Wisconsin
|
39-1987014
|
(State or other jurisdiction of
|
(I.R.S. Employer Identification No.)
|
incorporation or organization)
|
|
N93 W14475 Whittaker Way
Menomonee Falls, Wisconsin
|
53051
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer
|
Accelerated filer
|
Non-accelerated filer
|
Smaller reporting company
☑
|
|
|
|
Class
|
|
Shares Outstanding as of February 16, 2016
|
Common Stock, $0.01 Par Value Per Share
|
|
47,608,821
|
|
PART I. FINANCIAL INFORMATION (*)
|
Page
|
|
|
|
|
|
Item 1.
|
Condensed Consolidated Financial Statements (Unaudited)
|
2
|
|
|
|
||
Condensed Consolidated Balance Sheets
|
2
|
||
|
|||
Condensed Consolidated Statements of Operations
|
3
|
||
Condensed Consolidated Statements of Comprehensive Loss
|
4
|
||
Condensed Consolidated Statements of Changes in Equity
|
5
|
||
Condensed Consolidated Statements of Cash Flows
|
6
|
||
|
|
||
Notes to Condensed Consolidated Financial Statements
|
7
|
||
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
33 | |
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
41 | |
Item 4.
|
Controls and Procedures
|
41 | |
PART II. OTHER INFORMATION
|
|||
Item 1.
|
Legal Proceedings
|
42
|
|
Item 1A.
|
Risk Factors
|
42
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
42
|
|
|
|
||
Item 3.
|
Defaults upon Senior Securities
|
42
|
|
|
|
||
Item 4.
|
Mine Safety Disclosures
|
42
|
|
|
|
||
Item 5.
|
Other Information
|
42
|
|
Item 6.
|
Exhibits
|
42
|
|
|
|
||
Signatures
|
43
|
EnSync, Inc.
|
||||||||
Condensed Consolidated Balance Sheets
|
||||||||
(Unaudited)
|
||||||||
December 31, 2015
|
June 30, 2015
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
28,171,129
|
$
|
10,757,461
|
||||
Restricted cash on deposit
|
60,223
|
60,193
|
||||||
Accounts receivable, net
|
85,708
|
113,093
|
||||||
Inventories, net
|
2,673,598
|
1,198,117
|
||||||
Prepaid expenses and other current assets
|
596,498
|
441,537
|
||||||
Deferred financing costs
|
-
|
545,825
|
||||||
Customer intangible assets
|
154,875
|
-
|
||||||
Note receivable
|
165,156
|
159,107
|
||||||
Deferred project costs
|
159,978
|
-
|
||||||
Project assets
|
5,790,256
|
-
|
||||||
Total current assets
|
37,857,421
|
13,275,333
|
||||||
Long-term assets:
|
||||||||
Property, plant and equipment, net
|
3,794,418
|
4,164,912
|
||||||
Investment in investee company
|
2,339,931
|
2,408,528
|
||||||
Goodwill
|
803,079
|
803,079
|
||||||
Total assets
|
$
|
44,794,849
|
$
|
20,651,852
|
||||
Liabilities and Equity
|
||||||||
Current liabilities:
|
||||||||
Current maturities of bank loans and notes payable
|
$
|
328,744
|
$
|
324,626
|
||||
Accounts payable
|
1,411,045
|
1,056,744
|
||||||
Accrued expenses
|
415,291
|
1,129,166
|
||||||
Customer deposits
|
1,064,797
|
1,177,155
|
||||||
Accrued compensation and benefits
|
273,088
|
235,351
|
||||||
Total current liabilities
|
3,492,965
|
3,923,042
|
||||||
Long-term liabilities:
|
||||||||
Bank loans and notes payable, net of current maturities
|
888,451
|
1,053,581
|
||||||
Deferred revenue
|
13,290,000
|
-
|
||||||
Total liabilities
|
17,671,416
|
4,976,623
|
||||||
Commitments and contingencies (Note 15)
|
||||||||
Equity
|
||||||||
Series B redeemable convertible preferred stock ($0.01 par value, $1,000 face value) 3,000 shares authorized and issued, 2,300 and 2,575 shares outstanding, preference in liquidation of $5,172,385 and $5,635,866 as of December 31, 2015 and June 30, 2015, respectively
|
23
|
26
|
||||||
Series C convertible preferred stock ($0.01 par value, $1,000 face value), 28,048 and 0 shares authorized, issued, and outstanding, preference in liquidation of $21,951,048 and $0 as of December 31, 2015 and June 30, 2015, respectively
|
280
|
-
|
||||||
Common stock ($0.01 par value); 300,000,000 and 150,000,000 authorized, 47,608,821 and 39,129,334 shares issued and outstanding as of December 31, 2015 and June 30, 2015, respectively
|
1,184,403
|
1,099,608
|
||||||
Additional paid-in capital
|
136,775,596
|
117,104,936
|
||||||
Accumulated deficit
|
(110,877,163
|
)
|
(102,674,049
|
)
|
||||
Accumulated other comprehensive loss
|
(1,589,759
|
)
|
(1,589,486
|
)
|
||||
Total EnSync, Inc. equity
|
25,493,380
|
13,941,035
|
||||||
Noncontrolling interest
|
1,630,053
|
1,734,194
|
||||||
Total equity
|
27,123,433
|
15,675,229
|
||||||
Total liabilities and equity
|
$
|
44,794,849
|
$
|
20,651,852
|
EnSync, Inc.
|
||||||||||||||||
Condensed Consolidated Statements of Operations
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
Three months ended December 31,
|
Six months ended December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Revenues
|
||||||||||||||||
Product sales
|
$
|
335,694
|
$
|
114,177
|
$
|
486,230
|
$
|
663,518
|
||||||||
Engineering and development
|
46,567
|
186,477
|
169,007
|
201,997
|
||||||||||||
Total Revenues
|
382,261
|
300,654
|
655,237
|
865,515
|
||||||||||||
Costs and Expenses
|
||||||||||||||||
Cost of product sales
|
323,289
|
171,683
|
304,608
|
507,646
|
||||||||||||
Cost of engineering and development
|
82,020
|
59,982
|
136,167
|
169,145
|
||||||||||||
Advanced engineering and development
|
2,015,364
|
1,480,813
|
3,691,652
|
2,778,396
|
||||||||||||
Selling, general, and administrative
|
2,287,978
|
1,704,234
|
4,514,952
|
3,763,787
|
||||||||||||
Depreciation and amortization
|
181,066
|
159,174
|
359,656
|
313,690
|
||||||||||||
Total Costs and Expenses
|
4,889,717
|
3,575,886
|
9,007,035
|
7,532,664
|
||||||||||||
Loss from Operations
|
(4,507,456
|
)
|
(3,275,232
|
)
|
(8,351,798
|
)
|
(6,667,149
|
)
|
||||||||
Other Income (Expense)
|
||||||||||||||||
Equity in loss of investee company
|
(20,889
|
)
|
(225,471
|
)
|
(68,597
|
)
|
(307,973
|
)
|
||||||||
Gain on investment in investee company
|
-
|
-
|
-
|
1,257,407
|
||||||||||||
Interest income
|
14,094
|
7,879
|
18,710
|
11,490
|
||||||||||||
Interest expense
|
(12,517
|
)
|
(26,270
|
)
|
(27,647
|
)
|
(53,850
|
)
|
||||||||
Other income
|
-
|
-
|
76,437
|
-
|
||||||||||||
Total Other Income (Expense)
|
(19,312
|
)
|
(243,862
|
)
|
(1,097
|
)
|
907,074
|
|||||||||
Loss before benefit for Income Taxes
|
(4,526,768
|
)
|
(3,519,094
|
)
|
(8,352,895
|
)
|
(5,760,075
|
)
|
||||||||
Benefit for Income Taxes
|
(640
|
)
|
-
|
(640
|
)
|
-
|
||||||||||
Net loss
|
(4,526,128
|
)
|
(3,519,094
|
)
|
(8,352,255
|
)
|
(5,760,075
|
)
|
||||||||
Net loss attributable to noncontrolling interest
|
80,424
|
143,508
|
149,141
|
226,010
|
||||||||||||
Gain attributable to noncontrolling interest
|
-
|
-
|
-
|
(481,870
|
)
|
|||||||||||
Net Loss Attributable to EnSync, Inc.
|
(4,445,704
|
)
|
(3,375,586
|
)
|
(8,203,114
|
)
|
(6,015,935
|
)
|
||||||||
Preferred Stock Dividend
|
(70,058
|
)
|
(71,056
|
)
|
(146,580
|
)
|
(118,865
|
)
|
||||||||
Net Loss Attributable to Common Shareholders
|
$
|
(4,515,762
|
)
|
$
|
(3,446,642
|
)
|
$
|
(8,349,694
|
)
|
$
|
(6,134,800
|
)
|
||||
Net loss per share
|
||||||||||||||||
Basic and diluted
|
$
|
(0.10
|
)
|
$
|
(0.09
|
)
|
$
|
(0.18
|
)
|
$
|
(0.18
|
)
|
||||
Weighted average shares-basic and diluted
|
47,348,603
|
39,051,379
|
46,673,751
|
34,835,949
|
EnSync, Inc.
|
||||||||||||||||
Condensed Consolidated Statements of Comprehensive Loss
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
Three months ended December 31,
|
Six months ended December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Net loss
|
$
|
(4,526,128
|
)
|
$
|
(3,519,094
|
)
|
$
|
(8,352,255
|
)
|
$
|
(5,760,075
|
)
|
||||
Foreign exchange translation adjustments
|
1,377
|
3,538
|
(273
|
)
|
7,708
|
|||||||||||
Comprehensive loss
|
(4,524,751
|
)
|
(3,515,556
|
)
|
(8,352,528
|
)
|
(5,752,367
|
)
|
||||||||
Net (income) loss attributable to noncontrolling interest
|
80,424
|
143,508
|
149,141
|
(255,860
|
)
|
|||||||||||
Comprehensive Loss Attributable to EnSync, Inc.
|
$
|
(4,444,327
|
)
|
$
|
(3,372,048
|
)
|
$
|
(8,203,387
|
)
|
$
|
(6,008,227
|
)
|
EnSync, Inc.
|
||||||||||||||||||||||||||||||||||||||||
Condensed Consolidated Statements of Changes in Equity
|
||||||||||||||||||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||||||||||||||
Series B Preferred Stock
|
Series C Preferred Stock
|
Common Stock
|
Additional
Paid-in Capital |
Accumulated
Deficit |
Accumulated
Other Comprehensive Income (Loss) |
Noncontrolling
Interest |
||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||||||||||||
Balance: June 30, 2014
|
2,575
|
$
|
26
|
-
|
$
|
-
|
25,651,389
|
$
|
964,828
|
$
|
102,286,450
|
$
|
(89,788,242
|
)
|
$
|
(1,599,875
|
)
|
$
|
1,646,240
|
|||||||||||||||||||||
Net (loss) income
|
(12,885,808
|
)
|
74,198
|
|||||||||||||||||||||||||||||||||||||
Net currency translation adjustment
|
10,389
|
|||||||||||||||||||||||||||||||||||||||
Issuance of common stock, net of costs and underwriting fees
|
13,248,000
|
132,480
|
13,557,257
|
|||||||||||||||||||||||||||||||||||||
Stock-based compensation
|
229,945
|
2,300
|
1,261,229
|
|||||||||||||||||||||||||||||||||||||
Contribution of capital from noncontrolling interest
|
13,756
|
|||||||||||||||||||||||||||||||||||||||
Balance: June 30, 2015
|
2,575
|
26
|
-
|
-
|
39,129,334
|
1,099,608
|
117,104,936
|
(102,674,049
|
)
|
(1,589,486
|
)
|
1,734,194
|
||||||||||||||||||||||||||||
Net loss
|
(8,203,114
|
)
|
(149,141
|
)
|
||||||||||||||||||||||||||||||||||||
Net currency translation adjustment
|
(273
|
)
|
||||||||||||||||||||||||||||||||||||||
Issuance of common and preferred stock, net of costs and other fees
|
28,048
|
280
|
8,000,000
|
80,000
|
19,211,913
|
|||||||||||||||||||||||||||||||||||
Stock-based compensation
|
126,791
|
1,268
|
462,271
|
|||||||||||||||||||||||||||||||||||||
Contribution of capital from noncontrolling interest
|
45,000
|
|||||||||||||||||||||||||||||||||||||||
Conversion of preferred stock
|
(275
|
)
|
(3
|
)
|
352,696
|
3,527
|
(3,524
|
)
|
||||||||||||||||||||||||||||||||
Balance: December 31, 2015
|
2,300
|
$
|
23
|
28,048
|
$
|
280
|
47,608,821
|
$
|
1,184,403
|
$
|
136,775,596
|
$
|
(110,877,163
|
)
|
$
|
(1,589,759
|
)
|
$
|
1,630,053
|
EnSync, Inc.
|
||||||||
Condensed Consolidated Statements of Cash Flows
|
||||||||
(Unaudited)
|
||||||||
Six months ended December 31,
|
||||||||
2015
|
2014
|
|||||||
Cash flows from operating activities
|
||||||||
Net loss
|
$
|
(8,352,255
|
)
|
$
|
(5,760,075
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation of property, plant and equipment
|
345,209
|
313,690
|
||||||
Amortization of intangible asset
|
14,447
|
-
|
||||||
Stock-based compensation, net
|
463,539
|
853,811
|
||||||
Equity in loss of investee company
|
68,597
|
307,973
|
||||||
Gain on investment in investee company
|
-
|
(1,257,407
|
)
|
|||||
Interest accreted on note receivable
|
(6,049
|
)
|
(3,156
|
)
|
||||
Gain on bargain purchase
|
(76,437
|
)
|
-
|
|||||
Changes in assets and liabilities
|
||||||||
Accounts receivable
|
27,385
|
787,867
|
||||||
Inventories
|
(1,475,481
|
)
|
(98,328
|
)
|
||||
Prepaids and other current assets
|
(154,961
|
)
|
49,385
|
|||||
Refundable income taxes
|
-
|
10,908
|
||||||
Deferred project costs
|
(159,978
|
)
|
-
|
|||||
Project assets
|
(5,603,034
|
)
|
-
|
|||||
Accounts payable
|
354,301
|
(122,582
|
)
|
|||||
Accrued expenses
|
(731,570
|
)
|
(556,073
|
)
|
||||
Customer deposits
|
(112,358
|
)
|
(286,050
|
)
|
||||
Accrued compensation and benefits
|
37,737
|
33,610
|
||||||
Deferred revenue
|
13,290,000
|
-
|
||||||
Net cash used in operating activities
|
(2,070,908
|
)
|
(5,726,427
|
)
|
||||
Cash flows from investing activities
|
||||||||
Cash paid for business combination
|
(225,829
|
)
|
-
|
|||||
Change in restricted cash
|
(30
|
)
|
1,149
|
|||||
Expenditures for property and equipment
|
(10,416
|
)
|
(303,280
|
)
|
||||
Issuance of note receivable
|
-
|
(150,000
|
)
|
|||||
Net cash used in investing activities
|
(236,275
|
)
|
(452,131
|
)
|
||||
Cash flows from financing activities
|
||||||||
Payment of financing costs
|
(261,982
|
)
|
-
|
|||||
Repayments of bank loans and notes payable
|
(161,012
|
)
|
(173,982
|
)
|
||||
Proceeds from issuance of preferred stock
|
13,300,000
|
-
|
||||||
Proceeds from issuance of common stock
|
6,800,000
|
14,837,760
|
||||||
Common stock issuance costs
|
-
|
(1,148,023
|
)
|
|||||
Contributions of capital from noncontrolling interest
|
45,000
|
7,127
|
||||||
Net cash provided by financing activities
|
19,722,006
|
13,522,882
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
(1,155
|
)
|
5,340
|
|||||
Net increase in cash and cash equivalents
|
17,413,668
|
7,349,664
|
||||||
Cash and cash equivalents - beginning of period
|
10,757,461
|
10,360,721
|
||||||
Cash and cash equivalents - end of period
|
$
|
28,171,129
|
$
|
17,710,385
|
||||
Supplemental disclosures of cash flow information:
|
||||||||
Cash paid for interest
|
$
|
27,795
|
$
|
49,577
|
· | the timing of revenue recognition; |
· | allocation of purchase price in the business combination; |
· | 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; |
· | contract costs, losses, and reserves; |
· | warranty obligations; |
· | income tax valuation allowances; |
· | stock-based compensation; and |
· | valuation of equity instruments and warrants. |
December 31, 2015
|
June 30, 2015
|
|||||||
Current
|
$
|
41,153
|
$
|
4,291
|
||||
30-60 days
|
18,811
|
-
|
||||||
60-90 days
|
23,157
|
3,555
|
||||||
Over 90 days
|
2,587
|
105,248
|
||||||
Total
|
$
|
85,708
|
$
|
113,093
|
Estimated Useful Lives
|
|
Manufacturing equipment
|
3 - 7 years
|
Office equipment
|
3 - 7 years
|
Building and improvements
|
7 - 40 years
|
December 31, 2015
|
June 30, 2015
|
|||||||
Beginning balance
|
$
|
176,967
|
$
|
731,910
|
||||
Accruals for warranties during the period
|
33,883
|
167,901
|
||||||
Settlements during the period
|
(219,222
|
)
|
(480,683
|
)
|
||||
Adjustments relating to preexisting warranties
|
122,199
|
(242,161
|
)
|
|||||
Ending balance
|
$
|
113,827
|
$
|
176,967
|
· | 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 first one-fourth (the "Series C-1 Preferred Stock") of the Purchased Preferred Shares only become convertible upon the receipt of final payment for five megawatts worth of solar projects that are purchased by SPI in accordance with the Supply Agreement (the "Projects"); |
· | The second one-fourth (the "Series C-2 Preferred Stock") only become convertible upon the receipt of final payment for an aggregate of 15 megawatts worth of Projects; |
· | The third one-fourth (the "Series C-3 Preferred Stock") only become convertible upon the receipt of final payment for an aggregate of 25 megawatts worth of Projects; and |
· | The last one fourth (the "Series C-4 Preferred Stock") only become convertible upon the receipt of final payment for an aggregate of 40 megawatts worth of Projects. |
· | 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, 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"). |
Three Months Ended December 31,
|
Six Months Ended December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Revenues
|
$
|
708,523
|
$
|
52,541
|
$
|
720,477
|
$
|
351,582
|
||||||||
Gross Profit (loss)
|
46,939
|
(47,409
|
)
|
20,928
|
(80,901
|
)
|
||||||||||
Income (loss) from operations
|
(313,756
|
)
|
(725,136
|
)
|
(692,410
|
)
|
(1,132,920
|
)
|
||||||||
Net Income (loss)
|
(298,967
|
)
|
(720,422
|
)
|
(656,620
|
)
|
(1,134,591
|
)
|
Project assets
|
$
|
151,522
|
||
Customer intangible assets
|
169,321
|
|||
Identifiable net assets
|
$
|
320,843
|
Identifiable net assets acquired
|
$
|
320,843
|
||
Less: Fair value of the consideration transferred
|
244,406
|
|||
Gain on bargain purchase
|
$
|
76,437
|
December 31, 2015
|
June 30, 2015
|
|||||||
Raw materials
|
$
|
2,618,786
|
$
|
1,125,251
|
||||
Work in progress
|
54,812
|
72,866
|
||||||
Total
|
$
|
2,673,598
|
$
|
1,198,117
|
December 31, 2015
|
June 30, 2015
|
|||||||
Land
|
$
|
217,000
|
$
|
217,000
|
||||
Building and improvements
|
3,532,375
|
3,532,375
|
||||||
Manufacturing equipment
|
3,937,513
|
3,965,750
|
||||||
Office equipment
|
410,838
|
407,191
|
||||||
Construction in process
|
-
|
35,700
|
||||||
Total, at cost
|
8,097,726
|
8,158,016
|
||||||
Less: accumulated depreciation
|
(4,303,308
|
)
|
(3,993,104
|
)
|
||||
Property, plant and equipment, net
|
$
|
3,794,418
|
$
|
4,164,912
|
December 31, 2015
|
June 30, 2015
|
|||||||
Bank loans and notes payable-current
|
$
|
328,744
|
$
|
324,626
|
||||
Bank loans and notes payable-long term
|
888,451
|
1,053,581
|
||||||
Total
|
$
|
1,217,195
|
$
|
1,378,207
|
December 31, 2015
|
June 30, 2015
|
|||||||
|
||||||||
Note payable to Wisconsin Econcomic Development Corporation 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 by a specified number of employees, and the interest rate is increased in certain cases for failure to meet this requirement.
|
$
|
669,960
|
$
|
804,550
|
||||
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 remaining principal and interest due at maturity on June 1, 2018; collateralized by the building and land.
|
547,235
|
573,657
|
||||||
$
|
1,217,195
|
$
|
1,378,207
|
2016
|
$
|
163,325
|
||
2017
|
332,957
|
|||
2018
|
720,913
|
|||
$
|
1,217,195
|
Six Months Ended December 31,
|
||||
2015
|
2014
|
|||
Expected life of option (years)
|
4
|
4
|
||
Risk-free interest rate
|
1.12 - 1.50%
|
1.08 - 1.42%
|
||
Assumed volatility
|
100.77 - 101.70%
|
100.97 - 103.90%
|
||
Expected dividend rate
|
0.00%
|
0.00%
|
||
Expected forfeiture rate
|
6.23 - 12.63%
|
5.00 - 6.32%
|
Number
of Options |
Weighted
Average Exercise Price |
Average
Remaining Contractual Life (in years) |
||||||||||
Balance at June 30, 2014
|
1,419,068
|
$
|
3.23
|
|||||||||
Options granted
|
423,000
|
0.85
|
||||||||||
Options forfeited
|
(264,290
|
)
|
3.22
|
|||||||||
Balance at June 30, 2015
|
1,577,778
|
2.60
|
5.74
|
|||||||||
Options granted
|
2,171,000
|
0.64
|
||||||||||
Options forfeited
|
(212,900
|
)
|
3.22
|
|||||||||
Balance at December 31, 2015
|
3,535,878
|
$
|
1.36
|
6.74
|
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 |
||||||||||||||||||||
$
|
0.45 to $1.00
|
2,465,550
|
7.47
|
$
|
0.64
|
171,049
|
6.33
|
$
|
0.68
|
|||||||||||||||||
$
|
1.01 to $2.50
|
732,078
|
6.26
|
1.51
|
221,248
|
5.64
|
1.80
|
|||||||||||||||||||
$
|
2.51 to $5.00
|
98,600
|
3.48
|
3.95
|
98,600
|
3.48
|
3.95
|
|||||||||||||||||||
$
|
5.01 to $7.50
|
224,650
|
2.21
|
6.48
|
224,650
|
2.21
|
6.48
|
|||||||||||||||||||
$
|
7.51 to $17.95
|
15,000
|
0.07
|
17.95
|
15,000
|
0.07
|
17.95
|
|||||||||||||||||||
Balance at December 31, 2015
|
3,535,878
|
6.74
|
$
|
1.36
|
730,547
|
4.34
|
$
|
3.60
|
Number
of Options |
Weighted
Average Grant Date Fair Value Per Share |
Average
Remaining Contractual Life (in years) |
|||||||
Balance at June 30, 2014
|
822,469
|
$
|
1.63
|
||||||
Options granted
|
423,000
|
0.85
|
|||||||
Options vested
|
(347,328
|
)
|
1.42
|
||||||
Options forfeited
|
(121,616
|
)
|
2.31
|
||||||
Balance at June 30, 2015
|
776,525
|
1.19
|
|||||||
Options granted
|
2,171,000
|
0.64
|
|||||||
Options vested
|
(37,362
|
)
|
1.29
|
||||||
Options forfeited
|
(104,832
|
)
|
0.87
|
||||||
Balance at December 31, 2015
|
2,805,331
|
$
|
0.77
|
7.37
|
Number of
Restricted Stock Units |
Weighted
Average Valuation Price Per Unit |
|||||||
Balance at June 30, 2014
|
1,346,813
|
$
|
1.87
|
|||||
RSUs granted
|
922,500
|
1.05
|
||||||
RSUs forfeited
|
(103,334
|
)
|
1.69
|
|||||
Shares issued
|
(229,944
|
)
|
0.80
|
|||||
Balance at June 30, 2015
|
1,936,035
|
1.53
|
||||||
RSUs granted
|
2,364,000
|
0.50
|
||||||
RSUs forfeited
|
-
|
-
|
||||||
Shares issued
|
(126,791
|
)
|
0.78
|
|||||
Balance at December 31, 2015
|
4,173,244
|
$
|
1.01
|
· | 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 14. |
· | 1,710,525 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 $3.0 million of preferred stock on September 27, 2013 described in Note 14. In March 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 were exercisable at $2.10 per share and expired in July 2015 issued as partial payment for services. |
· | 15,000 warrants are exercisable at $1.417 per share and expire in July 2016 issued as partial payment for services. |
· | 15,000 warrants are exercisable at $1.928 per share and expire in July 2017 issued as partial payment for services. |
· | 15,000 warrants are exercisable at $0.963 per share and expire in July 2018 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. In March 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. |
· | 6,300 warrants were exercisable at $5.00 per share and expired in July 2015 issued as partial payment for services. |
· | 224,375 warrants were exercisable at $5.20 per share and expired in September 2015 issued to certain purchasers of Company shares in March 2010. |
· | 71,667 warrants were exercisable at $6.65 per share and expired in August 2015 issued to certain purchasers of Company shares in August 2009. |
Number of
Warrants |
Weighted
Average Exercise Price Per Share |
|||||||
Balance at June 30, 2014
|
2,933,752
|
$
|
1.88
|
|||||
Warrants granted
|
-
|
-
|
||||||
Warrants expired
|
(5,800
|
)
|
5.00
|
|||||
Warrants exercised
|
-
|
-
|
||||||
Balance at June 30, 2015
|
2,927,952
|
1.88
|
||||||
Warrants granted
|
45,000
|
1.44
|
||||||
Warrants expired
|
(317,342
|
)
|
5.38
|
|||||
Warrants exercised
|
-
|
-
|
||||||
Balance at December 31, 2015
|
2,655,610
|
$
|
1.45
|
As of December 31,
|
||||||||
2015
|
2014
|
|||||||
Stock options and restricted stock units
|
7,709,122
|
3,776,751
|
||||||
Stock warrants
|
2,655,610
|
2,933,752
|
||||||
Series B preferred shares
|
3,023,562
|
3,066,710
|
||||||
Total
|
13,388,294
|
9,777,213
|
2016
|
$
|
48,147
|
||
2017
|
44,098
|
|||
2018
|
6,000
|
|||
$
|
98,245
|
Six Months Ended December 31,
|
||||||||
2015
|
2014
|
|||||||
Current
|
$
|
(640
|
)
|
$
|
-
|
|||
Deferred
|
-
|
-
|
||||||
Provision (benefit) for income taxes
|
$
|
(640
|
)
|
$
|
-
|
As of December 31,
|
||||
2015
|
2014
|
|||
Income tax expense/(benefit) computed at the U.S. federal statutory rate
|
-34%
|
-34%
|
||
Change in valuation allowance
|
34%
|
34%
|
||
Total
|
0%
|
0%
|
December 31, 2015
|
June 30, 2015
|
|||||||
Federal net operating loss carryforwards
|
$
|
14,783,958
|
$
|
11,780,604
|
||||
Federal - other
|
2,392,460
|
2,783,304
|
||||||
Wisconsin net operating loss carryforwards
|
2,346,997
|
1,748,976
|
||||||
Australia net operating loss carryforwards
|
1,283,031
|
1,497,779
|
||||||
Deferred income tax asset valuation allowance
|
(20,806,446
|
)
|
(17,810,663
|
)
|
||||
Total deferred income tax assets
|
$
|
-
|
$
|
-
|
December 31, 2015
|
June 30, 2015
|
|||||||
Beginning balance
|
$
|
-
|
$
|
196,583
|
||||
Lapses of statutes of limitations
|
-
|
(161,344
|
)
|
|||||
Effect of foreign currency translation
|
-
|
(35,239
|
)
|
|||||
Ending balance
|
$
|
-
|
$
|
-
|
· | We have incurred losses since our inception in 1998 and anticipate incurring continuing losses. |
· | We may require a substantial amount of additional funds to finance our capital requirements and the growth of our business, and we may not be able to raise a sufficient amount of funds, or be able to do so on terms favorable to us and our stockholders, or at all. |
· | Our stock price could be volatile and our trading volume may fluctuate substantially. |
· | SPI could sell or transfer a substantial number of shares of our common stock, which could depress the price of our securities or result in a change in control of the Company. |
· | Our industry is highly competitive and we may be unable to successfully compete. |
· | Our ability to achieve significant revenue growth will be dependent on the successful commercialization of our new products, including our Agile Hybrid Storage System and Matrix Energy Management System. |
· | To achieve profitability, we will need to lower our costs and increase our margins, which we may not be able to do. |
· | If our products do not perform as planned, we could experience increased costs, lower margins and harm to our reputation. |
· | We need to continue to improve the performance of our products to meet future requirements and competitive pressures. |
· | We must build quality products to ensure acceptance of our products. |
· | To succeed, we will need to rapidly grow and we may not be successful in managing this rapid growth. |
· | Our relationships with our strategic partners may not be successful, and we may not be successful in establishing additional partnerships, which could adversely affect our ability to commercialize our products and services. |
· | We expect that a significant portion of our sales will be to a single customer. |
· | We depend on sole and limited source suppliers and outsource selected component manufacturing, and shortages or delay of supplies of component parts may adversely affect our operating results until alternate sources can be developed. |
· | We have no experience manufacturing our products on a large-scale basis and may be unable to do so at our manufacturing facilities. |
· | We are subject to risks relating to product concentration and lack of revenue diversification. |
· | SPI has significant influence over key decision making and may ultimately acquire complete control of the Company. |
· | Our China joint venture could be adversely affected by the laws and regulations of the Chinese government, our lack of decision-making authority and disputes between us and the Joint Venture. |
· | Business practices in Asia may entail greater risk and dependence upon the personal relationships of senior management than is common in North America, and therefore some of our agreements with other parties in China and South Korea could be difficult or impossible to enforce. |
· | Our success depends on our ability to retain our managerial personnel and to attract additional personnel. |
· | We market and sell, and plan to market and sell, our products in numerous international markets. If we are unable to manage our international operations effectively, our business, financial condition and results of operations could be adversely affected. |
· | Our sales cycle is lengthy and variable, which makes it difficult for us to forecast revenue and other operating results. |
· | Our increased emphasis on larger and more complex system solutions and customer concentration may adversely affect our ability to accurately predict the timing of revenues and to meet short-term expectations of operating results. |
· | We recently entered into our first power purchase agreement ("PPA") which represents a new business for us. We have very limited experience in the PPA business, which is very complex, and there can be no assurance that we will be able to successfully develop such business or secure the financing necessary to successfully develop such business. |
· | We expect to rely on third-party suppliers and contractors when developing and constructing systems for our PPA business. |
· | Businesses and consumers might not adopt alternative energy solutions as a means for obtaining their electricity and power needs, and therefore our revenues may not increase, and we may be unable to achieve and then sustain profitability. |
· | Our business depends in part on the regulatory treatment of third-party owned solar energy systems. |
· | The success of our business depends on our ability to develop and protect our intellectual property rights, which could be expensive. |
· | We may be subject to claims that we infringe the intellectual property rights of others, and unfavorable outcomes could harm our business. |
· | We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders and reduce our financial resources. |
· | We have never paid dividends and do not intend to do so. |
· | $151,606 increase in costs of product sales principally due to a $181,000 increase in warranty expenses and additional product shipments, partially offset by a $161,000 decrease in our reserve for excess and obsolete inventory as a result of estimated future forecasts of demand for inventory on hand compared to prior year; |
· | $22,038 increase in costs of engineering and development due to timing of costs incurred under the Lotte R&D Agreement for the three months ended December 31, 2015 compared to the three months ended December 31, 2014; |
· | $534,551 increase in advanced engineering and development expenses due to an additional $371,000 of expense for contract employees and $136,000 of additional expenses related to wages and benefits resulting from increased headcount. Expenditures on contract employees and other related costs are for certain engineering projects. These engineering projects are nearing completion and should be finalized by the end of the fiscal year; |
· | $583,744 increase in selling, general, and administrative expenses due to $236,000 of additional legal fees incurred during the period, and $200,000 of expenses incurred by Holu Energy during the current period primarily for wages and benefits, and $151,000 of additional expenses related to wages and benefits resulting from increased headcount; and |
· | $21,892 increase in depreciation and amortization expense as a result of additional depreciation expense recognized on new fixed assets capitalized during fiscal year 2015 as well as $8,447 of customer intangible asset amortization expense. |
· | $203,038 decrease in costs of product sales principally due to a $341,000 decrease in our reserve for excess and obsolete inventory as a result of estimated future forecasts of demand for inventory on hand, as well as decreased product sales compared to prior year, partially offset by $206,000 of additional warranty charges; |
· | $32,978 decrease in costs of engineering and development due to timing of costs incurred under the Lotte R&D Agreement for the six months ended December 31, 2015 compared to the six months ended December 31, 2014; |
· | $913,256 increase in advanced engineering and development expenses due to an additional $662,000 of expense for contract employees, $135,000 of additional expenses related to wages and benefits resulting from increased headcount, and a $125,000 increase in material purchases for R&D projects. Expenditures on contract employees and other related costs are for certain engineering projects. These engineering projects are nearing completion and should be finalized by the end of the fiscal year; |
· | $751,165 increase in selling, general, and administrative expenses due to $396,000 of additional expenses related to wages and benefits resulting from increased headcount, $252,000 of expenses incurred by Holu Energy during the current period primarily for wages and benefits, and $125,000 of severance expense incurred in connection with the termination of employment with the former CEO; and |
· | $45,966 increase in depreciation and amortization expense as a result of additional depreciation expense recognized on new fixed assets capitalized during fiscal year 2015 as well as $14,447 of customer intangible asset amortization expense. |
· | remain in operation; |
· | execute our growth plan; |
· | take advantage of future opportunities; or |
· | respond to customers and competition. |
Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
· | Neither we nor any person acting on our behalf solicited any offer to buy nor sell securities by any form of general solicitation or advertising. |
· | At the time of the issuance, the service provider was an accredited investor, as defined in Rule 501(a) of the Securities Act. |
· | The service providers had access to information regarding the Company and were knowledgeable about us and our business affairs. |
|
ENSYNC, INC.
By:
/s/ Bradley L. Hansen
Name: Bradley L. Hansen
Title: Chief Executive Officer
and President and Director
(Principal Executive Officer)
February 16, 2016
By:
/s/ James F. Schott
Name: James F. Schott
Title: Chief Financial Officer
(Principal Financial Officer)
February 16, 2016
|
Exhibit
No.
|
Description
|
Incorporated by Reference to
|
|
3.1
|
Articles of Incorporation of EnSync, Inc., as amended
|
Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K filed on September 28, 2015
|
|
Articles of Amendment to Articles of Incorporation of EnSync, Inc.
|
|||
3.3
|
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
|
|
3.4
|
Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock
|
Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on July 14, 2015
|
|
3.5
|
Amended and Restated By-laws of EnSync, Inc. (as of November 4, 2009)
|
Incorporated by reference to Exhibit 3.4 to the Company's Annual Report on Form 10-K filed on September 28, 2015
|
|
4.1
|
Form of Warrant issued to Solar Power, Inc.
|
Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on April 17, 2015
|
|
Amendment No. 3 of the EnSync, Inc. 2010 Omnibus Long-Term Incentive Plan
|
|||
Amendment No. 2 of the EnSync, Inc. 2012 Non-Employee Director Equity Compensation Plan
|
|||
EnSync, Inc. Director Compensation Policy
|
|||
Employment Agreement by and between James F. Schott and the Company, dated October 20, 2015
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Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Certification of Principal Financial pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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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
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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
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Class
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Number of Shares Authorized
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Par Value Per Share
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Common Stock
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Three Hundred Million (300,000,000) |
One Cent ($.01)
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Preferred Stock
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Ten Million (10,000,000)
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One Cent ($.01) |
ENSYNC, INC.
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By
/s/ James Schott
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(Signature)
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Name: James Schott
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Title: Chief Financial Officer
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(i) | An annual equity retainer in the amount of $72,000, to be awarded in accordance with clause (v) below. |
(ii) | An additional annual retainer in the amount of $24,000, payable in cash quarterly in arrears. |
(iii) | In addition, an annual Chairman's retainer in the following amounts, payable in cash quarterly in arrears: $50,000 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. |
(iv) | 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. |
(v) | The annual equity 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 and Mr. Stern'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 and Mr. Stern'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. |
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s/ James F. Schott
James F. Schott |
ENSYNC, INC.
By:
/s/ Bradley Hansen
Bradley Hansen
President & Chief Executive Officer
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