x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the fiscal year ended June 30, 2014
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Wisconsin
|
39-1987014
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
N93 W14475 Whittaker Way, Menomonee Falls, Wisconsin
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53051
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s telephone number, including area code:
|
(262) 253-9800
|
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class
|
Name of each exchange on which registered
|
Common Stock, $0.01 Par Value
|
NYSE MKT
|
Securities registered pursuant to Section 12(g) of the Act:
|
||
None
|
||
Large accelerated filer
¨
|
Accelerated filer
¨
|
Non-accelerated filer
¨
|
Smaller reporting company
x
|
|
·
|
Increased utility scale renewable energy generation to grid
|
|
·
|
“Shifting” of large amounts of energy from one time of day to another
|
|
·
|
Discharging stored energy for long periods of time
|
|
·
|
Limiting construction of new “peak power” assets
|
|
·
|
Increased utilization of existing “peak power” producing assets
|
|
·
|
Improved power quality and reliability in areas that are near the edge of the grid
|
|
·
|
Increased use of “plug-in” electric vehicles
|
|
·
|
Improved power quality and reliability in areas with high-density of rooftop solar
|
|
·
|
Firming of large renewable energy generating plants
|
|
·
|
Deployment of “dispatchable” and distributed generating assets
|
|
·
|
Tangible benefits of the “Smart Grid”, maximizing the efficiency and productivity of infrastructure
|
|
·
|
Reduce costly demand charges and peak rates
|
|
·
|
Enable “net-zero” energy from the grid
|
|
·
|
Forecast energy delivered from solar assets and regulate energy storage assets to meet demand with minimal grid supplied energy
|
|
·
|
Supplement solar generated electricity during cloud cover ramp-up and ramp-down to provide stable power
|
|
·
|
Protect building equipment and critical functions from damaging power surges and grid outages
|
|
·
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Protect the grid from power in areas where building premise generated electricity cannot be sent back to the grid
|
|
·
|
Instant back-up power in combination with or in lieu of a diesel gen set for elevators and other critical building functions
|
|
·
|
Use normally ‘stranded generating assets’ during grid outages
|
|
·
|
Minimize peak loads
|
|
·
|
Participate in utility demand response programs without curtailing operations
|
|
·
|
Maintain critical systems, such as elevator power, during power outages or failures
|
|
·
|
Dampen the impact of electric vehicle fast charging stations
|
|
·
|
Gain greater efficiency and improve reliability using a DC distribution system
|
|
·
|
Participate in Federal and State tax credits and grants
|
|
·
|
For off-grid communities, greatly reduce or eliminate altogether the use of diesel generators, leverage renewables and eliminate the use of environmental damaging lead-acid batteries
|
·
|
Long discharge capability for shifting large amounts of energy from one time of day to another
|
·
|
The lowest cost of ownership over a 20-year design life in bulk energy storage applications
|
·
|
High energy density and excellent safety for small footprint applications, such as commercial or occupied buildings
|
·
|
Quick deployment, requiring minimal site preparation and no additional infrastructure
|
·
|
A patented, integrated DC bus design requiring no onsite wiring for DC power connections
|
·
|
A black-start capable system with no external auxiliary power input required
|
·
|
A modular and scalable architecture from 50 kWh to Multi MWh from a single point of system connection
|
·
|
Wide ambient operating temperature range with no external structures or climate controlled enclosures that significantly increase cost and reduce overall energy efficiency
|
·
|
A system requiring no additional ventilation, fire suppression or spill containment for indoor locations
|
·
|
The heart of the ZBB EnerSystem, requiring only a single point of connection to all connected power sources and storage
|
·
|
A universal, modular design integrating any power input and output with any storage device via discrete power electronic ‘buckets’
|
·
|
Easily and quickly expanded or modified in the field
|
·
|
Utilizes inverters that are certified by ETL to the UL1741 standard
|
·
|
Patented with a common DC bus seamlessly hybridizing multiple battery traits — providing a fast response with long discharge bulk storage as needed
|
·
|
Rated from 25kw to Multi MW
|
·
|
A system with a wide temperature range of -22°F to 104°F / -30°C to 40°C
|
·
|
Available with additional AC and/or DC output ‘buckets’ for continuous, grid independent power supply to critical loads onsite
|
·
|
Customizable with an optional ZBB Grid Isolation Disconnect (GID) which automatically provides both normal and backup power supply with controls to isolate power to and from the grid supply, while connecting customer loads with onsite generation and storage during outages, then seamlessly reconnects to the normal grid operation when grid service is restored
|
·
|
Optimizes and integrates multiple, often intermittent energy sources into power that is manageable, cost-effective, clean, safe and secure
|
·
|
Often utilizes the ZBB EnerSection, a hybrid power conversion system and intelligent energy management system
|
·
|
Is configurable, modular, flexible and scalable for on-grid, off-grid and/or grid-as-backup
|
·
|
Has an open architecture that integrates multiple, simultaneous renewable energy sources including the grid as an input, with AC and/or DC critical power outputs
|
·
|
Combines with energy storage, like the ZBB EnerStore or in a hybrid storage configuration that provides continuous power regardless of momentary ramps up and down in generation supply and load demand
|
·
|
Is factory-built and tested for each customer application
|
·
|
The advancement of our zinc bromide flow battery technology both internally and in cooperation with strategic partners
|
·
|
Development of additional versions and sizes of the ZBB EnerSection and ZBB EnerStore
|
·
|
Expansion of the existing ZBB EnerSection plug-and-play module portfolio
|
·
|
Advancement of our remote monitoring and control platforms
|
·
|
Development of additional power electronics and control technologies dedicated to support of the ZBB EnerSection as well as products designed for the renewable energy, alternative energy and power quality markets
|
·
|
Further advance and field test our Distribution Grid Control power electronics products
|
·
|
Continuous enhancement of the existing product lines
|
|
·
|
execute our growth plan;
|
|
·
|
take advantage of future opportunities;
|
|
·
|
respond to customers and competition; or
|
|
·
|
remain in operation.
|
|
·
|
the various risks and uncertainties discussed herein;
|
|
·
|
general domestic and international economic conditions and other external factors;
|
|
·
|
general market conditions; and
|
|
·
|
the degree of trading liquidity in our common stock.
|
|
·
|
the price of our products relative to other products either currently available or subsequently introduced;
|
|
·
|
the perception by potential customers and strategic partners of the effectiveness of our products for their intended purposes;
|
|
·
|
our ability to fund our manufacturing, sales and marketing efforts; and
|
|
·
|
the effectiveness of our sales and marketing efforts.
|
|
·
|
changing requirements of customers;
|
|
·
|
accurate prediction of market and technical requirements;
|
|
·
|
timely completion and introduction of new designs;
|
|
·
|
quality, price and performance of our products;
|
|
·
|
availability, quality, price and performance of competing products and technologies;
|
|
·
|
our customer service and support capabilities and responsiveness;
|
|
·
|
successful development of our relationships with existing and potential customers; and
|
|
·
|
changes in technology, industry standards or end-user preferences.
|
|
·
|
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;
|
|
·
|
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.
|
|
·
|
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.
|
Item 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
High ($)
|
Low ($)
|
||
2014
|
|||
Fourth Quarter
|
2.13
|
1.10
|
|
Third Quarter
|
4.75
|
0.71
|
|
Second Quarter
|
1.17
|
0.40
|
|
First Quarter
|
1.35
|
0.90
|
|
2013
|
|||
Fourth Quarter
|
2.40
|
1.10
|
|
Third Quarter
|
2.25
|
1.35
|
|
Second Quarter
|
1.75
|
0.90
|
|
First Quarter
|
2.00
|
1.30
|
Item 6.
|
SELECTED FINANCIAL DATA
|
Item 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
·
|
$3,379,730 decrease in costs of product sales principally due to decreased product sales but also includes an increase of approximately $860,000 in cost of product sales related to our product upgrade initiative, as described below;
|
·
|
$1,024,175 increase in selling, general, and administrative expenses due primarily to an increase of approximately $746,000 in expenses related to our product upgrade initiative and $495,000 in non-refundable Korea withholding tax related to the one-time upfront license fee under our Amended License Agreement with Lotte, partially offset by decreases in travel and recruitment expenses of $129,000 and $65,000, respectively;
|
·
|
$349,456 decrease in depreciation and amortization which resulted from full amortization of the Company’s intangible assets early in the third quarter of fiscal year 2014. Intangible asset amortization expense decreased from $732,048 for the year ended June 30, 2013 to $411,073 for the year ended June 30, 2014.
|
·
|
remain in operation;
|
·
|
execute our growth plan;
|
·
|
take advantage of future opportunities; or
|
·
|
respond to customers and competition.
|
Page | |
Report of Independent Registered Public Accounting Firm
|
24
|
Consolidated Balance Sheets as of June 30, 2014 and 2013
|
25
|
Consolidated Statements of Operations for the Years ended June 30, 2014 and 2013
|
26
|
Consolidated Statements of Comprehensive Loss for the Years ended June 30, 2014 and 2013
|
27
|
Consolidated Statements of Changes in Equity for the Years ended June 30, 2014 and 2013
|
28
|
Consolidated Statements of Cash Flows for the Years ended June 30, 2014 and 2013
|
29
|
Notes to Consolidated Financial Statements
|
30
|
ZBB ENERGY CORPORATION
|
Consolidated Balance Sheets
|
June 30, 2014
|
June 30, 2013
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 10,360,721 | $ | 1,096,621 | ||||
Restricted cash on deposit
|
69,901 | 60,000 | ||||||
Accounts receivable, net
|
1,051,024 | 446,925 | ||||||
Inventories, net
|
1,352,970 | 2,459,776 | ||||||
Prepaid expenses and other current assets
|
295,814 | 224,542 | ||||||
Refundable income tax credit
|
91,191 | 137,228 | ||||||
Total current assets
|
13,221,621 | 4,425,092 | ||||||
Long-term assets:
|
||||||||
Property, plant and equipment, net
|
4,382,203 | 5,179,707 | ||||||
Investment in investee company
|
1,646,240 | 2,304,122 | ||||||
Intangible assets, net
|
- | 411,073 | ||||||
Goodwill
|
803,079 | 803,079 | ||||||
Total assets
|
$ | 20,053,143 | $ | 13,123,073 | ||||
Liabilities and Equity
|
||||||||
Current liabilities:
|
||||||||
Bank loans and notes payable
|
$ | 351,142 | $ | 885,786 | ||||
Accounts payable
|
589,642 | 570,932 | ||||||
Accrued expenses
|
2,621,479 | 785,532 | ||||||
Customer deposits
|
741,145 | 2,194,262 | ||||||
Accrued compensation and benefits
|
195,181 | 164,437 | ||||||
Total current liabilities
|
4,498,589 | 4,600,949 | ||||||
Long-term liabilities:
|
||||||||
Bank loans and notes payable, net of current maturities
|
2,045,127 | 2,395,802 | ||||||
Total liabilities
|
6,543,716 | 6,996,751 | ||||||
Commitments and contingencies (Note 12)
|
||||||||
Equity
|
||||||||
Series B redeemable convertible preferred stock ($0.01 par value, $1,000 face value) 10,000,000 authorized, 3,000 and 0 shares issued, 2,575 and 0 shares outstanding, preference in liquidation of $5,347,994 and $0 as of June 30, 2014 and June 30, 2013, respectively
|
26 | - | ||||||
Common stock ($0.01 par value); 150,000,000 authorized, 25,651,389 and 17,707,341 shares issued and outstanding as of June 30, 2014 and June 30, 2013, respectively
|
964,828 | 885,389 | ||||||
Additional paid-in capital
|
102,286,450 | 85,464,055 | ||||||
Accumulated deficit
|
(89,788,242 | ) | (80,932,824 | ) | ||||
Accumulated other comprehensive loss
|
(1,599,875 | ) | (1,594,418 | ) | ||||
Total ZBB Energy Corporation Equity
|
11,863,187 | 3,822,202 | ||||||
Noncontrolling interest
|
1,646,240 | 2,304,120 | ||||||
Total equity
|
13,509,427 | 6,126,322 | ||||||
Total liabilities and equity
|
$ | 20,053,143 | $ | 13,123,073 | ||||
See accompanying notes to consolidated financial statements.
|
||||||||
ZBB ENERGY CORPORATION
|
|||
Consolidated Statements of Operations
|
|||
|
Year ended June 30, | |||||||
2014 | 2013 | |||||||
Revenues
|
||||||||
Product sales
|
$ | 3,526,607 | $ | 7,305,516 | ||||
Engineering and development
|
1,325,000 | 418,183 | ||||||
License
|
3,000,000 | - | ||||||
Total Revenues
|
7,851,607 | 7,723,699 | ||||||
Costs and Expenses
|
||||||||
Cost of product sales
|
2,895,547 | 6,275,277 | ||||||
Cost of engineering and development
|
206,102 | 153,762 | ||||||
Advanced engineering and development
|
5,244,953 | 5,266,418 | ||||||
Selling, general, and administrative
|
7,259,683 | 6,235,508 | ||||||
Depreciation and amortization
|
1,042,577 | 1,392,033 | ||||||
Total Costs and Expenses
|
16,648,862 | 19,322,998 | ||||||
Income (Loss) from Operations
|
(8,797,255 | ) | (11,599,299 | ) | ||||
Other Income (Expense)
|
||||||||
Equity in loss of investee company
|
(657,882 | ) | (779,768 | ) | ||||
Interest income
|
5,635 | 2,896 | ||||||
Interest expense
|
(147,105 | ) | (186,375 | ) | ||||
Other income (expense)
|
896 | (45,000 | ) | |||||
Total Other Income (Expense)
|
(798,456 | ) | (1,008,247 | ) | ||||
Loss before benefit for Income Taxes
|
(9,595,711 | ) | (12,607,546 | ) | ||||
Benefit for Income Taxes
|
(82,411 | ) | (154,904 | ) | ||||
Net loss
|
(9,513,300 | ) | (12,452,642 | ) | ||||
Net loss attributable to noncontrolling interest
|
657,882 | 573,727 | ||||||
Net Income (Loss) Attributable to ZBB Energy Corporation
|
(8,855,418 | ) | (11,878,915 | ) | ||||
Preferred Stock Dividend
|
(222,009 | ) | - | |||||
Net Loss Attributable to Common Shareholders
|
$ | (9,077,427 | ) | $ | (11,878,915 | ) | ||
Net Loss per share
|
||||||||
Basic and diluted
|
$ | (0.46 | ) | $ | (0.74 | ) | ||
Weighted average shares-basic and diluted
|
19,853,579 | 16,082,001 | ||||||
See accompanying notes to consolidated financial statements.
|
ZBB ENERGY CORPORATION
|
||||||||||||||||
Consolidated Statements of Changes in Equity
|
Series B Preferred Stock
|
Common Stock
|
Additional
Paid-in Capital
|
Accumulated
Deficit
|
Accumulated
Other
Comprehensive
(Loss)
|
Noncontrolling
Interest
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||||||
Balance: June 30, 2012
|
- | $ | - | 14,595,120 | $ | 729,773 | $ | 80,363,519 | $ | (69,053,909 | ) | $ | (1,584,921 | ) | $ | 2,872,348 | ||||||||||||||||
Net loss
|
(11,878,915 | ) | (573,727 | ) | ||||||||||||||||||||||||||||
Net currency translation adjustment
|
(9,497 | ) | ||||||||||||||||||||||||||||||
Issuance of common stock, net of
costs
and underwriting fees
|
3,112,311 | 155,616 | 4,315,276 | |||||||||||||||||||||||||||||
Stock-based compensation
|
785,260 | |||||||||||||||||||||||||||||||
Issuance of subsidiary shares
to
noncontrolling interest
|
5,500 | |||||||||||||||||||||||||||||||
Balance: June 30, 2013
|
- | - | 17,707,431 | 885,389 | 85,464,055 | (80,932,824 | ) | (1,594,418 | ) | 2,304,121 | ||||||||||||||||||||||
Net loss
|
(8,855,418 | ) | (657,882 | ) | ||||||||||||||||||||||||||||
Net currency translation adjustment
|
(5,457 | ) | ||||||||||||||||||||||||||||||
Issuance of common stock, net of
costs
and underwriting fees
|
6,325,000 | 63,250 | 12,973,214 | |||||||||||||||||||||||||||||
Stock-based compensation
|
245,570 | 2,456 | 959,905 | |||||||||||||||||||||||||||||
Issuance of preferred stock, net of
costs
and underwriting fees
|
3,000 | 30 | 2,388,756 | |||||||||||||||||||||||||||||
Conversion of preferred stock
|
(425 | ) | (4 | ) | 470,171 | 4,701 | (4,696 | ) | ||||||||||||||||||||||||
Issuance of warrants
|
498,793 | |||||||||||||||||||||||||||||||
Issuance of warrants to underwriter
|
15,455 | |||||||||||||||||||||||||||||||
Exercise of warrants
|
903,217 | 9,032 | (9,032 | ) | ||||||||||||||||||||||||||||
Balance: June 30, 2014
|
2,575 | $ | 26 | 25,651,389 | $ | 964,828 | $ | 102,286,450 | $ | (89,788,242 | ) | $ | (1,599,875 | ) | $ | 1,646,240 | ||||||||||||||||
See accompanying notes to consolidated financial statements.
|
Estimated Useful
Lives
|
|
Manufacturing equipment
|
3 - 7 years
|
Office equipment
|
3 - 7 years
|
Assets held for lease
|
18 months
|
Building and improvements
|
7 - 40 years
|
Year ended June 30,
|
||||||||
2014
|
2013
|
|||||||
Beginning balance
|
$ | 479,873 | $ | 418,557 | ||||
Accruals for warranties during the period
|
741,412 | 404,096 | ||||||
Settlements during the period
|
(673,588 | ) | (95,543 | ) | ||||
Adjustments relating to preexisting warranties
|
184,213 | (247,237 | ) | |||||
Ending balance
|
$ | 731,910 | $ | 479,873 |
·
|
Substantive uncertainty exists as to the achievement of the milestone event at the inception of the arrangement;
|
·
|
The achievement of the milestone involves substantive effort and can only be achieved based in whole or in part on our performance or the occurrence of a specific outcome resulting from our performance;
|
·
|
The amount of the milestone payment appears reasonable either in relation to the effort expended or the enhancement of the value of the delivered item(s);
|
·
|
There is no future performance required to earn the milestone; and
|
·
|
The consideration is reasonable relative to all deliverables and payment terms in the arrangement.
|
·
|
the timing of revenue recognition;
|
·
|
the allowance for doubtful accounts;
|
·
|
provisions for excess and obsolete inventory;
|
·
|
the lives and recoverability of property, plant and equipment and other long-lived assets, including goodwill and other intangible assets;
|
·
|
contract costs, losses, and reserves;
|
·
|
warranty obligations;
|
·
|
income tax valuation allowances;
|
·
|
stock-based compensation; and
|
·
|
valuation of warrants.
|
·
|
Joint Venture Agreement of Anhui Meineng Store Energy Co., Ltd. (the “China JV Agreement”) by and between ZBB PowerSav Holdings Limited, a Hong Kong limited liability company (“Holdco”), and Anhui Xinrui Investment Co., Ltd, a Chinese limited liability company; and
|
·
|
Limited Liability Company Agreement of ZBB PowerSav Holdings Limited by and between ZBB Cayman Corporation and PowerSav New Energy Holdings Limited (the “Holdco Agreement”).
|
·
|
Management Services Agreement by and between Meineng Energy and Holdco (the “Management Services Agreement”);
|
·
|
License Agreement by and between Holdco and Meineng Energy (the “License Agreement”); and
|
·
|
Research and Development Agreement by and between the Company and Meineng Energy (the “Research and Development Agreement”).
|
Year ended June 30,
|
||||||||
2014
|
2013
|
|||||||
Revenues
|
$ | 285,631 | $ | - | ||||
Gross Profit (loss)
|
(309,406 | ) | - | |||||
Income (loss) from operations
|
(3,002,192 | ) | (2,615,055 | ) | ||||
Net Income (loss)
|
(3,038,432 | ) | (2,649,763 | ) |
As of June 30,
|
||||||||
2014
|
2013
|
|||||||
Raw materials
|
$ | 1,054,197 | $ | 1,181,557 | ||||
Work in progress
|
298,773 | 1,278,219 | ||||||
Total
|
$ | 1,352,970 | $ | 2,459,776 |
As of June 30,
|
||||||||
2014
|
2013
|
|||||||
Land
|
$ | 217,000 | $ | 217,000 | ||||
Building and improvements
|
3,520,872 | 3,520,872 | ||||||
Manufacturing equipment
|
3,710,127 | 3,819,533 | ||||||
Office equipment
|
399,583 | 403,541 | ||||||
Assets held for lease
|
- | 355,986 | ||||||
Construction in process
|
- | 24,300 | ||||||
Total, at cost
|
7,847,582 | 8,341,232 | ||||||
Less, accumulated depreciation
|
(3,465,379 | ) | (3,161,525 | ) | ||||
Property, Plant & Equipment, Net
|
$ | 4,382,203 | $ | 5,179,707 |
As of June 30,
|
||||||||
2014
|
2013
|
|||||||
Non-compete agreement
|
$ | 310,888 | $ | 310,888 | ||||
License agreement
|
288,087 | 288,087 | ||||||
Trade secrets
|
1,599,122 | 1,599,122 | ||||||
Total, at cost
|
2,198,097 | 2,198,097 | ||||||
Less, accumulated amortization
|
(2,198,097 | ) | (1,787,024 | ) | ||||
Intangible Assets, Net
|
$ | - | $ | 411,073 |
As of June 30,
|
||||||||
2014 | 2013 | |||||||
Bank loan payable of principal and interest at a rate equal to prime plus 1.50%, as
defined, subject to a floor of 4.75% with principal due at maturity on January 1,
2014; collateralized by accounts receivable and inventory related to a specific
customer contract; paid in full during fiscal 2014.
|
$ | - | $ | 213,750 | ||||
Note payable to the seller of Tier Electronics LLC of $495,000 payable on January
21, 2014. Interest accrued at a rate of 8% and was payable monthly. The
promissory note was collateralized by the Company’s membership interest in its
wholly-owned subsidiary Tier Electronics LLC; paid in full during fiscal 2014.
See note (a) below.
|
- | 495,000 | ||||||
Note payable to Wisconsin Department of Commerce payable in monthly
installments of $23,685, including interest at 2%, with the final payment due
May 1, 2018; collateralized by equipment purchased with the loan proceeds and
substantially all assets of the Company not otherwise collateralized. The
Company is required to maintain and increase a specified number of employees,
and the interest rate is increased in certain cases for failure to meet this
requirement.
See note (b) below.
|
1,069,793 | 1,136,195 | ||||||
Bank loan payable in fixed monthly payments of $6,800 of principal and interest
at a rate of 0.25% below prime, as defined, subject to a floor of 5% with any
principal due at maturity on June 1, 2018; collateralized by the building and land.
|
624,760 | 673,339 | ||||||
Note payable in fixed monthly installments of $6,610 of principal and interest at
a rate of 5.5% with any principal due at maturity on May 1, 2028; collateralized
by the building and land.
|
701,716 | 734,228 | ||||||
Bank loan payable in monthly installments of $21,000 of principal and interest at a
rate equal to prime, as defined, subject to a floor of 4.25%; paid in full during fiscal
2014.
|
- | 29,076 | ||||||
$ | 2,396,269 | $ | 3,281,588 |
(a)
|
If the federal capital gains tax rate exceeded 15% and or the State of Wisconsin capital gains tax rate exceeded 5.425% at any time prior to the payment in full of the unpaid principal balance and accrued interest on the promissory note, then the principal amount of the promissory note was to be retroactively increased by an amount equal to the product of (a) the aggregate amount of federal and state capital gain realized by the Seller or Seller’s sole member, as applicable, in connection with the acquisition, multiplied by (b) the difference between (i) the combined federal and State of Wisconsin capital gains tax rate as of the date of calculation, minus (ii) the combined federal and State of Wisconsin capital gains tax rate of 20.425% as of January 21, 2011. Any adjustment to the principal amount of the promissory note was to be effected by increasing the amount of the last payment due under the promissory note without affecting the next regularly scheduled payment(s) under the promissory note. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed, effectively raising the top rate for capital gains to 20%. The Company recorded an additional $45,000 of principal due under this note as other expense for the year ended June 30, 2013.
|
(b)
|
As of April 2013, the Wisconsin Department of Commerce granted the Company a 12 month deferral of the required installment payments of $22,800. On March 1, 2014, fifty equal monthly installments of $23,685 commenced through April 1, 2018 with the final installment due on May 1, 2018.
|
2015
|
$ | 351,142 | ||
2016
|
361,060 | |||
2017
|
371,402 | |||
2018
|
358,384 | |||
2019
|
105,832 | |||
2020 and thereafter
|
848,449 | |||
$ | 2,396,269 |
Year ended June 30,
|
||||||
2014
|
2013
|
|||||
Expected life of option (years)
|
4 | 4 | ||||
Risk-free interest rate
|
0.95 - 1.27 % | 0.46 - 0.61 % | ||||
Assumed volatility
|
94.35 - 111.20 % | 96.28 - 104.13 % | ||||
Expected dividend rate
|
0 % | 0 % | ||||
Expected forfeiture rate
|
4.91 - 5.62 % | 4.19 - 6.66 % |
Number
of
Options
|
Weighted
Average
Exercise Price
|
Average
Remaining
Contractual Life
(in years)
|
||||||||||
Balance at July 1, 2012
|
847,813 | $ | 6.25 | |||||||||
Options granted
|
142,710 | 1.88 | ||||||||||
Options forfeited
|
(205,239 | ) | 5.05 | |||||||||
Balance at June 30, 2013
|
785,284 | 5.78 | 5.34 | |||||||||
Options granted
|
699,850 | 1.33 | ||||||||||
Options forfeited
|
(66,066 | ) | 13.23 | |||||||||
Balance at June 30, 2014
|
1,419,068 | $ | 3.23 | 6.09 |
Outstanding
|
Exercisable
|
|||||||||||||||||||||||||
Range of Exercise Prices
|
Number
of
Options
|
Average
Remaining
Contractual Life
(in years)
|
Weighted
Average
Exercise
Price
|
Number
of
Options
|
Average
Remaining
Contractual Life
(in years)
|
Weighted
Average
Exercise
Price
|
||||||||||||||||||||
$ | 0.76 to $2.50 | 819,194 | 7.42 | $ | 1.42 | 57,656 | 5.70 | $ | 2.01 | |||||||||||||||||
$ | 2.51 to $5.00 | 207,434 | 5.13 | 3.88 | 175,969 | 5.08 | 3.87 | |||||||||||||||||||
$ | 5.01 to $7.50 | 377,440 | 3.90 | 6.24 | 347,974 | 3.85 | 6.28 | |||||||||||||||||||
$ | 7.51 to $17.95 | 15,000 | 1.58 | 17.95 | 15,000 | 1.58 | 17.95 | |||||||||||||||||||
Balance at June 30, 2014
|
1,419,068 | 6.09 | 3.23 | 596,599 | 4.33 | 5.45 | ||||||||||||||||||||
Number
of
Options
|
Weighted
Average
Grant Date
Fair Value
Per Share
|
Average
Remaining
Contractual Life
(in years)
|
|||||||
Balance at July 1, 2012
|
449,499 | $ | 4.70 | ||||||
Options granted
|
142,710 | 1.88 | |||||||
Options vested
|
(158,389 | ) | 4.75 | ||||||
Options forfeited
|
(171,152 | ) | 4.21 | ||||||
Balance at June 30, 2013
|
262,668 | 3.44 | |||||||
Options granted
|
699,850 | 1.33 | |||||||
Options vested
|
(127,586 | ) | 3.55 | ||||||
Options forfeited
|
(12,463 | ) | 3.38 | ||||||
Balance at June 30, 2014
|
822,469 | $ | 1.63 |
7.08
|
Number of
Restricted
Stock Units
|
Weighted
Average
Valuation
Price Per Unit
|
|||||||
Balance at July 1, 2012
|
489,687 | $ | 3.60 | |||||
RSUs granted
|
970,000 | 1.30 | ||||||
RSUs forfeited
|
(320,000 | ) | 1.30 | |||||
Shares issued
|
(8,000 | ) | 1.70 | |||||
Balance at June 30, 2013
|
1,131,687 | 2.30 | ||||||
RSUs granted
|
1,660,695 | 0.99 | ||||||
RSUs forfeited
|
(1,200,000 | ) | 1.10 | |||||
Shares issued
|
(245,570 | ) | 1.61 | |||||
Balance at June 30, 2014
|
1,346,812 | $ | 1.87 |
|
·
|
81,579 warrants exercisable at $0.95 per share and which expire in September 2016 issued as placement agent’s compensation in connection with the sale of $3 million of preferred stock on September 27, 2013 as described in Note 11.
|
|
·
|
1,710,526 warrants exercisable at $0.95 per share and which expire in September 2016 issued in connection with Securities Purchase Agreements entered into with certain investors providing for the sale of a total of $3 million of preferred stock on September 27, 2013 described in Note 11. On March 26, 2014, 1,447,369 warrants were exercised via a cashless exercise resulting in the issuance of 850,169 shares of common stock of the Company.
|
|
·
|
15,000 warrants exercisable at $2.10 per share which expire in July 2015 issued as partial payment for services.
|
|
·
|
306,902 warrants exercisable at $2.375 per share and which expire in June 2017 issued in connection with the Underwriting Agreement entered into with MDB Capital Group, LLC as part of underwriting compensation which provided for the sale of $12 million of common stock on June 19, 2012 as described in Note 11. On March 19, 2014, 272,159 warrants were exercised via a cashless exercise resulting in the issuance of 53,048 shares of common stock of the Company.
|
|
·
|
511,604 warrants exercisable at $2.65 per share and which expire in May 2017 issued in connection with Securities Purchase Agreements entered into with certain investors providing for the sale of a total of $2,465,000 of Zero Coupon Convertible Subordinated Notes on May 1, 2012.
|
|
·
|
12,100 warrants exercisable at $5.00 per share which expire March 2015 through July 2015 issued as partial payment for services.
|
|
·
|
224,375 warrants exercisable at $5.20 per share and which expire in September 2015 issued to certain purchasers of Company shares in March 2010.
|
|
·
|
71,667 warrants exercisable at $6.65 per share and which expire in August 2015 issued to certain purchasers of Company shares in August 2009.
|
Number of
Warrants
|
Weighted
Average
Exercise Price
Per Share
|
|||||||
Balance at July 1, 2012
|
1,400,506 | 3.15 | ||||||
Warrants granted
|
21,300 | 2.95 | ||||||
Warrants expired
|
- | - | ||||||
Warrants exercised
|
- | - | ||||||
Balance at June 30, 2013
|
1,421,806 | $ | 3.15 | |||||
Warrants granted
|
3,239,474 | 0.95 | ||||||
Warrants expired
|
(8,000 | ) | 2.80 | |||||
Warrants exercised
|
(1,719,528 | ) | 1.18 | |||||
Balance at June 30, 2014
|
2,933,752 | $ | 1.88 |
2015
|
$ 94,543
|
2016
|
31,514
|
$ 126,057
|
As of June 30,
|
||||||||
2014
|
2013
|
|||||||
Current
|
$ | (82,411 | ) | $ | (154,904 | ) | ||
Deferred
|
- | - | ||||||
Provision (benefit) for income taxes
|
$ | (82,411 | ) | $ | (154,904 | ) |
As of June 30,
|
||||||
2014
|
2013
|
|||||
Income tax expense/(benefit) computed at the U.S. federal statutory rate
|
-34 % | -34 % | ||||
Foreign tax expense/(benefit)
|
-1 % | -1 % | ||||
Change in valuation allowance
|
34 % | 34 % | ||||
Total
|
-1 % | -1 % |
As of June 30,
|
||||||||
2014
|
2013
|
|||||||
Federal net operating loss carryforwards
|
$ | 22,238,624 | $ | 19,777,894 | ||||
Federal - other
|
2,737,404 | 2,273,021 | ||||||
Wisconsin net operating loss carryforwards
|
2,747,275 | 2,482,692 | ||||||
Australia net operating loss carryforwards
|
1,497,779 | 1,398,139 | ||||||
Deferred income tax asset valuation allowance
|
(29,221,082 | ) | (25,931,746 | ) | ||||
Total deferred income tax assets
|
$ | - | $ | - |
As of June 30,
|
||||||||
2014
|
2013
|
|||||||
Beginning balance
|
$ | 193,097 | $ | 208,593 | ||||
Effect of foreign currency translation
|
$ | 3,486 | $ | (15,496 | ) | |||
Ending balance
|
$ | 196,583 | $ | 193,097 |
Item 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
Not applicable.
|
Item 9A.
|
CONTROLS AND PROCEDURES
|
ZBB ENERGY CORPORATION | |
/s/ Eric C. Apfelbach
|
|
Eric C. Apfelbach | |
Chief Executive Officer and Director |
Position | Date | |||
/s/ Eric C. Apfelbach
|
Chief Executive Officer | September 29, 2014 | ||
Eric C. Apfelbach | (Principal Executive Officer) and Director | |||
/s/ Dilek Wagner | Vice President of Finance | September 29, 2014 | ||
Dilek Wagner |
(Principal Financial Officer and Principal Accounting Officer)
|
|||
/s/ Bradley L. Hansen | President and Chief Operating Officer and Director | September 29, 2014 | ||
Bradley L. Hansen | ||||
/s/ Paul F. Koeppe | Chairman and Director | September 29, 2014 | ||
Paul F. Koeppe | ||||
/s/ Richard A. Abdoo | Director | September 29, 2014 | ||
Richard A. Abdoo | ||||
/s/ Manfred E. Birnbaum | Director | September 29, 2014 | ||
Manfred E. Birnbaum | ||||
/s/ James H. Ozanne | Director | September 29, 2014 | ||
James H. Ozanne | ||||
/s/ Theodore Stern | Director | September 29, 2014 | ||
Theodore Stern |
Exhibit
No. |
Description
|
Incorporated by Reference to
|
||
Articles of Incorporation of ZBB Energy Corporation, as amended
|
||||
3.2
|
Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Stock
|
Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 27, 2013
|
||
3.3
|
Amended and Restated By-laws of ZBB Energy Corporation (as of November 4, 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
|
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 Underwriter Warrant
|
Incorporated by reference to the Company’s Registration Statement on Form S-1 filed on April 10, 2012
|
||
4.5
|
Form of Warrant
|
Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on May 2, 2012
|
||
4.6
|
Form of Warrant
|
Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on September 27, 2013
|
||
10.1*
|
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
|
||
10.2*
|
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
|
||
10.3*
|
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
|
||
10.4*
|
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
|
||
10.5*
|
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
|
||
10.6*
|
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
|
10.7*
|
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
|
||
10.8*
|
2010 Omnibus Long-Term Incentive Plan
|
Incorporated by reference to Appendix A attached to the Company’s Definitive Proxy Statement filed on September 24, 2010
|
||
10.9
|
Amendment No. 1 to 2010 Omnibus Long-Term Incentive Plan
|
Incorporated by reference to Appendix A attached to the Company’s Definitive Proxy Statement filed on September 25, 2012
|
||
10.10*
|
2010 Omnibus Long-Term Incentive Plan Form Stock Option Award Agreement
|
Incorporated by reference to the Company’s Registration Statement on Form S-8 filed on January 31, 2010
|
||
10.11*
|
2010 Omnibus Long-Term Incentive Plan Form Restricted Stock Unit Award Agreement
|
Incorporated by reference to the Company’s Registration Statement on Form S-8 filed on January 31, 2010
|
||
10.12
|
Collaboration Agreement between ZBB Energy Corporation and Honam Petrochemical Corporation dated April 8, 2011
|
Incorporated by reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2011
|
||
10.13
|
Joint Venture Agreement of Anhui Meineng Store Energy Co., Ltd. by and between ZBB PowerSav Holdings Limited and Anhui Xinrui Investment Co., Ltd, dated August 30, 2011
|
Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011
|
||
10.14
|
Limited Liability Company Agreement of ZBB PowerSav Holdings Limited by and between ZBB Cayman Corporation and PowerSav, Inc., dated August 30, 2011
|
Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011
|
||
10.15
|
Anhui Meineng Store Energy Co., Ltd. Supplemental Agreement to the Joint Venture Agreement by and between ZBB PowerSav Holdings Limited and Anhui Xinlong Investment Management Co., Ltd, dated November 15, 2011
|
Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2011
|
||
10.16
|
License Agreement by and between ZBB PowerSav Holdings Ltd. and Anhui Meineng Store Energy Co., Ltd., dated November 11, 2011
|
Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2011
|
||
10.17
|
Management Services Agreement by and between ZBB PowerSav Holdings Ltd. and Anhui Meineng Store Energy Co., Ltd., dated November 11, 2011
|
Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2011
|
||
10.18*
|
Offer letter between ZBB Energy Corporation and Kevin Dennis dated February 3, 2010
|
Incorporated by reference to Exhibit 10.48 to Pre-Effective Amendment No. 1 to Company’s Registration Statement on Form S-1 filed on April 10, 2012
|
||
10.19*
|
Addendum to Employment Agreement between ZBB Energy Corporation and Kevin Dennis dated August 29, 2011
|
Incorporated by reference to Exhibit 10.49 to Pre-Effective Amendment No. 1 to Company’s Registration Statement on Form S-1 filed on April 10, 2012
|
||
10.20*
|
Offer letter between ZBB Energy Corporation and Daniel Nordloh dated April 29, 2010
|
Incorporated by reference to Exhibit 10.50 to Pre-Effective Amendment No. 1 to Company’s Registration Statement on Form S-1 filed on April 10, 2012
|
10.21*
|
First Amendment to Letter Agreement between ZBB Energy Corporation and Daniel Nordloh dated April 28, 2011
|
Incorporated by reference to Exhibit 10.51 to Pre-Effective Amendment No. 1 to Company’s Registration Statement on Form S-1 filed on April 10, 2012
|
||
10.22*
|
Second Amendment to Letter Agreement between ZBB Energy Corporation and Daniel Nordloh dated March 23, 2012
|
Incorporated by reference to Exhibit 10.52 to Pre-Effective Amendment No. 1 to Company’s Registration Statement on Form S-1 filed on April 10, 2012
|
||
10.23
|
Form of Securities Purchase Agreement
|
Incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K filed on September 27, 2013
|
||
10.24
*
|
Director Compensation Policy, adopted November 6, 2013
|
|||
10.25
|
First Amendment to License Agreement between ZBB PowerSav Holdings Ltd. and Anhui Meineng Store Energy Co. Ltd., dated December 3, 2013
|
Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014
|
||
10.26
|
Research and Development Agreement between ZBB Energy Corporation and Lotte Chemical Corporation, dated December 16, 2013
|
Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2013
|
||
10.27
|
Amended License Agreement between ZBB Energy Corporation and Lotte Chemical Corporation, dated December 16, 2013
|
Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2013
|
||
10.28
|
Amendment to Collaboration Agreement between ZBB Energy Corporation and Lotte Chemical Corporation, dated December 16, 2013
|
Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2013
|
||
10.29*
|
Professional Services Agreement between Jeff Reichard and ZBB Energy Corporation, dated February 7, 2014
|
Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014
|
||
10.30*
|
Employment Agreement between ZBB Energy Corporation and Dilek Wagner, dated February 2, 2014
|
Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014
|
||
10.31
*
|
Employment Agreement between ZBB Energy Corporation and Bradley Hansen, dated May 19, 2014
|
|||
10.32
*
|
Form of Nonstatutory Option Agreement issued on May 19, 2014 to Bradley Hansen
|
|||
10.33
*
|
Amended Separation Agreement between ZBB Energy Corporation and Charles Stankiewicz, dated May 19, 2014
|
|||
10.34
*
|
Third Amendment to Letter Agreement between ZBB Energy Corporation and Daniel Nordloh, dated July 15, 2014
|
|||
Subsidiaries of ZBB Energy Corporation
|
||||
Consent of Baker Tilly Virchow Krause, LLP
|
||||
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||||
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||||
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||||
101
|
Interactive Data Files
|
Class
|
Number of Shares Authorized
|
Par Value Per Share
|
Common Stock
|
One Hundred Fifty Million (150,000,000)
|
One Cent ($.01)
|
Preferred Stock
|
Ten Million (10,000,000)
|
One Cent ($.01)
|
|
(i)
|
An annual retainer in the amount of $72,000, to be awarded in accordance with clause (iv) below.
|
|
(ii)
|
In addition, an annual Chairman’s retainer in the following amounts, payable in cash quarterly in arrears: $30,000 for the Chairman of the Board; $12,000 for the Chairman of the Audit Committee and for the Chairman of the Compensation Committee; and $8,000 for the Chairman of the Nominating and Governance Committee.
|
|
(iii)
|
In addition, an annual committee membership fee in the amount of $6,000 for each committee of the Board on which the non-employee director serves, payable in cash quarterly in arrears, provided the non-employee director remains in continuous service with the Board through each applicable payment date.
|
|
(iv)
|
The annual retainer for a non-employee director for a year will be awarded as of the date of the annual meeting of shareholders of the Company (the “Annual Meeting”) in the form of restricted stock units (“RSUs”) under the Company’s 2012 Non-Employee Director Equity Compensation Plan (or any successor plan thereto) (the “Stock Plan”). The RSUs will have the following terms and conditions: (A) the number of RSUs will be determined by dividing the dollar amount of the award by the closing price of the Company’s common stock on the first business day preceding the Annual Meeting, rounded up to the next whole share; (B) 25% of the RSUs will vest on the date of grant, and the remaining RSUs will vest 25% each on March 31, June 30 and September 30 following the Annual Meeting, provided the non-employee director remains in continuous service with the Board through the applicable vesting date; (C) the RSUs will vest earlier in the event of a “Change in Control” of the Company (as defined in the Stock Plan); (D) except in the case of Mr. Birnbaum’s RSUs, vested RSUs will be payable upon the earlier of (x) the date that is six months after the non-employee director “separates from service” with the Board (within the meaning of Section 409A of the Internal Revenue Code) or (y) the date of a Change in Control (provided that the Change in Control is a permissible “change in control” payment event within the meaning of Section 409A of the Internal Revenue Code); (E) Mr. Birnbaum’s vested RSUs will be payable on vesting; (F) vested RSUs will be payable in the form of one share of common stock of the Company for each vested RSU then payable; and (G) the RSUs will otherwise be subject to the terms of the Stock Plan and will be evidenced by an appropriate RSU award agreement.
|
1.
|
Position.
|
(a) | You will serve as the Company’s President and COO, reporting to the Company’s Chief Executive Officer (“CEO”), and performing the duties described in Attachment A , or as may be later explicitly agreed upon between the parties. Your services shall be performed primarily in Menomonee Falls, Wisconsin. You acknowledge and agree, however, that you may be required to travel in connection with the performance of your job duties. | |
(b) | You have disclosed to the Company all your direct and indirect ownership interests in the Company’s China joint venture entity, Anhui Meineng Store Energy Co., Ltd. (“Meineng”). The Company acknowledges that you will retain such interests and also continue to serve as a director and General Manager and CEO of Meineng. You acknowledge and agree that you will abstain from voting as a director of either the Company or Meineng on any transactions between the two entities. | |
(c) | During your employment by ZBB, you may accept a position on the board of directors of any company that does not directly compete with the business of ZBB, provided such position is approved in advance by ZBB’s Board of Directors. | |
(d) | In addition to your role as the Company’s President and COO, you will also serve as a member of ZBB’s Board of Directors; provided, upon the earlier to occur of (1) the request of ZBB’s Board of Directors, and (2) the termination, for whatever reason, of your employment, you shall resign as a member of ZBB’s Board of Directors, effective as of the effective date of such earlier occurrence, pursuant to a resignation letter in the form attached hereto as Attachment B . | |
(e) | Nothing in this Agreement will be construed as conferring upon you any right to remain employed by the Company or any of its subsidiaries or affiliates, or affect the right of the Company or any of its affiliates to terminate your employment at any time, for any reason or no reason, subject to the obligations contained in this Agreement. |
2.
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Salary.
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(a) | You will be entitled to an annual salary of $245,000, payable in accordance with ZBB’s normal salaried payroll practices. The Company will review, at least annually, your overall compensation with a view to increasing it if, in the sole judgment of ZBB’s compensation committee, the performance of ZBB or your services merit such an increase. | |
(b) | ZBB shall be entitled to withhold from amounts to be paid to you hereunder any federal, state or local withholding or other taxes or charges which it is required to withhold under applicable law. |
3.
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Term.
This Agreement shall have an initial term of two (2) years, starting on the Effective Date (the “Term”), unless terminated earlier pursuant to Section 8, and thereafter shall remain in effect until terminated, by either party, at any time and for any reason, upon the provision of written notice to the other party, subject to the terms and conditions set forth in Section 8, below.
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4.
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Equity Awards.
Effective as of the date of first day of employment with the Company, you will receive two equity awards:
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(a) | You will be granted an option to purchase 360,000 shares with the exercise price based on the closing share price on the first day of your employment. This option will be an Inducement option. | ||
(i) | Vesting will be over 3 years with the first 1/3 vesting one year from the start of your employment the second 1/3 vesting two years from the start of your employment and the last 1/3 vesting three years after the start of your employment. | ||
(ii) | This option will immediately vest in full upon a “Change of Control” of ZBB. The definition of “Change of Control” is attached as Attachment C . | ||
(iii) | If, before the third anniversary of the start of your employment, you are terminated without Cause or due to Disability or resign for Good Reason, pursuant to Section 8, an additional 60,000 shares will become fully vested and exercisable as of the termination date. | ||
(iv) | The option will have such other terms and conditions specified in the form of Nonstatutory Stock Option Agreement provided to you and is included herein as Attachment D . |
(b) | You will also be granted 360,000 inducement restricted stock units (“RSUs”). | ||
(i) | The RSUs will vest upon the Compensation Committee’s confirmation that certain performance targets are met as described in Annex 1 to the Restricted Stock Unit Agreement provided to you (see Attachment E ). | ||
(ii) | The RSUs will have such other terms and conditions specified in the Restricted Stock Unit Agreement ( Attachment E ). |
5.
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Future Incentive Compensation.
You shall be eligible to participate in various performance-based stock option and cash bonus plans offered by the Company, the terms of conditions of which shall be solely determined by the Company and approved by the Company’s compensation committee.
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6.
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Commuting and Other Expenses.
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(a) | The Company will reimburse your commuting expenses to and from ZBB’s corporate offices and the expense for your wife to visit you in Wisconsin in the following manner: | ||
(i) | Coach class airfare between California and Wisconsin. | ||
(ii) | Incidental expenses such as mileage, parking, etc. for transportation from your and your wife’s home to ZBB’s corporate offices. | ||
(iii) | Local transportation when working at ZBB’s corporate offices. | ||
(iv) | The total reimbursement will not exceed $25,000 per year. | ||
(v) | All expenses must be invoiced to the Company within thirty (30) days of being incurred by you. | ||
(b) | The Company will provide you an apartment of your choosing located near ZBB’s corporate offices. This expense will paid directly by ZBB, provided that such expenses are reasonable and approved in advance by the Company’s CEO. | ||
(c) | Expenses for other Company travel will be reimbursed in accord with ZBB’s travel policy. |
7.
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Benefits.
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(a) | During the term of your employment by ZBB, ZBB will provide you with, and you will be eligible for, all benefits of employment generally made available to the senior executives of ZBB (collectively, the “Benefit Plans”), subject to and on a basis consistent with the terms, conditions and overall administration of such Benefit Plans. You will be considered for participation in Benefit Plans which by the terms thereof are discretionary in nature (such as stock option plans) on the same basis as other executive personnel of ZBB of similar rank. | |
(b) | The Company will offer you four (4) weeks of personal time off per calendar year, in accordance with Company policy in effect from time to time. | |
(c) | The Company will provide you with ten (10) paid holidays per calendar year, in accordance with Company policy in effect from time to time. |
8.
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Benefits Upon Termination.
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(a) | In addition to the benefits described in Section 4, you will be entitled to a severance payment in an amount equal to six (6) months of your annual base salary as then in effect (“Severance Payments”) in the event (A) ZBB terminates your employment for any reason other than “Cause” or “Disability,” or (B) you terminate your employment with ZBB for “Good Reason”; provided that in the event your termination occurs in connection with a Change of Control, the Severance Payments shall equal the greater of (X) six (6) months of your annual base salary as then in effect and (Y) payment of your base salary as then in effect for the remainder of the Term. You acknowledge and agree that the payment of the Severance Payments is contingent upon you executing a general release of claims for the benefit of ZBB (in a form substantially similar to that which is attached as Attachment G ) (the “General Release”), which must be executed by you (and any applicable revocation period must expire) in accordance with the terms of the General Release but in no event later than sixty (60) calendar days following the effective date of your termination of employment with ZBB. The Severance Payments shall be payable in accordance with ZBB’s normal salaried payroll practices then in effect, and the first payment (which shall include any accrued payments that would have otherwise been made beginning on the date of your termination of employment) shall be made to you on the first normal payroll date that occurs at least five (5) business days after the expiration of the applicable revocation period for the General Release. |
(b) | In the event your employment with ZBB is terminated due to “Disability,” you will be entitled to severance in an amount equal to six (6) months of your base salary as then in effect (“Disability Severance”), paid in accordance with ZBB’s normal salaried payroll practices, provided that you execute the General Release, which must be executed by you (and any applicable revocation period must expire) in accordance with the terms of the General Release but in no event later than sixty (60) calendar days following the effective date of your termination. Your first Disability Severance payment (which shall include any accrued payments that would have otherwise been made beginning on the date of your termination of employment) shall be made to you on the first normal payroll date that occurs at least five (5) business days after the expiration of the applicable revocation period for the General Release. |
(c) | If (i) you terminate your employment with ZBB for “Good Reason” or if the Company terminates your employment without Cause; (ii) you are a participant in ZBB’s health Benefit Plan on the date your employment terminates; and (iii) if you elect to continue your health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) following such termination, then ZBB shall pay your monthly premium under COBRA until the last day of the six (6) month period following such termination, unless during such period you are offered and accept or obtain equivalent health insurance coverage in connection with new employment or self-employment, in which case premium payments will cease as of the effective date of the new health insurance. | |
(d) | If you terminate your employment with ZBB other than for “Good Reason” or ZBB terminates your employment for “Cause,” you will be entitled to the payment of any accrued but unpaid base salary through the date of termination, plus all accrued and unpaid benefits under any Benefit Plans in which you participate through the date of termination. In either case, you will not be entitled to any Severance Payments, Disability Severance or payment of COBRA premiums. | |
(e) | As a condition of your employment, you will be required to execute: (i) the Restrictive Covenant Agreement which is attached to this Agreement as Attachment G and (ii) the Confidentiality & Intellectual Property Agreement which is attached to this Agreement as Attachment H , both of which are incorporated herein. | |
(f) | For purposes of this Agreement, “Cause” shall mean termination of your employment with ZBB due to (i) any failure by you to substantially perform your duties with ZBB (other than by reason of illness) which occurs after ZBB has delivered to you a demand for performance which specifically identifies the manner in which ZBB believes you have failed to perform your duties, and you fail to resume performance of your duties on a continuous basis within fourteen (14) days after receiving such demand; (ii) your commission of a material violation of any law or regulation applicable to ZBB or any of its subsidiaries or your activities in respect of ZBB or any of its subsidiaries; (iii) your commission of any material act of dishonesty or disloyalty involving ZBB or any of its subsidiaries; (iv) any violation by you of a ZBB policy of material import; (v) any act by you of moral turpitude which is likely to result in discredit to or loss of business, reputation or goodwill of ZBB; (vi) your chronic absence from work other than by reason of a serious health condition; (vii) your commission of a crime which substantially relates to the circumstances of your position with ZBB or any of its subsidiaries or which has material adverse effect on ZBB or any of its subsidiaries; or (viii) the willful engaging by you in conduct which is demonstrably and materially injurious to ZBB or any of its subsidiaries. | |
(g) | For purposes of this Agreement, “Disability” shall mean (i) you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months or (ii) you have been, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three (3) months under any accident, disability or health plan. |
(h) | For purposes of this Agreement, “Good Reason” shall mean your termination of your employment with ZBB within thirty (30) days after any of the following: (i) a change in your position with ZBB which materially reduces your level of responsibility or a material reduction in your base salary (except to the extent the base salary of substantially all of the executive officers of ZBB is reduced proportionately); (ii) a material breach by ZBB of any term of this Agreement following written notice thereof within thirty (30) days of the breach and the failure of ZBB to cure such breach within ten (10) days of such written notice; or (iii) any change in job title or responsibilities in connection with or within ninety (90) days prior to or following a Change in Control. Notwithstanding the above to the contrary, Good Reason does not exist unless (A) you object to any change, reduction, notification, or breach described above by written notice to ZBB within thirty (30) business days after such change, reduction, notification, or breach occurs and (B) ZBB fails to cure such change, reduction or breach within ten (10) business days after such notice is given. | |
(i) | Any Severance Payments payable to you under this Agreement are intended to be exempt from Section 409A of the Code under the separation pay exemption pursuant to Treasury Regulation §1.409A-1(b)(9)(iii) and for such purpose, each Severance Payment to you under this under this Agreement shall be considered a separate payment. |
9.
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Timing; Miscellaneous Provisions.
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(a) | This Agreement and all your rights and obligations hereunder are personal to you and may not be transferred or assigned by you at any time. ZBB can assign its rights under this Agreement to any entity that assumes ZBB’s obligations hereunder and this Agreement shall be binding upon any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation, or otherwise) to all or substantially all of ZBB’s business and/or assets. For all purposes of this Agreement, the term “ZBB” shall include any successor to ZBB’s business and/or assets which becomes bound by this Agreement. | |
(b) | This Agreement and all of your rights hereunder shall inure to the benefit of, and be enforceable by, your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. | |
(c) | Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by overnight courier or U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of notices to you, notices shall be addressed to you at the home address which you most recently communicated to ZBB in writing. In the case of notices to ZBB, notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary. |
(d) | No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by you and by an authorized officer of ZBB (other than you). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. | |
(e) | This Agreement and the other agreements, representations and understandings expressly set forth or referenced herein contain the entire understanding of the parties and shall supersede and replace all prior agreements and/or understandings between the parties with respect to the subject matter hereof. | |
(f) | Any termination of this Agreement shall not release either ZBB or you from our respective obligations to the date of termination nor from the provisions of this Agreement which, by necessary or reasonable implication, are intended to apply after termination of this Agreement. | |
(g) | The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of Wisconsin (other than provisions governing the choice of law). | |
(h) | The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. | |
(i) | You acknowledge and agree that this Agreement is contingent upon your submission to and successful completion of a screening process which may include a background check, drug testing, and employment eligibility verification. In the event that you do not successfully complete the screening process to the Company’s satisfaction, you acknowledge and agree that this Agreement shall be null and void, and that the Company shall have no further obligations under this Agreement. |
ZBB ENERGY CORPORATION | ||
/s/ Bradley Hansen | By: | /s/ Eric C. Apfelbach |
Bradley Hansen | Eric Apfelbach | |
125 Northam Avenue | Chief Executive Officer | |
San Carlos, CA 94070 |
Very truly yours, | |
ZBB ENERGY CORPORATION | |
By: /s/ Eric C. Apfelbach | |
Eric Apfelbach, President & CEO | |
Enclosure: Attachment A – Notice of Resignation | |
I agree with and accept the terms contained in | |
this agreement, including Attachment A, and | |
agree to be bound by them. | |
Dated this 31st day of May , 2014. | |
Time: 9:30 A.M. | |
/s/ Charles W. Stankiewicz | |
Charles W. Stankiewicz |
1. | Defined Terms . Any capitalized terms in this Amendment that are not defined herein shall have the meaning assigned to them in the Letter Agreement. | ||
2. | Salary . Section 2 of the Letter Agreement shall be deleted in its entirety and replaced with the following: | ||
● | Effective June 25, 2014, you will be entitled to an annual salary of $190,000, payable in accordance with ZBB’ s normal salaried payroll practices. The CEO will review, at least annually, your overall compensation with a view to increasing it if, in the sole judgment of the CEO, the performance of ZBB or your services merit such an increase. | ||
● | ZBB shall be entitled to withhold from amounts to be paid to you hereunder any federal, state, or local withholding or other taxes or charges which it is required to withhold under applicable law. |
3 | Letter Agreement in Full Force and Effect . Except as amended hereby, the Letter Agreement shall be unchanged and shall remain in full force and effect in all respects in accordance with the terms and conditions thereof. From and after the date hereof, all references to the Letter Agreement shall be deemed to be references to the Letter Agreement as amended hereby. | |
4 | Restrictive Covenant Agreement . Employee acknowledges and agrees that he is bound by the ZBB Corporation Restrictive Covenant Agreement to which he is a party, and nothing in this agreement shall be interpreted to supersede or limit his obligations under such agreement. |
5 | Binding Effect . This Amendment shall be binding upon the parties hereto, their respective legal representatives, successors, heirs, and assigns. | |
6 | Governing Law . This Amendment and all questions of its interpretation, performance, enforceability, and the rights and remedies of the parties hereto shall be governed by and determined in accordance with the internal laws of the State of Wisconsin. |
CORPORATION: | ||
ZBB ENERGY CORPORATION | ||
By: /s/ Eric C. Apfelbach | CEO | |
(Title) | ||
EMPLOYEE: | ||
/s/ Daniel Nordloh | ||
Daniel Nordloh |