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ZBB Energy Corporation Reports Third Quarter Fiscal Year 2014 Break-Even Earnings per Share

MILWAUKEE, WI -- (Marketwired) -- 05/15/14 -- ZBB Energy Corporation (NYSE MKT: ZBB), a leading developer of intelligent, renewable energy power platforms and hybrid vehicle control systems, today announced its financial results for its third fiscal quarter ended March 31, 2014.

Third Quarter Highlights

During the third quarter of fiscal year 2014, the Company's major accomplishments included:

  • Completed a secondary offering of 6,325,000 shares of common stock at $2.25 per share for net cash proceeds of $13.1 million.
  • Achieved the initial milestone of the joint development agreement with Lotte Chemical, and received $3 million in one-time upfront license fees for the quarter.
  • Tested and shipped equipment to Ergon Energy in Australia. Ergon has successfully completed their lab testing and will place the equipment in the field over the coming weeks as part of their field trial to determine suitability.

Subsequent to the end of the third quarter of fiscal year 2014, the Company:

  • Hired a sales manager for the state of Hawaii.
  • Advanced to the RFQ stage for the Imperial Irrigation District's 40-megawatt energy storage project.

"The completion of our secondary offering and the initiation of the Lotte Chemical project strengthened our balance sheet this quarter and enhanced our financial capacity to more aggressively pursue the multiple sales opportunities in our markets," said Eric C. Apfelbach, President and Chief Executive Officer. "To prepare for these opportunities, we are actively working to add staff in our sales and technical areas, including our recent hire of a sales manager for Hawaii."

"Additionally, ZBB and Lotte are working towards an agreement that would enable Lotte to purchase from ZBB the "chassis" frame, internal componentry and power electronics for ZBB EnerStore® flow batteries, whereby Lotte will source the electrolyte and manufacture the stacks to be placed in the chassis frame provided by ZBB. This combined global manufacturing strategy will give us the lowest possible costs and enable us to ramp quickly to meet the large demand that is being indicated by the RFQ activity."

"We believe our products are the right fit for the multi-billion dollar energy storage proposals in California, New York, Province of Ontario and South Korea." continued Mr. Apfelbach. "We expect additional energy storage proposals going forward, including in China, which we believe over time has the potential to be a $40 billion market opportunity."

Financial results for the three months ended March 31, 2014 as compared to the three months ended March 31, 2013 included:

  • Product sales decreased 59% to $822,318 from $2,019,191.
  • Engineering and development revenues increased 650% to $750,000 from $100,000.
  • License revenues were $3,000,000.
  • Product gross margin was 33.0% compared to 12.8% in the prior year quarter.
  • Net loss to common stockholders improved to $67,945 compared to $2,824,313.
  • Loss per share improved to ($0.00) from ($0.18).

Financial results for the nine month period ending March 31, 2014 compared to the nine months ended March 31, 2013:

  • Product sales decreased 58% to $2,652,896 from $6,372,336.
  • Engineering and development revenues increased 200% to $950,000 from $318,183.
  • Product gross margin was 36.0% compared to 13.4% in the prior year period.
  • Net loss to common stockholders improved to $4,901,204 compared to $8,790,560.
  • Loss per share improved to ($0.27) from ($0.57).

Financial Position

The Company's backlog as of March 31, 2014 was approximately $5.2 million. $3.25 million of our backlog relates to provisions of the Lotte Amended License and Research and Development Agreements. The Company ended the third quarter of fiscal 2014 with total assets of $23.5 million, including $13.4 million in cash and $583,000 in accounts receivable.

"I expect our order flow to remain uneven in the near-term. We will continue to work with our partners, including Lotte Chemical and Cummins Crosspoint, to extend our relationships and secure additional business. In addition, the recently announced plan by the U.S. Department of Energy to offer up to $4 billion in loan guarantees for renewable energy projects could rejuvenate interest and orders in the domestic market," Mr. Apfelbach concluded.

Conference call - May 15, 2014 - 4:30 p.m. Eastern Time (3:30 p.m. CT)

The Company will hold a conference call on Thursday, May 15, 2014 at 4:30 p.m. Eastern Time (3:30 p.m. Central Time) to discuss results for its third fiscal quarter ended March 31, 2014. To participate in the call, please dial 1-888-539-3612 for domestic callers and 1-719-457-0820 for international callers. The participant passcode is 3851779.

The call will be available for replay at 1-888-203-1112 for domestic callers, and 1-719-457-0820, for international callers. The replay passcode is 3851779. The conference call will also be available for replay via the investor relations section of the Company's website at www.zbbenergy.com.

                           ZBB ENERGY CORPORATION
              Condensed Consolidated Statements of Operations

                            Three months ended        Nine months ended
                                 March 31,                 March 31,
                         ------------------------  ------------------------
                             2014         2013         2014         2013
                         -----------  -----------  -----------  -----------
  Product sales          $   822,318  $ 2,019,191  $ 2,652,896  $ 6,372,336
  Engineering and
   development               750,000      100,000      950,000      318,183
  License                  3,000,000            -    3,000,000            -
                         -----------  -----------  -----------  -----------
    Total Revenues         4,572,318    2,119,191    6,602,896    6,690,519
                         -----------  -----------  -----------  -----------

Costs and Expenses
  Cost of product sales      546,904    1,761,762    1,698,762    5,519,360
  Cost of engineering
   and development            65,560       62,118      109,196      107,183
  Advanced engineering
   and development         1,095,589    1,293,147    3,400,318    3,828,686
  Selling, general, and
   administrative          2,667,569    1,439,235    5,221,065    4,731,209
  Depreciation and
   amortization              200,646      338,041      886,405    1,022,503
                         -----------  -----------  -----------  -----------
    Total Costs and
     Expenses              4,576,267    4,895,303   11,315,744   15,208,941

                         -----------  -----------  -----------  -----------
Income (Loss) from
 Operations                   (3,949)  (2,776,112)  (4,712,849)  (8,518,422)
                         -----------  -----------  -----------  -----------

Other Income (Expense)
  Equity in loss of
   investee company          (55,428)    (118,442)    (303,910)    (651,555)
  Interest income              1,435          913        2,944        1,896
  Interest expense           (27,153)     (40,829)    (124,668)    (134,039)
  Other income (expense)           -      (45,000)         896      (45,000)
                         -----------  -----------  -----------  -----------
    Total Other Income
     (Expense)               (81,146)    (203,358)    (424,738)    (828,698)

                         -----------  -----------  -----------  -----------
Income (Loss) before
 provision (benefit) for
 Income Taxes                (85,096)  (2,979,470)  (5,137,587)  (9,346,939)

Provision (benefit) for
 Income Taxes                (38,598)     (36,715)     (86,848)    (110,866)
                         -----------  -----------  -----------  -----------
  Net loss                   (46,497)  (2,942,755)  (5,050,739)  (9,236,074)
  Net loss attributable
   to noncontrolling
   interest                   55,428      118,442      303,910      445,514
                         -----------  -----------  -----------  -----------
Net Income (Loss)
 Attributable to ZBB
 Energy Corporation            8,931   (2,824,313)  (4,746,829)  (8,790,560)
                         -----------  -----------  -----------  -----------
Preferred Stock Dividend     (76,876)           -     (154,375)           -
                         -----------  -----------  -----------  -----------
Net Loss Attributable to
 Common Shareholders     $   (67,945) $(2,824,313) $(4,901,204) $(8,790,560)
                         -----------  -----------  -----------  -----------

Net Loss per share
  Basic and diluted      $     (0.00) $     (0.18) $     (0.27) $     (0.57)

Weighted average shares-
 basic and diluted        18,690,642   15,693,149   18,045,685   15,555,891

                           ZBB ENERGY CORPORATION
                   Condensed Consolidated Balance Sheets

                                                 March 31,
                                                (Unaudited)   June 30, 2013
                                               -------------  -------------
Current assets:
  Cash and cash equivalents                    $  13,393,266  $   1,096,621
  Restricted cash on deposit                          69,713         60,000
  Accounts receivable, net                           583,020        446,925
  Inventories                                      1,748,607      2,459,776
  Prepaid expenses and other current assets          261,323        224,542
  Refundable income tax credit                        93,976        137,228
                                               -------------  -------------
    Total current assets                          16,149,904      4,425,092
Long-term assets:
  Property, plant and equipment, net               4,526,730      5,179,707
  Investment in investee company                   2,000,219      2,304,122
  Intangible assets, net                                   -        411,073
  Goodwill                                           803,079        803,079
                                               -------------  -------------
    Total assets                               $  23,479,932  $  13,123,073
                                               =============  =============

Liabilities and Equity
Current liabilities:
  Bank loans and notes payable                 $     348,701  $     885,786
  Accounts payable                                   633,145        570,932
  Accrued expenses                                 1,461,447        785,532
  Customer deposits                                1,202,295      2,194,262
  Accrued compensation and benefits                  194,048        164,437
                                               -------------  -------------
    Total current liabilities                      3,839,635      4,600,949
Long-term liabilities:
  Bank loans and notes payable                     2,133,709      2,395,802
                                               -------------  -------------
    Total liabilities                              5,973,345      6,996,751
                                               -------------  -------------

  Series B redeemable convertible preferred
   stock ($0.01 par value, $1,000 face value)
   10,000,000 authorized, 2,750 and 0 shares
   issued and outstanding, preference in
   liquidation of $5,641,510 as of March 31,
   2014                                                   28              -
  Common stock ($0.01 par value); 150,000,000
   authorized, 25,257,700 and 17,707,341
   shares issued and outstanding as of March
   31, 2014 and June 30, 2013 respectively           960,891        885,389
  Additional paid-in capital                     101,823,820     85,464,055
  Accumulated deficit                            (85,679,653)   (80,932,824)
  Accumulated other comprehensive loss            (1,598,710)    (1,594,418)
                                               -------------  -------------
    Total ZBB Energy Corporation Equity           15,506,376      3,822,202
  Noncontrolling interest                          2,000,211      2,304,120
                                               -------------  -------------
    Total equity                                  17,506,587      6,126,322
                                               -------------  -------------
    Total liabilities and equity               $  23,479,932  $  13,123,073
                                               =============  =============

                           ZBB Energy Corporation
              Condensed Consolidated Statements of Cash Flows

                                                Nine months ended March 31,
                                                    2014           2013
                                               -------------  -------------
Cash flows from operating activities
Net loss                                       $  (5,050,739) $  (9,236,074)
Adjustments to reconcile net loss to net cash
 used in operating activities:
  Depreciation of property, plant and
   equipment                                         580,379        552,079
  Amortization of intangible assets                  411,073        549,532
  Stock-based compensation                           450,796        570,604
  Equity in loss of investee company                 303,910        651,555
  Amortization of discounts and debt issuance
   costs on notes payable                             14,566              -
  Purchase price adjustment                                -         45,000
Changes in assets and liabilities
  Accounts receivable                               (136,095)      (605,430)
  Inventories                                        823,670       (121,558)
  Prepaids and other current assets                  (51,346)         1,831
  Refundable income taxes                             43,253       (118,682)
  Accounts payable                                    62,213         48,340
  Accrued compensation and benefits                   29,610        (87,710)
  Accrued expenses                                   715,707       (417,946)
  Customer deposits                                 (991,967)      (174,644)
                                               -------------  -------------
Net cash used in operating activities             (2,794,971)    (8,343,103)
                                               -------------  -------------
Cash flows from investing activities
  Expenditures for property and equipment            (39,907)      (106,479)
  Investment in investee company                           -              -
  Deposits of restricted cash                         (9,713)       (60,000)
                                               -------------  -------------
Net cash used in investing activities                (49,620)      (166,479)
                                               -------------  -------------
Cash flows from financing activities
  Repayments of bank loans and notes payable        (843,262)      (877,312)
  Proceeds from issuance of preferred stock
   and warrants                                    3,000,000              -
  Preferred stock issuance costs                     (96,967)             -
  Proceeds from issuance of common stock          14,231,250      4,244,689
  Common stock issuance costs                     (1,149,786)      (177,606)
  Proceeds from noncontrolling interest                    -          5,500
                                               -------------  -------------
Net cash provided by financing activities         15,141,235      3,195,271
                                               -------------  -------------
Effect of exchange rate changes on cash and
 cash equivalents                                          -            776
                                               -------------  -------------
Net increase (decrease) in cash and cash
 equivalents                                      12,296,645     (5,313,535)
Cash and cash equivalents - beginning of
 period                                            1,096,621      7,823,217
                                               -------------  -------------

Cash and cash equivalents - end of period      $  13,393,266  $   2,509,683
                                               =============  =============

Cash paid for interest                         $     137,763  $     121,539
Cash received from foreign income tax credit         133,996              -

About ZBB Energy Corporation

ZBB Energy Corporation (NYSE MKT: ZBB) designs, develops, licenses and manufactures advanced energy storage and power electronics systems, as well as engineered custom and semi-custom products targeted at the growing global need for distributed renewable energy, energy efficiency, power quality, and grid modernization. ZBB's portfolio includes integrated power management platforms that combine advanced power and energy controls plus energy storage to optimize renewable energy sources and conventional power inputs for grid connected and off-grid applications. ZBB's innovative platforms solve a wide range of electrical system challenges in global markets for utility, governmental, commercial, industrial and residential customers. In addition, the platforms ensure optimal efficiencies today, while offering the flexibility to adapt and scale to future requirements. ZBB's corporate offices, engineering and development, and production facilities are located in Menomonee Falls, WI, USA with a research facility also located in Perth, Western Australia. ZBB has a joint venture with Meineng Energy, a provider of leading-edge energy storage systems and solutions to the greater China market. For more information, visit: www.zbbenergy.com.

Safe Harbor Statement

Certain statements made in this press release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended that are intended to be covered by the "safe harbor" created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as "believe," "expect," "may," "will," "should," "could," "seek," "intend," "plan," "estimate," "anticipate" or other comparable terms. Forward-looking statements in this press release may address the following subjects among others: statements regarding the sufficiency of our capital resources, expected operating losses, expected revenues, expected expenses and our expectations concerning our business strategy. Forward-looking statements involve inherent risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements, as a result of various factors including those risks and uncertainties described in the Risk Factors and in Management's Discussion and Analysis of Financial Condition and Results of Operations sections of our most recently filed Annual Report on Form 10-K and our subsequently filed Quarterly Reports on Form 10-Q. We urge you to consider those risks and uncertainties in evaluating our forward-looking statements. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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