☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to _________________

HII TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Issuer’s telephone number:  (713) 821-3157

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   

Yes   X       No ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                                                                                                   Yes   X   No ___

Indicate by check mark whether the registrant is a large 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.

Large accelerated filer [  ]

Accelerated filer [  ]

Non-accelerated filer [  ] (Do not check if a smaller reporting company)

Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  

Yes         No     X    

As of November 12, 2014, 55,192,110 shares of our common stock were outstanding.

1

HII TECHNOLOGIES, INC.

FORM 10-Q

September 30, 2014

TABLE OF CONTENTS

2

ITEM 1 –FINANCIAL INFORMATION

See accompanying notes to unaudited consolidated financial statements

A summary of the minimum lease payments for the above leases is shown below:

10

The summary below shows the activity related to all deferred financing fees related to the capital lease obligations as of September 30, 2014:

NOTE 5 – NOTES PAYABLE

On January 15, 2014, the Company, and its wholly owned subsidiary AES issued a promissory note in the amount of $370,000. The note is due on July 15, 2014 and bears annual interest of 10%.  The note was issued as consideration to fund a technology licensing fee (see Note 3). This note and all associated accrued interest was paid in full on July 8, 2014.

On February 17, 2014, the Company issued a promissory note in the amount of $130,000. The note is due on July 15, 2014 and bears annual interest of 10%.  The proceeds were used for working capital and general corporate purposes. This note and all associated accrued interest were paid in full on July 8, 2014.

On February 27, 2014, the Company’s wholly-owned subsidiary KMHVC (dba “STP) entered into a promissory note with a third-party equipment seller for the purchase of equipment.  KMHVC financed $117,120 of the purchase price and agreed to pay an additional $5,459 in finance charges (equal to 8.5% of the amount financed) for a total amount due under the promissory note of $122,579. The promissory note is secured by the equipment purchased. The promissory note is payable in 12 equal monthly installments of $10,215 with the first payment due on March 27, 2014 and the last payment due on February 27, 2015.  

On April 18, 2014, the Company’s wholly-owned subsidiary KMHVC entered into a promissory note with a third-party equipment seller for the purchase of equipment.  KMHVC financed $63,006 of the purchase price and agreed to pay an additional $2,935 in finance charges (equal to 8.5% of the amount financed) for a total amount due under the promissory note of $65,941.  The promissory note is secured by the equipment purchased   The promissory note is payable in 12 equal monthly installments of $5,495 with the first payment due on May 18, 2014 and the last payment due on April 18, 2015.  

On April 22, 2014, the Company’s wholly-owned subsidiary AES Water Solutions entered into a promissory note with Texas Mutual Insurance Company for workers’ compensation insurance premiums. AES Water Solutions financed the full amount of the premiums of $88,900, bearing an annual interest rate of 17% and agreed to pay an additional $3,853 in finance charges for a total amount due under the promissory note of $92,483. The promissory note is unsecured and is payable in 6 equal monthly installments of $15,342 with the first payment due on May 1, 2014 and the last payment due on October 1, 2014. This note and all associated accrued interest was paid in full on October 1, 2014.

On April 30, 2014, the Company issued 276,599 common shares with a market value of $149,366 to three related party note holders as partial consideration for notes payable and accrued interest outstanding of $138,303. A loss on conversion of debt of $11,063 resulting from the transactions was recorded at April 30, 2014.

On May 19, 2014, the Company’s wholly-owned subsidiary KMHVC entered into a promissory note with a third-party equipment seller for the purchase of equipment.  KMHVC financed $48,906 of the purchase price and agreed to pay an additional $2,278 in finance charges (equal to 8.5% of the amount financed) for a total amount due under the promissory note of $51,184.  The promissory note is secured by the equipment purchased. The promissory note is payable in 12 equal monthly installments of $4,265 with the first payment due on June 19, 2014 and the last payment due on May 19, 2015.  

Heartland Bank Credit Facility

On August 12, 2014, the Company and its wholly-owned subsidiaries (collectively, the “Borrower”) entered a senior secured credit facility (the “Facility”) with Heartland Bank as Agent consisting of (i) a credit agreement (the "Credit Agreement") with Heartland Bank for a 3-year $12 million term loan (the “Term Loan”) and (ii) an account purchase agreement (the “Purchase Agreement”) with Heartland Bank, as agent for the purchase and sale of

11

approved receivables of Borrower in amounts not to exceed $6 million. The proceeds of borrowings under the Facility may be used for the payment of a portion of the purchase price for the acquisition of Hamilton Investment Group; the refinance of outstanding debt under Borrower’s prior accounts receivable facility; working capital needs of the Company and its subsidiaries; funding of the debt service reserve account and payment of all costs and expenses arising in connection with the negotiation of the Credit Agreement and related documents. On the closing date, the Borrower received proceeds of $12 million under the Credit Agreement and approximately $4.65 million under the Purchase Agreement.   

Borrowings under the Credit Agreement bear interest at a rate per annum equal to WSJ prime plus a spread that ranges from 5.50% to 8.25% per annum depending on the Borrower’s first lien leverage ratio (provided that at no time shall the WSJ prime be less than 4%). The Term Loan requires monthly interest payments, quarterly principal payments of $300,000 and a balloon payment on the August 12, 2017 maturity date.  The Term Loan may be increased by up to an additional $10 million upon request and agreement by the Lenders, but is not a committed amount under the facility.  

Under the Purchase Agreement, all approved receivables will be purchased by the lenders thereunder for the face amount of such receivable less the lender’s 1.50% service charge.   In addition, the Purchase Agreement requires a 10% reserve against receivables purchased, which amount will increase from 25-50% for receivables outstanding past 60-90 days, respectively. The Lenders have the option under the agreements to require the Borrower to repurchase receivables under certain circumstances. The account purchase facility replaces the Company’s previous senior secured revolving facility.

The Company evaluated the Purchase Agreement under ASC 860 and determined that related transactions should be  accounted for as secured borrowings, the receivables sold under the Purchase Agreement remain as assets of the Company, the service charge under the agreement is included in interest expense, and the reserve established is presented as restricted cash on the Company’s balance sheet.

Both the Credit Agreement and the Purchase Agreement require the Borrower to maintain a fixed charge coverage ratio of not less than 1.2:1.0, a first lien leverage ratio of ranging from 3.0:1.0 during 2014  to 2.75:1.0 -2.25:1.0 during 2015 to 2.0:1.0 beginning in 2016, a EBITDA to Interest Expense ratio ranging from 2.75:1.0 during 2014, 3.75:1.0 during 2015 to 4.75:1.0 beginning in 2016 and a tangible net worth of not less than $1 million for each quarter beginning December 31, 2014.  The Borrower is also required to maintain a debt service reserve account sufficient to pay all debt and interest expense due in the next fiscal quarter. The restrictive covenants include customary restrictions on the Company's ability to incur additional debt; make investments; grant or incur liens on assets; sell assets; engage in mergers, consolidations, liquidations or dissolutions; engage in transactions with affiliates; and make dividend payments (although the Borrower is allowed to make dividend payments so long as no event of default will result from such payment or in shares of the Company’s stock). In addition, the Credit Agreement contains customary representations and warranties, affirmative covenants and events of default.

The Facility is secured by all of the Borrower’s assets as well as a pledge of the Company’s equity in each of its wholly-owned subsidiaries.  The Company paid a cash closing fee of $450,000 to the Lenders and also issued a 4-year warrant to purchase 2.5 million shares of the Company’s common stock with an exercise price $1.00 per share in connection with the Term Loan. The related fair value of the warrants amounting to $1,293,680 was recorded as a debt discount and is amortized over the term of the note. The Company relied on the exemption provided by Rule 506 and/or Section 4(2) of the Securities Act of 1933, as amended.

Effective September 15, 2014, the Company and its wholly-owned subsidiaries entered into a First Modification Agreement (the “APA Amendment”) with Heartland Bank, administrative agent, (“Agent”)  wherein the following amendments were made:  (i) increase the Facility Limit under the Account Purchase Agreement to $6,600,000 (from $6,000,000); (ii) change the Borrowers’ address and (iii) extend the deadline for Borrower’s delivery of landlord’s consents and waivers to 60-days of the date of the Account Purchase Agreement.

Effective September 15, 2014, the Company and its wholly-owned subsidiaries entered into a First Modification Agreement (the “Term Loan Amendment”) with Agent, wherein amendments were made to (i) change the Borrowers’ address and (ii) extend the deadline for Borrower’s delivery of landlord’s consents and waivers to 60-days of the date of the Account Purchase Agreement.

The Company incurred a total of $1,346,221 in various financing fees which are amortized over the life of the credit facility.  

12

The summary below shows the activity related to all deferred financing fees related to the notes payable as of September 30, 2014:

A summary of the activity in notes payable for the nine months ended September 30, 2014 is shown below:

NOTE 6 – LINE OF CREDIT

On June 26, 2013, our wholly-owned subsidiaries, KMHVC, Inc. and AES (the “Borrower”) entered into a $2 million revolving accounts receivable financing facility with Rosenthal & Rosenthal (“Rosenthal”). The financing facility provides for the Borrower to have access to the lesser of (i) $2 million or (ii) 85% of Net Amount of Eligible Receivables (as defined in the financing agreement). The financing facility is paid for by the assignment of the Borrower’s accounts receivable to Rosenthal and is secured by the Borrower’s assets. The financing facility has an interest rate of 4.00% in excess of the prime rate reported by the Wall Street Journal per annum. The interest rate increases to the prime rate plus 7.00% for any borrowings in excess of 85% of the Borrower’s Net Amount of Eligible Receivables. In addition, the Borrower paid Rosenthal a facility fee of $30,000 on the closing and an annual fee of $20,000 and a monthly administration fee of $1,000 as well as monthly additional charges of not less than $2,000. The financing facility is for an initial term of two-years, expiring on June 30, 2015, and will renew on a year to year basis, unless terminated in accordance with the financing agreement. If the facility is terminated prior to the first anniversary, Borrower is obligated to pay Rosenthal a fee of 2% of the maximum facility amount and if terminated after the first anniversary and prior to the second anniversary then Borrower shall pay a fee of 1% of the maximum facility amount. We guaranteed repayment of the line of credit, which guaranty is secured by our assets. As such, this transaction does not constitute a sale of receivables.

13

On November 20, 2013, our wholly-owned subsidiary, AquaTex entered into an Assumption Agreement with Rosenthal & Rosenthal, Inc. under which AquaTex became an additional borrower under the financing facility with Rosenthal.  In connection with AquaTex becoming an additional borrower under the facility, Rosenthal increased the maximum amount available under the facility to $3 million.  In January 2014, Rosenthal increased the maximum amount available under the facility to $4 million.  In April 2014, Rosenthal increased the maximum amount available under the facility to $5 million. Pursuant to the terms of the financing facility, the Company was required to maintain at the end of each quarter, tangible net worth in an amount not less than negative $1,000,000 and working capital of not less than negative $2,000,000.

On March 26, 2014, the Company’s wholly-owned subsidiaries, AquaTex, AES, and STP entered into a waiver and amendment agreement with Rosenthal & Rosenthal, Inc. under which Rosenthal waived our non- compliance with the covenant to maintain working capital of not less than negative $2,000,000 for the period ended December 31, 2013.  Additionally, Section 6.10 of our Financing Agreement with Rosenthal & Rosenthal, Inc. was amended to provide that we are required to maintain working capital of not less than negative $4,500,000 in future periods.  As of June 30, 2014, the Company was in compliance with all of its financial covenants.

During the nine months ended September 30, 2014, the Company made draws, net of expenses of $2,073,328.

On August 12, 2014, the balance of $4,752,317 on the line of credit was paid off using proceeds from the Heartland credit facility (see Note 5).

The Company paid a total of $54,167 in various financing fees related to the line of credit during the current period which were fully amortized as of August 12, 2014 due to the closing of the line of credit.  

The summary below shows the activity related to all deferred financing fees related to the line of credit as of September 30, 2014:

NOTE 7 – PREFERRED STOCK

From June 21, 2014 through July 8, 2014, we sold 4,000 shares of Series A Convertible Preferred Stock at a price of $1,000 per unit for $4,000,000. Each unit consists of (i) 1 share of our Series A Convertible Preferred Stock immediately convertible into a number of shares of our common stock equal to the quotient of $1,000 divided by the conversion price then in effect, which is initially$0.70, and (ii) common stock purchase warrants to purchase 500 common shares at an exercise price of $1.00 and a term of 3 years.  The Series A Convertible Preferred Stock and warrants contain standard piggy back registration rights.  

The Company evaluated the embedded conversion option of the preferred stock under FASB ASC 815-15 and determined that it is clearly and closely related to the host contract, the preferred stock, and does not require to be bifurcated.   The Company evaluated the preferred stock for a beneficial conversion feature under FASB ASC 470-20 and determined that a beneficial conversion feature of $720,424 existed which has been fully recognized as a deemed dividend to the preferred shareholders.  

The Company incurred issuance costs of $242,700 for broker fees related to the preferred share offering during the nine months ended September 30, 2014.

Pursuant to the terms of the Series A Certificate of Designation, each share of Series A Preferred: (i)  is entitled to receive cumulative cash dividends at an annual rate of 10% out of any funds and assets of the Company legally available therefor, prior and in preference to any declaration or payment of any dividend payable on the Common Stock, payable quarterly; (ii) is convertible into a number of shares of common stock equal to the quotient of $1,000 divided by the conversion price then in effect, which is initially $0.70; (iii) votes generally with the common stock on an as-converted basis on all matters, other than those matters on which the Series A Preferred is entitled to vote as a separate class by law or as set forth in the Series A Certificate of Designation; (iv) is senior to the common stock upon a liquidation of the Company; (v) is automatically converted into common stock at the then applicable

14

conversion price: (A) (1) if the underlying conversion shares are registered or such conversion shares are eligible for resale under Rule 144 under the Securities Act of 1933 and (2) Company’s stock price is at least $1.60 for 40 trading days during a 60 trading day period with average daily volume of at least 50,000 shares during those 40 trading days; (B) upon the written consent of the holders of 50% of the Series A Preferred, or, (C) on June 30, 2017; and (vi) is entitled to anti-dilution adjustments in the event of a dividend, stock split, reclassification, reorganization, consolidation or merger.

NOTE 8 – COMMON STOCK

On January 7, 2014, the Company issued 25,000 shares of its common stock to one of our directors upon exercise of outstanding warrants.  The Company received $6,250 in proceeds from the exercise of the warrant, which proceeds were used for working capital and general corporate purposes.  

On January 23, 2014, we issued 59,210 shares of our common stock upon exercise of outstanding warrants.  The warrant was issued to purchase 125,000 shares and was exercised in full on a cashless basis and accordingly 65,790 shares were withheld by the Company at the market price of $0.57 per share less the exercise price of $0.30 per share to fund the exercise price.

On January 23, 2014, we issued 58,035 shares of our common stock upon exercise of outstanding warrants.  The warrant was issued to purchase 125,000 shares and was exercised in full on a cashless basis and accordingly 66,965 shares were withheld by the Company at the market price of $0.56 per share less the exercise price of $0.30 per share to fund the exercise price.

On January 30, 2014, the Company issued 25,000 shares of its common stock upon exercise of outstanding warrants. We received $6,250 in proceeds from the exercise of the warrant, which proceeds were used for working capital and general corporate purposes.

On April 25, 2014, the Company entered into an investor relations consulting agreement pursuant to which the Company agreed to issue 250,000 shares of its common stock to a consultant in consideration of services rendered under the agreement. The fair value of the shares issued of $133,000 was recognized as stock compensation expense during the nine months ended September 30, 2014.

On April 30, 2014, the Company issued an aggregate of 276,599 shares of its common stock for the conversion of notes payable and accrued interest totaling to $138,303.   The Company recognized a loss on debt conversion for the nine months ended September 30, 2014 of $11,063.

On May 29, 2014, the Company issued 500,000 shares of its common stock to one of our directors upon exercise of his outstanding stock options.  The Company received $75,000 in proceeds from the exercise of the stock options, which proceeds were used for working capital and general corporate purposes.  

In connection with the acquisition of Hamilton (see Note 2), we issued 3,523,554 common shares to the members of HIG pursuant to the terms of the Purchase Agreement.  The fair value of the shares was recorded at $2,219,839 as determined based on the market value of our common stock.

NOTE 9 – STOCK OPTIONS AND WARRANTS

Stock options

HII currently has two stock option plans: (a) the 2005 Stock Incentive Plan reserved 10,000,000 common shares and 8,615,140 stock options have been granted through September 30, 2014 and 153,000 options are outstanding at September 30, 2014, and (b) the 2012 Stock Incentive Plan reserved 10,000,000 common shares and 2,500,000 stock options have been granted through September 30, 2014 and 2,000,000 options are outstanding at September 30, 2014.

During the nine months ended September 30, 2014, 500,000 options were exercised and no options expired.

During the nine months ended September 30, 2014, 564,000 options were granted to employees and valued at $278,022 using the Black-Scholes pricing model. The 564,000 options vest over a period of 36 months.

15

Significant assumptions used in the valuation include the following:

Expected term                       7 years

Expected volatility             186.00%

Risk free interest rate             2.13%

Expected dividend yield         0.00%

During the nine months ended September 30, 2014, 100,000 options were granted to two directors and valued at $50,972 using the Black-Scholes pricing model.  The 100,000 options vest over a 12 month period.

Significant assumptions used in the valuation include the following:

Expected term                       5 years

Expected volatility             185.66%

Risk free interest rate             1.46%

Expected dividend yield         0.00%

Stock compensation expense recognized for the nine months ended September 30, 2014 related to the above options including those issued in the prior year amounted to $166,402. Unrecognized compensation cost as of September 30, 2014 of $309,568 is expected to be recognized over a period of 2.33 years.

Warrants

From June 21, 2014 to July 8, 2014, 2,000,000 warrants were issued in conjunction to the Series A Preferred Stock subscriptions to accredited investors (see Note 6) and valued at $908,059 using the Black-Scholes pricing model. The 2,000,000 warrants are immediately exercisable.  The fair value of the warrants is included in additional paid in capital.

Significant assumptions used in the valuation include the following:

Expected term                       3 years

Expected volatility             173.03%

Risk free interest rate             0.88%

Expected dividend yield         0.00%

On June 30, 2014, 50,000 warrants were issued in conjunction with the capital lease transaction disclosed above (see Note 3) and valued at $31,788 using the Black-Scholes pricing model. The 50,000 warrants only vest if the Company elects to exercise the purchase option prior to the end of the lease term, and, therefore, the fair value was not recorded. The warrants have an exercise price of $0.65 and a 5 year term.

Significant assumptions used in the valuation include the following:

Expected term                       5 years

Expected volatility             173.03%

Risk free interest rate             0.88%

Expected dividend yield         0.00%

On August 12, 2014, 2,500,000 warrants were issued in conjunction with the Heartland Term Loan transaction disclosed above (see Note 5) and valued at $1,293,679 using the Black-Scholes pricing model. The 2,500,000 warrants are immediately exercisable. The relative fair value of the warrants is recorded as a debt discount and amortized over the life of the Heartland Term Loan. The warrants have an exercise price of $1.00 and a 4 year term.

Significant assumptions used in the valuation include the following:

Expected term                       4 years

Expected volatility             169.51%

Risk free interest rate             1.63%

Expected dividend yield         0.00%

16

During the nine months ended September 30, 2014, 50,000 warrants were exercised for cash and 250,000 warrants were exercised on a cashless basis (see Note 8).  

A summary of activity in options and warrants is as follows:

NOTE 10 – RELATED PARTY TRANSACTIONS

During the three months ended March 31, 2014, a member of the Board provided cash advances to the Company totaling $75,000. The Company made repayments of $50,000 resulting in an outstanding balance of $183,000 as of September 30, 2014.  The outstanding amount is included in accounts payable and other liabilities - related parties in the consolidated balance sheets.

In connection with the acquisition of Hamilton (see Note 2), the Company incurred a working capital adjustment due to the former members of Hamilton in the amount of $2,521,628 for working capital in excess of the stock purchase agreement requirement at the acquisition date. The outstanding amount as of September 30, 2014 is included in accounts payable and other liabilities – related parties in the consolidated balance sheets.

During the nine months ended September 30, 2014, the Company recognized a tax benefit of $5,639,233 related to the reversal of a portion of the full valuation allowance recorded on the deferred tax asset resulting from cumulative net operating loss carryforwards as a result of the acquisition of Hamilton on August 12, 2014. Management’s analysis of the future use of the currently existing cumulative net operating loss carryforwards determined that it is more likely than not that a portion will be utilized prior to expiration. Accordingly, the valuation allowance on the deferred tax asset was reduced during the period ended September 31, 2014, and a tax benefit recognized.

The Company has evaluated the deferred income taxes with regards to Section 382 of the Internal Revenue Code and has determined no limitations on the use of net operating loss carryforwards exist at September 30, 2014.

The Company reported no uncertain tax liability as of September 30, 2014 and expects no significant change to the uncertain tax liability over the next twelve months.

NOTE 12 – SUBSEQUENT EVENTS

On October 31, 2014, all of the holders of the Company’s existing unsecured convertible notes exercised their option to convert the outstanding principal and accrued interest amounts into our common shares at the fixed conversion price of $0.50 per share. The aggregate principal and accrued interest totaling to $1,025,000 was converted  to 2,050,000 common shares.

17

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements and notes. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions, which could cause actual results to differ materially from management's expectations. Factors that could cause differences include, but are not limited to, continued reliance on external sources on financing, development risks for new products and services, commercialization delays and customer acceptance risks when introducing new products and services, fluctuations in market demand, pricing for raw materials as well as general conditions of the energy and oilfield marketplace.

Overview

HII Technologies, Inc. is a Houston, Texas based oilfield services company with operations primarily in the Southwest U.S. focused on commercializing technologies and providing services in frac water management, safety services and portable power used by exploration and production (“E&P”) companies in the United States. We operate through our wholly-owned subsidiaries. The table below provides an overview of our current subsidiaries and their oilfield service activities:

The Company’s total frac water management services division does business as Hamilton Water Transfer, AquaTex and AES Water Solutions and provides total frac water management solutions associated with the needed millions of gallons of water typically used during hydraulic fracturing and completions of horizontally drilled oil and gas wells.  AES Safety Services is the Company’s oilfield safety consultancy providing experienced trained safety personnel such as contract safety engineers during oilfield operation from site preparation “rigging up” to drilling and completion for E&P customers. AES Safety Services provides the flexibility as outsourced safety consultants, training and inspection to its customers to move quickly in key locations.  The Company’s oilfield mobile power subsidiary does business as South Texas Power (STP) and operates a fleet of mobile generators, light towers and related equipment for in-field power rental where remote locations provide little or no existing electrical infrastructure.  

We currently employ 74 persons and extensively use independent contractor crews in connection with our field service work. Our executive offices are located at 8588 Katy Freeway, Suite 430, Houston, Texas, 77024.  Our telephone number is (713) 821-3157 and our Internet address is www.HIITinc.com.

Business Development – HII Technologies, Inc.

Organization

Our predecessor, Global Realty Management Group, Inc., or GRMG, was incorporated in the State of Florida in 1997. In June 2002, GRMG reincorporated under the laws of the State of Delaware from the State of Florida pursuant to a merger with a newly formed Delaware corporation. Under the terms of this reincorporation merger, GRMG changed its name from “Global Realty Management Group, Inc.” to “Excalibur Industries, Inc.” in connection with merging with the Excalibur operations. In October 2005, we changed our name from “Excalibur Industries, Inc.” to “Shumate Industries, Inc.” In February 2009, we changed our name from “Shumate Industries, Inc.” to “Hemiwedge Industries, Inc.” to emphasize and focus on our valve product technology after the October 2008 sale of assets related to Shumate, our contract machining business. On August 31, 2011, we changed our name to “HII Technologies, Inc.”, which name change was required in connection with our May 2011 sale of our valve product technology and assets.

18

Acquisition of Apache Energy Services, LLC

On September 27, 2012, we consummated the acquisition (the “Acquisition”) of all of the outstanding membership interests of Apache Energy Services LLC (dba AES Water Solutions), a Nevada limited liability company (“AES” ) pursuant to the terms of a Securities Purchase Agreement dated September 26, 2012 by and among the registrant, AES and the members of AES (the “Purchase Agreement”). AES is a water transfer services company serving oilfield customers. The purchase price consisted of: (a) Cash in the amount of $290,000, of which $250,000 was paid on the closing date and the remaining $40,000 is payable (subject to a purchase price adjustment) in six equal installments, with the first installment payable on the first day of each month beginning the third month following the month in which the Closing occurs and each month thereafter until paid in full; (b) $1,300,000 in 5% subordinated secured promissory notes (the “Notes”), and (c) 6,500,000 shares (the “Shares”) of the registrant’s common stock. The Notes are payable in 12 equal quarterly installments beginning on February 1, 2013 and have a maturity date of November 1, 2015. The Notes are secured by the assets of the registrant and AES. The Shares are subject to a restricted stock agreement pursuant to which 500,000 shares will vest each quarter beginning December 31, 2012. The purchase agreement contains 2-year non-compete/non-solicitation provisions for Messrs. Mulliniks and Cox.

Launch of our Mobile Oilfield Power Business

In December 2012, we launched our mobile oilfield power solutions and services business, which is being conducted through our wholly-owned subsidiary, KMHVC, Inc. dba South Texas Power, or STP.

Launch of our Contract Safety Consultant Business

In January 2013, we launched AES Safety Services, our Safety division that offers contract safety engineers and professionals, safety training and onsite safety inspection services for E&P companies that prefer outsourcing many of their safety programs or are required to do so by state regulation.

Acquisition of Aqua Handling of Texas, LLC.  

On November 12, 2013, we consummated the acquisition of all of the outstanding membership interests of Acquisition of Aqua Handling of Texas, LLC. (dba AquaTex) pursuant to the terms of a Securities Purchase Agreement dated November 11, 2013 by and among the registrant, AquaTex and the members of AquaTex (the “Purchase Agreement”). The purchase price consisted of: (a) Cash in the amount of $300,000; (b) $500,000 in 5% subordinated secured promissory notes (the “Notes”), and (c) 1,443,696 shares of the registrant’s common stock ($500,000 value based on the trailing 30-day average of the registrant’s common stock).  The Notes are payable in 12 equal quarterly installments beginning on February 1, 2014 and have a maturity date of November 1, 2016.  The Notes are secured by the assets of the registrant and AquaTex.  In addition, there exists a working capital adjustment provision whereby we would be required to pay the AquaTex members additional cash equal to the amount of any working capital of AquaTex at closing; provided, however, that in the event that AquaTex has negative working capital at closing, then the amount of such negative working capital will be offset against the notes issued to the former AquaTex members at closing   The purchase agreement contains 3-year non-compete/non-solicitation provisions for Messer’s George and Brewer, the former members of AquaTex.

Acquisition of Hamilton Investment Group

On August 12, 2014, we consummated the acquisition (the “Acquisition”) of all of the outstanding stock of Hamilton Investment Group, Inc.  (“Hamilton”) pursuant to the terms of a Stock Purchase Agreement dated August 11, 2014 by and among the registrant, Hamilton and the stockholders of Hamilton (the “Stock Purchase Agreement”). The purchase price consisted of: (a) Cash in the amount of $9,000,000; and (b) 3,523,554 shares (the “Shares”) of the registrant’s common stock ($2,300,000 value based on the trailing 20-day average of the registrant’s common stock).  In addition, there exists a working capital adjustment provision whereby are required pay the Hamilton stockholders additional cash equal to the amount of any working capital of Hamilton in excess of $2,200,000 (“Working Capital Target”) at closing; provided, however, that in the event that Hamilton’s working capital at closing is less than the Working Capital Target, then the amount of such deficit will be offset against the Shares issued to the former Hamilton stockholders at closing   The purchase agreement contains 2-year non-compete/non-solicitation provisions for William M. Hamilton and Sharon K. Hamilton, the former Hamilton stockholders. 

19

Results of Operations for the Three Months Ended September 30, 2014 and 2013

Revenues. Our revenues increased by $6,097,790, or approximately 155% to $10,029,506 for the three months ended September 30, 2014 from $3,931,716 for the three months ended September 30, 2013.  This increase was primarily attributable to the acquisition of Hamilton on August 12, 2014 and continued growth within our water division from AES Water Solutions and AquaTex (acquired in November 2013) frac water management services.  Additionally, increased revenues came from continued organic growth of AES Safety Services including its new spill remediation service line and the organic growth of STP’s generator rental fleet business in mobile oilfield power, as compared to the prior period. All three divisions of Water, Safety and Power benefitted from the continued activity levels of horizontal drilling and its related hydraulic fracing in the domestic U.S.  

Cost of Revenues. Cost of revenues increased by $4,313,625 or approximately 154%, to $7,108,454 for the three months ended September 30, 2014, or 71% of revenues, compared to cost of revenues of $2,794,829, or 71% of revenues for the three months ended September 30, 2013.  The cost of revenues during the three months ended September 30, 2014 were primarily the result of contract labor of $2,174,171, equipment and truck rental of $1,402,433, frac water pipe and pump rental of $754,583, and related fuel costs of $1,130,399.  The cost of revenues as a percentage of sales was the result of the additional revenues of AquaTex, subsidiary which was acquired in November 2013, Hamilton, subsidiary which was acquired on August 12, 2014, lower equipment rental costs, as well as higher revenues covering more fixed costs within cost of revenues particularly in the newer Safety and Power divisions, as compared to the prior period. The Company currently anticipates a lower cost of sales as a percentage of sales in the next fiscal year from continued increases in revenues covering a higher percentage of fixed costs, decreasing rental expense through the procurement of additional fixed assets, and the anticipated future impact of revenues resulting from the anticipated commencement of new technology related services and their higher margins. The cost of revenues during the three months ended September 30, 2013 were primarily the result of contract labor of $1,191,075, equipment and truck rental of $1,022,544 and fuel for water transfer pumps and equipment of $422,341.

Selling, general, and administrative. Selling, general and administrative expenses increased by $1,435,469, or approximately 121%, to $2,565,053, or approximately 27% of revenues, for the three months ended September 30, 2014, as compared to $1,129,584 or approximately 29% of revenues for the comparable period in 2013.  The decrease as a percentage of sales was the result of the additional revenues of AquaTex, subsidiary which was acquired in November 2013, Hamilton, subsidiary which was acquired on August 12, 2014, covering more fixed costs within selling, general, and administrative particularly in the newer Safety and Power divisions, as compared to the prior period.  The Company currently anticipates lower selling, general and administrative expenses as a percentage of sales in the next fiscal year from continued increases in revenues covering a higher percentage of fixed costs, reduced testing and development costs related to water recycling technologies, and decreasing growth in expenses for personnel.

Interest expense. Interest expense increased by $939,152, or approximately 965% to $1,036,479 in the three months ended September 30, 2014, from $97,327 for the comparable period in 2013.  The increase was attributable to the interest accrued on the accounts receivable financing facility, the senior term loan credit facility and amortization of related deferred finance costs and non-cash debt discount, interest expense associated with promissory notes we issued in our September 2012 and October 2013 financings, as well as accrued interest on the Seller notes issued in connection with our acquisition of AES Water Solutions in September 2012 and AquaTex in November 2013.

Net income. Our net income increased by $5,024,981, or approximately 2,868% to $4,849,770 for the three months ended September 30, 2014 from a net loss of $175,211 for the comparable period in 2013. The net income for the three months ended September 30, 2014 included the tax benefit related to the reduction of the valuation allowance on the deferred tax asset of $5,639,233, the amortization of non-cash debt discount costs of $56,801 and the amortization of deferred financing costs of $85,278.  In addition the Company incurred $32,140 in expenses from the testing and development costs related to water recycling technologies. In the prior year, the loss during the three months ended September 30, 2013 was primarily attributable to the acquisition expenses related to the purchase of AES Water Solutions and the disposal of obsolete assets.  

Results of Operations for the Nine Months Ended September 30, 2014 and 2013

Revenues. Our revenues increased by $14,519,025, or approximately 149% to $24,286,951 for the nine months ended September 30, 2014 from $9,767,926 for the nine months ended September 30, 2013.  This increase was primarily attributable to the acquisition of Hamilton on August 12, 2014 and continued growth within our water division from AES Water Solutions and AquaTex (acquired in November 2013) frac water management services.  Additionally, increased revenues came from the continued organic growth of AES Safety Services, including its new spill remediation service line, and the organic growth of STP’s generator rental fleet business in mobile oilfield

20

power. All three divisions of Water, Safety and Power benefitted from the continued activity levels of horizontal drilling and its related hydraulic fracing in the domestic U.S.  

Cost of Revenues. Cost of revenues increased by $10,178,036 or approximately 141%, to $17,411,655 for the nine months ended September 30, 2014, or 72% of revenues, compared to cost of revenues of $7,233,619, or 74% of revenues for the nine months ended September 30, 2013.  The cost of revenues during the nine months ended September 30, 2014 were primarily the result of contract labor of $6,108,639, direct costs associated with the spill remediation line of $1,523,660, frac water pipe and pump rental of $2,163,167, equipment and truck rental of $2,893,228 and related fuel costs of $2,284,370.  The decrease in cost of revenues as a percentage of sales was the result of the additional revenues of AquaTex, subsidiary which was acquired in November 2013, Hamilton, subsidiary which was acquired in August 2014, lower equipment rental costs, as well as higher revenues covering more fixed costs within cost of revenues particularly in the newer Safety and Power divisions.  The Company currently anticipates a lower cost of sales as a percentage of sales in the next fiscal year from continued increases in revenues covering a higher percentage of fixed costs, decreasing rental expense through the procurement of additional fixed assets, and the anticipated future impact of revenues resulting from the anticipated commencement of new technology related services and their higher margins. The cost of revenues during the nine months ended September 30, 2013 were primarily the result of contract labor of $3,695,132, equipment and truck rental of $2,186,666 and related fuel costs of $936,066.

Selling, general, and administrative. Selling, general and administrative expenses increased by $4,186,629, or approximately 161%, to $6,780,411, or approximately 29% of revenues, for the nine months ended September 30, 2014, as compared to $2,593,782 or approximately 27% of revenues for the comparable period in 2013. The increase was primarily attributable to newly added employee compensation expense, consulting fees, the cost of public reporting and holding company expenses, as well as the testing and development costs related to water recycling technologies during 2014. The Company currently anticipates lower selling, general and administrative expenses as a percentage of sales in the next fiscal year from continued increases in revenues covering a higher percentage of fixed costs, reduced testing and development costs related to water recycling technologies, and decreasing growth in expenses for personnel.

Interest expense. Interest expense increased by $1,032,423, or approximately 323% to $1,352,324 in the nine months ended September 30, 2014, from $319,901 for the comparable period in 2013.  The increase was attributable to the interest accrued on the accounts receivable financing facility, the senior term loan credit facility and amortization of related deferred finance costs and non-cash debt discount, interest expense associated with promissory notes we issued in our September 2012 and October 2013 financings, as well as accrued interest on the Seller notes issued in connection with our acquisition of AES Water Solutions in September 2012 and AquaTex in November 2013.

Net income. Our net income increased by $4,847,492, or approximately 731% to $4,184,365 for the nine months ended September 30, 2014 from a  net loss of $663,127 for the comparable period in 2013. The net income for the nine months ended September 30, 2014 included the tax benefit related to the reduction of the valuation allowance on the deferred tax asset of $5,639,233, non-cash charges in connection with the issuance of share-based awards of $133,000, the amortization of non-cash debt discount costs of $56,801 and the amortization of deferred financing costs of $217,702. In addition, the Company incurred $155,829 in expenses from the testing and development costs related to water recycling technologies. In the prior year, the loss during the nine months ended September 30, 2013 was primarily attributable to the acquisition expenses related to the purchase of AES Water Solutions and the disposal of obsolete assets.  

Liquidity and Capital Resources

We have financed our operations, acquisitions, debt service, and capital requirements through cash flows generated from operations, debt financing, other loans, and issuance of equity securities.  We had cash of $1,979,923 and a working capital deficit of $2,735,436 as of September 30, 2014 as compared to cash of $866,035 and a working capital deficit of $2,578,883 as of December 31, 2013.

Net cash used in operating activities for the nine months ended September 30, 2014 was $3,015,608 resulting primarily from our net income of $4,184,365 and increases in accounts payable of $1,296,798, accounts payable-related parties of $25,000 and accrued expenses of $1,172,058 and adjustments in non-cash items including $133,000 in non-cash stock for services, $907,502 in depreciation and amortization $56,801 in amortization of debt discount, $166,400 in amortization of stock based compensation, and $217,702 in amortization of deferred finance costs, which amounts were offset by increases in accounts receivable of $4,992,877 and prepaid expenses and other assets of $507,164, the $78,010 in gain on asset disposal, and $5,639,233 in tax benefits for release of deferred tax asset allowance. By comparison, net cash used in operating activities for the nine months ended September 30, 2013 was

21

$516,927 resulting primarily from our net loss of $663,127 which was offset by an increase in accounts payable and accrued expenses of $865,028 and an increase in accounts receivable, prepaid expenses and other assets of $1,509,875.

Net cash used in investing activities for the nine months ended September 30, 2014 was $573,578 resulting primarily from our acquisition of assets and equipment of $3,969,905, offset by cash received from the acquisition of Hamilton of $2,797,327 and proceeds received from the sale of property and equipment of $599,000. By comparison, net cash used in investing activities for the nine months ended September 30, 2013 was $304,138 consisting primarily of $399,449 related to the purchase of property and equipment, which was offset by proceeds received from the sale of property and equipment for $86,674 and notes receivable of $8,637.

Our net cash provided by financing activities was $4,703,074 for the nine months ended September 30, 2014. This consisted of $3,757,300 in net proceeds from the sale of preferred shares, $1,755,685 in proceeds from the issuance of notes, $2,073,325 in net proceeds from our revolving line of credit, and $87,500 in proceeds from the exercise of warrants, which amounts were offset by payments on notes payable of $1,034,098, payments on capital lease obligations of $845,226, $945,126 in payments for deferred financing costs, and dividends paid on our preferred shares of $101,343.  Our net cash provided by financing activities was $573,750 in the nine months ended September 30, 2013. This consisted primarily of $50,000 received upon the exercise of warrants and options, $63,000 in proceeds from advances from related parties, $874,473 in net proceeds from our line of credit and $87,375 received on the sale-leaseback transaction, which was offset by payments on notes payable for $462,400, payments against advances from related parties of $20,000, and payments for deferred financing costs of $18,698.

The net increase in cash for the nine months ended September 30, 2014 was $1,113,888 as compared to a net decrease in cash of $247,315 for the nine months ended September 30, 2013.

Accounts Receivable Financing Facility

On June 26, 2013, our wholly-owned subsidiaries, KMHVC, Inc. and Apache Energy Services, LLC (the “Borrower”) entered into a $2 million revolving accounts receivable financing facility with Rosenthal & Rosenthal. The financing facility provides for the Borrower to have access to the lesser of (i) $2 million or (ii) 85% of Net Amount of Eligible Receivables (as defined in the financing agreement). The financing facility is paid for by the assignment of the Borrower’s accounts receivable to Rosenthal and is secured by the Borrower’s assets. The financing facility has an interest rate of 4.00% in excess of the prime rate reported by the Wall Street Journal per annum.  In addition, the Borrower paid Rosenthal a facility fee of $30,000 on the closing and an annual fee of $20,000 and a monthly administration fee of $1,000 as well as monthly additional charges of not less than $2,000. The financing facility is for an initial term of two-years and will renew on a year to year basis, unless terminated in accordance with the financing agreement.  If the facility is terminated prior to the first anniversary, Borrower is obligated to pay Rosenthal a fee equal to 2% of the maximum facility amount and if terminated after the first anniversary and prior to the second anniversary then Borrower shall pay a fee equal to 1% of the maximum facility amount. We guaranteed repayment of the line of credit, which guaranty is secured by our assets.  On November 20, 2013, our wholly-owned subsidiary, Aqua Handling of Texas, LLC (dba AquaTex) entered into an Assumption Agreement Rosenthal & Rosenthal, Inc. under which AquaTex became an additional borrower under the financing facility with Rosenthal.  In connection with AquaTex becoming an additional borrower under the facility, the Lender increased the maximum amount available under the facility to $3 million.  In January 2014, the Lender increased the maximum amount available under the facility to $4 million.  In April 2014, the Lender increased the maximum amount available under the facility to $5 million.   The Company is required to maintain at the end of each fiscal quarter a tangible net worth of not less than negative $1 million and working capital of not less than $4.5 million.   On August 12, 2014, in connection with the consummation of the Heartland Bank Credit Facility, we terminated this financing facility and paid approximately $4.75 million in repayment of all amounts due thereunder with proceeds received under the Heartland Bank Credit Facility.

Heartland Bank Credit Facility

On August 12, 2014, HII Technologies, Inc. (the "Company") and its wholly-owned subsidiaries (collectively, the “Borrower”) entered a senior secured credit facility (the “Facility”) with Heartland Bank as Agent consisting of (i) a credit agreement (the "Credit Agreement") with Heartland Bank for a 3-year $12 million term loan (the “Term Loan”) and (ii) an account purchase agreement (the “Purchase Agreement”) with Heartland Bank, as agent for the purchase and sale of approved receivables of Borrower in amounts not to exceed $6 million, which amount was increased to $6.6 million pursuant to a first modification agreement executed on September 15, 2014. The proceeds of borrowings under the Facility may be used for the payment of a portion of the purchase price for the acquisition of Hamilton Investment Group (“Hamilton”); the refinance of outstanding debt under Borrower’s prior accounts receivable facility; working capital needs of the Company and its subsidiaries; funding of the debt service

22

reserve account and payment of all costs and expenses arising in connection with the negotiation of the Credit Agreement and related documents. On the closing date, the Borrower received proceeds of $12 million under the Credit Agreement and approximately $4.65 million under the Purchase Agreement.  The Company utilized $9 million to pay a portion of the purchase price for the Hamilton acquisition, approximately $4.75 million to payoff the Borrower’s prior accounts receivable facility, $450,000 in commitment fees, $675,000 to fund Borrower’s debt service reserve account and approximately $190,000 in other expenses related to the Facility.  Borrower retained approximately $1.585 million for working capital. 

Borrowings under the Credit Agreement bear interest at a rate per annum equal to WSJ prime plus a spread that ranges from 5.50% to 8.25% per annum depending on the Borrower’s first lien leverage ratio (provided that at no time shall the WSJ prime be less than 4%). The Term Loan requires monthly interest payments, quarterly principal payments of $300,000 and a balloon payment on the August 12, 2017 maturity date.  The Term Loan contains an accordion feature, whereby the borrowings may be increased by up to an additional $10 million upon request and agreement by the Lenders, but is not a committed amount under the facility.  

Under the Purchase Agreement, all approved receivables will be purchased by the lenders thereunder for the face amount of such receivable less the lender’s 1.50% service charge.   In addition, the Purchase Agreement requires a 10% reserve against receivables purchased, which amount will increase from 25-50% for receivables outstanding past 60-90 days, respectively.  The account purchase facility replaces the Company’s previous senior secured revolving facility.

Both the Credit Agreement and the Purchase Agreement require the Borrower to maintain a fixed charge coverage ratio of not less than 1.2:1.0, a first lien leverage ratio of ranging from 3.0:1.0 during 2014  to 2.75:1.0 - 2.25:1.0 during 2015 to 2.0:1.0 beginning in 2016, a EBITDA to Interest Expense ratio ranging from 2.75:1.0 during 2014, 3.75:1.0  during 2015 to 4.75:1.0 beginning in 2016 and a tangible net worth of not less than $1 million for each quarter beginning December 31, 2014.  The Borrower is also required to maintain a debt service reserve account sufficient to pay all debt and interest expense due in the next fiscal quarter. The restrictive covenants include customary restrictions on the Company's ability to incur additional debt; make investments; grant or incur liens on assets; sell assets; engage in mergers, consolidations, liquidations or dissolutions; engage in transactions with affiliates; and make dividend payments (although the Borrower is allowed to make dividend payments so long as no event of default will result from such payment or in shares of the Company’s stock). In addition, the Credit Agreement contains customary representations and warranties, affirmative covenants and events of default.

The Facility is secured by all of the Borrower’s assets as well as a pledge of the Company’s equity in each of its wholly-owned subsidiaries.  The Company paid a cash closing fee of $450,000 to the Lenders and also issued a 4-year warrant to purchase 2.5 million shares of the Company’s common stock with an exercise price $1.00 per share in connection with the Facility.

Series A Preferred Stock Financing

From June 21, 2014 through July 8, 2014, we sold 4,000 units (“Units”) to 22 accredited investors at a price of $1,000 per Unit for total gross proceeds of $4,000,000 (of which 3,450 Units were purchased on or after June 27, 2014). We are offering up to 4,000 Units with each Unit consisting of (i) 1 share of our Series A Convertible Preferred Stock (“Series A Preferred”) convertible into a number of shares of common stock equal to the quotient of 1,00 divided by the conversion price then in effect, which is currently $0.70 (the “Conversion Shares”), and (ii) common stock purchase warrants (“Warrants”) to purchase five-hundred fifty (500) shares of Common Stock with an exercise price of $1.00 per whole share exercisable for 3 years after issuance (the “Warrant Shares”).  The Conversion Shares and the Warrant Shares contain standard piggy back registration rights.   We used $242,700 of these proceeds as payment for non-exclusive placement agent fees to FINRA registered broker-dealers.   In addition, approximately $500,000 was used to repay outstanding indebtedness under 10% promissory notes.  The remaining proceeds will be used for working capital and general corporate purposes and to fund growth opportunities. These issuances were exempt under Rule 506 of the Securities Act of 1933, as amended.

Promissory Notes – 2014

On January 15, 2014, we and our wholly-owned subsidiary issued a 10% promissory note in the amount of $370,000 to a single accredited investor.  The note has a maturity date of July 15, 2014 and was issued as consideration for a license fee for AES’ sublicense of a frac water treatment technology.  We did not receive any cash proceeds for issuance of this note. This note was paid in full on July 8, 2014.  

23

On February 17, 2014, we, and our wholly-owned subsidiary, Apache Energy Services, LLC issued a 10% promissory note in the amount of $130,000 to a single accredited investor. This note has a July 15, 2014 maturity date. We received cash proceeds of $130,000 from the issuance of this note, which proceeds were used for working capital and general corporate purposes.  This note was paid in full on July 8, 2014.

On February 27, 2014, our wholly-owned subsidiary KMHVC entered into a Security Agreement-Conditional Sales Contract with a third party equipment seller for the purchase of equipment.  KMHVC financed $117,120 of the purchase price and agreed to pay an additional $5,459 in finance charges (equal to 8.5% of the amount financed) for a total amount due under the conditional sales contract of $122,579.   To secure payment under this conditional sales contract, KMHVC granted a purchase money security interest in the equipment sold. The conditional sales contract is payable in twelve equal monthly installments of $10,215 beginning on March 27, 2014, the last of which is due on February 27, 2015.

On April 18, 2014, our wholly-owned subsidiary KMHVC entered into a Security Agreement-Conditional Sales Contract with a third party equipment seller for the purchase of equipment.  KMHVC financed $63,006 of the purchase price and agreed to pay an additional $2,935 in finance charges (equal to 8.5% of the amount financed) for a total amount due under the conditional sales contract of $65,941.   To secure payment under this conditional sales contract, KMHVC granted a purchase money security interest in the equipment sold. The conditional sales contract bears 8.50% interest and is payable in twelve equal monthly installments of $5,495 beginning on May 18, 2014, the last of which is due on April 18, 2015.

On April 22, 2014, our wholly-owned subsidiary AES Water Solutions issued a 17% secured promissory note in the amount of $88,900 to Texas Mutual Insurance Company. This note was issued as consideration for workers’ compensation insurance premiums and is not secured. The note bears 17% interest and is payable in six equal monthly installments of $15,342 beginning on May 1, 2014, the last of which is due on October 1, 2014.

On May 19, 2014, our wholly-owned subsidiary KMHVC entered into a Security Agreement-Conditional Sales Contract with a third party equipment seller for the purchase of equipment.  KMHVC financed $48,906 of the purchase price and agreed to pay an additional $2,278 in finance charges (equal to 8.5% of the amount financed) for a total amount due under the conditional sales contract of $51,184.   To secure payment under this conditional sales contract, KMHVC granted a purchase money security interest in the equipment sold. The conditional sales contract is payable in twelve equal monthly installments of $4,265 beginning on June 19, 2014, the last of which is due on May 19, 2015.

Convertible Debenture 2013

From October 31, 2013 through November 30, 2013, we issued 10% convertible promissory notes in the aggregate principal amount of $1,000,000 to ten accredited investors.  We received cash proceeds of $850,000 from the issuance of these notes and $150,000 of these notes were issued in consideration of an investor’s cancellation of an existing promissory note dated December 17, 2012 in the principal amount of $150,000.  The notes have 2 year term.  The notes are convertible into our common stock at a fixed conversion price of $0.50 per share. The proceeds were used to fund the cash consideration for our acquisition of Aqua Handling of Texas, LLC and for working capital and general corporate purposes.  We relied on the exemption from registration provided by Rule 506 and/or Section 4(2) of the Securities Act of 1933, as amended, for the offer and sale of the convertible notes. All outstanding principal and accrued interest under these notes were converted into common stock on October 31, 2014.

Promissory Notes - 2012

On December 17, 2012, the registrant issued a 10% subordinated secured promissory note in the amount of $150,000 with a warrant to purchase 550,000 shares of the registrant’s common stock. The aggregate gross proceeds from the sale of the note and warrant was $150,000. The note is due on December 17, 2013 and bears interest at the ten percent (10%).   The note is secured by the assets of the registrant.  The notes was issued with a warrant to purchase 550,000 shares of the registrant’s common stock at an exercise price of $0.09 per share   The warrant is exercisable until five (5) years after the closing date.  The registrant relied on the exemption from registration provided by Rule 506 and/or Section 4(2) of the Securities Act of 1933, as amended, for the offer and sale of the notes and the warrants.  This note was cancelled in exchange for $150,000 of 10% convertible promissory notes issued on October 31, 2013.

On November 5, 2012, we, and our wholly-owned subsidiary, Apache Energy Services, LLC issued a $600,000 10% secured promissory note to a single accredited investor. The aggregate gross proceeds from the sale

24

of the note were $600,000. The proceeds were used to facilitate the purchase of equipment by AES from a third party (see Item 5 below). The note is due on March 30, 2013 and bears interest at the ten percent (10%). The notes are secured by the Vanderra equipment purchased with the proceeds. The issuance was exempt under Section 4(2) and/or Rule 506 of Regulation D of the Securities Act of 1933, as amended.  This note was paid in full on June 27, 2013.

On October 31, 2012, we issued a $50,000 10% subordinated secured promissory note to a related party. The aggregate gross proceeds from the sale of the note were $50,000.  The proceeds were used for working capital and general corporate purposes. The note is due on March 30, 2013 and bears interest at ten percent (10%). The note is secured by our assets. The issuance was exempt under Section 4(2) and/or Rule 506 of Regulation D of the Securities Act of 1933, as amended.  This note was paid on May 24, 2013.

On September 24, 2012, we issued $300,000 of principal amount of 10% subordinated secured promissory notes and warrants to purchase our common stock. The aggregate gross proceeds from the sale of the notes and warrants were $300,000. The proceeds were used to fund the cash purchase price of the acquisition of Apache Energy Services LLC (dba AES Water Solutions) and for working capital requirements. The notes are due on September 23, 2013 and bear interest of ten percent (10%). The notes are secured by our assets. The notes were issued with “Class A” warrants to purchase up to 1,800,000 shares of the our common stock at an exercise price of $0.10 per share and “Class B” warrants to purchase up to 900,000 shares of the registrant’s common stock at an exercise price of $0.10 per share. The number of Warrant Shares underlying each Class A Warrant equals to the principal amount of the Note subscribed for by a purchaser Subscriber multiplied by six (6) The Class B Warrants are exercisable beginning on the one-year anniversary of the Closing Date (the “Target Date”) and the number of warrant shares underlying the Class B Warrant equals either (A) the principal amount of note subscribed for by a purchaser multiplied by 3 shares, if the Market Price (as defined in the Class B Warrant) on the Target Date is less than $0.20 or (B) 0 shares, if the Market Price on the Target Date is at least $0.20. The Class A Warrants and Class B Warrants are exercisable until five (5) years after the closing date. The Class A Warrants and the Class B Warrants are exercisable on a cashless basis. In September 2013, the Class B Warrant did not vest on the Target Date based on the Market Price and were effectively forfeited.  On September 25, 2013 warrant holders exercised warrants to purchase 1,720,000 shares of our common stock for a total consideration of $169,800 which consideration was paid by reduction of indebtedness for each warrant holder by the amount equal to their exercise price under the outstanding note. The remaining principal balance of $130,200 and accrued interest was paid between September 25, 2013 and February 21, 2014.

Liquidity and Capital Requirements – HII Technologies, Inc.

As of the date of this report, we believe that we will be able to fund our operations for the next 12 months by a combination of the continuing operations of our three divisions and our Purchase Agreement for accounts receivables.

Critical Accounting Policies

Our discussion and analysis of our financial conditions and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of financial statements requires managers to make estimates and disclosures on the date of the financial statements. On an on-going basis, we evaluate our estimates, including, but not limited to, those related to revenue recognition. We use authoritative pronouncements, historical experience, and other assumptions as the basis for making judgments. Actual results could differ from those estimates.

Accounts receivable are comprised of unsecured amounts due from customers.  The Company carries its accounts receivable at their face amounts less an allowance for bad debts. The allowance for bad debts is recognized based on management’s estimate of likely losses per year, based on past experience and review of customer profiles and the aging of receivable balances.

Goodwill acquired in a business acquisition is initially measured at cost being the excess of the cost of business combination over the net fair value of the identifiable assets, liabilities and contingent liabilities. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortized but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

Revenue is recognized when all of the following criteria are met: 1) persuasive evidence of an arrangement, 2) delivery has occurred, 3) the price is fixed and determinable, and 4) collectability is reasonably assured.

25

Off-Balance Sheet Arrangements

None.

26

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2014, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

27

PART II:  OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

None.

ITEM 1A – RISK FACTORS

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

1.

See our Current Report on Form 8-K dated June 21, 2014 and filed with the SEC on July 3, 2014.

2.

See our Current Report on Form 8-K dated August 11, 2014 and filed with the SEC on August 15, 2014.

3.

On October 31, 2014, we issued an aggregate of 2,050,000 shares of common stock upon conversions of 10% convertible promissory notes originally issued in October-November 2013. The aggregate principal and interest amount of these notes that were converted was $1,025,000. We did not receive any proceeds from the issuance of these shares. The issuances were exempt pursuant to Section 3(a)(9) of the Securities Act as well as Section 4(a)(2) of the Securities Act.

ITEM 3 – DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 – OTHER INFORMATION

None.

28

ITEM 6 - EXHIBITS