV systems is based on kilowatt usage and is recognized in accordance with its power purchase agreements, or PPAs.

The Company charges the appropriate Hawaii general excise tax to its customers. The taxes collected from sales are excluded from revenue and recorded as a payable.

(f) Restricted Cash

As of ~~September~~December 3031, 2011, the Company had restricted cash of $~~758~~757,000, which primarily relates to cash held as collateral for certain standby letters of credit. All interest received on these deposits is also recorded to restricted cash.

(g) Cost of Uncompleted Contracts

Cost of uncompleted contracts represents costs incurred for services performed and/or materials used towards completing a customer contract. Based on the Company’s revenue recognition policy, the costs incurred for services and/or materials can be recognized as contract costs, and revenues are recognized based on the completion percentage of each contract after considering the costs incurred and current estimate of remaining costs to complete the installation. As of ~~September~~December 3031, 2011 and March 31, 2011, costs of uncompleted contracts were approximately $1815,~~548,~~000 and $128,000, respectively, related to PV system installation contracts.

(h) Guarantees and Indemnifications

The Company has entered into PV system installation contracts which warrant the installation against defects in workmanship, generally for a period of one to five years from the date of installation. There were no accruals for or expenses related to the warranties for any period presented.

The Company, as permitted under Delaware law and in accordance with its Bylaws, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in that capacity. The term of the indemnification period is equal to the officer’s or director’s lifetime. The Company has also entered into additional indemnification agreements with its officers and directors in connection with its initial public offering. The maximum amount of potential future indemnification is unlimited; however, the Company has obtained director and officer insurance that limits its exposure and may enable it to recover a portion of any future amounts paid. The Company believes the fair value for these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations as of ~~September~~December 3031, 2011 and March 31, 2011.

The Company has entered into customer contracts that contain indemnification provisions. In these provisions, the Company typically agrees to indemnify the customer against certain types of third-party claims. The Company would accrue for known indemnification issues when a loss is probable and could be reasonably estimated. The Company also would accrue for estimated incurred but unidentified indemnification issues based on historical activity. There were no accruals for or expenses related to indemnification issues for any period presented.

(i) Reclassification

Certain amounts in the consolidated financial statements have been reclassified to conform to current period presentation. Specifically, in the consolidated statements of cash flows for the six month period ended September 30, 2010, the line items for purchases of and proceeds from maturities of short-term investments were removed to exclude activity for cash equivalents.

-5-

(2) Fair Value of Assets and Liabilities

As of ~~September~~December 3031, 2011 and March 31, 2011, the Company held the following assets that are required to be measured at fair value on a recurring basis (in thousands):

Fair Value Measurements as of September 30, 2011

Fair Value Measurements as of December 31, 2011

Total

Level 1

Level 2

Level 3

Cash equivalents

~~553~~191

—

Total assets measured at fair value

~~553~~191

—

	Fair Value Measurements as of March 31, 2011
	Total		Level 1		Level 2		Level 3
Cash equivalents	$	1,949	$	1,949	$	—	$	—
Total assets measured at fair value	$	1,949	$	1,949	$	—	$	—

The interest rates of the Company’s credit agreements reset on a quarterly basis based on fluctuations in the LIBOR rate. Accordingly, the fair value of the notes payable approximates the carrying value as of ~~September~~December 3031, 2011 and March 31, 2011.

There were no assets or liabilities that are required to be measured at fair value on a non-recurring basis.

(3) Property, Plant and Equipment

As of ~~September~~December 3031, 2011 and March 31, 2011, property, plant and equipment consisted of the following:

	September 30, 2011			March 31, 2011
	December 31, 2011			March 31, 2011
	(in thousands)
Construction in progress – Idaho plant and equipment	$	~~557~~613,~~884~~501		$	460,516
Electrical substation		1718,~~983~~049			17,983
PV solar systems		3,260			3,260
Production equipment		~~234~~318			108
Office equipment and furniture		~~771~~783			147
Automobile		~~184~~237			165
		580,316			482,179
		636,148			482,179
Less accumulated depreciation and amortization		(~~825~~1,006	)		(698	)
Property, plant and equipment, net	$	~~579~~635,~~491~~142		$	481,481

Long-lived assets, such as property, plant, and equipment, are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for impairment, the Company first compares undiscounted cash flows expected to be generated by that asset over its life to its carrying amount. If the carrying amount of the long-lived asset is not recoverable from future undiscounted cash flows, the Company must determine the fair value of the asset. Fair value is determined through various valuation techniques including discounted cash flow models and quoted market prices for comparable assets. If the carrying value exceeds the fair value, an impairment loss is recognized.

During the quarter ended ~~September~~December 3031, 2011, the Company observed a significant decline in the market prices for solar-grade polysilicon, caused by an ~~overall~~oversupply ~~softening~~ of polysilicon relative to demand in the solar materials supply chain. The Company concluded that the decline in the price in solar-grade polysilicon represented an event that ~~indicates~~indicated that the carrying value of its polysilicon plant under construction may not be recoverable. ~~As of September 30, 2011, the carrying value of the polysilicon plant was approximately $576 million.~~ The Company ~~prepared~~commenced with an ~~undiscounted~~impairment ~~cash~~analysis ~~flow model~~ to assess the recoverability of the polysilicon plant, which required the use of various inputs and assumptions over future periods. In its analysis, the Company evaluated the following key assumptions in determining whether the carrying value of the polysilicon plant exceeded the expected future undiscounted cash flows:

·	total costs to complete construction, including capitalized interest;

·	an expected useful life of the polysilicon plant of 30 years;

·	the projected costs to replace equipment during the life of the polysilicon plant;

·	an expected weighted average cost to produce polysilicon;

·	an expectation that substantially all polysilicon will be sold either to third parties or the Company’s parent company, Tianwei; and

· the ~~weighted average sales price of polysilicon based on contractual prices and~~ estimated market prices over the estimated 30 year life of the polysilicon plant.

~~-6-~~In developing these assumptions, the Company considered the expected operating results based upon internal projections and engineering analyses. Estimated market prices of polysilicon over the estimated 30 year life of the polysilicon plant were based on the assumption that the market price at December 31, 2011 was approximately $30 per kilogram. It was also assumed that the long term market price for polysilicon would experience a recovery beyond the rate of inflation due to a rebalancing of supply and demand that would result in a stabilization of prices.

InAs ~~developing~~of ~~these~~December ~~assumptions~~31, ~~the~~2011, ~~Company~~based ~~considered~~on the ~~expected~~assumptions ~~operating~~discussed ~~results based upon internal projections and engineering analyses. As of September 30~~above, ~~2011,~~ the sum of the expected future undiscounted cash flows from the polysilicon plant exceeded its carrying amount ~~by a narrow margin~~; therefore the Company concluded the carrying amount of the plant is recoverable.

~~For~~In ~~the~~addition ~~undiscounted~~to ~~cash~~further ~~flow~~declines ~~model~~in ~~prepared on September 30, 2011,~~ the ~~Company~~market ~~estimated~~prices ~~the weighted average sales price~~ of polysilicon ~~based on contractual prices~~ and/or ~~average market~~a ~~prices~~lack of ~~approximately~~recovery ~~$40 per kilogram over the estimated 30 year life~~ of the ~~polysilicon plant. The~~ market prices ~~for~~of ~~solar-grade~~ polysilicon ~~have~~at ~~declined~~a ~~significantly~~rate ~~since~~greater ~~September~~than ~~30, 2011, and~~ the ~~Company~~rate ~~estimates~~of ~~the~~inflation, ~~average~~certain ~~market~~other ~~price~~events isor ~~approximately~~changes ~~$34 per kilogram~~ in ~~November~~circumstances ~~2011. The Company has concluded that this further decline~~ in the ~~price~~future ~~of solar-grade polysilicon represented an event that~~ may also indicate that the carrying amount of the polysilicon plant may not be recoverable. ~~The~~ ~~Company~~Such isevents inor ~~the~~circumstances ~~process~~include, ofbut ~~determining~~are ~~the~~not ~~effect~~limited ofto, ~~this~~a ~~recent~~change ~~further decline~~ in ~~the~~expected ~~market~~demand ~~price~~ for ~~solar-grade~~ polysilicon, ~~and~~an ~~believes~~increase itin ~~could~~construction ~~result~~costs, a decrease in the ~~carrying~~expected ~~value~~life of the polysilicon plant, ~~exceeding~~an ~~the~~increase ~~estimated future undiscounted cash flows. The Company is~~ in ~~the~~projected ~~process~~costs ofto ~~updating~~replace ~~the undiscounted cash flow model that was prepared as of September 30~~equipment, ~~2011,~~an ~~for~~increase ~~changes~~ in ~~assumptions since September 30, 2011. If~~ the ~~model indicates that the carrying amount exceeds the~~ expected ~~undiscounted~~production ~~cash flows~~cost, ~~the Company will be required to determine the fair value of the polysilicon plant using valuation techniques such as discounted cash flow models~~ and/or ~~quoted~~a ~~market~~decrease ~~prices for comparable assets. If the results of the determination of fair value indicate that the carrying amount of the polysilicon plant exceeds the fair value it could result~~ in ~~a material impairment loss during~~ the ~~fiscal~~production ~~third quarter~~capacity.

In ~~addition~~fiscal ~~to declines in the market prices of polysilicon~~2011, ~~certain other events or changes in circumstances in~~ the ~~future~~Company ~~may~~reduced ~~also indicate that~~ the ~~carrying~~cost ~~amount~~ of the ~~polysilicon~~PV ~~plant~~systems ~~may~~owned ~~not~~by beHoku ~~recoverable.~~Solar ~~Such~~Power ~~events~~I orby ~~circumstances~~$2.3 ~~include,~~million ~~but~~as ~~are not limited to,~~ a ~~change~~result inof ~~expected~~federal ~~demand~~grants ~~for~~received ~~polysilicon,~~under anSection ~~increase~~1603 ~~in construction costs, a decrease in the expected life~~ of the ~~polysilicon~~American ~~plant,~~Recovery anand ~~increase~~Reinvestment inAct ~~projected~~of ~~costs to replace equipment~~2009, anwhich ~~increase~~provides incash ~~the~~incentives ~~expected~~for ~~production~~wind ~~cost,~~ and~~/or~~ asolar ~~decrease~~project ~~in the production capacity~~investments.

During the ~~six~~nine ~~months~~month period ended ~~September~~December 3031, ~~2010~~2011, the Company ~~reduced~~capitalized ~~the~~interest ~~cost~~during construction of ~~the~~$21.9 PVmillion, ~~systems~~comprised ~~owned~~of byinterest ~~Hoku~~charges ~~Solar~~of ~~Power~~$16.0 Imillion byand amortization of discount and deferred financing costs of $25.39 million. During asthe anine ~~result~~month ofperiod ~~federal~~ended ~~grants~~December ~~received~~31, ~~under~~2010, ~~Section~~the ~~1603~~Company capitalized interest during construction of ~~the~~$8.2 ~~American~~million, ~~Recovery~~comprised ~~and~~of ~~Reinvestment~~interest ~~Act~~charges of ~~2009~~$3.4 million, ~~which~~amortization ~~provides~~of ~~cash~~discount ~~incentives~~and ~~for~~deferred ~~wind~~financing costs of $4.6 million, and ~~solar~~stock ~~project~~based ~~investments~~compensation of $151,000.

During the six month period ended September 30, 2011, the Company capitalized interest during construction of $13.4 million, comprised of interest charges of $9.6 million and amortization of discount and deferred financing costs of $3.8 million. During the six month period ended September 30, 2010, the Company capitalized interest during construction of $5.7 million, comprised of interest charges of $2.0 million, amortization of discount and deferred financing costs of $3.6 million, and stock based compensation of $84,000.

(4) Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities were comprised of the following:

	September 30, 2011		March 31, 2011
	December 31, 2011		March 31, 2011
	(in thousands)
Accounts payable	$	2856,~~192~~320	$	13,720
Accrued liabilities		1820,~~816~~270		13,429
Total accounts payable and accrued liabilities	$	4776,~~008~~590	$	27,149

The following table summarizes the composition of accounts payable and accrued liabilities between capital and operating expenditures:

	September 30, 2011		March 31, 2011
	December 31, 2011		March 31, 2011
	(in thousands)
Capital expenditures	$	4167,~~775~~669	$	26,072
Operating expenditures		58,~~233~~921		1,077
Total accounts payable and accrued liabilities	$	4776,~~008~~590	$	27,149

The capital expenditures pertain primarily to the construction of the Polysilicon Plant and equipment additions related to the Polysilicon Plant.

(5) Customer Deposits

The Company has entered into various supply agreements with customers for the sale and delivery of polysilicon over specified periods of time. Under the supply agreements, customers are generally required to pay cash deposits to the Company as a prepayment for future product deliveries. Generally, these payments are for deliveries of polysilicon, which are expected to occur subsequent to the initial year of the agreements. These prepayments were used by the Company to finance the construction of the Polysilicon Plant. Accordingly, the receipts of these prepayments have been reflected in the financing activities section of the statements of cash flows. Upon the sale of product under the long-term supply agreements, the Company will reflect the application of the deposit in exchange for the product as a cash inflow from operations with a corresponding cash outflow in financing activities.

~~The~~As ~~Company~~of ~~has~~December ~~entered~~31, ~~into~~2011 ~~various~~and ~~supply~~March ~~agreements~~31, ~~with~~2011, ~~customers for~~ the ~~sale~~Company ~~and~~had ~~delivery~~$139.8 ofmillion ~~polysilicon~~and ~~over~~$140.2 ~~specified~~million, ~~periods~~respectively, ofrelated ~~time. Under~~to ~~the~~prepayments ~~supply~~received ~~agreements,~~under ~~customers~~its ~~are~~various ~~generally~~polysilicon ~~required~~supply toagreements. Through ~~pay~~December ~~cash~~31, ~~deposits~~2011, to the Company asrefunded a$440,000 ~~prepayment~~of ~~for~~customer ~~future~~deposits ~~product~~in ~~deliveries. Generally,~~accordance ~~these~~with ~~payments~~the ~~are~~amended ~~for~~polysilicon ~~deliveries~~supply ofagreements. In ~~polysilicon~~December 2009, ~~which~~an ~~are~~investment ~~expected~~transaction towith ~~occur~~Tianwei ~~subsequent~~was tocompleted and the ~~initial~~existing ~~year~~polysilicon ofsupply ~~the~~ agreements~~. These~~ ~~prepayments~~ were ~~used~~amended bysuch ~~the~~that ~~Company~~$50.0 tomillion ~~finance~~of ~~the~~an ~~construction~~aggregate of ~~the Polysilicon Plant~~$79. ~~Accordingly,~~0 ~~the~~million ~~receipts~~in ofsecured ~~these~~ prepayments ~~have~~previously ~~been~~paid ~~reflected~~by inTianwei to the ~~financing~~Company ~~activities~~was ~~section~~converted into shares of the ~~statements~~Company’s ofcommon ~~cash flows~~stock. ~~Upon~~The ~~the~~prepayments ~~sale~~which ofare ~~product~~expected ~~under~~to ~~the~~be ~~long-term~~applied ~~supply~~to ~~agreements,~~deliveries ~~the~~one ~~Company~~year ~~will~~subsequent ~~reflect~~to the ~~application~~balance ofsheet ~~the~~date ~~deposit~~have inbeen ~~exchange~~reflected ~~for~~in the ~~product~~consolidated asbalance asheets ~~cash~~as ~~inflow~~long-term ~~from~~customer ~~operations with a corresponding cash outflow in financing activities~~deposits.

AsUnder ofthe ~~September~~terms ~~30,~~of ~~2011 and March 30, 2011,~~ the ~~Company had $140.0 million and $140.2 million, respectively, related to prepayments received under its~~ various long-term polysilicon supply agreements~~. In~~ ~~December 2009, the investment transaction~~ with ~~Tianwei~~its ~~was~~customers, ~~completed and~~ the ~~existing~~Company ~~polysilicon~~is ~~supply~~generally ~~agreements~~required ~~were~~to ~~amended~~refund ~~such~~these ~~that~~prepayments, ~~$50.0 million of an aggregate of $79.0 million~~ in ~~secured~~each ~~prepayments~~case, ~~previously~~if ~~paid~~the bycustomer ~~Tianwei~~terminates to the ~~Company~~respective ~~was~~supply ~~converted into~~agreement ~~shares~~under ofcertain ~~the~~circumstances, ~~Company’s~~which ~~common~~generally ~~stock. The~~include, ~~prepayments~~but ~~which~~ are ~~expected~~not limited to, bebankruptcy, ~~applied~~failure to ~~deliveries~~commence ~~one~~shipments ~~year~~of ~~subsequent~~polysilicon toby ~~the~~specified ~~balance~~dates, ~~sheet~~repeated ~~date~~failure ~~have~~to ~~been reflected~~deliver ina ~~the~~specified ~~consolidated~~quality ~~balance~~of ~~sheets~~product, asand/or ~~long-term~~failure ~~customer~~to ~~deposit~~meet other milestones.

~~-7-~~The Company did not commence delivery of polysilicon to Shanghai Alex New Energy Co., Ltd. (Alex) or Hanwha SolarOne (SolarOne) in accordance with its agreements, which provided these customers with the right to terminate the agreements and require repayment of a $20.0 million, $49.0 million, and $2.0 million prepayment, respectively. The Company has granted security interests to each of its customers in all of the Company’s tangible and intangible assets related to its polysilicon business to serve as collateral for the Company’s obligation to repay the remaining amount of each of its customer’s respective prepayments made as of the date of any termination that has not been applied to the purchase price of polysilicon previously delivered under the respective contract. Such security interests are subordinated to bank financings.

~~Under~~The ~~the~~following ~~terms of the various long-term polysilicon supply agreements with its customers, the Company~~ is ~~generally~~a ~~required~~summary toof ~~refund these~~ prepayments, inreceived ~~each~~as ~~case, if the customer terminates the respective supply agreement under certain circumstances, which generally include, but are not limited to, bankruptcy, failure to commence shipments~~ of ~~polysilicon~~December ~~by specified dates~~31, ~~repeated~~2011 ~~failure to deliver a specified quality of product,~~ and~~/or~~ ~~failure~~March ~~to meet other milestones. Through September 30~~31, 2011~~, the Company refunded $220,000 of customer deposits in accordance with the amended polysilicon supply agreements.~~:

The Company did not commence delivery of polysilicon to Alex, SolarOne or Suntech in accordance with its agreements, which provided these customers with the right to terminate the agreements and require repayment of a $20.0 million, $49 million, and $2 million prepayment, respectively. The Company has granted security interests to each of its customers in all of the Company’s tangible and intangible assets related to its polysilicon business to serve as collateral for the Company’s obligation to repay the remaining amount of each of its customer’s respective prepayments made as of the date of any termination that has not been applied to the purchase price of polysilicon previously delivered under the respective contract. Such security interests are subordinated to bank financings.

Customer	December 31, 2011		March 31, 2011
	(in thousands)
Hanwha SolarOne, formerly Solarfun Power Hong Kong Ltd.	$	49,000		$	49,000
Tianwei New Energy (Chengdu) Wafer Co., Ltd.		29,000			29,000
Wealthy Rise International, Ltd. (Solargiga)		20,200			20,200
Jinko Solar Co., Ltd.		19,560			20,000
Shanghai Alex New Energy Co., Ltd.		20,000			20,000
Wuxi Suntech Power Co., Ltd.		2,000			2,000
	$	139,760		$	140,200

~~The~~Based ~~following~~on isexisting aterms ~~summary~~of the various long-term polysilicon supply agreements, the $139.8 million of customer prepayments ~~received~~would asbe ofcredited ~~September~~against ~~30,~~future ~~2011~~product ~~and~~deliveries ~~March~~in the years ending December 31, ~~2011:~~2012 through 2016 and thereafter as indicated in the following table.

Customer	September 30, 2011		March 31, 2011
	Application of
	(in thousands)
	Customer Deposits
Hanwha SolarOne, formerly Solarfun Power Hong Kong Ltd.	$	49,000		$	49,000
Year ending December 31,	(in thousands)
Tianwei New Energy (Chengdu) Wafer Co., Ltd.		29,000			29,000
2012	$	95,227
Wealthy Rise International, Ltd. (Solargiga)		20,200			20,200
2013		7,254
Jinko Solar Co., Ltd.		19,780			20,000
2014		10,021
Shanghai Alex New Energy Co., Ltd.		20,000			20,000
2015		5,233
Wuxi Suntech Power Co., Ltd.,		2,000			2,000
2016		3,100
	$	139,980		$	140,200
Thereafter		18,925
	$	139,760

Based on existing terms of the various long-term polysilicon supply agreements, the $140 million of customer prepayments would be credited against future product deliveries in the years ending September 30, 2012 through 2016 and thereafter as indicated in the following table.

	Application of
	Customer Deposits
Year ending September 30,	(in thousands)
2012	$	81,222
2013		11,950
2014		11,700
2015		5,300
2016		5,300
Thereafter		24,508
	$	139,980

(6) Notes Payable and Warrants

(a) Notes Payable

China Merchants Bank – New York Branch

In May 2010, the Company entered into a $20.0 million credit agreement with the New York branch of China Merchants Bank Co., Ltd. The loan under this credit agreement is secured by a standby letter of credit drawn by Tianwei in Chengdu, China and issued to China Merchants Bank, as collateral. The loan bears interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2% (23.8101% at ~~September~~December 3031, 2011) or, if the Company elects, any portion of the loan that is not less than $1.0 million may bear interest at an annual rate equal to the rate of interest announced by the lender as its “prime rate.” The principal amount and any unpaid interest thereon must be paid in full by May 2012. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit. As of ~~September~~December 3031, 2011, the entire $20.0 million was outstanding.

In August 2010, the Company entered into two credit agreements with the New York branch of China Merchants Bank Co., Ltd. to borrow $10.0 million and $5.0 million. The loans under these credit agreements are secured by standby letters of credit drawn by Tianwei in Chengdu, China and issued to China Merchants Bank, as collateral. The loans bear interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2% (between 2.7996% and 3.04% for the $10.0 million credit agreement and 23.8101% for the 5.0 million credit agreement at ~~September~~December 3031, 2011) or, if the Company elects, any portion of the loans that is not less than $1.0 million may bear interest at an annual rate equal to the rate of interest announced by the lender as its “prime rate.” The principal amount and any unpaid interest thereon must be paid in full by August 2012. The Company also entered into reimbursement agreements with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letters of credit. As of ~~September~~December 3031, 2011, the entire $15.0 million was outstanding.

~~-8-~~In September 2010, the Company entered into a $10.0 million credit agreement with the New York branch of China Merchants Bank Co., Ltd. The loan under this credit agreement is secured by a standby letter of credit drawn by Tianwei in Chengdu, China and issued to China Merchants Bank, as collateral. The loan bears interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2% (3.06% at December 31, 2011) or, if the Company elects, any portion of the loan that is not less than $1.0 million may bear interest at an annual rate equal to the rate of interest announced by the lender as its “prime rate.” The principal amount and any unpaid interest thereon must be paid in full by September 2013. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit. As of December 31, 2011, the entire $10.0 million was outstanding.

In ~~September~~October 2010, the Company entered into a $1013.0 million credit agreement with the New York branch of China Merchants Bank Co., Ltd. The ~~loan~~Company received the entire $13.0 million under this credit agreement, which is secured by a standby letter of credit drawn by Tianwei in Chengdu, China and issued to China Merchants Bank, as collateral. The loan bears interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2% (2.8589% at ~~September~~December 3031, 2011) or, if the Company elects, any portion of the loan that is not less than $1.0 million may bear interest at an annual rate equal to the rate of interest announced by the lender as its “prime rate.” The principal amount and any unpaid interest thereon must be paid in full by ~~September~~October 2013. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit. As of ~~September~~December 3031, 2011, the entire $1013.0 million was outstanding.

In ~~October~~December 2010, the Company entered into a $1310.0 million credit agreement with the New York branch of China Merchants Bank Co., Ltd. The Company received the entire $1310.0 million under this credit agreement, which is secured by acash ~~standby~~collateral ~~letter~~ of ~~credit~~110% ~~drawn~~of bythe ~~Tianwei~~principal inamount ~~Chengdu,~~of ~~China~~the ~~and~~credit ~~issued~~agreement toin ~~China~~Renminbi ~~Merchants~~provided ~~Bank,~~by ~~as collateral~~Tianwei. The loan bears interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2% (23.7506% at ~~September~~December 3031, 2011) or, if the Company elects, any portion of the loan that is not less than $1.0 million may bear interest at an annual rate equal to the rate of interest announced by the lender as its “prime rate.” The principal amount and any unpaid interest thereon must be paid in full by ~~October~~December 2013. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with ~~the~~providing ~~negotiation, execution and performance of~~ the ~~standby~~cash ~~letter of credit~~collateral. As of ~~September~~December 3031, 2011, the entire $1310.0 million was outstanding.

In ~~December~~February ~~2010~~2012, the Company entered into a $10.0 million credit agreement with the New York branch of China Merchants Bank Co., Ltd. The ~~Company~~loan ~~received the entire $10.0 million~~ under this credit agreement, ~~which~~ is secured by ~~cash~~a ~~collateral~~standby letter of ~~110%~~credit ofdrawn by Tianwei and issued by the ~~principal~~Chengdu ~~amount~~branch of ~~the~~China ~~credit~~Merchants ~~agreement~~Bank Co., Ltd. in ~~Renminbi~~favor ~~provided~~of bythe ~~Tianwei~~New York branch. The loan bears interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2~~% (2~~.850%. In ~~at September 30~~addition, ~~2011) or, if~~ the Company ~~elects,~~will ~~any~~pay ~~portion of the loan that is not less than $1.0 million may bear interest at~~ an annual ~~rate~~facility ~~equal~~fee ~~to the rate~~ of ~~interest~~2.5% ~~announced~~on by the ~~lender~~outstanding asbalance ~~its~~of ~~“prime rate~~the loan.” The principal amount and any unpaid interest thereon must be paid in full by ~~December~~February ~~2013~~2017. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for (a) any reimbursement obligations of Tianwei arising from any draws under the standby letter of credit and (b) all interest, fees and expenses incurred by Tianwei in connection with ~~providing~~the negotiation, execution and performance of the ~~cash~~standby ~~collateral~~letter of credit. AsIn addition, the Company granted to Tianwei a security interest in all of ~~September~~its ~~30,~~fixtures ~~2011,~~and ~~the~~personal ~~entire~~property ~~$10.0~~and ~~million~~all ~~was~~proceeds ~~outstanding~~and products from such fixtures and personal property.

China Construction Bank – New York Branch

In June 2010, the Company entered into a $28.3 million credit agreement with the New York branch of China Construction Bank. The loan under this credit agreement is secured by a standby letter of credit drawn by Tianwei and issued by the Sichuan branch of China Construction Bank in favor of the New York branch. The loan will bear interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 1.875% (between 2.1227% and 2.1734% at ~~September~~December 3031, 2011) or, if the Company elects, and if the bank agrees, any portion of the loan that is not less than $1.0 million may bear interest at an annual rate equal to the highest “Prime Rate” as published in the “Money Rates” column of the Eastern Edition of the Wall Street Journal from time to time. The principal amount and any unpaid interest thereon must be paid in full by June 2012. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit. As of ~~September~~December 3031, 2011, the entire $28.3 million was outstanding.

China Construction Bank – Singapore Branch

In October 2010, the Company entered into a $29.0 million credit agreement with the Singapore branch of China Construction Bank. The Company received the entire $29.0 million under this credit agreement which is secured by standby letters of credit drawn by Tianwei in Chengdu, China and issued to China Construction Bank Corporation, Sichuan Branch in favor of China Construction Bank – Singapore Branch. The loan will bear interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2% (between 2.2541% and 2.2744% at ~~September~~December 3031, 2011). The principal amount and any unpaid interest thereon must be paid in full by September 2013. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit. As of ~~September~~December 3031, 2011, the entire $29.0 million was outstanding.

-9-

Industrial and Commercial Bank of China – New York Branch

In December 2010, the Company entered into a $15.5 million credit agreement with the New York Branch of Industrial and Commercial Bank of China, Ltd. The loans are secured by a standby letter of credit issued by the Sichuan Branch of Industrial and Commercial Bank of China and procured by Tianwei in favor of the lender and which has an aggregate drawable amount of $17.0 million. The loans bear interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2.6% (23.9617% at ~~September~~December 3031, 2011). The principal amount and any unpaid interest thereon must be paid in full by December 2013. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit. As of ~~September~~December 3031, 2011, the entire $15.5 million was outstanding.

In January 2011, the Company entered into a $19.5 million credit agreement with the New York Branch of Industrial and Commercial Bank of China, Ltd. The loans are secured by a standby letter of credit issued by the Sichuan Branch of Industrial and Commercial Bank of China and procured by Tianwei in favor of the lender and which has an aggregate drawable amount of $22.0 million. The loans bear interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2.6% (2.8599% at ~~September~~December 3031, 2011). The principal amount and any unpaid interest thereon must be paid in full by January 2014. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit. As of ~~September~~December 3031, 2011, the entire $19.5 million was outstanding.

In April 2011, the Company entered into a $15.0 million credit agreement with the New York Branch of Industrial and Commercial Bank of China, Ltd., ~~New York Branch~~ (the “Lender”). The loans are secured by a standby letter of credit issued by the Sichuan Branch of Industrial and Commercial Bank of China and procured by Tianwei in favor of the lender and which has an aggregate drawable amount of $16.5 million. The loan bears interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2.7% (23.9508% at ~~September~~December 3031, 2011). The principal amount and any unpaid interest of the loan must be paid in full by April 6, 2014 or the tenth business day prior to the date on which the letter of credit expires or otherwise terminates, whichever is earlier. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit. As of ~~September~~December 3031, 2011, the entire $15.0 million was outstanding.

In June 2011, the Company entered into a $24.7 million credit agreement with the New York Branch of Industrial and Commercial Bank of China, Ltd., ~~New York Branch~~ (the “Lender”). The loan is secured by a standby letter of credit issued by the Sichuan Branch of Industrial and Commercial Bank of China and procured by Tianwei in favor of the lender and which has an aggregate drawable amount of not less than $30.1 million. The loan bears interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 3.8% (4.1333% at ~~September~~December 3031, 2011). The principal amount and any unpaid interest of the loan must be paid in full by June 2, 2016 or the tenth business day prior to the date on which the letter of credit expires or otherwise terminates, whichever is earlier. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit. As of ~~September~~December 3031, 2011, the entire $24.7 million was outstanding.

In September 2011, the Company entered into a $10.0 million credit agreement with the New York Branch of Industrial and Commercial Bank of China ~~LTD~~Ltd.~~, New York Branch.~~ The loans are secured by a standby letter of credit issued by Sichuan Branch of Industrial and Commercial Bank of China and procured by Tianwei in favor of the Lender and which has an aggregate drawable amount of not less than $11 million. The loans bear interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2.5% (23.8404% at ~~September~~December 3031, 2011). The principal amount and any unpaid interest of the loan must be paid in full by September 1, 2014 or the tenth business day prior to the date on which the standby letter of credit expires or otherwise terminates, whichever is earlier. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit. As of ~~September~~December 3031, 2011, the entire $10.0 million was outstanding.

In October 2011, the Company entered into a $13.6 million credit agreement with the New York Branch of Industrial and Commercial Bank of China Ltd. The loan is secured by a standby letter of credit issued by Sichuan Branch of Industrial and Commercial Bank of China and procured by Tianwei in favor of the Lender and which has an aggregate drawable amount of not less than $15 million. The loans bear interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 3.0% (3.38% at December 31, 2011). The principal amount and any unpaid interest of the loan must be paid in full by October 2014 or the tenth business day prior to the date on which the standby letter of credit expires or otherwise terminates, whichever is earlier. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit. As of December 31, 2011, the entire $13.6 million was outstanding.

In November 2011, the Company entered into a $5.8 million credit agreement with the New York Branch of Industrial and Commercial Bank of China Ltd. The loan is secured by a standby letter of credit issued by Sichuan Branch of Industrial and Commercial Bank of China and procured by Tianwei in favor of the Lender and which has an aggregate drawable amount of not less than $6 million. The loans bear interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 3.75% (4.27% at December 31, 2011). The principal amount and any unpaid interest of the loan must be paid in full by November 2014 or the tenth business day prior to the date on which the standby letter of credit expires or otherwise terminates, whichever is earlier. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit. As of December 31, 2011, the entire $5.8 million was outstanding.

In January 2012, the Company entered into a $10.0 million credit agreement with the New York Branch of Industrial and Commercial Bank of China Ltd. The loan is secured by a standby letter of credit issued by Sichuan Branch of Industrial and Commercial Bank of China and procured by Tianwei in favor of the Lender and which has an aggregate drawable amount of not less than $12.4 million. The loans bear interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 4.00%. The principal amount and any unpaid interest of the loan must be paid in full by January 2017 or the tenth business day prior to the date on which the standby letter of credit expires or otherwise terminates, whichever is earlier. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letter of credit.

CITIC Bank International Limited – New York Branch

In February 2011, the Company entered into a $19.0 million credit agreement with the New York Branch of CITIC Bank International Limited. The Company can receive up to $19.0 million of the loan which is secured by standby letters of credit issued by China Branch of CITIC Bank International Limited and procured by Tianwei in favor of CITIC Bank International Limited. The loans will bear interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2.5% (2.81% at ~~September~~December 3031, 2011). The principal amount and any unpaid interest thereon must be paid in full by January 2013. The Company also entered into a reimbursement agreement with Tianwei pursuant to which the Company agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letters of credit. The Company borrowed $8.9 million, $7.0 million and $2.0 million in May, March and February 2011, respectively. As of ~~September~~December 3031, 2011, $18.12 million was outstanding.

-10-

Bank of China – New York Branch

In February 2011, the Company and its subsidiary Hoku Materials entered into a credit agreement with the New York Branch of Bank of China that provides for one or more revolving loans in an aggregate principal amount not to exceed the lesser of (i) $30.0 million or (ii) the aggregate amount of the letters of credit procured by Tianwei. As of March 31, 2011, Tianwei has procured a letter of credit issued by the Sichuan Branch of Bank of China in favor of the lender. The loans bear interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2.4% (between 2.6577% and 2.7393% at ~~September~~December 3031, 2011). The principal amount of the loans and any unpaid interest must be paid in full by the earlier of (i) February 25, 2014 or (ii) the 15th business day prior to the date on which the letters of credit expires or terminates. The Company may prepay the loans, in whole or in part, at any time without penalty. The Company also entered into a reimbursement agreement with Tianwei pursuant to which it agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letters of credit. As of ~~September~~December 3031, 2011, the entire $30.0 million was outstanding.

In August 2011, the Company and its subsidiary Hoku Materials, Inc. entered into a Credit Agreement with the New York Branch of Bank of China that provides for one or more revolving loans in an aggregate principal amount not to exceed the lesser of (i) $15.0 million or (ii) the aggregate amount of the letters of credit procured by Tianwei. As of August 22, 2011, Tianwei has procured a standby letter of credit issued by the Sichuan Branch of Bank of China in favor of the. The Loans bear interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 2.5% (between 2.7997% and 23.8202% at ~~September~~ 30December 31, 2011). The principal amount of the Loans and any unpaid interest thereon must be paid in full by (i) August 16, 2016 or the (ii) 15th business day prior to the date on which the letters of credit expires or terminates. The Company may prepay the Loans, in whole or in part, at any time without penalty. The Company also entered into a reimbursement agreement with Tianwei pursuant to which it agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letters of credit. As of ~~September~~December 3031, 2011, the entire $15.0 million was outstanding.

In October 2011, the Company and its subsidiary Hoku Materials, Inc. entered into a Credit Agreement with the New York Branch of Bank of China that provides for one or more revolving loans in an aggregate principal amount not to exceed the lesser of (i) $22.1 million or (ii) the aggregate amount of the letters of credit procured by Tianwei. As of August 22, 2011, Tianwei has procured a standby letter of credit issued by the Sichuan Branch of Bank of China in favor of the lender. The Loans bear interest at a per annum rate equal to the LIBOR Rate for the applicable interest period plus 3.0% (between 3.39% and 3.40% at December 31, 2011). The principal amount of the Loans and any unpaid interest thereon must be paid in full by (i) October 12, 2016 or the (ii) 15th business day prior to the date on which the letters of credit expires or terminates. The Company may prepay the Loans, in whole or in part, at any time without penalty. The Company also entered into a reimbursement agreement with Tianwei pursuant to which it agreed to reimburse Tianwei for all interest, fees and expenses incurred by Tianwei in connection with the negotiation, execution and performance of the standby letters of credit. As of December 31, 2011, the entire $22.1 million was outstanding.

(b) Related Party Notes Payable, net

Tianwei New Energy Holding Co. Ltd.

As of ~~September~~December 3031, 2011, the Company has $50.0 million in notes payable to Tianwei. The Company received the first tranche of $20.0 million in January 2010 and received the second tranche of $30.0 million in March 2010. The notes bear an annual interest rate of 5.94% and have a term of two years. Pursuant to the loan agreement, the Company has pledged a security interest in all of its assets to Tianwei. The $20.0 million and $30.0 million in loan proceeds become due in January and March 2012, respectively, with no penalty for earlier prepayment of principal, and interest payments are due quarterly. ~~Tianwei~~In ~~has~~January 2012, Tianwei agreed to extend the due dates of ~~these~~the ~~loans~~$20.0 million and ~~will~~$30.0 ~~not~~million ~~require~~loans ~~the~~by ~~repayment~~one ofyear ~~these~~to ~~loans~~January ~~until~~and ~~subsequent~~March to2013, ~~April 2012~~respectively.

As part of the financing agreement, the Company also granted to Tianwei a warrant to purchase an additional 10 million shares of the Company’s common stock. The terms of the warrant include: (i) a per share exercise price equal to $2.52; (ii) an exercise period of seven years; and (iii) provision for a cashless, net-issue exercise.

The accounting of the warrant and debt was based on their relative fair values and calculated to be $12.9 million and $37.1 million, respectively, in proportion to the $50.0 million in loan proceeds. The fair value of the warrant was calculated using the Black-Scholes option pricing model, and the fair value of the debt was based on the present value of cash flows, discounted at a 7% interest rate.

The Company recorded approximately $1.2 million in transaction costs and $12.9 million of related fair value of the warrants as deferred costs of debt financing totaling $14.1 million. Accordingly, $12.9 million was reclassified as a discount on the debt and $1.2 million was deferred as cost of debt financing. The deferred cost of debt financing and discount on the debt will be amortized over the two year term of the $50.0 million in notes payable, using the effective interest method, and capitalized as construction in progress related to the polysilicon production facility. As of ~~September~~December 3031, 2011 and March 31, 2011, the carrying value of the $50.0 million in notes payable was $4749.10 million and $43.6 million, respectively, net of the respective unamortized discounts of $21.90 million and $6.4 million.

Based on existing terms of the various credit agreements, the Company’s notes payable balances would be required to be repaid in the years ending ~~September~~December 3031, 2012 through 2016 as indicated in the following table.

Year ending September 30,	(in thousands)
Year ending December 31,	(in thousands)
2012	$	~~113~~63,300
2013		70145,~~050~~678
2014		~~100~~93,~~000~~900
2015		—
2016		3961,~~700~~810
		323,050
		364,688
Unamortized discount		(21,~~936~~042	)
	$	~~320~~363,~~114~~646

Under the terms of all of the Company's supply agreements, the failure to deliver polysilicon by the stated delivery dates will allow the customers to terminate the supply agreements, require the repayments of the deposits under the agreements, which in turn could result in an event of default under the Company's existing credit agreements with its third-~~11-~~party lenders. If the Company is determined to be in default, its lenders will have the right to declare the outstanding principal and unpaid interest thereon due and payable. The third party credit agreements are all secured by standby letters of credit drawn by the Company's majority shareholder, Tianwei, as collateral. To the extent that the third party lenders accelerate repayment of the debt, Tianwei has provided a letter of commitment to the Company that it would not demand repayment from the Company until the original due dates of the third party credit agreements ranging from May 2012 to February 2017.

Under the terms of all of the Company's supply agreements, the failure to deliver polysilicon by the stated delivery dates will allow the customers to terminate the supply agreements, require the repayments of the deposits under the agreements, which in turn could result in an event of default under the Company's existing credit agreements with its third-party lenders. If the Company is determined to be in default, its lenders will have the right to declare the outstanding principal and unpaid interest thereon due and payable. The third party credit agreements are all secured by standby letters of credit drawn by the Company's majority shareholder, Tianwei, as collateral. To the extent that the third party lenders accelerate repayment of the debt, Tianwei has provided a letter of commitment to the Company that it would not demand repayment from the Company until the original due dates of the third party credit agreements ranging from May 2012 to August 2016.

(7) Total Equity

Changes in total equity for the ~~six~~nine months ended ~~September~~December 3031, 2011 were as follows (in thousands):

	~~Hoku Corporation Shareholders’ Equity~~	Hoku Corporation Shareholders’ Equity
	~~Common~~	Common					~~Additional Paid-In~~		~~Accumulated~~Additional Paid-In			~~Noncontrolling~~	Accumulated		~~Total~~		Noncontrolling	~~Comprehensive~~			Total			Comprehensive
	~~Stock~~	Stock		~~Warrant~~		Warrant	~~Capital~~		~~Deficit~~Capital			~~Interest~~	Deficit		~~Equity~~		Interest	~~Loss~~			Equity			Loss
Balance as of March 31, 2011	$	55$	55	$	~~12,884~~	$	$12,884	~~115,500~~	$	~~(32~~115,~~438~~500	)	$	~~816~~$	(32,438	$)	~~96,817~~	$	816	—		$	96,817			—
Distributions to noncontrolling interest													~~(145~~	)		~~(145~~	)	(218	)			(218	)
Net income (loss)										~~(18,117~~	)		68	(28,704	)	~~(18,049~~	)	82	~~(18,049~~	)		(28,622	)		(28,622	)
Stock-based compensation								~~303~~		477						~~303~~						477
Issuance of warrant to Solargiga					~~1,385~~		1,385									~~1,385~~						1,385
Balance as of September 30, 2011	$	55		$	14,269		$	115,803	$	(50,555	)	$	739		$	80,311		$	(18,049	)
Balance as of December 31, 2011		$	55			$	14,269		$	115,977			$	(61,142	)		$	680			$	69,839		$	(28,622	)

In December 2009, as part of the financing agreement with Tianwei, the Company granted to Tianwei a warrant to purchase 10 million shares of the Company’s common stock. The terms of the warrant include: (i) a per share exercise price equal to $2.52; (ii) an exercise period of seven years; and (iii) provision for a cashless, net-issue exercise. The accounting of the warrant was based on the relative fair value of the shares issuable upon exercise of the warrant and calculated to be $12.9 million. The fair value of the warrant was calculated using the Black-Scholes option pricing model.

In June 2011, as part of the amended supply agreement with Solargiga, the Company granted to Solargiga a warrant to purchase 1,196,581 shares of the Company’s common stock. The terms of the warrant include: (i) a per share exercise price equal to $2.75; (ii) a five year term; and (iii) immediately exercisable. The accounting of the warrant was based on the fair value of the warrant at the date of grant and was estimated to be $1.4 million, using the Black-Scholes option pricing model. The issuance of the warrant is reflected in the Company’s statement of operations for the ~~six~~nine month period ended ~~September~~December 3031, 2011 as a non-cash operating expense.

(8) Income Taxes

Income taxes are accounted for under the asset and liability method, which establishes financial accounting and reporting standards for income taxes. The Company recognizes federal and state current tax liabilities based on its estimate of taxes payable to or refundable by each tax jurisdiction in the current fiscal year.

~~Income~~Deferred ~~taxes~~tax assets and liabilities are ~~accounted~~established for ~~under~~the temporary differences between the ~~asset~~financial reporting bases and ~~liability~~the ~~method,~~tax ~~which~~bases ~~establishes~~of ~~financial~~the ~~accounting~~Company’s assets and ~~reporting~~liabilities ~~standards~~at ~~for~~the tax rates the Company expects to be in effect when these deferred tax assets or liabilities are anticipated to be recovered or settled. The Company’s ultimate realization of deferred tax assets is dependent upon the generation of future taxable income ~~taxes~~during periods in which those temporary differences become deductible. The Company ~~recognizes~~records ~~federal~~a ~~and~~valuation ~~state~~allowance ~~current~~to reduce deferred tax ~~liabilities~~assets by the amount of any tax benefits that, based on ~~its~~available ~~estimate~~evidence ofand ~~taxes~~judgment, ~~payable~~are not expected to orbe ~~refundable~~realized. byBased ~~each~~on the best available objective evidence, it is more likely than not that the Company’s net deferred tax ~~jurisdiction~~assets inwill not be realized. Accordingly, the ~~current~~Company ~~fiscal~~continues ~~year~~to provide a full valuation allowance against its net deferred tax assets as of December 31, 2011.

-12-

Deferred tax assets and liabilities are established for the temporary differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities at the tax rates the Company expects to be in effect when these deferred tax assets or liabilities are anticipated to be recovered or settled. The Company’s ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. The Company records a valuation allowance to reduce deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized. Based on the best available objective evidence, it is more likely than not that the Company’s net deferred tax assets will not be realized. Accordingly, the Company continues to provide a full valuation allowance against its net deferred tax assets as of September 30, 2011.

(9) Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding and not subject to repurchase during the period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of shares of common stock outstanding, and the dilutive potential common equivalent shares outstanding during the period. Dilutive potential common equivalent shares consist of dilutive shares of common stock subject to repurchase and dilutive shares of common stock issuable upon the exercise of outstanding options to purchase common stock, computed using the treasury stock method.

The following table sets forth the computation of basic and diluted net loss per share, including the reconciliation of the denominator used in the computation of basic and diluted net loss per share (in thousands, except share and per share data):

	Three Months Ended September 30,						Six Months Ended September 30,
	Three Months Ended December 31,						Nine Months Ended December 31,
	2011			2010			2011			2010
	(in thousands, except share and per share data)
Numerator:
Net loss attributable to Hoku Corporation	$	(710,~~917~~586	)	$	(23,~~011~~046	)	$	(1828,~~117~~704	)	$	(47,~~694~~740	)
Denominator:
Weighted average shares of common stock (basic)		54,~~872~~886,~~029~~650			54,~~659~~724,~~425~~354			54,~~868~~872,~~400~~287			54,~~620~~641,~~643~~657
Effect of Dilutive Securities
Add:
Weighted average stock options		—			—			—			—
Weighted average shares of common stock (diluted)		54,~~872~~886,~~029~~650			54,~~659~~724,~~425~~354			54,~~868~~872,~~400~~287			54,~~620~~641,~~463~~657
Basic net loss per share attributable to Hoku Corporation	$	(0.1419	)	$	(0.0406	)	$	(0.3352	)	$	(0.0914	)
Diluted net loss per share attributable to Hoku Corporation	$	(0.1419	)	$	(0.0406	)	$	(0.3352	)	$	(0.0914	)

The basic weighted average shares of common stock for the three and ~~six~~nine months ended ~~September~~December 3031, 2011 and 2010 excludes unvested restricted shares of common stock.

During the three and ~~six~~nine months ended ~~September~~December 3031, 2011, potential dilutive securities included options to purchase 49,999 shares of common stock, at prices ranging from $0.15 to $0.38 per share. During the three and ~~six~~nine months ended ~~September~~December 3031, 2010, potential dilutive securities included options to purchase ~~209~~227,~~460~~344 and 245,678 shares of common stock, at prices ranging from $0.075 to $2.9275 per share in both periods. During the three and ~~six~~nine month periods ended ~~September~~December 3031, 2011 and 2010, all potential common equivalent shares were anti-dilutive and were excluded in computing diluted net loss per share, due to the Company’s net loss for both periods.

(10) Commitments, Contingencies and Purchase Obligations

Stone & Webster, Inc. In August 2007, the Company entered into an Engineering, Procurement and Construction Management Contract with Stone & Webster, Inc., or S&W, a subsidiary of The Shaw Group Inc., for engineering and procurement services for the construction of the Company’s Polysilicon Plant, which was amended in October 2007 by Change Order No. 1, again in April 2008 by Change Order No. 2, and again in February 2009 by Change Order No. 3, which are collectively the Engineering Agreement. Under the Engineering Agreement, S&W would provide the engineering services to complete the design and plan for construction of the Company’s Polysilicon Plant in Pocatello, Idaho, along with procurement services. S&W would be paid on a time and materials basis plus a fee for its services.

The Company suspended all work under the Engineering Agreement in July 2009. In February 2010, work under the Engineering Agreement recommenced as agreed to in Change Order No. 4. In December 2010, the Company and S&W agreed to Change Order No. 5 under the Engineering Agreement, or Change Order No. 5, to, among other things: (i) set forth a target delivery schedule, added scope of work, estimated budget to complete the work, and payment schedule, and (ii) provide additional engineers and personnel to meet the target delivery schedule.

-13-

During the six months ended September 30, 2011, the Company made payments to S&W of $577,000, and as of September 30, 2011, the Company had paid S&W an aggregate amount of $60.7 million. As of September 30, 2011, all work under the aforementioned agreements and change orders has been completed.

JH Kelly LLC . In August 2007, the Company entered into a Cost Plus Incentive Contract with JH Kelly LLC, or JH Kelly, for construction services for the construction of the Polysilicon Plant, which was amended in October 2007, by Change Order No. 1, and again in April 2008 by Change Order No. 2, again in March 2009 by Change Order No. 3, and again in September 2009 by Change Order No. 4, which are collectively the JH Kelly Construction Agreement. Under the JH Kelly Construction Agreement, JH Kelly agreed to provide the construction services as the Company’s general contractor for the construction of the Polysilicon Plant with a production capacity of 4,000 metric tons per year. The target cost for the services to be provided under the JH Kelly Construction Agreement is $165.0 million, including up to $5.0 million of incentives that may be payable.

Pursuant to Change Order No. 5, the Company agreed among other things: (i) to confirm the plan for JH Kelly to complete construction of the Polysilicon Plant and (ii) set-up a payment schedule relating to outstanding invoices that the Company owed to JH Kelly and any additional expenses that JH Kelly incurred relating to the construction of the Polysilicon Plant.

During the six months ended September 30, 2011, the Company made payments to JH Kelly of $41.4 million, and as of September 30, 2011, the Company had paid JH Kelly an aggregate amount of $225.5 million. As of September 30, 2011, all work under the aforementioned contract and change orders has been completed.

Dynamic Engineering Inc. In October 2007, the Company entered into an agreement with Dynamic Engineering Inc., or Dynamic, for design and engineering services, and a related technology license for the process to produce and purify trichlorosilane, or TCS. Under the agreement with Dynamic, or the Dynamic Agreement, Dynamic is obligated to design and engineer a TCS production facility that is capable of producing 20,000 metric tons of TCS for the Polysilicon Plant. Under the Dynamic Agreement, Dynamic's engineering services are provided and invoiced on a time and materials basis, and the license fee will be calculated upon the successful completion of the TCS production facility, and demonstration of certain TCS purity and production efficiency capabilities. The maximum aggregate amount that the Company may pay Dynamic for the engineering services and the technology license is $12.5 million, which includes an incentive for Dynamic to complete the engineering services under budget. Dynamic is guaranteeing the quantity and purity of the TCS to be produced at the completed facility, and has agreed to indemnify the Company for any third-party claims of intellectual property infringement.

During the six months ended September 30, 2011, the Company made no payments to Dynamic, and as of September 30, 2011, the Company had paid Dynamic an aggregate amount of $8.4 million. As of September 30, 2011, all work under the aforementioned agreement has been completed.

GEC Graeber Engineering Consultants GmbH and MSA Apparatus Construction for Chemical Equipment Ltd. The Company entered into a contract with GEC Graeber Engineering Consultants GmbH, or GEC, and MSA Apparatus Construction for Chemical Equipment Ltd., or MSA, for the purchase and sale of 16 polysilicon reactors and eight hydrogenation reactors for the production of polysilicon, and related engineering and installation services. Under the contract, the Company will pay up to a total of 20.9 million Euros for the reactors. The reactors are designed and engineered to produce approximately 2,000 metric tons of polysilicon per year. The term of the contract extends until the end of the first month after the expiration date of the warranty period, but may be terminated earlier under certain circumstances.

As of ~~September~~December 3031, 2011, the Company received 16 polysilicon reactors and eight hydrogenation reactors, and related equipment from GEC and MSA, at the Polysilicon Plant, and all of these reactors have been assembled and put into place on the Polysilicon Plant’s production floor.

During the ~~six~~nine months ended ~~September~~December 3031, 2011, the Company made payments to GEC and MSA of 495,000 Euros or $704,000, and as of ~~September~~December 3031, 2011, the Company had paid GEC and MSA an aggregate amount of 19.5 million Euros or $27.4 million.

Idaho Power Company . The Company entered into an Electric Service Agreement with Idaho Power, or the ESA, for the supply of electric power and energy to the Company for use in the Polysilicon Plant, subject to the approval of the Idaho Public Utilities Commission, or the ~~PUC~~IPUC. The term of the ESA is four years, beginning in June 2009 and expiring in May 2013. During the term of the ESA, Idaho Power agrees to make up to 82,000 kilowatts of power available to the Company at certain fixed rates, which are subject to change only by action of the ~~PUC~~IPUC. After the initial term of the ESA expires, either the Company or Idaho Power may terminate the ESA without prejudice. If neither party chooses to terminate the ESA, then Idaho Power will continue to provide electric service to the Company. As of ~~September~~December 3031, 2011, the Company was contractually obligated to pay approximately $67.1 million to Idaho Power over the term of the ESA.

~~-14-~~During the nine months ended December 31, 2011, the Company made payments to Idaho Power of $17.2 million pursuant to the ESA.

~~During~~In February 2012, the ~~six~~Company ~~months~~and ~~ended~~Idaho ~~September~~Power ~~30,~~filed ~~2011,~~a stipulation (the ~~Company~~“Stipulation”) ~~made~~with ~~payments~~the IPUC to amend the ESA. If the Stipulation is approved by IPUC, the Company and Idaho Power ofwill ~~$9.6~~enter ~~million~~into ~~pursuant~~an toamended and restated Electric Service Agreement (the ~~ESA~~“AESA”) based on the terms set forth in the Stipulation.

~~PVA~~Pursuant ~~Tepla~~to ~~Danmark.~~the ~~In April 2008~~AESA, the Company ~~entered~~would ~~into~~be granted an ~~agreement~~18-month ~~with~~deferral ~~PVA~~period ~~Tepla~~from ~~Danmark,~~January ~~or PVA~~1, ~~for~~2012 ~~the~~to ~~purchase~~June ~~and sale of slim rod pullers and float zone crystal pullers. Under the agreement~~30, ~~PVA~~2013 isduring ~~obligated~~which ~~to manufacture and deliver~~ the slim rod pullers and float zone crystal pullers for the Polysilicon Plant. Slim rod pullers are used to make thin rods of polysilicon that are then transferred into polysilicon deposition reactors to be grown through a chemical vapor deposition process into polysilicon rods for commercial sale to the Company’s ~~end~~monthly ~~customers.~~billed ~~The~~energy ~~float~~charge ~~zone~~would ~~crystal~~be ~~pullers~~reduced ~~convert~~from ~~the slim rods into single crystal silicon for use in testing the quality and purity of the polysilicon. The total amount payable to PVA is approximately~~ $62.0 million, ~~which~~to ~~is payable in four installments~~$800, ~~the first of which was made in August 2008~~000. The ~~Either~~Company ~~party~~would ~~may~~also ~~terminate~~be ~~the~~required ~~agreement~~to ifmake ~~the~~an ~~other~~extra ~~party~~one-time ispayment into ~~material~~Idaho ~~breach~~Power of ~~the~~$3.8 ~~agreement~~million, and ~~has~~Idaho ~~not~~Power ~~cured~~would ~~such~~apply ~~breach~~$2.0 ~~within~~million ~~180 days after receipt~~ of ~~written notice of~~ the ~~breach,~~Company’s orexisting if$4.0 ~~the~~million ~~other~~deposit ~~party is bankrupt, insolvent, or unable~~ to ~~pay~~the ~~its~~one-time ~~debts~~payment. InThe ~~June 2011, the~~ Company ~~amended~~would ~~this~~be ~~agreement~~charged toan ~~restructure~~additional ~~the payment terms with PVA as follows: (i) in July 2011, the Company paid~~ $~~318~~100,000; ~~(ii)~~per inmonth ~~July~~during ~~2011,~~ the ~~Company~~18-month ~~delivered~~deferral aperiod ~~letter of credit~~ in ~~the~~order ~~amount~~to ~~of $636,000;~~pay ~~and~~off ~~(iii) upon~~ the ~~earlier~~remaining ofamount ~~six months after the date~~ of ~~commissioning and December 31, 2011,~~ the ~~Company~~one-time ~~shall pay the amount of $318,000~~payment.

~~During~~Idaho Power would create a balancing account during the ~~six~~18-month ~~months~~deferral ~~ended~~period ~~September,~~for ~~2011,~~the difference between the ~~Company~~monthly ~~made~~minimum ~~payments~~billed toenergy ~~PVA~~under the ESA and the monthly billed energy that results from the ESA. The maximum amount of this balancing account would be capped at $216.35 million, and aswould ofbe ~~September~~balanced ~~30,~~against ~~2011~~the Company’s actual energy consumption during the deferral period. Beginning in January 2014, the Company ~~had~~would ~~paid~~be ~~PVA~~required anto ~~aggregate~~repay ~~amount~~the ofbalancing ~~$6.3~~account ~~million.~~by Asmaking ofadditional ~~September~~payments ~~30,~~to ~~2011,~~Idaho ~~the~~Power ~~slim~~equal ~~rod~~to ~~pullers~~1/12th ~~and~~of ~~float~~the ~~zone~~total ~~crystal~~amount ~~pullers~~of ~~have~~the ~~been~~balancing ~~delivered~~account ~~and~~until ~~accepted~~the balancing account reaches zero.

The Company’s monthly power demand would be capped at 20,000 kilowatts during the 18-month deferral period, and if the Company exceeds that cap, it would be charged the Monthly Minimum Billed Energy Charge according to the ESA for the remainder of the 18-month deferral period. The term of the ESA would be extended to December 1, 2014, during which time the Company will pay embedded-cost rates beginning with service provided on and after December 1, 2013, including the then applicable Minimum Billed Energy Charge.

PVA Tepla Danmark. In April 2008, the Company entered into an agreement with PVA Tepla Danmark, or PVA, for the purchase and sale of slim rod pullers and float zone crystal pullers. Under the agreement, PVA is obligated to manufacture and deliver the slim rod pullers and float zone crystal pullers for the Polysilicon Plant. Slim rod pullers are used to make thin rods of polysilicon that are then transferred into polysilicon deposition reactors to be grown through a chemical vapor deposition process into polysilicon rods for commercial sale to the Company’s end customers. The float zone crystal pullers convert the slim rods into single crystal silicon for use in testing the quality and purity of the polysilicon. The total amount payable to PVA is approximately $6.0 million, which is payable in four installments, the first of which was made in August 2008. Either party may terminate the agreement if the other party is in material breach of the agreement and has not cured such breach within 180 days after receipt of written notice of the breach, or if the other party is bankrupt, insolvent, or unable to pay its debts. In June 2011, the Company amended this agreement to restructure the payment terms with PVA as follows: (i) in July 2011, the Company paid $318,000; (ii) in July 2011, the Company delivered a letter of credit in the amount of $636,000; and (iii) in December 2011, the Company paid $318,000.

During the nine months ended December 31, 2011, the Company made payments to PVA $2.7 million, and as of December 31, 2011, the Company had paid PVA an aggregate amount of $6.6 million. As of December 31, 2011, the slim rod pullers and float zone crystal pullers have been delivered and accepted.

Evonik Degussa Corporation. In March 2010, the Company entered into an agreement with Evonik Degussa Corporation, or Evonik, for the supply of TCS for use in the manufacturing of polysilicon for a term of approximately one year ending in February 2011. In April 2010, the Company paid Evonik a $100,000 deposit for the ISO containers that will transport the TCS to our facility in Pocatello, Idaho. In February 2011, the Company amended and restated this agreement to, among other things, extend the term of the agreement to November 2011. Under the amended agreement, Evonik has agreed to sell to the Company a minimum quantity of TCS during the term of the agreement. Pricing is fixed based on the quantity supplied in each calendar month and based on our frequency of payment. Commencing in May 2011, the Company will forecast its estimated desired monthly quantity of TCS. Pursuant to the agreement, Evonik is required to provide a minimum amount of TCS per calendar month, and it will use commercially reasonable efforts to provide additional quantities that we may request in addition to the monthly minimum amount.

The aggregate net value of the TCS to be purchased under the amended agreement during the term is approximately $13.5 million. AsDuring ofthe ~~September~~nine 30months ended December 31, 2011, the Company had paid Evonik an aggregate amount of $~~100~~1.2 million,~~000~~ and as of December 31, 2011, the Company paid Evonik an aggregate amount of $1.3 million.

If the Company is unable to secure additional financing to complete the construction of the Polysilicon Plant, the Company would need to curtail construction of the Polysilicon Plant. If the Company elects to curtail construction, it would not be able to produce its own polysilicon to meet the delivery requirements under certain polysilicon agreements. The Company was required to make polysilicon deliveries beginning in June 2011. The Company did not make any shipments by ~~September~~December 3031, 2011, and is in discussions with its customers regarding a possible amendment of the agreements. During fiscal 2012, the Company estimates that it may need to purchase between 300 to 500 metric tons of polysilicon to meet the minimum delivery requirements of its polysilicon contracts. The revenue from the 300 to 500 metric tons that the Company may need to deliver during fiscal 2012 may result in a loss on the subsequent sale of polysilicon under the current polysilicon agreements. As of ~~September~~December 3031, 2011, the Company has not entered into any agreements to purchase polysilicon.

(11) Operating Segments

Operating segments are components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision-making group is made up of the Chief Executive Officer, President, Chief Financial Officer, Chief Strategy Officer and the President of Hoku Materials. The chief operating decision-making group manages the profitability, cash flows, and assets of each segment’s various product or service lines and businesses. The Company has ~~two~~three operating business units: Hoku Solar ~~and~~, Hoku Materials and Tianwei Solar. Hoku Solar installs PV systems, ~~and~~ Hoku Materials will manufacture polysilicon for resale, and Tianwei Solar, which was incorporated in October 2011, resells and distributes photovoltaic modules. A description of the products for each business unit is described in Note 1 of the Consolidated Financial Statements.

-15-

	Three Months Ended December 31,				Nine Months Ended December 31,
	2011		2010		2011		2010
	(amounts in thousands)
Revenue:

Hoku Solar	$	7,083	$	1,226	$	9,457	$	3,330
Hoku Materials		—		16		—		27
Tianwei Solar		—		—		—		—

Total consolidated revenue	$	7,083	$	1,242	$	9,457	$	3,357

	Three Months Ended September 30,						Six Months Ended September 30,
	Three Months Ended December 31,						Nine Months Ended December 31,
	2011			2010			2011			2010
	(amounts in thousands)
Revenue:
Income (loss) from operations:
Hoku Solar	$	~~1,888~~236		$	~~1,185~~64		$	~~2,374~~(173	)	$	~~2,104~~234
Hoku Materials		—(10,766	)		—(3,114	)		—(28,406	)		11(8,043	)
Total consolidated revenue	$	1,888		$	1,185		$	2,374		$	2,115
Tianwei Solar		(43	)		—			(43	)		—
Total consolidated loss from operations	$	(10,573	)	$	(3,050	)	$	(28,622	)	$	(7,809	)

	Three Months Ended September 30,						Six Months Ended September 30,
	2011			2010			2011			2010
	(amounts in thousands)
Income (loss) from operations:
Hoku Solar	$	(231	)	$	86		$	(410	)	$	170
Hoku Materials		(7,638	)		(2,003	)		(17,640	)		(4,928	)
Total consolidated loss from operations	$	(7,869	)	$	(1,917	)	$	(18,050	)	$	(4,758	)

The reconciliation of segment operating results to the Company’s consolidated totals was as follows:

	Three Months Ended September 30,					Six Months Ended September 30,
	Three Months Ended December 31,					Nine Months Ended December 31,
	2011		2010			2011			2010
	(amounts in thousands)
Consolidated loss from operations	$	(710,~~869~~573)	$	(13,~~917~~050	)	$	(1828,~~050~~622	)	$	(47,~~758~~809	)
Interest and other income (loss)		—		(48	)		1			138
Interest and other income		—		27			—			166
Net income attributable to noncontrolling interest		(4813)		(4623	)		(6882)			(7497	)
Net loss attributable to Hoku Corporation	$	(710,~~917~~586)	$	(23,~~011~~046	)	$	(1828,~~117~~704	)	$	(47,~~694~~740	)

The Company allocates its assets to its business units based on the primary business units benefiting from the assets. Unallocated assets are composed primarily of cash and cash equivalents and office equipment and furniture. Capital additions for the Hoku Materials business unit primarily relate to construction in progress.

	September 30, 2011		March 31, 2011
	December 31, 2011		March 31, 2011
Identifiable assets:	(amounts in thousands)
Hoku Solar	$	8,~~935~~183	$	4,356
Hoku Materials		~~580~~642,~~730~~765		497,337
Unallocated assets		973		900
Tianwei Solar		46		—
	$	590,638	$	502,593
Unallocated assets		480		900
	$	651,474	$	502,593

~~-16-~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include all statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q. 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 our 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. We discuss many of these risks, uncertainties and other factors in this Quarterly Report on Form 10-Q in greater detail in Part II, Item IA. “Risk Factors.” Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date hereof. We hereby qualify all of our forward-looking statements by these cautionary statements. Except as required by law, we assume 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.

The following discussion should be read in conjunction with our financial statements and the related notes contained elsewhere in this Quarterly Report on Form 10-Q and with our financial statements and notes thereto for the fiscal year ended March 31, 2011, contained in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on July 15, 2011, as amended by Forms 10-K/A filed with the SEC on July 29, 2011 and August 17, 2011.

Overview

Hoku Corporation is a solar energy products and services company. We were incorporated in Hawaii in March 2001, as Pacific Energy Group, Inc. and changed our name to Hoku Scientific, Inc. in July 2001. In December 2004, we were reincorporated in Delaware. In March 2010, we changed our name from Hoku Scientific, Inc. to Hoku Corporation.

We originally focused our efforts on the design and development of fuel cell technologies, including our Hoku membrane electrode assemblies, or MEA’s, and Hoku Membranes. In May 2006, we announced our plans to form an integrated photovoltaic, or PV, module business, and our plans to manufacture polysilicon, a primary material used in the manufacture of PV modules, at our polysilicon manufacturing plant in Pocatello, Idaho, or the Polysilicon Plant. In fiscal 2007, we reorganized our business into three business units: Hoku Materials, Hoku Solar and Hoku Fuel Cells. In February and March 2007, we incorporated Hoku Materials, Inc. and Hoku Solar, Inc., respectively, as wholly owned subsidiaries to operate our polysilicon and solar businesses, respectively. In October 2011, we incorporated Tianwei Solar USA, Inc., or Tianwei Solar, as a wholly owned subsidiary to serve as the primary, direct reseller of Tianwei photovoltaic modules in the Americas.

In September 2010, we elected to discontinue the operations of Hoku Fuel Cells. However, we will maintain ownership of our intellectual property including patents.

Hoku Materials

Construction Update

Hoku Materials was incorporated to manufacture polysilicon, a key material used in PV modules. In May 2007, we commenced construction of our planned Polysilicon Plant which would be capable of producing up to 4,000 metric tons of polysilicon per year. We previously estimated the total cost for construction of approximately $410 million; however, we have determined that the total costs will be greater than our previous estimates and our current estimate for the total cost is approximately $700 million. We have incurred $~~576~~631.6 million in capital expenditures as of ~~September~~December 3031, 2011. We are currently commissioning the 2,500 metric ton plant, and we expect that it will cost approximately $700 million to add on-site trichlorosilane, or TCS production and increase our annual production capacity to 4,000 metric tons.

The primary driver of the increase in costs is related to our engineering and construction contracts first signed in 2007 as they are cost-plus contracts, rather than lump sum, or fixed cost contracts. As such, there was no guaranteed maximum cost. In addition, the estimated total cost increased in part by the fact that the construction schedule was originally expected to be approximately two years, but has instead been spread over more than four years with numerous starts and stops as a result of earlier challenges obtaining adequate financing in a timely manner. Furthermore, construction of the Polysilicon Plant commenced prior to the completion of the detailed engineering work, which caused numerous changes in the design of the facility, further contributing to the increase in delays and construction costs. In addition, to enable future expansion, we over-designed certain areas of our plant to accommodate future expansion, which increased our upfront engineering, construction, and equipment costs. In an effort to control costs, we have strengthened our internal management team to enable more detailed reviews and audits of all project expenses, and we have entered into new lump sum construction and engineering contracts, while phasing out work under our 2007 cost-plus contracts. Any significant increase in the cost to complete the Polysilicon Plant could have a material adverse effect on our business, financial condition and results of operations.

~~-17-~~During the quarter, we continued working together with Tianwei to obtain additional loans secured by letters of credit procured by Tianwei to finance plant construction and commissioning activities, accounts payable obligations, and working capital. The process to secure financing from foreign sources is complicated and requires time to resolve. As a result, we temporarily suspended all construction activities in Pocatello until these financial issues are resolved, which we anticipate occurring in the fourth quarter of fiscal 2012 with the goal of commencing production during fiscal 2013.

We received 16 Siemens-process reactors at the Polysilicon Plant and in April 2010 successfully produced polysilicon using two of the reactors. We produced the material after completing a comprehensive system commissioning protocol, which culminated in deposition runs in a select number of our installed polysilicon reactors. The primary purpose of the testing was to confirm system integrity and validate operating procedures.

We are actively commissioning the Polysilicon Plant, and contingent on securing additional financing, we expect to commission our reactors capable of producing 2,500 metric tons of polysilicon per annum. However, in view of current market conditions that have depressed polysilicon prices throughout the solar industry, we are evaluating a plan to delay commercial production in favor of accelerating the expansion of our production capacity to 8,000 metric tons per year.

In order to avoid price adjustments and/or breaching our supply contracts, we may purchase polysilicon from third parties if we do not produce sufficient amounts to meet our customer obligations. We estimate that we will need to purchase between 300 to 500 metric tons of polysilicon during fiscal 2012 to avoid any breaches of our contracts. As of ~~November~~March ~~2011~~2012, we have not entered into any agreements to purchase polysilicon; however the current spot market prices are ~~not~~less ~~significantly greater~~ than the prices at which our customers will be obligated to pay us.

During the three and nine months ended ~~September~~December 3031, 2011 Hoku Materials incurred an operating loss of $710.68 million and $28.4 million, respectively, which mainly consisted of payroll, including stock compensation, professional fees and payments made to Idaho Power pursuant to the Electric Service Agreement. In addition, as of ~~September~~December 3031, 2011, Hoku Materials has capitalized $~~575~~631.6 million related to construction costs for the Polysilicon Plant and had received $~~140~~139.8 million in customer deposits as prepayments under long-term polysilicon supply agreements.

Financing Update

During the three months ended ~~September~~December 3031, 2011, we have obtained an aggregate of $25 million of debt financing through two credit agreements with Industrial and Commercial Bank of China Limited, New York Branch, and Bank of China, New York Branch, to support our operations. In addition, in October 2011, we entered into credit agreements with Industrial and Commercial Bank of China, Limited, New York Branch and Bank of China, New York Branch to provide for an additional $1319.64 million and $22.1 million, respectively, of debt financing. These credit agreements are secured by letters of credit provided by our majority stockholder, Tianwei New Energy Holding Co. Ltd., or Tianwei.

AsIn January 2012, we entered into a credit agreement with Industrial and Commercial Bank of ~~September~~China, 30Limited, ~~2011~~New York Branch to provide for one or more term loans in an aggregate principal amount not to exceed $10.0 million. And in February 2012, we ~~have~~entered ~~funded~~into ~~approximately~~a ~~$534~~credit agreement with China Merchants Bank Co.1, Ltd., New York Branch to provide for a loan in an aggregate principal amount of $10 million. These credit agreements are secured by letters of ~~our~~credit ~~Polysilicon~~provided ~~Plant~~by Tianwei.

As of ~~September~~December 3031, 2011, we have ~~obtained~~funded anapproximately ~~aggregate of~~ $~~274~~546.9 million of ~~debt financing through 16 bank credit agreements to support~~ our ~~operations. As~~Polysilicon ~~of September 30, 2011, the total amount outstanding under these credit agreements were $273 million~~Plant. ~~The material terms of each credit agreement are described in more detail in Note 6 to the financial statement.~~

As of December 31, 2011, we have obtained an aggregate of $315.5 million of debt financing through 19 bank credit agreements to support our operations. As of December 31, 2011, the total amount outstanding under these credit agreements was $314.7 million. The material terms of each credit agreement are described in more detail in Note 6 to the consolidated financial statements.

Polysilicon Supply Agreement Updates

Wuxi Suntech Power Co. Ltd. In June 2007, we entered into a fixed price, fixed volume supply agreement with Wuxi Suntech Power Co., Ltd., or Suntech, for the sale and delivery of polysilicon. The supply agreement was subsequently amended in June 2010, pursuant to which we revised the first delivery of polysilicon products to Suntech in June 2011, and Suntech waived certain milestones required under the agreement. We also agreed to waive our right to prepayment of an additional $30.0 million, and Suntech may terminate the $30.0 million stand-by letter of credit previously issued by a bank in China. The term of the agreement was shortened to one year and pricing was fixed for the term of the agreement. ~~The~~We ~~agreement~~did ~~will~~not ~~automatically~~make ~~renew~~any shipments to Suntech in June 2011. However, in February 2012, the supply agreement with Suntech was amended, in which the ~~same~~parties agreed to reduce the amount of polysilicon to be delivered, remove the fixed pricing terms, ~~unless~~and ~~either~~negotiate ~~party~~pricing ~~terminates~~on a quarterly basis by reference to the ~~agreement~~average spot market price index for raw polysilicon. WeAlso, ~~did~~the ~~not~~amendment ~~make~~shortened ~~any~~the ~~shipments~~term of the agreement to ~~Suntech~~one inyear ~~June~~measured ~~2011~~from ~~and~~the wefirst ~~are~~shipment inof ~~discussion~~a specified quantity of raw polysilicon, which must commence no later than October 31, 2012. The amended agreement will automatically renew for an additional 12 months after the initial term with ~~Suntech~~the ~~regarding~~same aterms ~~possible~~unless ~~amendment~~one ofparty terminates or the parties mutually agree to amend the agreement.

Upon Suntech’s termination of the agreement under certain circumstances, we are required to refund to Suntech all prepayments, which were $2.0 million as of ~~September~~December 3031, 2011, less any part thereof that has been applied to the purchase price of polysilicon delivered under the agreement. Upon termination of the agreement for cause by us, we generally may retain the entire amount of prepayments made as of the date of such termination as liquidated damages, less any part thereof that has been applied to the purchase price of polysilicon delivered under the agreement.

-18-

Pursuant to the agreement, we granted to Suntech a security interest in all of our tangible and intangible assets related to our polysilicon business. This security interest is subordinated to the Tianwei financing and any third-party debt secured to finance construction of the Polysilicon Plant.

Hanwha SolarOne, formerly Solarfun Power Hong Kong Limited. In November 2007, we entered into a fixed price, fixed volume supply agreement with Hanwha SolarOne, or SolarOne, formerly known as Solarfun Power Hong Kong Limited, a subsidiary of Solarfun Power Holdings Co., Ltd., for the sale of polysilicon. As of ~~September~~December 3031, 2011, SolarOne has paid to us $49.0 million as a prepayment for future polysilicon product deliveries~~, and it is obligated to pay us an additional $6~~.~~0 million in prepayments.~~

The supply agreement was subsequently amended in November 2010, to provide that we will sell approximately 7,300 metric tons of polysilicon over an 11-year term, approximately 6,750 metric tons of which are to be shipped during the second through tenth year of the agreement. The pricing under the agreement was adjusted such that it is fixed for the first five years and thereafter will then vary from year to year based on market pricing and negotiations between us and SolarOne. The fixed pricing for the first five years of the supply agreement was a few dollars above the long-term contract prices then prevailing in the market and below the spot prices by a dollar amount that is in the low double digits. If SolarOne fails to make any of the $6.0 million prepayment under the agreement, then the pricing adjustments shall not be effective. We also agreed that the initial delivery date to avoid breach and termination would be extended to June 2011. We did not make any shipments to SolarOne by the June 2011 deadline, and we are in discussions with SolarOne regarding a possible amendment to the supply agreement.

Upon SolarOne’s termination of the agreement under certain circumstances, we are required to refund to SolarOne all prepayments made as of the date of termination, which were $49.0 million as of ~~September~~December 3031, 2011, less any part thereof that has been applied to the purchase price of polysilicon delivered under the agreement. Upon termination of the agreement by us, we generally may retain the entire amount of prepayments made as of the date of such termination as liquidated damages, less any part thereof that has been applied to the purchase price of polysilicon delivered under the agreement.

Pursuant to our agreement with SolarOne, we ~~also~~ granted to SolarOne a security interest in all of our tangible and intangible assets related to our polysilicon business. This security interest is subordinated to the Tianwei financing and any third-party debt secured to finance construction of the Polysilicon Plant.

Jinko Solar Co., Ltd. In July 2008, we entered into a supply agreement with Jinko Solar Co., Ltd., formerly known as Jiangxi Jinko Solar Co., Ltd., or Jinko, for the sale and delivery of polysilicon. In December 2010, we amended the supply agreement under which we agreed to sell approximately 1,800 metric tons of polysilicon over a nine-year term. The pricing under the agreement was adjusted such that it is fixed for the first five years and thereafter will vary from year to year based on market pricing and negotiations between us and Jinko. The fixed pricing for the first five years of the supply agreement was a few dollars above the long-term contract prices then prevailing in the market and below the spot prices by a dollar amount that is in the low double digits. We also agreed that the initial delivery date to avoid breach and termination would be extended to August 31, 2011. We did not make any delivery by August 31, 2011. Accordingly, we further amended the supply agreement with Jinko in September 2011. Under this amended agreement, we agreed to sell to Jinko an aggregate of 1,600 tons of polysilicon over an eight year period. The fixed prices during the first four years are a few dollars above the long-term contract prices then prevailing in the market and below the spot prices by a dollar amount that is in the low double digits. These prices are subject to adjustment the extent they vary from a mutually acceptable third party index. The prices in years five through eight are to be mutually determined by us and Jinko. If we do not deliver polysilicon in accordance with the agreed upon schedule, including the initial shipment on or before June 30, 2012, we will provide Jinko with a purchase price adjustment. In addition, we have agreed to refund a portion of Jinko’s $20.0 million deposit on a monthly basis for the period from September 2011 to June 2012. As of December 31, 2011, Jinko has paid us a total cash deposit of $19.6 million as prepayment for future product deliveries, which is net of refunds of $440,000 that were remitted as of December 31, 2011.

InUpon ~~July 2008, we entered into a supply agreement with~~ Jinko’s ~~Solar~~termination ~~Co., Ltd., formerly known as Jiangxi Jinko Solar Co., Ltd., or Jinko, for the sale and delivery~~ of ~~polysilicon. In December 2010, we amended~~ the ~~supply~~ agreement under ~~which~~certain ~~we agreed to sell approximately 1~~circumstances,~~800~~ ~~metric~~we ~~tons~~are ofrequired ~~polysilicon~~to ~~over~~refund ~~a nine-year term. The pricing under the agreement was adjusted such that it is fixed for the first five years and thereafter will vary from year~~ to ~~year based on market pricing and negotiations between us and~~ Jinko~~. The~~ ~~fixed~~all ~~pricing~~prepayments ~~for~~made ~~the~~as ~~first five years~~ of the supply agreement was a few dollars above the long-term contract prices then prevailing in the market and below the spot prices by a dollar amount that is in the low double digits. We also agreed that the initial delivery date toof ~~avoid breach and~~ termination, ~~would~~which bewere ~~extended to August 31, 2011~~$19. We6 ~~did~~million ~~not~~as ~~make~~of ~~any~~December ~~delivery by August~~ 31, 2011~~. Accordingly~~, weless ~~further~~any ~~amended~~part ~~the~~thereof ~~supply~~that ~~agreement~~has ~~with~~been ~~Jinko~~applied ~~in September 2011. Under this amended agreement, we agreed~~ to ~~sell~~the topurchase ~~Jinko~~price ~~an aggregate~~ of ~~1,600 tons of~~ polysilicon ~~over~~delivered anunder ~~eight year period. The fixed prices during~~ the ~~first four years are a few dollars above the long-term contract prices then prevailing in the market and below the spot prices by a dollar amount that is in the low double digits~~agreement. ~~These~~Jinko ~~prices~~also ~~are~~has ~~subject to adjustment~~ the ~~extent~~right ~~they vary from a mutually acceptable third party index. The prices in years five through eight are~~ to beterminate ~~mutually determined~~the byagreement usif ~~and Jinko. If~~ we do not deliver ~~polysilicon in accordance with~~ the ~~agreed upon schedule, including the~~ initial shipment on or before June 30, 2012, wein ~~will~~which ~~provide~~case ~~Jinko~~we ~~with~~would abe ~~purchase~~required ~~price~~to ~~adjustment. In~~remit ~~addition,~~to weJinko ~~have~~an ~~agreed~~amount equal to ~~refund~~150% aof ~~portion~~the ofprepayments ~~Jinko’s~~we ~~$20~~hold ~~million~~at ~~deposit~~the ontime aof ~~monthly~~termination. Upon ~~basis~~termination ~~for~~of the ~~period~~agreement ~~from~~by ~~September~~us, ~~2011~~we togenerally ~~June~~may ~~2012. As~~retain ofthe ~~September~~entire ~~30,~~amount ~~2011,~~of ~~Jinko~~prepayments ~~has~~made ~~paid~~as usof athe ~~total~~date ~~cash deposit~~ of ~~$19.8~~such ~~million~~termination as ~~prepayment~~liquidated ~~for~~damages, ~~future~~less ~~product~~any ~~deliveries,~~part ~~which~~thereof isthat ~~net~~has ofbeen aapplied ~~$220,000~~to ~~refund~~the ~~that~~purchase ~~was~~price ~~remitted~~of inpolysilicon ~~September~~delivered ~~2011~~under the agreement.

Pursuant to the agreement, we have granted to Jinko a security interest in all of our tangible and intangible assets related to our polysilicon business. This security interest is subordinated to the Tianwei financing and any third-party debt secured to finance construction of the Polysilicon Plant.

Tianwei New Energy (Chengdu) Wafer Co., Ltd. In fiscal 2009, we entered into two fixed price, fixed volume supply agreements with Tianwei New Energy (Chengdu) Wafer Co., Ltd., or Tianwei Wafer, for the sale and delivery of polysilicon. In December 2009, we amended the agreements pursuant to which we converted $50.0 million of the total $79.0 million of prepayments previously paid into shares of our common stock and reduced the price at which Tianwei Wafer purchases polysilicon by approximately 11% per year. The amount of polysilicon to be delivered remains unchanged and Tianwei Wafer is required to pay us an additional $2.0 million in prepayments; however, the total revenue for the polysilicon to be sold by us to Tianwei Wafer has been modified such that up to approximately $418.0 million may be payable to us during the ten-year term (exclusive of amounts Tianwei Wafer may purchase pursuant to its right of first refusal), subject to acceptance of product deliveries and other conditions. Our failure to commence shipments of polysilicon by June 2011 constituted a material breach by us under the terms of the agreement, among other circumstances. However, in June 2011, Tianwei Wafer agreed that we are not required to commence shipments of polysilicon through the calendar year 2012 unless there is excess product available beyond our current customer commitment.

~~-19-~~Upon Tianwei Wafer’s termination of the agreements under certain circumstances, we are required to refund to Tianwei Wafer the $29.0 million in prepayments made as of December 31, 2011 less any part thereof that has been applied to the purchase price of polysilicon delivered under the agreements. Upon a termination of the agreements by us, we generally may retain the entire amount of prepayments made as of the date of such termination as liquidated damages, less any part thereof that has been applied to the purchase price of polysilicon delivered under the agreements.

Upon Tianwei Wafer’s termination of the agreements under certain circumstances, we are required to refund to Tianwei Wafer the $29.0 million in prepayments made as of September 30, 2011 less any part thereof that has been applied to the purchase price of polysilicon delivered under the agreements. Upon a termination of the agreements by us, we generally may retain the entire amount of prepayments made as of the date of such termination as liquidated damages, less any part thereof that has been applied to the purchase price of polysilicon delivered under the agreements.

Pursuant to the agreements, we granted to Tianwei Wafer a security interest in all of our tangible and intangible assets related to our polysilicon business. This security interest is subordinated to the Tianwei financing and any third-party debt secured to finance construction of the polysilicon production facility.

Wealthy Rise International, Ltd. In September 2008, we entered into a fixed price, fixed volume 10-year supply agreement with Wealthy Rise International, Ltd., a wholly owned subsidiary of Solargiga Energy Holdings, Ltd., or Solargiga, for the sale of polysilicon. In March 2010, we amended the agreement pursuant to which we agreed to sell to Solargiga specified volumes of polysilicon at a predetermined price over a three-year period beginning in calendar year 2011, subject to product deliveries and other conditions. In June 2011, we amended the agreement pursuant to which we agreed to sell to Solargiga specified volumes of polysilicon at a predetermined price over a five-year period ~~beginning in fiscal 2013~~, subject to product deliveries and other conditions. ~~The~~In ~~fixed~~December ~~pricing~~2011, inwe ~~this~~amended ~~agreement was at~~ the ~~level~~agreement ofpursuant ~~long-term~~to ~~contract~~which ~~prices~~we ~~prevailing~~agreed into ~~the~~extend ~~market at~~ the ~~time~~supply of ~~this~~specific ~~amendment~~volumes ~~and~~of ~~below~~polysilicon ~~the~~at ~~spot~~fixed prices byto aSolargiga ~~dollar~~for ~~amount~~its ~~that~~general isuse beginning in ~~the~~calendar ~~low~~year ~~double~~2012 ~~digits. The~~and ~~pricing~~continuing for ~~the~~eight ~~last~~years ~~two~~from ~~years~~the date of the ~~five-year~~first ~~term~~shipment. The pricing for each year may be adjusted based on market prices of polysilicon and negotiations between us and Solargiga. The aggregate amount that may be paid to us over the ~~five~~eight-year term is $~~92.8~~134 million, assuming no such pricing adjustment ~~in the last two years~~ occurs and without taking into account the application of the prepayments already received by us. ~~The amendment also extended the date by which we were obligated to commence shipments of polysilicon from May 2011 to May 2012.~~ We also granted to Solargiga a warrant to purchase 1,196,581 shares of our common stock. The terms of the warrant include: (i) a per share exercise price equal to $2.75; (ii) a five year term; and (iii) immediately exercisable. The accounting of the warrant was based on the fair value of the warrant at the date of grant and was estimated to be $1.4 million, using the Black-Scholes option pricing model.

Solargiga has the right to terminate the amended agreement and recover any prepayments made if we have not commenced polysilicon shipments by September 30, 2012. Pursuant to the agreement, Solargiga was obligated to pay us additional prepayments in the aggregate amount of $13.2 million that was payable in four increments of $3.3 million in each of April, June, August and October 2010, and a final prepayment of $200,000 upon Solargiga’s receipt of certain aggregate volumes of polysilicon product from us. We received ~~all~~ four prepayments from Solargiga of $13.2 million.

Upon Solargiga’s termination of the agreement under certain circumstances, we are required to refund to Solargiga all prepayments made as of the date of termination, which were $20.2 million as of ~~September~~December 3031, 2011, less any part thereof that has been applied to the purchase price of polysilicon delivered under the agreement. Upon termination of the agreement by us, we generally may retain the entire amount of prepayments made as of the date of such termination as liquidated damages, less any part thereof that has been applied to the purchase price of polysilicon delivered under the agreement.

Pursuant to the agreement, we have granted to Solargiga a security interest in all of our tangible and intangible assets related to our polysilicon business. This security interest is subordinated to the Tianwei financing and any third-party debt secured to finance construction of the Polysilicon Plant.

Shanghai Alex New Energy Co., Ltd. In February 2009, we entered into a supply agreement with Shanghai Alex New Energy Co., Ltd., or Alex, for the sale and delivery of polysilicon. In January 2011, we entered into Amendment No. 2 to Supply Agreement with Alex, or Amendment No. 2, which provides for a pricing adjustment such that pricing is fixed for the first three years and thereafter will vary from year to year based on market pricing and negotiations between us and Alex. The fixed pricing for the first three years of the supply agreement was at the level of the long-term contract prices prevailing in the market at the time of the amendment and below the spot prices by a dollar amount that is in the low double digits. Under Amendment No. 2, we have an obligation to use commercially reasonable efforts to make our first shipment to Alex by March 31, 2011, and if we did not do so within a certain number of days after the scheduled delivery date, we would provide Alex with a purchase price adjustment. As of March 31, 2011, we did not make our first shipment and as a result the purchase price was adjusted accordingly. We also agreed that the initial delivery date to avoid breach and termination would be extended to September 2011. We did not make any shipments to Alex by the September 2011 deadline, and we are in discussions with Alex regarding a possible amendment to the supply agreement.

Upon Alex’s termination of the agreement under certain circumstances, we are required to refund to Alex all prepayments made as of the date of termination, which were $20.0 million as of ~~September~~December 3031, 2011, less any part thereof that has been applied to the purchase price of polysilicon delivered under the agreement. In addition, Alex has the right to terminate the agreement due to us not making any shipments by the September 2011 deadline. If Alex terminates the agreement due to our non-delivery, we would be required to remit to Alex an amount equal to 150% of the prepayments, or $30.0 million. Upon termination of the agreement by us, we generally may retain the entire amount of prepayments made as of the date of such termination as liquidated damages, less any part thereof that has been applied to the purchase price of polysilicon delivered under the agreement.

-20-

Hoku Solar

Our goal is to be a leading provider of investment grade PV systems for commercial, institutional, industrial and utility clients in Hawaii and on the U.S. mainland. We plan to continue our focus on designing, engineering and installing turnkey PV systems in Hawaii using solar modules purchased from Tianwei New Energy and from third-party suppliers. In addition, we plan to offer project development, engineering, procurement and construction management services on the U.S. mainland for PV projects under development by Hoku, and for PV projects begin developed by third parties.

During the three and nine months ended ~~September~~December 3031, 2011, Hoku Solar recognized an operating profit of $236,000 and operating loss of $~~240~~173,000, respectively, from its PV system installations and sale of electricity to the Hawaii State Department of Transportation.

Tianwei Solar USA

We have established a wholly-owned subsidiary of Hoku Corporation called Tianwei Solar USA, Inc., ~~which~~or –Tianwei ~~beginning~~Solar, inwhich serves as the ~~fourth~~primary, ~~calendar~~direct ~~quarter~~reseller of ~~2011~~Tianwei –PV ~~will~~modules ~~begin~~in ~~serving~~North asAmerica pursuant to a Reseller Agreement with Tianwei entered into in November 2011. Pursuant to the ~~primary~~terms of the Reseller Agreement, ~~direct~~Tianwei ~~reseller~~Solar ofwill market, distribute and sell Tianwei’s full range of UL-listed PV modules in ~~the~~North ~~Americas~~America. Tianwei Towill provide sales and marketing support ~~this~~in ~~activity~~the form of print and other advertising media, weand ~~plan~~it will contribute dedicated technical and sales representatives to ~~expand~~assist ~~our~~Tianwei ~~presence~~Solar. Tianwei onSolar will receive all marginal profit recognized from the Usale of the PV modules.S. The ~~mainland~~initial toterm ~~encompass~~of PVthe ~~module~~Reseller ~~sales~~Agreement ~~personnel,~~is ~~operations~~one year, and ~~logistics~~it ~~expertise,~~will ~~product~~automatically ~~engineers,~~renew ~~branding~~unless ~~and~~either ~~marketing~~party ~~capacity,~~terminates ~~and~~by ~~support~~providing ~~services~~prior ~~including~~written ~~legal,~~notice ~~finance~~to ~~and~~the ~~accounting~~other party.

WeTo ~~have~~support ~~established~~this anactivity, ~~office~~we inplan ~~Southern~~to ~~California~~expand ~~for~~our ~~this~~presence ~~module~~on ~~distribution~~the ~~business,~~U.S. ~~and~~mainland ~~will~~to ~~initially~~encompass ~~focus~~PV onmodule ~~developing~~sales ~~key~~personnel, ~~sales~~operations ~~channels~~and ~~within~~logistics ~~the~~expertise, ~~commercial~~product engineers, branding and ~~residential~~marketing ~~segments~~capacity, ofand ~~the~~support ~~distributed~~services ~~generation~~including ~~solar~~legal, ~~market.~~finance and accounting.

We have established an office in Southern California for this module distribution business and will initially focus on developing key sales channels within the commercial and residential segments of the distributed generation solar market. Tianwei Solar and Tianwei will concurrently work to expand sales into the utility market.

Financial Operations Review

During the three and ~~six~~nine months ended ~~September~~December 3031, 2011, we derived all of our revenue through PV system installation, resale of PV modules, and ancillary services related to Hoku Solar. We expect that all of our revenue will be derived through PV system installations, resale of PV modules, the sale of electricity, and the sale of polysilicon manufactured at our planned polysilicon production facility in Pocatello, Idaho.

During the three and ~~six~~nine months ended ~~September~~December 3031, 2011, our revenue was $17.91 million and $29.45 million, respectively, comprised of PV system installations, the resale of PV modules, and the sale of electricity.

Consolidated Results of Operations

The following analysis of the unaudited consolidated financial condition and results of operations of Hoku Corporation and its subsidiaries should be read in conjunction with the consolidated financial statements and the related notes thereto in this Quarterly Report on Form 10-Q.

Comparison of Three Months Ended ~~September~~December 3031, 2011 and 2010

Revenue. Revenue was $17.91 million for the three months ended ~~September~~December 3031, 2011, compared to $1.2 million for the same period in fiscal 2011. Revenue in both periods was primarily comprised of PV system installations, the resale of PV modules and ~~related~~the ~~services~~sale of electricity.

Cost of Revenue. Cost of revenue was $16.74 million for the three months ended ~~September~~December 3031, 2011, compared to $~~852~~948,000 for the same period in fiscal 2011. Cost of revenue primarily consisted of employee compensation and supplies and materials for the PV system installation, PVand ~~modules~~resale ~~and~~of ~~related~~PV ~~services~~modules.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $811.03 million for the three months ended ~~September~~December 3031, 2011, compared to $23.3 million for the same period in fiscal 2011. The increase of $58.70 million was primarily due to electricity costs related to the construction of the Polysilicon Plant of $3.5.2 million, ~~and~~increases ~~an increase~~ in payroll expense of $1.75 million, ~~which~~facility ~~includes~~and ~~stock~~equipment ~~compensation. In~~maintenance ~~addition~~of $375,000, ~~the~~and ~~increase~~employee inuniforms ~~expense~~and ~~included~~tools ~~costs related to a contract termination fee~~ of $~~200~~236,000. In addition, ~~rent primarily~~the ~~for~~increase ~~corporate,~~was ~~warehouse~~due ~~and~~to ~~storage~~expenses ~~facilities~~related ~~of $192,000,~~to ~~insurance~~recruiting of $~~169~~184,000, ~~professional~~depreciation ~~fees~~expense of $~~138~~133,000, ~~and~~a ~~office~~liquidated ~~supplies~~damages ~~and~~fee ~~equipment~~ of $~~113~~132,000~~. There~~, ~~higher~~insurance ~~expenses~~of ~~were offset by a~~ $~~451~~123,000, ~~decrease~~and inrent ~~costs~~primarily ~~related~~for tocorporate, awarehouse ~~reimbursement~~and ~~received~~storage ~~from~~facilities ~~the State~~ of ~~Idaho for training costs incurred~~$114,000.

Interest and Other Income~~/(Loss)~~. Interest and other income was $4827,000 for the three months ended ~~September~~December 3031, 2010. Interest and other income for the three months ended ~~September~~December 3031, 2010 was primarily ~~composed~~comprised of a ~~foreign~~general ~~currency~~excise ~~transaction~~tax ~~loss~~refund of $7021,000, ~~related to Euro-based invoices offset by~~ the reversal of prior accruals for general excise tax reserves due to the expiration of the statute limitations of $225,000, and interest income of $1,000.

~~-21-~~Comparison of Nine Months Ended December 31, 2011 and 2010

~~Comparison~~Revenue. ofRevenue ~~Six~~was ~~Months~~$9.5 ~~Ended~~million ~~September~~for 30the nine months ended December 31, 2011, compared to $3.4 million for the same period in fiscal 2011. Revenue in both periods was primarily comprised of PV system installations, the resale of PV modules and ~~2010~~the sale of electricity.

Cost of Revenue. ~~Revenue~~Cost of revenue was $28.4 million for the ~~six~~nine months ended ~~September~~December 3031, 2011, compared to $2.14 million for the same period in fiscal 2011. ~~Revenue~~Cost inof ~~both~~revenue ~~periods was~~ primarily ~~comprised~~consisted of PVemployee ~~system~~compensation ~~installations,~~and ~~the~~supplies ~~resale~~and ofmaterials PVfor ~~modules~~the ~~and~~PV ~~sale~~system ofinstallation, ~~electricity to~~ the ~~Hawaii~~resale ~~State Department~~ of ~~Transportation~~PV modules.

~~Cost~~Selling, ofGeneral ~~Revenue~~and Administrative Expenses. ~~Cost~~Selling, ofgeneral ~~revenue~~and ~~was~~administrative expenses were $229.16 million for the ~~six~~nine months ended ~~September~~December 3031, 2011, compared to $18.48 million for the same period in fiscal 2011. The ~~Cost~~increase of ~~revenue~~$20.8 million was primarily ~~consisted~~due to electricity costs related to the construction of ~~employee~~the Polysilicon Plant of $13.5 million, an increase in payroll expense of $4.5 million, which includes stock compensation, and ~~supplies~~the issuance of a warrant to Solargiga of $1.4 million. In addition, the increase in expenses included costs related to facility and ~~materials~~equipment maintenance of $507,000, rent primarily for ~~the~~corporate, PVwarehouse ~~system~~and ~~installation~~storage facilities of $493,000, PVinsurance ~~modules~~of $350,000, and employee uniforms and tools of $266,000. These increases were offset by a $743,000 decrease in costs related ~~services~~to the initial polysilicon production demonstration completed in April 2010, and a $639,000 decrease in costs related to a reimbursement received from the State of Idaho for training costs incurred.

~~Selling,~~Interest ~~General~~ and ~~Administrative~~Other ~~Expenses~~Income. ~~Selling,~~Interest ~~general~~ and ~~administrative~~other ~~expenses~~income ~~were~~was $~~18.4~~166,000 ~~million~~ for the ~~six~~nine months ended ~~September~~December 3031, ~~2011,~~2010. Interest ~~compared~~and toother ~~$5.5~~income ~~million~~ for the ~~same~~nine ~~period~~months inended ~~fiscal~~December ~~2011.~~31, ~~The~~2010 ~~increase of $12.9 million~~ was primarily ~~due~~comprised toof ~~electricity~~a ~~costs~~foreign ~~related~~currency totransaction ~~the~~gain ~~construction~~ of ~~the Polysilicon Plant of~~ $~~8.3 million~~107,000 anrelated ~~increase~~to inEuro-based ~~payroll expense of $3.0 million~~invoices, ~~which~~the ~~includes~~reversal ~~stock~~of ~~compensation,~~prior ~~and~~accruals ~~rent primarily~~ for ~~corporate,~~general ~~warehouse~~excise ~~and~~tax ~~storage~~reserves ~~facilities~~due ofto ~~$379,000. In addition,~~ the ~~increase~~expiration inof ~~expense~~the ~~included~~statute ~~costs~~limitations ~~related to a contract termination fee~~ of $~~200~~36,000, ~~insurance~~a ~~of $227,000,~~general ~~office~~excise ~~supplies~~tax ~~and~~refund ~~equipment~~ of $~~217~~21,000, and ~~professional~~interest ~~fees~~income of $~~175~~2,000. These increases were offset by a $743,000 decrease in costs related to the initial polysilicon production demonstration completed in April 2010, and a $451,000 decrease in costs related to a reimbursement received from the State of Idaho for training costs incurred.

Interest and Other Income. Interest and other income was $138,000 for the six months ended September 30, 2010. Interest and other income for the six months ended September 30, 2010 was primarily comprised of a foreign currency transaction gain of $107,000 related to Euro-based invoices and the reversal of prior accruals for general excise tax reserves due to statute limitations of $31,000.

Liquidity and Capital Resources

We have incurred significant net losses since inception and we have relied on our ability to fund our operations principally through borrowings under credit agreements, prepayments on long-term polysilicon contracts and registered and unregistered offerings of our securities. Even if we are successful in securing additional long-term polysilicon contracts that could provide additional prepayments, and our existing customers fulfill their obligations to make additional prepayments when due (of which there can be no assurances), we will still need to seek additional financing to complete our Polysilicon Plant. As of ~~September~~December 3031, 2011, we had cash and cash equivalents on hand of $3.2 million and current liabilities of $~~241~~236.8 million.

Tianwei, our majority shareholder has committed to provide us financial support for our ongoing operations, planned capital expenditures and debt service requirements until at least April 1, 2012. In addition, Tianwei has provided standby letters of credit as collateral for our third-party debt with a principal amount of $~~273~~314.7 million as of ~~September~~December 3031, 2011.

Under the terms of all of our supply agreements, the failure to deliver polysilicon by the stated delivery dates will allow the customers to terminate the supply agreements, require the repayments of the deposits under the agreements, which in the aggregate amount to $~~140~~139.8 million as of ~~September~~December 3031, 2011, which in turn could result in an event of default under our existing credit agreements with third party lenders. The event of default under our existing credit agreements could result in our lenders accelerating repayment of our third-party debt, which we do not have the resources to repay. To the extent that the third-party lenders accelerate repayment of the debt, Tianwei has provided a letter of commitment to us that it would not demand repayment from us until the original due dates of the third-party credit agreement ranging from May 2012 through ~~October~~February ~~2016~~2017.

As of ~~September~~December 3031, 2011, we have obtained an aggregate of $~~274~~315.5 million of debt financing through 1619 credit agreements to support our operations. As of ~~September~~December 3031, 2011, the total amount outstanding under these credit agreements was $~~273~~314.7 million. During the three months ended ~~September~~December 3031, 2011, we have obtained an aggregate of $2519.4 million of debt financing through two credit agreements with Industrial and Commercial Bank of China Limited, New York Branch, and ~~Bank of China, New York Branch, to support our operations~~$22.1 Inmillion ~~October~~of ~~2011,~~debt wefinancing ~~entered~~through ~~into~~a credit ~~agreements~~agreement with ~~Industrial and Commercial~~ Bank of China, ~~Limited,~~ New York Branch ~~and Bank of China~~, ~~New York Branch~~ to ~~provide~~support ~~for~~our ~~an additional $13~~operations.6 ~~million and $22.1 million, respectively, of debt financing.~~ All of our credit agreements are secured by letters of credit provided by Tianwei. The material terms of each credit agreement are described in more detail in Note 6 to the financial ~~statement~~statements. As of ~~September~~December 3031, 2011, we have funded approximately $~~534~~546.19 million of our Polysilicon Plant. In January 2012, we entered into a credit agreement with Industrial and Commercial Bank of China, Limited, New York Branch to provide for one or more term loans in an aggregate principal amount not to exceed $10.0 million. And in February 2012, we entered into a credit agreement with China Merchants Bank Co., Ltd., New York Branch to provide for a loan in an aggregate principal amount of $10 million. We estimate that we still need to raise at least an additional $~~162~~139.8 million to complete the construction of the Polysilicon Plant based upon our current estimate of $700 million to complete construction.

We expect to complete the construction of the 2,500 metric ton per year plant, or Phase I, through the use of our available cash, loan proceeds received from credit agreements and debt supported by Tianwei. Tianwei has committed to assist us in obtaining additional financing for any additional construction costs necessary to complete Phase I, for working capital needs and to purchase polysilicon from third parties to meet our upcoming commitments with the understanding that it will receive fair compensation for the financial services it provides us. We cannot be certain that we will reach an agreement with Tianwei regarding the appropriate compensation for Tianwei which could affect Tianwei's willingness to continue to assist us in obtaining necessary additional financing.

-22-

We plan on raising the remaining costs to complete our Polysilicon Plant and working capital needs through debt and/or equity offerings and possibly prepayments from new customer contracts. Tianwei has also committed to assist us in obtaining additional financing that may be required by us to construct and operate the Polysilicon Plant. There is no guarantee that we will be able to obtain additional financing in terms acceptable to us or at all, even with the assistance of Tianwei. Tianwei has committed to provide us financial support for our ongoing operations, planned capital expenditures and debt service requirements until at least April 1, 2012. Furthermore, any significant increase in the cost to complete the Polysilicon Plant could have a material adverse effect on our business, financial condition and results of operations.

The additional capital we have secured since the beginning of fiscal year 2011 has enabled us to settle accounts payable and accrued capital expenditures, and is providing us with the necessary capital to sustain operations. In addition, we are reserving adequate funding in the event we are required to purchase of third-party polysilicon to meet our contractual obligations with our polysilicon customers, and for interest and other financing costs related to our loans. However, the amount we have secured is not sufficient to complete construction of the Polysilicon Plant, and should there be delays in securing additional financing, we may need to implement cost and expense reduction programs and other programs to generate cash that are not currently planned, but are responsive to our liquidity requirements. If we are unable to secure additional financing or structure credit terms with our vendors that are favorable to us, we may also need to curtail construction of the Polysilicon Plant in the fourth quarter of fiscal 2012. If we have to curtail construction, our excess capital would primarily be used to reduce our current liabilities, to purchase of third-party polysilicon and for working capital needs. Tianwei has committed to assist us in obtaining additional financing for working capital needs and to purchase polysilicon from third-parties to meet our upcoming commitments with the understanding that it will receive fair compensation for the financial services it provides us. In addition, some of our lenders have lengthy and complex payment approval processes that can result in delays in transferring funds to us following the execution of a loan agreement. During the three months ended December 31, 2011, we experienced fund transfer delays that caused us to temporarily suspend our construction activities at the Polysilicon Plant. We have been working with Tianwei to ensure timely receipt of funds from these lenders, and we expect the schedules of fund transfers from China to become more predictable in the near future.

Net Cash Used In Operating Activities. Net cash used in operating activities was $1427.03 million and $26.86 million for the ~~six~~nine months ended ~~September~~December 3031, 2011 and 2010, respectively. Net cash used in operating activities for the ~~six~~nine months ended ~~September~~December 3031, 2011 primarily reflects the net loss of $1828.16 million which resulted in a cash deficit of $1626.24 million when adjusted for noncash operating activities~~. The~~ ~~cash deficit was offset by~~ and net cash ~~inflows~~outflows from working capital of $~~2.2 million~~855,000, primarily from increases in accounts ~~payable~~receivable and ~~accrued~~other ~~operating~~current ~~expenditures and deferred revenue~~assets. In comparison, net cash used in operating activities for the ~~six~~nine months ended ~~September~~December 3031, 2010 ~~primarily~~reflected ~~reflects~~a ~~the~~ net loss of $47.6 million ~~which~~or ~~resulted in~~ a cash deficit of $36.97 million when adjusted for noncash operating activities. The cash deficit was offset by net cash inflows from working capital of $~~1.1 million~~139,000, primarily from decreases in other current assets and increases in accounts payable and accrued operating expenditures and deferred revenue.

We had a working capital ~~deficit~~deficits of $~~231~~221.0 million and $3332.6 million as of ~~September~~December 3031, 2011 and March 31, 2011, respectively. The working capital deficits reflect the current portion of notes payable that are due within one year, the increased deployment of funds to construct the Polysilicon Plant in Idaho and the Company’s net losses. In addition, $8195.2 million and $25.3 million of deposits from long-term polysilicon contracts were classified as short-term liabilities as of ~~September~~December 3031, 2011 and March 31, 2011, respectively, to reflect the prepayments that apply to the product deliveries that are scheduled to ship within one year.

Net Cash Used In Investing Activities. Net cash used in investing activities was $78106.52 million for the ~~six~~nine months ended ~~September~~December 3031, 2011, compared to $73141.24 million for the same period in fiscal 2011. The net cash used in investing activities in both periods was ~~primarily~~ related to the continuing construction of the Polysilicon Plant.

Net Cash Provided By Financing Activities. Net cash provided by financing activities was $77118.4 million for the ~~six~~nine months ended ~~September~~December 3031, 2011, compared to $80151.42 million for the same period in fiscal 2011. The net cash provided by financing activities during the ~~six~~nine months ended ~~September~~December 3031, 2011 was primarily due to loan proceeds received from Industrial and Commercial Bank of China, New York Branch of $4969.71 million, loan proceeds received from the New York Branch of CITIC Bank International Limited of $8.9 million, and loan proceeds received from Bank of China, New York Branch of $20 42.1 million. The net cash provided by financing activities during the ~~six~~nine months ended ~~September~~December 3031, 2010 was primarily due to loan proceeds received from China Construction Bank of $2857.3 million, loan proceeds received from China Merchants Bank of $4568.0 million, loan proceeds received from Industrial and Commercial Bank of China of $15.5 million and deposits received under polysilicon supply agreements of $913.92 million, offset by cash distributions to the minority investor of Hoku Solar Power I of $2.7 million.

Operating Capital and Capital Expenditure Requirements

As we invest resources towards our polysilicon manufacturing and PV systems installation service businesses, develop our products, expand our corporate infrastructure, prepare for the increased production of our products and evaluate new markets to grow our business, we expect that our expenses will continue to increase and, as a result, we will need to generate significant revenue to achieve profitability.

We do not expect to generate significant revenue until we successfully commence the manufacture and shipment of polysilicon and begin meeting the obligations under our supply contracts. We have incurred $~~576~~631.6 million in capital expenditures as of ~~September~~December 3031, 2011. We are currently commissioning the 2,500 metric ton plant, and we expect that it will cost approximately $700 million to add on-site trichlorosilane, or TCS, production and increase our annual production capacity to 4,000 metric tons.

The amount we have secured is not sufficient to complete construction of the Polysilicon Plant, and should there be delays in securing additional financing, we may need to implement cost and expense reduction programs and other programs to generate cash that are not currently planned, but are responsive to our liquidity requirements. If we are unable to secure additional financing or structure credit terms with our vendors that are favorable to us, we would also need to curtail construction of the Polysilicon Plant in the first quarter of calendar 2012. If we have to curtail construction, our excess capital would primarily be used for interest and other financing costs related to our loans, reduce our current liabilities, purchase of third-~~23-~~party polysilicon and for working capital needs.

We expect to complete the construction of the 2,500 metric ton per year plant, or Phase I, through the use of our available cash and loan proceeds and through additional debt supported by Tianwei. Tianwei has committed to assist us in obtaining additional financing for any additional construction costs necessary to complete Phase I, for working capital needs and to purchase polysilicon from third-parties to meet our upcoming commitments with the understanding that it will receive fair compensation for the financial services it provides us. We cannot be certain that we will reach an agreement with Tianwei regarding the appropriate compensation for Tianwei which could affect Tianwei's willingness to continue to assist us in obtaining necessary additional financing.

We plan on raising the remaining costs to complete our Polysilicon Plant and working capital needs through debt and/or equity offerings and possibly prepayments from new customer contracts. Tianwei has also committed to assist us in obtaining additional financing that may be required by us to construct and operate the Polysilicon Plant. There is no guarantee that we will be able to obtain additional financing in terms acceptable to us or at all, even with the assistance of Tianwei. There is no guarantee that we will be able to obtain additional financing on terms acceptable to us or at all, even with the assistance of Tianwei. Furthermore, any significant increase in the cost to complete the Polysilicon Plant could have a material adverse effect on our business, financial condition and results of operations.

The amount we have secured is not sufficient to complete construction of the Polysilicon Plant, and should there be delays in securing additional financing, we may need to implement cost and expense reduction programs and other programs to generate cash that are not currently planned, but are responsive to our liquidity requirements. If we are unable to secure additional financing or structure credit terms with our vendors that are favorable to us, we would also need to curtail construction of the Polysilicon Plant in the fourth quarter of calendar 2011. If we have to curtail construction, our excess capital would primarily be used for interest and other financing costs related to our loans, reduce our current liabilities, purchase of third-party polysilicon and for working capital needs.

The issuance of additional equity and convertible debt instruments may result in additional dilution to our current stockholders and/or a change of control. If we raise additional funds through the issuance of convertible debt securities, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. We may require additional capital beyond our currently forecasted amounts. Any required additional capital may not be available on reasonable terms, if at all. If we are unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned research, development and commercialization and manufacturing activities, which could harm our business. Our forecasts of the period of time through which our financial resources will be adequate to support our operations are forward-looking statements and involve risks and uncertainties. Actual results could vary as a result of a number of factors, including the factors discussed in Part II, Item 1.A. “Risk Factors.”

Contractual Obligations

The following table summarizes the contractual obligations that existed atas ~~September~~of 30December 31, 2011. The amounts in the table below do not include time and materials contracts or incentive payments.

	Payment due by Period
Contractual Obligations	Total		Less Than One Year		One to Three Years		Three to Five Years		More Than Five Years
	(in thousands)
Construction in progress	$	868,~~062~~079	$	868,~~062~~079	$	—	$	—	$	—
Equipment purchases		45,~~986~~090		45,~~986~~090		—		—		—
Supply purchases		7061,~~109~~245		27,~~623~~682		4233,~~486~~563		—		—
Leases		~~501~~846		~~165~~297		~~310~~549		26—		—
Customer deposits		139,980		81,222		23,650		10,600		24,508
Deposits – Hoku Materials		139,760		95,227		17,275		8,333		18,925
Total	$	~~301~~215,~~638~~020	$	~~200~~136,~~058~~375	$	6651,~~446~~387	$	108,~~626~~333	$	2418,~~508~~925

City of Pocatello. In March 2007, we entered into a 99-~~24-~~year ground lease with the City of Pocatello, Idaho, for approximately 67 acres of land and, in May 2007, the City of Pocatello approved an ordinance that authorizes the Pocatello Development Authority to provide us certain tax incentives related to certain necessary infrastructure costs we incur in the construction and operation of our Polysilicon Plant. In May 2009, we entered into an Economic Development Agreement, or the EDA Agreement, with the Pocatello Development Authority, or PDA, pursuant to which PDA agreed to reimburse to us amounts we actually incur in making certain infrastructure improvements consistent with the North Portneuf Urban Renewal Area and Revenue Allocation District Improvement Plan and the Idaho Urban Renewal Law, or the Infrastructure Reimbursement, and an additional amount as reimbursement for and based on the number of full time employee equivalents we create and maintain, or the Employment Reimbursement, at the Polysilicon Plant. The parties agreed that (a) the Infrastructure Reimbursement will be an amount that is equal to 95% of the tax increment payments PDA actually collects on the North Portneuf Tax Increment Financing District with respect to our real and personal property located in such district, or the TIF Revenue, up to approximately $26.0 million, less the actual Road Costs (defined below), and (b) the Employment Reimbursement will be an amount that is equal to 50% of the TIF Revenue, up to approximately $17.4 million. Each of the Infrastructure Reimbursement and the Employment Reimbursement will be made to us over time as TIF Revenue is received, and only after the costs of completing a public access road to the Polysilicon Plant, in an amount not to exceed $11.0 million, or the Road Costs, has been paid to PDA out of TIF Revenue, and up to $2.0 million in capital costs has been paid to the City of Pocatello out of TIF Revenue. As of December 31, 2011, we have received $629,000 in connection with the Employment Reimbursement.

City of Pocatello. In March 2007, we entered into a 99-year ground lease with the City of Pocatello, Idaho, for approximately 67 acres of land and, in May 2007, the City of Pocatello approved an ordinance that authorizes the Pocatello Development Authority to provide us certain tax incentives related to certain necessary infrastructure costs we incur in the construction and operation of our Polysilicon Plant. In May 2009, we entered into an Economic Development Agreement, or the EDA Agreement, with the Pocatello Development Authority, or PDA, pursuant to which PDA agreed to reimburse to us amounts we actually incur in making certain infrastructure improvements consistent with the North Portneuf Urban Renewal Area and Revenue Allocation District Improvement Plan and the Idaho Urban Renewal Law, or the Infrastructure Reimbursement, and an additional amount as reimbursement for and based on the number of full time employee equivalents we create and maintain, or the Employment Reimbursement, at the Polysilicon Plant. The parties agreed that (a) the Infrastructure Reimbursement will be an amount that is equal to 95% of the tax increment payments PDA actually collects on the North Portneuf Tax Increment Financing District with respect to our real and personal property located in such district, or the TIF Revenue, up to approximately $26.0 million, less the actual Road Costs (defined below), and (b) the Employment Reimbursement will be an amount that is equal to 50% of the TIF Revenue, up to approximately $17.4 million. Each of the Infrastructure Reimbursement and the Employment Reimbursement will be made to us over time as TIF Revenue is received, and only after the costs of completing a public access road to the Polysilicon Plant, in an amount not to exceed $11.0 million, or the Road Costs, has been paid to PDA out of TIF Revenue, and up to $2.0 million in capital costs has been paid to the City of Pocatello out of TIF Revenue. As of September 30, 2011, we have received $573,000 in connection with the Employment Reimbursement.

Stone & Webster, Inc. In August 2007, we entered into an Engineering, Procurement and Construction Management Contract with Stone & Webster, Inc., or S&W, a subsidiary of The Shaw Group Inc., for engineering and procurement services for the construction of our Polysilicon Plant, which was subsequently amended in October 2007, April 2008, February 2009 and February 2010 (collectively referred to as “Engineering Agreement”). Under the Engineering Agreement, S&W would provide the engineering services to complete the design and plan for construction of the Polysilicon Plant, along with procurement services. S&W would be paid on a time and materials basis plus a fee for its services.

During the six months ended September 30, 2011, we made payments to S&W of $577,000, and as of September 30, 2011, we had paid S&W an aggregate amount of $60.7 million under the Engineering Agreement. As of September 30, 2011, all work under the aforementioned agreements and change orders has been completed.

JH Kelly LLC. In August 2007, we entered into a Cost Plus Incentive Contract with JH Kelly LLC, or JH Kelly, for construction services for the construction of the Polysilicon Plant, which was subsequently amended in October 2007, April 2008, March 2009, September 2009, and August 2010 (collectively referred to as the “JH Kelly Construction Agreement”). Under the JH Kelly Construction Agreement, JH Kelly agreed to provide the construction services as our general contractor for the construction of the Polysilicon Plant with a production capacity of 4,000 metric tons per year. The target cost for the services to be provided under the JH Kelly Construction Agreement is $165.0 million, including up to $5.0 million of incentives that may be payable.

Under this agreement, we also agreed, among other things, to (i) confirm the plan for JH Kelly to complete construction of the Polysilicon Plant and (ii) set up a payment schedule relating to outstanding invoices that we owed to JH Kelly and any additional expenses that JH Kelly incurred relating to the construction of the Polysilicon Plant..

During the six months ended September 30, 2011, we made payments to JH Kelly of $41.4 million, and as of September 30, 2011, we paid JH Kelly an aggregate amount of $225.5 million under the JH Kelly Construction Agreement. As of September 30, 2011, all work under the aforementioned contract and change orders has been completed.

Dynamic Engineering Inc. In October 2007, we entered into an agreement with Dynamic Engineering Inc., or Dynamic, for design and engineering services, and a related technology license for the process to produce and purify TCS. Under the agreement with Dynamic, or the Dynamic Agreement, Dynamic is obligated to design and engineer a TCS production facility that is capable of producing 20,000 metric tons of TCS for the Polysilicon Plant. Under the Dynamic Agreement, Dynamic's engineering services are provided and invoiced on a time and materials basis, and the license fee will be calculated upon the successful completion of the TCS production facility, and demonstration of certain TCS purity and production efficiency capabilities. The maximum aggregate amount that the Company may pay Dynamic for the engineering services and the technology license is $12.5 million, which includes an incentive for Dynamic to complete the engineering services under budget. Dynamic is guaranteeing the quantity and purity of the TCS to be produced at the completed facility, and has agreed to indemnify the Company for any third-party claims of intellectual property infringement.

During the six months ended September 30, 2011, we made no payments to Dynamic, and as of September 30, 2011, we had paid Dynamic an aggregate amount of $8.4 million under the Dynamic Agreement. As of September 30, 2011, all work under the aforementioned agreement has been completed.

GEC Graeber Engineering Consultants GmbH and MSA Apparatus Construction for Chemical Equipment Ltd. We entered into a contract with GEC Graeber Engineering Consultants GmbH, or GEC, and MSA Apparatus Construction for Chemical Equipment Ltd., or MSA, for the purchase and sale of 16 hydrogen reduction reactors and hydrogenation reactors for the production of polysilicon, and related engineering and installation services. Under the contract, we will pay up to a total of 20.9 million Euros for the reactors. The reactors are designed and engineered to produce approximately 2,500 metric tons of polysilicon per year. The term of the contract extends until the end of the first month after the expiration date of the warranty period, but may be terminated earlier under certain circumstances.

As of ~~September~~December 3031, 2011, pursuant to the contract with GEC and MSA, we received all 16 hydrogen reduction reactors, eight hydrogenation reactors, and related equipment, at the Polysilicon Plant.

~~-25-~~During the nine months ended December 31, 2011, we made payments to GEC and MSA of 495,000 Euros or $704,000, and as of December 31, 2011, we paid GEC and MSA an aggregate amount of 19.5 million Euros or $27.4 million.

~~During~~Idaho ~~the~~Power ~~six~~Company. ~~months~~We ~~ended~~entered ~~September~~into 30an Electric Service Agreement with Idaho Power, ~~2011~~or the ESA, wefor ~~made~~the ~~payments~~supply of electric power and energy to ~~GEC~~us for use in the Polysilicon Plant, subject to the approval of the Idaho Public Utilities Commission, or the IPUC. The term of the ESA is four years, beginning in June 2009 and ~~MSA~~will expire in May 2013. During the term of ~~495~~the ESA, Idaho Power agrees to make up to 82,000 ~~Euros~~kilowatts of power available to us at certain fixed rates, which are subject to change only by action of the IPUC. After the initial term of the ESA expires, either we or ~~$704~~Idaho Power may terminate the ESA without prejudice. If neither party chooses to terminate the ESA,~~000~~ then Idaho Power will continue to provide electric service to us. Beginning in May 2011, we are required to make a minimum monthly payment ranging between $1.1 million and as$1.9 ofmillion ~~September~~per 30month. In addition, pursuant to applicable tariff regulations and under the ESA, in October 2011, we paid ~~GEC~~Idaho ~~and~~Power ~~MSA~~a ancash ~~aggregate~~deposit in the amount of ~~19.5~~$4 million, ~~Euros~~which ormay ~~$27~~be applied to our monthly bills.4 The ~~million~~deposit will be held for a minimum of 12 months and may be refunded to us, plus interest, if we meet certain criteria based on Idaho Power’s credit evaluation.

~~Idaho~~As ~~Power~~of ~~Company. We~~December ~~entered into an Electric Service Agreement with Idaho Power~~31, ~~or the ESA~~2011, ~~for~~we ~~the~~were ~~supply~~contractually ofobligated ~~electric power and energy~~ to uspay ~~for~~approximately ~~use~~$61.2 inmillion ~~the Polysilicon Plant, subject~~ to ~~the approval of the~~ Idaho ~~Public~~Power ~~Utilities~~over ~~Commission, or~~ the ~~PUC. The~~ term of the ESA ~~is four years, beginning in June 2009 and will expire in May 2013~~. During the ~~term~~nine ofmonths ~~the~~ended ~~ESA,~~December ~~Idaho Power agrees to make up to 82~~31,~~000~~ kilowatts of power available to us at certain fixed rates, which are subject to change only by action of the PUC. After the initial term of the ESA expires, either we or Idaho Power may terminate the ESA without prejudice. If neither party chooses to terminate the ESA, then Idaho Power will continue to provide electric service to us. Beginning in May 2011, we ~~are~~made ~~required~~payments to make a minimum monthly payment ranging between $1.1 million and $1.9 million per month until October 2011. In addition, pursuant to applicable tariff regulations and under the ESA, in October 2011, we paid Idaho Power ~~a cash deposit in the amount~~ of $417.2 million~~, which may be applied to our monthly bills~~. ~~The deposit will be held for a minimum of 12 months and may be refunded to us, plus interest, if we meet certain criteria based on Idaho Power’s credit evaluation.~~

AsIn ofFebruary ~~September 30~~2012, ~~2011,~~ we ~~were~~filed ~~contractually~~a ~~obligated~~stipulation to(the ~~pay~~“Stipulation”) ~~approximately~~with ~~$67.1~~the ~~million~~IPUC to ~~Idaho~~amend ~~Power over~~ the ~~term of the~~ ESA. ~~During~~If the ~~six~~Stipulation ~~months~~is ~~ended~~approved ~~September~~by 30IPUC, ~~2011,~~ we ~~made~~will ~~payments~~enter tointo ~~Idaho~~an ~~Power~~amended ofand ~~$9.6~~restated ~~million~~Electric Service Agreement (the “AESA”) based on the terms set forth in the Stipulation.

~~PVA~~Pursuant ~~Tepla~~to ~~Danmark.~~the ~~In April 2008~~AESA, we ~~entered~~would ~~into~~be granted an ~~agreement~~18-month ~~with~~deferral ~~PVA~~period ~~Tepla~~from ~~Danmark,~~January ~~or PVA~~1, ~~for~~2012 ~~the~~to ~~purchase~~June ~~and~~30, ~~sale~~2013 ofduring ~~slim~~which ~~rod~~our ~~pullers~~monthly ~~and~~billed ~~float~~energy ~~zone~~charge ~~crystal~~would ~~pullers.~~be ~~Under~~reduced ~~the~~from ~~agreement,~~$2.0 ~~PVA~~million ~~is obligated~~ to ~~manufacture and deliver the slim rod pullers and float zone crystal pullers for the Project~~$800,000. We ~~Slim~~would ~~rod~~also ~~pullers~~be ~~are~~required ~~used~~ to make ~~thin~~an ~~rods~~extra ofone-time ~~polysilicon~~payment ~~that are then transferred into polysilicon deposition reactors~~ to beIdaho ~~grown~~Power ~~through~~of ~~a chemical vapor deposition process into polysilicon rods for commercial sale to our end customers~~$3.8 ~~The~~million, ~~float zone crystal pullers convert the slim rods into single crystal silicon for use in testing the quality~~ and ~~purity~~Idaho ofPower ~~the~~would ~~polysilicon.~~apply ~~The total fees payable to PVA is approximately~~ $62.0 million, ~~which is payable in four installments, the first~~ of ~~which~~our ~~was~~existing ~~made in August 2008~~$4.0 ~~Either~~million ~~party~~deposit ~~may~~to ~~terminate~~ the ~~agreement~~one-time if the other party is in material breach of the agreement and has not cured such breach within 180 days after receipt of written notice of the breach, or if the other party is bankrupt, insolvent, or unable to pay its debtspayment. InWe ~~June~~would ~~2011,~~be wecharged ~~amended~~an ~~this~~additional ~~agreement to restructure the payment terms with PVA, pursuant to which in July 2011, we paid~~ $~~318~~100,000 ~~and~~per ~~delivered~~month aduring ~~letter of credit in~~ the ~~amount~~18-month ofdeferral ~~$636,000. We~~period ~~are~~in ~~also~~order ~~required~~ to pay off the remaining amount of ~~$318,000 upon~~ the ~~earlier~~one-time ~~of six months after the date of commissioning and December 31, 2011~~payment.

~~During~~Idaho Power would create a balancing account during the ~~six~~18-month ~~months~~deferral ~~ended~~period ~~September,~~for ~~2011,~~the wedifference ~~made~~between ~~payments~~the tomonthly ~~PVA~~minimum ofbilled ~~$2.3~~energy ~~million,~~under the ESA and asthe ofmonthly ~~September~~billed ~~30,~~energy ~~2011,~~that weresults ~~had~~from ~~paid~~the ~~PVA~~ESA. anThe ~~aggregate~~maximum amount of this balancing account would be capped at $616.35 million. Asand ofwould ~~September~~be ~~30,~~balanced ~~2011~~against our actual energy consumption during the deferral period. Beginning in January 2014, we would be required to repay the ~~slim~~balancing ~~rod~~account ~~pullers~~by ~~and~~making ~~float~~additional ~~zone~~payments ~~crystal~~to ~~pullers~~Idaho ~~have~~Power ~~been~~equal ~~delivered~~to ~~and~~1/12th ~~accepted~~of the total amount of the balancing account until the balancing account reaches zero.

~~Evonik~~Our ~~Degussa~~monthly ~~Corporation. In~~power ~~March~~demand ~~2010,~~would webe ~~entered~~capped ~~into~~at ~~an agreement with Evonik Degussa Corporation~~20,000 orkilowatts ~~Evonik,~~during ~~for~~ the ~~supply~~18-month ofdeferral ~~TCS~~period, ~~for~~and ~~use~~if inwe ~~the~~exceed ~~manufacturing~~that ~~of polysilicon for a term of approximately one year ending in February 2011. In April 2010~~cap, we ~~paid~~would ~~Evonik~~be acharged ~~$100,000 deposit for~~ the ~~ISO~~Monthly ~~containers~~Minimum ~~that~~Billed ~~will~~Energy ~~transport~~Charge ~~the~~according ~~TCS~~ to ~~our~~the ~~facility~~ESA infor ~~Pocatello, Idaho. In February 2011, we amended and restated this agreement to, among other things, extend~~ the ~~term~~remainder of the ~~agreement~~18-month todeferral ~~November 2011~~period. ~~Under~~The ~~the amended agreement, Evonik has agreed to sell to us a minimum quantity of TCS during the~~ term of the ~~agreement. Pricing~~ESA iswould ~~fixed~~be ~~based~~extended onto ~~the~~December ~~quantity~~1, ~~supplied~~2014, induring ~~each~~which ~~calendar~~time ~~month and based on our frequency of payment. Commencing in May 2011,~~ we will ~~forecast~~pay ~~our~~embedded-cost ~~estimated~~rates ~~desired~~beginning ~~monthly~~with ~~quantity~~service ofprovided ~~TCS. Pursuant~~on toand ~~the~~after ~~agreement~~December 1, ~~Evonik is required to provide a minimum amount of TCS per calendar month~~2013, ~~and~~including itthe ~~will~~then ~~use~~applicable ~~commercially~~Minimum ~~reasonable~~Billed ~~efforts~~Energy ~~to provide additional quantities that we may request in addition to the monthly minimum amount~~Charge.

PVA Tepla Danmark. In April ~~2010~~2008, we ~~paid~~entered ~~Evonik~~into aan ~~$100~~agreement with PVA Tepla Danmark,~~000~~ ~~deposit~~or PVA, for the ~~ISO~~purchase ~~containers~~and ~~that~~sale ~~will~~of ~~transport~~slim rod pullers and float zone crystal pullers. Under the ~~TCS~~agreement, PVA is obligated to manufacture and deliver the slim rod pullers and float zone crystal pullers for the Project. Slim rod pullers are used to make thin rods of polysilicon that are then transferred into polysilicon deposition reactors to be grown through a chemical vapor deposition process into polysilicon rods for commercial sale to our ~~facility~~end customers. The float zone crystal pullers convert the slim rods into single crystal silicon for use in ~~Pocatello,~~testing ~~Idaho~~the quality and purity of the polysilicon. ~~Evonik~~ ~~will~~The ~~return~~total ~~our~~fees ~~deposit~~payable ~~upon~~to ~~expiration~~PVA is approximately $6.0 million, which is payable in four installments, the first of which was made in August 2008. Either party may terminate the ~~initial~~agreement ~~term~~if the other party is in material breach of the agreement and ~~completion~~has not cured such breach within 180 days after receipt of ~~our~~written ~~obligations~~notice ~~under~~of the ~~agreement;~~breach, ~~however~~or if the other party is bankrupt, insolvent, or unable to pay its debts. In June 2011, we ~~expect~~amended ~~the~~this agreement to berestructure ~~amended~~the payment terms with PVA, pursuant to which in July 2011, we paid $318,000, delivered a letter of credit in the amount of $636,000, and paid $318,000 in December 2011.

~~The~~During ~~aggregate net value of~~ the ~~TCS~~nine tomonths beended ~~purchased~~December ~~under~~31, ~~the~~2011, ~~amended~~we ~~agreement~~made ~~during~~payments ~~the~~to ~~term~~PVA isof ~~approximately~~ $132.57 million., Asand as of ~~September~~December 3031, 2011, we had paid ~~Evonik~~PVA an aggregate amount of $~~100~~6.6 million. As of December 31,~~000~~ 2011, the slim rod pullers and float zone crystal pullers have been delivered and accepted.

Evonik Degussa Corporation. In March 2010, we entered into an agreement with Evonik Degussa Corporation, or Evonik, for the supply of TCS for use in the manufacturing of polysilicon for a term of approximately one year ending in February 2011. In April 2010, we paid Evonik a $100,000 deposit for the ISO containers that will transport the TCS to our facility in Pocatello, Idaho. Evonik will return our deposit upon expiration of the initial term and completion of our obligations under the agreement; however, we expect the agreement to be amended. In February 2011, we amended and restated this agreement to, among other things, extend the term of the agreement to November 2011. Pricing is fixed based on the quantity supplied in each calendar month and based on our frequency of payment. Pursuant to the agreement, Evonik is required to provide a minimum amount of TCS per calendar month, and it will use commercially reasonable efforts to provide additional quantities that we may request in addition to the monthly minimum amount. The amended agreement required that we purchase, pay for, and accept a minimum quantity of TCS by August 2011 or pay liquidation damages of $33,000 per month until we accept the minimum quantity. We did not accept the minimum quantity by August 2011 and as of December 31, 2011 have paid $66,000 in liquidated damages.

The aggregate net value of the TCS to be purchased under the amended agreement during the term is approximately $13.5 million. During the nine months ended December 31, 2011, we made payments to Evonik of $1.2 million, and as of December 31, 2011, we paid Evonik an aggregate amount of $1.3 million.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our unaudited consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements and the instructions to Form 10-Q and Regulation S-X. The preparation of these unaudited consolidated financial statements requires us to make estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our management has discussed the development and selection of these critical accounting policies and estimates with the audit committee of our board of directors and the audit committee has reviewed our disclosures relating to our critical accounting policies and estimates in this report. Actual results may differ from these estimates.

-26-

While our significant accounting policies are more fully described in Note 1 to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q and Note 1 to the audited financial statements included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on July 15, 2011, as amended, we believe that the following accounting policies and estimates are critical to a full understanding and evaluation of our reported financial results.

Revenue Recognition. Revenue from polysilicon, ~~and~~ PV system installations, ~~and~~ the resale of PV system installation inventory, and the sale of electricity is recognized when there is evidence of an arrangement, delivery has occurred or services have been rendered, the arrangement fee is fixed or determinable, and collectability of the arrangement fee is reasonably assured. PV system installation contracts may have several different phases with corresponding progress billings.

We apply the percentage-of-completion method of revenue recognition for our PV system contracts for which we can make reasonably dependable estimates of costs. Under the percentage-of-completion method, revenue and related costs are deferred and subsequently recognized based on the progress of the installation and an estimate of remaining costs to complete the installation. We recognize revenue under the completed contract method, in which revenue and related costs are deferred and then subsequently recognized only upon completion of the contract.

We entered the PV system installation business in fiscal year 2008. Prior to April 1, 2010, due to the short period of time we were in the PV system installation business, we did not have the historical experience or the procedures in place to develop reasonably dependable estimates of costs and therefore utilized the completed contract method to record revenue for PV contracts. Subsequent to this startup period, we have developed history and reliable processes and procedures of projecting and tracking contract fulfillment costs, in order to develop reasonably dependable estimates which are required to use the percentage -of -completion method. In applying the percentage-of-completion method, we determine the percentage of contract completion on the basis of engineering, labor, subcontractor and other installation costs and excludes material and other non-installation contract costs, which are not considered the primary cost determinants in gauging the progress of the PV system contract. Revenue and related costs are recognized proportionately based on the completion percentage of each project and considering the current estimate of remaining costs required to complete the project.

We will continue to recognize revenue under the completed contract method for PV installations contracts entered into prior to April 1, 2010.

Stock-Based Compensation. We account for stock-based employee compensation arrangements using the fair value method, whereby the fair value of stock options granted to our employees and non-employees is determined using the Black-Scholes pricing model. The Black-Scholes pricing model requires the input of several subjective assumptions including the expected or contractual life of the option and the expected volatility of the option at the time the option is granted. The fair value of our option, as determined by the Black-Scholes pricing model, is expensed over the requisite service period, which is generally one to five years for stock options.

The market value is based on the public market for our common stock. Due to our limited operating history, we have assumed a volatility of 100% based on competitive benchmarks and management’s judgment and an expected life based on the average of the typical vesting period and the option’s contractual life which ranges from 5.5 to 7.5 years.

The assumptions used in calculating the fair value of our stock options and restricted stock awards represent our management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, changes in these inputs and assumptions can materially affect the measure of the estimated fair value of our stock options and restricted stock awards. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those options and shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period. Furthermore, this accounting estimate is reasonably likely to change from period to period as further stock options and restricted stock awards are granted and adjustments are made for stock option and restricted stock awards forfeitures and cancellations. We do not record any deferred stock-based compensation on our balance sheet for our stock options and restricted stock awards.

We expect our stock-based compensation expense from restricted stock awards to increase as we expand our operations and hire new employees. These expenses will increase our overall expenses and may increase our losses for the foreseeable future. As a restricted stock award is a non-cash expense, it will not have any effect upon our liquidity or capital resources.

Accounting for the Impairment or Disposal of Long Lived Assets. As of ~~September~~December 3031, 2011, primarily all of our long lived assets related to the construction-in-progress of our ~~polysilicon~~Polysilicon ~~plant~~Plant and PV systems. In accounting for long-lived assets, we must make estimates about the expected useful lives of the assets, the expected residual values of the assets and the potential for impairment based on the fair value of the assets and if the cash flows they expect to generate are insufficient to support the carrying value of the assets.

During the quarter ended ~~September~~December 3031, 2011, we observed a significant decline in the market prices for solar-grade polysilicon, caused by an ~~overall~~oversupply ~~softening~~ of polysilicon relative to demand in the solar materials supply chain. We concluded that the decline in the price in solar-grade polysilicon represented an event that ~~indicates~~indicated that the carrying value of our ~~polysilicon~~Polysilicon ~~plant~~Plant under construction may not be recoverable. ~~As of September 30, 2011, the carrying value of the polysilicon plant was approximately $576 million.~~ We ~~prepared~~commenced with an ~~undiscounted~~impairment ~~cash~~analysis ~~flow model~~ to assess the recoverability of the ~~polysilicon~~Polysilicon ~~plant~~Plant, which required the use of various inputs and assumptions over future periods. In this analysis, we evaluated the following items key assumptions in determining whether the carrying value of the ~~polysilicon~~Polysilicon ~~plant~~Plant exceeded the expected future undiscounted cash flows:

·	total costs to complete construction, including capitalized interest, of $700 million;

· an expected useful life of the ~~polysilicon~~Polysilicon ~~plant~~Plant of 30 years;

· the projected costs to replace equipment with an average estimated useful life of 15 years during the life of the ~~polysilicon~~Polysilicon ~~plant~~Plant;

·	an expected weighted average cost to produce polysilicon;

·	an expectation that substantially all polysilicon will be sold either to third parties or the Company’s parent company, Tianwei; and

· the ~~weighted average sales price of polysilicon based on contractual prices and~~ estimated market prices over the estimated 30 year life of the ~~polysilicon~~Polysilicon ~~plant~~Plant.

~~-27-~~In developing these assumptions, we considered the expected operating results based upon internal projections and engineering analyses. Estimated market prices of polysilicon over the estimated 30 year life of the polysilicon plant were based on the assumption that the market price at December 31, 2011 was approximately $30 per kilogram. It was also assumed that the long term market price for polysilicon would experience a recovery beyond the rate of inflation due to a rebalancing of supply and demand that would result in a stabilization of prices. As of December 31, 2011, the sum of the expected future undiscounted cash flows from the polysilicon plant exceeded its carrying amount; therefore we concluded the carrying amount of the plant is recoverable.

InThere ~~developing~~are ~~these~~inherent uncertainties related to the significant assumptions used in our analysis. For example, we ~~considered~~are assuming that our cost to produce polysilicon will be at the lower end of the reported average production costs of our competitors that use similar production processes. Our expected ~~operating~~cost ~~results~~to produce polysilicon is based ~~upon~~on our internal projections. If ~~and~~the ~~engineering~~actual ~~analyses.~~cost Asto ofproduce ~~September~~polysilicon ~~30,~~were ~~2011~~to exceed our cost projections, or if we are unable to sell substantially all polysilicon at a sales price that eventually recovers at a rate greater than the ~~sum~~rate of ~~the~~inflation, ~~expected~~we ~~future~~may ~~undiscounted~~be ~~cash~~unable ~~flows~~to ~~from~~recover ~~the~~our investment in our polysilicon plant ~~exceeded~~absent ~~its~~any ~~carrying~~reduction ~~amount~~in byrelated acapital ~~narrow~~costs. ~~margin;~~Additionally, ~~therefore~~the weactual ~~concluded~~cost ~~the~~to ~~carrying~~construct ~~amount~~and ofequip the polysilicon plant ismay ~~recoverable~~be significantly higher than our estimated cost. IfChanges ~~the~~in ~~average~~construction ~~market~~costs ~~prices~~resulting offrom ~~polysilicon~~increased ~~were~~demand, tomodifications ~~decline~~in toconstruction ~~approximately~~timelines, ~~$34~~changes ~~per~~in ~~kilogram~~the ~~over~~design, delays in the ~~estimated~~construction ~~useful~~schedule ~~life~~and other factors could cause the actual cost of the polysilicon plant, to exceed the ~~carrying~~estimated ~~amount~~cost. Technological ofdevelopment in the solar power industry could reduce market demand for polysilicon ~~plant~~or allow for lower cost production of polysilicon by our competitors, which could cause revenues and profits to decline, which may ~~not~~impact bethe ~~recoverable~~estimated useful life of the polysilicon plant.

InAs ~~addition~~of toDecember ~~declines~~31, ~~in the market prices of polysilicon~~2011, ~~certain~~based ~~other~~on ~~events or changes in circumstances in~~ the ~~future~~assumptions ~~may~~discussed ~~also~~above, ~~indicate that~~ the ~~carrying~~sum ~~amount~~ of the ~~polysilicon plant may not be recoverable. Such events or circumstances include, but are not limited to, a change in~~ expected ~~demand~~future ~~for~~undiscounted ~~polysilicon,~~cash anflows ~~increase~~from ~~in construction costs, a decrease in~~ the ~~expected life of the~~ polysilicon plant, anexceeded ~~increase~~its incarrying ~~projected~~amount; ~~costs~~therefore towe ~~replace~~concluded ~~equipment, an increase in~~ the ~~expected~~carrying ~~production~~amount ~~cost,~~of ~~and/or a decrease in~~ the ~~production~~plant ~~capacity~~is recoverable.

~~Notes~~In ~~Payable~~addition ~~and~~to ~~Warrant.~~further Wedeclines ~~account~~in ~~for~~ the ~~warrant~~market prices of polysilicon and/or ~~debt~~a ~~agreement~~lack ~~with~~of ~~Tianwei~~recovery ~~based~~of onthe ~~their~~market ~~relative~~prices ~~fair~~of ~~values~~polysilicon inat ~~proportion~~a torate greater than the ~~loan~~rate ~~proceeds. The~~of ~~fair~~inflation, ~~values~~certain ofother ~~the~~events ~~warrants~~or ~~were~~changes ~~calculated~~in ~~using~~circumstances in the ~~Black-Scholes~~future ~~option~~may ~~pricing~~also ~~model,~~indicate ~~which~~that ~~requires~~ the ~~input~~carrying amount of ~~several~~the ~~subjective~~Polysilicon ~~assumptions~~Plant ~~including~~may ~~the~~not ~~life~~be ofrecoverable. ~~the~~Such ~~warrant~~events ~~and~~or ~~the~~circumstances include, but are not limited to, a change in expected ~~volatility~~demand offor ~~the~~polysilicon, ~~warrant~~an atincrease ~~the~~in ~~time~~construction ~~the~~costs, ~~warrant~~a ~~was~~decrease ~~granted.~~in ~~The~~the ~~fair~~expected ~~value~~life of the ~~debt~~Polysilicon ~~was~~Plant, ~~based~~an onincrease ~~the~~in ~~present~~projected ~~value~~costs ofto ~~cash~~replace ~~flows~~equipment, atan increase in the ~~estimated~~expected ~~market~~production ~~interest~~cost, ~~rate~~and/or a decrease in the production capacity.

~~The~~Notes ~~assumptions~~Payable ~~used~~and inWarrants. ~~calculating~~We account for the warrant and debt ~~represent~~agreement ~~our~~with ~~management’s~~Tianwei ~~best~~and ~~estimates~~the warrant issued to Solargiga based on their relative fair values in proportion to the loan proceeds. The fair values of the warrants were calculated using the Black-Scholes option pricing model, ~~but~~which ~~these~~requires ~~estimates~~the ~~involve~~input ~~inherent~~of ~~uncertainties~~several subjective assumptions including the life of the warrants and the ~~application~~expected volatility of ~~management~~the ~~judgment~~warrants at the time the warrants were granted. InThe ~~estimating~~fair ~~market~~value ~~interest~~of ~~rate,~~the wedebt ~~relied~~was based on ~~available~~the ~~marketplace~~present ~~information~~value of ~~similar~~cash ~~transactions~~flows at the estimated market interest rate.

~~Item~~The 1assumptions used in calculating the warrants and debt represent our management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. ~~QUANTITATIVE~~In ~~AND~~estimating ~~QUALITATIVE~~market ~~DISCLOSURES~~interest ~~ABOUT~~rate, ~~MARKET~~we ~~RISK~~relied on available marketplace information of similar transactions.

~~The~~Item ~~primary objective of our investment activities is to preserve our capital for the purpose of funding our operations~~3. QUANTITATIVE ToAND ~~achieve~~QUALITATIVE ~~this~~DISCLOSURES ~~objective,~~ABOUT ~~our~~MARKET investment policy allows us to maintain a portfolio of cash equivalents and short-term investments in a variety of securities, including commercial paper, auction instruments, corporate and government bonds and certificates of deposit. These investments are generally short-term in nature and highly liquid. As of September 30, 2011, we did not maintain any short-term investments. Our cash and cash equivalents as of September 30, 2011 were $3.2 million.RISK

The primary objective of our investment activities is to preserve our capital for the purpose of funding our operations. To achieve this objective, our investment policy allows us to maintain a portfolio of cash equivalents and short-term investments in a variety of securities, including commercial paper, auction instruments, corporate and government bonds and certificates of deposit. These investments are generally short-term in nature and highly liquid. As of December 31, 2011, we did not maintain any short-term investments. Our cash and cash equivalents as of December 31, 2011 were $3.2 million.

All of our contracts are denominated in U.S. dollars, except for our contracts with GEC and MSA which are denominated in Euros, and our training services agreement with Tianwei, which is denominated in Renminbi. Accordingly, we are subject to the then current spot rate between the U.S. dollar and various foreign currencies at such time that a payment is required under invoices related to the GEC and MSA, and Tianwei contracts.

Our bank credit agreements carry floating interest rates that are tied to LIBOR. Therefore, these credit agreements may expose us to variability in interest amount due to changes in these rates. If interest rates increase, interest expense increases. Conversely, if interest rates decrease, interest expense decreases. However, we do not believe such exposure is material to our consolidated financial position or liquidity.

Item 24. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in the Securities Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting. There have not been changes in our internal controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~-28-~~PART II—OTHER INFORMATION

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

From time to time we may be involved in litigation relating to claims arising in the ordinary course of our business. We are not involved in any material pending legal proceedings.

ITEM 1A. RISK FACTORS

In addition to the risks discussed in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our business is subject to the risks set forth below.

Risks Related to Our Business

We will need to secure additional financing in the future; and if we are unable to generate revenue or secure adequate funds on terms acceptable to us or at all, we will be unable to complete construction of our Polysilicon Plant and build our polysilicon business.

As of ~~September~~December 3031, 2011, we had cash and cash equivalents on hand of $3.2 million and current liabilities of $~~241~~236.8 million. Cash used in operations was approximately $1427.3 million for the ~~six~~nine months ended ~~September~~December 3031, 2011.

Our planned entry into the polysilicon market will require us to spend significant sums to support the construction of the Polysilicon Plant, purchase capital equipment, fund new sales and marketing efforts, pay for additional operating costs and significantly increase our headcount. As a result, we expect our costs to increase significantly, which will result in further losses before we can begin to generate significant operating revenue from our Hoku Materials division.

We will need additional financing to complete the construction of the Polysilicon Plant, and should there be delays in securing additional financing, we will need to implement cost and expense reduction programs and other programs to generate cash that are not currently planned, but are responsive to our liquidity requirements. Reduction of expenditures could have a material adverse effect on our business. If we are unable to secure additional financing or structure credit terms with our vendors that are favorable to us, based on the current level of capital available to us, we may need to curtail construction of the Polysilicon Plant. If we elect to curtail construction, we would not be able to produce our own polysilicon to meet the delivery requirements under certain of our polysilicon supply agreements. In order to avoid breaching these contracts, we may be required to purchase polysilicon from third parties for delivery ~~in November 2011~~ under certain of our polysilicon supply agreements unless we are able to successfully negotiate amendments to these agreements.

Since the beginning of fiscal year 2011, we have entered into 1821 bank credit agreements that provided us an aggregate of $~~309~~334.7 million to fund our operations. We will need additional capital to complete the construction of the Polysilicon Plant, and we plan on raising this money through one or more subsequent debt and/or equity offerings and possibly prepayments from new customer contracts. We cannot be certain that we will be able to obtain equity or debt financing in time to enable us to meet our current construction schedule, on terms acceptable to us, or at all. In addition, some of our lenders have lengthy and complex payment approval processes that can result in delays in transferring funds to us following the execution of a loan agreement. During the three months ended December 31, 2011, we experienced fund transfer delays that caused us to temporarily suspend our construction activities at the Polysilicon Plant. We have been working with Tianwei to ensure timely receipt of funds from these lenders, and we expect the schedules of fund transfers from China to become more predictable in the near future.

We currently expect to complete the construction of the 2,500 metric ton per year plant, or Phase I, through the use of our available cash, the loan proceeds we received from credit agreements, and through additional debt supported by our majority stockholder, Tianwei New Energy Co. Ltd., or Tianwei. Tianwei has agreed to assist us in obtaining additional financing for any additional construction costs necessary to complete Phase I, for working capital needs and to purchase polysilicon from third parties to meet our upcoming commitments, in return for fair compensation. As previously disclosed, we have been discussing with Tianwei what would constitute fair compensation for Tianwei for the financial services it has been providing and will provide us. While the discussions are on-going, we expect to finalize the type of compensation and amount during the fiscal year 2012. We also believe this compensation may be in the form of common stock warrants. To the extent common stock warrants are issued to Tianwei for its financial services it may significantly dilute the ownership of its stockholders other than Tianwei. In addition, the issuance of fair compensation for providing the letters of credit to secure our loans could result in issuance costs and increase the amount of interest that we recognize. We cannot be certain that we will reach an agreement with Tianwei regarding the appropriate compensation for Tianwei which could affect Tianwei's willingness to continue to assist us in obtaining necessary additional financing.

II-1

If we are unable to renegotiate amendments to our supply agreements or if any of our supply agreements is terminated for any reason, our business will be materially harmed.

Pursuant to our existing supply agreements with Suntech, Hanwha SolarOne, Jinko, Tianwei, Solargiga and Alex, as of ~~September~~December 3031, 2011, we have received prepayments for future product deliveries in an aggregate amount of $~~140~~139.8 million. Our supply agreements contain production and delivery milestones that, if not met, allow the counterparty to these agreements and require us to refund any prepayments received under such agreements. We were obligated to commence delivery of polysilicon to our customers beginning in June 2011 under these agreements. However, we did not make shipments to our customers within the timeline required under these supply agreements, and we are in discussion with them to amend the supply agreements to extend the delivery dates or change other terms in order avoid a breach of the supply agreements. We have been advised by certain customers that if we fail to deliver polysilicon in accordance with our supply agreements, which may include third-party polysilicon, they intend to terminate the supply agreement and seek a refund of their prepayment. Since June 2011, we have renegotiated amendments to our supply agreements with Suntech, Jinko and Solargiga to, among other things, adjust the pricing terms and extend the delivery dates. However, there are no assurances that we will be successful in renegotiating amendments to the remaining supply agreements, and failure to do so would result in the termination of the agreements, which will materially harm our business.

To the extent any supply agreement is terminated for any reason, we will not receive any further prepayments from the counterparty. In some circumstances we will be required to refund prepayments received under any terminated amended supply agreement and will not receive promised additional prepayments, and consequently we will need to secure new funds to cover the refund obligation and to provide adequate financing for the completion of the construction of our Polysilicon Plant. In addition, we would be required to refund an amount equal to 150% of the prepayments received under the Jinko supply agreement or Alex supply agreement if either agreement were terminated due to our failure to deliver polysilicon in accordance with the applicable agreement. Securing new funds may delay the anticipated timing of completion of the Polysilicon Plant, which delay may result in us failing to meet our delivery requirements under our other supply agreements. We may not be able to secure new funds on terms as favorable to us as those under the amended supply agreements, or at all. If we are unable to secure new funds, we will not be able to complete construction of the Polysilicon Plant, our business will be materially harmed and we may be forced to delay, alter or abandon our planned business operations.

Furthermore, pursuant to these supply agreements, we granted our customers a security interest in all of our tangible and intangible assets related to our polysilicon business to serve as collateral for our obligations under the related supply agreements. Accordingly, if we are unable to renegotiate amendments to avoid a breach of the supply agreements, our customers may seek to recover their losses by sales or foreclosure of substantially all of our assets, which could force us to cease operations.

Under the supply ~~agreements~~agreement with Hanwha SolarOne, or SolarOne, formerly known as Solarfun Power Hong Kong Limited, a subsidiary of Solarfun Power Holdings Co., Ltd., ~~and Suntech,~~ because we failed to commence the delivery of polysilicon by June 2011, SolarOne ~~and~~has ~~Suntech had~~ the right to terminate the ~~respective~~ supply ~~agreements~~agreement, in which event we would be obligated to repay the prepayments under the supply ~~agreements~~agreement. We did not make any shipments to SolarOne ~~or Suntech~~ by June 2011, and we are in discussions with SolarOne regarding a possible amendment of the agreement. Similarly under the supply agreement with Alex, because we failed to commence the delivery of polysilicon by September 2011, Alex has the right to terminate the supply agreement, in which event we would be obligated to pay an amount equal to 150% of the prepayments under the supply agreement. We did not make any shipments to Alex by September 2011, and ~~Suntech~~we are in discussions with Alex regarding a possible ~~amendments~~amendment of the ~~agreements~~agreement. There can be no assurance that we will succeed in negotiating an amendment with SolarOne or ~~Suntech~~Alex. If SolarOne or ~~Suntech~~Alex terminates our supply agreement, it could be viewed as an event of default under each of the credit agreements described above. If we are determined to be in default, our lenders will have the right to declare the outstanding principal and unpaid interest thereon due and payable.

Under the terms of all of our supply agreements, the failure to deliver polysilicon by the stated delivery dates will allow the customers to terminate the supply agreements, and require the repayments of the deposits under the agreements, which is in the aggregate amount to $~~140~~139.8 million, ~~which~~and in ~~turn~~the ~~could~~case inof anthe ~~event~~Jinko or Alex supply agreements would require payment of ~~default~~an ~~under~~amount ~~our~~equal ~~existing~~to ~~credit~~150% ~~agreements~~of ~~with~~the ~~our~~prepayments ~~third~~received ~~party~~at ~~lenders~~the time of termination. ~~The~~Any such termination in turn could result in an event of default under our existing credit agreements with our third party lenders, which could result in our lenders accelerating repayment of our third party debt, which we do not have the wherewithal to repay. The third-party credit agreements are all secured by standby letters of credit drawn by our majority shareholder, Tianwei, as collateral. To the extent that the third-party lenders accelerate repayment of the debt, Tianwei has provided a letter of commitment to us that it would not demand repayment from us until the original due dates of the third party credit agreements ranging from May 2012 through ~~October~~February ~~2016~~2017.

II-2

Even if we are able to amend these supply agreements, it could result in new terms and conditions that increase our obligations or reduce the economic benefit of the supply agreement to us. For example, such amendment could result in a reduction in the purchase price, a refund of some or all of the prepayments we have received to date, adjustments in the volume allocated to each customer, the forfeiture of future prepayments owed to us, the issuance of equity or debt securities to compensate our customers for the delayed shipments, or any combination of the foregoing, which could materially harm our financial condition and results of operations.

If we are unable to successfully renegotiate our agreement with Idaho Power Company, we may be unable to operate the Polysilicon Plant.

We entered into an Electric Service Agreement with Idaho Power, or the ESA, for the supply of electric power and energy to us for use in the Polysilicon Plant. The term of the ESA is four years, beginning in June 2009 and will expire in May 2013. During the term of the ESA, Idaho Power agrees to make up to 82,000 kilowatts of power available to us at certain fixed rates, which are subject to change only by action of the Idaho Public Utilities Commission, or the IPUC. Beginning in May 2011, we are required to make a minimum monthly payment ranging between $1.1 million and $1.9 million per month. In February 2012, we filed a stipulation (the “Stipulation”) with the IPUC to amend the ESA. If the Stipulation is approved by IPUC, we will enter into an amended and restated Electric Service Agreement (the “AESA”) based on the terms set forth in the Stipulation. However, if we are unable to obtain IPUC approval for the AESA, we may be unable to remit our minimum monthly payment to Idaho Power, which may prompt Idaho Power to disconnect us from the power grid. If we are disconnected from the power grid, we may be unable to start-up or operate the Polysilicon Plant.

We may be required to procure third-party polysilicon to meet our contractual delivery requirements. If we are unable to secure adequate quantities of solar-grade polysilicon on favorable terms and at the times needed, our business will be materially harmed.

Due to the delays in financing, ~~the required curtailment of construction of the Polysilicon Plant,~~ and the inability to meet our initial delivery of polysilicon to our customers under existing agreements, we may be required to procure third-party polysilicon to meet our contractual delivery requirements. There are no assurances that we will be able to secure solar-grade polysilicon at the time and in the amounts needed on favorable terms. As we will be required to procure third-party polysilicon in the open market, our cost to purchase polysilicon could be in excess of our contractual sales prices or could result in no profit or a loss. If we are unable to secure polysilicon on favorable terms and at the times needed, our business, financial condition and results of operations will be materially harmed.

The actual cost to construct and equip our Polysilicon Plant may be significantly higher than our estimated cost.

We previously estimated the total cost for construction of approximately $410 million. However, in February 2011, we determined that the total costs will be greater than our previous estimates. We have incurred $~~576~~631.6 million in capital expenditures as of ~~September~~December 3031, 2011. We are currently commissioning the 2,500 metric ton plant, and we expect that it will cost approximately $700 million to add on-site trichlorosilane, or TCS, production and increase our annual production capacity to 4,000 metric tons.

The primary driver of the increase in costs relates to our engineering contract with Stone & Webster, Inc., and our construction contract with JH Kelly LLC as they are cost-plus contracts, rather than lump sum, or fixed cost contracts. As such, there is no guaranteed maximum cost. In addition, the estimated total cost increased in part by the fact that the construction schedule was expected to be approximately two years, but has instead been spread over four years with numerous starts and stops as a result of earlier challenges obtaining adequate financing in a timely manner. Furthermore, construction of the Polysilicon Plant commenced prior to the completion of the detailed engineering work, which caused numerous changes in the design of the facility, further contributing to the increase in delays and construction costs.

The amount and timing of our future capital needs depend on many factors, including the timing of the Polysilicon Plant development efforts, and the amount and timing of any revenue we are able to generate. Changes in construction costs resulting from increased demand, modifications in construction timelines, changes in our design, delays in our construction schedule and other factors could cause our actual cost to significantly exceed our estimate. If the actual cost is significantly higher than we estimate, we may be unable to raise any additional funding required to pay for any such added costs it could materially and adversely affect our ability to raise capital, to complete the Polysilicon Plant on schedule or at all, and could materially harm our business, financial condition and results of operations and we may be forced to delay, alter or abandon our planned business operations. Even if we receive additional financing and prepayments on time and in the amounts agreed upon, the actual costs to engineer, construct, and procure the Polysilicon Plant could exceed our estimates. If we are unable to meet our customer commitments, our business will be materially harmed and we may be forced to delay, alter or abandon our planned business operations.

II-3

An unexpected and significant increase in the cost of construction may slow down or delay the completion of the Polysilicon Plant, which increases the risk that we will not meet certain construction and delivery milestones in our long-term polysilicon supply contracts. Failure to meet our construction and delivery milestones could cause one of our customers to terminate one or more of our polysilicon supply contracts and exercise their right to seek a refund of any prepayments made as of the date of termination. Any such termination could have a material adverse effect on our financial condition and results of operations.

If we are unable to meet our obligations under our vendor and supplier agreements, or if we do not receive customer prepayments under our polysilicon supply agreement, we may not be able to continue or complete the construction of the Polysilicon Plant.

In order to address our cash needs for the construction of the Polysilicon Plant, we have modified payment terms in purchase orders with some of our vendors, and are in negotiations with other vendors, to structure payment plans for amounts past due and to be invoiced in the future. In the event we are unable to meet our obligations under payment plans and other agreements, we will have to ask our vendors to forebear from enforcing one or more of their rights under their respective agreements. There are no assurances that any of our vendors will agree to forebear or otherwise make any concessions under their respective agreements. If any of our vendors seek to enforce our obligations under these agreements that we are unable to perform, which could include asserting and/or foreclosing on materialman’s and laborer’s liens on the Polysilicon Plant, or taking other legal action, it could materially harm our business, financial condition and results of operations and we may be forced to delay, alter or abandon our planned polysilicon business operations, which could have a material adverse effect on our business.

In addition, we have experienced delays in the receipt of customer prepayments from certain of our long-term polysilicon supply customers. If we experience further delays in receipt of these payments, receive reduced payments, or fail to receive any of them entirely, we could experience delays in our ability to continue the engineering and construction of the Polysilicon Plant in order to deliver polysilicon within the time periods specified in our customer supply contracts, which could materially harm our business. Even if we receive these prepayments on time and in the amounts agreed upon, the actual costs to engineer and construct the Polysilicon Plant could exceed our estimates, and we may be unable to raise any additional funding required to pay for any such added costs. If we are unable to meet our customer commitments, our business will be materially harmed and we may be forced to delay, alter or abandon our planned business operations.

WeFluctuations ~~have a limited operating history and,~~ in ~~fiscal~~demand ~~2007,~~for ~~we decided to enter the photovoltaic system installation and~~ polysilicon ~~markets~~ and toindustrial ~~redirect~~production ~~efforts~~capacity ~~and~~for ~~resources~~polysilicon ~~that~~could ~~were~~harm ~~historically directed toward the fuel cell market. If we are unable to generate significant revenue from~~ our ~~photovoltaic~~business ~~system installations~~ and ~~polysilicon~~results ~~segments,~~of ~~our business will be materially harmed~~operations.

WeDuring ~~were~~fiscal ~~incorporated~~year in2012, ~~March~~spot ~~2001~~market ~~and~~prices ~~have~~of apolysilicon ~~limited~~decreased ~~operating~~dramatically ~~history.~~with Wean ~~have~~increase ~~cumulative~~in ~~net~~supply. ~~losses~~During ~~since~~the ~~our~~quarter ~~inception~~ended ~~through~~December ~~September 30~~31, 2011~~. In fiscal 2007~~, we ~~announced~~observed a ~~change~~decline in ~~our~~the ~~main~~market ~~business~~prices ~~and~~for ~~our~~solar-grade ~~intention to form a~~ polysilicon ~~business through our subsidiary~~, ~~Hoku~~caused ~~Materials,~~by ~~and~~an aoverall ~~photovoltaic,~~softening orof ~~PV,~~demand ~~system~~in ~~installation~~the ~~business~~solar ~~through~~materials ~~our~~supply ~~subsidiary, Hoku Solar~~chain. ~~The~~There ~~polysilicon~~is ~~business~~no ~~includes~~assurance ~~developing~~that ~~production capabilities for, and~~ the ~~eventual~~market ~~production~~condition offor solar-grade polysilicon. ~~The~~will ~~PV systems installation business includes the design~~improve, ~~engineering, procurement~~ and ~~installation~~any offurther ~~turnkey~~decreases PVin ~~systems~~demand ~~for residential~~ and ~~commercial~~polysilicon ~~customers.~~prices ~~Prior~~could tomaterially ~~our announcement,~~harm our business, ~~was~~financial ~~solely~~condition, ~~focused~~results onof ~~the~~operations, ~~stationary~~as ~~and~~well ~~automotive~~as ~~fuel~~our ~~cell~~ability ~~markets. In September 2010, we elected~~ to ~~discontinue~~generate ~~the~~positive ~~operations~~gross ofmargins ~~Hoku~~and ~~Fuel~~operating ~~Cells~~cash flows.

~~We have no prior experience in the polysilicon business. In order to be successful~~Conversely, weindustry–wide ~~are~~shortages ~~devoting substantial management time and energy and significant capital resources to develop this new business, including the construction~~ of ~~the~~polysilicon ~~Polysilicon~~could ~~Plant.~~result ~~We commenced construction~~ in ~~May~~dramatic ~~2007,~~increases ~~and we produced our first product at our production demonstration~~ in ~~April~~the ~~2010.~~long-term Wecontract ~~expect~~and tospot ~~begin~~prices ~~commercial~~for ~~production of~~ polysilicon. Under ~~beginning~~our inlong-term ~~the~~supply ~~first~~agreements ~~half of fiscal year 2012,~~ with ~~full-scale~~major ~~production~~customers inthat ~~the~~contain ~~second~~fixed ~~half of fiscal 2012; however~~prices, ~~there~~we ~~are~~would ~~no assurances that this schedule will not need to~~ be ~~further~~forced ~~modified. We may need~~ to ~~purchase~~sell the polysilicon ~~from~~we ~~third-parties~~produce inat ~~order~~prices tothat ~~meet delivery~~are ~~schedules~~below inthe ~~order~~then toprevailing ~~avoid~~spot ~~termination of one or more of our customer supply contracts~~prices. InTo ~~addition, delays in polysilicon shipments could result in~~ the ~~termination~~extent ofwe aare ~~customer~~unable ~~supply contract, which could require us~~ to ~~refund~~take ~~substantial~~advantage ~~amounts~~ of ~~prepayments~~price ~~made to us for future product deliveries. We have encountered~~increases, ~~and~~either ~~expect that we will continue to encounter, significant challenges relating to our entry into the polysilicon industry and changes~~ in ~~that~~spot ~~industry,~~or ~~including~~contract ~~potentially significant increases in polysilicon supply and falling polysilicon~~ prices., Ifit wewould ~~are~~have ~~unable~~a tonegative ~~address~~impact ~~these~~on ~~risks and other risks successfully,~~ our ~~business, financial condition and~~ results of operations ~~will be materially~~ and ~~adversely~~financial ~~affected~~condition.

IIIn addition, in the past, industry-4wide shortages of polysilicon have created shortages of PV modules and increased prices for such modules. In the event of a polysilicon shortage, any inability to obtain PV modules at commercially reasonable prices, or at all, would adversely affect our PV system installation business by reducing our ability to meet potential customer demand for our products or to provide products at competitive prices. Any continued industry shortage in available polysilicon could delay the potential growth of our PV system installations business, thereby harming our business.

IfWe ~~any~~have ofa ~~our~~limited ~~project~~operating ~~engineering,~~history ~~construction~~and, orin ~~key~~fiscal ~~equipment~~2008, ~~vendors~~we ~~are~~decided ~~late~~to inenter ~~providing~~the ~~their~~photovoltaic ~~contract~~system ~~deliverables,~~installation weand ~~may~~polysilicon bemarkets ~~unable~~and to ~~complete~~redirect ~~the~~efforts ~~construction~~and ofresources ~~the~~that ~~Polysilicon~~were ~~Plant~~historically todirected ~~begin~~toward ~~commercial~~the ~~shipments~~fuel ~~during~~cell ~~second~~market. ~~half~~If ofwe ~~calendar~~are ~~year~~unable ~~2011,~~to orgenerate atsignificant ~~all,~~revenue ~~which~~from ~~could~~our ~~materially~~photovoltaic ~~harm~~system installations and polysilicon segments, our business will be materially harmed.

We ~~have~~were ~~contracts~~incorporated ~~with~~in ~~Stone~~March &2001 ~~Webster,~~and ~~Inc.~~have JHa ~~Kelly,~~limited ~~LLC,~~operating ~~GEC~~history. ~~Graeber~~We ~~Engineering~~have ~~Consultants~~cumulative ~~GmbH~~net ~~and~~losses ~~MSA~~since ~~Apparatus~~our ~~Construction~~inception ~~for~~through ~~Chemical~~December ~~Equipment~~31, ~~Ltd~~2011., In ~~Idaho~~fiscal ~~Power Company~~2007, ~~Dynamic~~we ~~Engineering~~announced ~~Inc.,~~a ~~PVA~~change ~~Tepla~~in ~~Danmark,~~our ~~Polymet~~main ~~Alloys,~~business ~~Inc., Evonik Degussa Corporation,~~ and our ~~other~~intention ~~vendors,~~to ~~contractors~~form ~~and~~a ~~consultants~~polysilicon ~~who~~business ~~are~~through ~~providing~~our ~~key services~~subsidiary, ~~equipment~~Hoku Materials, and ~~supplies~~a ~~for~~photovoltaic, ~~the~~or ~~engineering~~PV, ~~and~~system ~~construction~~installation ofbusiness ~~the~~through ~~Polysilicon~~our ~~Plant.~~subsidiary, WeHoku ~~have~~Solar. ~~experienced~~The ~~delays~~polysilicon inbusiness ~~the~~includes ~~performance~~developing orproduction ~~delivery~~capabilities ~~of these services~~for, ~~equipment,~~ and ~~goods~~the ~~under~~eventual ~~some~~production of ~~these agreements, which resulted in delays in our production schedule and increased our costs to construct the Polysilicon Plant~~polysilicon. If weThe ~~experience~~PV ~~additional~~systems ~~delays~~installation inbusiness ~~the~~includes ~~performance or delivery of~~ the ~~services~~design, ~~equipment~~engineering, orprocurement ~~goods~~and ~~under~~installation ~~any~~ of ~~these~~turnkey ~~respective~~PV ~~agreements,~~systems wefor ~~may~~residential beand ~~unable~~commercial tocustomers. ~~commence~~Prior ~~production~~to ofour ~~polysilicon in the second half of calendar year 2011~~announcement, ~~with~~our ~~full-scale~~business ~~production~~was insolely ~~the~~focused ~~second~~on ~~half of calendar year 2012, or deliver~~ the ~~volume~~stationary ofand ~~polysilicon~~automotive ~~that~~fuel iscell ~~required~~markets. ~~under~~In ~~our~~September ~~polysilicon~~2010, ~~supply agreements. If~~ we ~~are~~elected ~~unable~~ to ~~meet~~discontinue ~~these~~the ~~scheduling~~operations ~~goals, our business, financial condition and results~~ of ~~operations~~Hoku ~~will~~Fuel ~~be materially and adversely affected~~Cells.

We have no prior experience in the polysilicon business. In order to be successful, we are devoting substantial management time and energy and significant capital resources to develop this new business, including the construction of the Polysilicon Plant. We commenced construction in May 2007, and we produced our first product at our production demonstration in April 2010. We expect to begin commercial production of polysilicon beginning in the first half of calendar year 2012, with full-scale production in the second half of calendar year 2012; however, there are no assurances that this schedule will not need to be further modified. We may need to purchase polysilicon from third-parties in order to meet delivery schedules in order to avoid termination of one or more of our customer supply contracts. In addition, delays in polysilicon shipments could result in the termination of a customer supply contract, which could require us to refund substantial amounts of prepayments made to us for future product deliveries. We have encountered, and expect that we will continue to encounter, significant challenges relating to our entry into the polysilicon industry and changes in that industry, including potentially significant increases in polysilicon supply and falling polysilicon prices. If we are unable to address these risks and other risks successfully, our business, financial condition and results of operations will be materially and adversely affected.

If any of our project engineering, construction, or key equipment vendors are late in providing their contract deliverables, we may be unable to complete the construction of the Polysilicon Plant to begin commercial shipments during the first half of calendar year 2012, or at all, which could materially harm our business.

We have contracts with Stone & Webster, Inc. JH Kelly, LLC, GEC Graeber Engineering Consultants GmbH and MSA Apparatus Construction for Chemical Equipment, Ltd., Idaho Power Company, Dynamic Engineering Inc., PVA Tepla Danmark, Polymet Alloys, Inc., Evonik Degussa Corporation, and our other vendors, contractors and consultants who are providing key services, equipment, and supplies for the engineering and construction of the Polysilicon Plant. We have experienced delays in the performance or delivery of these services, equipment, and goods under some of these agreements, which resulted in delays in our production schedule and increased our costs to construct the Polysilicon Plant. If we experience additional delays in the performance or delivery of the services, equipment, or goods under any of these respective agreements, we may be unable to commence production of polysilicon in the first half of calendar year 2012, with full-scale production in the second half of calendar year 2012, or deliver the volume of polysilicon that is required under our polysilicon supply agreements. If we are unable to meet these scheduling goals, our business, financial condition and results of operations will be materially and adversely affected.

If we are unable to secure adequate quantities of trichlorosilane on favorable terms and at the times needed, our business will be materially harmed.

We deferred capital expenditures by delaying construction of our on-site trichlorosilane, or TCS, production facility. TCS is needed to produce polysilicon. We have received shipments of small volumes of TCS from two suppliers for our initial polysilicon production, and are in discussions to procure TCS with various third parties. There are no assurances that we will be able to secure adequate TCS at the time and in the amounts required on favorable terms, or at all. Failure to do so may prevent us from meeting certain milestones in our customer contracts or to meet our customer supply commitments and our business, financial condition and results of operations will be materially harmed.

We may have difficulty managing changes in our operations, which could harm our business.

To date we have expended significant financial and management resources in connection with our planned entry into the polysilicon market and the development of our PV system installation business. For example, in May 2007, we commenced construction of the Polysilicon Plant. Construction of the Polysilicon Plant and the operation of the polysilicon manufacturing and PV system installation businesses involves substantial changes to our operations and places a significant strain on our senior management team and financial and other resources, and has, among other things, required us to significantly increase our international activities; hire and train additional financial, accounting, sales and marketing personnel; and to make substantial investment in our engineering, logistics, financial and information systems, including implementing new enterprise-level transaction processing, operational and financial management information systems, procedures and controls.

Any failure by us to manage the expansion of our operations or succeed in these markets or other markets that we may enter in the future, may harm our business, prospects, financial condition and results of operations.

Fluctuations in demand for polysilicon and industrial production capacity for polysilicon could harm our business.

Certain polysilicon producers have invested heavily in the expansion of their production capacities in view of the recent scarcity of solar-grade polysilicon. We currently expect significant additional capacity to come on-line in calendar year 2012, near the time when the Polysilicon Plant is scheduled to become fully operational. In addition, if an excess supply of electronic-grade polysilicon were to develop, producers of electronic-grade silicon could switch production to solar-grade polysilicon, causing the price of solar-grade polysilicon to decline more rapidly than we currently anticipate. The electronic-grade polysilicon market historically has experienced significant cyclicality; for example, that market experienced significant excess supply from 1998 through 2003. Moreover, the forecasted increases in polysilicon supply could also be exacerbated if the demand for polysilicon decreases significantly as a result of the introduction of new technologies that materially reduce or eliminate the need for polysilicon in producing effective PV systems.

II-5

If any of these events occur, they could result in an excess supply of solar-grade polysilicon and could suppress market prices for solar-grade polysilicon. Any such suppression of market prices for polysilicon would affect the price which we could expect to receive in selling our polysilicon in the spot market and could provide our customers with incentives to reconsider or renegotiate their long-term supply contracts with us to the extent the polysilicon deliverable under those contracts is priced above prevailing market prices. During fiscal year 2012, spot market prices of polysilicon decreased dramatically with an increase in supply, and further price declines are possible in fiscal year 2013 as additional supply is forecasted to enter the market. Further decreases in demand and polysilicon prices could materially harm our business, financial condition, results of operations, and our ability to generate positive gross margins and operating cash flows.

Significant decreases in market prices for polysilicon could also impact our ability to fully recover our investment in our polysilicon plant and the related costs to produce polysilicon, which may result in an impairment of our long-lived assets and polysilicon inventory.

Conversely, industry–wide shortages of polysilicon could result in dramatic increases in the long-term contract and spot prices for polysilicon. Under our long-term supply agreements with major customers that contain fixed prices, we would be forced to sell the polysilicon we produce at prices that are below the then prevailing spot prices. To the extent we are unable to take advantage of price increases, either in spot or contract prices, it would have a negative impact on its results of operations and financial condition.

In addition, in the past, industry-wide shortages of polysilicon have created shortages of PV modules and increased prices for such modules. In the event of a polysilicon shortage, any inability to obtain PV modules at commercially reasonable prices, or at all, would adversely affect our PV system installation business by reducing our ability to meet potential customer demand for our products or to provide products at competitive prices. Any continued industry shortage in available polysilicon could delay the potential growth of our PV system installations business, thereby harming our business.

We rely on limited suppliers and, if these suppliers fail to deliver materials that meet our quality requirements in a timely, cost-effective manner or at all, our production of polysilicon and our installation of PV systems would be limited.

It is highly likely that we will procure materials for our PV system installation business from vertically integrated solar module manufacturing and installation companies that are also our competitors. These companies may choose in the future not to sell these materials to us at all, or may raise their prices to a level that would prevent us from selling our goods and services on a profitable basis.

In our polysilicon business we rely heavily on our contracted suppliers of key process technologies and infrastructure including such components as the reactors and the TCS process. If any of these suppliers fail to perform their contractual obligations, we will be required to seek alternative suppliers and likely will not be able to commence production of polysilicon at the Polysilicon Plant on our current schedule. Any such production delays may result in a breach of one or more of our supply agreements with Alex, Suntech, SolarOne, Jinko, Tianwei and/or Solargiga and such breaches may allow these customers to terminate the supply agreements and seek a return of prepayments, which would harm our business and may make the completion of the Polysilicon Plant impossible.

Even if we achieve our polysilicon and PV system installation objectives on a timely basis and complete the construction of the Polysilicon Plant, we may still be unsuccessful in developing, producing and/or selling these products and services, which would harm our business.

II-6

If we are successful in our efforts to construct the Polysilicon Plant, our ability to successfully compete in the polysilicon and PV system installation markets will depend on a number of factors, including:

our ability to produce or procure TCS and polysilicon, and install PV systems at costs that allow us to achieve or maintain profitability in these businesses;

our ability to successfully manage a much larger and growing enterprise, with a broader national and international presence;

our ability to attract new customers and expand existing customer relationships;

our ability to develop new technologies to become competitive through cost reductions;

our ability to scale our business and maintain low production costs to be competitive;

our ability to predict and adapt to changing market conditions, including the price of inputs and the spot price for polysilicon sold in the market by us or purchased by us from third parties to settle customer commitments; and

future product liability or warranty claims.

If our PV system installation competitors are able to develop and market products that customers prefer to our products, we may not be able to generate sufficient revenue to continue operations.

The market for PV systems installations is competitive and continually evolving. As a relatively new entrant to this market, we expect to face substantial competition from companies such as SunPower Corporation, SunEdison, Chevron Energy Solutions, REC Solar and other new and emerging companies in Hawaii, Asia, North America and Europe. In addition, the Hawaii market is gaining additional attention from potential competitors, owing to the expected introduction of a Feed-in Tariff by the local public utility. Many of our known competitors are more established in the solar industry than we are, and have a stronger market position than ours and have larger resources and name recognition than we have. Furthermore, the PV market in general competes with other sources of renewable energy and conventional power generation, and if our customers prefer these other sources over ours, it may have a material adverse impact on our revenue and results of operations.

Technological development in the solar power industry could reduce market demand for polysilicon or allow for lower cost production of polysilicon by our competitors, which could cause our sales and profit to decline.

The solar power industry is characterized by evolving technologies and standards. Technological evolutions and developments in PV products, including thin-film technologies, higher PV efficiency and thinner wafers may decrease the demand for polysilicon by PV module manufacturers, and some manufacturers are developing alternative solar technologies that require significantly less silicon than crystalline silicon-based solar cells and modules, or no polysilicon at all. If these developing technologies prove more advantageous in application and are widely adopted, we may experience a decrease in demand for our polysilicon and a decrease in our sales or operating margins.

Additionally, other technologies for the production of polysilicon are increasing in prevalence in the industry. Technologies which compete with the Siemens reactor process, including fluidized bed reactor process, may enable the manufacture of polysilicon more quickly or at lower cost than does the Siemens reactor process. To the extent that our competitors adopt other technologies that enable them to compete more effectively, our operating margins and price-competitiveness may be impacted. In the event that we are unable to re-design the Polysilicon Plant around these more efficient processes on manageable timetables and at reasonable cost, our business could be adversely affected.

II-7

Our operating results have fluctuated in the past, and we expect a number of factors to cause our operating results to continue to fluctuate in the future, making it difficult for us to accurately forecast our quarterly and annual operating results.

Hoku Materials does not currently generate any operating revenue. All of our revenue presently is generated by our PV system installation activities, the resale of PV modules and sale of electricity.

Our future operating results and cash flows will depend on many factors that will impact our polysilicon business run by Hoku Materials and, our PV system installation business run by Hoku Solar, including the following:

the size and timing of customer orders, milestone achievement, product delivery and customer acceptance, if required;

the length of contract negotiation cycles;

the timing of equipment delivery and procurement, integration and testing;

our success in obtaining prepayments from customers for future shipments of polysilicon;

our success in maintaining and enhancing existing strategic relationships and developing new strategic relationships with potential customers;

our ability to finance power purchase agreements for potential PV system installation customers;

actions taken by our competitors, including new product introductions and pricing changes;

the costs of maintaining our operations;

customer budget cycles and changes in these budget cycles; and

external economic and industry conditions.

As a result of these factors, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indications of future performance.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements could be impaired, which could adversely affect our operating results, our ability to operate our business and investors’ views of us.

Ensuring that we have adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. In May 2007, we commenced construction of the Polysilicon Plant. Construction of the Polysilicon Plant and the operation of our polysilicon manufacturing and PV system installation businesses will involve substantial changes to our operations and will require us to increase our international activities; hire and train additional financial and accounting personnel; make substantial investments in our engineering, logistics, financial and information systems, including implementing new enterprise-level transaction processing, operational, financial and accounting management information systems, procedures and controls. In connection with the planned increased scale of our polysilicon manufacturing and PV system installation businesses and our implementation of new operational and financial management information systems to accommodate these businesses, we expect to engage in a process of documenting, reviewing and improving our internal controls and procedures in connection with Section 404 of the Sarbanes-Oxley Act, which requires an annual assessment by management on the effectiveness of our internal control over financial reporting. We conduct annual testing of our internal controls in connection with the Section 404 requirements and, as part of that documentation and testing, we may identify areas for further attention and improvement. Implementing any appropriate changes to our internal controls may entail substantial costs in order to modify our existing accounting systems and may take a significant period of time to complete, which may distract our officers, directors and employees from the operation of our business. Further, we may encounter difficulties assimilating or integrating the internal controls, disclosure controls and IT infrastructure of the businesses that we may acquire in the future. These changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements may seriously affect our stock price.

II-8

We will use materials that are considered hazardous in our planned polysilicon manufacturing and production processes and, therefore, we could be held liable for any losses not covered by insurance that result from the use and handling of such hazardous materials.

The production of polysilicon will involve the use of materials that are hazardous to human health and the environment, and the storage, handling and disposal of which will be subject to government regulation. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may increase our manufacturing costs and may require us to halt or suspend our operations until we regain compliance. If we have an accident at the Polysilicon Plant involving a spill or release of these substances, we may be subject to civil and/or criminal penalties, including financial penalties and damages, and possibly injunctions preventing us from continuing our operations. Any liability for penalties or damages, and any injunction resulting from damages to the environment or public health and safety, could harm our business. In addition under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate is liable for costs of removal or remediation of certain hazardous or toxic substances on or in such property. These laws often impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such substances. We do not have any insurance for liabilities arising from the use and handling of hazardous materials.

Our polysilicon manufacturing business will involve many operating risks that can cause substantial losses.

The manufacture of our polysilicon may involve one or more of the following risks:

fires or explosions;

spills or releases; and

pipe, vessel, or system failures.

In the event that any of the foregoing events occur, we could incur substantial losses as a result of injury or loss of life; severe damage or destruction of property, natural resources or equipment; pollution and other environmental damage; investigatory and clean-up responsibilities; regulatory investigation and penalties; suspension of operations; or repairs to resume operations. If we experience any of these problems, our ability to conduct operations could be adversely affected. These conditions can cause substantial damage to facilities and interrupt production. If realized, the foregoing risks could have a material adverse affect on our business, financial condition and results of operations.

Any significant and prolonged disruption of our operations in Hawaii could result in PV system installation delays that would reduce our revenue.

Hoku Solar’s business operations are currently located exclusively in the state of Hawaii, which is subject to the potential risk of earthquakes, hurricanes, tsunamis, floods and other natural disasters. The occurrence of an earthquake, hurricane, tsunami, flood or other natural disaster in Hawaii could result in damage, power outages and other disruptions that would interfere with our ability to conduct our PV system installation business. In October 2006, for example, Hawaii suffered a major earthquake causing significant damage throughout the state. Our facilities and operations, however, did not suffer any damage.

II-9

Most of the materials we use in our PV system installation business must be delivered via air or sea. Hawaii has a large union presence and has historically experienced labor disputes, including dockworker strikes, which could prevent or delay cargo shipments. Any future dispute that delays shipments via air or sea could prevent us from procuring or installing our turnkey PV systems in time to meet our customers’ requirements, or might require us to seek alternative and more expensive freight forwarders or contract manufacturers, which could increase our expenses and/or impact the timing of revenue recognition

We have significant international activities and customers, particularly in China, that subject us to additional business risks, including increased logistical complexity and regulatory requirements, which could result in a decline in our revenue.

Our current polysilicon supply agreements are with Alex, Suntech, Jinko, SolarOne, Tianwei and Solargiga, all of which are located in the People’s Republic of China, or China, and Hong Kong. As a result, we will be engaging in significant international sales of our polysilicon, which can be subject to many inherent risks that are difficult or impossible for us to predict or control, including:

political and economic instability;

unexpected changes in regulatory requirements and tariffs;

difficulties and costs associated with staffing and managing foreign operations, including foreign distributor relationships;

longer accounts receivable collection cycles in certain foreign countries;

adverse economic or political changes;

more limited protection for intellectual property in some countries;

potential trade restrictions, exchange controls and import and export licensing requirements;

U.S. and foreign government policy changes affecting the markets for our products;

problems in collecting accounts receivable; and

potentially adverse tax consequences of overlapping tax structures.

All of our polysilicon supply contracts are denominated in U.S. dollars. Therefore, increases in the exchange rate of the U.S. dollar to foreign currencies will cause our products to become relatively more expensive to customers in those countries, which could lead to a reduction in sales or profitability in some cases.

All of our polysilicon customers are located in China and Hong Kong, which involves various political and economic risks.

Presently, all of our long-term polysilicon supply contracts are with companies based in China and Hong Kong. Accordingly, our business, financial condition, results of operations and prospects could be disproportionately affected by economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many respects, including:

the higher level of government involvement and regulation;

the early stage of development of the market-oriented sector of the economy;

the rapid growth rate; and

the higher level of control over foreign exchange.

II-10

China’s government continues to exercise significant control over economic growth in China through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and imposing policies that impact particular industries or companies in different ways. China’s government also sets policy with respect to the use of alternative energy such as solar. Any adverse change in the economic conditions or government conditions or government policies in China could have a material adverse effect on our business, financial condition and results of operations.

Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

We are subject to the U.S. Foreign Corrupt Practices Act, which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Non-U.S. companies, including some that may compete with us, are not subject to these prohibitions. If our employees or other agents are found to have engaged in practices such as bribery, pay-offs or other fraudulent practices in China, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

Adverse general economic conditions could harm our business.

Adverse overall economic conditions that impact consumer spending could impact our results of operations. Future economic conditions affecting disposable income such as employment levels, consumer confidence, credit availability, business conditions, stock market volatility, weather conditions, acts of terrorism, pandemic, threats of war, and interest and tax rates could reduce consumer spending or cause consumers to shift their spending away from our goods and services. If the economic conditions continue to be adverse or worsen, we may experience material adverse impacts on our business, operating results and financial condition.

A drop in the retail price of conventional energy or non-solar renewable energy sources could harm our business.

The price of conventional energy can affect the demand for alternative energy solutions such as solar. Fluctuations in economic and market conditions that impact the prices of conventional and non-solar renewable energy sources could cause the demand for solar energy systems to decline, which would have a negative impact on our business. Reduction in prices for oil and other fossil fuels and utility electric rates could also have a negative effect on our PV system installation and polysilicon production businesses.

Conversely, our polysilicon manufacturing process uses significant amounts of electric energy. High energy prices, therefore, could increase our production costs, and increases in the cost of electricity could reduce our margins. Although we have entered into a long term contract with Idaho Power to supply electric power to the Polysilicon Plant at a fixed rate, the Idaho Public Utilities Commission can change the rate under certain circumstances. Should this happen, substantial increases in our electricity costs could have a material adverse effect on our business, financial condition and results of operations.

Current credit and financial market conditions could prevent or delay our current or future customers from obtaining financing necessary to purchase our products and services or finance their own operations or capacity expansions, which could adversely affect our business, our operating results and financial condition.

Due to the recent severe tightening of credit and concerns regarding the availability of credit around the world, our solar customers may delay or attempt to delay their payments to us in connection with product and service purchases, or may be delayed in obtaining, or may not be able to obtain, necessary financing for their purchases of our products and services or their own operations or expansion plans. If the credit and financial market conditions deteriorate, it would adversely affect the ability of our customers that have executed long-term supply agreements to purchase polysilicon from us and to make additional required payments to us pursuant to these long-term supply agreements or to fund their own expansion plans. These delays could materially harm our polysilicon sales and PV installations, and therefore harm our business.

II-11

Risks Associated With Government Regulation and Incentives

If we do not obtain on a timely basis the necessary government permits and approvals to construct and operate the Polysilicon Plant, our construction costs could increase and our business could be harmed.

We have received the air permit and storm water prevention permit that are necessary to begin construction of the Polysilicon Plant; however, we need to apply for additional permits with federal, state and local authorities before we can commence operation of the Polysilicon Plant. The government regulatory process is lengthy and unpredictable and delays could cause additional expense and increase our construction costs. In addition, we could be required to change our construction plans in order receive the required permits and such changes could also result in additional expense and delay. Any delay in completion of construction could result in us failing to meet our delivery deadlines under our supply agreements and give the other parties to these agreements the right to terminate the agreements.

Our business and industry are subject to government regulation, which may harm our ability to market our products.

The market for electricity generation products is heavily influenced by foreign, federal, state and local government regulations and policies concerning the electric utility industry, as well as policies promulgated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. In the United States and in a number of other countries, these regulations and policies are being modified and may continue to be modified. Customer purchases of, or further investment in the research and development of, alternative energy sources, including solar power technology, could be deterred by these regulations and policies, which could result in a significant reduction in the potential demand for our PV system installations. For example, without a regulatory mandated exception for solar power systems, utility customers are often charged interconnection or standby fees for putting distributed power generation on the electric utility grid. These fees could increase the cost to our customers of installing PV systems and make them less desirable, thereby harming our business, prospects, results of operations and financial condition. ~~Furthermore, our agreements with The James Campbell Company and Forest City Sustainable Resources, LLC to construct PV systems are conditioned upon receiving various government approvals.~~

The installation of PV systems is subject to oversight and regulation in accordance with national and local ordinances relating to zoning, building codes, safety, environmental protection, utility interconnection and metering and related matters. It is difficult to track the requirements of individual states and counties and to design equipment to comply with the varying standards. Any new government regulations or utility policies pertaining to PV system installations may result in significant additional expenses to us and, as a result, could cause a significant reduction in demand for our PV system installation services.

If government incentives to locate the Polysilicon Plant in the City of Pocatello, Idaho are not realized then the costs of establishing the Polysilicon Plant may be higher than we currently estimate.

The State of Idaho and the local municipal government have approved a variety of incentives to attract Hoku Materials, including tax incentives, financial support for infrastructure improvements around the Polysilicon Plant, and grants to fund the training of new employees. In March 2007, we entered into a 99-year ground lease with the City of Pocatello, for approximately 67 acres of land in Pocatello, Idaho and in May 2007, we commenced construction of the Polysilicon Plant.

II-12

In May 2007, the City of Pocatello approved an ordinance that authorized certain tax incentives related to the infrastructure necessary for the completion and operation of the Polysilicon Plant. In May 2009, we entered into an Economic Development Agreement, or the PDA Agreement, with the Pocatello Development Authority, or the PDA, pursuant to which the PDA agreed to reimburse to us amounts we actually incur in making certain infrastructure improvements consistent with the North Portneuf Urban Renewal Area and Revenue Allocation District Improvement Plan and the Idaho Urban Renewal Law, or the Infrastructure Reimbursement, and an additional amount as reimbursement for and based on the number of full time employee equivalents we create and maintain, or the Employment Reimbursement, at the Polysilicon Plant. The parties agreed that (a) the Infrastructure Reimbursement will be an amount that is equal to 95% of the tax increment payments the PDA actually collects on the North Portneuf Tax Increment Financing District with respect to our real and personal property located in such district, or the TIF Revenue, up to approximately $26.0 million, less the actual Road Costs, and (b) the Employment Reimbursement will be an amount that is equal to 50% of the TIF Revenue, up to approximately $17.4 million. However, there are no assurances that all or any part of the amount authorized will be paid to us, and we could ultimately receive significantly less or no payment at all, and we may not realize the benefits of these other offered incentives including workforce training funds and utility capacities. The tax incentives expire on December 31, 2030. If there are changes to the ordinance, which reduces the amount of the incentives, or for other reasons, some of which may be beyond our control, we are unable to realize all or any part of these incentives, the operating costs of the Polysilicon Plant may be higher than we currently estimate.

The reduction or elimination of government and economic incentives for PV systems and related products could reduce the market opportunity for our PV installation services.

We believe that the near-term growth of the market for on-grid applications, where solar power is used to supplement a customer’s electricity purchased from the utility network, depends in large part on the availability and size of government incentives. Because we plan to sell to the on-grid market, the reduction or elimination of government incentives may adversely affect the growth of this market or result in increased price competition, both of which adversely affect our ability to compete in this market. Currently, the U.S. federal solar tax credit is scheduled to expire at the end of calendar year 2016. If similar tax or other federal government incentives are not available beyond calendar year 2016, it could harm our PV system installation business.

Today, the cost of solar power exceeds the cost of power furnished by the electric utility grid in many locations. As a result, federal, state and local government bodies in many countries, most notably Germany, Japan and the United States, have provided incentives in the form of rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of solar power products to promote the use of solar energy in on-grid applications and to reduce dependency on other forms of energy. These government economic incentives could be reduced or eliminated altogether. For example, Germany has been a strong supporter of solar power products and systems and political changes in Germany could result in significant reductions or eliminations of incentives, including the reduction of tariffs over time. Some solar program incentives expire, decline over time, are limited in total funding or require renewal of authority. Net metering policies in Japan could limit the amount of solar power installed there. Reductions in, or elimination or expiration of, governmental incentives could result in decreased demand for PV products, and reduce the size of the market for our planned PV system installation services and the demand for solar-grade polysilicon.

Anti-dumping and countervailing duties against Chinese solar panel manufacturers could impact our ability to grow our module distribution subsidiary.

In October 2011, several solar manufacturers filed a petition with the U.S. Department of Commerce and the International Trade Commission to impose a duty on panels imported from China. The petition accuses Chinese solar panel manufacturers of selling solar panels at less than half of what the production costs would be in a comparable free-market economy. Our module distribution subsidiary, Tianwei Solar USA, Inc., is the primary distributor of Tianwei New Energy’s PV modules to the North American market. Tianwei New Energy is a Chinese based solar panel manufacturer. Therefore, any duties imposed by the U.S. government on panels imported from China would significantly impact our ability to compete in North America.

Risks Associated With Our Common Stock and Charter Documents

Our stock price is volatile and purchasers of our common stock could incur substantial losses.

Our stock price is volatile and between April 1, 2011 and ~~September~~December 3031, 2011, our stock had low and high sales prices in the range of $10.3550 to $2.25 per share. During fiscal 2011, the stock market in general experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The market price of our common stock may fluctuate significantly in response to a number of factors, including:

variations in our financial results or those of our competitors and our customers;

II-13

changes in projected schedule and estimated cost for the construction of the Polysilicon Plant;

announcements by us, our competitors and our customers of acquisitions, new products, the acquisition or loss of significant contracts, commercial relationships or capital commitments;

the performance of the stock market generally and the over-all condition of the global macro economy;

failure to meet the expectations of securities analysts or investors with respect to our financial results;

our ability to develop and market new and enhanced products on a timely basis;

litigation;

changes in our management;

changes in governmental regulations or in the status of our regulatory approvals;

future sales of our common stock by us and future sales of our common stock by our officers, directors and affiliates, including Tianwei;

investors’ perceptions of us; and

general economic, industry and market conditions.

In addition, in the past, following periods of volatility and a decrease in the market price of a company’s securities, securities class action litigation has often been instituted against that company. Class action litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

Tianwei has a controlling interest in us and, as long as Tianwei controls us, other stockholders’ ability to influence matters requiring stockholder approval will be limited.

As of ~~September~~December 3031, 2011, Tianwei owns 33,379,287 shares of our common stock, and holds a warrant to purchase an additional 10 million shares of our common stock, together representing approximately 67% of our total outstanding shares of common stock. Tianwei has the right to nominate four out of seven of our directors until the earlier of (i) Tianwei (together with its affiliates) ceasing to be our largest individual stockholder or (i) Tianwei (together with its affiliates) owning less than 25% of the outstanding shares of our common stock.

In addition, as a majority stockholder Tianwei has the ability to control the outcome of all matters that would be determined by a vote of our stockholders, including:

the composition of our board of directors and, through our board of directors, any determination with respect to our business plans and policies, including the appointment and removal of our officers;

any determinations with respect to mergers and other business combinations;

our acquisition or disposition of assets;

our financing activities;

changes to our polysilicon supply agreements with Tianwei;

the allocation of business opportunities that may be suitable for us and Tianwei;

the payment of dividends on our common stock; and

the number of shares available for issuance under our stock plans.

II-14

Tianwei’s voting control may discourage transactions involving a change of control of us, including transactions in which the holders of our common stock might otherwise receive a premium for their shares over the then current market price. In addition, Tianwei is not prohibited from selling its equity interest in us to a third party and may do so without stockholder approval and without providing for a purchase of other stockholders’ shares of common stock. Accordingly, our shares of common stock may be worth less than they would be if Tianwei did not maintain voting control over us.

Through control of our board of directors, Tianwei may cause our board to act in Tianwei’s best interests which may diverge from the best interests of other stockholders and make it difficult for us to recruit quality independent directors.

Pursuant to an Investor Rights Agreement, dated as of December 2009, Tianwei has the right to nominate four out of seven directors on our Board of Directors and may at any time replace four out of seven of our directors. Currently four out of seven directors on our board are designees of Tianwei. As a result, unless and until the earlier of (i) Tianwei (together with its affiliates) ceasing to be our largest individual stockholder or (ii) Tianwei (together with its affiliates) owning less than 25% of the outstanding shares of our common stock, Tianwei can effectively control and direct our board of directors, which means that to the extent that our interests and the interests of Tianwei diverge, Tianwei can cause us to act in Tianwei’s best interest to the detriment of the value of our common stock. Under these circumstances, persons who might otherwise accept our invitation to join our board of directors may decline.

Foreign investors in our stock may face certain tax withholding rules if we are classified as a U.S. real property holding corporation.

Under U.S. tax rules, a corporation is considered a U.S. real property holding corporation if the fair market value of its real property interests held by the corporation in the United States equals or exceeds 50% of the total fair market values of its real property interests and business assets. In such event, the foreign seller of stock in a publicly-traded corporation who owns more than 5% of that corporation’s common stock is subject to a tax withholding requirement imposed on the purchaser, equal to 10% of the sales price of the stock. This 10% withholding applies to the amount realized on the sale of the stock, irrespective of the seller’s gain on the sale. This withheld tax is treated as an advance payment against the actual individual or corporate capital-gains tax owed by the investor. In the event we were to be classified as a U.S. real property holding corporation, large foreign investors who hold more than 5% of our stock, would be subject to this 10% withholding requirement.

Anti-takeover defenses that we have in place could prevent or frustrate attempts by stockholders to change our directors or management.

Provisions in our amended and restated certificate of incorporation and bylaws may make it more difficult for or prevent a third party from acquiring control of us without the approval of our Board of Directors. These provisions:

establish a classified Board of Directors, so that not all members of our Board of Directors may be elected at one time;

set limitations on the removal of directors;

limit who may call a special meeting of stockholders;

establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon at stockholder meetings;

prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders; and

provide our Board of Directors the ability to designate the terms of and issue new series of preferred stock without stockholder approval.

II-15

These provisions may have the effect of entrenching our management team and may deprive investors of the opportunity to sell their shares to potential acquirers at a premium over prevailing prices. This potential inability to obtain a control premium could reduce the price of our common stock.

As a Delaware corporation, we are also subject to Delaware anti-takeover provisions. Section 203 of the Delaware General Corporation Law provides, subject to certain exceptions, that if a person acquires 15% of our voting stock, the person is an “interested stockholder” and may not engage in “business combinations” with us for a period of three years from the time the person acquired 15% or more or our voting stock. Our Board of Directors could rely on Delaware law to prevent or delay an acquisition.

Because we do not intend to pay dividends, stockholders will benefit from an investment in our common stock only if it appreciates in value.

We have not paid cash dividends on any of our classes of capital stock to date, and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. The success of an investment in our common stock will depend entirely upon any future appreciation. There is no guarantee that our common stock will appreciate in value or even maintain the price at which stockholders purchased their shares.

If our common stock is delisted from The Nasdaq Global Market, it will reduce the liquidity of our common stock, depress the value of our common stock, and materially harm our business.

In January 2012, we received a written notice from The Nasdaq Stock Market indicating that, for 30 consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share required for continued inclusion on The Nasdaq Global Market under Nasdaq Listing Rule 5450(a)(1). The notification letter states that we will be afforded 180 calendar days, or until July 10, 2012, to regain compliance with the minimum bid price requirement. In order to regain compliance, shares of our common stock must maintain a minimum bid closing price of at least $1.00 per share for a minimum of ten consecutive business days.

NASDAQ’s letter further states that if we do not regain compliance with the minimum bid price requirement, we may be eligible for additional time under NASDAQ Marketplace Rule 5810(c)(3)(A)(ii) for an additional 180 day period if we submit, no later than July 10, 2012, an application to transfer our common stock to the NASDAQ Capital Market. We will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards of the NASDAQ Capital Market, with the exception of the minimum bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split if necessary. NASDAQ staff will make a determination of whether it believes we will be able to cure this deficiency, or should we determine not to submit a transfer application to the NASDAQ Capital Market, NASDAQ will provide written notification that our common stock will be subject to delisting from the NASDAQ Global Market. At that time, we may appeal NASDAQ’s decision to a NASDAQ Hearings Panel.

We intend to actively monitor the bid price for our common stock between now and July 10, 2012, and will consider all available options to resolve the deficiency and regain compliance with the Nasdaq minimum bid price requirement. There is no assurance that we will be able to regain compliance or otherwise meet the continued listing requirements to transfer to NASDAQ Capital Mark. If we fail to continue to meet the applicable NASDAQ listing requirements and Nasdaq determines to delist our common stock, it could adversely affect the market liquidity and value of our common stock, impair our ability to obtain financing and material harm our business operations.

Item 6. EXHIBITS

(a) Exhibits

The following exhibits are included, or incorporated by reference, in this Form 10-Q (and are numbered in accordance with Item 601 of Regulation S-K). Pursuant to Item 601(a)(2) of Regulation S-K, this exhibit index immediately precedes the exhibits.

Exhibit No.

Exhibit Description

Form

File Number

Exhibit

Filing Date

Filed Herewith

10.1

Credit Agreement, dated ~~August~~October 165, 2011, between Hoku Corporation, ~~Hoku~~and ~~Materials,~~Industrial ~~Inc.~~ and Commercial Bank of China, Limited, New York Branch.

8-K

000-51458

10.1

810/2206/~~2011~~11

10.2

Reimbursement Agreement, dated ~~June~~October 25, 2011, between Hoku Corporation and Tianwei New Energy Holdings Co., Ltd.

8-K

000-51458

10.2

810/2206/~~2011~~11

10.3

Credit Agreement, dated ~~September~~October 112, 2011, between Hoku Corporation, ~~and~~Hoku ~~Industrial~~Materials, Inc. and ~~Commercial~~ Bank of China, ~~Ltd.,~~ New York Branch.

8-K

000-51458

10.1

910/214/~~2011~~11

10.4

Reimbursement Agreement, dated ~~September~~October 112, 2011, between Hoku Corporation and Tianwei New Energy Holdings Co., Ltd.

8-K

000-51458

10.2

910/214/~~2011~~11

10.5††

Reseller Agreement, dated November 14, 2011 between Tianwei Solar USA, Inc. and Tianwei New Energy Holdings Co., Ltd.

10.6

Credit Agreement, dated November 30, 2011, between Hoku Corporation and Industrial and Commercial Bank of China, Limited, New York Branch.

8-K

000-51458

10.1

12/01/11

II-16

10.7

Reimbursement Agreement, dated November 30, 2011, between Hoku Corporation and Tianwei New Energy Holdings Co., Ltd.

8-K

000-51458

10.2

12/01/11

10.8††

Amendment No. 2 to Second Amended & Restated Supply Agreement, dated December 27, 2011, between Hoku Materials, Inc. and Wealthy Rise International, Ltd.

31.1

Certification of Chief Executive Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

31.2

Certification required of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

32.1#

Form 10-Q Certification of Chief Executive Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended

32.2#

Form 10-Q Certification of Chief Financial Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended

101.INS**

XBRL Instance

101.SCH**

XBRL Taxonomy Extension Schema

101.CAL**

XBRL Taxonomy Extension Calculation

101.DEF**

XBRL Taxonomy Extension Definition

101.LAB**

XBRL Taxonomy Extension Labels

101.PRE**

XBRL Taxonomy Extension Presentation

Exhibit No.

Exhibit Description

Form

File Number

Exhibit

Filing Date

Filed Herewith

††

Confidential treatment has been requested for certain information contained in this document. Such information has been omitted and filed separately with the Securities and Exchange Commission.

10.5††

Amendment No. 3 to the Amended and Restated Supply Agreement between Hoku Materials, Inc., a wholly owned subsidiary of Hoku Corporation and Jinko Solar Co., Ltd., dated September 19, 2011

In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

10.6

Credit Agreement, dated October 5, 2011, between Hoku Corporation and Industrial and Commercial Bank of China, Ltd., New York Branch

8-K

000-51458

10.1

10/5/2011

Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

10.7

Reimbursement Agreement, dated October 5, 2011, between Hoku Corporation and Tianwei New Energy Holdings Co., Ltd.

8-K

000-51458

10.2

10/5/2011

10.8

Credit Agreement, dated October 12, 2011, between Hoku Corporation and Bank of China, New York Branch

8-K

000-51458

10.1

10/12/2011

10.9

Reimbursement Agreement, dated October 12, 2011, between Hoku Corporation and Tianwei New Energy Holdings Co., Ltd.

8-K

000-51458

10.2

10/12/2011

31.1

Certification of Chief Executive Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

31.2

Certification required of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

32.1#

Form 10-Q Certification of Chief Executive Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended

32.2#

Form 10-Q Certification of Chief Financial Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended

101.INS**

XBRL Instance

101.SCH**

XBRL Taxonomy Extension Schema

101.CAL**

XBRL Taxonomy Extension Calculation

101.DEF**

XBRL Taxonomy Extension Definition

101.LAB**

XBRL Taxonomy Extension Labels

101.PRE**

XBRL Taxonomy Extension Presentation

†† Confidential treatment has been requested for certain information contained in this document. Such information has been omitted and filed separately with the Securities and Exchange Commission.

# In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

** Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

II-17

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on ~~November~~March 255, ~~2011~~2012.

HOKU CORPORATION /s/ DARRYL S. NAKAMOTO Darryl S. Nakamoto Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)

~~II-18~~INDEX OF EXHIBITS

Exhibit

No.

Exhibit Description

Form

File Number

Exhibit

Filing

Date

Filed

Herewith

10.1

Credit Agreement, dated October 5, 2011, between Hoku Corporation and Industrial and Commercial Bank of China, Limited, New York Branch.

8-K

000-51458

10.1

10/06/11

10.2

Reimbursement Agreement, dated October 5, 2011, between Hoku Corporation and Tianwei New Energy Holdings Co., Ltd.

8-K

000-51458

10.2

10/06/11

10.3

Credit Agreement, dated October 12, 2011, between Hoku Corporation, Hoku Materials, Inc. and Bank of China, New York Branch.

8-K

000-51458

10.1

10/14/11

10.4

Reimbursement Agreement, dated October 12, 2011, between Hoku Corporation and Tianwei New Energy Holdings Co., Ltd.

8-K

000-51458

10.2

10/14/11

10.5††

Reseller Agreement, dated November 14, 2011 between Tianwei Solar USA, Inc. and Tianwei New Energy Holdings Co., Ltd.

10.6

Credit Agreement, dated November 30, 2011, between Hoku Corporation and Industrial and Commercial Bank of China, Limited, New York Branch.

8-K

000-51458

10.1

12/01/11

10.7

Reimbursement Agreement, dated November 30, 2011, between Hoku Corporation and Tianwei New Energy Holdings Co., Ltd.

8-K

000-51458

10.2

12/01/11

10.7

Reimbursement Agreement, dated November 30, 2011, between Hoku Corporation and Tianwei New Energy Holdings Co., Ltd.

8-K

000-51458

10.2

12/01/11

10.8††

Amendment No. 2 to Second Amended & Restated Supply Agreement, dated December 27, 2011, between Hoku Materials, Inc. and Wealthy Rise International, Ltd.

31.1

Certification of Chief Executive Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

31.2

Certification required of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

32.1#

Form 10-Q Certification of Chief Executive Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended

32.2#

Form 10-Q Certification of Chief Financial Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended

101.INS**

XBRL Instance

101.SCH**

XBRL Taxonomy Extension Schema

101.CAL**

XBRL Taxonomy Extension Calculation

101.DEF**

XBRL Taxonomy Extension Definition

101.LAB**

XBRL Taxonomy Extension Labels

101.PRE**

XBRL Taxonomy Extension Presentation

††	Confidential treatment has been requested for certain information contained in this document. Such information has been omitted and filed separately with the Securities and Exchange Commission.

#	In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

**	Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

Filing Compare · Hoku Corp