Abtech Holdings, Inc. Reports Fiscal Year 2012 Financial Results

Abtech Holdings, Inc. (OTCQB: ABHD) ("AbTech" or the "Company"), a developer, manufacturer and distributor of patented innovative environmental technologies and solutions addressing issues of water pollution and contamination, today reported financial results for its year ended December 31, 2012.  During the year, AbTech devoted much of its effort to preparing its operations for anticipated order flow and focused its business development efforts on procuring projects. The Company's order flow was significantly impacted by structural and regulatory events in its initial target market areas in 2012, especially in Southern California; fortunately those issues have largely been resolved. In the fourth quarter, AbTech also began diversifying and expanding its business development operations and those actions began yielding results in early 2013.

 

"While a great deal of preparation for significant order flow occurred in 2012, our revenue objective for the year, as previously disclosed during our third quarter 2012 financial report and conference call, was not met.  Although obviously disappointing, the projects expected in 2012 are not lost but delayed opportunities that are growing in number. We lined up many projects during 2012; however, the unique turnkey solution the Company provided required more time for cities to understand and embrace than we anticipated.  Given challenging economic conditions, many cities postponed much needed projects until there was clarity on all funding sources, thus delaying municipalities from starting new infrastructure projects, such as Public Private Partnership (P3s), as planned in 2012.  Fortunately, a shift is now occurring.  First, the incubation period involved with the adoption of a new technology with unique funding sources is well underway.  Second, federal monies have begun to come through for heavy infrastructure rebuilding in the eastern half of the U.S.  Today, for the first time in the Company's history, our immediate storm water proposal pipeline at RFP stages exceeds $10 million," commented Glenn Rink, founder and CEO of AbTech.

 

During the year, the Company:

- Received notification of its Smart Sponge products being included in a storm water installation in the Great Lakes area and received its first orders from its recently announced Australia distributorship; 

- Developed the country's first comprehensive storm water management program and began rolling out this offering nationally, also receiving a first Letter of Intent from a city intending to move forward with such a public private partnership (P3);

- Positioned its water treatment solution in the Oil & Gas industry, began building its proposal pipeline and initiated structuring distributorships and teaming relationships;

- Launched a new engineering subsidiary, AEWS Engineering, which established relationships with North Carolina State University, a top global storm water engineering university, and the National Environmental Services Center;

- Identified material production cost savings and explored alternative manufacturing processes that could provide a 5 to 10-fold capacity increase at a cost of under $50,000;

- Strengthened its Advisory Board and Board of Directors with notable industry leaders and strategic experts;

- Accomplished the release of an independent, five-year "end of pipe" study by the town of Babylon (Long Island Sound), which further validates the effectiveness of the AbTech Smart Sponge(R) filtration technology for municipal use;

- Completed a laboratory based study with the Environment Agency in the UK showing a 97% - 100% reduction of pathogens with Smart Sponge(R) Plus;

- Received a Notice of Allowance from the Canadian Intellectual Property Office for an additional patent for Smart Sponge(R)antimicrobial technology;

- Strengthened its balance sheet and eliminated debt totaling approximately $7.1 million, requiring only $275,000 of capital to retire debt of holders that opted not to convert into the Company's common stock; and

- Received several notable awards recognizing Smart Sponge(R) as an effective filtration technology including the Artemis Top 50 Water Tech Listing and the World Shale Oil & Gas industry a "Technological Innovator" award.

In addition, on March 20, 2013, AbTech was named Water Management Company of the Year at the Gulf Coast Oil & Gas Awards in Houston, Texas. The Gulf Coast Oil & Gas Awards recognizes advancements made in the key areas of the environment, efficiency, innovation and corporate social responsibility and health & safety within the industry.  AbTech's Frac Flowback and Produced Water Treatment Solutions combine best-of-breed available technologies, innovative systems engineering, and AbTech's proprietary Smart Sponge(R) de-oiling technology to remove oil and other contaminants from frac and produced water at oilfield production sites. Proven to remove up to 99.9% of hydrocarbons from produced and frac water, AbTech's Smart Sponge(R) media also has a high BTU value once saturated, and has the potential to be used as an energy source for heat, steam and power generation. In addition, spent Smart Sponge, when available in sufficient quantities, can be recycled into bunker quality fuel to be sold back to refineries. This is accomplished through a solid-to-liquid conversion process known as pyrolysis.

 

Mr. Rink continued, "Growing environmental and political pressure is ensuring global focus on fresh water scarcity and the necessity of water reuse in industrial and commercial processes.  Our technology is highly versatile, thereby providing multiple, immediate opportunities in areas such as the oil and gas industry. In positioning for growth, we have put together a strong business development team that is seeing results, including hiring a seasoned oil and gas professional in Houston to head up on-the-ground business development for our fracking and produced water effort.  We have already begun signing teaming agreements with well established, service companies, and we anticipate initial orders to follow shortly.  In addition, we have been reviewing several notable international opportunities.  We announced our Australian distributorship at year end and have now shipped our second order to them.  We anticipate more orders to follow.  Importantly, the European Union has passed significant regulations under the Water Framework Directive requiring that all waterways reach "good status" by 2015.  Non-compliance will result in significant fines.  We are pursuing several new initiatives in the European Union and anticipate a great deal more to follow.  In sum, although 2012 was not the year we expected, we strongly believe 2013 will be our defining year."

 

For the full year 2012, AbTech reported revenues of $717,000, an increase from $537,000 for the previous year.  Approximately 34 percent of 2012 revenue was generated from replaced or expanded existing installations of Smart Sponge products.  The Company expects significant sales growth to materialize in 2013 as funding decisions are finalized, economic conditions improve, programs for public-private partnerships are approved and further expanded, and opportunities to enter into new markets for produced water and other industrial applications of the Smart Sponge technology are pursued. 

 

The Company reported a net loss of $(10.4) million or $(0.19) per basic share for the full year 2012, which included interest expense of $4.2 million and a loss of $944,000 related to the valuation of the warrant liability. This compares to a net loss of$(5.4) million or $(0.11) per basic share for the full year 2011, which included interest expense of $2.1 million and a gain of$242,000 attributed to the valuation of the warrant liability.  AbTech reported a loss from operations of $(5.3) million in 2012 versus a loss from operations of $(3.7) million during the prior year.

 

AbTech's gross profit on revenue totaled $228,000 in 2012, yielding a gross margin of 32 percent, compared to a gross margin of 14 percent in the prior year.  Current gross margins reflect low production levels as fixed overhead costs are absorbed over a relatively small production base.  The Company operated at approximately 3 percent of capacity in 2012.  At full capacity, AbTech anticipates gross margins in excess of 50 percent.

 

Operating expenses during 2012 totaled $5.5 million, an increase of approximately $1.8 million (48%) over the prior year.  A significant portion of the increase was attributed to costs associated with rising selling, general and administrative ("SG&A") expenses due to an expanded business development effort that included hiring nine additional employees; establishing the Company's engineering subsidiary, AEWS Engineering; the launching of an investor relations program and government affairs (federal/state/local levels) consultants; as well as the vesting in 2012 of stock options granted to officers and directors of the Company over the past two years.  Expenses related to travel and trade show events, increased by approximately $146,000 in 2012. In addition, AbTech increased its research and development costs by $218,000 (34%) due primarily to lab and field testing costs associated with the oil and gas sector, including fees for lab analysis, equipment rental and travel costs.  While AbTech anticipates operating expenses to increase relative to increased business activity, such increases will be closely managed and timed to revenue growth to maximize operating margins.

 

The Company incurred interest expense in 2012 of $4.2 million as compared to $2.1 million in 2011.  Of the $4.2 million in interest expense, $3.5 million was related to non-cash charges for derivative liability ($1.4 million), imputed interest on promissory notes issued with beneficial conversion terms ($1.2 million), and amortization of deferred financing costs related to the private offerings ($900,000).  Interest accrued on notes outstanding and other finance charges totaled $700,000. 

 

At December 31, 2012, the Company had cash and cash equivalents of $2.5 million, accounts receivable of $74,000 and inventory of $398,000.  Total assets during 2012 increased approximately $568,000 to $3.2 million.  The Company's debt was substantially reduced during the fourth quarter of 2012.  On December 31, 2012, the Company's short term debt totaled approximately $1.8 million, net of discounts, a decrease of approximately $2.8 million over the balance of short-term debt atSeptember 30, 2012.  Long term debt decreased by approximately $1.3 million during the fourth quarter and totaled approximately $531,000 at year end.  During 2012, the Company eliminated debt totaling approximately $7.1 million, requiring only $275,000 of cash to retire debt of holders that opted not to convert into the Company's common stock.

 

As of December 31, 2012, AbTech had approximately 64.6 million shares of common stock outstanding, an increase of 17.5 million shares from year end 2011, predominantly due to the conversion of convertible notes into common stock of the Company, and new shares issued in the $3.7 million equity private offering that occurred in September 2012.  AbTech's fully diluted shares totaled approximately 92.0 million (inclusive of all options, some of which are performance based; warrants; convertible preferred stock of subsidiary and convertible debt).  As of December 31, 2012, the Company has federal tax loss carry forwards of approximately $33.9 million and state tax loss carry forwards of approximately $16.2 million, which expire through 2032 and 2017, respectively.

 

Conference Call Details:

Date/Time: Thursday, March 28, 2013 11:00 a.m. (ET)Telephone Number: 800-860-2442International Dial-In Number: 412-858-4600Internet Access: http://www.videonewswire.com/event.asp?id=92935or www.abtechindustries.com

It is recommended that participants phone-in at least 10 minutes before the call is scheduled to begin. A replay of the conference call in its entirety will be available approximately one hour after its completion via the Internet access link above.

 

Investor Contact:

Yvonne L. ZappullaManaging DirectorGrannus Financial Advisors, Inc.212-681-4108Yvonne@GrannusFinancial.com

 

or

 

Lane J. CastletonChief Financial OfficerAbtech Holdings, Inc.480-874-4000lcastleton@abtechindustries.com

 

ABOUT ABTECH HOLDINGS, INC. (OTCBB: ABHD) AND ABTECH INDUSTRIES, INC.

 

AbTech Industries, Inc. (a subsidiary of AbTech Holdings Inc.) is a full-service environmental technologies and engineering firm dedicated to providing innovative solutions to communities, industry and governments addressing issues of water pollution and contamination. Its products are based on polymer technologies capable of removing hydrocarbons, sediment and other foreign elements in storm water runoff (ponds, lakes and marinas), flowing water (curbside drains, pipe outflows, rivers and oceans), and industrial process and wastewater. AbTech's offerings include the ground-breaking new antimicrobial technology called Smart Sponge(R) Plus. This technology is effective in reducing coliform bacteria found in storm water, industrial wastewater, and municipal wastewater. Smart Sponge(R) Plus is registered with the Environmental Protection Agency (Registration #86256-1). AbTech's teams of water treatment technology experts, civil and environmental engineers, and field operations specialists develop solutions to improve the quality of our limited water resources. AEWS Engineering (a subsidiary of Abtech Holdings, Inc.), is an independent engineering civil and environmental engineering firm partnered with top research and engineering universities. By focusing on bringing new engineering and technology innovation to the water infrastructure sector, AEWS is positioned to be at the forefront of storm water Best Management Practices development and to deliver the latest in design excellence to its customers. For more information please visit www.abtechindustries.com. More information on AEWS Engineering can be found at www.aewsengineering.com.

 

This news release contains "forward-looking statements" which are not purely historical and include any statements regarding beliefs, plans, expectations or intentions regarding the future. Such forward-looking statements include, among other things, the development, costs and results of new business opportunities. Actual results could differ from those projected in any forward-looking statements due to numerous factors. Such factors include, among others, the inherent uncertainties associated with new projects. These forward-looking statements are made as of the date of this news release, and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Although we believe that any beliefs, plans, expectations and intentions contained in this press release are reasonable, there can be no assurance that any such beliefs, plans, expectations or intentions will prove to be accurate. Investors should consult all of the information set forth herein and should also refer to the risk factors disclosure outlined in our annual report on Form 10-K for the most recent fiscal year, our quarterly reports on Form 10-Q and other periodic reports filed from time-to-time with the Securities and Exchange Commission.

 

AbTech Company Contact:   investors@abtechindustries.com

*** Financial Statements Follow   ***

 

 

ABTECH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

December 31,

 

 

2012

 

2011

ASSETS

 

 

 

Current assets:

 

 

 

 

    Cash and cash equivalents

$      2,543,898

 

$      1,386,502

 

    Accounts receivable trade, net

74,180

 

108,170

 

    Accounts receivable related party, net

-

 

2,032

 

    Inventories, net

397,804

 

528,009

 

    Deferred charges, net

10,128

 

439,203

 

    Prepaid expenses and other current assets

14,077

 

37,988

Total current assets

3,040,087

 

2,501,904

 

 

 

 

Fixed assets, net

72,981

 

49,485

Security deposits

33,940

 

17,977

Deferred charges, net

4,892

 

15,020

Total assets

$     3,151,900

$

$     2,584,386

 

 

 

 

LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY)

 

 

 

Current liabilities:

 

 

 

 

    Accounts payable

$       263,379

 

$        483,879

 

    Accounts payable related party

52,636

 

29,703

 

    Loan from shareholders

9,000

 

9,000

 

    Convertible promissory notes, net of discounts

620,000

 

3,758,082

 

    Convertible promissory notes related party, net of discounts

1,185,000

 

578,681

 

    Capital lease obligation current portion

3,739

 

-

 

    Customer deposits

41,584

 

38,505

 

    Accrued interest payable

28,676

 

126,232

 

    Accrued expenses

190,782

 

122,790

Total current liabilities        

2,394,796

 

5,146,872

 

 

 

 

Due to related party

96,181

 

101,524

Convertible promissory notes noncurrent portion

6,000

 

155,000

Convertible promissory notes related party noncurrent portion

525,000

 

1,881,000

Current lease obligation noncurrent portion

6,654

 

-

Warrant liability

-

 

498,976

Total liabilities

3,028,631

 

7,783,372

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders' equity (deficiency)

 

 

 

 

    Common stock, $0.001 par value; 300,000,000 authorized shares;

 

 

 

 

           64,638,372 and 47,160,435 shares issued and outstanding at

 

 

 

 

           December 31, 2012 and 2011, respectively

64,638

 

47,160

 

    Additional paid-in capital

40,372,764

 

24,651,344

 

    Non-controlling interest

(1,814,388)

 

(1,674,105)

 

    Accumulated deficit

(38,499,745)

 

(28,223,385)

Total stockholders' equity (deficiency)

123,269

 

(5,198,986)

Total liabilities and stockholders' equity (deficiency)

$      3,151,900

 

$      2,584,386

 

ABTECH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

For the Years Ended December 31,

 

 

 

2012

 

 

2011

 

 

 

 

 

 

 

Net revenues

 

 

$        716,691

 

 

$      537,152

Cost of  revenues

 

 

488,281

 

 

458,006

Gross profit

 

 

228,410

 

 

79,146

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

     Selling, general and administrative

 

 

4,687,011

 

 

3,107,596

     Research and development

 

 

851,999

 

 

634,109

Total operating expenses

 

 

5,539,010

 

 

3,741,705

 

 

 

 

 

 

 

Operating loss

 

 

(5,310,600)

 

 

(3,662,559)

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

     Interest expense

 

 

(4,189,707)

 

 

(2,078,704)

     Gain on extinguishment of debt

 

 

-

 

 

115,000

     Gain (loss) on valuation of warrant liability

 

 

(944,291)

 

242,052

     Other income (expense)

 

 

27,955

 

 

(1,592)

Total other income (expense), net

 

 

(5,106,043)

 

 

(1,723,244)

 

Net loss before income taxes

 

 

 

(10,416,643)

 

 

 

(5,385,803)

Provision for income taxes

 

 

-

 

 

-

Net loss

 

 

(10,416,643)

 

 

(5,385,803)

Net loss attributable to non-controlling interest

 

 

(596,315)

 

 

(489,655)

Net loss attributable to controlling interest

 

 

$    (9,820,328)

 

 

$   (4,896,148)

Basic and diluted loss per common share

 

 

$            (0.19)

 

 

$           (0.11)

Basic and diluted weighted average number

of shares outstanding

 

 

 

52,567,978

 

 

 

44,160,713

 

SOURCE Abtech Holdings, Inc.

 

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