Ecosphere Technologies Reports 2012 Results

$31.1 Million in Revenue, Up 48% Year/Year

$3.9 Million Cash Flow from Operations

STUART, Fla., March 25, 2013 (GLOBE NEWSWIRE) --Ecosphere Technologies, Inc. (OTCBB:ESPH), a water engineering, technology licensing and innovative U.S. manufacturing company, today announced unaudited financial results for the full year 2012. The Company recorded $31.1 million of revenue, representing a 48% year-over-year increase. Cash flow from operations was $3.9 million, also up 48% year-over-year. Net income attributable to common shareholders was $136 thousand, which compares to a loss of $7.7 million in 2011.

Ecosphere Chief Financial Officer David Brooks stated, "2012 was another successful year for Ecosphere with a 48% increase in both revenue and cash flow from operations over 2011, while achieving net income of approximately $1.1 million. We manufactured and delivered eight more Ozonix® EF80 units to Hydrozonix and were recognized by leading industry consultants such as Frost and Sullivan as leaders in the oil and gas disinfection equipment market. Furthermore, our patented Ozonix® technology was successfully used on approximately 326 oil and natural gas wells in 2012 compared to 182 wells in 2011, representing a 79% year-over-year increase."

Full Year 2012 Financial Details

Revenue for the year ended December 31, 2012 was $31.1 million, an increase of $10.0 million over the year ended December 31, 2011. The increase was primarily due to the sale of eight Ozonix® EF80 units representing 73% of total revenue, or $22.6 million. The remaining portion of revenue was $7.4 million attributable to field services, and $1.1 million attributable to aftermarket parts sales.

Selling, general and administrative expenses were $8.0 million.

Net income for 2012 was $1.1 million.Net income attributable to common shareholders was $136 thousand, or breakeven per share. Net income attributable to common shareholders reflects the net income plus accrued preferred stock dividends, as well as the net income applicable to the non-controlling interest in its consolidated subsidiary, Ecosphere Energy Services, LLC. The Company generated $3.9 million in operating cash flow for the year and Ecosphere Energy Services made a dividend distribution of approximately $6.7 million.

Subsequent Events

The financial results reported here are unaudited. The final presentation of financial results is subject to completion of the annual audit by the Company's auditors, Salberg & Company, P.A. Fully audited results will be presented in the Company's filing on Form 10-K with the US Securities and Exchange Commission. 

About Ecosphere Technologies

Ecosphere Technologies, Inc. (OTCBB:ESPH) is a water engineering, technology licensing and innovative U.S. manufacturing company that develops non-chemical water treatment solutions for industrial markets throughout the world. The Company is a leader in emerging advanced oxidation processes and has an extensive portfolio of intellectual property that includes five United States patents for the Ecosphere Ozonix® process. The patented Ecosphere Ozonix® process is a revolutionary advanced oxidation process that is currently being used by energy exploration companies to reduce costs, increase treatment efficiencies and eliminate liquid chemicals from wastewater treatment operations around the United States.

A recipient of Frost & Sullivan's 2012 North American Product Leadership Award in Disinfection Equipment for Shale Oil and Gas Wastewater Treatment and chosen as a 2013 IHS CERAWeek Energy Innovation Pioneer, Ecosphere has enabled oil and gas customers to recycle and reuse over two billion gallons of water on more than 700 oil and natural gas wells in major shale plays around the United States since 2008.

For more information, please visit  www.EcosphereTech.com .

To receive timely information on Ecosphere Technologies, sign up for Ecosphere's email news alert system at http://www.ESPH-IR.com .

The Ecosphere Technologies, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=12214
Ecosphere Technologies, Inc. and Subsidiaries     
Consolidated Statements of Operations     
(Unaudited)       
       
   For the Years Ended December 31, 
   2012   2011   2010 
Revenues       
 Equipment sales and licensing   $ 22,602,408  $ 11,460,078  $ --
 Field services   7,405,266  9,628,081  8,964,484
 Aftermarket part sales   1,124,624  --  --
Total revenues   31,132,298  21,088,159  8,964,484
       
Costs and expenses       
 Equipment sales and licensing costs (exclusive of depreciation shown below)   16,430,617  8,261,524  --
 Field services costs (exclusive of depreciation shown below)   2,492,397  2,583,911  3,394,688
 Aftermarket part costs (exclusive of depreciation shown below)   773,929  --  --
 Selling, general and administrative   7,951,540  13,407,983  12,056,943
 Depreciation and amortization   2,318,605  2,174,983  1,957,881
 Asset impairment   --  --  116,000
 Restructuring charge   --  --  50,000
Total costs and expenses   29,967,088  26,428,401  17,575,512
       
Income (loss) from operations   1,165,210  (5,340,242)  (8,611,028)
       
Other income (expense)       
 Interest expense   (360,031)  (581,392)  (1,176,222)
 Restructuring charge reversal   62,000  --  --
 Gain on sale/disposal of fixed assets, net   142,457  --  --
 Loss on settlement, net   --  --  (65,756)
 Loss on conversion, net   --  (93,762)  (19,604)
 Gain (loss) on change in fair value of derivative instruments   41,374  152,888  (12,787,666)
 Other, net   3,057  909  292
Total other expense   (111,143)  (521,357)  (14,048,956)
       
Net income (loss)   1,054,067  (5,861,599)  (22,659,984)
       
Preferred stock dividends   (102,813)  (103,000)  (105,500)
       
Net income (loss) applicable to common stock before allocation to non-controlling interest   951,254  (5,964,599)  (22,765,484)
Less: net (income) loss applicable to non-controlling interest in consolidated subsidiary   (815,054)  (1,690,075)  528,277
       
Net income (loss) applicable to Ecosphere Technologies, Inc. common stock   $ 136,200  $ (7,654,674)  $ (22,237,207)
       
Net income (loss) per common share applicable to common stock   
Basic   $ 0.00  $ (0.05)  $ (0.17)
Diluted   $ 0.00  $ (0.05)  $ (0.17)
       
Weighted average number of common shares outstanding   
Basic   148,989,308  143,989,520  131,502,601
Diluted   154,568,010  143,989,520  131,502,601
   
   
Ecosphere Technologies, Inc. and Subsidiaries   
Consolidated Balance Sheets     
(Unaudited)     
     
   December 31, 
   2012   2011 
Assets     
Current assets     
Cash   $ 2,464,911  $ 2,043,593
Restricted cash   60,168  --
Accounts receivable   1,150,152  873,117
Inventory   757,682  408,747
Prepaid expenses and other current assets   107,067  81,850
Total current assets   4,539,980  3,407,307
Property and equipment, net   4,264,125  6,141,519
Patents, net   81,691  42,164
Deposits   22,441  22,598
Total assets   $ 8,908,237  $ 9,613,588
     
Liabilities, Redeemable Convertible Cumulative Preferred Stock and Equity   
Current liabilities     
Accounts payable   $ 845,241  $ 1,180,723
Accrued liabilities   1,122,119  1,163,504
Customer deposit   23,196  --
Convertible notes payable, net of discounts   1,203,126  370,561
Current portion of note payable   68,100  --
Related party note payable   --  204,776
Warrant derivatives fair value   197,009  347,235
Financing obligations   96,548  49,299
Capital lease obligation   14,593  --
Total current liabilities   3,569,932  3,316,098
Convertible notes payable, net of discounts   --  1,366,177
Note payable, net of current portion   136,199  --
Related party note payable   --  204,299
Financing obligations   106,612  168,048
Restructuring reserve   5,909  119,184
Capital lease obligation   57,276  --
Total liabilities   3,875,928  5,173,806
     
Redeemable convertible cumulative preferred stock   
Series A - 11 shares authorized; 6 shares issued and outstanding at December 31, 2012 and 2011; $25,000 per share redemption amount plus dividends in arrears   1,180,994  1,158,494
Series B - 484 shares authorized; 241 and 322 shares issued and outstanding at December 31, 2012 and 2011, respectively; $2,500 per share redemption amount plus dividends in arrears   2,456,781  2,822,302
Total redeemable convertible cumulative preferred stock   3,637,775  3,980,796
Commitments and contingencies (Note 19)   
Equity     
Ecosphere Technologies, Inc. stockholders' deficit   
Common stock, $0.01 par value; 300,000,000 shares authorized; 152,438,179 and 146,262,357 shares issued and outstanding at December 31, 2012 and 2011, respectively   1,524,381  1,462,622
Common stock issuable, $0.01 par value; 1,084,499 and 71,959 issuable at December 31, 2012 and 2011, respectively   10,845  720
Additional paid-in capital   107,774,131  104,804,159
Accumulated deficit   (117,337,883)  (117,576,896)
Total Ecosphere Technologies, Inc. stockholders' deficit   (8,028,526)  (11,309,395)
Noncontrolling interest in consolidated subsidiary   9,423,060  11,768,381
Total equity   1,394,534  458,986
Total liabilities, redeemable convertible cumulative preferred stock and equity   $ 8,908,237  $ 9,613,588
     
     
Ecosphere Technologies, Inc. and Subsidiaries     
Consolidated Statements of Cash Flows     
(Unaudited)       
       
   For the Years Ended December 31, 
   2012   2011   2010 
Operating Activities:       
Net income (loss) applicable to Ecosphere Technologies, Inc. common stock   $ 136,200  $ (7,654,674)  $ (22,237,207)
Adjustments to reconcile net income (loss) applicable to Ecosphere Technologies, Inc. common stock to net cash provided by (used in) operating activities: 
Preferred stock dividends   102,813  103,000  105,500
Depreciation and amortization   2,318,605  2,174,983  1,957,881
Asset impairment charges   --  --  116,000
Amortization of discount on notes payable   189,604  263,767  543,551
Restructuring charges (reversal)   (62,000)  --  50,000
Loss on conversion of debt and accrued interest to common stock   --  93,762  19,604
Stock-based compensation expense   1,480,692  6,668,229  5,517,992
Non-cash expense to modify warrants   --  --  93,735
Shares issued for settlement   --  --  108,979
Gain on sale/disposal of fixed assets, net   (142,457)  --  --
Noncontrolling interest in income (loss) of consolidated subsidiary   815,054  1,690,075  (528,277)
(Gain) loss from change in fair value of warrant derivative liability   (41,374)  (152,888)  8,772,446
Loss from change in fair value of embedded conversion option derivative liability   --  --  4,015,220
Changes in operating assets and liabilities:     
Increase in accounts receivable   (277,035)  (169,642)  (1,476)
Decrease in prepaid expenses and other current assets   102,844  115,353  159,172
Increase in inventory   (348,935)  (19,189)  --
Decrease (increase) in deposits   157  (393)  (12,006)
(Decrease) increase in accounts payable   (335,482)  (790,166)  386,653
(Decrease) increase in accrued liabilities   (41,385)  350,399  374,564
Decrease in restructuring reserve   (51,275)  (61,935)  (37,537)
Decrease in deferred revenue   --  --  (672,000)
Increase in customer deposits   23,196  --  --
Net cash provided by (used in) operating activities   3,869,222  2,610,681  (1,267,206)
Investing Activities:       
Construction in process purchases   --  --  (2,007,817)
Proceeds from sale of fixed asset   206,000  --  --
Transfers (to) from restricted cash   (60,168)  --  425,000
Purchase of property and equipment   (373,386)  (622,240)  (242,443)
Net cash used in investing activities   (227,554)  (622,240)  (1,825,260)
Financing Activities:       
Proceeds from issuance of notes payable and warrants   --  --  400,000
Proceeds from issuance of notes payable   --  1,575,000  --
Proceeds from issuance of common stock and warrants   --  --  545,000
Proceeds from warrant and option exercises   278,675  849,819  1,224,444
Proceeds from warrant modifications   107,400  --  --
Proceeds from warrants exchanged for cash   --  --  756,968
Proceeds from equipment and vehicle financing   54,287  175,744  42,000
Distributions from EES subsidiary to noncontrolling members   (3,160,375)  --  --
Repayments of notes payable and insurance financing   (240,162)  (151,052)  (717,277)
Repayments of notes payable to related parties   (136,676)  (2,412,783)  --
Repayments of vehicle and equipment financing   (116,474)  (27,963)  (188,440)
Principal payments on capital leases   (7,025)  --  (13,080)
Net cash (used in) provided by financing activities   (3,220,350)  8,765  2,049,615
Net increase (decrease) in cash   421,318  1,997,206  (1,042,851)
Cash at beginning of year   2,043,593  46,387  1,089,238
Cash at end of year   $ 2,464,911  $ 2,043,593  $ 46,387
CONTACT: Investor Relations:         Gary Dvorchak, CFA         Senior Vice President         ICR, Inc.         +1 (310) 954-1123         gary.dvorchak@icrinc.com                  Press and Media Relations:         Brian Ruby         Vice President         ICR, Inc.         +1 (203) 682-8268         brian.ruby@icrinc.com                  Company:         Corey McGuire         Director of Marketing         Ecosphere Technologies, Inc.         +1 (772) 287-4846         cmcguire@ecospheretech.com

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