ZBB Energy Corporation Reports Third Quarter Fiscal Year 2014
Break-even Earnings per Share
MILWAUKEE, WI – (Marketwire – May 15, 2014) – ZBB Energy Corporation (NYSE MKT: ZBB), a leading developer of intelligent, renewable energy power platforms and hybrid vehicle control systems, today announced its financial results for its third fiscal quarter ended March 31, 2014.
Third Quarter Highlights
During the third quarter of fiscal year 2014, the Company’s major accomplishments included:
| | · | Completed a secondary offering of 6,325,000 shares of common stock at $2.25 per share for net cash proceeds of $13.1 million. |
| | · | Achieved the initial milestone of the joint development agreement with Lotte Chemical, and received $3 million in one-time upfront license fees for the quarter. |
| | · | Tested and shipped equipment to Ergon Energy in Australia. Ergon has successfully completed their lab testing and will place the equipment in the field over the coming weeks as part of their field trial to determine suitability. |
Subsequent to the end of the third quarter of fiscal year 2014, the Company:
| | · | Hired a sales manager for the state of Hawaii. |
| | · | Advanced to the RFQ stage for the Imperial Irrigation District’s 40-megawatt energy storage project. |
“The completion of our secondary offering and the initiation of the Lotte Chemical project strengthened our balance sheet this quarter and enhanced our financial capacity to more aggressively pursue the multiple sales opportunities in our markets,” said Eric C. Apfelbach, President and Chief Executive Officer. “To prepare for these opportunities, we are actively working to add staff in our sales and technical areas, including our recent hire of a sales manager for Hawaii.”
“Additionally, ZBB and Lotte are working towards an agreement that would enable Lotte to purchase from ZBB the “chassis” frame, internal componentry and power electronics for ZBB EnerStore® flow batteries, whereby Lotte will source the electrolyte and manufacture the stacks to be placed in the chassis frame provided by ZBB. This combined global manufacturing strategy will give us the lowest possible costs and enable us to ramp quickly to meet the large demand that is being indicated by the RFQ activity.”
“We believe our products are the right fit for the multi-billion dollar energy storage proposals in California, New York, Province of Ontario and South Korea.” continued Mr. Apfelbach. “We expect additional energy storage proposals going forward, including in China, which we believe over time has the potential to be a $40 billion market opportunity.”
Financial results for the three months ended March 31, 2014 as compared to the three months ended March 31, 2013 included:
| | · | Product sales decreased 59% to $822,318 from $2,019,191. |
| | · | Engineering and development revenues increased 650% to $750,000 from $100,000. |
| | · | License revenues were $3,000,000. |
| | · | Product gross margin was 33.0% compared to 12.8% in the prior year quarter. |
| | · | Net loss to common stockholders improved to $67,945 compared to $2,824,313. |
| | · | Loss per share improved to ($0.004) from ($0.18). |
Financial results for the nine month period ending March 31, 2014 compared to the nine months ended March 31, 2013:
| | · | Product sales decreased 58% to $2,652,896 from $6,372,336. |
| | · | Engineering and development revenues increased 200% to $950,000 from $318,183. |
| | · | Product gross margin was 36.0% compared to 13.4% in the prior year period. |
| | · | Net loss to common stockholders improved to $4,901,204 compared to $8,790,560. |
| | · | Loss per share improved to ($0.27) from ($0.57). |
Financial Position
The Company’s backlog as of March 31, 2014 was approximately $5.2 million. $3.25 million of our backlog relates to provisions of the Lotte Amended License and Research and Development Agreements. The Company ended the third quarter of fiscal 2014 with total assets of $23.5 million, including $13.4 million in cash and $583,000 in accounts receivable.
“I expect our order flow to remain uneven in the near-term. We will continue to work with our partners, including Lotte Chemical and Cummins Crosspoint, to extend our relationships and secure additional business. In addition, the recently announced plan by the U.S. Department of Energy to offer up to $4 billion in loan guarantees for renewable energy projects could rejuvenate interest and orders in the domestic market,” Mr. Apfelbach concluded.
Conference call – May 15, 2014 – 4:30 p.m. Eastern Time (3:30 p.m. CT)
The Company will hold a conference call on Thursday, May 15, 2014 at 4:30 p.m. Eastern Time (3:30 p.m. Central Time) to discuss results for its third fiscal quarter ended March 31, 2014. To participate in the call, please dial 1-888-539-3612 for domestic callers and 1-719-457-0820 for international callers. The participant passcode is 3851779.
The call will be available for replay at 1-888-203-1112 for domestic callers, and 1-719-457-0820, for international callers. The replay passcode is 3851779. The conference call will also be available for replay via the investor relations section of the Company’s website at www.zbbenergy.com.
| ZBB ENERGY CORPORATION | |
| Condensed Consolidated Statements of Operations | |
| | |
| | | Three months ended March 31, | | | Nine months ended March 31, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
| Revenues | | | | | | | | | | | | |
| Product sales | | $ | 822,318 | | | $ | 2,019,191 | | | $ | 2,652,896 | | | $ | 6,372,336 | |
| Engineering and development | | | 750,000 | | | | 100,000 | | | | 950,000 | | | | 318,183 | |
| License | | | 3,000,000 | | | | - | | | | 3,000,000 | | | | - | |
| Total Revenues | | | 4,572,318 | | | | 2,119,191 | | | | 6,602,896 | | | | 6,690,519 | |
| | | | | | | | | | | | | | | | | |
| Costs and Expenses | | | | | | | | | | | | | | | | |
| Cost of product sales | | | 546,904 | | | | 1,761,762 | | | | 1,698,762 | | | | 5,519,360 | |
| Cost of engineering and development | | | 65,560 | | | | 62,118 | | | | 109,196 | | | | 107,183 | |
| Advanced engineering and development | | | 1,095,589 | | | | 1,293,147 | | | | 3,400,318 | | | | 3,828,686 | |
| Selling, general, and administrative | | | 2,667,569 | | | | 1,439,235 | | | | 5,221,065 | | | | 4,731,209 | |
| Depreciation and amortization | | | 200,646 | | | | 338,041 | | | | 886,405 | | | | 1,022,503 | |
| Total Costs and Expenses | | | 4,576,267 | | | | 4,895,303 | | | | 11,315,744 | | | | 15,208,941 | |
| | | | | | | | | | | | | | | | | |
| Income (Loss) from Operations | | | (3,949 | ) | | | (2,776,112 | ) | | | (4,712,849 | ) | | | (8,518,422 | ) |
| | | | | | | | | | | | | | | | | |
| Other Income (Expense) | | | | | | | | | | | | | | | | |
| Equity in loss of investee company | | | (55,428 | ) | | | (118,442 | ) | | | (303,910 | ) | | | (651,555 | ) |
| Interest income | | | 1,435 | | | | 913 | | | | 2,944 | | | | 1,896 | |
| Interest expense | | | (27,153 | ) | | | (40,829 | ) | | | (124,668 | ) | | | (134,039 | ) |
| Other income (expense) | | | - | | | | (45,000 | ) | | | 896 | | | | (45,000 | ) |
| Total Other Income (Expense) | | | (81,146 | ) | | | (203,358 | ) | | | (424,738 | ) | | | (828,698 | ) |
| | | | | | | | | | | | | | | | | |
| Income (Loss) before provision (benefit) for Income Taxes | | | (85,096 | ) | | | (2,979,470 | ) | | | (5,137,587 | ) | | | (9,346,939 | ) |
| | | | | | | | | | | | | | | | | |
| Provision (benefit) for Income Taxes | | | (38,598 | ) | | | (36,715 | ) | | | (86,848 | ) | | | (110,866 | ) |
| Net loss | | | (46,497 | ) | | | (2,942,755 | ) | | | (5,050,739 | ) | | | (9,236,074 | ) |
| Net loss attributable to noncontrolling interest | | | 55,428 | | | | 118,442 | | | | 303,910 | | | | 445,514 | |
| Net Income (Loss) Attributable to ZBB Energy Corporation | | | 8,931 | | | | (2,824,313 | ) | | | (4,746,829 | ) | | | (8,790,560 | ) |
| Preferred Stock Dividend | | | (76,876 | ) | | | - | | | | (154,375 | ) | | | - | |
| Net Loss Attributable to Common Shareholders | | $ | (67,945 | ) | | $ | (2,824,313 | ) | | $ | (4,901,204 | ) | | $ | (8,790,560 | ) |
| | | | | | | | | | | | | | | | | |
| Net Loss per share | | | | | | | | | | | | | | | | |
| Basic and diluted | | $ | (0.004 | ) | | $ | (0.18 | ) | | $ | (0.27 | ) | | $ | (0.57 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average shares-basic and diluted | | | 18,690,642 | | | | 15,693,149 | | | | 18,045,685 | | | | 15,555,891 | |
| | | | | | | | | | | | | | | | | |
| ZBB ENERGY CORPORATION | |
| Condensed Consolidated Balance Sheets | |
| | |
| | | March 31, 2014 | | | | |
| | | (Unaudited) | | | June 30, 2013 | |
| Assets | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 13,393,266 | | | $ | 1,096,621 | |
| Restricted cash on deposit | | | 69,713 | | | | 60,000 | |
| Accounts receivable, net | | | 583,020 | | | | 446,925 | |
| Inventories | | | 1,748,607 | | | | 2,459,776 | |
| Prepaid expenses and other current assets | | | 261,323 | | | | 224,542 | |
| Refundable income tax credit | | | 93,976 | | | | 137,228 | |
| Total current assets | | | 16,149,904 | | | | 4,425,092 | |
| Long-term assets: | | | | | | | | |
| Property, plant and equipment, net | | | 4,526,730 | | | | 5,179,707 | |
| Investment in investee company | | | 2,000,219 | | | | 2,304,122 | |
| Intangible assets, net | | | - | | | | 411,073 | |
| Goodwill | | | 803,079 | | | | 803,079 | |
| Total assets | | $ | 23,479,932 | | | $ | 13,123,073 | |
| | | | | | | | | |
| Liabilities and Equity | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Bank loans and notes payable | | $ | 348,701 | | | $ | 885,786 | |
| Accounts payable | | | 633,145 | | | | 570,932 | |
| Accrued expenses | | | 1,461,447 | | | | 785,532 | |
| Customer deposits | | | 1,202,295 | | | | 2,194,262 | |
| Accrued compensation and benefits | | | 194,048 | | | | 164,437 | |
| Total current liabilities | | | 3,839,635 | | | | 4,600,949 | |
| Long-term liabilities: | | | | | | | | |
| Bank loans and notes payable | | | 2,133,709 | | | | 2,395,802 | |
| Total liabilities | | | 5,973,345 | | | | 6,996,751 | |
| | | | | | | | | |
| Equity | | | | | | | | |
| Series B redeemable convertible preferred stock ($0.01 par value, | | | | | | | | |
| $1,000 face value) 10,000,000 authorized, 2,750 and 0 shares issued and outstanding, preference in liquidation of $5,641,510 as of March 31, 2014 | | | 28 | | | | - | |
| Common stock ($0.01 par value); 150,000,000 authorized, | | | | | | | | |
| 25,257,700 and 17,707,341 shares issued and outstanding as of March 31, 2014 and June 30, 2013 respectively | | | 960,891 | | | | 885,389 | |
| Additional paid-in capital | | | 101,823,820 | | | | 85,464,055 | |
| Accumulated deficit | | | (85,679,653 | ) | | | (80,932,824 | ) |
| Accumulated other comprehensive loss | | | (1,598,710 | ) | | | (1,594,418 | ) |
| Total ZBB Energy Corporation Equity | | | 15,506,376 | | | | 3,822,202 | |
| Noncontrolling interest | | | 2,000,211 | | | | 2,304,120 | |
| Total equity | | | 17,506,587 | | | | 6,126,322 | |
| Total liabilities and equity | | $ | 23,479,932 | | | $ | 13,123,073 | |
| ZBB Energy Corporation | |
| Condensed Consolidated Statements of Cash Flows | |
| | |
| | | Nine months ended March 31, | |
| | | 2014 | | | 2013 | |
| Cash flows from operating activities | | | | | | |
| Net loss | | $ | (5,050,739 | ) | | $ | (9,236,074 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
| Depreciation of property, plant and equipment | | | 580,379 | | | | 552,079 | |
| Amortization of intangible assets | | | 411,073 | | | | 549,532 | |
| Stock-based compensation | | | 450,796 | | | | 570,604 | |
| Equity in loss of investee company | | | 303,910 | | | | 651,555 | |
| Amortization of discounts and debt issuance costs on notes payable | | | 14,566 | | | | - | |
| Purchase price adjustment | | | - | | | | 45,000 | |
| Changes in assets and liabilities | | | | | | | | |
| Accounts receivable | | | (136,095 | ) | | | (605,430 | ) |
| Inventories | | | 823,670 | | | | (121,558 | ) |
| Prepaids and other current assets | | | (51,346 | ) | | | 1,831 | |
| Refundable income taxes | | | 43,253 | | | | (118,682 | ) |
| Accounts payable | | | 62,213 | | | | 48,340 | |
| Accrued compensation and benefits | | | 29,610 | | | | (87,710 | ) |
| Accrued expenses | | | 715,707 | | | | (417,946 | ) |
| Customer deposits | | | (991,967 | ) | | | (174,644 | ) |
| Net cash used in operating activities | | | (2,794,971 | ) | | | (8,343,103 | ) |
| Cash flows from investing activities | | | | | | | | |
| Expenditures for property and equipment | | | (39,907 | ) | | | (106,479 | ) |
| Investment in investee company | | | - | | | | - | |
| Deposits of restricted cash | | | (9,713 | ) | | | (60,000 | ) |
| Net cash used in investing activities | | | (49,620 | ) | | | (166,479 | ) |
| Cash flows from financing activities | | | | | | | | |
| Repayments of bank loans and notes payable | | | (843,262 | ) | | | (877,312 | ) |
| Proceeds from issuance of preferred stock and warrants | | | 3,000,000 | | | | - | |
| Preferred stock issuance costs | | | (96,967 | ) | | | - | |
| Proceeds from issuance of common stock | | | 14,231,250 | | | | 4,244,689 | |
| Common stock issuance costs | | | (1,149,786 | ) | | | (177,606 | ) |
| Proceeds from noncontrolling interest | | | - | | | | 5,500 | |
| Net cash provided by financing activities | | | 15,141,235 | | | | 3,195,271 | |
| Effect of exchange rate changes on cash and cash equivalents | | | - | | | | 776 | |
| Net increase (decrease) in cash and cash equivalents | | | 12,296,645 | | | | (5,313,535 | ) |
| Cash and cash equivalents - beginning of period | | | 1,096,621 | | | | 7,823,217 | |
| | | | | | | | | |
| Cash and cash equivalents - end of period | | $ | 13,393,266 | | | $ | 2,509,683 | |
| | | | | | | | | |
| Cash paid for interest | | $ | 137,763 | | | $ | 121,539 | |
| Cash received from foreign income tax credit | | | 133,996 | | | | - | |
About ZBB Energy Corporation
ZBB Energy Corporation (NYSE MKT: ZBB) designs, develops, licenses and manufactures advanced energy storage and power electronics systems, as well as engineered custom and semi-custom products targeted at the growing global need for distributed renewable energy, energy efficiency, power quality, and grid modernization. ZBB’s portfolio includes integrated power management platforms that combine advanced power and energy controls plus energy storage to optimize renewable energy sources and conventional power inputs for grid connected and off-grid applications. ZBB’s innovative platforms solve a wide range of electrical system challenges in global markets for utility, governmental, commercial, industrial and residential customers. In addition, the platforms ensure optimal efficiencies today, while offering the flexibility to adapt and scale to future requirements. ZBB's corporate offices, engineering and development, and production facilities are located in Menomonee Falls, WI, USA with a research facility also located in Perth, Western Australia. ZBB has a joint venture with Meineng Energy, a provider of leading-edge energy storage systems and solutions to the greater China market. For more information, visit: www.zbbenergy.com.
Safe Harbor Statement
Certain statements made in this press release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended that are intended to be covered by the "safe harbor" created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as "believe," "expect," "may," "will," "should," "could," "seek," "intend," "plan," "estimate," "anticipate" or other comparable terms. Forward-looking statements in this press release may address the following subjects among others: statements regarding the sufficiency of our capital resources, expected operating losses, expected revenues, expected expenses and our expectations concerning our business strategy. Forward-looking statements involve inherent risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements, as a result of various factors including those risks and uncertainties described in the Risk Factors and in Management's Discussion and Analysis of Financial Condition and Results of Operations sections of our most recently filed Annual Report on Form 10-K and our subsequently filed Quarterly Reports on Form 10-Q. We urge you to consider those risks and uncertainties in evaluating our forward-looking statements. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Investor Relations Contact:
David Mossberg
Three Part Advisors, LLC
817-310-0051
