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.

On November 6, 2018, the Company completed a reverse stock split of 200-for-1 to its issued and outstanding shares of common stock and 16-for-1 reverse split to the authorized shares of common stock (see NOTE 10 – Subsequent Events). All share amounts and per share amounts related to the Company’s common stock in these condensed consolidated financial statements have been adjusted to give retroactive effect to the reverse stock split for all periods presented.

The condensed consolidated financial statements as of September 30, 2018 and for the three and nine months ended September 30, 2018 and 2017 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.

Significant estimates are used in determining the allowance for doubtful accounts and obsolete inventory in valuing stock-based compensation, and in evaluating the Company’s ability to continue as a going concern. Due to the uncertainties inherent in the formulation of accounting estimates, and the significance of these items, it is reasonable to expect that the estimates in connection with these items could be materially revised within the next year.

Significant accounting policy

– Revenue is measured based on the consideration specified in a contract with a customer and excludes any sales incentives. The Company recognizes revenue when it satisfies a performance obligation by transferring control over goods or services to a customer.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. The Company recognizes shipping and handling fees associated with outbound freight after control over a product has transferred to a customer as revenue and the related expenses as a fulfillment cost included in cost of revenues.

Nature of Goods and Services

– The Company generates its revenue from one segment, the filtration and treatment of polluted water. The Company sells various filtration products that contain various types of filtration media along with ancillary equipment used for the deployment of the filtration products, such as diversion collars, vessels and containment cages. The Company is focused on two application markets for its products, stormwater and industrial.

	Three Months ended				Nine Months Ended
	September 30, 2018 Unaudited		September 30, 2017 Unaudited		September 30, 2018 Unaudited		September 30, 2017 Unaudited
Geographical Markets
North America	$	125,721	$	311,952	$	411,714	$	500,262
Foreign		3,118		-		14,724		6,300
	$	128,839	$	311,952	$	426,438	$	506,562

Application Markets
Stormwater	$	128,839	$	279,702	$	393,564	$	474,312
Industrial		-		32,250		32,874		32,250
	$	128,839	$	311,952	$	426,438	$	506,562

Net Loss Per Share

–

Basic net loss per share is computed by dividing net loss attributable to controlling interests 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 2018 and 2017 would be anti-dilutive. The following chart lists the securities as of September 30, 2018 and 2017 that were not included in the computation of diluted net loss per share because their effect would have been antidilutive:

	Common Shares
	September 30, 2018 Unaudited		September 30, 2017 Unaudited
Options to purchase common stock		13,046		17,427
Warrants to purchase common stock		43,829		44,004
Promissory notes		1,119,465		21,114
Convertible preferred stock in AbTech		16,316		32,287
Due to investors with conversion right		8,889,569		-
		10,082,225		114,832

In January 2016, the FASB issued ASU No. 2016-01, “

Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,”

which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments and affects all entities that hold financial assets or owe financial liabilities. The Company has now adopted this new standard. However, its adoption had no material impact on the condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “

Leases (Topic 842),”

which, among other provisions, requires lessees to recognize lease assets and lease liabilities for those leases classified as operating leases under previous GAAP. Under this new provision, a lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public entities. Because the Company has various operating leases, these amendments could significantly affect the manner in which such operating leases are presented in its condensed consolidated financial statements. While the affect of the amendment on the amount of operating expense recognized in the condensed consolidated statements of operations is uncertain, the amendment will result in the Company including on its balance sheet a right to use asset and a corresponding liability for the lease payments due under operating leases in effect at the balance sheet dates.

In June 2016, the FASB issued ASU No. 2016-13, “

Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,”

which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The standard will take effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the new standard which will apply to the estimation of credit losses on the Company’s trade receivables, but based on the historical composition of current trade receivables, it is not expected to have a material effect on the Company’s measurement of such credit losses.

In August 2016, the FASB issued ASU No. 2016-15, “

Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,”

which addresses how eight specific cash flow issues should be presented and classified in the statement of cash flows. The Company has now adopted this new standard. However, its adoption had no material impact on the condensed consolidated financial statements.

In June 2017, the FASB issued ASU No. 2017-09,

“Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,”

which provides guidance on which changes to the terms or conditions of share-based payment awards require an entity to apply modification accounting in ASC Topic 718. The Company has now adopted this new standard. However, its adoption had no material impact on the condensed consolidated financial statements.

Changes in accounting policies

– Beginning in 2018, the Company adopted Topic 606, Revenue from Contracts with Customers. While the adoption of this new standard is a change in accounting policy for revenue recognition, the change had no material effect on the amount or timing of the recognition of revenue as reflected in these condensed consolidated financial statements. Accordingly, there is no difference for the Company between using the retrospective or cumulative approaches to adopting the new standard in these condensed consolidated financial statements.