Ecosphere Technologies Announces Q3 2013, Reporting YTD Net Income Of $22.0 Million And EPS Of $0.13, An Increase Of $19.9 Million And $0.12 Over Q3 2012 YTD

STUART, Fla., Nov. 13, 2013 (GLOBE NEWSWIRE) -- Ecosphere Technologies, Inc. (OTCBB:ESPH), a water engineering, technology licensing and innovative U.S. manufacturing company, today announced results for the nine months and quarter ended September 30, 2013 in its quarterly report on Form 10-Q, reflecting Net Income for the nine months ended September 30, 2013 of $22.0 million, compared to $2.1 million in the same period in 2012. The Company announced Basic and Fully Diluted EPS of $0.13, an increase of $0.12 versus the same period in 2012. For the third quarter, the Company reported a net loss of $2.8 million, or $0.02 per share.

David Brooks, CFO of Ecosphere Technologies stated, "The sale of an additional percentage of FNES to Fidelity National Financial, Inc. ("FNF"), a Fortune 500 company, at the same valuation has further validated the value of one of our seven core applications in which the Company's patented, revolutionary Ozonix® technology can be applied. Unlike revenue generated from manufacturing Ozonix® units and related service revenue, which have limited gross profit margins, the sale of intellectual property has essentially 100% gross margins. The 2013 profit is an indicator of the success of the Company's long-held plan of developing and monetizing its intellectual property. The net loss for the quarter of $2.8 million results from our transition from being the full-time managing majority partner of FNES into monetizing additional subsidiaries in which our Ozonix® technology can be used including but not limited to Agriculture, Food & Beverage, Industrial, Mining, Marine and Municipal wastewater treatment."

Brooks continued, "The Company retains 100% of the global rights to monetize its patented Ozonix® technology in all other non-energy related water treatment industries and plans to realize similar value as recently realized from the development and sale of its ownership interest in FNES. This process does not allow us to recognize consistent revenues or profits but ultimately provides much greater value for our shareholders."

The Company's total assets have increased by $13.1 million since December 31, 2012, from $8.9 million to $22.0 million, while total liabilities have decreased by $1.5 million, from $3.9 million to $2.4 million. Working capital has increased by $2.1 million since 2012, from $1.0 million to $3.1 million as of September 30, 2013. Mr. Brooks added, "We are positioning the Company to realize similar success with non-energy related subsidiaries by using proceeds from the sale of our IP related to the energy sector to maintain a solid balance sheet." 

Dean Becker, Director and Intellectual Property Strategist for Ecosphere Technologies, stated, "During the three months ended September 30, 2013, Ecosphere retained Navigant Consulting, Inc., a leading company in the field of intellectual property valuation, to perform an analysis to value our patented Ozonix® technology portfolio. Navigant delivered the valuation in November 2013, which includes all of the potential industries and applications where Ozonix® can be used and licensed, including the global energy field-of-use, of which the Company owns approximately 31% interest in FNES. While this valuation is subject to a number of assumptions, the Company believes it illustrates the hidden value that is not recognized on our Balance Sheet or by the investment community."

Becker continued, "In the past five months, Ecosphere has received $10 million from FNF for the sale of the Company's 20% interest in FNES. We believe that this sale represents approximately 2% of the estimated value of the Company's global Ozonix® intellectual property portfolio. Additionally, FNF has an option to purchase another 12% interest for $6 million in Q4 2013, representing approximately 1% of the Company's global Ozonix® intellectual property portfolio."

Becker added, "The application of Ozonix® in the energy field-of-use is just the start of a long-term intellectual property monetization strategy of inventing, patenting, innovating, manufacturing and successfully deploying our intellectual property assets across numerous industries around the world."

Financial Statement Highlights

  • Net Income for the nine months ended September 30, 2013 of $22.0 million, or $0.13 per share
  • Sale of 20% of the Company's interest in FNES resulting in proceeds of $10.0 million over the second and third quarters of 2013
  • At September 30, 2013 the Company had approximately a 31% interest in FNES, a fair value of approximately $15.3 million
  • Increase in total assets of $13.1 million since December 31, 2012
  • Increase in working capital of $2.1 million since December 31, 2012
  • Decrease in total liabilities by $1.5 million since December 31, 2012

Ecosphere's 2013 annual meeting of shareholders will be held on Friday, December 13, 2013 at 10:00 AM EST the Hilton Orlando Bonnet Creek Hotel in Orlando Florida. The meeting will feature presentations by members of Ecosphere's executive leadership team, tours and demonstrations of Ozonix® equipment, and a question and answer session with management.

The Company requests that all parties planning to attend please RSVP to representatives of its investor relations firm ICR, LLC. Contact information for ICR is listed below.

About Ecosphere Technologies

Ecosphere Technologies, Inc. (OTCBB:ESPH) is a water engineering, technology licensing and innovative U.S. manufacturing company that develops environmental 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 customers to reduce costs, increase treatment efficiencies and eliminate harmful chemicals from wastewater treatment operations around the United States. Ozonix® can be used to replace chemicals in a wide variety of industries and applications, including but not limited to agriculture, energy, food and beverage, industrial, mining, marine, and municipal wastewater treatment.

In 2013, Ecosphere was named Water Management Company of the Year in the Midcontinent by the Oil and Gas Awards, chosen by Bloomberg as a New Energy Pioneer and selected by IHS CERAWeek as a 2013 Energy Innovation Pioneer. Ecosphere is also a recipient of the 2013 American Technology Award - "Clean Tech/Green Tech" category and the 2012 Frost & Sullivan North American Product Leadership Award in Disinfection Equipment for Shale Oil and Gas Wastewater Treatment.  In addition, Ecosphere has been chosen for the Artemis "Top 50 Water Tech" Listing for the last three years.

Since 2008, Fidelity National Environmental Solutions, a company in which ESPH holds a 31% interest, has enabled oil and gas customers to treat, recycle and reuse over 3 billion gallons of water on more than 800 oil and natural gas wells.

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.

Cautionary Note Regarding Forward-Looking Statements.

This press release contains forward-looking statements including plans for and future success from non-energy related industries. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the ability to find a purchaser for our Ozonix® unit, the ability to locate partners to finance the use of our technology in other markets and general reluctance of businesses to utilize new technology.

Further information on our risk factors is contained in our filings with the SEC, including our Form 10-K for the year ended December 31, 2012. Any forward-looking statement made by us in this press release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Ecosphere Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
     
  September 30, December 31,
  2013 2012
  (Unaudited)  
Assets    
Current assets    
Cash  $ 1,435,763  $ 2,464,911
Restricted cash 25,000 60,168
Accounts receivable 1,150,152
Current portion of accounts receivable-related party 713,794
Inventory 2,238,542 757,682
Prepaid expenses and other current assets 297,914 107,067
Total current assets 4,711,013 4,539,980
Investment in unconsolidated investee 14,813,002
Accounts receivable-related party, net of current portion 1,106,770
Property and equipment, net 1,185,601 4,264,125
Debt issuance costs, net 45,100
Patents, net 77,235 81,691
Deposits 14,840 22,441
Total assets  $ 21,953,561  $ 8,908,237
     
Liabilities, Redeemable Convertible Cumulative Preferred Stock and Equity    
Current liabilities    
Accounts payable  $ 398,173  $ 845,241
Accrued liabilities 628,402 1,122,119
Customer deposits 187,500 23,196
Convertible notes payable, net of discounts 240,305 1,203,126
Current portion of note payable 85,125 68,100
Warrant derivatives fair value 4,308 197,009
Current portion of financing obligations 64,144 96,548
Current portion of capital lease obligation 15,155 14,593
Total current liabilities 1,623,112 3,569,932
Convertible note payable, net of discounts and current portion 477,296
Note payable, net of current portion 85,124 136,199
Financing obligations, net of current portion 119,050 106,612
Restructuring reserve 5,909
Capital lease obligation, net of current portion 45,839 57,276
Total liabilities 2,350,421 3,875,928
     
Redeemable convertible cumulative preferred stock    
Series A - 11 shares authorized; 6 shares issued and outstanding at September 30, 2013 and December 31, 2012; $25,000 per share redemption amount plus dividends in arrears 1,197,869 1,180,994
Series B - 484 shares authorized; 241 shares issued and outstanding at September 30, 2013 and December 31, 2012; $2,500 per share redemption amount plus dividends in arrears 2,501,970 2,456,781
Total redeemable convertible cumulative preferred stock 3,699,839 3,637,775
Commitments and contingencies (Note 15)    
Equity    
Ecosphere Technologies, Inc. stockholders' equity (deficit)    
Common stock, $0.01 par value; 300,000,000 shares authorized; 163,588,214 and 160,060,088 shares issued and outstanding at September 30, 2013, and December 31, 2012, respectively 1,635,881 1,600,601
Common stock issuable, $0.01 par value; 0 and 1,138,724 issuable at September 30, 2013, and December 31, 2012, respectively 11,387
Additional paid-in capital 109,420,155 107,697,369
Accumulated deficit  (95,152,735)  (117,337,883)
Total Ecosphere Technologies, Inc. stockholders' equity (deficit) 15,903,301  (8,028,526)
Noncontrolling interest in consolidated subsidiary 9,423,060
Total equity 15,903,301 1,394,534
Total liabilities, redeemable convertible cumulative preferred stock and equity  $ 21,953,561  $ 8,908,237
 
Ecosphere Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
         
  For the Three Months Ended For the Nine Months Ended
  September 30, September 30,
  2013 2012 2013 2012
Revenues        
Equipment sales and licensing  $ —   $ 5,664,637  $ —   $ 17,091,344
Equipment sales and licensing, related party 2,268,295 2,268,295
Field services 1,133,021 1,547,786 6,692,213
Aftermarket part sales 528,725 287,724 528,725
Aftermarket part sales, related party 120,294 122,521
Total revenues 2,388,589 7,326,383 4,226,326 24,312,282
         
Costs and expenses        
Equipment sales and licensing costs (exclusive of depreciation shown below) 1,923,064 4,272,243  1,923,064 12,942,666
Field services costs (exclusive of depreciation shown below) 576,670  721,214 2,092,252
Aftermarket part costs (exclusive of depreciation shown below) 95,950  322,423
Selling, general and administrative 2,055,462 1,694,775  6,563,147 5,470,075
Restructuring charge  (62,000)  (3,170)  (62,000)
Gain on sale/disposal of fixed assets, net  (142,457)  (142,457)
Depreciation and amortization 55,253 556,154 931,504 1,657,324
Total costs and expenses 4,129,729 6,895,385 10,458,182 21,957,860
         
Income (loss) from operations  (1,741,140) 430,998  (6,231,856) 2,354,422
         
Loss on investment in unconsolidated investee  (437,594)  (483,598)
         
Other income (expense)        
Gain on deconsolidation  29,474,609
Interest expense  (113,478)  (111,261)  (351,707)  (286,602)
Gain on change in fair value of derivative instruments  1,215 87,724  89,894 1,729
Loss on sale of interest in unconsolidated investee  (500,000)  (500,000)
Other, net 4,627
Total other income (expense), net  (612,263)  (23,537) 28,712,796  (280,246)
         
Net (loss) income   (2,790,997) 407,461 21,997,342  2,074,176
         
Preferred stock dividends  (20,688)  (25,687)  (62,064)  (77,125)
         
         
Net (loss) income applicable to common stock before allocation to non controlling interest  (2,811,685) 381,774 21,935,278 1,997,051
         
Less: net (income) loss applicable to non controlling interest in consolidated subsidiary  (65,789) 187,806  (810,420)
         
Net (loss) income applicable to Ecosphere Technologies, Inc. common stock  $ (2,811,685)  $ 315,985  $ 22,123,084  $ 1,186,631
         
Net (loss) income per common share applicable to common stock        
Basic  $ (0.02)  $ —  $ 0.13  $ 0.01
Diluted  $ (0.02)  $ —  $ 0.13  $ 0.01
         
Weighted average number of common shares outstanding        
Basic 163,588,214 156,948,937 163,237,401 156,012,479
Diluted 163,588,214 164,624,749 164,929,678 168,746,364
 
Ecosphere Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
     
  For the Nine Months Ended
  September 30,
  2013 2012
     
Operating Activities:    
Net income applicable to Ecosphere Technologies, Inc. common stock  $ 22,123,084  $ 1,186,631
Adjustments to reconcile net income applicable to Ecosphere Technologies, Inc. common stock to net cash provided by (used in) operating activities:    
Gain on deconsolidation  (29,474,609)
Preferred stock dividends  62,064 77,125
Depreciation and amortization  931,504 1,657,323
Loss on sale/disposal of fixed assets, net  (142,457)
Non-controlling interest in income (loss) of consolidated subsidiary  (187,806) 810,420
Amortization of debt issue costs 19,644
Accretion of discount on notes payable 197,984 152,977
Stock-based compensation expense 1,042,028 1,203,975
Restructuring charge reversal  (62,000)
Income from change in fair value of warrant derivative liability  (89,894)  (1,729)
Loss on investment in unconsolidated investee  483,598
Loss on sale of interest in unconsolidated investee  500,000
Write-down of inventory  158,650
Changes in operating assets and liabilities:    
Increase in accounts receivable  (1,130,699)  (1,413,033)
Increase in prepaid expenses and other current assets  (184,715)  (136,641)
Increase in inventory  (2,392,824)  (115,844)
Decrease in deposits 445
Increase in restricted cash  (41,083)
Decrease in accounts payable  (312,363)  (95,400)
Decrease in accrued liabilities  (476,088)  (150,104)
Increase in billings in excess of costs and estimated earnings on uncompleted contracts  (89,140)
Decrease in restructuring reserve  (5,909)  (37,842)
Decrease in customer deposits 165,465 218,968
Net cash (used in) provided by operating activities  (8,570,886) 3,022,591
Investing Activities:    
Net proceeds from sale of interest in subsidiary 9,600,000
Repayment of amounts due to unconsolidated investee  (1,385,139)
Cash held by deconsolidated subsidiary  (247,636)
Purchase of property and equipment  (227,246)  (116,487)
Proceeds from sale of fixed asset 206,000
Transfer from (to) restricted cash 35,168  (25,000)
Net cash provided by investing activities 7,775,147 64,513
Financing Activities:    
Proceeds from issuance of convertible notes payable and warrants, net of debt issue costs 706,467
Proceeds from warrant and option exercises 249,300
Proceeds from warrant modifications 133,188 107,400
Distributions from subsidiary to noncontrolling members  (1,619,654)
Repayments of notes payable and insurance financing  (964,050)  (183,398)
Repayments of capital lease obligations  (10,875)
Repayments of vehicle and equipment financing  (98,139)  (67,938)
Net cash used in financing activities  (233,409)  (1,514,290)
Net decrease in cash  (1,029,148) 1,572,814
Cash at beginning of period 2,464,911 2,043,593
Cash at end of period  $ 1,435,763  $ 3,616,407
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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