What changed in Drilling Tools International Corp's 10-K — 2023 vs 2024
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Paragraph-level year-over-year comparison of Drilling Tools International Corp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.
+369 added−322 removedSource: 10-K (2025-03-14) vs 10-K (2024-03-28)
Top changes in Drilling Tools International Corp's 2024 10-K
369 paragraphs added · 322 removed · 204 edited across 1 sections
- Item 1C. Cybersecurity+369 / −322 · 204 edited
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
204 edited+165 added−118 removed169 unchanged
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
204 edited+165 added−118 removed169 unchanged
2023 filing
2024 filing
Biggest changeThe accompanying notes are an integral part of these consolidated financial statements . 50 CONSOLIDATED STATEMEN TS OF CASH FLOWS Year Ended December 31, (In thousands) 2023 2022 Cash flows from operating activities: Net income $ 14,748 $ 21,080 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 20,352 19,709 Amortization of deferred financing costs 139 94 Amortization of debt discount — 58 Non-cash lease expense 4,515 4,139 Provision for excess and obsolete inventory 75 45 Provision for excess and obsolete property and equipment 122 510 Loss on asset disposal 489 — Bad debt expense 117 307 Deferred tax expense 3,443 1,080 Gain on sale of property ( 101 ) ( 127 ) Unrealized (gain) loss on equity securities 255 ( 234 ) Unrealized (gain) loss on interest rate swap — ( 1,423 ) Realized loss on interest rate swap 4 — Gross profit from sale of lost-in-hole equipment ( 16,686 ) ( 16,813 ) Stock-based compensation expense 3,986 — Changes in operating assets and liabilities: Accounts receivable, net ( 1,048 ) ( 9,268 ) Prepaid expenses and other current assets 519 ( 3,476 ) Inventories, net ( 1,716 ) ( 906 ) Deposits and other long-term assets ( 496 ) 17 Operating lease liabilities ( 4,415 ) ( 4,174 ) Accounts payable ( 1,552 ) ( 1,432 ) Accrued expenses and other current liabilities 583 4,808 Net cash from operating activities 23,334 13,994 Cash flows from investing activities: Proceeds from sale of property and equipment 202 1,042 Purchase of property, plant and equipment ( 43,750 ) ( 24,688 ) Proceeds from sale of lost-in-hole equipment 19,684 21,116 Net cash from investing activities ( 23,864 ) ( 2,530 ) Cash flows from financing activities: Proceeds from Merger and PIPE Financing, net of transaction costs 23,162 — Payment of deferred financing costs ( 324 ) ( 251 ) Proceeds from revolving line of credit 73,050 108,594 Payments on revolving line of credit ( 91,399 ) ( 116,670 ) Payments on long-term debt — ( 1,000 ) Payments on finance leases — ( 10 ) Payments to holders of DTIH redeemable convertible preferred stock in connection with retiring their DTI stock upon the Merger ( 194 ) — Net cash from financing activities 4,295 ( 9,337 ) Effect of Changes in Foreign Exchange Rate ( 114 ) 173 Net Change in Cash 3,651 2,300 Cash at Beginning of Period 2,352 52 Cash at End of Period $ 6,003 $ 2,352 Supplemental cash flow information: Cash paid for interest $ 1,174 $ 340 Cash paid for income taxes $ 3,006 $ 723 Non-cash investing and financing activities: ROU assets obtained in exchange for lease liabilities $ 3,264 $ 7,907 Purchases of inventory included in accounts payable and accrued expenses and other current liabilities $ 601 $ 79 Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities $ 1,422 $ 372 Non-cash directors and officers insurance $ 695 $ — Non-cash Merger financing $ 2,000 $ — Exchange of DTIH redeemable convertible preferred stock for DTIC Common Stock in connection with Merger $ 7,193 $ — Issuance of DTIC Common Stock to former holders of DTIH redeemable convertible preferred stock in connection with Exchange Agreements $ 10,805 $ — Accretion of redeemable convertible preferred stock to redemption value $ 314 $ 1,189 The accompanying notes are an integral part of these consolidated financial statements . 51 NOTE 1 – SUMMARY OF SIFNICIANT ACCOUNTING POLICIES Organization and Structure Drilling Tools International Corporation, a Delaware corporation ("DTIC" or the "Company"), manufactures, rents, inspects, and refurbishes downhole drilling tools primarily to companies in the oil and natural gas industry for bottom hole assemblies used in onshore and offshore horizontal and directional drilling.
Biggest changeAustin, Texas March 14, 2025 We have served as the Company's auditor since 2022. lv CONSOLIDAT ED BALANCE SHEETS December 31, December 31, (In thousands, except share data) 2024 2023 ASSETS Current assets Cash $ 6,185 $ 6,003 Accounts receivable, net 39,606 29,929 Related party note receivable, current 909 — Inventories, net 17,502 5,034 Prepaid expenses and other current assets 3,874 4,553 Investments - equity securities, at fair value — 888 Total current assets 68,076 46,408 Property, plant and equipment, net 75,571 65,800 Operating lease right-of-use asset 22,718 18,786 Intangible assets, net 37,232 216 Goodwill 12,147 — Deferred financing costs, net 817 409 Related party note receivable, less current portion 4,262 — Deposits and other long-term assets 1,608 879 Total assets $ 222,431 $ 132,498 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 11,983 $ 7,751 Accrued expenses and other current liabilities 7,864 10,579 Current portion of operating lease liabilities 4,121 3,958 Current maturities of long-term debt 6,995 — Total current liabilities 30,963 22,288 Operating lease liabilities, less current portion 18,765 14,893 Long term debt, net of current portion 19,676 — Revolving line of credit 27,142 Deferred tax liabilities, net 5,926 6,627 Total liabilities 102,472 43,808 Commitments and contingencies (See Note 15) Shareholders' equity Common stock, $ 0.0001 par value, shares authorized 500,000,000 as of December 31, 2024 and December 31, 2023, 34,704,696 shares issued and outstanding as of December 31, 2024 and 29,768,568 shares issued and outstanding as of December 31, 2023 3 3 Additional paid-in-capital 125,415 95,218 Accumulated deficit ( 3,582 ) ( 6,306 ) Accumulated other comprehensive loss ( 1,877 ) ( 225 ) Total shareholders' equity 119,959 88,690 Total liabilities and shareholders' equity $ 222,431 $ 132,498 The accompanying notes are an integral part of these consolidated financial statements . lvi CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Year Ended December 31, (In thousands, except share and per share data) 2024 2023 Revenue, net: Tool rental $ 117,926 $ 119,239 Product sale 36,520 32,795 Total revenue, net 154,446 152,034 Operating costs and expenses: Cost of tool rental revenue 24,110 28,270 Cost of product sale revenue 14,381 7,249 Selling, general, and administrative expense 78,695 68,264 Depreciation and amortization expense 23,832 20,352 Total operating costs and expenses 141,018 124,135 Income from operations 13,428 27,899 Other expense, net: Interest expense, net ( 3,369 ) ( 1,103 ) Gain on sale of property 60 101 Loss on asset disposal — ( 489 ) Gain (loss) on remeasurement of previously held equity interest 368 ( 255 ) Other income (expense), net ( 7,503 ) ( 6,359 ) Total other expense, net ( 10,444 ) ( 8,105 ) Income before income tax expense 2,984 19,794 Income tax (expense)/benefit 30 ( 5,046 ) Net income $ 3,014 $ 14,748 Accumulated dividends on redeemable convertible preferred stock — 314 Net income available to common shareholders $ 3,014 $ 14,434 Basic earnings per share $ 0.09 $ 0.67 Diluted earnings per share $ 0.09 $ 0.59 Basic weighted-average common shares outstanding 31,938,847 21,421,610 Diluted weighted-average common shares outstanding 32,308,179 25,131,024 Comprehensive income: Net income $ 3,014 $ 14,748 Foreign currency translation adjustment, net of tax ( 1,652 ) ( 114 ) Net comprehensive income $ 1,362 $ 14,634 The accompanying notes are an integral part of these consolidated financial statements . lvii CONSOLIDATED STATEMENTS OF CHANGES IN REDE EMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY Redeemable Convertible Preferred Stock Common Stock (In thousands, except share and per share data) Shares Amount Shares Amount Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Shareholders' Equity BALANCE, December 31, 2022 6,719,641 $ 17,878 11,951,137 $ 1 $ 52,388 $ ( 21,054 ) $ ( 111 ) $ 31,224 Net exercise of stock options by DTIH stockholder (Note 2) - - 36,163 - - - - - Accretion of redeemable convertible preferred stock to redemption value prior to closing of the Merger - 314 - - ( 314 ) - - ( 314 ) Exchange of DTIH redeemable convertible preferred stock for DTIC Common Stock (Note 2) ( 6,719,641 ) ( 18,192 ) 6,719,641 1 7,192 - - 7,193 Issuance of DTIC Common Stock to former holders of DTIH redeemable convertible preferred stock in connection with Exchange Agreements (Note 2) - - 2,042,181 - 10,805 - - 10,805 Merger, net of redemptions and transaction costs (Note 2) - - 5,711,721 1 ( 8,839 ) - - ( 8,838 ) Issuance of DTIC Common Stock in connection with the consummation of the PIPE Financing (Note 2) - - 2,970,296 - 30,000 - - 30,000 Stock-based compensation - - 337,429 - 3,986 - - 3,986 Foreign currency translation adjustment, net of tax - - - - - - ( 114 ) ( 114 ) Net income - - - - - 14,748 - 14,748 BALANCE, December 31, 2023 - $ - 29,768,568 $ 3 $ 95,218 $ ( 6,306 ) $ ( 225 ) $ 88,690 Stock-based compensation - - - - 1,647 - - 1,647 Shares issued due to vesting of restricted stock units - - 74,440 - 443 - - 443 Exercise of stock options - - 16,556 - 255 ( 290 ) - ( 35 ) Issuance of Common Stock related to business combinations - - 4,845,132 - 27,714 - - 27,714 Accelerated vesting of substitute stock options - - - - 138 - - 138 Foreign currency translation adjustment, net of tax - - - - - - ( 1,652 ) ( 1,652 ) Net income - - - - - 3,014 - 3,014 BALANCE, December 31, 2024 - $ - 34,704,696 $ 3 $ 125,415 $ ( 3,582 ) $ ( 1,877 ) $ 119,959 The accompanying notes are an integral part of these consolidated financial statements. 58 CONSOLIDATED STATEMEN TS OF CASH FLOWS Year Ended December 31, (In thousands) 2024 2023 Cash flows from operating activities: Net income $ 3,014 $ 14,748 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 23,832 20,352 Amortization of deferred financing costs 313 139 Non-cash lease expense 5,121 4,515 Unrealized loss on currency remeasurement 225 — Provision for excess and obsolete inventory — 75 Provision for excess and obsolete property and equipment — 122 Provision for credit losses 424 117 Deferred tax expense/(benefit) ( 778 ) 3,443 Loss on asset disposal — 489 Gain on sale of property ( 60 ) ( 101 ) Realized loss on equity securities 12 — Unrealized (gain) loss on equity securities ( 368 ) 255 Realized loss on interest rate swap — 4 Gross profit from sale of lost-in-hole equipment ( 10,027 ) ( 16,686 ) Stock-based compensation expense 2,092 3,986 Interest Income on related party note receivable ( 151 ) Changes in operating assets and liabilities: Accounts receivable, net ( 4,015 ) ( 1,048 ) Prepaid expenses and other current assets 874 519 Inventories, net ( 4,320 ) ( 1,716 ) Deposits and other current assets — ( 496 ) Operating lease liabilities ( 4,832 ) ( 4,415 ) Accounts payable ( 78 ) ( 1,552 ) Accrued expenses and other current liabilities ( 5,220 ) 583 Net cash flows from operating activities 6,058 23,334 Cash flows from investing activities: Acquisition of a business, net of cash acquired ( 47,258 ) — Proceeds from sale of property and equipment 79 202 Purchase of property, plant and equipment ( 22,892 ) ( 43,750 ) Proceeds from sale of lost-in-hole equipment 15,253 19,684 Proceeds from sale of equity securities 1,244 — Purchases of intangible assets ( 12 ) — Net cash flows from investing activities ( 53,586 ) ( 23,864 ) Cash flows from financing activities: Proceeds from Merger and PIPE Financing, net of transaction costs — 23,162 Payment of deferred financing costs ( 722 ) ( 324 ) Proceeds from revolving line of credit 38,618 73,050 Payments on revolving line of credit ( 11,476 ) ( 91,399 ) Proceeds from long-term debt 25,000 — Payments on long-term debt ( 3,535 ) — Payments to holders of DTIH redeemable convertible preferred stock in connection with retiring their DTI stock upon the Merger — ( 194 ) Net cash flows from financing activities 47,885 4,295 Effect of Changes in Foreign Exchange Rate ( 175 ) ( 114 ) Net Change in Cash 182 3,651 Cash at Beginning of Period 6,003 2,352 Cash at End of Period $ 6,185 $ 6,003 Supplemental cash flow information: Cash paid for interest $ 2,673 $ 1,174 Cash paid for income taxes $ 2,970 $ 3,006 Non-cash investing and financing activities: Fair value of CTG liabilities assumed in CTG Acquisition $ 3,162 $ — Fair value of SDPI liabilities assumed in SDPI Acquisition $ 6,246 $ — Fair value of EDP liabilities assumed in EDP Acquisition $ 1,769 $ — ROU assets obtained in exchange for lease liabilities $ 5,737 $ 3,264 Non-cash recovery of note receivable $ 453 $ — Net exercise of stock options $ 254 $ — Shares withheld from exercise of stock options for payment of taxes $ 36 $ — Purchases of inventory included in accounts payable and accrued expenses and other current liabilities $ 1,176 $ 601 Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities $ 126 $ 1,422 Non-cash directors and officers insurance $ — $ 695 Non-cash Merger financing $ — $ 2,000 Exchange of DTIH redeemable convertible preferred stock for DTIC Common Stock in connection with Merger $ — $ 7,193 Issuance of DTIC Common Stock to former holders of DTIH redeemable convertible preferred stock in connection with Exchange Agreements $ — $ 10,805 Accretion of redeemable convertible preferred stock to redemption value $ — $ 314 The accompanying notes are an integral part of these consolidated financial statements . 59 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Structure Drilling Tools International Corporation, a Delaware corporation ("DTIC" or the "Company"), manufactures, rents, inspects, and refurbishes downhole drilling tools primarily to companies in the oil and natural gas industry for bottom hole assemblies used in onshore and offshore horizontal and directional drilling.
As part of this straight-line methodology, when the equipment is returned, the Company recognizes as incremental revenue the excess, if any, between the amount the customer is contractually required to pay, which is based on the rental contract period applicable to the actual number of days the drilling tool was out on rent, over the cumulative amount of revenue recognized to date.
As part of this straight-line methodology, when the equipment is returned, the Company recognizes as incremental revenue the excess, if any, between the amount the customer is contractually required to pay, which is based on the rental contract period applicable to the actual number of days the drilling tool was out on rent, over the cumulative amount of revenue recognized to date.
In any given accounting period, the Company will have customers return the drilling tool and be contractually required to pay the Company more than the cumulative amount of revenue recognized to date under the straight-line methodology. Additionally, the Company has rental contracts that are based on usage, either on a per footage or per well basis.
In any given accounting period, the Company will have customers return the drilling tool and be contractually required to pay the Company more than the cumulative amount of revenue recognized to date under the straight-line methodology. Additionally, the Company has rental contracts that are based on usage, either on a per footage or per well basis.
ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of the future minimum lease payments over the lease term. Operating lease ROU assets also include the impact of any lease incentives. An amendment to a lease is assessed to determine if it represents a lease modification or a separate contract.
ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of the future minimum lease payments over the lease term. Operating lease ROU assets also include the impact of any lease incentives. An amendment to a lease is assessed to determine if it represents a lease modification or a separate contract.
Our agreements with our customers for rental equipment contain an operating lease component under ASC 842 because (i) there are identified assets, (ii) the customer has the right to obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use and (iii) the customer directs the use of the identified assets throughout the period of use.
Our agreements with our customers for rental equipment contain an operating lease component under ASC 842 because (i) there are identified assets, (ii) the customer has the right to obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use and (iii) the customer directs the use of the identified assets throughout the period of use.
Although no assurance can be given with respect to the outcome of these or any other pending legal and administrative proceedings and the effect such outcomes may have, in the opinion of our management, there is no pending litigation, dispute or claim against us that, if decided adversely, will have a material adverse effect on our results of operations, financial condition or cash flows.
Although no assurance can be given with respect to the outcome of these or any other pending legal and administrative proceedings and the effect such outcomes may have, in the opinion of our management, there is no xxxv pending litigation, dispute or claim against us that, if decided adversely, will have a material adverse effect on our results of operations, financial condition or cash flows.
We elected not to recognize leases with an initial term of 12 months or less within the consolidated balance sheets and to recognize those lease payments on a straight-line basis in the consolidated statements of operation over the lease term. The new lease accounting standard also provides practical expedients for an entity’s ongoing accounting.
We elected not to recognize leases with an initial term of 12 months or less within the consolidated balance sheets and to recognize those lease payments on a straight-line basis in the consolidated statements of operation over the lease term. The new lease accounting standard also provides practical expedients xlix for an entity’s ongoing accounting.
Property, Plant and Equipment 56 Property, plant and equipment purchased by the Company are recorded at cost less accumulated depreciation. Depreciation is recorded using the straight-line method based on the estimated useful lives of the depreciable property or, for leasehold improvements, the remaining term of the lease, whichever is shorter. Assets not yet placed in use are not depreciated.
Property, Plant and Equipment Property, plant and equipment purchased by the Company are recorded at cost less accumulated depreciation. Depreciation is recorded using the straight-line method based on the estimated useful lives of the depreciable property or, for leasehold improvements, the remaining term of the lease, whichever is shorter. Assets not yet placed in use are not depreciated.
Per a post-closing amendment, Company Options currently held by former holders of DTIH stock options are no longer subject to employment considerations. The fair value of each stock option award is estimated on the date of grant using a Black-Scholes option valuation model. Expected volatilities are based on comparable public company data.
Per a post-closing amendment, Company Options currently held by former holders of DTIH stock options are no longer subject to employment considerations. The fair value of each stock option award is estimated on the date of grant using a Black-Scholes model. Expected volatilities are based on comparable public company data.
ASC 842 was adopted using the modified retrospective transition approach, with no restatement of prior periods or cumulative adjustments to retained earnings. We recognize revenue in accordance with two different accounting standards: 1) Topic 606 (which addresses revenue from contracts with customers) and 2) Topic 842 (which addresses lease revenue).
ASC 842 was adopted using the modified retrospective transition approach, with no restatement of prior periods or cumulative adjustments to retained earnings. xlvii We recognize revenue in accordance with two different accounting standards: 1) Topic 606 (which addresses revenue from contracts with customers) and 2) Topic 842 (which addresses lease revenue).
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the revenue standard. The transaction price is measured as consideration specified in a contract with a customer and excludes any sales incentives and taxes or other amounts collected on behalf of third parties.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer xlviii and is the unit of account in the revenue standard. The transaction price is measured as consideration specified in a contract with a customer and excludes any sales incentives and taxes or other amounts collected on behalf of third parties.
The Company uses future estimated employee termination and forfeiture rates of the options within the valuation model. The expected term of options granted is derived using the “plain vanilla” method due to the lack of history and volume of option activity at the Company. The risk-free rate is based on the approximate U.S.
The Company uses future estimated employee termination and forfeiture rates of the 81 options within the valuation model. The expected term of options granted is derived using the “plain vanilla” method due to the lack of history and volume of option activity at the Company. The risk-free rate is based on the approximate U.S.
Selected Financial Data. [Reserved] 30 It em 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Drilling Tools International Holdings, Inc. (“DTIH”) entered into a business combination agreement (the “Agreement”) with ROC Energy Acquisition Corp. (“ROC”) on February 13, 2023.
Selected Financial Data. [Reserved] It em 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Drilling Tools International Holdings, Inc. (“DTIH”) entered into a business combination agreement (the “Agreement”) with ROC Energy Acquisition Corp. (“ROC”) on February 13, 2023.
Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
At times, the Company may elect to early adopt a new or revised standard. As such, the Company’s financial statements may not be comparable to companies that comply with public company effective dates. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S.
At times, the Company may elect to early 60 adopt a new or revised standard. As such, the Company’s financial statements may not be comparable to companies that comply with public company effective dates. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Weaver and Tidwell, L.L.P.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. / s / Weaver and Tidwell, L.L.P.
Key Components of Results of Operations The discussion below relating to significant line items from our consolidated statements of operations and comprehensive income are based on available information and represent our analysis of significant changes or events that impact the comparability of the reported amount.
Key Components of Results of Operations xxxix The discussion below relating to significant line items from our consolidated statements of operations and comprehensive income are based on available information and represent our analysis of significant changes or events that impact the comparability of the reported amount.
This was partially offset by a complete paydown on the Credit 39 Facility Agreement of $18.3 million, payments of deferred financing costs of $0.3 million, and payments to holders of DTIH convertible preferred stock in connection with the Merger of $0.2 million.
This was partially offset by a complete paydown on the Credit Facility Agreement of $18.3 million, payments of deferred financing costs of $0.3 million, and payments to holders of DTIH convertible preferred stock in connection with the Merger of $0.2 million.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company recognizes lease expense for its operating leases on a straight-line basis over the term of the lease. 57 ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from a lease.
The Company recognizes lease expense for its operating leases on a straight-line basis over the term of the lease. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from a lease.
The Company records the amounts billed to customers in excess of recognizable revenue as deferred revenue on its consolidated balance sheet. 54 As noted above, the Company is unsure of when the customer will return rented drilling tools.
The Company records the amounts billed to customers in excess of recognizable revenue as deferred revenue on its consolidated balance sheet. As noted above, the Company is unsure of when the customer will return rented drilling tools.
Contract estimates and judgments Our revenues accounted for under Topic 606 generally do not require significant estimates or judgments, primarily because: • The transaction price is generally fixed and stated in our contracts; • As noted above, out contracts generally do not include multiple performance obligations, and accordingly, do not require estimates of standalone selling price for each performance obligation; • Our revenues do not include material amounts of variable consideration, or result in significant obligations associated with returns, refunds, or warranties; and • Most of our revenue is recognized when the applicable performance obligations are readily determinable.
Contract estimates and judgments Our revenues accounted for under Topic 606 generally do not require significant estimates or judgments, primarily because: • The transaction price is generally fixed and stated in our contracts; • As noted above, out contracts generally do not include multiple performance obligations, and accordingly, do not require estimates of standalone selling price for each performance obligation; • Our revenues do not include variable consideration, or result in significant obligations associated with returns, refunds, or warranties; and • Most of our revenue is recognized when the applicable performance obligations are readily determinable.
Cybersecurity Risk Identification and Management The Company has a cybersecurity Risk Management Policy in place that governs the life cycle in which cybersecurity risks, including: • Risk Identification: through various initiatives performed, including, annual assessments, penetration tests, Incident Response tabletop exercises, vulnerability scans, and cybersecurity reviews of critical third-party vendor engagements, etc. • Risk Evaluation & Treatment: Identified issues, vulnerabilities, and exposures are captured within the Company’s Risk Register, which is updated periodically to reflect the most up to date treatment option selected by the Risk Owners. • Risk Reporting and Ongoing Management: Potentially material risks are shared as part of a monthly Cybersecurity Governance Forum, that’s attended by leadership.
Cybersecurity Risk Identification and Management The Company has a cybersecurity Risk Management Policy in place that governs the life cycle in which cybersecurity risks, including: • Risk Identification: through various initiatives performed, including, annual assessments, penetration tests, Incident Response tabletop exercises, vulnerability scans, system monitoring activities, and cybersecurity reviews of critical third-party vendor engagements, etc. • Risk Evaluation & Treatment: Identified issues, vulnerabilities, and exposures are captured within the Company’s Risk Register, which is updated periodically to reflect the most up to date treatment option selected by the Risk Owners. • Risk Reporting and Ongoing Management: Potentially material risks are shared as part of a monthly Cybersecurity Governance Forum, that’s attended by leadership.
Nonetheless, we cannot be confident that transit times or input prices will return to the lower levels experienced in prior years. Continued inflation and looming concerns regarding a possible recession weigh on the outlook for oil demand which could in turn negatively impact demand for our goods and services. 45 Ite m 8. Financial Statements and Supplementary Data.
Nonetheless, we cannot be confident that transit times or input prices will return to the lower levels experienced in prior years. Continued inflation and looming concerns regarding a possible recession weigh on the outlook for oil demand which could in turn negatively impact demand for our goods and services. liii Ite m 8. Financial Statements and Supplementary Data.
For the year ended December 31, 2023 and 2022, management determined that there were no triggering events necessitating impairment testing of property, plant, and equipment or intangible assets. Leases The Company adopted ASC 842, Leases (“ASC 842”) as of January 1, 2022 using the modified retrospective transition approach, with no restatement of prior periods or cumulative adjustments to retained earnings.
For the year ended December 31, 2024 and 2023, management determined that there were no triggering events necessitating impairment testing of property, plant, and equipment or intangible assets. 64 Leases The Company adopted ASC 842, Leases (“ASC 842”) as of January 1, 2022 using the modified retrospective transition approach, with no restatement of prior periods or cumulative adjustments to retained earnings.
(3) Index to Exhibits The exhibits required to be filed or furnished pursuant to Item 601 of Regulation S-K are set forth below. 88 Exhibit Index Exhibit Number Description 2.1 Agreement and Plan of Merger, dated as of February 13, 2023, by and among ROC Energy Acquisition Corp., ROC Merger Sub, Inc. and Drilling Tools International Holdings, Inc.
(3) Index to Exhibits The exhibits required to be filed or furnished pursuant to Item 601 of Regulation S-K are set forth below. 90 Exhibit Index Exhibit Number Description 2.1 Agreement and Plan of Merger, dated as of February 13, 2023, by and among ROC Energy Acquisition Corp., ROC Merger Sub, Inc. and Drilling Tools International Holdings, Inc.
Accounting Standards Issued Not Yet Effective In December 2023, FASB issued Accounting Standard Update (“ASU”) 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which requires enhanced income tax disclosures that reflect how operations and related tax risks, as well as how tax planning and operational opportunities, affect the tax rate and prospects for future cash flows.
Recent Accounting Pronouncements - Accounting Standards Issued Not Yet Effective In December 2023, FASB issued Accounting Standard Update (“ASU”) 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which requires enhanced income tax disclosures that reflect how operations and related tax risks, as well as how tax planning and operational opportunities, affect the tax rate and prospects for future cash flows.
Basis for Opinion These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
Basis for Opinion These consolidated financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
See Note 15, Commitments and Contingencies. It em 4. Mine Safety Disclosures. Not applicable. 29 PART II It em 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information The Common Stock is listed on Nasdaq under the symbol “DTI”.
See Note 15, Commitments and Contingencies. It em 4. Mine Safety Disclosures. Not applicable. xxxvi PART II It em 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information The Common Stock is listed on Nasdaq under the symbol “DTI”.
The Company’s tax years remain open for examination by all tax authorities since inception and carryover attributes remain open to adjustment by the U.S. and state authorities. 75 NOTE 12 – STOCK-BASED COMPENSATION On June 20, 2023, the Company adopted the Drilling Tools International Corporation 2023 Omnibus Incentive Plan (the "2023 Plan").
The Company’s tax years remain open for examination by all tax authorities since inception and carryover attributes remain open to adjustment by the U.S. and state authorities. NOTE 12 – STOCK-BASED COMPENSATION Stock Options On June 20, 2023, the Company adopted the Drilling Tools International Corporation 2023 Omnibus Incentive Plan (the "2023 Plan").
DTI considers both current conditions and reasonable and supportable forecasts of future conditions when evaluating expected credit losses for uncollectible receivable balances. In our determination of the allowance for credit losses, we pool receivables by days outstanding and apply an expected credit loss percentage to each pool.
The Company considers both current conditions and reasonable and supportable forecasts of future conditions when evaluating expected credit losses for uncollectible receivable balances. In our determination of the allowance for credit losses, we pool receivables by days outstanding and apply an expected credit loss percentage to each pool.
The impact of the Company’s creditworthiness has also been factored into the fair value measurement of the interest rate swap in a liability position. For the years ended December 31, 2023 and 2022, the application of valuation techniques applied to similar assets and liabilities has been consistent.
The impact of the Company’s creditworthiness has also been factored into the fair value measurement of the interest rate swap in a liability position. For the years ended December 31, 2024 and 2023, the application of valuation techniques applied to similar assets and liabilities has been consistent.
Certain Relationships and Related Transactions, and Director Independence. The information required by this item (and only such information) is incorporated by reference to our Proxy Statement. Ite m 14. Principal Accounting Fees and Services. The information required by this item (and only such information) is incorporated by reference to our Proxy Statement. 87 PART IV It em 15.
Certain Relationships and Related Transactions, and Director Independence. The information required by this item (and only such information) is incorporated by reference to our Proxy Statement. Ite m 14. Principal Accounting Fees and Services. The information required by this item (and only such information) is incorporated by reference to our Proxy Statement. 89 PART IV It em 15.
The amount of the impairment loss is the excess of the asset’s carrying amount over its fair value. For the year ended December 31, 2023 and 2022, management determined that there was no impairment with regard to our property, plant, and equipment.
The amount of the impairment loss is the excess of the asset’s carrying amount over its fair value. For the year ended December 31, 2024 and 2023, management determined that there was no impairment with regard to our property, plant, and equipment.
We apply the short-term lease policy election, which allows us to exclude from recognition leases with an original term of 12 months or less. We have not entered into any finance leases as of December 31, 2023.
We apply the short-term lease policy election, which allows us to exclude from recognition leases with an original term of 12 months or less. We have not entered into any finance leases as of December 31, 2024.
DTI would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year following the fifth anniversary of the date of the completion of the offering on December 6, 2021; (ii) the last day of the fiscal year in 43 which its total annual gross revenue is equal to or more than $1.07 billion (iii) the date on which it has issued more than $1.0 billion in nonconvertible debt during the previous three years or (iv) the date on which it is deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission. 44 Ite m 7A.
DTI would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year following the fifth anniversary of the date of the completion of the offering on December 6, 2021; (ii) the last day of the fiscal year in which its total annual gross revenue is equal to or more than $1.235 billion (iii) the date on which it has issued more than $1.0 billion in nonconvertible debt during the previous three years or (iv) the date on which it is deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission. lii Ite m 7A.
Leases For the years ended December 31, 2023 and 2022, the Company paid rent expense to Cree Investments, LLC, a shareholder of the Company, of approximately $ 51 thousand and $ 51 thousand, respectively, relating to the lease of a building.
Leases For the years ended December 31, 2024 and 2023, the Company paid rent expense to Cree Investments, LLC, a shareholder of the Company, of approximately $ 51 thousand and $ 51 thousand, respectively, relating to the lease of a building.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Not applicable. It em 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 86 PART III It em 10. Directors, Executive Officers and Corporate Governance. The information required by this item (and only such information) is incorporated by reference to our Proxy Statement. It em 11. Executive Compensation.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 88 PART III It em 10. Directors, Executive Officers and Corporate Governance. The information required by this item (and only such information) is incorporated by reference to our Proxy Statement. It em 11. Executive Compensation.
However, there were no amounts recognized relating to interest and penalties in the consolidated statements of income and comprehensive income for the year ended December 31, 2023 and 2022.
However, there were no amounts recognized relating to interest and penalties in the consolidated statements of income and comprehensive income for the year ended December 31, 2024 and 2023.
I tem 9A. Controls and Procedures. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.
The process of maintaining effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ R. Wayne Prejean President, CEO, and Director March 28, 2024 R. Wayne Prejean (Principal Executive Officer) /s/ David R.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ R. Wayne Prejean President, CEO, and Director March 14, 2025 R. Wayne Prejean (Principal Executive Officer) /s/ David R.
As part of this straight-line methodology, when the equipment is returned, we recognize as incremental revenue the excess, if any, of the amount the customer is contractually required to pay, which is based on the rental contract period applicable to the actual number of days the drilling tool was rented, over the cumulative amount of revenue recognized to date.
As part of this straight-line methodology, when the equipment is returned, we recognize as incremental revenue the excess, if any, between the amount the customer is contractually required to pay, which is based on the rental contract period applicable to the actual number of days the drilling tool was out on rent, over the cumulative amount of revenue recognized to date.
DRILLING TOOLS INTERNATIONAL CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID Number 410 ) Consolidated Balance Sheets as of December 31. 2023 and 2022 Consolidated Statement of Income and Comprehensive Income for the Years Ended December 31, 2023 and 2022 Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Shareholder's Equity for the Years Ended December 31 2023, and 2022 Consolidated Statement of Cash Flows for the Years Ended December 31, 2023 and 2022 Notes to the Consolidated Financial Statements 46 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Drilling Tools International Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Drilling Tools International Corporation (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income and comprehensive income, changes in redeemable convertible preferred stock and shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).
DRILLING TOOLS INTERNATIONAL CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID Number 410 ) Consolidated Balance Sheets as of December 31, 2024 and 2023 Consolidated Statement of Income and Comprehensive Income for the Years Ended December 31, 2024 and 2023 Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Shareholder's Equity for the Years Ended December 31 2024, and 2023 Consolidated Statement of Cash Flows for the Years Ended December 31, 2024 and 2023 Notes to the Consolidated Financial Statements liv Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders Drilling Tools International Corporation Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Drilling Tools International Corporation (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of income and comprehensive income, consolidated statements of changes in redeemable convertible preferred stock and shareholders’ equity and consolidated statements of cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).
If the income tax position is expected to meet the more likely than not criteria, 61 the benefit recorded in the consolidated financial statements equals the largest amount that is greater than 50 % likely to be realized upon its ultimate settlement. The Company has no uncertain tax positions at December 31, 2023 and 2022.
If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the consolidated financial statements equals the largest amount that is greater than 50 % likely to be realized upon its ultimate settlement. The Company has no uncertain tax positions at December 31, 2024 and 68 2023.
This standard is effective for the Company beginning January 1, 2025 with early adoption permitted. The Company is evaluating the effects of adopting this new accounting guidance on its disclosures but does not currently expect adoption will have a material impact on the Company’s consolidated financial statements. The Company does not intend to early adopt this ASU.
This standard is effective for the Company beginning January 1, 2025 with early adoption permitted. The Company is evaluating the effects of adopting this new accounting guidance on its disclosures but does not currently expect adoption will have a material impact on the Company’s consolidated financial statements. The Company is currently evaluating the effects of adopting this new accounting guidance.
Cash Flows (Used In) Provided by Financing Activities Net cash provided by financing activities for the year ended December 31, 2023 was $4.3 million resulting from proceeds from the Merger and PIPE Financing, net of transaction costs, of $23.1 million.
Net cash provided by financing activities for the year ended December 31, 2023 was $4.3 million resulting from proceeds from the Merger and PIPE Financing, net of transaction costs, of $23.1 million.
Management fees paid to the shareholder are included in selling, general and administrative expense in the accompanying consolidated statements of income and comprehensive income. Director fees For the years ended December 31, 2023 and 2022, director fees paid to our Board of Directors were approximately $ 0.2 million and $ 0.1 million, respectively.
Management fees paid to the shareholder are included in selling, general and administrative expense in the accompanying consolidated statements of income and comprehensive income. Director fees For the years ended December 31, 2024 and 2023, director fees paid to our Board of Directors were approximately $ 0.6 million and $ 0.2 million, respectively.
Working Capital Loan Prior to the Merger on June 20, 2023, ROC paid the remaining outstanding principal amount owed to an affiliate of the ROC Sponsor in the amount of $ 0.4 million for a loan to fund working capital deficiencies and finance transaction costs in connection with the Merger.
Working Capital Loan Prior to the Merger on June 20, 2023, ROC paid the remaining outstanding principal amount owed to an affiliate of the ROC Sponsor in the amount of $ 0.4 million for a loan to fund working capital deficiencies and finance transaction costs in connection with the Merger. The loan did not bear interest.
How We Evaluate Our Operations We use a number of financial and operational measures to routinely analyze and evaluate the performance of our business, including revenue, net and non-GAAP measures Adjusted EBITDA and Free Cash Flow.
How We Evaluate Our Operations We use a number of financial and operational measures to routinely analyze and evaluate the performance of our business, including revenue, net and non-GAAP measures Adjusted EBITDA.
As such, we do not know how much the customer will owe us upon return of the tool and we therefore cannot provide a maturity analysis of future lease payments. Our drilling tools are generally rented for short periods of time, oftentimes for significantly less than a year. Lessees do not provide residual value guarantees on rented equipment.
As such, we do not know how much the customer will owe us upon return of the tool and we therefore cannot provide a maturity analysis of future lease payments. Our drilling tools are generally rented for short periods of time. Lessees do not provide residual value guarantees on rented equipment.
Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15 under the Exchange Act, management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures in effect as of December 31, 2023, the end of the period covered by this Report, using the Internal Control Integrated Framework (“ICIF”) by COSO.
Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15 under the Exchange Act, management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures in effect as of December 31, 2024, the end of the period covered by this Report, using the Internal Control Integrated Framework (“ICIF”) by the Committee of Sponsoring Organizations (COSO).
As of December 31, 2023 and 2022, we had an accumulated deficit of $6.3 million and $21.1 million, respectively. We believe our future financial performance will be driven by continued investment in oil and gas drilling following years of industry underinvestment.
As of December 31, 2024 and 2023, we had an accumulated deficit of $3.6 million and $6.3 million, respectively. We believe our future financial performance will be driven by continued investment in oil and gas drilling following years of industry underinvestment.
Other (expense) income, net Our other (expense) income, net is primarily comprised of interest income (expense), gain on sale of property, unrealized gain (loss) on securities, and other miscellaneous income and expense unrelated to our core operations.
Other expense, net Our other expense, net is primarily comprised of interest income (expense), gain on sale of property, unrealized gain (loss) on securities, transaction related expenses, and other miscellaneous income and expense unrelated to our core operations.
The performance obligation for made to order product sales is satisfied and revenue is recognized when control of the asset transfers to the customer, which typically occurs upon delivery of the product or when the product is made available to the customer for pickup at our shipping dock.
The performance obligation for made to order product sales is satisfied and revenue is recognized when control of the asset transfers to the customer, which typically occurs upon delivery of the product or when the product is picked up at our shipping dock.
As of December 31, 2023 and 2022, the Company did not have any material contract liabilities. All deferred revenue were expected to be recognized during the following 12 months, and they were recorded in accrued expenses and other current liabilities in the accompanying consolidated balance sheets.
As of December 31, 2024 and 2023, the Company did no t have any material contract liabilities. All deferred revenue were expected to be recognized during the following 12 months, and they were recorded in accrued expenses and other current liabilities in the accompanying consolidated balance sheets.
The 2023 Plan provides for the issuance of shares of Common Stock up to ten percent ( 10 %) of the shares of outstanding Common Stock as of the closing of the Merger (which equates to 0 shares as of December 31, 2023) and automatically increases on the first trading day of each calendar year by the number of shares of Common Stock equal to three percent ( 3 %) of the total number of outstanding Common Stock on the last day of the prior calendar year.
The 2023 Plan provides for the issuance of shares of Common Stock up to ten percent ( 10 %) of the shares of outstanding Common Stock as of the closing of the Merger and automatically increases on the first trading day of each calendar year by the number of shares of Common Stock equal to three percent ( 3 %) of the total number of outstanding Common Stock on the last day of the prior calendar year.
As a result, we were not able to rely upon the disclosure controls and procedures that were in place as of December 31, 2023, or as of the date of this filing, and we continue to have a material weakness in our internal control over financial reporting. This material weakness is described in more detail below.
As a result, we were not able to rely upon the disclosure controls and procedures that were in place as of December 31, 2024 and we continue to have a material weakness in our internal control over financial reporting. This material weakness is described in more detail below.
(incorporated by reference to Exhibit 10.18 to ROC Energy Acquisition Corp.’s Registration Statement on Form S 4 (File No. 333-269763), filed with the Securities and Exchange Commission on February 14, 2023). 10.8# Form of 2023 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to ROC Energy Acquisition Corp.’s Registration Statement on Form S-4 (File No. 333-269763), filed with the Securities and Exchange Commission on February 14, 2023). 10.9 Assignment and Assumption Agreement, dated as of June 20, 2023, between Drilling Tools International Holdings, Inc. and Drilling Tools International Corporation (incorporated by reference 89 to Exhibit 10.13 to Drilling Tools International Corporation’s Registration Statement on Form S-1 (File No. 333-273348), filed with the Securities and Exchange Commission on July 20, 2023). 21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to Drilling Tools International Corporation’s Current Report on Form 8-K (File No. 001-41103), filed with the Securities and Exchange Commission on June 27, 2023). 23.1* Consent of Independent Registered Public Accounting Firm. 24.1 Power of Attorney (included on signature page hereto). 31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended. 31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended. 32.1* Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Chief Financial Officer pursuant to Schedule 906 of the Sarbanes-Oxley Act of 2002 . 97.1* DTI Clawback Policy - 8398475 101.INS* Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document 101.SCH* Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents 104* Cover page formatted as Inline XBRL and contained in Exhibit 101 * Filed herewith. Certain exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2).
(incorporated by reference to Exhibit 10.18 to ROC Energy Acquisition Corp.’s Registration Statement on Form S 4 (File No. 333-269763), filed with the Securities and Exchange Commission on February 14, 2023). 10.8# Form of 2023 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to ROC Energy Acquisition Corp.’s Registration Statement on Form S-4 (File No. 333-269763), filed with the Securities and Exchange Commission on February 14, 2023). 10.9 Assignment and Assumption Agreement, dated as of June 20, 2023, between Drilling Tools International Holdings, Inc. and Drilling Tools International Corporation (incorporated by reference to Exhibit 10.13 to Drilling Tools International Corporation’s Registration Statement on Form S-1 (File No. 333-273348), filed with the Securities and Exchange Commission on July 20, 2023). 10.10 Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated as of March 15, 2024, by and among Drilling Tools International, Inc., certain of its subsidiaries and PNC Bank, National Association (incorporated by reference to Exhibit 10.1 to Drilling Tools International Corporation’s Current Report on Form 8-K (File No. 001-41103), filed with the Securities and Exchange Commission on March 15, 2024). 19.1* Drilling Tools International Corporation Insider Trading Policy 91 21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to Drilling Tools International Corporation’s Current Report on Form 8-K (File No. 001-41103), filed with the Securities and Exchange Commission on June 27, 2023). 23.1* Consent of Independent Registered Public Accounting Firm. 24.1 Power of Attorney (included on signature page hereto). 31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended. 31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended. 32.1* Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Chief Financial Officer pursuant to Schedule 906 of the Sarbanes-Oxley Act of 2002 . 97.1* DTI Clawback Policy - 8398475 101.INS* Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document 101.SCH* Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents 104* Cover page formatted as Inline XBRL and contained in Exhibit 101 * Filed herewith. Certain exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2).
In connection with our preparation and the audit of our consolidated financial statements as of and for the year ended December 31, 2022, we identified the following deficiencies in the design or operation of our internal controls to be a material weakness: • Failure to promote effective internal control over financial reporting throughout the Company’s management structure; • Failure to develop effective risk assessment controls to identify financial reporting risks and reacting to changes in the operating environment that could have a material effect on financial reporting; • Ineffective monitoring activities to assess the operation of internal control over financial reporting; and • Inadequate documentation and monitoring of information technology (“IT”) general controls and cyber-security processes within the Company’s IT environment, including access controls and segregation of duties between key IT functions.
In connection with our preparation and the audit of our consolidated financial statements as of and for the year ended December 31, 2022 , we identified the following deficiencies in the design or operation of our internal controls to be a material weakness: • Failure to promote effective internal control over financial reporting throughout the Company’s management structure; • Failure to develop effective risk assessment controls to identify financial reporting risks and reacting to changes in the operating environment that could have a material effect on financial reporting; • Inadequate documentation and monitoring of information technology (“IT”) general controls and cyber-security processes within the Company’s IT environment, including access controls and segregation of duties between key IT functions; and 86 • Ineffective monitoring activities to assess the operation of internal control over financial reporting; During 2023 and 2024, management made significant progress on remediation initiatives in response to the previously identified material weakness.
None. 90 SIGN ATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . Company Name Date: March 28, 2024 By: /s/ R. Wayne Prejean R.
None. 92 SIGN ATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . Company Name Date: March 14, 2025 By: /s/ R. Wayne Prejean R.
Such leases are accounted for in accordance with ASC 842. For the year ended December 31, 2023 and 2022, tool rental revenue was approximately $ 119.2 million and $ 99.0 million , respectively. Our lease contract periods are short-term in nature and are typically daily, monthly, per well, or footage based.
Such leases are accounted for in accordance with ASC 842. For the year ended December 31, 2024 and 2023, tool rental revenue was approximately $ 117.9 million and $ 119.2 million , respectively. Our lease contract periods are short-term in nature and are typically daily, monthly, per well, or footage based.
Johnson Chief Financial Officer March 28, 2024 David R. Johnson (Principal Financial and Accounting Officer) /s/ Thomas O. Hicks Chairman of the Board March 28, 2024 Thomas O. Hicks /s/ Eric C. Neuman Director March 28, 2024 Eric C. Neuman /s/ John D. Furst Director March 28, 2024 John D. Furst /s/ C. Richard Vermillion Director March 28, 2024 C.
Johnson Chief Financial Officer March 14, 2025 David R. Johnson (Principal Financial and Accounting Officer) /s/ Thomas O. Hicks Chairman of the Board March 14, 2025 Thomas O. Hicks /s/ Eric C. Neuman Director March 14, 2025 Eric C. Neuman /s/ John D. Furst Director March 14, 2025 John D. Furst /s/ C. Richard Vermillion Director March 14, 2025 C.
With respect to accounts receivable, we monitor the credit quality of our customers as well as maintain an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. Concentration risk During the years ended December 31, 2023, 39% of our total revenue was earned from three of our customers.
With respect to accounts receivable, we monitor the credit quality of our customers as well as maintain an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. Concentration risk During the years ended December 31, 2024, 28% of our total revenue was earned from two of our customers.
Stock-Based Compensation We account for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires that the cost of awards of equity instruments offered in exchange for employee services, including employee stock options and restricted stock awards, be measured based on the grant-date fair value of the award.
ASC 718 requires that the cost of awards of equity instruments offered in exchange for employee services, including employee stock options and restricted stock awards, be measured based on the grant-date fair value of the award.
Depreciation and Amortization Expense Depreciation and amortization expense relates to the consumption of our property and equipment, which consists of rental tools, shop equipment, computer equipment, furniture and fixtures and leasehold improvements, and the amortization of our intangible assets mainly related to customer relationships, software and partnerships.
Depreciation and Amortization Expense Depreciation and amortization expense relates to the consumption of our property and equipment, which consists of rental tools, shop equipment, computer equipment, furniture and fixtures and leasehold improvements, and the amortization of our intangible assets mainly related to customer relationships, patents, and developed technology.
The Company determines the fair value of stock options granted using the Black-Scholes- Merton option-pricing model (“Black-Scholes model”) and recognizes the cost over the period during which an employee is required to provide service in exchange for the award, generally the vesting period, with forfeitures accounted for as they occur.
The Company determines the fair value of stock options granted using the Black-Scholes-Merton option-pricing model (“Black-Scholes model”) and recognizes the cost over the period during which an employee is required to provide service in exchange for the award, generally the vesting period, net of estimated forfeitures.
On December 29, 2023, the closing price of the Common Stock was $3.20 per share. As of December 31, 2023, there were approximately 86 holders of record of Common Stock. Such number does not include beneficial owners holding shares of the Common Stock through nominees. Dividend Policy We have not paid any cash dividends on the Common Stock.
On December 31, 2024, the closing price of the Common Stock was $3.27 per share. As of December 31, 2024, there were approximately 42 holders of record of Common Stock. Such number does not include beneficial owners holding shares of the Common Stock through nominees. Dividend Policy We have not paid any cash dividends on the Common Stock.
The consolidated financial statements presented herein as of and for the years ended December 31, 2023 and 2022 have been revised to correct the errors described above in accordance with SEC SAB Topic 1.M, as codified in ASC 250.
The audited consolidated financial statements presented herein for the year ended December 31, 2023 have been revised to correct the errors described above in accordance with SEC SAB Topic 1.M, as codified in ASC 250.
Upon the closing of the Merger, all of the redeemable convertible preferred stock was canceled in exchange for DTIC Common Stock and the right to receive cash. Accordingly, there was no redeemable convertible preferred stock outstanding as of December 31, 2023. As of December 31, 2022, the carrying value of the redeemable convertible preferred stock outstanding was $ 17.9 million.
Upon the closing of the Merger, all of the redeemable convertible preferred stock was canceled in exchange for DTIC Common Stock and the right to receive cash. Accordingly, there was no redeemable convertible preferred stock outstanding as of December 31, 2023.
Level 2 – Valuation inputs are quoted prices for identical assets or liabilities in markets that are not active, quoted market prices for similar assets and liabilities in active markets and other observable inputs directly or indirectly related to the assets or liabilities being measured. Level 3 – Valuation inputs are unobservable and significant to the fair value measurement.
Level 2 – Valuation inputs are quoted prices for identical assets or liabilities in markets that are not active, quoted market prices for similar assets and liabilities in active markets and other observable inputs directly or indirectly related to the assets or liabilities being measured.
Our disclosure controls and procedures were not effective as of December 31, 2023, or as of the date of filing of this Report, because all findings in connection with our preparation and the audit of our consolidated financial statements as of and for the year ended December 31, 2022 have not been fully remediated despite ongoing projects and improvements made in the current quarter.
Our disclosure controls and procedures were not effective as of December 31, 2024because all findings in connection with our preparation and the audit of our consolidated financial statements as of and for the year ended December 31, 2022 and December 31, 2023, have not been fully remediated despite ongoing projects and improvements made in the current year.
Please see the table below for additional information on our properties: Location Type Own/Lease United States: Bakersfield, CA Service Center Lease Broussard, LA Service Center, Manufacturing Facility Lease New Iberia, LA Service Center Lease Shreveport, LA Service Center Lease Williston, ND Service Center Lease Oklahoma City, OK Service Center Lease Charleroi, PA Service Center Lease Houston, TX Service Center, Manufacturing Facility Lease Midland, TX (1) Service Center Lease Odessa, TX (1) Service Center, Manufacturing Facility Lease Carlsbad, NM Service Center Lease Casper, WY Service Center Lease Vernal, UT Service Center Lease Canada: Service Center Lease Nisku, Canada Service Center Lease (1) Consists of two facilities 28 Ite m 3.
Please see the table below for additional information on our properties: Location Type Own/Lease United States: Bakersfield, CA Service Center Lease Broussard, LA Service Center, Manufacturing Facility Lease New Iberia, LA Service Center Lease Shreveport, LA Service Center Lease Williston, ND Service Center Lease Oklahoma City, OK Service Center Lease Charleroi, PA Service Center Lease Houston, TX Service Center, Manufacturing Facility Lease Midland, TX (1) Service Center Lease Odessa, TX (1) Service Center, Manufacturing Facility Lease Carlsbad, NM Service Center Lease Casper, WY Service Center Lease Vernal, UT Service Center Lease Canada: Service Center Lease Nisku, Canada Service Center Lease Middle East: Dubai, UAE Service Center Lease United Kingdom: Aberdeen, Scotland Service Center Lease Europe: Amsterdam, The Netherlands Support Center Lease (1) Consists of two facilities Ite m 3.
We generated revenue from tool rentals and product sales of $152.0 million and $129.6 million for the years ended December 31, 2023 and 2022, respectively, and had net income of $14.7 million and $21.1 million for those same periods. We historically incurred significant operating losses since inception.
We generated revenue from tool rentals and product sales of $154.4 million and $152.0 million for the years ended December 31, 2024 and 2023, respectively, and had net income of $3.0 million and $14.7 million for those same periods. We historically incurred significant operating losses since inception.
For the year ended December 31, 2023, the aggregate foreign currency exchange rate fluctuations on transactions included in the consolidated statements of income and comprehensive income totaled approximately $ 0.1 million in losses.
For the years ended December 31, 2024 and 2023, the aggregate foreign currency exchange rate fluctuations on transactions included in the consolidated statements of income and comprehensive income totaled approximately $ 44.5 thousand and $ 0.1 million in losses, respectively.
For the year ended December 31, 2023, the Company did not grant any stock options. For any grants of stock options subsequent to the Company being publicly traded, the Company will use the quoted market price as of the grant date as an input into the Black-Scholes model.
For any grants of stock options subsequent to the Company being publicly traded, the Company will use the quoted market price as of the grant date as an input into the Black-Scholes model.
Our product sales revenues are primarily dependent on oil and gas companies paying for tools that are lost or damaged in their drilling programs as well as the drilling contractors need to replace aging or consumable products and our ability to provide competitive pricing. These factors may be influenced by the oil and gas region in which our customers operate.
Our product sales revenues are primarily dependent on oil and gas companies paying for tools that are lost or damaged in their drilling programs as well as the customers need to replace aging or consumable products and our ability to provide competitive pricing.
The initial accounting for this business combination is in process which includes conducting a valuation analysis to value the assets and liabilities assumed as a result of the transaction. As such, the impact on the consolidated financial statements cannot be estimated at this time. 84 It em 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.
The initial accounting for this business combination is in process, which includes conducting a valuation analysis to value the assets and liabilities assumed as a result of the transaction. As such, the impact on the consolidated financial statements cannot be estimated at this time.
Revenue is recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
Product sales are accounted for under Topic 606. 62 Revenue is recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
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