Friday February 29, 9:00 am ET
CONROE, Texas--(BUSINESS WIRE)--Shumate Industries (OTCBB:SHMT - News) announced today a general business update for its stockholders.
Shumate Machine Works (SMW)
Within our SMW subsidiary, demand has remained strong for the expandable liner hanger products and top drive assemblies that we manufacture for our customers. Additionally, SMW acquired a new computer numeric-controlled (CNC) mill machine, purchased in the fourth quarter of 2007, for about $160,000 which will be allocated to expanding capacity in making upper top drive assemblies and related components.
SMW has recently received two new customer wins, with purchase orders received for “measurement while drilling” (or MWD) tools and formation evaluation products that require complex machining and long-class drill collars that require precision manufacturing. SMW has seen a slow down in its power frame products due to a customer shifting utilization to more of their internal manufacturing.
February 2008 was the largest order entry month of record for SMW, as it received more than $1.3 million in new purchase orders during the month. Machinist hiring and training programs have been successful and SMW direct labor targets have been met. Long-bed lathe CNC machinery procurement is still difficult from tight market supply.
Hemiwedge Valve Corp (HVC)
Hemiwedge® Cartridge Valve Product Line
HVC anticipates signing a new sales representative agreement within the next two months with a large regional U.S. based valve manufacturer’s representative company. HVC believes this agreement will be a big catalyst for future sales growth of the Hemiwedge® Cartridge valve product line. Currently, discussions are underway with five other companies to serve as additional sales representatives in the U.S. and in international markets, which will leverage HVC’s internal direct sales force personnel. HVC is also pursuing a strategic alliance and corporate partnering opportunity with a larger company to access with our technology their market channels currently not in HVC’s 5-year marketing plan.
The U.S. Patent office has recently awarded a new patent issuance on the “Cartridge Invention,” within the Hemiwedge® Cartridge valve design, which extends our current intellectual property for an additional 17 years with this patent. Over the past three years, HVC has filed several other patent applications in the U.S. and worldwide based on new inventions and improvements to the original designs and intellectual property acquired a few years ago.
HVC has designed additional sizes and pressure classes of the Hemiwedge® Cartridge Valve, which are in final stages of product release for manufacturer and sale. HVC is also currently in the process of obtaining additional industry approvals and product qualifications to pursue specific markets and applications within the oil and gas industry in the U.S. and Canada such as production facilities and oil sands operations.
Also, a leading trade magazine has notified HVC that it is publishing a customer testimonial article on field use of the Hemiwedge® Cartridge Valve within the next few weeks. HVC will notify its stakeholders as this comes available.
Hemiwedge® Down hole Valves
HVC is currently working on a final piece in the prototype evaluation of the initial tool system. Further information on this project will be reported as it becomes available.
Hemiwedge® Sub Sea High Pressure Valve
The original anticipated date for concluding a licensing agreement for this project was delayed by mutual interest between HVC and its partner in order to develop additional technology surrounding metal-to-metal (or all metal) seats within the high pressure valve line along with zero leakage and bi-directional sealing. This current design and prototype manufacturing is now completed, and additional patent applications have been applied for in connection with this new technology. HVC currently anticipates moving forward on this licensing agreement following additional partnering pre-commercialization scale-up testing and their final product development have been completed.
Other Hemiwedge® Activities
HVC is actively engaged in sourcing other strategic alliances with companies for additional product forms and applications using its technology -- such as ‘cartridge-only’ designed space saving products for use within sub-sea manifold applications as well as the recent announcement for all metal seated surface-level high pressure valves.
Corporate
Financial Liquidity
While the legacy business, SMW was EBITDA positive during 2007, the R&D, scale-up and operational expenses at HVC did not generate a profit during 2007. The Company anticipates the conclusion of two primary Hemiwedge® development projects by early fiscal 2008 to significantly reduce R&D expenses as well as Hemiwedge® Cartridge valve sales growth increases to start to generate a positive cash flow by fiscal year end 2008.
As reported in the Company’s Quarterly Report on Form 10-QSB for September 30, 2007 end period, Shumate has financed its operations through a combination of debt securities, equity securities, corporate alliance R&D subsidies and bank lines of credit. The Company remains undercapitalized and is focused on sourcing permanent financing in order to refinance debt with short-term maturities and to provide additional working capital. Under the current market conditions, the Company is investigating mezzanine debt opportunities as a source of this permanent financing. Our ability to achieve positive cash flow, both at the HVC level and at the Company-wide level, will be greatly enhanced if we are able to successfully source permanent financing.
In addition to seeking permanent financing, the Company has signed a contract and submitted to title company a “sale and lease back” transaction of one of its facilities. This transaction is currently anticipated to bring in some working capital for the Company within the next few weeks. Additionally, anticipated licensing proceeds and subsidy of current HVC R&D projects should positively impact cash flow during 2008. Finally, the Company recently renewed its credit facility with its senior lender. The bank revolving line of credit was renewed for one year, and the equipment term loan, previously maturing in April 2008, now matures in April 2010 with the renewal advancing an additional approximately $300,000 at closing. See the Company’s Current Report on Form 8-K filed January 31, 2008 for more information about this credit facility renewal.
Larry Shumate, Chairman and CEO, stated, “The Shumate management team is very focused on getting these milestones successfully concluded and enhancing value for its shareholders.”
About Shumate Industries, Inc.
Shumate Industries, Inc. is a Texas-based energy field services company that incorporates new technologies to bring products to market leveraging its existing infrastructure, expertise and customer channels. The Company operates through two wholly owned subsidiaries: 1.) Shumate Machine Works, a contract machining and manufacturing division focused in oilfield tubular products, and 2.) Hemiwedge Valve Corporation, a proprietary new valve technology division. The Hemiwedge® division commercialized its Hemiwedge® Cartridge valve product line targeting oil, gas, process and power markets in early 2007 and is in prototype development of its Hemiwedge® sub-sea high pressure valve product line and a Hemiwedge® down-hole valve product line which it intends to commercialize via corporate partners. For additional information on the Company and its products, please visit www.shumateinc.com.
Forward-Looking Statements
This document contains discussion of items that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurances that its expectations will be achieved. Factors that could cause actual results to differ from expectations include, but are not limited to, customer concentration risk, difficulties in refinancing its debt, difficulties in consolidating the operations of the Company's operating subsidiaries, difficulties in accelerating internal sales growth, volatility of the energy business and its effects on the Company's business, difficulties in new technology acceptance within the energy industry, restrictive covenants in our existing credit facilities, fluctuations in metals prices, general economic conditions in markets in which we do business, extensive environmental and workplace regulation by federal and state agencies and other general risks related to its common stock, and other uncertainties and business issues that are detailed in its filings with the Securities and Exchange Commission. All information provided in this release is as of February 29, 2008 and the Company undertakes no duty to update this information.
Contact:
North Coast Advisors, Investor Relations for the Company:
Craig Stewart, Principal, at 5852187371, or,
Don Michlin, Principal, at 9362712423
The Company:
Shumate Industries, Inc., Conroe, Texas
Matthew Flemming, CFO 9365395770
Source: Shumate Industries, Inc.