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<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On August 30, 2011, the Company entered into agreements providing
for establishment of a joint venture to develop, produce, sell, distribute and service advanced storage batteries and power electronics
in China (the “Joint Venture”).  Joint Venture partners include ZBB PowerSav Holdings Limited (“Holdco”),
AnHui XinLong Electrical Co. and Wuhu Huarui Power Transmission and Transformation Engineering Co.  The Joint Venture
was established upon receipt of certain governmental approvals from China which were received in November 2011.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Joint Venture operates through a jointly-owned Chinese company
located in Wuhu City, Anhui Province named Anhui Meineng Store Energy Co., Ltd. (“Meineng Energy”).  Meineng
Energy intends to initially assemble and ultimately manufacture the Company’s products for sale in the power management industry
on an exclusive basis in mainland China and on a non-exclusive basis in Hong Kong and Taiwan.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s President and Chief Operating Officer (“President
and COO”) has served as the Chief Executive Officer of Meineng Energy since December 2011.  The President and COO
owns an indirect 6% equity interest in Meineng Energy.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In connection with the Joint Venture, on August 30, 2011 the Company
and certain of its subsidiaries entered into the following agreements:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">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</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
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<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Limited Liability Company Agreement of ZBB PowerSav Holdings Limited by and between ZBB Cayman Corporation and PowerSav New Energy Holdings Limited (the “Holdco Agreement”).</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In connection with the Joint Venture, upon establishment of Meineng
Energy, the Company and certain of its subsidiaries entered into the following agreements:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Management Services Agreement by and between Meineng Energy and Holdco (the “Management Services Agreement”);</font></td></tr>
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<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">License Agreement by and between Holdco and Meineng Energy (the “License Agreement”); and</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
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<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Research and Development Agreement by and between the Company and Meineng Energy (the “Research and Development Agreement”).</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Pursuant to the China JV Agreement, Meineng Energy was capitalized
with approximately $13.6 million of equity capital.  The Company’s only capital contributions to the Joint Venture
were the contribution of technology to Meineng Energy via the License Agreement and $200,000 in cash.  The Company’s
indirect interest in Meineng Energy equaled approximately 33%.  On August 12, 2014, Meineng Energy received a cash investment
of 20,000,000 RMB (approximately $3.2 million) from Wuhu Fuhai-Haoyan Venture Investment, L.P., a branch of Shenzhen Oriental Fortune
Capital Co., Ltd., for a post-closing equity position of 8%.  Required governmental approval was obtained in October
2014.  This investment capital will be used to fund ongoing operations and development of the China market, and provided
Meineng Energy a 250,000,000 RMB (approximately $42 million) post-closing valuation.  Following this investment, the
Company’s indirect investment in Meineng Energy equals approximately 30%.  The Company’s indirect gain as
a result of the investment was $775,537.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s investment in Meineng Energy was made through
Holdco.  Pursuant to the Holdco Agreement, the Company contributed to Holdco technology via a license agreement with
an agreed upon value of approximately $4.1 million and $200,000 in cash in exchange for a 60% equity interest and PowerSav agreed
to contribute to Holdco $3.3 million in cash in exchange for a 40% equity interest.  The initial capital contributions
(consisting of the Company’s technology contribution and one half of required cash contributions) were made in December 2011.  The
subsequent capital contributions (consisting of one half of the required cash contribution) were made on May 16, 2012.  For
financial reporting purposes, Holdco’s assets and liabilities are consolidated with those of the Company and PowerSav’s
40% interest in Holdco is included in the Company’s condensed consolidated financial statements as a noncontrolling interest.  For
the three and six months ended December 31, 2014, Meineng Energy had a net loss of $720,422 and $1,134,591, respectively.  For
the three and six months ended December 31, 2013, Meineng Energy had a net loss of $603,130 and $1,147,617, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s basis in the technology contributed to Holdco
is $0 due to US GAAP requirements related to research and development expenditures.  The difference of approximately
$4.1 million in the Company’s basis in this technology and the valuation of the technology by Meineng Energy is accounted
for by the Company through the elimination of the amortization expense recognized by Meineng Energy related to the technology.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company has the right to appoint a majority of the members of
the Board of Directors of Hong Kong Holdco and Hong Kong Holdco has the right to appoint a majority of the members of the Board
of Directors of Meineng Energy.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Pursuant to the Management Services Agreement, Holdco will provide
certain management services to Meineng Energy in exchange for a management services fee equal to five percent of Meineng Energy’s
net sales for the five year period beginning on the first day of the first quarter in which the JV Company achieves operational
breakeven results and three percent of Meineng Energy’s net sales for the subsequent three years, provided the payment of
such fees will terminate upon Meineng Energy completing an initial public offering on a nationally recognized securities exchange.  To
date, no management service fee revenues have been recognized by Holdco.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Pursuant to the Amended License Agreement dated July 1, 2014, Holdco
granted to Meineng Energy (1) an exclusive royalty-free license to manufacture and distribute the Company’s ZBB EnerStore,
zinc bromide flow battery, version three (V3) (50KW) and ZBB EnerSection, power and energy control center (up to 250KW) (the “Products”)
in mainland China in the power supply management industry and (2) a non-exclusive royalty-free license to manufacture and distribute
the Products in Hong Kong and Taiwan in the power supply management industry.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Pursuant to the Research and Development Agreement, Meineng Energy
may request the Company to provide research and development services upon commercially reasonable terms and conditions.  Meineng
Energy would pay the Company’s fully-loaded costs and expenses incurred in providing such services.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company had product sales of $58,099 to Meineng Energy during
the three and six months ended December 31, 2014, respectively.  The Company had product sales of $495,984 and $540,462
to Meineng Energy during the three and six months ended December 31, 2013, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The operating results for Meineng Energy for the three and six months
ended December 31, 2014 and December 31, 2013 are summarized as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Three months ended December 31,</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Six months ended December 31,</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2013</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2013</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%"><font style="font-size: 8pt">Revenues</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">52,541</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">54,338</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">351,582</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">96,183</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Gross Profit (loss)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(47,409</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(23,759</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(80,901</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(52,746</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Income (loss) from operations</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(725,136</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(631,463</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(1,132,920</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(1,215,059</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Net Income (loss)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(720,422</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(603,130</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(1,134,591</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(1,147,617</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The accompanying condensed consolidated financial statements have
been prepared on the basis of a going concern which contemplates that the Company will be able to realize assets and discharge
its liabilities in the normal course of business.  Accordingly, they do not give effect to any adjustments that would
be necessary should the Company be required to liquidate its assets.  The Company incurred a net loss of $6,015,935 attributable
to ZBB Energy Corporation for six months ended December 31, 2014, and as of December 31, 2014 has an accumulated deficit of $95,804,176
and total ZBB Energy Corporation equity of $20,398,509.  The ability of the Company to settle its total liabilities of
$5,436,270 and to continue as a going concern is dependent upon increasing revenues and achieving profitability.  The
accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these
uncertainties.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">We believe that cash and cash equivalents on hand at December 31,
2014, expected collections on the Lotte R&D Agreement and other potential sources of cash, will be sufficient to fund our current
operations through the third quarter of fiscal year 2016.  However, there can be no assurances that unforeseen circumstances
will not require the Company to raise additional investment capital to fund its operations.  If the Company is unable
to obtain additional required funding, the Company’s financial condition and results of operations may be materially adversely
affected and the Company may not be able to continue operations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Inventories are comprised of the following as of:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Raw materials</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,245,571</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,054,197</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Work in progress</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">25,636</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">298,773</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Finished goods</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">180,091</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,451,298</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,352,970</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On September 23, 2014, the Company was issued a $150,000 convertible
promissory note from an unrelated party.  The note accrues interest at 8% per annum on the outstanding principal amount.  The
entire outstanding principal balance and accrued interest is due and payable on December 15, 2015, the maturity date of the note.  If
at the maturity date the note and accrued interest has not been paid in full, the Company may convert the principal and interest
outstanding into shares of its convertible preferred stock at the then-current valuation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Property, plant, and equipment are comprised of the following as
of:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Land</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">217,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">217,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Building and improvements</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,532,375</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,520,872</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Manufacturing equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,750,502</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,710,127</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Office equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">424,718</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">399,583</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Construction in process</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">230,107</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Total, at cost</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">8,154,702</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7,847,582</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Less: accumulated depreciation</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(3,782,909</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(3,465,379</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Property, plant and equipment, net</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">4,371,793</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">4,382,203</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company recorded depreciation expense of $159,174 and $313,690
for the three and six months ended December 31, 2014, respectively.  The Company recorded depreciation expense of $158,657
and $421,760 for the three and six months ended December 31, 2013, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company acquired ZBB Technologies, Inc., a former wholly-owned
subsidiary, through a series of transactions in March 1996.  ZBB Technologies Inc. was subsequently merged with and into
ZBB Energy Corporation on January 1, 2012.  The goodwill amount of $1.134 million, the difference between the price paid
for ZBB Technologies, Inc. and the net assets of the acquisition, amortized through fiscal 2002, resulted in the net goodwill amount
of $803,079 as of December 31, 2014 and June 30, 2014.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s debt consisted of the following as of:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Bank loans and notes payable-current</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">356,065</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">351,142</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Bank loans and notes payable-long term</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">1,866,222</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">2,045,127</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,222,287</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,396,269</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Bank loans and notes payable consisted of the following as of:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Note payable to Wisconsin Econcomic Development Corporation payable
in</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   monthly installments of $23,685,
including interest at 2%, with the final</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   payment due May 1, 2018; collateralized
by equipment purchased with the loan</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   proceeds and substantially
all assets of the Company not otherwise</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   collateralized.  The
Company is required to maintain and increase a specified</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   number of employees, and the
interest rate is increased in certain cases for</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   failure to meet this requirement.  See
note (a) below.</p></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">937,861</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,069,793</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Bank loan payable in fixed monthly payments of $6,800 of principal
and interest</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   at a rate of 0.25% below prime,
as defined, subject to a floor of 5% with any</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   principal due at maturity on
June 1, 2018; collateralized by the building and land.</p></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">599,655</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">624,760</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Note payable in fixed monthly installments of $6,610 of principal
and interest at</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   a rate of 5.5% with any principal
due at maturity on May 1, 2028; collateralized</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   by the building and land.</p></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">684,771</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">701,716</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,222,287</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,396,269</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; text-align: right"><font style="font-size: 8pt">(a)  </font></td>
<td><font style="font-size: 8pt">As of April 2013, the Wisconsin Economic Development Corporation granted the Company a 12-month deferral of the required installment payments of $22,800.  On March 1, 2014, fifty equal monthly installments of $23,685 commenced through April 1, 2018 with the final installment due on May 1, 2018.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Maximum aggregate annual principal payments for fiscal periods subsequent
to December 31, 2014 are as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">176,811</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">361,042</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">2017</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">371,383</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">2018</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">761,037</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">2019</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">42,917</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">2020 and thereafter</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">509,097</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,222,287</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company previously adopted the 2002 Stock Option Plan (“2002
Plan”) in which a stock option committee could grant up to 1,000,000 shares to key employees or non-employee members of the
board of directors.  The options vest in accordance with specific terms and conditions contained in an employment agreement.  If
vesting terms and conditions are not defined in an employment agreement, then the options vest as determined by the stock option
committee.  If the vesting period is not defined in an employment agreement or by the stock option committee, then the
options immediately vest in full upon death, disability, or termination of employment.  Vested options expire upon the
earlier of either the five year anniversary of the vesting date or termination of employment.  No shares are available
to be issued under the 2002 Plan.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company also previously adopted the 2007 Equity Incentive Plan
(“2007 Plan”) that authorized the board of directors or a committee to grant up to 300,000 shares to employees and
directors of the Company.  Unless defined in an employment agreement or otherwise determined, the options vest ratably
over a three-year period.  Options expire 10 years after the date of grant.  No shares are available to be
issued under the 2007 Plan.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In November 2010, the Company adopted the 2010 Omnibus Long-Term
Incentive Plan (“Omnibus Plan”) which authorizes a committee of the board of directors to grant stock options, stock
appreciation rights, restricted stock, restricted stock units, unrestricted stock, other stock-based awards and cash awards.  The
Omnibus Plan authorized up to 800,000 shares plus shares of Common Stock underlying any outstanding stock option of other awards
granted by any predecessor employee stock plan of the Company that is forfeited, terminated, or cancelled without issuance of shares,
to employees, officers, non-employee members of the board of directors, consultants, and advisors.  Unless otherwise
determined, options vest ratably over a three-year period and expire 8 years after the date of grant.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">At the annual meeting of shareholders held on November 7, 2012 the
Company’s shareholders approved an amendment of the Omnibus Plan which increased the number of shares of the Company’s
common stock available for issuance pursuant to awards under the Omnibus Plan by 900,000 shares and the creation of the 2012 Non-Employee
Director Equity Compensation Plan (“2012 Director Equity Plan”), under which the Company may issue up to 700,000 RSU
awards and other equity awards to our non-employee directors pursuant to the Company’s director compensation policy.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">At the annual meeting of shareholders held on November 18, 2014,
the Company’s shareholders approved an amendment of the Omnibus Plan which increased the number of shares of the Company’s
common stock available for issuance under the Omnibus Plan by 1,250,000.  The shareholders also approved an amendment
of the 2012 Director Equity Plan which increased the number of shares of the Company’s common stock available for issuance
under the 2012 Director Equity Plan by 1,000,000.  As of December 31, 2014, there are a total of 1,603,244 shares available
to be issued under the Omnibus Plan and 456,804 shares available to be issued under the 2012 Director Equity Plan.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In aggregate for all plans, at December 31, 2014 there were outstanding
a total of 1,681,133 options and 2,095,618 restricted stock units (“RSUs”).</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The fair value of each option granted is estimated on the date of
grant using the Black-Scholes option-pricing method.  The Company uses historical data to estimate the expected price
volatility, the expected option life and the expected forfeiture rate.  The Company has not made any dividend payments
nor does it have plans to pay dividends in the foreseeable future.  The following assumptions were used to estimate the
fair value of options granted during the six months ended December 31, 2014 and December 31, 2013 using the Black-Scholes option-pricing
model:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 80%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="3" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Six months ended December 31,</font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 46%"> </td>
<td style="width: 3%"> </td>
<td style="width: 25%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td>
<td style="width: 3%"> </td>
<td style="width: 23%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2013</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Expected life of option (years)</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">1.08 - 1.42%</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">0.95 - 1.20%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Assumed volatility</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">100.97 - 103.90%</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">94.35 - 154.68%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Expected dividend rate</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">0%</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">0%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Expected forfeiture rate</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">5.00 - 6.32%</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">5.16 - 5.62%</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Time-vested and performance-based stock awards, including stock options
and RSUs are accounted for at fair value at date of grant.  Compensation expense is recognized over the requisite service
and performance periods.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">During the three and six months ended December 31, 2014, the Company’s
results of operations include compensation expense for stock options and RSUs granted under its various equity incentive plans.  The
amount recognized in the financial statements related to stock-based compensation was $477,420 and $853,811, based on the amortized
grant date fair value of options and RSUs during the three and six months ended December 31, 2014, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Information with respect to stock option activity is as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">of</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Options</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Remaining</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Contractual Life</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">(in years)</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Balance at June 30, 2013</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">785,284</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">5.78</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   Options granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">699,850</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.33</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Options forfeited</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(66,066</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">13.23</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="padding-bottom: 1.5pt"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 67%"><font style="font-size: 8pt">Balance at June 30, 2014</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,419,068</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">3.23</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">6.09</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   Options granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">418,000</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.85</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Options forfeited</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(155,935</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">3.64</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Balance at December 31, 2014</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,681,133</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">2.60</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td> </td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">6.19</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The following table summarizes information relating to the stock
options outstanding as of December 31, 2014:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td colspan="2" style="padding-bottom: 1.5pt"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="9" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Outstanding</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="9" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Exercisable</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td colspan="2" style="border-bottom: black 1.5pt solid"><font style="font-size: 8pt">Range of Exercise Prices</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">of</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Options</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Remaining</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Contractual Life</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">(in years)</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Price</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">of</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Options</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Remaining</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Contractual Life</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">(in years)</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Price</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td colspan="2"><font style="font-size: 8pt">$0.48 to $1.00</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">446,000</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 7.26</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.70</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">72,000</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 6.86</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.78</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td colspan="2"><font style="font-size: 8pt">$1.01 to $2.50</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">757,660</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 7.24</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.52</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">67,755</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 5.29</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.99</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td colspan="2"><font style="font-size: 8pt">$2.51 to $5.00</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">102,900</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 4.50</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3.95</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">92,374</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 4.44</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3.97</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td colspan="2"><font style="font-size: 8pt">$5.01 to $7.50</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">359,573</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 3.36</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6.23</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">331,573</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 3.30</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6.28</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">$7.51 to $17.95</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">15,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 8pt"> 1.07</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">17.95</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">15,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 8pt"> 1.07</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">17.95</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td colspan="2" style="padding-bottom: 3pt"><font style="font-size: 8pt">Balance at December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,681,133</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 6.19</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">2.60</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">578,702</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 4.10</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">5.03</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">During the six months ended December 31, 2014, options to purchase
418,000 shares were granted to employees exercisable at $0.48 to $1.67 per share based on various service-based and performance-based
vesting terms from July 2014 through December 2017 and exercisable at various dates through December 2022.  During the
six months ended December 31, 2013, options to purchase 245,200 shares were granted to employees exercisable at $0.78 to $1.90
per share based on service based vesting terms from July 2013 through December 2016 and exercisable at various dates through December
2021.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The aggregate intrinsic value of outstanding options totaled $3,600
and was based on the Company’s adjusted closing stock price of $0.51 as of December 31, 2014.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">A summary of the status of unvested employee stock options as of
December 31, 2014 and June 30, 2014 and changes during the six months and year then ended is presented below:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">of </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Options</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Grant Date</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Fair Value</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Per Share</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; vertical-align: middle">
<p style="font: 8pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Remaining</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Contractual Life</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">(in years)</p></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 48%"><font style="font-size: 8pt">Balance at June 30, 2013</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%; text-align: right"><font style="font-size: 8pt">262,668</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 2%"><font style="font-size: 8pt">$</font></td>
<td style="width: 15%; text-align: right"><font style="font-size: 8pt">3.44</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 19%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   Options granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">699,850</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.33</font></td>
<td nowrap="nowrap"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   Options vested</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(127,586</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3.55</font></td>
<td nowrap="nowrap"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Options forfeited</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(12,463</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">3.38</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Balance at June 30, 2014</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">822,469</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.63</font></td>
<td nowrap="nowrap"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   Options granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">418,000</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.85</font></td>
<td nowrap="nowrap"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   Options vested</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(111,186</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.45</font></td>
<td nowrap="nowrap"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Options forfeited</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(26,852</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">2.31</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Balance at December 31, 2014</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,102,431</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">1.33</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: center"><font style="font-size: 8pt">7.27</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Total fair value of options granted for the six months ended December
31, 2014 and December 31, 2013 was $248,402 and $167,501, respectively.  At December 31, 2014, there was $527,855 in
unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period
of 1.6 years.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">As of December 31, 2014 there were 808,542 unvested RSUs outstanding
which will vest through January 15, 2016 and $461,263 in unrecognized compensation cost related to unvested RSUs which are expected
to be recognized through January 15, 2016.  Generally, shares of common stock related to vested RSUs are to be issued
six months after the holder’s separation from service with the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The table below summarizes the activity of the restricted stock units
for the six months and year ended December 31, 2014 and June 30, 2014:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number of</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Restricted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Stock Units</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Valuation</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Price Per Unit</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Balance at June 30, 2013</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,131,687</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">2.30</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   RSUs granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,660,695</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.99</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   RSUs forfeited</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(1,200,000</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.10</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Shares issued</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(245,570</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">1.61</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Balance at June 30, 2014</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,346,812</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.87</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   RSUs granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">922,500</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.05</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   RSUs forfeited</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Shares issued</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(173,694</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">0.84</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Balance at December 31, 2014</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,095,618</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">1.37</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">At December 31, 2014, the following warrants to purchase the Company’s
common stock were outstanding and exercisable:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"> </td>
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">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.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"> </td>
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">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 11.  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.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"> </td>
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">15,000 warrants exercisable at $2.10 per share which expire in July 2015 issued as partial payment for services.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"> </td>
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">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.  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.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"> </td>
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">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.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"> </td>
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">12,100 warrants exercisable at $5.00 per share which expire March 2015 through July 2015 issued as partial payment for services.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"> </td>
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">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.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"> </td>
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">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.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The table below summarizes warrant balances and activity for the
six month period and year ended December 31, 2014 and June 30, 2014:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number of</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Warrants</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Per Share</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Balance at June 30, 2013</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,421,806</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">3.15</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   Warrants granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,239,474</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.95</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   Warrants expired</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(8,000</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2.80</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Warrants exercised</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(1,719,528</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">1.18</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Balance at June 30, 2014</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,933,752</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.88</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   Warrants granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   Warrants expired</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Warrants exercised</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Balance at December 31, 2014</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,933,752</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">1.88</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On August 27, 2014, the Company completed an underwritten public
offering of its common stock at a price to the public of $1.12 per share.  The Company sold a total of 13,248,000 shares
of its common stock in the offering for aggregate proceeds of approximately $14.8 million.  The Company received approximately
$13.7 million of net proceeds from the offering, after deducting the underwriting discount and expenses.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On March 13, 2013, the Company entered into a Common Stock Purchase
Agreement (“Purchase Agreement”) with Aspire Capital Fund, LLC, an Illinois limited liability company (“Aspire
Capital”), which provided that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital
was committed to purchase up to an aggregate of $10 million of shares of the Company’s common stock over the two-year term
of the Purchase Agreement.  On August 18, 2014, the Company provided notice to Aspire Capital electing to terminate the
Purchase Agreement.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On March 19, 2014, the Company completed an underwritten public offering
of its common stock at a price to the public of $2.25 per share.  The Company sold a total of 6,325,000 shares of its
common stock in the offering for aggregate proceeds of approximately $14.2 million.  The Company received approximately
$13.0 million of net proceeds from the offering, after deducting the underwriting discount and expenses.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On October 31, 2013, the Company effected a reverse stock split of
its common stock by a ratio of 1-for-5 (the “Reverse Split”).  As a result of the Reverse Split every five
outstanding shares of Common Stock became one share of common stock.  No fractional shares were issued in connection
with the Reverse Split.  A shareholder who would otherwise have been entitled to receive a fractional share of common
stock received a cash payment equal to the closing sales price of the Company’s Common Stock on October 31, 2013 as reported
on the NYSE MKT times the amount of the fractional share.  The Reverse Split did not change the number of shares of common
or preferred stock that the Company is authorized to issue, or the par value of the Company’s common or preferred stock.  The
Reverse Split resulted in a proportionate adjustment to the per share exercise price and the number of shares of common stock issuable
upon the exercise of outstanding warrants and stock options, as well as the number of shares of common stock eligible for issuance
under the Omnibus Plan and the 2012 Director Equity Plan.  All of the information in these financial statements has been
presented to reflect the impact of the 1-for-5 Reverse Split on a retroactive basis.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On September 26, 2013 the Company entered into a Securities Purchase
Agreement with certain investors providing for the sale of 3,000 shares of Series B Convertible Preferred Stock (the “Preferred
Stock”).  Certain Directors of the Company purchased 500 shares.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Shares of Preferred Stock were sold for $1,000 per share (the “Stated
Value”) and accrue dividends on the Stated Value at an annual rate of 10%.  The net proceeds to the Company, after
deducting $90,127 of offering costs, were $2,903,034.  During the year ended June 30, 2014, 425 shares of Preferred Stock
were converted into 470,171 shares of common stock of the Company.  At December 31, 2014, 2,575 shares of Preferred Stock
were convertible into 3,066,710 shares of common stock of the Company (“Common Stock”) at a conversion price equal
to $0.95.  Upon any liquidation, dissolution or winding up of the Corporation, holders of Preferred Stock are entitled
to receive out of the assets of the Company an amount equal to two times the Stated Value, plus any accrued and unpaid dividends
thereon.  At December 31, 2014 the liquidation preference of the Preferred Stock was $5,488,375.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In connection with the purchase of the Preferred Stock, investors
received warrants to purchase a total of 3,157,897 shares of Common Stock at an exercise price of $0.95.  The warrants
are exercisable at any time prior to September 27, 2016.  During the year ended June 30, 2014, 1,447,368 warrants were
exercised via a cashless exercise resulting in the issuance of 850,169 shares of common stock of the Company.  In addition,
the Company issued a total of 81,579 warrants to a placement agent in connection with the transaction.  These warrants
expire on September 27, 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Leasing Activities</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company leases its Australian research and development facility
from a non-related Australian company under the terms of a lease that expires October 31, 2016.  The rental rate was
$75,596 per year (A$72,431) and was subject to an annual CPI adjustment.  Rent expense was $22,392 and $46,126 for the
three and six months ended December 31, 2014 and $23,239 and $46,185 for the three and six months ended December 31, 2013, respectively.  In
July of 2011, the Company renewed the lease on its Australian research and development facility through October 2016 at a rental
rate of $95,855 per year (A$95,000) subject to an annual CPI adjustment.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company also leased a building from an officer of its subsidiary,
Tier Electronics LLC, who is also a shareholder and was a director, under a lease agreement that was due to expire on December
31, 2014.  Subsequently a lease termination agreement was entered into on October 20, 2013, which terminated the lease
effective December 31, 2013 for a fee of $21,000.  The rent expense for the three and six months ended December 31, 2014
was $0 and $42,000 and $63,000 for the three and six months ended December 31, 2013, respectively.  The Company was required
to pay real estate taxes and other occupancy costs related to the facility.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The future payments required under the terms of the leases for fiscal
periods subsequent to December 31, 2014 are as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">41,617</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">83,234</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">27,745</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">152,596</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Employment Contracts</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company has entered into employment contracts with executives
and management personnel.  The contracts provide for salaries, bonuses and stock option grants, along with other employee
benefits.  The employment contracts generally have no set term and can be terminated by either party.  There
is a provision for payments of up to six months of annual salary as severance if the Company terminates a contract without cause,
along with the acceleration of certain unvested stock option grants.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">All Australian based employees are entitled to varying degrees of
benefits on retirement, disability, or death.  The Company contributes to an accumulation fund on behalf of the employees
under an award which is legally enforceable.  For U.S. employees, the Company has a 401(k) plan.  All active
participants are 100% vested immediately.  Expenses under these plans were $22,040 and $45,703 for the three and six
months ended December 31, 2014, respectively.  Expenses under these plans were $35,819 and $68,145 for the three and
six months ended December 31, 2013, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The provision (benefit) for income taxes consists of the following:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Six months ended December 31,</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2013</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Current</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">(48,250</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Deferred</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Provision (benefit) for income taxes</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">(48,250</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"><font style="font-size: 8pt">)</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company accounts for income taxes using an asset and liability
approach which generally requires the recognition of deferred income tax assets and liabilities based on the expected future income
tax consequences of events that have previously been recognized in the Company’s financial statements or tax returns.  In
addition, a valuation allowance is recognized if it is more likely than not that some or all of the deferred income tax assets
will not be realized in the foreseeable future.  Deferred income tax assets are reviewed for recoverability based on
historical taxable income, the expected reversals of existing temporary differences, tax planning strategies and projections of
future taxable income.  As a result of this analysis, the Company has provided for a valuation allowance against its
net deferred income tax assets as of December 31, 2014 and June 30, 2014.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s combined effective income tax rate differed from
the U.S. federal statutory income rate as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">As of December 31,</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2013</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Income tax expense/(benefit) computed at the U.S. federal statutory rate</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-34</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt">%</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-34</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Foreign tax expense/(benefit)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-1</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Change in valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">34</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">%</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">34</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"><font style="font-size: 8pt">%</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-1</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"><font style="font-size: 8pt">%</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Significant components of the Company’s net deferred income
tax assets as of December 31, 2014 and June 30, 2014 were as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Federal net operating loss carryforwards</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">24,345,304</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">22,238,624</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Federal - other</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,880,796</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,737,404</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Wisconsin net operating loss carryforwards</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,115,566</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,747,275</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Australia net operating loss carryforwards</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,497,779</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,497,779</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Deferred income tax asset valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(31,839,445</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(29,221,082</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total deferred income tax assets</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company has U.S. federal net operating loss carryforwards of
approximately $71.6 million as of December 31, 2014, that expire at various dates between June 30, 2017 and 2034.  The
Company also has $8.5 million in other federal deferred tax assets comprised of charitable contributions carryforwards and intangible
amortization.  The Company has U.S. federal research and development tax credit carryforwards of approximately $223,000
as of December 31, 2014 that expire at various dates through June 30, 2033.  As of December 31, 2014, the Company has
approximately $59.8 million of Wisconsin net operating loss carryforwards that expire at various dates between December 31, 2014
and 2028.  As of December 31, 2014, the Company also has approximately $5.0 million of Australian net operating loss
carryforwards available to reduce future taxable income of its Australian subsidiaries with an indefinite carryforward period.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">A reconciliation of the beginning and ending balance of unrecognized
income tax benefits is as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt"> Beginning balance</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">196,583</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">193,097</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt"> Effect of foreign currency translation</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(24,803</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">3,486</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt"> Ending balance</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">171,780</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">196,583</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s issuance of additional shares of common stock
has constituted an ownership change under Section 382 of the Internal Revenue Code which places an annual dollar limit on the use
of net operating loss (“NOL”) carryforwards and other tax attributes that may be utilized in the future.  The
calculation of the annual limitation of usage is based on a percentage of the equity value immediately after any ownership change.  The
annual amount of tax attributes that may be utilized after the change in ownership is limited.  Previous issuances of
additional shares of common stock also resulted in ownership changes and the annual amount of tax attributes from previous years
is limited as well.  The extent of any limitations on the usage of net operating losses has not been determined.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Description of Business</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">ZBB Energy Corporation (“ZBB,” “we,” “us,”
“our” or the “Company”) develops, licenses, and manufactures innovative energy management systems solutions
serving the utility, commercial and industrial building and off-grid markets.  ZBB was incorporated in Wisconsin in 1998
and is headquartered in Menomonee Falls, Wisconsin, USA with offices also located in Perth, Western Australia.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">ZBB Energy develops and commercializes application solutions for
advanced energy management systems critical to the transition from a “coal-centric economy” to one reliant on renewable
energy sources.  These advanced systems directly connect wind and solar equipment to the grid and other systems that
can form various levels of micro-grids as well as power quality regulation solutions.  ZBB Energy brings vital power
control and energy storage solutions to problems caused by the incorporation of increasingly pervasive renewable energy generating
assets that are part of the grid power transmission and distribution network used in commercial, industrial, and multi-tenant buildings.  The
Company also develops and commercializes energy management systems for off-grid applications such as island or remote power.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The condensed consolidated financial statements include the accounts
of the Company and those of its wholly-owned subsidiaries ZBB Energy Pty Ltd. (formerly known as ZBB Technologies, Ltd.) which
has an advanced engineering and development facility in Perth, Australia, Century West PNL, LLC, and its sixty percent owned subsidiary
ZBB PowerSav Holdings Limited located in Hong Kong which was formed in connection with the Company’s investment in a China
joint venture.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Interim Financial Data</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for
interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly,
they do not include all of the information and notes required by US GAAP for complete financial statements.  In the opinion
of management, all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for fair
presentation of the results of operations have been included.  Operating results for the three and six month periods
ended December 31, 2014 are not necessarily indicative of the results that might be expected for the year ending June 30, 2015.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The condensed consolidated balance sheet at June 30, 2014 has been
derived from audited financial statements at that date, but does not include all of the information and disclosures required by
US GAAP.  For a more complete discussion of accounting policies and certain other information, refer to the Company’s
annual report filed on Form 10-K for the fiscal year ended June 30, 2014 filed with the Securities and Exchange Commission on September
29, 2014.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Basis of Presentation</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The accompanying condensed consolidated financial statements include
the accounts of the Company and its wholly and majority-owned subsidiaries and have been prepared in accordance with US GAAP.  All
significant intercompany accounts and transactions have been eliminated in consolidation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Fair Value of Financial Instruments</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s financial instruments consist of cash and cash
equivalents, restricted cash on deposit, accounts receivable, a note receivable, accounts payable, and bank loans and notes payable.  The
carrying amounts of the Company’s financial instruments approximate their respective fair values due to the relatively short-term
nature of these instruments, except for the bank loans and notes payable.  The carrying amount of the bank loans and
notes payable approximates fair value due to the interest rate and terms approximating those available to us for similar obligations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company accounts for the fair value of financial instruments
in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
820.  Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.  The degree of judgment utilized in measuring
the fair value of assets and liabilities generally correlates to the level or pricing observability.  FASB ASC 820 describes
a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the
last unobservable, that may be used to measure fair value:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Level 1 inputs are quoted prices (unadjusted) in active markets for
identical assets or liabilities that the reporting entity can access at the measurement date.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Level 2 inputs are inputs other than quoted prices that are observable
for the asset or liability, either directly or indirectly, for similar assets or liabilities in active markets.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Level 3 inputs are unobservable inputs for the asset or liability.  As
such, the prices or valuation techniques require inputs that are both significant to the fair value measurement and are unobservable.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Cash and Cash Equivalents</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company considers all highly liquid investments with maturities
of three months or less to be cash equivalents.  The Company maintains its cash deposits in fully insured accounts at
financial institutions predominately in the United States, Australia, and Hong Kong.  The Company has not experienced
any losses in such accounts.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Restricted Cash on Deposit</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company had $68,752 and $69,901 in restricted cash on deposit
as of December 31, 2014 and June 30, 2014, respectively, as collateral for certain credit arrangements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Accounts Receivable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Credit is extended based on an evaluation of a customer’s financial
condition.  Accounts receivable are stated at the amount the Company expects to collect from outstanding balances.  The
Company records allowances for doubtful accounts based on customer-specific analysis and general matters such as current assessments
of past due balances and economic conditions.  The Company writes off accounts receivable against the allowance when
they become uncollectible.  Accounts receivable are stated net of an allowance for doubtful accounts of $10,878 as of
December 31, 2014 and June 30, 2014.  The composition of accounts receivable by aging category is as follows as of:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Current</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">37,349</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">902,545</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">30-60 days</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">60-90 days</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Over 90 days</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">225,808</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">148,479</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">263,157</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,051,024</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Inventories</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Inventories are stated at the lower of cost or market.  Cost
is computed using standard cost, which approximates actual cost, on a first-in, first-out basis.  The Company provides
inventory write-downs based on excess and obsolete inventories determined primarily by future demand forecasts.  The
write-down is measured as the difference between the cost of the inventory and market based upon assumptions about future demand
and charged to the provision for inventory, which is a component of cost of sales.  At the point of the loss recognition,
a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the
restoration or increase in that newly established cost basis.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Note Receivable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company has one note receivable from an unrelated party.  The
note matures on December 15, 2015 and is classified as “Note receivable” in the financial statements.  We
regularly evaluate the financial condition of the borrower to determine if any reserve for uncollectible amount should be established.  To
date, no such reserve is required.  See further discussion of the note receivable in Note 5.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Property, Plant and Equipment</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Land, building, equipment, computers, furniture and fixtures are
recorded at cost.  Maintenance, repairs and betterments are charged to expense as incurred.  Depreciation is
provided for all plant and equipment on a straight-line basis over the estimated useful lives of the assets.  The estimated
useful lives used for each class of depreciable asset are:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="width: 64%"> </td>
<td style="width: 3%"> </td>
<td style="width: 33%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Estimated Useful Lives</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Manufacturing equipment</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">3 - 7 years</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Office equipment</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">3 - 7 years</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Assets held for lease</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">18 months</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Building and improvements</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">7 - 40 years</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company completed a review of the estimated useful lives of specific
assets for the quarter ended December 31, 2014 and determined that there were no changes in the estimated useful lives of assets.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Impairment of Long-Lived Assets</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In accordance with FASB ASC Topic 360, "Impairment or Disposal
of Long-Lived Assets," the Company assesses potential impairments to its long-lived assets including property, plant, equipment
and intangible assets when there is evidence that events or changes in circumstances indicate that the carrying value may not be
recoverable.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">If such an indication exists, the recoverable amount of the asset
is compared to the asset’s carrying value.  Any excess of the asset’s carrying value over its recoverable
amount is expensed in the statement of operations.  In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate.  Management has determined that there were no long-lived assets
impaired as of December 31, 2014 and June 30, 2014.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Investment in Investee Company</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Investee companies that are not consolidated, but over which the
Company exercises significant influence, are accounted for under the equity method of accounting.  Whether or not the
Company exercises significant influence with respect to an investee depends on an evaluation of several factors including, among
others, representation on the investee company’s board of directors and ownership level, which is generally a 20% to 50%
interest in the voting securities of the investee company.  Under the equity method of accounting, an investee company’s
accounts are not reported in the Company’s condensed consolidated balance sheets and statements of operations; however, the
Company’s share of the earnings or losses of the investee company is reflected in the caption ‘‘Equity in loss
of investee company” in the condensed consolidated statements of operations.  The Company’s carrying value
in an equity method investee company is reported in the caption ‘‘Investment in investee company’’ in the
Company’s condensed consolidated balance sheets.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">When the Company’s carrying value in an equity method investee
company is reduced to zero, no further losses are recorded in the Company’s condensed consolidated financial statements unless
the Company guaranteed obligations of the investee company or has committed additional funding.  When the investee company
subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses
not previously recognized.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Goodwill</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Goodwill is recognized as the excess cost of an acquired entity over
the net amount assigned to assets acquired and liabilities assumed.  Goodwill is not amortized but reviewed for impairment
annually as of June 30 or more frequently if events or changes in circumstances indicate that its carrying value may be impaired.  These
conditions could include a significant change in the business climate, legal factors, operating performance indicators, competition,
or sale or disposition of a significant portion of a reporting unit.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The first step of the impairment test requires the comparing of a
reporting unit’s fair value to its carrying value.  If the carrying value is less than the fair value, no impairment
exists and the second step is not performed.  If the carrying value is higher than the fair value, there is an indication
that impairment may exist and the second step must be performed to compute the amount of the impairment.  In the second
step, the impairment is computed by estimating the fair values of all recognized and unrecognized assets and liabilities of the
reporting unit and comparing the implied fair value of reporting unit goodwill with the carrying amount of that unit’s goodwill.  The
Company determined fair value as evidenced by market capitalization, and concluded that there was no need for an impairment charge
as of December 31, 2014 and June 30, 2014.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Accrued Expenses</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Accrued expenses consist of the Company’s present obligations
related to various expenses incurred during the period and includes a reserve for estimated contract losses, other accrued expenses,
and warranty obligations.  Included in accrued expenses as of December 31, 2014 is a reserve of approximately $1.3 million
for a product upgrade initiative established in the fourth quarter of fiscal 2014.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Subsequent to commercialization, installation and commissioning of
units in the field, the Company garnered meaningful insights that have resulted in system design modifications and other general
upgrades that have improved the performance, efficiency, and reliability of its systems.  In the interest of enhancing
customer satisfaction, the Company launched the product upgrade initiative to implement these improvements at certain locations
of its installed base over fiscal years 2015 and 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Warranty Obligations</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company typically warrants its products for twelve months after
installation or eighteen months after date of shipment, whichever first occurs.  Warranty costs are provided for estimated
claims and charged to cost of product sales as revenue is recognized.  Warranty obligations are also evaluated quarterly
to determine a reasonable estimate for the replacement of potentially defective materials of all energy storage systems that have
been shipped to customers.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">While the Company actively engages in monitoring and improving its
evolving battery and production technologies, there is only a limited product history and relatively short time frame available
to test and evaluate the rate of product failure.  Should actual product failure rates differ from the Company’s
estimates, revisions are made to the estimated rate of product failures and resulting changes to the liability for warranty obligations.  In
addition, from time to time, specific warranty accruals may be made if unforeseen technical problems arise.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">As of December 31, 2014 and June 30, 2014, included in the Company’s
accrued expenses were $693,568 and $731,910, respectively, related to warranty obligations.  The following is a summary
of accrued warranty activity:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Six Months and Year Ended</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Beginning balance</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">731,910</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">479,873</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Accruals for warranties during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">151,860</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">741,412</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Settlements during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(225,815</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(673,588</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Adjustments relating to preexisting warranties</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">35,613</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">184,213</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Ending balance</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">693,568</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">731,910</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Revenue Recognition</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Revenues are recognized when persuasive evidence of a contractual
arrangement exits, delivery has occurred or services have been rendered, the seller’s price to buyer is fixed and determinable,
and collectability is reasonably assured.  The portion of revenue related to installation and final acceptance, is deferred
until such installation and final customer acceptance are completed.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">From time to time, the Company may enter into separate agreements
at or near the same time with the same customer.  The Company evaluates such agreements to determine whether they should
be accounted for individually as distinct arrangements or whether the separate agreements are, in substance, a single multiple
element arrangement.  The Company evaluates whether the negotiations are conducted jointly as part of a single negotiation,
whether the deliverables are interrelated or interdependent, whether the fees in one arrangement are tied to performance in another
arrangement, and whether elements in one arrangement are essential to another arrangement.  The Company’s evaluation
involves significant judgment to determine whether a group of agreements might be so closely related that they are, in effect,
part of a single arrangement.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Our collaboration agreements typically involve multiple elements
or deliverables, including upfront fees, contract research and development, milestone payments, technology licenses or options
to obtain technology licenses, and royalties.  For these arrangements, revenues are recognized in accordance with FASB
ASC 605-25,<i> </i>“Revenue Recognition – Multiple Element Arrangements.”  The Company’s
revenues associated with multiple element contracts is based on the selling price hierarchy, which utilizes vendor-specific objective
evidence (“VSOE”) when available, third-party evidence (“TPE”) if VSOE is not available, and if neither
is available then the best estimate of the selling price is used.  The Company utilizes best estimate for its multiple
deliverable transactions as VSOE and TPE do not exist.  To be considered a separate element, the product or service in
question must represent a separate unit under SEC Staff Accounting Bulletin 104, and fulfill the following criteria: the delivered
item(s) has value to the customer on a standalone basis; there is objective and reliable evidence of the fair value of the undelivered
item(s); and if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of
the undelivered item(s) is considered probable and substantially in our control. For arrangements containing multiple elements,
revenue from time and materials based service arrangements is recognized as the service is performed.  Revenue relating
to undelivered elements is deferred at the estimated fair value until delivery of the deferred elements.  If the arrangement
does not meet all criteria above, the entire amount of the transaction is deferred until all elements are delivered.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The portion of revenue related to engineering and development is
recognized ratably upon delivery of the goods or services pertaining to the underlying contractual arrangement or revenue is recognized
as certain activities are performed by the Company over the estimated performance period.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Revenues from government funded research and development contracts
are recognized proportionally as costs are incurred and compared to the estimated total research and development costs for each
contract.  In many cases, the Company is reimbursed only a portion of the costs incurred or to be incurred on the contract.  Government
funded research and development contracts are generally multi-year, cost-reimbursement and/or cost-share type contracts.  The
Company is generally reimbursed for reasonable and allocable costs up to the reimbursement limits set by the contract.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company charges shipping and handling fees when products are
shipped or delivered to a customer, and includes such amounts in product revenues and shipping costs in cost of sales.  The
Company reports its revenues net of estimated returns and allowances.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Total revenues of $300,654 and $865,515 were recognized for the three
and six months ended December 31, 2014, respectively.  Revenues for the three months ended December 31, 2014 were comprised
of three significant customers (94% of total revenue) and revenues for the six months ended December 31, 2014 were comprised of
two significant customers (86% of total revenue).  Total revenues of $961,456 and $2,030,578 were recognized for the
three and six months ended December 31, 2013, respectively.  Revenues for the three months ended December 31, 2013 were
comprised of three significant customers (95% of total revenue) and revenues for the six months ended December 31, 2013 were comprised
of four significant customers (91% of total revenue).</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Advertising Expense</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Advertising costs of $25,698 and $10,462 for the three months ended
December 31, 2014 and December 31, 2013, respectively, and advertising costs of $33,262 and $33,614  for the six months
ended December 31, 2014 and December 31, 2013, respectively, were charged to selling, general, and administrative expenses as incurred.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Income Taxes</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company records deferred income taxes in accordance with FASB
ASC Topic 740, “Accounting for Income Taxes.”  FASB ASC Topic 740 requires recognition of deferred income
tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the amounts at which they
are carried in the financial statements, based upon the enacted tax rates in effect for the year in which the differences are expected
to reverse.  The Company establishes a valuation allowance when necessary to reduce deferred income tax assets to the
amount expected to be realized.  There were no net deferred income tax assets recorded as of December 31, 2014 and June
30, 2014.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company applies a more-likely-than-not recognition threshold
for all tax uncertainties as required under FASB ASC Topic 740, which only allows the recognition of those tax benefits that have
a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s U.S. Federal income tax returns for the years
ended June 30, 2011 through June 30, 2014 and the Company’s Wisconsin and Australian income tax returns for the years ended
June 30, 2010 through June 30, 2014 are subject to examination by taxing authorities.  As of December 31, 2014, there
were no examinations in progress.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Foreign Currency</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company uses the United States dollar as its functional and reporting
currency, while the Australian dollar and Hong Kong dollar are the functional currencies of its foreign subsidiaries.  Assets
and liabilities of the Company’s foreign subsidiaries are translated into United States dollars at exchange rates that are
in effect at the balance sheet date while equity accounts are translated at historical exchange rates.  Income and expense
items are translated at average exchange rates which were applicable during the reporting period.  Translation adjustments
are accumulated in accumulated other comprehensive loss as a separate component of equity in the condensed consolidated balance
sheets.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Loss per Share</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company follows the FASB ASC Topic 260, “Earnings per Share,”
provisions which require the reporting of both basic and diluted earnings (loss) per share.  Basic earnings (loss) per
share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares
outstanding for the period.  Diluted earnings (net loss) per share reflect the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted into common stock.  In accordance with
the FASB ASC Topic 260, any anti-dilutive effects on net income (loss) per share are excluded.  For the six months ended
December 31, 2014 and December 31, 2013 there were 9,777,213 and 6,850,061 shares of common stock underlying convertible preferred
stock, options, restricted stock units and warrants that are excluded, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Concentrations of Credit Risk</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash and accounts receivable.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company maintains significant cash deposits primarily with two
financial institutions.  All deposits are fully insured as of December 31, 2014.  The Company has not previously
experienced any losses on such deposits.  Additionally, the Company performs periodic evaluations of the relative credit
ratings of these institutions as part of its banking strategy.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Concentrations of credit risk with respect to accounts receivable
are limited due to accelerated payment terms in current customer contracts and creditworthiness of the current customer base.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Use of Estimates</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The preparation of financial statements in conformity with US GAAP
requires management to make estimates and assumptions.  These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amount of revenues and expenses during the reporting period.  It is reasonably possible that the estimates we have made
may change in the near future.  Significant estimates underlying the accompanying condensed consolidated financial statements
include those related to:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">the timing of revenue recognition;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">the allowance for doubtful accounts;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">provisions for excess and obsolete inventory;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">the lives and recoverability of property, plant and equipment and other long-lived assets, including goodwill;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">contract costs, losses, and reserves;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">warranty obligations;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">income tax valuation allowances;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">stock-based compensation; and</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">valuation of warrants.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Reclassifications</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Certain amounts previously reported have been reclassified to conform
to the current presentation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Segment Information</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company has determined that it operates as one reportable segment.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Recent Accounting Pronouncements</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">From time to time, new accounting pronouncements are issued by the
FASB or other standard setting bodies that are adopted by the Company as of the specified effective date.  Unless otherwise
discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material
impact on our financial position or results of operations upon adoption.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In January 2015, the FASB issued ASU 2015-01 – Income Statement
– Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept
of Extraordinary Items.  The amendment was issued to reduce complexity in the accounting standards by eliminating the
concept of extraordinary items from US GAAP.  The amendment is effective for annual periods ending after December 15,
2015.  The change may be applied prospectively or retrospectively to all prior periods presented in the financial statements.  Early
adoption is permitted.  The Company does not expect adoption of this guidance to have a significant impact on its consolidated
financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In August 2014, the FASB issued ASU 2014-15 – Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40).  The update requires
management to perform a going concern assessment if there is substantial doubt about an entity’s ability to continue as a
going concern within one year of the financial statement issuance date.  Under the new standard, the definition of substantial
doubt incorporates a likeliness threshold of “probable” that is consistent with the current use of the term defined
in US GAAP for loss contingencies (Topic 450 – Contingencies).  Management will need to consider conditions that
are known and reasonably knowable at the financial statement issuance date and determine whether the entity will be able to meet
its obligations within the one-year period.  Additional disclosures are required if it is probable that the entity will
be unable to meet its current obligations.  The amendments in this ASU will be effective for annual periods ending after
December 15, 2016.  Early adoption is permitted.  The Company does not expect adoption of this guidance to
have a significant impact on its consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In June 2014, the FASB issued ASU 2014-12 - Compensation –
Stock Compensation (Topic 718).  The amendments require that entities should treat performance targets that can be met
after the requisite service period of a share-based payment award as performance conditions that affect vesting and, accordingly,
the performance target should not be reflected in estimating the grant-date fair value of the award.  Compensation expense
should be recognized in the period in which it becomes probable that the performance target will be achieved.  ASU 2014-12
is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015<b>.  </b>The
Company is required to adopt this standard beginning July 1, 2016.  ASU 2014-12 does not contain any new disclosure requirements.  The
Company does not expect the adoption of ASU 2014-12 to have a material effect on our financial position, results of operations
or cash flows.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In May 2014, the FASB issued ASU 2014-09 – Revenue from Contracts
with Customers (Topic 606).  The amendments outline a single comprehensive model for entities to use in accounting for
revenue arising from contracts with customers and supersede most current revenue recognition guidance, including industry-specific
guidance.  The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services.  In applying the revenue model to contracts within its scope, an entity identifies the contract(s)
with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction
price to the performance obligations in the contract and recognizes revenue when the entity satisfies a performance obligation.  ASU
2014-09, which includes additional disclosure requirements regarding revenue, cash flows and obligations related to contracts with
customers, will be effective for annual reporting periods beginning after December 15, 2016.  Early adoption is not permitted.  The
guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements
in the year of adoption, through a cumulative adjustment.  The Company is currently evaluating the effect that implementation
of this update will have on its consolidated financial position and results of operations upon adoption.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In April 2014, the FASB issued ASU 2014-08 -<i> </i>Presentation
of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures
of Disposals of Components of an Entity.  The update changes the requirements for reporting discontinued operations in
Subtopic 205-20.  To be classified as a discontinued operation, the disposal of a component or group of components must
represent a strategic shift that has, or will have, a major effect on an entity’s operations and financial results.  Examples
include a disposal of a major geographic area, a major line of business or a major equity method investment.  The amendments
in this ASU are effective prospectively for reporting periods beginning on or after December 15, 2014, with early adoption permitted.  The
adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In July 2013, the FASB issued ASU 2013-11 – Presentation of
an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which
requires an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net
operating loss carryforward, similar tax loss, or a tax credit carryforward.  To the extent the tax benefit is not available
at the reporting date under the governing tax law or if the entity does not intend to use the deferred tax asset for such purpose,
the unrecognized tax benefit should be presented as a liability and not combined with deferred tax assets.  ASU 2013-11
is effective for annual periods, and interim periods within those years, beginning after December 15, 2013.  The amendments
are to be applied to all unrecognized tax benefits that exist as of the effective date and may be applied retrospectively to each
prior reporting period presented.  The adoption of this pronouncement did not have a material impact on the Company’s
consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In April 2013, the FASB issued ASU 2013-07 – Presentation of
Financial Statements (Topic 205) – Liquidation Basis of Accounting.  The amendments require an entity to prepare
its financial statements using the liquidation basis of accounting when liquidation is imminent.  Liquidation is imminent
when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by
the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan
will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy).  If
a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example,
limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs
from the plan for liquidation that was specified at the entity’s inception.  The amendments require financial statements
prepared using the liquidation basis of accounting to present relevant information about an entity’s expected resources in
liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation.  The entity
should include in its presentation of assets any items it had not previously recognized under US GAAP but that it expects to either
sell in liquidation or use in settling liabilities (for example, trademarks).  The amendments are effective for entities
that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting
periods therein.  Entities should apply the requirements prospectively from the day that liquidation becomes imminent.  Early
adoption is permitted.  The adoption did not have an impact on the Company’s consolidated financial statements
in its present condition.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In March 2013, the FASB issued ASU 2013-05 – Foreign Currency
Matters (Topic 830) – Parent’s Accounting for the Cumulative Translation Adjustment upon derecognition of Certain Subsidiaries
or Group of Assets within a Foreign Entity or of an Investment in a Foreign Entity.  These amendments provide guidance
on releasing cumulative translation adjustments when a reporting entity (parent) ceases to have a controlling financial interest
in a subsidiary or a group of assets that is a non-profit activity or a business within a foreign entity.  In addition,
these amendments provide guidance on the release of cumulative translation adjustments in partial sales of equity method investments
and in step acquisitions.  The amendments are effective for fiscal years and interim reporting periods within those years,
beginning after December 15, 2013.  The amendments should be applied prospectively to derecognition events occurring
after the effective date.  Prior periods should not be adjusted.  Early adoption is permitted.  If
an entity elects to early adopt the amendments, it should apply them as of the beginning of the entity’s fiscal year of adoption.  The
Company was required to adopt this standard beginning July 1, 2014.  The adoption of this pronouncement did not have
a material impact on the Company’s consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In February 2013, the FASB issued ASU 2013-04 – Liabilities
(Topic 405) – Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation
is Fixed at the Reporting Date.  These amendments provide guidance for the recognition, measurement, and disclosure of
obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope
of this guidance is fixed at the reporting date, except for obligations addressed within existing guidance in US GAAP.  Examples
of obligations within this guidance are debt arrangements, other contractual obligations, and settled litigation and judicial rulings.  The
amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.  These
amendments shall be applied retrospectively to all prior periods presented for those obligations within the scope of this Subtopic
that exist at the beginning of an entity’s fiscal year of adoption.  Early adoption is permitted.  The
adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.</p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Current</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">37,349</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">902,545</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">30-60 days</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">60-90 days</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Over 90 days</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">225,808</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">148,479</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">263,157</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,051,024</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="width: 64%"> </td>
<td style="width: 3%"> </td>
<td style="width: 33%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Estimated Useful Lives</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Manufacturing equipment</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">3 - 7 years</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Office equipment</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">3 - 7 years</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Assets held for lease</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">18 months</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Building and improvements</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">7 - 40 years</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Six Months and Year Ended</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Beginning balance</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">731,910</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">479,873</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Accruals for warranties during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">151,860</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">741,412</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Settlements during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(225,815</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(673,588</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Adjustments relating to preexisting warranties</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">35,613</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">184,213</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Ending balance</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">693,568</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">731,910</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Three months ended December 31,</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Six months ended December 31,</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2013</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2013</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%"><font style="font-size: 8pt">Revenues</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">52,541</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">54,338</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">351,582</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">96,183</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Gross Profit (loss)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(47,409</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(23,759</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(80,901</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(52,746</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Income (loss) from operations</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(725,136</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(631,463</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(1,132,920</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(1,215,059</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Net Income (loss)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(720,422</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(603,130</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(1,134,591</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(1,147,617</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Raw materials</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,245,571</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,054,197</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Work in progress</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">25,636</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">298,773</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Finished goods</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">180,091</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,451,298</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,352,970</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Land</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">217,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">217,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Building and improvements</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,532,375</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,520,872</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Manufacturing equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,750,502</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,710,127</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Office equipment</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">424,718</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">399,583</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Construction in process</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">230,107</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Total, at cost</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">8,154,702</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7,847,582</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Less: accumulated depreciation</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(3,782,909</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(3,465,379</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Property, plant and equipment, net</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">4,371,793</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">4,382,203</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Bank loans and notes payable-current</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">356,065</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">351,142</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Bank loans and notes payable-long term</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">1,866,222</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">2,045,127</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,222,287</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,396,269</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="margin-top: 0; margin-bottom: 0"> </p>
<p style="margin-top: 0; margin-bottom: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Bank loans and notes payable consisted of the following as of:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Note payable to Wisconsin Econcomic Development Corporation payable
in</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   monthly installments of $23,685,
including interest at 2%, with the final</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   payment due May 1, 2018; collateralized
by equipment purchased with the loan</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   proceeds and substantially
all assets of the Company not otherwise</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   collateralized.  The
Company is required to maintain and increase a specified</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   number of employees, and the
interest rate is increased in certain cases for</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   failure to meet this requirement.  See
note (a) below.</p></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">937,861</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,069,793</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Bank loan payable in fixed monthly payments of $6,800 of principal
and interest</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   at a rate of 0.25% below prime,
as defined, subject to a floor of 5% with any</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   principal due at maturity on
June 1, 2018; collateralized by the building and land.</p></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">599,655</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">624,760</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Note payable in fixed monthly installments of $6,610 of principal
and interest at</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   a rate of 5.5% with any principal
due at maturity on May 1, 2028; collateralized</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">   by the building and land.</p></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">684,771</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">701,716</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,222,287</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,396,269</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="margin-top: 0; margin-bottom: 0"> </p>
<p style="margin-top: 0; margin-bottom: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font-size: 8pt">(a)  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">As of April 2013, the Wisconsin Economic Development Corporation 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.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="margin-top: 0; margin-bottom: 0"></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 80%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="3" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Six months ended December 31,</font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 46%"> </td>
<td style="width: 3%"> </td>
<td style="width: 25%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td>
<td style="width: 3%"> </td>
<td style="width: 23%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2013</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Expected life of option (years)</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">4</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">1.08 - 1.42%</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">0.95 - 1.20%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Assumed volatility</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">100.97 - 103.90%</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">94.35 - 154.68%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Expected dividend rate</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">0%</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">0%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Expected forfeiture rate</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">5.00 - 6.32%</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">5.16 - 5.62%</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">of</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Options</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Remaining</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Contractual Life</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">(in years)</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Balance at June 30, 2013</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">785,284</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">5.78</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   Options granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">699,850</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.33</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Options forfeited</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(66,066</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">13.23</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="padding-bottom: 1.5pt"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 67%"><font style="font-size: 8pt">Balance at June 30, 2014</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,419,068</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">3.23</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">6.09</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   Options granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">418,000</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.85</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Options forfeited</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(155,935</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">3.64</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Balance at December 31, 2014</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,681,133</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">2.60</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td> </td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">6.19</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td colspan="2" style="padding-bottom: 1.5pt"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="9" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Outstanding</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="9" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Exercisable</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td colspan="2" style="border-bottom: black 1.5pt solid"><font style="font-size: 8pt">Range of Exercise Prices</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">of</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Options</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Remaining</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Contractual Life</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">(in years)</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Price</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">of</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Options</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Remaining</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Contractual Life</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">(in years)</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Price</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td colspan="2"><font style="font-size: 8pt">$0.48 to $1.00</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">446,000</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 7.26</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.70</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">72,000</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 6.86</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.78</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td colspan="2"><font style="font-size: 8pt">$1.01 to $2.50</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">757,660</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 7.24</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.52</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">67,755</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 5.29</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.99</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td colspan="2"><font style="font-size: 8pt">$2.51 to $5.00</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">102,900</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 4.50</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3.95</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">92,374</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 4.44</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3.97</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td colspan="2"><font style="font-size: 8pt">$5.01 to $7.50</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">359,573</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 3.36</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6.23</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">331,573</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 3.30</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">6.28</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 11%; padding-bottom: 1.5pt"><font style="font-size: 8pt">$7.51 to $17.95</font></td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"> </td>
<td style="width: 11%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">15,000</font></td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 8pt"> 1.07</font></td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 11%; padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">17.95</font></td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"> </td>
<td style="width: 11%; border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">15,000</font></td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: center"><font style="font-size: 8pt"> 1.07</font></td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="width: 11%; padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">17.95</font></td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td colspan="2" style="padding-bottom: 3pt"><font style="font-size: 8pt">Balance at December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,681,133</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 6.19</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">2.60</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">578,702</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="text-align: center"><font style="font-size: 8pt"> 4.10</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">5.03</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">of </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Options</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Grant Date</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Fair Value</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Per Share</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"> Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Remaining</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Contractual Life</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">(in years)</p></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 48%"><font style="font-size: 8pt">Balance at June 30, 2013</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">262,668</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 2%"> </td>
<td style="width: 3%"><font style="font-size: 8pt">$</font></td>
<td style="width: 12%; text-align: right"><font style="font-size: 8pt">3.44</font></td>
<td nowrap="nowrap" style="width: 2%"> </td>
<td style="width: 18%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   Options granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">699,850</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.33</font></td>
<td nowrap="nowrap"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   Options vested</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(127,586</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3.55</font></td>
<td nowrap="nowrap"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Options forfeited</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(12,463</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">3.38</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Balance at June 30, 2014</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">822,469</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.63</font></td>
<td nowrap="nowrap"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   Options granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">418,000</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.85</font></td>
<td nowrap="nowrap"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   Options vested</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(111,186</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.45</font></td>
<td nowrap="nowrap"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Options forfeited</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(26,852</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">2.31</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Balance at December 31, 2014</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,102,431</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">1.33</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: center"><font style="font-size: 8pt">7.27</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number of</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Restricted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Stock Units</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Valuation</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Price Per Unit</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Balance at June 30, 2013</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,131,687</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">2.30</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   RSUs granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,660,695</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.99</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   RSUs forfeited</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(1,200,000</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.10</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Shares issued</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(245,570</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">1.61</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Balance at June 30, 2014</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,346,812</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.87</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   RSUs granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">922,500</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.05</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   RSUs forfeited</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Shares issued</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(173,694</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">0.84</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Balance at December 31, 2014</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,095,618</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">1.37</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number of</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Warrants</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center">Per Share</p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Balance at June 30, 2013</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,421,806</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">3.15</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   Warrants granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,239,474</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.95</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   Warrants expired</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(8,000</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2.80</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Warrants exercised</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(1,719,528</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">1.18</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Balance at June 30, 2014</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,933,752</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1.88</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">   Warrants granted</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">   Warrants expired</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">   Warrants exercised</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Balance at December 31, 2014</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,933,752</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">1.88</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">41,617</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">83,234</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">27,745</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">152,596</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Six months ended December 31,</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2013</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Current</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">(48,250</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Deferred</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Provision (benefit) for income taxes</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">(48,250</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"><font style="font-size: 8pt">)</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">As of December 31,</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">2013</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Income tax expense/(benefit) computed at the U.S. federal statutory rate</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-34</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt">%</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-34</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Foreign tax expense/(benefit)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-1</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Change in valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">34</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">%</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">34</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"><font style="font-size: 8pt">%</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-1</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"><font style="font-size: 8pt">%</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Federal net operating loss carryforwards</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">24,345,304</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">22,238,624</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Federal - other</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,880,796</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,737,404</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Wisconsin net operating loss carryforwards</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,115,566</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,747,275</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Australia net operating loss carryforwards</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,497,779</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,497,779</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Deferred income tax asset valuation allowance</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(31,839,445</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(29,221,082</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total deferred income tax assets</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt"> Beginning balance</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">196,583</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">193,097</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt"> Effect of foreign currency translation</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(24,803</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">3,486</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt"> Ending balance</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">171,780</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">196,583</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
1051024
263157
148479
225808
0
0
0
0
902545
37349
P3Y
P7Y
P3Y
P7Y
P7Y
P40Y
P18M
731910
693568
479873
35613
184213
-225815
-673588
151860
741412
-1134591
-1147617
-720422
-603130
-1132920
-1215059
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-47409
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351582
96183
52541
54338
58099
540462
58099
495984
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180091
298773
25636
1054197
1245571
3465379
3782909
7847582
8154702
0
230107
399583
424718
3710127
3750502
3520872
3532375
217000
217000
2396269
2222287
1069793
937861
624760
599655
701716
684771
176811
509097
42917
761037
371383
361042
P4Y
P4Y
.0108
.0095
.0142
.0120
1.0097
.9435
1.0390
1.5468
0.
0
.0500
.0516
0.0632
.0562
1681133
1681133
1419068
785284
2095618
1346812
1131687
446000
102900
359573
15000
757660
-155935
0
-66066
-1200000
418000
922500
699850
1660695
2.6
2.6
3.23
5.78
1.37
1.87
2.3
0.7
3.95
6.23
17.95
1.52
3.64
13.23
1.1
0.85
1.05
1.33
0.99
P6Y2M8D
P6Y2M8D
P7Y3M4D
P4Y6M
P3Y4M10D
P1Y25D
P7Y2M26D
P6Y1M2D
822469
1102431
262668
-26852
-12463
-111186
-127586
418000
699850
1.63
1.33
3.44
2.31
3.38
1.45
3.55
0.85
1.33
P7Y3M7D
-173694
-245570
0.84
1.61
578702
72000
92374
331573
15000
67755
P4Y1M6D
P6Y10M10D
P4Y5M8D
P3Y3M18D
P1Y25D
P5Y3M14D
5.03
0.78
3.97
6.28
17.95
1.99
2933752
2933752
0
-1719528
0
-8000
0
3239474
2933752
1421806
1.88
1.88
1.18
2.8
0.95
1.88
3.15
27745
83234
41617
45703
68145
22040
35819
0
-48250
0
0
-0.34
-0.34
0.00
-.01
.34
.34
0.00
-0.01
29221082
31839445
1497779
1497779
2747275
3115566
2737404
2880796
22238624
24345304
0
0
196583
171780
193097
196583
-24803
3486
3156
0
25651389
39073084
17707431
2575
2575
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Description of Business</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">ZBB Energy Corporation (“ZBB,” “we,” “us,”
“our” or the “Company”) develops, licenses, and manufactures innovative energy management systems solutions
serving the utility, commercial and industrial building and off-grid markets.  ZBB was incorporated in Wisconsin in 1998
and is headquartered in Menomonee Falls, Wisconsin, USA with offices also located in Perth, Western Australia.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">ZBB Energy develops and commercializes application solutions for
advanced energy management systems critical to the transition from a “coal-centric economy” to one reliant on renewable
energy sources.  These advanced systems directly connect wind and solar equipment to the grid and other systems that
can form various levels of micro-grids as well as power quality regulation solutions.  ZBB Energy brings vital power
control and energy storage solutions to problems caused by the incorporation of increasingly pervasive renewable energy generating
assets that are part of the grid power transmission and distribution network used in commercial, industrial, and multi-tenant buildings.  The
Company also develops and commercializes energy management systems for off-grid applications such as island or remote power.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The condensed consolidated financial statements include the accounts
of the Company and those of its wholly-owned subsidiaries ZBB Energy Pty Ltd. (formerly known as ZBB Technologies, Ltd.) which
has an advanced engineering and development facility in Perth, Australia, Century West PNL, LLC, and its sixty percent owned subsidiary
ZBB PowerSav Holdings Limited located in Hong Kong which was formed in connection with the Company’s investment in a China
joint venture.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Interim Financial Data</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for
interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly,
they do not include all of the information and notes required by US GAAP for complete financial statements.  In the opinion
of management, all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for fair
presentation of the results of operations have been included.  Operating results for the three and six month periods
ended December 31, 2014 are not necessarily indicative of the results that might be expected for the year ending June 30, 2015.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The condensed consolidated balance sheet at June 30, 2014 has been
derived from audited financial statements at that date, but does not include all of the information and disclosures required by
US GAAP.  For a more complete discussion of accounting policies and certain other information, refer to the Company’s
annual report filed on Form 10-K for the fiscal year ended June 30, 2014 filed with the Securities and Exchange Commission on September
29, 2014.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Basis of Presentation</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The accompanying condensed consolidated financial statements include
the accounts of the Company and its wholly and majority-owned subsidiaries and have been prepared in accordance with US GAAP.  All
significant intercompany accounts and transactions have been eliminated in consolidation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Fair Value of Financial Instruments</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s financial instruments consist of cash and cash
equivalents, restricted cash on deposit, accounts receivable, a note receivable, accounts payable, and bank loans and notes payable.  The
carrying amounts of the Company’s financial instruments approximate their respective fair values due to the relatively short-term
nature of these instruments, except for the bank loans and notes payable.  The carrying amount of the bank loans and
notes payable approximates fair value due to the interest rate and terms approximating those available to us for similar obligations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company accounts for the fair value of financial instruments
in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
820.  Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.  The degree of judgment utilized in measuring
the fair value of assets and liabilities generally correlates to the level or pricing observability.  FASB ASC 820 describes
a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the
last unobservable, that may be used to measure fair value:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Level 1 inputs are quoted prices (unadjusted) in active markets for
identical assets or liabilities that the reporting entity can access at the measurement date.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Level 2 inputs are inputs other than quoted prices that are observable
for the asset or liability, either directly or indirectly, for similar assets or liabilities in active markets.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Level 3 inputs are unobservable inputs for the asset or liability.  As
such, the prices or valuation techniques require inputs that are both significant to the fair value measurement and are unobservable.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Cash and Cash Equivalents</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company considers all highly liquid investments with maturities
of three months or less to be cash equivalents.  The Company maintains its cash deposits in fully insured accounts at
financial institutions predominately in the United States, Australia, and Hong Kong.  The Company has not experienced
any losses in such accounts.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Restricted Cash on Deposit</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company had $68,752 and $69,901 in restricted cash on deposit
as of December 31, 2014 and June 30, 2014, respectively, as collateral for certain credit arrangements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Accounts Receivable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Credit is extended based on an evaluation of a customer’s financial
condition.  Accounts receivable are stated at the amount the Company expects to collect from outstanding balances.  The
Company records allowances for doubtful accounts based on customer-specific analysis and general matters such as current assessments
of past due balances and economic conditions.  The Company writes off accounts receivable against the allowance when
they become uncollectible.  Accounts receivable are stated net of an allowance for doubtful accounts of $10,878 as of
December 31, 2014 and June 30, 2014.  The composition of accounts receivable by aging category is as follows as of:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Current</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">37,349</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">902,545</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">30-60 days</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">60-90 days</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Over 90 days</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">225,808</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">148,479</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">263,157</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,051,024</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Inventories</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Inventories are stated at the lower of cost or market.  Cost
is computed using standard cost, which approximates actual cost, on a first-in, first-out basis.  The Company provides
inventory write-downs based on excess and obsolete inventories determined primarily by future demand forecasts.  The
write-down is measured as the difference between the cost of the inventory and market based upon assumptions about future demand
and charged to the provision for inventory, which is a component of cost of sales.  At the point of the loss recognition,
a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the
restoration or increase in that newly established cost basis.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Note Receivable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company has one note receivable from an unrelated party.  The
note matures on December 15, 2015 and is classified as “Note receivable” in the financial statements.  We
regularly evaluate the financial condition of the borrower to determine if any reserve for uncollectible amount should be established.  To
date, no such reserve is required.  See further discussion of the note receivable in Note 5.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Property, Plant and Equipment</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Land, building, equipment, computers, furniture and fixtures are
recorded at cost.  Maintenance, repairs and betterments are charged to expense as incurred.  Depreciation is
provided for all plant and equipment on a straight-line basis over the estimated useful lives of the assets.  The estimated
useful lives used for each class of depreciable asset are:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="width: 64%"> </td>
<td style="width: 20%"> </td>
<td style="width: 16%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Estimated Useful Lives</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Manufacturing equipment</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">3 - 7 years</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Office equipment</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">3 - 7 years</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Assets held for lease</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">18 months</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Building and improvements</font></td>
<td> </td>
<td style="text-align: center"><font style="font-size: 8pt">7 - 40 years</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company completed a review of the estimated useful lives of specific
assets for the quarter ended December 31, 2014 and determined that there were no changes in the estimated useful lives of assets.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Impairment of Long-Lived Assets</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In accordance with FASB ASC Topic 360, "Impairment or Disposal
of Long-Lived Assets," the Company assesses potential impairments to its long-lived assets including property, plant, equipment
and intangible assets when there is evidence that events or changes in circumstances indicate that the carrying value may not be
recoverable.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">If such an indication exists, the recoverable amount of the asset
is compared to the asset’s carrying value.  Any excess of the asset’s carrying value over its recoverable
amount is expensed in the statement of operations.  In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate.  Management has determined that there were no long-lived assets
impaired as of December 31, 2014 and June 30, 2014.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Investment in Investee Company</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Investee companies that are not consolidated, but over which the
Company exercises significant influence, are accounted for under the equity method of accounting.  Whether or not the
Company exercises significant influence with respect to an investee depends on an evaluation of several factors including, among
others, representation on the investee company’s board of directors and ownership level, which is generally a 20% to 50%
interest in the voting securities of the investee company.  Under the equity method of accounting, an investee company’s
accounts are not reported in the Company’s condensed consolidated balance sheets and statements of operations; however, the
Company’s share of the earnings or losses of the investee company is reflected in the caption ‘‘Equity in loss
of investee company” in the condensed consolidated statements of operations.  The Company’s carrying value
in an equity method investee company is reported in the caption ‘‘Investment in investee company’’ in the
Company’s condensed consolidated balance sheets.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">When the Company’s carrying value in an equity method investee
company is reduced to zero, no further losses are recorded in the Company’s condensed consolidated financial statements unless
the Company guaranteed obligations of the investee company or has committed additional funding.  When the investee company
subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses
not previously recognized.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Goodwill</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Goodwill is recognized as the excess cost of an acquired entity over
the net amount assigned to assets acquired and liabilities assumed.  Goodwill is not amortized but reviewed for impairment
annually as of June 30 or more frequently if events or changes in circumstances indicate that its carrying value may be impaired.  These
conditions could include a significant change in the business climate, legal factors, operating performance indicators, competition,
or sale or disposition of a significant portion of a reporting unit.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The first step of the impairment test requires the comparing of a
reporting unit’s fair value to its carrying value.  If the carrying value is less than the fair value, no impairment
exists and the second step is not performed.  If the carrying value is higher than the fair value, there is an indication
that impairment may exist and the second step must be performed to compute the amount of the impairment.  In the second
step, the impairment is computed by estimating the fair values of all recognized and unrecognized assets and liabilities of the
reporting unit and comparing the implied fair value of reporting unit goodwill with the carrying amount of that unit’s goodwill.  The
Company determined fair value as evidenced by market capitalization, and concluded that there was no need for an impairment charge
as of December 31, 2014 and June 30, 2014.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Accrued Expenses</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Accrued expenses consist of the Company’s present obligations
related to various expenses incurred during the period and includes a reserve for estimated contract losses, other accrued expenses,
and warranty obligations.  Included in accrued expenses as of December 31, 2014 is a reserve of approximately $1.3 million
for a product upgrade initiative established in the fourth quarter of fiscal 2014.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Subsequent to commercialization, installation and commissioning of
units in the field, the Company garnered meaningful insights that have resulted in system design modifications and other general
upgrades that have improved the performance, efficiency, and reliability of its systems.  In the interest of enhancing
customer satisfaction, the Company launched the product upgrade initiative to implement these improvements at certain locations
of its installed base over fiscal years 2015 and 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>Warranty Obligations</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company typically warrants its products for twelve months after
installation or eighteen months after date of shipment, whichever first occurs.  Warranty costs are provided for estimated
claims and charged to cost of product sales as revenue is recognized.  Warranty obligations are also evaluated quarterly
to determine a reasonable estimate for the replacement of potentially defective materials of all energy storage systems that have
been shipped to customers.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">While the Company actively engages in monitoring and improving its
evolving battery and production technologies, there is only a limited product history and relatively short time frame available
to test and evaluate the rate of product failure.  Should actual product failure rates differ from the Company’s
estimates, revisions are made to the estimated rate of product failures and resulting changes to the liability for warranty obligations.  In
addition, from time to time, specific warranty accruals may be made if unforeseen technical problems arise.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">As of December 31, 2014 and June 30, 2014, included in the Company’s
accrued expenses were $693,568 and $731,910, respectively, related to warranty obligations.  The following is a summary
of accrued warranty activity:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">Six Months and Year Ended</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">December 31, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt">June 30, 2014</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Beginning balance</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">731,910</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">479,873</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Accruals for warranties during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">151,860</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">741,412</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Settlements during the period</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(225,815</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(673,588</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Adjustments relating to preexisting warranties</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">35,613</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">184,213</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Ending balance</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">693,568</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">731,910</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Revenue Recognition</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Revenues are recognized when persuasive evidence of a contractual
arrangement exits, delivery has occurred or services have been rendered, the seller’s price to buyer is fixed and determinable,
and collectability is reasonably assured.  The portion of revenue related to installation and final acceptance, is deferred
until such installation and final customer acceptance are completed.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">From time to time, the Company may enter into separate agreements
at or near the same time with the same customer.  The Company evaluates such agreements to determine whether they should
be accounted for individually as distinct arrangements or whether the separate agreements are, in substance, a single multiple
element arrangement.  The Company evaluates whether the negotiations are conducted jointly as part of a single negotiation,
whether the deliverables are interrelated or interdependent, whether the fees in one arrangement are tied to performance in another
arrangement, and whether elements in one arrangement are essential to another arrangement.  The Company’s evaluation
involves significant judgment to determine whether a group of agreements might be so closely related that they are, in effect,
part of a single arrangement.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Our collaboration agreements typically involve multiple elements
or deliverables, including upfront fees, contract research and development, milestone payments, technology licenses or options
to obtain technology licenses, and royalties.  For these arrangements, revenues are recognized in accordance with FASB
ASC 605-25,<i> </i>“Revenue Recognition – Multiple Element Arrangements.”  The Company’s
revenues associated with multiple element contracts is based on the selling price hierarchy, which utilizes vendor-specific objective
evidence (“VSOE”) when available, third-party evidence (“TPE”) if VSOE is not available, and if neither
is available then the best estimate of the selling price is used.  The Company utilizes best estimate for its multiple
deliverable transactions as VSOE and TPE do not exist.  To be considered a separate element, the product or service in
question must represent a separate unit under SEC Staff Accounting Bulletin 104, and fulfill the following criteria: the delivered
item(s) has value to the customer on a standalone basis; there is objective and reliable evidence of the fair value of the undelivered
item(s); and if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of
the undelivered item(s) is considered probable and substantially in our control. For arrangements containing multiple elements,
revenue from time and materials based service arrangements is recognized as the service is performed.  Revenue relating
to undelivered elements is deferred at the estimated fair value until delivery of the deferred elements.  If the arrangement
does not meet all criteria above, the entire amount of the transaction is deferred until all elements are delivered.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The portion of revenue related to engineering and development is
recognized ratably upon delivery of the goods or services pertaining to the underlying contractual arrangement or revenue is recognized
as certain activities are performed by the Company over the estimated performance period.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Revenues from government funded research and development contracts
are recognized proportionally as costs are incurred and compared to the estimated total research and development costs for each
contract.  In many cases, the Company is reimbursed only a portion of the costs incurred or to be incurred on the contract.  Government
funded research and development contracts are generally multi-year, cost-reimbursement and/or cost-share type contracts.  The
Company is generally reimbursed for reasonable and allocable costs up to the reimbursement limits set by the contract.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company charges shipping and handling fees when products are
shipped or delivered to a customer, and includes such amounts in product revenues and shipping costs in cost of sales.  The
Company reports its revenues net of estimated returns and allowances.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Total revenues of $300,654 and $865,515 were recognized for the three
and six months ended December 31, 2014, respectively.  Revenues for the three months ended December 31, 2014 were comprised
of three significant customers (94% of total revenue) and revenues for the six months ended December 31, 2014 were comprised of
two significant customers (86% of total revenue).  Total revenues of $961,456 and $2,030,578 were recognized for the
three and six months ended December 31, 2013, respectively.  Revenues for the three months ended December 31, 2013 were
comprised of three significant customers (95% of total revenue) and revenues for the six months ended December 31, 2013 were comprised
of four significant customers (91% of total revenue).</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Engineering, Development, and License Revenues</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">We assess whether a substantive milestone exists at the inception
of our agreements.  In evaluating if a milestone is substantive we consider whether:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">Substantive uncertainty exists as to the achievement of the milestone event at the inception of the arrangement;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">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;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">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);</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">There is no future performance required to earn the milestone; and</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">The consideration is reasonable relative to all deliverables and payment terms in the arrangement.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">If any of these conditions are not met, we do not consider the milestone
to be substantive and we defer recognition of the milestone payment and recognize it as revenue over the estimated period of performance,
if any.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On December 13, 2011, the Company entered into a joint development
and license agreement with a global technology company to jointly develop flow batteries.  The objective of the joint
development agreement was to develop low cost, high energy density grid scale flow battery stacks and systems that could lead to
a significant cost reduction for grid level storage.  The Company recognized revenue under this agreement upon achievement
of certain performance milestones.  The Company recognized $0 of revenue under this agreement for the three and six months
ended December 31, 2014 and $200,000 for the three and six months ended December 31, 2013.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On April 8, 2011, the Company entered into a Collaboration Agreement
(the “Collaboration Agreement”) with Honam Petrochemical Corporation, now known as Lotte Chemical Corporation (“Lotte”),
pursuant to which the Company and Lotte collaborated on the technical development of the Company’s third generation Zinc
Bromide flow battery module (the “Version 3 Battery Module”) and Lotte received a fully paid-up, exclusive and royalty-free
license to sell and manufacture the Version 3 Battery Module in Korea and a non-exclusive royalty-bearing license to sell the Version
3 Battery Module in Japan, Thailand, Taiwan, Malaysia, Vietnam and Singapore.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On December 16, 2013, the Company and Lotte entered into a Research
and Development Agreement (the “R&D Agreement”) pursuant to which the Company has agreed to develop and provide
to Lotte a Zinc Bromide chemical flow battery system, including a Zinc Bromide chemical flow battery module and related software
(the “Product”), on the terms and conditions set forth in the R&D Agreement (the “Project”).  The
Project is scheduled to continue until December 16, 2015, unless extended by the mutual agreement of the Company and Lotte.  Subject
to the satisfaction of certain specified milestones, Lotte is required to make payments to the Company under the R&D Agreement
totaling $3,000,000 over the term of the Project.  ZBB will recognize revenue based upon a Performance Based Method pursuant
to the model described in FASB ASC 980-605-25, where revenue is recognized based on the lesser of the amount of nonrefundable cash
received or the amounts due based on the proportional amount of the total effort expected to be expended on the contract that has
been provided to date as there does not exist substantial doubt that the milestones will be achieved.  The Company recognized
$186,477 of revenue under this agreement for the three and six months ended December 31, 2014, respectively and $0 of revenue under
this agreement for the three and six months ended December 31, 2013.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Additionally, on December 16, 2013, the Company and Lotte entered
into an Amended License Agreement (the “Amended License”).  Pursuant to the Amended License Agreement, the
Company granted to Lotte, (1) an exclusive and royalty-free limited license in Korea to use the Company’s Zinc Bromide flow
battery module, Zinc Bromide flow battery stack and the technical information and know how related to the intellectual property
arising from the Project (collectively, the “Technology”) to manufacture or sell a Zinc Bromide flow battery (the “Lotte
Product”) in Korea and (2) a non-exclusive (a) royalty-free limited license for Lotte and its affiliates to use the Technology
internally in all locations other than China and Korea to manufacture the Lotte Product and (b) royalty-bearing limited license
to sell the Lotte Product in all locations other than China, the United States and Korea. Lotte is required to pay the Company
a total license fee of $3,000,000 under the Amended License Agreement plus up to an additional $1,000,000 if certain specific milestones
are successfully achieved.  In addition, Lotte is required to make ongoing royalty payments to the Company equal to a
single digit percentage of Lotte’s sales of the Lotte Product outside of Korea until December 31, 2019.  The license
fees are subject to a 16.5% non-refundable Korea withholding tax.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Since the agreement date through December 31, 2014 there were $4,500,000
of payments received and $4,311,477 of revenue recognized under the Lotte agreements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company recognized $186,477 in engineering and development revenues
for the three months ended December 31, 2014 and $201,997 for the six months ended December 31, 2014.  The Company recognized
$200,000 for the three and six months ended December 31, 2013, respectively, related to collaborative agreements.  Engineering
and development costs related to the collaboration agreements totaled $59,982 and $169,145 for the three and six months ended December,
31 2014.  Engineering and development costs related to the collaboration agreements totaled $43,636 for the three and
six months ended December 31, 2013.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">As of December 31, 2014 and December 31, 2013, the Company had no
unbilled amounts from engineering and development contracts in process.  The Company had received $31,680 and $0 in customer
payments for engineering and development contracts, representing deposits in advance of performance of the contracted work, as
of December 31, 2014, and June 30, 2014, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Advanced Engineering and Development Expenses</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In accordance with FASB ASC Topic 730, “Research and Development,”
the Company expenses advanced engineering and development costs as incurred.  These costs consist primarily of materials,
labor, and allocable indirect costs incurred to design, build, and test prototype units, as well as the development of manufacturing
processes for these units.  Advanced engineering and development costs also include consulting fees and other costs.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">To the extent these costs are separately identifiable, incurred and
funded by advanced engineering and development type agreements with outside parties, they are shown separately on the condensed
consolidated statements of operations as a “Cost of engineering and development.”</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Stock-Based Compensation</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company measures all “Share-Based Payments," including
grants of stock options, restricted shares and restricted stock units to be recognized in its condensed consolidated statement
of operations based on their fair values on the grant date, which is consistent with FASB ASC Topic 718, “Stock Compensation,”
guidelines.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Accordingly, the Company measures share-based compensation cost for
all share-based awards at the fair value on the grant date and recognition of share-based compensation over the service period
for awards that are expected to vest.  The fair value of stock options is determined based on the number of shares granted
and the price of the shares at grant, and calculated based on the Black-Scholes valuation model.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company compensates its outside directors primarily with restricted
stock units (“RSUs”) rather than cash.  The grant date fair value of the restricted stock unit awards is
determined using the closing stock price of the Company’s common stock on the day prior to the date of the grant, with the
compensation expense amortized over the vesting period of restricted stock unit awards, net of estimated forfeitures.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company only recognizes expense to its statements of operations
for those options or shares that are expected ultimately to vest, using two attribution methods to record expense, the straight-line
method for grants with only service-based vesting or the graded-vesting method, which considers each performance period, for all
other awards.  See further discussion of stock-based compensation in Note 9.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Advertising Expense</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Advertising costs of $25,698 and $10,462 for the three months ended
December 31, 2014 and December 31, 2013, respectively, and advertising costs of $33,262 and $33,614  for the six months
ended December 31, 2014 and December 31, 2013, respectively, were charged to selling, general, and administrative expenses as incurred.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Income Taxes</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company records deferred income taxes in accordance with FASB
ASC Topic 740, “Accounting for Income Taxes.”  FASB ASC Topic 740 requires recognition of deferred income
tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the amounts at which they
are carried in the financial statements, based upon the enacted tax rates in effect for the year in which the differences are expected
to reverse.  The Company establishes a valuation allowance when necessary to reduce deferred income tax assets to the
amount expected to be realized.  There were no net deferred income tax assets recorded as of December 31, 2014 and June
30, 2014.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company applies a more-likely-than-not recognition threshold
for all tax uncertainties as required under FASB ASC Topic 740, which only allows the recognition of those tax benefits that have
a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s U.S. Federal income tax returns for the years
ended June 30, 2011 through June 30, 2014 and the Company’s Wisconsin and Australian income tax returns for the years ended
June 30, 2010 through June 30, 2014 are subject to examination by taxing authorities.  As of December 31, 2014, there
were no examinations in progress.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Foreign Currency</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company uses the United States dollar as its functional and reporting
currency, while the Australian dollar and Hong Kong dollar are the functional currencies of its foreign subsidiaries.  Assets
and liabilities of the Company’s foreign subsidiaries are translated into United States dollars at exchange rates that are
in effect at the balance sheet date while equity accounts are translated at historical exchange rates.  Income and expense
items are translated at average exchange rates which were applicable during the reporting period.  Translation adjustments
are accumulated in accumulated other comprehensive loss as a separate component of equity in the condensed consolidated balance
sheets.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Loss per Share</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company follows the FASB ASC Topic 260, “Earnings per Share,”
provisions which require the reporting of both basic and diluted earnings (loss) per share.  Basic earnings (loss) per
share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares
outstanding for the period.  Diluted earnings (net loss) per share reflect the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted into common stock.  In accordance with
the FASB ASC Topic 260, any anti-dilutive effects on net income (loss) per share are excluded.  For the six months ended
December 31, 2014 and December 31, 2013 there were 9,777,213 and 6,850,061 shares of common stock underlying convertible preferred
stock, options, restricted stock units and warrants that are excluded, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Concentrations of Credit Risk</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash and accounts receivable.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company maintains significant cash deposits primarily with two
financial institutions.  All deposits are fully insured as of December 31, 2014.  The Company has not previously
experienced any losses on such deposits.  Additionally, the Company performs periodic evaluations of the relative credit
ratings of these institutions as part of its banking strategy.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Concentrations of credit risk with respect to accounts receivable
are limited due to accelerated payment terms in current customer contracts and creditworthiness of the current customer base.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Use of Estimates</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The preparation of financial statements in conformity with US GAAP
requires management to make estimates and assumptions.  These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amount of revenues and expenses during the reporting period.  It is reasonably possible that the estimates we have made
may change in the near future.  Significant estimates underlying the accompanying condensed consolidated financial statements
include those related to:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">the timing of revenue recognition;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">the allowance for doubtful accounts;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">provisions for excess and obsolete inventory;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">the lives and recoverability of property, plant and equipment and other long-lived assets, including goodwill;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">contract costs, losses, and reserves;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">warranty obligations;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">income tax valuation allowances;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">stock-based compensation; and</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px"><font style="font-size: 8pt">·</font></td>
<td><font style="font-size: 8pt">valuation of warrants.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Reclassifications</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Certain amounts previously reported have been reclassified to conform
to the current presentation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Segment Information</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company has determined that it operates as one reportable segment.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Recent Accounting Pronouncements</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">From time to time, new accounting pronouncements are issued by the
FASB or other standard setting bodies that are adopted by the Company as of the specified effective date.  Unless otherwise
discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material
impact on our financial position or results of operations upon adoption.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In January 2015, the FASB issued ASU 2015-01 – Income Statement
– Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept
of Extraordinary Items.  The amendment was issued to reduce complexity in the accounting standards by eliminating the
concept of extraordinary items from US GAAP.  The amendment is effective for annual periods ending after December 15,
2015.  The change may be applied prospectively or retrospectively to all prior periods presented in the financial statements.  Early
adoption is permitted.  The Company does not expect adoption of this guidance to have a significant impact on its consolidated
financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In August 2014, the FASB issued ASU 2014-15 – Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40).  The update requires
management to perform a going concern assessment if there is substantial doubt about an entity’s ability to continue as a
going concern within one year of the financial statement issuance date.  Under the new standard, the definition of substantial
doubt incorporates a likeliness threshold of “probable” that is consistent with the current use of the term defined
in US GAAP for loss contingencies (Topic 450 – Contingencies).  Management will need to consider conditions that
are known and reasonably knowable at the financial statement issuance date and determine whether the entity will be able to meet
its obligations within the one-year period.  Additional disclosures are required if it is probable that the entity will
be unable to meet its current obligations.  The amendments in this ASU will be effective for annual periods ending after
December 15, 2016.  Early adoption is permitted.  The Company does not expect adoption of this guidance to
have a significant impact on its consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In June 2014, the FASB issued ASU 2014-12 - Compensation –
Stock Compensation (Topic 718).  The amendments require that entities should treat performance targets that can be met
after the requisite service period of a share-based payment award as performance conditions that affect vesting and, accordingly,
the performance target should not be reflected in estimating the grant-date fair value of the award.  Compensation expense
should be recognized in the period in which it becomes probable that the performance target will be achieved.  ASU 2014-12
is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015<b>.  </b>The
Company is required to adopt this standard beginning July 1, 2016.  ASU 2014-12 does not contain any new disclosure requirements.  The
Company does not expect the adoption of ASU 2014-12 to have a material effect on our financial position, results of operations
or cash flows.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In May 2014, the FASB issued ASU 2014-09 – Revenue from Contracts
with Customers (Topic 606).  The amendments outline a single comprehensive model for entities to use in accounting for
revenue arising from contracts with customers and supersede most current revenue recognition guidance, including industry-specific
guidance.  The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services.  In applying the revenue model to contracts within its scope, an entity identifies the contract(s)
with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction
price to the performance obligations in the contract and recognizes revenue when the entity satisfies a performance obligation.  ASU
2014-09, which includes additional disclosure requirements regarding revenue, cash flows and obligations related to contracts with
customers, will be effective for annual reporting periods beginning after December 15, 2016.  Early adoption is not permitted.  The
guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements
in the year of adoption, through a cumulative adjustment.  The Company is currently evaluating the effect that implementation
of this update will have on its consolidated financial position and results of operations upon adoption.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In April 2014, the FASB issued ASU 2014-08 -<i> </i>Presentation
of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures
of Disposals of Components of an Entity.  The update changes the requirements for reporting discontinued operations in
Subtopic 205-20.  To be classified as a discontinued operation, the disposal of a component or group of components must
represent a strategic shift that has, or will have, a major effect on an entity’s operations and financial results.  Examples
include a disposal of a major geographic area, a major line of business or a major equity method investment.  The amendments
in this ASU are effective prospectively for reporting periods beginning on or after December 15, 2014, with early adoption permitted.  The
adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In July 2013, the FASB issued ASU 2013-11 – Presentation of
an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which
requires an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net
operating loss carryforward, similar tax loss, or a tax credit carryforward.  To the extent the tax benefit is not available
at the reporting date under the governing tax law or if the entity does not intend to use the deferred tax asset for such purpose,
the unrecognized tax benefit should be presented as a liability and not combined with deferred tax assets.  ASU 2013-11
is effective for annual periods, and interim periods within those years, beginning after December 15, 2013.  The amendments
are to be applied to all unrecognized tax benefits that exist as of the effective date and may be applied retrospectively to each
prior reporting period presented.  The adoption of this pronouncement did not have a material impact on the Company’s
consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In April 2013, the FASB issued ASU 2013-07 – Presentation of
Financial Statements (Topic 205) – Liquidation Basis of Accounting.  The amendments require an entity to prepare
its financial statements using the liquidation basis of accounting when liquidation is imminent.  Liquidation is imminent
when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by
the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan
will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy).  If
a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example,
limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs
from the plan for liquidation that was specified at the entity’s inception.  The amendments require financial statements
prepared using the liquidation basis of accounting to present relevant information about an entity’s expected resources in
liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation.  The entity
should include in its presentation of assets any items it had not previously recognized under US GAAP but that it expects to either
sell in liquidation or use in settling liabilities (for example, trademarks).  The amendments are effective for entities
that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting
periods therein.  Entities should apply the requirements prospectively from the day that liquidation becomes imminent.  Early
adoption is permitted.  The adoption did not have an impact on the Company’s consolidated financial statements
in its present condition.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In March 2013, the FASB issued ASU 2013-05 – Foreign Currency
Matters (Topic 830) – Parent’s Accounting for the Cumulative Translation Adjustment upon derecognition of Certain Subsidiaries
or Group of Assets within a Foreign Entity or of an Investment in a Foreign Entity.  These amendments provide guidance
on releasing cumulative translation adjustments when a reporting entity (parent) ceases to have a controlling financial interest
in a subsidiary or a group of assets that is a non-profit activity or a business within a foreign entity.  In addition,
these amendments provide guidance on the release of cumulative translation adjustments in partial sales of equity method investments
and in step acquisitions.  The amendments are effective for fiscal years and interim reporting periods within those years,
beginning after December 15, 2013.  The amendments should be applied prospectively to derecognition events occurring
after the effective date.  Prior periods should not be adjusted.  Early adoption is permitted.  If
an entity elects to early adopt the amendments, it should apply them as of the beginning of the entity’s fiscal year of adoption.  The
Company was required to adopt this standard beginning July 1, 2014.  The adoption of this pronouncement did not have
a material impact on the Company’s consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In February 2013, the FASB issued ASU 2013-04 – Liabilities
(Topic 405) – Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation
is Fixed at the Reporting Date.  These amendments provide guidance for the recognition, measurement, and disclosure of
obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope
of this guidance is fixed at the reporting date, except for obligations addressed within existing guidance in US GAAP.  Examples
of obligations within this guidance are debt arrangements, other contractual obligations, and settled litigation and judicial rulings.  The
amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.  These
amendments shall be applied retrospectively to all prior periods presented for those obligations within the scope of this Subtopic
that exist at the beginning of an entity’s fiscal year of adoption.  Early adoption is permitted.  The
adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Stock-Based Compensation</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company measures all “Share-Based Payments," including
grants of stock options, restricted shares and restricted stock units to be recognized in its condensed consolidated statement
of operations based on their fair values on the grant date, which is consistent with FASB ASC Topic 718, “Stock Compensation,”
guidelines.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Accordingly, the Company measures share-based compensation cost for
all share-based awards at the fair value on the grant date and recognition of share-based compensation over the service period
for awards that are expected to vest.  The fair value of stock options is determined based on the number of shares granted
and the price of the shares at grant, and calculated based on the Black-Scholes valuation model.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company compensates its outside directors primarily with restricted
stock units (“RSUs”) rather than cash.  The grant date fair value of the restricted stock unit awards is
determined using the closing stock price of the Company’s common stock on the day prior to the date of the grant, with the
compensation expense amortized over the vesting period of restricted stock unit awards, net of estimated forfeitures.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company only recognizes expense to its statements of operations
for those options or shares that are expected ultimately to vest, using two attribution methods to record expense, the straight-line
method for grants with only service-based vesting or the graded-vesting method, which considers each performance period, for all
other awards.  See further discussion of stock-based compensation in Note 9.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
351142
356065
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Engineering, Development, and License Revenues</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">We assess whether a substantive milestone exists at the inception
of our agreements.  In evaluating if a milestone is substantive we consider whether:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Substantive uncertainty exists as to the achievement of the milestone event at the inception of the arrangement;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">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;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">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);</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">There is no future performance required to earn the milestone; and</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 30px; font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">The consideration is reasonable relative to all deliverables and payment terms in the arrangement.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">If any of these conditions are not met, we do not consider the milestone
to be substantive and we defer recognition of the milestone payment and recognize it as revenue over the estimated period of performance,
if any.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On December 13, 2011, the Company entered into a joint development
and license agreement with a global technology company to jointly develop flow batteries.  The objective of the joint
development agreement was to develop low cost, high energy density grid scale flow battery stacks and systems that could lead to
a significant cost reduction for grid level storage.  The Company recognized revenue under this agreement upon achievement
of certain performance milestones.  The Company recognized $0 of revenue under this agreement for the three and six months
ended December 31, 2014 and $200,000 for the three and six months ended December 31, 2013.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On April 8, 2011, the Company entered into a Collaboration Agreement
(the “Collaboration Agreement”) with Honam Petrochemical Corporation, now known as Lotte Chemical Corporation (“Lotte”),
pursuant to which the Company and Lotte collaborated on the technical development of the Company’s third generation Zinc
Bromide flow battery module (the “Version 3 Battery Module”) and Lotte received a fully paid-up, exclusive and royalty-free
license to sell and manufacture the Version 3 Battery Module in Korea and a non-exclusive royalty-bearing license to sell the Version
3 Battery Module in Japan, Thailand, Taiwan, Malaysia, Vietnam and Singapore.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On December 16, 2013, the Company and Lotte entered into a Research
and Development Agreement (the “R&D Agreement”) pursuant to which the Company has agreed to develop and provide
to Lotte a Zinc Bromide chemical flow battery system, including a Zinc Bromide chemical flow battery module and related software
(the “Product”), on the terms and conditions set forth in the R&D Agreement (the “Project”).  The
Project is scheduled to continue until December 16, 2015, unless extended by the mutual agreement of the Company and Lotte.  Subject
to the satisfaction of certain specified milestones, Lotte is required to make payments to the Company under the R&D Agreement
totaling $3,000,000 over the term of the Project.  ZBB will recognize revenue based upon a Performance Based Method pursuant
to the model described in FASB ASC 980-605-25, where revenue is recognized based on the lesser of the amount of nonrefundable cash
received or the amounts due based on the proportional amount of the total effort expected to be expended on the contract that has
been provided to date as there does not exist substantial doubt that the milestones will be achieved.  The Company recognized
$186,477 of revenue under this agreement for the three and six months ended December 31, 2014, respectively and $0 of revenue under
this agreement for the three and six months ended December 31, 2013.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Additionally, on December 16, 2013, the Company and Lotte entered
into an Amended License Agreement (the “Amended License”).  Pursuant to the Amended License Agreement, the
Company granted to Lotte, (1) an exclusive and royalty-free limited license in Korea to use the Company’s Zinc Bromide flow
battery module, Zinc Bromide flow battery stack and the technical information and know how related to the intellectual property
arising from the Project (collectively, the “Technology”) to manufacture or sell a Zinc Bromide flow battery (the “Lotte
Product”) in Korea and (2) a non-exclusive (a) royalty-free limited license for Lotte and its affiliates to use the Technology
internally in all locations other than China and Korea to manufacture the Lotte Product and (b) royalty-bearing limited license
to sell the Lotte Product in all locations other than China, the United States and Korea. Lotte is required to pay the Company
a total license fee of $3,000,000 under the Amended License Agreement plus up to an additional $1,000,000 if certain specific milestones
are successfully achieved.  In addition, Lotte is required to make ongoing royalty payments to the Company equal to a
single digit percentage of Lotte’s sales of the Lotte Product outside of Korea until December 31, 2019.  The license
fees are subject to a 16.5% non-refundable Korea withholding tax.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Since the agreement date through December 31, 2014 there were $4,500,000
of payments received and $4,311,477 of revenue recognized under the Lotte agreements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company recognized $186,477 in engineering and development revenues
for the three months ended December 31, 2014 and $201,997 for the six months ended December 31, 2014.  The Company recognized
$200,000 for the three and six months ended December 31, 2013, respectively, related to collaborative agreements.  Engineering
and development costs related to the collaboration agreements totaled $59,982 and $169,145 for the three and six months ended December,
31 2014.  Engineering and development costs related to the collaboration agreements totaled $43,636 for the three and
six months ended December 31, 2013.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">As of December 31, 2014 and December 31, 2013, the Company had no
unbilled amounts from engineering and development contracts in process.  The Company had received $31,680 and $0 in customer
payments for engineering and development contracts, representing deposits in advance of performance of the contracted work, as
of December 31, 2014, and June 30, 2014, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Advanced Engineering and Development Expenses</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In accordance with FASB ASC Topic 730, “Research and Development,”
the Company expenses advanced engineering and development costs as incurred.  These costs consist primarily of materials,
labor, and allocable indirect costs incurred to design, build, and test prototype units, as well as the development of manufacturing
processes for these units.  Advanced engineering and development costs also include consulting fees and other costs.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">To the extent these costs are separately identifiable, incurred and
funded by advanced engineering and development type agreements with outside parties, they are shown separately on the condensed
consolidated statements of operations as a “Cost of engineering and development.”</p>
152596
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 90%"><font style="font-size: 8pt">2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 7%; text-align: right"><font style="font-size: 8pt">176,811</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">361,042</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">2017</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">371,383</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">2018</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">761,037</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom"><font style="font-size: 8pt">2019</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom; text-align: right"><font style="font-size: 8pt">42,917</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">2020 and thereafter</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">509,097</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,222,287</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>