Knobias ClipReport (6-26-2007)

Submitted from Knobias ClipReport.

Monday’s session saw home sales numbers reach four year lows and inventory numbers of previously owned homes reach their highest levels in 15 years. The summation was a bleak look for housing over the coming months.

The morning hours of trading saw the market begin the week in a green fashion before abruptly turning about face in the noon hours and ending the day moderately in the red. Much of the losses were attributed to market data which was set to be released during Tuesday’s session. Also contributing was continued unrest from the brokers stemming from subprime losses.

In the small cap arena, solar names were the focus of many traders with one name in particular displaying strong momentum over the weekend. Hoku Scientific Inc. (HOKU) shares gained over 27% on over 32M shares traded.

Another name in the sector also had a fairly heavy day in trading though not near the volume. Daystar Technologies (DSTI) shares gained 31% on only 1.6M shares.

On Thursday, the Company released an 8-K detailing a bridge loan financing agreement in which it secured $4 million to continue operations while it searched for an additional $25 million to ramp up production.

The $25 million financing was noted as possibly being equity derived which would seem to be a negative to investors looking for possible investments in the solar arena.

The Company, which makes thin film solar cells, was planning on moving their headquarters to California from New York. Some of the money expected to be raised in the equity deal was noted as to be used in the move.

Even though the raising of equity financing could be considered a positive for the name, terms would have to be good with the number of shares being issued as low as possible to limit the amount of dilution.

But the large amount of financing could be a fairly tall order since the Company lost $20 million last year, and even in its initial public offering only raised around $8 million. Also of note was that the Company was currently able to use $1.5 million of the bridge financing loan proceeds. If there is no continuing event of default the Company would be able to use another $1.2 million 30 days after June 15, 2007.

Speculation suggested that if the Company wasn’t close to securing the $25 million in equity financing that the remaining $2.5 million in bridge financing wouldn’t be available for use.

Add to the fact that the Senate Finance committee recently proposed an Energy Incentive Bill that was considered by many to be a bit modest, and one can see the uphill battle this name could face in the coming months.

With a positive outcome to the equity financing deal as well as a successful transition into the new headquarters along with the construction of the new 25 megawatt production line in California, and the name could become one to watch in this highly speculative solar arena. Investors would be wise to watch.