Abtech Holdings, Inc. Reports Fiscal Year 2015 Financial Results

SCOTTSDALE, Ariz., March 30, 2016 /PRNewswire/ -- Abtech Holdings, Inc. (OTC QB: ABHD) ("AbTech" or the "Company"), an environmental technologies firm dedicated to providing innovative solutions to communities, industry and governments addressing issues of water pollution and contamination, today reported financial results for its full year ended December 31, 2015.

Key Full Year and Fourth Quarter 2015 Financial Results Summary

• Revenues for the full year 2015 decreased 16% to $513,000 from the same period in the prior year as the Company redirected its focus towards expanding industrial and commercial opportunities and bringing new technologies to market.  Revenues during the fourth quarter 2015 totaled $141,000, a 40% improvement over the third quarter of 2015.
• Gross profit for the full year 2015 totaled $62,000 representing a 12% gross margin.  Gross profit generated in the fourth quarter 2015 was $33,000 (23% gross margin).
• Operating expenses increased by approximately 7% to $6 million for the full year of 2015 compared to the same period in the prior year.  Fourth quarter operating expenses totaled approximately $1.5 million in 2015, a 9% increase over the third quarter of 2015.
• Operating loss for the full year 2015 increased $453,000 or 8.3% over the same period of the prior year to $5.9 million.  Legal fees in 2015 totaled $1.4 million compared to $177,000 in the prior year.
• During 2015, the Company raised approximately $2.6 million from the issuance of secured promissory notes, $875,000 of which was used for debt repayment, and in November 2015, raised $2.55 million from the issuance of common stock.
• In November 2015, $10.8 million of AbTech's outstanding debt was converted into approximately 359 million shares of common stock.  The Company's remaining debt totaled $1.1 million at December 31, 2015. 
• Senior personnel appointments:

Upen Bharwada, Chief Technology Officer (May 8) – a senior executive known globally in the water and waste water industries with notable expertise in liquid separation technologies holding key Research and Chief Operating positions at DOW Chemical, GE Water, Hydranautics (Nitto Group Company), and Hydration Technology Innovations.

Jeffrey Gutierrez, VP Sales and Business Development (August 3) – One of three new hires of highly experienced water industry professionals with many years of experience at firms such as US Filter, Siemens and Evoqua.

Dipak P. Jogia, Board of Directors (February 2016) – Mr. Jogia is the Managing Partner and Co-Founder of Highmore, an alternative asset manager, and serves as investment advisor to the Hugo Neu Corporation, the owner of approximately 13% of AbTech's outstanding common stock. Prior positions: Head of Alternative Investments Research at Oppenheimer & Co.; Partner at FrontPoint Partners, a multi-strategy hedge fund partnership based in Greenwich, Connecticut. Holds B.A. in History, a postgraduate Diploma in Economics/MSc in Economic History-London School of Economics and Political Science.

"To the general public 2015 marked a year overshadowed by legal events surrounding the federal investigation of the New York State Senate Majority Leader and the related suspension of AbTech's contract with Nassau County.  Significant executive management and Board time was consumed during the year with the developments in New York, including the Company's responses to subpoenas received from the U.S. Court for the Southern District of New York ("USDC") and the Securities and Exchange Commission ("SEC").  These events raised questions for many about the future of the Company.  However, as it turns out, 2015 was a year of significant progress," commented Jonathan Thatcher, chief operating officer of AbTech.  "During the year we expanded our business focus towards industrial and commercial markets, hiring proven technical and sales talent to support this effort; increased our product offering with our new heavy metals media and evaporative technology; restructured our balance sheet, converting approximately 90% of our debt to equity; reduced operating costs and focused our resources." 

AbTech's push into the industrial/commercial market verticals continues to go very well.  The main solutions being marketed are: hydrocarbon removal, heavy metals removal, phosphorous removal, and process water systems.  To support these efforts, a direct salesperson with 30 years of experience was added in December 2015 for the Eastern part of the country and a direct salesperson with 35 years of experience was added in January 2016 for the Western part of the country.  Currently, the Company has multiple pilots underway and/or bids outstanding touching all of the categories.  Pipeline opportunities, near-term funnel opportunities and win rate are being tracked and the Company looks forward to reporting on those as the year progresses.  AbTech will be adding additional technical resources in process engineering and project management to support the size, scope and complexity necessary to shepherd these projects through pilot, engineering, installation and commissioning.

Similarly, our stormwater opportunity pipeline has continued to increase substantially and additional direct sales resources will be added in 2016.  Key to the stormwater strategy in 2016 with the increased sales efforts is the launch of our nutrient removal products based on the integration of the heavy metals technology with Smart Sponge.  These products are specifically targeted for areas with intense regulatory oversight and pressure to reduce sediment and nutrients flowing into key water bodies such as the Chesapeake Bay and the Great Lakes.  AbTech is currently field trialing the solutions and collecting the necessary data for third-party certifying bodies such as NJCAT certification. 

Opportunistically, AbTech has pursued development of a low cost onsite vaporization technology designed to treat produced water, including frac flowback water, reducing the volume by greater than 80% and returning the water back to the environment in the form of water vapor.  This technology is currently being manufactured, tested and trialed.  The project experienced some delays as component engineering was completed, and is now scheduled to field trial in the second quarter of 2016.  Presales efforts, contingent on successful demonstration of the technology, have been strong.

For the full year 2015, AbTech reported revenues of $513,000 compared to revenue of $607,000 for the full year 2014.  The May 2015 suspension of the Nassau County project following the announcement of the federal investigation of a New York state senator and his son, who had acted as a consultant to the Company, contributed to the 16% decrease in year over year revenue.  Given negative publicity surrounding these events and the difficulty encountered in moving other municipal stormwater projects forward in the face of continued funding constraints for new municipal and federal facility stormwater projects, AbTech has hastened its efforts to diversify its revenue base in the commercial and industrial markets, expand its opportunities by bringing new technologies to market, while continuing to support stormwater product sales through direct sales staff and through distributors in international markets.  Although the Company's redirected sales efforts did not have a significant impact on revenue in 2015, progress made by the Company in treating produced water for the oil & gas industry, as well as treating water contaminated by heavy metals, is creating a number of commercial pilots in early 2016.

The Company reported a net loss attributable to controlling interest of $(9.8) million or $(0.11) per basic share for the full year 2015, which included interest expense of $1.4 million and debt conversion expense of $3.2 million. This compares to a net loss attributable to controlling interest of $(5.8) million or $(0.09) per basic share for the full year 2014, which included interest expense of $1.0 million.  AbTech reported a loss from operations of $(5.9) million in 2015 versus a loss from operations of $(5.4) million in the prior year.

AbTech's gross profit on revenue totaled approximately $62,000 in 2015, yielding a gross margin of 12%, compared to a gross margin of 21% in the prior year.  The gross margin in 2015 and 2014 was adversely affected by the continued cost of excess production capacity, as the Company operated at approximately just 2% of manufacturing capacity. AbTech's current manufacturing facility is capable of producing approximately 75,000 pounds of Smart Sponge material per month, which at current product prices could generate up to $20 million in annual revenue.  The Company expects to realize blended gross margin rates that vary, at the low end, from that of a typical engineering, procurement, and construction management contractor, of approximately 10% to 20%, to margins at the high end of over 50% on sales of products that incorporate AbTech's proprietary technologies. 

Selling, general and administrative (SG&A) expenses in 2015 totaled $4.8 million, an $804,000 (20%) increase over the prior year due primarily to legal fees totaling approximately $1.4 million incurred in responding to the USDC and SEC subpoenas.  Excluding these unusual legal expenses, other SG&A expenses decreased by approximately $585,000 during 2015 to $3.4 million, due largely to reduced consulting fees in 2015.

Research and development ("R&D") over the last two years has been focused on new products, including the development of a heavy metals filtration technology, Smart Sponge HM, and technologies to treat produced water which have undergone significant lab and field product testing and analysis.  R&D expenses totaled $1.1 million in 2015, a $414,000 decrease from the prior year due primarily to the heavy costs in 2014 associated with oil & gas field validation work.  Also causing the lower R&D expense in 2015 was a decrease of approximately $103,000 in university sponsored research projects in 2015, as well as a reduction in consulting expenses of $89,000 for the development of the technology targeted for the treatment of landfill leachate, a program which was suspended in mid-2015.

The Company incurred interest expense in 2015 of $1.4 million as compared to $1.0 million in 2014.  The increase in year over year interest expense is due to the additional promissory notes issued by the Company in 2014 and 2015.  Interest expense during 2015 included interest accrued on notes payable of $655,000 plus imputed interest for the amortization of note discounts for beneficial conversion features totaling $158,000, note discounts for the value of warrants issued with debt of $415,000 and deferred finance costs for debt offerings of $211,000. In fourth quarter 2015, the Company recognized $3.2 million of debt conversion expense related to the conversion of three convertible promissory notes that were converted to common stock at a conversion rate substantially less than the notes' original conversion rates. The debt conversion expense was calculated as the difference between the number of shares issued upon conversion of the convertible promissory notes (152,846,571 shares), less the number of shares of common stock that would have been issued if the Convertible Notes had been converted at their original conversion price (9,229,148 shares), multiplied by the market value of the shares on the date of conversion (ranging from $0.0175 to $0.0231).

The Company's capital expenditures were minimal in 2015, and as of December 31, 2015 AbTech had no commitments for future capital expenditures.  However, if the Company is successful in achieving significant sales growth in 2016, it will need to acquire approximately $250,000 of equipment for the manufacture of its new heavy-metal filtration media and may need to expand its manufacturing capacity.  In the event of significant sales growth, the Company intends to finance ensuing capital expenditures with leases or other asset-backed financing. 

For the fourth quarter ended December 31, 2015, AbTech reported revenues of $141,000 compared to revenue of $235,000 for the comparable quarter of 2014 and $101,000 for the third quarter of 2015.  The Company reported gross margin on sales of 23% for the final quarter of 2015.  In the fourth quarter of 2015, AbTech's operating expenses increased $116,000 over the same period of 2014 to approximately $1.5 million, primarily due to legal fees of $345,000 incurred during the current year fourth quarter.  Loss from operations for the fourth quarter 2015 totaled $(1.5) million compared to $(1.3) million during the prior year's fourth quarter and a loss from operations of $(1.6) million during the third quarter of 2015. Interest expense decreased during the fourth quarter of 2015 to $256,000 as compared to $356,000 during the prior year's fourth quarter and $403,000 in the third quarter of 2015 due to the debt conversion that was completed mid-fourth quarter of 2015.  For the three months ended December 31, 2015, the Company incurred a net loss attributable to controlling interest of $(4.7) million or $(0.03) per basic share which included a debt conversion expense of $3.2 million.  This compares to a loss of $(1.5) million or $(0.02) per basic share for the same period in 2014, and $(1.8) million or $(0.03) for the third quarter of 2015.

At December 31, 2015, the Company reported cash and cash equivalents of $683,000, accounts receivable of $103,000 and inventory of $394,000. Total assets during 2015 decreased approximately $734,000 to $1.3 million at December 31, 2015.  The monthly cash burn from operations during 2015 averaged approximately $386,000.  During 2015, the Company secured debt funding totaling approximately $2.6 million.  From these proceeds, the Company repaid approximately $875,000 of debt maturing in April 2015 plus accrued interest on that debt of approximately $71,000.  During the fourth quarter of 2015, AbTech announced a significant financing transaction that resulted in the conversion of approximately $10.8 million of debt and accrued interest into 359,878,140 shares of common stock, and the receipt of proceeds by the Company of $2.55 million from the issuance of 72,857,145 shares of common stock.  At December 31, 2015, the Company had notes payable outstanding of approximately $1.1 million, net of discounts, a material decrease of approximately $7.7 million from the prior year-end balance.  In 2013, AbTech entered into an agreement for a $2 million equity line of credit.  The Company has made no draws on this equity line of credit to date and does not currently intend to make any draws prior to the expiration of the equity line of credit in June 2016.  AbTech has a bank line of credit with a credit limit of $100,000.  At year-end 2015, the outstanding balance due on the bank line of credit was zero and the full $100,000 credit limit was available to the Company for borrowing.

On December 28, 2015, following the approval of the AbTech Board and a majority of the Company's stockholders, the shares of common stock that the Company is authorized to issue was increased from 300,000,000 to 800,000,000.  As of December 31, 2015, AbTech had approximately 501.7 million shares of common stock outstanding, an increase of approximately 433.1 million shares from year-end 2014 due to shares of common stock issued for the following:  359 million shares issued for conversion of promissory notes and accrued interest totaling approximately $10.8 million; 72.9 million shares issued for $2.5 million of cash in a private offering; 858,000 shares of common stock issued to a prior director of the Company as payment in lieu of cash compensation for his service as a director; and 400,000 shares of common stock issued to a vendor as payment for $145,750 of services rendered to the Company. 

At year-end 2015, the Company's fully diluted share count totaled approximately 528.4 million shares (inclusive of all options, warrants and convertible debt). As of December 31, 2015, the Company had the following outstanding commitments to acquire common stock (all shares are stated in ABHD share equivalents):

Conference Call:  Given the Company's ongoing cooperation with authorities concerning the USDC and SEC subpoenas, which has prevented the company from taking questions directly from investors over the past three quarters, a quarterly conference call will not be held for the fourth quarter and full year 2015 financial results.

ABOUT ABTECH HOLDINGS, INC. (OTC QB: 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 stormwater 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® Plus. This technology is effective in reducing coliform bacteria found in stormwater, industrial wastewater, and municipal wastewater. Smart Sponge^® 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. For more information please visit www.abtechindustries.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, our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward-looking statements included in this news release.  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.

*** Financial Statements Follow ***

SOURCE Abtech Holdings, Inc.

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