HII Technologies, Inc. (fka HIITQ)

[windough-shopper]

HII Technologies Top and Bottom Line Growth Continues, Uplisting Imminent





Highlights
•$50 million current revenue run rate
•Year-over-year revenue growth of 142% to $35.3 million (inclusive of Hamilton for the fiscal year 2014)
•Recent SkyTides Q&A with CEO confirms uplisting talk is not just smoke
•SkyTides confirms both NASDAQ and NYSE listing requirements can be met if HIIT completes a reverse stock split
•SkyTides updated target price: $0.91






SkyTides is an independent party to the company discussed herein. Please see our disclaimer below.



On February 14, 2015, SkyTides completed a short question and answer session with Matthew Fleming, the Chief Executive Officer of HII Technologies, Inc. (HIIT). The questions were developed entirely by SkyTides. The answers were provided by email from Mr. Flemming on February 14, 2015. SkyTides has not modified Mr. Flemming's comments in any way. The Q&A session is detailed below.



Q: I have attached an analysis a team member of mine produced that tests whether you qualify for an uplisting to the NYSE MKT (formerly the Amex). I have not reviewed this yet myself but it is likely accurate. However, I would appreciate your review. Please let me know if you believe any of this data is incorrect. We do not want to produce any misinformation to the public. The link to find this specific criteria is at https://usequities.nyx.com/listings/list-with-nyse/nyse-mkt-listing-standards.



A. We have reviewed these listing requirements. Only the NYSE could tell you whether they are current and accurate but they appear to be the same standards we were sent by Bruce Poignant some time ago. Note, Bruce recently left the NYSE and another person is the current primary contact for new listings.



Q. As you can see in the PDF we believe you already qualify for a listing on the NYSE MKT under standards 2 and 3. As a result of your raise a few months back you likely qualify even easier than you did back as of June 30. Aside from filing the application and working with the NYSE MKT to answer any questions, your only significant obstacle would be to complete a reverse stock split or you could attempt to wait for the stock to reach $2/share. My question is do you have any obstacles internally (such as control, voting, legal issues) that would delay an approval for a stock split if you attempted to go down that road?



A. The requirements needed to perform a reverse stock split would be our Board's approval and a stockholder vote via a special meeting/proxy process. Other than those practical matters, there are no obstacles that we are aware of at this time.



Q. Can you envision any reason where the drawbacks to a listing on the NYSE MKT would outweigh the benefits? If so what drawbacks do you envision?



A. The company’s current position is that any value currently given to its common stock on the other the counter market should be worth more as a listed security. As of yet, we have not made any decision on a reverse stock split but may soon. To your question we can not see any particular draw backs to having our firm's common stock traded on a listed exchange, subject to exchange approvals, potentially a stockholder’s meeting for a reserve approval and the items listed above.



Q. Do you envision any other acquisitions in the coming 6 months?



A. Per our last earnings call, the company sees as its growth strategies, first, organic growth and, secondarily, acquisitions. Therefore, we can envision other acquisitions as we grow including possibly within the next six months. However, there can be no assurances given for future acquisitions. Currently, many companies are for sale for little or no money down as they mostly share the objective to sell to a bundled service provider so that their one-service profile will make it.. Also, I would note the AES Water Solutions (Sept '12), AquaTex (Nov '13) and Hamilton (Aug '14) all have been great impactful additions to the company.



Q. Do you envision any scenario where your stockholder’s equity as of December 31, 2014 could be below $5 million once you complete your audit?



A. N/a. We believe from our pre-lim numbers published you can see that stockholders equity could be twice that. Rely only on audited numbers once published in our March 2015 Annual Report on Form 10-k please.




Summary:





Revenue Growth Continues, Current Annual Run Rate is $50 Million



On January 29, 2015, HIIT announced its preliminary financial results for the year ended December 31, 2014. Revenue for 2014 was approximately $35.3 million, compared to $14.6 million for 2013 - representing approximately 142% top line growth. Matthew Flemming, HIIT’s CEO also stated,



“The company exited 2014 with a $50 million revenue run rate.”



SkyTides Confirms Both NASDAQ and NYSE Listing Requirements can be met if Reverse Stock Split is Executed



The following is an analysis of each of the key criteria HIIT must meet in order to complete a listing on a NASDAQ or NYSE market. The criteria is specific to the listing standard of both the NASDAQ and NYSE that SkyTides believes HIIT can most easily qualify for.


Stockholders’ Equity. SkyTides notes stockholders’ equity was $12.8 million as of September 30, 2014 according to HIIT’s most recenty quarterly filing on Form 10-Q. SkyTides then confirmed with Mr. Flemming that HIIT’s stockholders’ equity would not fall below $5 million as of December 31, 2014.


Market Value of Publicly Held Shares Must be at least $15 Million. SkyTides notes HIIT’s SEC filings show there were approximately 55.2 million and 48.6 million shares outstanding as of November 12, 2014 and March 26, 2014. HIIT’s 2014 definitive proxy statement reported that management owned 18.51% of HIIT’s common stock. HIIT’s stock closed at $0.4221 as of February 26, 2015. Therefore, HIIT’s market capitalization was approximately $23.3 million on that date (i.e. 55.2 million X $0.4221). We note that management’s shareholdings in HIIT did not change significantly in 2014 and only 6.6 million shares were issued since March 26, 2014 – primarily for the acquisition of Hamilton Investment Group in August 2014. As a result, it is clear that the market value of publicly held shares of HIIT was at last $15 million as of February 26, 2015.


The Company Must Have at Least a 2-Year Operating History. SkyTides notes that the primary operating division of HIIT is AES Water Solutions. This entity was acquired by HIIT in September 2012. Therefore, HIIT and its primary operating division has at least a 2-year operating history.


Public Shareholders Must Own at Least 1 Million Shares. SkyTides notes that management only held 18.51%, or 9 million shares of HIIT, as of March 26, 2014. The public held the remaining 39.6 million shares. As a result, it is clear that the public held over 1 million shares as of February 12, 2015.


There Must be at Least 300 Shareholders if Listing on NASDAQ and 400 Shareholders if Listing on the NYSE. SkyTides notes that there were over 300 shareholders of HIIT common stock as of March 26, 2014 (383 is the actual figure reported on March 26, 2014) and it is highly likely HIIT can successfully show there were more than 400 shareholders of record as of February 12, 2015 or thereafter. It is commonly understood that the shareholders of record reported by transfer agents is generally understated due to the prevalence of shares held in “street name.” HIIT has not bought back any shares of common stock since that date. As a result it is clear that HIIT meets both the 300 and 400 shareholder requirement.


The Company Must be Sponsored by at Least 3 Market Makers. SkyTides has reviewed the “Level II” trading activity of HIIT on February 13, 2015 and noted there were 16 active market makers “on the bid” in HIIT’s stock on that date. SkyTides has noted HIIT has an active group of market makers throughout 2014. SkyTides believes HIIT will have no issues obtaining the support of 3 market makers needed in order to complete its NASDAQ or NYSE listing application.


The only listing criteria HIIT does not currently meet is the “bid price or closing price” standard. This $4 or $3 price can be achieved by HIIT upon the execution of a reverse stock split – a common transaction executed by public companies in order to comply with NASDAQ or NYSE listing rules.*



HIIT Will Uplist its Common Stock



As a result of the Q&A session we completed with Mr. Flemming and our understanding that HIIT has been discussing an uplisting for some time now, we believe an application to list HIIT’s shares on the NASDAQ or NYSE will be filed at some point in the next few months - or may have already been filed. We noted another company that had yet to complete its reverse stock split when it filed its application with the NASDAQ in early 2014. Transgenomic filed its application in January 2014 and was approved for listing in May 2014.



We note from our own experience that public companies do not always issue a press release or file a Form 8-K with the SEC to disclose that they have filed an application to list on the NASDAQ or NYSE. Some companies choose to do this and some do not. As a result, it is possible that investors will not hear from management about an uplisting of HIIT’s stock until and if management receives approval from either the NASDAQ or NYSE.



SkyTides Believes a NASDAQ or NYSE Listing Could Happen in March



We believe HIIT shares represent a tremendous buying opportunity as the uplisting timeline progresses. We expect an application for a NASDAQ or NYSE listing (a “Listing Application”) could be filed any day now, if it has not been filed already. We note that HIIT is under no obligation to disclose to the public that it filed a Listing Application and therefore may have already filed the Listing Application. HIIT noted in its recent press release that it would file its annual report on Form 10-K in March 2015. We believe the NASDAQ or NYSE would wait to approve of HIIT’s Listing Application until such time as the Form 10-K has been filed (in our experience this is somewhat customary when an annual report is due around the time an application is filed). Therefore, a NASDAQ or NYSE application could be approved as soon as the Form 10-K is filed, or approximately March 2015.



SkyTides Rates HIIT Shares a Strong Buy: Target Price $0.91



We noted in a previous article that the oil and gas industry has generally valued companies at rate of at least 1X sales and at times approximately 1.5X sales. HIIT has a $50 million current revenue run rate and has 55.2 million shares outstanding. We believe HIIT's market capitalization should be at least 1X sales. A $50 million market capitalization equates to a per share price of $0.91 (i.e. $50 million / 55.2 million shares). Ultimately, if and once HIIT is able to complete a listing on the NYSE or NASDAQ we expect HIIT's shares will trade closer to 1.5X sales, which equates to a per share price of $1.36.
- See more at: http://skytides.com/article/hii-technologies-top-and-bottom-line-growth-continues-uplisting-imminent#sthash.jRaEMUZ3.ktsmtYcA.dpuf