NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES

Description of Business. Aqua Handling of Texas, LLC (“we”, “our”, “the Company” or “AquaTex”) is a Texas based oilfield services company with operations in Texas focused on commercializing technologies in water management used by exploration and production (“E&P”) companies in the United States.  The Company manages the logistical and transportation associated with the water used typically during hydraulic fracturing and completions of horizontally drilled oil and gas wells.  The water transfer services can range from drilling water wells and digging water storage pits to arranging for miles of above ground temporary pipe and high volume pumps to address all of the logistics needs of water during fracing for an oilfield operator.  Once a frac job is completed, AquaTex transfers the pipe, pumps and other temporary infrastructure to another location at the request of its customers.

Use of Estimates.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents.  For purposes of the statements of cash flows, cash equivalents include all highly liquid investments with original maturities of three months or less.

Accounts Receivable.  Accounts receivable are comprised of unsecured amounts due from customers.  The Company carries it 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.  As of September 30, 2013, no allowance for bad debts was required.

Property and equipment.   Property and equipment is valued at cost. Additions are capitalized and maintenance and repairs are charged to expense as incurred.  Gains and losses on dispositions of equipment are reflected in operations.  Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which ranges from three to five years.

Revenue Recognition.  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.

Cost of Revenues.  Cost of revenue includes all direct expenses incurred to produce the revenue for the period.  This includes, but is not limited to, employee cost, contract labor, equipment rental, equipment maintenance, and fuel.  Costs of revenues are recorded in the same period as the resulting revenue.

Income taxes.   AquaTex operates as a limited liability company and is a disregarded entity for federal and state income tax purposes.  AquaTex is not liable for U.S. federal income taxes as its members recognize their share of income and loss in their respective tax return.  Accordingly, no provision for U.S. federal income taxes is recorded.

Fair Value of Financial Instruments.  The carrying value of short-term instruments, including cash, accounts payable and accrued expenses, short-term notes approximate fair value due to the relatively short period to maturity for these instruments. The long-term debt approximate fair value since the related rates of interest approximate current market rates.

Recently Adopted Accounting Standards.   No new accounting pronouncement issued or effective has had, or is expected to have, a material impact on the Company’s financial statements.

NOTE 2 – GOING CONCERN

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital and has incurred a net loss since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

These financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately attain profitability. Management believes that we can alleviate the facts and circumstances which indicate a going concern by evaluating capitalization options included but not limited the sale of some or all of the membership interest along with ongoing efforts to increase the customer base for our company’s services.

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment at September 30, 2013 consists of the following:

NOTE 4 – CUSTOMER CONCENTRATION

For the period from October 15, 2012 (inception) through September 30, 2013, two customers accounted for substantially all of AquaTex’s total sales.

AquaTex’s customers generally do not enter into long-term agreements obligating them to future services. AquaTex may not continue to receive significant revenues from any of these or from other large customers. A reduction or delay in orders from any of AquaTex’s significant customers, or a delay or default in payment by any significant customer could materially impact AquaTex’s business and prospects. Because of AquaTex’s significant customer concentration, its net sales and operating income could fluctuate significantly due to changes in political or economic conditions, or the loss, reduction of business, or less favorable terms for any of AquaTex’s significant customers.

NOTE 5 – MEMBERS’ EQUITY

Aqua Handling of Texas, LLC was formed on October 15, 2012, by two members. Original members have 51% and 49% ownership in the Company.  During the period from inception through September 30, 2013, there were no contributions by or distributions to the members.

NOTE 6 – RELATED PARTY TRANSACTIONS

AquaTex contracts labor and rents equipment from K&B Services, LLC, an entity that is owned by a member of AquaTex. During the period from inception through September 30, 2013 AquaTex purchased services totaling $351,445 and had outstanding payables of $165,095.

During the period from inception through September 30, 2013, a member of AquaTex advanced $75,883 in funds to the Company and paid $5,000 in payables on behalf of the Company. These amounts are unsecured, non-interest bearing, and due on demand.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

From time to time, AquaTex may be subject to routine litigation, claims, or disputes in the ordinary course of business. In the opinion of management; no pending or known threatened claims, actions or proceedings against AquaTex are expected to have a material adverse effect on AquaTex’s financial position, results of operations or cash flows. AquaTex cannot predict with certainty, however, the outcome or effect of any of the litigation or investigatory matters. There can be no assurance as to the ultimate outcome of these lawsuits and investigations.

In February 2013, AquaTex entered into a month to month lease agreement with an individual in Texas for a yard facility for its equipment storage at a cost of $2,500 per month.

NOTE 8 – SUBSEQUENT EVENTS

On November 12, 2013 the members of AquaTex sold all their interests to HII Technologies, Inc. pursuant to the terms of a Securities Purchase Agreement dated November 11, 2013. 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 (the “Shares”) of HII Technologies, Inc. common stock (valued at $500,000 based on the trailing 30-day average of the Company’s common stock). Additionally, a working capital adjustment provision exists whereby HII Technologies, Inc. would be required to pay the members of AquaTex 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 members at closing.