x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT |
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Wisconsin | 39-1987014 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
N93 W14475 Whittaker Way, Menomonee Falls, Wisconsin | 53051 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: | (262) 253-9800 |
Title of each class | Name of each exchange on which registered | |
Common Stock, $0.01 Par Value | NYSE Amex |
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company x |
Part III – Items 10, 11, 12, 13 and 14 | In the Company’s Definitive Proxy Statement in connection with its 2010 annual meeting of shareholders to be filed with the Securities and Exchange Commission no later than October 28, 2010. | |
Part IV - Certain exhibits listed in response to Item 15(a) | Prior filings made by the Company under the Securities Act of 1933 and the Securities Exchange Act of 1934. |
Page | ||
PART I | 3 | |
Item 1. | Business | 3 |
Item 1A. | Risk Factors | 11 |
Item 1B. | Unresolved Staff Comments | 17 |
Item 2. | Properties | 17 |
Item 3. | Legal Proceedings | 17 |
Item 4. | (Removed and Reserved) | 17 |
PART II | 18 | |
Item 5. | Market for Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities | 18 |
Item 6. | Selected Financial Data | 18 |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operation.(restated) | 18 |
Item 7A. | Quantitative Disclosures About Market Risk | 26 |
Item 8. | Financial Statements and Supplementary Data | 27 |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 47 |
Item 9A. | Controls and Procedures | 47 |
Item 9B. | Other Information | 47 |
PART III | 48 | |
Item 10. | Directors, Executive Officers and Corporate Governance | 48 |
Item 11. | Executive Compensation | 48 |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 48 |
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 48 |
Item 14. | Principal Accountant Fees and Services | 48 |
PART IV | 49 | |
Item 15. | Exhibits and Financial Statement Schedules | 49 |
Signatures | 50 |
CUSTOMER PROBLEM | ZESS POWR SOLUTION | |
Wind and sun are unreliable energy sources | ZESS POWR stores renewable energy and feeds load as needed | |
Must use dirty and expensive diesel gensets during grid outages or when no grid is available | ZESS POWR can operate as back-up power and as off grid power, reducing diesel run-times or eliminating them all together | |
Grid becomes unstable when wind stops or clouds blow over solar panels | ZESS POWR acts as a “shock absorber” to rapid swings in renewable energy sources. | |
Grid needs voltage support during peaks and has congestion on “feeder lines” into high density areas | The distributed storage and intelligent power management system of ZESS POWR can be called upon to provide energy during peaks | |
Remote off-grid or micro-grid systems do not have reliable and cost effective power sources. Diesel fuel is too expensive. | ZESS POWR integrates solar, wind, gensets with storage, and then manages all power flows to deliver reliable power. |
· | Modular Construction: The ZESS flow battery is built in 50 kWh modules and the POWR PECC is designed with standardized electronics modules. This allows the system to be architected specifically to customer’s needs and easily modified to fit future needs like EV charging. |
· | Turnkey Solution: A customer can outline their system requirements and we can deliver an expandable solution that is “plug and play” |
· | Intelligent Direct Current (DC) Buss on POWR PECC: Enables simple management of multiple power inputs, multiple storage types, and any dynamic load profile. Also enables simple expansion for future needs. |
· | Energy density relative to lead acid batteries or vanadium redox: A larger amount of energy can be stored in a system of a given weight and size (measured in Watt Hours per Kilogram or Wh/kg), recharge cycle and overall cycle life. |
· | Lower cost than lithium ion: It is unlikely that the Li ion storage will ever be sold for less than about $600/kW-hr, whereas we expect that our flow batteries will reach the $300-$400/kW-hr price range depending on size and power electronics. |
· | On and off grid wireless telecom towers installations that use renewable energy to reduce or eliminate diesel run time; |
· | Off grid power generation systems; | |
· | military and remote village power |
· | Commercial and residential building integration with renewables and/or back-up power needs; and |
· | Small community power systems and micro-grids. |
· | The goal of the Smart Grid is to maximize the efficiency and reliability of the existing infrastructure and accommodate the continued integration of renewable power resources. |
· | Evolution of the Smart Grid will depend on cost effective energy storage. Smart grid without smart storage equals “dumb grid”. |
o | SEI for the integration of solar PV with energy storage for an on grid dispatchable power plant for use at a US government facility. |
o | NIDON for the integration of solar PV with energy storage for an elevator system that utilizes power from the grid and renewable energy in “Pulani Manor”, a mid rise, multi-family apartment located near downtown Honolulu. This system will manage the energy usage from a 20kW PV array and allows the elevator to be operated during emergency situations and extended power outages. The scalability of the ZESS system enables future input and storage from other renewable energy sources. |
o | BC Hydro to be utilized as part of a demonstration project that uses multiple components (power generation, utilization, storage, and dispatch optimization) to provide electrical power to an isolated remote area grid with the goal of reducing reliance on diesel generation and the reduction of greenhouse gas emissions in remote communities in British Columbia. The project objective is to increase the utilization of BC Hydro’s Clayton Falls small hydro plant and reduce the reliance on diesel generators at its Ah Sin Heek generating facility |
o | General Atomics to be utilized as a demonstration project at its headquarters in San Diego, California. This fully integrated ZESS power system will be used in an on-grid configuration with photovoltaic (PV) renewable energy generation inputs and multiple connection points for both AC and DC power requirements that will connect to the host building’s power distribution system. The ZESS POWR PECC system controls energy and power inputs, directs energy flow to and from energy storage, regulates clean power to various demonstration loads, and when available, sends excess energy to the sites larger electrical distribution system. |
· | The development of a prototype off grid system consisting of ZESS 50 energy storage and ZESS POWR PECC hybrid for cell tower application in Africa via ZBB partner Likusasa. |
· | The shipment of a ZESS 500 in conjunction with existing wind energy assets at the Dundalk Institute of Technology in the Republic of Ireland. |
· | The deployment of the ZBB Hybrid ZESS POWR PECC and ZESS 50 energy storage to Oregon State University for the advanced study of energy storage with wind power. |
· | Installation of an order with Envinity, a renewable system integrator, for the delivery of two ZESS 50 energy storage devices and ZESS POWR PECC designed to integrate two solar PV arrays, ten wind turbines, a hydro generator, and a conventional generator to provide a single output power plant for an off grid application. |
· | Completion of a $230,000 funded project with the Wisconsin Energy Independence Fund for the development of our own proprietary power conversion systems for both AC to DC and DC to DC renewable energy applications; |
· | Research and development project (Advanced Electricity Storage Technologies project) with the Commonwealth of Australia represented by and acting through the Department of Environment and Water Resources (the “Department”) which included the production and delivery of one 500kWh energy storage system for installation into a renewable energy site in Australia. Under this contract which will be completed on September 30, 2010 the Department agreed to provide funding to us for the development of an energy storage system that will be used to demonstrate the storage and supply of renewable energy generated from photovoltaic solar panels and wind turbines already operational at the Commonwealth Scientific and Industrial Research Organization’s Newcastle Energy Centre in New South Wales, Australia. We received a total of $2.4 million (A$2.9 million) in project funding under this contract through June 30, 2010. |
· | our inability to raise additional capital to fund our operations, whether through the issuance of equity securities or debt; |
· | our failure to successfully advance the development of our programs or otherwise implement our business objectives; |
· | issuance of new or changed securities analysts’ reports or recommendations; |
· | significant acquisitions or business combinations, strategic partnerships, joint ventures or capital committees by or involving us or our competitors; |
· | our ability to consummate a strategic transaction to ensure the continued funding of our operations, including corporate collaborations, merger and acquisition activities and consolidations; |
· | our ability to successfully integrate our acquisitions and realize anticipated benefits from acquisitions; |
· | changes or contemplated changes in U.S. and foreign governmental regulations; |
· | competitors’ publicity regarding actual or potential products under development; |
· | competitors announcing technological innovations or new commercial products; |
· | changes in our intellectual property portfolio or developments or disputes concerning proprietary rights, including patent litigation; |
· | actual or anticipated fluctuations in our quarterly financial and operating results; |
· | changes in accounting policies or practices; |
· | news reports relating to trends, concerns and other issues in our industry; |
· | general domestic and international economic conditions and other external factors; |
· | general market conditions; and |
· | the degree of trading liquidity in our common stock. |
· | execute our growth plan; |
· | take advantage of future opportunities, including synergistic acquisitions; |
· | respond to customers and competition; or |
· | remain in operation. |
· | market acceptance of fuel cell, photovoltaic and wind turbine systems that incorporate our products; |
· | the cost competitiveness of these systems; |
· | regulatory requirements; and |
· | the emergence of newer, more competitive technologies and products. |
· | changes in general economic and political conditions in the countries in which we operate; |
· | unexpected adverse changes in foreign laws or regulatory requirements, including those with respect to renewable energy, environmental protection, permitting, export duties and quotas; |
· | trade barriers such as export requirements, tariffs, taxes and other restrictions and expenses, which could increase the prices of our products and make us less competitive in some countries; |
· | fluctuations in exchange rates may affect demand for our products and may adversely affect our profitability in US dollars to the extent the price of our products and cost of raw materials and labor are denominated in a foreign currency; |
· | difficulty with staffing and managing widespread operations; |
· | difficulty of, and costs relating to compliance with, the different commercial and legal requirements of the overseas markets in which we offer and sell our products; |
· | inability to obtain, maintain or enforce intellectual property rights; and |
· | difficulty in enforcing agreements in foreign legal systems. |
Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
Item 3. | Legal Proceedings |
Item 4. | (Removed and Reserved) |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
High ($) | Low ($) | |||||||
2010 | ||||||||
Fourth Quarter | 0.86 | 0.20 | ||||||
Third Quarter | 2.00 | 0.78 | ||||||
Second Quarter | 1.45 | 0.90 | ||||||
First Quarter | 1.61 | 1.00 | ||||||
1.58 | 0.84 | |||||||
Third Quarter | 1.55 | 0.80 | ||||||
Second Quarter | 2.30 | 0.86 | ||||||
First Quarter | 4.05 | 2.22 | ||||||
Fourth Quarter | 4.19 | 2.80 | ||||||
Third Quarter | 3.15 | 1.75 | ||||||
Second Quarter | 4.25 | 1.98 | ||||||
First Quarter | 5.94 | 3.27 |
· | increased costs of product sales primarily resulting from $572,891 related to the shipment to the Dundalk Institute of Technology; |
· | decrease in cost of engineering and development revenues of $215,504 due to a decrease in activities required under the AEST contract; |
· | increases in advanced engineering and development expenses primarily resulting from $1,368,000 due to an increase in the Company’s engineering and development activities for its next generation battery module and the PECC systems; |
· | severance pay to the Company’s former CEO of $390,000; |
· | increase in non-cash directors fees of $182,500 and an increase of $38,584 cash based directors fees due to an increase in the size of the Board of Directors and an increase in directors fees; |
· | increase in stock option expense of $188,575 for options issued to new employees and for accelerated vesting of directors options; |
· | legal and accounting fees increases of $258,249 related to the termination of the Company’s former CEO and restatements of the Company’s financial statements; and |
· | fund raising expenses of $177,918 for government grant proposals, section 48c tax credit fees, and loan commitment fees. |
Depreciation Life | ||
Manufacturing Equipment | 3 - 7 years | |
Office Equipment | 3 - 7 years | |
Building and improvements | 7 - 40 years |
· | Raw materials – purchased cost of direct material |
· | Finished goods and work-in-progress – purchased cost of direct material plus direct labor plus a proportion of manufacturing overheads. |
Page | ||
Report of Independent Registered Public Accounting Firm | 28 | |
Consolidated Balance Sheets as of June 30, 2010 and 2009 | 29 | |
Consolidated Statements of Operations for the years ended June 30, 2010 and 2009 | 30 | |
Consolidated Statements of Changes in Shareholders’ Equity for the Years ended June 30, 2010 and 2009 | 31 | |
Consolidated Statements of Cash Flows for the years ended June 30, 2010 and 2009 | 32 | |
Notes to Consolidated Financial Statements | 33 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
ZBB Energy Corporation
Milwaukee, Wisconsin
We have audited the accompanying consolidated balance sheets of ZBB Energy Corporation and subsidiaries as of June 30, 2010 and 2009, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ZBB Energy Corporation and subsidiaries at June 30, 2010 and 2009, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company continues to incur significant operating losses and has an accumulated deficit of $46,894,677 that raises substantial doubt about the Company’s ability to continue as a going concern. The Company is dependent on future debt and equity fundraising, additional sales orders, increase in margins, strategic partnerships, and/or government programs to sustain continued operations and meet past obligations. Management’s plans regarding these matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
New York, NY
September 7, 2010
June 30, 2010 | June 30, 2009 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,235,635 | $ | 2,970,009 | ||||
Bank certificate of deposit | - | 1,000,000 | ||||||
Accounts receivable | 7,553 | 614,154 | ||||||
Interest receivable | - | 19,746 | ||||||
Inventories-net of $304,200 and $145,301 allowance | 702,536 | 1,587,113 | ||||||
Prepaids and other current assets | 149,098 | 143,173 | ||||||
Total current assets | 2,094,822 | 6,334,195 | ||||||
Long-term assets: | ||||||||
Property, plant and equipment, net | 3,568,823 | 4,578,180 | ||||||
Goodwill | 803,079 | 803,079 | ||||||
Total assets | $ | 6,466,724 | $ | 11,715,454 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current liabilities: | ||||||||
Bank loans | 395,849 | 416,558 | ||||||
Accounts payable | 869,179 | 827,001 | ||||||
Accrued expenses | 539,100 | 25,765 | ||||||
Deferred revenues | 325,792 | 1,128,539 | ||||||
Accrued compensation and benefits | 765,106 | 151,841 | ||||||
Total current liabilities | 2,895,026 | 2,549,704 | ||||||
Long-term liabilities: | ||||||||
Bank loans | 2,120,421 | 2,399,915 | ||||||
Total liabilities | $ | 5,015,447 | $ | 4,949,619 | ||||
Shareholders' equity | ||||||||
Common stock ($0.01 par value); 150,000,000 authorized | ||||||||
14,915,389 and 10,618,297 shares issued | 149,155 | 106,183 | ||||||
Additional paid-in capital | 49,770,987 | 45,549,079 | ||||||
Treasury stock - 13,833 shares | (11,136 | ) | - | |||||
Accumulated other comprehensive (loss) | (1,563,052 | ) | (1,601,576 | ) | ||||
Accumulated (deficit) | (46,894,677 | ) | (37,287,851 | ) | ||||
Total shareholders' equity | $ | 1,451,277 | $ | 6,765,835 | ||||
Total liabilities and shareholders' equity | $ | 6,466,724 | $ | 11,715,454 |
Year ended June 30, | ||||||||
2010 | 2009 | |||||||
Revenues | ||||||||
Product sales and revenues | $ | 967,455 | $ | 67,995 | ||||
Engineering and development revenues | 578,525 | 1,088,797 | ||||||
Total Revenues | 1,545,980 | 1,156,792 | ||||||
Costs and Expenses | ||||||||
Cost of product sales | 899,287 | 56,468 | ||||||
Cost of engineering and development revenues | 1,836,299 | 2,051,803 | ||||||
Advanced engineering and development | 2,239,139 | 807,291 | ||||||
Selling, general, and administrative | 4,755,592 | 3,474,476 | ||||||
Depreciation | 424,297 | 277,896 | ||||||
Impairment and other equipment charges | 903,305 | - | ||||||
Total Costs and Expenses | 11,057,919 | 6,667,934 | ||||||
Loss from Operations | (9,511,939 | ) | (5,511,142 | ) | ||||
Other Income (Expense) | ||||||||
Interest income | 60,193 | 145,088 | ||||||
Interest (expense) | (149,521 | ) | (182,074 | ) | ||||
Other income (expense) | (5,559 | ) | (12,928 | ) | ||||
Total Other Income (Expense) | (94,887 | ) | (49,914 | ) | ||||
Loss before provision for Income Taxes | (9,606,826 | ) | (5,561,056 | ) | ||||
Provision for Income Taxes | - | - | ||||||
Net Loss | $ | (9,606,826 | ) | $ | (5,561,056 | ) | ||
Net Loss per share- | ||||||||
Basic and diluted | $ | (0.74 | ) | $ | (0.53 | ) | ||
Weighted average shares-basic and diluted: | ||||||||
Basic | 12,924,362 | 10,547,621 | ||||||
Diluted | 12,924,362 | 10,547,621 |
Number of Shares | Common Stock | Add'l Paid-in Capital | Treasury Stock | Note Receivable from Shareholders | Accumulated Other Comprehensive (Loss) | Accumulated Deficit | TOTAL Shareholders' Equity | Comprehensive (Loss) | ||||||||||||||||||||||||||||
Balance: June 30, 2008 | 10,512,283 | $ | 105,123 | $ | 45,619,608 | $ | - | $ | (608,333 | ) | $ | (1,373,485 | ) | $ | (31,726,795 | ) | $ | 12,016,118 | ||||||||||||||||||
Stock options expensed | 294,114 | 294,114 | ||||||||||||||||||||||||||||||||||
Issuance of restricted stock in payment of compensation | 101,014 | 1,010 | 72,167 | 73,177 | ||||||||||||||||||||||||||||||||
Deferred stock compensation | (72,167 | ) | (72,167 | ) | ||||||||||||||||||||||||||||||||
Amortization of deferred stock compensation | 30,490 | 30,490 | ||||||||||||||||||||||||||||||||||
Issuance of restricted stock - in payment of consulting fees | 5,000 | 50 | 13,200 | 13,250 | ||||||||||||||||||||||||||||||||
Reduction of note receivable | (408,333 | ) | 608,333 | 200,000 | ||||||||||||||||||||||||||||||||
Net Loss | (5,561,056 | ) | (5,561,056 | ) | (5,561,056 | ) | ||||||||||||||||||||||||||||||
Net Translation Adjustment | (228,091 | ) | (228,091 | ) | (228,091 | ) | ||||||||||||||||||||||||||||||
Balance: June 30, 2009 | 10,618,297 | $ | 106,183 | $ | 45,549,079 | $ | - | $ | - | $ | (1,601,576 | ) | $ | (37,287,851 | ) | $ | 6,765,835 | $ | (5,789,147 | ) | ||||||||||||||||
Issuance of common stock net of costs underwriting fees | 4,035,417 | 40,355 | 3,661,495 | 3,701,850 | ||||||||||||||||||||||||||||||||
Equity offering costs | (244,409 | ) | (244,409 | ) | ||||||||||||||||||||||||||||||||
Amortization of deferred equity compensation | 527,439 | 527,439 | ||||||||||||||||||||||||||||||||||
Settlement of stock purchase agreement | (28,750 | ) | (287 | ) | 287 | |||||||||||||||||||||||||||||||
Retired restricted stock | (46,921 | ) | (469 | ) | 469 | |||||||||||||||||||||||||||||||
Issuance of restricted common stock offering | 337,346 | 3,373 | 276,627 | 280,000 | ||||||||||||||||||||||||||||||||
Purchase of treasury stock | (11,136 | ) | (11,136 | ) | ||||||||||||||||||||||||||||||||
Net Loss | (9,606,826 | ) | (9,606,826 | ) | (9,606,826 | ) | ||||||||||||||||||||||||||||||
Net Translation Adjustment | 38,524 | 38,524 | 38,524 | |||||||||||||||||||||||||||||||||
Balance: June 30, 2010 | 14,915,389 | $ | 149,155 | $ | 49,770,987 | $ | (11,136 | ) | $ | - | $ | (1,563,052 | ) | $ | (46,894,677 | ) | $ | 1,451,277 | $ | (9,568,302 | ) |
ZBB Energy Corporation | Year ended June 30, | |||||||
Consolidated Statements of Cash Flows | 2010 | 2009 | ||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (9,606,826 | ) | $ | (5,561,056 | ) | ||
Adjustments to reconcile net loss to net cash (used) in operating activities: | ||||||||
Depreciation | 424,297 | 277,896 | ||||||
Change in inventory allowance | 158,899 | (88,699 | ) | |||||
Equipment costs reclassified to expenses | - | 372,855 | ||||||
Impairment and other equipment charges | 903,305 | - | ||||||
Payments applied to note receivable for consulting fees | - | 200,000 | ||||||
Stock based compensation | 527,439 | 338,864 | ||||||
(Increase) decrease in operating assets: | ||||||||
Accounts receivable | 606,601 | (609,987 | ) | |||||
Inventories | 725,678 | (185,530 | ) | |||||
Prepaids and other current assets | (5,925 | ) | (41,799 | ) | ||||
Other receivables-interest | 19,746 | 61,083 | ||||||
Increase (decrease) in operating liabilities: | ||||||||
Accounts payable | 42,178 | 247,500 | ||||||
Accrued compensation and benefits | 613,265 | 22,092 | ||||||
Accrued expenses | 544,551 | 25,765 | ||||||
Deferred revenues | (802,747 | ) | 717,539 | |||||
Net cash (used) in operating activities | (5,849,539 | ) | (4,223,477 | ) | ||||
Cash flows from investing activities | ||||||||
Capital expenditures | (318,245 | ) | (889,658 | ) | ||||
Bank certificate of deposit | 1,000,000 | (1,000,000 | ) | |||||
Net cash provided (used) in investing activities | 681,755 | (1,889,658 | ) | |||||
Cash flows from financing activities | ||||||||
Proceeds from bank loan | 156,000 | 1,070,000 | ||||||
Repayments of bank loans | (456,203 | ) | (306,984 | ) | ||||
Proceeds from stock issuance - net of fees and costs | 3,737,442 | - | ||||||
Purchase of treasury stock | (11,136 | ) | - | |||||
Net cash provided by financing activities | 3,426,103 | 763,016 | ||||||
Effect of exchange rate changes on cash and cash equivalents | 7,307 | (131,192 | ) | |||||
Net (decrease) in cash and cash equivalents | (1,734,374 | ) | (5,481,311 | ) | ||||
Cash and cash equivalents - beginning of year | 2,970,009 | 8,451,320 | ||||||
Cash and cash equivalents - end of year | $ | 1,235,635 | $ | 2,970,009 | ||||
Cash paid for interest | $ | 111,927 | $ | 121,468 | ||||
Supplemental schedule of non-cash investing and financing activities: | ||||||||
Investment in joint venture offset by unfulfilled deferred revenue | - | 160,000 | ||||||
Equipment costs reclassified to expenses | - | 372,855 |
· | Load management for generation, transmission and distribution utilities, energy service companies and large industrial customers allowing peak shaving and deferral of capital expenditures that otherwise would be required to alleviate utility system constraints. |
· | Storage of renewable wind and solar energy production in both grid connected and grid independent environments. |
· | Power quality to alleviate downtime caused by voltage sags, voltage swells, frequency fluctuations, and combined with uninterruptible power supply (UPS) to eliminate power outages. |
Depreciation Life | ||
Manufacturing Equipment | 3 - 7 years | |
Office Equipment | 3 - 7 years | |
Building and improvements | 7 - 40 years |
· | Raw materials – purchased cost of direct material |
· | Finished goods and work-in-progress – purchased cost of direct material plus direct labor plus a proportion of manufacturing overheads. |
2010 | 2009 | |||||||
Raw materials | $ | 631,656 | $ | 766,881 | ||||
Work in progress | 375,080 | 402,001 | ||||||
Finished goods | - | 563,532 | ||||||
Inventory valuation allowance | (304,200 | ) | (145,301 | ) | ||||
Total | $ | 702,536 | $ | 1,587,113 |
2010 | 2009 | |||||||
Office equipment | $ | 119,779 | $ | 115,809 | ||||
Manufacturing equipment | 3,591,508 | 4,626,178 | ||||||
Building and improvements | 1,996,134 | 1,996,134 | ||||||
Land | 217,000 | 217,000 | ||||||
5,924,421 | 6,955,121 | |||||||
Less, accumulated depreciation | (2,355,598 | ) | (2,376,941 | ) | ||||
Net Property, Plant & Equipment | $ | 3,568,823 | $ | 4,578,180 |
2010 | 2009 | |||||||
Bank loans-current | $ | 395,849 | $ | 416,558 | ||||
Bank loans-long term | 2,120,421 | 2,399,915 | ||||||
Total | $ | 2,516,270 | $ | 2,816,473 |
2011 | $ | 395,849 | ||
2012 | 363,710 | |||
2013 | 322,618 | |||
2014 | 81,648 | |||
2015 | 86,020 | |||
2016 and thereafter | 1,266,425 | |||
$ | 2,516,270 |
Stock Option Activity | Number of Options | Weighted- Average Exercise Price Per Share | ||||||
Balance at June 30, 2008 | 1,029,700 | $ | 4.03 | |||||
Options granted | 451,410 | 1.49 | ||||||
Options expired | (16,793 | ) | 5.61 | |||||
Options forfeited | (39,963 | ) | 1.35 | |||||
Options exercised | - | - | ||||||
Balance at June 30, 2009 | 1,424,354 | $ | 3.24 | |||||
Options granted | 1,471,500 | 1.22 | ||||||
Options forfeited | (578,862 | ) | 3.49 | |||||
Options exercised | - | |||||||
Balance at June 30, 2010 | 2,316,992 | $ | 1.92 |
Outstanding | Exercisable | |||||||||||||||||||
Range of Exercise Prices | Number of Options | Average Remaining Contractual Life (in years) | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price | |||||||||||||||
$0.49 to $1.69 | 1,666,992 | 6.5 | $ | 1.26 | 729,492 | $ | 1.36 | |||||||||||||
$3.59 to $3.82 | 650,000 | 3.8 | $ | 3.61 | 600,000 | $ | 3.61 | |||||||||||||
Balance at March 31, 2010 | 2,316,992 | $ | 1.92 | 1,329,492 | $ | 2.38 |
2010 | 2009 | ||
Expected life of option (years) | 2.5-4.75 | 2.5-4.75 | |
Risk-free interest rate | .8 - 1.4% | 1.2 - 1.4% | |
Assumed volatility | 62 - 70% | 62 - 70% | |
Expected dividend rate | 0 | 0 | |
Expected forfeiture rate | 0 | 0 |
Unvested Stock Option Activity | Number of Options | Weighted- Average Grant Date Fair Value Per Share | ||||||
Balance at June 30, 2008 | 284,000 | $ | 0.77 | |||||
Granted | 451,410 | $ | 0.30 | |||||
Vested | (323,914 | ) | $ | 0.63 | ||||
Forfeited | (39,963 | ) | $ | 0.30 | ||||
Balance at June 30, 2009 | 371,533 | $ | 0.77 | |||||
Granted | 1,471,500 | $ | 0.58 | |||||
Vested | (662,328 | ) | $ | 0.49 | ||||
Forfeited | (193,205 | ) | $ | 0.29 | ||||
Balance at June 30, 2010 | 987,500 | $ | 0.62 |
Stock Warrants Non-related parties | Number of Warrants | Weighted- Average Exercise Price Per Share | ||||||
Balance at June 30, 2008 | 365,823 | $ | 4.41 | |||||
Warrants granted | - | |||||||
Warrants expired | - | |||||||
Warants exercised | - | |||||||
Balance at June 30, 2009 | 365,823 | $ | 4.41 | |||||
Warrants granted | 1,480,208 | $ | 1.11 | |||||
Warrants expired | - | |||||||
Warants exercised | - | |||||||
Balance at June 30, 2010 | 1,846,031 | $ | 1.76 |
For the twelve months ending June 30: | ||||
2010 | $ | 63,261 | ||
2011 | 21,087 | |||
Total | $ | 84,348 |
2010 | 2009 | |||||||
Income tax benefit computed at the federal statutory rate | -34 | % | -34 | % | ||||
Foreign rate differential | 4 | % | 4 | % | ||||
Change in valuation allowance | 30 | % | 30 | % | ||||
Total | 0 | % | 0 | % |
2010 | 2009 | |||||||
Net operating loss carryforwards | $ | 11,113,835 | $ | 8,255,175 | ||||
Foreign loss carryforwards | 1,386,125 | 971,952 | ||||||
Deferred tax asset valuation allowance | (12,499,960 | ) | (9,227,127 | ) | ||||
Total deferred tax assets | $ | - | $ | - |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Report of Independent Registered Public Accounting Firm | 28 |
Consolidated Balance Sheets as of June 30, 2010 and 2009 | 29 |
Consolidated Statements of Operations for the years ended June 30, 2010 and 2009 | 30 |
Consolidated Statements of Changes in Shareholders’ Equity for the Years ended June 30, 2010 and 2009 | 31 |
Consolidated Statements of Cash Flows for the years ended June 30, 2010 and 2009 | 32 |
ZBB ENERGY CORPORATION |
/s/ Eric C.Apfelbach |
Eric C.Apfelbach |
Chief Executive Officer |
(Principal Executive Officer) and Director |
Position | Date | |||
/s/ Eric C. Apfelbach | Chief Executive Officer | September 10, 2010 | ||
Eric C. Apfelbach | (Principal executive officer) and Director | |||
/s/ Scott W. Scampini | Chief Financial Officer | September 10, 2010 | ||
Scott W. Scampini | (Principal financial officer and Principal accounting officer) | |||
/s/ Paul F. Koeppe | Director | September 10, 2010 | ||
Paul F. Koeppe | ||||
/s/ Richard A. Abdoo | Director | September 10, 2010 | ||
Richard A. Abdoo | ||||
/s/ Manfred Birnbaum | Director | September 10, 2010 | ||
Manfred Birnbaum | ||||
/s/ Richard A. Payne | Director | September 10, 2010 | ||
Richard A. Payne | ||||
/s/ William Mundell | Director | September 10, 2010 | ||
William Mundell |
Exhibit No. | Description | Incorporated by Reference to | ||
3.1 | Articles of Incorporation of ZBB Energy Corporation as amended dated February 16, 1998, as amended | Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed on October 27, 2006 | ||
3.2 | Amended and Restated By-laws of ZBB Energy Corporation (as of November 16, 2009) | Incorporated by reference to the Company’s definitive proxy statement filed on September 25, 2009 | ||
4.1 | Form of Stock Certificate | Incorporated by reference to the Company’s Amendment No. 3 to Registration Statement on Form SB-2 filed on April 13, 2007 | ||
4.2 | Form of Common Stock Purchase Warrant, attached as Exhibit C to Exhibit 10.7 attached hereto | Incorporated by reference to the Company’s Report on Form 8-K filed on August 14, 2009 | ||
4.3 | Form of Warrant | Incorporated by reference to the Company’s Report on Form 8-K filed on March 9, 2010 | ||
4.4 | Form of Debenture | Incorporated by reference to the Company’s Report on Form 8-K filed on August 31, 2010 | ||
4.5 | Warrant to Purchase Common Stock Issued to Socius CG II, Ltd. dated August 30, 2010 | Incorporated by reference to the Company’s Report on Form 8-K filed on August 31, 2010 | ||
10.1 | Letter Agreement dated as of July 13, 2006 between ZBB Energy Corporation, 41 Broadway Associates, LLC | Incorporated by reference to the Company’s Amendment No. 2 to Registration Statement on Form SB-2 filed on March 19, 2007 | ||
10.2 | Contract dated as of June 29, 2007 between ZBB Technologies Ltd and the Commonwealth of Australia | Incorporated by reference to the Company’s Registration Statement on Form S-1 filed on September 3, 2010 | ||
10.3 | Employment agreement dated August 18, 2010 between ZBB Energy Corporation and Scott Scampini | Incorporated by reference to the Company’s Report on Form 8-K filed on August 23, 2010 | ||
10.4 | 2002 Stock Option Plan of ZBB Energy Corporation | Incorporated by reference to the Company’s Registration Statement on Form S-8 filed on April 16, 2008 | ||
10.5 | 2005 Employee Stock Option Scheme of ZBB Energy Corporation | Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed on October 27, 2006 | ||
10.6 | 2007 Equity Incentive Plan of ZBB Energy Corporation | Incorporated by reference to the Company’s Registration Statement on Form S-8 filed on April 16, 2008 | ||
10.7 | Form of Subscription Agreement, dated August 13, 2009, entered into between ZBB Energy Corporation and CapStone Investments and each purchaser signatory thereto | Incorporated by reference to the Company’s Report on Form 8-K filed on August 14, 2009 |
Exhibit No. | Description | Incorporated by Reference to | ||
10.8 | Resignation and Indemnification Agreement by and between the Company and Robert J. Parry dated as of October 31, 2009 | Incorporated by reference to the Company’s Report on Form 8-K filed on November 4, 2009 | ||
10.9 | Director Nonstatutory Stock Option Agreement by and between the Company and Paul F. Koeppe dated as of November 2, 2009 | Incorporated by reference to the Company’s Report on Form 8-K filed on November 4, 2009 | ||
10.10 | Agreement dated January 7, 2010 by and between the Company and Eric C. Apfelbach | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2009 | ||
10.11 | Restrictive Covenant Agreement dated January 7, 2010 by and between the Company and Eric C. Apfelbach | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2009 | ||
10.12 | Nonstatutory Stock Option Agreement dated January 7, 2010 by and between the Company and Eric C. Apfelbach (performance-based) | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2009 | ||
10.13 | Nonstatutory Stock Option Agreement dated January 7, 2010 by and between the Company and Eric C. Apfelbach (time-based). | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2009 | ||
10.14 | Agreement dated February 3, 2010 by and between the Company and Steven A. Seeker | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2009 | ||
10.15 | Placement Agent Agreement, dated March 1, 2010, by and between ZBB Energy Corporation and Sutter Securities Incorporated | Incorporated by reference to the Company’s Report on Form 8-K filed on March 09, 2010 | ||
10.16 | Securities Purchase Agreement, dated March 8, 2010, by and between ZBB Energy Corporation and the purchasers signatory thereto | Incorporated by reference to the Company’s Report on Form 8-K filed on March 09, 2010 | ||
10.17 | Form Stock Purchase Agreement, dated March 19, 2010 | Incorporated by reference to the Company’s Report on Form 8-K filed on March 22, 2010 | ||
10.18 | Amended and Restated Securities Purchase Agreement by and between ZBB Energy Corporation and Socius CG II, Ltd., dated August 30, 2010 | Incorporated by reference to the Company’s Report on Form 8-K filed on August 31, 2010 | ||
23 | Consent of Independent Registered Public Accounting Firm | Filed herewith | ||
31.1 | Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, promulgated to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
31.2 | Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, promulgated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith |
Exhibit No. | Description | Incorporated by Reference to | ||
32.1 | Certification by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, promulgated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
32.2 | Certification by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, promulgated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith |