Ridgeline Energy Services Inc fka RLE

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Ridgeline (RLE.V) RGDEF-- To Our Valued Shareholders:

As you are aware, the stock has been under considerable pressure due to a number of rumors and speculation in the market. We’d like to take this opportunity to address some of our investors’ concerns that have come to light.

First, the business remains on track. We have a solid and sustainable balance sheet and our growth has never been better. The integration of Santa Fe Springs (“SFS”) and Carthage (formerly “CWT”) has exceeded our expectations. Combined revenues from SFS and Carthage have increased from $15 million to a $40 million annual run rate and are still increasing.

Given our strategy to acquire underperforming and distressed assets, it is not uncommon in the U.S. to encounter legal disputes among minority legacy shareholders of an entity being acquired. As it relates to CWT, the majority owners of the facility were sued by their minority shareholder, and Ridgeline was named in this action. Let me state clearly that Ridgeline has acted properly in its management and acquisition of CWT LP. We and our attorneys are confident that GEM’s lawsuit is frivolous and that their claims will be dismissed early in the litigation.

We are aware and concerned that the minority shareholder issued a misleading and inflammatory press release and opted to try their case in the press thus pressuring our stock price rather than relying on presenting the facts to a Judge, who has already expressed grave doubts about the merits of their case.

Ridgeline’s first goal will be to move for a dismissal of all claims. As this is an active legal matter, we are limited in what we may disclose. However, Ridgeline’s responses to the allegations in the lawsuit will become a matter of public record in due course, and we believe it will become clear to everyone that the actions that GEM took were improper, at best and that Ridgeline acted appropriately.

It is very important to point out that this litigation actually began in March of this year before Ridgeline was included as a party, when GEM attempted to persuade the New York State court to block the acquisition of CWT LP by Ridgeline. At that time, the Honorable Shirley Werner Kornreich presiding over the case denied GEM's attempts to block or delay the acquisition and expressed skepticism that GEM would succeed on its claims in the lawsuit because there was evidence that GEM itself had breached its agreements.1 Additionally, the Judge noted that GEM did not have clear and convincing evidence that would allow it to succeed in its case. All of the relief GEM sought was denied2.

Indeed, GEM failed to comply with its contractual obligations to provide funding to operate CWT properly. As a result of GEM’s failure to meet and breach of its funding obligations, CWT's business was severely constrained and put at substantial financial risk. The transaction that was ultimately completed with Ridgeline provided what is necessary for the business to operate while enabling Ridgeline to gain full control of CWT such that the significant synergies of the acquisition can be realized.

Let me reiterate that this legal matter will not become a distraction and we remain 100% focused on the continued growth of the business. The integration of CWT has gone extremely well, and we have once again demonstrated our ability to acquire an underperforming asset and dramatically improve both the revenue and cash flow. As we have discussed in the past, we have identified other similar assets and look forward to replicating this strategy across North America.

We are very pleased to announce the appointment of two new directors. These appointments were timely as we are transitioning from a Western Canadian, energy services company to a fully integrated, North American industrial water treatment and fuel production company. Given the rapid evolution of the business, we required additional skill sets and market expertise at our board level. We believe the credentials and backgrounds of the new board members speak for themselves. We fully appreciate the service of all our past and present board members, and will continue to expand the board in order to best serve the needs of our shareholders, while ensuring the highest standards of corporate governance.

I am fully confident in our business strategy, especially given our track record at Santa Fe Springs and Carthage, and the strong financial results we expect each of these acquisitions to generate. We remain as optimistic as ever about the growth prospects for the business and look forward to delivering tremendous value for our shareholders in the months and year ahead.

Sincerely,

Dennis Danzik, CEO
Ridgeline Energy Services
“[T]here’s very good evidence here that there was a breach of the subscription agreement [by GEM]” Source: May 13 Proceeding in New York Supreme Court, Page 19, lines 6-7
“I do not believe in this case, there’s clear and convincing evidence that the plaintiff Gem Holdco, LLC will succeed on its case.” Source: May 13 Proceeding in New York Supreme Court, Page 38, lines 15-17
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