10-Q 1 v409442_10q.htm FORM 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2015

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ABTECH HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Nevada		14-1994102
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

4110 N. Scottsdale Road, Suite 235 Scottsdale, Arizona		85251
(Address of principal executive offices)		(Zip Code)

(480) 874-4000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES x

NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES x

NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

¨ Large accelerated filer

¨ Accelerated filer

¨ Non-accelerated filer
(Do not check if smaller reporting
company)

x Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ¨

NO x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at May 14, 2015
Common stock, $.001 par value		68,943,002

ABTECH HOLDINGS, INC.

FORM 10-Q

March 31, 2015

INDEX

		PAGE
PART I—FINANCIAL INFORMATION		3

Item 1. Financial Statements		3

Condensed Consolidated Balance Sheets as of March 31, 2015 (Unaudited) and December 31, 2014		3

Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014		4

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014		5

Notes to the Unaudited Condensed Consolidated Financial Statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13

Item 3. Quantitative and Qualitative Disclosures About Market Risk		18

Item 4. Controls and Procedures		19

PART II—OTHER INFORMATION		20

Item 1. Legal Proceedings		20

Item 1A. Risk Factors		20

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		20

Item 3. Defaults Upon Senior Securities		20

Item 4. Mine Safety Disclosures		21

Item 5. Other Information		21

Item 6. Exhibits		21

Signature Page		22

Certifications
Exhibit 31.1
Exhibit 31.2
Exhibit 32

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements regarding the Company. Reference is made in particular to the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward-looking statements included in this report. Such statements may be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “would,” “could,” “confident,” “forecast,” “hope,” “likely,” “plan,” “possible,” “potential,” “predict,” “project,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar terms, variations of such terms or the negative of such terms. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Such statements address future events and conditions concerning, among others, capital expenditures, earnings, litigation, regulatory matters, liquidity and capital resources, and accounting matters. Actual results in each case could differ materially from those anticipated in such statements by reason of factors such as future economic conditions, changes in consumer demand, legislative, regulatory and competitive developments in markets in which we operate, results of litigation, and other circumstances affecting anticipated revenues and costs, and the risk factors set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed on March 31, 2015 and the additional “Risk Factors” set forth in Item 1A of PART II of this report on Form 10-Q.

YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events or information as of the date on which the statements are made in this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report and the documents that we reference in this report, including documents referenced by incorporation, completely and with the understanding that our actual future results may be materially different from what we expect or hope.

Explanatory Note

As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our,” “ABHD” and the “Company” refer to Abtech Holdings, Inc.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The December 31, 2014 consolidated balance sheet included in this Quarterly Report on Form 10-Q was derived from audited financial statements but does not include all disclosures required by GAAP. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2015. For further information, refer to the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ABTECH HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2015 (Unaudited)			December 31, 2014
ASSETS
Current assets
Cash and cash equivalents	$	978,921		$	1,049,460
Accounts receivable – trade, net		252,349			127,435
Inventories, net		479,766			498,214
Deferred charges, net		134,977			198,090
Prepaid expenses and other current assets		22,494			37,995
Total current assets		1,868,507			1,911,194

Fixed assets, net		50,523			56,830
Security deposits		33,940			33,940
Deferred charges, net		9,286			12,760
Total assets	$	1,962,256		$	2,014,724

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
Current liabilities
Accounts payable	$	690,700		$	642,910
Accounts payable – related party		18,085			5,545
Loans from stockholders		9,000			9,000
Bank line of credit		80,000			-
Notes payable, net of discounts		1,606,090			1,572,325
Notes payable – related party, net of discounts		3,632,549			2,680,294
Convertible promissory notes, net of discounts		939,338			935,566
Convertible promissory notes – related party, net of discounts		3,124,084			3,061,841
Capital lease obligation – current portion		1,723			2,731
Customer deposits		2,242			2,242
Accrued interest payable		628,786			462,356
Accrued expenses		262,620			263,801
Total current liabilities		10,995,217			9,638,611

Due to related party		83,171			84,669
Convertible promissory notes – related party, net of discounts – non-current portion		573,404			569,491
Total liabilities		11,651,792			10,292,771

Commitments and contingencies

Stockholders’ equity (deficiency)
Common stock, $0.001 par value; 300,000,000 authorized shares; 68,543,002 shares issued and outstanding at March 31, 2015 and December 31, 2014		68,543			68,543
Additional paid-in capital		44,506,009			44,359,358
Non-controlling interest		(2,886,990	)		(2,768,397	)
Accumulated deficit		(51,377,098	)		(49,937,551	)
Total stockholders’ equity (deficiency)		(9,689,536	)		(8,278,047	)
Total liabilities and stockholders’ equity (deficiency)	$	1,962,256		$	2,014,724

The accompanying notes are an integral part of these condensed consolidated financial statements.

ABTECH HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31,

	2015			2014

Net revenues	$	203,507		$	75,258

Cost of revenues		121,660			103,214
Gross profit (loss)		81,847			(27,956	)

Operating expenses
Selling, general and administrative		967,359			986,544
Research and development		273,010			333,465
Total operating expenses		1,240,369			1,320,009

Operating loss		(1,158,522	)		(1,347,965	)

Other income (expense)
Interest expense		(399,645	)		(166,683	)
Other income		27			62
Total other income (expense), net		(399,618	)		(166,621	)

Loss before income taxes		(1,558,140	)		(1,514,586	)

Provision for income taxes		-			-

Net loss		(1,558,140	)		(1,514,586	)

Net loss attributable to non-controlling interest		(118,593	)		(160,591	)

Net loss attributable to controlling interest	$	(1,439,547	)	$	(1,353,995	)

Basic and diluted loss per common share	$	(0.02	)	$	(0.02	)

Basic and diluted weighted average number of shares outstanding		68,543,002			67,883,879

The accompanying notes are an integral part of these condensed consolidated financial statements.

ABTECH HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31,

	2015			2014
Operating Activities
Net loss	$	(1,558,140	)	$	(1,514,586	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		6,307			7,034
Stock-based compensation expense		97,141			87,790
Note discount amortized as interest		155,458			66,038
Deferred charges expensed as interest		66,587			27,093
Changes in operating assets and liabilities:
Accounts receivable		(124,914	)		94,596
Inventories		18,448			(31,545	)
Prepaid expenses and other current assets		15,501			(106,743	)
Accounts payable		60,330			(113,934	)
Customer deposits		-			(1,608	)
Accrued interest payable		166,430			71,640
Accrued expenses		(1,181	)		(10,113	)
Net cash used in operating activities		(1,098,033	)		(1,424,338	)

Investing Activities
Purchases of fixed assets		-			(11,417	)
Net cash used in investing activities		-			(11,417	)

Financing Activities
Proceeds from notes payable – related party		950,000			-
Proceeds from notes payable		-			875,000
Proceeds from bank line of credit		80,000			-
Repayments under capital lease obligation		(1,008	)		(1,288	)
Net decrease in due to related party		(1,498	)		(1,424	)
Net cash provided by financing activities		1,027,494			872,288

Net change in cash and cash equivalents		(70,539	)		(563,467	)
Cash and cash equivalents at beginning of period		1,049,460			1,212,984
Cash and cash equivalents at end of period	$	978,921		$	649,517

Supplemental cash flow information:
Cash paid for interest	$	11,171		$	1,911
Cash paid for income taxes	$	-		$	-
Non-cash investing and financing activities:
Unamortized portion of debt discount	$	341,514		$	545,581
Warrants issued with debt	$	49,510		$	107,856

The accompanying notes are an integral part of these condensed consolidated financial statements.

ABTECH HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – ORGANIZATION

Abtech Holdings, Inc. (“ABHD” or the “Company”) (formerly Laural Resources, Inc.), was incorporated under the laws of the State of Nevada on February 13, 2007, with authorized capital stock of 300,000,000 shares at $0.001 par value.

AbTech Industries, Inc. (“AbTech”), a Delaware corporation with an authorized capital of 15,000,000 shares of $0.01 par value common stock and 5,000,000 shares of $0.01 par value preferred stock, was acquired by ABHD in a reverse acquisition transaction on February 10, 2011. The preferred stockholders of AbTech that elected not to convert and exchange their shares for ABHD common shares, represent the non-controlling interest shown on the Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014.

AbTech is an environmental technologies firm that provides innovative solutions to address issues of water pollution. AbTech has developed and patented the Smart Sponge^® polymer technology. This technology’s oil absorbing capabilities make it highly effective as a filtration media to remove hydrocarbons and other pollutants from flowing or pooled water. AbTech is headquartered in Scottsdale, Arizona and has a manufacturing facility located in Phoenix, Arizona.

In 2012, the Company formed a subsidiary, AEWS Engineering, LLC (“AEWS”), an independent civil and environmental engineering firm, established to provide engineering and technology innovation to the water infrastructure sector. AEWS is owned 80% by the Company and 20% by Bjornulf White, a co-founder. Under the AEWS operating agreement, the Company will fund the initial start-up costs of AEWS. Any future profits will be allocated first to those members that have funded initial start-up costs and prior losses (AbTech) and then to members in proportion to their membership interests. Accordingly, the operations of AEWS for the periods reflected in these condensed consolidated financial statements are allocated 100% to the Company. AEWS has an office located in Raleigh, North Carolina and its operations since inception have been focused on setting up the business and pursuing new business development activities.

In 2013, the Company formed a wholly-owned subsidiary in the United Kingdom, AbTech Industries (UK) Limited (“AbTech UK”). The Company intends to use this subsidiary to conduct operations in the UK and potentially other European countries, however, as of March 31, 2015, AbTech UK had not initiated operations and had no financial transactions.

AbTech’s wholly-owned subsidiary, Environmental Security Corporation (“ESC”), was formed in 2003 to develop a sensor array technology designed to detect impurities in water flows. ESC owns a U.S. patent on this technology and has acquired rights to another monitoring technology, but otherwise had no operations during 2015 or 2014.

The Company operates in one business segment which is the filtration and treatment of polluted water.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Financial Statement Presentation – The condensed consolidated financial statements include the accounts of ABHD, AbTech, AEWS and ESC. Intercompany accounts and transactions have been eliminated. The shares of AbTech preferred stock that have not converted to shares of ABHD common stock represent the non-controlling interest shown on the condensed consolidated balance sheets.

The condensed consolidated financial statements as of March 31, 2015 and for the three months ended March 31, 2015 and 2014 are unaudited and, in the opinion of the Company’s management, include all adjustments necessary for a fair presentation of such condensed consolidated financial statements. Such adjustments are of a normal recurring nature.

Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Revenue Recognition – The Company recognizes revenue only when all of the following criteria have been met:

Persuasive Evidence of an Arrangement – The Company documents all terms of an arrangement in a quote signed or confirmed by the customer prior to recognizing revenue.

Delivery Has Occurred or Services Have Been Performed – The Company performs all services or delivers all products prior to recognizing revenue. Services are considered to be performed when the services are complete.

The Fee for the Arrangement is Fixed or Determinable – Prior to recognizing revenue, a customer’s fee is either fixed or determinable under the terms of the quote or accepted customer purchase order.

Collectability Is Reasonably Assured – Collectability is assessed on a customer by customer basis based on criteria outlined by management.

In 2015 and 2014, the Company recognized revenue from the sale of its Smart Sponge^® and Smart Sponge Plus products, including Ultra-Urban^® Filters, Line Skimmers, Passive Skimmers and Smart Paks^®. The Smart Paks are usually sold as a component of an engineered system such as an end-of-pipe vault or other larger multi-product treatment train. The Company provides engineering design services on some engineered solutions. Revenue from design services are recognized at the time the engineering services are completed.

In 2013, the Company entered into a contract arrangement whereby it earns revenue for multiple deliverables including, engineering services, installation of storm water treatment systems and maintenance activities. The Company accounts for the contract deliverables related to installation and construction using the percentage-of-completion method and makes estimates of the completion percentages based on the costs and hours actually incurred to complete each project task. The contract deliverables related to pre-construction engineering services and post-construction maintenance services, are handled as separate units of accounting with the revenue allocated by the contract to each separate unit of accounting recognized as the respective services are actually performed. As of March 31, 2015, only the pre-construction engineering services have been performed under the contract.

The Company recognizes shipping and handling fees as revenue and the related expenses as a component of cost of sales. All internal handling charges are charged to selling, general and administrative expenses.

The payment terms for sales made to customers vary based on the credit worthiness of the particular customer and the size of the order. Some orders require prepayment of up to 50% at the time the order is received, others require payment in full before shipping and others are made on terms requiring payment within 30 days of the date of shipment. Customers do not have a right of return for products purchased from the Company. The Company may on occasion allow a return under appropriate conditions to promote good business practices; however, such returns have been and are expected to be minimal. Regardless of when payment is received from the customer, revenues are recognized in accordance with the criteria for revenue recognition described above.

Net Loss Per Share – Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. The Company has other potentially dilutive securities outstanding that are not shown in a diluted net loss per share calculation because their effect in both 2015 and 2014 would be anti-dilutive. The following chart lists the securities as of March 31, 2015 and 2014 that were not included in the computation of diluted net loss per share because their effect would have been antidilutive:

	Common Shares
	March 31, 2015 Unaudited		March 31, 2014 Unaudited
Options to purchase common stock		8,484,902		10,218,863
Warrants to purchase common stock		9,466,355		8,232,339
Convertible promissory notes		9,529,895		7,856,722
Convertible preferred stock in AbTech		6,457,467		6,457,467
		33,938,619		32,765,391

Recent Accounting Pronouncements – In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers,” which provides guidance for revenue recognition. The guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes the most current revenue recognition guidance. The guidance is effective for the Company beginning the first quarter of fiscal 2017, however, in April 2015, the FASB issued for public comment a proposed ASU that would defer the effective date of the new revenue recognition standard by one year. The Company is currently evaluating ASU 2014-09 and its potential impact on the Company’s financial statements.

In June 2014, the FASB issued Accounting Standards Update No. 2014-12, "Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period" ("ASU 2014-12"). ASU 2014-12 provides explicit guidance on whether to treat a performance target that could be achieved after the requisite service period as a performance condition that affects vesting, or as a non-vesting condition that affects the grant-date fair value of an award. The update requires that compensation costs are recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. This update is effective for the annual periods and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the effect that the updated standard will have on the financial statements and related disclosures.

In August 2014, the Financial Accounting Standards Board issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” which provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The guidance is effective for the Company beginning for the annual period ending December 31, 2016 and interim period thereafter. The Company is currently evaluating this ASU and its potential impact on the Company’s financial statement footnote disclosures.

NOTE 3 – INVENTORIES

The Company uses a perpetual inventory system and periodic physical test counts to determine inventory amounts at interim balance sheet dates. Inventories are stated at the lower of cost or market, with cost computed on an average cost method which approximates the first-in, first-out basis.

	March 31, 2015 (Unaudited)			December 31, 2014
Raw materials	$	91,620		$	94,817
Work in process		441,167			478,145
Finished goods		56,979			35,252
Reserve for obsolescence		(110,000	)		(110,000	)
Total	$	479,766		$	498,214

NOTE 4 – GOING CONCERN

These unaudited condensed consolidated financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and expenses, which raises doubts about the ability of the Company to continue as a going concern. In order to continue as a going concern, the Company will need to generate additional revenue and obtain additional capital to fund its operating losses and service its debt, including accounts payable, of which a substantial portion is presently past due. Management of the Company has developed a strategy, which it believes will accomplish this objective through revenue growth and additional funding, which will enable the Company to operate for the coming year. In June 2013, the Company entered into an equity line of credit agreement with Dutchess Opportunity Fund, II, LP (“Dutchess”) whereby Dutchess is irrevocably committed to purchase from the Company up to $2 million of ABHD common stock over the course of the 36 month period ending September 9, 2016. As of March 31, 2015, the Company had made no draws on the equity line of credit and the full committed amount remains available for draw. However, even with this funding commitment in place, there can be no assurance that the Company’s overall efforts will be successful. If the Company is unable to generate significant sales growth in the near term and raise additional capital, there is a risk that the Company could default on debt maturing during 2015, and could be required to significantly reduce the scope of its operations if no other means of financing operations are available. As a result, the Company’s independent registered public accounting firm has included an emphasis-of-matter paragraph regarding the Company’s ability to continue as a going concern in their opinion attached to the Company’s audited financial statements for the year ended December 31, 2014. These condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

NOTE 5 – RELATED PARTY TRANSACTIONS

Accounts payable, related party – At March 31, 2015 and December 31, 2014, “Accounts payable – related party” represents advertising fees due to a non-profit organization of which the president of the Company is a director and nominal amounts due to an officer of the Company for travel expenses.

Accrued expenses – At March 31, 2015, accrued expenses included $32,500 for fees due to directors of the Company for their services as directors.

Stock Options – The Company granted 1,525,000 stock options to directors and officers of the Company in February 2015 and 240,000 stock options to a new director of the Company in March 2014 (see NOTE 8 – STOCKHOLDERS’ DEFICIENCY AND STOCK-BASED COMPENSATION).

Private Placements – In March 2015, an investor that is considered to be a related party because it has beneficial ownership interest in the Company of greater than 5% purchased a $950,000 secured promissory note from the Company (see NOTE 9 – PRIVATE OFFERINGS).

NOTE 6 – PROMISSORY NOTES AND OTHER DEBT

Information regarding the various promissory notes that were outstanding as of March 31, 2015 is set forth in the table below:

	Principal Amount		Discount		Net Amount		Interest Rate			Maturity Date	Conversion Rate
Notes payable
Secured notes (senior)	$	700,000		-	$	700,000		7.5	%	4/8/2015* ŧ		N/A
Secured note (senior)		50,000		-		50,000		7.5	%	4/8/2015* ŧ		N/A
Secured note (senior)		125,000		-		125,000		7.5	%	4/8/2015* ŧ		N/A
Secured note (senior)		100,000		1,293		98,707		7.5	%	5/30/2015*		N/A
Secured note		100,000		3,241		96,759		7.5	%	9/22/2015*		N/A
Secured note		104,000		3,410		100,590		7.5	%	9/30/2015*		N/A
Secured note		100,000		2,901		97,099		7.5	%	10/14/2015*		N/A
Secured note		100,000		3,396		96,604		7.5	%	10/29/2015*		N/A
Secured note		250,000		8,669		241,331		7.5	%	11/13/2015*		N/A
Subtotal		1,629,000		22,910		1,606,090

	Principal Amount		Discount		Net Amount		Interest Rate			Maturity Date	Conversion Rate
Notes payable - related party
Secured note (senior)		1,025,000		3,055		1,021,945		9.5	%	6/10/2015**		N/A
Secured note		500,000		13,629		486,371		7.5	%	8/18/2015*		N/A
Secured note		212,979		6,972		206,007		7.5	%	9/18/2015*		N/A
Secured note		500,000		16,930		483,070		7.5	%	10/28/2015*		N/A
Secured note		550,000		19,398		530,602		7.5	%	11/26/2015*		N/A
Secured note		950,000		45,446		904,554		7.5	%	3/23/2016*		N/A
Subtotal		3,737,979		105,430		3,632,549

Convertible promissory notes
Unsecured note		250,000		-		250,000		6.5	%	6/2/2015	$	0.53
Unsecured note		500,000		-		500,000		6.5	%	6/2/2015		0.64
Secured note		200,000		10,662		189,338		6.5	%	12/6/2015		0.53
Subtotal		950,000		10,662		939,338

Convertible promissory notes - related party
Secured note		3,300,000		175,916		3,124,084		6.5	%	12/6/2015	$	0.53
Subtotal		3,300,000		175,916		3,124,084

Convertible promissory notes - related party – noncurrent
Secured note		600,000		26,596		573,404		7.5	%	11/26/2016	$	0.3586
Subtotal		600,000		26,596		573,404
Total promissory notes	$	10,216,979	$	341,514	$	9,875,465

* Indicates that the maturity date of the note may be extended up to two times by 90 days each. If the first extension option is exercised, the interest rate will increase to 9.5% per annum. If the second extension option is exercised, the interest rate will increase to 11.5% per annum. Use of the extension of the due dates for these notes was deemed unlikely by management as of March 31, 2015.

** The first extension option for this note was exercised by the Company in March 2015. The maturity date shown is the extended maturity date and the interest rate is the new interest rate in effect as of March 10, 2015. Upon exercise of the first extension option, the number of warrant shares issued with this note was increased by 51,250 shares.

ŧ Indicates notes that were repaid by the Company in April 2015.

The convertible promissory notes are convertible into shares of the Company’s common stock at the indicated conversion rate.

The note discounts result from warrants issued with the notes and any beneficial conversion features inherent in the convertible notes. The note discounts are amortized under the effective interest method over the term of the promissory notes. Interest expense related to the amortization of the discount on the promissory notes for the three months ended March 31, 2015 and 2014 was $155,458 and $66,038, respectively.

The secured notes have a security interest in all of the personal property and other assets of the Company. The Security interest of the secured notes maturing in April, May and June 2015 (the “Senior Notes”) is senior to the security interest of the other secured notes.

Bank Line of Credit

The Company has a bank line of credit with a credit limit of $100,000. This line of credit has an annual interest rate of prime plus 6.75% and requires monthly payment of any interest due plus approximately 1% of the outstanding balance. At March 31, 2015 and December 31, 2014, the outstanding balance due on the bank line of credit was $80,000 and $0, respectively.

NOTE 7 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, customer deposits, capital lease obligation, notes payable and convertible notes payable. It is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values, using level 3 inputs, based on their short maturities, or for long term debt, based on borrowing rates currently available to the Company for loans with similar terms and maturities. Gains and losses recognized on changes in fair value of financial instruments, if any, are reported in other income (expense) as gain (loss) on change in fair value. At March 31, 2015, the Company had no financial instruments outstanding that were estimated using level 1or level 2 inputs.

NOTE 8 – STOCKHOLDERS’ DEFICIENCY

The $146,651 increase in common stock and additional paid-in capital for the three-months ended March 31, 2015 is attributable to stock based compensation of $97,141 for stock options vesting during the period, $46,455 for the value of warrants issued with secured promissory notes during the period and $3,055 for the value of 51,250 additional warrant shares issued upon the Company’s exercise of the first extension option on a secured note that had an original maturity date of March 10, 2015.

During the three-months ended March 31, 2015, the Company granted 1,325,000 performance-based stock options to officers and directors of the Company. These options will only vest if certain performance objectives are met during 2015. Compensation expense for these options will be recognized ratably during 2015 only when it becomes likely that the performance objective will be met. The Company also granted a stock option for 200,000 shares to the President of its AEWS subsidiary. This option will vest 100% on December 31, 2015. In addition, the Company granted 40,000 stock options to a consultant during the period, which vested immediately upon grant. The compensation expense for the options granted will be recognized as the options vest based on the estimated fair value of the options granted as determined by the Black-Scholes option pricing model. The following table summarizes the significant assumptions used in applying the Black-Scholes model for the options granted during the three-months ended March 31, 2015.

Weighted fair value per share of options granted	$	0.18
Weighted average assumptions used:
Expected dividend yield		0.0	%
Expected volatility		64.5	%
Risk-free interest rate		1.28	%
Expected term in years		4.91
Exercise price	$	0.34

The Company used the following assumptions to estimate the fair value of the warrants that were issued in conjunction with secured promissory notes during three months ended March 31, 2015:

Expected volatility		50.29% - 51.18%
Expected dividend yield		0%
Expected term		2.1 - 2.5 years
Risk-free interest rate		0.93% - 1.10%
Market price of common stock		$0.30 - $0.32

The assumptions for expected dividend yield, expected volatility and expected term reflect management’s judgment and include consideration of historical experience. Expected volatility is based on historical volatility of the Company’s common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option.

NOTE 9 – PRIVATE PLACEMENTS

In March 2015, the Company issued a secured promissory note to a related party investor for $950,000 (the “2015 Note”). The proceeds from the 2015 Note were used in April 2015 to repay $875,000 of mature debt plus accrued interest of approximately $71,000. The 2015 Note matures on March 23, 2016, has an interest rate of 7.5% per annum and has a security interest in the assets of the Company that is junior to the Senior Notes. The purchaser of the 2015 Note also received a warrant for the purchase of 475,000 shares of the Company’s common stock. The warrant has an exercise price of $0.315 per share and expires five (5) years from the date of grant. The Company may extend the maturity date of the 2015 Note up to two times by 90 days each. If the first extension option is exercised, the interest rate will increase to 9.5% per annum. If the second extension option is exercised, the interest rate will increase to 11.5% per annum. The number of warrant shares that the 2015 Note holder will be entitled to under the terms of the warrant issued by the Company with the 2015 Note will be increased by 10% for each extension option exercised by the Company.

NOTE 10 – SUBSEQUENT EVENTS

The proceeds from the $950,000 2015 Note received in March 2015, were used in April 2015 to repay $875,000 of mature debt plus accrued interest of approximately $71,000.

In April 2015, the Company issued a secured promissory note to a related party investor for $250,000 (the “April Note”). The April Note matures on July 13, 2015, has an interest rate of 7.5% per annum and has a security interest in the assets of the Company that is the junior to the security interest of all other outstanding secured notes at April 13, 2015. The purchaser of the April Note also received a warrant for the purchase of 55,000 shares of the Company’s common stock. The warrant has an exercise price of $0.298 per share and expires five (5) years from the date of grant. The Company may extend the maturity date of the April Note up to two times by 90 days each. If the first extension option is exercised, the interest rate will increase to 9.5% per annum. If the second extension option is exercised, the interest rate will increase to 11.5% per annum. The number of warrant shares that the April Note holder will be entitled to under the terms of the warrant issued by the Company with the April Note will be increased by 10% for each extension option exercised by the Company.

On April 17, 2015, the Company issued a release addressing the fact that AbTech and its $12 million storm water drainage contract with Nassau County (the “Contract”) had been mentioned in reports of a grand jury investigation of a New York Senator and his son. On May 4, 2015, it was announced that a federal complaint had been filed alleging that, among other things, they engaged in unlawful practices in connection with the award of the Contract to AbTech. AbTech is not a target of the criminal proceedings, and intends to continue to fully cooperate with federal investigator’s request for information. On May 12, 2015, AbTech received notice from the County of Nassau Department of Public Works suspending all work under the Contract until such time, if at all, as the County notifies AbTech in writing that the County has lifted the work suspension. If the County of Nassau does not lift the suspension, AbTech will be materially adversely affected.

On May 6, 2015, AbTech received notice that its previously announced teaming agreement with Corvias Solutions for the joint development of large stormwater infrastructure projects was being terminated. AbTech waived the notice period for termination of the agreement and the parties mutually agreed to make the termination effective immediately. The collaboration between AbTech and Corvias had not produced any significant projects or revenues.

In April 2015, the Company issued to a consultant a certificate for 400,000 shares of the Company’s common stock as payment for a $120,000 amount due to the consultant.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion includes forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and the timing of events may differ materially from those anticipated in these forward-looking statements as a result of a variety of business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change.

Overview

Management is focused on establishing ABHD and its subsidiaries as a reliable provider of water treatment solutions in the emerging markets for the treatment of stormwater runoff, produced water from oil and gas extraction and mining operations, and other industrial water applications. ABHD is the parent holding company. Its subsidiary, AbTech, is the operating company that manufactures and sells water treatment products, many of which incorporate its patented Smart Sponge technology. ABHD’s other operating subsidiary, AEWS, provides engineering services to assist government and industry in developing effective solutions to their specific water treatment needs. ESC is a dormant subsidiary that holds a patent regarding a sensor array technology designed to detect impurities in water flows. AbTech UK is a new subsidiary established to develop business in the United Kingdom and other parts of Europe. AbTech UK had no operations in the periods covered by this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which is based on the consolidated operations of ABHD and its subsidiaries.

The Company is incurring significant costs as it seeks to gain traction in its targeted water treatment markets and position itself with validated treatment solutions that, if accepted and adopted by the market, can generate significant revenues in the future. The Company’s operations reflect limited historical sales revenue as the Company attempts to engage in those business development activities that management believes have the greatest opportunity to generate future revenues. Key factors affecting ABHD’s results of operations during the periods covered in this section include revenues, cost of revenues, operating expenses and interest expense.

Results of Operations

Comparison of the three months ended March 31, 2015 and 2014

Revenues

Revenues for the three months ended March 31, 2015 increased by $128,249 (170%) compared to revenues in the same period of the prior year. The increase in revenue was largely due to the fulfillment of the initial order of approximately $107,000 from Naylor Industries, the Company’s new distributor in the United Kingdom. The Company also recognized approximately $14,500 of revenue in the first quarter of 2015 on the stormwater contract with Nassau County (the “Contract”). The Contract with Nassau County for up to $12 million of stormwater projects has been an important component of AbTech’s expected future revenues. Recently, AbTech and the Contract were mentioned in reports of a grand jury investigation and a federal complaint filed against a New York Senator and his son alleging that, among other things, the Senator and his son engaged in unlawful practices in connection with the award of the Contract to AbTech. AbTech is not a target of the criminal proceedings, and intends to continue to fully cooperate with federal investigator’s requests for information. On May 12, 2015, AbTech received notice from the County of Nassau Department of Public Works suspending all work underthe Contract until such time, if at all, as the County of Nassau notifies AbTech in writing that the County has lifted the work suspension. If the County of Nassau does not lift the suspension, AbTech will be materially adversely affected. See NOTE 10 to Item 1 of Part I and Item 1A of Part II of this Form 10-Q for more information on this matter.

The Company continues to face challenges in moving other projects forward in the face of the continued funding constraints for new municipal and federal facility stormwater projects and the complexities of developing public private partnerships (“P3s”) for large municipal projects. In addition, the Company’s ability to continue with these large projects has been significantly adversely affected by the events surrounding the Nassau County contract including the fact that the Company’s teaming agreement with Corvias Solutions was recently terminated. AbTech waived the notice period for termination of the agreement and the parties mutually agreed to make the termination effective immediately. Despite these setbacks, the Company intends to continue pursuing other markets for its technologies including non-municipal stormwater projects and the treatment of water in industrial applications such as water produced in the oil and gas extraction industry. See NOTE 10 to Item 1 of Part I and Item 1A of Part II of this Form 10-Q for more information on this matter.

Gross margin

The Company’s gross margin on sales was 40% for the three months ended March 31, 2015 compared to a negative gross margin on sales of (37)% for the same period of 2014. The improved gross margin in 2015 is the direct result of the increased sales during the quarter and the resultant increase in production activities that reduced the costs of excess capacity experienced in the first quarter of 2014. The Company’s manufacturing facility operated at approximately 4% and 1% of operating capacity for the three months ended March 31, 2015 and 2014, respectively. The significant gross margin improvement in the first quarter of 2015 illustrates the significant favorable impact increased production levels have on gross margins. Going forward, the Company expects that gross margin percentages, quarter by quarter, could vary widely depending on the volume of product sales and the corresponding volume of product manufacturing.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased by approximately $19,000 or 2% in the first three months of 2015 as compared to the same period in 2014, reflecting a consistent level of operations for the two periods.

Research and development expenses

Research and development (“R&D”) expenses decreased by approximately $60,000 (18%) for the three months ended March 31, 2015 as compared to the same period of the prior year. The higher R&D expenses in 2014 were primarily attributable to field testing conducted with the Company’s mobile, produced water treatment system in Texas. These field testing costs totaled approximately $127,000 during the first three months of 2014. There were no similar field testing costs incurred in the first three months of 2015. However, R&D costs in 2015 included a new consulting expense item of approximately $75,000 related to the development and worldwide exclusive license of an evaporator technology being developed for the treatment of landfill leachate. These consulting expenses began in the second quarter of 2014 and are expected to continue through at least the end of 2015.

Other income (expense)

Interest expense increased substantially for the three months ended March 31, 2015 as compared to the same period of 2014 due to interest costs related to the $5 million of secured promissory notes issued by the Company during 2014. The various components of interest expense that accounted for the increase are summarized in the table below:

	Three months ended March 31,
Interest Components	2015		2014
1. Interest accrued on notes outstanding and other finance charges	$	177,601	$	73,552
2. Amortization of the note discount created by the bifurcation of the value of the warrants issued with promissory notes		114,074		27,855
3. Interest imputed on promissory notes issued with beneficial conversion terms		41,384		38,183
4. Amortization of deferred financing costs related to private offerings of debt		66,586		27,093
TOTAL INTEREST EXPENSE	$	399,645	$	166,683

Liquidity and Capital Resources

Liquidity

As of March 31, 2015, the Company had a working capital deficiency of approximately $9,127,000 compared to a working capital deficit of approximately $7,727,000 at December 31, 2014. The increased working capital deficiency is primarily attributable to the use of cash for operations during the three months ended March 31, 2015 and the $950,000 of additional short term debt taken on by the Company in 2015. The Company’s cash balance decreased from $1,049,460 at December 31, 2014 to $978,921 at March 31, 2015. The cash balance at March 31, 2015 includes approximately $943,000 that was committed to repay promissory notes maturing in April 2014. The remaining cash balance of approximately $36,000 represents less than one month of the Company’s historical monthly cash used for operations and evidences the Company’s need to raise additional capital in the immediate short-term. In April 2015, the Company issued a secured promissory note for $250,000 (see NOTE 10 – SUBSEQUENT EVENTS to the financial statements included in Item 1 of this report).

To date, the Company has not generated sufficient revenue to cover its operating costs and expenses and continues to operate with negative cash flow. While we expect to achieve sales growth sufficient to cover operating costs and expenses over the long-term, continued negative cash flow from operations is expected in the short-term. The Company will require additional capital to maintain current operations until the Company achieves the sales growth necessary to cover operating costs and expenses. In addition, rapid sales growth may require the Company to enter into working capital financing arrangements.

Operations in the first three months of 2015 were funded with the cash on hand at the beginning of that period. The Company also has a $2,000,000 equity line of credit (“ELOC”) available pursuant to an agreement it entered into in June 2013 with Dutchess Opportunity Fund, II, LP (“Dutchess”) whereby Dutchess is irrevocably committed to purchase up to $2 million of ABHD common stock from the Company over the course of 36 months. The aggregate number of shares issuable by the Company and purchasable by Dutchess under the ELOC is limited by the dollar amount sold, in this instance no more than $2 million, and will depend upon the trading price of the Company’s shares. The purchase price will be set at ninety-seven percent (97%) of the lowest daily volume weighted average price of the Company’s common stock during the five consecutive trading days beginning on the date of the applicable put. The Company may draw on the ELOC from time to time, as and when it determines appropriate in accordance with the terms and conditions of the Investment Agreement. The Company has no obligation to utilize the full amount available under the ELOC. As of March 31, 2015, the Company had made no draws on the ELOC.

Comparison of cash flows for the three months ended March 31, 2015 and 2014

Operating Activities

The Company had negative cash flows from operations for the three months ended March 31, 2015 of approximately $1,098,000 compared to negative cash flows from operations of approximately $1,424,000 for the same period of the prior year. This reduction in cash used for operations is primarily due to the operating loss being approximately $189,000 less in the first quarter of 2015 than operating loss for the same period of the prior year. While interest expense in the first three months of 2015 was approximately $233,000 greater than interest expense for the same period of 2014, the majority of this interest expense did not require cash because it represented unpaid interest accrued on outstanding notes or the amortization of note discounts and deferred financing costs as interest expense. Cash used for the payment of interest in the first three months of 2015 and 2014 was $11,171 and $1,911, respectively. Cash flow was adversely affected during the first three months of 2015 by an increase of $125,000 in the balance of accounts receivable, due primarily to the $107,000 payment due from the Company’s U.K. distributor which was received in April 2015. The adverse effect of the increase in receivables was partially offset by a $60,000 increase in payables during the first three months of 2015, resulting in an accounts payable balance at March 31, 2015 of approximately $709,000.

Investing Activities

The Company had no capital expenditures for the three months ended March 31, 2015 and $11,417 of capital expenditures for the same period of 2014. As of March 31, 2015, the Company had no commitments for any material future capital expenditures.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2015 amounted to approximately $1,027,000 compared to cash provided by financing activities of approximately $872,000 in the same period of 2014. The primary financing source of cash in the first three months of 2015 was the issuance of a $950,000 secured promissory note. The Company also borrowed $80,000 on its bank line of credit during the quarter ended March 31, 2015. During the first three months of 2014, the Company raised approximately $875,000 from the sale of short-term secured promissory notes.

Going Concern and Management’s Plans

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities and commitments in the normal course of business. As discussed in NOTE 4 to the accompanying condensed consolidated financial statements, we have not achieved a sufficient level of revenues to support our business and have suffered substantial recurring losses from operations since our inception. These factors raise substantial doubt about the Company’s ability to continue operations as a going concern. As such, the Company’s independent registered public accounting firm included an emphasis-of-matter paragraph regarding the Company’s ability to continue as a going concern in their opinion attached to the Company’s audited financial statements for the year ended December 31, 2014. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities or any other adjustment that might be necessary should the Company be unable to continue as a going concern. Management believes that the Company’s ability to continue as a going concern will be dependent on its ability to generate sales and raise capital sufficient to cover all of its costs and operational expenses. The Company’s ability to achieve these objectives cannot be determined at this time. Management’s plans in regard to these matters are described in NOTE 4 to the accompanying condensed consolidated financial statements. If the Company is unable to generate significant sales growth in the near term and raise additional capital, there is a risk that the Company could default on debt maturing during 2015, and could be required to significantly reduce the scope of its operations if no other means of financing operations are available.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations

As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.

Critical Accounting Policies and Estimates

The methods, estimates, interpretations and judgments we use in applying our most critical accounting policies can have a significant impact on the results that we report in our condensed consolidated financial statements. An entity’s most critical accounting policies are those policies that are both most important to the portrayal of the entity’s financial condition and results of operations and those that require the entity’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about matters that are inherently uncertain when estimated.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on ABHD’s condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and expenses during the reporting periods. On an ongoing basis, management evaluates these estimates and assumptions. Management bases the estimates on historical experience and on various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The going concern basis of presentation assumes we will continue in operation throughout the next fiscal year and into the foreseeable future and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business. As discussed above, certain conditions currently exist which raise substantial doubt upon the validity of this assumption. The financial statements do not include any adjustments that might result from the outcome of the uncertainty.

The following discussion provides supplemental information regarding the significant estimates, judgments and assumptions made in implementing the Company’s critical accounting policies.

Fair value of warrants and note discount

The Company bifurcates the value of warrants sold with promissory notes. This bifurcation results in the establishment of a note discount with a corresponding charge to equity unless the terms of the warrant require it to be classified as a liability. The warrants and corresponding discount are valued using the Black-Scholes valuation model because there is no market price available for the warrants. This model uses estimates of volatility, risk free interest rate and the expected term of the warrants, along with the current market price of the Company’s common stock, to estimate the value of the outstanding warrants. The assumptions for expected dividend yield, expected volatility and expected term reflect management’s judgment and include consideration of historical experience. Expected volatility is based on historical volatility of the Company’s common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the warrant.

The Company used the following assumptions in applying the Black-Scholes model to estimate the fair value of the warrants issued during the three months ended March 31, 2015:

Weighted average of fair value for warrants issued	$	0.09
Weighted average assumptions used:
Expected dividend yield		0.0	%
Expected volatility		50.38	%
Risk-free interest rate		0.95	%
Expected term (in years)		2.46
Exercise price	$	0.33

Inventory valuation

The Company’s inventory is stated at the lesser of cost or market, with cost computed on an average cost method which approximates the first-in, first-out basis. Provision is made for obsolete, slow moving or defective items where appropriate. This estimated valuation requires that management make certain judgments about the likelihood that specific inventory items may have minimal or no realizable value in the future. These judgments are based on the current quantity of the item on hand compared to historical sales volumes, potential alternative uses of the products and the age of the inventory item.

Revenue recognition and allowance for doubtful accounts

There are four factors that the Company uses to determine the appropriate timing of the recognition of revenue. Three of these factors (evidence of arrangement exists, delivery occurs and fee is fixed or determinable) are generally factual considerations that are not subject to material estimates or assumptions. With regard to projects where revenue is earned for a variety of tasks including design, installation and maintenance activities, the Company accounts for the project using the percentage-of-completion method and makes estimates of the completion percentages based on the cost actually incurred to complete each project task. The fourth factor involves judgment regarding the collectability of the sales price. The Company only ships product when it has reasonable assurance that it will receive payment from the customer. When such assurance is not available, the Company will require payment in advance. The assessment of a customer’s credit-worthiness is reliant on management’s judgment regarding such factors as previous payment history, credit rating, credit references and market reputation. If any sales are made that ultimately become uncollectible, the Company charges the uncollected amount against a reserve for uncollectible accounts. This reserve is established and adjusted from time to time based on management’s assessment of each outstanding receivable and the likelihood of it being collected.

Stock-based compensation

The Company uses the Black-Scholes model to estimate the value of options and warrants issued to employees and consultants as compensation for services rendered to the Company. This model uses estimates of volatility, risk free interest rate and the expected term of the options or warrants, along with the current market price of the underlying stock, to estimate the value of the options and warrants on the date of grant. In addition, the calculation of compensation costs requires that the Company estimate the number of awards that will be forfeited during the vesting period. The fair value of the stock-based awards is amortized over the vesting period of the awards. For stock-based awards that vest based on performance conditions, expense is recognized when it is probable that the conditions will be met.

The following table summarizes the weighted average of fair value and the significant assumptions used in applying the Black-Scholes model for options granted during the three months ended March 31, 2015:

Weighted average of fair value for options granted	$	0.18
Weighted average assumptions used:
Expected dividend yield		0.0	%
Expected volatility		64.5	%
Risk-free interest rate		1.28	%
Expected term (in years)		4.91
Exercise price	$	0.34

The assumptions for expected dividend yield, expected volatility and expected term reflect management’s judgment and include consideration of historical experience. Expected volatility is based on historical volatility of the Company’s shares. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option.

Accounting for conversion options and imputed interest

The convertible promissory notes issued by the Company provide the note holders an option to convert the notes into the Company’s common stock at a set price. The value of these options has not been bifurcated from the value of the related notes because management has determined that such bifurcation is not required under generally accepted accounting principles due to the specific terms of the conversion option and management’s estimate that the underlying shares would not be readily convertible into cash. However, whenever such conversion options represent a right to convert at a price that is less than the market price at the date of issuance, the Company imputes the value of such beneficial conversion feature and charges it to interest expense over the term of the notes.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item. Notwithstanding the foregoing, the Company is providing the following risk factor to supplement the Risk Factors disclosed in the Company’s Report on Form 10-K for the year ended December 31, 2014.

A party to one of our material contracts is under criminal investigation in New York, the announcement of the investigation and the outcome of that investigation, could materially adversely impact our business.

On May 4, 2015, it was announced that Federal authorities had filed a complaint against New York Senator Dean Skelos and his son, Adam Skelos. The complaint alleges, among other things, that the Skelos’ engaged in unlawful practices in connection with the award of a $12 million storm water drainage contract (the “Contract”) between Nassau County and the Company. The Company is not a target of the Skelos’ criminal proceedings and intends to continue to fully cooperate with federal investigator’s request for information. On May 12, 2015, the Company received notice from the County of Nassau Department of Public Works suspending all work under the Contract until such time, if at all, as the County notifies AbTech in writing that the County has lifted the work suspension. If the County of Nassau does not lift the suspension, AbTech will be materially adversely affected.

On May 6, 2015, AbTech received notice that its previously announced teaming agreement with Corvias Solutions for the joint development of large stormwater infrastructure projects was being terminated. The collaboration between AbTech and Corvias had not produced any significant projects or revenues. We cannot estimate the full impact that this criminal investigation and any results may have on the Company’s financial position, operating results or cash flows. Even if we do not experience significant monetary costs, there may be adverse publicity associated with these matters that could result in reputational harm to us that may adversely affect our business. We have not yet recorded a liability related to these matters. No estimate of the possible loss or range of loss can be made.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In March 2015, the Company issued a secured promissory note to Golden Properties Ltd., a related party and an accredited investor, for $950,000 (the “2015 Note”). The proceeds from the 2015 Note were used in April 2015 to repay $875,000 of mature debt plus accrued interest of approximately $71,000. The 2015 Note matures on March 23, 2016, has an interest rate of 7.5% per annum and has a security interest in the assets of the Company that is junior to the security interest of the Senior Notes. The purchaser of the 2015 Note also received a warrant for the purchase of 475,000 shares of the Company’s common stock. The warrant has an exercise price of $0.315 per share and expires five (5) years from the date of grant. The Company may extend the maturity date of the 2015 Note up to two times by 90 days each. If the first extension option is exercised, the interest rate will increase to 9.5% per annum. If the second extension option is exercised, the interest rate will increase to 11.5% per annum. The number of warrant shares that the 2015 Note holder will be entitled to under the terms of the warrant issued by the Company with the 2015 Note will be increased by 10% for each extension option exercised by the Company.

The Company issued the 2015 Note and the accompanying warrants pursuant to the exemption contained in Section 4(2) and Rule 506 of Regulation D of the Securities Act.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits.

Exhibit Number		Name
10.1*		Credit Agreement related to the private placement that closed on March 23, 2015 for secured promissory note and warrant
31.1 *		Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)
31.2 *		Rule 13a-14(d)/15d-14(d) Certification (Principal Financial Officer)
32 **		Section 1350 Certifications
101.INS *		XBRL Instance Document
101.SCH *		XBRL Taxonomy Extension Schema Document
101.CAL *		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF *		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB *		XBRL Taxonomy Extension Label Linkbase Document
101.PRE *		XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

** Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ABTECH HOLDINGS, INC. (Registrant)

Date: May 15, 2015	By:	/s/ Glenn R. Rink
		Glenn R. Rink
		Chief Executive Officer, President, and Director

Date: May 15, 2015	By:	/s/ Lane J. Castleton
		Lane J. Castleton
		Chief Accounting Officer, Chief Financial Officer, Vice President and Treasurer