| SEGMENT REPORTING | NOTE
14. SEGMENT REPORTING We
report our segment results based on our geographic areas of operations, North America and International. These segments have similarities
from a product perspective, but management believes that due to operational differences, such as sales models and regulatory environments,
information about the segment would be useful to readers of the financial statements.
● North
America includes our PDC drill bit and specialty tool sales and contract services business
in the United States and Mexico, which have been aggregated
● International
includes our specialty tool rental business in the Middle East Revenues
and certain operating expenses are directly attributable to our segments. Unallocated
corporate costs primarily include corporate shared costs, such as payroll and compensation, professional fees, and rent, as well as costs
associated with certain shared research and development activities. Our
operating segments are not evaluated using asset information. Prior periods have been restated to conform with the current year presentation. This change was made due to international
revenue becoming more significant in the current year. SUPERIOR DRILLING PRODUCTS,
INC. NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS The
following table summarizes information about our segments: SCHEDULE
OF SEGMENTS INFORMATION WITH GEOGRAPHIC AREAS
2022 2021
Year Ended December 31,
2022 2021
Revenues:
North America $ 16,917,259 $ 11,619,593
International 2,180,428 1,716,556
Total revenue $ 19,097,687 $ 13,336,149
Operating income (loss):
North America $ 9,672,853 $ 6,190,184
International (3,551 ) (577,408 )
Corporate costs, unallocated (7,732,852 ) (6,199,527 )
Total operating income (loss) $ 1,936,450 $ (586,751 )
Depreciation expense:
North America $ 634,388 $ 790,565
International 702,921 729,636
Total depreciation expense $ 1,337,309 $ 1,520,201 North
America revenue includes revenue from operations in Mexico totaling $ 144,984 18,000 Information
about products and services See
Note 2 – Revenue. Information
about geographic areas The
following table summarizes net property, plant and equipment by geographic location: SCHEDULE
OF NET PROPERTY, PLANT AND EQUIPMENT BY GEOGRAPHIC LOCATION
2022 2021
December 31,
2022 2021
Property, plant and equipment, net:
United States $ 6,560,435 $ 5,762,066
Other countries 2,016,416 1,168,263
Total property, plant and equipment, net $ 8,576,851 $ 6,930,329 None Management’s
Evaluation of Disclosure Controls and Procedures Disclosure
controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated
and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. As
of the end of the period covered by this Annual Report, we carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation
of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, as of December 31, 2022,
our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. Management’s
Report on Internal Control over Financial Reporting Our
management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange
Act Rule 13a-15(f). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. Under
the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial
Officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework
established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as set forth in Internal Control - Integrated
Framework Changes
in Internal Controls over Financial Reporting There
has been no change in our internal control over financial reporting that occurred during the fourth quarter of 2022 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting. Inherent
Limitations of the Effectiveness of Controls Management
does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all
error and fraud. A control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable,
not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements
due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. Attestation
Report of Registered Public Accounting Firm This
Annual Report does not contain an attestation report of our independent registered public accounting firm related to internal control
over financial reporting because the rules for smaller reporting companies provide an exemption from the attestation requirement. Not
applicable. ITEM
9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not
applicable. The
following table sets forth information concerning our directors, executive officers and significant employees as of December 31, 2022:
Name Age Position
G.
Troy Meier 61 Board
Chair, Class III Director and Chief Executive Officer
Annette
Meier 60 Class
II Director, President and Chief Operating Officer
James
R. Lines 61 Class
II Director
Robert
Iversen 68 Class
III Director
Michael
V. Ronca 69 Class
I Director
Christopher
D. Cashion 67 Chief
Financial Officer G.
Troy Meier. Mr.
Meier was selected to serve on our Board of Directors and as the Board Chair because of his extensive industry experience, his role as
our co-founder and chief innovator, and his and Ms. Meier’s majority shareholding. Mr. Meier is married to Annette Meier. Annette
Meier. Ms.
Meier was selected to serve on our Board of Directors because of her extensive industry experience, her role as our co-founder and substantial
knowledge of our day-to-day operations, and her and Mr. Meier’s majority shareholding. Ms. Meier is married to G. Troy Meier. James
Lines. Mr.
Lines was selected to serve on the Board of Directors due to his extensive experience in growing a midsize business, as well as his background
in manufacturing and engineering in the energy industry. Robert
E. Iversen. Mr.
Iversen was selected to serve on our Board of Directors because of his strong experience with start-up companies and the development
and commercialization of new technology products. Mr. Iversen further brings his broad executive and operational management expertise
in the oil and gas industry. Michael
Ronca Mr.
Ronca was selected to serve on our Board of Directors because of his strong experience within the oil and gas industry. Christopher
D. Cashion. Section
16(a) Beneficial Ownership Reporting Compliance Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires our directors and executive officers,
and persons who own more than 10% of our equity securities, to file initial reports of ownership and reports of changes in ownership
of our common stock with the SEC and to furnish us a copy of each filed report. To
our knowledge, based solely on review of the copies of such reports furnished to us and written representations that no other reports
were required, during the fiscal year ended December 31, 2022, our officers, directors and greater than 10% beneficial owners timely
filed all required Section 16(a) reports. Material
Changes in Director Nominations Process There
have not been any material changes to the procedures by which shareholders may recommend nominees to our Board. Audit
Committee Our
Audit Committee is comprised solely of “independent” directors, as defined under and required by Rule 10A-3 of the Exchange
Act and the NYSE American rules. Our Audit Committee is directly responsible for, among other things, the appointment, compensation,
retention and oversight of our independent registered public accounting firm. The oversight of our independent public accounting firm
includes reviewing the plans and results of the audit engagement with the firm, approving any additional professional services provided
by the firm and reviewing the independence of the firm. Commencing with our first report on internal controls over financial reporting,
the Committee will be responsible for discussing the effectiveness of the internal controls over financial reporting with our independent
registered public accounting firm and relevant financial management. The members of this Committee are Messrs. Iversen, Ronca, and Lines
with Mr. Lines serving as committee chair. Our Board of Directors has determined that Mr. Lines qualifies as an “audit committee
financial expert,” as defined by the rules under the Exchange Act. The Audit Committee held four meetings in 2022. Code
of Ethics We
have adopted a Code of Business Conduct and Ethics that applies to all of our employees, as well as each member of our Board. The Code
of Business Conduct and Ethics is available under “Corporate Governance” at the “Investors” section of our website
at www.sdpi.com Corporate
Governance The
charters for our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee and our Code of Business Conduct
and Ethics are available under “Corporate Governance” at the “Investors” section of our website at www.sdpi.com Summary
Compensation Table The
following table provides information concerning compensation paid or accrued during the fiscal years ended December 31, 2022 and 2021,
to our principal executive officer, our chief operating officer and our principal financial officer, to whom we sometimes refer together
as our “named executive officers.”
Name and Principal Position Year Salary Bonus Stock Option Non-Equity All Other Total
G. Troy Meier 2022 $ 475,000 (1) $ — (2) $ 332,500 (4) $ — $ — $ 2,370 (5) $ 809,870
Chief Executive Officer 2021 $ 444,666 (1) $ 665,000 (2) $ 332,500 (3) $ — $ — $ 8,012 (5) $ 1,450,178
Annette Meier 2022 $ 414,113 (1) $ — (2) $ 255,000 (4) $ — $ — $ 10,656 (5) $ 679,770
President and Chief Operating Officer 2021 $ 395,201 (1) $ 595,000 (2) $ 255,000 (3) $ — $ — $ 12,288 (5) $ 1,257,489
Christopher Cashion 2022 $ 289,029 (1) $ — $ 120,000 (4) $ — $ — $ 13,340 (6) $ 422,370
Chief Financial Officer 2021 $ 276,989 (1) $ — $ 120,000 (3) $ — $ — $ 11,566 (6) $ 408,555
(1) Salary
amounts represent base compensation for the individuals indicated.
(2) A bonus of $333,900 was accrued but not paid in 2022
for Mr. Meier, and $296,100 was accrued but not paid for Ms. Meier. For 2021, accrued bonuses of $665,000 for Mr. Meier and $595,000 for Ms. Meier were used to offset the Tronco related party obligation.
(3) Reflects
the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. See Note
12 Share-Based Compensation to our consolidated financial statements included herein. The
grant date fair value for these restricted stock awards was based on the average price of our common stock on the grant date (August
9, 2021), which was $0.765 per share. The restricted stock awards will vest in accordance with the following vesting schedule: 33.3%
of the shares of restricted common stock vested on August 9, 2022, 33.3% of the shares of restricted common stock will vest on
August 9, 2023 and 33.4% of the shares of restricted common stock will vest on August 9, 2024.
(4) The
grant date fair value for these restricted stock awards was based on the average price of
our common stock on the grant date (August 12, 2022), which was $1.00 per share. The restricted
stock awards will vest in accordance with the following vesting schedule: 33.3% of the shares
of restricted common stock will vest on August 12, 2023, 33.3% of the shares of restricted common
stock will vest on August 12, 2024 and 33.4% of the shares of restricted common stock will
vest on August 12, 2025.
(5) Represents
certain company paid health care costs and life insurance costs for G. Troy Meier and Annette
Meier.
(6) Represents
certain company paid health care costs and life insurance costs. Narrative
Disclosure to Summary Compensation Table See
the footnotes to the Summary Compensation Table and “Employment Agreements and Potential Benefits Upon Termination or Change-in-Control”
for narrative disclosure with respect to the table, as well as the below discussion. Employment
Agreements and Potential Benefits Upon Termination or Change-in-Control In
connection with our initial public offering, we planned to enter into employment agreements with each of our named executive officers,
and the forms of those agreements were filed with the SEC as exhibits to our registration statement on Form S-1. However, management
and the Board have continued to discuss and negotiate the final terms of those agreements and as of the date hereof, the agreements have
not been executed. As a result, none of the named executive officers currently has a contractual right to any of the benefits described
below. The employment agreements to be entered into with our named executive officers will provide for, among other things, the payment
of base salary, reimbursement of certain costs and expenses, and for each named executive officer’s participation in our bonus
plan and employee benefit plans. With
the exception of G. Troy Meier’s and Annette Meier’s employment agreements, each agreement will provide for a term of employment
commencing on the date of the agreement and continuing (a) until we or the executive provide 30-days written notice of termination to
the other party, (b) upon termination by us for cause, or (c) upon the executive’s death or disability. Except with respect to
certain items of compensation, as described below, the terms of each agreement will be similar in all material respects. In
addition to the base salaries shown above,
● Mr.
Meier’s form of employment agreement provides for an annual review by our Board of
Directors, and a performance bonus of 70% to 110% of his base salary based on criteria to
be established by the Compensation Committee and participate in our incentive plans.
● Ms.
Meier’s form of employment agreement provides for an annual review by our Board of
Directors, and a performance bonus of 70% to 110% of her base salary based on criteria to
be established by the Compensation Committee and participate in our incentive plans.
● Mr.
Cashion’s form of employment agreement entitles him to receive a performance bonus
based on criteria established by the Compensation Committee, and to participate in our incentive
plans. Each
of the Meiers’ employment agreements will provide for customary and usual fringe benefits generally available to our executive
officers, and reimbursement for reasonable out-of-pocket business expenses, including the use of a company vehicle. Change
of Control Provisions (1)
(a) a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, with respect
to which persons who were our stockholders immediately prior to such transaction do not, immediately thereafter, own more than 50% of
the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company’s
then outstanding voting securities, in substantially the same proportions as their ownership immediately prior to such transaction, (b)
our liquidation or dissolution, or (c) the sale of all or substantially all of our assets (unless such reorganization, merger, consolidation
or other corporate transaction, liquidation, dissolution or sale is subsequently abandoned); or (2)
the acquisition in a transaction or series or transactions by any person, entity or “group”, within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act, of more than 50% of either the then outstanding shares of common stock or the combined voting
power of our then outstanding voting securities entitled to vote generally in the election of directors (a “Controlling Interest”),
excluding any acquisitions by (a) us or our subsidiaries, (b) any person, entity or “group” that as of the date of the amendments
to the employment agreements owns beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act of a Controlling Interest,
or (c) any of our employee benefit plans. G.
Troy Meier’s and Annette Meier’s employment agreements will provide that (a) the non-competition covenant does not apply
following the termination of employment if their employment is terminated without cause or for good reason, (b) the non-solicitation
of employees covenant applies with respect to any current employee or any former employee who was employed by us within the prior six
months, and (c) the non-solicitation of customers covenant applies to all actual or targeted prospective clients of ours to the extent
solicited on behalf of any person or entity in connection with any business competitive with our business. As
consideration and compensation to our executive officers for, and subject to each executive officer’s adherence to, the above covenants
and limitations, we have agreed to continue to pay the executive officer’s base salary in the same manner as if they continued
to be employed by us during the one-year non-competition period following the executive officer’s termination. Payments
on Termination Outstanding
Equity Awards for Year Ended December 31, 2022 The
following table shows the number of shares covered by exercisable and unexercisable options awards and stock awards held by our named
executive officers on December 31, 2022 that were made under the 2015 Long Term Incentive Plan.
Option Awards Stock Awards
Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
(a) (b) (c) (d) (e) (f) (g) (h) (1) (i) (j)
G. Troy Meier — 86,762 $ 50,793 (3) — —
289,906 $ 221,778 (2) — —
332,500 $ 332,500 (4)
Annette Meier — 66,540 $ 39,092 (3) — —
222,334 $ 170,086 (2) — —
255,000 $ 255,000 (4)
Christopher Cashion (5) 11,995 — — 1.73 03/04/2026
12,416 — — 1.67 03/18/2026
15,057 — — 1.37 03/31/2026
46,969 $ 27,594 (3) — —
104,628 $ 80,040 (2) — —
120,000 $ 120,000 (4) — —
(1) See
Note 12 –Share-Based Compensation in the consolidated financial statements included
herein.
(2) The
grant date fair value for restricted stock awards is based on the average price of our common
stock on the grant date (August 9, 2021), which was $0.765 per share. The remaining restricted
stock awards vested in accordance with the following vesting schedule: 33.3% of the shares
of restricted common stock vested on August 9, 2022, 33.3% of the shares of restricted common
stock will vest on August 9, 2023, and 33.4% of the shares of restricted common stock will
vest on August 9, 2024.
(3) The
grant date fair value for restricted stock awards is based on the average price of our common
stock on the grant date (August 7, 2020), which was $0.5875 per share. The restricted stock
awards vested in accordance with the following vesting schedule: 33.3% of the shares of restricted
common stock vested on August 7, 2021, 33.3% of the shares of restricted common stock vested
on August 7, 2022 and 33.4% of the shares of restricted common stock will vest on August
7, 2023.
(4) The
grant date fair value for restricted stock awards is based on the average price of our common
stock on the grant date (August 12, 2022), which was $1.000 per share. The remaining restricted
stock awards will vest in accordance with the following vesting schedule: 33.3% of the shares
of restricted common stock will vest on August 12, 2023, 33.3% of the shares of restricted
common stock will vest on August 12, 2024, and 33.4% of the shares of restricted common stock
will vest on August 12, 2025.
(5) During
March 2016, the named executive officer agreed to receive awards of stock options in lieu
of base salary. The grant date fair value for the stock option awards was based on the closing
price of our common stock on the grant date of a) March 4, 2016, which was $1.73 per share;
b) March 18, 2016, which was $1.67 per share; and c) March 31, 2016, which was $1.37 per
share. All options vested 100% on the grant date and have a ten-year term expiring on March
4, 2026, March 18, 2026 and March 31, 2026, respectively. The fair value of the vested stock
options were calculated using the Black-Scholes model with a volatility and discount rate
over the expected term of each employee. Director
Compensation Our
employee directors are not separately compensated for their service as a director. In 2022, each of our non-employee directors received
88,008 shares of restricted common stock for his service as a director. In addition to receiving shares of stock, our non-employee directors
earned the following fees: Mr. Lines, $93,343; Mr. Iverson, $87,898; and Mr. Ronca, $128,417. The members of our Board of Directors are
entitled to reimbursement of their expenses incurred in connection with the attendance at Board and committee meetings in accordance
with Company policy. The
following table summarizes the annual compensation for our non-employee directors during 2022.
Name (a) Fees Earned or Paid in Cash (b) Stock Awards (c) (1) Option Awards (d) Non-Equity Incentive Plan Compensation (e) Nonqualified Deferred Compensation Earnings (f) All Other Compensation (g) Total
James R. Lines $ 93,343 $ 75,000 - - - - $ 168,343
Robert Iversen $ 87,898 $ 75,000 - - - - $ 162,898
Michael V. Ronca $ 128,417 $ 75,000 - - - - $ 203,417
(1) Reflects
the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of awards
granted by the Board of Directors. See Note 12 - Share-Based Compensation in the consolidated
financial statements included herein. The grant date fair value for restricted stock awards
is based on the average price of our common stock on the grant date (August 12, 2022), which
was $1.00 per share, respectively. As of December 31, 2022, Mr. Lines, Mr. Iversen and Mr.
Ronca each have an aggregate of 169,749 outstanding shares of unvested restricted stock.
The restricted stock awards have the following vesting schedule: a) for the shares granted
on August 7, 2020: 33.3% of the shares of restricted common stock vested on the first anniversary
of the date of grant, 33.3% of the shares of restricted common stock vested on the second
anniversary of the date of grant and 33.4% of the shares of restricted common stock will
vest on the third anniversary of the date of grant in each case, so long as the director
continues to serve on the Board through such date; b) for the shares granted on August 9,
2021: 33.3% of the shares of restricted common stock vested on the first anniversary of the
date of grant, 33.3% of the shares of restricted common stock will vest on the second anniversary
of the date of grant and 33.4% of the shares of restricted common stock will vest on the
third anniversary of the date of grant in each case, so long as the director continues to
serve on the Board through such date and c) for the shares granted on August 12, 2022 33.3%
of the shares of restricted common stock will vest on the first anniversary of the date of
grant, 33.3% of the shares of restricted common stock will vest on the second anniversary
of the date of grant and 33.4% of the shares of restricted common stock will vest on the
third anniversary of the date of grant in each case, so long as the director continues to
serve on the Board through such date The
following table sets forth information with respect to the beneficial ownership of our common stock as of December 31, 2022, by:
● each
person who is known by us to beneficially own 5% or more of the outstanding class of our
capital stock;
● each
member of the Board;
● each
of our executive officers; and
● all
of our directors and executive officers as a group. Beneficial
ownership is determined in accordance with the rules of the SEC. To our knowledge, each of the holders of capital stock listed below
has sole voting and investment power as to the capital stock owned unless otherwise noted.
Name and Address of Beneficial Owner Numbers of Shares % of Common Stock (1)
G. Troy Meier (2) 11,320,426 38.7 %
Annette Meier (3) 10,989,062 37.6 %
Christopher D. Cashion (4), (9) 926,026 3.2 %
James R. Lines (5), (6) 451,290 1.5 %
Robert Iversen (5), (7) 606,675 2.0 %
Michael V. Ronca (5), (8) 547,202 1.9 %
Jeffrey E. Eberwein 2,184,4299 7.5 %
Star Equity Fund, LP 1,150,000 3.9 %
Executive Officers and Directors as a group (6 persons) 14,932,224 51.1 %
(1) Based
on 29,245,080 shares outstanding as of December 31, 2022. Unless otherwise noted, the address
for the holder is 1583 South 1700 East, Vernal, Utah 84078.
(2) Includes
(i) 5,641,510 shares of common stock indirectly owned through his ownership in Meier Family
Holding Company, LLC, and (ii) 3,173,350 shares of common stock indirectly owned through
his ownership in Meier Management Company, LLC. Also includes 702,801 shares of vested restricted
common stock, 709,168 shares of unvested restricted common stock. The unvested restricted
stock will vest on August 12, 2023, August 12, 2024, and August 12, 2025.
(3) Includes
(i) 5,641,510 shares of common stock indirectly owned through her ownership in Meier Family
Holding Company, LLC, and (ii) 3,173,350 shares of common stock indirectly owned through
her ownership in Meier Management Company, LLC. Also includes 536,731 shares of vested restricted
common stock, 543,874 shares of unvested restricted common stock. The unvested restricted
stock will vest on August 12, 2023, August 12, 2024, and August 12, 2025.
(4) Includes
(a) 46,969 shares of restricted common stock that vests in accordance with the following
vesting schedule: 33.3% of the shares of restricted common stock vested on August 7, 2021,
33.3% of the shares of restricted common stock vested on August 7, 2022, and 33.4% of the
shares of restricted common stock will vest on August 7, 2023; (b) 104,628 shares of restricted
common stock that vests in accordance with the following vesting schedule: 33.3% of the shares
of restricted common stock vested on August 9, 2022, 33.3% of the shares of restricted common
stock will vest on August 9, 2023, and 33.4% of the shares of restricted common stock will
vest on August 9, 2024 and (c) 120,000 shares of restricted common stack that vests in accordance
with the following vesting schedule: 33.3% of the shares of restricted common stock will
vest on August 12, 2023, 33.3% of shares of restricted common stock will vest on August 12,
2024, and 33.4% of shares of restricted common stock will vest on August 12, 2025.
(5) Includes
(a) 29,356 shares of restricted common stock that vests in accordance with the following
vesting schedule: 33.3% of the shares of restricted common stock vested on August 7, 2021,
33.3% of the shares of restricted common stock vested on August 7, 2022, and 33.4% of the
shares of restricted common stock will vest on August 7, 2023; (b) 65,393 shares of restricted
common stock that vests in accordance with the following vesting schedule: 33.3% of the shares
of restricted common stock vested on August 9, 2022, 33.3% of the shares of restricted common
stock will vest on August 9, 2023, and 33.4% of the shares of restricted common stock will
vest on August 9, 2024 and (c) 75,000 shares of restricted common stack that vests in accordance
with the following vesting schedule: 33.3% of the shares of restricted common stock will
vest on August 12, 2023, 33.3% of shares of restricted common stock will vest on August 12,
2024, and 33.4% of shares of restricted common stock will vest on August 12, 2025.
(6) The
address of Mr. Lines is c/o Superior Drilling Products Inc.
(7) The
address of Mr. Iversen is c/o Superior Drilling Products Inc.
(8) The
address of Mr. Ronca is c/o Superior Drilling Products Inc.
(9) The
address of Mr. Cashion is c/o Superior Drilling Products Inc. Certain
Relationships and Related Party Transactions Related
Party Note Receivable The
Company holds 8,267,860 shares as collateral for the Tronco Note (see Note 6 – Related Party Note Receivable in our consolidated
financial statements). Policies
and Procedures for Related Party Transactions Any
request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons’ immediate
family members or affiliates, in which the amount involved exceeds $120,000, must first be presented to our audit committee for review,
consideration and approval. All of our directors and executive officers are required to report to the audit committee chair any such
related person transaction. In approving or rejecting the proposed agreement, our audit committee shall consider the facts and circumstances
available and deemed relevant to the audit committee, including, but not limited to, costs and benefits to us, the terms of the transaction,
the availability of other sources for comparable services or products, and, if applicable, the impact on a director’s independence.
Our audit committee shall approve only those agreements that, in light of known circumstances, are in, or are not inconsistent with,
our best interests and the best interests of our shareholders, as our audit committee determines in the good faith exercise of its discretion.
If we should discover related person transactions that have not been approved, the audit committee will be notified and will determine
the appropriate action, including ratification, rescission or amendment of the transaction. Director
Independence The
Board has determined that the following members are independent within the meaning of the listing rules of the NYSE American: James Lines,
Robert Iversen and Michael Ronca. Independent
Registered Public Accountant Fees The
following table sets forth the fees incurred for services performed by Moss Adams LLP:
Years Ended December 31,
2022 2021
Audit Fees $ 190,900 $ 218,782
Audit-Related Fees - -
Tax Fees - -
All Other Fees - -
Total $ 190,900 $ 218,782 Policy
on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accountants The
charter of the Audit Committee and its pre-approval policy require that the Audit Committee review and pre-approve the Company’s
independent registered public accounting firm’s fees for audit, audit-related, tax and other services. The Chairman of the Audit
Committee has the authority to grant pre-approvals, provided such approvals are within the pre-approval policy and are presented to the
Audit Committee at a subsequent meeting. For the year ended December 31, 2022, the Audit Committee approved 100% of the services described
above under the captions “Audit Fees.” (a)
The following documents are filed as part of this Report: (1)
Financial Statements – see Index to Financial Statements appearing on page 31 (2)
Financial Statement Schedules – None (3)
Exhibits –
Exhibit
No. Description
1.1 Placement Agency Agreement dated October 12, 2021, between Superior Drilling Products, Inc. and EF Hutton, division of Benchmark Investments, LLC (incorporated by reference to Exhibit 1.1 to the Company’s Current Repor |
