Q4 Cash Flow From Operations $2.5 Million
Q4 Revenue Up 227% Year/Year
2011 Revenue Up 135% Year/Year
STUART, Fla., March 8, 2012 (GLOBE NEWSWIRE) -- Ecosphere Technologies, Inc. (OTCBB:ESPH), a diversified water engineering, technology licensing and environmental services company, today announced financial results for the fourth quarter and full year 2011. For the first time in its history, the Company reported positive annual operating cash flow of over $2.6 million. The Company recorded $8.3 million of revenue for the 2011 fourth quarter, representing a 227% year-over-year increase. Revenue for the full year 2011 was $21.1 million, a 135% increase versus 2010.
Ecosphere Chairman and Chief Executive Officer Charles Vinick stated, "The pivotal event in 2011 was our licensing agreement with Hydrozonix. The agreement commits them to purchase a minimum of sixteen EF80s over the initial two years to maintain their exclusivity, which should yield at least $44 million in revenue to Ecosphere. We executed on this deal by delivering the first four units in 2011. For the first time in our history, this license agreement gives us sales visibility through 2012 and into 2013. In addition to our licensing revenue, we have seen continued growth of our water treatment service business in onshore oil and gas fracturing and we see numerous other industrial wastewater treatment opportunities that we can exploit with our patented Ozonix technologies."
Fourth Quarter 2011 Financial Details
Q4 2011 revenue increased 227% year-over-year to $8.3 million. The mix of revenue was $5.8 million of equipment sales and licensing, representing 70% of total revenue, and $2.5 million of field services, or 30% of revenue. In 2010, all revenue was derived from field services.
Gross profit in the fourth quarter 2011 was $4.2 million, representing a gross margin of 50.6%.
Selling, general and administrative ("SG&A") expenses were $4.5 million, which slightly exceeded gross profit and led to a small operating loss. SG&A included $2 million in non-cash compensation. SG&A expense was down from the same period a year ago despite total revenues growing over threefold.
Net loss attributable to common shareholders of $685,590 reflects the net loss plus the accrual of preferred stock dividends, as well as the net income applicable to the noncontrolling interest in its consolidated subsidiary, Ecosphere Energy Services LLC.
Full Year 2011 Financial Details
Revenue for the year ended December 31, 2011 was $21.1 million, an increase of $12.1 million over the year ended December 31, 2010. This increase was primarily due to the sale of four Ozonix® EF80 units representing 54% of total revenue, or $11.5 million. The remaining portion of revenues was $9.6 million attributable to field services, or 46% of revenue. In 2010, our revenue was derived solely from field services to oil and gas exploration companies.
Gross profit for the year ended December 31, 2011 was $10.2 million verses $5.6 million for the year ended December 31, 2010.
Selling, general and administrative expenses were $15.6 million, which includes $6.7 million in non-cash compensation. Although the Company had an increase in SG&A expenses for the year ended December 31, 2011 over 2010, the Company experienced significant growth in revenue in the same period. The Company intends to continue to invest in its corporate infrastructure to support rapid growth in the near term, but expects to experience operating leverage over longer time periods.
Net loss for 2011 was $5.9 million.Net loss attributable to common shareholders of $7.7 million, or $0.05 per share, reflects the net loss plus the payment of preferred stock dividends, as well as the net income applicable to the noncontrolling interest in its consolidated subsidiary, Ecosphere Energy Services, LLC.
The Company strengthened its balance sheet in 2011, concluding the year with over $2 million in cash, reduced debt and had positive working capital. The Company also generated over $2.6 million in operating cash flow for the year.
Adrian Goldfarb, Chief Financial Officer of Ecosphere Technologies, said, "Our fundamental business momentum continues. We are generating increasingly more operating cash and the Company is now in the position to achieve profitability. Also, Ecosphere's strengthening balance sheet gives us the financial flexibility to fund new growth opportunities."
2012 Financial Guidance
In 2012, Ecosphere expects total revenue to rise approximately 33% to around $28 million. Gross profit is estimated to be over $14 million, representing at least a 50% gross margin. Operating expenses are expected to equal gross profit, leading to operating income that will be approximately at breakeven. Excluding non-cash expenses such as depreciation, operating cash flow is expected to increase to approximately $3 million.
Fourth Quarter 2011 Conference Call Details
The Company will discuss its financial results and guidance in a conference call today at 4:30 p.m. EST. The conference call can be accessed by dialing toll-free +1 (888) 221-3915 (U.S.) or +1 (913) 312-0836 (International). A telephone replay will be available approximately two hours after the call concludes through Thursday, March 15, 2012 by dialing toll-free +1 (877) 870-5176 (U.S.) or +1 (858) 384-5517 (International), and by entering the passcode: 6433438. 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. In Operation since 2008, the Ozonix technology has enabled Ecosphere's oil and gas customers to recycle and reuse over 1 billion gallons of water on more than 475 oil and natural gas wells in major shale plays across the country.
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, future sales results from the Hydrozonix licensing agreement, opportunities to exploit the Ozonix technology, continuing to invest in corporate infrastructure, expected operating leverage, business momentum, profitability, and financial flexibility to fund new growth opportunities. 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, competition and predatory pricing from larger companies, the acceptance of the EF80 and its effectiveness in the field, reluctance of businesses to change to new technologies, federal or state regulations which affect hydraulic fracturing, problems that arise from the manufacturing of the units and delays in receipt of parts from component manufacturers.
Further information on our risk factors is contained in our filings with the SEC. Any forward-looking statement made by us in this press release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
| Ecosphere Technologies, Inc. and Subsidiaries | ||||
| Consolidated Statements of Operations | ||||
|
For the Three Months Ended December 31, |
For the Year Ended December 31, |
|||
| 2011 | 2010 | 2011 | 2010 | |
| Revenues | ||||
| Equipment sales and licensing | $ 5,815,026 | $ -- | $ 11,460,078 | $ -- |
| Field services | 2,470,618 | 2,536,697 | 9,628,081 | 8,964,484 |
| Total revenues | 8,285,644 | 2,536,697 | 21,088,159 | 8,964,484 |
| Cost of revenues | ||||
| Cost of equipment | 3,533,058 | -- | 8,261,524 | -- |
| Cost of field services | 590,606 | 853,122 | 2,583,911 | 3,394,688 |
| Total cost of revenues | 4,123,664 | 853,122 | 10,845,435 | 3,394,688 |
| Gross profit | 4,161,980 | 1,683,575 | 10,242,724 | 5,569,796 |
| Operating expenses | ||||
| Selling, general and administrative | 4,513,499 | 5,379,717 | 15,582,966 | 14,014,824 |
| Asset impairment charge | -- | -- | -- | 116,000 |
| Restructuring charge | -- | -- | -- | 50,000 |
| Total operating expenses | 4,513,499 | 5,379,717 | 15,582,966 | 14,180,824 |
| Loss from operations | (351,519) | (3,696,142) | (5,340,242) | (8,611,028) |
| Other income (expense) | ||||
| Other income | 426 | 19 | 910 | 292 |
| Gain (loss) on settlement, net | -- | (65,756) | -- | (65,756) |
| Gain (loss) on conversion, net | 1,064 | 101,476 | (93,762) | (19,604) |
| Interest expense | (121,045) | (237,009) | (581,392) | (1,176,222) |
| Change in fair value of derivative instruments | 147,355 | 43,690 | 152,888 | (12,787,666) |
| Total other income (expense) | 27,800 | (157,580) | (521,356) | (14,048,956) |
| Net loss | (323,719) | (3,853,722) | (5,861,598) | (22,659,984) |
| Preferred stock dividends | (25,750) | (25,750) | (103,000) | (105,500) |
| Net loss applicable to common stock | (349,469) | (3,879,472) | (5,964,598) | (22,765,484) |
| Less: net (income) loss applicable to noncontrolling interest in consolidated subsidiary | (336,121) | 585,322 | (1,690,075) | 528,277 |
| Net loss applicable to Ecosphere Technologies, Inc. common stock | $ (685,590) | $ (3,294,150) | $ (7,654,673) | $ (22,237,207) |
| Net loss per common share applicable to common stock | ||||
| Basic and diluted | $ -- | $ (0.10) | $ (0.05) | $ (0.17) |
| Ecosphere Technologies, Inc. and Subsidiaries | ||||
| Consolidated Statements of Cash Flows | ||||
|
For the Three Months Ended December 31, |
For the Year Ended December 31, |
|||
| 2011 | 2010 | 2011 | 2010 | |
| OPERATING ACTIVITIES: | ||||
| Net loss applicable to Ecosphere Technologies, Inc. common stock | $ (685,590) | $ (3,294,150) | $ (7,654,673) | $ (22,237,207) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||
| Preferred stock dividends | 25,750 | 25,750 | 103,000 | 105,500 |
| Depreciation and amortization | 559,032 | 521,926 | 2,174,983 | 1,957,881 |
| Provision for asset impairment | -- | -- | -- | 116,000 |
| Accretion of discount on notes payable | 72,733 | 4,839 | 263,767 | 543,551 |
| Restructuring charge | -- | -- | -- | 50,000 |
| Loss on conversion of debt and accrued interest to common stock | -- | -- | 93,762 | 19,604 |
| Stock-based compensation expense | 2,033,059 | 2,999,459 | 6,668,229 | 5,517,992 |
| (Gain) loss from change in fair value of warrant derivative liability | (147,355) | (43,690) | (152,888) | 8,772,446 |
| Loss from change in fair value of embedded conversion option derivative liability | -- | -- | -- | 4,015,220 |
| Non-cash expense to modify warrants | -- | -- | -- | 93,735 |
| Shares of common stock issued for settlement | -- | -- | -- | 108,979 |
| Noncontrolling interest in income (loss) of consolidated subsidiary | 336,121 | (585,322) | 1,690,075 | (528,277) |
| Net other non-cash items | 45,209 | -- | 39,440 | -- |
| Changes in operating assets and liabilities: | ||||
| Decrease (increase) in accounts receivable | 525,898 | (9,921) | (169,642) | (1,476) |
| Increase in inventory | (218,796) | -- | (19,189) | -- |
| Decrease in prepaid expenses and other current assets | 21,128 | 83,375 | 115,353 | 159,172 |
| Increase in deposits | (393) | -- | (393) | (12,006) |
| (Decrease) increase in accounts payable | (402,057) | 4,664 | (790,167) | 386,653 |
| Increase (decrease) in accrued expenses | 360,634 | 123,304 | 310,959 | 374,564 |
| Increase (decrease) in restructuring reserve | (13,433) | 5,315 | (61,935) | (37,537) |
| Increase (decrease) in deferred revenue | -- | -- | -- | (672,000) |
| Net cash provided by (used in) operating activities | $ 2,511,940 | $ (164,451) | $ 2,610,681 | $ (1,267,206) |
| Ecosphere Technologies, Inc. and Subsidiaries | ||
| Consolidated Balance Sheets | ||
| December 31, | ||
| 2011 | 2010 | |
| Assets | ||
| Current assets | ||
| Cash | $ 2,043,593 | $ 46,387 |
| Accounts receivable | 873,117 | 703,475 |
| Inventory | 408,747 | -- |
| Prepaid expenses and other current assets | 81,850 | 46,151 |
| Total current assets | 3,407,307 | 796,013 |
| Property and equipment, net | 6,141,519 | 7,729,721 |
| Construction in progress | -- | 389,558 |
| Patents, net | 42,164 | 46,145 |
| Deposits | 22,598 | 22,205 |
| Total assets | $ 9,613,588 | $ 8,983,642 |
| Liabilities, Redeemable Convertible Cumulative Preferred Stock and Equity (Deficit) | ||
| Current liabilities | ||
| Accounts payable | $ 1,180,723 | $ 1,970,891 |
| Accrued liabilities | 1,163,504 | 917,872 |
| Notes payable, net of discounts | 370,561 | 50,000 |
| Related party notes payable | 204,776 | 2,636,093 |
| Warrant derivatives fair value | 347,235 | 610,642 |
| Financing obligations | 49,299 | 69,566 |
| Total current liabilities | 3,316,098 | 6,255,064 |
| Notes payable, net of discounts | 1,366,177 | 313,722 |
| Related party notes payable | 204,299 | 136,676 |
| Financing obligations | 168,048 | -- |
| Restructuring reserve | 119,184 | 181,119 |
| Total liabilities | 5,173,806 | 6,886,581 |
| Redeemable convertible cumulative preferred stock | ||
| Series A - 11 shares authorized; 6 shares issued and outstanding at December 31, 2011 and 2010; $25,000 per share redemption amount plus dividends in arrears | 1,158,494 | 1,135,994 |
| Series B - 484 shares authorized; 322 shares issued and outstanding at December 31, 2011 and 2010; $2,500 per share redemption amount plus dividends in arrears | 2,822,302 | 2,741,802 |
| Total redeemable convertible cumulative preferred stock | 3,980,796 | 3,877,796 |
| Commitments and contingencies | ||
| Equity (deficit) | ||
| Ecosphere Technologies, Inc. stockholders' equity (deficit) | ||
| Common stock, $0.01 par value; 300,000,000 shares authorized; 146,262,357 and 137,430,756 shares issued and outstanding at December 31, 2011 and 2010, respectively | 1,462,622 | 1,374,307 |
| Common stock issuable, $0.01 par value; 71,959 and 1,347,915 issuable at December 31, 2011 and 2010, respectively | 720 | 13,480 |
| Additional paid-in capital | 104,804,159 | 96,778,394 |
| Accumulated deficit | (117,576,896) | (110,025,222) |
| Total Ecosphere Technologies, Inc. stockholders' deficit | (11,309,395) | (11,859,041) |
| Noncontrolling interest in consolidated subsidiary | 11,768,381 | 10,078,306 |
| Total equity (deficit) | 458,986 | (1,780,735) |
| Total liabilities, redeemable convertible cumulative preferred stock and equity (deficit) | $ 9,613,588 | $ 8,983,642 |