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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">As filed with the United States Securities
and Exchange Commission on April 13, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">Registration No. 333-</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">________________________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">UNITED STATES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SECURITIES AND EXCHANGE COMMISSION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">WASHINGTON, D.C. 20549</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">________________________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">FORM S-1</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">ABTECH HOLDINGS, INC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Name of Registrant as specified in its
charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 32%; font-size: 10pt; text-align: center">Nevada</TD>
    <TD STYLE="width: 4%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 30%; font-size: 10pt; text-align: center">1090</TD>
    <TD STYLE="width: 4%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 30%; font-size: 10pt; text-align: center">14-1994102</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(State or other jurisdiction</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">of incorporation)</P></TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Primary Standard Industrial</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Classification Code Number)</P></TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(IRS Employer</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Identification No.)</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">4110 N. Scottsdale Road, Suite 235</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Scottsdale, Arizona 85251</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(480) 874-4000</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Address and telephone number of principal
executive offices and principal place of business)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">________________________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Glenn R. Rink</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Chief Executive Officer, President, and
Director</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Abtech Holdings, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">4110 N. Scottsdale Road, Suite 235</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Scottsdale, Arizona 85251</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(480) 874-4000</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">(Name address and telephone
number of agent for service)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">________________________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Copies to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Christopher D. Johnson, Esq.<BR>
Squire Sanders (US) LLP<BR>
1 East Washington Street<BR>
Suite 2700<BR>
Phoenix, AZ 85004<BR>
Tel: (602) 528-4000 Fax: (602) 253-8129</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">________________________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; color: black">If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box: </FONT><FONT STYLE="font-family: Wingdings 2">T</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. &#61472;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. &#61472;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. &#61472;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 &ldquo;large accelerated
filer,&rdquo; &ldquo;accelerated filer,&rdquo; and &ldquo;smaller reporting company&rdquo; in Rule 12b-2 of the Exchange Act. (Check
one):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR>
    <TD STYLE="width: 63%">Large accelerated filer </TD>
    <TD STYLE="width: 37%">Accelerated filer </TD></TR>
<TR>
    <TD>Non-accelerated filer&nbsp;&nbsp; (Do not check if smaller reporting company)</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; color: black">Smaller reporting company </FONT><FONT STYLE="font-family: Wingdings 2">T</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">________________________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CALCULATION OF REGISTRATION FEE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Title of each class of securities to be registered &nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amount to be registered &nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Proposed maximum offering price per share</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Proposed maximum aggregate offering price</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amount
    of registration fee</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="width: 41%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Common Stock, par value $0.001 per share</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 12%; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> 14,582,862(1)</FONT></TD>
    <TD STYLE="width: 2%; font-size: 10pt; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 2%; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp; &nbsp;</FONT></TD>
    <TD STYLE="width: 12%; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$0.75(2)</FONT></TD>
    <TD STYLE="width: 3%; font-size: 10pt; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 2%; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 13%; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$10,937,146(2)</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 2%; text-align: center"></TD>
    <TD STYLE="width: 9%; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$1,253.40</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%; font-size: 10pt">(1)&nbsp;</TD>
    <TD STYLE="width: 96%; font-size: 10pt; text-align: justify">This registration statement registers for resale 14,582,862 shares of common stock, par value $0.001 per share, of the registrant, of which (a) 9,428,573 are issuable upon conversion of secured convertible promissory notes sold in a private placement completed on February 15, 2012, and (b) up to 5,154,289 shares of our common stock are issuable upon exercise of warrants, of which (i) warrants to purchase 4,400,003 shares of our common stock were issued to investors in the private placement and (ii) warrants to purchase 754,286 shares of our common stock were issued to a placement agent in connection with the private placement.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%; font-size: 10pt">(2)&nbsp;</TD>
    <TD STYLE="width: 96%; font-size: 10pt">Estimated pursuant to Rule 457(c) of the Securities Act of 1933 solely for the purpose of computing the amount of the registration fee based on the average of the high and low prices reported on the OTC Bulletin Board on April 10, 2012, which was $0.75.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act
of 1933, as amended, or until the registration statement shall become effective on such date as the United States Securities and
Exchange Commission, acting pursuant to said section 8(a), may determine.</P>



<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
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    <TD STYLE="width: 100%; border-top: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-top: 12pt; padding-bottom: 6pt; font-size: 10pt; color: #C00000">The information in this prospectus is not complete and may be changed.&nbsp; These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective.&nbsp; This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SUBJECT TO COMPLETION, DATED APRIL 13, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">ABTECH HOLDINGS, INC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">14,582,862 Shares of Common Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The selling shareholders identified in this prospectus may offer
and sell up to 14,582,862 shares of our common stock consisting of (a) 9,428,573 shares of our common stock which are issuable
to investors upon conversion of secured convertible promissory notes sold in a private placement completed on February 15, 2012,
and (b) up to 5,154,289 shares of our common stock issuable upon exercise of warrants, of which (i) warrants to purchase 4,400,003
shares of our common stock were issued to investors in the private placement and (ii) warrants to purchase 754,286 shares of our
common stock were issued to a placement agent in connection with the private placement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are not selling any shares of our common stock in this offering
and will not receive any proceeds from this offering. We may receive proceeds on the exercise of outstanding warrants for shares
of our common stock covered by this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The selling shareholders may offer the shares covered by this
prospectus at fixed prices, at prevailing market prices at the time of sale, at varying prices or negotiated prices, in negotiated
transactions, or in trading markets for our common stock. We will bear all costs associated with the registration of the shares
covered by this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our common stock trades on the OTC Bulletin Board under the
symbol &ldquo;ABHD.&rdquo; The closing price of our common stock on the OTC Bulletin Board on April 10, 2012, was $0.75 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Investing in our common stock involves significant risks.
You should consider carefully the risk factors beginning on page  5 of this prospectus.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The date of this prospectus is April
__, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TABLE OF CONTENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 94%">&nbsp;</TD>
    <TD STYLE="width: 6%">Page</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-decoration: none">Prospectus Summary</TD>
    <TD>2</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-decoration: none">Risk Factors</TD>
    <TD>5</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-decoration: none">Forward-Looking Statements</TD>
    <TD>19</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-decoration: none">Use of Proceeds</TD>
    <TD>20</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-decoration: none">Price Range of Common Stock</TD>
    <TD>20</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-decoration: none">Dividend Policy</TD>
    <TD>21</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-decoration: none">Management&rsquo;s Discussion and Analysis of Financial Condition</TD>
    <TD>22</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-decoration: none">Our Business</TD>
    <TD>26</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-decoration: none">Management</TD>
    <TD>43</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-decoration: none">Executive Compensation</TD>
    <TD>47</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-decoration: none">Certain Relationships and Related Party Transactions</TD>
    <TD>51</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-decoration: none">Security Ownership of Certain Beneficial Owners and Management</TD>
    <TD>51</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-decoration: none">Selling Shareholders</TD>
    <TD>53</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-decoration: none">Plan of Distribution</TD>
    <TD>55</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-decoration: none">Description of Securities</TD>
    <TD>57</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-decoration: none">Experts</TD>
    <TD>57</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-decoration: none">Legal Matters</TD>
    <TD>57</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-decoration: none">Available Information</TD>
    <TD>58</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-decoration: none">Index to Financial Statements</TD>
    <TD>F-1</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This prospectus is part of a registration statement we filed
with the Securities and Exchange Commission (the &ldquo;SEC&rdquo;). Under this registration process, the selling shareholders
may, from time to time, offer and sell up to 14,582,862 shares of our common stock, as described in this prospectus, in one or
more offerings. This prospectus provides you with a general description of the common stock the selling shareholders may offer.
You should read this prospectus carefully before making an investment decision.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">You may only rely on the information contained in this prospectus
or that we have referred you to. We have not authorized anyone to provide you with additional or different information. This prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the shares of our common stock
offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common
stock in any circumstances or any jurisdiction in which such offer or solicitation is not permitted. You should not assume that
the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus
regardless of the time of delivery of this prospectus or any sale of our common stock. The rules of the SEC may require us to update
this prospectus in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As used in this prospectus, the terms &ldquo;Abtech Holdings,&rdquo;
&ldquo;Abtech,&rdquo; &ldquo;ABHD,&rdquo; the &ldquo;Company,&rdquo; &ldquo;we,&rdquo; &ldquo;our&rdquo; and similar terms refer
to Abtech Holdings, Inc. and its subsidiaries, unless the context indicates otherwise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>The following summary highlights selected information contained
elsewhere in this prospectus and does not contain all of the information you should consider before investing in our securities.
Before deciding to invest in our securities, you should read this entire prospectus, including the discussion of &ldquo;Risk Factors&rdquo;
and our consolidated financial statements and the related notes.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Company</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Abtech Holdings, Inc. (&ldquo;Abtech Holdings,&rdquo; &ldquo;Abtech,&rdquo;
&ldquo;ABHD,&rdquo; the &ldquo;Company,&rdquo; &ldquo;we&rdquo; or the &ldquo;registrant&rdquo;) was incorporated in Nevada on
February 13, 2007 under the name &ldquo;Laural Resources, Inc.&rdquo; and was initially engaged in the business of acquiring and
developing mineral properties. Subsequent to its fiscal year ended May 31, 2010, Laural Resources, Inc. decided to change its business
focus to clean technology products and services, specifically in the water clean-up sector. In furtherance of its business objectives,
effective June 14, 2010, Laural Resources, Inc. merged with its wholly owned subsidiary, Abtech Holdings, Inc., for the purpose
of effecting a name change to &ldquo;Abtech Holdings, Inc.&rdquo; On October 21, 2010, the Company&rsquo;s Board of Directors (the
&ldquo;Board of Directors&rdquo; or the &ldquo;Board&rdquo;) changed the Company&rsquo;s fiscal year end from May 31 to December
31.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our History </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 10, 2011, the Company closed a merger transaction
(the &ldquo;Merger&rdquo;) with AbTech Industries, Inc., a Delaware corporation (&ldquo;AbTech Industries&rdquo;), pursuant to
an Agreement and Plan of Merger (the &ldquo;Merger Agreement&rdquo;), by and among Abtech Holdings, Abtech Merger Sub, Inc., a
Nevada corporation and wholly owned subsidiary of Abtech Holdings (&ldquo;Merger Sub&rdquo;), and AbTech Industries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of the Merger, Abtech Holdings acquired all of the
issued and outstanding common stock of AbTech Industries (through a reverse acquisition transaction) in exchange for the common
stockholders of AbTech Industries acquiring an approximate 78% ownership interest in Abtech Holdings, AbTech Industries became
a majority-owned subsidiary of Abtech Holdings, and Abtech Holdings acquired the business and operations of AbTech Industries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Abtech Holdings was a &ldquo;shell company&rdquo; prior to the
Merger and did not conduct an active trade or business. From and after the consummation of the Merger on February 10, 2011, Abtech
Holdings&rsquo; primary operations consisted of the business and operations of AbTech Industries. Because Abtech Holdings was a
shell company at the time of the Merger, we filed with the SEC on February 14, 2011, a &ldquo;super&rdquo; Form 8-K that disclosed
information required by Item 2.01(f) of Form 8-K (being information that would be required if we had filed a general form for registration
under Form 10 under the Securities Exchange Act of 1934, as amended (the &ldquo;Exchange Act&rdquo;)).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For accounting purposes, the Merger transaction has been accounted
for as a reverse acquisition, with AbTech Industries as the acquirer. The consolidated financial statements of Abtech Holdings
for the fiscal year ended December 31, 2011 represent a continuation of the financial statements of AbTech Industries, with one
adjustment, which is to retroactively adjust the legal capital of AbTech Industries to reflect the legal capital of Abtech Holdings.
See Note 1 of Notes to Consolidated Financial Statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Industry</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries has developed a variety of products that leverage
its cornerstone filtration media technology called Smart Sponge&reg;. This patented technology&rsquo;s oil absorbing capabilities
make it highly effective as a filtration media to remove hydrocarbons and other pollutants from water. AbTech Industries has introduced
its products into a variety of markets resulting in over 15,000 products installed in 36 states and 8 countries to date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries developed the Smart Sponge media, a patented
polymer technology that effectively removes pollutants from water and encapsulates them so that they cannot be released back into
the water, even under high pressure. AbTech Industries recently expanded the capability of the Smart Sponge technology by adding
an antimicrobial agent that has proven to be effective in reducing coliform bacteria found in stormwater, industrial wastewater
and municipal wastewater while maintaining its oil-absorbing capability. This expanded technology, known as Smart Sponge Plus,
provides an effective solution to municipalities and other entities faced with beach closures and other hazards of bacteria-laden
stormwater. This antimicrobial capability differentiates Smart Sponge Plus products from competitive stormwater treatment devices.
It can be engineered to treat massive amounts of water runoff in end-of-pipe applications, such as drainage vaults or other configurations.
In July 2010, AbTech Industries received notification from the United States Environmental Protection Agency (the &ldquo;EPA&rdquo;)
that AbTech Industries&rsquo; application to register Smart Sponge Plus as a pesticide under the Federal Insecticide, Fungicide
and Rodenticide Act had been conditionally approved.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Corporate Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our principal executive offices are located at 4110 North Scottsdale
Road, Suite 235, Scottsdale, Arizona 85251. Our telephone number is (480) 874-4000 and our website address is <I>www.abtechindustries.com</I>.
The information contained on our website is not part of this prospectus.</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The Offering</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%">Common stock outstanding prior to the offering</TD>
    <TD STYLE="width: 50%">48,482,344 shares outstanding as of April 11, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Common stock offered by selling shareholders</TD>
    <TD>Up to 14,582,862 shares</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Common stock to be outstanding after the offering</TD>
    <TD>63,065,206 shares, assuming full conversion of the secured convertible notes and full exercise of the warrants held by the selling shareholders</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Use of proceeds</TD>
    <TD>We will not receive any proceeds from the sale of the common stock.&nbsp; To the extent that the selling shareholders and the placement agent exercise all of the warrants covering the 5,154,289 shares of common stock issuable upon exercise thereof, we would receive $3,168,002 from such exercises. We intend to use such proceeds for general corporate and working capital purposes. See &ldquo;Use of Proceeds&rdquo; for a complete description.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>OTC Bulletin Board Symbol</TD>
    <TD>ABHD</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Risk Factors</TD>
    <TD>The purchase of our common stock involves a high degree of risk. You should carefully review and consider the &ldquo;Risk Factors&rdquo; beginning on page 5.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Background of the Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">From September 19 through December 31, 2011 (the &ldquo;September
Offering&rdquo;), the Company sold $4,000,000 of Secured Convertible Promissory Notes (the &ldquo;Secured Notes&rdquo;). The Secured
Notes bear interest at a rate of twelve percent (12%) per annum and are due and payable in full on the nine (9) month anniversary
of issuance (the &ldquo;Original Maturity Date&rdquo;). The Company may extend the maturity date by an additional ninety (90) day
period, during which period the interest rate will increase to fifteen percent (15%) per annum on the unpaid principal of the Secured
Note. The Company may also extend the maturity date by a second additional 90 day period, during which period the interest rate
shall increase to eighteen percent (18%) per annum on the unpaid principal of the Secured Note. All interest accrued on the Secured
Notes through the Original Maturity Date will be payable by the Company on the Original Maturity Date in cash or in-kind, at the
option of the payee. For all periods after the Original Maturity Date, all accrued interest will be payable quarterly in cash by
the Company. The Secured Notes may be converted into shares of our common stock at any time prior to a sale for cash by the Company
of debt or equity securities generating aggregate gross proceeds of at least $5,000,000 (including the proceeds from any converting
Secured Notes) (a &ldquo;Qualified Financing&rsquo;) at the conversion rate of $0.70 per share (the &ldquo;Conversion Price&rdquo;).
However, if the Company at any time while a Secured Note is outstanding, issues any debt or equity securities (with certain exceptions)
entitling investors to subscribe for, purchase, or convert such securities into shares of our common stock at a price per share
less than the Conversion Price (the &ldquo;New Securities Issuance Price&rdquo;), then the Conversion Price for such outstanding
Secured Notes shall be reduced effective concurrently with such issuance to the New Securities Issuance Price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the event of a Qualified Financing by the Company, each subscriber
of the Secured Notes will have the option to (i) convert their Secured Note into the securities purchased by investors in a Qualified
Financing at a 20% discount to the price paid by investors in the Qualified Financing; or (ii) tender their Secured Note to the
Company for immediate repayment of principal and accrued and unpaid interest. The Secured Notes may be prepaid in whole or in part
without the prior written consent of the payee at any time following not less than ten (10) days prior written notice to the subscriber
notifying the subscriber of the Company&rsquo;s decision to prepay the Secured Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Secured Notes are secured by all of the Company&rsquo;s
right, title and interest in, to and under all personal property and other assets of the Company (the certain exceptions to allow
for potential financing arrangements for accounts receivable and inventory) pursuant to a security agreement entered into by the
Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">From January 2012 through February 15, 2012 (the &ldquo;February
Offering&rdquo;), the Company sold an additional $2,600,000 of the Secured Notes. The September Offering and the February Offering
were undertaken by the Company in reliance on Section 4(2) and Regulation D of the Securities Act of 1933, as amended (the &ldquo;Securities
Act&rdquo;). The Company believes each purchaser of the Secured Notes to be an accredited investor as that term is defined in Rule
501(a) of Regulation D under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Each subscriber of the Secured Notes sold in the September Offering
and the February Offering also received a warrant for the purchase of the number of shares of our common stock equal to forty percent
(40%) of the number of shares of common stock into which the Secured Notes are convertible on the closing date of the Qualified
Financing. In the event a Secured Note remains outstanding beyond the Original Maturity Date, the Secured Note holder will receive
an additional warrant for 10% of the principal amount of the Secured Note outstanding at that date divided by the Conversion Price.
The number of warrant shares that the payee will be entitled to under the terms of the warrant issued by the Company to subscribers
in connection with their purchase of the Secured Notes shall be increased by ten percent (10%) for each extension by the Company
of the Original Maturity Date. The warrants will have an initial exercise price equal to the exercise price of the warrants purchased
by investors in the Qualified Financing. In the event the Secured Note holder elects to exercise the warrant prior to the consummation
of a Qualified Financing, the number of shares exercisable will be based on an assumed conversion price of $0.60 per share (the
&ldquo;Assumed Conversion Price&rdquo;) and the exercise price will be $0.60 per share (the &ldquo;Base Exercise Price&rdquo;).
However, in the event that the Company issues shares of common stock or common stock equivalents (with certain exceptions) at any
time after the issuance of the warrant and prior to a Qualified Financing at a price per share less than the Base Exercise Price
(the &ldquo;New Securities Exercise Price&rdquo;) then the Base Exercise Price and the Assumed Conversion Price shall each be reduced
effective concurrently with such issuance to the New Securities Exercise Price. Each warrant will be exercisable for a five (5)
year period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company engaged a placement agent in connection with the
September Offering and the February Offering and paid the placement agent a cash placement fee equal to eight percent (8%) of the
aggregate purchase price paid by each subscriber. This fee amounted to $320,000 for the September Offering and $208,000 for the
February Offering. The placement agent will also receive a cash fee equal to four percent (4%) of all amounts received by the Company
in connection with the exercise by investors of any warrants received by investors in connection with the Secured Notes. In addition
to the placement agent fee, the Company issued to the placement agent warrants to purchase a number of shares of our common stock
obtained by dividing eight percent (8%) of the gross proceeds from the sale of securities by the conversion price of the Secured
Notes (the &ldquo;PA Warrants&rdquo;). The PA Warrants have an exercise price per share equal to the conversion price of the Secured
Notes. The PA Warrants will expire five years from the date of issuance and will be in the same form the Secured Notes, except
that the PA Warrants will include a &ldquo;net issuance&rdquo; cashless exercise feature. As of the close of the February Offering,
PA Warrants for 754,286 shares of common stock were due to the placement agent. The value of these warrants is estimated by applying
the Black Scholes model and was recorded as a deferred financing charge with its estimated fair value at each balance sheet date
included in the warrant liability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Our business and an investment in our common stock is subject
to a variety of risks. The following risk factors describe the most significant events, facts or circumstances that could have
a material adverse effect upon our business, financial condition, results of operations, ability to implement our business plan
and the market price for our common stock. Many of these events are outside of our control. If any of these risks actually occurs,
our business, financial condition or results of operations may be materially adversely affected. In such case, the trading price
of our common stock could decline and investors in our common stock could lose all or part of their investment.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>The risk factors discussed below relate to our business and
operations following the consummation of the Merger and, accordingly, relate primarily to Abtech Holdings and its subsidiary, AbTech
Industries. As used in this &ldquo;Risk Factors&rdquo; section, the terms &ldquo;Company,&rdquo; &ldquo;we,&rdquo; our&rdquo; and
like words mean Abtech Holdings together with Abtech Industries, unless the context otherwise requires.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Risks Relating to Our Business</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our ability to generate revenue to support our operations
is uncertain.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are in the early stage of our business and have a limited
history of generating revenues. We have a limited operating history upon which you can evaluate our potential for future success,
and we are subject to the additional risks affecting early-stage businesses. Rather than relying on historical information, financial
or otherwise, to evaluate our Company, you should evaluate our Company in light of your assessment of the growth potential of our
business and the expenses, delays, uncertainties, and complications typically encountered by early-stage businesses, many of which
will be beyond our control. Early-stage businesses in rapidly evolving markets commonly face risks, such as the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">unanticipated problems, delays, and expenses relating
to the development and implementation of their business plans;</TD>
</TR></TABLE>



<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">operational difficulties;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">lack of sufficient capital;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">competition from more advanced enterprises; and</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">uncertain revenue generation.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our limited operating history may make it difficult for us
to forecast accurately our operating results.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our planned expense levels are, and will continue to be, based
in part on our expectations, which are difficult to forecast accurately based on our stage of development and factors outside of
our control. We may be unable to adjust spending in a timely manner to compensate for any unexpected developments. Further, business
development expenses may increase significantly as we expand operations. To the extent that any unexpected expenses precede, or
are not rapidly followed by, a corresponding increase in revenue, our business, operating results, and financial condition may
be materially and adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We have a history of losses that may continue, which may
negatively impact our ability to achieve our business objectives.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have incurred net losses since our inception. The Company
had a net loss of approximately $5.4 million during the fiscal year ended December 31, 2011. We cannot assure you that we can achieve
or sustain profitability on a quarterly or annual basis in the future. There can be no assurance that future operations will be
profitable. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our success depends on our ability to expand, operate, and
manage successfully our operations.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our success depends on our ability to expand, operate, and manage
successfully our operations. Our ability to expand successfully will depend upon a number of factors, including the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">signing with strategic partners, dominant in their
field</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the continued development of our business;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the hiring, training, and retention of additional personnel;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the ability to enhance our operational, financial,
and management systems;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the availability of adequate financing;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">competitive factors;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">general economic and business conditions; and</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the ability to implement methods for revenue generation.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>If we are unable to obtain additional capital, our business
operations could be harmed.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The development and expansion of our business may require additional
funds. In the future, we may seek additional equity or debt financing to provide capital for our Company. Such financing may not
be available or may not be available on satisfactory terms. If financing is not available on satisfactory terms, we may be unable
to expand our operations. While debt financing will enable us to expand our business more rapidly than we otherwise would be able
to do, debt financing increases expenses and we must repay the debt regardless of our operating results. Future equity financings
could result in dilution to our stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The recent global financial crisis, which has included, among
other things, significant reductions in available capital and liquidity from banks and other providers of credit, substantial reductions
or fluctuations in equity and currency values worldwide, and concerns that the worldwide economy may enter into a prolonged recessionary
period, may make it difficult for us to raise additional capital or obtain additional credit, when needed, on acceptable terms
or at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our inability to obtain adequate capital resources, whether
in the form of equity or debt, to fund our business and growth strategies, may require us to delay, scale back, or eliminate some
or all of our operations, which may adversely affect our financial results and ability to operate as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>You may suffer significant dilution if we raise additional
capital.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If we raise additional capital, we expect it will be necessary
for us to issue additional equity or convertible debt securities. If we issue equity or convertible debt securities, the price
at which we offer such securities may not bear any relationship to our value, the net tangible book value per share may decrease,
the percentage ownership of our current stockholders would be diluted, and any equity securities we may issue in such offering
or upon conversion of convertible debt securities issued in such offering, may have rights, preferences, or privileges with respect
to liquidation, dividends, redemption, voting, and other matters that are senior to or more advantageous than our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We have completed debt financings and face risks associated
with financing our operations.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has completed several debt financings and is subject
to the normal risks associated with debt financing, including the risk that our cash flow will be insufficient to meet required
payments of principal and interest and the risk that we will not be able to renew, repay, or refinance our debt when it matures
or that the terms of any renewal or refinancing will not be as favorable as the existing terms of that debt.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We have debt outstanding that is secured by all of the assets
of the Company.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2011, we issued the Secured Notes that are secured by
all of the assets of the Company, including its intellectual property. If we are unable to pay our obligations to our secured lenders,
they could proceed against any or all of the collateral securing our indebtedness to them which could prevent the Company from
continuing its operations in whole or in part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>You may suffer dilution if the Secured Notes are converted
to common stock.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011, the Company had approximately $6.8
million of convertible notes outstanding that, if converted, would require the company to issue approximately 10 million shares
of common stock. Such conversion would cause the percentage ownership of our current stockholders to be diluted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Outstanding convertible notes and warrants have price protection
features.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During 2011 and 2012, we issued convertible notes and warrants
that have certain price protection features that would allow the conversion prices or exercise prices of the outstanding notes
and warrants to be decreased in the event of a financing by the Company at a price per share less than the stated conversion price
of the notes or exercise price of the warrants. In the event the Company completes such a down-round financing within 15 months
of the issuance dates of the affected notes and warrants, any subsequent conversion of the affected notes and/or exercise of the
affected warrants would have a greater dilutive effect on current stockholders than would be expected if a down-round financing
does not take place within the 15-month time period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our independent auditors have expressed substantial doubt
about the Company&rsquo;s ability to continue as a going concern, which may hinder our ability to obtain future financing. <I>
</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In their report dated March 30, 2012, our independent registered
public accounting firm stated that our financial statements for the fiscal year ended December 31, 2011 were prepared assuming
that the Company would continue as a going concern. Its ability to continue as a going concern is an issue raised as a result of
recurring losses from operations. To date, each of Abtech Holdings and AbTech Industries have only incurred net operating losses
resulting in a significant accumulated deficit. Our ability to continue as a going concern is subject to our ability to obtain
necessary funding from outside sources, including obtaining additional funding from the sale of our securities. Our continued net
operating losses increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We depend on our officers and key employees who would be
difficult to replace, and our business will likely be harmed if we lose their services or cannot hire additional qualified personnel.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our success depends substantially on the efforts and abilities
of our officers and other key employees. AbTech Industries has employment agreements with its chief executive officer, its chief
financial officer, and certain key employees, but we do not think those agreements limit any employee&rsquo;s ability to terminate
his or her employment. We have key person life insurance on Glenn R. Rink, our president, chief executive officer and a director;
we do not have key person life insurance covering any of our other officers or other key employees. The loss of services of one
or more of our officers or key employees or the inability to add key personnel could have a material adverse effect on our business.
Competition for experienced personnel in our industry is substantial. Our success depends in part on our ability to attract, hire,
and retain qualified personnel. In addition, if any of our officers or other key employees join a competitor or form a competing
company, we may lose some of our customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We depend on the recruitment and retention of qualified personnel,
and our failure to attract and retain such personnel could seriously harm our business.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Due to the specialized nature of our business, our future performance
is highly dependent upon the continued services of current and future key personnel and managers. Our future business depends upon
our ability to attract and retain qualified engineering, manufacturing, marketing, sales, and management personnel for our operations.
We may also have to compete with the other companies in our industry in the recruitment and retention of qualified managerial and
technical employees. Competition for personnel is intense and confidentiality and non-compete agreements may restrict our ability
to hire individuals employed by other companies. Therefore, we may not be successful in attracting or retaining qualified personnel.
Our failure to attract and retain qualified personnel could seriously harm our business, results of operations, and financial condition.
Furthermore, we may not be able to accurately forecast our needs for additional personnel, which could adversely affect our ability
to grow.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The expected results from the Merger may vary significantly
from our expectations.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The expected results from the Merger might vary materially from
those anticipated and disclosed by us. These expectations are inherently subject to uncertainties and contingencies. These assumptions
may be impacted by factors that are beyond our control, including, but not limited to, general economic factors impacting the U.S.
economy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The Merger could be difficult to integrate, disrupt business,
dilute stockholder value, and harm operating results of the combined entity.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our experience in acquiring and integrating businesses is limited.
The Merger involves numerous risks, including the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">problems integrating the purchased operations, services,
personnel, or technologies;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">unanticipated costs associated with the acquisition;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">diversion of management&rsquo;s attention from the
core businesses;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">adverse effects on existing business relationships
with suppliers and customers of purchased organizations;</TD>
</TR></TABLE>



<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">potential loss of key employees and customers of purchased
organizations; and</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">risk of impairment charges related to potential write-downs
of acquired assets.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These factors and potential unforeseeable costs may result in
disruption to the business of the combined entity and any such disruption could have a significant negative impact on the combined
entity&rsquo;s assets, revenue, expenses, and stock price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The effects of the recent global economic downturn may adversely
impact our business, operating results, or financial condition. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The recent global economic downturn has caused disruptions and
volatility in global financial markets and increased rates of default and bankruptcy and has impacted levels of consumer and commercial
spending. We are unable to predict the duration or severity of the current global economic and financial crisis. There can be no
assurance that any actions we may take in response to further deterioration in general economic and financial conditions will be
sufficient. A protracted continuation or worsening of the global economic downturn or disruptions in the financial markets could
have a material adverse effect on our business, financial condition, or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>If we do not achieve broad market acceptance of our products
and services, we may not be successful.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Although our products and services will serve existing needs,
our delivery of these products and services is unique and subject to broad market acceptance. As is typical of any new product
or service, the demand for and market acceptance of these products and services are highly uncertain. We cannot assure you that
any of our products and services will be commercialized on a widespread basis. The commercial acceptance of our products and services
may be affected by a number of factors, including the willingness of municipalities and other commercial and industrial entities
to use our products and services to control the quality of water and other fluids. If the markets for our products and services
fail to develop on a meaningful basis, if they develop more slowly than we anticipate, or if our products and services fail to
achieve sufficient market acceptance, our business and future results of operations could be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Because our products may be designed to provide a solution
which competes with existing methods, we are likely to face resistance to change, which could impede our ability to commercialize
this business.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our products may be designed to provide a solution to environmental
challenges created by contaminated water and other fluids. Currently, large and well capitalized companies provide services in
these areas. These competitors have strong relationships with their customers&rsquo; personnel, and there is a natural reluctance
for businesses to change to new technologies, particularly in such industries as the oil and gas industries where our future products
may be relevant. This reluctance is increased when potential customers make significant capital investments in competing technologies.
Because of these obstacles, we may face substantial barriers to commercializing our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>If we experience rapid growth and we are not able to manage
this growth successfully, this inability to manage the growth could adversely affect our business, financial condition, and results
of operations.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Rapid growth places a significant strain on our financial, operational,
and managerial resources. While we engage in strategic and operational planning to adequately manage anticipated growth, there
can be no assurance that we will be able to implement and subsequently improve operations and financial systems successfully and
in a timely manner to fully manage our growth. There can be no assurance that we will be able to manage our growth and any inability
to successfully manage growth could materially adversely affect our business, financial condition, and results of operation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We have no experience in manufacturing or assembling products
on a large scale basis, and if we do not develop adequate manufacturing and assembly processes and capabilities to do so in a timely
manner, we may be unable to achieve our growth and profitability objectives.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have no experience manufacturing or assembling products on
a large scale. We do not know whether our current or future manufacturing arrangements will be able to develop efficient, low-cost
manufacturing capabilities and processes that will enable us to meet the quality, price, engineering, design and production standards,
or production volumes required to successfully mass market such products. Even if we are successful in developing manufacturing
capabilities and processes, we do not know whether we will do so in time to meet our product commercialization schedule or to satisfy
the requirements of our target market. Our failure to develop these manufacturing processes and capabilities, if necessary, in
a timely manner, could prevent us from achieving our growth and profitability objectives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>If we fail to continue to develop or acquire new products,
adapt to rapid and significant technological change, and respond to introductions of new products, we will not be competitive.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our growth strategy includes significant investment in and expenditures
for product development. We intend to sell products, primarily in the water clean-up sector, which are characterized by rapid and
significant technological changes, frequent new product and service introductions, and enhancements and evolving industry standards.
Without the timely introduction of new products, services, and enhancements, our products and services may become technologically
obsolete over time, in which case our revenue and operating results would suffer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, our competitors may adapt more quickly to new technologies
and changes in customers&rsquo; requirements than we can. The products that we are currently developing or those that we will develop
in the future may not be technologically feasible or accepted by the marketplace, and our products or technologies could become
uncompetitive or obsolete.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The market for our products is highly competitive, and there
can be no assurance that competitors will not emerge in the near to medium term with comparable products or technologies. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The markets for our products and services are expected to remain
highly competitive. While we believe our products are unique and have, or will have, adequate patent protection for the underlying
technologies, or unique trade secrets, there can be no assurance that competitors will not emerge in the near to medium term with
comparable products or technologies. There are a number of large companies involved in the same businesses as us, but with larger
more established sales and marketing organizations, technical staff, and financial resources. We may establish marketing and distribution
partnerships or alliances with some of these companies, but there can be no assurance that such alliances will be formed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our business may become substantially dependent on contracts
that are awarded through competitive bidding processes.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We may sell a significant portion of our products pursuant to
contracts that are subject to competitive bidding, including contracts with municipal authorities. Competition for, and negotiation
and award of, contracts present varied risks, including, but not limited to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">investment of substantial time and resources by management
for the preparation of bids and proposals with no assurance that a contract will be awarded to us;</TD>
</TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

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<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the requirement to certify as to compliance with numerous
laws (for example, socio-economic, small business, and domestic preference) for which a false or incorrect certification can lead
to civil and criminal penalties;</TD>
</TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the need to estimate accurately the resources and cost
structure required to service a contract; and</TD>
</TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the expenses and delays that we might suffer if our
competitors protest a contract awarded to us, including the potential that the contract may be terminated and a new bid competition
may be conducted.</TD>
</TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If we are unable to win contracts awarded through the competitive
bidding process, we may not be able to operate in the market for products and services that are provided under those contracts
for a number of years. If we are unable to consistently win new contract awards over any extended period, or if we fail to anticipate
all of the costs and resources that will be required to secure and perform such contract awards, our growth strategy and our business,
financial condition, and results of operations could be materially and adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We will sell products and services to companies in industries
which tend to be extremely cyclical; downturns in those industries would adversely affect our results of operations.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The growth and profitability of our business will depend on
sales to industries that are subject to cyclical downturns. Slowdowns in these industries may adversely affect sales by our businesses,
which in turn would adversely affect our revenues and results of operations. In particular, our products may be sold to and used
by the oil and gas industry, which historically has realized significant shifts in activity and spending due to fluctuations in
commodity prices. Our revenues may be dependent upon spending by oil and gas producers; therefore, a reduction in spending by producers
may have a materially adverse effect on our business, financial conditions, and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The industries in which we may sell our products are heavily
regulated and costs associated with such regulation could reduce our profitability. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Federal, state, and local authorities extensively regulate the
stormwater and oil and gas industries, which are primary industries in which we may sell our products and offer our services. Legislation
and regulations affecting the industries are under constant review for amendment or expansion. State and local authorities regulate
various aspects of stormwater and oil and gas activities that ultimately affect how customers use our products and how we develop
and market our products. The overall regulatory burden on the industries increases the cost of doing business, which, in turn,
decreases profitability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">International sales are also subject to rules and regulations
promulgated by regulatory bodies within foreign jurisdictions, and there can be no assurance that such foreign regulatory bodies
will not adopt laws or regulatory requirements that could adversely affect our Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>If chemical companies engage in predatory pricing, we may
lose customers, which could materially and adversely affect us.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Municipalities and other commercial and industrial entities
traditionally have used chemicals to control the quality of water and other fluids. The chemical companies represent a significant
competitive factor. The chemical companies who supply chemicals to such municipalities and other commercial and industrial entities
may, in order to maintain their business relationship, drastically reduce their price and seek to undercut the pricing at which
we can realistically charge for our products and services. While predatory pricing that is designed to drive us out of business
may be illegal under the United States anti-trust and other laws, we may lose customers as a result of any future predatory pricing
and be required to file lawsuits against any companies who engage in such improper tactics. Any such litigation may be very expensive
which will further impact us and affect their financial condition. As a result, predatory pricing by chemical companies could materially
and adversely affect us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We are, or in the future may be, subject to substantial regulation
related to quality standards applicable to our manufacturing and quality processes. Our failure to comply with applicable quality
standards could have an adverse effect on our business, financial condition, or results of operations.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Environmental Protection Agency regulates the registration,
manufacturing, and sales and marketing of products in our industry, and those of our distributors and partners, in the United States.
Significant government regulation also exists in overseas markets. Compliance with applicable regulatory requirements is subject
to continual review and is monitored through periodic inspections and other review and reporting mechanisms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Failure by us or our partners to comply with current or future
governmental regulations and quality assurance guidelines could lead to temporary manufacturing shutdowns, product recalls or related
field actions, product shortages, or delays in product manufacturing. Efficacy or safety concerns and/or manufacturing quality
issues with respect to our products or those of our partners could lead to product recalls, fines, withdrawals, declining sales,
and/or our failure to successfully commercialize new products or otherwise achieve revenue growth.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>If a natural or man-made disaster strikes our or a third-party&rsquo;s
manufacturing facility that we may use, we may be unable to manufacture our products for a substantial amount of time and our sales
and profitability will decline.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The manufacturing facility and manufacturing equipment we use
to produce our products will be costly to replace and could require substantial lead-time to repair or replace. Our facility or
a third-party&rsquo;s facility that we use may be affected by natural or man-made disasters. In the event they were affected by
a disaster, we would be forced to set up alternative production capacity, or rely on third-party manufacturers to whom we would
have to disclose our trade secrets. Although we possess insurance for damage to our property and the disruption of our business
from casualties, such insurance may not be sufficient to cover all of our potential losses, may not continue to be available to
us on acceptable terms, or at all, and may not address the marketing and goodwill consequences of our inability to provide products
for an extended period of time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We may decide to outsource manufacturing in the future. Dependence
on contract manufacturing and outsourcing other portions of our supply chain may adversely affect our ability to bring products
to market and damage our reputation. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As part of our efforts to streamline operations and to cut costs
in the future, we may decide to outsource aspects of our manufacturing processes and other functions. If our contract manufacturers
or other outsourcers fail to perform their obligations in a timely manner or at satisfactory quality levels, our ability to bring
products to market and our reputation could suffer. For example, during a market upturn, our contract manufacturers may be unable
to meet our demand requirements, which may preclude us from fulfilling our customers&rsquo; orders on a timely basis. The ability
of these manufacturers to perform is largely outside of our control. Additionally, outsourcing may take place in developing countries
and, as a result, may be subject to geopolitical uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The success of our businesses will depend on our ability
to effectively develop and implement strategic business initiatives.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are currently implementing various strategic business initiatives.
In connection with the development and implementation of these initiatives, we will incur additional expenses and capital expenditures
to implement the initiatives. The development and implementation of these initiatives also requires management to divert a portion
of its time from day-to-day operations. These expenses and diversions could have a significant impact on our operations and profitability,
particularly if the initiatives prove to be unsuccessful. Moreover, if we are unable to implement an initiative in a timely manner,
or if those initiatives turn out to be ineffective or are executed improperly, our business and operating results would be adversely
affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Failure to successfully reduce our current or future production
costs may adversely affect our financial results.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A significant portion of our strategy will rely upon our ability
to successfully rationalize and improve the efficiency of our operations. In particular, our strategy relies on our ability to
reduce our production costs in order to remain competitive. If we are unable to continue to successfully implement cost reduction
measures, especially in a time of a worldwide economic downturn, or if these efforts do not generate the level of cost savings
that we expect going forward or result in higher than expected costs, there could be a material adverse effect on our business,
financial condition, results of operations, or cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>If we are unable to make necessary capital investments or
respond to pricing pressures, our business may be harmed.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In order to remain competitive, we need to invest in research
and development, manufacturing, customer service and support, and marketing. From time to time, we may have to adjust the prices
of our products and services to remain competitive. We may not have available sufficient financial or other resources to continue
to make investments necessary to maintain our competitive position.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Failure to obtain sufficient supply of component materials
to conduct our business may have an adverse effect on our production and revenue targets.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our component and materials&rsquo; suppliers may fail to meet
our needs. We intend to manufacture our products using materials and components procured from a limited number of third-party suppliers.
We do not currently have long-term supply contracts with our suppliers. This generally serves to reduce our commitment risk, but
does expose us to supply risk and to price increases that we may have to pass on to our customers. In some cases, supply shortages
and delays in delivery may result in curtailed production or delays in production, which can contribute to an increase in inventory
levels and loss of profit. We expect that shortages and delays in deliveries of some components will occur from time to time. If
we are unable to obtain sufficient components on a timely basis, we may experience manufacturing delays, which could harm our relationships
with current or prospective customers and reduce our sales. We may also not be able to obtain competitive pricing for some of our
supplies compared to our competitors. We also cannot assure that the component and materials from domestic suppliers will be of
similar quality or quantity as those imported component and materials, which may lead to rejections of component and materials
by our customers. In the event the domestic component and materials do not perform as well as the imported component and materials
or do not perform at all, our business, financial condition, and results of operations could be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We have limited product distribution experience and we expect
to rely on third parties who may not successfully sell our products.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have limited product distribution experience and currently
rely and plan to rely primarily on product distribution arrangements with third parties. We may also license our technology to
certain third parties for commercialization of certain applications. We expect to enter into distribution agreements and/or licensing
agreements in the future, and we may not be able to enter into these agreements on terms that are favorable to us, if at all. In
addition, we may have limited or no control over the distribution activities of these third parties. These third parties could
sell competing products and may devote insufficient sales efforts to our products. As a result, our future revenues from sales
of our products, if any, will depend on the success of the efforts of these third parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We could face significant liabilities in connection with
our technology, products, and business operations, which if incurred beyond any insurance limits, would adversely affect our business
and financial condition. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are subject to a variety of potential liabilities connected
to our technology development and business operations, such as potential liabilities related to environmental risks. As a business
which manufactures and/or markets products for use by consumers and institutions, we may become liable for any damage caused by
our products, whether used in the manner intended or not. Any such claim of liability, whether meritorious or not, could be time-consuming
and/or result in costly litigation. Although we have obtained insurance against certain of these risks, no assurance can be given
that such insurance will be adequate to cover related liabilities or will be available in the future or, if available, that premiums
will be commercially justifiable. If we were to incur any substantial liability and related damages were not covered by our insurance
or exceeded policy limits, or if we were to incur such liability at a time when we are not able to obtain liability insurance,
our business, financial conditions, and results of operations could be materially adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our failure to protect our intellectual property rights may
undermine our competitive position, and litigation to protect our intellectual property rights or defend against third-party allegations
of infringement may be costly.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our success will depend in part on our ability to develop patentable
products and obtain and enforce patent protection for our products in the United States and other countries. We intend to file
applications, as appropriate, for patents covering our products. Patents may not be issued for any pending or future patent applications
owned by or licensed to us, and the claims allowed under any issued patents may not be sufficiently broad to protect our technology.
Any issued patents owned by or licensed to us may be challenged, invalidated, or circumvented, and the rights under these patents
may not provide us with competitive advantages. In addition, competitors may design around our technology or develop competing
technologies. Intellectual property rights may also be unavailable or limited in some foreign countries, which could make it easier
for competitors to capture increased market position. We could incur substantial costs to defend suits brought against us or suits
in which we may assert our patent rights against others. An unfavorable outcome of any such litigation could materially adversely
affect our business and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We may also rely on trade secrets and proprietary know-how with
which we seek to protect our products, in part by confidentiality agreements with our collaborators, employees, and consultants.
Nevertheless, these agreements afford only limited protection, and the actions we take to protect our intellectual property rights
may not be adequate. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade
secrets may otherwise become known or be independently developed by our competitors. As a result, third parties may infringe or
misappropriate our proprietary technologies or other intellectual property rights, which could have a material adverse effect on
our business, financial condition, or operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, policing unauthorized use of proprietary technology
can be difficult and expensive. Litigation may be necessary to enforce our intellectual property rights, protect our trade secrets,
or determine the validity and scope of the proprietary rights of others. We cannot assure you that the outcome of any litigation
will be in our favor. Intellectual property litigation may be costly and may divert management attention, as well as expend our
other resources away from our business. An adverse determination in any such litigation will impair our intellectual property rights
and may harm our business, prospects, and reputation. In addition, we have no insurance coverage against litigation costs and would
have to bear all costs arising from such litigation to the extent we are unable to recover them from other parties. The occurrence
of any of the foregoing could have a material adverse effect on our business, results of operations, and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Operational and Structural Risks</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We can provide no assurances as to our future financial performance
or the investment result of a purchase of our common stock.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Any projected results of operations, including the recent Merger,
involve significant risks and uncertainty, should be considered speculative, and depend on various assumptions which may not be
correct. The future performance of our Company and the return on our common stock depends on a complex series of events that are
beyond our control and that may or may not occur. Actual results for any period may or may not approximate any assumptions that
are made and may differ significantly from such assumptions. We can provide no assurance or prediction as to our future profitability
or to the ultimate success of an investment in our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The compensation we pay to our executive officers and employees
will likely increase, which will affect our future profitability.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe that the compensation we have historically paid to
our executive officers is within the lower quartile of compensation paid by companies similar to our Company. Following the closing
of the Merger, we increased the compensation payable to the combined entity&rsquo;s executive officers and employees. An increase
in compensation and bonuses payable to our executive officers and employees could decrease our net income.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>As a public reporting company, we are subject to corporate
governance and internal control reporting requirements, and our costs related to compliance with, or our failure to comply with
existing and future requirements, could adversely affect our business.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We may face new corporate governance requirements under the
Sarbanes-Oxley Act of 2002, as well as new rules and regulations subsequently adopted by the SEC and the Public Company Accounting
Oversight Board. These laws, rules, and regulations continue to evolve and may become increasingly stringent in the future. We
are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (&ldquo;Section
404&rdquo;). We are a smaller reporting company as defined in Rule 12b-2 under the Exchange Act. Section 404 requires us to include
an internal control report with our Annual Report on Form 10-K. The report must include management&rsquo;s assessment of the effectiveness
of our internal control over financial reporting as of the end of the fiscal year. This report must also include disclosure of
any material weaknesses in internal control over financial reporting that we have identified. Failure to comply, or any adverse
results from such evaluation, could result in a loss of investor confidence in our financial reports and have an adverse effect
on the trading price of our securities. We strive to continuously evaluate and improve our control structure to help ensure that
we comply with Section 404. The financial cost of compliance with these laws, rules, and regulations is expected to remain substantial.
We cannot assure you that we will be able to fully comply with these laws, rules, and regulations that address corporate governance,
internal control reporting, and similar matters. Failure to comply with these laws, rules, and regulations could materially adversely
affect our reputation, financial condition, and the value of our securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>As a public company, we will have significant operating costs
relating to compliance requirements and our management is required to devote substantial time to compliance initiatives.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our management has only limited experience operating AbTech
Holdings as a public company. To operate effectively, we will be required to continue to implement changes in certain aspects of
our business and develop, manage, and train management level and other employees to comply with on-going public company requirements.
Failure to take such actions, or delay in the implementation thereof, could have a material adverse effect on our business, financial
condition, and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Sarbanes-Oxley Act of 2002, as well as rules subsequently
implemented by the SEC, impose various requirements on public companies, including requiring establishment and maintenance of effective
disclosure and financial controls and changes in corporate governance practices. Our management and other personnel will need to
devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations will increase our
legal and financial compliance costs and will make some activities more time-consuming and costly.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Risks Related to our Common Stock</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>A limited public trading market exists for our common stock,
which makes it more difficult for our stockholders to sell their common stock in the public markets.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Although our common stock is quoted on the OTCBB under the symbol
&ldquo;ABHD,&rdquo; there is a limited public market for our common stock. No assurance can be given that an active market will
develop or that a stockholder will ever be able to liquidate its shares of common stock without considerable delay, if at all.
Many brokerage firms may not be willing to effect transactions in the securities. Even if a purchaser finds a broker willing to
effect a transaction in these securities, the combination of brokerage commissions, state transfer taxes, if any, and any other
selling costs may exceed the selling price. Furthermore, our stock price may be impacted by factors that are unrelated or disproportionate
to our operating performance. These market fluctuations, as well as general economic, political, and market conditions, such as
recessions, interest rates, or international currency fluctuations may adversely affect the market price and liquidity of our common
stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our stock price may be volatile.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The market price of our common stock is likely to be highly
volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the
following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">limited &ldquo;public float&rdquo; in the hands of
a small number of persons whose sales (or lack of sales) could result in positive or negative pricing pressure on the market price
for our common stock;</TD>
</TR></TABLE>



<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">actual or anticipated variations in our quarterly operating
results;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">changes in our earnings estimates;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">our ability to obtain adequate working capital financing;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">changes in market valuations of similar companies;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">publication (or lack of publication) of research reports
about us;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">changes in applicable laws or regulations, court rulings,
enforcement and legal actions;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">loss of any strategic relationships;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">additions or departures of key management personnel;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">actions by our stockholders (including transactions
in our shares);</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">speculation in the press or investment community;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">increases in market interest rates, which may increase
our cost of capital;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">changes in our industry;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">competitive pricing pressures;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">our ability to execute our business plan; and</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">economic and other external factors.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market
fluctuations may also materially and adversely affect the market price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our common stock may be subject to the penny stock rules
which may make it more difficult to sell our common stock.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The SEC has adopted regulations which generally define a &ldquo;penny
stock&rdquo; to be any equity security that has a market price, as defined, less than $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. Our securities may be covered by the penny stock rules, which impose additional
sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors, such
as institutions with assets in excess of $5,000,000 or an individual with net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with his or her spouse. For transactions covered by this rule, the broker-dealers must make a special
suitability determination for the purchase and receive the purchaser&rsquo;s written agreement of the transaction prior to the
sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities and also affect the ability of our
stockholders to sell their shares in the secondary market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>FINRA sales practice requirements may also limit a shareholder&rsquo;s
ability to buy and sell our stock. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition to the &ldquo;penny stock&rdquo; rules described
above, the Financial Industry Regulatory Authority (&ldquo;FINRA&rdquo;) has adopted rules that require that in recommending an
investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.
Prior to recommending speculative, low priced securities to their non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer&rsquo;s financial status, tax status, investment objectives, and other information.
Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low priced securities will
not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that
their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the
market for our shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our common shares are currently traded at low volume, and
you may be unable to sell at or near ask prices or at all if you need to sell or liquidate a substantial number of shares at one
time. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We cannot predict the extent to which an active public market
for our common stock will develop or be sustained. Our common shares are currently traded, but currently with low volume, based
on quotations on the &ldquo;Over-the-Counter Bulletin Board,&rdquo; meaning that the number of persons interested in purchasing
our common shares at or near bid prices at any given time may be relatively small or non-existent. This situation is attributable
to a number of factors, including the fact that we are a small company which is still relatively unknown to stock analysts, stock
brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even
if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such
as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned
issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse
effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock
will develop or be sustained, or that trading levels will be sustained.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Shareholders should be aware that, according to SEC Release
No. 34-29093, the market for &ldquo;penny stocks&rdquo; has suffered in recent years from patterns of fraud and abuse. Such patterns
include: (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
(2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler
room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive
and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse
of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the
penny stock market, and we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate
in the market. The occurrence of these patterns or practices could increase the future volatility of our share price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We have historically not paid dividends and do not intend
to pay dividends for the foreseeable future.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have historically not paid dividends to our stockholders,
and management does not anticipate paying any cash dividends on our common stock to our stockholders for the foreseeable future.
Any determination we make regarding dividends will be at the discretion of our Board of Directors and will depend on our results
of operations, our financial condition, contractual restrictions, restrictions imposed by applicable law, and other factors our
Board of Directors deem relevant. Even if the funds are legally available for distribution, we may nevertheless decide not to pay
any dividends. We presently intend to retain future earnings, if any, for use in the operation and expansion of our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The elimination of monetary liability against our directors,
officers, and employees under Nevada law and the existence of indemnification rights to our directors, officers, and employees
may result in substantial expenditures by our Company and may discourage lawsuits against our directors, officers, and employees.
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our articles of incorporation contain a provision permitting
us to eliminate the personal liability of our directors to our Company and shareholders for damages for breach of fiduciary duty
as a director or officer to the extent provided by Nevada law. We may also have contractual indemnification obligations under our
employment agreements with our officers. The foregoing indemnification obligations could result in our Company incurring substantial
expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup.
These provisions and resultant costs may also discourage our Company from bringing a lawsuit against directors and officers for
breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against
our directors and officers even though such actions, if successful, might otherwise benefit our Company and shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This prospectus contains forward-looking statements within the
meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act, regarding the Company. These forward-looking
statements are based on our current expectations, estimates and projections about our industry, management&rsquo;s beliefs and
certain assumptions made by us. Words such as &ldquo;anticipates,&rdquo; &ldquo;expects,&rdquo; &ldquo;intends,&rdquo; &ldquo;plans,&rdquo;
&ldquo;predicts,&rdquo; &ldquo;potential,&rdquo; &ldquo;believes,&rdquo; &ldquo;seeks,&rdquo; &ldquo;hopes,&rdquo; &ldquo;estimates,&rdquo;
&ldquo;should,&rdquo; &ldquo;may,&rdquo; &ldquo;will,&rdquo; &ldquo;with a view to&rdquo; and variations of these words or similar
expressions are intended to identify forward-looking statements. Forward-looking statements in this prospectus may include, for
example, statements about:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<UL TYPE="DISC" STYLE="margin-top: 0in; font-family: Times New Roman, Times, Serif">

<LI STYLE="margin: 0pt 0; font-family: Times New Roman, Times, Serif">any projections of earnings, revenue or other financial items;</LI>

</UL STYLE="font-family: Times New Roman, Times, Serif">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></P>

<UL TYPE="DISC" STYLE="margin-top: 0in; font-family: Times New Roman, Times, Serif">

<LI STYLE="margin: 0pt 0; font-family: Times New Roman, Times, Serif">any statements of the plans, strategies and objectives of
management for future operations;</UL STYLE="font-family: Times New Roman, Times, Serif">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<UL TYPE="DISC" STYLE="margin-top: 0in; font-family: Times New Roman, Times, Serif">

<LI STYLE="margin: 0pt 0; font-family: Times New Roman, Times, Serif">any statements concerning proposed new products, services
or developments;</LI>

</UL STYLE="font-family: Times New Roman, Times, Serif">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<UL TYPE="DISC" STYLE="margin-top: 0in; font-family: Times New Roman, Times, Serif">

<LI STYLE="margin: 0pt 0; font-family: Times New Roman, Times, Serif">any statements regarding future economic conditions or performance;</LI>

</UL STYLE="font-family: Times New Roman, Times, Serif">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<UL TYPE="DISC" STYLE="margin-top: 0in; font-family: Times New Roman, Times, Serif">

<LI STYLE="margin: 0pt 0; font-family: Times New Roman, Times, Serif">any statements or belief; and</LI>

</UL STYLE="font-family: Times New Roman, Times, Serif">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<UL TYPE="DISC" STYLE="margin-top: 0in; font-family: Times New Roman, Times, Serif">

<LI STYLE="margin: 0pt 0; font-family: Times New Roman, Times, Serif">any statements of assumptions underlying any of the foregoing.</LI>

</UL STYLE="font-family: Times New Roman, Times, Serif">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These forward-looking statements involve various risks and uncertainties.
Although we believe our expectations expressed in these forward-looking statements are reasonable, our expectations may later be
found to be incorrect. Our actual results could be materially different from our expectations. Important risks and factors that
could cause our actual results to be materially different from our expectations are generally set forth in &ldquo;Risk Factors,&rdquo;
&ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations,&rdquo; &ldquo;Our Business&rdquo;
and other sections in this prospectus. You should read this prospectus and the documents we refer to thoroughly with the understanding
that our actual future results may be materially different from and worse than what we expect. Other sections of this prospectus
include additional factors which could adversely impact our business and financial performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The forward-looking statements made in this prospectus relate
only to events or information as of the date on which the statements are made in this prospectus. 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 prospectus and the documents we refer to in this prospectus and have filed as exhibits to this prospectus completely
and with the understanding that our actual future results may be materially different from what we expect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>USE OF PROCEEDS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We will not receive any proceeds from sale of the shares of
common stock covered by this prospectus by the selling shareholders. To the extent the selling shareholders exercise for cash all
of the warrants covering the 5,154,289 shares of common stock issuable upon exercise of all of the warrants held by such selling
shareholders, we would receive $3,168,002 from such exercises. The warrants may expire without having been exercised. Even if some
or all of these warrants are exercised, we cannot predict when they will be exercised and when we would receive the proceeds. We
intend to use any proceeds we receive upon exercise of the warrants for general working capital and other corporate purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MARKET PRICE OF OUR COMMON STOCK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our common stock is listed on the OTCBB under the symbol &ldquo;ABHD.&rdquo;
<FONT STYLE="color: black">The closing price of our common stock on the OTC Bulletin Board on April 10, 2012, was $0.75 per share.
</FONT>Our common stock has been listed on the OTCBB since June 2010. Prior to that time, there was no public market for our common
stock. The following table sets forth, for the calendar quarters indicated, the high and low stock prices for our common stock
as reported by the NASDAQ.com. These quotations may represent prices between dealers without adjustment for retail markups, markdowns,
or commissions and may not represent actual transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="width: 50%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-right: 5.75pt; padding-left: 5.75pt; text-decoration: underline">Sales Price of Common Stock</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 44%; padding-right: 5.75pt; padding-left: 5.75pt">Quarter ended</TD>
    <TD STYLE="width: 28%; padding-right: 5.75pt; padding-left: 5.75pt; text-decoration: underline">High</TD>
    <TD STYLE="width: 28%; padding-right: 5.75pt; padding-left: 5.75pt; text-decoration: underline">Low</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; December 31, 2011</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$0.63</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$0.32</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; September 30, 2011</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$0.75</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$0.35</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; June 30, 2011</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$1.44</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$0.25</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; March 31, 2011</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$1.65</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$0.41</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-right: 5.75pt; padding-left: 5.75pt; text-decoration: underline">Sales Price of Common Stock</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt; text-decoration: underline">High</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt; text-decoration: underline">Low</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; December 31, 2010</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$0.99</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$0.40</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; September 30, 2010</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$2.55</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$0.86</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; June 30, 2010</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$2.90</TD>
    <TD STYLE="padding-right: 5.75pt; padding-left: 5.75pt">$0.99</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Stockholders</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of April 12, 2012 there were 173 stockholders of record of
our common stock. Our transfer agent is Worldwide Stock Transfer, LLC. The transfer agent&rsquo;s address is 433 Hackensack Ave.,
Level L, Hackensack, NJ 07601.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The offering will have no effect on the amount and percentage
of present holdings of shares of common stock held by any 5% beneficial owner, directors and nominees and directors and officers
as a group, except that one of the selling shareholders, Pinnacle Family Office Investments, L.P., purchased $1,800,000 of the
Secured Notes in the February Offering. The shares issuable upon conversion of these notes plus the shares of common stock issuable
upon exercise of the warrants issued with the notes, total 3,771,428 giving them a 7.2 % beneficial ownership of the Company&rsquo;s
common stock after the February Offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Dividends</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The holders of our common stock are entitled to receive dividends
as may be declared by our Board of Directors. As of the date of this prospectus, we have never declared or paid cash dividends
on our common stock, and we do not anticipate paying dividends in the foreseeable future. Our future payment of dividends will
depend on our earnings, capital requirements, expansion plans, financial condition, and other relevant factors that our Board of
Directors may deem relevant. Our retained earnings deficit currently limits our ability to pay dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DILUTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our unaudited pro forma net tangible book value as of December
31, 2011, as adjusted to include the effect of the February 15, 2012 final closing of the private placement, was negative $(5.7)
million, or negative $(0.12) per share of common stock based upon 48,482,344 shares outstanding (which includes 1,321,409 shares
issued subsequent to December 31, 2011). Net tangible book value per share is determined by dividing such number of outstanding
shares of common stock into our net tangible book value, which is our total tangible assets less total liabilities. After giving
effect to the sale of our common stock in this offering for which the Company would receive no proceeds for the shares issued upon
conversion of the Secured Notes and approximately $0.60 per share for each warrant share exercised, with no other offering expenses
payable by us, our pro forma as adjusted net tangible book value at December 31, 2011 would have been approximately negative $(2.0)
million, or $(0.03) per share. This represents an immediate increase in net tangible book value of approximately $0.09 per share
to our existing stockholders, and an immediate dilution of $(0.78) per share to investors purchasing common stock in the offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table illustrates the per share dilution to investors
purchasing common stock in the offering:</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 74%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 11%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 11%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Assumed public offering price per unit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">0.75</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Net tangible book value per share as of December 31, 2011, as adjusted</TD>
    <TD>$</TD>
    <TD STYLE="text-align: center">(0.12)</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Increase per share attributable to sale of securities to investors</TD>
    <TD STYLE="border-bottom: windowtext 1.5pt solid">$</TD>
    <TD STYLE="border-bottom: windowtext 1.5pt solid; text-align: center">0.09</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">$</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt">Pro forma as adjusted net tangible book value per share after the offering</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">$</TD>
    <TD STYLE="border-bottom: windowtext 1.5pt double; text-align: right">(0.03)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Dilution per share to investors</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-bottom: windowtext 4.5pt double; text-align: right">(0.78)</TD>
    <TD STYLE="border-top: windowtext 1.5pt solid; border-bottom: windowtext 4.5pt double">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RESULTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">You should read the following discussion and analysis in conjunction
with our financial statements and related notes contained elsewhere in this prospectus. This discussion contains forward-looking
statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of a variety of factors, including those set forth under Risk Factors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Abtech Holdings was incorporated in the State of Nevada on February
13, 2007 under the name &ldquo;Laural Resources, Inc.&rdquo; On February 10, 2011, Abtech Holdings consummated the Merger with
AbTech Industries, pursuant to the Merger Agreement. Prior to the Merger, Abtech Holdings was a development stage company engaged
in the business of acquiring and developing mineral properties, and a public reporting &ldquo;shell company,&rdquo; as defined
in SEC Rule 12b-2 under the Exchange Act. As a result of the Merger, Abtech Holdings acquired all of the issued and outstanding
common stock of AbTech Industries (through a reverse acquisition transaction) in exchange for the stockholders of AbTech Industries
acquiring a 78% ownership interest in Abtech Holdings, AbTech Industries became Abtech Holdings&rsquo; majority-owned subsidiary,
and Abtech Holdings acquired the business and operations of AbTech Industries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This &ldquo;Management&rsquo;s Discussion and Analysis of Financial
Condition and Results of Operations&rdquo; is based on and relates only to AbTech Industries. Prior to the consummation of the
Merger, Abtech Holdings was a &ldquo;shell company&rdquo; that did not have an active business and its results of operations are
immaterial and are not included in the discussion below. Key factors affecting AbTech Industries&rsquo; results of operations during
the periods covered in this section include revenues, cost of revenues, operating expenses and income, and taxation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For accounting purposes, the Merger transaction has been accounted
for as a reverse acquisition, with AbTech Industries as the acquirer. The consolidated financial statements of Abtech Holdings
as of and for the year ended December 31, 2011 represent a continuation of the financial statements of AbTech Industries, with
one adjustment, which is to retroactively adjust the legal capital of AbTech Industries to reflect the legal capital of Abtech
Holdings. See Note 1 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>Results of Operations</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Comparison of the years ended December 31, 2011 and 2010</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenues increased by approximately 24% in 2011 but continued
to be adversely impacted by the effects of a worldwide economic downturn that stalled most projects with municipal and other customers.
Going forward the Company expects significant sales growth due to improving general economic conditions, maturity of the market
for stormwater products, strategic alliances with market dominant strategic partners and an expansion into new markets for produced
water and other industrial applications of the Smart Sponge technology. The Company&rsquo;s new distributor, Waste Management,
Inc. (&ldquo;WMI&rdquo;), announced in April 2011 that it was launching its entry into the stormwater market and intended to initiate
its sales efforts in four pilot market areas in 2011. As of December 31, 2011, WMI had identified and launched sales efforts in
three of these pilot areas. While the Company has not yet recognized significant revenue from this distribution arrangement, gradual
revenue growth is anticipated in 2012 as the Company and WMI pursue these initial efforts in the pilot market areas and expand
into other geographic markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The sales in both 2011 and 2010 were affected by non-recurring,
unusual items. In 2011, the Company recorded approximately $77,000 of revenue resulting from the forfeiture of a prepayment made
by a distributor in 2007 to secure exclusive geographic marketing rights under a distribution agreement. Under the terms of the
distribution agreement, the distributor was allowed to apply the prepaid fee to purchases of AbTech Industries products for a limited
period of time. As of December 31, 2011, the distributor forfeited the $77,000 unused balance of the prepayment and the Company
recorded it as revenue. In 2010, approximately 23% of sales were attributable to the sale of Smart Sponge products to one customer
who donated the products for deployment in the Gulf of Mexico to treat the massive oil spill that occurred there during the year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These unusual transactions in 2011 and 2010 had a favorable
impact on gross margins. However, the gross margins of 14.7% and 9.7% for 2011 and 2010, respectively, are well below the gross
margins that we would expect if the Company were operating near full capacity. Our current manufacturing facility is capable of
producing sufficient products to generate approximately $10 million in revenue per year. If the Company can spread the overhead
costs of operating the facility over a larger base of produced products, the margins would be expected to improve significantly.
We do not currently have plans to reduce excess manufacturing capacity, and we anticipate that the excess capacity will continue
to adversely affect gross margins for at least a portion of 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The cost of the primary raw materials used to manufacture the
Company&rsquo;s products is directly affected by the cost of oil. Accordingly, fluctuations in the price of oil could have a material
impact on the cost of manufacturing Smart Sponge products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Selling, general and administrative expenses increased by $754,363
(32%) in 2011, compared to 2010, due in part to the legal, accounting and other costs associated with the merger of Abtech Holdings
and AbTech Industries which closed in February, 2011. The Company also experienced new costs related to being a public company
including legal fees, auditing fees, and other compliance costs. In 2011, the Company began a significant expansion of its business
development efforts in line with its strategy of developing alliances with companies that have dominant positions in the specific
industry segments targeted by AbTech Industries for distribution of Smart Sponge products. These efforts included increased cost
for personnel, advertising, travel, legal and other promotional costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Research and development efforts in 2010 were focused primarily
on attempts to modify Smart Sponge products for easy and effective deployment in treating the Gulf oil spill. In 2011, the Company
shifted its R&amp;D focus to new products using the Smart Sponge technology in applications for the treatment of produced water,
and other industrial applications. These efforts involved a significant amount of product testing in the lab and in the field with
corresponding increased costs for personnel (employees and consultants), fees for lab analysis, equipment rental and travel costs.
The increased R&amp;D activities in 2011 resulted in R&amp;D costs increasing to $634,109, a 26% increase over R&amp;D costs in
2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest expense increased from $115,568 in 2010 to $2,078,704
in 2011 due largely to a non-monetary, non-recurring charge of $1,620,955 for imputed interest on promissory notes that were converted
to common stock on beneficial conversion terms during 2011. See Note 13 of the Consolidated Financial Statements. In addition,
the Secured Notes have interest rates of twelve percent (12%). See Note 14 of the Consolidated Financial Statements. The interest
expense accrued on these notes in 2011 amounted to approximately $126,000. Interest expense was further impacted by the amortization
of the deferred charges and imputed note discounts for warrants related to these offerings, which were charged to interest expense
in 2011 and amounted to approximately $125,000 and $160,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>Liquidity and Capital Resources</U> </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To date, the Company has not generated sufficient revenue to
cover its operating costs and continues to operate with negative cash flow. At December 31, 2011, our cash balance was $1,386,502,
significantly higher than the $4,123 balance reported at December 31, 2010, but representing only approximately 4 months of historical
negative cash flows from operations. While we expect to achieve significant sales growth over the long-term, continued negative
cash flow from operations is expected in the short term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Operations in 2011 and 2010 were funded primarily by proceeds
from the issuance of AbTech Industries convertible promissory notes (the &ldquo;AbTech Notes&rdquo;), short-term loans, Abtech
Holdings convertible notes and warrants (the &ldquo;ABHD Notes&rdquo;), the Secured Notes and equity investments of $2,320,000
pertaining to the funding requirement of the Merger. These proceeds amounted to $7,322,100 in 2011 and $2,827,865 in 2010. Of the
proceeds received in 2011, $500,000 was received from a director of the Company who also was paid $200,000 for repayment of a non-interest
bearing convertible note issued by AbTech Industries in 2008. The AbTech Notes are convertible into shares of AbTech Industries&rsquo;
Series A preferred stock at a conversion rate of $3.75 per share. The Series A preferred stock is convertible into shares of Abtech
Holdings common stock at a rate of 5.32 shares of Abtech Holdings common stock for each share of AbTech Industries Series A preferred
stock. At December 31, 2011, the principal amount of debt outstanding was $6,946,524, of which $4,700,000 pertains to ABHD Notes
and the Secured Notes with maturity dates in 2012. In the event that the holders of these notes elect to not convert the notes
to ABHD stock at maturity, the Company will be required to raise additional capital in 2012 to repay the notes at maturity or extend
the debt maturity dates and incur higher interest rates on the debt. Under the terms of the ABHD Notes and the Secured Notes, the
Company may extend the maturity dates by an additional ninety (90) day period, during which period the interest rate will increase
from twelve percent (12%) to fifteen percent (15%) per annum on the unpaid principal of the notes. The Company may also extend
the maturity dates by a second additional 90 day period during which period the interest rate will increase to eighteen percent
(18%) per annum on the unpaid principal of the notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In February 2012, the Company completed the final closing of
the private offering of the Secured Notes and received $2.6 million (less closing costs) for the additional Secured Notes sold.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our balance sheet at December 31, 2011 shows approximately $528,000
of inventory, a relatively large amount compared to net revenues for 2011 of $537,152. This supply of inventory on hand will mitigate
some of the working capital requirements AbTech Industries will encounter in the event it successfully increases sales revenue
in 2012. At December 31, 2011, AbTech Industries had customer deposits of $38,505 as prepayments by certain distributors for future
product orders. Future sales to these distributors will not generate positive cash flow until the prepayments are depleted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company had capital expenditures of $11,606 in 2011 and
$15,596 in 2010. As of December 31, 2011, the Company had no commitments for future capital expenditures. However, if the Company
is successful in achieving significant sales growth in 2012, it may need to expand its manufacturing capacity or outsource some
of its manufacturing. The Company is currently considering both options. The Company estimates that it could double its current
manufacturing capacity for approximately $250,000 and accommodate an annual sales rate of over $20 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>Contractual Obligations</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a smaller reporting company, as defined in Rule 12b-2 of
the Exchange Act, Abtech Holdings is not required to provide the information required by this item.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>Off-Balance Sheet Arrangements</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have not entered into any other financial guarantees or other
commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are
indexed to our shares and classified as shareholder&rsquo;s equity or that are not reflected in our consolidated financial statements.
Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as
credit, liquidity, or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that
provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or research and development
services with us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>Critical Accounting Policies </U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our discussion and analysis of our financial condition and results
of operations, including the discussion on liquidity and capital resources, are based upon our financial statements, which have
been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses,
and related disclosure of contingent assets and liabilities. On an ongoing basis, management re-evaluates its estimates and judgments.
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. For any given individual estimate or assumption we make, it is possible that other
people applying reasonable judgment to the same facts and circumstances could develop different estimates. Actual results may materially
differ from these estimates under different assumptions or conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. Certain conditions, discussed above, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 consolidated
financial statements. The SEC considers an entity&rsquo;s most critical accounting policies to be those policies that are both
most important to the portrayal of the entity&rsquo;s financial condition and results of operations and those that require the
entity&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our critical accounting policies include fair values of financial
instruments, inventory valuation, revenue and cost recognition, allowance for doubtful accounts, stock-based compensation, accounting
for conversion options, common stock purchase warrants, imputed interest and business combinations and are discussed in detail
in the financial statements filed herewith, as are recent accounting pronouncements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>OUR BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview and Recent Events</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Abtech Holdings was incorporated in Nevada on February 13, 2007
under the name &ldquo;Laural Resources, Inc.&rdquo; and was initially engaged in the business of acquiring and developing mineral
properties. Subsequent to its fiscal year ended May 31, 2010, Laural Resources, Inc. decided to change its business focus to clean
technology products and services, specifically in the water clean-up sector. In furtherance of its business objectives, effective
June 14, 2010, Laural Resources, Inc. merged with its wholly-owned subsidiary, Abtech Holdings, Inc., for the purpose of effecting
a name change to &ldquo;Abtech Holdings, Inc.&rdquo; On October 21, 2010, the Company&rsquo;s Board of Directors changed the Company&rsquo;s
fiscal year end from May 31 to December 31.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 10, 2011, the Company closed a merger transaction
with AbTech Industries, Inc., a Delaware corporation, pursuant to an Agreement and Plan of Merger by and among Abtech Holdings,
Abtech Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of Abtech Holdings and AbTech Industries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of the Merger, Abtech Holdings acquired all of the
issued and outstanding common stock of AbTech Industries (through a reverse acquisition transaction) in exchange for the common
stockholders of AbTech Industries acquiring an approximate 78% ownership interest in Abtech Holdings, AbTech Industries became
a majority-owned subsidiary of Abtech Holdings, and Abtech Holdings acquired the business and operations of AbTech Industries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Abtech Holdings was a &ldquo;shell company&rdquo; prior to the
Merger and did not conduct an active trade or business. From and after the consummation of the Merger on February 10, 2011, Abtech
Holdings&rsquo; primary operations consisted of the business and operations of AbTech Industries. Because Abtech Holdings was a
shell company at the time of the Merger, we filed with the SEC on February 14, 2011, a &ldquo;super&rdquo; Form 8-K that disclosed
information required by Item 2.01(f) of Form 8-K (being information that would be required if we had filed a general form for registration
under Form 10 under the Exchange Act).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For accounting purposes, the Merger transaction has been accounted
for as a reverse acquisition, with AbTech Industries as the acquirer. The consolidated financial statements of Abtech Holdings
for the year ended December 31, 2011 represent a continuation of the financial statements of AbTech Industries, with one adjustment,
which is to retroactively adjust the legal capital of AbTech Industries to reflect the legal capital of Abtech Holdings. See Note
1 of Consolidated Financial Statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries has developed a variety of products that leverage
its cornerstone filtration media technology called Smart Sponge&reg;. This patented technology&rsquo;s oil absorbing capabilities
make it highly effective as a filtration media to remove hydrocarbons and other pollutants from water. AbTech Industries has introduced
its products into a variety of markets resulting in over 15,000 products installed in 36 states and 8 countries to date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries developed the Smart Sponge media, a patented
polymer technology that effectively removes pollutants from water and encapsulates them so that they cannot be released back into
the water, even under high pressure. AbTech Industries recently expanded the capability of the Smart Sponge technology by adding
an antimicrobial agent that has proven to be effective in reducing coliform bacteria found in stormwater, industrial wastewater
and municipal wastewater while maintaining its oil-absorbing capability. This expanded technology, known as Smart Sponge Plus,
provides an effective solution to municipalities and other entities faced with beach closures and other hazards of bacteria-laden
stormwater. This antimicrobial capability differentiates Smart Sponge Plus products from competitive stormwater treatment devices.
It can be engineered to treat massive amounts of water runoff in end-of-pipe applications, such as drainage vaults or other configurations.
In July 2010, AbTech Industries received notification from the EPA that AbTech Industries&rsquo; application to register Smart
Sponge Plus as a pesticide under the Federal Insecticide, Fungicide and Rodenticide Act had been conditionally approved.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries&rsquo; business is subject to several significant
risks, any of which could materially adversely affect its business, operating results, financial condition, and the actual outcome
of matters as to which it makes forward-looking statements. See &ldquo;Risk Factors&rdquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Technologies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Smart Sponge</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Over the past nine years, AbTech Industries has developed and
patented its core Smart Sponge technologies based on a proprietary blend of synthetic polymers aimed at the removal of hydrocarbons
and oil derivatives from surface water. The removal process starts with the physical contact between polymer and contaminant and
the consequent adsorption (physical interaction, contaminant distributed on surface of adsorbing material) or absorption (contaminant
distributed throughout the absorbing material). The absorption/adsorption process is determined by several polymer parameters (e.g.,
composition and structure, flexibility of the chain and molecular weight), as well as physical parameters (e.g., polymer physical
form, contaminant molecule size and temperature). While polymer composition is the critical factor in defining the solubility,
the polymer structure (amorphous or crystalline) is probably the most important factor in determining the process of absorption
or adsorption.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries&rsquo; polymers are composed of amorphous
products that are able to selectively absorb various hydrocarbons (contaminants) present in water, then stabilize and retain them
in a gelified structure. Other traditional sorbent products, with more crystalline structures, can only adsorb the contaminants
and don&rsquo;t have the capability to totally retain them when the sorbent is removed from the water. AbTech Industries&rsquo;
polymers, in order to selectively remove oil derivatives from water, are oleophilic (strong affinity for oils) and hydrophobic
(repels water).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The adsorption/absorption process is also controlled by the
physical size of the sorbent as diffusion is fairly proportional to the contact surface between fluid and sorbent. Finely powderized
materials show the best absorption but, because of swelling, tend to gel quickly and block the contact of additional fluid with
the remaining active sorbent, and are very difficult to handle. In order to overcome this problem and use the sorbent to the maximum
capacity, AbTech Industries has developed a patented extrusion process that takes advantage of the different thermal behavior of
the polymers used to create entanglements with the amorphous part of the other polymer, bonding the chains of the polymers in a
flexible porous structure called Smart Sponge.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The porosity of the Smart Sponge allows the fluid containing
the contaminant to penetrate into its structure, then the polymer chains selectively absorb the hydrocarbon contaminants and stably
encapsulate them. Based on the level of contaminant, the entire structure begins to swell (but not collapse into a total gel) while
maintaining absorption capabilities well beyond usual levels. Once reaching saturation, the Smart Sponge is easily recoverable
and does not leach any of the absorbed contaminant, even in rough water or under pressure, giving it less expensive disposal options
such as recycling through a waste-to-energy facility. The Smart Sponge can absorb, on average, 3.5 times its weight, depending
on the contaminant absorbed and remains buoyant permitting it to remain in place until fully saturated. The malleable nature of
the Smart Sponge material allows it to be formed into a variety of shapes for optimum effectiveness in a wide variety of contaminated
water filtration applications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The advantages of Smart Sponge based products over competing
products include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">absorbing rather than adsorbing water-borne hydrocarbons;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">reducing coliform bacteria found in stormwater, industrial
wastewater and municipal wastewater;</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">locking-up or encapsulating the hydrocarbons;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">transforming the encapsulated pollutant into a solid
to prevent leaching;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">remaining buoyant after the encapsulation in order
to permit recovery;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">oil-soaked product may be recycled as a waste-to-energy
fuel source;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">simpler and less expensive disposal due to classification
as a solid &ldquo;non-hazardous waste&rdquo;;</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">easy deployment and retrieval; and</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">possesses the ability to harvest energy from contaminated
water thereby creating a sustainable media solution.</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Due to the ability of Smart Sponge to capture and retain hydrocarbons
and other contaminants within its highly porous structure, its performance can best be measured by an in-depth look at the spent
material to analyze its composition and the quantity of the various contaminants retained. This type of data cannot be gleaned
from the customary random sampling events typically used to test filters. Such tests are often misleading or erroneous due to the
non-homogenous concentrations of pollutants in stormwater. Analyzing all contaminants entrapped in the filter over a period of
time provides a better indicator of the filter&rsquo;s true performance. Consequently, AbTech Industries took a more advanced approach
and engaged a highly qualified, analytical laboratory to use complex analytical techniques to deconstruct used Smart Sponge polymer
and selectively extract all the entrapped contaminants. This in-depth mapping and finger printing of contaminants (a first of its
kind in stormwater treatment) is analogous to having a &ldquo;Black Box&rdquo; recording of the UUF&rsquo;s filtration mechanisms
and all the contaminants collected in the Smart Sponge material during the time that it is deployed. The results of this analysis
were then compared to base tests performed on virgin Smart Sponge material. The difference between the two samples constitutes
the contaminants collected by the field deployed Smart Sponge. By extrapolating these results, estimations were made of the total
contaminants AbTech Industries&rsquo; products prevented from being discharged into open waters for entire installation projects
such as at Norwalk. In Norwalk, Connecticut, 275 Ultra-Urban Filters were installed in storm drains to protect residential, commercial,
waterside, and industrial manufacturing settings which flow into Norwalk Harbor. The deconstruction or meltdown of Smart Sponge
media samples documented approximately 50 pounds per filter of total contaminants with the presence of several heavy metals (e.g.,
copper, titanium, and zinc) and a variety of hydrocarbons, (about 32 pounds per filter), including solvents, oils and cosmetic
product components as well as chemical plasticizers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The grand total of contaminants including hydrocarbons and heavy
metals removed, extrapolated for the 275 filters, is an estimated 13,530 pounds. Essentially, the installation of the filters prevented
the equivalent of an oil spill of 1,200 gallons from entering the Long Island Sound. This analysis demonstrated the effectiveness
of AbTech Industries&rsquo; products with quantifiable data and added substantially to data provided by other tests that merely
tested the difference between influents and effluents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Smart Sponge Plus</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The presence of bacteria in stormwater is a serious problem
and poses significant health risks that increasingly result in the contamination of water bodies. Water quality standards for bacteria
counts are very strictly monitored in most coastal areas and small increases in bacteria counts can trigger beach closures. The
best potential to reduce this bacteria count during rain events is the control and treatment of the stormwater runoff. This control
can be achieved by expensive, heavy equipment, such as ultraviolet light or chlorine treatment systems that become cost prohibitive
for most municipalities. AbTech Industries has developed a set of cost-effective systems for retrofit into existing stormwater
infrastructure, leveraging the antimicrobial capabilities of Smart Sponge Plus. These systems require no electricity or moving
parts and create no downstream toxicity effect (a problem that must be mitigated in alternative chemical treatment approaches).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The technological breakthrough in creating Smart Sponge Plus
occurred when AbTech Industries developed the capability to bind an antimicrobial agent to its proprietary polymers thereby modifying
their surface and adding micro biostatic features while maintaining their oil absorbing capabilities. This enhanced filtration
material provides a significant reduction in coliform bacteria and other pathogens frequently found in stormwater and other water
streams. AbTech Industries believes that this breakthrough, coupled with additional advancements that have dramatically increased
the antimicrobial strength of Smart Sponge Plus, will be key factors in penetrating the stormwater market. Accordingly, AbTech
Industries has been issued three U.S. patents that protect the use of Smart Sponge Plus in stormwater filtration applications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The anti-microbial agent used for this innovative technology
is an organosilane derivative that is widely used in a variety of fields including medical, consumables, pool equipment and consumer
goods. This anti-microbial agent is registered with the EPA for various applications and has been proven successful in those applications
against a wide variety of microorganisms. As further discussed under &ldquo;Regulatory,&rdquo; AbTech Industries&rsquo; Smart Sponge
Plus has received a time-limited registration from the EPA under the Federal Insecticide, Fungicide, and Rodenticide Act as an
antimicrobial pesticide. Smart Sponge Plus will also act as a fungistatic to control fungus and mildew odor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The anti-microbial mechanism of Smart Sponge Plus is based on
the agent&rsquo;s electromagnetic interaction with the microorganism cell membrane, causing the disruption of the cell wall of
the microorganism, but no chemical or physical change in the agent. Consequently, the anti-microbial agent is not depleted over
time, maintains its long-term effectiveness and unlike any other technology (with the exception of ultra-violet light), doesn&rsquo;t
release any chemical or by-product into the treated water.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In manufacturing the Smart Sponge Plus material, the anti-microbial
agent is chemically and permanently bound to the polymer surface. In the development process, AbTech Industries has been successful
in increasing the amount of anti-microbial agent bound to the polymer thus increasing its antimicrobial potency 2,000% over its
first generation strength. In laboratory testing, the current generation of Smart Sponge Plus material, has proven to be not only
much more effective in destroying bacteria than the original generation of Smart Sponge Plus material, but also capable of reducing
bacteria to meet EPA criteria for bathing and recreational waters in a much shorter period of time (residence time), a very important
factor in filtration applications where the contaminated water is in contact with the Smart Sponge material for just a few minutes
versus the hours required in a sanitary sewer system.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Engineered Deployment Systems &ndash; Stormwater/Wastewater</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In conjunction with developing advanced filtration media, AbTech
Industries engineers have also developed a variety of deployment systems that can be retrofitted into existing stormwater and wastewater
infrastructure. This solves a major problem for municipalities where aging water infrastructure and increasing enforcement of water
quality standards (a result of increased awareness of the detrimental environmental and public health effects) pose one of the
largest infrastructure headaches in the coming decades. Cities have already determined in the vast majority of cases that so-called
centralized solutions are cost-prohibitive or infeasible. These solutions include rerouting combined sewer overflow water and/or
even stormwater to sanitation treatment plants for purification (which would also require the construction of additional sanitation
treatment plants) or building large central stormwater/wastewater treatment &ldquo;tunnels&rdquo; underneath cities. AbTech Industries&rsquo;
products enable decentralized solutions at the point-of-entry (e.g. stormdrains, etc.) or at the end of stormwater/combined sewer
overflow outfall pipes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries has engineered a variety of point-of-entry
systems that can be dropped into storm drains with little or zero infrastructure disruption and end-of-pipe treatment &ldquo;vaults&rdquo;
that can be built into the existing water lines and treat the flowing water as it passes through.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Smart Sponge versus Commonly Used Non-Advanced Media Filtration</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries&rsquo; core technologies are highly-engineered
advanced material that are chemically selective towards contaminants and, in the case of the antimicrobial material, create biostatic
fields to disrupt the cellular membranes of pathogens. These advanced materials enable an entire set of engineered deployment systems
that otherwise would be less effective or entirely ineffective using non-advanced materials.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Smart Sponge material has a distinct advantage over traditional
polypropylene material for example. In the case of oils and hydrocarbons, once oil comes in contact with the Smart Sponge material
it is permanently encapsulated in the structure of the polymer and cannot be released under any amount of pressure. In comparison,
polypropylene materials adsorb or form a temporary attachment to water as well as oil, thus making them much heavier and messier
to remove releasing both water and oil back into the environment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Disposal Options</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As local conditions, product use and exposure can vary widely,
the end user must determine the most appropriate disposal method for a spent Smart Sponge or Smart Sponge Plus&rsquo; material.
Smart Sponge samples saturated with hydrocarbons both in the lab and in the field have been tested according to the EPA&rsquo;s
Toxicity Characteristic Leaching Procedure (&ldquo;TCLP&rdquo;). These tests show that Smart Sponge is a &ldquo;non-leaching&rdquo;
product. In addition, used Smart Sponge material can be recycled as an energy source with a British thermal unit, or BTU, value
ranging from 10,000 to 18,000 based on the type of contaminant absorbed. As a result, Smart Sponge technology affords many cost
effective and environmentally friendly disposal options. The following waste disposal and resource recovery industries have accepted
spent Smart Sponge materials for disposal and/or recycling:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Waste-to-Energy Facilities (&ldquo;WTE&rdquo;).</I> A specialized
segment of the solid waste industry has used spent Smart Sponge material as an alternative fuel in the production of electricity.
WTE is acknowledged at the federal level as a renewable energy source under the Federal Power Act, Title IV of the Clean Air Act
and is a participant in the Department of Energy&rsquo;s National Renewable Energy Program.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Cement Kilns.</I> This industry has used the spent Smart
Sponge material as an alternative fuel in the production process of Portland Cement. This process is considered a beneficial reuse
of waste products. The British thermal unit value of spent Smart Sponge material is consistently above the average acceptable levels
set for this high temperature process.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Landfills.</I> Used Smart Sponge products have been classified
as a solid waste and are commonly accepted at Subtitle D Landfills.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Engineered Systems and Smart Sponge-based Products</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries&rsquo; product lines are marketed under the
trade name &ldquo;Smart Sponge&reg;&rdquo; and &ldquo;Smart Sponge Plus.&rdquo; Smart Sponge Plus includes antimicrobial capability.
AbTech Industries' Smart Sponge contains a unique molecular structure which is chemically selective to hydrocarbons, removing approximately
three times its own weight. Smart Sponge remains buoyant when saturated and encapsulates hydrocarbons and oils, without leaching.
AbTech Industries' Smart Sponge Plus is EPA approved to reduce coliform bacteria found in stormwater, industrial wastewater, and
municipal wastewater, and can be engineered to meet specific performance requirements. The following products incorporate the Smart
Sponge or Smart Sponge Plus material in one or more of its various forms and are designed to meet specific market needs:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Smart Sponge Popcorn</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Smart Sponge material can be formed into a variety of physical
shapes to optimize its performance in a wide range of filtration applications. The Smart Sponge material is the cornerstone of
AbTech Industries&rsquo; current products, and AbTech Industries continues to find new applications for its use. When produced
in its &ldquo;popcorn&rdquo; form (clumps of polymer similar in shape to popcorn), Smart Sponge is an effective filtration media
due to its high porosity and favorable hydraulic characteristics. AbTech Industries is currently pursuing the use of Smart Sponge
popcorn in end-of-pipe applications such as vaults and other configurations. The Smart Sponge material can also be sold to OEMs
and other users to be integrated into many different filtration pressure vessels or gravity flow structures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Ultra-Urban&reg; Filter</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Ultra-Urban&reg; Filter (&ldquo;UUF&rdquo;) with Smart Sponge
is an innovative low-cost Best Management Practice (&ldquo;BMP&rdquo;) that helps meet National Pollution Discharge Elimination
System (&ldquo;NPDES&rdquo;) requirements with effective filtration, efficient application, and low maintenance. The UUF is a modular
filtration unit (or Catch Basin Insert) designed in a variety of shapes and sizes for use in &ldquo;curb opening&rdquo; and &ldquo;top
down&rdquo; storm drains and is used to treat stormwater runoff for new or retrofitted sites by absorbing oil and grease and capturing
trash and sediment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The UUF is ideal for municipal, industrial and construction
applications ensuring compliance with stormwater regulations. The filter comes in three designs: the Curb Opening, Drain Insert,
and Customized Drain Insert. The unique micro porosity of Smart Sponge allows the standard sized CO1414 UUF filter a hydraulic
flow rate of more than 250 gallons per minute and has proven effective in removing more than 80% of hydrocarbons and total suspended
solids (&ldquo;TSS&rdquo;) (300 microns or greater).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The unique design of the Curb Opening Series allows crews to
easily hang the appropriate number of filters in each drain on a simple mounting bracket. The product is designed with a lateral
bypass to utilize each box as well as an overflow capability to eliminate the potential for street flooding in the event of a plugged
filter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The UUF Drain Insert Series offers the same filtration characteristics
of the Curb Opening series for stormwater filtration of hydrocarbons, trash and sediment. The unique micro porosity of Smart Sponge
allows the DI2020 UUF a hydraulic flow rate of more than 500 gallons per minute, and has proven effective in removing more than
80% of hydrocarbons and TSS (300 microns or greater). These units are designed to be suspended beneath a collar installed under
the stormwater grates. This simple design allows easy access for maintenance while eliminating the potential for street flooding
in the event of a plugged filter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Customized drain inserts are available for those customers with
shallow drains or requiring deeper bed depths. AbTech Industries&rsquo; team of engineers will work with customers to understand
the site characteristics, including hydraulics and contamination levels and will confirm the appropriate Smart Sponge bed depth
to achieve the project&rsquo;s filtration goals.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Water Treatment Vaults (using advanced filtration media like
Smart Sponge)</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries&rsquo; water treatment vaults with advanced
filtration media such as Smart Paks are an effective alternative to treating individual catch basins. These easily installed, typically
pre-cast vaults are retrofitted into existing stormwater systems and are ideal for stormwater treatment at or near the end of pipe.
Vault sizes can be adapted for various flow rates and contamination levels to solve a wide range of stormwater treatment issues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries can engineer its water treatment vaults for
large projects either as stand-alone applications or as part of a treatment train to polish water working with retention ponds
or hydrodynamic separators. These engineered solutions can be direct or radial flow, and can easily be adapted to treat first flush
while allowing the later flow of a major storm event to pass around the systems to achieve the hydraulic requirements of the watershed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>SMART PAK&reg;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries' Smart Pak is designed for use in new or existing
vaults that experience oil and grease pollution accompanied by sediment, trash/debris, hydrocarbons, and coliform bacteria (when
specified with Smart Sponge Plus). Smart Pak helps users meet and/or exceed stormwater NPDES permit requirements with effective
filtration, absorption, life expectancy and maintenance costs. Smart Pak products are constructed out of AbTech Industries' patented
Smart Sponge media which is a nonhazardous material, and can be specified for a variety of applications. AbTech Industries' Smart
Pak allows Smart Sponge technology to be scaled to virtually any size required in an easy-to-maintain form.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Absorbent Boom and Line Skimmer</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries' Tubular Absorbent Booms and Line Skimmers
employ the Smart Sponge absorptive technology which rejects water while absorbing even sheen levels of hydrocarbons in low energy
flow environments. Tubular Absorbent Booms and Line Skimmers are designed to absorb and permanently encapsulate hydrocarbons resulting
in no dewatering of oily water during removal. These products remain completely buoyant, even after being saturated allowing long
term deployment and conveniently scheduled removal.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Passive Skimmer</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Passive Skimmer is designed to absorb and encapsulate hydrocarbons
by floating directly on the water in catch basins, sumps, oil/water separators, and marine fueling stations. Passive Skimmers are
made with Smart Sponge, are packaged in flexible mesh containers, and are available in a variety of sizes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Bilge Skimmer</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Smart Sponge Non-Leaching Bilge Skimmer is engineered and
designed for permanently encapsulating the petroleum hydrocarbons that appear as oily sheen in the engine compartment during normal
boat operation. The Bilge Skimmer will absorb the contaminant and allow the boater to discharge clean water from the bilge pump.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Industrial Process Water </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries has a variety of solutions for treating industrial
process water including gravity filters and pressure vessel filters.&nbsp; Gravity filters are generally designed using Smart Paks
which can be easily replaced once consumed.&nbsp; All solutions and media bed depths are determined based on flow rate and the
level of contaminant in the water.&nbsp; AbTech Industries also uses a variety of third-party pressure vessels filled with Smart
Sponge material as effective filtration devices. Depending on the design and size of the vessel, the Smart Sponge material may
be deployed in convenient bag filters for ease of media change out, or it may be installed in loose form requiring change-out with
the use of a vacuum truck.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Produced Water Products</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries has developed two de-oiling solutions for
the produced water market.&nbsp; The first solution for the removal of free oil is AbTech Industries&rsquo; contactor(s) in a
pretreatment position.&nbsp; These consist of contactor tanks that are sized based on flow rate, influent concentration of contaminant,
the desired change out schedule, and space or size constraints.&nbsp; The contactors used are widely available ASME certified
pressure vessels that are filled with loose Smart Sponge popcorn media. AbTech Industries has developed a second solution for
removal of free oil and dissolved phase gasoline range organics including benzene, toluene, ethylbenzene and xylene, generally
referred to as volatile organic compounds (&ldquo;VOCs&rdquo;).&nbsp; In collaboration with QED Environmental Systems (&ldquo;QED&rdquo;),
AbTech Industries has paired its oil removal contactors with QED air strippers and a thermal oxidizer system.&nbsp; The air strippers
will remove the VOCs from the water stream and the thermal oxidizer will oxidize them prior to release to the environment.&nbsp;
These systems can be implemented ranging from 300 to 3,000 gallons per minute.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Markets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries targets four major markets: stormwater/wastewater,
industrial wastewater/process water, produced water applications for the oil &amp; gas industry, and spill prevention and control
markets (including marine environments).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stormwater Market/Wastewater</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This market consists of municipalities and private sector entities
that for regulatory or other reasons are seeking to control the quality of water and other fluids that run off roads and other
paved surfaces during wet weather, cleaning or oil spill events. Current customers include municipalities, state agencies, federal
agencies, private developers, industrial facilities and businesses. Stormwater discharges are generated during a rainfall event
by runoff from land and impervious areas such as paved streets, parking lots and building rooftops. The runoff water picks up a
variety of pollutants, in particular bacteria and hydrocarbons, in quantities that can adversely affect water quality, and carries
those pollutants into nearby rivers, lakes and oceans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Regulatory Drivers to the Stormwater Market</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Stormwater discharges are subject to regulation by the U.S.
Environmental Protection Agency, state and local regulatory bodies. Authorized by the Clean Water Act, the National Pollutant Discharge
Elimination System (NPDES) program requires permits for sources that discharge pollutants into waters. Obtaining and complying
with NPDES permits requires implementation of stormwater control measures, such as AbTech Industries&rsquo; engineered solutions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Regulation of stormwater is a relatively new occurrence. The
first phase of the NPDES program was promulgated in 1990 but the permit requirement was limited to only select regulated entities.
The second phase of the NPDES program expanded the permit requirement significantly but did not start until 2003. The next expansion
of stormwater regulations is planned for 2012 and is contemplated, amongst other things, to require retrofitting of stormwater
control measures into existing development, to develop specific requirements for transportation infrastructure, and otherwise expand
the scope and regulatory reach of the NPDES program.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Combined Sewer Overflows also must comply with the Clean Water
Act and present an opportunity for AbTech Industries&rsquo; engineered treatment solutions. Combined sewer systems serve roughly
772 communities serving 40 million people. In periods of rainfall or snowmelt, the combined stormwater and wastewater volume in
a combined sewer system can exceed the capacity of the sewer system or treatment plant. This leads to the direct discharge of untreated
sewage, etc. to the environment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Enforcement of stormwater/CSO standards have increased, with
EPA compelling installation of stormwater control measures and water quality treatment systems through consent decrees. In recent
years, billions of dollars of mandated spending on stormwater/CSO systems has been created through consent decrees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Health and Tourism Concerns Driving the Stormwater Market</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">One area of the stormwater market that is receiving increased
publicity and attention is the water pollution caused by microorganisms (bacteria). Polluted stormwater runoff can expose boaters
and swimmers to bacteria, viruses and protozoans. A recent Southern California epidemiological study revealed that individuals
who swim in areas adjacent to flowing storm drain outfalls were 50 percent more likely to develop a variety of symptoms than those
who swim further away from the same drains. These situations are the cause for thousands of beach closings every year affecting
public health and local economies dependent upon tourism and recreation. According to a report of the Natural Resources Defense
Council (&ldquo;NRDC&rdquo;), in 2010 there were 24,091 days of closings and advisories across the country at ocean, bay and Great
Lakes beaches. NRDC reported that nearly three-quarters of the 2010 beach closings and advisories were issued because water quality
monitoring revealed bacteria levels exceeding health and safety standards. Given mandates for increased monitoring under the Beach
Act, NRDC predicts that these numbers will continue to grow in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Going Green Initiatives</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Knowing that polluted stormwater runoff is one of the leading
causes of water pollution in the country, many companies are including on-site stormwater treatment in their environmental sustainability
goals. AbTech Industries&rsquo; systems can help companies meet these goals. AbTech Industries&rsquo; Smart Sponge technology not
only treats polluted water, it is also recyclable, requires no electricity or other power source and can provide users with quantifiable
results of its efficacy, thus helping companies demonstrate their &ldquo;going green&rdquo; stewardship.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Industrial Wastewater Market</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The industrial market serves manufacturers seeking to control
and clean wastewater generated in various processes. The market is comprised of both heavy industry such as oil refineries, steel
mills, chemical plants, pulp and paper plants and more localized concerns such as mid-size manufacturers, refuse sites and shipping/receiving
areas. This market also includes private developers, gas stations and owners of developed sites (i.e., parking lots) of over one
acre.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Industry is placing increased emphasis on water recovery and
reuse in order to conserve and protect scarce water resources and the environment. These efforts create the need for effective
products and services to treat the water to reduce bacteria and remove unwanted contaminants such as oil derivatives and hydrocarbons.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Industrial customers are also required to comply with increasingly
stringent discharge regulations creating the need for products to treat runoff water or discharge water before it leaves an industrial
facility. The EPA has classified over 3,000 industrial and electric utility facilities as water pollution dischargers. Each of
these facilities provides its own wastewater treatment prior to discharge into an open body of water. The size of many of these
plants is equal to or greater than those of many municipalities, and in many instances their processes are more complex than provided
by a municipality because of the nature of the chemical pollutants being treated. The largest industrial spender on wastewater
treatment processes is the chemical and petrochemical sector. There are more than 12,000 chemical/petrochemical plants in the United
States and approximately 90% treat wastewater on-site. In addition, there are approximately 30 to 40 independent industrial off-site
plants, most of which handle chemical and petrochemical effluent, principally from medium-sized and small companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the industrial market, AbTech Industries&rsquo; intent is
to market its products through qualified and specialized national distributors, preferably operating in the water treatment business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Produced Water and Frack Water Applications</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Oil and gas exploration and production activities result in
the production of significant volumes of contaminated water. On average there is five times as much contaminated water generated
as oil or gas. Approximately 75% of this water is re-injected into the formation to maintain pressure or deep well re-injected
at another site. In a traditional oil production field this water is called &ldquo;produced water.&rdquo; In fracking operations
this can include &ldquo;frac flowback water&rdquo; and in gas fields this could include &ldquo;gas condensate water.&rdquo; Approximately
25% of all water generated from the exploration and production activities must be treated for either reuse in operations or for
discharge to the environment under an NPDES permit. According to the EPA, the Clean Water Act prohibits the discharge of oil or
oily waste into or upon the navigable waters of the United States or the waters of the contiguous zone if such discharge causes
a film or sheen upon the surface of the water. Violators are subject to a monetary penalty. The attributes of AbTech Industries&rsquo;
Smart Sponge technology and its ability to remove &ldquo;oily sheen&rdquo; make it especially suited to service this market. Smart
Sponge can be used as a pretreatment system to remove diesel range organics and free oils prior to additional treatment by downstream
technologies to remove contaminants such as volatile organic compounds, dissolved solids, and bacteria.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Marine Market - Spill Prevention and Control</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There are a number of applications related to rivers, lakes,
and oceans that call for the use of floating or in-line filtration products to control and reduce the presence of hydrocarbons
in the water or on board transiting vessels. Customers include the cruise ship industry, recreational boaters, marina owners, port
authorities, spill response organizations and commercial shippers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This market also comprises airports, airport fueling facilities,
U.S. Department of Defense (&ldquo;DOD&rdquo;) bases, transfer stations, and others concerned about oil spills. Under the Federal
Clean Water Act, the EPA has issued the Spill Prevention, Control and Countermeasure (&ldquo;SPCC&rdquo;) rule, which requires
owners or operators of facilities that store, use, process, transfer, distribute or consume oil and oil products, including airports
and military bases, to have at a minimum one of the following preventative systems or its equivalent:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">dikes, berms, or retaining walls sufficiently impervious
to contain spilled product;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">curbing;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">culverting, gutters, or other drainage systems;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">weirs, booms, or other barriers;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">spill diversion ponds;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">retention ponds; or</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">sorbent materials.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The risks of not adequately implementing such countermeasures
are regulatory violations, fines and potential releases that result in contamination, clean-up and additional fines. The impact
of these issues can result in significant costs to a facility owner/operator. There are more than 250 medium and large sized airports
in the United States and more than 322 U.S. military facilities</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries&rsquo; systems can be deployed for the oil
and fuel contamination problems facing airports and military facilities. These systems can not only be used to address such problems
as stormwater runoff, but also provide effective SPCC solutions to limit potential liabilities to customers by providing a last
line of defense or perimeter protection for fuel spills.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Sales, Distribution, and Marketing Support</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stormwater/Wastewater</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries historically focused on the public sector
market, primarily cities and municipalities, and sought to sell to and service those entities through a series of local geographically
defined exclusive distributorships. For small companies and distributors, sales to the public sector have inherent challenges including
long sales cycles and erratic budget allocations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A reassessment of strategy resulted in a decision to unwind
many of the geography specific distributors and focus on establishing a strategic partnership with an industry segment specific
dominant market leader. In order to effectively go-to-market, AbTech Industries established the following criteria for a strategic
partner: (1) market leadership or dominance, (2) a concomitant large customer base, (3) operational competence in selling and servicing
public sector customers, (4) active local advocacy resources, (5) sufficient capital to dedicate to and exploit the opportunity,
and (6) experience in dealing with the environmental challenges faced by the public sector.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries has now successfully unwound most of its distributorship
arrangements. In January, 2011, AbTech Industries entered into a strategic relationship by executing a marketing and distribution
agreement with Waste Management, Inc. to pursue the distribution of its relevant technologies and systems in the municipal stormwater
market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The federal sector represents a significant opportunity for
AbTech Industries. AbTech Industries believes that its best approach to the sector is to identify a strong strategic partner. It
established the following criteria for identifying candidates: (1) market leadership or dominance, (2) demonstrated ability to
secure and service federal and military contracts, (3) appropriate engineering capabilities and support, (4) strong federal advocacy,
and (5) experience and organizational emphasis on supporting &ldquo;green&rdquo; initiatives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries has identified strategic partner candidates,
is currently in advanced discussions, and has several proposed projects in their preliminary stages.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Industrial Wastewater Market</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The industrial wastewater market is focused on the treatment
of oily wastewater from industrial processes for either reuse or discharge. This market is serviced by many regional chemical and
equipment supply companies that offer a catalog of solutions. Solutions may require little to no individual engineering, up to
custom engineered solutions to address a customer need. AbTech Industries services this market by providing manufacturer&rsquo;s
representatives and engineering support services to industrial chemical suppliers, equipment suppliers and consulting engineers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Oil &amp; Gas Market</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Treatment of contaminated produced water for the oil &amp; gas
industry focuses on the water produced during oil and gas exploration and production. Oil services companies, oil and gas producers,
and engineering firms are the main customers. Applications for this market are generally engineered solutions. AbTech Industries
services this market with direct AbTech Industries&rsquo; sales representatives and engineering resources, including external engineering
design resources when necessary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Collaboration With Consulting Firms, Academic Institutions
and Public Advocacy Groups</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries, both on its own, and with its distributors,
has been active in seeking out and cooperating with a number of academic institutions and private groups that have interests that
may advance the use of AbTech Industries&rsquo; products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries has had an opportunity to have its products
assessed by several consultants and institutions. These include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Alden Labs.</I> Alden, a recognized leader in the field of
research and development, is the oldest continuously operating hydraulic laboratory in the United States and one of the oldest
in the world. Alden has completed a variety of tests on AbTech Industries&rsquo; SMART PAK for hydraulic conductivity and sediment
removal in vault configurations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>North America Science Associates (&ldquo;NAMSA&rdquo;).</I>
For over 40 years, NAMSA has been supporting the medical device and pharmaceutical industries through a wide variety of testing
services, all designed to ensure safety, efficacy and regulatory compliance. NAMSA has completed extensive lab efficiency tests
for Smart Sponge Plus materials using varied concentrations of bacteria and exposure times.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Millsaps College.</I> Millsaps is a private liberal arts
college located in Jackson, Mississippi. Through the Department of Geology, Millsaps has cooperated with AbTech Industries to test
the Smart Sponge&rsquo;s absorption capability with different hydrocarbons, Smart Sponge porosity and performance claims for the
Ultra-Urban filter and other new products designed for the aviation industry. Millsaps has completed testing for many other large
corporations including 3M, Dow, Clorox and Ergon, a local supplier of polypropylene fibers and sorbents for oil spills.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>HydroQual Inc.</I> HydroQual is an environmental engineering
and science firm. With a staff of over 100 employees, HydroQual addresses issues dealing with water quality, TMDL analyses, floatables
pollution, water and wastewater treatment. HydroQual has performed a variety of tests to validate AbTech Industries&rsquo; claims
regarding the performance of the Smart Sponge.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>University of California, Los Angeles (&ldquo;UCLA&rdquo;)</I>.
The UCLA Department of Engineering and Environmental Sciences provided independent validation of early versions of AbTech Industries&rsquo;
Ultra-Urban Filter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Competition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stormwater Products</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Four key factors differentiate AbTech Industries&rsquo; Ultra-Urban
Filter from other filters in the stormwater market:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Anti-microbial capability.</I> AbTech Industries&rsquo; Smart
Sponge filtration media, when treated with an anti-microbial agent, can reduce bacteria and other microbes flowing through the
filter. AbTech Industries believes that its Ultra-Urban Filter with Smart Sponge Plus is the only product available and approved
by the EPA that can reduce bacteria at street level without the installation of additional infrastructure and retention areas.
Smart Sponge products are available with or without the added anti-microbial agent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Structural Filter.</I> AbTech Industries believes that the
Ultra-Urban Filter is the only product designed so that the entire structure is involved in the filtration process. Other products
have inserted pads or pillows that allow some hydrocarbon removal, but the Ultra-Urban Filter directs the entire water flow through
the filtration media thus enhancing the effectiveness of the filter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Superior Filtration Media.</I> An essential and superior
feature of the Ultra-Urban Filter is the ability of its Smart Sponge filtration medium to absorb hydrocarbons and prohibit them
from being released back into the water flow when there are subsequent rain events. The reason for this is that AbTech Industries&rsquo;
proprietary blend of polymers is oleophilic - an absorbent - which means that hydrocarbons are bonded within its chemical matrix
and cannot be washed off, squeezed out or leached out of the material during subsequent wetting or rain events. There are various
materials used by competitors for stormwater filtration that do not have this absorbent characteristic, instead they feature an
adsorbent capability that merely attracts hydrocarbons to their surface area, but cannot prevent them from leaching back into the
environment during subsequent rain events. The most commonly used adsorbent in the market is polypropylene, which is currently
used in many sorbent products used for the 2010 BP oil spill clean-up. Although it is generally accepted that adsorbents are clearly
inferior to absorbents regarding their ability to capture and remove hydrocarbons from stormwater flows, they are widely used because
of the low comparative cost. Over the last ten years, AbTech Industries has performed numerous laboratory and field tests that
verify its products&rsquo; absorption capabilities and other performance features dealing with the removal of trash, sediment,
debris, and other contaminants. Central to these test data is the incontrovertible conclusion that AbTech Industries&rsquo; Smart
Sponge filtration medium is an absorbent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Porous Structure.</I> AbTech Industries&rsquo; Smart Sponge
technology maximizes the effectiveness of the oil-absorbing polymers by forming them into an extremely porous structure that allows
effective, long-lasting absorption without clogging or channeling which is common among filter media in a powder or particulate
form.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There are three general categories of products that deal with
the treatment of stormwater: hydrodynamic separators (&ldquo;HDS&rdquo;), catch basin inserts and ultra-violet light systems. To
give a complete competitor profile, a brief explanation of HDS systems is given below since HDS systems are more often considered
an alternative to catch basin inserts in new construction projects.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Hydrodynamic Separators.</I> HDS products use gravitational
flow to spin the water in such a way that density differences cause sediment and other pollutants to be separated and skimmed-off
the water. HDS units are large compared to catch basin inserts (smallest systems are about the size of an automobile) and are comprised
of several large chambers or vaults, each designed to trap specific pollutants. These systems are much more expensive than catch
basin inserts but also have the ability to handle more water flow. Unit costs for HDS systems range from $10,000 to $100,000 depending
on size. These systems tend to be more cost effective in large new developments where the HDS can be designed into the stormwater
system and large areas of run-off can be directed to each unit. In dealing with existing storm drains, HDS products are less desirable
because they require streets and sidewalks to be torn-up, drainage redirected, and construction equipment to retrofit the drain
and install the units. Catch basin inserts, on the other hand, are relatively easy to install because they fit into existing storm
drain catch basins and require little or no construction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not only are HDS systems expensive, they also require significant
maintenance to remove the trapped pollutants and ensure that the system continues to function properly. Some HDS vendors have purchased
AbTech Industries&rsquo; Smart Sponge products to be used in conjunction with the HDS units to absorb the oil that is separated
from the water, thus enhancing the performance of the systems and reducing the required maintenance. Another drawback of HDS systems
is that they are designed to retain standing water after a rain or water flow event. Consequently, the HDS vaults become breeding
grounds for mosquitoes (carrier of West Nile Virus), mold, mildew, bacteria and other undesirables.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The primary vendors of HDS systems are: ConTech (CDS Technologies,
Vortechs), Stormceptor and Baysaver Technologies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Catch Basin Inserts.</I> Competing products in this category
include the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">&ldquo;DrainPac&rdquo; by PacTec</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">&ldquo;StormBasin&rdquo; by Fabco Industries</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">&ldquo;Fossil Filter&rdquo; and &ldquo;Flow Guard&rdquo;
by Kristar</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">&ldquo;Grate Inlet Skimmer Box&rdquo; by Suntree Technologies</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">&ldquo;Aqua Guard&rdquo; by AquaShield</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">&ldquo;Inceptor&rdquo; by Stormdrain Solutions</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">&ldquo;Hydrocartridge&rdquo; by Advanced Aquatic Products</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">&ldquo;Ultra HydroKleen&rdquo; by Ultra Tech International</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Ultra Violet Light (&ldquo;UVL&rdquo;).</I> For customers
seeking effective antibacterial treatment of stormwater, UVL offers a potential solution. However, the economics of these products
are far different from catch basin inserts or other vault and SWAT systems offered by AbTech Industries. Because UVL systems require
electricity and expensive equipment, they are very costly to implement and maintain. Consequently, they are not even a viable option
for many municipalities. Furthermore, these systems become less effective in turbid waters. While AbTech Industries does not compete
directly with UVL systems, such systems do provide an alternative to AbTech Industries&rsquo; antimicrobial Smart Sponge products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Other Markets</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the industrial, oil &amp; gas and marine markets, competition
primarily comes from traditional sorbent products and other particulate-based polymer adsorption products that are widely available
through industrial supply vendors. AbTech Industries&rsquo; competitive advantage lies in:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">its patented and patent-pending technologies to form
these polymers in shapes, such as the propellet, that greatly enhance performance and ease of use;</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">its unique delivery systems, including in-line filtration
cartridges and filtration vessels;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the completely hydrophobic nature of its products;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the capability to deal with more than one contaminant
(i.e., hydrocarbons and microorganisms); and</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">the high saturation capacity.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Intellectual Property, Research, and Development</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Intellectual Property</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Patents</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries endeavors to protect the intellectual property
it develops through its research and development efforts. The United States Patent Office has issued AbTech Industries 17 patents
related to the Smart Sponge technology and products. Additionally, three of the patent applications have been pursued internationally
with patents issued in Australia, Belgium, Canada, China, France, Germany, Israel, Italy, Japan, Korea, Mexico and Singapore. AbTech
Industries intends to pursue patent protection for new patentable technologies that it develops. AbTech Industries&rsquo; success
depends, in part, on its ability to maintain trade secrecy protection and operate without infringing on the proprietary rights
of third parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Trademarks</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries has registered three trademarks with the U.S.
Patent and Trademark Office: (i) Smart Sponge&reg;, which denotes the Smart Sponge material itself in its various shapes and sizes;
(ii) Ultra-Urban&reg; Filter, which denotes AbTech Industries&rsquo; line of storm drain filtration devices; and (iii) SMART PAK&reg;,
which describes Smart Sponge material compacted into blocks, bricks or other pre-shaped forms. AbTech Industries also trademarked,
but does not currently use, the name OARS&reg;, which denotes an oil aquatic recovery system encompassing Smart Sponge products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Trade Secrets</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In order to protect its trade secrets and un-patented proprietary
information arising from its development activities, AbTech Industries requires its employees, consultants and contractors to enter
into agreements providing for confidentiality, non-disclosure and Company ownership of any trade secret or other un-patented proprietary
information developed by employees, consultants or contractors during their employment or engagement by AbTech Industries. AbTech
Industries also requires all potential collaborative partners and distributors to enter into confidentiality and non-disclosure
agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Research and Development</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The current Smart Sponge technology has prompted the development
of a robust line of products. However, to ensure future growth, new products and technologies must be developed. Research and development
effort is expended only on projects that meet certain criteria. The project must have a reasonable commercial potential, both in
terms of revenue and in terms of profit margins. The products developed from the work must inherently be differentiated from competing
products, if any, or allow AbTech Industries to fill a critical gap in its products offering. The development time to achieve the
new technology or product must also be reasonable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries maintains active development programs focused
on the treatment and removal of heavy metals, PCB&rsquo;s, radionuclides, and phosphates from contaminated water.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries also has ongoing projects to evaluate of Smart
Sponge and other polymers to determine absorption performance under varying conditions and with a variety of contaminants. This
testing not only provides independent verification of product performance but also allows AbTech Industries to provide more reliable
information to customers about the product&rsquo;s performance under various field conditions. In addition, AbTech Industries is
evaluating various polymer combinations as the field of polymer science continues to evolve.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries&rsquo; strategy on all of these projects is
to partner with third parties (universities, engineering companies and other commercial partners) for experimentation and validation
of proposed concepts. AbTech Industries has worked cooperatively with, Millsaps College, California State University at Fullerton,
Alden Labs, NAMSA and Hydroqual, Inc. on various projects and is looking at other qualified partners for specific projects. AbTech
Industries will maintain its own R&amp;D treatability lab for internal research and quality control of raw material and finished
products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Manufacturing and Engineering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As manufacturing volumes increase, AbTech Industries intends
to maintain its core engineering competencies in the United States and create a manufacturing outsourcing network capable of supplying
existing and future products around the world. The network will include some internal manufacturing (mainly assembly) capabilities
but will largely comprise contract manufacturers and/or strategic partners with the required expertise and facilities to cost-effectively
manufacture AbTech Industries&rsquo; products. Due to the nature of the product (very low specific gravity or density, therefore
high unitary shipping cost), AbTech Industries expects to establish its manufacturing and warehousing sites in key geographic areas.
The manufacturing network will have an integrated information system capable of effectively managing production orders and ensuring
high quality products manufactured to consistent specifications around the world. This plan will be rolled out in two steps:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Short term (up to 12 months)</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries will fully exploit its internal manufacturing
capabilities at its 13,000 square foot facility in Phoenix, Arizona. While maximizing the capacity of this facility, AbTech Industries
will search out and train outsourcing partners in the United States and other regions. Products not using the Smart Sponge material
will be contracted to outside manufacturers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Long term (12 months or longer)</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AbTech Industries intends to evaluate the opportunities to outsource
the manufacturing of all components and most of the finished products, focusing on total quality and consistency. Due to the very
atypical process and equipment used in AbTech Industries&rsquo; manufacturing, it is unclear at this time if a suitable manufacturing
partner exists. AbTech Industries would need to confirm a clear value proposition prior to outsourcing manufacturing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Regulatory</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In mid-2008, the EPA initiated a compliance action against AbTech
Industries alleging that AbTech Industries was in violation of the Federal Insecticide, Fungicide and Rodenticide Act by distributing
Smart Sponge Plus, which the EPA considered to be an unregistered pesticide. Despite the EPA&rsquo;s prior position that registration
of AbTech Industries&rsquo; Smart Sponge Plus for use in stormwater filtration applications was not required or allowed, in subsequent
discussions with the EPA it became evident that the EPA considered it imperative that AbTech Industries register its Smart Sponge
Plus material as a pesticide if AbTech Industries intended to make claims about its antimicrobial capability. Consequently, in
2008, AbTech Industries began to prepare a registration application for Smart Sponge Plus, which was eventually filed with the
EPA in September 2009. In July 2010, AbTech Industries received notice of a time-limited registration from the EPA that contained
certain conditions requiring AbTech Industries to submit additional testing data to the EPA by July 1, 2011. Subsequently, and
based on information provided by the third-party laboratory contracted to perform the additional studies, EPA granted an extension
of the time-limited registration until August 31, 2012. The registration number for Smart Sponge Plus is 86256-1. AbTech Industries
is not aware of any other competitive product that has been approved by the EPA for outdoor use as an antimicrobial (pesticide)
and believes that this registration will further differentiate Smart Sponge Plus products from other competitive products on the
market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Employees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of March 23, 2012, we had twenty-one full-time employees,
and two full-time consultants. Nine of these individuals are involved in sales and marketing; three in production; four in research
and development, and six in administrative functions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Properties</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We currently maintain an administrative office located at 4110
North Scottsdale Road, Suite 235, Scottsdale, Arizona 85251. The company also leases space for its manufacturing facility located
at 3610-2 E. Southern Ave., Phoenix, Arizona 85040. Our telephone number is (480) 874-4000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Legal Proceedings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We may become involved in various lawsuits and legal proceedings
arising in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in these or other
matters may arise from time to time that may have an adverse effect on our business, financial conditions and results of operations.
We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material
adverse effect on our business, financial condition or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Directors and Executive Officers Prior to and Following
the Closing Date of the Merger</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Prior to the Closing Date of the Merger, Ms. Mandi Luis was
the Chief Executive Officer, President and Director of the Company and Mr. Robert MacKay was the Chief Financial Officer, Chief
Accounting Officer, Secretary, Treasurer and Director of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a condition to closing the Merger Agreement, Ms. Mandi Luis
resigned as Chief Executive Officer, President, and Director of the Company, and Mr. Robert MacKay resigned as Chief Financial
Officer, Chief Accounting Officer, Secretary, Treasurer, and Director of the Company, both resignations became effective February
10, 2011 upon the effectiveness of the Merger. Upon the effectiveness of the Merger, Olivia H. Farr, David Greenwald, A. Judson
Hill, Jonathan Thatcher, Karl Seitz, and F. Daniel Gabel, the then current directors (together with Mr. Rink) of AbTech Industries,
were appointed to the Board of Directors. At the closing of the Merger, Mr. Glenn R. Rink was appointed Chief Executive Officer
and President, Mr. Lane J. Castleton was appointed Chief Financial Officer, Vice President, and Treasurer, and Ms. Olivia H. Farr
was appointed Secretary of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s current Directors and executive officers
are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 23%">&nbsp;</TD>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 64%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-weight: bold">Name</TD>
    <TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="3" STYLE="border-bottom: black 1pt solid; font-weight: bold">Age</TD>
    <TD>&nbsp;</TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-weight: bold">Position</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">Glenn R. Rink</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">52</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Chief Executive Officer, President, and Director</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">Jonathan Thatcher</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">42</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Vice President and Chief Operating Officer of AbTech Industries, Inc. and Director</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">Olivia H. Farr</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">50</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Secretary and Director</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">David Greenwald</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">57</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Director</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">A. Judson Hill</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">57</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Director</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">Karl Seitz</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">61</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Director</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">F. Daniel Gabel</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">73</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Director</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">Bjornulf White</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">31</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Executive Vice President of Corporate Strategy and Business Development for AbTech Industries, Inc.</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">Lane J. Castleton</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">56</TD>
    <TD NOWRAP STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Chief Financial Officer, Vice President, and Treasurer</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Biographical information with respect to the Company&rsquo;s
directors and executive officers is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black"><I>Glenn R. Rink</I>, 52, has served
as our Chief Executive Officer and President since February 10, 2011, and as a Director since October 4, 2010. </FONT>Mr.&nbsp;Rink
is an entrepreneur and founder of AbTech Industries. Since AbTech Industries&rsquo; inception, in June&nbsp;1995, Mr.&nbsp;Rink
has led AbTech Industries through its transition from a start-up R&amp;D venture to an operating company with developed products
on the market. From 1992 to 1995, Mr.&nbsp;Rink was the President of HydroGrowth International, an agricultural products company
that specializes in aqueous absorption polymer technology. The advancement of this technology at HydroGrowth expanded into the
development and application of polymer technologies and fostered the founding of AbTech Industries. For the 12&nbsp;years prior
to founding HydroGrowth, Mr.&nbsp;Rink was involved in the restaurant industry where he participated in business expansions and
acquisitions that resulted in the creation of Desert Moon Cafe, a successful restaurant franchise business. Mr.&nbsp;Rink is also
currently the Chairman of the Board of Trustees of Waterkeepers Alliance, Inc., a nonprofit organization working to protect water
resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black"><I>Jonathan Thatcher</I>, 42, has
served as a Director of the Company and as Vice President and Chief Operating Officer of AbTech Industries since February 10, 2011.
</FONT>Mr.&nbsp;Thatcher is the past Director and President of Exeter Life Sciences, Inc., a holding company that invests in and
promotes human, plant and animal technologies that positively contribute to the health of people, the environment and animals.
Mr.&nbsp;Thatcher has also previously served as Chairman of Arcadia Biosciences, the Co-founder and Chairman of Kronos &mdash;
The Optimal Health Company, the Chairman of Viagen, Inc., the Chairman and Interim President for Start Licensing, Inc., and a Director
of OneTouch Systems, Inc. Mr.&nbsp;Thatcher is a member of the board and Chair of the Governance Committee for the Arizona Chapter
of the National Multiple Sclerosis Society.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Olivia H. Farr</I>, 50, has served as a Director since <FONT STYLE="color: black">February
10, 2011. </FONT> Ms.&nbsp;Farr is currently President of Best Movies by Farr, a website and event business promoting the best
in film. She is also Co-Founder of Bedford 2020 Coalition, a non-profit dedicated to reducing her town&rsquo;s greenhouse gas emissions
20% by 2020. Ms.&nbsp;Farr serves on the Boards of Energy Improvement Corporation, a local development corporation as well as the
John Merk Fund and St. Mark&rsquo;s School.. Past employment includes Partner at First Funding Associates in Stamford, Connecticut,
Research Associate at Natural Resources Defense Council and Assistant Director of the Mrs.&nbsp;Giles Whiting Foundation. Ms.&nbsp;Farr
has an M.B.A. from Pace University, an M.P.A. from New York University and a B.A. from the University of Pennsylvania.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black"><I>David Greenwald, </I>57, has served
as a Director since February 10, 2011. </FONT>Mr.&nbsp;Greenwald is the Chairman of Lansco Colors, a global supplier of pigments
to the coatings, ink, plastic and construction industries. During his more than 30 years with Lansco, he also served as President
of Shoot the Moon Productions (1982-1984), a company that produced with Warner Bros., a television series that ran for four years
and is still in syndication in some markets. From 1995 to 1999 Mr.&nbsp;Greenwald served on the Board of Directors for Northern
Westchester Center for the Arts and from 2000 to 2008 served on the Board of Directors of The Boys and Girls Clubs of Northern
Westchester. He received a B.A. from Connecticut College.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black"><I>Karl Seitz, </I>61<I>, </I>has
served as a Director since February 10, 2011. </FONT>Mr.&nbsp;Seitz is the past President of Deimos Ventures, LLC, a private equity
fund focused on investing in early stage technology companies relative to water, bio fuels and genetics. He was responsible for
the overall management of the fund including investment strategy, analysis and acquisitions. Prior to forming Deimos, Mr.&nbsp;Seitz
served with Mars, Inc., a global food manufacturer, for 20&nbsp;years in a number of domestic and international financial positions.
He became a CPA after receiving his Bachelor of Arts from UCLA in Economics and Political Science. Mr.&nbsp;Seitz was formerly
Controller for Kawasaki Motors USA from 1977 to 1984 and Senior Tax Advisor at Arthur Andersen from 1973 to 1977). He is active
in a number of community non-profit organizations in Southern California.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>A. Judson Hill</I>, 57, has served as a Director since <FONT STYLE="color: black">February
10, 2011</FONT>. Mr.&nbsp;Hill is the Managing Director of NGP Energy Capital Management, a private equity firm. Previously, Mr.&nbsp;Hill
was the Managing Partner with Summit Global Management Inc., focusing on strategic business development and private-market investments.
Mr.&nbsp;Hill was formerly a Partner with The Halifax Group, a Washington DC private equity firm with investments including water
and other infrastructure-related businesses, and Aqua International Partners, L.P., a private equity fund affiliated with Texas
Pacific Group focused exclusively in the global water sector. Mr.&nbsp;Hill earlier served as a Managing Director for HSBC, where
he was responsible for investment-banking activities including water technology/services and water utilities. Mr.&nbsp;Hill also
has 15&nbsp;years of operational management experience with Westinghouse Electric Corp. and Atlantic Richfield Corp. Mr.&nbsp;Hill
has B.S./M.S. degrees in Civil/Environmental Engineering from the University of Pittsburgh and a B.S. degree in Biology and Chemistry
from Edinboro University.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>F. Daniel Gabel</I>, 73, has served as a Director since <FONT STYLE="color: black">February
10, 2011</FONT>. Mr.&nbsp;Gabel has been the President and Chief Executive Officer of Hagedorn &amp; Company, an International
Insurance Broker, since 1979. Mr.&nbsp;Gabel began his career with Hagedorn &amp; Company in 1963 after three years with Price
Waterhouse &amp; Company. Mr.&nbsp;Gabel is a Director of the Insurance Broker Association of New York State and a past Director
of the National Association of Insurance Brokers. Mr.&nbsp;Gabel is a Director on the Board of Trustees of Waterkeepers Alliance,
Inc., a non-profit organization working to protect water resources and a member of the Advisory Board of the Nicholas School of
the Environment at Duke University. He is also a Director for Cheshire Academy, a Director and Vice President of Hundred Year Association,
a Director of the Cary Institute, an environmental think tank, and a Director of Friends of the Earth Inc. Mr.&nbsp;Gabel is a
Chartered Life Underwriter with a B.A. degree in Accounting from Duke University.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black"><I>Lane J. Castleton</I> has served
as our </FONT>Chief Financial Officer, Vice President, and Treasurer<FONT STYLE="color: black"> since February 10, 2011 and has
been the Chief Financial Officer of AbTech Industries, Inc. since 1998. </FONT>Mr. Castleton has over 30 years of experience in
managing, accounting, and finance functions. From 1992 to 1997, Mr. Castleton managed the finance, accounting, and administrative
functions of Marine Preservations Association, an oil industry trade association that funded the establishment of a national catastrophic
oil spill response capability. For nine years, Mr. Castleton served as the Controller and Chief Financial Officer of Symbion, Inc.,
a publicly traded medical device manufacturing company. Mr. Castleton is a CPA with a master&rsquo;s degree in professional accountancy,
and public accounting experience gained as an auditor for Coopers &amp; Lybrand (now PriceWaterhouseCoopers), an international
public accounting firm.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Bjornulf White </I><FONT STYLE="color: black">has served
as the </FONT>EVP of Corporate Strategy and Business Development<FONT STYLE="color: black"> for AbTech Industries, Inc. since 2010.
Mr. White </FONT>previously worked as a portfolio manager at Lockheed Martin Corporation where he was responsible for identifying,
incubating, and expanding new technologies and markets for the corporation and managing new market segment programs, such as the
energy and water technologies sector. Prior to joining Lockheed, Mr. White worked as an attorney and business strategy consultant
in Washington, DC representing primarily Fortune 100 financial institutions, assisting them in developing, structuring and negotiating
business relationships, including joint ventures, mergers, asset and stock acquisitions, and restructurings. Mr. White is a graduate
of George Washington University Law School, holds a master&rsquo;s degree in public administration from Cornell University where
he graduated with distinguished honors concentrating in economics and fiscal regulatory policy, and also received his BA in government
from Cornell University. He currently serves as a Vice Chairman of the Board of the National Energy Systems Technology Center co-led
by Department of Energy laboratories, UC Berkeley, and UC Davis. He is also on the Board of the iGATE Development Corporation,
a non-profit dedicated to providing research and development space to start-up technology companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Director Independence</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">With the assistance of legal counsel to the Company, the Board
has determined that, other than Glenn R. Rink and Jonathan Thatcher, who are employees of the Company, each of the members of the
Board is an &ldquo;independent director&rdquo; for purposes of the NASDAQ Listing Rules and Rule 10A-3(b)(i) under the Securities
Exchange Act of 1934, as amended, as the term applies to membership on the Board and its committees. NASDAQ&rsquo;s independence
definition includes a series of objective tests, such as that the Director is not an employee of the company and has not engaged
in various types of business dealings with the company. In addition, as further required by NASDAQ rules, our Board has made an
affirmative subjective determination as to each independent director that no relationships exist which, in the opinion of the Board,
would interfere with the exercise of independent judgment in carrying out the responsibilities of a Director. In making these determinations,
the Board reviewed and discussed information provided by the Directors and us with regard to each Director&rsquo;s business and
personal activities as they may relate to the Company and its management. On an annual basis, each Director and executive officer
is obligated to complete a Director and Officer Questionnaire that requires disclosure of any transactions with the Company in
which the Director or officer, or any member of his or her family, have a direct or indirect material interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Based upon all of the elements of independence set forth in
the NASDAQ rules and listing standards, the Board has determined that each of the following non-employee directors is independent
and has no relationship with Abtech, except as a Director and stockholder of the Company: Olivia H. Farr; David Greenwald; A. Judson
Hill; F. Danile Gabel; and Karl Seitz.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, the Board determined that Mr. Rink is not independent
because he is our Chief Executive Officer and President, and Mr. Thatcher is not independent because he is the Chief Operating
Officer of our majority owned subsidiary, AbTech Industries, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Corporate Governance</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">The Board is committed to maintaining
strong corporate governance principles and practices. Our governance structure and processes are based upon a number of key governance
documents, including our Code of Business Conduct and Ethics (the &ldquo;Code&rdquo;), which was first adopted on February 24,
2007. The Code </FONT>addresses general business ethical principles, embodies<FONT STYLE="color: black"> </FONT>our commitment
to certain ethical principles and sets forth the responsibilities of Abtech and its officers and directors with regard to the Company&rsquo;s
shareholders, employees, customers, lenders, and other stakeholders. T<FONT STYLE="color: black">he Code is reviewed at least annually
and updated periodically in response to changing regulatory requirements, evolving practices, issues raised by our stockholders
and other stakeholders and otherwise as circumstances warrant. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Board recognizes that one of its key responsibilities is
to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. The Board understands
that there is no single, generally accepted approach to providing Board leadership, and that given the dynamic and competitive
environment in which we operate, the right Board leadership structure may vary as circumstances warrant. Our current structural
philosophy provides for a board comprised primarily of independent non-employee directors, as well as Compensation and Audit Committees
comprised entirely of independent non-employee directors. The Board believes that this leadership structure is optimal for the
Company at the current time, as it provides independent oversight, coupled with a small number of employee directors who are deeply
familiar with the history and operations of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Compensation Committee Interlocks and Insider Participation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">No member of the Compensation Committee during the fiscal year
ended December 31, 2011 served as an officer, former officer or employee of the Company. During this period, no executive officer
of the Company served as (i) a member of a compensation committee (or equivalent) of any other entity, one of whose executive officers
served as one of our directors or was an immediate family member of a director, or served on our Compensation Committee; or (ii)
a director of any other entity, one of whose executive officers or their immediate family member served on our Compensation Committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXECUTIVE COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Compensation Discussion and Analysis</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This Compensation Discussion and Analysis (&ldquo;CD&amp;A,&rdquo;)
describes Abtech&rsquo;s executive compensation program for 2011 and certain elements of the 2012 program. We use this program
to attract, motivate and retain the colleagues who lead our business. In particular, this CD&amp;A explains how the Board made
compensation decisions for 2011 for our Named Executive Officers. The 2011 Named Executive Officers are:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="margin: 0; text-indent: 0.25in"> &bull; Glenn R. Fink, President and Chief Executive Officer, our principal executive officer;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42.5pt">&nbsp;</P>

<P STYLE="margin: 0; text-indent: 0.25in"> <FONT STYLE="color: black">&bull;</FONT> Lane J. Castleton<FONT STYLE="color: black">, </FONT>Chief Financial Officer, Vice President, and Treasurer<FONT STYLE="color: black">, our principal financial officer;</FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="margin: 0; text-indent: 0.25in"> <FONT STYLE="color: black">&bull;</FONT> Jonathan Thatcher<FONT STYLE="color: black">, </FONT>Chief Operating Officer of our subsidiary, AbTech Industries; and</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="margin: 0; text-indent: 0.25in"> <FONT STYLE="color: black">&bull;</FONT> Bjornulf White, Executive Vice President of Corporate Strategy and Business Development of our subsidiary, AbTech Industries.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Board has responsibility for establishing, implementing
and monitoring the Company&rsquo;s compensation philosophy as it relates to our executive officers. Our executive officers have
broad policy-making authority in the Company, and the Board holds them responsible for the Company&rsquo;s financial performance
and for setting and maintaining a culture of strong ethics.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Compensation Philosophy and Objectives</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Board believes that Abtech&rsquo;s executive compensation
program implements and achieves the goals of our executive compensation philosophy. The Board believes that an effective executive
compensation program rewards the achievement of identified annual, long-term and strategic goals by the Company. An effective program
seeks to align the interests of the Company&rsquo;s executives with those of its stockholders by rewarding performance above established
goals that may be expected to enhance stockholder value. The Board considers performance and compensation to ensure that the Company
is able to attract, motivate and retain superior people in key positions and that compensation provided to key employees is competitive
relative to the compensation paid to similarly situated executives in peer companies generally. The Board believes that an effective
means of achieving those objectives is to provide a compensation package to the Company&rsquo;s executives, including the Named
Executive Officers, which includes both cash and stock-based compensation that rewards performance measured against established
goals.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">2011 Executive Compensation Components</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended December 31, 2011, the main elements of compensation
for the NEOs were: (i) base salary; (ii) stock options granted by AbTech Industries prior to the Merger; and (iii) a performance-based
cash bonus plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">2012 Executive Compensation Components</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the 2012 fiscal year, it is expected that the main elements
of compensation for the NEOs will be: (i) base salary; (ii) a performance-based cash bonus plan; and (iii) equity-based long-term
compensation through the 2012 Incentive Stock Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Potential Payments Upon Termination or Change-in-Control;
Employment Agreements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">SEC regulations state that we must disclose information regarding
agreements, plans, or arrangements that provide for payments or benefits to our executive officers in connection with any termination
of employment or change in control of the Company. There are no employment agreements between Abtech Holdings and any of its officers
or directors. AbTech Industries has entered into employment agreements with Glenn R. Rink and Lane J. Castleton (for the purposes
of this section only, each an &ldquo;Executive&rdquo;, and collectively, the &ldquo;Executives&rdquo;). Under these agreements
the Executives are entitled to compensatory benefits in the event the Executive terminates his employment for good reason (meaning
the assignment to Executive of any duties materially inconsistent with Executive&rsquo;s position, authority, duties or responsibilities
as described in the agreement or failure of AbTech Industries to comply with the compensation and benefit provisions of the agreements)
or upon the termination of the Executive&rsquo;s employment by AbTech Industries without cause (meaning at the option of AbTech
Industries in the event it determines it is in AbTech Industries&rsquo; best interest to terminate the employment of Executive).
Under these circumstances AbTech Industries is required to pay to the Executive a severance benefit equal to Executive&rsquo;s
salary at the then current annual salary rate for a period equal to the product of (A)&nbsp;the number of years of service of Executive
with the Company (specifically including those years of service rendered prior to the Effective Date) times (B)&nbsp;two (2)&nbsp;months.
AbTech Industries may elect to pay the severance benefit described herein either as one lump sum within 30&nbsp;days of the notice
of termination, or in a series of bi-weekly installments beginning on the regularly scheduled payday of AbTech Industries which
follows the effective date of such termination with the amount of each such installment being equal to the Executive&rsquo;s then
current bi-weekly salary amount. AbTech Industries is required to pay to the Executive an additional severance benefit equal to
the cost of extending the Executive&rsquo;s health insurance coverage under the provisions of COBRA for a period of eighteen (18)&nbsp;months,
with such severance amount being paid in a lump sum payment grossed up to cover the taxes that Executive is required to pay on
such benefit. All stock options theretofore granted to the Executive to purchase any equity shares of AbTech Industries shall become
immediately and fully vested and exercisable in accordance with the terms of the AbTech Industries&rsquo; stock option plans and
grant awards. The agreement with Mr.&nbsp;Rink provides for a base annual salary of $150,000 with performance incentives, which
if met, will increase the base annual salary in stages to $200,000 and $250,000. The agreement with Mr.&nbsp;Castleton provides
for a base annual salary of $126,000 with performance incentives, which if met, will increase the base annual salary in stages
to $150,000 and $175,000.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Compensation Tables</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth the compensation earned during
the applicable fiscal year by each individual who served as our principal executive officer during 2011, and our three most highly
compensated executive officers other than the principal executive officer who were serving as executive officers at the end of
the last completed fiscal year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SUMMARY COMPENSATION TABLE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">Name
    and Principal Position <BR>(a)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">Year (b)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">Salary ($)
    <BR>
    (c)(2)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">Bonus ($)
    <BR>
    (d)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">Stock Awards
    <BR>
    ($)(e)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">Option Awards<BR>
    ($)(f)(1)</FONT></TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">Non-Equity
    Incentive<BR> Plan Compensation ($)<BR> (g)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">All Other
    Compensation ($) <BR> (h)</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-align: left"><FONT STYLE="font-size: 10pt">Total ($)
    (i)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 28%; font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Glenn
    R. Rink (3)</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 8%; font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">2011</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 8%; font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">159,670</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 8%; font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">50,000</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 8%; font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 8%; font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">425,463</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 8%; font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 8%; font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">7,489</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 8%; font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">642,622</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0"><FONT STYLE="font-size: 10pt">CEO, President</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">2010</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">150,000</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">41,698</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">7,884</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">199,582</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Lane J. Castleton
    (4)</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">2011</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">131,385</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">14,000</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">147,346</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">292,731</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0"><FONT STYLE="font-size: 10pt">CFO, VP, Treasurer</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">2010</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">121,154</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">25,542</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">146,696</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Jonathan Thatcher
    (5)</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">2011</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">147,692</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">30,000</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">4,200</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">172,087</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">353,979</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: 0; padding-left: 0.12in"><FONT STYLE="font-size: 10pt">COO,
    AbTech Industries</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Bjornulf
White (6)</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">2011</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">120,000</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">20,000</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">171,703</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">311,703</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: 0; padding-left: 0.12in"><FONT STYLE="font-size: 10pt">EVP, AbTech Industries</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">2010</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">60,000</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">10,400</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">70,400</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">Mandi Luis (3)</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">2011</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0"><FONT STYLE="font-size: 10pt">CEO, President</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">2010</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">5,000</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">-</FONT></TD><TD STYLE="font-size: 10pt; padding-left: 0; text-indent: 0; text-align: left"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0"><FONT STYLE="font-size: 10pt">5,000</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>These amounts represent full grant date fair value of these awards, in accordance with the Financial Accounting Standard Board&rsquo;s
(&ldquo;FASB&rdquo;) ASC Topic 718. Assumptions used in the calculation of dollar amounts of these awards are included in Note
11 of the Consolidated Financial Statements.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>This table includes compensation paid by the Company&rsquo;s subsidiary AbTech Industries, including such compensation paid
prior to the Merger.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: black">(3)</FONT></TD><TD>Mandi Luis resigned as Chief Executive Officer, President, and Director of the Company effective February&nbsp;10, 2011, and
immediately thereafter Glenn R. Rink was appointed Chief Executive Officer and President.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>Lane J. Castleton was appointed Chief Financial Officer of the Company on February 10, 2011.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: black">(5)</FONT></TD><TD>Jonathan Thatcher<FONT STYLE="color: black"> was appointed Vice President and Chief Operating Officer of AbTech Industries
on</FONT> February 10, 2011.<FONT STYLE="color: black"> The stock award for Mr. Thatcher was valued at the closing price of the
Company&rsquo;s stock on the date of grant.</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(6)</TD><TD>Bjornulf White was appointed Vice President Business Development and Corporate Strategy for AbTech Industries on July 1, 2010
and became Executive Vice President on July 1, 2011.<FONT STYLE="color: black"> </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Outstanding Equity Awards at Fiscal Year
End</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table discloses certain information regarding
all outstanding equity awards at fiscal year-end for each of the officers named in the Summary Compensation Table, as of December
31, 2011. Some values contained in the table below have not been, and may never be, realized. The options might never be exercised
and the value, if any, will depend on the share price on the exercise date. There were no stock awards by the Company in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="5" STYLE="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Option Awards</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 19%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Name</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(a)</B></P></TD>
    <TD STYLE="width: 18%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><B>Number
    of Securities Underlying Unexercised Options Exercisable (#)</B></TD>
    <TD STYLE="width: 16%; border-top: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><B>Number
    of Securities Underlying Unexercised Options Unexercisable (#)</B></TD>
    <TD STYLE="width: 18%; border-top: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><B>Equity
    Incentive Plan Awards:&nbsp; Number of Securities Underlying Unexercised Unearned Options (#)</B></TD>
    <TD STYLE="width: 13%; border-top: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><B>Option
    Exercise Price ($)</B></TD>
    <TD STYLE="width: 16%; border-top: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Option Expiration Date</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Glenn R. Rink</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">212,951</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">106,476</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="padding-right: 15pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">1,062,000</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">485,000</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">0.70</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">0.70</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">0.42</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">0.42</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">12/13/17</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">10/11/20</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">12/14/21</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">12/14/21</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Lane J. Castleton</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">133,095</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">63,885</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="padding-right: 15pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">386,000</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">150,000</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">0.70</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">0.70</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">0.42</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">0.42</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">12/13/17</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">10/11/20</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">12/14/21</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">12/14/21</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Jonathan Thatcher</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">239,570</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 15pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">476,000</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">150,000</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">0.70</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">0.42</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">0.42</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">12/13/12</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">2/14/21</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">2/14/21</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Bjornulf White</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left">53,238</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 15pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">421,000</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">203,000</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">0.70</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">0.42</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">0.42</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">10/11/20</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">12/14/21</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">12/14/21</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Rink and Mr. Thatcher are not paid any additional compensation
by virtue of their service on the Board. The following table discloses the compensation of our non-employee directors for the last
completed fiscal year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 20%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Name</TD>
    <TD STYLE="width: 13%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Fees earned or paid in cash ($)</TD>
    <TD STYLE="width: 12%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Stock Awards ($)</TD>
    <TD STYLE="width: 11%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Option Awards ($)(1)</TD>
    <TD STYLE="width: 10%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Non-Equity Incentive Plan Comp ($)</TD>
    <TD STYLE="width: 11%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Non-Qual deferred comp earnings ($)</TD>
    <TD STYLE="width: 14%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">All Other Compensation ($)</TD>
    <TD STYLE="width: 9%; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Total ($)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Olivia H. Farr</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">76,972</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">76,972</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">F. Daniel Gabel</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">76,972</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">76,972</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">David Greenwald</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">76,972</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">76,972</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">A. Judson Hill</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">76,972</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">76,972</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Karl Seitz</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">76,972</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">-</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">76,972</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">(1)</TD><TD STYLE="text-align: justify">At December 31, 2011, the aggregate number of stock options
outstanding for each non-employee Director was as follows: Ms. Farr, 679,284; Mr. Gabel, 519,570; Mr. Greenwald, 679,284; Mr.
Hill, 679,284; Mr. Seitz, 599,427.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In 2011, F. Daniel Gabel, a director of the Company, purchased
a Convertible Note (the &ldquo;Gabel Note&rdquo;) and accompanying warrant for 333,333 shares, for $500,000 in a private offering
conducted by the Company. $200,000 of the purchase price was remitted in the form of a non-interest bearing Senior Convertible
Promissory Note due from AbTech Industries for the principal amount of $200,000. The Gabel Note bears interest at twelve percent
(12%) per annum through April 30, 2012; fifteen percent (15%) per annum from May 1, 2012 through July 31, 2012 and eighteen percent
(18%) per annum for any period after July 30, 2012 that the Gabel Note remains outstanding. All interest accrued on the Gabel Note
will be due and payable at maturity. In the event of a Qualified Financing, Mr. Gabel will have the option to (i) convert the Gabel
Note into the securities purchased by investors in a Qualified Financing at a 20% discount to the price paid by investors in the
Qualified Financing; or (ii) tender the Gabel Note to the Company for immediate repayment of principal and accrued and unpaid interest.
In the event that the Company does not close a Qualified Financing on or prior to November 1, 2012, Mr. Gabel shall have the option
to convert the Gabel Note into shares of our common stock at the Conversion Price. In the event the Gabel Note remains outstanding
as of April 30, 2012, Mr. Gabel will receive an additional warrant for 10% of the principal amount of the Gabel Note outstanding
at that date divided by the Conversion Price. In the event the Gabel Note remains outstanding as of July 31, 2012, Mr. Gabel will
receive an additional warrant for 10% of the principal amount of the Gabel Note outstanding at that date divided by the Conversion
Price. The warrants will have an exercise price equal to the Conversion Price and a five year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In 2011, Mr. Gabel sold a convertible promissory note due from
AbTech Industries in the principal amount of $100,000 to another investor for $112,581, representing the face value of the note
plus interest accrued thereon at 8% per annum. The investor subsequently converted this note to 198,980 shares of Company common
stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Although we have adopted the Code, we still rely on our Board
to review related party transactions on an ongoing basis to prevent conflicts of interest. The Board reviews a transaction in light
of the affiliations of the director, officer, or employee and the affiliations of such person&rsquo;s immediate family. Transactions
are presented to our Board for approval before they are entered into or, if this is not possible, for ratification after the transaction
has occurred. If the Board finds that a conflict of interest exists, then it will determine the appropriate remedial action, if
any. Our Board approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of
the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The table below sets forth the number of shares of our common
stock beneficially owned as of the close of business on March 31, 2012 by each of our Directors, each Named Executive Officer listed
in the 2011 Summary Compensation Table, the number of shares beneficially owned by all of our Directors and executive officers
as a group, and each person we know to be the beneficial owner of 5% or more of the outstanding shares of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Beneficial ownership is determined in accordance with Rule
13d-3 under the Exchange Act and generally includes voting or investment power over securities. Under this rule, a person is deemed
to be the beneficial owner of securities that can be acquired by such person within 60 days of April 15, 2012 upon the exercise
of options or warrants. Each beneficial owner&rsquo;s percentage ownership is determined by assuming that all options and warrants
held by such person that are exercisable within 60 days of April 15, 2012 have been exercised. The table and footnotes also include
information about such options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Unless otherwise noted, the address of each person named in the table is 4110 N. Scottsdale Road,
Suite 235, Scottsdale, AZ 85251.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Common Stock</TD></TR>
<TR>
    <TD STYLE="width: 57%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Name of Beneficial Owner</TD>
    <TD STYLE="width: 11%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Footnote</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Reference</B></P></TD>
    <TD STYLE="width: 16%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Amount and Nature of Beneficial Ownership**</TD>
    <TD STYLE="width: 16%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Percent of</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Class</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Owned</B></P></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Directors and Executive Officers:&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Glenn R. Rink</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">3,492,812</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">7.2%</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Jonathan Thatcher&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">2</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">249,570</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">*</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Olivia H. Farr&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">3</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">694,003</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">1.4%</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">David Greenwald</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">4</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">1,345,341</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">2.8%</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Karl Seitz</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">5</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">319,427</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">*</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">A. Judson Hill</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">6</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">413,483</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">*</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">F. Daniel Gabel</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">7</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">1,814,347</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">3.6%</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Lane J. Castleton</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">8</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">196,980</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">*</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Bjornulf White</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">9</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">53,238</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">*</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 12.6pt">All Directors and executive officers as a group (9 persons)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">8,579,201</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">17.2%</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">5% Holders:</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Country Mutual Insurance Company and<BR>
Country Insurance Company <BR>
1705 N. Towanda Avenue, PO Box 2020<BR>
Bloomington, IL 61702-2020</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">10</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">3,698,560</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">7.1%</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Bernard L. Madoff Investment Securities LLC <BR>
c/o Baker &amp; Hostetler LLP<BR>
45 Rockefeller Plaza, New York, NY 10111</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">11</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">3,194,270</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">6.2%</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 12.6pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 12.6pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">*</TD><TD>Percent of class owned is less than 1%.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: black">**</FONT></TD><TD>Beneficial ownership has been determined in accordance with Rule&nbsp;13d-3 under the Exchange Act. Pursuant to the rules of
the SEC, shares of common stock which an individual or group has a right to acquire within 60&nbsp;days pursuant to the exercise
of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or
group, but are not deemed to be beneficially owned and outstanding for the purpose of computing the percentage ownership of any
other person shown in the table.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Includes options to purchase 319,427 shares of Abtech common stock.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: black">(2)</FONT></TD><TD>Includes options to purchase 239,570 shares of Abtech common stock.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: black">(3)</FONT></TD><TD>Includes 399,284 options to purchase Abtech common stock.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: black">(4)</FONT></TD><TD>Includes 399,284 options to purchase Abtech common stock and 101,407 shares of Abtech common stock held by Landers Segal Color,
Co., Inc. for which Mr. Greenwald has shared voting and investment power.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: black">(5)</FONT></TD><TD>Represents options to purchase 319,427 shares of Abtech common stock.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: black">(6)</FONT></TD><TD>Represents options to purchase 413,483 shares of Abtech common stock.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: black">(7)</FONT></TD><TD>Includes options to purchase 239,570 shares of Abtech common stock, warrants to purchase 475,302 shares of Abtech common stock
and 833,333 shares of Abtech common stock reserved for issuances upon conversion of the Gabel Note.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: black">(8)</FONT></TD><TD>Represents options to purchase 196,980 shares of Abtech common stock.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: black">(9)</FONT></TD><TD>Represents options to purchase 53,238 shares of Abtech common stock.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: black">(10)</FONT></TD><TD>Includes warrants to purchase 435,363 shares of Abtech common stock and 3,263,197 shares of Abtech common stock issuable upon
conversion of 612,947 unconverted shares of AbTech Industries Series&nbsp;A Preferred Stock that may be converted at the option
of the holder; does not include 2,001,742 shares of Abtech common stock reserved for issuance upon conversion of certain Senior
Convertible Promissory Notes.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: black">(11)</FONT></TD><TD>Represents 3,194,270 shares of AbTech common stock reserved for issuance upon conversion of 600,000 shares of AbTech Industries
Series&nbsp;A Preferred Stock that may be converted at the option of the holder; does not include 425,903 shares of Abtech common
stock reserved for issuance upon conversion of certain Senior Convertible Promissory Notes with an aggregate principal amount of
$300,000, which were not converted as of the effective date of the Merger and which are not presently convertible.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SELLING SHAREHOLDERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The <FONT STYLE="color: black">14,582,862 shares of our common
stock included in this prospectus, including shares of our common stock issuable pursuant to the terms of outstanding warrants,
were issued to the selling shareholders in the September Offering and the February Offering pursuant to exemptions from the registration
requirements of the Securities Act pursuant to Regulation D and Regulation S promulgated thereunder. The Secured Notes and related
warrants were purchased by accredited investors from September 19, 2011 to February 15, 2012. In addition, the PA Warrants issued
in connection with the September Offering and the February Offering are also included in this prospectus on behalf of the placement
agent.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth, as to each of the selling shareholders:
the number of shares of our common stock beneficially owned, based on each selling shareholder&rsquo;s ownership of the Secured
Notes and warrants held of record as of April 13, 2012, assuming exercise of all of the warrants held by such selling shareholder
on that date, without regard to any limitations on exercise; the number of shares of our common stock being offered by such selling
shareholder pursuant to this prospectus; and the number of shares of our common stock beneficially owned upon completion of the
offering and the percentage of beneficial ownership upon completion of the offering based upon 63,065,206 shares of our common
stock outstanding as of April 13, 2012, assuming full conversion of the Secured Notes and full exercise of all warrants held by
the selling shareholders and outstanding on that date, without regard to any limitations on exercise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Information in the table below and the notes thereto has been
provided to us by the selling shareholders. Beneficial ownership and percentage have been determined in accordance with Rule 13d-3
under the Exchange Act and generally includes voting or dispositive power with respect to the securities. The information listed
below is not necessarily indicative of beneficial ownership for any other purpose. Except as otherwise noted, none of the selling
shareholders have, within the last three years from the date of this prospectus, held any position, office or material relationship
with the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD COLSPAN="4" STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-decoration: underline; text-align: center">Beneficial Ownership Before Offering</TD>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; font-weight: bold; text-align: right">&nbsp;</TD>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 22%; border: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-decoration: underline; text-align: center">Name</TD>
    <TD STYLE="width: 13%; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-decoration: underline; text-align: center">Shares Issuable On Conversion</TD>
    <TD STYLE="width: 13%; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-decoration: underline; text-align: center">Warrants</TD>
    <TD STYLE="width: 13%; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-decoration: underline; text-align: center; padding-right: 0">Total</TD>
    <TD STYLE="width: 13%; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-align: center; padding-right: 0"><B><U>Share
    of Common Stock in Prospectus</U></B></TD>
    <TD STYLE="width: 13%; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-align: center"><B><U>Beneficial
    Ownership After Offering(1)</U></B></TD>
    <TD STYLE="width: 13%; border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-align: center"><B><U>Percentage
    of Beneficial Ownership After Offering</U></B></TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">John J. Connors</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">71,429</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">33,333</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Katherine O'Leary</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">35,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">16,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Richard O'Leary</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">35,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">16,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Irwin Blitt Revocable Trust UTA 1-28-79</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">142,857</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">66,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Option Opportunities Corp.</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">85,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">40,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">125,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">125,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Alan B. Miller</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">71,429</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">33,333</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Warberg Opportunistic Trading Fund LP</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">114,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">53,333</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">167,619</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">167,619</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">M.J. Fil Investments, LLC</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">50,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">23,333</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">73,333</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">73,333</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Sandor Capital Master Fund, L.P.</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">571,428</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">266,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">838,095</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">838,095</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Pinnacle Family Office Investments, L.P.</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">2,571,429</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">1,199,999</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">3,771,428</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">3,771,428</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Micro PIPE Fund I, LLC</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">285,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">133,334</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">419,048</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">419,048</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Maurice Werdegar</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">35,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">16,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Barry J. Goldstein</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">35,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">16,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">HVM Corporation</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">142,857</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">66,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Robert J. Dobrient</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">35,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">16,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Alan S. Nasar</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">35,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">16,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Michael H. Weiss</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">85,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">40,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">125,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">125,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Ronald Lachman</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">107,143</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">50,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">157,143</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">157,143</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Donald F. Farley</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">85,715</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">40,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">125,715</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">125,715</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"></TD></TR></TABLE>

<!-- Field: Page; Sequence: 55; Value: 1 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">                                                                                                                                                                                                                                                                                                                                                                                                                                             <TR>
<TD COLSPAN="4" STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-decoration: underline; text-align: center">Beneficial Ownership Before Offering&nbsp;</TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right; border-top: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; border-top: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; border-top: Black 1pt solid">&nbsp;</TD></TR>
<TR>
<TD STYLE="border: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-decoration: underline; text-align: center; vertical-align: bottom">&nbsp;Name</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-decoration: underline; text-align: center; vertical-align: bottom">&nbsp;Shares Issuable On Conversion</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-decoration: underline; text-align: center; vertical-align: bottom">Warrants&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-decoration: underline; text-align: center; vertical-align: bottom">Total&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-decoration: underline; text-align: center; vertical-align: bottom">Share
    of Common Stock in Prospectus&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-decoration: underline; text-align: center; vertical-align: bottom"><B><U>Beneficial
    Ownership After Offering(1)</U></B>&nbsp;</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-top: 6pt; padding-bottom: 6pt; font-weight: bold; text-decoration: underline; text-align: center"><B><U>Percentage
    of Beneficial Ownership After Offering</U></B>&nbsp;</TD></TR>
<TR><TD STYLE="border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; width: 22%">Beneficial Capital Corp.</TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; width: 13%; border-top: Black 1pt solid">357,143</TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; width: 13%; border-top: Black 1pt solid">166,667</TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right; width: 13%; border-top: Black 1pt solid">523,810</TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right; width: 13%; border-top: Black 1pt solid">523,810</TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; width: 13%; border-top: Black 1pt solid">0</TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; width: 13%; border-top: Black 1pt solid">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Morris Smith</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">85,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">40,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">125,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">125,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">SKS Ventures LLC</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">142,857</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">66,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">RMH 2007 Irrevocable Trust</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">107,143</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">50,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">157,143</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">157,143</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Alpha Capital Anstalt</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">785,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">366,666</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">1,152,380</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">1,152,380</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">George Thayer</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">35,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">16,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">JSL Kids Partners</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">142,857</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">66,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">JMW Fund, LLC</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">357,143</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">166,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">523,810</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">523,810</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">San Gabriel Fund, LLC</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">357,143</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">166,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">523,810</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">523,810</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">William H. White Jr. Family Trust DTD 8/1/94</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">57,143</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">26,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">83,810</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">83,810</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">West Hampton Special Situations Fund, LLC</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">142,857</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">66,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Samir Bhatt</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">14,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">6,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">20,953</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">20,953</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Scott Johnson Clark</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">57,143</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">26,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">83,810</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">83,810</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Gemini Master Fund, Ltd.</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">214,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">100,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">314,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">314,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">David H. Clarke</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">107,143</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">50,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">157,143</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">157,143</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Michel Finzi</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">71,429</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">33,333</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">William Silver</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">42,857</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">20,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">62,857</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">62,857</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Morgan Keegan FBO: Rodney D. Baber</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">71,429</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">33,333</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Koyote Trading LLC</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">71,429</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">33,333</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Lacuna Hedge Fund LLLP</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">142,857</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">66,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Whalehaven Capital Fund Ltd.</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">428,571</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">200,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">628,571</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">628,571</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Virginia E. Dadey</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">71,429</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">33,333</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Biagio Maffettone</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">35,714</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">16,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">52,381</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Sable Ridge Capital Opportunity Fund LP</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">71,429</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">33,333</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Gus Blass II</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">214,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">100,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">314,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">314,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Kensington Partners</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">214,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">100,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">314,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">314,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Gus Blass III</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">214,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">100,000</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">314,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">314,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Michael Greller</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">71,429</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">33,333</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">104,762</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Harry Mittelman</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">142,857</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">66,667</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">209,524</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Middlebury Securities(2)</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">754,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">754,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 15pt; padding-left: 5.4pt; text-align: right">754,286</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR>
    <TD STYLE="border: windowtext 1pt solid; vertical-align: bottom; padding-top: 6pt; padding-right: 0; padding-left: 5.4pt; font-weight: bold">TOTAL</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-top: 6pt; padding-right: 0; padding-left: 5.4pt; text-align: center">9,428,573</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-top: 6pt; padding-right: 0; padding-left: 5.4pt; text-align: center">5,154,289</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-top: 6pt; padding-right: 0; padding-left: 5.4pt; text-align: center">14,582,862</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-top: 6pt; padding-right: 0; padding-left: 5.4pt; text-align: center">14,582,682</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-top: 6pt; padding-right: 0; padding-left: 5.4pt; text-align: center">0</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; vertical-align: top; padding-top: 6pt; padding-right: 0; padding-left: 5.4pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>The numbers in this column assume each selling stockholder sells all of its shares being registered pursuant to this prospectus.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Middlebury Securities acted as placement agent in connection with the September Offering and the February Offering. The shares
of our common stock registered pursuant to this prospectus reflect the PA Warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PLAN OF DISTRIBUTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The selling shareholders may sell our common stock covered by
this prospectus (the &ldquo;registered securities&rdquo;) from time to time in one or more transactions at:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">fixed prices;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">prevailing market prices at the time of sale;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">varying prices determined at the time of sale; or</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">negotiated prices.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The selling shareholders will act independently of us in making
decisions regarding the timing, manner and size of each sale. The selling shareholders may effect these transactions by selling
the registered securities to or through broker-dealers or directly to investors. Broker-dealers engaged by the selling shareholders
may arrange for other broker-dealers to participate in the sales.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The registered securities may be sold in
one or more of the following transactions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">a block trade in which a broker-dealer attempts to sell the shares
of the registered securities as agent but may resell a portion of the block as principal to facilitate the transaction;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">a purchase by a broker-dealer as principal and resale by the broker-dealer
for its account under this prospectus;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">an exchange distribution in accordance with the rules of the exchange;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">ordinary brokerage transactions and transactions in which a broker
solicits purchasers;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">privately negotiated transactions, including directly to investors;
and</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">a combination of any of the above transactions.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We may amend or supplement this prospectus from time to time
to describe a specific plan of distribution. If the plan of distribution involves an arrangement with a broker-dealer for the sale
of the registered securities through a block trade, special offering, exchange distribution or secondary distribution, or a purchase
by a broker-dealer, the amendment or supplement will disclose:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the name of the selling shareholders and the participating broker-dealer;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the number of shares of the registered securities involved;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the price at which the shares of the registered securities are sold;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the commissions paid or discounts or concessions allowed to the broker-dealer;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">that the broker-dealer did not conduct any investigation to verify
the information contained or incorporated by reference in this prospectus; and</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">other facts material to the transaction.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

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<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The selling shareholders may enter into hedging transactions
with broker-dealers or affiliates thereof in connection with distributions of the registered securities. In these transactions,
broker-dealers or affiliates may engage in short sales of the registered securities pursuant to this prospectus to offset the positions
they assume with the selling shareholders and use shares of the registered securities received from the selling shareholders to
close out their short positions. The selling shareholders also may sell the registered securities short, deliver this prospectus
in connection with some or all of those sales and redeliver the registered securities to close out their short positions. The selling
shareholders may enter into option or other transactions with broker-dealers which require the delivery to the broker-dealer or
an affiliate thereof of shares of the registered securities. The broker-dealer may then resell or otherwise transfer the shares
of the registered securities under this prospectus. The selling shareholders also may loan, pledge or grant a security interest
in some or all of the registered securities covered by this prospectus to a broker-dealer or an affiliate thereof. The broker-dealer
may sell the loaned or pledged registered securities under this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Broker-dealers or agents may receive compensation from the selling
shareholders in the form of commissions, discounts or concessions. Broker-dealers or agents may also receive compensation from
the purchasers of the registered securities for whom they act as agents or to whom they sell as principals, or both. A broker-dealer&rsquo;s
compensation will be negotiated in connection with the sale and may exceed the broker-dealer&rsquo;s customary commissions. Broker-dealers,
agents or the selling shareholders may be deemed to be &ldquo;underwriters&rdquo; within the meaning of the Securities Act in connection
with sales of the registered securities. Any commission, discount or concession received by these broker-dealers or agents and
any profit on the sale of the registered securities purchased by them may be deemed to be underwriting discounts or commissions
under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Because the selling shareholders may be deemed to be &ldquo;underwriters&rdquo;
within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act. In
addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be
sold under Rule 144 rather than under this prospectus. The selling shareholders have advised us that they have not entered into
any agreements, understandings or arrangements with any underwriter or broker-dealer regarding the sale of the registered securities.
There is currently no coordinating broker acting in connection with the proposed sale of the registered securities by the selling
shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We agreed to keep this prospectus effective until the earlier
of (i) May 16, 2012, (ii) the date on which all of the shares of the registered securities have been sold pursuant to this prospectus,
(iii) the expiration of the holding period that would be applicable to the registered securities under Rule 144 under the Securities
Act were it not held by an affiliate of ours, or (iv) the sale of all of the shares of the registered securities pursuant to Rule
144. The registered securities will be sold only through registered or licensed brokers or dealers if required under applicable
state securities laws. In addition, in certain states the registered securities may not be sold unless it has been registered or
qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and
is complied with.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In order to comply with the applicable securities laws of particular
states, if applicable, the shares of registered securities will be sold in the jurisdictions only through registered or licensed
brokers or dealers. In addition, in particular states, the shares of registered securities may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is
available and is complied with.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The selling shareholders and any broker-dealers or agents that
participate with the selling shareholders in the distribution of the shares of registered securities may be deemed to be &ldquo;underwriters&rdquo;
within the meaning of the Securities Act, and any commissions received by them and any profit on the resale of the registered securities
may be deemed to be underwriting commissions or discounts under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under applicable rules and regulations under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, any person engaged in the distribution of the registered securities may
not simultaneously engage in market making activities with respect to the registered securities for a period of two business days
prior to the commencement of the distribution. In addition, the selling shareholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of the registered securities by the selling shareholders or any other person. We will make copies of this prospectus
available to the selling shareholders and have informed them of the need to deliver a copy of this prospectus to each purchaser
at or prior to the time of the sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We will pay all costs, expenses and fees associated with the
registration of the registered securities, including without limitation, SEC filing fees and expenses of compliance with state
securities or &ldquo;blue sky&rdquo; laws. The selling shareholders will pay all underwriting commissions and discounts, selling
or placement agent fees or broker fees and commissions, and transfer taxes, if any, associated with the sale of the registered
securities. The selling shareholders may agree to indemnify any broker-dealer or agent that participates in sales of the registered
securities against specified liabilities, including liabilities arising under the Securities Act. The selling shareholders have
agreed to indemnify certain persons against specified liabilities in connection with the offering of the registered securities,
including liabilities arising under the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF SECURITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our authorized capital consists of 300,000,000 shares of common
stock, par value $0.001 per share, of which 48,482,344 shares are issued and outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The holders of our common stock are entitled to receive dividends
as may be declared by our Board of Directors; are entitled to share ratably in all of our assets available for distribution upon
winding up of the affairs our Company; and are entitled to one non-cumulative vote per share on all matters on which shareholders
may vote at all meetings of the shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The shareholders are not entitled to preference as to dividends
or interest; preemptive rights to purchase in new issues of shares; preference upon liquidation; or any other special rights or
preferences.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the date of this prospectus we have not paid any cash
dividends to stockholders. The declaration of any future cash dividends, if any, will be at the discretion of the Board of Directors
and will depend on our earnings, if any, capital requirements and financial position, general economic conditions and other pertinent
conditions. It is our present intention not to pay any cash dividends in the near future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXPERTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The audited consolidated financial statements of the Company
and its subsidiary as of and for the years ended December 31, 2011 and 2010 were audited by Semple, Marchal &amp; Cooper, LLP,
an independent registered public accounting firm, to the extent set forth in its report and are included herein in reliance upon
the authority of this firm as experts in accounting and auditing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The validity of our common stock offered hereby will be passed
upon for us by Squire Sanders (US) LLP, Phoenix, AZ.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>AVAILABLE INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This prospectus is part of a registration statement on Form
S-1 we have filed with the SEC. We have not included in this prospectus all of the information contained in the registration statement
and you should refer to our registration statement and its exhibits for further information.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any materials we file with the SEC at the SEC&rsquo;s Public Reference
Room at 100 F Street, NE, Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. You may obtain
information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings are also available
to the public from commercial document retrieval services and at the website maintained by the SEC at www.sec.gov.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our website address is www.abtechindustries.com. The information
on our website is not incorporated into this prospectus.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>





<P STYLE="margin: 0"></P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ABTECH HOLDINGS, INC. AND SUBSIDIARY<BR>
CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>AS OF AND FOR THE YEARS ENDED<BR>
DECEMBER 31, 2011 AND 2010</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONTENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="width: 90%; padding: 0; text-autospace: none; text-indent: 0">Report of Independent Registered Public Accounting Firm</TD>
    <TD STYLE="width: 10%; padding: 0; text-autospace: none; text-indent: 0; text-align: right">F-2</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0">Consolidated Balance Sheets</TD>
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0; text-align: right">F-3</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0">Consolidated Statements of Operations</TD>
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0; text-align: right">F-4</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0">Consolidated Statements of Stockholders&rsquo; Deficiency</TD>
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0; text-align: right">F-5</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0">Consolidated Statements of Cash Flows</TD>
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0; text-align: right">F-6</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0">Notes to the Consolidated Financial Statements</TD>
    <TD STYLE="padding: 0; text-autospace: none; text-indent: 0; text-align: right">F-7 &ndash; F-28</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.4in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">
&nbsp;<IMG SRC="pg42.jpg" ALT=""></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.4in"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ABTECH HOLDINGS, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED BALANCE SHEETS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DECEMBER 31,</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 1pt; margin-bottom: 1pt"><DIV STYLE="font-size: 1pt; border-top: Black 0.75pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding: 0; text-indent: 0">2011</TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding: 0; text-indent: 0">2010</TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">ASSETS</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Current assets</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Cash and cash equivalents</TD><TD STYLE="width: 2%; font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right; padding: 0; text-indent: 0">1,386,502</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right; padding: 0; text-indent: 0">4,123</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Accounts receivable &ndash; trade, net</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">108,170</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">36,642</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Accounts receivable &ndash; related party, net</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">2,032</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">13,044</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Inventories, net</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">528,009</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">569,042</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Deferred charges, net</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">439,203</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">20,028</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Prepaid expenses and other current assets</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">37,988</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">76,759</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Total current assets</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">2,501,904</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">719,638</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Fixed assets, net</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">49,485</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">65,514</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Security deposits</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">17,977</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">17,977</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Deferred charges, net</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">15,020</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">22,673</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Goodwill</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">10,000</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">10,000</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Total assets</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">$</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">2,594,386</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">$</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">835,802</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">LIABILITIES AND STOCKHOLDERS&rsquo; DEFICIENCY</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Current liabilities</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Accounts payable</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">$</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">483,879</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">$</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">629,470</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Accounts payable &ndash; related party</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">29,703</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">7,736</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Loans from shareholders</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">9,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">180,500</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Notes payable</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">21,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Convertible promissory notes, net of discounts</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">3,758,082</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">208,679</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Convertible promissory notes &ndash; related party, net of discounts</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">578,681</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">1,156,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Customer deposits</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">38,505</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">193,180</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Accrued interest payable</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">126,232</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">39,904</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Accrued expenses</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">122,790</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">125,557</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Total current liabilities</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">5,146,872</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">2,562,026</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Due to related party</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">101,524</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">106,601</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Convertible promissory notes</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">155,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">1,375,865</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Convertible promissory notes &ndash; related party</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">1,881,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">2,581,001</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Warrant liability</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">498,976</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">-</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Total liabilities</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">7,783,372</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">6,625,493</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Commitments and contingencies</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Stockholders&rsquo; deficiency</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -0.12in; padding: 0 0 0 0.24in">Common stock, $0.001 par&nbsp; value; 300,000,000 authorized shares; 47,160,435 and 49,249,674 shares issued and outstanding at December 31, 2011 and 2010, respectively</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">47,160</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">49,250</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: 0; padding: 0 0 0 0.12in">Additional paid-in capital</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">24,661,344</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">18,672,746</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding: 0 0 0 0.12in; text-indent: 0">Non-controlling interest</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">(1,674,105</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Accumulated deficit</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(28,223,385</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(24,511,687</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0in; text-indent: 0">Total stockholders&rsquo; deficiency</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(5,188,986</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(5,789,691</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Total liabilities and stockholders&rsquo; deficiency</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">$</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">2,594,386</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">$</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">835,802</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>The accompanying notes are an integral
part of these consolidated financial statements.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I></I></P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I></I><FONT STYLE="font-size: 10pt"><B>ABTECH HOLDINGS, INC. AND SUBSIDIARY</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FOR THE YEARS ENDED DECEMBER 31,</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 1pt; margin-bottom: 1pt"><DIV STYLE="font-size: 1pt; border-top: Black 0.75pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding: 0; text-indent: 0">2011</TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding: 0; text-indent: 0">2010</TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Net revenues</TD><TD STYLE="width: 2%; font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right; padding: 0; text-indent: 0">537,152</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right; padding: 0; text-indent: 0">381,517</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Net revenues &ndash; related party</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">-</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">52,141</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Total net revenues</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">537,152</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">433,658</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Cost of revenues</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">458,006</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">391,675</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Gross profit</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">79,146</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">41,983</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-style: italic; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-style: italic; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-style: italic; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-style: italic; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-style: italic; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-style: italic; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-style: italic; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-style: italic; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Operating expenses</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Selling, general and administrative</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">3,107,596</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">2,353,233</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Research and development</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">634,109</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">504,396</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Total operating expenses</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">3,741,705</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">2,857,629</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Operating loss</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(3,662,559</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(2,815,646</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Other income (expense)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Interest expense</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">(2,078,704</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">(115,568</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Gain on extinguishment of debt</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">115,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Gain on valuation of warrant liability</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">242,052</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Other income (expense)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(1,592</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(27,201</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Total other income (expense), net</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(1,723,244</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(142,769</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Net loss before income taxes</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">(5,385,803</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">(2,958,415</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Provision for income taxes</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">-</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">-</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Net loss</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">(5,385,803</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">(2,958,415</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Net loss attributable to non-controlling interest</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(489,655</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">-</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Net loss attributable to controlling interest</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">$</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(4,896,148</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">$</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(2,958,415</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">Basic and diluted loss per common share</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">$</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(0.11</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">$</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(0.06</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0; text-align: left; text-indent: 0">Basic and diluted weighted average number of shares outstanding</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; padding: 0; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; padding: 0; text-align: right; text-indent: 0">44,160,713</TD><TD STYLE="padding: 0; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; padding: 0; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; padding: 0; text-align: right; text-indent: 0">48,099,333</TD><TD STYLE="padding: 0; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>The accompanying notes are an integral
part of these consolidated financial statements.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ABTECH HOLDINGS, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS&rsquo;
DEFICIENCY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 1pt; margin-bottom: 1pt"><DIV STYLE="font-size: 1pt; border-top: Black 0.75pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0; text-indent: 0"><B>&nbsp;</B></TD><TD STYLE="font-size: 10pt; padding: 0; text-align: center; text-indent: 0"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; border-bottom: Black 1pt solid; padding: 0; text-align: center; text-indent: 0"><B>Common Stock</B></TD><TD STYLE="padding: 0; font-size: 10pt; text-align: center; text-indent: 0"><B>&nbsp;</B></TD><TD STYLE="font-size: 10pt; padding: 0; text-align: center; text-indent: 0"><B>&nbsp;</B></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; padding: 0; text-indent: 0"><B>Additional</B></TD><TD STYLE="padding: 0; font-size: 10pt; text-align: center; text-indent: 0"><B>&nbsp;</B></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-align: center; text-indent: 0"><B>&nbsp;</B></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding: 0; text-indent: 0"><B>&nbsp;</B></TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-align: center; text-indent: 0"><B>&nbsp;</B></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-align: center; text-indent: 0"><B>&nbsp;</B></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding: 0; text-indent: 0"><B>Non-</B></TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-align: center; text-indent: 0"><B>&nbsp;</B></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-align: center; text-indent: 0"><B>&nbsp;</B></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding: 0; text-indent: 0"><B>&nbsp;</B></TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-align: center; text-indent: 0"><B>&nbsp;</B></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0; text-indent: 0"><B>&nbsp;</B></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-align: center; text-indent: 0"><B>&nbsp;</B></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding: 0; text-indent: 0"><B>Shares</B></TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-align: center; text-indent: 0"><B>&nbsp;</B></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-align: center; text-indent: 0"><B>&nbsp;</B></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding: 0; text-indent: 0"><B>Amounts</B></TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-align: center; text-indent: 0"><B>&nbsp;</B></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-align: center; text-indent: 0"><B>&nbsp;</B></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding: 0; text-indent: 0"><B>paid-in
    capital</B></TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-align: center; text-indent: 0"><B>&nbsp;</B></TD><TD STYLE="font-size: 10pt; padding: 0; text-align: center; text-indent: 0"><B>&nbsp;</B></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; border-bottom: Black 1pt solid; padding: 0; text-align: center; text-indent: 0"><B>Accumulated deficit</B></TD><TD STYLE="padding: 0; font-size: 10pt; text-align: center; text-indent: 0"><B>&nbsp;</B></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-align: center; text-indent: 0"><B>&nbsp;</B></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding: 0; text-indent: 0"><B>controlling
    interest</B></TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-align: center; text-indent: 0"><B>&nbsp;</B></TD><TD STYLE="font-size: 10pt; padding: 0; text-align: center; text-indent: 0"><B>&nbsp;</B></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; border-bottom: Black 1pt solid; padding: 0; text-align: center; text-indent: 0"><B>Total</B></TD><TD STYLE="padding: 0; font-size: 10pt; text-align: center; text-indent: 0"><B>&nbsp;</B></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%; font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Balance at December 31, 2009</TD><TD STYLE="width: 2%; font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 6%; font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">47,307,593</TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">$</TD><TD STYLE="width: 6%; font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">47,308</TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">$</TD><TD STYLE="width: 6%; font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">16,624,566</TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">$</TD><TD STYLE="width: 6%; font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">(21,553,272</TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">)</TD><TD STYLE="width: 2%; font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 6%; font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">-</TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">$</TD><TD STYLE="width: 6%; font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">(4,881,398</TD><TD STYLE="width: 1%; font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Stock-based compensation expense</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">239,265</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">239,265</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Common stock issued for services</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">27,034</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">26</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">19,954</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">19,980</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Preferred stock of subsidiary issued for debt conversion</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">354,921</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">356</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">249,644</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">250,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Interest paid in preferred shares of subsidiary</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">65,126</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">65</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">45,812</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">45,877</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Advances received pre-merger</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">1,495,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">1,495</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">1,493,505</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">1,495,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Net loss</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">&nbsp;</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">&nbsp;</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">&nbsp;</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(2,958,415</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">&nbsp;</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(2,958,415</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Balance at December 31, 2010</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">49,249,674</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">49,250</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">18,672,746</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">(24,511,687</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">-</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding: 0; text-indent: 0">(5,789,691</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding: 0; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Stock-based compensation expense</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">135,546</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">135,546</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Common stock issued for cash</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">825,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">825</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">824,175</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">825,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Common stock issued for services</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">449,931</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">450</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">320,083</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">320,533</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Shares forfeited and cancelled</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">(684,300</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">(684</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">684</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Preferred stock of subsidiary issued for debt conversion</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">4,984,324</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">4,983</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">3,058,707</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">3,063,690</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Interest paid in preferred shares of subsidiary</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">20,784</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">20,784</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Beneficial conversion feature of new debt</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">1,620,955</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">1,620,955</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Preferred shares of subsidiary that did not convert at merger and remain outstanding</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">(7,664,194</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">(7,664</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">7,664</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">1,184,450</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">(1,184,450</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Net loss</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">&nbsp;</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">&nbsp;</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">&nbsp;</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(4,896,148</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(489,655</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; padding: 0; font-size: 10pt; text-align: right; text-indent: 0">(5,385,803</TD><TD STYLE="padding: 0; font-size: 10pt; text-align: left; text-indent: 0">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: normal; text-align: left; padding: 0; text-indent: 0">Balance at December 31, 2011</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; font-weight: bold; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; font-weight: bold; text-align: right; text-indent: 0">47,160,435</TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; font-weight: bold; text-align: left; text-indent: 0">$</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; font-weight: bold; text-align: right; text-indent: 0">47,160</TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; font-weight: bold; text-align: left; text-indent: 0">$</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; font-weight: bold; text-align: right; text-indent: 0">24,661,344</TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; font-weight: bold; text-align: left; text-indent: 0">$</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; font-weight: bold; text-align: right; text-indent: 0">(28,223,385</TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-align: left; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; font-weight: bold; text-align: left; text-indent: 0">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; font-weight: bold; text-align: right; text-indent: 0">(1,674,105</TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-align: left; text-indent: 0">)</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; font-weight: bold; text-align: left; text-indent: 0">$</TD><TD STYLE="border-bottom: Black 2.5pt double; padding: 0; font-size: 10pt; font-weight: bold; text-align: right; text-indent: 0">(5,188,986</TD><TD STYLE="padding: 0; font-size: 10pt; font-weight: bold; text-align: left; text-indent: 0">)</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7in 0pt 0; text-align: center"><I>The accompanying notes are
an integral part of these consolidated financial statements.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7in 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7in 0pt 0; text-align: center"></P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7in 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ABTECH HOLDINGS, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FOR
THE YEARS ENDED DECEMBER 31,</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 0; text-indent: 0">Operating Activities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0">Net loss attributable to controlling interest</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(4,896,148</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(2,958,415</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: 0; padding-left: 0.12in">Adjustments to reconcile net loss attributable to controlling interest to net cash used in operating activities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: 0; padding-left: 0.12in">Depreciation and amortization</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">27,635</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">47,452</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: 0; padding-left: 0.12in">Common stock issued for services rendered</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">320,533</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">19,980</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: 0; padding-left: 0.12in">Stock-based compensation expense</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">135,546</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">239,265</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Preferred stock of subsidiary issued for interest on notes payable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">20,784</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">45,877</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Interest related to beneficial conversion feature</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,620,955</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Income from forgiveness of debt</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(115,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Note discount amortized as interest</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">159,657</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Deferred charges expensed as interest</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">142,836</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Net loss attributable to non-controlling interest</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(489,655</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Gain on change in fair value of warrant liability</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(242,052</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Changes in operating assets and liabilities:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; text-indent: 0">Accounts receivable, net</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(60,516</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(4,709</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; text-indent: 0">Inventories, net</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">41,033</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12,082</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; text-indent: 0">Prepaid expenses and other current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">38,771</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,905</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; text-indent: 0">Deferred charges, net</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(436,222</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; text-indent: 0">Accounts payable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(123,624</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">309,505</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; text-indent: 0">Customer deposits</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(154,675</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(3,928</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; text-indent: 0">Accrued interest payable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">86,328</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">17,199</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.24in; text-indent: 0">Accrued expenses</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(2,767</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">54,414</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0; text-indent: 0">Net cash used in operating activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(3,926,581</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(2,219,373</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 0; text-indent: 0">Investing Activities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in; text-indent: 0">Purchases of fixed assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(11,606</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(15,596</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0; text-indent: 0">Net cash used in investing activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(11,606</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(15,596</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 0; text-indent: 0">Financing Activities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Proceeds from issuance of common stock</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">825,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,495,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Proceeds from borrowings from shareholders</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">41,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Repayment of borrowings</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,924,957</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(551,321</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Repayment of borrowings from shareholders</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(71,500</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(141,500</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Proceeds from notes payable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6,497,100</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,291,865</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in; text-indent: 0">Net decrease in due to related party</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(5,077</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(4,862</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0; text-indent: 0">Net cash provided by financing activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5,320,566</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,130,182</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0">Net change in cash and cash equivalents</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,382,379</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(104,787</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0; text-indent: 0">Cash and cash equivalents at beginning of period</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">4,123</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">108,910</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 0; text-indent: 0">Cash and cash equivalents at end of period</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1,386,502</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">4,123</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 0; text-indent: 0">Supplemental cash flow information:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Cash paid for interest</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">43,642</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">43,343</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Cash paid for income taxes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 0; text-indent: 0">Noncash investing and financing activities:</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Preferred stock &nbsp;of subsidiary issued for conversion of debt, including accrued interest</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3,084,474</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">295,877</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Common stock and warrants issued for services</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">456,079</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">19,980</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Beneficial conversion feature recorded to additional paid-in capital</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,620,955</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Preferred shares &nbsp;of subsidiary not converting at merger</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,184,450</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Unamortized portion of debt discount</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">463,235</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">Portion of debt discount in deferred charges</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">118,136</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><I>The accompanying
notes are an integral part of these consolidated financial statements.</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><I>&nbsp;</I></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><I></I></FONT><B>ABTECH HOLDINGS, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to the Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 1pt; margin-bottom: 1pt"><DIV STYLE="font-size: 1pt; border-top: Black 0.75pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">NOTE 1 &ndash; BUSINESS AND SUMMARY OF
ACCOUNTING POLICIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Organization and Description of Business</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Abtech Holdings, Inc. (&ldquo;ABHD&rdquo;
or the &ldquo;Company&rdquo;) (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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">AbTech Industries, Inc.
(&ldquo;AbTech&rdquo;), 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 (the
&ldquo;Merger&rdquo;) on February 10, 2011. In accordance with the merger agreement between AbTech and ABHD (the
&ldquo;Merger Agreement&rdquo;), ABHD acquired all of the issued and outstanding common stock of AbTech, including shares
issuable upon the conversion of Series A preferred stock and convertible promissory notes outstanding, in exchange for the
stockholders of AbTech acquiring 46,000,000 shares of ABHD common stock. ABHD also agreed to reduce its number of common
shares outstanding to 10,000,000 shares prior to the merger. (See Note 12 &ndash; Reverse Acquisition Transaction). The
preferred stockholders of AbTech Industries that elected to not convert and exchange their shares for ABHD common shares,
represent the non-controlling interest shown on the Consolidated Balance Sheet as of December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For accounting purposes, the transaction
has been accounted for as a reverse acquisition, with AbTech as the acquirer. These consolidated financial statements of the Company
represent a continuation of the financial statements of AbTech, with one adjustment, which is to retroactively adjust the legal
capital of AbTech to reflect the legal capital of ABHD. Comparative information presented in these consolidated financial statements
also have been retroactively adjusted to reflect the legal capital of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is an environmental technologies
firm that provides innovative solutions to address issues of water pollution. The Company has developed and patented the Smart
Sponge<SUP>&reg;</SUP> polymer technology. This technology&rsquo;s oil absorbing capabilities make it highly effective as a filtration
media to remove hydrocarbons and other pollutants from flowing or pooled water. The Company is headquartered in Scottsdale, Arizona
and has a manufacturing facility located in Phoenix, Arizona.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">AbTech&rsquo;s wholly-owned subsidiary,
Environmental Security Corporation (&ldquo;ESC&rdquo;), was formed by the Company 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 either 2011 or 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="text-underline-style: none"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="text-underline-style: none"><B>Summary
of Significant Accounting Policies</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Basis of Financial Statement Presentation</U><B>
&ndash; </B>The consolidated financial statements include the accounts of ABHD, AbTech and ESC. Intercompany accounts and transactions
have been eliminated. The consolidated financial statements do not include the operations of ABHD prior to the date of the Merger
which are considered to be immaterial to the operations of AbTech. The equity section of the Consolidated Balance Sheets and the
basic and diluted weighted average number of shares outstanding on the Consolidated Statements of Operations for periods prior
to the date of the Merger have been restated to give retroactive effect to the merger transaction and to show the shares outstanding
at the Balance Sheet dates as if such shares had been exchanged for ABHD shares in accordance with the terms of the Merger Agreement.
The equity section of the Consolidated Balance Sheets and the basic and diluted weighted average number of shares outstanding on
the Consolidated Statements of Operations for periods ended after the date of the Merger, represents the actual shares of ABHD
outstanding after the share exchanges that occurred as part of the merger transaction. The non-controlling interest shown on the
Consolidated Balance Sheet as of December 31, 2011, represents the ownership interest in AbTech of the holders of AbTech Series
A preferred stock that elected not to exchange their Series A preferred shares for common shares of ABHD as allowed by the Merger
Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Cash and Cash Equivalents</U> &ndash;
The Company considers all highly liquid debt instruments with a maturity of three months or less when acquired to be cash and cash
equivalents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Use of Estimates</U> &ndash; The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make certain estimates and assumptions that affect the reported amount 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 those estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Significant estimates are used in determining
the allowance for doubtful accounts and inventory allowance, in valuing the warrant liability, beneficial conversion features,
stock-based compensation and stock issued in the reverse merger and in determining the classification of conversion options embedded
in convertible promissory notes. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Concentration of Credit Risk</U> &ndash;
Credit risk represents the accounting loss that would be recognized at the reporting date if counter parties failed completely
to perform as contracted. Concentrations of credit risk that arise from financial instruments exist for groups of customers or
counter parties when they have similar economic characteristics that would cause their ability to meet contractual obligations
to be similarly affected by changes in economic or other conditions described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><I>Cash and cash equivalents &ndash; </I>Financial
instruments that subject the Company to credit risk are cash balances maintained in excess of federal depository insurance limits.
At December 31, 2011, the Company had $251,249 in cash or cash equivalent balances which were not guaranteed by the Federal Deposit
Insurance Corporation. To date, the Company has not experienced any losses in such accounts and believes the exposure is minimal.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><I>Major customers and accounts receivable &ndash;
</I>Major customers represent any customer that accounts for more than 10% of revenues for the year. During 2011, the Company
had two customers that accounted for 29% and 15%, respectively, of revenues and whose accounts receivable balances (unsecured)
accounted for approximately 0% and 42%, respectively, of accounts receivable at December 31, 2011. During 2010, the Company had
one customer that accounted for 23% of its revenues and whose accounts receivable balance (unsecured) accounted for approximately
12% of accounts receivable at December 31, 2010.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><I>Supplier &ndash; </I>Major suppliers represent
any vendor that accounts for more than 10% of purchases for the year. During 2011, the Company had two vendors that accounted
for 34% and 41%, respectively, of its purchases. Neither of these vendors had an accounts payable balance at December 31, 2011.
During 2010, the Company had two vendors that each accounted for more than 10% of its purchases at 14% and 11%, respectively.
Neither of these vendors had an accounts payable balance at December 31, 2010.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Fair Values of Financial Assets and
Liabilities</U>&ndash; The Company measures and discloses certain financial assets and liabilities at fair value. Authoritative
guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. Authoritative guidance also establishes a fair value hierarchy which requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels
of inputs that may be used to measure fair value:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><I>Level 1</I> &ndash; Quoted prices in active markets
for identical assets or liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><I>Level 2 </I>&ndash; Observable
inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of
the assets or liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><I>Level 3</I> &ndash; Unobservable
inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company estimates fair value of the
warrant liability using the Black-Scholes valuation model. Significant assumptions were determined as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">Expected term is determined under the simplified method
using an average of the contractual term and vesting period of the award as appropriate statistical data required to properly
estimate the expected term was not available;</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">Expected volatility is measured using the historical
weekly changes in the market price of the Company&rsquo;s common stock, disregarding identifiable periods of time in which share
price was extraordinarily volatile due to certain events that are not expected to recur during the expected term;</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">Risk-free interest rate is to approximate the implied
yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and,</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">Forfeitures are based on the history of cancellations
of warrants granted by the Company and management&rsquo;s analysis of potential future forfeitures.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Inventories</U> &ndash; 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. Inventory costs include raw materials, direct labor and manufacturing overhead. Provision is made for obsolete, slow-moving
or defective items where appropriate. The amount of any provision is recognized as an expense in the period the provision occurs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Warranty Accrual</U> &ndash; The Company&rsquo;s
products are subject to warranty periods of one year or less. The warranty accrual is based on management&rsquo;s best estimate
of expected costs associated with product failure and historical product failures. The Company has not incurred any significant
warranty claims to date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Fixed Assets</U> &ndash; Fixed assets,
stated at cost, are depreciated on the straight-line method for financial statement reporting purposes, over the estimated useful
lives of the assets, which range from three to ten years. Leasehold improvement costs are depreciated over the shorter of the lease
term or their useful life. Repairs and maintenance costs are expensed as incurred. Betterments or renewals are capitalized when
they occur.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Deferred Charges</U> &ndash; Deferred
charges are costs incurred in connection with the issuance of debt. These costs are capitalized as an asset and amortized over
the term of the debt using the effective interest method. Amortization expense related to these deferred charges totaled $142,836
in 2011 and $20,029 in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Revenue Recognition</U> &ndash; The
Company recognizes revenue only when all of the following criteria have been met:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">Persuasive evidence of an arrangement exists;</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">Delivery has occurred or services have been rendered;</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">The fee for the arrangement is fixed or determinable;
and</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left">&bull;</TD><TD STYLE="text-align: justify">Collectability is reasonably assured.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Persuasive Evidence of an Arrangement</I>
&ndash; The Company documents all terms of an arrangement in a quote signed or confirmed by the customer prior to recognizing revenue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Delivery Has Occurred or Services Have
Been Performed</I> &ndash; The Company performs all services or delivers all products prior to recognizing revenue. Services are
considered to be performed when the services are complete.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>The Fee for the Arrangement is Fixed
or Determinable</I> &ndash; Prior to recognizing revenue, a customer&rsquo;s fee is either fixed or determinable under the terms
of the quote or accepted customer purchase order.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Collectability Is Reasonably Assured</I>
&ndash; Collectibility is assessed on a customer by customer basis based on criteria outlined by management.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Allowance for Doubtful Accounts</U>
&ndash; The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers
to make required payments. The allowances are calculated based on a detailed review of individual customer accounts, historical
rates and an estimation of the overall economic conditions affecting the Company&rsquo;s customer base. The Company reviews a customer&rsquo;s
credit history before extending credit. If the financial condition of its customers were to deteriorate, resulting in an impairment
of their ability to make payments, additional allowances may be required. The allowance for doubtful accounts was $16,600 at December
31, 2011 and $14,600 at December 31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Customer Deposits</U> &ndash; The Company
receives from some distributors a one-time fee for the exclusive distribution rights to its products. In some cases, this nonrefundable
fee represents a prepayment by the distributor for future product purchases. In such cases the deposit is recognized as revenue
when products are shipped and the risks and rewards of ownership have been transferred or when the distributor forfeits the prepayment,
in accordance with the terms of the distribution agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Cost Recognition</U> &ndash; Cost of
revenues includes all direct material and labor costs and those indirect costs of bringing raw materials to sale condition, including
shipping and handling costs. Selling, general, and administrative costs are charged to operating expenses as incurred. Research
and development costs are expensed as incurred and are included in operating expenses. Advertising costs are expensed as incurred.
Total advertising costs for 2011 and 2010 were $23,792 and $14,811, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Long-Lived Assets</U> &ndash; The Company
evaluates long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset
may not be recoverable. When indicators of impairment are present and the undiscounted cash flows estimated to be generated by
those assets are less than the assets&rsquo; carrying amount, the Company measures the amount of such impairment by comparing the
assets' carrying value to the assets' present value of the expected future discounted cash flows. Impairment charges, if any, are
recorded in the period realized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt"><U>Income
Taxes</U> &ndash;Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between
the book and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted
tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances
are established to reduce a deferred tax asset to the amount expected to be realized. The Company assesses its ability to realize
deferred tax assets based on current earnings performance and on projections of future taxable income in the relevant tax jurisdictions.
These projections do not include taxable income from the reversal of deferred tax liabilities and do not reflect a general growth
assumption but do consider known or pending events, such as the passage of legislation. The Company&rsquo;s estimates of future
taxable income are reviewed annually.</FONT> <FONT STYLE="font-size: 10pt">All tax positions are first analyzed to determine if
the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including
resolution of any related appeals or litigation processes. After the initial analysis, the tax benefit is measured as the largest
amount that is more than 50% likely of being realized upon ultimate settlement. Our income tax returns are subject to adjustment
under audit for approximately the last four years.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If the Company is required to pay interest on the underpayment
of income taxes, the Company recognizes interest expense in the first period the interest becomes due according to the provisions
of the relevant tax law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If the Company is subject to payment of
penalties, the Company recognizes an expense for the amount of the statutory penalty in the period when the position is taken on
the income tax return. If the penalty was not recognized in the period when the position was initially taken, the expense is recognized
in the period when the Company changes its judgment about meeting minimum statutory thresholds related to the initial position
taken.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Stock-Based Compensation</U> &ndash;
All share-based payments to employees, including grants of employee stock options, are expensed based on their estimated fair values
at grant date, in accordance with ASC 718.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Compensation expense for stock options
is recorded over the vesting period using the estimated fair value on the date of grant, as calculated by the Company using the
Black-Scholes model. The Company classifies all share-based awards as equity instruments and recognizes the vesting of the awards
ratably over their respective terms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">See Note 11 for a description of the Company&rsquo;s
share-based compensation plan and information related to awards granted under the plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt"><U>Net
Loss Per Share</U> &ndash; Basic net loss per share is computed by dividing net loss attributable to common shareholders by
the weighted average number of shares of common stock outstanding during the period. The calculation of basic loss per share
gives retroactive effect to the recapitalization related to the reverse acquisition of AbTech Industries by AbTech
Holdings.</FONT> <FONT STYLE="font-size: 10pt">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 2011 and 2010 would be anti-dilutive. These
potentially dilutive securities include Series A Preferred Stock, options, warrants and convertible promissory notes (see
Notes 10 and 11), and total 31,667,254 shares at December 31, 2011 and 19,271,902 shares at December 31, 2010.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Conversion Options</U> &ndash; The Company
bifurcates conversion options embedded in financial instruments and accounts for them at fair value when required. The Company
has determined that none of its embedded conversion options require bifurcation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Imputed Interest</U> &ndash; A note
issued solely for cash equal to its face amount is presumed to earn the stated rate of interest. However, in some cases the parties
may also exchange unstated (or stated) rights or privileges, which are given accounting recognition by establishing a note discount
or premium account. In such cases, the Company imputes interest when required.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Business Combination</U> &ndash; The
Company has accounted for the reverse acquisition discussed above in accordance with ASC 805-40 (Reverse Acquisitions). Goodwill
is measured as the excess of the fair value of the consideration effectively transferred over the net amount of ABHD&rsquo;s recognized
identifiable assets and liabilities. The 10,000,000 shares of ABHD outstanding immediately prior to the reverse acquisition represent
the consideration transferred for the merger. Prior to the announcement of the merger, ABHD&rsquo;s stock had no material value.
No assets were acquired and liabilities assumed were insignificant. The Company estimated the value of the 10,000,000 shares transferred
in the acquisition to be $10,000, which the Company has recognized as goodwill at December 31, 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Recent Accounting Pronouncements </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">With the exception of those discussed below,
there have been no recent accounting pronouncements or changes in accounting pronouncements during the year ended December 31,
2011, that are of significance, or potential significance, to the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In December 2010, the FASB issued authoritative
guidance clarifying the determination of the impairment of goodwill and the related calculation of that impairment (&ldquo;Step
2&rdquo;) when entities have reporting units with zero or negative carrying amounts. For entities with reporting units with zero
or negative carrying values, Step 2 is required if it is more likely than not that a goodwill impairment exits. The adoption of
this guidance had no material effect on the Company&rsquo;s financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May 2011, the FASB issued authoritative
guidance regarding measurement of fair value and for disclosing information about fair value measurements. Application of the highest
and best use and valuation premise concepts are clarified for use in measuring the fair value of nonfinancial assets and are not
relevant when measuring the fair value of financial assets or of liabilities. New disclosures should disclose quantitative information
about the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy.
This guidance becomes effective for the Company for fiscal years and interim periods within those years beginning in 2012. The
Company does not anticipate adoption of this guidance will have a material effect on the Company&rsquo;s financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In September 2011, the FASB issued authoritative
guidance providing the option to first assess qualitative factors when testing goodwill for impairment. Entities have the option
to first evaluate qualitative factors to determine whether the existence of events or circumstances, that in totality, would be
more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative evaluation determines
it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step
impairment test is unnecessary. This guidance becomes effective for the Company for fiscal years and interim periods within those
years beginning in 2012. The Company does not anticipate adoption of this guidance will have a material effect on the Company&rsquo;s
financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>NOTE 2 &ndash; GOING CONCERN</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="text-underline-style: none"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying consolidated financial
statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. As shown in the consolidated financial statements, the Company has incurred ongoing net losses since
inception. These losses, with the associated substantial accumulated deficit, are a direct result of the Company&rsquo;s product
development activities and the costs of introducing its technologies to the market and pursuing market acceptance. In view of these
matters, realization of a major portion of the assets in the accompanying consolidated balance sheets is dependent upon continued
operations of the Company which in turn is dependent upon the Company&rsquo;s ability to meet its financing requirements, and the
success of its future operations. The Company operates in a new, developing industry with a variety of competitors. These factors
raise substantial doubt about the Company&rsquo;s ability to continue as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management believes that the Company&rsquo;s
ability to continue as a going concern will be dependent on its ability to raise additional capital and/or generate significant
sales growth in the short term. The Company&rsquo;s ability to achieve these objectives cannot be determined at this time. Management&rsquo;s
plans in regard to these matters are described as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Sales and Marketing</I>. Historically,
the Company has selected qualified distributors to represent its products in key geographic markets. The recent economic downturn
and other factors have led to a significant contraction in sales revenue as municipalities, the Company&rsquo;s primary customers,
experienced severe budgetary and financial constraints. In an attempt to reinvigorate sales, the Company has redirected its focus
on multiple market segments and has revised its go-to-market strategy by disengaging distributors with exclusive geographic territories,
in favor of new alliances with larger, market-dominant companies to cover entire market segments such as municipal stormwater,
federal facilities and industrial process water. In early 2011, the Company signed its first such distribution agreement with Waste
Management, Inc., a company that has a major presence in the public sector market. Under this distribution agreement, market rollout
was initiated in three market areas during 2011 and is planned to move into other areas of the country during 2012. The Company
is also making efforts to expand into specific foreign markets and new markets addressing treatment of contaminated water.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Financing.</I> To date, the Company
has financed its operations primarily with loans from shareholders, private placement financings and sales revenue. During 2011,
the Company raised $825,000 in a private offering of common stock, raised $1,722,100 in a series of transactions that allowed the
Company to repay or convert to stock approximately $1,350,000 of debt, raised $700,000 in a private offering of convertible promissory
notes and raised $4,000,000 in a private offering of secured convertible promissory notes. In February, 2012, the Company received
an additional $2,600,000 in the final closing of the private offering of secured convertible promissory notes. Management believes
that with continued field validation successes, an improving economy, federal regulatory approval of the Company&rsquo;s antimicrobial
technologies, and new strategic alliances with companies that are dominant in key market sectors, sales revenue can grow rapidly,
thus enabling the Company to reverse its negative cash flow and raise additional capital as needed. There is no assurance that
the Company can achieve sustainable operations or that additional capital, if needed, will be available on acceptable terms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B><U>NOTE 3 - INVENTORIES</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Inventories consist of the following at December 31:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 80%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: justify">Raw materials</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">76,381</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">85,711</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Work in process</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">446,538</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">394,540</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify">Finished goods</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">106,625</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">221,791</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Reserve for obsolescence</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(101,535</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(133,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt; padding-left: 0.24in">Total</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">528,009</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">569,042</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>NOTE 4 - FIXED ASSETS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Fixed assets consist of the following at December 31:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 80%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: justify">Furniture and fixtures</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">128,093</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">128,093</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Computer equipment</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">61,831</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">58,231</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify">Machinery and equipment</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">250,986</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">242,980</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Leasehold improvements</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">19,348</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">19,348</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify">Total</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">460,258</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">448,652</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Less accumulated depreciation</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(410,773</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(383,138</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Net book value</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">49,485</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">65,514</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Depreciation expense charged to operations during 2011 and 2010
was $27,635 and $27,423, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>NOTE 5 - COMMITMENTS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Capital Leases</U></I> &ndash; As
of December 31, 2011 and 2010 the Company had no assets under capital lease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Operating Leases</U></I> &ndash;
The Company leases office and warehouse space, office equipment and an automobile under various noncancelable operating leases
that extend through February 2013. Total rental expense charged to operations during the years ended December 31, 2011 and 2010
were $271,906 and $259,944, respectively. Future annual minimum lease payments for the next five years, under noncancelable operating
leases with initial or remaining terms of one year or more, as of December 31, 2011, are as follows: 2012: $273,008; and 2013:
$29,278; Total: $302,286.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Indemnification Agreements</U> -
</I>The Company enters into indemnification provisions under its agreements with officers and directors and companies in its ordinary
course of business, typically with business partners, customers, landlords, lenders and lessors. Under these provisions the Company
generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result
of the Company&rsquo;s activities or, in some cases, as a result of the indemnified party&rsquo;s activities under the agreement.
The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is
unlimited. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements.
As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities
recorded for these agreements as of December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Other Commitments</U></I> &ndash;
The Company has other commitments for consulting fees that extend through 2012 amounting to $90,400. These commitments are cancellable
on 15-30 days notice.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>NOTE 6 - LOANS FROM SHAREHOLDERS
</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Loans from shareholders at December 31,
2011 and 2010 consist of one and four, respectively, short-term loans made by Directors of the Company to the Company or its subsidiary,
ESC with balances of $9,000 and $180,500 respectively. These loans are unsecured and the single loan remaining as of December 31,
2011 was non-interest bearing and &ldquo;due on demand.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>NOTE 7 - RELATED PARTY TRANSACTIONS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Accounts receivable; related party</U></I>
&ndash; represents amounts due from distributors owned by certain ABHD stockholders. Management deems the remaining balance at
December 31, 2011, net of reserves taken, to be collectible.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Royalty Agreement</U></I> &ndash;
In 2009, the Company entered into a Royalty Agreement (the &ldquo;Agreement&rdquo;) with Hydrophix of California (&ldquo;Hydrophix&rdquo;),
a distributor owned by two stockholders of the Company. The Agreement requires the Company to pay to Hydrophix a royalty equal
to 5-10% of revenues generated by AbTech on certain products sold by AbTech, up to a maximum total royalty of $1,086,000. The first
$104,665 of royalties due under the Agreement is to be retained by AbTech as payment for outstanding amounts due from Hydrophix.
The term of the Agreement is ten years or the date on which total royalty payments reach $1,086,000. As of December 31, 2011, $1,906
of royalties had been earned by Hydrophix and applied under this Agreement to amounts due from Hydrophix. The remaining $102,759
due from Hydrophix, that is to be offset by future royalties payments due under the Agreement, is included in &ldquo;<I>Prepaids
and other current assets</I>&rdquo; net of a $77,000 reserve.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Due to related party</U></I> &ndash;
represents amounts owed to a related company for services provided in the form of office and clerical support, and cash advances.
On December 31, 1998, the Company executed a loan document in the amount of $127,353, with an original maturity date of December
31, 2003 (extended to December 31, 2013), with interest accruing at the rate of 5% per annum until the loan is paid in full. In
the event of default of principal or interest, the entire unpaid balance, including principal and interest, will be due and payable
without notice, with interest accruing at 8% from the date of default.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Convertible Promissory Notes</U></I> &ndash; In 2011,
director purchase a Convertible Note and accompanying warrant for 333,333 shares, for $500,000 in the July Offering (see Note 14
&ndash; PRIVATE PLACEMENTS). $200,000 of the purchase price was remitted in the form of a non-interest bearing Senior Convertible
Promissory Note due from AbTech Industries in the amount of $200,000. In 2011, a Convertible Note held by this director in the
principal amount of $100,000 was purchased by another investor and converted with interest into 198,980 shares of Company common
stock. Refer to Note 10 &ndash; CONVERTIBLE PROMISSORY NOTES for a summary of debt held
by related parties at December 31, 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Equity- </U></I>In 2011, the Company granted 16,000 shares
of common stock to a director for financial services provided by the director to the company. The shares were valued at $0.42 per
shares and recorded as stock issued for services. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Stock Options </U></I>&ndash; All of the 4,734,300 stock
options granted by the Company in 2011 were granted to directors and officers of the company (see Note 11 &ndash; STOCKHOLDERS&rsquo;
EQUITY AND STOCK-BASED COMPENSATION).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>NOTE 8 &ndash; ACCRUED EXPENSES</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accrued expenses consist of the following at December 31:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 80%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: justify">Accrued payroll</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">62,180</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">53,860</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Deferred rent</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">21,941</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">36,172</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify">Accrued vacation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">32,692</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">26,307</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Accrued warranty reserve</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Other accruals</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">977</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">4,218</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">122,790</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">125,557</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>NOTE 9 - INCOME TAXES</U> </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There is no current or deferred tax expense
for the years ended December 31, 2011 and 2010 due to the Company&rsquo;s loss position and the full reserve taken on the Company&rsquo;s
deferred tax asset in both years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A reconciliation of statutory rates is
as follows at December 31:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; text-indent: 0; padding-left: 0; width: 72%">Statutory Rate</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">34.0</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">34.0</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; text-indent: 0; padding-left: 0">State income taxes, net of federal income tax benefit</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5.0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5.0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; text-indent: -0.12in; padding-left: 0.12in">Reduction in valuation allowance related to net operating loss carry-forwards and change in temporary differences</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-39.0</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-39.0</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt; padding-left: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">0.0</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">0.0</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The tax effects of temporary differences
that give rise to deferred tax assets (liabilities) are as follows at December 31:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 80%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify">Deferred tax assets (liabilities):</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: justify; padding-left: 0.12in">Net operating loss carryforwards</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">10,447,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">9,154,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 0.12in">Accumulated depreciation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(13,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(13,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Less valuation allowance</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(10,434,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(9,141,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Net deferred tax assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the years ended December
31, 2011 and 2010, net deferred tax benefit was approximately $1,293,000 and $520,000, respectively. At December 31, 2011
and 2010, the Company has federal loss carryforwards of approximately $27.9 million and $24.6 million, respectively, and
state loss carryforwards of approximately $12.5 million and $9.6 million, respectively, which are available to reduce future
taxes, if any. These net operating loss carryforwards expire through 2031 and 2016, respectively. <FONT STYLE="color: black">The
net change in the total valuation allowance for the years ended December 31, 2011 and 2010, was a net increase of
approximately $1,293,000 and $520,000, respectively. Based on the Company&rsquo;s loss position and projection of future
taxable income, management believes that it is more likely than not that the Company will not fully realize the benefit of
its net deferred tax assets. </FONT>Pursuant to Internal Revenue Code Section 382, annual utilization of the Company&rsquo;s
net operating loss carryforwards may be limited if a cumulative change in ownership of more than 50% is deemed to occur
within any three-year period. The Company believes that the Reverse Acquisition Transaction will not cause any limitation on
future utilization of net operating loss carryforwards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>NOTE 10 &ndash; CONVERTIBLE PROMISSORY NOTES</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At December 31, 2011 and December 31, 2010
the Company had promissory notes outstanding of $6,372,763 and $5,321,545, respectively, convertible into shares of the Company&rsquo;s
common stock. The conversion rate, interest rate and maturity dates of the notes outstanding at December 31, 2011 are shown in
the table below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding-left: 0; text-indent: 0">Type of Financing</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Principal Amount</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Interest Rate</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Conversion Rate</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Maturity Date</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 0; text-indent: 0">Related Party</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 34%; font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Junior Convertible Notes</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">100,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">0</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">0.50</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 12%; font-size: 10pt; text-align: center; padding-left: 5.4pt">9/30/2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">750,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">3/31/2013</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">400,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">7/7/2013</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">12/19/2013</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">325,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">2/3/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">4/16/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">5/11/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;ABHD Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">500,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.60</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">4/30/2012</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; text-indent: -0.12in">&nbsp;Unamortized discount on ABHD Convertible Notes</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(21,319</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in; text-indent: 0">&nbsp;Subtotal - related party</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,459,681</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-indent: 0">Non-related party</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Note</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">55,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">4/8/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">100,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">11/25/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;ABHD Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.60</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">4/30/2012</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Secured ABHD Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">25,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">5/15/2012</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Secured ABHD Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">25,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">5/18/2012</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Secured ABHD Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">50,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">5/22/2012</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Secured ABHD Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">550,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">6/3/2012</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Secured ABHD Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">675,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">6/19/2012</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Secured ABHD Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">650,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">7/24/2012</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Secured ABHD Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,645,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">8/18/2012</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Secured ABHD Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">380,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.70</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">8/24/2012</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; text-indent: -0.12in">&nbsp;Unamortized discount on Secured ABHD Notes</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(441,918</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.24in; text-indent: 0">Subtotal - non-related party</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,913,082</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 0.6in; text-indent: 0">Total</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">6,372,763</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The conversion rate, interest rate and
maturity dates of the notes outstanding at December 31, 2010 are shown in the table below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding-left: 0; text-indent: 0">Type of Financing</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Principal Amount</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Interest Rate</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Conversion Rate</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Maturity Date</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 0; text-indent: 0">Related Party</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 34%; font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Junior Convertible Notes</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">1,156,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">0</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">2.65</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 12%; font-size: 10pt; text-align: center; padding-left: 5.4pt">9/30/2011</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">750,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">3/31/2013</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">400,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">7/7/2013</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,001</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">8/27/2013</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">12/19/2013</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">325,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">2/3/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">4/16/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">5/11/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">500,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt; padding-left: 5.4pt">6/26/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Subtotal - related party</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,737,001</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 0; text-indent: 0">Non-related party</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">100,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">10/3/2013</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">100,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">1/8/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">50,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">10/3/2013</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Note</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">55,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">4/8/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Note</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">100,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">5/8/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">50,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">6/12/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">50,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">11/5/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">100,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">11/25/2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Note</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">100,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">2/5/2015</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">185,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">2/9/2015</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Note</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">25,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">2/12/15</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Note</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">300,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">4/13/15</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Note</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">125,865</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">7/15/15</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Senior Convertible Note</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">35,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">9/10/15</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Promissory Note</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">83,679</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">8/2/10</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Promissory Note</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">100,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 5.4pt">8/26/10</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in; text-indent: 0">&nbsp;Promissory Note</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">25,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt; padding-left: 5.4pt">5/2/11</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in; text-indent: 0">Subtotal - non-related party</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,584,544</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 0.6in; text-indent: 0">Total</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">5,321,545</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The terms of the various types of convertible
notes included in the tables above are described as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Junior Convertible Notes and Senior
Convertible Notes</U></I> &ndash; These notes are convertible into shares of AbTech Series A preferred stock and, consequently,
into shares of ABHD common stock. The conversion rate shown in the table above reflects the rate at which the notes could be converted
into shares of ABHD common stock. The notes are due in full at maturity but may be prepaid at any time prior to the maturity date
with proper notice to the note holder. In the event of liquidation of AbTech, the Senior Convertible Notes have priority in right
of payment over the Junior Convertible Notes. Additionally, holders of Senior Convertible Notes have priority over any amounts
due stockholders of AbTech, regardless of the form of payment which may be due. Two notes included in the table above have maturity
dates prior to December 31, 2011, however, each of the note holders has indicated their intention to convert the notes in accordance
with their terms in 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>ABHD Convertible Notes</U></I> &ndash;
These notes were issued as part of the July Offering (see Note 14 - PRIVATE PLACEMENTS).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Secured ABHD Convertible Notes</U></I>
&ndash; These notes were issued in the September Offering (see Note 14 - PRIVATE PLACEMENTS).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Aggregate maturities of debt obligations
commencing in 2012 are:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 50%">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 20%; font-size: 10pt; text-align: right">4,800,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 19%; font-size: 10pt; text-align: right">1,350,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 19%; font-size: 10pt; text-align: right">686,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 19%; font-size: 10pt; text-align: right">6,836,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>NOTE 11 &ndash; STOCKHOLDERS&rsquo; EQUITY AND STOCK-BASED
COMPENSATION</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Stock Options</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company grants stock options to officers,
directors, employees and consultants under stock plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>AbTech&rsquo;s 2007 Stock Plan</B> -
Prior to the Merger with ABHD, AbTech issued stock options under a plan ( the &ldquo;2007 Stock Plan&rdquo;) that allowed up to
15% of the capital stock outstanding of AbTech to be available for awards granted under the plan. Options granted under the plan
expire on the earlier of the stated expiration date or, in the case of incentive stock options, ninety days after the date employment
ends or, in the case of non-statutory options, 30 days after the optionee ceases to be a service provider to the Company. The stated
expiration dates occur between 2012 and 2020. Stock options were granted at the fair market value of the common stock as determined
by the Board of Directors on the date of grant and are exercisable subject to vesting provisions and performance objectives. All
outstanding stock options granted by AbTech outstanding as of the date of the reverse acquisition transaction with ABHD automatically
convert into options for the purchase of shares of ABHD common stock at the rate of 5.32 shares of ABHD stock for each share of
AbTech stock. ABHD will issue new authorized shares for the AbTech stock options exercised after February 10, 2011, the date of
the Merger.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>ABHD&rsquo;s 2012 Incentive Stock Plan</B>
&ndash; In December 2011, the Board of Directors of ABHD approved the 2012 Incentive Stock Plan (the &ldquo;2012 Plan&rdquo;),
which allows for up to 9,000,000 shares of common stock awards to be granted during the term of the plan. The exercise price of
options granted under the 2012 Plan is determined by the 2012 Plan Committee and may not be less than 100% of the fair market value
of the common stock of ABHD on the grant date. Options expire not more than 10 years from the date of grant. Options granted under
the plan have a minimum vesting period of one year from the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the years ended December 31, 2011 and
2010, compensation expense of $77,532 and $163,420, respectively, for stock options accounted for under ASC 718 is included in
<I>Selling, general and administrative</I> expense in the consolidated statements of operations. There was no related tax benefit
recognized due to the Company&rsquo;s loss position. At December 31, 2011, the Company had approximately $1,338,963 of total unrecognized
compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of approximately
1.7 years. No cash was received from the exercise of stock options during 2011 or 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Compensation expense was determined from
the estimates of fair values of stock options granted using the Black-Scholes option pricing model. The following table summarizes
the weighted average of fair value and the significant assumptions used in applying the Black-Scholes model for options granted
in 2011 and 2010:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 90%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">Weighted average of fair value for options granted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: left; padding: 0 0 0 0.36in; text-indent: 0">AbTech Options &nbsp; &nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">0.90</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.36in; text-indent: 0">ABHD Options</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.27</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.12</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding: 0; text-indent: 0">Weighted average assumptions used:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding: 0 0 0 0.12in; text-indent: 0">Expected dividend yield</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding: 0 0 0 0.12in; text-indent: 0">Expected volatility</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">81.5</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">13.0-15.0%</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding: 0 0 0 0.12in; text-indent: 0">Risk-free interest rate</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.9</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2.1</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0 0 0 0.12in; text-indent: 0">Expected life (in years)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5.0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">8.7</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The assumptions for expected dividend yield,
expected volatility and expected term reflect management&rsquo;s judgment and include consideration of historical experience. Expected
volatility is based on historical volatility of the Company&rsquo;s shares and the historical volatility of public companies or
mutual funds operating in similar markets. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s stock option activity
for the years ending December 31, 2011 and 2010 is summarized below:&#9;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>AbTech Options &ndash; </B>Share amounts
and exercise prices included in this table are stated in terms of AbTech shares as originally issued. The ABHD equivalent number
of shares is approximately 5.32 times the number of AbTech shares and the ABHD equivalent exercise price is 1/5.32 times the AbTech
exercise price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Number of AbTech Shares Under Option</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Weighted Average Exercise Price</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Weighted Average Remaining Term</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 58%; font-size: 10pt; text-align: justify">Balance at December 31, 2009</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">780,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">3.74</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">4.97</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 0.12in">&nbsp;Granted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">621,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 0.12in">&nbsp;Exercised</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 0.12in">&nbsp;Forfeited or expired</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(400,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3.72</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify">Outstanding at December 31, 2010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,001,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3.75</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6.56</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 0.12in">&nbsp;Forfeited or expired</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(494,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3.75</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Outstanding at December 31, 2011</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">507,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">3.75</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">3.45</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2011, there were 507,000
stock options outstanding and exercisable with a weighted average remaining life of 3.45 years and an intrinsic value of $0.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>ABHD Options</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Number of ABHD Shares Under Option</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Weighted Average Exercise Price</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Weighted Average Remaining Term</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify">Balance at December 31, 2009</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 58%; font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 0.12in">&nbsp;Granted</TD><TD STYLE="width: 2%; font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">640,000<SUP></SUP></TD><TD STYLE="width: 1%; padding-bottom: 1pt; font-size: 10pt; text-align: left"><SUP>&nbsp;(1)</SUP></TD><TD STYLE="width: 2%; font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">0.55</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify">Outstanding at December 31, 2010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">640,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.55</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4.86</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 0.12in">&nbsp;Granted</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">4,734,300</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">0.42</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Outstanding at December 31, 2011</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">5,374,300</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">0.44</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">9.58</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><SUP>(1)</SUP></TD><TD STYLE="text-align: justify">These options were previously excluded, however, the
exclusion had no effect on the consolidated statement of operations as the options did not begin to vest until 2011.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2011, there were 5,374,300
stock options outstanding with a weighted average remaining life of 9.6 years and an intrinsic value of $0. As of December 31,
2011, there were approximately 320,000 options exercisable with a weighted average remaining life of 3.86 years and an intrinsic
value of $0. Of the non-exercisable stock options outstanding at December 31, 2011, 3,865,000 stock options vest over time between
2012 and 2015 and 1,189,300 stock options vest only upon the Company achieving specific performance objectives in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table summarizes the activity
of the shares and weighted-average grant date fair value of the Company&rsquo;s non-vested common stock options during the years
ending December 31, 2011 and 2010:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Non-vested AbTech Shares</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Non-vested ABHD Shares</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Number of Shares</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Weighted- <BR>average <BR>grant date <BR>fair value</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Number of Shares</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Weighted <BR>-average <BR>grant date <BR>fair value</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 44%; font-size: 10pt; text-align: justify">Non-vested at December 31, 2009</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">267,999</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1.49</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 0.12in">&nbsp;Granted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">621,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.90</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">640,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.12</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 0.12in">&nbsp;Vested</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(185,999</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.88</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 0.12in">&nbsp;Forfeited or expired</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(233,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1.45</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify">Non-vested at December 31, 2010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">470,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.96</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">640,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.12</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 0.12in">&nbsp;Granted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4,734,300</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.27</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 0.12in">&nbsp;Vested</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(75,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.53</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(320,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.12</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 0.12in">&nbsp;Forfeited or expired</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(395,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1.04</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Non-vested at December 31, 2011</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">5,054,300</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">0.27</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Common stock </U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In conjunction with the Merger that occurred
in February 2011, the Company sold 2,320,000 shares of common stock for $2,320,000 of cash, of this amount 1,495,000 shares were
issued during 2010 and 825,000 shares were issued during 2011 (see Note 12 - REVERSE ACQUISITION TRANSACTION).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Warrants</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2011 the Company issued the following
warrants:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Thirty investors participating in the September Private
Placement (see Note 14 - PRIVATE PLACEMENTS) received warrants to purchase 2,666,667 shares of ABHD common stock. In addition,
the placement agent received warrants to purchase 533,333 shares of ABHD common stock.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Three individuals participating in the July Offering
(see Note 14 - PRIVATE PLACEMENTS) received warrants to purchase 466,666 shares of ABHD common stock.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Two individuals received warrants to purchase 530,000
shares of ABHD common stock as compensation for consulting services provided to the Company. These warrants have an exercise price
of $0.50 per share. One warrant for 30,000 shares expires on July 23, 2013 and the other warrant for 500,000 shares expires on
February 28, 2014. Compensation expense related to these warrants of $58,014 was included in <I>Selling, general and administrative
</I>expense in the consolidated statements of operations.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2010 the Company issued the following
warrants:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Four individuals received warrants to purchase 130,000
shares of AbTech common stock as compensation for consulting services provided to the Company. Warrants for 120,000 shares have
an exercise price of $4.25 per share and are exercisable at any time prior to January 11, 2015. Warrants for 10,000 shares have
an exercise price of $3.75 per share and are exercisable at any time prior to April 17, 2015. Compensation expense related to
these warrants of $68,024 was included in <I>Selling, general and administrative</I> expense in the consolidated statements of
operations.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">One individual received a warrant to purchase 10,933
shares of AbTech common stock with an exercise price of $3.75 per share as a finder&rsquo;s fee in conjunction with raising capital.
The warrants are exercisable at any time prior to April 7, 2015 and April 30, 2015, respectively. Compensation expense related
to this warrant of $7,821 was included in <I>Other income (expense)</I> in the consolidated statements of operations.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All outstanding warrants issued by AbTech
are automatically converted in to warrants for ABHD common stock at a conversion rate of approximately 5.32 shares of ABHD for
each share of AbTech.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A summary of common stock warrants and
Series A Preferred Stock warrants outstanding at December 31 is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">AbTech Warrants</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">ABHD Warrants</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Number of <BR>Warrants</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Weighted-average Exercise Price</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Number of <BR>Warrants</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Weighted-average Exercise Price</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 44%; font-size: 10pt">Outstanding at December 31, 2009</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">830,777</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">4.19</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.12in">&nbsp;Granted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">140,933</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4.18</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0.12in">&nbsp;Exercised</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in">&nbsp;Forfeited or expired</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(20,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3.75</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Outstanding at December 31, 2010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">951,710</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4.20</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.12in">&nbsp;Granted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4,196,666</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">.59</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0.12in">&nbsp;Exercised</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in">&nbsp;Forfeited or expired</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(621,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">4.25</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">Outstanding at December 31, 2011</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">330,710</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">4.10</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">4,196,666</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">.59</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The 330,710 exercisable AbTech warrants
outstanding at December 31, 2011 expire at various dates through 2015 and have a weighted average remaining life of 2.5 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The 4,196,666 exercisable ABHD warrants
outstanding at December 31, 2011 expire at various dates through 2016 and have a weighted average remaining life of 4.5 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>AbTech Series A Convertible Preferred
Stock</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">AbTech has designated 3,500,000 of its
5,000,000 authorized preferred shares as Series A Convertible Preferred Stock (&ldquo;Series A Stock&rdquo;) and has 1,439,614
of such shares issued and outstanding at December 31, 2011. These shares represent the non-controlling interest in the Company&rsquo;s
subsidiary as shown on the Consolidated Balance Sheets and Consolidated Statements of Operations. Series A Stock has a par value
of $0.01 and no liquidation or dividend preferences.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The holders of Series A Stock may at any
time elect to convert any or all such shares into common shares of the Company at a conversion rate initially set at one share
of common stock for each share of Series A Stock, subject to certain anti-dilution adjustments that protect Series A Stockholders
if the Company issues new shares at less than $3.75 per share. The Series A Stock will automatically convert into common shares
upon either (a) the closing of a firm underwritten public offering, (b) subsequent listing on the New York Stock Exchange or the
NASDAQ Global Market, or (c) upon the sale or transfer of substantially all the assets or the consolidation or merger with an entity
solely for cash or solely for cash and securities listed on the New York Stock Exchange or the NASDAQ Global Market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">While Series A Stockholders have no
voting rights as ABHD stockholders, they do have specific rights pertaining to the governance of AbTech, ABHD&rsquo;s
subsidiary. As long as Series A Stockholders hold, on a converted basis, at least 8% of the Common Stock of the Company, they
will be granted a pre-emptive right to maintain their respective ownership percentages, as determined on a fully-diluted
basis, in subsequent sales of Common Stock or Common Stock Equivalents conducted by the Company. Series A Stockholders have a
right to designate up to three Directors to the Board of Directors (Series A Directors) and the Series A Directors are
entitled to choose at least one member of the Audit Committee and one Member of the Compensation Committee. Corporate
governance provisions were also modified to require various levels of supermajority approval by the Board for specific, major
actions taken by the Company. For some actions, approval of 2/3<SUP>rds</SUP> of the Series A Directors is required.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Common shares reserved for future
issuance</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2011, ABHD common shares
reserved for future issuance were as follows (all shares are stated in ABHD share equivalent):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 80%">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 86%; font-size: 10pt; text-align: justify; padding-left: 0; text-indent: 0">Conversion of convertible AbTech preferred stock</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">7,664,193</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 0; text-indent: 0">Shares issuable upon conversion of debt</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">9,972,309</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 0; text-indent: 0">Stock options outstanding</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">8,073,458</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 0; text-indent: 0">Warrants to purchase common stock</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5,957,294</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt; padding-left: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">31,667,254</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 12 &ndash; REVERSE ACQUISITION TRANSACTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 10, 2011, ABHD closed a reverse
acquisition transaction (the &ldquo;Merger&rdquo;) with its wholly-owned subsidiary, Abtech Merger Sub, Inc., and AbTech pursuant
to an Agreement and Plan of Merger dated July 17, 2010. As a result of the Merger, ABHD acquired all of the issued and outstanding
common stock of AbTech in exchange for the common stockholders of AbTech (including Series A preferred stockholders and holders
of convertible debt with rights to convert their holdings into shares of AbTech common stock) acquiring an approximate 78% ownership
interest in ABHD. In addition, AbTech became the &ldquo;Surviving Corporation&rdquo; a majority-owned subsidiary of ABHD, and ABHD
acquired the business and operations of AbTech.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><I>Issuance of Common Stock &ndash; </I>At the closing
of the Merger, ABHD issued 32,009,801 shares of its common stock to the stockholders of AbTech in exchange for 100% of the issued
and outstanding common stock of AbTech. Immediately prior to the Merger, ABHD had 10,000,000 shares of common stock issued and
outstanding, excluding the shares issued as part of a $3 million funding required by the Merger Agreement. $1,645,000 of the $3
million funding was received by ABHD prior to closing ($150,000 of the $1,645,000 was received after December 31, 2010). The financier
issued a promissory note (the &ldquo;Note&rdquo;) to ABHD for the $1,355,000 balance of the financing commitment which was to
be funded in cash after the Merger closing. The Note was secured by a total of 1,145,000 shares of ABHD common stock pledged by
the financier (the &ldquo;Collateral&rdquo;). ABHD elected to hold the Note as a funding commitment only and did not record the
Note or issue any shares in exchange for the Note. Subsequent to the date of the merger ABHD received $675,000 of the remaining
$1,355,000 due on the Note. Of the 675,000 common shares due to investors for these payments, the Company issued 500,000 shares
and held the remaining 175,000 shares as additional collateral for the Note. In May of 2011, the financier defaulted on the $680,000
balance due on the Note, released 509,300 shares of the Collateral and relinquished its rights to the 175,000 shares of additional
collateral held by the Company.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><I>Conversion of AbTech&rsquo;s Preferred Stock</I>
&ndash; At the effectiveness of the Merger, 1,439,614 shares of Series A Preferred Stock (&ldquo;Preferred Stock&rdquo;) of AbTech
outstanding immediately prior to the Merger were converted into 1,439,614 shares of preferred stock of Surviving Corporation (i.e.
AbTech, post-Merger). The privileges, rights, and preferences of the Preferred Stock were not affected or altered by such conversion.
Accordingly, the Preferred Stock may be converted at any time into common shares of AbTech as the Surviving Corporation and subsequently
such common shares of the Surviving Corporation will be exchanged for shares of the common stock of ABHD at the same exchange
rate in effect for common shares of AbTech at the date of the Merger (the &ldquo;Merger Consideration&rdquo;). The preferred stockholders
that elected to not convert and exchange their shares for ABHD common shares, represent the non-controlling interest shown on
the Consolidated Balance Sheet as of December 31, 2011. Because the consolidated balance sheet as of December 31, 2010 has been
restated to give retroactive effect to the Merger, the common stock shown as of December 31, 2010 includes the par value ($.001
per share) of the 10,000,000 shares of ABHD stock outstanding at the time of the merger plus all shares of AbTech common and preferred
stock outstanding as of the December 31, 2010, as if converted into ABHD common shares at the Merger exchange rate. Because some
of the preferred stockholders of AbTech elected to not convert their shares to ABHD common stock at the time of the Merger, the
consolidated balance sheet as of December 31, 2011 shows a decrease in the amount of common stock outstanding.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>
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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><I>Conversion of AbTech&rsquo;s Warrants &ndash;
</I>At the effectiveness of the Merger, 480,266 warrants to purchase AbTech common stock outstanding immediately prior to the
Merger were converted into warrants to purchase 2,557,153 shares of common stock of ABHD. At the effective time of the Merger,
471,444 warrants to purchase AbTech Preferred Stock outstanding immediately prior to the Merger were converted into warrants to
purchase 471,444 shares of preferred stock of the AbTech as the Surviving Corporation. The aggregate exercise price and other
terms of such warrants were not affected or altered by such conversion and, upon exercise of any such warrants, the shares of
preferred stock received upon such exercise would be convertible at any time for common shares of AbTech, whereupon such common
shares would be exchanged for the Merger Consideration.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><I>Conversion of AbTech&rsquo;s Options &ndash; </I>
At the effectiveness of the Merger, options to purchase 992,000 shares of AbTech common stock outstanding immediately prior to
the Merger were converted into options to purchase 5,281,855 shares of common stock of ABHD. The aggregate exercise price and
other terms of such options were not affected or altered by such conversion.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><I>Conversion of AbTech&lsquo;s Convertible Debt</I>
&ndash; As of the closing of the Merger, $3,980,666 of outstanding notes of the Company that were convertible into Preferred Stock
of AbTech prior to the Merger were retained by the holders and $1,347,372 of such notes were converted into 1,919,315 shares of
common stock of ABHD.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 13 &ndash; DEBT REPAYMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In March 2011, the Company initiated an
offering to raise funds to repay approximately $1,960,000 of existing debt obligations of AbTech that were then due or would become
due during 2011 (the &ldquo;Targeted Notes&rdquo;). Investors in the offering (&ldquo;New Investors&rdquo;) were given the option
to either purchase a portion of the Targeted Notes and convert it immediately to ABHD common stock, or buy new convertible notes
from ABHD (the &ldquo;New Notes&rdquo;) that would convert to ABHD common stock. The intended objective was to complete the transactions
with the same net effect as if all the Targeted Notes were converted by their terms to ABHD common stock. Accordingly, the conversion
rate given New Investors for conversion of either the purchased Targeted Notes or the New Notes was a blended rate of approximately
$0.57 per share. The Company received $747,100 from New Investors interested in purchasing Targeted Notes. These funds were forwarded
to the Targeted Note Holders to purchase the Targeted Notes. The New Investors subsequently converted the purchased Targeted Notes
to 1,320,454 shares of ABHD common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, during the nine months ended
September 30, 2011, the Company received $975,000 from New Investors interested in buying New Notes. From these proceeds the Company
repaid approximately $604,100 of outstanding debt and used the balance of the funds for operating capital. The New Notes were all
automatically converted to shares of ABHD common stock resulting in the issuance of 1,723,255 shares of common stock by the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Due to the beneficial conversion feature
implied in these transactions, at the time of each investment by a New Investor the applicable Targeted Notes or New Notes were
discounted by the lesser of: (i) the intrinsic value of the beneficial conversion feature, or (ii) the proceeds realized from the
New Investor. These discounts aggregated $1,620,955 and were charged to additional paid in capital and interest expense. The Targeted
Notes that were purchased by New Investors and the New Notes issued to New Investors were converted by the New Investors into shares
of ABHD common stock during the second quarter of 2011 and upon such conversion the discounts were charged to income as interest
expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 14 &ndash; PRIVATE PLACEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Private Placement in July 2011</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In July
2011, the Company sold $700,000 of Convertible Promissory Notes (the &ldquo;July Offering&rdquo;). The Convertible
Promissory Notes (the &ldquo;Notes&rdquo;) bear interest at a rate of twelve percent (12%) per annum from the closing date through
April 30, 2012; fifteen percent (15%) per annum from May 1, 2012 through July 31, 2012 and eighteen percent (18%) per annum for
any period after July 30, 2012 that the Note remains outstanding. All interest accrued on the Notes will be due and payable at
maturity. Any Notes outstanding on November 1, 2012 will be redeemed in cash equal to the face amount plus any unpaid accrued interest
thereon. In the event of a Qualified Financing by the Company, as defined below, each subscriber in the Offering will have the
option to (i) convert their Note into the securities purchased by investors in a Qualified Financing at a 20% discount to the price
paid by investors in the Qualified Financing; or (ii) tender their Note to the Company for immediate repayment of principal and
accrued and unpaid interest. A &ldquo;Qualified Financing&rdquo; is defined as the sale for cash by the Company of debt or equity
securities generating aggregate gross proceeds of at least US $5,000,000 (including the proceeds from any converting Notes). In
the event that the Company does not close a Qualified Financing on or prior to November 1, 2012, the Note holder shall have the
option to convert the Note into shares of Company common stock at a conversion price equal to $0.60 per share (the &ldquo;Conversion
Price&rdquo;). The Company may, at any time on ten business days&rsquo; notice, repurchase any or all outstanding Notes in cash
for the face amount of such Notes, plus any unpaid, accrued interest thereon. Upon such notice from the Company, Note holders will
have 5 days to either convert the Notes in accordance with their terms or accept the cash repurchase price from the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each subscriber in the July Offering also
received a warrant for the purchase of the number of shares of the Company&rsquo;s common stock equal to forty percent (40%) of
the amount invested divided by the Conversion Price. In the event a Note remains outstanding as of April 30, 2012, the Note holder
will receive an additional warrant for 10% of the principal amount of the Note outstanding at that date divided by the Conversion
Price. In the event the Note remains outstanding as of July 31, 2012, the Note holder will receive an additional warrant for 10%
of the principal amount of the Note outstanding at that date divided by the Conversion Price. The warrants will have an exercise
price equal to the Conversion Price and a five year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Private Placement in September 2011</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">From
September 19 through December 31, 2011, the Company sold $4,000,000 of Secured Convertible Promissory Notes (the &ldquo;September
Offering&rdquo;). </FONT><FONT STYLE="font: 10pt Times New Roman, Times, Serif">The Secured Convertible Promissory Notes (the
&ldquo;Secured Notes&rdquo;) bear interest at a rate of twelve percent (12%) per annum and are due and payable in full on the
nine (9) month anniversary of issuance (the &ldquo;Original Maturity Date&rdquo;). The Company may extend the maturity date by
an additional ninety (90) day period (the &ldquo;First Extension Option&rdquo;), during which period the interest rate will increase
to fifteen percent (15%) per annum on the unpaid principal of the Secured Note. The Company may also extend the maturity date
by a second additional 90 day period (the &ldquo;Second Extension Option&rdquo;) during which period the interest rate shall increase
to eighteen percent (18%) per annum on the unpaid principal of the Secured Note. All interest accrued on the Secured Notes through
the Original Maturity Date will be payable by the Company on the Original Maturity Date in cash or in-kind, at the option of the
payee. For all periods after the Original Maturity Date, all accrued interest will be payable quarterly in cash by the Company.
The Secured Notes may be converted into shares of common stock of the Company at any time prior to a Qualified Financing at the
conversion rate of $0.70 per share (the &ldquo;Conversion Price&rdquo;). However, if the Company at any time while a Secured Note
is outstanding, issues any debt or equity securities (with certain exceptions) entitling investors to subscribe for, purchase,
or convert such securities into shares of Company common stock at a price per share less than the Conversion Price (the &ldquo;New
Securities Issuance Price&rdquo;) then the Conversion Price for such outstanding Secured Notes shall be reduced effective concurrently
with such issuance to the New Securities Issuance Price.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT>&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the event of a Qualified Financing by
the Company, as defined above, each subscriber in the September Offering will have the option to (i) convert their Secured Note
into the securities purchased by investors in a Qualified Financing at a 20% discount to the price paid by investors in the Qualified
Financing; or (ii) tender their Secured Note to the Company for immediate repayment of principal and accrued and unpaid interest.
The Secured Notes may be prepaid in whole or in part without the prior written consent of the payee at any time following not less
than ten (10) days prior written notice to the subscriber notifying the subscriber of the Company&rsquo;s decision to prepay the
Secured Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Secured Notes are secured by all of
the Company&rsquo;s right, title and interest in, to and under all personal property and other assets of the Company (the certain
exceptions to allow for potential financing arrangements for accounts receivable and inventory) pursuant to a Security Agreement
entered into by the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each subscriber in the September Offering
also received a warrant for the purchase of the number of shares of Company common stock equal to forty percent (40%) of the number
of shares of common stock into which the Secured Notes are convertible on the closing date of the Qualified Financing. In the event
a Secured Note remains outstanding beyond the Original Maturity Date, the Secured Note holder will receive an additional warrant
for 10% of the principal amount of the Secured Note outstanding at that date divided by the Conversion Price. The number of warrant
shares that the Payee will be entitled to under the terms of the warrant issued by the Company to subscribers in connection with
the September Offering shall be increased by ten percent (10%) for each Extension Option exercised by the Company. The warrants
will have an initial exercise price equal to the exercise price of the warrants purchased by investors in the Qualified Financing.
In the event the Holder elects to exercise the warrant prior to the consummation of a Qualified Financing, the number of shares
exercisable will be based on an assumed conversion price of $0.60 per share (the &ldquo;Assumed Conversion Price&rdquo;) and the
exercise price will be $0.60 per share (the &ldquo;Base Exercise Price&rdquo;). However, in the event that the Company issues shares
of common stock or common stock equivalents (with certain exceptions) at any time after the issuance of the warrant and prior to
a Qualified Financing at a price per share less than the Base Exercise Price (the &ldquo;New Securities Exercise Price&rdquo;)
then the Base Exercise Price and the Assumed Conversion Price shall each be reduced effective concurrently with such issuance to
the New Securities Exercise Price. Each warrant will be exercisable for a five (5) year period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Notes issued in connection with the
July Offering and the Secured Notes issued in connection with the September Offering have been discounted by the value of the detachable
warrants issued with the Notes and the Secured Notes. The value of the warrants was bifurcated from the value of the Notes and
shown separately as warrant liability because of certain down-round price protection features of the warrants. The warrant liability
value is revalued at each reporting period. The value of the warrants was estimated by applying the Black Scholes model and amounted
to $622,895. This corresponding note discount is amortized over the life of the Secured Notes using the effective interest method.
The amount of the discount amortized and charged to interest as of December 31, 2011 was $159,657. The estimated value of the warrants
upon grant is $741,028 and the estimated value of the warrant liability at December 31, 2011 is $498,976 (see Note 15 &ndash; FAIR
VALUE OF FINANCIAL INSTRUMENTS).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company paid the Placement Agent engaged
in connection with the September Offering a cash placement fee equal to eight percent (8%) of the aggregate purchase price paid
by each investor. This fee amounted to $320,000 for the $4,000,000 received through December 31, 2011. The placement agent will
also receive a cash fee equal to four percent (4%) of all amounts received by the Company in connection with the exercise by investors
of any warrants received by investors in connection with the September Offering. In addition to the placement agent fee, the Company
will issue to the placement agent warrants to purchase a number of shares of the Company&rsquo;s common stock obtained by dividing
eight percent (8%) of the gross proceeds from the sale of securities by the conversion price of the Secured Notes (the &ldquo;PA
Warrants&rdquo;). The PA Warrants issued in connection with the September Offering will have an exercise price per share equal
to the conversion price of the Secured Notes. The PA Warrants will expire five years from the date of issuance and will be in the
same form as the securities sold in the September Offering, except that the PA Warrants will include a &ldquo;net issuance&rdquo;
cashless exercise feature. As of December 31, 2011, PA Warrants for 533,333 shares of common stock were due to the placement agent.
The value of these warrants was estimated by applying the Black Scholes model and amounted to $118,133, upon grant. The balance
was recorded as a deferred financing charge and its estimated fair value at December 31, 2011 is included in the warrant liability
at December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>NOTE 15 &ndash;FAIR VALUE OF FINANCIAL INSTRUMENTS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s financial instruments
consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, convertible notes payable, notes
payable and warrant liability. It is management&rsquo;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 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 are reported in
other income (expense) as gain (loss) on change in fair value. The Company estimates the fair value of level 3 inputs using the
Black-Scholes valuation model using historical volatility as the method to estimate expected volatility. At December 31, 2011,
the Company had no financial instruments outstanding that were estimated using level 1 or level 2 inputs. The Company&rsquo;s warrant
liability was estimated using Level 3 inputs as shown in the reconciliation table below for the year ended December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Fair value measurements using significant unobservable inputs <BR>(Level 3)</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Description</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">Warrant Liability</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">Beginning balance, December 31, 2010</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 86%; font-size: 10pt; text-align: left; padding-left: 0.12in">&nbsp;Purchases, issuance and settlements</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">741,028</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in">&nbsp;Total (gains) or losses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(242,052</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in">&nbsp;Transfers in or out of Level 3</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">Ending balance, December 31, 2011</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">498,976</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company used the following assumptions
to estimate the fair value of the warrant liability at December 31, 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 80%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="width: 64%; border: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">Expected volatility</TD>
    <TD STYLE="width: 36%; border: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">81.45%</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="border: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">Expected dividend yield</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">0%</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="border: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">Expected term</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">2.3-2.5 years</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="border: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify">Risk-free interest rate</TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">.83%</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has determined that the Black-Scholes
model used to calculate the fair value of the warrant liability provides a reasonable estimate at such value considering the terms
of the warrants, and the unlikelihood of events occurring that would create valuation complexities requiring a more robust analysis
by valuation experts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>NOTE 16 &ndash; LITIGATION, CLAIMS AND ASSESSMENTS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company experiences routine litigation
in the normal course of its business. The Company is not aware of any pending or threatened litigation that would have a material
adverse effect on the Company&rsquo;s financial condition, results of operations or cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>NOTE 17 &ndash; SUBSEQUENT EVENTS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February, 2012, the Company sold an
additional $2,600,000 of Secured Notes and warrants in the final closing of the September Offering (see NOTE 14 &ndash; PRIVATE
PLACEMENTS), bringing the total amount raised in the September Offering to $6,600,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February, 2012, two stockholders holding
a total of 206,667 shares of AbTech Industries Series A Preferred Stock elected to convert such shares into 1,321,908 shares of
ABHD common stock in accordance with the terms of the Merger Agreement (see Note 12 &ndash; REVERSE ACQUISITION TRANSACTION).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">ABTECH HOLDINGS, INC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">14,582,862 SHARES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">COMMON STOCK</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PROSPECTUS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">APRIL __, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PART II</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INFORMATION NOT REQUIRED IN PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 13. Other Expenses of Issuance and Distribution</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth the costs and expenses payable
by Abtech Holdings, Inc. (&ldquo;Abtech Holdings,&rdquo; &ldquo;Abtech,&rdquo; &ldquo;ABHD,&rdquo; the &ldquo;Company,&rdquo; &ldquo;we&rdquo;
or &ldquo;us&rdquo;) in connection with the offering described in the prospectus that is part of this registration statement. All
amounts, other than the SEC Registration Fee, are estimates. Although we will not receive any of the proceeds from the sale of
the shares of our common stock being registered in this registration statement, we agreed to bear the costs and expenses of the
registration of such shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 87%; font-size: 10pt; text-align: left">SEC Registration Fee</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,253</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Printing Fees and Expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Accounting Fees and Expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,500</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Legal Fees and Expenses</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">10,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">Total</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">16,753</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 14. Indemnification of Directors and Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under Nevada law, a corporation may include in its articles
of incorporation a provision that eliminates or limits the personal liability of a director to the corporation or its stockholders
for monetary damages for breach of fiduciary duties as a director, but no such provision may eliminate or limit the liability of
a director (a) for any breach of his or her fiduciary duty as a director, (b) for acts or omissions not in good faith or that involve
intentional misconduct, fraud or a knowing violation of law, (c) for conduct violating the Nevada General Corporation Law (&ldquo;NGCL&rdquo;),
or (d) for any transaction from which the director will personally receive a benefit in money, property or services to which the
director is not legally entitled.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Section 78.7502 of the Nevada Revised Statues (&ldquo;NRS&rdquo;)
provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except
an action by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit or proceeding
if the person acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was
unlawful.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NRS Section 78.4502 also provides, in general, that a corporation
may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was
a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including
amounts paid in settlement and attorneys' fees actually and reasonably incurred by the person in connection with the defense or
settlement of the action or suit if the person acted in good faith and in a manner which he or she reasonably believed to be in
or not opposed to the best interests of the corporation; provided, however, that indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that
in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the
court deems proper.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Any indemnification pursuant to the above provisions may be
made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The determination must be made: (a) by the stockholders; (b) by the Board of
Directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding; (c) if a
majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent
legal counsel in a written opinion; or (d) if a quorum consisting of directors who were not parties to the action, suit or proceeding
cannot be obtained, by independent legal counsel in a written opinion</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Articles of Incorporation and Bylaws provide, among other
things, that a director or officer of the corporation may be indemnified against expenses, liability, and loss (including attorneys&rsquo;
fees inclusive of any appeal), judgments, fines and amounts paid in settlement reasonably incurred by such person in connection
with any claim, action, suit or proceeding, whether civil, criminal, or investigative, to the fullest extent permitted under the
NGCL, unless it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. Directors and officers of the corporation cannot be personally liable for damages for breach of fiduciary duty, except
(a) for acts of omissions involving intentional misconduct, fraud, or knowing violation of law, or (b) the payment of dividends
in violation of Section 78.300 of the NRS.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is also party to an Indemnification Agreement by
and among the directors and officers (the &ldquo;Indemnitees&rdquo;) and the Company dated as of February 10, 2011 (the &ldquo;Indemnification
Agreement&rdquo;). The Indemnification Agreement provides for the maintenance, at the Company&rsquo;s expense, of directors&rsquo;
and officers&rsquo; liability insurance, as well as provisions providing indemnification and advancement of expenses in connection
with certain proceedings to which the Indemnitee is a party or threatened to be a party by reason of the fact that the Indemnitee
is or was an agent of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the &ldquo;Securities Act&rdquo;) may be provided for directors, officers, employees, agents
or persons controlling an issuer pursuant to the foregoing provisions, the opinion of the Securities and Exchange Commission (the
&ldquo;SEC&rdquo;) is that such indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable.
In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of
any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being
offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At the present time, there is no pending litigation or proceeding
involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are
not aware of any threatened litigation or proceeding, which may result in a claim for such indemnification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 15. Recent Sales of Unregistered Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>The Merger Transaction</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="color: black">On February 10, 2011, in connection
with the consummation of the merger transaction (the &ldquo;Merger&rdquo;) with AbTech Industries, Inc., a Delaware corporation
(&ldquo;AbTech Industries&rdquo;) pursuant to an Agreement and Plan of Merger (the &ldquo;Merger Agreement&rdquo;), ABHD issued
32,009,801 shares of common stock to the stockholders of AbTech Industries in exchange for 100% of the common stock of AbTech Industries.
</FONT>The issuance of the common stock to the stockholders of AbTech Industries pursuant to the Merger Agreement was exempt from
registration under the Securities Act pursuant to Section 4(2) and Regulation D thereof. We made this determination based on the
representations of the stockholders of AbTech Industries which included, in pertinent part, that such shareholders, as applicable,
were &ldquo;accredited investors&rdquo; within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, and
that such stockholders were acquiring our common stock for investment purposes for their own accounts and not as nominee or agent,
and not with a view to the resale or distribution thereof, and that such stockholders understood that the shares of our common
stock may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.
Pursuant to the Merger Agreement, at the effectiveness of the Merger, 480,266 warrants to purchase common stock of AbTech Industries
immediately prior to the Merger were converted into warrants to purchase 2,557,153 shares of common stock of the Company; 471,444
warrants to purchase AbTech Industries Preferred Stock outstanding immediately prior to the merger were converted into warrants
to purchase 471,444 shares of preferred stock of AbTech Industries as the surviving corporation; and options to purchase 992,000
shares of common stock of AbTech Industries immediately prior to the Merger were converted into options to purchase 5,281,855 shares
of common stock of the Company. <FONT STYLE="color: black">For more information regarding the issuance, please refer to the information
provided under Items 1.01, 2.01 and 3.02 of the Company&rsquo;s Current Report on Form 8-K filed on February 14, 2011 (the &ldquo;Super
8-K&rdquo;), and the Company&rsquo;s Current Form on Form 8-K/A filed on March 1, 2011, amending the Super 8-K, both of which are
incorporated herein by reference.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Private Offering of Common Stock</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As part of a $3 million funding required by the Merger Agreement,
$1,645,000 of the $3 million funding was received by ABHD prior to closing of the Merger, including $150,000 that was received
after December 31, 2010. A financier issued a promissory note to ABHD (the &ldquo;Note&rdquo;) for the $1,355,000 balance of the
funding commitment which was to be funded by cash after the Merger closing. The Note was secured by a total of 1,145,000 shares
of ABHD common stock pledged by the financier (the &ldquo;Collateral&rdquo;). ABHD elected to hold the Note as a funding commitment
only and did not record the Note or issue any shares in exchange for the Note. Subsequent to the date of the Merger, ABHD received
$675,000 of the remaining $1,355,000 due on the Note. Of the 675,000 common shares due to investors for these payments, the Company
issued 500,000 shares and held the remaining 175,000 shares as additional collateral for the Note. In May of 2011, the financier
defaulted on the $680,000 balance due on the Note, released 509,300 shares of the Collateral and relinquished its rights to the
175,000 shares of additional collateral held by the Company. The issuance of the ABHD common stock to the investors was exempt
from registration under the Securities Act pursuant to Section 4(2), Regulation S and Regulation D thereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In March 2011, the Company initiated an offering to raise funds
to repay approximately $1,960,000 of existing debt obligations of AbTech Industries that were currently due or would become due
during 2011 (the &ldquo;Targeted Notes&rdquo;). Investors in the offering (&ldquo;New Investors&rdquo;) were given the option to
either purchasing a portion of the Targeted Notes and converting it immediately to ABHD common stock, or buying new convertible
notes from ABHD (the &ldquo;New Notes&rdquo;) that would convert to ABHD common stock. The intended objective was to complete the
transactions with the same net effect as if all the Targeted Notes were converted by their terms to ABHD common stock. Accordingly,
the conversion rate given New Investors for conversion of either the purchased Targeted Notes or the New Notes was a blended rate
of approximately $0.57 per share. As of June 30, 2011, the Company had received $747,100 from New Investors interested in purchasing
Targeted Notes. These funds were forwarded to the Targeted Note Holders to purchase the Targeted Notes. The New Investors subsequently
converted the purchased Targeted Notes to 1,320,454 shares of ABHD common stock. In addition, the Company received $975,000 from
New Investors interested in buying New Notes. From these proceeds the Company repaid approximately $604,100 of outstanding debt
and used the balance of the funds for operating capital. The New Notes were all automatically converted to shares of ABHD common
stock resulting in the issuance of 1,723,255 shares by the Company. The Company offered and sold the Targeted Notes and the New
Notes in reliance on Section 4(2) and Regulation D of the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Private Placement in July 2011</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In July 2011, the Company sold $700,000 of Convertible Promissory
Notes (the &ldquo;July Offering&rdquo;). The Convertible Promissory Notes (the &ldquo;Convertible Promissory Notes&rdquo;) bear
interest at a rate of twelve percent (12%) per annum from the closing date through April 30, 2012; fifteen percent (15%) per annum
from May 1, 2012 through July 31, 2012 and eighteen percent (18%) per annum for any period after July 30, 2012 that the Convertible
Promissory Note remains outstanding. All interest accrued on the Convertible Promissory Notes will be due and payable at maturity.
Any Convertible Promissory Notes outstanding on November 1, 2012 will be redeemed in cash equal to the face amount plus any unpaid
accrued interest thereon. In the event of a sale for cash by the Company of debt or equity securities generating aggregate gross
proceeds of at least $5,000,000 (including the proceeds from any converting Convertible Promissory Notes (a &ldquo;Qualified Financing&rdquo;),
each subscriber in the July Offering will have the option to (i) convert their Convertible Promissory Note into the securities
purchased by investors in a Qualified Financing at a 20% discount to the price paid by investors in the Qualified Financing; or
(ii) tender their Convertible Promissory Note to the Company for immediate repayment of principal and accrued and unpaid interest.
In the event that the Company does not close a Qualified Financing on or prior to November 1, 2012, the Convertible Promissory
Note holder shall have the option to convert the Convertible Promissory Note into shares of Company common stock at a conversion
price equal to $0.60 per share (the &ldquo;Conversion Price&rdquo;). The Company may, at any time on ten business days&rsquo; notice,
repurchase any or all outstanding Convertible Promissory Notes in cash for the face amount of such Convertible Promissory Notes,
plus any unpaid, accrued interest thereon. Upon such notice from the Company, Convertible Promissory Note holders will have 5 days
to either convert the Convertible Promissory Notes in accordance with their terms or accept the cash repurchase price from the
Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Each subscriber in the July Offering also received a
warrant for the purchase of the number of shares of Company common stock equal to forty percent (40%) of the amount invested
divided by the Conversion Price. In the event a Convertible Promissory Note remains outstanding as of April 30, 2012, the
Convertible Promissory Note holder will receive an additional warrant for 10% of the principal amount of the Convertible
Promissory Note outstanding at that date divided by the Conversion Price. In the event the Convertible Promissory Note
remains outstanding as of July 31, 2012, the Convertible Promissory Note holder will receive an additional warrant for 10% of
the principal amount of the Convertible Promissory Note outstanding at that date divided by the Conversion Price. The
warrants will have an exercise price equal to the Conversion Price and a five year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There were no commissions or placement
agent fees paid in connection with the July Offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company offered and sold the Convertible Promissory Notes
and related warrants of the July Offering in reliance on Section 4(2) and Regulation D of the Securities Act to three investors,
each of which the Company believes to be an &ldquo;accredited investor&rdquo; as defined in Rule 501(a) of Regulation D.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Private Placement of Secured Convertible
Promissory Notes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In a private placement of Secured Convertible Promissory Notes
initiated by the Company in September 2011 (the &ldquo;September Offering&rdquo;), the Company sold $4,000,000 of Secured Convertible
Promissory Notes (the &ldquo;Secured Notes&rdquo;) during 2011 and an additional $2,600,000 in a final closing of the offering
in February 2012. The Secured Notes bear interest at a rate of twelve percent (12%) per annum and are due and payable in full on
the nine (9) month anniversary of issuance (the &ldquo;Original Maturity Date&rdquo;). The Company may extend the maturity date
by an additional ninety (90) day period, during which period the interest rate will increase to fifteen percent (15%) per annum
on the unpaid principal of the Secured Note. The Company may also extend the maturity date by a second additional 90 day period
during which period the interest rate shall increase to eighteen percent (18%) per annum on the unpaid principal of the Secured
Note. All interest accrued on the Secured Notes through the Original Maturity Date will be payable by the Company on the Original
Maturity Date in cash or in-kind, at the option of the payee. For all periods after the Original Maturity Date, all accrued interest
will be payable quarterly in cash by the Company. The Secured Notes may be converted into shares of common stock of the Company
at any time prior to a Qualified Financing at the conversion rate of $0.70 per share (the &ldquo;Secured Note Conversion Price&rdquo;).
However, if the Company at any time while a Secured Note is outstanding, issues any debt or equity securities (with certain exceptions)
entitling investors to subscribe for, purchase, or convert such securities into shares of Company common stock at a price per share
less than the Secured Note Conversion Price (the &ldquo;New Securities Issuance Price&rdquo;) then the Secured Note Conversion
Price for such outstanding Secured Notes shall be reduced effective concurrently with such issuance to the New Securities Issuance
Price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the event of a Qualified Financing by the Company, each subscriber
in the September Offering will have the option to (i) convert their Secured Note into the securities purchased by investors in
a Qualified Financing at a 20% discount to the price paid by investors in the Qualified Financing; or (ii) tender their Secured
Note to the Company for immediate repayment of principal and accrued and unpaid interest. The Secured Notes may be prepaid in whole
or in part without the prior written consent of the payee at any time following not less than ten (10) days prior written notice
to the subscriber notifying the subscriber of the Company&rsquo;s decision to prepay the Secured Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Secured Notes are secured by all of the Company&rsquo;s
right, title and interest in, to and under all personal property and other assets of the Company (the certain exceptions to allow
for potential financing arrangements for accounts receivable and inventory) pursuant to a Security Agreement entered into by the
Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Each subscriber in the September Offering also received a warrant
for the purchase of the number of shares of Company common stock equal to forty percent (40%) of the number of shares of common
stock into which the Secured Notes are convertible on the closing date of the Qualified Financing. In the event a Secured Note
remains outstanding beyond the Original Maturity Date, the Secured Note holder will receive an additional warrant for 10% of the
principal amount of the Secured Note outstanding at that date divided by the Secured Note Conversion Price. The number of warrant
shares that the Payee will be entitled to under the terms of the warrant issued by the Company to subscribers in connection with
the September Offering shall be increased by ten percent (10%) for each Extension Option exercised by the Company. The warrants
will have an initial exercise price equal to the exercise price of the warrants purchased by investors in the Qualified Financing.
In the event the Holder elects to exercise the warrant prior to the consummation of a Qualified Financing, the number of shares
exercisable will be based on an assumed conversion price of $0.60 per share (the &ldquo;Assumed Conversion Price&rdquo;) and the
exercise price will be $0.60 per share (the &ldquo;Base Exercise Price&rdquo;). However, in the event that the Company issues shares
of common stock or common stock equivalents (with certain exceptions) at any time after the issuance of the warrant and prior to
a Qualified Financing at a price per share less than the Base Exercise Price (the &ldquo;New Securities Exercise Price&rdquo;)
then the Base Exercise Price and the Assumed Conversion Price shall each be reduced effective concurrently with such issuance to
the New Securities Exercise Price. Each warrant will be exercisable for a five (5) year period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company paid the placement agent engaged in connection with
the September Offering a cash placement fee equal to eight percent (8%) of the aggregate purchase price paid by each investor.
This fee amounted to $528,000 for the $6,600,000 received in the offering. The placement agent will also receive a cash fee equal
to four percent (4%) of all amounts received by the Company in connection with the exercise by investors of any warrants received
by investors in connection with the September Offering. In addition to the placement agent fee, the Company will issue to the placement
agent warrants to purchase a number of shares of the Company&rsquo;s common stock obtained by dividing eight percent (8%) of the
gross proceeds from the sale of securities by the conversion price of the Secured Notes (the &ldquo;PA Warrants&rdquo;). The PA
Warrants issued in connection with the September Offering will have an exercise price per share equal to the conversion price of
the Secured Notes. The PA Warrants will expire five years from the date of issuance and will be in the same form as the securities
sold in the September Offering, except that the PA Warrants will include a &ldquo;net issuance&rdquo; cashless exercise feature.
PA Warrants for 754,286 shares of common stock were issued to the placement agent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company offered and sold the Secured
Notes and related warrants of the September Offering in reliance on Section 4(2) and Regulation D of the Securities Act to eleven
investors, each of which the Company believes to be an &ldquo;accredited investor&rdquo; as defined in Rule 501(a) of Regulation
D.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 16. Exhibits and Financial Statement Schedules</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The information required by this item is set forth on the Exhibit
Index that follows the signature page of this registration statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 17. Undertakings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The undersigned registrant hereby undertakes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">(1)</TD><TD STYLE="text-align: justify">To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 40.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">(i)</TD><TD STYLE="text-align: justify">To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 76.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">(ii)</TD><TD STYLE="text-align: justify">to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left">(iii)</TD><TD STYLE="text-align: justify">to include any material information with respect to
the plan of distribution not previously disclosed in the registration statement or any material change to such information in
the registration statement.</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">(2)</TD><TD STYLE="text-align: justify">That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof.</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">(3)</TD><TD STYLE="text-align: justify">To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the termination of the offering.</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">(4)</TD><TD STYLE="text-align: justify">That, for the purpose of determining liability under
the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance
on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.
Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part
of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or prospectus that was part of the registration statement or made in
any such document immediately prior to such date of first use.</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">(5)</TD><TD STYLE="text-align: justify">Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.</TD>
</TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the requirements of the Securities
Act of 1933, as amended, we have duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Scottsdale, on the 13<SUP>th</SUP> day of April, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE BORDER="0" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2">ABTECH HOLDINGS, INC.</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; width: 50%">&nbsp;</TD>
    <TD STYLE="width: 4%">By:&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 46%"><I>/s/ Glenn R. Rink</I></TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-top: #000000 1px solid">Glenn R. Rink<BR>Chief Executive Officer,<BR>
President and Director<BR>
</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>POWER OF ATTORNEY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Know all men by these
presents, that each person whose signature appears below constitutes and appoints jointly and severally, Glenn R. Rink and Lane
J. Castleton, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign a registration statement or registration statements
on Form S-1 and any and all amendments (including post-effective amendments) and supplements, with all exhibits thereto, and any
other documents in connection therewith, to be filed by Abtech Holdings, Inc. with the SEC for the purpose of registering under
the Securities Act of 1933, as amended, resales of shares of common stock, par value $0.001 per share, of the Company delivered
or to be delivered by the Company in connection with the Company&rsquo;s sale in a private offering of $6,600,000 of secured convertible
promissory notes with a detachable warrant, granting unto said attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming all which said attorneys-in-fact and agents, or
any of them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates
indicated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<TABLE BORDER="0" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR>
    <TD STYLE="vertical-align: top; width: 50%">Date: <FONT STYLE="color: black">April 13</FONT>, 2012&nbsp;</TD>
    <TD STYLE="width: 4%">By:&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 46%"><I>/s/ Glenn R. Rink</I></TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-top: #000000 1px solid; padding-left: 0.12in">Glenn R. Rink<BR>Chief Executive Officer,<BR>
President and Director</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<TABLE BORDER="0" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR>
    <TD STYLE="vertical-align: top; width: 50%">Date: <FONT STYLE="color: black">April 13</FONT>, 2012&nbsp;</TD>
    <TD STYLE="width: 4%">By:&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 46%"><I>/s/ Lane J. Castleton</I></TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-top: #000000 1px solid; text-indent: 0in; padding-left: 0.12in">Lane J. Castleton<BR>Chief Accounting Officer, Chief Financial Officer,
Vice President and Treasurer</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<TABLE BORDER="0" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR>
    <TD STYLE="vertical-align: top; width: 50%">Date: <FONT STYLE="color: black">April 13</FONT>, 2012&nbsp;</TD>
    <TD STYLE="width: 4%">By:&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 46%"><I>/s/ Olivia H. Farr</I></TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-top: #000000 1px solid; padding-left: 0.12in">Olivia H. Farr, Director and Corporate
    Secretary</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt"></P>

<TABLE BORDER="0" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR>
    <TD STYLE="vertical-align: top; width: 50%">Date: <FONT STYLE="color: black">April 13</FONT>, 2012&nbsp;</TD>
    <TD STYLE="width: 4%">By:&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 46%; border-bottom: Black 1pt solid"><I>/s/ David Greenwald</I></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-indent: 0.72in">David Greenwald, Director&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-top: #000000 1px solid"></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt"></P>

<TABLE BORDER="0" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR>
    <TD STYLE="vertical-align: top; width: 50%">Date: <FONT STYLE="color: black">April 13</FONT>, 2012&nbsp;</TD>
    <TD STYLE="width: 4%">By:&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 46%; border-bottom: Black 1pt solid"><I>/s/ A. Judson Hill</I></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-indent: 0.72in">A. Judson Hill, Director&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-top: #000000 1px solid"></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE BORDER="0" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR>
    <TD STYLE="vertical-align: top; width: 50%">Date: <FONT STYLE="color: black">April 13</FONT>, 2012&nbsp;</TD>
    <TD STYLE="width: 4%">By:&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 46%; border-bottom: Black 1pt solid"><I>/s/ Jonathan Thatcher</I></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-indent: 0.72in">Jonathan Thatcher, Director&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-top: #000000 1px solid"></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>



</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt"></P>

<TABLE BORDER="0" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR>
    <TD STYLE="vertical-align: top; width: 50%">Date: <FONT STYLE="color: black">April 13</FONT>, 2012&nbsp;</TD>
    <TD STYLE="width: 4%">By:&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 46%"><I>/s/ Karl Seitz</I></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-indent: 0.72in">Karl Seitz, Director&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-top: #000000 1px solid"><BR></TD></TR>
</TABLE>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TR>
    <TD STYLE="vertical-align: top; width: 50%">Date: <FONT STYLE="color: black">April 13</FONT>, 2012&nbsp;</TD>
    <TD STYLE="width: 4%">By:&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 46%"><I>/s/ F. Daniel Gabel</I></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-indent: 0.72in">F. Daniel Gabel, Director&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-top: #000000 1px solid"><BR></TD></TR>
</TABLE>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXHIBIT INDEX</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12%">2.1</TD>
    <TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 85%">Agreement and Plan of Merger, dated July 17, 2010, by and among the Registrant, Abtech Merger Sub, Inc., and AbTech Industries, Inc. (incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K as filed with the SEC on July 22, 2010)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.2</TD>
    <TD>&nbsp;</TD>
    <TD>Amendment No. 1 to Agreement and Plan of Merger, dated September 17, 2010, by and among the Registrant, Abtech Merger Sub, Inc., and AbTech Industries, Inc. (incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K as filed with the SEC on September 22, 2010).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>Certificate of Incorporation (incorporated by reference to the Registrant&rsquo;s Registration Statement on Form SB-2 filed on July 27, 2007, Registration No. 333-144923)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>Articles of Incorporation (incorporated by reference to the Registrant&rsquo;s Registration Statement on Form SB-2 filed on July 27, 2007, Registration No. 333-144923)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.3</TD>
    <TD>&nbsp;</TD>
    <TD>Bylaws (incorporated by reference to the Registrant&rsquo;s Registration Statement on Form SB-2 filed on July 27, 2007, Registration No. 333-144923)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.4</TD>
    <TD>&nbsp;</TD>
    <TD>Amendment to Articles of Incorporation (incorporated by reference to the Registrant&rsquo;s Current Report on Form 8-K as filed with the SEC on June 16, 2010)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4</TD>
    <TD>&nbsp;</TD>
    <TD>Stock Specimen (incorporated by reference to the Registrant&rsquo;s Registration Statement on Form SB-2 filed on July 27, 2007, Registration No. 333-144923)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>5.1**</TD>
    <TD>&nbsp;</TD>
    <TD>Opinion of Squire Sanders (US) LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.1</TD>
    <TD>&nbsp;</TD>
    <TD>Transfer Agent Agreement (change of transfer agent effective February 12, 2012) (filed as Exhibit 10.1 to our Annual Report on Form 10-K filed on March 30, 2012 and incorporated herein by reference)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.2</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Agreement dated May 13, 2009, by and between Glenn R. Rink and AbTech Industries, Inc. (filed as Exhibit 10.2 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.3</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Agreement dated May 13, 2009, by and between Lane J. Castleton and AbTech Industries, Inc. (filed as Exhibit 10.3 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.4</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Indemnification Agreement between Abtech Holdings, Inc. and each member of its Board of Directors.&nbsp; (filed as Exhibit 10.4 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.5</TD>
    <TD>&nbsp;</TD>
    <TD>Independent Contractor Agreement dated May 1, 2010, by and between Gordon Brown and AbTech Industries, Inc.&nbsp; (filed as Exhibit 10.5 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.6</TD>
    <TD>&nbsp;</TD>
    <TD>AbTech Industries, Inc. 2007 Stock Plan&nbsp; (filed as Exhibit 10.6 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD></TD></TR></TABLE>

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    <TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 85%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.7</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">Form of AbTech Industries, Inc. 2007 Incentive Stock Option Agreement&nbsp;&nbsp; (filed as Exhibit 10.7 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.8</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">Form of AbTech Industries, Inc. 2007 Non-qualified Stock Option Agreement&nbsp; (filed as Exhibit 10.8 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.9</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">Form of AbTech Industries, Inc. Warrant Agreement&nbsp;&nbsp; (filed as Exhibit 10.9 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>21.1</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">List of Subsidiaries <FONT STYLE="color: black">(filed as Exhibit 21 to our Annual Report on Form 10-K filed on March 30, 2012 and incorporated herein by reference)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>23.1**</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">Consent of Squire Sanders (US) LLP (Included in Exhibit 5.1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>23.2*</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">Consent of Semple, Marchal &amp; Cooper, LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>24.1*</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">Power of Attorney (Included on the Signature Page of this Registration Statement on Form S-1)</TD></TR>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U></U>* Filed herewith.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">** To be filed subsequent to the date hereof by amendment.</P>



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[{"type": "S-1", "sequence": "1", "filename": "v309051_s1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1003122}]
{"company-data": {"conformed-name": "Abtech Holdings, Inc.", "cik": "0001405858", "assigned-sic": "1090", "irs-number": "141994102", "state-of-incorporation": "NV", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-180721", "film-number": "12758646"}, "business-address": {"street1": "1223 BURROWHILL LANE", "city": "MISSISSAUGA", "state": "A6", "zip": "L5H 4M7", "phone": "905-274-5231"}, "mail-address": {"street1": "1223 BURROWHILL LANE", "city": "MISSISSAUGA", "state": "A6", "zip": "L5H 4M7"}, "former-company": {"former-conformed-name": "Laural Resources, Inc.", "date-changed": "20070706"}}
As filed with the United States Securities
and Exchange Commission on April 13, 2012
Registration No. 333-
________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
ABTECH HOLDINGS, INC.
(Name of Registrant as specified in its
charter)
Nevada
1090
14-1994102
(State or other jurisdiction
of incorporation)
(Primary Standard Industrial
Classification Code Number)
(IRS Employer
Identification No.)
4110 N. Scottsdale Road, Suite 235
Scottsdale, Arizona 85251
(480) 874-4000
(Address and telephone number of principal
executive offices and principal place of business)
________________________________
Glenn R. Rink
Chief Executive Officer, President, and
Director
Abtech Holdings, Inc.
4110 N. Scottsdale Road, Suite 235
Scottsdale, Arizona 85251
(480) 874-4000
(Name address and telephone
number of agent for service)
________________________________
Copies to:
Christopher D. Johnson, Esq.
Squire Sanders (US) LLP
1 East Washington Street
Suite 2700
Phoenix, AZ 85004
Tel: (602) 528-4000 Fax: (602) 253-8129
________________________________
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box:
T
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. 
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. 
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. 
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. (Check
one):
Large accelerated filer
Accelerated filer
Non-accelerated filer   (Do not check if smaller reporting company)
Smaller reporting company
T
________________________________
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered
Amount to be registered
Proposed maximum offering price per share
Proposed maximum aggregate offering price
Amount
    of registration fee
Common Stock, par value $0.001 per share
14,582,862(1)
$0.75(2)
$10,937,146(2)
$1,253.40
(1)
This registration statement registers for resale 14,582,862 shares of common stock, par value $0.001 per share, of the registrant, of which (a) 9,428,573 are issuable upon conversion of secured convertible promissory notes sold in a private placement completed on February 15, 2012, and (b) up to 5,154,289 shares of our common stock are issuable upon exercise of warrants, of which (i) warrants to purchase 4,400,003 shares of our common stock were issued to investors in the private placement and (ii) warrants to purchase 754,286 shares of our common stock were issued to a placement agent in connection with the private placement.
(2)
Estimated pursuant to Rule 457(c) of the Securities Act of 1933 solely for the purpose of computing the amount of the registration fee based on the average of the high and low prices reported on the OTC Bulletin Board on April 10, 2012, which was $0.75.
The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act
of 1933, as amended, or until the registration statement shall become effective on such date as the United States Securities and
Exchange Commission, acting pursuant to said section 8(a), may determine.
The information in this prospectus is not complete and may be changed.  These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective.  This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED APRIL 13, 2012
ABTECH HOLDINGS, INC.
14,582,862 Shares of Common Stock
The selling shareholders identified in this prospectus may offer
and sell up to 14,582,862 shares of our common stock consisting of (a) 9,428,573 shares of our common stock which are issuable
to investors upon conversion of secured convertible promissory notes sold in a private placement completed on February 15, 2012,
and (b) up to 5,154,289 shares of our common stock issuable upon exercise of warrants, of which (i) warrants to purchase 4,400,003
shares of our common stock were issued to investors in the private placement and (ii) warrants to purchase 754,286 shares of our
common stock were issued to a placement agent in connection with the private placement.
We are not selling any shares of our common stock in this offering
and will not receive any proceeds from this offering. We may receive proceeds on the exercise of outstanding warrants for shares
of our common stock covered by this prospectus.
The selling shareholders may offer the shares covered by this
prospectus at fixed prices, at prevailing market prices at the time of sale, at varying prices or negotiated prices, in negotiated
transactions, or in trading markets for our common stock. We will bear all costs associated with the registration of the shares
covered by this prospectus.
Our common stock trades on the OTC Bulletin Board under the
symbol "ABHD." The closing price of our common stock on the OTC Bulletin Board on April 10, 2012, was $0.75 per share.
Investing in our common stock involves significant risks.
You should consider carefully the risk factors beginning on page  5 of this prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The date of this prospectus is April
__, 2012.
TABLE OF CONTENTS
Page
Prospectus Summary
2
Risk Factors
5
Forward-Looking Statements
19
Use of Proceeds
20
Price Range of Common Stock
20
Dividend Policy
21
Management's Discussion and Analysis of Financial Condition
22
Our Business
26
Management
43
Executive Compensation
47
Certain Relationships and Related Party Transactions
51
Security Ownership of Certain Beneficial Owners and Management
51
Selling Shareholders
53
Plan of Distribution
55
Description of Securities
57
Experts
57
Legal Matters
57
Available Information
58
Index to Financial Statements
F-1
This prospectus is part of a registration statement we filed
with the Securities and Exchange Commission (the "SEC"). Under this registration process, the selling shareholders
may, from time to time, offer and sell up to 14,582,862 shares of our common stock, as described in this prospectus, in one or
more offerings. This prospectus provides you with a general description of the common stock the selling shareholders may offer.
You should read this prospectus carefully before making an investment decision.
You may only rely on the information contained in this prospectus
or that we have referred you to. We have not authorized anyone to provide you with additional or different information. This prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the shares of our common stock
offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common
stock in any circumstances or any jurisdiction in which such offer or solicitation is not permitted. You should not assume that
the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus
regardless of the time of delivery of this prospectus or any sale of our common stock. The rules of the SEC may require us to update
this prospectus in the future.
As used in this prospectus, the terms "Abtech Holdings,"
"Abtech," "ABHD," the "Company," "we," "our" and similar terms refer
to Abtech Holdings, Inc. and its subsidiaries, unless the context indicates otherwise.
1
PROSPECTUS SUMMARY
The following summary highlights selected information contained
elsewhere in this prospectus and does not contain all of the information you should consider before investing in our securities.
Before deciding to invest in our securities, you should read this entire prospectus, including the discussion of "Risk Factors"
and our consolidated financial statements and the related notes.
Our Company
Abtech Holdings, Inc. ("Abtech Holdings," "Abtech,"
"ABHD," the "Company," "we" or the "registrant") was incorporated in Nevada on
February 13, 2007 under the name "Laural Resources, Inc." and was initially engaged in the business of acquiring and
developing mineral properties. Subsequent to its fiscal year ended May 31, 2010, Laural Resources, Inc. decided to change its business
focus to clean technology products and services, specifically in the water clean-up sector. In furtherance of its business objectives,
effective June 14, 2010, Laural Resources, Inc. merged with its wholly owned subsidiary, Abtech Holdings, Inc., for the purpose
of effecting a name change to "Abtech Holdings, Inc." On October 21, 2010, the Company's Board of Directors (the
"Board of Directors" or the "Board") changed the Company's fiscal year end from May 31 to December
31.
Our History
On February 10, 2011, the Company closed a merger transaction
(the "Merger") with AbTech Industries, Inc., a Delaware corporation ("AbTech Industries"), pursuant to
an Agreement and Plan of Merger (the "Merger Agreement"), by and among Abtech Holdings, Abtech Merger Sub, Inc., a
Nevada corporation and wholly owned subsidiary of Abtech Holdings ("Merger Sub"), and AbTech Industries.
As a result of the Merger, Abtech Holdings acquired all of the
issued and outstanding common stock of AbTech Industries (through a reverse acquisition transaction) in exchange for the common
stockholders of AbTech Industries acquiring an approximate 78% ownership interest in Abtech Holdings, AbTech Industries became
a majority-owned subsidiary of Abtech Holdings, and Abtech Holdings acquired the business and operations of AbTech Industries.
Abtech Holdings was a "shell company" prior to the
Merger and did not conduct an active trade or business. From and after the consummation of the Merger on February 10, 2011, Abtech
Holdings' primary operations consisted of the business and operations of AbTech Industries. Because Abtech Holdings was a
shell company at the time of the Merger, we filed with the SEC on February 14, 2011, a "super" Form 8-K that disclosed
information required by Item 2.01(f) of Form 8-K (being information that would be required if we had filed a general form for registration
under Form 10 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")).
For accounting purposes, the Merger transaction has been accounted
for as a reverse acquisition, with AbTech Industries as the acquirer. The consolidated financial statements of Abtech Holdings
for the fiscal year ended December 31, 2011 represent a continuation of the financial statements of AbTech Industries, with one
adjustment, which is to retroactively adjust the legal capital of AbTech Industries to reflect the legal capital of Abtech Holdings.
See Note 1 of Notes to Consolidated Financial Statements.
Our Industry
AbTech Industries has developed a variety of products that leverage
its cornerstone filtration media technology called Smart Sponge®. This patented technology's oil absorbing capabilities
make it highly effective as a filtration media to remove hydrocarbons and other pollutants from water. AbTech Industries has introduced
its products into a variety of markets resulting in over 15,000 products installed in 36 states and 8 countries to date.
2
AbTech Industries developed the Smart Sponge media, a patented
polymer technology that effectively removes pollutants from water and encapsulates them so that they cannot be released back into
the water, even under high pressure. AbTech Industries recently expanded the capability of the Smart Sponge technology by adding
an antimicrobial agent that has proven to be effective in reducing coliform bacteria found in stormwater, industrial wastewater
and municipal wastewater while maintaining its oil-absorbing capability. This expanded technology, known as Smart Sponge Plus,
provides an effective solution to municipalities and other entities faced with beach closures and other hazards of bacteria-laden
stormwater. This antimicrobial capability differentiates Smart Sponge Plus products from competitive stormwater treatment devices.
It can be engineered to treat massive amounts of water runoff in end-of-pipe applications, such as drainage vaults or other configurations.
In July 2010, AbTech Industries received notification from the United States Environmental Protection Agency (the "EPA")
that AbTech Industries' application to register Smart Sponge Plus as a pesticide under the Federal Insecticide, Fungicide
and Rodenticide Act had been conditionally approved.
Corporate Information
Our principal executive offices are located at 4110 North Scottsdale
Road, Suite 235, Scottsdale, Arizona 85251. Our telephone number is (480) 874-4000 and our website address is
www.abtechindustries.com
.
The information contained on our website is not part of this prospectus.
The Offering
Common stock outstanding prior to the offering
48,482,344 shares outstanding as of April 11, 2012
Common stock offered by selling shareholders
Up to 14,582,862 shares
Common stock to be outstanding after the offering
63,065,206 shares, assuming full conversion of the secured convertible notes and full exercise of the warrants held by the selling shareholders
Use of proceeds
We will not receive any proceeds from the sale of the common stock.  To the extent that the selling shareholders and the placement agent exercise all of the warrants covering the 5,154,289 shares of common stock issuable upon exercise thereof, we would receive $3,168,002 from such exercises. We intend to use such proceeds for general corporate and working capital purposes. See "Use of Proceeds" for a complete description.
OTC Bulletin Board Symbol
ABHD
Risk Factors
The purchase of our common stock involves a high degree of risk. You should carefully review and consider the "Risk Factors" beginning on page 5.
3
Background of the Offering
From September 19 through December 31, 2011 (the "September
Offering"), the Company sold $4,000,000 of Secured Convertible Promissory Notes (the "Secured Notes"). The Secured
Notes bear interest at a rate of twelve percent (12%) per annum and are due and payable in full on the nine (9) month anniversary
of issuance (the "Original Maturity Date"). The Company may extend the maturity date by an additional ninety (90) day
period, during which period the interest rate will increase to fifteen percent (15%) per annum on the unpaid principal of the Secured
Note. The Company may also extend the maturity date by a second additional 90 day period, during which period the interest rate
shall increase to eighteen percent (18%) per annum on the unpaid principal of the Secured Note. All interest accrued on the Secured
Notes through the Original Maturity Date will be payable by the Company on the Original Maturity Date in cash or in-kind, at the
option of the payee. For all periods after the Original Maturity Date, all accrued interest will be payable quarterly in cash by
the Company. The Secured Notes may be converted into shares of our common stock at any time prior to a sale for cash by the Company
of debt or equity securities generating aggregate gross proceeds of at least $5,000,000 (including the proceeds from any converting
Secured Notes) (a "Qualified Financing') at the conversion rate of $0.70 per share (the "Conversion Price").
However, if the Company at any time while a Secured Note is outstanding, issues any debt or equity securities (with certain exceptions)
entitling investors to subscribe for, purchase, or convert such securities into shares of our common stock at a price per share
less than the Conversion Price (the "New Securities Issuance Price"), then the Conversion Price for such outstanding
Secured Notes shall be reduced effective concurrently with such issuance to the New Securities Issuance Price.
In the event of a Qualified Financing by the Company, each subscriber
of the Secured Notes will have the option to (i) convert their Secured Note into the securities purchased by investors in a Qualified
Financing at a 20% discount to the price paid by investors in the Qualified Financing; or (ii) tender their Secured Note to the
Company for immediate repayment of principal and accrued and unpaid interest. The Secured Notes may be prepaid in whole or in part
without the prior written consent of the payee at any time following not less than ten (10) days prior written notice to the subscriber
notifying the subscriber of the Company's decision to prepay the Secured Notes.
The Secured Notes are secured by all of the Company's
right, title and interest in, to and under all personal property and other assets of the Company (the certain exceptions to allow
for potential financing arrangements for accounts receivable and inventory) pursuant to a security agreement entered into by the
Company.
From January 2012 through February 15, 2012 (the "February
Offering"), the Company sold an additional $2,600,000 of the Secured Notes. The September Offering and the February Offering
were undertaken by the Company in reliance on Section 4(2) and Regulation D of the Securities Act of 1933, as amended (the "Securities
Act"). The Company believes each purchaser of the Secured Notes to be an accredited investor as that term is defined in Rule
501(a) of Regulation D under the Securities Act.
Each subscriber of the Secured Notes sold in the September Offering
and the February Offering also received a warrant for the purchase of the number of shares of our common stock equal to forty percent
(40%) of the number of shares of common stock into which the Secured Notes are convertible on the closing date of the Qualified
Financing. In the event a Secured Note remains outstanding beyond the Original Maturity Date, the Secured Note holder will receive
an additional warrant for 10% of the principal amount of the Secured Note outstanding at that date divided by the Conversion Price.
The number of warrant shares that the payee will be entitled to under the terms of the warrant issued by the Company to subscribers
in connection with their purchase of the Secured Notes shall be increased by ten percent (10%) for each extension by the Company
of the Original Maturity Date. The warrants will have an initial exercise price equal to the exercise price of the warrants purchased
by investors in the Qualified Financing. In the event the Secured Note holder elects to exercise the warrant prior to the consummation
of a Qualified Financing, the number of shares exercisable will be based on an assumed conversion price of $0.60 per share (the
"Assumed Conversion Price") and the exercise price will be $0.60 per share (the "Base Exercise Price").
However, in the event that the Company issues shares of common stock or common stock equivalents (with certain exceptions) at any
time after the issuance of the warrant and prior to a Qualified Financing at a price per share less than the Base Exercise Price
(the "New Securities Exercise Price") then the Base Exercise Price and the Assumed Conversion Price shall each be reduced
effective concurrently with such issuance to the New Securities Exercise Price. Each warrant will be exercisable for a five (5)
year period.
The Company engaged a placement agent in connection with the
September Offering and the February Offering and paid the placement agent a cash placement fee equal to eight percent (8%) of the
aggregate purchase price paid by each subscriber. This fee amounted to $320,000 for the September Offering and $208,000 for the
February Offering. The placement agent will also receive a cash fee equal to four percent (4%) of all amounts received by the Company
in connection with the exercise by investors of any warrants received by investors in connection with the Secured Notes. In addition
to the placement agent fee, the Company issued to the placement agent warrants to purchase a number of shares of our common stock
obtained by dividing eight percent (8%) of the gross proceeds from the sale of securities by the conversion price of the Secured
Notes (the "PA Warrants"). The PA Warrants have an exercise price per share equal to the conversion price of the Secured
Notes. The PA Warrants will expire five years from the date of issuance and will be in the same form the Secured Notes, except
that the PA Warrants will include a "net issuance" cashless exercise feature. As of the close of the February Offering,
PA Warrants for 754,286 shares of common stock were due to the placement agent. The value of these warrants is estimated by applying
the Black Scholes model and was recorded as a deferred financing charge with its estimated fair value at each balance sheet date
included in the warrant liability.
4
RISK FACTORS
Our business and an investment in our common stock is subject
to a variety of risks. The following risk factors describe the most significant events, facts or circumstances that could have
a material adverse effect upon our business, financial condition, results of operations, ability to implement our business plan
and the market price for our common stock. Many of these events are outside of our control. If any of these risks actually occurs,
our business, financial condition or results of operations may be materially adversely affected. In such case, the trading price
of our common stock could decline and investors in our common stock could lose all or part of their investment.
The risk factors discussed below relate to our business and
operations following the consummation of the Merger and, accordingly, relate primarily to Abtech Holdings and its subsidiary, AbTech
Industries. As used in this "Risk Factors" section, the terms "Company," "we," our" and
like words mean Abtech Holdings together with Abtech Industries, unless the context otherwise requires.
Risks Relating to Our Business
Our ability to generate revenue to support our operations
is uncertain.
We are in the early stage of our business and have a limited
history of generating revenues. We have a limited operating history upon which you can evaluate our potential for future success,
and we are subject to the additional risks affecting early-stage businesses. Rather than relying on historical information, financial
or otherwise, to evaluate our Company, you should evaluate our Company in light of your assessment of the growth potential of our
business and the expenses, delays, uncertainties, and complications typically encountered by early-stage businesses, many of which
will be beyond our control. Early-stage businesses in rapidly evolving markets commonly face risks, such as the following:
•
unanticipated problems, delays, and expenses relating
to the development and implementation of their business plans;
•
operational difficulties;
•
lack of sufficient capital;
•
competition from more advanced enterprises; and
•
uncertain revenue generation.
Our limited operating history may make it difficult for us
to forecast accurately our operating results.
Our planned expense levels are, and will continue to be, based
in part on our expectations, which are difficult to forecast accurately based on our stage of development and factors outside of
our control. We may be unable to adjust spending in a timely manner to compensate for any unexpected developments. Further, business
development expenses may increase significantly as we expand operations. To the extent that any unexpected expenses precede, or
are not rapidly followed by, a corresponding increase in revenue, our business, operating results, and financial condition may
be materially and adversely affected.
5
We have a history of losses that may continue, which may
negatively impact our ability to achieve our business objectives.
We have incurred net losses since our inception. The Company
had a net loss of approximately $5.4 million during the fiscal year ended December 31, 2011. We cannot assure you that we can achieve
or sustain profitability on a quarterly or annual basis in the future. There can be no assurance that future operations will be
profitable. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on us.
Our success depends on our ability to expand, operate, and
manage successfully our operations.
Our success depends on our ability to expand, operate, and manage
successfully our operations. Our ability to expand successfully will depend upon a number of factors, including the following:
•
signing with strategic partners, dominant in their
field
•
the continued development of our business;
•
the hiring, training, and retention of additional personnel;
•
the ability to enhance our operational, financial,
and management systems;
•
the availability of adequate financing;
•
competitive factors;
•
general economic and business conditions; and
•
the ability to implement methods for revenue generation.
If we are unable to obtain additional capital, our business
operations could be harmed.
The development and expansion of our business may require additional
funds. In the future, we may seek additional equity or debt financing to provide capital for our Company. Such financing may not
be available or may not be available on satisfactory terms. If financing is not available on satisfactory terms, we may be unable
to expand our operations. While debt financing will enable us to expand our business more rapidly than we otherwise would be able
to do, debt financing increases expenses and we must repay the debt regardless of our operating results. Future equity financings
could result in dilution to our stockholders.
The recent global financial crisis, which has included, among
other things, significant reductions in available capital and liquidity from banks and other providers of credit, substantial reductions
or fluctuations in equity and currency values worldwide, and concerns that the worldwide economy may enter into a prolonged recessionary
period, may make it difficult for us to raise additional capital or obtain additional credit, when needed, on acceptable terms
or at all.
Our inability to obtain adequate capital resources, whether
in the form of equity or debt, to fund our business and growth strategies, may require us to delay, scale back, or eliminate some
or all of our operations, which may adversely affect our financial results and ability to operate as a going concern.
You may suffer significant dilution if we raise additional
capital.
If we raise additional capital, we expect it will be necessary
for us to issue additional equity or convertible debt securities. If we issue equity or convertible debt securities, the price
at which we offer such securities may not bear any relationship to our value, the net tangible book value per share may decrease,
the percentage ownership of our current stockholders would be diluted, and any equity securities we may issue in such offering
or upon conversion of convertible debt securities issued in such offering, may have rights, preferences, or privileges with respect
to liquidation, dividends, redemption, voting, and other matters that are senior to or more advantageous than our common stock.
6
We have completed debt financings and face risks associated
with financing our operations.
The Company has completed several debt financings and is subject
to the normal risks associated with debt financing, including the risk that our cash flow will be insufficient to meet required
payments of principal and interest and the risk that we will not be able to renew, repay, or refinance our debt when it matures
or that the terms of any renewal or refinancing will not be as favorable as the existing terms of that debt.
We have debt outstanding that is secured by all of the assets
of the Company.
During 2011, we issued the Secured Notes that are secured by
all of the assets of the Company, including its intellectual property. If we are unable to pay our obligations to our secured lenders,
they could proceed against any or all of the collateral securing our indebtedness to them which could prevent the Company from
continuing its operations in whole or in part.
You may suffer dilution if the Secured Notes are converted
to common stock.
As of December 31, 2011, the Company had approximately $6.8
million of convertible notes outstanding that, if converted, would require the company to issue approximately 10 million shares
of common stock. Such conversion would cause the percentage ownership of our current stockholders to be diluted.
Outstanding convertible notes and warrants have price protection
features.
During 2011 and 2012, we issued convertible notes and warrants
that have certain price protection features that would allow the conversion prices or exercise prices of the outstanding notes
and warrants to be decreased in the event of a financing by the Company at a price per share less than the stated conversion price
of the notes or exercise price of the warrants. In the event the Company completes such a down-round financing within 15 months
of the issuance dates of the affected notes and warrants, any subsequent conversion of the affected notes and/or exercise of the
affected warrants would have a greater dilutive effect on current stockholders than would be expected if a down-round financing
does not take place within the 15-month time period.
Our independent auditors have expressed substantial doubt
about the Company's ability to continue as a going concern, which may hinder our ability to obtain future financing.
In their report dated March 30, 2012, our independent registered
public accounting firm stated that our financial statements for the fiscal year ended December 31, 2011 were prepared assuming
that the Company would continue as a going concern. Its ability to continue as a going concern is an issue raised as a result of
recurring losses from operations. To date, each of Abtech Holdings and AbTech Industries have only incurred net operating losses
resulting in a significant accumulated deficit. Our ability to continue as a going concern is subject to our ability to obtain
necessary funding from outside sources, including obtaining additional funding from the sale of our securities. Our continued net
operating losses increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.
7
We depend on our officers and key employees who would be
difficult to replace, and our business will likely be harmed if we lose their services or cannot hire additional qualified personnel.
Our success depends substantially on the efforts and abilities
of our officers and other key employees. AbTech Industries has employment agreements with its chief executive officer, its chief
financial officer, and certain key employees, but we do not think those agreements limit any employee's ability to terminate
his or her employment. We have key person life insurance on Glenn R. Rink, our president, chief executive officer and a director;
we do not have key person life insurance covering any of our other officers or other key employees. The loss of services of one
or more of our officers or key employees or the inability to add key personnel could have a material adverse effect on our business.
Competition for experienced personnel in our industry is substantial. Our success depends in part on our ability to attract, hire,
and retain qualified personnel. In addition, if any of our officers or other key employees join a competitor or form a competing
company, we may lose some of our customers.
We depend on the recruitment and retention of qualified personnel,
and our failure to attract and retain such personnel could seriously harm our business.
Due to the specialized nature of our business, our future performance
is highly dependent upon the continued services of current and future key personnel and managers. Our future business depends upon
our ability to attract and retain qualified engineering, manufacturing, marketing, sales, and management personnel for our operations.
We may also have to compete with the other companies in our industry in the recruitment and retention of qualified managerial and
technical employees. Competition for personnel is intense and confidentiality and non-compete agreements may restrict our ability
to hire individuals employed by other companies. Therefore, we may not be successful in attracting or retaining qualified personnel.
Our failure to attract and retain qualified personnel could seriously harm our business, results of operations, and financial condition.
Furthermore, we may not be able to accurately forecast our needs for additional personnel, which could adversely affect our ability
to grow.
The expected results from the Merger may vary significantly
from our expectations.
The expected results from the Merger might vary materially from
those anticipated and disclosed by us. These expectations are inherently subject to uncertainties and contingencies. These assumptions
may be impacted by factors that are beyond our control, including, but not limited to, general economic factors impacting the U.S.
economy.
The Merger could be difficult to integrate, disrupt business,
dilute stockholder value, and harm operating results of the combined entity.
Our experience in acquiring and integrating businesses is limited.
The Merger involves numerous risks, including the following:
•
problems integrating the purchased operations, services,
personnel, or technologies;
•
unanticipated costs associated with the acquisition;
•
diversion of management's attention from the
core businesses;
•
adverse effects on existing business relationships
with suppliers and customers of purchased organizations;
•
potential loss of key employees and customers of purchased
organizations; and
•
risk of impairment charges related to potential write-downs
of acquired assets.
These factors and potential unforeseeable costs may result in
disruption to the business of the combined entity and any such disruption could have a significant negative impact on the combined
entity's assets, revenue, expenses, and stock price.
8
The effects of the recent global economic downturn may adversely
impact our business, operating results, or financial condition.
The recent global economic downturn has caused disruptions and
volatility in global financial markets and increased rates of default and bankruptcy and has impacted levels of consumer and commercial
spending. We are unable to predict the duration or severity of the current global economic and financial crisis. There can be no
assurance that any actions we may take in response to further deterioration in general economic and financial conditions will be
sufficient. A protracted continuation or worsening of the global economic downturn or disruptions in the financial markets could
have a material adverse effect on our business, financial condition, or results of operations.
If we do not achieve broad market acceptance of our products
and services, we may not be successful.
Although our products and services will serve existing needs,
our delivery of these products and services is unique and subject to broad market acceptance. As is typical of any new product
or service, the demand for and market acceptance of these products and services are highly uncertain. We cannot assure you that
any of our products and services will be commercialized on a widespread basis. The commercial acceptance of our products and services
may be affected by a number of factors, including the willingness of municipalities and other commercial and industrial entities
to use our products and services to control the quality of water and other fluids. If the markets for our products and services
fail to develop on a meaningful basis, if they develop more slowly than we anticipate, or if our products and services fail to
achieve sufficient market acceptance, our business and future results of operations could be adversely affected.
Because our products may be designed to provide a solution
which competes with existing methods, we are likely to face resistance to change, which could impede our ability to commercialize
this business.
Our products may be designed to provide a solution to environmental
challenges created by contaminated water and other fluids. Currently, large and well capitalized companies provide services in
these areas. These competitors have strong relationships with their customers' personnel, and there is a natural reluctance
for businesses to change to new technologies, particularly in such industries as the oil and gas industries where our future products
may be relevant. This reluctance is increased when potential customers make significant capital investments in competing technologies.
Because of these obstacles, we may face substantial barriers to commercializing our business.
If we experience rapid growth and we are not able to manage
this growth successfully, this inability to manage the growth could adversely affect our business, financial condition, and results
of operations.
Rapid growth places a significant strain on our financial, operational,
and managerial resources. While we engage in strategic and operational planning to adequately manage anticipated growth, there
can be no assurance that we will be able to implement and subsequently improve operations and financial systems successfully and
in a timely manner to fully manage our growth. There can be no assurance that we will be able to manage our growth and any inability
to successfully manage growth could materially adversely affect our business, financial condition, and results of operation.
9
We have no experience in manufacturing or assembling products
on a large scale basis, and if we do not develop adequate manufacturing and assembly processes and capabilities to do so in a timely
manner, we may be unable to achieve our growth and profitability objectives.
We have no experience manufacturing or assembling products on
a large scale. We do not know whether our current or future manufacturing arrangements will be able to develop efficient, low-cost
manufacturing capabilities and processes that will enable us to meet the quality, price, engineering, design and production standards,
or production volumes required to successfully mass market such products. Even if we are successful in developing manufacturing
capabilities and processes, we do not know whether we will do so in time to meet our product commercialization schedule or to satisfy
the requirements of our target market. Our failure to develop these manufacturing processes and capabilities, if necessary, in
a timely manner, could prevent us from achieving our growth and profitability objectives.
If we fail to continue to develop or acquire new products,
adapt to rapid and significant technological change, and respond to introductions of new products, we will not be competitive.
Our growth strategy includes significant investment in and expenditures
for product development. We intend to sell products, primarily in the water clean-up sector, which are characterized by rapid and
significant technological changes, frequent new product and service introductions, and enhancements and evolving industry standards.
Without the timely introduction of new products, services, and enhancements, our products and services may become technologically
obsolete over time, in which case our revenue and operating results would suffer.
In addition, our competitors may adapt more quickly to new technologies
and changes in customers' requirements than we can. The products that we are currently developing or those that we will develop
in the future may not be technologically feasible or accepted by the marketplace, and our products or technologies could become
uncompetitive or obsolete.
The market for our products is highly competitive, and there
can be no assurance that competitors will not emerge in the near to medium term with comparable products or technologies.
The markets for our products and services are expected to remain
highly competitive. While we believe our products are unique and have, or will have, adequate patent protection for the underlying
technologies, or unique trade secrets, there can be no assurance that competitors will not emerge in the near to medium term with
comparable products or technologies. There are a number of large companies involved in the same businesses as us, but with larger
more established sales and marketing organizations, technical staff, and financial resources. We may establish marketing and distribution
partnerships or alliances with some of these companies, but there can be no assurance that such alliances will be formed.
Our business may become substantially dependent on contracts
that are awarded through competitive bidding processes.
We may sell a significant portion of our products pursuant to
contracts that are subject to competitive bidding, including contracts with municipal authorities. Competition for, and negotiation
and award of, contracts present varied risks, including, but not limited to:
•
investment of substantial time and resources by management
for the preparation of bids and proposals with no assurance that a contract will be awarded to us;
10
•
the requirement to certify as to compliance with numerous
laws (for example, socio-economic, small business, and domestic preference) for which a false or incorrect certification can lead
to civil and criminal penalties;
•
the need to estimate accurately the resources and cost
structure required to service a contract; and
•
the expenses and delays that we might suffer if our
competitors protest a contract awarded to us, including the potential that the contract may be terminated and a new bid competition
may be conducted.
If we are unable to win contracts awarded through the competitive
bidding process, we may not be able to operate in the market for products and services that are provided under those contracts
for a number of years. If we are unable to consistently win new contract awards over any extended period, or if we fail to anticipate
all of the costs and resources that will be required to secure and perform such contract awards, our growth strategy and our business,
financial condition, and results of operations could be materially and adversely affected.
We will sell products and services to companies in industries
which tend to be extremely cyclical; downturns in those industries would adversely affect our results of operations.
The growth and profitability of our business will depend on
sales to industries that are subject to cyclical downturns. Slowdowns in these industries may adversely affect sales by our businesses,
which in turn would adversely affect our revenues and results of operations. In particular, our products may be sold to and used
by the oil and gas industry, which historically has realized significant shifts in activity and spending due to fluctuations in
commodity prices. Our revenues may be dependent upon spending by oil and gas producers; therefore, a reduction in spending by producers
may have a materially adverse effect on our business, financial conditions, and results of operations.
The industries in which we may sell our products are heavily
regulated and costs associated with such regulation could reduce our profitability.
Federal, state, and local authorities extensively regulate the
stormwater and oil and gas industries, which are primary industries in which we may sell our products and offer our services. Legislation
and regulations affecting the industries are under constant review for amendment or expansion. State and local authorities regulate
various aspects of stormwater and oil and gas activities that ultimately affect how customers use our products and how we develop
and market our products. The overall regulatory burden on the industries increases the cost of doing business, which, in turn,
decreases profitability.
International sales are also subject to rules and regulations
promulgated by regulatory bodies within foreign jurisdictions, and there can be no assurance that such foreign regulatory bodies
will not adopt laws or regulatory requirements that could adversely affect our Company.
If chemical companies engage in predatory pricing, we may
lose customers, which could materially and adversely affect us.
Municipalities and other commercial and industrial entities
traditionally have used chemicals to control the quality of water and other fluids. The chemical companies represent a significant
competitive factor. The chemical companies who supply chemicals to such municipalities and other commercial and industrial entities
may, in order to maintain their business relationship, drastically reduce their price and seek to undercut the pricing at which
we can realistically charge for our products and services. While predatory pricing that is designed to drive us out of business
may be illegal under the United States anti-trust and other laws, we may lose customers as a result of any future predatory pricing
and be required to file lawsuits against any companies who engage in such improper tactics. Any such litigation may be very expensive
which will further impact us and affect their financial condition. As a result, predatory pricing by chemical companies could materially
and adversely affect us.
11
We are, or in the future may be, subject to substantial regulation
related to quality standards applicable to our manufacturing and quality processes. Our failure to comply with applicable quality
standards could have an adverse effect on our business, financial condition, or results of operations.
The Environmental Protection Agency regulates the registration,
manufacturing, and sales and marketing of products in our industry, and those of our distributors and partners, in the United States.
Significant government regulation also exists in overseas markets. Compliance with applicable regulatory requirements is subject
to continual review and is monitored through periodic inspections and other review and reporting mechanisms.
Failure by us or our partners to comply with current or future
governmental regulations and quality assurance guidelines could lead to temporary manufacturing shutdowns, product recalls or related
field actions, product shortages, or delays in product manufacturing. Efficacy or safety concerns and/or manufacturing quality
issues with respect to our products or those of our partners could lead to product recalls, fines, withdrawals, declining sales,
and/or our failure to successfully commercialize new products or otherwise achieve revenue growth.
If a natural or man-made disaster strikes our or a third-party's
manufacturing facility that we may use, we may be unable to manufacture our products for a substantial amount of time and our sales
and profitability will decline.
The manufacturing facility and manufacturing equipment we use
to produce our products will be costly to replace and could require substantial lead-time to repair or replace. Our facility or
a third-party's facility that we use may be affected by natural or man-made disasters. In the event they were affected by
a disaster, we would be forced to set up alternative production capacity, or rely on third-party manufacturers to whom we would
have to disclose our trade secrets. Although we possess insurance for damage to our property and the disruption of our business
from casualties, such insurance may not be sufficient to cover all of our potential losses, may not continue to be available to
us on acceptable terms, or at all, and may not address the marketing and goodwill consequences of our inability to provide products
for an extended period of time.
We may decide to outsource manufacturing in the future. Dependence
on contract manufacturing and outsourcing other portions of our supply chain may adversely affect our ability to bring products
to market and damage our reputation.
As part of our efforts to streamline operations and to cut costs
in the future, we may decide to outsource aspects of our manufacturing processes and other functions. If our contract manufacturers
or other outsourcers fail to perform their obligations in a timely manner or at satisfactory quality levels, our ability to bring
products to market and our reputation could suffer. For example, during a market upturn, our contract manufacturers may be unable
to meet our demand requirements, which may preclude us from fulfilling our customers' orders on a timely basis. The ability
of these manufacturers to perform is largely outside of our control. Additionally, outsourcing may take place in developing countries
and, as a result, may be subject to geopolitical uncertainty.
12
The success of our businesses will depend on our ability
to effectively develop and implement strategic business initiatives.
We are currently implementing various strategic business initiatives.
In connection with the development and implementation of these initiatives, we will incur additional expenses and capital expenditures
to implement the initiatives. The development and implementation of these initiatives also requires management to divert a portion
of its time from day-to-day operations. These expenses and diversions could have a significant impact on our operations and profitability,
particularly if the initiatives prove to be unsuccessful. Moreover, if we are unable to implement an initiative in a timely manner,
or if those initiatives turn out to be ineffective or are executed improperly, our business and operating results would be adversely
affected.
Failure to successfully reduce our current or future production
costs may adversely affect our financial results.
A significant portion of our strategy will rely upon our ability
to successfully rationalize and improve the efficiency of our operations. In particular, our strategy relies on our ability to
reduce our production costs in order to remain competitive. If we are unable to continue to successfully implement cost reduction
measures, especially in a time of a worldwide economic downturn, or if these efforts do not generate the level of cost savings
that we expect going forward or result in higher than expected costs, there could be a material adverse effect on our business,
financial condition, results of operations, or cash flows.
If we are unable to make necessary capital investments or
respond to pricing pressures, our business may be harmed.
In order to remain competitive, we need to invest in research
and development, manufacturing, customer service and support, and marketing. From time to time, we may have to adjust the prices
of our products and services to remain competitive. We may not have available sufficient financial or other resources to continue
to make investments necessary to maintain our competitive position.
Failure to obtain sufficient supply of component materials
to conduct our business may have an adverse effect on our production and revenue targets.
Our component and materials' suppliers may fail to meet
our needs. We intend to manufacture our products using materials and components procured from a limited number of third-party suppliers.
We do not currently have long-term supply contracts with our suppliers. This generally serves to reduce our commitment risk, but
does expose us to supply risk and to price increases that we may have to pass on to our customers. In some cases, supply shortages
and delays in delivery may result in curtailed production or delays in production, which can contribute to an increase in inventory
levels and loss of profit. We expect that shortages and delays in deliveries of some components will occur from time to time. If
we are unable to obtain sufficient components on a timely basis, we may experience manufacturing delays, which could harm our relationships
with current or prospective customers and reduce our sales. We may also not be able to obtain competitive pricing for some of our
supplies compared to our competitors. We also cannot assure that the component and materials from domestic suppliers will be of
similar quality or quantity as those imported component and materials, which may lead to rejections of component and materials
by our customers. In the event the domestic component and materials do not perform as well as the imported component and materials
or do not perform at all, our business, financial condition, and results of operations could be adversely affected.
13
We have limited product distribution experience and we expect
to rely on third parties who may not successfully sell our products.
We have limited product distribution experience and currently
rely and plan to rely primarily on product distribution arrangements with third parties. We may also license our technology to
certain third parties for commercialization of certain applications. We expect to enter into distribution agreements and/or licensing
agreements in the future, and we may not be able to enter into these agreements on terms that are favorable to us, if at all. In
addition, we may have limited or no control over the distribution activities of these third parties. These third parties could
sell competing products and may devote insufficient sales efforts to our products. As a result, our future revenues from sales
of our products, if any, will depend on the success of the efforts of these third parties.
We could face significant liabilities in connection with
our technology, products, and business operations, which if incurred beyond any insurance limits, would adversely affect our business
and financial condition.
We are subject to a variety of potential liabilities connected
to our technology development and business operations, such as potential liabilities related to environmental risks. As a business
which manufactures and/or markets products for use by consumers and institutions, we may become liable for any damage caused by
our products, whether used in the manner intended or not. Any such claim of liability, whether meritorious or not, could be time-consuming
and/or result in costly litigation. Although we have obtained insurance against certain of these risks, no assurance can be given
that such insurance will be adequate to cover related liabilities or will be available in the future or, if available, that premiums
will be commercially justifiable. If we were to incur any substantial liability and related damages were not covered by our insurance
or exceeded policy limits, or if we were to incur such liability at a time when we are not able to obtain liability insurance,
our business, financial conditions, and results of operations could be materially adversely affected.
Our failure to protect our intellectual property rights may
undermine our competitive position, and litigation to protect our intellectual property rights or defend against third-party allegations
of infringement may be costly.
Our success will depend in part on our ability to develop patentable
products and obtain and enforce patent protection for our products in the United States and other countries. We intend to file
applications, as appropriate, for patents covering our products. Patents may not be issued for any pending or future patent applications
owned by or licensed to us, and the claims allowed under any issued patents may not be sufficiently broad to protect our technology.
Any issued patents owned by or licensed to us may be challenged, invalidated, or circumvented, and the rights under these patents
may not provide us with competitive advantages. In addition, competitors may design around our technology or develop competing
technologies. Intellectual property rights may also be unavailable or limited in some foreign countries, which could make it easier
for competitors to capture increased market position. We could incur substantial costs to defend suits brought against us or suits
in which we may assert our patent rights against others. An unfavorable outcome of any such litigation could materially adversely
affect our business and results of operations.
We may also rely on trade secrets and proprietary know-how with
which we seek to protect our products, in part by confidentiality agreements with our collaborators, employees, and consultants.
Nevertheless, these agreements afford only limited protection, and the actions we take to protect our intellectual property rights
may not be adequate. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade
secrets may otherwise become known or be independently developed by our competitors. As a result, third parties may infringe or
misappropriate our proprietary technologies or other intellectual property rights, which could have a material adverse effect on
our business, financial condition, or operating results.
14
In addition, policing unauthorized use of proprietary technology
can be difficult and expensive. Litigation may be necessary to enforce our intellectual property rights, protect our trade secrets,
or determine the validity and scope of the proprietary rights of others. We cannot assure you that the outcome of any litigation
will be in our favor. Intellectual property litigation may be costly and may divert management attention, as well as expend our
other resources away from our business. An adverse determination in any such litigation will impair our intellectual property rights
and may harm our business, prospects, and reputation. In addition, we have no insurance coverage against litigation costs and would
have to bear all costs arising from such litigation to the extent we are unable to recover them from other parties. The occurrence
of any of the foregoing could have a material adverse effect on our business, results of operations, and financial condition.
Operational and Structural Risks
We can provide no assurances as to our future financial performance
or the investment result of a purchase of our common stock.
Any projected results of operations, including the recent Merger,
involve significant risks and uncertainty, should be considered speculative, and depend on various assumptions which may not be
correct. The future performance of our Company and the return on our common stock depends on a complex series of events that are
beyond our control and that may or may not occur. Actual results for any period may or may not approximate any assumptions that
are made and may differ significantly from such assumptions. We can provide no assurance or prediction as to our future profitability
or to the ultimate success of an investment in our common stock.
The compensation we pay to our executive officers and employees
will likely increase, which will affect our future profitability.
We believe that the compensation we have historically paid to
our executive officers is within the lower quartile of compensation paid by companies similar to our Company. Following the closing
of the Merger, we increased the compensation payable to the combined entity's executive officers and employees. An increase
in compensation and bonuses payable to our executive officers and employees could decrease our net income.
As a public reporting company, we are subject to corporate
governance and internal control reporting requirements, and our costs related to compliance with, or our failure to comply with
existing and future requirements, could adversely affect our business.
We may face new corporate governance requirements under the
Sarbanes-Oxley Act of 2002, as well as new rules and regulations subsequently adopted by the SEC and the Public Company Accounting
Oversight Board. These laws, rules, and regulations continue to evolve and may become increasingly stringent in the future. We
are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 ("Section
404"). We are a smaller reporting company as defined in Rule 12b-2 under the Exchange Act. Section 404 requires us to include
an internal control report with our Annual Report on Form 10-K. The report must include management's assessment of the effectiveness
of our internal control over financial reporting as of the end of the fiscal year. This report must also include disclosure of
any material weaknesses in internal control over financial reporting that we have identified. Failure to comply, or any adverse
results from such evaluation, could result in a loss of investor confidence in our financial reports and have an adverse effect
on the trading price of our securities. We strive to continuously evaluate and improve our control structure to help ensure that
we comply with Section 404. The financial cost of compliance with these laws, rules, and regulations is expected to remain substantial.
We cannot assure you that we will be able to fully comply with these laws, rules, and regulations that address corporate governance,
internal control reporting, and similar matters. Failure to comply with these laws, rules, and regulations could materially adversely
affect our reputation, financial condition, and the value of our securities.
15
As a public company, we will have significant operating costs
relating to compliance requirements and our management is required to devote substantial time to compliance initiatives.
Our management has only limited experience operating AbTech
Holdings as a public company. To operate effectively, we will be required to continue to implement changes in certain aspects of
our business and develop, manage, and train management level and other employees to comply with on-going public company requirements.
Failure to take such actions, or delay in the implementation thereof, could have a material adverse effect on our business, financial
condition, and results of operations.
The Sarbanes-Oxley Act of 2002, as well as rules subsequently
implemented by the SEC, impose various requirements on public companies, including requiring establishment and maintenance of effective
disclosure and financial controls and changes in corporate governance practices. Our management and other personnel will need to
devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations will increase our
legal and financial compliance costs and will make some activities more time-consuming and costly.
Risks Related to our Common Stock
A limited public trading market exists for our common stock,
which makes it more difficult for our stockholders to sell their common stock in the public markets.
Although our common stock is quoted on the OTCBB under the symbol
"ABHD," there is a limited public market for our common stock. No assurance can be given that an active market will
develop or that a stockholder will ever be able to liquidate its shares of common stock without considerable delay, if at all.
Many brokerage firms may not be willing to effect transactions in the securities. Even if a purchaser finds a broker willing to
effect a transaction in these securities, the combination of brokerage commissions, state transfer taxes, if any, and any other
selling costs may exceed the selling price. Furthermore, our stock price may be impacted by factors that are unrelated or disproportionate
to our operating performance. These market fluctuations, as well as general economic, political, and market conditions, such as
recessions, interest rates, or international currency fluctuations may adversely affect the market price and liquidity of our common
stock.
Our stock price may be volatile.
The market price of our common stock is likely to be highly
volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the
following:
•
limited "public float" in the hands of
a small number of persons whose sales (or lack of sales) could result in positive or negative pricing pressure on the market price
for our common stock;
•
actual or anticipated variations in our quarterly operating
results;
•
changes in our earnings estimates;
•
our ability to obtain adequate working capital financing;
16
•
changes in market valuations of similar companies;
•
publication (or lack of publication) of research reports
about us;
•
changes in applicable laws or regulations, court rulings,
enforcement and legal actions;
•
loss of any strategic relationships;
•
additions or departures of key management personnel;
•
actions by our stockholders (including transactions
in our shares);
•
speculation in the press or investment community;
•
increases in market interest rates, which may increase
our cost of capital;
•
changes in our industry;
•
competitive pricing pressures;
•
our ability to execute our business plan; and
•
economic and other external factors.
In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market
fluctuations may also materially and adversely affect the market price of our common stock.
Our common stock may be subject to the penny stock rules
which may make it more difficult to sell our common stock.
The SEC has adopted regulations which generally define a "penny
stock" to be any equity security that has a market price, as defined, less than $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. Our securities may be covered by the penny stock rules, which impose additional
sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors, such
as institutions with assets in excess of $5,000,000 or an individual with net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with his or her spouse. For transactions covered by this rule, the broker-dealers must make a special
suitability determination for the purchase and receive the purchaser's written agreement of the transaction prior to the
sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities and also affect the ability of our
stockholders to sell their shares in the secondary market.
FINRA sales practice requirements may also limit a shareholder's
ability to buy and sell our stock.
In addition to the "penny stock" rules described
above, the Financial Industry Regulatory Authority ("FINRA") has adopted rules that require that in recommending an
investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.
Prior to recommending speculative, low priced securities to their non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer's financial status, tax status, investment objectives, and other information.
Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low priced securities will
not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that
their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the
market for our shares.
17
Our common shares are currently traded at low volume, and
you may be unable to sell at or near ask prices or at all if you need to sell or liquidate a substantial number of shares at one
time.
We cannot predict the extent to which an active public market
for our common stock will develop or be sustained. Our common shares are currently traded, but currently with low volume, based
on quotations on the "Over-the-Counter Bulletin Board," meaning that the number of persons interested in purchasing
our common shares at or near bid prices at any given time may be relatively small or non-existent. This situation is attributable
to a number of factors, including the fact that we are a small company which is still relatively unknown to stock analysts, stock
brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even
if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such
as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned
issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse
effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock
will develop or be sustained, or that trading levels will be sustained.
Shareholders should be aware that, according to SEC Release
No. 34-29093, the market for "penny stocks" has suffered in recent years from patterns of fraud and abuse. Such patterns
include: (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
(2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler
room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive
and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse
of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the
penny stock market, and we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate
in the market. The occurrence of these patterns or practices could increase the future volatility of our share price.
We have historically not paid dividends and do not intend
to pay dividends for the foreseeable future.
We have historically not paid dividends to our stockholders,
and management does not anticipate paying any cash dividends on our common stock to our stockholders for the foreseeable future.
Any determination we make regarding dividends will be at the discretion of our Board of Directors and will depend on our results
of operations, our financial condition, contractual restrictions, restrictions imposed by applicable law, and other factors our
Board of Directors deem relevant. Even if the funds are legally available for distribution, we may nevertheless decide not to pay
any dividends. We presently intend to retain future earnings, if any, for use in the operation and expansion of our business.
The elimination of monetary liability against our directors,
officers, and employees under Nevada law and the existence of indemnification rights to our directors, officers, and employees
may result in substantial expenditures by our Company and may discourage lawsuits against our directors, officers, and employees.
Our articles of incorporation contain a provision permitting
us to eliminate the personal liability of our directors to our Company and shareholders for damages for breach of fiduciary duty
as a director or officer to the extent provided by Nevada law. We may also have contractual indemnification obligations under our
employment agreements with our officers. The foregoing indemnification obligations could result in our Company incurring substantial
expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup.
These provisions and resultant costs may also discourage our Company from bringing a lawsuit against directors and officers for
breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against
our directors and officers even though such actions, if successful, might otherwise benefit our Company and shareholders.
18
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains forward-looking statements within the
meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act, regarding the Company. These forward-looking
statements are based on our current expectations, estimates and projections about our industry, management's beliefs and
certain assumptions made by us. Words such as "anticipates," "expects," "intends," "plans,"
"predicts," "potential," "believes," "seeks," "hopes," "estimates,"
"should," "may," "will," "with a view to" and variations of these words or similar
expressions are intended to identify forward-looking statements. Forward-looking statements in this prospectus may include, for
example, statements about:
any projections of earnings, revenue or other financial items;
any statements of the plans, strategies and objectives of
management for future operations;
any statements concerning proposed new products, services
or developments;
any statements regarding future economic conditions or performance;
any statements or belief; and
any statements of assumptions underlying any of the foregoing.
These forward-looking statements involve various risks and uncertainties.
Although we believe our expectations expressed in these forward-looking statements are reasonable, our expectations may later be
found to be incorrect. Our actual results could be materially different from our expectations. Important risks and factors that
could cause our actual results to be materially different from our expectations are generally set forth in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of Operations," "Our Business"
and other sections in this prospectus. You should read this prospectus and the documents we refer to thoroughly with the understanding
that our actual future results may be materially different from and worse than what we expect. Other sections of this prospectus
include additional factors which could adversely impact our business and financial performance.
The forward-looking statements made in this prospectus relate
only to events or information as of the date on which the statements are made in this prospectus. 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 prospectus and the documents we refer to in this prospectus and have filed as exhibits to this prospectus completely
and with the understanding that our actual future results may be materially different from what we expect.
19
USE OF PROCEEDS
We will not receive any proceeds from sale of the shares of
common stock covered by this prospectus by the selling shareholders. To the extent the selling shareholders exercise for cash all
of the warrants covering the 5,154,289 shares of common stock issuable upon exercise of all of the warrants held by such selling
shareholders, we would receive $3,168,002 from such exercises. The warrants may expire without having been exercised. Even if some
or all of these warrants are exercised, we cannot predict when they will be exercised and when we would receive the proceeds. We
intend to use any proceeds we receive upon exercise of the warrants for general working capital and other corporate purposes.
MARKET PRICE OF OUR COMMON STOCK
Our common stock is listed on the OTCBB under the symbol "ABHD."
The closing price of our common stock on the OTC Bulletin Board on April 10, 2012, was $0.75 per share.
Our common stock has been listed on the OTCBB since June 2010. Prior to that time, there was no public market for our common
stock. The following table sets forth, for the calendar quarters indicated, the high and low stock prices for our common stock
as reported by the NASDAQ.com. These quotations may represent prices between dealers without adjustment for retail markups, markdowns,
or commissions and may not represent actual transactions.
Sales Price of Common Stock
Quarter ended
High
Low
December 31, 2011
$0.63
$0.32
September 30, 2011
$0.75
$0.35
June 30, 2011
$1.44
$0.25
March 31, 2011
$1.65
$0.41
Sales Price of Common Stock
High
Low
December 31, 2010
$0.99
$0.40
September 30, 2010
$2.55
$0.86
June 30, 2010
$2.90
$0.99
Stockholders
As of April 12, 2012 there were 173 stockholders of record of
our common stock. Our transfer agent is Worldwide Stock Transfer, LLC. The transfer agent's address is 433 Hackensack Ave.,
Level L, Hackensack, NJ 07601.
20
The offering will have no effect on the amount and percentage
of present holdings of shares of common stock held by any 5% beneficial owner, directors and nominees and directors and officers
as a group, except that one of the selling shareholders, Pinnacle Family Office Investments, L.P., purchased $1,800,000 of the
Secured Notes in the February Offering. The shares issuable upon conversion of these notes plus the shares of common stock issuable
upon exercise of the warrants issued with the notes, total 3,771,428 giving them a 7.2 % beneficial ownership of the Company's
common stock after the February Offering.
Dividends
The holders of our common stock are entitled to receive dividends
as may be declared by our Board of Directors. As of the date of this prospectus, we have never declared or paid cash dividends
on our common stock, and we do not anticipate paying dividends in the foreseeable future. Our future payment of dividends will
depend on our earnings, capital requirements, expansion plans, financial condition, and other relevant factors that our Board of
Directors may deem relevant. Our retained earnings deficit currently limits our ability to pay dividends.
DILUTION
Our unaudited pro forma net tangible book value as of December
31, 2011, as adjusted to include the effect of the February 15, 2012 final closing of the private placement, was negative $(5.7)
million, or negative $(0.12) per share of common stock based upon 48,482,344 shares outstanding (which includes 1,321,409 shares
issued subsequent to December 31, 2011). Net tangible book value per share is determined by dividing such number of outstanding
shares of common stock into our net tangible book value, which is our total tangible assets less total liabilities. After giving
effect to the sale of our common stock in this offering for which the Company would receive no proceeds for the shares issued upon
conversion of the Secured Notes and approximately $0.60 per share for each warrant share exercised, with no other offering expenses
payable by us, our pro forma as adjusted net tangible book value at December 31, 2011 would have been approximately negative $(2.0)
million, or $(0.03) per share. This represents an immediate increase in net tangible book value of approximately $0.09 per share
to our existing stockholders, and an immediate dilution of $(0.78) per share to investors purchasing common stock in the offering.
The following table illustrates the per share dilution to investors
purchasing common stock in the offering:
Assumed public offering price per unit
$
0.75
Net tangible book value per share as of December 31, 2011, as adjusted
$
(0.12)
$
Increase per share attributable to sale of securities to investors
$
0.09
$
Pro forma as adjusted net tangible book value per share after the offering
$
(0.03)
Dilution per share to investors
$
(0.78)
21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction
with our financial statements and related notes contained elsewhere in this prospectus. This discussion contains forward-looking
statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of a variety of factors, including those set forth under Risk Factors.
Overview
Abtech Holdings was incorporated in the State of Nevada on February
13, 2007 under the name "Laural Resources, Inc." On February 10, 2011, Abtech Holdings consummated the Merger with
AbTech Industries, pursuant to the Merger Agreement. Prior to the Merger, Abtech Holdings was a development stage company engaged
in the business of acquiring and developing mineral properties, and a public reporting "shell company," as defined
in SEC Rule 12b-2 under the Exchange Act. As a result of the Merger, Abtech Holdings acquired all of the issued and outstanding
common stock of AbTech Industries (through a reverse acquisition transaction) in exchange for the stockholders of AbTech Industries
acquiring a 78% ownership interest in Abtech Holdings, AbTech Industries became Abtech Holdings' majority-owned subsidiary,
and Abtech Holdings acquired the business and operations of AbTech Industries.
This "Management's Discussion and Analysis of Financial
Condition and Results of Operations" is based on and relates only to AbTech Industries. Prior to the consummation of the
Merger, Abtech Holdings was a "shell company" that did not have an active business and its results of operations are
immaterial and are not included in the discussion below. Key factors affecting AbTech Industries' results of operations during
the periods covered in this section include revenues, cost of revenues, operating expenses and income, and taxation.
For accounting purposes, the Merger transaction has been accounted
for as a reverse acquisition, with AbTech Industries as the acquirer. The consolidated financial statements of Abtech Holdings
as of and for the year ended December 31, 2011 represent a continuation of the financial statements of AbTech Industries, with
one adjustment, which is to retroactively adjust the legal capital of AbTech Industries to reflect the legal capital of Abtech
Holdings. See Note 1 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.
Results of Operations
Comparison of the years ended December 31, 2011 and 2010
Revenues increased by approximately 24% in 2011 but continued
to be adversely impacted by the effects of a worldwide economic downturn that stalled most projects with municipal and other customers.
Going forward the Company expects significant sales growth due to improving general economic conditions, maturity of the market
for stormwater products, strategic alliances with market dominant strategic partners and an expansion into new markets for produced
water and other industrial applications of the Smart Sponge technology. The Company's new distributor, Waste Management,
Inc. ("WMI"), announced in April 2011 that it was launching its entry into the stormwater market and intended to initiate
its sales efforts in four pilot market areas in 2011. As of December 31, 2011, WMI had identified and launched sales efforts in
three of these pilot areas. While the Company has not yet recognized significant revenue from this distribution arrangement, gradual
revenue growth is anticipated in 2012 as the Company and WMI pursue these initial efforts in the pilot market areas and expand
into other geographic markets.
22
The sales in both 2011 and 2010 were affected by non-recurring,
unusual items. In 2011, the Company recorded approximately $77,000 of revenue resulting from the forfeiture of a prepayment made
by a distributor in 2007 to secure exclusive geographic marketing rights under a distribution agreement. Under the terms of the
distribution agreement, the distributor was allowed to apply the prepaid fee to purchases of AbTech Industries products for a limited
period of time. As of December 31, 2011, the distributor forfeited the $77,000 unused balance of the prepayment and the Company
recorded it as revenue. In 2010, approximately 23% of sales were attributable to the sale of Smart Sponge products to one customer
who donated the products for deployment in the Gulf of Mexico to treat the massive oil spill that occurred there during the year.
These unusual transactions in 2011 and 2010 had a favorable
impact on gross margins. However, the gross margins of 14.7% and 9.7% for 2011 and 2010, respectively, are well below the gross
margins that we would expect if the Company were operating near full capacity. Our current manufacturing facility is capable of
producing sufficient products to generate approximately $10 million in revenue per year. If the Company can spread the overhead
costs of operating the facility over a larger base of produced products, the margins would be expected to improve significantly.
We do not currently have plans to reduce excess manufacturing capacity, and we anticipate that the excess capacity will continue
to adversely affect gross margins for at least a portion of 2012.
The cost of the primary raw materials used to manufacture the
Company's products is directly affected by the cost of oil. Accordingly, fluctuations in the price of oil could have a material
impact on the cost of manufacturing Smart Sponge products.
Selling, general and administrative expenses increased by $754,363
(32%) in 2011, compared to 2010, due in part to the legal, accounting and other costs associated with the merger of Abtech Holdings
and AbTech Industries which closed in February, 2011. The Company also experienced new costs related to being a public company
including legal fees, auditing fees, and other compliance costs. In 2011, the Company began a significant expansion of its business
development efforts in line with its strategy of developing alliances with companies that have dominant positions in the specific
industry segments targeted by AbTech Industries for distribution of Smart Sponge products. These efforts included increased cost
for personnel, advertising, travel, legal and other promotional costs.
Research and development efforts in 2010 were focused primarily
on attempts to modify Smart Sponge products for easy and effective deployment in treating the Gulf oil spill. In 2011, the Company
shifted its R&D focus to new products using the Smart Sponge technology in applications for the treatment of produced water,
and other industrial applications. These efforts involved a significant amount of product testing in the lab and in the field with
corresponding increased costs for personnel (employees and consultants), fees for lab analysis, equipment rental and travel costs.
The increased R&D activities in 2011 resulted in R&D costs increasing to $634,109, a 26% increase over R&D costs in
2010.
Interest expense increased from $115,568 in 2010 to $2,078,704
in 2011 due largely to a non-monetary, non-recurring charge of $1,620,955 for imputed interest on promissory notes that were converted
to common stock on beneficial conversion terms during 2011. See Note 13 of the Consolidated Financial Statements. In addition,
the Secured Notes have interest rates of twelve percent (12%). See Note 14 of the Consolidated Financial Statements. The interest
expense accrued on these notes in 2011 amounted to approximately $126,000. Interest expense was further impacted by the amortization
of the deferred charges and imputed note discounts for warrants related to these offerings, which were charged to interest expense
in 2011 and amounted to approximately $125,000 and $160,000, respectively.
23
Liquidity and Capital Resources
To date, the Company has not generated sufficient revenue to
cover its operating costs and continues to operate with negative cash flow. At December 31, 2011, our cash balance was $1,386,502,
significantly higher than the $4,123 balance reported at December 31, 2010, but representing only approximately 4 months of historical
negative cash flows from operations. While we expect to achieve significant sales growth over the long-term, continued negative
cash flow from operations is expected in the short term.
Operations in 2011 and 2010 were funded primarily by proceeds
from the issuance of AbTech Industries convertible promissory notes (the "AbTech Notes"), short-term loans, Abtech
Holdings convertible notes and warrants (the "ABHD Notes"), the Secured Notes and equity investments of $2,320,000
pertaining to the funding requirement of the Merger. These proceeds amounted to $7,322,100 in 2011 and $2,827,865 in 2010. Of the
proceeds received in 2011, $500,000 was received from a director of the Company who also was paid $200,000 for repayment of a non-interest
bearing convertible note issued by AbTech Industries in 2008. The AbTech Notes are convertible into shares of AbTech Industries'
Series A preferred stock at a conversion rate of $3.75 per share. The Series A preferred stock is convertible into shares of Abtech
Holdings common stock at a rate of 5.32 shares of Abtech Holdings common stock for each share of AbTech Industries Series A preferred
stock. At December 31, 2011, the principal amount of debt outstanding was $6,946,524, of which $4,700,000 pertains to ABHD Notes
and the Secured Notes with maturity dates in 2012. In the event that the holders of these notes elect to not convert the notes
to ABHD stock at maturity, the Company will be required to raise additional capital in 2012 to repay the notes at maturity or extend
the debt maturity dates and incur higher interest rates on the debt. Under the terms of the ABHD Notes and the Secured Notes, the
Company may extend the maturity dates by an additional ninety (90) day period, during which period the interest rate will increase
from twelve percent (12%) to fifteen percent (15%) per annum on the unpaid principal of the notes. The Company may also extend
the maturity dates by a second additional 90 day period during which period the interest rate will increase to eighteen percent
(18%) per annum on the unpaid principal of the notes.
In February 2012, the Company completed the final closing of
the private offering of the Secured Notes and received $2.6 million (less closing costs) for the additional Secured Notes sold.
Our balance sheet at December 31, 2011 shows approximately $528,000
of inventory, a relatively large amount compared to net revenues for 2011 of $537,152. This supply of inventory on hand will mitigate
some of the working capital requirements AbTech Industries will encounter in the event it successfully increases sales revenue
in 2012. At December 31, 2011, AbTech Industries had customer deposits of $38,505 as prepayments by certain distributors for future
product orders. Future sales to these distributors will not generate positive cash flow until the prepayments are depleted.
The Company had capital expenditures of $11,606 in 2011 and
$15,596 in 2010. As of December 31, 2011, the Company had no commitments for future capital expenditures. However, if the Company
is successful in achieving significant sales growth in 2012, it may need to expand its manufacturing capacity or outsource some
of its manufacturing. The Company is currently considering both options. The Company estimates that it could double its current
manufacturing capacity for approximately $250,000 and accommodate an annual sales rate of over $20 million.
Contractual Obligations
As a smaller reporting company, as defined in Rule 12b-2 of
the Exchange Act, Abtech Holdings is not required to provide the information required by this item.
24
Off-Balance Sheet Arrangements
We have not entered into any other financial guarantees or other
commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are
indexed to our shares and classified as shareholder's equity or that are not reflected in our consolidated financial statements.
Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as
credit, liquidity, or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that
provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or research and development
services with us.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results
of operations, including the discussion on liquidity and capital resources, are based upon our financial statements, which have
been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses,
and related disclosure of contingent assets and liabilities. On an ongoing basis, management re-evaluates its estimates and judgments.
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. For any given individual estimate or assumption we make, it is possible that other
people applying reasonable judgment to the same facts and circumstances could develop different estimates. Actual results may materially
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. Certain conditions, discussed above, 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 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 consolidated
financial statements. The SEC considers an entity's most critical accounting policies to be 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.
Our critical accounting policies include fair values of financial
instruments, inventory valuation, revenue and cost recognition, allowance for doubtful accounts, stock-based compensation, accounting
for conversion options, common stock purchase warrants, imputed interest and business combinations and are discussed in detail
in the financial statements filed herewith, as are recent accounting pronouncements.
25
OUR BUSINESS
Overview and Recent Events
Abtech Holdings was incorporated in Nevada on February 13, 2007
under the name "Laural Resources, Inc." and was initially engaged in the business of acquiring and developing mineral
properties. Subsequent to its fiscal year ended May 31, 2010, Laural Resources, Inc. decided to change its business focus to clean
technology products and services, specifically in the water clean-up sector. In furtherance of its business objectives, effective
June 14, 2010, Laural Resources, Inc. merged with its wholly-owned subsidiary, Abtech Holdings, Inc., for the purpose of effecting
a name change to "Abtech Holdings, Inc." On October 21, 2010, the Company's Board of Directors changed the Company's
fiscal year end from May 31 to December 31.
On February 10, 2011, the Company closed a merger transaction
with AbTech Industries, Inc., a Delaware corporation, pursuant to an Agreement and Plan of Merger by and among Abtech Holdings,
Abtech Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of Abtech Holdings and AbTech Industries.
As a result of the Merger, Abtech Holdings acquired all of the
issued and outstanding common stock of AbTech Industries (through a reverse acquisition transaction) in exchange for the common
stockholders of AbTech Industries acquiring an approximate 78% ownership interest in Abtech Holdings, AbTech Industries became
a majority-owned subsidiary of Abtech Holdings, and Abtech Holdings acquired the business and operations of AbTech Industries.
Abtech Holdings was a "shell company" prior to the
Merger and did not conduct an active trade or business. From and after the consummation of the Merger on February 10, 2011, Abtech
Holdings' primary operations consisted of the business and operations of AbTech Industries. Because Abtech Holdings was a
shell company at the time of the Merger, we filed with the SEC on February 14, 2011, a "super" Form 8-K that disclosed
information required by Item 2.01(f) of Form 8-K (being information that would be required if we had filed a general form for registration
under Form 10 under the Exchange Act).
For accounting purposes, the Merger transaction has been accounted
for as a reverse acquisition, with AbTech Industries as the acquirer. The consolidated financial statements of Abtech Holdings
for the year ended December 31, 2011 represent a continuation of the financial statements of AbTech Industries, with one adjustment,
which is to retroactively adjust the legal capital of AbTech Industries to reflect the legal capital of Abtech Holdings. See Note
1 of Consolidated Financial Statements.
AbTech Industries has developed a variety of products that leverage
its cornerstone filtration media technology called Smart Sponge®. This patented technology's oil absorbing capabilities
make it highly effective as a filtration media to remove hydrocarbons and other pollutants from water. AbTech Industries has introduced
its products into a variety of markets resulting in over 15,000 products installed in 36 states and 8 countries to date.
AbTech Industries developed the Smart Sponge media, a patented
polymer technology that effectively removes pollutants from water and encapsulates them so that they cannot be released back into
the water, even under high pressure. AbTech Industries recently expanded the capability of the Smart Sponge technology by adding
an antimicrobial agent that has proven to be effective in reducing coliform bacteria found in stormwater, industrial wastewater
and municipal wastewater while maintaining its oil-absorbing capability. This expanded technology, known as Smart Sponge Plus,
provides an effective solution to municipalities and other entities faced with beach closures and other hazards of bacteria-laden
stormwater. This antimicrobial capability differentiates Smart Sponge Plus products from competitive stormwater treatment devices.
It can be engineered to treat massive amounts of water runoff in end-of-pipe applications, such as drainage vaults or other configurations.
In July 2010, AbTech Industries received notification from the EPA that AbTech Industries' application to register Smart
Sponge Plus as a pesticide under the Federal Insecticide, Fungicide and Rodenticide Act had been conditionally approved.
26
AbTech Industries' business is subject to several significant
risks, any of which could materially adversely affect its business, operating results, financial condition, and the actual outcome
of matters as to which it makes forward-looking statements. See "Risk Factors".
Technologies
Smart Sponge
Over the past nine years, AbTech Industries has developed and
patented its core Smart Sponge technologies based on a proprietary blend of synthetic polymers aimed at the removal of hydrocarbons
and oil derivatives from surface water. The removal process starts with the physical contact between polymer and contaminant and
the consequent adsorption (physical interaction, contaminant distributed on surface of adsorbing material) or absorption (contaminant
distributed throughout the absorbing material). The absorption/adsorption process is determined by several polymer parameters (e.g.,
composition and structure, flexibility of the chain and molecular weight), as well as physical parameters (e.g., polymer physical
form, contaminant molecule size and temperature). While polymer composition is the critical factor in defining the solubility,
the polymer structure (amorphous or crystalline) is probably the most important factor in determining the process of absorption
or adsorption.
AbTech Industries' polymers are composed of amorphous
products that are able to selectively absorb various hydrocarbons (contaminants) present in water, then stabilize and retain them
in a gelified structure. Other traditional sorbent products, with more crystalline structures, can only adsorb the contaminants
and don't have the capability to totally retain them when the sorbent is removed from the water. AbTech Industries'
polymers, in order to selectively remove oil derivatives from water, are oleophilic (strong affinity for oils) and hydrophobic
(repels water).
The adsorption/absorption process is also controlled by the
physical size of the sorbent as diffusion is fairly proportional to the contact surface between fluid and sorbent. Finely powderized
materials show the best absorption but, because of swelling, tend to gel quickly and block the contact of additional fluid with
the remaining active sorbent, and are very difficult to handle. In order to overcome this problem and use the sorbent to the maximum
capacity, AbTech Industries has developed a patented extrusion process that takes advantage of the different thermal behavior of
the polymers used to create entanglements with the amorphous part of the other polymer, bonding the chains of the polymers in a
flexible porous structure called Smart Sponge.
The porosity of the Smart Sponge allows the fluid containing
the contaminant to penetrate into its structure, then the polymer chains selectively absorb the hydrocarbon contaminants and stably
encapsulate them. Based on the level of contaminant, the entire structure begins to swell (but not collapse into a total gel) while
maintaining absorption capabilities well beyond usual levels. Once reaching saturation, the Smart Sponge is easily recoverable
and does not leach any of the absorbed contaminant, even in rough water or under pressure, giving it less expensive disposal options
such as recycling through a waste-to-energy facility. The Smart Sponge can absorb, on average, 3.5 times its weight, depending
on the contaminant absorbed and remains buoyant permitting it to remain in place until fully saturated. The malleable nature of
the Smart Sponge material allows it to be formed into a variety of shapes for optimum effectiveness in a wide variety of contaminated
water filtration applications.
27
The advantages of Smart Sponge based products over competing
products include:
•
absorbing rather than adsorbing water-borne hydrocarbons;
•
reducing coliform bacteria found in stormwater, industrial
wastewater and municipal wastewater;
•
locking-up or encapsulating the hydrocarbons;
•
transforming the encapsulated pollutant into a solid
to prevent leaching;
•
remaining buoyant after the encapsulation in order
to permit recovery;
•
oil-soaked product may be recycled as a waste-to-energy
fuel source;
•
simpler and less expensive disposal due to classification
as a solid "non-hazardous waste";
•
easy deployment and retrieval; and
•
possesses the ability to harvest energy from contaminated
water thereby creating a sustainable media solution.
Due to the ability of Smart Sponge to capture and retain hydrocarbons
and other contaminants within its highly porous structure, its performance can best be measured by an in-depth look at the spent
material to analyze its composition and the quantity of the various contaminants retained. This type of data cannot be gleaned
from the customary random sampling events typically used to test filters. Such tests are often misleading or erroneous due to the
non-homogenous concentrations of pollutants in stormwater. Analyzing all contaminants entrapped in the filter over a period of
time provides a better indicator of the filter's true performance. Consequently, AbTech Industries took a more advanced approach
and engaged a highly qualified, analytical laboratory to use complex analytical techniques to deconstruct used Smart Sponge polymer
and selectively extract all the entrapped contaminants. This in-depth mapping and finger printing of contaminants (a first of its
kind in stormwater treatment) is analogous to having a "Black Box" recording of the UUF's filtration mechanisms
and all the contaminants collected in the Smart Sponge material during the time that it is deployed. The results of this analysis
were then compared to base tests performed on virgin Smart Sponge material. The difference between the two samples constitutes
the contaminants collected by the field deployed Smart Sponge. By extrapolating these results, estimations were made of the total
contaminants AbTech Industries' products prevented from being discharged into open waters for entire installation projects
such as at Norwalk. In Norwalk, Connecticut, 275 Ultra-Urban Filters were installed in storm drains to protect residential, commercial,
waterside, and industrial manufacturing settings which flow into Norwalk Harbor. The deconstruction or meltdown of Smart Sponge
media samples documented approximately 50 pounds per filter of total contaminants with the presence of several heavy metals (e.g.,
copper, titanium, and zinc) and a variety of hydrocarbons, (about 32 pounds per filter), including solvents, oils and cosmetic
product components as well as chemical plasticizers.
The grand total of contaminants including hydrocarbons and heavy
metals removed, extrapolated for the 275 filters, is an estimated 13,530 pounds. Essentially, the installation of the filters prevented
the equivalent of an oil spill of 1,200 gallons from entering the Long Island Sound. This analysis demonstrated the effectiveness
of AbTech Industries' products with quantifiable data and added substantially to data provided by other tests that merely
tested the difference between influents and effluents.
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Smart Sponge Plus
The presence of bacteria in stormwater is a serious problem
and poses significant health risks that increasingly result in the contamination of water bodies. Water quality standards for bacteria
counts are very strictly monitored in most coastal areas and small increases in bacteria counts can trigger beach closures. The
best potential to reduce this bacteria count during rain events is the control and treatment of the stormwater runoff. This control
can be achieved by expensive, heavy equipment, such as ultraviolet light or chlorine treatment systems that become cost prohibitive
for most municipalities. AbTech Industries has developed a set of cost-effective systems for retrofit into existing stormwater
infrastructure, leveraging the antimicrobial capabilities of Smart Sponge Plus. These systems require no electricity or moving
parts and create no downstream toxicity effect (a problem that must be mitigated in alternative chemical treatment approaches).
The technological breakthrough in creating Smart Sponge Plus
occurred when AbTech Industries developed the capability to bind an antimicrobial agent to its proprietary polymers thereby modifying
their surface and adding micro biostatic features while maintaining their oil absorbing capabilities. This enhanced filtration
material provides a significant reduction in coliform bacteria and other pathogens frequently found in stormwater and other water
streams. AbTech Industries believes that this breakthrough, coupled with additional advancements that have dramatically increased
the antimicrobial strength of Smart Sponge Plus, will be key factors in penetrating the stormwater market. Accordingly, AbTech
Industries has been issued three U.S. patents that protect the use of Smart Sponge Plus in stormwater filtration applications.
The anti-microbial agent used for this innovative technology
is an organosilane derivative that is widely used in a variety of fields including medical, consumables, pool equipment and consumer
goods. This anti-microbial agent is registered with the EPA for various applications and has been proven successful in those applications
against a wide variety of microorganisms. As further discussed under "Regulatory," AbTech Industries' Smart Sponge
Plus has received a time-limited registration from the EPA under the Federal Insecticide, Fungicide, and Rodenticide Act as an
antimicrobial pesticide. Smart Sponge Plus will also act as a fungistatic to control fungus and mildew odor.
The anti-microbial mechanism of Smart Sponge Plus is based on
the agent's electromagnetic interaction with the microorganism cell membrane, causing the disruption of the cell wall of
the microorganism, but no chemical or physical change in the agent. Consequently, the anti-microbial agent is not depleted over
time, maintains its long-term effectiveness and unlike any other technology (with the exception of ultra-violet light), doesn't
release any chemical or by-product into the treated water.
In manufacturing the Smart Sponge Plus material, the anti-microbial
agent is chemically and permanently bound to the polymer surface. In the development process, AbTech Industries has been successful
in increasing the amount of anti-microbial agent bound to the polymer thus increasing its antimicrobial potency 2,000% over its
first generation strength. In laboratory testing, the current generation of Smart Sponge Plus material, has proven to be not only
much more effective in destroying bacteria than the original generation of Smart Sponge Plus material, but also capable of reducing
bacteria to meet EPA criteria for bathing and recreational waters in a much shorter period of time (residence time), a very important
factor in filtration applications where the contaminated water is in contact with the Smart Sponge material for just a few minutes
versus the hours required in a sanitary sewer system.
29
Engineered Deployment Systems – Stormwater/Wastewater
In conjunction with developing advanced filtration media, AbTech
Industries engineers have also developed a variety of deployment systems that can be retrofitted into existing stormwater and wastewater
infrastructure. This solves a major problem for municipalities where aging water infrastructure and increasing enforcement of water
quality standards (a result of increased awareness of the detrimental environmental and public health effects) pose one of the
largest infrastructure headaches in the coming decades. Cities have already determined in the vast majority of cases that so-called
centralized solutions are cost-prohibitive or infeasible. These solutions include rerouting combined sewer overflow water and/or
even stormwater to sanitation treatment plants for purification (which would also require the construction of additional sanitation
treatment plants) or building large central stormwater/wastewater treatment "tunnels" underneath cities. AbTech Industries'
products enable decentralized solutions at the point-of-entry (e.g. stormdrains, etc.) or at the end of stormwater/combined sewer
overflow outfall pipes.
AbTech Industries has engineered a variety of point-of-entry
systems that can be dropped into storm drains with little or zero infrastructure disruption and end-of-pipe treatment "vaults"
that can be built into the existing water lines and treat the flowing water as it passes through.
Smart Sponge versus Commonly Used Non-Advanced Media Filtration
AbTech Industries' core technologies are highly-engineered
advanced material that are chemically selective towards contaminants and, in the case of the antimicrobial material, create biostatic
fields to disrupt the cellular membranes of pathogens. These advanced materials enable an entire set of engineered deployment systems
that otherwise would be less effective or entirely ineffective using non-advanced materials.
Smart Sponge material has a distinct advantage over traditional
polypropylene material for example. In the case of oils and hydrocarbons, once oil comes in contact with the Smart Sponge material
it is permanently encapsulated in the structure of the polymer and cannot be released under any amount of pressure. In comparison,
polypropylene materials adsorb or form a temporary attachment to water as well as oil, thus making them much heavier and messier
to remove releasing both water and oil back into the environment.
Disposal Options
As local conditions, product use and exposure can vary widely,
the end user must determine the most appropriate disposal method for a spent Smart Sponge or Smart Sponge Plus' material.
Smart Sponge samples saturated with hydrocarbons both in the lab and in the field have been tested according to the EPA's
Toxicity Characteristic Leaching Procedure ("TCLP"). These tests show that Smart Sponge is a "non-leaching"
product. In addition, used Smart Sponge material can be recycled as an energy source with a British thermal unit, or BTU, value
ranging from 10,000 to 18,000 based on the type of contaminant absorbed. As a result, Smart Sponge technology affords many cost
effective and environmentally friendly disposal options. The following waste disposal and resource recovery industries have accepted
spent Smart Sponge materials for disposal and/or recycling:
Waste-to-Energy Facilities ("WTE").
A specialized
segment of the solid waste industry has used spent Smart Sponge material as an alternative fuel in the production of electricity.
WTE is acknowledged at the federal level as a renewable energy source under the Federal Power Act, Title IV of the Clean Air Act
and is a participant in the Department of Energy's National Renewable Energy Program.
Cement Kilns.
This industry has used the spent Smart
Sponge material as an alternative fuel in the production process of Portland Cement. This process is considered a beneficial reuse
of waste products. The British thermal unit value of spent Smart Sponge material is consistently above the average acceptable levels
set for this high temperature process.
30
Landfills.
Used Smart Sponge products have been classified
as a solid waste and are commonly accepted at Subtitle D Landfills.
Engineered Systems and Smart Sponge-based Products
AbTech Industries' product lines are marketed under the
trade name "Smart Sponge®" and "Smart Sponge Plus." Smart Sponge Plus includes antimicrobial capability.
AbTech Industries' Smart Sponge contains a unique molecular structure which is chemically selective to hydrocarbons, removing approximately
three times its own weight. Smart Sponge remains buoyant when saturated and encapsulates hydrocarbons and oils, without leaching.
AbTech Industries' Smart Sponge Plus is EPA approved to reduce coliform bacteria found in stormwater, industrial wastewater, and
municipal wastewater, and can be engineered to meet specific performance requirements. The following products incorporate the Smart
Sponge or Smart Sponge Plus material in one or more of its various forms and are designed to meet specific market needs:
Smart Sponge Popcorn
The Smart Sponge material can be formed into a variety of physical
shapes to optimize its performance in a wide range of filtration applications. The Smart Sponge material is the cornerstone of
AbTech Industries' current products, and AbTech Industries continues to find new applications for its use. When produced
in its "popcorn" form (clumps of polymer similar in shape to popcorn), Smart Sponge is an effective filtration media
due to its high porosity and favorable hydraulic characteristics. AbTech Industries is currently pursuing the use of Smart Sponge
popcorn in end-of-pipe applications such as vaults and other configurations. The Smart Sponge material can also be sold to OEMs
and other users to be integrated into many different filtration pressure vessels or gravity flow structures.
Ultra-Urban® Filter
The Ultra-Urban® Filter ("UUF") with Smart Sponge
is an innovative low-cost Best Management Practice ("BMP") that helps meet National Pollution Discharge Elimination
System ("NPDES") requirements with effective filtration, efficient application, and low maintenance. The UUF is a modular
filtration unit (or Catch Basin Insert) designed in a variety of shapes and sizes for use in "curb opening" and "top
down" storm drains and is used to treat stormwater runoff for new or retrofitted sites by absorbing oil and grease and capturing
trash and sediment.
The UUF is ideal for municipal, industrial and construction
applications ensuring compliance with stormwater regulations. The filter comes in three designs: the Curb Opening, Drain Insert,
and Customized Drain Insert. The unique micro porosity of Smart Sponge allows the standard sized CO1414 UUF filter a hydraulic
flow rate of more than 250 gallons per minute and has proven effective in removing more than 80% of hydrocarbons and total suspended
solids ("TSS") (300 microns or greater).
The unique design of the Curb Opening Series allows crews to
easily hang the appropriate number of filters in each drain on a simple mounting bracket. The product is designed with a lateral
bypass to utilize each box as well as an overflow capability to eliminate the potential for street flooding in the event of a plugged
filter.
31
The UUF Drain Insert Series offers the same filtration characteristics
of the Curb Opening series for stormwater filtration of hydrocarbons, trash and sediment. The unique micro porosity of Smart Sponge
allows the DI2020 UUF a hydraulic flow rate of more than 500 gallons per minute, and has proven effective in removing more than
80% of hydrocarbons and TSS (300 microns or greater). These units are designed to be suspended beneath a collar installed under
the stormwater grates. This simple design allows easy access for maintenance while eliminating the potential for street flooding
in the event of a plugged filter.
Customized drain inserts are available for those customers with
shallow drains or requiring deeper bed depths. AbTech Industries' team of engineers will work with customers to understand
the site characteristics, including hydraulics and contamination levels and will confirm the appropriate Smart Sponge bed depth
to achieve the project's filtration goals.
Water Treatment Vaults (using advanced filtration media like
Smart Sponge)
AbTech Industries' water treatment vaults with advanced
filtration media such as Smart Paks are an effective alternative to treating individual catch basins. These easily installed, typically
pre-cast vaults are retrofitted into existing stormwater systems and are ideal for stormwater treatment at or near the end of pipe.
Vault sizes can be adapted for various flow rates and contamination levels to solve a wide range of stormwater treatment issues.
AbTech Industries can engineer its water treatment vaults for
large projects either as stand-alone applications or as part of a treatment train to polish water working with retention ponds
or hydrodynamic separators. These engineered solutions can be direct or radial flow, and can easily be adapted to treat first flush
while allowing the later flow of a major storm event to pass around the systems to achieve the hydraulic requirements of the watershed.
SMART PAK®
AbTech Industries' Smart Pak is designed for use in new or existing
vaults that experience oil and grease pollution accompanied by sediment, trash/debris, hydrocarbons, and coliform bacteria (when
specified with Smart Sponge Plus). Smart Pak helps users meet and/or exceed stormwater NPDES permit requirements with effective
filtration, absorption, life expectancy and maintenance costs. Smart Pak products are constructed out of AbTech Industries' patented
Smart Sponge media which is a nonhazardous material, and can be specified for a variety of applications. AbTech Industries' Smart
Pak allows Smart Sponge technology to be scaled to virtually any size required in an easy-to-maintain form.
Absorbent Boom and Line Skimmer
AbTech Industries' Tubular Absorbent Booms and Line Skimmers
employ the Smart Sponge absorptive technology which rejects water while absorbing even sheen levels of hydrocarbons in low energy
flow environments. Tubular Absorbent Booms and Line Skimmers are designed to absorb and permanently encapsulate hydrocarbons resulting
in no dewatering of oily water during removal. These products remain completely buoyant, even after being saturated allowing long
term deployment and conveniently scheduled removal.
Passive Skimmer
The Passive Skimmer is designed to absorb and encapsulate hydrocarbons
by floating directly on the water in catch basins, sumps, oil/water separators, and marine fueling stations. Passive Skimmers are
made with Smart Sponge, are packaged in flexible mesh containers, and are available in a variety of sizes.
32
Bilge Skimmer
The Smart Sponge Non-Leaching Bilge Skimmer is engineered and
designed for permanently encapsulating the petroleum hydrocarbons that appear as oily sheen in the engine compartment during normal
boat operation. The Bilge Skimmer will absorb the contaminant and allow the boater to discharge clean water from the bilge pump.
Industrial Process Water
AbTech Industries has a variety of solutions for treating industrial
process water including gravity filters and pressure vessel filters.  Gravity filters are generally designed using Smart Paks
which can be easily replaced once consumed.  All solutions and media bed depths are determined based on flow rate and the
level of contaminant in the water.  AbTech Industries also uses a variety of third-party pressure vessels filled with Smart
Sponge material as effective filtration devices. Depending on the design and size of the vessel, the Smart Sponge material may
be deployed in convenient bag filters for ease of media change out, or it may be installed in loose form requiring change-out with
the use of a vacuum truck.
Produced Water Products
AbTech Industries has developed two de-oiling solutions for
the produced water market.  The first solution for the removal of free oil is AbTech Industries' contactor(s) in a
pretreatment position.  These consist of contactor tanks that are sized based on flow rate, influent concentration of contaminant,
the desired change out schedule, and space or size constraints.  The contactors used are widely available ASME certified
pressure vessels that are filled with loose Smart Sponge popcorn media. AbTech Industries has developed a second solution for
removal of free oil and dissolved phase gasoline range organics including benzene, toluene, ethylbenzene and xylene, generally
referred to as volatile organic compounds ("VOCs").  In collaboration with QED Environmental Systems ("QED"),
AbTech Industries has paired its oil removal contactors with QED air strippers and a thermal oxidizer system.  The air strippers
will remove the VOCs from the water stream and the thermal oxidizer will oxidize them prior to release to the environment. 
These systems can be implemented ranging from 300 to 3,000 gallons per minute.
Markets
AbTech Industries targets four major markets: stormwater/wastewater,
industrial wastewater/process water, produced water applications for the oil & gas industry, and spill prevention and control
markets (including marine environments).
Stormwater Market/Wastewater
This market consists of municipalities and private sector entities
that for regulatory or other reasons are seeking to control the quality of water and other fluids that run off roads and other
paved surfaces during wet weather, cleaning or oil spill events. Current customers include municipalities, state agencies, federal
agencies, private developers, industrial facilities and businesses. Stormwater discharges are generated during a rainfall event
by runoff from land and impervious areas such as paved streets, parking lots and building rooftops. The runoff water picks up a
variety of pollutants, in particular bacteria and hydrocarbons, in quantities that can adversely affect water quality, and carries
those pollutants into nearby rivers, lakes and oceans.
33
Regulatory Drivers to the Stormwater Market
Stormwater discharges are subject to regulation by the U.S.
Environmental Protection Agency, state and local regulatory bodies. Authorized by the Clean Water Act, the National Pollutant Discharge
Elimination System (NPDES) program requires permits for sources that discharge pollutants into waters. Obtaining and complying
with NPDES permits requires implementation of stormwater control measures, such as AbTech Industries' engineered solutions.
Regulation of stormwater is a relatively new occurrence. The
first phase of the NPDES program was promulgated in 1990 but the permit requirement was limited to only select regulated entities.
The second phase of the NPDES program expanded the permit requirement significantly but did not start until 2003. The next expansion
of stormwater regulations is planned for 2012 and is contemplated, amongst other things, to require retrofitting of stormwater
control measures into existing development, to develop specific requirements for transportation infrastructure, and otherwise expand
the scope and regulatory reach of the NPDES program.
Combined Sewer Overflows also must comply with the Clean Water
Act and present an opportunity for AbTech Industries' engineered treatment solutions. Combined sewer systems serve roughly
772 communities serving 40 million people. In periods of rainfall or snowmelt, the combined stormwater and wastewater volume in
a combined sewer system can exceed the capacity of the sewer system or treatment plant. This leads to the direct discharge of untreated
sewage, etc. to the environment.
Enforcement of stormwater/CSO standards have increased, with
EPA compelling installation of stormwater control measures and water quality treatment systems through consent decrees. In recent
years, billions of dollars of mandated spending on stormwater/CSO systems has been created through consent decrees.
Health and Tourism Concerns Driving the Stormwater Market
One area of the stormwater market that is receiving increased
publicity and attention is the water pollution caused by microorganisms (bacteria). Polluted stormwater runoff can expose boaters
and swimmers to bacteria, viruses and protozoans. A recent Southern California epidemiological study revealed that individuals
who swim in areas adjacent to flowing storm drain outfalls were 50 percent more likely to develop a variety of symptoms than those
who swim further away from the same drains. These situations are the cause for thousands of beach closings every year affecting
public health and local economies dependent upon tourism and recreation. According to a report of the Natural Resources Defense
Council ("NRDC"), in 2010 there were 24,091 days of closings and advisories across the country at ocean, bay and Great
Lakes beaches. NRDC reported that nearly three-quarters of the 2010 beach closings and advisories were issued because water quality
monitoring revealed bacteria levels exceeding health and safety standards. Given mandates for increased monitoring under the Beach
Act, NRDC predicts that these numbers will continue to grow in the future.
Going Green Initiatives
Knowing that polluted stormwater runoff is one of the leading
causes of water pollution in the country, many companies are including on-site stormwater treatment in their environmental sustainability
goals. AbTech Industries' systems can help companies meet these goals. AbTech Industries' Smart Sponge technology not
only treats polluted water, it is also recyclable, requires no electricity or other power source and can provide users with quantifiable
results of its efficacy, thus helping companies demonstrate their "going green" stewardship.
34
Industrial Wastewater Market
The industrial market serves manufacturers seeking to control
and clean wastewater generated in various processes. The market is comprised of both heavy industry such as oil refineries, steel
mills, chemical plants, pulp and paper plants and more localized concerns such as mid-size manufacturers, refuse sites and shipping/receiving
areas. This market also includes private developers, gas stations and owners of developed sites (i.e., parking lots) of over one
acre.
Industry is placing increased emphasis on water recovery and
reuse in order to conserve and protect scarce water resources and the environment. These efforts create the need for effective
products and services to treat the water to reduce bacteria and remove unwanted contaminants such as oil derivatives and hydrocarbons.
Industrial customers are also required to comply with increasingly
stringent discharge regulations creating the need for products to treat runoff water or discharge water before it leaves an industrial
facility. The EPA has classified over 3,000 industrial and electric utility facilities as water pollution dischargers. Each of
these facilities provides its own wastewater treatment prior to discharge into an open body of water. The size of many of these
plants is equal to or greater than those of many municipalities, and in many instances their processes are more complex than provided
by a municipality because of the nature of the chemical pollutants being treated. The largest industrial spender on wastewater
treatment processes is the chemical and petrochemical sector. There are more than 12,000 chemical/petrochemical plants in the United
States and approximately 90% treat wastewater on-site. In addition, there are approximately 30 to 40 independent industrial off-site
plants, most of which handle chemical and petrochemical effluent, principally from medium-sized and small companies.
In the industrial market, AbTech Industries' intent is
to market its products through qualified and specialized national distributors, preferably operating in the water treatment business.
Produced Water and Frack Water Applications
Oil and gas exploration and production activities result in
the production of significant volumes of contaminated water. On average there is five times as much contaminated water generated
as oil or gas. Approximately 75% of this water is re-injected into the formation to maintain pressure or deep well re-injected
at another site. In a traditional oil production field this water is called "produced water." In fracking operations
this can include "frac flowback water" and in gas fields this could include "gas condensate water." Approximately
25% of all water generated from the exploration and production activities must be treated for either reuse in operations or for
discharge to the environment under an NPDES permit. According to the EPA, the Clean Water Act prohibits the discharge of oil or
oily waste into or upon the navigable waters of the United States or the waters of the contiguous zone if such discharge causes
a film or sheen upon the surface of the water. Violators are subject to a monetary penalty. The attributes of AbTech Industries'
Smart Sponge technology and its ability to remove "oily sheen" make it especially suited to service this market. Smart
Sponge can be used as a pretreatment system to remove diesel range organics and free oils prior to additional treatment by downstream
technologies to remove contaminants such as volatile organic compounds, dissolved solids, and bacteria.
Marine Market - Spill Prevention and Control
There are a number of applications related to rivers, lakes,
and oceans that call for the use of floating or in-line filtration products to control and reduce the presence of hydrocarbons
in the water or on board transiting vessels. Customers include the cruise ship industry, recreational boaters, marina owners, port
authorities, spill response organizations and commercial shippers.
35
This market also comprises airports, airport fueling facilities,
U.S. Department of Defense ("DOD") bases, transfer stations, and others concerned about oil spills. Under the Federal
Clean Water Act, the EPA has issued the Spill Prevention, Control and Countermeasure ("SPCC") rule, which requires
owners or operators of facilities that store, use, process, transfer, distribute or consume oil and oil products, including airports
and military bases, to have at a minimum one of the following preventative systems or its equivalent:
•
dikes, berms, or retaining walls sufficiently impervious
to contain spilled product;
•
curbing;
•
culverting, gutters, or other drainage systems;
•
weirs, booms, or other barriers;
•
spill diversion ponds;
•
retention ponds; or
•
sorbent materials.
The risks of not adequately implementing such countermeasures
are regulatory violations, fines and potential releases that result in contamination, clean-up and additional fines. The impact
of these issues can result in significant costs to a facility owner/operator. There are more than 250 medium and large sized airports
in the United States and more than 322 U.S. military facilities
AbTech Industries' systems can be deployed for the oil
and fuel contamination problems facing airports and military facilities. These systems can not only be used to address such problems
as stormwater runoff, but also provide effective SPCC solutions to limit potential liabilities to customers by providing a last
line of defense or perimeter protection for fuel spills.
Sales, Distribution, and Marketing Support
Stormwater/Wastewater
AbTech Industries historically focused on the public sector
market, primarily cities and municipalities, and sought to sell to and service those entities through a series of local geographically
defined exclusive distributorships. For small companies and distributors, sales to the public sector have inherent challenges including
long sales cycles and erratic budget allocations.
A reassessment of strategy resulted in a decision to unwind
many of the geography specific distributors and focus on establishing a strategic partnership with an industry segment specific
dominant market leader. In order to effectively go-to-market, AbTech Industries established the following criteria for a strategic
partner: (1) market leadership or dominance, (2) a concomitant large customer base, (3) operational competence in selling and servicing
public sector customers, (4) active local advocacy resources, (5) sufficient capital to dedicate to and exploit the opportunity,
and (6) experience in dealing with the environmental challenges faced by the public sector.
AbTech Industries has now successfully unwound most of its distributorship
arrangements. In January, 2011, AbTech Industries entered into a strategic relationship by executing a marketing and distribution
agreement with Waste Management, Inc. to pursue the distribution of its relevant technologies and systems in the municipal stormwater
market.
36
The federal sector represents a significant opportunity for
AbTech Industries. AbTech Industries believes that its best approach to the sector is to identify a strong strategic partner. It
established the following criteria for identifying candidates: (1) market leadership or dominance, (2) demonstrated ability to
secure and service federal and military contracts, (3) appropriate engineering capabilities and support, (4) strong federal advocacy,
and (5) experience and organizational emphasis on supporting "green" initiatives.
AbTech Industries has identified strategic partner candidates,
is currently in advanced discussions, and has several proposed projects in their preliminary stages.
Industrial Wastewater Market
The industrial wastewater market is focused on the treatment
of oily wastewater from industrial processes for either reuse or discharge. This market is serviced by many regional chemical and
equipment supply companies that offer a catalog of solutions. Solutions may require little to no individual engineering, up to
custom engineered solutions to address a customer need. AbTech Industries services this market by providing manufacturer's
representatives and engineering support services to industrial chemical suppliers, equipment suppliers and consulting engineers.
Oil & Gas Market
Treatment of contaminated produced water for the oil & gas
industry focuses on the water produced during oil and gas exploration and production. Oil services companies, oil and gas producers,
and engineering firms are the main customers. Applications for this market are generally engineered solutions. AbTech Industries
services this market with direct AbTech Industries' sales representatives and engineering resources, including external engineering
design resources when necessary.
Collaboration With Consulting Firms, Academic Institutions
and Public Advocacy Groups
AbTech Industries, both on its own, and with its distributors,
has been active in seeking out and cooperating with a number of academic institutions and private groups that have interests that
may advance the use of AbTech Industries' products.
AbTech Industries has had an opportunity to have its products
assessed by several consultants and institutions. These include:
Alden Labs.
Alden, a recognized leader in the field of
research and development, is the oldest continuously operating hydraulic laboratory in the United States and one of the oldest
in the world. Alden has completed a variety of tests on AbTech Industries' SMART PAK for hydraulic conductivity and sediment
removal in vault configurations.
North America Science Associates ("NAMSA").
For over 40 years, NAMSA has been supporting the medical device and pharmaceutical industries through a wide variety of testing
services, all designed to ensure safety, efficacy and regulatory compliance. NAMSA has completed extensive lab efficiency tests
for Smart Sponge Plus materials using varied concentrations of bacteria and exposure times.
Millsaps College.
Millsaps is a private liberal arts
college located in Jackson, Mississippi. Through the Department of Geology, Millsaps has cooperated with AbTech Industries to test
the Smart Sponge's absorption capability with different hydrocarbons, Smart Sponge porosity and performance claims for the
Ultra-Urban filter and other new products designed for the aviation industry. Millsaps has completed testing for many other large
corporations including 3M, Dow, Clorox and Ergon, a local supplier of polypropylene fibers and sorbents for oil spills.
37
HydroQual Inc.
HydroQual is an environmental engineering
and science firm. With a staff of over 100 employees, HydroQual addresses issues dealing with water quality, TMDL analyses, floatables
pollution, water and wastewater treatment. HydroQual has performed a variety of tests to validate AbTech Industries' claims
regarding the performance of the Smart Sponge.
University of California, Los Angeles ("UCLA")
.
The UCLA Department of Engineering and Environmental Sciences provided independent validation of early versions of AbTech Industries'
Ultra-Urban Filter.
Competition
Stormwater Products
Four key factors differentiate AbTech Industries' Ultra-Urban
Filter from other filters in the stormwater market:
Anti-microbial capability.
AbTech Industries' Smart
Sponge filtration media, when treated with an anti-microbial agent, can reduce bacteria and other microbes flowing through the
filter. AbTech Industries believes that its Ultra-Urban Filter with Smart Sponge Plus is the only product available and approved
by the EPA that can reduce bacteria at street level without the installation of additional infrastructure and retention areas.
Smart Sponge products are available with or without the added anti-microbial agent.
Structural Filter.
AbTech Industries believes that the
Ultra-Urban Filter is the only product designed so that the entire structure is involved in the filtration process. Other products
have inserted pads or pillows that allow some hydrocarbon removal, but the Ultra-Urban Filter directs the entire water flow through
the filtration media thus enhancing the effectiveness of the filter.
Superior Filtration Media.
An essential and superior
feature of the Ultra-Urban Filter is the ability of its Smart Sponge filtration medium to absorb hydrocarbons and prohibit them
from being released back into the water flow when there are subsequent rain events. The reason for this is that AbTech Industries'
proprietary blend of polymers is oleophilic - an absorbent - which means that hydrocarbons are bonded within its chemical matrix
and cannot be washed off, squeezed out or leached out of the material during subsequent wetting or rain events. There are various
materials used by competitors for stormwater filtration that do not have this absorbent characteristic, instead they feature an
adsorbent capability that merely attracts hydrocarbons to their surface area, but cannot prevent them from leaching back into the
environment during subsequent rain events. The most commonly used adsorbent in the market is polypropylene, which is currently
used in many sorbent products used for the 2010 BP oil spill clean-up. Although it is generally accepted that adsorbents are clearly
inferior to absorbents regarding their ability to capture and remove hydrocarbons from stormwater flows, they are widely used because
of the low comparative cost. Over the last ten years, AbTech Industries has performed numerous laboratory and field tests that
verify its products' absorption capabilities and other performance features dealing with the removal of trash, sediment,
debris, and other contaminants. Central to these test data is the incontrovertible conclusion that AbTech Industries' Smart
Sponge filtration medium is an absorbent.
Porous Structure.
AbTech Industries' Smart Sponge
technology maximizes the effectiveness of the oil-absorbing polymers by forming them into an extremely porous structure that allows
effective, long-lasting absorption without clogging or channeling which is common among filter media in a powder or particulate
form.
38
There are three general categories of products that deal with
the treatment of stormwater: hydrodynamic separators ("HDS"), catch basin inserts and ultra-violet light systems. To
give a complete competitor profile, a brief explanation of HDS systems is given below since HDS systems are more often considered
an alternative to catch basin inserts in new construction projects.
Hydrodynamic Separators.
HDS products use gravitational
flow to spin the water in such a way that density differences cause sediment and other pollutants to be separated and skimmed-off
the water. HDS units are large compared to catch basin inserts (smallest systems are about the size of an automobile) and are comprised
of several large chambers or vaults, each designed to trap specific pollutants. These systems are much more expensive than catch
basin inserts but also have the ability to handle more water flow. Unit costs for HDS systems range from $10,000 to $100,000 depending
on size. These systems tend to be more cost effective in large new developments where the HDS can be designed into the stormwater
system and large areas of run-off can be directed to each unit. In dealing with existing storm drains, HDS products are less desirable
because they require streets and sidewalks to be torn-up, drainage redirected, and construction equipment to retrofit the drain
and install the units. Catch basin inserts, on the other hand, are relatively easy to install because they fit into existing storm
drain catch basins and require little or no construction.
Not only are HDS systems expensive, they also require significant
maintenance to remove the trapped pollutants and ensure that the system continues to function properly. Some HDS vendors have purchased
AbTech Industries' Smart Sponge products to be used in conjunction with the HDS units to absorb the oil that is separated
from the water, thus enhancing the performance of the systems and reducing the required maintenance. Another drawback of HDS systems
is that they are designed to retain standing water after a rain or water flow event. Consequently, the HDS vaults become breeding
grounds for mosquitoes (carrier of West Nile Virus), mold, mildew, bacteria and other undesirables.
The primary vendors of HDS systems are: ConTech (CDS Technologies,
Vortechs), Stormceptor and Baysaver Technologies.
Catch Basin Inserts.
Competing products in this category
include the following:
•
"DrainPac" by PacTec
•
"StormBasin" by Fabco Industries
•
"Fossil Filter" and "Flow Guard"
by Kristar
•
"Grate Inlet Skimmer Box" by Suntree Technologies
•
"Aqua Guard" by AquaShield
•
"Inceptor" by Stormdrain Solutions
•
"Hydrocartridge" by Advanced Aquatic Products
•
"Ultra HydroKleen" by Ultra Tech International
39
Ultra Violet Light ("UVL").
For customers
seeking effective antibacterial treatment of stormwater, UVL offers a potential solution. However, the economics of these products
are far different from catch basin inserts or other vault and SWAT systems offered by AbTech Industries. Because UVL systems require
electricity and expensive equipment, they are very costly to implement and maintain. Consequently, they are not even a viable option
for many municipalities. Furthermore, these systems become less effective in turbid waters. While AbTech Industries does not compete
directly with UVL systems, such systems do provide an alternative to AbTech Industries' antimicrobial Smart Sponge products.
Other Markets
In the industrial, oil & gas and marine markets, competition
primarily comes from traditional sorbent products and other particulate-based polymer adsorption products that are widely available
through industrial supply vendors. AbTech Industries' competitive advantage lies in:
•
its patented and patent-pending technologies to form
these polymers in shapes, such as the propellet, that greatly enhance performance and ease of use;
•
its unique delivery systems, including in-line filtration
cartridges and filtration vessels;
•
the completely hydrophobic nature of its products;
•
the capability to deal with more than one contaminant
(i.e., hydrocarbons and microorganisms); and
•
the high saturation capacity.
Intellectual Property, Research, and Development
Intellectual Property
Patents
AbTech Industries endeavors to protect the intellectual property
it develops through its research and development efforts. The United States Patent Office has issued AbTech Industries 17 patents
related to the Smart Sponge technology and products. Additionally, three of the patent applications have been pursued internationally
with patents issued in Australia, Belgium, Canada, China, France, Germany, Israel, Italy, Japan, Korea, Mexico and Singapore. AbTech
Industries intends to pursue patent protection for new patentable technologies that it develops. AbTech Industries' success
depends, in part, on its ability to maintain trade secrecy protection and operate without infringing on the proprietary rights
of third parties.
Trademarks
AbTech Industries has registered three trademarks with the U.S.
Patent and Trademark Office: (i) Smart Sponge®, which denotes the Smart Sponge material itself in its various shapes and sizes;
(ii) Ultra-Urban® Filter, which denotes AbTech Industries' line of storm drain filtration devices; and (iii) SMART PAK®,
which describes Smart Sponge material compacted into blocks, bricks or other pre-shaped forms. AbTech Industries also trademarked,
but does not currently use, the name OARS®, which denotes an oil aquatic recovery system encompassing Smart Sponge products.
40
Trade Secrets
In order to protect its trade secrets and un-patented proprietary
information arising from its development activities, AbTech Industries requires its employees, consultants and contractors to enter
into agreements providing for confidentiality, non-disclosure and Company ownership of any trade secret or other un-patented proprietary
information developed by employees, consultants or contractors during their employment or engagement by AbTech Industries. AbTech
Industries also requires all potential collaborative partners and distributors to enter into confidentiality and non-disclosure
agreements.
Research and Development
The current Smart Sponge technology has prompted the development
of a robust line of products. However, to ensure future growth, new products and technologies must be developed. Research and development
effort is expended only on projects that meet certain criteria. The project must have a reasonable commercial potential, both in
terms of revenue and in terms of profit margins. The products developed from the work must inherently be differentiated from competing
products, if any, or allow AbTech Industries to fill a critical gap in its products offering. The development time to achieve the
new technology or product must also be reasonable.
AbTech Industries maintains active development programs focused
on the treatment and removal of heavy metals, PCB's, radionuclides, and phosphates from contaminated water.
AbTech Industries also has ongoing projects to evaluate of Smart
Sponge and other polymers to determine absorption performance under varying conditions and with a variety of contaminants. This
testing not only provides independent verification of product performance but also allows AbTech Industries to provide more reliable
information to customers about the product's performance under various field conditions. In addition, AbTech Industries is
evaluating various polymer combinations as the field of polymer science continues to evolve.
AbTech Industries' strategy on all of these projects is
to partner with third parties (universities, engineering companies and other commercial partners) for experimentation and validation
of proposed concepts. AbTech Industries has worked cooperatively with, Millsaps College, California State University at Fullerton,
Alden Labs, NAMSA and Hydroqual, Inc. on various projects and is looking at other qualified partners for specific projects. AbTech
Industries will maintain its own R&D treatability lab for internal research and quality control of raw material and finished
products.
Manufacturing and Engineering
As manufacturing volumes increase, AbTech Industries intends
to maintain its core engineering competencies in the United States and create a manufacturing outsourcing network capable of supplying
existing and future products around the world. The network will include some internal manufacturing (mainly assembly) capabilities
but will largely comprise contract manufacturers and/or strategic partners with the required expertise and facilities to cost-effectively
manufacture AbTech Industries' products. Due to the nature of the product (very low specific gravity or density, therefore
high unitary shipping cost), AbTech Industries expects to establish its manufacturing and warehousing sites in key geographic areas.
The manufacturing network will have an integrated information system capable of effectively managing production orders and ensuring
high quality products manufactured to consistent specifications around the world. This plan will be rolled out in two steps:
41
Short term (up to 12 months)
AbTech Industries will fully exploit its internal manufacturing
capabilities at its 13,000 square foot facility in Phoenix, Arizona. While maximizing the capacity of this facility, AbTech Industries
will search out and train outsourcing partners in the United States and other regions. Products not using the Smart Sponge material
will be contracted to outside manufacturers.
Long term (12 months or longer)
AbTech Industries intends to evaluate the opportunities to outsource
the manufacturing of all components and most of the finished products, focusing on total quality and consistency. Due to the very
atypical process and equipment used in AbTech Industries' manufacturing, it is unclear at this time if a suitable manufacturing
partner exists. AbTech Industries would need to confirm a clear value proposition prior to outsourcing manufacturing.
Regulatory
In mid-2008, the EPA initiated a compliance action against AbTech
Industries alleging that AbTech Industries was in violation of the Federal Insecticide, Fungicide and Rodenticide Act by distributing
Smart Sponge Plus, which the EPA considered to be an unregistered pesticide. Despite the EPA's prior position that registration
of AbTech Industries' Smart Sponge Plus for use in stormwater filtration applications was not required or allowed, in subsequent
discussions with the EPA it became evident that the EPA considered it imperative that AbTech Industries register its Smart Sponge
Plus material as a pesticide if AbTech Industries intended to make claims about its antimicrobial capability. Consequently, in
2008, AbTech Industries began to prepare a registration application for Smart Sponge Plus, which was eventually filed with the
EPA in September 2009. In July 2010, AbTech Industries received notice of a time-limited registration from the EPA that contained
certain conditions requiring AbTech Industries to submit additional testing data to the EPA by July 1, 2011. Subsequently, and
based on information provided by the third-party laboratory contracted to perform the additional studies, EPA granted an extension
of the time-limited registration until August 31, 2012. The registration number for Smart Sponge Plus is 86256-1. AbTech Industries
is not aware of any other competitive product that has been approved by the EPA for outdoor use as an antimicrobial (pesticide)
and believes that this registration will further differentiate Smart Sponge Plus products from other competitive products on the
market.
Employees
As of March 23, 2012, we had twenty-one full-time employees,
and two full-time consultants. Nine of these individuals are involved in sales and marketing; three in production; four in research
and development, and six in administrative functions.
Properties
We currently maintain an administrative office located at 4110
North Scottsdale Road, Suite 235, Scottsdale, Arizona 85251. The company also leases space for its manufacturing facility located
at 3610-2 E. Southern Ave., Phoenix, Arizona 85040. Our telephone number is (480) 874-4000.
Legal Proceedings
We may become involved in various lawsuits and legal proceedings
arising in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in these or other
matters may arise from time to time that may have an adverse effect on our business, financial conditions and results of operations.
We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material
adverse effect on our business, financial condition or results of operations.
42
MANAGEMENT
Directors and Executive Officers Prior to and Following
the Closing Date of the Merger
Prior to the Closing Date of the Merger, Ms. Mandi Luis was
the Chief Executive Officer, President and Director of the Company and Mr. Robert MacKay was the Chief Financial Officer, Chief
Accounting Officer, Secretary, Treasurer and Director of the Company.
As a condition to closing the Merger Agreement, Ms. Mandi Luis
resigned as Chief Executive Officer, President, and Director of the Company, and Mr. Robert MacKay resigned as Chief Financial
Officer, Chief Accounting Officer, Secretary, Treasurer, and Director of the Company, both resignations became effective February
10, 2011 upon the effectiveness of the Merger. Upon the effectiveness of the Merger, Olivia H. Farr, David Greenwald, A. Judson
Hill, Jonathan Thatcher, Karl Seitz, and F. Daniel Gabel, the then current directors (together with Mr. Rink) of AbTech Industries,
were appointed to the Board of Directors. At the closing of the Merger, Mr. Glenn R. Rink was appointed Chief Executive Officer
and President, Mr. Lane J. Castleton was appointed Chief Financial Officer, Vice President, and Treasurer, and Ms. Olivia H. Farr
was appointed Secretary of the Company.
The Company's current Directors and executive officers
are as follows:
Name
Age
Position
Glenn R. Rink
52
Chief Executive Officer, President, and Director
Jonathan Thatcher
42
Vice President and Chief Operating Officer of AbTech Industries, Inc. and Director
Olivia H. Farr
50
Secretary and Director
David Greenwald
57
Director
A. Judson Hill
57
Director
Karl Seitz
61
Director
F. Daniel Gabel
73
Director
Bjornulf White
31
Executive Vice President of Corporate Strategy and Business Development for AbTech Industries, Inc.
Lane J. Castleton
56
Chief Financial Officer, Vice President, and Treasurer
Biographical information with respect to the Company's
directors and executive officers is as follows:
Glenn R. Rink
, 52, has served
as our Chief Executive Officer and President since February 10, 2011, and as a Director since October 4, 2010.
Mr. Rink
is an entrepreneur and founder of AbTech Industries. Since AbTech Industries' inception, in June 1995, Mr. Rink
has led AbTech Industries through its transition from a start-up R&D venture to an operating company with developed products
on the market. From 1992 to 1995, Mr. Rink was the President of HydroGrowth International, an agricultural products company
that specializes in aqueous absorption polymer technology. The advancement of this technology at HydroGrowth expanded into the
development and application of polymer technologies and fostered the founding of AbTech Industries. For the 12 years prior
to founding HydroGrowth, Mr. Rink was involved in the restaurant industry where he participated in business expansions and
acquisitions that resulted in the creation of Desert Moon Cafe, a successful restaurant franchise business. Mr. Rink is also
currently the Chairman of the Board of Trustees of Waterkeepers Alliance, Inc., a nonprofit organization working to protect water
resources.
43
Jonathan Thatcher
, 42, has
served as a Director of the Company and as Vice President and Chief Operating Officer of AbTech Industries since February 10, 2011.
Mr. Thatcher is the past Director and President of Exeter Life Sciences, Inc., a holding company that invests in and
promotes human, plant and animal technologies that positively contribute to the health of people, the environment and animals.
Mr. Thatcher has also previously served as Chairman of Arcadia Biosciences, the Co-founder and Chairman of Kronos —
The Optimal Health Company, the Chairman of Viagen, Inc., the Chairman and Interim President for Start Licensing, Inc., and a Director
of OneTouch Systems, Inc. Mr. Thatcher is a member of the board and Chair of the Governance Committee for the Arizona Chapter
of the National Multiple Sclerosis Society.
Olivia H. Farr
, 50, has served as a Director since
February
10, 2011.
Ms. Farr is currently President of Best Movies by Farr, a website and event business promoting the best
in film. She is also Co-Founder of Bedford 2020 Coalition, a non-profit dedicated to reducing her town's greenhouse gas emissions
20% by 2020. Ms. Farr serves on the Boards of Energy Improvement Corporation, a local development corporation as well as the
John Merk Fund and St. Mark's School.. Past employment includes Partner at First Funding Associates in Stamford, Connecticut,
Research Associate at Natural Resources Defense Council and Assistant Director of the Mrs. Giles Whiting Foundation. Ms. Farr
has an M.B.A. from Pace University, an M.P.A. from New York University and a B.A. from the University of Pennsylvania.
David Greenwald,
57, has served
as a Director since February 10, 2011.
Mr. Greenwald is the Chairman of Lansco Colors, a global supplier of pigments
to the coatings, ink, plastic and construction industries. During his more than 30 years with Lansco, he also served as President
of Shoot the Moon Productions (1982-1984), a company that produced with Warner Bros., a television series that ran for four years
and is still in syndication in some markets. From 1995 to 1999 Mr. Greenwald served on the Board of Directors for Northern
Westchester Center for the Arts and from 2000 to 2008 served on the Board of Directors of The Boys and Girls Clubs of Northern
Westchester. He received a B.A. from Connecticut College.
Karl Seitz,
61
,
has
served as a Director since February 10, 2011.
Mr. Seitz is the past President of Deimos Ventures, LLC, a private equity
fund focused on investing in early stage technology companies relative to water, bio fuels and genetics. He was responsible for
the overall management of the fund including investment strategy, analysis and acquisitions. Prior to forming Deimos, Mr. Seitz
served with Mars, Inc., a global food manufacturer, for 20 years in a number of domestic and international financial positions.
He became a CPA after receiving his Bachelor of Arts from UCLA in Economics and Political Science. Mr. Seitz was formerly
Controller for Kawasaki Motors USA from 1977 to 1984 and Senior Tax Advisor at Arthur Andersen from 1973 to 1977). He is active
in a number of community non-profit organizations in Southern California.
A. Judson Hill
, 57, has served as a Director since
February
10, 2011
. Mr. Hill is the Managing Director of NGP Energy Capital Management, a private equity firm. Previously, Mr. Hill
was the Managing Partner with Summit Global Management Inc., focusing on strategic business development and private-market investments.
Mr. Hill was formerly a Partner with The Halifax Group, a Washington DC private equity firm with investments including water
and other infrastructure-related businesses, and Aqua International Partners, L.P., a private equity fund affiliated with Texas
Pacific Group focused exclusively in the global water sector. Mr. Hill earlier served as a Managing Director for HSBC, where
he was responsible for investment-banking activities including water technology/services and water utilities. Mr. Hill also
has 15 years of operational management experience with Westinghouse Electric Corp. and Atlantic Richfield Corp. Mr. Hill
has B.S./M.S. degrees in Civil/Environmental Engineering from the University of Pittsburgh and a B.S. degree in Biology and Chemistry
from Edinboro University.
44
F. Daniel Gabel
, 73, has served as a Director since
February
10, 2011
. Mr. Gabel has been the President and Chief Executive Officer of Hagedorn & Company, an International
Insurance Broker, since 1979. Mr. Gabel began his career with Hagedorn & Company in 1963 after three years with Price
Waterhouse & Company. Mr. Gabel is a Director of the Insurance Broker Association of New York State and a past Director
of the National Association of Insurance Brokers. Mr. Gabel is a Director on the Board of Trustees of Waterkeepers Alliance,
Inc., a non-profit organization working to protect water resources and a member of the Advisory Board of the Nicholas School of
the Environment at Duke University. He is also a Director for Cheshire Academy, a Director and Vice President of Hundred Year Association,
a Director of the Cary Institute, an environmental think tank, and a Director of Friends of the Earth Inc. Mr. Gabel is a
Chartered Life Underwriter with a B.A. degree in Accounting from Duke University.
Lane J. Castleton
has served
as our
Chief Financial Officer, Vice President, and Treasurer
since February 10, 2011 and has
been the Chief Financial Officer of AbTech Industries, Inc. since 1998.
Mr. Castleton has over 30 years of experience in
managing, accounting, and finance functions. From 1992 to 1997, Mr. Castleton managed the finance, accounting, and administrative
functions of Marine Preservations Association, an oil industry trade association that funded the establishment of a national catastrophic
oil spill response capability. For nine years, Mr. Castleton served as the Controller and Chief Financial Officer of Symbion, Inc.,
a publicly traded medical device manufacturing company. Mr. Castleton is a CPA with a master's degree in professional accountancy,
and public accounting experience gained as an auditor for Coopers & Lybrand (now PriceWaterhouseCoopers), an international
public accounting firm.
Bjornulf White
has served
as the
EVP of Corporate Strategy and Business Development
for AbTech Industries, Inc. since 2010.
Mr. White
previously worked as a portfolio manager at Lockheed Martin Corporation where he was responsible for identifying,
incubating, and expanding new technologies and markets for the corporation and managing new market segment programs, such as the
energy and water technologies sector. Prior to joining Lockheed, Mr. White worked as an attorney and business strategy consultant
in Washington, DC representing primarily Fortune 100 financial institutions, assisting them in developing, structuring and negotiating
business relationships, including joint ventures, mergers, asset and stock acquisitions, and restructurings. Mr. White is a graduate
of George Washington University Law School, holds a master's degree in public administration from Cornell University where
he graduated with distinguished honors concentrating in economics and fiscal regulatory policy, and also received his BA in government
from Cornell University. He currently serves as a Vice Chairman of the Board of the National Energy Systems Technology Center co-led
by Department of Energy laboratories, UC Berkeley, and UC Davis. He is also on the Board of the iGATE Development Corporation,
a non-profit dedicated to providing research and development space to start-up technology companies.
Director Independence
With the assistance of legal counsel to the Company, the Board
has determined that, other than Glenn R. Rink and Jonathan Thatcher, who are employees of the Company, each of the members of the
Board is an "independent director" for purposes of the NASDAQ Listing Rules and Rule 10A-3(b)(i) under the Securities
Exchange Act of 1934, as amended, as the term applies to membership on the Board and its committees. NASDAQ's independence
definition includes a series of objective tests, such as that the Director is not an employee of the company and has not engaged
in various types of business dealings with the company. In addition, as further required by NASDAQ rules, our Board has made an
affirmative subjective determination as to each independent director that no relationships exist which, in the opinion of the Board,
would interfere with the exercise of independent judgment in carrying out the responsibilities of a Director. In making these determinations,
the Board reviewed and discussed information provided by the Directors and us with regard to each Director's business and
personal activities as they may relate to the Company and its management. On an annual basis, each Director and executive officer
is obligated to complete a Director and Officer Questionnaire that requires disclosure of any transactions with the Company in
which the Director or officer, or any member of his or her family, have a direct or indirect material interest.
45
Based upon all of the elements of independence set forth in
the NASDAQ rules and listing standards, the Board has determined that each of the following non-employee directors is independent
and has no relationship with Abtech, except as a Director and stockholder of the Company: Olivia H. Farr; David Greenwald; A. Judson
Hill; F. Danile Gabel; and Karl Seitz.
In addition, the Board determined that Mr. Rink is not independent
because he is our Chief Executive Officer and President, and Mr. Thatcher is not independent because he is the Chief Operating
Officer of our majority owned subsidiary, AbTech Industries, Inc.
Corporate Governance
The Board is committed to maintaining
strong corporate governance principles and practices. Our governance structure and processes are based upon a number of key governance
documents, including our Code of Business Conduct and Ethics (the "Code"), which was first adopted on February 24,
2007. The Code
addresses general business ethical principles, embodies
our commitment
to certain ethical principles and sets forth the responsibilities of Abtech and its officers and directors with regard to the Company's
shareholders, employees, customers, lenders, and other stakeholders. T
he Code is reviewed at least annually
and updated periodically in response to changing regulatory requirements, evolving practices, issues raised by our stockholders
and other stakeholders and otherwise as circumstances warrant.
The Board recognizes that one of its key responsibilities is
to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. The Board understands
that there is no single, generally accepted approach to providing Board leadership, and that given the dynamic and competitive
environment in which we operate, the right Board leadership structure may vary as circumstances warrant. Our current structural
philosophy provides for a board comprised primarily of independent non-employee directors, as well as Compensation and Audit Committees
comprised entirely of independent non-employee directors. The Board believes that this leadership structure is optimal for the
Company at the current time, as it provides independent oversight, coupled with a small number of employee directors who are deeply
familiar with the history and operations of the Company.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee during the fiscal year
ended December 31, 2011 served as an officer, former officer or employee of the Company. During this period, no executive officer
of the Company served as (i) a member of a compensation committee (or equivalent) of any other entity, one of whose executive officers
served as one of our directors or was an immediate family member of a director, or served on our Compensation Committee; or (ii)
a director of any other entity, one of whose executive officers or their immediate family member served on our Compensation Committee.
46
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis ("CD&A,")
describes Abtech's executive compensation program for 2011 and certain elements of the 2012 program. We use this program
to attract, motivate and retain the colleagues who lead our business. In particular, this CD&A explains how the Board made
compensation decisions for 2011 for our Named Executive Officers. The 2011 Named Executive Officers are:
• Glenn R. Fink, President and Chief Executive Officer, our principal executive officer;
•
Lane J. Castleton
,
Chief Financial Officer, Vice President, and Treasurer
, our principal financial officer;
•
Jonathan Thatcher
,
Chief Operating Officer of our subsidiary, AbTech Industries; and
•
Bjornulf White, Executive Vice President of Corporate Strategy and Business Development of our subsidiary, AbTech Industries.
The Board has responsibility for establishing, implementing
and monitoring the Company's compensation philosophy as it relates to our executive officers. Our executive officers have
broad policy-making authority in the Company, and the Board holds them responsible for the Company's financial performance
and for setting and maintaining a culture of strong ethics.
Compensation Philosophy and Objectives
The Board believes that Abtech's executive compensation
program implements and achieves the goals of our executive compensation philosophy. The Board believes that an effective executive
compensation program rewards the achievement of identified annual, long-term and strategic goals by the Company. An effective program
seeks to align the interests of the Company's executives with those of its stockholders by rewarding performance above established
goals that may be expected to enhance stockholder value. The Board considers performance and compensation to ensure that the Company
is able to attract, motivate and retain superior people in key positions and that compensation provided to key employees is competitive
relative to the compensation paid to similarly situated executives in peer companies generally. The Board believes that an effective
means of achieving those objectives is to provide a compensation package to the Company's executives, including the Named
Executive Officers, which includes both cash and stock-based compensation that rewards performance measured against established
goals.
2011 Executive Compensation Components
For the year ended December 31, 2011, the main elements of compensation
for the NEOs were: (i) base salary; (ii) stock options granted by AbTech Industries prior to the Merger; and (iii) a performance-based
cash bonus plan.
2012 Executive Compensation Components
For the 2012 fiscal year, it is expected that the main elements
of compensation for the NEOs will be: (i) base salary; (ii) a performance-based cash bonus plan; and (iii) equity-based long-term
compensation through the 2012 Incentive Stock Plan.
47
Potential Payments Upon Termination or Change-in-Control;
Employment Agreements
SEC regulations state that we must disclose information regarding
agreements, plans, or arrangements that provide for payments or benefits to our executive officers in connection with any termination
of employment or change in control of the Company. There are no employment agreements between Abtech Holdings and any of its officers
or directors. AbTech Industries has entered into employment agreements with Glenn R. Rink and Lane J. Castleton (for the purposes
of this section only, each an "Executive", and collectively, the "Executives"). Under these agreements
the Executives are entitled to compensatory benefits in the event the Executive terminates his employment for good reason (meaning
the assignment to Executive of any duties materially inconsistent with Executive's position, authority, duties or responsibilities
as described in the agreement or failure of AbTech Industries to comply with the compensation and benefit provisions of the agreements)
or upon the termination of the Executive's employment by AbTech Industries without cause (meaning at the option of AbTech
Industries in the event it determines it is in AbTech Industries' best interest to terminate the employment of Executive).
Under these circumstances AbTech Industries is required to pay to the Executive a severance benefit equal to Executive's
salary at the then current annual salary rate for a period equal to the product of (A) the number of years of service of Executive
with the Company (specifically including those years of service rendered prior to the Effective Date) times (B) two (2) months.
AbTech Industries may elect to pay the severance benefit described herein either as one lump sum within 30 days of the notice
of termination, or in a series of bi-weekly installments beginning on the regularly scheduled payday of AbTech Industries which
follows the effective date of such termination with the amount of each such installment being equal to the Executive's then
current bi-weekly salary amount. AbTech Industries is required to pay to the Executive an additional severance benefit equal to
the cost of extending the Executive's health insurance coverage under the provisions of COBRA for a period of eighteen (18) months,
with such severance amount being paid in a lump sum payment grossed up to cover the taxes that Executive is required to pay on
such benefit. All stock options theretofore granted to the Executive to purchase any equity shares of AbTech Industries shall become
immediately and fully vested and exercisable in accordance with the terms of the AbTech Industries' stock option plans and
grant awards. The agreement with Mr. Rink provides for a base annual salary of $150,000 with performance incentives, which
if met, will increase the base annual salary in stages to $200,000 and $250,000. The agreement with Mr. Castleton provides
for a base annual salary of $126,000 with performance incentives, which if met, will increase the base annual salary in stages
to $150,000 and $175,000.
48
Compensation Tables
The following table sets forth the compensation earned during
the applicable fiscal year by each individual who served as our principal executive officer during 2011, and our three most highly
compensated executive officers other than the principal executive officer who were serving as executive officers at the end of
the last completed fiscal year.
SUMMARY COMPENSATION TABLE
Name
    and Principal Position
(a)
Year (b)
Salary ($)
(c)(2)
Bonus ($)
(d)
Stock Awards
($)(e)
Option Awards
($)(f)(1)
Non-Equity
    Incentive
Plan Compensation ($)
(g)
All Other
    Compensation ($)
(h)
Total ($)
    (i)
Glenn
    R. Rink (3)
2011
159,670
50,000
-
425,463
-
7,489
642,622
CEO, President
2010
150,000
-
-
41,698
-
7,884
199,582
Lane J. Castleton
    (4)
2011
131,385
14,000
-
147,346
-
-
292,731
CFO, VP, Treasurer
2010
121,154
-
-
25,542
-
-
146,696
Jonathan Thatcher
    (5)
2011
147,692
30,000
4,200
172,087
-
-
353,979
COO,
    AbTech Industries
Bjornulf
White (6)
2011
120,000
20,000
-
171,703
-
-
311,703
EVP, AbTech Industries
2010
60,000
10,400
70,400
Mandi Luis (3)
2011
-
-
-
-
-
-
-
CEO, President
2010
5,000
-
-
-
-
-
5,000
(1)
These amounts represent full grant date fair value of these awards, in accordance with the Financial Accounting Standard Board's
("FASB") ASC Topic 718. Assumptions used in the calculation of dollar amounts of these awards are included in Note
11 of the Consolidated Financial Statements.
(2)
This table includes compensation paid by the Company's subsidiary AbTech Industries, including such compensation paid
prior to the Merger.
(3)
Mandi Luis resigned as Chief Executive Officer, President, and Director of the Company effective February 10, 2011, and
immediately thereafter Glenn R. Rink was appointed Chief Executive Officer and President.
(4)
Lane J. Castleton was appointed Chief Financial Officer of the Company on February 10, 2011.
(5)
Jonathan Thatcher
was appointed Vice President and Chief Operating Officer of AbTech Industries
on
February 10, 2011.
The stock award for Mr. Thatcher was valued at the closing price of the
Company's stock on the date of grant.
(6)
Bjornulf White was appointed Vice President Business Development and Corporate Strategy for AbTech Industries on July 1, 2010
and became Executive Vice President on July 1, 2011.
49
Outstanding Equity Awards at Fiscal Year
End
The following table discloses certain information regarding
all outstanding equity awards at fiscal year-end for each of the officers named in the Summary Compensation Table, as of December
31, 2011. Some values contained in the table below have not been, and may never be, realized. The options might never be exercised
and the value, if any, will depend on the share price on the exercise date. There were no stock awards by the Company in 2011.
Option Awards
Name
(a)
Number
    of Securities Underlying Unexercised Options Exercisable (#)
Number
    of Securities Underlying Unexercised Options Unexercisable (#)
Equity
    Incentive Plan Awards:  Number of Securities Underlying Unexercised Unearned Options (#)
Option
    Exercise Price ($)
Option Expiration Date
Glenn R. Rink
212,951
106,476
1,062,000
485,000
0.70
0.70
0.42
0.42
12/13/17
10/11/20
12/14/21
12/14/21
Lane J. Castleton
133,095
63,885
386,000
150,000
0.70
0.70
0.42
0.42
12/13/17
10/11/20
12/14/21
12/14/21
Jonathan Thatcher
239,570
476,000
150,000
0.70
0.42
0.42
12/13/12
2/14/21
2/14/21
Bjornulf White
53,238
421,000
203,000
0.70
0.42
0.42
10/11/20
12/14/21
12/14/21
Director Compensation
Mr. Rink and Mr. Thatcher are not paid any additional compensation
by virtue of their service on the Board. The following table discloses the compensation of our non-employee directors for the last
completed fiscal year.
Name
Fees earned or paid in cash ($)
Stock Awards ($)
Option Awards ($)(1)
Non-Equity Incentive Plan Comp ($)
Non-Qual deferred comp earnings ($)
All Other Compensation ($)
Total ($)
Olivia H. Farr
-
-
76,972
-
-
-
76,972
F. Daniel Gabel
-
-
76,972
-
-
-
76,972
David Greenwald
-
-
76,972
-
-
-
76,972
A. Judson Hill
-
-
76,972
-
-
-
76,972
Karl Seitz
-
-
76,972
-
-
-
76,972
(1)
At December 31, 2011, the aggregate number of stock options
outstanding for each non-employee Director was as follows: Ms. Farr, 679,284; Mr. Gabel, 519,570; Mr. Greenwald, 679,284; Mr.
Hill, 679,284; Mr. Seitz, 599,427.
50
CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
In 2011, F. Daniel Gabel, a director of the Company, purchased
a Convertible Note (the "Gabel Note") and accompanying warrant for 333,333 shares, for $500,000 in a private offering
conducted by the Company. $200,000 of the purchase price was remitted in the form of a non-interest bearing Senior Convertible
Promissory Note due from AbTech Industries for the principal amount of $200,000. The Gabel Note bears interest at twelve percent
(12%) per annum through April 30, 2012; fifteen percent (15%) per annum from May 1, 2012 through July 31, 2012 and eighteen percent
(18%) per annum for any period after July 30, 2012 that the Gabel Note remains outstanding. All interest accrued on the Gabel Note
will be due and payable at maturity. In the event of a Qualified Financing, Mr. Gabel will have the option to (i) convert the Gabel
Note into the securities purchased by investors in a Qualified Financing at a 20% discount to the price paid by investors in the
Qualified Financing; or (ii) tender the Gabel Note to the Company for immediate repayment of principal and accrued and unpaid interest.
In the event that the Company does not close a Qualified Financing on or prior to November 1, 2012, Mr. Gabel shall have the option
to convert the Gabel Note into shares of our common stock at the Conversion Price. In the event the Gabel Note remains outstanding
as of April 30, 2012, Mr. Gabel will receive an additional warrant for 10% of the principal amount of the Gabel Note outstanding
at that date divided by the Conversion Price. In the event the Gabel Note remains outstanding as of July 31, 2012, Mr. Gabel will
receive an additional warrant for 10% of the principal amount of the Gabel Note outstanding at that date divided by the Conversion
Price. The warrants will have an exercise price equal to the Conversion Price and a five year term.
In 2011, Mr. Gabel sold a convertible promissory note due from
AbTech Industries in the principal amount of $100,000 to another investor for $112,581, representing the face value of the note
plus interest accrued thereon at 8% per annum. The investor subsequently converted this note to 198,980 shares of Company common
stock.
Although we have adopted the Code, we still rely on our Board
to review related party transactions on an ongoing basis to prevent conflicts of interest. The Board reviews a transaction in light
of the affiliations of the director, officer, or employee and the affiliations of such person's immediate family. Transactions
are presented to our Board for approval before they are entered into or, if this is not possible, for ratification after the transaction
has occurred. If the Board finds that a conflict of interest exists, then it will determine the appropriate remedial action, if
any. Our Board approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of
the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The table below sets forth the number of shares of our common
stock beneficially owned as of the close of business on March 31, 2012 by each of our Directors, each Named Executive Officer listed
in the 2011 Summary Compensation Table, the number of shares beneficially owned by all of our Directors and executive officers
as a group, and each person we know to be the beneficial owner of 5% or more of the outstanding shares of our common stock.
Beneficial ownership is determined in accordance with Rule
13d-3 under the Exchange Act and generally includes voting or investment power over securities. Under this rule, a person is deemed
to be the beneficial owner of securities that can be acquired by such person within 60 days of April 15, 2012 upon the exercise
of options or warrants. Each beneficial owner's percentage ownership is determined by assuming that all options and warrants
held by such person that are exercisable within 60 days of April 15, 2012 have been exercised. The table and footnotes also include
information about such options.
51
Unless otherwise noted, the address of each person named in the table is 4110 N. Scottsdale Road,
Suite 235, Scottsdale, AZ 85251.
Common Stock
Name of Beneficial Owner
Footnote
Reference
Amount and Nature of Beneficial Ownership**
Percent of
Class
Owned
Directors and Executive Officers:
Glenn R. Rink
1
3,492,812
7.2%
Jonathan Thatcher
2
249,570
*
Olivia H. Farr
3
694,003
1.4%
David Greenwald
4
1,345,341
2.8%
Karl Seitz
5
319,427
*
A. Judson Hill
6
413,483
*
F. Daniel Gabel
7
1,814,347
3.6%
Lane J. Castleton
8
196,980
*
Bjornulf White
9
53,238
*
All Directors and executive officers as a group (9 persons)
8,579,201
17.2%
5% Holders:
Country Mutual Insurance Company and
Country Insurance Company
1705 N. Towanda Avenue, PO Box 2020
Bloomington, IL 61702-2020
10
3,698,560
7.1%
Bernard L. Madoff Investment Securities LLC
c/o Baker & Hostetler LLP
45 Rockefeller Plaza, New York, NY 10111
11
3,194,270
6.2%
*
Percent of class owned is less than 1%.
**
Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Pursuant to the rules of
the SEC, shares of common stock which an individual or group has a right to acquire within 60 days pursuant to the exercise
of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or
group, but are not deemed to be beneficially owned and outstanding for the purpose of computing the percentage ownership of any
other person shown in the table.
(1)
Includes options to purchase 319,427 shares of Abtech common stock.
(2)
Includes options to purchase 239,570 shares of Abtech common stock.
(3)
Includes 399,284 options to purchase Abtech common stock.
(4)
Includes 399,284 options to purchase Abtech common stock and 101,407 shares of Abtech common stock held by Landers Segal Color,
Co., Inc. for which Mr. Greenwald has shared voting and investment power.
(5)
Represents options to purchase 319,427 shares of Abtech common stock.
(6)
Represents options to purchase 413,483 shares of Abtech common stock.
(7)
Includes options to purchase 239,570 shares of Abtech common stock, warrants to purchase 475,302 shares of Abtech common stock
and 833,333 shares of Abtech common stock reserved for issuances upon conversion of the Gabel Note.
(8)
Represents options to purchase 196,980 shares of Abtech common stock.
(9)
Represents options to purchase 53,238 shares of Abtech common stock.
(10)
Includes warrants to purchase 435,363 shares of Abtech common stock and 3,263,197 shares of Abtech common stock issuable upon
conversion of 612,947 unconverted shares of AbTech Industries Series A Preferred Stock that may be converted at the option
of the holder; does not include 2,001,742 shares of Abtech common stock reserved for issuance upon conversion of certain Senior
Convertible Promissory Notes.
(11)
Represents 3,194,270 shares of AbTech common stock reserved for issuance upon conversion of 600,000 shares of AbTech Industries
Series A Preferred Stock that may be converted at the option of the holder; does not include 425,903 shares of Abtech common
stock reserved for issuance upon conversion of certain Senior Convertible Promissory Notes with an aggregate principal amount of
$300,000, which were not converted as of the effective date of the Merger and which are not presently convertible.
52
SELLING SHAREHOLDERS
The
14,582,862 shares of our common
stock included in this prospectus, including shares of our common stock issuable pursuant to the terms of outstanding warrants,
were issued to the selling shareholders in the September Offering and the February Offering pursuant to exemptions from the registration
requirements of the Securities Act pursuant to Regulation D and Regulation S promulgated thereunder. The Secured Notes and related
warrants were purchased by accredited investors from September 19, 2011 to February 15, 2012. In addition, the PA Warrants issued
in connection with the September Offering and the February Offering are also included in this prospectus on behalf of the placement
agent.
The following table sets forth, as to each of the selling shareholders:
the number of shares of our common stock beneficially owned, based on each selling shareholder's ownership of the Secured
Notes and warrants held of record as of April 13, 2012, assuming exercise of all of the warrants held by such selling shareholder
on that date, without regard to any limitations on exercise; the number of shares of our common stock being offered by such selling
shareholder pursuant to this prospectus; and the number of shares of our common stock beneficially owned upon completion of the
offering and the percentage of beneficial ownership upon completion of the offering based upon 63,065,206 shares of our common
stock outstanding as of April 13, 2012, assuming full conversion of the Secured Notes and full exercise of all warrants held by
the selling shareholders and outstanding on that date, without regard to any limitations on exercise.
Information in the table below and the notes thereto has been
provided to us by the selling shareholders. Beneficial ownership and percentage have been determined in accordance with Rule 13d-3
under the Exchange Act and generally includes voting or dispositive power with respect to the securities. The information listed
below is not necessarily indicative of beneficial ownership for any other purpose. Except as otherwise noted, none of the selling
shareholders have, within the last three years from the date of this prospectus, held any position, office or material relationship
with the Company.
Beneficial Ownership Before Offering
Name
Shares Issuable On Conversion
Warrants
Total
Share
    of Common Stock in Prospectus
Beneficial
    Ownership After Offering(1)
Percentage
    of Beneficial Ownership After Offering
John J. Connors
71,429
33,333
104,762
104,762
0
Katherine O'Leary
35,714
16,667
52,381
52,381
0
Richard O'Leary
35,714
16,667
52,381
52,381
0
Irwin Blitt Revocable Trust UTA 1-28-79
142,857
66,667
209,524
209,524
0
Option Opportunities Corp.
85,714
40,000
125,714
125,714
0
Alan B. Miller
71,429
33,333
104,762
104,762
0
Warberg Opportunistic Trading Fund LP
114,286
53,333
167,619
167,619
0
M.J. Fil Investments, LLC
50,000
23,333
73,333
73,333
0
Sandor Capital Master Fund, L.P.
571,428
266,667
838,095
838,095
0
Pinnacle Family Office Investments, L.P.
2,571,429
1,199,999
3,771,428
3,771,428
0
Micro PIPE Fund I, LLC
285,714
133,334
419,048
419,048
0
Maurice Werdegar
35,714
16,667
52,381
52,381
0
Barry J. Goldstein
35,714
16,667
52,381
52,381
0
HVM Corporation
142,857
66,667
209,524
209,524
0
Robert J. Dobrient
35,714
16,667
52,381
52,381
0
Alan S. Nasar
35,714
16,667
52,381
52,381
0
Michael H. Weiss
85,714
40,000
125,714
125,714
0
Ronald Lachman
107,143
50,000
157,143
157,143
0
Donald F. Farley
85,715
40,000
125,715
125,715
0
53
Beneficial Ownership Before Offering
Name
Shares Issuable On Conversion
Warrants
Total
Share
    of Common Stock in Prospectus
Beneficial
    Ownership After Offering(1)
Percentage
    of Beneficial Ownership After Offering
Beneficial Capital Corp.
357,143
166,667
523,810
523,810
0
Morris Smith
85,714
40,000
125,714
125,714
0
SKS Ventures LLC
142,857
66,667
209,524
209,524
0
RMH 2007 Irrevocable Trust
107,143
50,000
157,143
157,143
0
Alpha Capital Anstalt
785,714
366,666
1,152,380
1,152,380
0
George Thayer
35,714
16,667
52,381
52,381
0
JSL Kids Partners
142,857
66,667
209,524
209,524
0
JMW Fund, LLC
357,143
166,667
523,810
523,810
0
San Gabriel Fund, LLC
357,143
166,667
523,810
523,810
0
William H. White Jr. Family Trust DTD 8/1/94
57,143
26,667
83,810
83,810
0
West Hampton Special Situations Fund, LLC
142,857
66,667
209,524
209,524
0
Samir Bhatt
14,286
6,667
20,953
20,953
0
Scott Johnson Clark
57,143
26,667
83,810
83,810
0
Gemini Master Fund, Ltd.
214,286
100,000
314,286
314,286
0
David H. Clarke
107,143
50,000
157,143
157,143
0
Michel Finzi
71,429
33,333
104,762
104,762
0
William Silver
42,857
20,000
62,857
62,857
0
Morgan Keegan FBO: Rodney D. Baber
71,429
33,333
104,762
104,762
0
Koyote Trading LLC
71,429
33,333
104,762
104,762
0
Lacuna Hedge Fund LLLP
142,857
66,667
209,524
209,524
0
Whalehaven Capital Fund Ltd.
428,571
200,000
628,571
628,571
0
Virginia E. Dadey
71,429
33,333
104,762
104,762
0
Biagio Maffettone
35,714
16,667
52,381
52,381
0
Sable Ridge Capital Opportunity Fund LP
71,429
33,333
104,762
104,762
0
Gus Blass II
214,286
100,000
314,286
314,286
0
Kensington Partners
214,286
100,000
314,286
314,286
0
Gus Blass III
214,286
100,000
314,286
314,286
0
Michael Greller
71,429
33,333
104,762
104,762
0
Harry Mittelman
142,857
66,667
209,524
209,524
0
Middlebury Securities(2)
0
754,286
754,286
754,286
0
TOTAL
9,428,573
5,154,289
14,582,862
14,582,682
0
(1)
The numbers in this column assume each selling stockholder sells all of its shares being registered pursuant to this prospectus.
(2)
Middlebury Securities acted as placement agent in connection with the September Offering and the February Offering. The shares
of our common stock registered pursuant to this prospectus reflect the PA Warrants.
54
PLAN OF DISTRIBUTION
The selling shareholders may sell our common stock covered by
this prospectus (the "registered securities") from time to time in one or more transactions at:
·
fixed prices;
·
prevailing market prices at the time of sale;
·
varying prices determined at the time of sale; or
·
negotiated prices.
The selling shareholders will act independently of us in making
decisions regarding the timing, manner and size of each sale. The selling shareholders may effect these transactions by selling
the registered securities to or through broker-dealers or directly to investors. Broker-dealers engaged by the selling shareholders
may arrange for other broker-dealers to participate in the sales.
The registered securities may be sold in
one or more of the following transactions:
·
a block trade in which a broker-dealer attempts to sell the shares
of the registered securities as agent but may resell a portion of the block as principal to facilitate the transaction;
·
a purchase by a broker-dealer as principal and resale by the broker-dealer
for its account under this prospectus;
·
an exchange distribution in accordance with the rules of the exchange;
·
ordinary brokerage transactions and transactions in which a broker
solicits purchasers;
·
privately negotiated transactions, including directly to investors;
and
·
a combination of any of the above transactions.
We may amend or supplement this prospectus from time to time
to describe a specific plan of distribution. If the plan of distribution involves an arrangement with a broker-dealer for the sale
of the registered securities through a block trade, special offering, exchange distribution or secondary distribution, or a purchase
by a broker-dealer, the amendment or supplement will disclose:
·
the name of the selling shareholders and the participating broker-dealer;
·
the number of shares of the registered securities involved;
·
the price at which the shares of the registered securities are sold;
·
the commissions paid or discounts or concessions allowed to the broker-dealer;
·
that the broker-dealer did not conduct any investigation to verify
the information contained or incorporated by reference in this prospectus; and
·
other facts material to the transaction.
55
The selling shareholders may enter into hedging transactions
with broker-dealers or affiliates thereof in connection with distributions of the registered securities. In these transactions,
broker-dealers or affiliates may engage in short sales of the registered securities pursuant to this prospectus to offset the positions
they assume with the selling shareholders and use shares of the registered securities received from the selling shareholders to
close out their short positions. The selling shareholders also may sell the registered securities short, deliver this prospectus
in connection with some or all of those sales and redeliver the registered securities to close out their short positions. The selling
shareholders may enter into option or other transactions with broker-dealers which require the delivery to the broker-dealer or
an affiliate thereof of shares of the registered securities. The broker-dealer may then resell or otherwise transfer the shares
of the registered securities under this prospectus. The selling shareholders also may loan, pledge or grant a security interest
in some or all of the registered securities covered by this prospectus to a broker-dealer or an affiliate thereof. The broker-dealer
may sell the loaned or pledged registered securities under this prospectus.
Broker-dealers or agents may receive compensation from the selling
shareholders in the form of commissions, discounts or concessions. Broker-dealers or agents may also receive compensation from
the purchasers of the registered securities for whom they act as agents or to whom they sell as principals, or both. A broker-dealer's
compensation will be negotiated in connection with the sale and may exceed the broker-dealer's customary commissions. Broker-dealers,
agents or the selling shareholders may be deemed to be "underwriters" within the meaning of the Securities Act in connection
with sales of the registered securities. Any commission, discount or concession received by these broker-dealers or agents and
any profit on the sale of the registered securities purchased by them may be deemed to be underwriting discounts or commissions
under the Securities Act.
Because the selling shareholders may be deemed to be "underwriters"
within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act. In
addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be
sold under Rule 144 rather than under this prospectus. The selling shareholders have advised us that they have not entered into
any agreements, understandings or arrangements with any underwriter or broker-dealer regarding the sale of the registered securities.
There is currently no coordinating broker acting in connection with the proposed sale of the registered securities by the selling
shareholders.
We agreed to keep this prospectus effective until the earlier
of (i) May 16, 2012, (ii) the date on which all of the shares of the registered securities have been sold pursuant to this prospectus,
(iii) the expiration of the holding period that would be applicable to the registered securities under Rule 144 under the Securities
Act were it not held by an affiliate of ours, or (iv) the sale of all of the shares of the registered securities pursuant to Rule
144. The registered securities will be sold only through registered or licensed brokers or dealers if required under applicable
state securities laws. In addition, in certain states the registered securities may not be sold unless it has been registered or
qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and
is complied with.
In order to comply with the applicable securities laws of particular
states, if applicable, the shares of registered securities will be sold in the jurisdictions only through registered or licensed
brokers or dealers. In addition, in particular states, the shares of registered securities may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is
available and is complied with.
The selling shareholders and any broker-dealers or agents that
participate with the selling shareholders in the distribution of the shares of registered securities may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions received by them and any profit on the resale of the registered securities
may be deemed to be underwriting commissions or discounts under the Securities Act.
56
Under applicable rules and regulations under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, any person engaged in the distribution of the registered securities may
not simultaneously engage in market making activities with respect to the registered securities for a period of two business days
prior to the commencement of the distribution. In addition, the selling shareholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of the registered securities by the selling shareholders or any other person. We will make copies of this prospectus
available to the selling shareholders and have informed them of the need to deliver a copy of this prospectus to each purchaser
at or prior to the time of the sale.
We will pay all costs, expenses and fees associated with the
registration of the registered securities, including without limitation, SEC filing fees and expenses of compliance with state
securities or "blue sky" laws. The selling shareholders will pay all underwriting commissions and discounts, selling
or placement agent fees or broker fees and commissions, and transfer taxes, if any, associated with the sale of the registered
securities. The selling shareholders may agree to indemnify any broker-dealer or agent that participates in sales of the registered
securities against specified liabilities, including liabilities arising under the Securities Act. The selling shareholders have
agreed to indemnify certain persons against specified liabilities in connection with the offering of the registered securities,
including liabilities arising under the Securities Act.
DESCRIPTION OF SECURITIES
Our authorized capital consists of 300,000,000 shares of common
stock, par value $0.001 per share, of which 48,482,344 shares are issued and outstanding.
The holders of our common stock are entitled to receive dividends
as may be declared by our Board of Directors; are entitled to share ratably in all of our assets available for distribution upon
winding up of the affairs our Company; and are entitled to one non-cumulative vote per share on all matters on which shareholders
may vote at all meetings of the shareholders.
The shareholders are not entitled to preference as to dividends
or interest; preemptive rights to purchase in new issues of shares; preference upon liquidation; or any other special rights or
preferences.
As of the date of this prospectus we have not paid any cash
dividends to stockholders. The declaration of any future cash dividends, if any, will be at the discretion of the Board of Directors
and will depend on our earnings, if any, capital requirements and financial position, general economic conditions and other pertinent
conditions. It is our present intention not to pay any cash dividends in the near future.
EXPERTS
The audited consolidated financial statements of the Company
and its subsidiary as of and for the years ended December 31, 2011 and 2010 were audited by Semple, Marchal & Cooper, LLP,
an independent registered public accounting firm, to the extent set forth in its report and are included herein in reliance upon
the authority of this firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of our common stock offered hereby will be passed
upon for us by Squire Sanders (US) LLP, Phoenix, AZ.
57
AVAILABLE INFORMATION
This prospectus is part of a registration statement on Form
S-1 we have filed with the SEC. We have not included in this prospectus all of the information contained in the registration statement
and you should refer to our registration statement and its exhibits for further information.
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any materials we file with the SEC at the SEC's Public Reference
Room at 100 F Street, NE, Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. You may obtain
information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings are also available
to the public from commercial document retrieval services and at the website maintained by the SEC at www.sec.gov.
Our website address is www.abtechindustries.com. The information
on our website is not incorporated into this prospectus.
58
ABTECH HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2011 AND 2010
CONTENTS
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets
F-3
Consolidated Statements of Operations
F-4
Consolidated Statements of Stockholders' Deficiency
F-5
Consolidated Statements of Cash Flows
F-6
Notes to the Consolidated Financial Statements
F-7 – F-28
F-
1
F-
2
ABTECH HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
2011
2010
ASSETS
Current assets
Cash and cash equivalents
$
1,386,502
$
4,123
Accounts receivable – trade, net
108,170
36,642
Accounts receivable – related party, net
2,032
13,044
Inventories, net
528,009
569,042
Deferred charges, net
439,203
20,028
Prepaid expenses and other current assets
37,988
76,759
Total current assets
2,501,904
719,638
Fixed assets, net
49,485
65,514
Security deposits
17,977
17,977
Deferred charges, net
15,020
22,673
Goodwill
10,000
10,000
Total assets
$
2,594,386
$
835,802
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable
$
483,879
$
629,470
Accounts payable – related party
29,703
7,736
Loans from shareholders
9,000
180,500
Notes payable
-
21,000
Convertible promissory notes, net of discounts
3,758,082
208,679
Convertible promissory notes – related party, net of discounts
578,681
1,156,000
Customer deposits
38,505
193,180
Accrued interest payable
126,232
39,904
Accrued expenses
122,790
125,557
Total current liabilities
5,146,872
2,562,026
Due to related party
101,524
106,601
Convertible promissory notes
155,000
1,375,865
Convertible promissory notes – related party
1,881,000
2,581,001
Warrant liability
498,976
-
Total liabilities
7,783,372
6,625,493
Commitments and contingencies
Stockholders' deficiency
Common stock, $0.001 par  value; 300,000,000 authorized shares; 47,160,435 and 49,249,674 shares issued and outstanding at December 31, 2011 and 2010, respectively
47,160
49,250
Additional paid-in capital
24,661,344
18,672,746
Non-controlling interest
(1,674,105
)
-
Accumulated deficit
(28,223,385
)
(24,511,687
)
Total stockholders' deficiency
(5,188,986
)
(5,789,691
)
Total liabilities and stockholders' deficiency
$
2,594,386
$
835,802
The accompanying notes are an integral
part of these consolidated financial statements.
F-
3
ABTECH HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
2011
2010
Net revenues
$
537,152
$
381,517
Net revenues – related party
-
52,141
Total net revenues
537,152
433,658
Cost of revenues
458,006
391,675
Gross profit
79,146
41,983
Operating expenses
Selling, general and administrative
3,107,596
2,353,233
Research and development
634,109
504,396
Total operating expenses
3,741,705
2,857,629
Operating loss
(3,662,559
)
(2,815,646
)
Other income (expense)
Interest expense
(2,078,704
)
(115,568
)
Gain on extinguishment of debt
115,000
-
Gain on valuation of warrant liability
242,052
-
Other income (expense)
(1,592
)
(27,201
)
Total other income (expense), net
(1,723,244
)
(142,769
)
Net loss before income taxes
(5,385,803
)
(2,958,415
)
Provision for income taxes
-
-
Net loss
(5,385,803
)
(2,958,415
)
Net loss attributable to non-controlling interest
(489,655
)
-
Net loss attributable to controlling interest
$
(4,896,148
)
$
(2,958,415
)
Basic and diluted loss per common share
$
(0.11
)
$
(0.06
)
Basic and diluted weighted average number of shares outstanding
44,160,713
48,099,333
The accompanying notes are an integral
part of these consolidated financial statements.
F-
4
ABTECH HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIENCY
Common Stock
Additional
Non-
Shares
Amounts
paid-in
    capital
Accumulated deficit
controlling
    interest
Total
Balance at December 31, 2009
47,307,593
$
47,308
$
16,624,566
$
(21,553,272
)
-
$
(4,881,398
)
Stock-based compensation expense
239,265
239,265
Common stock issued for services
27,034
26
19,954
19,980
Preferred stock of subsidiary issued for debt conversion
354,921
356
249,644
250,000
Interest paid in preferred shares of subsidiary
65,126
65
45,812
45,877
Advances received pre-merger
1,495,000
1,495
1,493,505
1,495,000
Net loss
(2,958,415
)
(2,958,415
)
Balance at December 31, 2010
49,249,674
49,250
18,672,746
(24,511,687
)
-
(5,789,691
)
Stock-based compensation expense
135,546
135,546
Common stock issued for cash
825,000
825
824,175
825,000
Common stock issued for services
449,931
450
320,083
320,533
Shares forfeited and cancelled
(684,300
)
(684
)
684
-
Preferred stock of subsidiary issued for debt conversion
4,984,324
4,983
3,058,707
3,063,690
Interest paid in preferred shares of subsidiary
20,784
20,784
Beneficial conversion feature of new debt
1,620,955
1,620,955
Preferred shares of subsidiary that did not convert at merger and remain outstanding
(7,664,194
)
(7,664
)
7,664
1,184,450
(1,184,450
)
-
Net loss
(4,896,148
)
(489,655
)
(5,385,803
)
Balance at December 31, 2011
47,160,435
$
47,160
$
24,661,344
$
(28,223,385
)
(1,674,105
)
$
(5,188,986
)
The accompanying notes are
an integral part of these consolidated financial statements.
F-
5
ABTECH HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31,
2011
2010
Operating Activities
Net loss attributable to controlling interest
$
(4,896,148
)
$
(2,958,415
)
Adjustments to reconcile net loss attributable to controlling interest to net cash used in operating activities
Depreciation and amortization
27,635
47,452
Common stock issued for services rendered
320,533
19,980
Stock-based compensation expense
135,546
239,265
Preferred stock of subsidiary issued for interest on notes payable
20,784
45,877
Interest related to beneficial conversion feature
1,620,955
-
Income from forgiveness of debt
(115,000
)
-
Note discount amortized as interest
159,657
-
Deferred charges expensed as interest
142,836
-
Net loss attributable to non-controlling interest
(489,655
)
-
Gain on change in fair value of warrant liability
(242,052
)
-
Changes in operating assets and liabilities:
Accounts receivable, net
(60,516
)
(4,709
)
Inventories, net
41,033
12,082
Prepaid expenses and other current assets
38,771
1,905
Deferred charges, net
(436,222
)
-
Accounts payable
(123,624
)
309,505
Customer deposits
(154,675
)
(3,928
)
Accrued interest payable
86,328
17,199
Accrued expenses
(2,767
)
54,414
Net cash used in operating activities
(3,926,581
)
(2,219,373
)
Investing Activities
Purchases of fixed assets
(11,606
)
(15,596
)
Net cash used in investing activities
(11,606
)
(15,596
)
Financing Activities
Proceeds from issuance of common stock
825,000
1,495,000
Proceeds from borrowings from shareholders
-
41,000
Repayment of borrowings
(1,924,957
)
(551,321
)
Repayment of borrowings from shareholders
(71,500
)
(141,500
)
Proceeds from notes payable
6,497,100
1,291,865
Net decrease in due to related party
(5,077
)
(4,862
)
Net cash provided by financing activities
5,320,566
2,130,182
Net change in cash and cash equivalents
1,382,379
(104,787
)
Cash and cash equivalents at beginning of period
4,123
108,910
Cash and cash equivalents at end of period
$
1,386,502
$
4,123
Supplemental cash flow information:
Cash paid for interest
$
43,642
$
43,343
Cash paid for income taxes
$
-
$
-
Noncash investing and financing activities:
Preferred stock  of subsidiary issued for conversion of debt, including accrued interest
$
3,084,474
$
295,877
Common stock and warrants issued for services
$
456,079
$
19,980
Beneficial conversion feature recorded to additional paid-in capital
$
1,620,955
$
-
Preferred shares  of subsidiary not converting at merger
$
1,184,450
$
-
Unamortized portion of debt discount
$
463,235
$
-
Portion of debt discount in deferred charges
$
118,136
$
-
The accompanying
notes are an integral part of these consolidated financial statements.
F-
6
ABTECH HOLDINGS, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
NOTE 1 – BUSINESS AND SUMMARY OF
ACCOUNTING POLICIES
Organization and Description of Business
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 (the
"Merger") on February 10, 2011. In accordance with the merger agreement between AbTech and ABHD (the
"Merger Agreement"), ABHD acquired all of the issued and outstanding common stock of AbTech, including shares
issuable upon the conversion of Series A preferred stock and convertible promissory notes outstanding, in exchange for the
stockholders of AbTech acquiring 46,000,000 shares of ABHD common stock. ABHD also agreed to reduce its number of common
shares outstanding to 10,000,000 shares prior to the merger. (See Note 12 – Reverse Acquisition Transaction). The
preferred stockholders of AbTech Industries that elected to not convert and exchange their shares for ABHD common shares,
represent the non-controlling interest shown on the Consolidated Balance Sheet as of December 31, 2011.
For accounting purposes, the transaction
has been accounted for as a reverse acquisition, with AbTech as the acquirer. These consolidated financial statements of the Company
represent a continuation of the financial statements of AbTech, with one adjustment, which is to retroactively adjust the legal
capital of AbTech to reflect the legal capital of ABHD. Comparative information presented in these consolidated financial statements
also have been retroactively adjusted to reflect the legal capital of the Company.
The Company is an environmental technologies
firm that provides innovative solutions to address issues of water pollution. The Company 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. The Company is headquartered in Scottsdale, Arizona
and has a manufacturing facility located in Phoenix, Arizona.
AbTech's wholly-owned subsidiary,
Environmental Security Corporation ("ESC"), was formed by the Company 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 either 2011 or 2010.
Summary
of Significant Accounting Policies
Basis of Financial Statement Presentation
–
The consolidated financial statements include the accounts of ABHD, AbTech and ESC. Intercompany accounts and transactions
have been eliminated. The consolidated financial statements do not include the operations of ABHD prior to the date of the Merger
which are considered to be immaterial to the operations of AbTech. The equity section of the Consolidated Balance Sheets and the
basic and diluted weighted average number of shares outstanding on the Consolidated Statements of Operations for periods prior
to the date of the Merger have been restated to give retroactive effect to the merger transaction and to show the shares outstanding
at the Balance Sheet dates as if such shares had been exchanged for ABHD shares in accordance with the terms of the Merger Agreement.
The equity section of the Consolidated Balance Sheets and the basic and diluted weighted average number of shares outstanding on
the Consolidated Statements of Operations for periods ended after the date of the Merger, represents the actual shares of ABHD
outstanding after the share exchanges that occurred as part of the merger transaction. The non-controlling interest shown on the
Consolidated Balance Sheet as of December 31, 2011, represents the ownership interest in AbTech of the holders of AbTech Series
A preferred stock that elected not to exchange their Series A preferred shares for common shares of ABHD as allowed by the Merger
Agreement.
F-
7
Cash and Cash Equivalents
–
The Company considers all highly liquid debt instruments with a maturity of three months or less when acquired to be cash and cash
equivalents.
Use of Estimates
– The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make certain estimates and assumptions that affect the reported amount 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 those estimates.
Significant estimates are used in determining
the allowance for doubtful accounts and inventory allowance, in valuing the warrant liability, beneficial conversion features,
stock-based compensation and stock issued in the reverse merger and in determining the classification of conversion options embedded
in convertible promissory notes. 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.
Concentration of Credit Risk
–
Credit risk represents the accounting loss that would be recognized at the reporting date if counter parties failed completely
to perform as contracted. Concentrations of credit risk that arise from financial instruments exist for groups of customers or
counter parties when they have similar economic characteristics that would cause their ability to meet contractual obligations
to be similarly affected by changes in economic or other conditions described below.
·
Cash and cash equivalents –
Financial
instruments that subject the Company to credit risk are cash balances maintained in excess of federal depository insurance limits.
At December 31, 2011, the Company had $251,249 in cash or cash equivalent balances which were not guaranteed by the Federal Deposit
Insurance Corporation. To date, the Company has not experienced any losses in such accounts and believes the exposure is minimal.
·
Major customers and accounts receivable –
Major customers represent any customer that accounts for more than 10% of revenues for the year. During 2011, the Company
had two customers that accounted for 29% and 15%, respectively, of revenues and whose accounts receivable balances (unsecured)
accounted for approximately 0% and 42%, respectively, of accounts receivable at December 31, 2011. During 2010, the Company had
one customer that accounted for 23% of its revenues and whose accounts receivable balance (unsecured) accounted for approximately
12% of accounts receivable at December 31, 2010.
·
Supplier –
Major suppliers represent
any vendor that accounts for more than 10% of purchases for the year. During 2011, the Company had two vendors that accounted
for 34% and 41%, respectively, of its purchases. Neither of these vendors had an accounts payable balance at December 31, 2011.
During 2010, the Company had two vendors that each accounted for more than 10% of its purchases at 14% and 11%, respectively.
Neither of these vendors had an accounts payable balance at December 31, 2010.
F-
8
Fair Values of Financial Assets and
Liabilities
– The Company measures and discloses certain financial assets and liabilities at fair value. Authoritative
guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. Authoritative guidance also establishes a fair value hierarchy which requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels
of inputs that may be used to measure fair value:
Level 1
– Quoted prices in active markets
for identical assets or liabilities.
Level 2
– Observable
inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of
the assets or liabilities.
Level 3
– Unobservable
inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company estimates fair value of the
warrant liability using the Black-Scholes valuation model. Significant assumptions were determined as follows:
•
Expected term is determined under the simplified method
using an average of the contractual term and vesting period of the award as appropriate statistical data required to properly
estimate the expected term was not available;
•
Expected volatility is measured using the historical
weekly changes in the market price of the Company's common stock, disregarding identifiable periods of time in which share
price was extraordinarily volatile due to certain events that are not expected to recur during the expected term;
•
Risk-free interest rate is to approximate the implied
yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and,
•
Forfeitures are based on the history of cancellations
of warrants granted by the Company and management's analysis of potential future forfeitures.
Inventories
– 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. Inventory costs include raw materials, direct labor and manufacturing overhead. Provision is made for obsolete, slow-moving
or defective items where appropriate. The amount of any provision is recognized as an expense in the period the provision occurs.
Warranty Accrual
– The Company's
products are subject to warranty periods of one year or less. The warranty accrual is based on management's best estimate
of expected costs associated with product failure and historical product failures. The Company has not incurred any significant
warranty claims to date.
Fixed Assets
– Fixed assets,
stated at cost, are depreciated on the straight-line method for financial statement reporting purposes, over the estimated useful
lives of the assets, which range from three to ten years. Leasehold improvement costs are depreciated over the shorter of the lease
term or their useful life. Repairs and maintenance costs are expensed as incurred. Betterments or renewals are capitalized when
they occur.
Deferred Charges
– Deferred
charges are costs incurred in connection with the issuance of debt. These costs are capitalized as an asset and amortized over
the term of the debt using the effective interest method. Amortization expense related to these deferred charges totaled $142,836
in 2011 and $20,029 in 2010.
F-
9
Revenue Recognition
– The
Company recognizes revenue only when all of the following criteria have been met:
•
Persuasive evidence of an arrangement exists;
•
Delivery has occurred or services have been rendered;
•
The fee for the arrangement is fixed or determinable;
and
•
Collectability is reasonably assured.
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
– Collectibility is assessed on a customer by customer basis based on criteria outlined by management.
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.
Allowance for Doubtful Accounts
– The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers
to make required payments. The allowances are calculated based on a detailed review of individual customer accounts, historical
rates and an estimation of the overall economic conditions affecting the Company's customer base. The Company reviews a customer's
credit history before extending credit. If the financial condition of its customers were to deteriorate, resulting in an impairment
of their ability to make payments, additional allowances may be required. The allowance for doubtful accounts was $16,600 at December
31, 2011 and $14,600 at December 31, 2010.
Customer Deposits
– The Company
receives from some distributors a one-time fee for the exclusive distribution rights to its products. In some cases, this nonrefundable
fee represents a prepayment by the distributor for future product purchases. In such cases the deposit is recognized as revenue
when products are shipped and the risks and rewards of ownership have been transferred or when the distributor forfeits the prepayment,
in accordance with the terms of the distribution agreement.
Cost Recognition
– Cost of
revenues includes all direct material and labor costs and those indirect costs of bringing raw materials to sale condition, including
shipping and handling costs. Selling, general, and administrative costs are charged to operating expenses as incurred. Research
and development costs are expensed as incurred and are included in operating expenses. Advertising costs are expensed as incurred.
Total advertising costs for 2011 and 2010 were $23,792 and $14,811, respectively.
Long-Lived Assets
– The Company
evaluates long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset
may not be recoverable. When indicators of impairment are present and the undiscounted cash flows estimated to be generated by
those assets are less than the assets' carrying amount, the Company measures the amount of such impairment by comparing the
assets' carrying value to the assets' present value of the expected future discounted cash flows. Impairment charges, if any, are
recorded in the period realized.
F-
10
Income
Taxes
–Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between
the book and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted
tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances
are established to reduce a deferred tax asset to the amount expected to be realized. The Company assesses its ability to realize
deferred tax assets based on current earnings performance and on projections of future taxable income in the relevant tax jurisdictions.
These projections do not include taxable income from the reversal of deferred tax liabilities and do not reflect a general growth
assumption but do consider known or pending events, such as the passage of legislation. The Company's estimates of future
taxable income are reviewed annually.
All tax positions are first analyzed to determine if
the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including
resolution of any related appeals or litigation processes. After the initial analysis, the tax benefit is measured as the largest
amount that is more than 50% likely of being realized upon ultimate settlement. Our income tax returns are subject to adjustment
under audit for approximately the last four years.
If the Company is required to pay interest on the underpayment
of income taxes, the Company recognizes interest expense in the first period the interest becomes due according to the provisions
of the relevant tax law.
If the Company is subject to payment of
penalties, the Company recognizes an expense for the amount of the statutory penalty in the period when the position is taken on
the income tax return. If the penalty was not recognized in the period when the position was initially taken, the expense is recognized
in the period when the Company changes its judgment about meeting minimum statutory thresholds related to the initial position
taken.
Stock-Based Compensation
–
All share-based payments to employees, including grants of employee stock options, are expensed based on their estimated fair values
at grant date, in accordance with ASC 718.
Compensation expense for stock options
is recorded over the vesting period using the estimated fair value on the date of grant, as calculated by the Company using the
Black-Scholes model. The Company classifies all share-based awards as equity instruments and recognizes the vesting of the awards
ratably over their respective terms.
See Note 11 for a description of the Company's
share-based compensation plan and information related to awards granted under the plan.
Net
Loss Per Share
– Basic net loss per share is computed by dividing net loss attributable to common shareholders by
the weighted average number of shares of common stock outstanding during the period. The calculation of basic loss per share
gives retroactive effect to the recapitalization related to the reverse acquisition of AbTech Industries by AbTech
Holdings.
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 2011 and 2010 would be anti-dilutive. These
potentially dilutive securities include Series A Preferred Stock, options, warrants and convertible promissory notes (see
Notes 10 and 11), and total 31,667,254 shares at December 31, 2011 and 19,271,902 shares at December 31, 2010.
Conversion Options
– The Company
bifurcates conversion options embedded in financial instruments and accounts for them at fair value when required. The Company
has determined that none of its embedded conversion options require bifurcation.
Imputed Interest
– A note
issued solely for cash equal to its face amount is presumed to earn the stated rate of interest. However, in some cases the parties
may also exchange unstated (or stated) rights or privileges, which are given accounting recognition by establishing a note discount
or premium account. In such cases, the Company imputes interest when required.
F-
11
Business Combination
– The
Company has accounted for the reverse acquisition discussed above in accordance with ASC 805-40 (Reverse Acquisitions). Goodwill
is measured as the excess of the fair value of the consideration effectively transferred over the net amount of ABHD's recognized
identifiable assets and liabilities. The 10,000,000 shares of ABHD outstanding immediately prior to the reverse acquisition represent
the consideration transferred for the merger. Prior to the announcement of the merger, ABHD's stock had no material value.
No assets were acquired and liabilities assumed were insignificant. The Company estimated the value of the 10,000,000 shares transferred
in the acquisition to be $10,000, which the Company has recognized as goodwill at December 31, 2011 and 2010.
Recent Accounting Pronouncements
With the exception of those discussed below,
there have been no recent accounting pronouncements or changes in accounting pronouncements during the year ended December 31,
2011, that are of significance, or potential significance, to the Company.
In December 2010, the FASB issued authoritative
guidance clarifying the determination of the impairment of goodwill and the related calculation of that impairment ("Step
2") when entities have reporting units with zero or negative carrying amounts. For entities with reporting units with zero
or negative carrying values, Step 2 is required if it is more likely than not that a goodwill impairment exits. The adoption of
this guidance had no material effect on the Company's financial statements.
In May 2011, the FASB issued authoritative
guidance regarding measurement of fair value and for disclosing information about fair value measurements. Application of the highest
and best use and valuation premise concepts are clarified for use in measuring the fair value of nonfinancial assets and are not
relevant when measuring the fair value of financial assets or of liabilities. New disclosures should disclose quantitative information
about the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy.
This guidance becomes effective for the Company for fiscal years and interim periods within those years beginning in 2012. The
Company does not anticipate adoption of this guidance will have a material effect on the Company's financial statements.
In September 2011, the FASB issued authoritative
guidance providing the option to first assess qualitative factors when testing goodwill for impairment. Entities have the option
to first evaluate qualitative factors to determine whether the existence of events or circumstances, that in totality, would be
more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative evaluation determines
it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step
impairment test is unnecessary. This guidance becomes effective for the Company for fiscal years and interim periods within those
years beginning in 2012. The Company does not anticipate adoption of this guidance will have a material effect on the Company's
financial statements.
NOTE 2 – GOING CONCERN
The accompanying consolidated financial
statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. As shown in the consolidated financial statements, the Company has incurred ongoing net losses since
inception. These losses, with the associated substantial accumulated deficit, are a direct result of the Company's product
development activities and the costs of introducing its technologies to the market and pursuing market acceptance. In view of these
matters, realization of a major portion of the assets in the accompanying consolidated balance sheets is dependent upon continued
operations of the Company which in turn is dependent upon the Company's ability to meet its financing requirements, and the
success of its future operations. The Company operates in a new, developing industry with a variety of competitors. These factors
raise substantial doubt about the Company's ability to continue as a going concern.
F-
12
Management believes that the Company's
ability to continue as a going concern will be dependent on its ability to raise additional capital and/or generate significant
sales growth in the short term. The Company's ability to achieve these objectives cannot be determined at this time. Management's
plans in regard to these matters are described as follows:
Sales and Marketing
. Historically,
the Company has selected qualified distributors to represent its products in key geographic markets. The recent economic downturn
and other factors have led to a significant contraction in sales revenue as municipalities, the Company's primary customers,
experienced severe budgetary and financial constraints. In an attempt to reinvigorate sales, the Company has redirected its focus
on multiple market segments and has revised its go-to-market strategy by disengaging distributors with exclusive geographic territories,
in favor of new alliances with larger, market-dominant companies to cover entire market segments such as municipal stormwater,
federal facilities and industrial process water. In early 2011, the Company signed its first such distribution agreement with Waste
Management, Inc., a company that has a major presence in the public sector market. Under this distribution agreement, market rollout
was initiated in three market areas during 2011 and is planned to move into other areas of the country during 2012. The Company
is also making efforts to expand into specific foreign markets and new markets addressing treatment of contaminated water.
Financing.
To date, the Company
has financed its operations primarily with loans from shareholders, private placement financings and sales revenue. During 2011,
the Company raised $825,000 in a private offering of common stock, raised $1,722,100 in a series of transactions that allowed the
Company to repay or convert to stock approximately $1,350,000 of debt, raised $700,000 in a private offering of convertible promissory
notes and raised $4,000,000 in a private offering of secured convertible promissory notes. In February, 2012, the Company received
an additional $2,600,000 in the final closing of the private offering of secured convertible promissory notes. Management believes
that with continued field validation successes, an improving economy, federal regulatory approval of the Company's antimicrobial
technologies, and new strategic alliances with companies that are dominant in key market sectors, sales revenue can grow rapidly,
thus enabling the Company to reverse its negative cash flow and raise additional capital as needed. There is no assurance that
the Company can achieve sustainable operations or that additional capital, if needed, will be available on acceptable terms.
The 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.
NOTE 3 - INVENTORIES
Inventories consist of the following at December 31:
2011
2010
Raw materials
$
76,381
$
85,711
Work in process
446,538
394,540
Finished goods
106,625
221,791
Reserve for obsolescence
(101,535
)
(133,000
)
Total
$
528,009
$
569,042
F-
13
NOTE 4 - FIXED ASSETS
Fixed assets consist of the following at December 31:
2011
2010
Furniture and fixtures
$
128,093
$
128,093
Computer equipment
61,831
58,231
Machinery and equipment
250,986
242,980
Leasehold improvements
19,348
19,348
Total
460,258
448,652
Less accumulated depreciation
(410,773
)
(383,138
)
Net book value
$
49,485
$
65,514
Depreciation expense charged to operations during 2011 and 2010
was $27,635 and $27,423, respectively.
NOTE 5 - COMMITMENTS
Capital Leases
– As
of December 31, 2011 and 2010 the Company had no assets under capital lease.
Operating Leases
–
The Company leases office and warehouse space, office equipment and an automobile under various noncancelable operating leases
that extend through February 2013. Total rental expense charged to operations during the years ended December 31, 2011 and 2010
were $271,906 and $259,944, respectively. Future annual minimum lease payments for the next five years, under noncancelable operating
leases with initial or remaining terms of one year or more, as of December 31, 2011, are as follows: 2012: $273,008; and 2013:
$29,278; Total: $302,286.
Indemnification Agreements
-
The Company enters into indemnification provisions under its agreements with officers and directors and companies in its ordinary
course of business, typically with business partners, customers, landlords, lenders and lessors. Under these provisions the Company
generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result
of the Company's activities or, in some cases, as a result of the indemnified party's activities under the agreement.
The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is
unlimited. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements.
As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities
recorded for these agreements as of December 31, 2011.
Other Commitments
–
The Company has other commitments for consulting fees that extend through 2012 amounting to $90,400. These commitments are cancellable
on 15-30 days notice.
NOTE 6 - LOANS FROM SHAREHOLDERS
Loans from shareholders at December 31,
2011 and 2010 consist of one and four, respectively, short-term loans made by Directors of the Company to the Company or its subsidiary,
ESC with balances of $9,000 and $180,500 respectively. These loans are unsecured and the single loan remaining as of December 31,
2011 was non-interest bearing and "due on demand."
NOTE 7 - RELATED PARTY TRANSACTIONS
Accounts receivable; related party
– represents amounts due from distributors owned by certain ABHD stockholders. Management deems the remaining balance at
December 31, 2011, net of reserves taken, to be collectible.
Royalty Agreement
–
In 2009, the Company entered into a Royalty Agreement (the "Agreement") with Hydrophix of California ("Hydrophix"),
a distributor owned by two stockholders of the Company. The Agreement requires the Company to pay to Hydrophix a royalty equal
to 5-10% of revenues generated by AbTech on certain products sold by AbTech, up to a maximum total royalty of $1,086,000. The first
$104,665 of royalties due under the Agreement is to be retained by AbTech as payment for outstanding amounts due from Hydrophix.
The term of the Agreement is ten years or the date on which total royalty payments reach $1,086,000. As of December 31, 2011, $1,906
of royalties had been earned by Hydrophix and applied under this Agreement to amounts due from Hydrophix. The remaining $102,759
due from Hydrophix, that is to be offset by future royalties payments due under the Agreement, is included in "
Prepaids
and other current assets
" net of a $77,000 reserve.
F-
14
Due to related party
–
represents amounts owed to a related company for services provided in the form of office and clerical support, and cash advances.
On December 31, 1998, the Company executed a loan document in the amount of $127,353, with an original maturity date of December
31, 2003 (extended to December 31, 2013), with interest accruing at the rate of 5% per annum until the loan is paid in full. In
the event of default of principal or interest, the entire unpaid balance, including principal and interest, will be due and payable
without notice, with interest accruing at 8% from the date of default.
Convertible Promissory Notes
– In 2011,
director purchase a Convertible Note and accompanying warrant for 333,333 shares, for $500,000 in the July Offering (see Note 14
– PRIVATE PLACEMENTS). $200,000 of the purchase price was remitted in the form of a non-interest bearing Senior Convertible
Promissory Note due from AbTech Industries in the amount of $200,000. In 2011, a Convertible Note held by this director in the
principal amount of $100,000 was purchased by another investor and converted with interest into 198,980 shares of Company common
stock. Refer to Note 10 – CONVERTIBLE PROMISSORY NOTES for a summary of debt held
by related parties at December 31, 2011 and 2010.
Equity-
In 2011, the Company granted 16,000 shares
of common stock to a director for financial services provided by the director to the company. The shares were valued at $0.42 per
shares and recorded as stock issued for services.
Stock Options
– All of the 4,734,300 stock
options granted by the Company in 2011 were granted to directors and officers of the company (see Note 11 – STOCKHOLDERS'
EQUITY AND STOCK-BASED COMPENSATION).
NOTE 8 – ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
2011
2010
Accrued payroll
$
62,180
$
53,860
Deferred rent
21,941
36,172
Accrued vacation
32,692
26,307
Accrued warranty reserve
5,000
5,000
Other accruals
977
4,218
$
122,790
$
125,557
NOTE 9 - INCOME TAXES
There is no current or deferred tax expense
for the years ended December 31, 2011 and 2010 due to the Company's loss position and the full reserve taken on the Company's
deferred tax asset in both years.
F-
15
A reconciliation of statutory rates is
as follows at December 31:
2011
2010
Statutory Rate
34.0
%
34.0
%
State income taxes, net of federal income tax benefit
5.0
%
5.0
%
Reduction in valuation allowance related to net operating loss carry-forwards and change in temporary differences
-39.0
%
-39.0
%
0.0
%
0.0
%
The tax effects of temporary differences
that give rise to deferred tax assets (liabilities) are as follows at December 31:
2011
2010
Deferred tax assets (liabilities):
Net operating loss carryforwards
$
10,447,000
9,154,000
Accumulated depreciation
(13,000
)
(13,000
)
Less valuation allowance
(10,434,000
)
(9,141,000
)
Net deferred tax assets
$
-
-
During the years ended December
31, 2011 and 2010, net deferred tax benefit was approximately $1,293,000 and $520,000, respectively. At December 31, 2011
and 2010, the Company has federal loss carryforwards of approximately $27.9 million and $24.6 million, respectively, and
state loss carryforwards of approximately $12.5 million and $9.6 million, respectively, which are available to reduce future
taxes, if any. These net operating loss carryforwards expire through 2031 and 2016, respectively.
The
net change in the total valuation allowance for the years ended December 31, 2011 and 2010, was a net increase of
approximately $1,293,000 and $520,000, respectively. Based on the Company's loss position and projection of future
taxable income, management believes that it is more likely than not that the Company will not fully realize the benefit of
its net deferred tax assets.
Pursuant to Internal Revenue Code Section 382, annual utilization of the Company's
net operating loss carryforwards may be limited if a cumulative change in ownership of more than 50% is deemed to occur
within any three-year period. The Company believes that the Reverse Acquisition Transaction will not cause any limitation on
future utilization of net operating loss carryforwards.
F-
16
NOTE 10 – CONVERTIBLE PROMISSORY NOTES
At December 31, 2011 and December 31, 2010
the Company had promissory notes outstanding of $6,372,763 and $5,321,545, respectively, convertible into shares of the Company's
common stock. The conversion rate, interest rate and maturity dates of the notes outstanding at December 31, 2011 are shown in
the table below:
Type of Financing
Principal Amount
Interest Rate
Conversion Rate
Maturity Date
Related Party
Junior Convertible Notes
$
100,000
0
%
$
0.50
9/30/2011
Senior Convertible Notes
750,000
0
%
$
0.70
3/31/2013
Senior Convertible Notes
400,000
0
%
$
0.70
7/7/2013
Senior Convertible Notes
200,000
0
%
$
0.70
12/19/2013
Senior Convertible Notes
325,000
0
%
$
0.70
2/3/2014
Senior Convertible Notes
200,000
0
%
$
0.70
4/16/2014
Senior Convertible Notes
6,000
0
%
$
0.70
5/11/2014
ABHD Convertible Notes
500,000
12
%
$
0.60
4/30/2012
Unamortized discount on ABHD Convertible Notes
(21,319
)
Subtotal - related party
2,459,681
Non-related party
Senior Convertible Note
55,000
0
%
$
0.70
4/8/2014
Senior Convertible Notes
100,000
0
%
$
0.70
11/25/2014
ABHD Convertible Notes
200,000
12
%
$
0.60
4/30/2012
Secured ABHD Notes
25,000
12
%
$
0.70
5/15/2012
Secured ABHD Notes
25,000
12
%
$
0.70
5/18/2012
Secured ABHD Notes
50,000
12
%
$
0.70
5/22/2012
Secured ABHD Notes
550,000
12
%
$
0.70
6/3/2012
Secured ABHD Notes
675,000
12
%
$
0.70
6/19/2012
Secured ABHD Notes
650,000
12
%
$
0.70
7/24/2012
Secured ABHD Notes
1,645,000
12
%
$
0.70
8/18/2012
Secured ABHD Notes
380,000
12
%
$
0.70
8/24/2012
Unamortized discount on Secured ABHD Notes
(441,918
)
Subtotal - non-related party
3,913,082
Total
$
6,372,763
The conversion rate, interest rate and
maturity dates of the notes outstanding at December 31, 2010 are shown in the table below:
Type of Financing
Principal Amount
Interest Rate
Conversion Rate
Maturity Date
Related Party
Junior Convertible Notes
$
1,156,000
0
%
$
2.65
9/30/2011
Senior Convertible Notes
750,000
0
%
$
3.75
3/31/2013
Senior Convertible Notes
400,000
0
%
$
3.75
7/7/2013
Senior Convertible Notes
200,001
0
%
$
3.75
8/27/2013
Senior Convertible Notes
200,000
0
%
$
3.75
12/19/2013
Senior Convertible Notes
325,000
0
%
$
3.75
2/3/2014
Senior Convertible Notes
200,000
0
%
$
3.75
4/16/2014
Senior Convertible Notes
6,000
0
%
$
3.75
5/11/2014
Senior Convertible Notes
500,000
12
%
$
3.75
6/26/2014
Subtotal - related party
3,737,001
Non-related party
Senior Convertible Notes
100,000
0
%
$
3.75
10/3/2013
Senior Convertible Notes
100,000
0
%
$
3.75
1/8/2014
Senior Convertible Notes
50,000
0
%
$
3.75
10/3/2013
Senior Convertible Note
55,000
0
%
$
3.75
4/8/2014
Senior Convertible Note
100,000
0
%
$
3.75
5/8/2014
Senior Convertible Notes
50,000
0
%
$
3.75
6/12/2014
Senior Convertible Notes
50,000
0
%
$
3.75
11/5/2014
Senior Convertible Notes
100,000
0
%
$
3.75
11/25/2014
Senior Convertible Note
100,000
0
%
$
3.75
2/5/2015
Senior Convertible Notes
185,000
0
%
$
3.75
2/9/2015
Senior Convertible Note
25,000
0
%
$
3.75
2/12/15
Senior Convertible Note
300,000
0
%
$
3.75
4/13/15
Senior Convertible Note
125,865
0
%
$
3.75
7/15/15
Senior Convertible Note
35,000
0
%
$
3.75
9/10/15
Promissory Note
83,679
12
%
$
3.75
8/2/10
Promissory Note
100,000
12
%
$
3.75
8/26/10
Promissory Note
25,000
12
%
$
3.75
5/2/11
Subtotal - non-related party
1,584,544
Total
$
5,321,545
F-
17
The terms of the various types of convertible
notes included in the tables above are described as follows:
Junior Convertible Notes and Senior
Convertible Notes
– These notes are convertible into shares of AbTech Series A preferred stock and, consequently,
into shares of ABHD common stock. The conversion rate shown in the table above reflects the rate at which the notes could be converted
into shares of ABHD common stock. The notes are due in full at maturity but may be prepaid at any time prior to the maturity date
with proper notice to the note holder. In the event of liquidation of AbTech, the Senior Convertible Notes have priority in right
of payment over the Junior Convertible Notes. Additionally, holders of Senior Convertible Notes have priority over any amounts
due stockholders of AbTech, regardless of the form of payment which may be due. Two notes included in the table above have maturity
dates prior to December 31, 2011, however, each of the note holders has indicated their intention to convert the notes in accordance
with their terms in 2012.
ABHD Convertible Notes
–
These notes were issued as part of the July Offering (see Note 14 - PRIVATE PLACEMENTS).
Secured ABHD Convertible Notes
– These notes were issued in the September Offering (see Note 14 - PRIVATE PLACEMENTS).
Aggregate maturities of debt obligations
commencing in 2012 are:
2012
2013
2014
Total
$
4,800,000
$
1,350,000
$
686,000
$
6,836,000
NOTE 11 – STOCKHOLDERS' EQUITY AND STOCK-BASED
COMPENSATION
Stock Options
The Company grants stock options to officers,
directors, employees and consultants under stock plans.
AbTech's 2007 Stock Plan
-
Prior to the Merger with ABHD, AbTech issued stock options under a plan ( the "2007 Stock Plan") that allowed up to
15% of the capital stock outstanding of AbTech to be available for awards granted under the plan. Options granted under the plan
expire on the earlier of the stated expiration date or, in the case of incentive stock options, ninety days after the date employment
ends or, in the case of non-statutory options, 30 days after the optionee ceases to be a service provider to the Company. The stated
expiration dates occur between 2012 and 2020. Stock options were granted at the fair market value of the common stock as determined
by the Board of Directors on the date of grant and are exercisable subject to vesting provisions and performance objectives. All
outstanding stock options granted by AbTech outstanding as of the date of the reverse acquisition transaction with ABHD automatically
convert into options for the purchase of shares of ABHD common stock at the rate of 5.32 shares of ABHD stock for each share of
AbTech stock. ABHD will issue new authorized shares for the AbTech stock options exercised after February 10, 2011, the date of
the Merger.
F-
18
ABHD's 2012 Incentive Stock Plan
– In December 2011, the Board of Directors of ABHD approved the 2012 Incentive Stock Plan (the "2012 Plan"),
which allows for up to 9,000,000 shares of common stock awards to be granted during the term of the plan. The exercise price of
options granted under the 2012 Plan is determined by the 2012 Plan Committee and may not be less than 100% of the fair market value
of the common stock of ABHD on the grant date. Options expire not more than 10 years from the date of grant. Options granted under
the plan have a minimum vesting period of one year from the date of grant.
For the years ended December 31, 2011 and
2010, compensation expense of $77,532 and $163,420, respectively, for stock options accounted for under ASC 718 is included in
Selling, general and administrative
expense in the consolidated statements of operations. There was no related tax benefit
recognized due to the Company's loss position. At December 31, 2011, the Company had approximately $1,338,963 of total unrecognized
compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of approximately
1.7 years. No cash was received from the exercise of stock options during 2011 or 2010.
Compensation expense was determined from
the estimates of fair values of stock options granted using the Black-Scholes option pricing model. The following table summarizes
the weighted average of fair value and the significant assumptions used in applying the Black-Scholes model for options granted
in 2011 and 2010:
2011
2010
Weighted average of fair value for options granted
AbTech Options
$
-
$
0.90
ABHD Options
0.27
0.12
Weighted average assumptions used:
Expected dividend yield
0.0
%
0.0
%
Expected volatility
81.5
%
13.0-15.0%
Risk-free interest rate
1.9
%
2.1
%
Expected life (in years)
5.0
8.7
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 and the historical volatility of public companies or
mutual funds operating in similar markets. 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.
The Company's stock option activity
for the years ending December 31, 2011 and 2010 is summarized below:
F-
19
AbTech Options –
Share amounts
and exercise prices included in this table are stated in terms of AbTech shares as originally issued. The ABHD equivalent number
of shares is approximately 5.32 times the number of AbTech shares and the ABHD equivalent exercise price is 1/5.32 times the AbTech
exercise price.
Number of AbTech Shares Under Option
Weighted Average Exercise Price
Weighted Average Remaining Term
Balance at December 31, 2009
780,000
$
3.74
4.97
Granted
621,000
3.75
Exercised
-
-
Forfeited or expired
(400,000
)
3.72
Outstanding at December 31, 2010
1,001,000
3.75
6.56
Forfeited or expired
(494,000
)
3.75
Outstanding at December 31, 2011
507,000
$
3.75
3.45
As of December 31, 2011, there were 507,000
stock options outstanding and exercisable with a weighted average remaining life of 3.45 years and an intrinsic value of $0.
ABHD Options
Number of ABHD Shares Under Option
Weighted Average Exercise Price
Weighted Average Remaining Term
Balance at December 31, 2009
-
$
-
-
Granted
640,000
(1)
0.55
Outstanding at December 31, 2010
640,000
0.55
4.86
Granted
4,734,300
0.42
Outstanding at December 31, 2011
5,374,300
$
0.44
9.58
(1)
These options were previously excluded, however, the
exclusion had no effect on the consolidated statement of operations as the options did not begin to vest until 2011.
As of December 31, 2011, there were 5,374,300
stock options outstanding with a weighted average remaining life of 9.6 years and an intrinsic value of $0. As of December 31,
2011, there were approximately 320,000 options exercisable with a weighted average remaining life of 3.86 years and an intrinsic
value of $0. Of the non-exercisable stock options outstanding at December 31, 2011, 3,865,000 stock options vest over time between
2012 and 2015 and 1,189,300 stock options vest only upon the Company achieving specific performance objectives in 2011.
F-
20
The following table summarizes the activity
of the shares and weighted-average grant date fair value of the Company's non-vested common stock options during the years
ending December 31, 2011 and 2010:
Non-vested AbTech Shares
Non-vested ABHD Shares
Number of Shares
Weighted-
average
grant date
fair value
Number of Shares
Weighted
-average
grant date
fair value
Non-vested at December 31, 2009
267,999
$
1.49
-
Granted
621,000
0.90
640,000
$
0.12
Vested
(185,999
)
0.88
-
Forfeited or expired
(233,000
)
1.45
-
Non-vested at December 31, 2010
470,000
0.96
640,000
$
0.12
Granted
-
4,734,300
$
0.27
Vested
(75,000
)
0.53
(320,000
)
$
0.12
Forfeited or expired
(395,000
)
1.04
-
Non-vested at December 31, 2011
-
$
-
5,054,300
$
0.27
Common stock
In conjunction with the Merger that occurred
in February 2011, the Company sold 2,320,000 shares of common stock for $2,320,000 of cash, of this amount 1,495,000 shares were
issued during 2010 and 825,000 shares were issued during 2011 (see Note 12 - REVERSE ACQUISITION TRANSACTION).
Warrants
In 2011 the Company issued the following
warrants:
·
Thirty investors participating in the September Private
Placement (see Note 14 - PRIVATE PLACEMENTS) received warrants to purchase 2,666,667 shares of ABHD common stock. In addition,
the placement agent received warrants to purchase 533,333 shares of ABHD common stock.
·
Three individuals participating in the July Offering
(see Note 14 - PRIVATE PLACEMENTS) received warrants to purchase 466,666 shares of ABHD common stock.
·
Two individuals received warrants to purchase 530,000
shares of ABHD common stock as compensation for consulting services provided to the Company. These warrants have an exercise price
of $0.50 per share. One warrant for 30,000 shares expires on July 23, 2013 and the other warrant for 500,000 shares expires on
February 28, 2014. Compensation expense related to these warrants of $58,014 was included in
Selling, general and administrative
expense in the consolidated statements of operations.
In 2010 the Company issued the following
warrants:
·
Four individuals received warrants to purchase 130,000
shares of AbTech common stock as compensation for consulting services provided to the Company. Warrants for 120,000 shares have
an exercise price of $4.25 per share and are exercisable at any time prior to January 11, 2015. Warrants for 10,000 shares have
an exercise price of $3.75 per share and are exercisable at any time prior to April 17, 2015. Compensation expense related to
these warrants of $68,024 was included in
Selling, general and administrative
expense in the consolidated statements of
operations.
·
One individual received a warrant to purchase 10,933
shares of AbTech common stock with an exercise price of $3.75 per share as a finder's fee in conjunction with raising capital.
The warrants are exercisable at any time prior to April 7, 2015 and April 30, 2015, respectively. Compensation expense related
to this warrant of $7,821 was included in
Other income (expense)
in the consolidated statements of operations.
F-
21
All outstanding warrants issued by AbTech
are automatically converted in to warrants for ABHD common stock at a conversion rate of approximately 5.32 shares of ABHD for
each share of AbTech.
A summary of common stock warrants and
Series A Preferred Stock warrants outstanding at December 31 is as follows:
AbTech Warrants
ABHD Warrants
Number of
Warrants
Weighted-average Exercise Price
Number of
Warrants
Weighted-average Exercise Price
Outstanding at December 31, 2009
830,777
$
4.19
-
$
-
Granted
140,933
4.18
-
-
Exercised
-
-
-
-
Forfeited or expired
(20,000
)
3.75
-
-
Outstanding at December 31, 2010
951,710
4.20
-
-
Granted
-
-
4,196,666
.59
Exercised
-
-
-
-
Forfeited or expired
(621,000
)
4.25
-
-
Outstanding at December 31, 2011
330,710
$
4.10
4,196,666
$
.59
The 330,710 exercisable AbTech warrants
outstanding at December 31, 2011 expire at various dates through 2015 and have a weighted average remaining life of 2.5 years.
The 4,196,666 exercisable ABHD warrants
outstanding at December 31, 2011 expire at various dates through 2016 and have a weighted average remaining life of 4.5 years.
AbTech Series A Convertible Preferred
Stock
AbTech has designated 3,500,000 of its
5,000,000 authorized preferred shares as Series A Convertible Preferred Stock ("Series A Stock") and has 1,439,614
of such shares issued and outstanding at December 31, 2011. These shares represent the non-controlling interest in the Company's
subsidiary as shown on the Consolidated Balance Sheets and Consolidated Statements of Operations. Series A Stock has a par value
of $0.01 and no liquidation or dividend preferences.
The holders of Series A Stock may at any
time elect to convert any or all such shares into common shares of the Company at a conversion rate initially set at one share
of common stock for each share of Series A Stock, subject to certain anti-dilution adjustments that protect Series A Stockholders
if the Company issues new shares at less than $3.75 per share. The Series A Stock will automatically convert into common shares
upon either (a) the closing of a firm underwritten public offering, (b) subsequent listing on the New York Stock Exchange or the
NASDAQ Global Market, or (c) upon the sale or transfer of substantially all the assets or the consolidation or merger with an entity
solely for cash or solely for cash and securities listed on the New York Stock Exchange or the NASDAQ Global Market.
While Series A Stockholders have no
voting rights as ABHD stockholders, they do have specific rights pertaining to the governance of AbTech, ABHD's
subsidiary. As long as Series A Stockholders hold, on a converted basis, at least 8% of the Common Stock of the Company, they
will be granted a pre-emptive right to maintain their respective ownership percentages, as determined on a fully-diluted
basis, in subsequent sales of Common Stock or Common Stock Equivalents conducted by the Company. Series A Stockholders have a
right to designate up to three Directors to the Board of Directors (Series A Directors) and the Series A Directors are
entitled to choose at least one member of the Audit Committee and one Member of the Compensation Committee. Corporate
governance provisions were also modified to require various levels of supermajority approval by the Board for specific, major
actions taken by the Company. For some actions, approval of 2/3
rds
of the Series A Directors is required.
F-
22
Common shares reserved for future
issuance
As of December 31, 2011, ABHD common shares
reserved for future issuance were as follows (all shares are stated in ABHD share equivalent):
Conversion of convertible AbTech preferred stock
7,664,193
Shares issuable upon conversion of debt
9,972,309
Stock options outstanding
8,073,458
Warrants to purchase common stock
5,957,294
31,667,254
NOTE 12 – REVERSE ACQUISITION TRANSACTION
On February 10, 2011, ABHD closed a reverse
acquisition transaction (the "Merger") with its wholly-owned subsidiary, Abtech Merger Sub, Inc., and AbTech pursuant
to an Agreement and Plan of Merger dated July 17, 2010. As a result of the Merger, ABHD acquired all of the issued and outstanding
common stock of AbTech in exchange for the common stockholders of AbTech (including Series A preferred stockholders and holders
of convertible debt with rights to convert their holdings into shares of AbTech common stock) acquiring an approximate 78% ownership
interest in ABHD. In addition, AbTech became the "Surviving Corporation" a majority-owned subsidiary of ABHD, and ABHD
acquired the business and operations of AbTech.
·
Issuance of Common Stock –
At the closing
of the Merger, ABHD issued 32,009,801 shares of its common stock to the stockholders of AbTech in exchange for 100% of the issued
and outstanding common stock of AbTech. Immediately prior to the Merger, ABHD had 10,000,000 shares of common stock issued and
outstanding, excluding the shares issued as part of a $3 million funding required by the Merger Agreement. $1,645,000 of the $3
million funding was received by ABHD prior to closing ($150,000 of the $1,645,000 was received after December 31, 2010). The financier
issued a promissory note (the "Note") to ABHD for the $1,355,000 balance of the financing commitment which was to
be funded in cash after the Merger closing. The Note was secured by a total of 1,145,000 shares of ABHD common stock pledged by
the financier (the "Collateral"). ABHD elected to hold the Note as a funding commitment only and did not record the
Note or issue any shares in exchange for the Note. Subsequent to the date of the merger ABHD received $675,000 of the remaining
$1,355,000 due on the Note. Of the 675,000 common shares due to investors for these payments, the Company issued 500,000 shares
and held the remaining 175,000 shares as additional collateral for the Note. In May of 2011, the financier defaulted on the $680,000
balance due on the Note, released 509,300 shares of the Collateral and relinquished its rights to the 175,000 shares of additional
collateral held by the Company.
·
Conversion of AbTech's Preferred Stock
– At the effectiveness of the Merger, 1,439,614 shares of Series A Preferred Stock ("Preferred Stock") of AbTech
outstanding immediately prior to the Merger were converted into 1,439,614 shares of preferred stock of Surviving Corporation (i.e.
AbTech, post-Merger). The privileges, rights, and preferences of the Preferred Stock were not affected or altered by such conversion.
Accordingly, the Preferred Stock may be converted at any time into common shares of AbTech as the Surviving Corporation and subsequently
such common shares of the Surviving Corporation will be exchanged for shares of the common stock of ABHD at the same exchange
rate in effect for common shares of AbTech at the date of the Merger (the "Merger Consideration"). The preferred stockholders
that elected to not convert and exchange their shares for ABHD common shares, represent the non-controlling interest shown on
the Consolidated Balance Sheet as of December 31, 2011. Because the consolidated balance sheet as of December 31, 2010 has been
restated to give retroactive effect to the Merger, the common stock shown as of December 31, 2010 includes the par value ($.001
per share) of the 10,000,000 shares of ABHD stock outstanding at the time of the merger plus all shares of AbTech common and preferred
stock outstanding as of the December 31, 2010, as if converted into ABHD common shares at the Merger exchange rate. Because some
of the preferred stockholders of AbTech elected to not convert their shares to ABHD common stock at the time of the Merger, the
consolidated balance sheet as of December 31, 2011 shows a decrease in the amount of common stock outstanding.
F-
23
·
Conversion of AbTech's Warrants –
At the effectiveness of the Merger, 480,266 warrants to purchase AbTech common stock outstanding immediately prior to the
Merger were converted into warrants to purchase 2,557,153 shares of common stock of ABHD. At the effective time of the Merger,
471,444 warrants to purchase AbTech Preferred Stock outstanding immediately prior to the Merger were converted into warrants to
purchase 471,444 shares of preferred stock of the AbTech as the Surviving Corporation. The aggregate exercise price and other
terms of such warrants were not affected or altered by such conversion and, upon exercise of any such warrants, the shares of
preferred stock received upon such exercise would be convertible at any time for common shares of AbTech, whereupon such common
shares would be exchanged for the Merger Consideration.
·
Conversion of AbTech's Options –
At the effectiveness of the Merger, options to purchase 992,000 shares of AbTech common stock outstanding immediately prior to
the Merger were converted into options to purchase 5,281,855 shares of common stock of ABHD. The aggregate exercise price and
other terms of such options were not affected or altered by such conversion.
·
Conversion of AbTech's Convertible Debt
– As of the closing of the Merger, $3,980,666 of outstanding notes of the Company that were convertible into Preferred Stock
of AbTech prior to the Merger were retained by the holders and $1,347,372 of such notes were converted into 1,919,315 shares of
common stock of ABHD.
NOTE 13 – DEBT REPAYMENT
In March 2011, the Company initiated an
offering to raise funds to repay approximately $1,960,000 of existing debt obligations of AbTech that were then due or would become
due during 2011 (the "Targeted Notes"). Investors in the offering ("New Investors") were given the option
to either purchase a portion of the Targeted Notes and convert it immediately to ABHD common stock, or buy new convertible notes
from ABHD (the "New Notes") that would convert to ABHD common stock. The intended objective was to complete the transactions
with the same net effect as if all the Targeted Notes were converted by their terms to ABHD common stock. Accordingly, the conversion
rate given New Investors for conversion of either the purchased Targeted Notes or the New Notes was a blended rate of approximately
$0.57 per share. The Company received $747,100 from New Investors interested in purchasing Targeted Notes. These funds were forwarded
to the Targeted Note Holders to purchase the Targeted Notes. The New Investors subsequently converted the purchased Targeted Notes
to 1,320,454 shares of ABHD common stock.
In addition, during the nine months ended
September 30, 2011, the Company received $975,000 from New Investors interested in buying New Notes. From these proceeds the Company
repaid approximately $604,100 of outstanding debt and used the balance of the funds for operating capital. The New Notes were all
automatically converted to shares of ABHD common stock resulting in the issuance of 1,723,255 shares of common stock by the Company.
Due to the beneficial conversion feature
implied in these transactions, at the time of each investment by a New Investor the applicable Targeted Notes or New Notes were
discounted by the lesser of: (i) the intrinsic value of the beneficial conversion feature, or (ii) the proceeds realized from the
New Investor. These discounts aggregated $1,620,955 and were charged to additional paid in capital and interest expense. The Targeted
Notes that were purchased by New Investors and the New Notes issued to New Investors were converted by the New Investors into shares
of ABHD common stock during the second quarter of 2011 and upon such conversion the discounts were charged to income as interest
expense.
F-
24
NOTE 14 – PRIVATE PLACEMENTS
Private Placement in July 2011
In July
2011, the Company sold $700,000 of Convertible Promissory Notes (the "July Offering"). The Convertible
Promissory Notes (the "Notes") bear interest at a rate of twelve percent (12%) per annum from the closing date through
April 30, 2012; fifteen percent (15%) per annum from May 1, 2012 through July 31, 2012 and eighteen percent (18%) per annum for
any period after July 30, 2012 that the Note remains outstanding. All interest accrued on the Notes will be due and payable at
maturity. Any Notes outstanding on November 1, 2012 will be redeemed in cash equal to the face amount plus any unpaid accrued interest
thereon. In the event of a Qualified Financing by the Company, as defined below, each subscriber in the Offering will have the
option to (i) convert their Note into the securities purchased by investors in a Qualified Financing at a 20% discount to the price
paid by investors in the Qualified Financing; or (ii) tender their Note to the Company for immediate repayment of principal and
accrued and unpaid interest. A "Qualified Financing" is defined as the sale for cash by the Company of debt or equity
securities generating aggregate gross proceeds of at least US $5,000,000 (including the proceeds from any converting Notes). In
the event that the Company does not close a Qualified Financing on or prior to November 1, 2012, the Note holder shall have the
option to convert the Note into shares of Company common stock at a conversion price equal to $0.60 per share (the "Conversion
Price"). The Company may, at any time on ten business days' notice, repurchase any or all outstanding Notes in cash
for the face amount of such Notes, plus any unpaid, accrued interest thereon. Upon such notice from the Company, Note holders will
have 5 days to either convert the Notes in accordance with their terms or accept the cash repurchase price from the Company.
Each subscriber in the July Offering also
received a warrant for the purchase of the number of shares of the Company's common stock equal to forty percent (40%) of
the amount invested divided by the Conversion Price. In the event a Note remains outstanding as of April 30, 2012, the Note holder
will receive an additional warrant for 10% of the principal amount of the Note outstanding at that date divided by the Conversion
Price. In the event the Note remains outstanding as of July 31, 2012, the Note holder will receive an additional warrant for 10%
of the principal amount of the Note outstanding at that date divided by the Conversion Price. The warrants will have an exercise
price equal to the Conversion Price and a five year term.
Private Placement in September 2011
From
September 19 through December 31, 2011, the Company sold $4,000,000 of Secured Convertible Promissory Notes (the "September
Offering").
The Secured Convertible Promissory Notes (the
"Secured Notes") bear interest at a rate of twelve percent (12%) per annum and are due and payable in full on the
nine (9) month anniversary of issuance (the "Original Maturity Date"). The Company may extend the maturity date by
an additional ninety (90) day period (the "First Extension Option"), during which period the interest rate will increase
to fifteen percent (15%) per annum on the unpaid principal of the Secured Note. The Company may also extend the maturity date
by a second additional 90 day period (the "Second Extension Option") during which period the interest rate shall increase
to eighteen percent (18%) per annum on the unpaid principal of the Secured Note. All interest accrued on the Secured Notes through
the Original Maturity Date will be payable by the Company on the Original Maturity Date in cash or in-kind, at the option of the
payee. For all periods after the Original Maturity Date, all accrued interest will be payable quarterly in cash by the Company.
The Secured Notes may be converted into shares of common stock of the Company at any time prior to a Qualified Financing at the
conversion rate of $0.70 per share (the "Conversion Price"). However, if the Company at any time while a Secured Note
is outstanding, issues any debt or equity securities (with certain exceptions) entitling investors to subscribe for, purchase,
or convert such securities into shares of Company common stock at a price per share less than the Conversion Price (the "New
Securities Issuance Price") then the Conversion Price for such outstanding Secured Notes shall be reduced effective concurrently
with such issuance to the New Securities Issuance Price.
F-
25
In the event of a Qualified Financing by
the Company, as defined above, each subscriber in the September Offering will have the option to (i) convert their Secured Note
into the securities purchased by investors in a Qualified Financing at a 20% discount to the price paid by investors in the Qualified
Financing; or (ii) tender their Secured Note to the Company for immediate repayment of principal and accrued and unpaid interest.
The Secured Notes may be prepaid in whole or in part without the prior written consent of the payee at any time following not less
than ten (10) days prior written notice to the subscriber notifying the subscriber of the Company's decision to prepay the
Secured Notes.
The Secured Notes are secured by all of
the Company's right, title and interest in, to and under all personal property and other assets of the Company (the certain
exceptions to allow for potential financing arrangements for accounts receivable and inventory) pursuant to a Security Agreement
entered into by the Company.
Each subscriber in the September Offering
also received a warrant for the purchase of the number of shares of Company common stock equal to forty percent (40%) of the number
of shares of common stock into which the Secured Notes are convertible on the closing date of the Qualified Financing. In the event
a Secured Note remains outstanding beyond the Original Maturity Date, the Secured Note holder will receive an additional warrant
for 10% of the principal amount of the Secured Note outstanding at that date divided by the Conversion Price. The number of warrant
shares that the Payee will be entitled to under the terms of the warrant issued by the Company to subscribers in connection with
the September Offering shall be increased by ten percent (10%) for each Extension Option exercised by the Company. The warrants
will have an initial exercise price equal to the exercise price of the warrants purchased by investors in the Qualified Financing.
In the event the Holder elects to exercise the warrant prior to the consummation of a Qualified Financing, the number of shares
exercisable will be based on an assumed conversion price of $0.60 per share (the "Assumed Conversion Price") and the
exercise price will be $0.60 per share (the "Base Exercise Price"). However, in the event that the Company issues shares
of common stock or common stock equivalents (with certain exceptions) at any time after the issuance of the warrant and prior to
a Qualified Financing at a price per share less than the Base Exercise Price (the "New Securities Exercise Price")
then the Base Exercise Price and the Assumed Conversion Price shall each be reduced effective concurrently with such issuance to
the New Securities Exercise Price. Each warrant will be exercisable for a five (5) year period.
The Notes issued in connection with the
July Offering and the Secured Notes issued in connection with the September Offering have been discounted by the value of the detachable
warrants issued with the Notes and the Secured Notes. The value of the warrants was bifurcated from the value of the Notes and
shown separately as warrant liability because of certain down-round price protection features of the warrants. The warrant liability
value is revalued at each reporting period. The value of the warrants was estimated by applying the Black Scholes model and amounted
to $622,895. This corresponding note discount is amortized over the life of the Secured Notes using the effective interest method.
The amount of the discount amortized and charged to interest as of December 31, 2011 was $159,657. The estimated value of the warrants
upon grant is $741,028 and the estimated value of the warrant liability at December 31, 2011 is $498,976 (see Note 15 – FAIR
VALUE OF FINANCIAL INSTRUMENTS).
F-
26
The Company paid the Placement Agent engaged
in connection with the September Offering a cash placement fee equal to eight percent (8%) of the aggregate purchase price paid
by each investor. This fee amounted to $320,000 for the $4,000,000 received through December 31, 2011. The placement agent will
also receive a cash fee equal to four percent (4%) of all amounts received by the Company in connection with the exercise by investors
of any warrants received by investors in connection with the September Offering. In addition to the placement agent fee, the Company
will issue to the placement agent warrants to purchase a number of shares of the Company's common stock obtained by dividing
eight percent (8%) of the gross proceeds from the sale of securities by the conversion price of the Secured Notes (the "PA
Warrants"). The PA Warrants issued in connection with the September Offering will have an exercise price per share equal
to the conversion price of the Secured Notes. The PA Warrants will expire five years from the date of issuance and will be in the
same form as the securities sold in the September Offering, except that the PA Warrants will include a "net issuance"
cashless exercise feature. As of December 31, 2011, PA Warrants for 533,333 shares of common stock were due to the placement agent.
The value of these warrants was estimated by applying the Black Scholes model and amounted to $118,133, upon grant. The balance
was recorded as a deferred financing charge and its estimated fair value at December 31, 2011 is included in the warrant liability
at December 31, 2011.
NOTE 15 –FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments
consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, convertible notes payable, notes
payable and warrant liability. 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 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 are reported in
other income (expense) as gain (loss) on change in fair value. The Company estimates the fair value of level 3 inputs using the
Black-Scholes valuation model using historical volatility as the method to estimate expected volatility. At December 31, 2011,
the Company had no financial instruments outstanding that were estimated using level 1 or level 2 inputs. The Company's warrant
liability was estimated using Level 3 inputs as shown in the reconciliation table below for the year ended December 31, 2011.
Fair value measurements using significant unobservable inputs
(Level 3)
Description
Warrant Liability
Beginning balance, December 31, 2010
-
Purchases, issuance and settlements
$
741,028
Total (gains) or losses
(242,052
)
Transfers in or out of Level 3
-
Ending balance, December 31, 2011
$
498,976
The Company used the following assumptions
to estimate the fair value of the warrant liability at December 31, 2011:
Expected volatility
81.45%
Expected dividend yield
0%
Expected term
2.3-2.5 years
Risk-free interest rate
.83%
F-
27
The Company has determined that the Black-Scholes
model used to calculate the fair value of the warrant liability provides a reasonable estimate at such value considering the terms
of the warrants, and the unlikelihood of events occurring that would create valuation complexities requiring a more robust analysis
by valuation experts.
NOTE 16 – LITIGATION, CLAIMS AND ASSESSMENTS
The Company experiences routine litigation
in the normal course of its business. The Company is not aware of any pending or threatened litigation that would have a material
adverse effect on the Company's financial condition, results of operations or cash flows.
NOTE 17 – SUBSEQUENT EVENTS
In February, 2012, the Company sold an
additional $2,600,000 of Secured Notes and warrants in the final closing of the September Offering (see NOTE 14 – PRIVATE
PLACEMENTS), bringing the total amount raised in the September Offering to $6,600,000.
In February, 2012, two stockholders holding
a total of 206,667 shares of AbTech Industries Series A Preferred Stock elected to convert such shares into 1,321,908 shares of
ABHD common stock in accordance with the terms of the Merger Agreement (see Note 12 – REVERSE ACQUISITION TRANSACTION).
F-
28
ABTECH HOLDINGS, INC.
14,582,862 SHARES
COMMON STOCK
PROSPECTUS
APRIL __, 2012
59
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable
by Abtech Holdings, Inc. ("Abtech Holdings," "Abtech," "ABHD," the "Company," "we"
or "us") in connection with the offering described in the prospectus that is part of this registration statement. All
amounts, other than the SEC Registration Fee, are estimates. Although we will not receive any of the proceeds from the sale of
the shares of our common stock being registered in this registration statement, we agreed to bear the costs and expenses of the
registration of such shares.
SEC Registration Fee
$
1,253
Printing Fees and Expenses
$
3,000
Accounting Fees and Expenses
$
2,500
Legal Fees and Expenses
$
10,000
Total
$
16,753
Item 14. Indemnification of Directors and Officers
Under Nevada law, a corporation may include in its articles
of incorporation a provision that eliminates or limits the personal liability of a director to the corporation or its stockholders
for monetary damages for breach of fiduciary duties as a director, but no such provision may eliminate or limit the liability of
a director (a) for any breach of his or her fiduciary duty as a director, (b) for acts or omissions not in good faith or that involve
intentional misconduct, fraud or a knowing violation of law, (c) for conduct violating the Nevada General Corporation Law ("NGCL"),
or (d) for any transaction from which the director will personally receive a benefit in money, property or services to which the
director is not legally entitled.
Section 78.7502 of the Nevada Revised Statues ("NRS")
provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except
an action by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit or proceeding
if the person acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was
unlawful.
NRS Section 78.4502 also provides, in general, that a corporation
may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was
a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including
amounts paid in settlement and attorneys' fees actually and reasonably incurred by the person in connection with the defense or
settlement of the action or suit if the person acted in good faith and in a manner which he or she reasonably believed to be in
or not opposed to the best interests of the corporation; provided, however, that indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that
in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the
court deems proper.
60
Any indemnification pursuant to the above provisions may be
made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The determination must be made: (a) by the stockholders; (b) by the Board of
Directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding; (c) if a
majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent
legal counsel in a written opinion; or (d) if a quorum consisting of directors who were not parties to the action, suit or proceeding
cannot be obtained, by independent legal counsel in a written opinion
Our Articles of Incorporation and Bylaws provide, among other
things, that a director or officer of the corporation may be indemnified against expenses, liability, and loss (including attorneys'
fees inclusive of any appeal), judgments, fines and amounts paid in settlement reasonably incurred by such person in connection
with any claim, action, suit or proceeding, whether civil, criminal, or investigative, to the fullest extent permitted under the
NGCL, unless it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. Directors and officers of the corporation cannot be personally liable for damages for breach of fiduciary duty, except
(a) for acts of omissions involving intentional misconduct, fraud, or knowing violation of law, or (b) the payment of dividends
in violation of Section 78.300 of the NRS.
The Company is also party to an Indemnification Agreement by
and among the directors and officers (the "Indemnitees") and the Company dated as of February 10, 2011 (the "Indemnification
Agreement"). The Indemnification Agreement provides for the maintenance, at the Company's expense, of directors'
and officers' liability insurance, as well as provisions providing indemnification and advancement of expenses in connection
with certain proceedings to which the Indemnitee is a party or threatened to be a party by reason of the fact that the Indemnitee
is or was an agent of the Company.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act") may be provided for directors, officers, employees, agents
or persons controlling an issuer pursuant to the foregoing provisions, the opinion of the Securities and Exchange Commission (the
"SEC") is that such indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable.
In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of
any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being
offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
At the present time, there is no pending litigation or proceeding
involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are
not aware of any threatened litigation or proceeding, which may result in a claim for such indemnification.
61
Item 15. Recent Sales of Unregistered Securities
The Merger Transaction
On February 10, 2011, in connection
with the consummation of the merger transaction (the "Merger") with AbTech Industries, Inc., a Delaware corporation
("AbTech Industries") pursuant to an Agreement and Plan of Merger (the "Merger Agreement"), ABHD issued
32,009,801 shares of common stock to the stockholders of AbTech Industries in exchange for 100% of the common stock of AbTech Industries.
The issuance of the common stock to the stockholders of AbTech Industries pursuant to the Merger Agreement was exempt from
registration under the Securities Act pursuant to Section 4(2) and Regulation D thereof. We made this determination based on the
representations of the stockholders of AbTech Industries which included, in pertinent part, that such shareholders, as applicable,
were "accredited investors" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, and
that such stockholders were acquiring our common stock for investment purposes for their own accounts and not as nominee or agent,
and not with a view to the resale or distribution thereof, and that such stockholders understood that the shares of our common
stock may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.
Pursuant to the Merger Agreement, at the effectiveness of the Merger, 480,266 warrants to purchase common stock of AbTech Industries
immediately prior to the Merger were converted into warrants to purchase 2,557,153 shares of common stock of the Company; 471,444
warrants to purchase AbTech Industries Preferred Stock outstanding immediately prior to the merger were converted into warrants
to purchase 471,444 shares of preferred stock of AbTech Industries as the surviving corporation; and options to purchase 992,000
shares of common stock of AbTech Industries immediately prior to the Merger were converted into options to purchase 5,281,855 shares
of common stock of the Company.
For more information regarding the issuance, please refer to the information
provided under Items 1.01, 2.01 and 3.02 of the Company's Current Report on Form 8-K filed on February 14, 2011 (the "Super
8-K"), and the Company's Current Form on Form 8-K/A filed on March 1, 2011, amending the Super 8-K, both of which are
incorporated herein by reference.
Private Offering of Common Stock
As part of a $3 million funding required by the Merger Agreement,
$1,645,000 of the $3 million funding was received by ABHD prior to closing of the Merger, including $150,000 that was received
after December 31, 2010. A financier issued a promissory note to ABHD (the "Note") for the $1,355,000 balance of the
funding commitment which was to be funded by cash after the Merger closing. The Note was secured by a total of 1,145,000 shares
of ABHD common stock pledged by the financier (the "Collateral"). ABHD elected to hold the Note as a funding commitment
only and did not record the Note or issue any shares in exchange for the Note. Subsequent to the date of the Merger, ABHD received
$675,000 of the remaining $1,355,000 due on the Note. Of the 675,000 common shares due to investors for these payments, the Company
issued 500,000 shares and held the remaining 175,000 shares as additional collateral for the Note. In May of 2011, the financier
defaulted on the $680,000 balance due on the Note, released 509,300 shares of the Collateral and relinquished its rights to the
175,000 shares of additional collateral held by the Company. The issuance of the ABHD common stock to the investors was exempt
from registration under the Securities Act pursuant to Section 4(2), Regulation S and Regulation D thereof.
In March 2011, the Company initiated an offering to raise funds
to repay approximately $1,960,000 of existing debt obligations of AbTech Industries that were currently due or would become due
during 2011 (the "Targeted Notes"). Investors in the offering ("New Investors") were given the option to
either purchasing a portion of the Targeted Notes and converting it immediately to ABHD common stock, or buying new convertible
notes from ABHD (the "New Notes") that would convert to ABHD common stock. The intended objective was to complete the
transactions with the same net effect as if all the Targeted Notes were converted by their terms to ABHD common stock. Accordingly,
the conversion rate given New Investors for conversion of either the purchased Targeted Notes or the New Notes was a blended rate
of approximately $0.57 per share. As of June 30, 2011, the Company had received $747,100 from New Investors interested in purchasing
Targeted Notes. These funds were forwarded to the Targeted Note Holders to purchase the Targeted Notes. The New Investors subsequently
converted the purchased Targeted Notes to 1,320,454 shares of ABHD common stock. In addition, the Company received $975,000 from
New Investors interested in buying New Notes. From these proceeds the Company repaid approximately $604,100 of outstanding debt
and used the balance of the funds for operating capital. The New Notes were all automatically converted to shares of ABHD common
stock resulting in the issuance of 1,723,255 shares by the Company. The Company offered and sold the Targeted Notes and the New
Notes in reliance on Section 4(2) and Regulation D of the Securities Act.
62
Private Placement in July 2011
In July 2011, the Company sold $700,000 of Convertible Promissory
Notes (the "July Offering"). The Convertible Promissory Notes (the "Convertible Promissory Notes") bear
interest at a rate of twelve percent (12%) per annum from the closing date through April 30, 2012; fifteen percent (15%) per annum
from May 1, 2012 through July 31, 2012 and eighteen percent (18%) per annum for any period after July 30, 2012 that the Convertible
Promissory Note remains outstanding. All interest accrued on the Convertible Promissory Notes will be due and payable at maturity.
Any Convertible Promissory Notes outstanding on November 1, 2012 will be redeemed in cash equal to the face amount plus any unpaid
accrued interest thereon. In the event of a sale for cash by the Company of debt or equity securities generating aggregate gross
proceeds of at least $5,000,000 (including the proceeds from any converting Convertible Promissory Notes (a "Qualified Financing"),
each subscriber in the July Offering will have the option to (i) convert their Convertible Promissory Note into the securities
purchased by investors in a Qualified Financing at a 20% discount to the price paid by investors in the Qualified Financing; or
(ii) tender their Convertible Promissory Note to the Company for immediate repayment of principal and accrued and unpaid interest.
In the event that the Company does not close a Qualified Financing on or prior to November 1, 2012, the Convertible Promissory
Note holder shall have the option to convert the Convertible Promissory Note into shares of Company common stock at a conversion
price equal to $0.60 per share (the "Conversion Price"). The Company may, at any time on ten business days' notice,
repurchase any or all outstanding Convertible Promissory Notes in cash for the face amount of such Convertible Promissory Notes,
plus any unpaid, accrued interest thereon. Upon such notice from the Company, Convertible Promissory Note holders will have 5 days
to either convert the Convertible Promissory Notes in accordance with their terms or accept the cash repurchase price from the
Company.
Each subscriber in the July Offering also received a
warrant for the purchase of the number of shares of Company common stock equal to forty percent (40%) of the amount invested
divided by the Conversion Price. In the event a Convertible Promissory Note remains outstanding as of April 30, 2012, the
Convertible Promissory Note holder will receive an additional warrant for 10% of the principal amount of the Convertible
Promissory Note outstanding at that date divided by the Conversion Price. In the event the Convertible Promissory Note
remains outstanding as of July 31, 2012, the Convertible Promissory Note holder will receive an additional warrant for 10% of
the principal amount of the Convertible Promissory Note outstanding at that date divided by the Conversion Price. The
warrants will have an exercise price equal to the Conversion Price and a five year term.
There were no commissions or placement
agent fees paid in connection with the July Offering.
The Company offered and sold the Convertible Promissory Notes
and related warrants of the July Offering in reliance on Section 4(2) and Regulation D of the Securities Act to three investors,
each of which the Company believes to be an "accredited investor" as defined in Rule 501(a) of Regulation D.
63
Private Placement of Secured Convertible
Promissory Notes
In a private placement of Secured Convertible Promissory Notes
initiated by the Company in September 2011 (the "September Offering"), the Company sold $4,000,000 of Secured Convertible
Promissory Notes (the "Secured Notes") during 2011 and an additional $2,600,000 in a final closing of the offering
in February 2012. The Secured Notes bear interest at a rate of twelve percent (12%) per annum and are due and payable in full on
the nine (9) month anniversary of issuance (the "Original Maturity Date"). The Company may extend the maturity date
by an additional ninety (90) day period, during which period the interest rate will increase to fifteen percent (15%) per annum
on the unpaid principal of the Secured Note. The Company may also extend the maturity date by a second additional 90 day period
during which period the interest rate shall increase to eighteen percent (18%) per annum on the unpaid principal of the Secured
Note. All interest accrued on the Secured Notes through the Original Maturity Date will be payable by the Company on the Original
Maturity Date in cash or in-kind, at the option of the payee. For all periods after the Original Maturity Date, all accrued interest
will be payable quarterly in cash by the Company. The Secured Notes may be converted into shares of common stock of the Company
at any time prior to a Qualified Financing at the conversion rate of $0.70 per share (the "Secured Note Conversion Price").
However, if the Company at any time while a Secured Note is outstanding, issues any debt or equity securities (with certain exceptions)
entitling investors to subscribe for, purchase, or convert such securities into shares of Company common stock at a price per share
less than the Secured Note Conversion Price (the "New Securities Issuance Price") then the Secured Note Conversion
Price for such outstanding Secured Notes shall be reduced effective concurrently with such issuance to the New Securities Issuance
Price.
In the event of a Qualified Financing by the Company, each subscriber
in the September Offering will have the option to (i) convert their Secured Note into the securities purchased by investors in
a Qualified Financing at a 20% discount to the price paid by investors in the Qualified Financing; or (ii) tender their Secured
Note to the Company for immediate repayment of principal and accrued and unpaid interest. The Secured Notes may be prepaid in whole
or in part without the prior written consent of the payee at any time following not less than ten (10) days prior written notice
to the subscriber notifying the subscriber of the Company's decision to prepay the Secured Notes.
The Secured Notes are secured by all of the Company's
right, title and interest in, to and under all personal property and other assets of the Company (the certain exceptions to allow
for potential financing arrangements for accounts receivable and inventory) pursuant to a Security Agreement entered into by the
Company.
Each subscriber in the September Offering also received a warrant
for the purchase of the number of shares of Company common stock equal to forty percent (40%) of the number of shares of common
stock into which the Secured Notes are convertible on the closing date of the Qualified Financing. In the event a Secured Note
remains outstanding beyond the Original Maturity Date, the Secured Note holder will receive an additional warrant for 10% of the
principal amount of the Secured Note outstanding at that date divided by the Secured Note Conversion Price. The number of warrant
shares that the Payee will be entitled to under the terms of the warrant issued by the Company to subscribers in connection with
the September Offering shall be increased by ten percent (10%) for each Extension Option exercised by the Company. The warrants
will have an initial exercise price equal to the exercise price of the warrants purchased by investors in the Qualified Financing.
In the event the Holder elects to exercise the warrant prior to the consummation of a Qualified Financing, the number of shares
exercisable will be based on an assumed conversion price of $0.60 per share (the "Assumed Conversion Price") and the
exercise price will be $0.60 per share (the "Base Exercise Price"). However, in the event that the Company issues shares
of common stock or common stock equivalents (with certain exceptions) at any time after the issuance of the warrant and prior to
a Qualified Financing at a price per share less than the Base Exercise Price (the "New Securities Exercise Price")
then the Base Exercise Price and the Assumed Conversion Price shall each be reduced effective concurrently with such issuance to
the New Securities Exercise Price. Each warrant will be exercisable for a five (5) year period.
64
The Company paid the placement agent engaged in connection with
the September Offering a cash placement fee equal to eight percent (8%) of the aggregate purchase price paid by each investor.
This fee amounted to $528,000 for the $6,600,000 received in the offering. The placement agent will also receive a cash fee equal
to four percent (4%) of all amounts received by the Company in connection with the exercise by investors of any warrants received
by investors in connection with the September Offering. In addition to the placement agent fee, the Company will issue to the placement
agent warrants to purchase a number of shares of the Company's common stock obtained by dividing eight percent (8%) of the
gross proceeds from the sale of securities by the conversion price of the Secured Notes (the "PA Warrants"). The PA
Warrants issued in connection with the September Offering will have an exercise price per share equal to the conversion price of
the Secured Notes. The PA Warrants will expire five years from the date of issuance and will be in the same form as the securities
sold in the September Offering, except that the PA Warrants will include a "net issuance" cashless exercise feature.
PA Warrants for 754,286 shares of common stock were issued to the placement agent.
The Company offered and sold the Secured
Notes and related warrants of the September Offering in reliance on Section 4(2) and Regulation D of the Securities Act to eleven
investors, each of which the Company believes to be an "accredited investor" as defined in Rule 501(a) of Regulation
D.
Item 16. Exhibits and Financial Statement Schedules
The information required by this item is set forth on the Exhibit
Index that follows the signature page of this registration statement.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii)
to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and
(iii)
to include any material information with respect to
the plan of distribution not previously disclosed in the registration statement or any material change to such information in
the registration statement.
(2)
That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3)
To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the termination of the offering.
65
(4)
That, for the purpose of determining liability under
the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance
on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.
Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part
of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or prospectus that was part of the registration statement or made in
any such document immediately prior to such date of first use.
(5)
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
66
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, we have duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Scottsdale, on the 13
th
day of April, 2012.
ABTECH HOLDINGS, INC.
By:
/s/ Glenn R. Rink
Glenn R. Rink
Chief Executive Officer,
President and Director
POWER OF ATTORNEY
Know all men by these
presents, that each person whose signature appears below constitutes and appoints jointly and severally, Glenn R. Rink and Lane
J. Castleton, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign a registration statement or registration statements
on Form S-1 and any and all amendments (including post-effective amendments) and supplements, with all exhibits thereto, and any
other documents in connection therewith, to be filed by Abtech Holdings, Inc. with the SEC for the purpose of registering under
the Securities Act of 1933, as amended, resales of shares of common stock, par value $0.001 per share, of the Company delivered
or to be delivered by the Company in connection with the Company's sale in a private offering of $6,600,000 of secured convertible
promissory notes with a detachable warrant, granting unto said attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming all which said attorneys-in-fact and agents, or
any of them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates
indicated.
Date:
April 13
, 2012
By:
/s/ Glenn R. Rink
Glenn R. Rink
Chief Executive Officer,
President and Director
Date:
April 13
, 2012
By:
/s/ Lane J. Castleton
Lane J. Castleton
Chief Accounting Officer, Chief Financial Officer,
Vice President and Treasurer
Date:
April 13
, 2012
By:
/s/ Olivia H. Farr
Olivia H. Farr, Director and Corporate
    Secretary
67
Date:
April 13
, 2012
By:
/s/ David Greenwald
David Greenwald, Director
Date:
April 13
, 2012
By:
/s/ A. Judson Hill
A. Judson Hill, Director
Date:
April 13
, 2012
By:
/s/ Jonathan Thatcher
Jonathan Thatcher, Director
Date:
April 13
, 2012
By:
/s/ Karl Seitz
Karl Seitz, Director
Date:
April 13
, 2012
By:
/s/ F. Daniel Gabel
F. Daniel Gabel, Director
68
EXHIBIT INDEX
2.1
Agreement and Plan of Merger, dated July 17, 2010, by and among the Registrant, Abtech Merger Sub, Inc., and AbTech Industries, Inc. (incorporated by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on July 22, 2010)
2.2
Amendment No. 1 to Agreement and Plan of Merger, dated September 17, 2010, by and among the Registrant, Abtech Merger Sub, Inc., and AbTech Industries, Inc. (incorporated by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on September 22, 2010).
3.1
Certificate of Incorporation (incorporated by reference to the Registrant's Registration Statement on Form SB-2 filed on July 27, 2007, Registration No. 333-144923)
3.2
Articles of Incorporation (incorporated by reference to the Registrant's Registration Statement on Form SB-2 filed on July 27, 2007, Registration No. 333-144923)
3.3
Bylaws (incorporated by reference to the Registrant's Registration Statement on Form SB-2 filed on July 27, 2007, Registration No. 333-144923)
3.4
Amendment to Articles of Incorporation (incorporated by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on June 16, 2010)
4
Stock Specimen (incorporated by reference to the Registrant's Registration Statement on Form SB-2 filed on July 27, 2007, Registration No. 333-144923)
5.1**
Opinion of Squire Sanders (US) LLP
10.1
Transfer Agent Agreement (change of transfer agent effective February 12, 2012) (filed as Exhibit 10.1 to our Annual Report on Form 10-K filed on March 30, 2012 and incorporated herein by reference)
10.2
Employment Agreement dated May 13, 2009, by and between Glenn R. Rink and AbTech Industries, Inc. (filed as Exhibit 10.2 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)
10.3
Employment Agreement dated May 13, 2009, by and between Lane J. Castleton and AbTech Industries, Inc. (filed as Exhibit 10.3 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)
10.4
Form of Indemnification Agreement between Abtech Holdings, Inc. and each member of its Board of Directors.  (filed as Exhibit 10.4 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)
10.5
Independent Contractor Agreement dated May 1, 2010, by and between Gordon Brown and AbTech Industries, Inc.  (filed as Exhibit 10.5 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)
10.6
AbTech Industries, Inc. 2007 Stock Plan  (filed as Exhibit 10.6 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)
69
10.7
Form of AbTech Industries, Inc. 2007 Incentive Stock Option Agreement   (filed as Exhibit 10.7 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)
10.8
Form of AbTech Industries, Inc. 2007 Non-qualified Stock Option Agreement  (filed as Exhibit 10.8 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)
10.9
Form of AbTech Industries, Inc. Warrant Agreement   (filed as Exhibit 10.9 to our current report on Form 8-K filed on February 14, 2011 and incorporated herein by reference)
21.1
List of Subsidiaries
(filed as Exhibit 21 to our Annual Report on Form 10-K filed on March 30, 2012 and incorporated herein by reference)
23.1**
Consent of Squire Sanders (US) LLP (Included in Exhibit 5.1)
23.2*
Consent of Semple, Marchal & Cooper, LLP
24.1*
Power of Attorney (Included on the Signature Page of this Registration Statement on Form S-1)
* Filed herewith.
** To be filed subsequent to the date hereof by amendment.
70