EX-99.1 2 esph_ex99z1.htm PRESS RELEASE Press Release



EXHIBIT 99.1

[esph_ex99z1001.jpg]


ECOSPHERE TECHNOLOGIES REPORTS SECOND QUARTER 2012 RESULTS


Q2 Net Income of $506 Thousand, Up 39% Sequentially


STUART, Fla., August 2, 2012 -- Ecosphere Technologies, Inc. (OTCBB: ESPH), a diversified water engineering, technology licensing and environmental services company, today announced financial results for the second quarter of 2012.  The Company grew revenue 264% year-over-year to $8.6 million compared to $2.4 million in Q2 2011.  The Company generated net income applicable to common shareholders of $506 thousand, compared to $365 thousand in Q1 2012.


“We are pleased to report our second consecutive quarter of net income”, stated Ecosphere Chairman and CEO Charles Vinick.  “We are building on the foundation we established in 2011, which is paying off as we move through this year.  Our revenue is up both year-over-year and sequentially, and we continue to generate solid margins.  To date, we have delivered eight Ozonix EF80s to Hydrozonix, and look forward to continuing to build an installed base of systems that will generate recurring revenue and royalties in the years ahead.”


Second Quarter 2012 Financial Details


Q2 2012 revenue increased 264% year-over-year to $8.6 million, which was a record for any quarter in the Company’s history.  Gross profit was $3.3 million, an increase of 114% year-over-year.  Selling, general and administrative expense declined 21% year-over-year.  Income from operations totaled $885 thousand.  Adjusted EBITDA, a non-GAAP financial measure that removes the effects of depreciation and amortization, stock-based compensation and interest expense, was $1.6 million, a 15X increase year-over-year and more than a $100 thousand increase over the trailing quarter.  


The balance sheet remains strong, with unrestricted cash of $2.0 million and debt reduced by approximately $500 thousand during the quarter.

 

Equipment and licensing revenue was $5.8 million as a result of the Company manufacturing two Ozonix EF80s for Hydrozonix in Q2 2012.  Ecosphere has now produced eight Ozonix systems for Hydrozonix pursuant to the technology licensing agreement initiated in March 2011.


Ecosphere Energy Services, LLC, field services revenue was $2.8 million, a 20% increase year-over-year and 5% sequentially.







Significant Recent Events and Achievements


·

Ecosphere has deployed 35 Ozonix units to date, which are currently servicing major oil and gas operators conducting hydraulic fracturing ("fracking") operations around the United States.  Eight Ozonix EF80 units are deployed by Hydrozonix, with the balance being operated by Ecosphere Energy Services, LLC (EES).  


·

Hydrozonix and EES combined have treated over 2 billion gallons of water for over 570 oil and natural gas wells in major shale plays around the United States since entering the market in 2008.


·

In June, the Company appointed Ocean Tomo to develop a global licensing program for Ecospheres patented Ozonix technology and related intellectual property.  Ocean Tomo is a leading consultant that provides financial products and services related to intellectual property, including expert testimony, valuation, research, ratings, investments, risk management strategy and transactions.


·

On behalf of the Company, Robbie Cathey, CEO of Ecosphere Energy Services, and Corey McGuire, Director of Marketing for Ecosphere Technologies, accepted Frost & Sullivans 2012 "North American Product Leadership Award in Disinfection Equipment for Shale Oil and Gas Wastewater Treatment".


·

The Company is actively pursuing onshore oil and gas wastewater treatment opportunities outside of the United States. The Company exhibited at two Canadian oil and gas conferences in Q2 of 2012 and has since been in discussion with a number of potential partners to penetrate the hydraulic fracturing wastewater treatment market in Canada, Northern Europe, Mexico and the Middle East.


·

The Company continues to progress in its initiative to enter the mining wastewater treatment market.  The Company is in active discussions with a number of potential partners for Ecosphere Exploration and Mining Services, LLC, a subsidiary formed by the Company last year.


·

The Company is exploring opportunities to treat wastewater produced by coal-fired power plants in response to utilities and their associated service providers seeking innovative wastewater treatment solutions.  


2012 Financial Guidance


The Company remains positive in its outlook for 2012.  Results to date indicate that the Company could exceed its previously issued guidance for the year.  However, due to the uncertain conditions in the global economy, the Company is maintaining its conservative guidance policy and will not update guidance with specific numbers at this time.







“Our business continues to demonstrate solid growth,” continued CEO Charles Vinick.  “With each passing quarter, Hydrozonix increases its fleet in the field, its customer count, and their gallons of water treated.  Simultaneously, our field services business in EES is also expanding. Between this foundation and new opportunities in international oil and gas markets and other verticals, we are very optimistic about our growth in the quarters ahead.”


Second Quarter 2012 Conference Call Details


The Company will discuss its financial results and guidance in a conference call today at 4:30 p.m. EDT.  The conference call can be accessed by dialing +1 (877) 675-4757 (U.S. toll-free) or +1 (719) 325-4893 (outside of North America).  A telephone replay will be available approximately two hours after the call concludes through Tuesday, August 28, 2012 by dialing +1 (877) 870-5176 (U.S. toll-free) or +1 (858) 384-5517 (outside of North America), and by entering the passcode: 1413199.  A live webcast of the conference call will be available through the Company’s website at http://ir.stockpr.com/ecospheretech/events and will be archived on the website for one year.


About Ecosphere Technologies


Ecosphere Technologies, Inc. (OTCBB: ESPH) is a diversified water engineering, technology licensing and environmental services company that designs, develops, and manufactures wastewater treatment technologies for a variety of industrial markets. The company provides environmental services and technology solutions for large-scale, sustainable applications across industries, nations and ecosystems.


Ecosphere is currently driving clean water innovation with its patented Ozonix advanced oxidation technologies and mobile, low-maintenance water treatment systems. Ecosphere's patented Ozonix technology is a high-volume, advanced oxidation process designed to recycle water while reducing liquid chemicals used during water treatment applications. A recipient of Frost & Sullivan's 2012 North American Product Leadership Award in Disinfection Equipment for Shale Oil and Gas Wastewater Treatment, Ecosphere has enabled oil and gas customers to recycle and reuse over 2 billion gallons of water on approximately 570 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.






Cautionary Note Regarding Forward-Looking Statements

 

This press release contains forward-looking statements including 2012 guidance, business growth, revenue growth, recurring revenue and royalties, opportunities in the wastewater treatment market outside the United States including Canada, Northern Europe, Mexico and the Middle East, opportunities and progress toward entering into the mining wastewater treatment market and other markets.  Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods.


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 a decline in the price of natural gas, the ability of Ecosphere or a partner to expand the Ozonix technology outside of the United States, the ability to locate a partner to finance the use of our technology in other markets and our ability to reach definitive agreements with one or more partners, reluctance of businesses to change to new technologies, international regulations which affect hydraulic fracturing, federal or state regulations which affect hydraulic fracturing, problems that arise from the manufacturing of the Ozonix units and delays in receipt of parts from component manufacturers.


Further information on our risk factors is contained in our filings with the SEC including the Form 10-K for the year ended December 31, 2011.  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.


Regulation G – Non-GAAP Financial Measure


The Company uses a financial measure which is not calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”) in evaluating its financial and operational decision making and as a means to evaluate period-to period comparison. The Company presents this non-GAAP financial measure because it believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.







The Company defines Adjusted EBITDA as earnings (or loss) before interest expense, income taxes, depreciation and amortization, and amortization of non-cash stock-based compensation. The Company excludes stock-based compensation because it is non-cash in nature.  Other companies (including the Company’s competitors) may define Adjusted EBITDA differently.


Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to net income, operating income, cash flow from operating activities, as a measure of the Company’s liquidity or any other financial measures.  It may not be indicative of the historical operating results of the Company nor is it intended to be predictive of potential future results.  Investors should not consider Adjusted EBITDA in isolation or as a substitute for performance measures calculated in accordance with GAAP.


For a reconciliation of Adjusted EDITDA to net income, see the table contained in this press release.


Contacts

Investor Relations:

Gary Dvorchak, CFA

Senior Vice President

ICR, LLC

+1 (310) 954-1123

gary.dvorchak@icrinc.com


Press and Media Relations:

Brian Ruby

Vice President

ICR, LLC

+1 (203) 682-8268

brian.ruby@icrinc.com


Company:

Corey McGuire

Director of Marketing

Ecosphere Technologies, Inc.

+1 (772) 287-4846

cmcguire@ecospheretech.com


Source:  Ecosphere Technologies, Inc.

Released August 2, 2012






ECOSPHERE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


 

 

June 30,

 

 

December 31,

 

 

 

2012

 

 

2011

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash

 

$

1,977,796

 

 

$

2,043,593

 

Restricted cash

 

 

403,809

 

 

 

 

Accounts receivable

 

 

3,722,882

 

 

 

873,117

 

Inventory

 

 

447,736

 

 

 

408,747

 

Prepaid expenses and other current assets

 

 

188,226

 

 

 

81,850

 

Total current assets

 

 

6,740,449

 

 

 

3,407,307

 

Property and equipment, net

 

 

5,090,183

 

 

 

6,141,519

 

Patents, net

 

 

40,173

 

 

 

42,164

 

Deposits

 

 

22,035

 

 

 

22,598

 

Total assets

 

$

11,892,840

 

 

$

9,613,588

 

  

 

 

 

 

 

 

 

 

Liabilities, Redeemable Convertible Cumulative Preferred Stock and Equity (Deficit)

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,212,213

 

 

$

1,180,723

 

Accrued liabilities

 

 

941,911

 

 

 

1,163,504

 

Billings in excess of costs and estimated earnings on uncompleted contracts

 

 

188,679

 

 

 

 

Customer deposit

 

 

100,000

 

 

 

 

Convertible notes payable, net of discounts

 

 

1,128,700

 

 

 

370,561

 

Other notes payable

 

 

68,100

 

 

 

 

Related party notes payable

 

 

136,676

 

 

 

204,776

 

Warrant derivatives fair value

 

 

327,006

 

 

 

347,235

 

Financing obligations

 

 

120,083

 

 

 

49,299

 

Total current liabilities

 

 

4,223,368

 

 

 

3,316,098

 

Convertible notes payable, net of discounts

 

 

 

 

 

1,366,177

 

Related party notes payable

 

 

 

 

 

204,299

 

Other notes payable

 

 

170,249

 

 

 

 

Financing obligations

 

 

125,206

 

 

 

168,048

 

Restructuring reserve

 

 

94,259

 

 

 

119,184

 

Total liabilities

 

 

4,613,082

 

 

 

5,173,806

 

Redeemable convertible cumulative preferred stock

 

 

 

 

 

 

 

 

Series A - 11 shares authorized; 6 shares issued and outstanding at June 30, 2012 and December 31, 2011; $25,000 per share redemption amount plus accrued dividends

 

 

1,169,744

 

 

 

1,158,494

 

Series B - 484 shares authorized; 321 and 322 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively; $2,500 per share redemption amount plus accrued dividends

 

 

2,859,989

 

 

 

2,822,302

 

Total redeemable convertible cumulative preferred stock

 

 

4,029,733

 

 

 

3,980,796

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Equity (deficit)

 

 

 

 

 

 

 

 

Ecosphere Technologies, Inc. stockholders' deficit

 

 

 

 

 

 

 

 

Common stock, $0.01 par value; 300,000,000 shares authorized; 149,092,684 and 146,262,357 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively

 

 

1,490,926

 

 

 

1,462,622

 

Common stock issuable, $0.01 par value; 71,959 issuable at June 30, 2012 and December 31, 2011, respectively

 

 

720

 

 

 

720

 

Additional paid-in capital

 

 

106,808,730

 

 

 

104,804,159

 

Accumulated deficit

 

 

(116,654,812

)

 

 

(117,576,896

)

Total Ecosphere Technologies, Inc. stockholders' deficit

 

 

(8,354,436

)

 

 

(11,309,395

)

Noncontrolling interest in consolidated subsidiary

 

 

11,604,461

 

 

 

11,768,381

 

Total equity

 

 

3,250,025

 

 

 

458,986

 

Total liabilities, redeemable convertible cumulative preferred stock and equity (deficit)

 

$

11,892,840

 

 

$

9,613,588

 







ECOSPHERE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


 

 

For the Three Months Ended

June 30,

 

 

For the Six Months Ended

June 30,

 

 

 

2012

 

 

2011

 

 

2012

 

 

2011

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Equipment sales and licensing

 

$

5,778,614

 

 

$

 

 

$

11,426,707

 

 

$

 

Field services

 

 

2,846,490

 

 

 

2,367,543

 

 

 

5,559,192

 

 

 

4,595,184

 

Total revenues

 

 

8,625,104

 

 

 

2,367,543

 

 

 

16,985,899

 

 

 

4,595,184

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equipment sales and licensing

 

 

4,562,761

 

 

 

 

 

 

8,670,423

 

 

 

 

Field services

 

 

713,865

 

 

 

802,558

 

 

 

1,515,582

 

 

 

1,424,257

 

Total cost of revenues

 

 

5,276,626

 

 

 

802,558

 

 

 

10,186,005

 

 

 

1,424,257

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

3,348,478

 

 

 

1,564,985

 

 

 

6,799,894

 

 

 

3,170,927

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

2,463,714

 

 

 

3,100,049

 

 

 

4,876,470

 

 

 

8,036,199

 

Total operating expenses

 

 

2,463,714

 

 

 

3,100,049

 

 

 

4,876,470

 

 

 

8,036,199

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

884,764

 

 

 

(1,535,064

)

 

 

1,923,424

 

 

 

(4,865,272

)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(77,861

)

 

 

(189,084

)

 

 

(175,342

)

 

 

(311,496

)

Loss on conversion, net

 

 

 

 

 

 

 

 

 

 

 

(94,662

)

Gain (loss) from change in fair value of derivative instruments

 

 

112,167

 

 

 

174,873

 

 

 

(85,995

)

 

 

(23,888

)

Other, net

 

 

864

 

 

 

290

 

 

 

4,628

 

 

 

433

 

Total other income (expense)

 

 

35,170

 

 

 

(13,921

)

 

 

(256,709

)

 

 

(429,613

)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

919,934

 

 

 

(1,548,985

)

 

 

1,666,715

 

 

 

(5,294,885

)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

(25,688

)

 

 

(25,750

)

 

 

(51,438

)

 

 

(51,500

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) applicable to common stock before allocation to noncontrolling interest

 

 

894,246

 

 

 

(1,574,735

)

 

 

1,615,277

 

 

 

(5,346,385

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: net income applicable to noncontrolling interest in consolidated subsidiary

 

 

(388,386

)

 

 

(285,786

)

 

 

(744,631

)

 

 

(313,798

)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) applicable to Ecosphere Technologies, Inc. common stock

 

$

505,860

 

 

$

(1,860,521

)

 

$

870,646

 

 

$

(5,660,183

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share applicable to common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.00

 

 

$

(0.01

)

 

$

0.01

 

 

$

(0.04

)

Diluted

 

$

0.00

 

 

$

(0.01

)

 

$

0.01

 

 

$

(0.04

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

148,851,205

 

 

 

143,472,955

 

 

 

148,132,482

 

 

 

142,577,732

 

Diluted

 

 

158,744,098

 

 

 

143,472,955

 

 

 

160,914,515

 

 

 

142,577,732

 








ECOSPHERE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


 

 

For the Six Months Ended

June 30,

 

 

 

2012

 

 

2011

 

Operating Activities:

 

 

 

 

 

 

Net income (loss) applicable to Ecosphere Technologies, Inc. common stock

 

$

870,646

 

 

$

(5,660,183

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

51,438

 

 

 

51,500

 

Depreciation and amortization

 

 

1,101,170

 

 

 

1,062,142

 

Accretion of discount on notes payable

 

 

115,178

 

 

 

118,607

 

Loss on conversion of debt and accrued interest to common stock

 

 

 

 

 

93,762

 

Stock-based compensation expense

 

 

895,672

 

 

 

3,753,097

 

Stock options issued for services

 

 

 

 

 

97,450

 

Noncontrolling interest in income of consolidated subsidiary

 

 

744,631

 

 

 

313,798

 

Loss from change in fair value of warrant derivative liability

 

 

85,995

 

 

 

23,888

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Increase in accounts receivable

 

 

(2,849,765

)

 

 

(53,553

)

Decrease in prepaid expenses and other current assets

 

 

46,517

 

 

 

45,840

 

Increase in inventory

 

 

(38,989

)

 

 

(3,684,795

)

Decrease (increase) in deposits

 

 

563

 

 

 

(5,440

)

Increase in restricted cash

 

 

(378,809

)

 

 

(323,125

)

Increase (decrease) in accounts payable

 

 

31,493

 

 

 

(591,780

)

Decrease in accrued liabilities

 

 

(221,593

)

 

 

(240,083

)

Increase in billings in excess of costs and estimated earnings on uncompleted contracts

 

 

188,679

 

 

 

 

Decrease in restructuring reserve

 

 

(24,925

)

 

 

(35,585

)

Increase in customer deposits

 

 

100,000

 

 

 

4,300,000

 

Net cash provided by (used in) operating activities

 

 

717,901

 

 

 

(734,460

)

Investing Activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(47,845

)

 

 

(539,207

)

Transfer to restricted cash

 

 

(25,000

)

 

 

 

Net cash used in investing activities

 

 

(72,845

)

 

 

(539,207

)

Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of convertible notes payable and warrants

 

 

 

 

 

1,575,000

 

Proceeds from warrant and option exercises

 

 

249,299

 

 

 

604,164

 

Proceeds from warrant modifications

 

 

107,400

 

 

 

 

Proceeds from equipment financing

 

 

 

 

 

189,504

 

Distributions from EES subsidiary to noncontrolling members

 

 

(908,551

)

 

 

 

Repayments of notes payable and insurance financing

 

 

(109,862

)

 

 

(83,191

)

Repayments of notes payable to related parties

 

 

 

 

 

(611,807

)

Repayments of vehicle and equipment financing

 

 

(49,139

)

 

 

(6,937

)

Net cash (used in) provided by financing activities

 

 

(710,853

)

 

 

1,666,733

 

Net (decrease) increase in cash

 

 

(65,797

)

 

 

393,066

 

Cash at beginning of year

 

 

2,043,593

 

 

 

46,387

 

Cash at end of period

 

$

1,977,796

 

 

$

439,453

 









ECOSPHERE TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME

(Unaudited)




 

 

 

Current Quarter

 

 

 

Trailing Quarter

 

 

 

Same Quarter, Prior Year

 

 

 

 

For the Three Months Ended

 

 

 

 

June 30,

2012

 

 

 

March 31,

2012

 

 

 

June 30,

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

1,587,096

 

 

$

1,455,734

 

 

$

109,783

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

(549,570

)

 

 

(551,600

)

 

 

(534,097

)

Stock-based compensation

 

 

(453,805

)

 

 

(441,867

)

 

 

(1,247,123

)

Interest expense

 

 

(77,861

)

 

 

(97,481

)

 

 

(189,084

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

505,860

 

 

$

364,786

 

 

$

(1,860,521

)