ENVIRONMENTAL SOLUTIONS WORLDWIDE INC - FORM 8-K - EX-99.1 - August 4, 2014

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8-K - ENVIRONMENTAL SOLUTIONS WORLDWIDE INCq2results8k-pn1my1.htm

 

ESW Group® Reports Q2 2014 Results

 

 

Achieves Strong Q2 Revenues (up 144% vs. Q2 2013) and EBITDA

 

 

MONTGOMERYVILLE, PA — August 4, 2014 —Environmental Solutions Worldwide, Inc. (“ESW”) (OTCQB: ESWW) today reported financial results for the six and three month periods ended June 30, 2014.

 

SECOND QUARTER 2014 RESULTS

 

Revenues for the six month periods ended June 30, 2014 increased 217% to $15.04 million compared to $4.75 million for the six month periods ended June 30, 2013.

 

Revenues for the three month periods ended June 30, 2014 increased 144% to $8.04 million compared to $3.29 million for the three month periods ended June 30, 2013.  


EBITDA(1) for the six month period ended June 30, 2014 was $4.45 million compared to a negative EBITDA(1) of $1.18 million for the six month period ended June 30, 2013.

 

ESW ended the second quarter with approximately $6.57 million in cash.

 

Key financial results for Q2 2014 versus Q2 2013 are set forth in the following table. Reconciliations of EBITDA(1) to their nearest comparable GAAP financial measures are attached to this Press Release.

 

 

SIX MONTH PERIOD ENDED JUNE 30,

  

 

2014

2013

% Change

Revenues

$15,035,545

$4,745,345

217%

EBITDA(1) 

$4,454,762

$(1,178,507)

NM(2)

Net Cash Generated from (Used in) Operating Activities

$2,738,825

$(2,244,935)

NM(2)

 

Notes: 

 

(1)

 

EBITDA is defined as earnings before interest on promissory notes payable, income tax expense, depreciation and the items used to reconcile GAAP to adjusted non-GAAP financial measures, including (1) allowance for doubtful accounts (2) stock-based compensation, (3) amortization of discount on promissory notes payable and (4) change in fair value of conversion option derivative liability (5) warranty provision, (6) recovery on disposal of inventory, (7) gain on sale of property, plant and equipment and (8) loss on write down of inventory. EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes.

(2)

 

Not meaningful, as, the prior year period amount was negative.

 

About Environmental Solutions Worldwide, Inc.

Headquartered in Montgomeryville, PA, Environmental Solutions Worldwide, Inc., through its wholly owned subsidiaries ESW America, Inc., Technology Fabricators Inc., ESW Technologies Inc., ESW CleanTech, Inc., and ESW Canada, Inc. (together, “ESW Group®” ), is engaged in the design, development, manufacturing and sales of diesel emission control technologies focused on the medium and heavy duty diesel market. ESW also provides emissions testing and environmental certification services with its primary focus on the North American on-road and off-road diesel engine, chassis and after-treatment market. For updated information, please visit ESW’s websites at:

www.eswgroup.com

http://eswamerica.com/

Or follow us on:

 

 

Forward-Looking Statements

This press release and any related calls or discussions may contain forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly release any modifications or revisions to these forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, we caution investors that actual financial and operating results may differ materially from those projected in forward-looking statements made by, or on behalf of, us. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements, as described in more detail in the Company’s SEC reports and filings.

The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should,” “may,” “plan,” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, intended, or planned. We assume no obligation to and do not intend to update these forward-looking statements.

FOR MORE INFORMATION CONTACT: Environmental Solutions Worldwide, Inc.

Email: Investor-relations@cleanerfuture.com or visit www.eswgroup.com

 

 

 

 

ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

           
     

JUNE 30,

  

DECEMBER 31,

     

2014

  

2013

     

(Unaudited)

    

ASSETS

      
           

Current Assets

      
 

Cash and cash equivalents (Note 4)

$ 6,565,778

 

$ 4,077,096

 

Accounts receivable, net of allowance

      
   

for doubtful accounts of $283,682 (2013 - $250,862) (Note 2)

3,097,024

  

1,888,511

 

Inventory, net of reserve of $221,357 (2013 - $246,509) (Note 5)

3,844,110

  

3,693,367

 

Prepaid expenses and other assets (Note 13)

657,162

  

750,835

           
   

Total current assets

14,164,074

  

10,409,809

           

Equipment under construction (Note 6)

314,847

  

431,022

           

Property, plant and equipment, net of accumulated

     
 

depreciation of $3,502,723 (2013 - $3,294,168) (Note 6)

1,838,184

  

1,574,181

           
     

$ 16,317,105

 

$ 12,415,012

 

 

  

 

LIABILITIES AND STOCKHOLDERS' EQUITY

      
           

Current Liabilities

      
 

Accounts payable (Notes 12 and 16)

$ 1,337,081

 

$ 1,656,379

 

Accrued liabilities (Notes 8 and 12)

927,252

  

1,007,920

 

Warranty provision (Note 13)

1,841,263

  

1,723,769

 

Customer deposits

206,924

  

124,645

 

Current portion of loan payable (Note 7)

70,666

  

71,022

   

Total current liabilities

4,383,186

  

4,583,735

           

Long-term Liabilities

      
 

Senior secured convertible promissory notes payable (Note 8)

2,412,193

  

2,146,780

 

Conversion option derivative liability (Note 9)

2,921,551

  

1,131,745

 

Loan payable (Note 7)

298,296

  

333,185

           
   

Total long-term liabilities

5,632,040

  

3,611,710

           
   

Total liabilities

10,015,226

  

8,195,445

           

Commitments and Contingencies (Note 13)

      
           

Stockholders' Equity (Note 11)

      
 

Common stock, $0.001 par value, 250,000,000

      
   

shares authorized; 131,526 (2013 - 125,742)

     
   

shares issued and outstanding

$ 131

 

125

 

Additional paid-in capital

57,815,327

  

57,541,924

 

Shares to be issued (Note 11)

57,163

  

-

 

Accumulated other comprehensive income

344,183

  

344,183

 

Accumulated deficit

(51,914,925)

  

(53,666,665)

           
   

Total stockholders' equity

6,301,879

  

4,219,567

           
     

$ 16,317,105

 

$ 12,415,012

 

 

 

 

 

ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)

FOR THE SIX AND THREE MONTH PERIODS ENDED JUNE 30,

(Unaudited)

 

   

SIX MONTH PERIOD
ENDED JUNE 30,

  

THREE MONTH PERIOD ENDED JUNE 30,

   

2014

  

2013

  

2014

  

2013

                 

Revenue (Notes 2 and 16)

$ 15,035,545

 

$ 4,745,345

 

$ 8,039,961

 

$ 3,289,503

                 

Cost of revenue (Notes 2, 5, 6 and 13)

7,629,988

  

4,953,625

  

4,194,834

  

3,864,780

                 

Gross profit

7,405,557

  

(208,280)

  

3,845,127

  

(575,277)

                 

Operating expenses

              
 

Marketing, office and general expenses (Note 7)

2,335,082

  

2,137,526

  

1,168,986

  

1,370,131

 

Officers' compensation and directors' fees (Notes 11 and 12)

430,072

  

435,707

  

208,249

  

130,494

 

Research and development costs (Notes 2 and 6)

353,066

  

240,611

  

176,329

  

158,871

 

Consulting and professional fees (Note 12)

207,779

  

279,499

  

59,356

  

212,382

 

Depreciation (Note 6)

28,981

  

112,578

  

2,362

  

57,458

 

Foreign exchange (gain) / loss

(4,812)

  

11,180

  

4,489

 

3,068

                 
   

3,350,168

  

3,217,101

  

1,619,771

  

1,932,404

                 

Income / (loss) from operations

4,055,389

 

(3,425,381)

  

2,225,356

 

(2,507,681)

                 

Interest on convertible promissory notes payable

(Notes 8 and 12)

(258,725)

  

(72,311)

  

(130,203)

  

(68,811)

Accretion of discount on convertible promissory notes payable

(Note 8)

(199,566)

  

(46,437)

  

(104,792)

  

(44,381)

Change in fair value of conversion option derivative liability

(Note 9)

(1,733,168)

  

(1,038,323)

  

(547,653)

  

(1,330,893)

                 

Net income / (loss) before provision for income taxes

1,863,930

 

(4,582,452)

  

1,442,708

 

(3,951,766)

 

Income taxes (Note 10)

112,190

 

-

 

112,190

 

-

                 

Net income / (loss) and comprehensive income / (loss)

$ 1,751,740

 

$ (4,582,452)

  

$ 1,330,518

 

$ (3,951,766)

                 

Net earnings / (loss) per share (Note 15)

              
 

Basic

$ 13.65

 

$ (40.44)

  

$ 10.17

 

$ (34.71)

 

Fully diluted

$ 12.88

 

$ (40.44)

  

$ 9.60

 

$ (34.71)

   

 

  

 

  

 

  

 

Weighted average number of shares outstanding (Note 15)

              
 

Basic

128,323

  

113,304

  

130,875

  

113,845

 

Fully diluted

136,021

  

113,304

  

138,573

  

113,845

 

 

 

 

 

ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTH PERIODS ENDED JUNE 30,

(Unaudited)

   

2014

  

2013

         

Net income / (loss)

$ 1,751,740

 

$ (4,582,452)

         

Adjustments to reconcile net income / (loss) to net cash

      
 

used in operating activities:

      
 

Depreciation (Note 6)

208,556

 

339,019

 

Interest on promissory notes payable

258,725

 

72,311

 

Amortization of discount on promissory notes payable

199,566

 

46,437

 

Change in fair value of conversion option derivative liability

1,733,168

 

1,038,323

 

Stock-based compensation

74,272

 

172,953

 

Allowance for doubtful accounts

32,820

 

-

 

Warranty provision

117,494

 

1,504,900

 

Loss on write down of inventory

-

 

230,002

 

Recovery on disposal of inventory

(14,769)

  

-

 

Gain on sale of property, plant and equipment

(19,000)

  

-

         
   

2,590,832

 

3,403,945

Decrease in cash flows from operating

      
 

activities resulting from changes in:

      
 

Accounts receivable

(1,241,333)

  

276,626

 

Inventory

(135,974)

  

(1,241,289)

 

Prepaid expenses and other assets

93,673

 

(252,511)

 

Accounts payable and accrued liabilities

(402,392)

  

133,014

 

Customer deposits

82,279

 

17,732

         
   

(1,603,747)

  

(1,066,428)

         

Net cash generated from / (used in) operating activities

2,738,825

 

(2,244,935)

         

Investing activities:

      
 

Proceeds from sale of property, plant and equipment

19,000

 

-

 

Acquisition of patent and trademarks

-

 

(42,000)

 

Acquisition of property, plant and equipment

(300,405)

  

(275,688)

 

Additions to property, plant and equipment under construction

(55,979)

  

(55,118)

         

Net cash used in investing activities

(337,384)

  

(372,806)

         

Financing activities:

      
 

Proceeds from notes payable

122,486

 

5,000,000

 

Payment for fractional shares

-

 

(51,516)

 

Repayment of loan payable

(35,245)

  

(34,204)

         

Net cash provided by financing activities

87,241

 

4,914,280

         

Net change in cash and equivalents

2,488,682

 

2,296,539

         

Cash and cash equivalents, beginning of period

4,077,096

 

253,998

         

Cash and cash equivalents, end of period

$ 6,565,778

 

$ 2,550,537

         

Supplemental disclosures:

      
 

Cash interest paid

$ 5,843

 

$ 6,884

 

Property, plant and equipment included in accounts payable

$ -

 

$ 80,234

 

Interest paid in common stock

$ 256,300

 

$ -

 

Transfer from equipment under construction to property, plant and equipment

$ 415,732

 

$ -

 

 

 

 

 

ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.

NET INCOME TO EBITDA RECONCILIATION

SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(UNAUDITED)

         

The following table sets forth a reconciliation of EBITDA to net income, the most directly comparable GAAP financial measure.

         

 

SIX MONTHS ENDED JUNE 30,

 

2014

2013

 

   

Net income / (loss)

$

1,751,740

$

(4,582,452)

Plus:

        

Interest on promissory notes payable

  

258,725

 

72,311

Income tax expense

  

112,190

 

-

Depreciation

 

208,556

 

339,019

Reconciliation of GAAP to adjusted non-GAAP financial measures:

        

Allowance for doubtful accounts

  

32,820

 

-

Stock-based compensation

  

74,272

 

172,953

Amortization of discount on promissory notes payable

 

199,566

 

46,437

Change in fair value of conversion option derivative liability

 

1,733,168

 

1,038,323

Warranty provision

  

117,494

 

1,504,900

Recovery on disposal of inventory

  

(14,769)

  

-

Gain on sale of property, plant and equipment

 

(19,000)

  

-

Loss on write down of inventory

  

-

 

230,002

EBITDA

$

4,454,762

$

(1,178,507)

 

EBITDA as calculated above represents earnings before interest on promissory notes payable, income tax expense, depreciation and the items used to reconcile GAAP to adjusted non-GAAP financial measures, including (1) allowance for doubtful accounts (2) stock-based compensation, (3) amortization of discount on promissory notes payable and (4) change in fair value of conversion option derivative liability, (5) warranty provision, (6) recovery on disposal of inventory, (7) gain on sale of property, plant and equipment and (8) loss on write down of inventory.  We disclose EBITDA as a supplemental non-GAAP financial performance measure as we believe it is a useful metric by which to compare the performance of our business from period to period. We understand that measures similar to EBITDA are broadly used by analysts, rating agencies and investors in assessing our performance. Accordingly, we believe that the presentation of EBITDA provides useful information to investors.

 

EBITDA is not in accordance with, or an alternative to, net income, and may be different from non-GAAP measures used by other companies. In addition, EBITDA is not based on any comprehensive set of accounting rules or principles. This adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated our results of operations determined in accordance with GAAP. EBITDA should not be considered in isolation of, as a substitute for, or superior to, any financial information prepared in accordance with GAAP. EBITDA as defined herein may differ from similarly titled measures presented by other companies. EBITDA, as well as other information in this press release, should be read in conjunction with our financial statements filed with the SEC.

 

                      

ENVIRONMENTAL SOLUTIONS WORLDWIDE INC Reports