October 9, 2012
Set forth below is a stockholder update letter being delivered to all stockholders of HII Technologies, Inc. (the “Company”). You are receiving this update because our records list you as a current stockholder of the Company. The Company has changed its product lines and business focus over the years (see Background Information at the end of the this letter) and accordingly, you may have originally acquired your shares under the Company’s previous names of Hemiwedge Industries, Inc. (February 2009-September 2011), Shumate Industries, Inc.(October 2005-February 2009) or Excalibur Industries, Inc. (April 2002- October 2005).
The Company is pleased to report its acquisition of Apache Energy Services, LLC, a Ft. Worth based frac water handling company, operating under the name of “AES”. This acquisition closed on September 27, 2012 and was publicly announced on September 28, 2012. The consideration for the acquisition was approximately $2.3 million, consisting of cash, stock and a seller note. Further details can be found in our Current Report on Form 8- K filed with the Securities and Exchange Commission at www.sec.gov.
This acquisition marks the first step in our previously announced acquisition strategy for oilfield service companies. AES provides water related services to exploration and production (“E&P”) energy companies including the necessary coordination, logistics and planning required therewith. Oil and gas wells that utilize hydraulic fracturing (or “fracing”’) require as much as a million gallons of water per well. AES’ management has been involved with water transfer services since fracing of horizontally drilled oil and gas reservoirs became an industry standard. AES provides a wide array of water transfer services to E&P companies ranging from drilling water wells, to digging water pits, to connecting temporary water pipe lines to water transfer from the pits to the drilling frac site. AES provides the materials and labor necessary to set up these temporary water transfer lines on a day rate basis to their customers. AES fills a necessary and critical role in the drilling process which we believe will be a profitable growing enterprise the Company. An October 5, 2012 Houston Chronicle article stated, “The Eagle Ford Shale oil fields located in south Texas should grow by another 20,000 frac’d oil wells over the next sixteen years.” We expect AES to be a player in such growth and take advantage of the Company’s $25+million tax loss-carryforward.
AES operates in several key areas of Texas and Oklahoma with plans to grow in adjacent states and its customers range from large E&P companies to well capitalized independent players. Strategically, the Company believes the enhancements to multi-stage frac technology in horizontal drilling will continue to increase the amount of water needed and related services to deliver the commodity to the well site. Additionally, HII Technologies has identified several recycling technologies that may be used in flow-back water returned to holding tanks and pits after frac jobs. Ultimately, the Company’s approach is to be prepared to offer the services its customer’s needs on a very competitive turn-key basis.
AES is currently having its financial statements audited by a PCAOB audit firm and the Company will file copies of such statements with the SEC when available anticipated within the next few weeks.
The Company is continuing to evaluate companies and opportunities in the oil field services industry, including a mobile power generation business for E&P companies. As with AES, there is a large market opportunity for turn-key service and product solutions to E&P companies in the field, including onsite mobile power.
You can find additional information about the Company on our website at www.HIITinc.com. Our website also contains links to our public filings and also includes information on our current service providers, including the transfer agent for questions about your common stock. We will post all major announcements as they occur on our website as well.
I look forward to a bright future, creating long term stockholder value and hope that you share our enthusiasm and confidence.
HII Technologies, Inc.
By way of background, the Company owned and operated several manufacturing companies in Oklahoma and Texas since late 2001 under the name of Excalibur Industries, Inc. The Company underwent a restructuring from the negative effects of terrorist attacks from September 11, 2001 and resulting business difficulties thereafter and shut down its Oklahoma operations thereafter. By 2005, the Company had concluded its restructuring and the stockholders approved a name change to Shumate Industries illustrating its focus on its oilfield machining and manufacturing business in Conroe, Texas known as Shumate Machine Works. By late 2007, the Company had developed and launched a proprietary industrial valve product line and sold Shumate Machine Works for approximately $6 million in October, 2008. In early 2009, the company renamed Hemiwedge Industries to illustrate its focus on its Hemiwedge valve product line. In May 2011, the company sold the valve product line and Hemiwedge trade mark for $7.625 million. Afterwards, the Company undertook a strategic review looking at ways the create stockholder valve given its debt free status, large tax loss carry-forward or NOL and remaining cash. The Board of Directors concluded this review and determined that the most appropriate course of action given all the factors in the marketplace and the company was to acquire and grow oilfield operations. The Company chose a focus in the growing market of Power and Water sectors of oilfield services. Providing mobile onsite power through generator rental to E&P companies and providing onsite temporary water transfer infrastructure for E&P companies who’s well sites are performing hydraulic fracturing (fracing) needing millions of gallons of water.