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$HIIT Private Placement mentioned in News Article
http://thedealnewsroom.tumblr.com/post/121269901417/why-skittish-pipe-financiers-are-closing-deals-at
BAS CEO Calls a Bottom? - buys stock
A little optimism to lighten up the board...
http://www.insidermonkey.com/blog/calling-a-bottom-basic-energy-services-insider-boosts-stake-356363/
8K-Annual-Mtg- All items voted Yes
See SEC filing for vote totals
- Mgmt approved for another year
- Reverse Split Approved
- Accounting Firm approved
My take on the 8k Slideshow
Windough,
* please verify all below per SEC filings
First things First - Liquidity
Slide 6 " Selected Data"
- a review of the full 10Q and S-1 from $3.05M offering would suggest that the company has limited unrestricted cash and cash flow options right now
Use of proceeds
3,050,000
( 213,500 ) fees to bank
( 1,972,425 ) applied to AP
( 757,575 ) added to restricted cash ( to pay bank pmts )
= $106,800
+ $1,100,000 unrestricted cash at 3/31
= 1.2 M cash
6.6 M of 9.8 M AR pledged to credit line
Equity of 4.5M supported by 4.7 M of goodwill
Bottom line - only sources of cash
- accelerate AR
- delay AP again
- sell power division
- raise more capital
** generate positive cash through earnings
- need to wait until Q2 reported to see what they have done
Slide 14 Clean Tech
This is a great slide - the key to branding the company is
- cost savings through on site recycling and evaporation of water
- environmentally better than trucking and wells
- total cradle to grave water management
Branding and focusing on this can generate the new business needed to become cash flow positive again
-- summary, liquidity appears to be enough to get through Q3 right now
- Q2 should report 45 days from 6/30= 8/15
... Just gonna have to wait until then to know more...
Just Listened to Call...
Looks like they are trying to stabilize operations a bit and clean up the balance sheet
At 40% of Sales, Sage Power could be sold for $1M with a $1.2M positive impact on cash flow
Converting the $4M of goodwill to a loss adds $1.5M to deferred tax asset (35% loss carry forward )
So, based on 3/31 balance sheet
Book value ( leaving goodwill off ) was 0
Add 2.7 Million capital raise
Add 1.0 Million from sale of Sage
Add 1.5 cash value of goodwill as loss
= 5.2 Million book value if sold as going concern
@ 10c a share + What is 40M revenue worth??
Stock going nowhere until Q2 released Aug 15 ( or later )
In my opinion, the stock is still worth 15-25c a share...
" an option with no expiration date..."
Stay tuned
$They will need to raise more money$
Fully diluted shares are about 70,000,000 with A & B shares
Most likely scenario is $4million Series C raise at .20 call
= 20,000,000 more shares
So any valuation should take this into consideration
Company Value / 90,000,000 shares
Given 40M sales ( price/sales) valuation
( all oil service small cap valued at .4-.6 P/S right now )
Mkt. price/. Price/
Cap. Share. Sales
----------------------------------
$5M. 5 cents .13 P/S
$10M 11 cents .25 P/S
$15M 17 cents .38 P/S
$20M 23 cents .50 P/S
In my opinion the stock is fairly
Valued between 0.15 - 0.25 given
You believe it remains a "going concern"
= not going into chapter 11 or 7 bankruptcy
Let's see what the call says .....
Performance Goals Needed to Right the Ship
Texas-Plains, this is what needs to happen
To stay on track with no further capital raised needed
Based on Q1 2015 Report, the Company needs;
quarterly revenues of $11,250,00
(Currently $8,503,232)
Gross Margin of 20%
(Currently 5%)
SG&A of $2,250,000
(Currently $2,414,558)
Q1 Revenues should be adjusted up 2/12 as two of twelve weeks of operations were shut down due to ice and snow. Adjusted Q1 Revenue is
8,503,232/.8665= $9,812,176
14% growth through year end gives $11,250,000
SG&A needs to be trimmed 7-8%
Margins are hurt by cost concessions by all vendors in the area by 10% or more, and the company entered into capital leases for 2 years ( beginning 6-30-14 ) anticipating 2x current volume. Most operators in the area are at 50% utilization.
Just some notes - check the 10Q yourselves
News will come at Annual Meeting June 22
At this point, the company is probably preparing for the Annual Shareholders Meeting two weeks from Monday. A complete update will come then and a press release afterwards. Probably not good to muddy the waters with news just before the annual meeting. There actually has been news - that they were able to raise 3.05M quickly and keep Heartland Bank happy for a few more quarters. There are really only a few possibilities for discussion at the meeting given the current situation and all will most likely disappoint / dilute current shareholders.
* these are just my opinion and best guess, but likely scenarios are
1) an additional Preferred C capital raise offered to B and A series holders so they can average down. Most likely they need $5M and will probably be at .15 - .20 option conversion. This would add 25M - 30M additional shares and dilute existing shareholders by 25% - 35%
2) Go private by acquiring 51% of the shares with a new round of C investors combined with current 5% holders and management. The Mkt Cap of the company is less than 10M and this group already has 42% of the stock. This would probably involve a reverse split and a tender offer after dilution. But this would probably be done at a much lower observed stock price based on trading .05 - .10 per share
3) sell the company to stronger hands, again a 5-10 M price would probably be all they could get right now
4) Chapter 11 or 7 Bankeuptcy. The book value of the company was negative at March 31 if you take out the $4 Million of "Goodwill" on the Balance Sheet. The capital raise added $3m cash and some relief might be possible on capital leases and selling assets but the mac book value is probably only about 3-5 million which is .05 - .10 per share undiluted and less if additional capital raised. Mr. Fleming managed the bankruptcy of Exalibur which was the predecessor of Hemiwedge Industries Inc HII and has had to do this before
5) Actually turn operations around by cutting costs significantly ( not taking salaries etc for a quarter or two ) - the company cannot lose another 1 million each quarter or they will be insolvent quickly without raising more capital per above or selling or seeking creditor protection
Conclusion - These are the honest discussions that will have to be had at the shareholders meeting in 2 weeks. Mr. Fleming has made a lot of money for a lot of investors who bought in at .04 and rode it up to 1.10- these folks may join in on a "reset" investment at .10 cents a share or maybe higher. Not good news for those who bought in from 1.10 down to .20 but in the long run - it can work out.
The company is so small that it would be easy for a group of "reset" investors to put $5-10 million into the company for a 51% ++ stake and use the existing pure play platform in fracwater management to grow and consolidate into a much larger company over the next 2 years. Current shareholders could be diluted 2:1 or even 3:1, but longer term it might work out well
+++ just some of my thoughts on this- we will see what happens at the meeting. This stock is not for the faint of heart.
HIIT trading less than Hamilton Water
I find it interesting that the current Mkt cap of HIIT 10.5M is less than the purchase price of Hamilton Water. Mr. & Mrs. Hamilton got $9M cash and 6.5M HIIT Shares. They could probably buy their company back and have cash to spare! I think that the company probably overpaid for Hamilton even at just $9M cash ( and no shares) at the "top" of the market. The Hamilton's certainly have enough cash to buy the whole company at 9M and they already own 10% of stock. The company would probably be sold as a last resort but the price would not be that great.
I think that the overpayment for Hamilton has contributed to the capital problems and expense to consolidate. It just came at the wrong time, but who could have predicted? Mgmt and 5% shareholders own almost 42% of the stock so they do have a vested interest in righting the ship. Need to cut expenses and raise revenue to break even ASAP on GAAP earnings.
U.S. Oil production has stabilized at 9m bpd even though rig count cut in half, so there is still 9m bpd of water needs to match supply. Just a question of whether the company is getting that business....
Form D filing - for 3.05M Series B
Form D is a required filing that follows up on the announcement of the sale of $3,050,000 in Series B preferred stock. The same form was filed last summer a week after the Series A offering. 14 investors bought into the offering with a minimum investment of $25,000. Roth Capital acted as broker and received a 230k commission. Roth helped them out last time.
The company originally filed to sell $5.7M if you check the original offer letter, so they sold 3.05/5.70 planned to sell so it was just over 50% subscribed, but they got it done quickly in time to report on the 10Q which shows management knows how to access the capital markets and work with creditors. They raised about 4.5m last summer in the Series A. It is good that they were able to raise the money and keeps Heatland Bank at bay for a few more quarters with respect to the debt covenants. The capital was raised to pay down AP and reserve restricted cash for the bank. It allows breathing room to improve operations over the next few quarters. In my opinion, not a bad days work given the extreme turn of events in the oil market since last June and the recent acquisition of Hamilton Water.
It is all spelled out in the historical SEC filings which are listed on the company website
RE: Fat Finger / Series A B Dilution
Fat fingers are "mistakes" in executing a trade. One of the prior posters showed a screenshot of a 75,000 share block traded at .02 presumably at "the market". The daily avg volume is usually less than 75,000 shares, so either the trader entered 75,000 instead of 7,500 or forgot to mark as limit... This would be a fat finger mistake ... Or the trader just does not understand thin markets - an experienced trader would set a limit and price breaks etc for a trade equal to daily volume.
Regarding Series A B dilution, the 10Q shows 2,890 $1,000 Face Series A convertible at $.70 and the Series B offering per 8k was 3,050 $1,000 face convertible at $.40, ( warrants require cash outlays at .50 for B and much higher for A ), so fully diluted share count would be approx
57,232,426 common
4,128,571 series A left
6,100,000 series B
67,470,997 fully diluted approx
At revenue per share of .50 fully diluted
(8,503,232 x 4)/67,470,997= .5041
Price/Sales is still between .40 - .60 range
( see previous post )
.25/.50= .49 ( $.25 per share price )
.20/.50= .40 ( $.20 per share price )
Article-Hotstocked.com - 'Fat Finger' trade on no news?
http://www.hotstocked.com/article/90252/hii-technologies-inc-otcmkts-hiit-suffers-a.html
Relative Valuation Revisited (Price/Sales) .42
Looks like after the "blip", the stock repriced at
At a Price/Sales of .42
Per 10Q1 2015
57,232,436 shares at bid of $0.25
($14,308,109) mkt cap
Divided by
Q1 Revenue of 8,503,232 x 4
($34,012,928)
= 0.42
As stated in prior post, many small cap
Oil service stocks trading at .40 to .60 P/S
- as always, read the 10Q and do your own homework
.... And remember to use Limit orders!!!!
Relative Valuation of HIIT based on Price/Sales
Methodology - Other small cap oil service companies are trading at a price to sales around .40 - .60 based on Q1 2015 revenues annualized at Friday closing share price. Ex) PES, PKD, KEG, BAS, GLF, NES. - larger companies such as NBR and CJES trading at .80 - 1.10
Assume HIIT year end 2015 revenues are $36M, $40M, $44M, with a price/sales valuation of .40, .50, .60
Assume share count per 10Q 2015 of 57,232,436
Valuation Matrix as follows;
P/S $36M. $40M. $44M 2015 sales
.40. $0.25. $0.28. $0.31 share price
.50. $0.31. $0.35. $0.38 share price
.60 $0.38. $0.42. $0.46 share price
- Note - this is just a rational basis for discussion
Use your own judgment on the proper Price/Sales
Ratio, estimated 2015 year end revenues, and
Estimate of fully diluted shares by year end. Liquidity
And debt should also be considered
The market just paid $2.7M for preferred shares
With a conversion at $0.40 with $1.7M in warrants
At $0.50 conversion
- All small oil service companies are trading at a fraction
Of sales. Earnings estimates are extremely difficult to
Estimate in the current environment
* check 10Q 2015 for further info on this stock
2015 Performance Goals Needed to Right the Ship
Based on Q1 2015 Report, the Company needs;
quarterly revenues of $11,250,00
(Currently $8,503,232)
Gross Margin of 20%
(Currently 5%)
SG&A of $2,250,000
(Currently $2,414,558)
Q1 Revenues should be adjusted up 2/12 as two of twelve weeks of operations were shut down due to ice and snow. Adjusted Q1 Revenue is
8,503,232/.8665= $9,812,176
14% growth through year end gives $11,250,000
SG&A needs to be trimmed 7-8%
Margins are hurt by cost concessions by all vendors in the area by 10% or more, and the company entered into capital leases for 2 years ( beginning 6-30-14 ) anticipating 2x current volume. Most operators in the area are at 50% utilization.
Just some notes - check the 10Q yourselves
FES trading at Price/Sales of .09! Q1-15
Look at Q1 results of comps BAS, KEG, PKD, SSE
all trading at P/S of .35 - .85
Benefits of Uplisting....
Look at two other similar companies in Oil Services of similar market cap.
Watch how they trade in comparison - they are listed and not subject to OTC BB brat pack ??
GRH 35M mkt cap
FES 35N mkt cap
10Q - 3/31 Rev $8.5 M GAAP EPS (0.06)
Q1 2015 Results in
8K2day - $2.7M raised - Bank Loan Modified
10Q should be out soon
Got my proxy in the mail today
Hope they reverse split 20:1 and uplist to get away from the OTC BB pink sheet bandits