Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2023 | Nov. 14, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2023 | |
Entity File Number | 001-41103 | |
Entity Registrant Name | DRILLING TOOLS INTERNATIONAL CORPORATION | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 87-2488708 | |
Entity Address, Address Line One | 3701 Briarpark Drive | |
Entity Address, Address Line Two | Suite 150 | |
Entity Address, City or Town | Houston | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 77042 | |
City Area Code | 832 | |
Local Phone Number | 742-8500 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 29,768,568 | |
Entity Central Index Key | 0001884516 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Title of 12(b) Security | Common stock, par value $0.0001 per share | |
Trading Symbol | DTI | |
Security Exchange Name | NASDAQ | |
Entity Bankruptcy Proceedings, Reporting Current | true |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Assets, Current [Abstract] | ||
Cash | $ 3,989 | $ 2,352 |
Accounts receivable, net | 29,073 | 28,998 |
Inventories, net | 6,586 | 3,281 |
Prepaid expenses and other current assets | 4,976 | 4,381 |
Investments - equity securities, at fair value | 995 | 1,143 |
Total current assets | 45,619 | 40,155 |
Property, plant and equipment, net | 64,569 | 44,154 |
Operating lease right-of-use asset | 19,621 | 20,037 |
Intangible assets, net | 228 | 263 |
Deferred financing costs, net | 460 | 226 |
Deposits and other long-term assets | 939 | 383 |
Total assets | 131,436 | 105,218 |
Current liabilities | ||
Accounts payable | 8,089 | 7,281 |
Accrued expenses and other current liabilities | 11,864 | 7,299 |
Current portion of operating lease liabilities | 3,940 | 3,311 |
Revolving line of credit | 0 | 18,349 |
Total current liabilities | 23,893 | 36,240 |
Operating lease liabilities, less current portion | 15,753 | 16,691 |
Deferred tax liabilities, net | 6,926 | 3,185 |
Total liabilities | 46,572 | 56,116 |
Commitments and contingencies (See Note 14) | ||
Redeemable convertible preferred stock | ||
Series A redeemable convertible preferred stock*, par value $0.01; nil shares and 30,000,000 shares authorized at September 30, 2023 and December 31, 2022, respectively; nil shares and 6,719,641 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 0 | 17,878 |
Shareholders' equity | ||
Common stock*, par value $0.0001; 500,000,000 shares and 65,000,000 shares authorized at September 30, 2023 and December 31, 2022, respectively; 29,768,568 shares and 11,951,137 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 3 | 1 |
Preferred stock, par value $0.0001; 10,000,000 and nil shares authorized at September 30, 2023 and December 31, 2022, respectively; nil shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | ||
Additional paid-in-capital | 95,218 | 52,388 |
Accumulated deficit | (10,129) | (21,054) |
Less treasury stock, at cost; nil shares at September 30, 2023 and December 31, 2022 | 0 | 0 |
Accumulated other comprehensive loss | (228) | (111) |
Total shareholders' equity | 84,864 | 31,224 |
Total liabilities, redeemable convertible preferred stock and shareholders' equity | $ 131,436 | $ 105,218 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Series A redeemable convertible preferred stock, par value | $ 0.01 | $ 0.01 |
Series A redeemable convertible preferred stock, shares authorized | 30,000,000 | |
Series A redeemable convertible preferred stock, shares issued | 6,719,641 | |
Series A redeemable convertible preferred stock, shares outstanding | 6,719,641 | |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 500,000,000 | 65,000,000 |
Common stock, shares issued | 29,768,568 | 11,951,137 |
Common stock, shares outstanding | 29,768,568 | 11,951,137 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 10,000,000 | |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Treasury stock, shares |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Revenue, net: | ||||
Revenue, net | $ 38,138 | $ 36,547 | $ 116,845 | $ 92,896 |
Operating costs and expenses: | ||||
Selling, general, and administrative expense | 16,552 | 14,692 | 50,999 | 36,424 |
Depreciation and amortization expense | 5,303 | 4,820 | 15,035 | 14,782 |
Total operating costs and expenses | 31,006 | 28,470 | 93,474 | 75,569 |
Operating income | 7,132 | 8,077 | 23,371 | 17,327 |
Other expense, net: | ||||
Interest expense, net | (73) | (45) | (995) | (41) |
Gain on sale of property | 0 | 102 | 68 | 107 |
Unrealized loss on equity securities | (535) | (398) | (148) | (75) |
Other expense, net | (135) | (114) | (6,170) | (209) |
Total other expense, net | (743) | (455) | (7,245) | (218) |
Income before income tax expense | 6,389 | 7,622 | 16,126 | 17,109 |
Income tax expense | (2,102) | (626) | (5,201) | (2,846) |
Net income | 4,287 | 6,996 | 10,925 | 14,263 |
Accumulated dividends on redeemable convertible preferred stock | 0 | 294 | 314 | 883 |
Net income available to common shareholders | $ 4,287 | $ 6,702 | $ 10,611 | $ 13,380 |
Basic earnings per share | $ 0.14 | $ 0.56 | $ 0.57 | $ 1.12 |
Diluted earnings per share | $ 0.14 | $ 0.36 | $ 0.46 | $ 0.72 |
Basic weighted-average common shares outstanding | 29,768,568 | 11,951,137 | 18,608,708 | 11,951,137 |
Diluted weighted-average common shares outstanding | 30,043,546 | 19,677,507 | 23,554,593 | 19,677,507 |
Comprehensive income: | ||||
Net income | $ 4,287 | $ 6,996 | $ 10,925 | $ 14,263 |
Foreign currency translation adjustment, net of tax | 90 | (24) | (117) | (86) |
Net comprehensive income | 4,377 | 6,972 | 10,808 | 14,177 |
Tool Rental | ||||
Revenue, net: | ||||
Revenue, net | 29,361 | 26,837 | 90,639 | 70,277 |
Operating costs and expenses: | ||||
Operating costs and expenses | 7,956 | 7,586 | 23,785 | 20,578 |
Product Sale | ||||
Revenue, net: | ||||
Revenue, net | 8,777 | 9,710 | 26,206 | 22,619 |
Operating costs and expenses: | ||||
Operating costs and expenses | $ 1,195 | $ 1,372 | $ 3,655 | $ 3,785 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Previously Reported | Redeemable Convertible Preferred Stock | Redeemable Convertible Preferred Stock Previously Reported | Redeemable Convertible Preferred Stock Revision of Prior Period, Adjustment | Common Stock | Common Stock Previously Reported | Common Stock Revision of Prior Period, Adjustment | Treasury Stock Previously Reported | Treasury Stock Revision of Prior Period, Adjustment | Additional Paid-In Capital | Additional Paid-In Capital Previously Reported | Additional Paid-In Capital Revision of Prior Period, Adjustment | Accumulated Deficit | Accumulated Deficit Previously Reported | Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss Previously Reported |
Temporary equity, beginning balance at Dec. 31, 2021 | $ 16,689 | $ 16,689 | |||||||||||||||
Temporary equity, beginning balance, shares at Dec. 31, 2021 | 6,719,641 | 20,370,377 | (13,650,736) | ||||||||||||||
Beginning balance at Dec. 31, 2021 | $ 11,160 | $ 11,160 | $ 1 | $ 532 | $ (531) | $ (933) | $ 933 | $ 53,577 | $ 53,979 | $ (402) | $ (42,134) | $ (42,134) | $ (284) | $ (284) | |||
Beginning balance, shares at Dec. 31, 2021 | 11,951,137 | 53,175,028 | (41,223,891) | (811,156) | 811,156 | ||||||||||||
Accretion of redeemable convertible preferred stock to redemption value | $ 294 | ||||||||||||||||
Accretion of redeemable convertible preferred stock to redemption value | (294) | (294) | |||||||||||||||
Foreign currency translation adjustment, net of tax | (75) | (75) | |||||||||||||||
Net income | 1,333 | 1,333 | |||||||||||||||
Temporary equity, ending balance at Mar. 31, 2022 | $ 16,983 | ||||||||||||||||
Temporary equity, ending balance, shares at Mar. 31, 2022 | 6,719,641 | ||||||||||||||||
Ending balance at Mar. 31, 2022 | 12,124 | $ 1 | 53,283 | (40,801) | (359) | ||||||||||||
Ending balance, shares at Mar. 31, 2022 | 11,951,137 | ||||||||||||||||
Temporary equity, beginning balance at Dec. 31, 2021 | $ 16,689 | $ 16,689 | |||||||||||||||
Temporary equity, beginning balance, shares at Dec. 31, 2021 | 6,719,641 | 20,370,377 | (13,650,736) | ||||||||||||||
Beginning balance at Dec. 31, 2021 | $ 11,160 | 11,160 | $ 1 | $ 532 | $ (531) | $ (933) | $ 933 | 53,577 | 53,979 | (402) | (42,134) | (42,134) | (284) | (284) | |||
Beginning balance, shares at Dec. 31, 2021 | 11,951,137 | 53,175,028 | (41,223,891) | (811,156) | 811,156 | ||||||||||||
Net exercise of DTIH stockholders stock options, shares | 0 | ||||||||||||||||
Net income | $ 14,263 | ||||||||||||||||
Temporary equity, ending balance at Sep. 30, 2022 | $ 17,572 | ||||||||||||||||
Temporary equity, ending balance, shares at Sep. 30, 2022 | 6,719,641 | ||||||||||||||||
Ending balance at Sep. 30, 2022 | 24,454 | $ 1 | 52,694 | (27,871) | (370) | ||||||||||||
Ending balance, shares at Sep. 30, 2022 | 11,951,137 | ||||||||||||||||
Temporary equity, beginning balance at Mar. 31, 2022 | $ 16,983 | ||||||||||||||||
Temporary equity, beginning balance, shares at Mar. 31, 2022 | 6,719,641 | ||||||||||||||||
Beginning balance at Mar. 31, 2022 | 12,124 | $ 1 | 53,283 | (40,801) | (359) | ||||||||||||
Beginning balance, shares at Mar. 31, 2022 | 11,951,137 | ||||||||||||||||
Accretion of redeemable convertible preferred stock to redemption value | $ 295 | ||||||||||||||||
Accretion of redeemable convertible preferred stock to redemption value | (295) | (295) | |||||||||||||||
Foreign currency translation adjustment, net of tax | 13 | 13 | |||||||||||||||
Net income | 5,934 | 5,934 | |||||||||||||||
Temporary equity, ending balance at Jun. 30, 2022 | $ 17,278 | ||||||||||||||||
Temporary equity, ending balance, shares at Jun. 30, 2022 | 6,719,641 | ||||||||||||||||
Ending balance at Jun. 30, 2022 | 17,776 | $ 1 | 52,988 | (34,867) | (346) | ||||||||||||
Ending balance, shares at Jun. 30, 2022 | 11,951,137 | ||||||||||||||||
Accretion of redeemable convertible preferred stock to redemption value | $ 294 | ||||||||||||||||
Accretion of redeemable convertible preferred stock to redemption value | $ (294) | (294) | |||||||||||||||
Net exercise of DTIH stockholders stock options, shares | 0 | ||||||||||||||||
Foreign currency translation adjustment, net of tax | $ (24) | (24) | |||||||||||||||
Net income | 6,996 | 6,996 | |||||||||||||||
Temporary equity, ending balance at Sep. 30, 2022 | $ 17,572 | ||||||||||||||||
Temporary equity, ending balance, shares at Sep. 30, 2022 | 6,719,641 | ||||||||||||||||
Ending balance at Sep. 30, 2022 | $ 24,454 | $ 1 | 52,694 | (27,871) | (370) | ||||||||||||
Ending balance, shares at Sep. 30, 2022 | 11,951,137 | ||||||||||||||||
Temporary equity, beginning balance at Dec. 31, 2022 | $ 17,878 | $ 17,878 | |||||||||||||||
Temporary equity, beginning balance, shares at Dec. 31, 2022 | 6,719,641 | 6,719,641 | 20,370,377 | (13,650,736) | |||||||||||||
Beginning balance at Dec. 31, 2022 | $ 31,224 | 31,224 | $ 1 | $ 532 | $ (531) | $ (933) | $ 933 | 52,388 | 52,790 | (402) | (21,054) | (21,054) | (111) | (111) | |||
Beginning balance, shares at Dec. 31, 2022 | 11,951,137 | 53,175,028 | (41,223,891) | (811,156) | 811,156 | ||||||||||||
Accretion of redeemable convertible preferred stock to redemption value | $ 314 | ||||||||||||||||
Accretion of redeemable convertible preferred stock to redemption value | (314) | (314) | |||||||||||||||
Net income | 5,701 | 5,701 | |||||||||||||||
Temporary equity, ending balance at Mar. 31, 2023 | $ 18,192 | ||||||||||||||||
Temporary equity, ending balance, shares at Mar. 31, 2023 | 6,719,641 | ||||||||||||||||
Ending balance at Mar. 31, 2023 | $ 36,611 | $ 1 | 52,074 | (15,353) | (111) | ||||||||||||
Ending balance, shares at Mar. 31, 2023 | 11,951,137 | ||||||||||||||||
Temporary equity, beginning balance at Dec. 31, 2022 | $ 17,878 | $ 17,878 | |||||||||||||||
Temporary equity, beginning balance, shares at Dec. 31, 2022 | 6,719,641 | 6,719,641 | 20,370,377 | (13,650,736) | |||||||||||||
Beginning balance at Dec. 31, 2022 | $ 31,224 | $ 31,224 | $ 1 | $ 532 | $ (531) | $ (933) | $ 933 | 52,388 | $ 52,790 | $ (402) | (21,054) | $ (21,054) | (111) | $ (111) | |||
Beginning balance, shares at Dec. 31, 2022 | 11,951,137 | 53,175,028 | (41,223,891) | (811,156) | 811,156 | ||||||||||||
Net income | $ 10,925 | ||||||||||||||||
Temporary equity, ending balance, shares at Sep. 30, 2023 | |||||||||||||||||
Ending balance at Sep. 30, 2023 | $ 84,864 | $ 3 | 95,218 | (10,129) | (228) | ||||||||||||
Ending balance, shares at Sep. 30, 2023 | 29,768,568 | ||||||||||||||||
Temporary equity, beginning balance at Mar. 31, 2023 | $ 18,192 | ||||||||||||||||
Temporary equity, beginning balance, shares at Mar. 31, 2023 | 6,719,641 | ||||||||||||||||
Beginning balance at Mar. 31, 2023 | 36,611 | $ 1 | 52,074 | (15,353) | (111) | ||||||||||||
Beginning balance, shares at Mar. 31, 2023 | 11,951,137 | ||||||||||||||||
Net exercise of DTIH stockholders stock options, shares | 36,163 | ||||||||||||||||
Exchange of DTIH redeemable convertible preferred stock for DTIC Common Stock | $ (18,192) | ||||||||||||||||
Exchange of DTIH redeemable convertible preferred stock for DTIC Common Stock, shares | (6,719,641) | ||||||||||||||||
Exchange of DTIH redeemable convertible preferred stock for DTIC Common Stock | 7,193 | $ 1 | 7,192 | ||||||||||||||
Exchange of DTIH redeemable convertible preferred stock for DTIC Common Stock, shares | 6,719,641 | ||||||||||||||||
Issuance of DTIC Common Stock to former holders of DTIH redeemable convertible preferred stock in connection with Exchange Agreements | 10,805 | 10,805 | |||||||||||||||
Issuance of DTIC Common Stock to former holders of DTIH redeemable convertible preferred stock in connection with Exchange Agreements, shares | 2,042,181 | ||||||||||||||||
Merger, net of redemptions and transaction costs | (8,838) | $ 1 | (8,839) | ||||||||||||||
Merger, net of redemptions and transaction costs, shares | 5,711,721 | ||||||||||||||||
Issuance of common stock in connection with the consummation of the PIPE Financing | 30,000 | 30,000 | |||||||||||||||
Issuance of common stock in connection with the consummation of the PIPE Financing, shares | 2,970,296 | ||||||||||||||||
Stock-based compensation | 3,986 | 3,986 | |||||||||||||||
Stock-based compensation | 337,429 | ||||||||||||||||
Foreign currency translation adjustment, net of tax | (207) | (207) | |||||||||||||||
Net income | 937 | 937 | |||||||||||||||
Ending balance at Jun. 30, 2023 | 80,487 | $ 3 | 95,218 | (14,416) | (318) | ||||||||||||
Ending balance, shares at Jun. 30, 2023 | 29,768,568 | ||||||||||||||||
Foreign currency translation adjustment, net of tax | 90 | 90 | |||||||||||||||
Net income | $ 4,287 | 4,287 | |||||||||||||||
Temporary equity, ending balance, shares at Sep. 30, 2023 | |||||||||||||||||
Ending balance at Sep. 30, 2023 | $ 84,864 | $ 3 | $ 95,218 | $ (10,129) | $ (228) | ||||||||||||
Ending balance, shares at Sep. 30, 2023 | 29,768,568 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Cash flows from operating activities: | ||
Net income | $ 10,925 | $ 14,263 |
Adjustments to reconcile net income to net cash from operating activities: | ||
Depreciation and amortization | 15,035 | 14,782 |
Amortization of deferred financing costs | 88 | 74 |
Amortization of debt discount | 0 | 52 |
Non-cash lease expense | 3,418 | 3,087 |
Provision for excess and obsolete inventory | 22 | 29 |
Provision for excess and obsolete property and equipment | 381 | 400 |
Bad debt expense | 502 | 223 |
Deferred tax expense | 3,741 | 697 |
Gain on sale of property | (68) | (107) |
Unrealized loss on equity securities | 148 | 75 |
Unrealized gain on interest rate swap | 0 | (1,373) |
Realized loss on interest rate swap | 4 | 0 |
Gross profit from sale of lost-in-hole equipment | (13,968) | (12,595) |
Stock-based compensation expense | 3,986 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | (577) | (8,531) |
Prepaid expenses and other current assets | (92) | (5,456) |
Inventories, net | (2,876) | (261) |
Operating lease liabilities | (3,311) | (3,100) |
Accounts payable | (888) | (2,046) |
Accrued expenses and other current liabilities | 1,014 | 5,428 |
Net cash flows from operating activities | 17,484 | 5,641 |
Cash flows from investing activities: | ||
Proceeds from sale of property and equipment | 126 | 1,021 |
Purchase of property, plant and equipment | (36,776) | (16,235) |
Proceeds from sale of lost-in-hole equipment | 16,623 | 16,287 |
Net cash from investing activities | (20,027) | 1,073 |
Cash flows from financing activities: | ||
Proceeds from Merger and PIPE Financing, net of transaction costs | 23,162 | 0 |
Payment of deferred financing costs | (322) | (149) |
Proceeds from revolving line of credit | 71,646 | 76,471 |
Payments on revolving line of credit | (89,995) | (82,239) |
Payments on finance leases | 0 | (10) |
Payments to holders of DTIH redeemable convertible preferred stock in connection with retiring their DTI stock upon the Merger | (194) | 0 |
Net cash from financing activities | 4,297 | (5,927) |
Effect of Changes in Foreign Exchange Rate | (117) | (86) |
Net Change in Cash | 1,637 | 701 |
Cash at Beginning of Period | 2,352 | 52 |
Cash at End of Period | 3,989 | 753 |
Supplemental cash flow information: | ||
Cash paid for interest | 901 | 884 |
Cash paid for income taxes | 2,546 | 1,925 |
Non-cash investing and financing activities: | ||
ROU assets obtained in exchange for lease liabilities | 3,002 | 5,246 |
Purchases of inventory included in accounts payable and accrued expenses and other current liabilities | 451 | 1,776 |
Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities | 1,733 | 1,459 |
Non-cash directors and officers insurance | 1,063 | 0 |
Non-cash Merger financing | 2,000 | 0 |
Exchange of DTIH redeemable convertible preferred stock for DTIC Common Stock in connection with Merger | 7,193 | 0 |
Issuance of DTIC common stock to former holders of DTIH redeemable convertible preferred stock in connection with Exchange Agreements | 10,805 | 0 |
Deferred financing fees included in accounts payable | 0 | 69 |
Accretion of redeemable convertible preferred stock to redemption value | $ 314 | $ 883 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 –SUMMARY OF SIGNIFI CANT ACCOUNTING POLICIES Organization and Nature of Operations 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. On June 20, 2023 (the "Closing Date"), a merger transaction between Drilling Tools International Holdings, Inc. ("DTIH"), ROC Energy Acquisition Corp ("ROC"), and ROC Merger Sub, Inc., a directly, wholly owned subsidiary of ROC ("Merger Sub"), was completed (the "Merger", see Note 2) pursuant to the initial merger agreement dated February 13, 2023 and subsequent amendment to the merger agreement dated June 5, 2023 collectively, (the "Merger Agreement"). In connection with the closing of the Merger, ROC changed its name to Drilling Tools International Corporation. The common stock of DTIC ("DTIC Common Stock" or the "Company's Common Stock") commenced trading on the Nasdaq Stock Market LLC ("Nasdaq") under the symbol "DTI" on June 21, 2023. The Company’s United States (“U.S.”) operations have locations in Texas, California, Louisiana, Oklahoma, Pennsylvania, North Dakota, New Mexico, Utah, and Wyoming. The Company’s international operations are located in Canada. Operations outside the U.S. are subject to risks inherent in operating under different legal systems and various political and economic environments. Among the risks are changes in existing tax laws and possible limitations on foreign investment. The Company does not engage in hedging activities to mitigate its exposure to fluctuations in foreign currency exchange rates. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as set forth by the Financial Accounting Standards Board ("FASB") and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). References to US GAAP issued by the FASB in these notes to the accompanying unaudited condensed consolidated financial statements are to the FASB Accounting Standards Codifications (“ASC”) and Accounting Standards Update (“ASUs”). Certain items included in the comparative financial statements for the prior period have been reclassified to conform to the current period presentation. Unaudited Interim Financial Information The accompanying interim unaudited condensed consolidated financial statements included in this quarterly report have been prepared in accordance with U.S. GAAP and, in the opinion of the Company, contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of September 30, 2023, and its results of operations for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022. The condensed consolidated balance sheet at December 31, 2022 , was derived from the audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. COVID-19 Related Credits and Relief As a response to the COVID-19 outbreak, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and provided an Employee Retention Credit (“ERC”) which is a refundable tax credit against certain employment taxes equal to 50 % of qualified wages paid, up to $ 10 thousand per employee annually for wages paid. Additional relief provisions were passed by the United States government, which extended and expanded the qualified wage caps on these credits to 70 % of qualified wages paid, up to $ 10 thousand per employee per quarter, through September 30, 2021. In November 2021, the Infrastructure Investment and Jobs Act was signed into law and ended the employee retention credit early, making wages paid after December 31, 2021, ineligible for the credit. ERC benefits of nil and $ 4.3 million were included in selling, general, and administrative expense as an offset to the related compensation expenses in the unaudited condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2022 , respectively. ERC benefits receivable of nil and $ 2.1 million were included in prepaid expenses and other current assets in the accompanying unaudited condensed consolidated balance sheet as of September 30, 2023 and December 31, 2022 , respectively. The Company received all ERC benefits receivables in January 2023, resulting in the ERC benefits receivable balance to be nil as of September 30, 2023. Laws and regulations concerning government programs, including the ERC, are complex and subject to varying interpretations. Claims made under these programs may also be subject to retroactive audit and review. While the Company does not believe there is a basis for estimation of an audit or recapture risk at this time, there can be no assurance that regulatory authorities will not challenge the Company’s claim to the ERC in a future period. Emerging Growth Company Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard, until such time the Company is no longer considered to be an emerging growth company. 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 unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the Company’s unaudited condensed consolidated financial statements and accompanying notes as of the date of the unaudited condensed consolidated financial statements. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. In the current macroeconomic and business environment affected by the Russia-Ukraine and Israel-Hamas conflicts and inflationary pressures, these estimates require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, these estimates may change materially in future periods. Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated on consolidation. Foreign Currency Translation and Transactions The Company has determined that the functional and reporting currency for its operations across the globe is the functional currency of the Company’s international subsidiaries. Accordingly, all foreign balance sheet accounts have been translated into United States dollars using the rate of exchange at the respective balance sheet date. Components of the unaudited condensed consolidated statements of income and comprehensive income have been translated at the average rates for the year of the reporting period. Translation gains and losses are recorded in accumulated other comprehensive loss as a component of stockholders’ equity. Gains or losses arising from currency exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in the unaudited condensed consolidated statements of income and comprehensive income. For the three and nine months ended September 30, 2023, the aggregate foreign currency translation included in the unaudited condensed consolidated statements of income and comprehensive income totaled approximately $ 0.1 million in gains and $ 0.1 million in losses, respectively. For the three and nine months ended September 30, 2022, the aggregate foreign currency translation included in the unaudited condensed consolidated statements of income and comprehensive income totaled $ 24 thousand and $ 0.1 million in losses, respectively. Revenue Recognition The Company recognizes revenue in accordance with Topic 842 (which addresses lease accounting) and Topic 606 (which addresses revenue from contracts with customers). The Company derives its revenue from two revenue types, tool rental services and product sales. Tool Rental Services Tool rental services consist of rental services, inspection services, and repair services. Tool rental services are accounted for under Topic 842. Owned tool rentals represent the most significant revenue type and are governed by the Company’s standard rental contract. The Company accounts for such rentals as operating leases. The lease terms are included in the contracts, and the determination of whether the Company’s contracts contain leases generally does not require significant assumptions or judgments. The Company’s lease revenues do not include material amounts of variable payments. Owned tool rentals represent revenue from renting tools that the Company owns. The Company does not generally provide an option for the lessee to purchase the rented equipment at the end of the lease. The Company recognizes revenues from renting tools on a straight-line basis. The Company’s rental contract periods are daily, monthly, per well, or based on footage. 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. The Company records the amounts billed to customers in excess of recognizable revenue as deferred revenue on its unaudited condensed consolidated balance sheet. As noted above, the Company is unsure of when the customer will return rented drilling tools. As such, the Company does not know how much the customer will owe the Company upon return of the tool and cannot provide a maturity analysis of future lease payments. The Company’s drilling tools are generally rented for short periods of time (significantly less than a year). Lessees do not provide residual value guarantees on rented equipment. The Company expects to derive significant future benefits from its drilling tools following the end of the rental term. The Company’s rentals are generally short-term in nature, and its tools are typically rented for the majority of the time that the Company owns them. Product Sales Product sales consist of charges for rented tools that are damaged beyond repair, charges for lost-in-hole, and charges for lost-in-transit while in the care, custody or control of the Company’s customers, and other charges for made to order product sales. Product sales are accounted for under Topic 606. 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. To determine revenue recognition for its arrangements with customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. 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. As each of the Company’s contracts with customers contain a single performance obligation to provide a product sale, the Company does not have any performance obligations requiring allocation of transaction prices. The performance obligation for made to order product sales is satisfied and revenue is recognized at a point in time 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 the Company’s shipping dock. Additionally, pursuant to the contractual terms with the Company’s customers, the customer must notify the Company of, and purchase from the Company, any rented tools that are damaged beyond repair, lost-in-hole, or lost-in-transit while in the care, custody or control of the Company’s customers. Revenue is recognized for these products at a point in time upon the customer’s notification to the Company of the occurrence of one of these noted events. The Company does not have any revenue expected to be recognized in the future related to remaining performance obligations or contracts with variable consideration related to undelivered performance obligations. There was no revenue recognized in the current period from performance obligations satisfied in previous periods. Revenue per geographic location Revenue generated was concentrated within the United States. For the three and nine months ended September 30, 2023, the revenue generated within the United States was $ 34.9 million and $ 106.6 million , respectively, or 92 % and 91 % of total revenues, respectively. For the three and nine months ended September 30, 2023, the revenue generated outside of the United States, in Canada and International, was $ 3.2 million and $ 10.2 million , respectively, or 8 % and 9 % of total revenues, respectively. For the three and nine months ended September 30, 2022, the revenue generated within the United States was $ 33.4 million and $ 84.9 million , respectively, or 91 % and 91 % of total revenues, respectively. For the three and nine months ended September 30, 2022, the revenue generated outside of the United States, in Canada and International, was $ 3.2 million and $ 8.0 million , respectively, or 9 % and 9 % of total revenues, respectively. Contract Assets and Contract Liabilities Contract assets represent the Company’s rights to consideration for work completed but not billed. As of September 30, 2023 and December 31, 2022, the Company had contract assets of $ 4.4 million and $ 4.8 million , respectively. Contract assets were recorded in accounts receivable, net in the accompanying unaudited condensed consolidated balance sheets. Contract liabilities consist of fees invoiced or paid by the Company’s customers for which the associated services have not been performed and revenue has not been recognized based on the Company’s revenue recognition criteria described above. As of September 30, 2023 and December 31, 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 unaudited condensed consolidated balance sheets. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company did no t have any cash equivalents as of September 30, 2023 and December 31, 2022 . Accounts Receivable, net The Company’s accounts receivable consists principally of uncollateralized amounts billed to customers. These receivables are generally due within 30 to 60 days of the period in which the corresponding sales or rentals occur and do not bear interest. They are recorded at net realizable value less an allowance for doubtful accounts and are classified as account receivable, net on the unaudited condensed consolidated balance sheets. Allowance for Doubtful Accounts The Company adopted ASU 2016-13, Financial Instruments - Credit Losses , on December 31, 2022, which was retroactively applied as of the first day of fiscal year 2022. This accounting standard requires companies to measure expected credit losses on financial instruments based on the total estimated amount to be collected over the lifetime of the instrument. Prior to the adoption of this accounting standard, the Company recorded incurred loss reserves against receivable balances based on current and historical information. Expected credit losses for uncollectible receivable balances consider both current conditions and reasonable and supportable forecasts of future conditions. Current conditions considered include predefined aging criteria, as well as specified events that indicate the balance due is not collectible. Reasonable and supportable forecasts used in determining the probability of future collection consider publicly available macroeconomic data and whether future credit losses are expected to differ from historical losses. The Company is not party to any off-balance sheet arrangements that would require an allowance for credit losses in accordance with this accounting standard. As of September 30, 2023 and December 31, 2022, the allowance for doubtful accounts totaled $ 1.8 million and $ 1.5 million , respectively. Inventories, net Inventories are stated at the lower of cost or net realizable value. Cost is determined by using the specific identification method. Inventory that is obsolete or in excess of forecasted usage is written down to its net realizable value based on assumptions regarding future demand and market conditions. Inventory write-downs are charged to operating costs and establish a new cost basis for the inventory. Inventory includes raw material and finished goods. Property, Plant and Equipment, net 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 acquired as part of a business acquisition is recorded at acquisition date fair value with subsequent additions at cost. The cost of refurbishments and renewals are capitalized when the value of the property, plant or equipment is enhanced for an extended period. Expenditures to maintain and repair property, plant and equipment, which do not improve or extend the life of the related assets, are charged to operations when incurred. When property, plant and equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in operations. 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. Upon adoption, the Company elected the package of transition practical expedients, which allowed it to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. The Company elected the use-of-hindsight to reassess lease term. The Company elected not to recognize leases with an initial term of 12 months or less within the unaudited condensed consolidated balance sheets and to recognize those lease payments on a straight-line basis in the unaudited condensed consolidated statements of income and comprehensive income over the lease term. The new lease accounting standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the practical expedient to not separate lease and non-lease components for all leases. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and current operating lease liabilities and operating lease liabilities, net of current portion on the unaudited condensed consolidated balance sheets. 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. 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. Lease modifications are reassessed as of the effective date of the modification using an incremental borrowing rate based on the information available at the commencement date. For modified leases the Company also reassess the lease classification as of the effective date of the modification. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate because the interest rate implicit in the Company’s leases is not readily determinable. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The Company’s lease terms include periods under options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option in the measurement of its ROU assets and liabilities. The Company considers contractual-based factors such as the nature and terms of the renewal or termination, asset-based factors such as physical location of the asset and entity-based factors such as the importance of the leased asset to the Company’s operations to determine the lease term. The Company generally uses the base, noncancelable, lease term when determining the ROU assets and lease liabilities. The right-of-use asset is tested for impairment in accordance with Accounting Standards Codification Topic 360, Property, Plant, and Equipment. Lessor Accounting Our leased equipment primarily consists of rental tools and equipment. 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 lease contract periods are daily, monthly, per well or based on footage. Lease revenue is recognized on a straight-line basis based on these rates. We do not provide an option for the lessee to purchase the rented tools at the end of the lease and the lessees do not provide residual value guarantees on the rented assets. We recognized operating lease revenue within “Tool rental” on the unaudited condensed consolidated statements of income and comprehensive income. Intangible Assets Intangible assets with finite useful lives include customer relationships, trade name, patents, non-compete agreements and a supply agreement. These intangible assets are amortized either on a straight-line basis over the asset’s estimated useful life or on a basis that reflects the pattern in which the economic benefits of the intangible are realized. Accounting for Impairment of Long-lived Assets Long-lived assets with finite lives include property, plant and equipment and acquired intangible assets. The Company evaluates long-lived assets, including acquired intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset exceeds these estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the assets exceeds the fair value of the asset or asset group. For the three and nine months ended September 30, 2023 and 2022 , management determined that there were no triggering events necessitating impairment testing of property, plant, and equipment or intangible assets. Investments - Equity Securities Equity securities are stated at fair value. Unrealized gains and losses are reflected in the unaudited condensed consolidated statements of income and comprehensive income. The Company periodically reviews the securities for other than temporary declines in fair value below cost and more frequently when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. As of the three and nine months ended September 30, 2023 and September 30, 2022 , the Company believes the cost of the securities was recoverable in all material respects. Redeemable Convertible Preferred Stock Prior to the closing of the Merger, there were outstanding shares of DTIH Series A redeemable convertible preferred stock ("the "redeemable convertible preferred stock"), which was classified outside of permanent equity in mezzanine equity on the unaudited condensed consolidated balance sheets as it was redeemable on a fixed date. 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 September 30, 2023. As of December 31, 2022, the carrying value of the redeemable convertible preferred stock outstanding was $ 17.9 million . Preferred Stock As of the closing of the Merger, the Board of Directors have expressly granted authority to issue shares of preferred stock, in one or more series, and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series and as may be permitted by the Delaware General Corporation Law. The number of authorized shares of preferred stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, without a separate vote of the holders of the preferred stock, or any series thereof, unless a vote of any such holders is required pursuant to any preferred stock designation. The Board of Directors of the Company has no t issued any shares of any classes or series of preferred stock as of September 30, 2023 , and through the date these financial statements were available to be issued. Cost of Revenue The Company recorded all operating costs associated with its product sales and tool rental revenue streams in cost of product sale revenue and cost of tool rental revenue, respectively, in the unaudited condensed consolidated statements of income and comprehensive income. All indirect operating costs, including labor, freight, contract labor and others, are included in selling, general, and administrative expense in the unaudited condensed consolidated statements of income and comprehensive income. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”). 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. 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. Because the Company’s common stock was not yet publicly traded for any of its stock options granted to date, the Company estimated the fair value of its common stock as of the grant date and used these estimates as inputs into the Black-Scholes model. The Board of Directors considered numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting in which awards were approved. The factors considered include, but were not limited to: (i) the results of contemporaneous independent third-party valuations of the Company’s common stock; (ii) the prices, rights, preferences, and privileges of the redeemable convertible preferred stock relative to those of its common stock; (iii) the lack of marketability of the Company’s common stock; (iv) actual operating and financial results; (v) current business conditions and projections; (vi) the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company, given prevailing market conditions; and (vii) precedent transactions involving the Company’s shares. During the nine months ended September 30, 2023 and 2022 , the Company did no t 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. Earnings Per Share Basic earnings per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted earnings is computed by adjusting net income (loss) to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted earnings is computed by dividing the diluted net income (loss) by the weighted-average number of common shares outstanding for the period, including potential dilutive common stock. For the purposes of this calculation, outstanding stock options and redeemable convertible p |
MERGER
MERGER | 9 Months Ended |
Sep. 30, 2023 | |
Business Combinations [Abstract] | |
MERGER | NOTE 2 - MERGER As discussed in Note 1 - Summary of Significant Accounting Policies , on June 20, 2023, the Company completed the Merger. Upon the closing of the Merger, the following occurred: • Each share of DTIH common stock issued and outstanding immediately prior to the closing of the Merger, which totaled 52,363,876 shares (other than the shares described for the net exercise of the option and as compensation pursuant to the TSA), was exchanged for the right to receive 0.2282 shares of DTIC Common Stock (the "Common Exchange Ratio") resulting in the issuance of 11,951,137 shares of DTIC Common Stock. • Each share of DTIH redeemable convertible preferred stock issued and outstanding immediately prior to the closing of the Merger, which totaled 20,370,377 shares, was exchanged for the right to receive 0.3299 shares of DTIC Common Stock (the "Preferred Exchange Ratio") resulting in the issuance of 6,719,641 shares of DTIC Common Stock. • Each non-redeemable share of ROC common stock issued and outstanding immediately prior to the closing of the Merger, which totaled 3,403,500 shares, was exchanged for, on a one-for-one basis , shares of DTIC Common Stock. • Each share of ROC common stock subject to possible redemption that was not redeemed prior to the closing of the Merger, which totaled 158,621 shares, was exchanged for, on a one-for-one basis , shares of DTIC Common Stock. • Each of ROC's public rights and private rights outstanding immediately prior to the closing of the Merger, which totaled 20,700,000 and 796,000 , respectively, were exchanged for, on a ten-for-one basis , 2,070,000 and 79,600 shares of DTIC Common Stock, respectively. • Prior to the closing of the Merger, one DTIH stock option holder elected to net exercise all of such holder's options, resulting in the issuance of 158,444 shares of DTIH common stock, which upon the closing of the Merger, were canceled and exchanged for the right to receive 0.2282 shares of DTIC Common Stock per share of DTIH common stock, which resulted in the issuance of 36,163 shares of DTIC Common Stock. • DTIH entered into a transaction services agreement (the "TSA") with Hicks Holdings Operating LLC ("HHLLC") on January 27, 2012, as amended February 13, 2023, pursuant to which DTIH must pay HHLLC a transaction fee equal to 1.5 % of any subsequent transaction, as defined in the TSA. The Merger constitutes a subsequent transaction per the TSA and, therefore, the Board authorized DTIH to issue 1,149,830 shares of DTIH common stock to HHLLC and 328,611 shares of DTIH common stock to a stockholder of DTIH who is affiliated with HHLLC, immediately prior to the closing of the Merger. The DTIH common stock was issued immediately prior to the closing of the Merger and the issuance resulted in the recognition of $ 2.3 million of stock-based compensation expense within other expense on the unaudited condensed consolidated statements of income and comprehensive income for the nine months ended September 30, 2023. The shares of DTIH common stock issued were exchanged for 337,429 shares of DTIC Common Stock as of the date of the closing of the Merger in accordance with the Common Exchange Ratio. The $ 2.3 million of stock-based compensation was recorded by taking the $ 6.95 quoted market price of the Company's common stock as of the date and time of the closing of the Merger and multiplying this price by the 337,429 shares of DTIC Common Stock Issued. • In connection with the Merger, certain holders of DTIH redeemable convertible preferred stockholders entered into exchange agreements (the "Exchange Agreements") wherein the DTIH redeemable convertible preferred stockholders exchanged their rights to receive a portion of the $ 11.0 million Aggregate Company Cash Consideration (as defined within the Merger Agreement) for the rights to receive shares of DTIC Common Stock. Immediately following the effectiveness of the Exchange Agreements, which became effective as of the closing of the Merger, the holders of DTIH redeemable convertible preferred stock that participated in the Exchange Agreements held 2,042,181 shares of DTIC Common Stock as a result of their participation in the Exchange Agreements. In addition, the holders of DTIH redeemable convertible preferred stock that did not participate in the Exchange Agreements were paid $ 0.2 million from the Aggregate Company Cash Consideration in exchange for the cancellation of their DTIH redeemable convertible preferred stock in connection with the closing of the Merger. • In connection with the Merger, ROC entered into subscription agreements (the "Subscription Agreements") with certain accredited investors (which were related parties of ROC due to their affiliation with ROC Energy Holdings, LLC, which is ROC's sponsor ("Sponsor" or "ROC Sponsor")) (the "PIPE Investors") for an aggregate of 2,970,296 shares of DTIC Common Stock at a price of $ 10.10 per share, for a total of $ 30.0 million (the "PIPE Financing"). Upon the closing of the PIPE Financing (which closed in connection with the closing of the Merger), the Company received $ 25.9 million in cash and $ 4.1 million worth of shares from the PIPE Financing were used to settle related party promissory notes issued by ROC to the ROC Sponsor and an affiliate of ROC Sponsor. The proceeds received by the Company from the Merger and PIPE Financing, net of transaction costs, totaled $ 23.2 million . The Merger was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, ROC was treated as the acquired company for financial reporting purposes (see Note 1 for further details. Accordingly, for accounting purposes, the Merger was treated as the equivalent of the Company issuing shares for the net assets of ROC, accompanied by a recapitalization. The net assets of ROC were stated at historical cost with no goodwill or other intangible assets recorded. The following table presents the total DTIC Common Stock outstanding immediately after the closing of the Merger: Exchange of ROC common stock not subject to possible redemption for DTIC Common Stock upon Merger 3,403,500 Conversion of ROC Public Rights into shares of DTIC Common Stock 2,070,000 Conversion of ROC Private Rights into shares of DTIC Common Stock 79,600 Exchange of ROC common stock subject to possible redemption that was not redeemed for DTIC Common Stock 158,621 Subtotal - Merger, net of redemptions 5,711,721 Issuance of DTIC Common Stock in connection with PIPE Financing 2,970,296 Exchange of DTIH common stock outstanding as of December 31, 2022 for DTIC Common Stock 11,951,137 Exchange of DTIH redeemable convertible preferred stock outstanding as of December 31, 2022 for DTIC Common Stock 6,719,641 Issuance of shares as stock-based compensation to former DTIH stockholders as part of transaction services agreement upon the Merger 337,429 Issuance of DTIC Common Stock to former holders of DTIH redeemable convertible preferred stock in connection with Exchange Agreements 2,042,181 Net exercise of stock options by DTIH stockholder 36,163 Total - DTIC Common Stock outstanding as a result of Merger, PIPE Financing, DTIH for DTIC share exchanges, transaction services agreement, Exchange Agreements, and exercise of stock options 29,768,568 |
INVESTMENTS - EQUITY SECURITIES
INVESTMENTS - EQUITY SECURITIES | 9 Months Ended |
Sep. 30, 2023 | |
Investments, Debt and Equity Securities [Abstract] | |
INVESTMENTS - EQUITY SECURITIES | NOTE 3 – INVESTMENTS – EQUITY SECURITIES The following table shows the cost and fair value of the Company’s investments in equity securities (in thousands): Cost Unrealized Fair Value September 30, 2023 $ 999 $ ( 4 ) $ 995 Cost Unrealized Fair Value December 31, 2022 $ 999 $ 144 $ 1,143 Unrealized holding losses on equity securities for the three months ended September 30, 2023 and 2022 were approximately $ 0.5 million and $ 0.4 million , respectively. Unrealized holding losses on equity securities for the nine months ended September 30, 2023 and 2022 were approximately $ 0.1 million and $ 0.1 million , respectively. |
BALANCE SHEET DETAILS - CURRENT
BALANCE SHEET DETAILS - CURRENT ASSETS AND CURRENT LIABILITIES | 9 Months Ended |
Sep. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BALANCE SHEET DETAILS - CURRENT ASSETS AND CURRENT LIABILITIES | NOTE 4 – BALANCE SHEET DETAILS - CURRENT ASSETS AND CURRENT LIABILITIES Inventories, net The following table shows the components of inventory (in thousands): September 30, 2023 December 31, 2022 Raw materials $ 6,638 $ 3,377 Finished goods 108 115 Total inventories 6,746 3,492 Allowance for obsolete inventory ( 160 ) ( 211 ) Inventories, net $ 6,586 $ 3,281 Prepaid expenses and other current assets The following table shows the components of prepaid expenses and other current assets (in thousands): September 30, 2023 December 31, 2022 Prepaid expenses: ERC benefits receivable $ — $ 2,117 Deposits on inventory 2,040 680 Prepaid income tax 565 — Prepaid insurance 1,621 358 Prepaid rent 371 381 Prepaid equipment 178 179 Prepaid other 187 173 Other current assets: Interest rate swap asset $ — $ 476 Other 14 17 Total $ 4,976 $ 4,381 Accrued expenses and other current liabilities The following table shows the components of accrued expenses and other current liabilities (in thousands): September 30, 2023 December 31, 2022 Accrued expenses: Accrued compensation and related benefits $ 5,306 $ 3,392 Accrued insurance 1,564 525 Accrued transaction advisory fees 1,500 — Accrued professional services 2 509 Accrued interest 58 62 Accrued property taxes 835 41 Other 111 38 Other current liabilities: Income tax payable $ 2,129 $ 1,780 Sales tax payable 204 587 Unbilled lost-in-hole revenue 155 282 Deferred revenue — 83 Total accrued expenses and other current liabilities $ 11,864 $ 7,299 |
INTANGIBLE ASSETS, NET
INTANGIBLE ASSETS, NET | 9 Months Ended |
Sep. 30, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS, NET | NOTE 6 – INTANGIBLE ASSETS, NET The following table shows the components of intangible assets, net (in thousands): Useful Lives (in Years) September 30, 2023 December 31, 2022 Trade name 10 - 13 $ 1,280 $ 1,280 Technology 13 270 270 Total intangible assets 1,550 1,550 Less: accumulated amortization ( 1,322 ) ( 1,287 ) Intangible assets, net $ 228 $ 263 Total amortization expense for the three months ended September 30, 2023 and 2022 was approximately $ 12 thousand and $ 12 thousand , respectively. Total amortization expense for the nine months ended September 30, 2023 and 2022 was approximately $ 35 thousand and $ 0.1 million , respectively. |
REVOLVING CREDIT FACILITY
REVOLVING CREDIT FACILITY | 9 Months Ended |
Sep. 30, 2023 | |
Line of Credit Facility [Abstract] | |
REVOLVING CREDIT FACILITY | NOTE 7 – REVOLVING CREDIT FACILITY In December 2015, the Company entered into a credit facility with PNC Bank, National Association (the "Credit Facility"). The facility provides for a revolving line of credit with a maximum borrowing amount totaling $ 60.0 million , as of September 30, 2023 and December 31, 2022. On June 20, 2023, the Company entered into the Amended and Restated Revolving Credit, Security and Guaranty Agreement among Drilling Tools International, Inc., certain of its subsidiaries, Drilling Tools International Corporation and PNC Bank, National Association (the “Credit Facility Agreement”) that modified the terms of its previous agreement and related amendments. This amended agreement modified certain defined terms in the previous agreement, removed the $ 20.0 million unfunded capital expenditures requirement, removed the $ 9.0 million sublimit to the Company's Canadian entity and changed the legal debtor from DTIH to DTIC. See Note 2 - Merger for further discussion of the Merger. For the three and nine months ended September 30, 2023, the interest on the amount drawn was based on SOFR or the bank’s base lending rate plus applicable margin (approximately 8.32 % at September 30, 2023 ). The Credit Facility is collateralized by substantially all the assets of the Company and matures December 31, 2025. As of September 30, 2023 , there were no amounts drawn against the line of credit. The Company is subject to various restrictive covenants associated with these borrowings including, but not limited to, a fixed charge ratio, and a minimum amount of undrawn availability. As of September 30, 2023, the Company was in compliance with all restrictive covenants. Contingent Interest Embedded Derivative Liability Under the Credit Facility Agreement, the interest rate will reset (the 'Default Rate') upon the event of a default and an additional 2 % will be added to the base rate. The Company analyzed the Default Rate feature of the Credit Facility for derivative accounting consideration under ASC 815, Derivatives and Hedging , and determined the Default Rate met the definition of a derivative as it is a contingent interest feature. The Company also noted that the Default Rate feature (the 'Default Rate Derivative') required bifurcation from the host contract and was to be accounted for at fair value. In accordance with ASC 815-15, the Company bifurcated the Default Rate feature of the note and determined the derivative is liability classified. The Default Rate Derivative is treated as a liability, initially measured at fair value with subsequent changes in fair value recorded in earnings. Management has assessed the probability of occurrence for a non-credit default event and determined the likelihood of a referenced event to be remote. Therefore, the estimated fair value of the Default Rate Derivative was negligible as of September 30, 2023 and December 31, 2022 and therefore no amounts were recorded as of September 30, 2023 or December 31, 2022 . |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 8 – INCOME TAXES The Company recorded income tax expense on the unaudited condensed consolidated statements of income and comprehensive income of $ 2.1 million and $ 0.6 million for the three months ended September 30, 2023 and 2022, respectively. The Company recorded income tax expense on the unaudited condensed consolidated statements of income and comprehensive income of $ 5.2 million and $ 2.8 million for the nine months ended September 30, 2023 and 2022, respectively. The Company calculates its tax provision using the discreet quarter methodology. The Company’s effective tax rate for the three months ended September 30, 2023 and 2022 were provisions of 32.9 % and 8.2 % , respectively. The Company’s effective tax rate for the nine months ended September 30, 2023 and 2022 were provisions of 32.3 % and 16.6 % , respectively. Such rates differed from the Federal Statutory rate of 21.0 % primarily due to permanent differences, including disallowed transaction expenses, as well as state taxes and foreign income taxes on the Company's international operations. The Company records deferred tax assets and liabilities for the future tax benefit or expense that will result from differences between the carrying value of its assets for income tax purposes and for financial reporting purposes, as well as for operating loss and tax credit carryovers. A valuation allowance is recorded to bring the net deferred tax assets to a level that is more likely than not to be realized in the foreseeable future. This level will be estimated based on a number of factors, especially the amount of net deferred tax assets of the Company that are actually expected to be realized, for tax purposes, in the foreseeable future. There was no change to the valuation allowance during the three and nine months ended September 30, 2023 and 2022 . |
PROPERTY, PLANT AND EQUIPMENT,
PROPERTY, PLANT AND EQUIPMENT, NET | 9 Months Ended |
Sep. 30, 2023 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT, NET | NOTE 5 – PROPERTY, PLANT AND EQUIPMENT, NET The following table shows the component of property, plant and equipment, net (in thousands): Estimated Useful September 30, 2023 December 31, 2022 Rental tools and equipment 5 - 10 186,042 160,973 Buildings and improvements 5 - 40 6,634 5,781 Office furniture, fixtures and equipment 3 - 5 2,362 2,101 Transportation and equipment 3 - 5 796 827 Total property, plant and equipment 195,834 169,682 Less: accumulated deprecation ( 131,265 ) ( 125,537 ) Property, plant and equipment, net (excluding construction in progress) 64,569 44,145 Construction in progress - 9 Property, plant and equipment, net $ 64,569 $ 44,154 Total depreciation expense for the three months ended September 30, 2023 and 2022 was approximately $ 5.3 million and $ 4.8 million , respectively. Total depreciation expense for the nine months ended September 30, 2023 and 2022 was approximately $ 15.0 million and $ 14.7 million , respectively. The Company has not acquired any property, plant and equipment under capital leases. Property, plant and equipment, net, were concentrated within the United States. As of September 30, 2023 and December 31, 2022, property, plant and equipment, net held within the United States was $ 62.4 million and $ 41.8 million , respectively, or 97 % and 95 % of total property, plant and equipment, net, respectively. As of September 30, 2023 and December 31, 2022 property, plant and equipment, net held outside of the United States, in Canada, was $ 2.2 million and $ 2.3 million , or 3 % and 5 % of total property, plant and equipment net for both periods. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
STOCK-BASED COMPENSATION | NOTE 9 – STOCK-BASED COMPENSATION On June 20, 2023, the Company adopted the Drilling Tools International Corporation 2023 Omnibus Incentive Plan (the 2023 Plan). The 2023 Plan became effective on the closing of the Merger, which also occurred on June 20, 2023 . 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 2,976,854 shares as of September 30, 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 allows for awards to be issued to employees, non-employee directors, and consultants in the form of options, stock appreciation rights, restricted shares, restricted stock units, performance based awards, other share-based awards, other cash-based awards, or a combination of the foregoing. As of September 30, 2023, there were 2,976,854 shares of Common Stock available for issuance under the 2023 Plan. In connection with the Merger, all outstanding options to purchase shares of DTIH common stock were canceled and exchanged for options to purchase shares of DTIC Common Stock ("Company Options"). The number of Company Options issued and the associated exercise prices were adjusted using the Common Exchange Ratio used for the Merger (see Note 2 - Merger ). As a result of the Merger, the Company issued options to purchase a total of 2,361,722 shares of the Company's Common Stock to former holders of the DTIH stock options. The vesting schedules, remaining term, and provisions (other than the adjusted number of underlying shares and exercise prices) of the Company Options issued, are identical to the vesting schedules, remaining term, and other provisions of the DTIH stock options that were exchanged. 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. 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. Treasury yield rate in effect at the time of grant. The Company’s calculation of share price involves the use of different valuation techniques, including a combination of an income and market approach. 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. Determination of the fair value is a matter of judgment and often involves the use of estimates and assumptions. In June of 2022 and prior to the closing of the Merger, one holder of DTIH stock options elected to net exercise all of such holder's stock options, resulting in 158,444 shares of DTIH common stock being issued prior to the Merger and subsequently canceled and exchanged for a total of 36,163 shares of DTIC Common Stock as of the date of the Merger. During the three and nine months ended September 30, 2022 , there were no op tions granted, exercised or forfeited. During the nine months ended September 30, 2023, the Company recognized $ 1.7 million of stock-based compensation expense within selling, general, and administrative expense on the unaudited condensed consolidated statements of income and comprehensive income related to the accelerated vesting of an executive's 534,063 performance-based stock options. The performance conditions were satisfied upon completion of the Merger and all 534,063 performance-based stock options vested on June 20, 2023. During the nine months ended September 30, 2023, the Company recognized $ 2.3 million of stock-based compensation expense within other expense on the unaudited condensed consolidated statements of income and comprehensive income as a result of the issuance of shares in accordance with the TSA with HHLLC (see Note 2 - Merger ). During the three months ended September 30, 2023 , there was no stock-based compensation expense recognized. |
OTHER EXPENSES, NET
OTHER EXPENSES, NET | 9 Months Ended |
Sep. 30, 2023 | |
Other Income and Expenses [Abstract] | |
OTHER EXPENSES, NET | NOTE 10 – OTHER EXPENSES, NET The following table shows the components of other expenses, net for the three months ended September 30, 2023 and 2022 (in thousands): Three months ended September 30, 2023 Three months ended September 30, 2022 Transaction fees ( 124 ) — Other, net ( 11 ) ( 114 ) Other expense, net $ ( 135 ) $ ( 114 ) The following table shows the components of other expenses, net for the nine months ended September 30, 2023 and 2022 (in thousands): Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 HHLLC stock-based compensation $ ( 2,339 ) $ — Transaction fees ( 3,623 ) — Other, net ( 256 ) ( 209 ) Interest income 48 — Other expense, net $ ( 6,170 ) $ ( 209 ) |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2023 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 11 – RELATED PARTY TRANSACTIONS Management fees For the three months ended September 30, 2023 and 2022, management fees paid to Hicks Holdings Operating LLC, a shareholder of the Company, were approximately $ 0.3 million and $ 0.2 million , respectively. For the nine months ended September 30, 2023 and 2022, management fees paid to Hicks Holdings Operating LLC were approximately $ 0.9 million and $ 0.4 million , respectively. Management fees paid to a shareholder are included in selling, general and administrative expense in the accompanying unaudited condensed consolidated statements of income and comprehensive income. Leases For the three months ended September 30, 2023 and 2022, the Company paid rent expense to Cree Investments, LLC, a shareholder of the Company, of approximately $ 13 thousand and $ 13 thousand , respectively, relating to the lease of a building. For the nine months ended September 30, 2023 and 2022, the Company paid rent expense to Cree Investments, LLC of approximately $ 38 thousand and $ 38 thousand , respectively, relating to the lease of a building. Future minimum lease payments related to this lease are included in the future minimum lease schedule in Note 12 - Leases . Tools For the three and nine months ended September 30, 2022, the Company paid $ 4.0 thousand to Heath Woodrum, a shareholder of the Company, for tools. Promissory Notes Upon consummation of the Merger on June 20, 2023, the Company issued shares of DTIC Common Stock in connection with the PIPE Financing to payoff convertible promissory notes which were issued to an affiliate of the ROC Sponsor on December 6, 2022 and March 2, 2023, respectively. The notes did not bear interest and were in the amounts of $ 2.1 million and $ 2.1 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 or finance transaction costs in connection with the Merger. The loan did not bear interest. |
LEASES
LEASES | 9 Months Ended |
Sep. 30, 2023 | |
Leases [Abstract] | |
LEASES | NOTE 12 – LEASES The Company leases various facilities and vehicles under noncancelable operating lease agreements. The remaining lease terms for our leases range from 1 month to 14 years. These leases often include options to extend the term of the lease which may be for periods of up to 5 years. When it is reasonably certain that the option will be exercised, the impact of the renewal term is included in the lease term for purposes of determining total future lease payments and measuring the ROU asset and lease liability. 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 September 30, 2023. For the three and nine months ended September 30, 2023, the components of the Company’s lease expense were as follows (in thousands): Three months ended September 30, 2023 Three months ended September 30, 2022 Operating Lease Cost $ 1,543 $ 1,449 Short-term Lease Cost 33 41 Variable Lease Cost 78 80 Sublease Income — ( 46 ) Total Lease Cost $ 1,654 $ 1,524 Nine months ended September 30, 2023 Nine months ended September 30, 2022 Operating Lease Cost $ 4,593 $ 4,322 Short-term Lease Cost 96 108 Variable Lease Cost 242 225 Sublease Income ( 76 ) ( 137 ) Total Lease Cost $ 4,855 $ 4,518 Supplemental balance sheet information related to leases was as follows (in thousands): Nine months ended September 30, 2023 Weighted-average remaining lease term (in years) 6.65 Weighted average discount rate 5.79 % Nine months ended September 30, 2023 Right-of-use assets obtained in exchange for new operating lease liabilities $ 3,002 Cash paid for amounts included in the measurement of lease liabilities 4,153 Future undiscounted cash flows for each of the next five years and thereafter and reconciliation to the lease liabilities recognized on the unaudited condensed consolidated balance sheet as of September 30, 2023 were as follows (in thousands): 2023 $ 1,283 2024 4,835 2025 4,036 2026 3,476 2027 2,439 Thereafter 7,545 Total lease payments $ 23,614 Less: imputed interest ( 3,921 ) Present value of lease liabilities $ 19,693 The Company leases downhole drilling tools to companies in the oil and natural gas industry. Such leases are accounted for in accordance with ASC 842. For the three and nine months ended September 30, 2023, tool rental revenue was approximately $ 29.4 million and $ 90.6 million , respectively. Our lease contract periods are short-term in nature and are typically daily, monthly, per well, or footage based. Due to the short term nature of the contracts, no maturity table is presented. |
EMPLOYEE BENEFITS
EMPLOYEE BENEFITS | 9 Months Ended |
Sep. 30, 2023 | |
Defined Benefit Plan [Abstract] | |
EMPLOYEE BENEFITS | NOTE 13 – EMPLOYEE BENEFITS The Company has a defined contribution plan that complies with Section 401(k) of the Internal Revenue Code. All employees are auto enrolled at a 3% contribution, unless they opt out, beginning on the first plan entry date following six months of service. Plan entry dates are the first day of January and July. In March of 2020, the Company suspended any employee contribution match effective immediately and through the end of 2021. The match was reinstated on January 1, 2022. For 2022, the Company matched employee contributions 150 % of the first 3 % of employee contributions, not to exceed $ 2 thousand per participant per calendar year. Employees vest in employer contributions over six years. The contribution is limited to the maximum contribution allowed under the Internal Revenue Service Regulations. The total expense for the three months ended September 30, 2023 and 2022 was approximately $ 0.1 million and $ 0.1 million , respectively. The total expense for the nine months ended September 30, 2023 and 2022 was approximately $ 0.4 million and $ 0.4 million , respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 14 – COMMITMENTS AND CONTINGENCIES The Company maintains operating leases for various facilities and vehicles. See Note 12 - Leases , for further information. Litigation From time to time, the Company may become involved in various legal proceedings in the ordinary course of its business and may be subject to third-party infringement claims. In the normal course of business, the Company may agree to indemnify third parties with whom it enters into contractual relationships, including customers, lessors, and parties to other transactions with the Company, with respect to certain matters. The Company has agreed, under certain conditions, to hold these third parties harmless against specified losses, such as those arising from a breach of representations or covenants, other third-party claims that the Company’s products when used for their intended purposes infringe the intellectual property rights of such other third parties, or other claims made against certain parties. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances that are likely to be involved in each particular claim. As of September 30, 2023 a petition was filed against Premium Tools LLC, a wholly owned subsidiary of DTIC, by Exco Resources Inc. The Company believes the ultimate resolution of this petition will not have a material adverse effect on its unaudited condensed consolidated balance sheets, statements of operations and comprehensive income or cash flows. In addition, a former employee has filed a claim under the Fair Labor Standards Act of 1938, as amended (the “FLSA”) seeking overtime payment. The Company believes this claim will be disallowed and will not have a material adverse effect on its unaudited condensed consolidated balance sheets, statements of operations and comprehensive income or cash flows. As of December 31, 2022, the Company had not been subject to any pending litigation claims. Management Fee The Company is required to pay a monthly management fee to a shareholder. The fee is based upon a percentage of the Company’s trailing twelve months, earnings before interest, taxes and accumulated depreciation amount, as defined in the management agreement. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2023 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | NOTE 15 – EARNINGS PER SHARE Basic earnings per share is computed using the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed using the weighted-average number of common shares outstanding for the period plus dilutive potential common shares, including performance share awards, using the treasury stock method. Performance share awards are included based on the number of shares that would be issued as if the end of the reporting period was the end of the performance period and the result was dilutive. The following table sets forth the computation of the Company’s basic and diluted net earnings per share for the three and nine months ended September 30, 2023 and 2022 (in thousands except share and per share data): Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 Numerator: Net income (loss) $ 4,287 $ 6,996 $ 10,925 $ 14,263 Less: Redeemable convertible preferred stock dividends — ( 294 ) ( 314 ) ( 883 ) Net income (loss) attributable to common shareholders — basic $ 4,287 $ 6,702 $ 10,611 $ 13,380 Add: Redeemable convertible preferred stock dividends — 294 314 883 Net income (loss) attributable to common shareholders — diluted $ 4,287 $ 6,996 $ 10,925 $ 14,263 Denominator Weighted-average common shares used in computing 29,768,568 11,951,137 18,608,708 11,951,137 Weighted-average effect of potentially dilutive securities: Effect of potentially dilutive time-based stock options 204,686 1,006,729 651,996 1,006,729 Effect of potentially dilutive performance-based stock options 70,292 — 60,269 — Effect of potentially dilutive redeemable convertible — 6,719,641 4,233,620 6,719,641 Weighted-average common shares outstanding — diluted 30,043,546 19,677,507 23,554,593 19,677,507 Earnings (net loss) per share — basic $ 0.14 $ 0.56 $ 0.57 $ 1.12 Earnings (net loss) per share — diluted $ 0.14 $ 0.36 $ 0.46 $ 0.72 As of September 30, 2023, the Company’s potentially dilutive securities consisted of options to purchase common stock. As of September 30, 2022, the Company's potentially dilutive securities consisted of redeemable convertible preferred stock and options to purchase common stock. Based on the amounts outstanding as of the three and nine months ended September 30, 2023 and 2022, the Company excluded the following potential common shares from the computation of diluted net loss per share because including them would have had an anti-dilutive effect: Three months ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Time-based options outstanding 140,135 140,135 140,135 140,135 Total 140,135 140,135 140,135 140,135 Our performance-based stock options were excluded from the diluted earnings per share calculations for the three and nine months ended September 30, 2022 because all necessary performance conditions were not satisfied by September 30, 2022. Our performance-based stock options excluded from diluted earnings per share for the three and nine months ended September 30, 2022 were as follows: Three months ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Performance-based options outstanding — 534,063 — 534,063 Total — 534,063 — 534,063 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2023 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 16 – SUBSEQUENT EVENTS None. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
Organization and Nature of Operations | Organization and Nature of Operations 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. On June 20, 2023 (the "Closing Date"), a merger transaction between Drilling Tools International Holdings, Inc. ("DTIH"), ROC Energy Acquisition Corp ("ROC"), and ROC Merger Sub, Inc., a directly, wholly owned subsidiary of ROC ("Merger Sub"), was completed (the "Merger", see Note 2) pursuant to the initial merger agreement dated February 13, 2023 and subsequent amendment to the merger agreement dated June 5, 2023 collectively, (the "Merger Agreement"). In connection with the closing of the Merger, ROC changed its name to Drilling Tools International Corporation. The common stock of DTIC ("DTIC Common Stock" or the "Company's Common Stock") commenced trading on the Nasdaq Stock Market LLC ("Nasdaq") under the symbol "DTI" on June 21, 2023. The Company’s United States (“U.S.”) operations have locations in Texas, California, Louisiana, Oklahoma, Pennsylvania, North Dakota, New Mexico, Utah, and Wyoming. The Company’s international operations are located in Canada. Operations outside the U.S. are subject to risks inherent in operating under different legal systems and various political and economic environments. Among the risks are changes in existing tax laws and possible limitations on foreign investment. The Company does not engage in hedging activities to mitigate its exposure to fluctuations in foreign currency exchange rates. |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as set forth by the Financial Accounting Standards Board ("FASB") and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). References to US GAAP issued by the FASB in these notes to the accompanying unaudited condensed consolidated financial statements are to the FASB Accounting Standards Codifications (“ASC”) and Accounting Standards Update (“ASUs”). Certain items included in the comparative financial statements for the prior period have been reclassified to conform to the current period presentation. |
Unaudited Interim Financial Information | Unaudited Interim Financial Information The accompanying interim unaudited condensed consolidated financial statements included in this quarterly report have been prepared in accordance with U.S. GAAP and, in the opinion of the Company, contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of September 30, 2023, and its results of operations for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022. The condensed consolidated balance sheet at December 31, 2022 , was derived from the audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. |
COVID-19 Related Credits and Relief | COVID-19 Related Credits and Relief As a response to the COVID-19 outbreak, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and provided an Employee Retention Credit (“ERC”) which is a refundable tax credit against certain employment taxes equal to 50 % of qualified wages paid, up to $ 10 thousand per employee annually for wages paid. Additional relief provisions were passed by the United States government, which extended and expanded the qualified wage caps on these credits to 70 % of qualified wages paid, up to $ 10 thousand per employee per quarter, through September 30, 2021. In November 2021, the Infrastructure Investment and Jobs Act was signed into law and ended the employee retention credit early, making wages paid after December 31, 2021, ineligible for the credit. ERC benefits of nil and $ 4.3 million were included in selling, general, and administrative expense as an offset to the related compensation expenses in the unaudited condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2022 , respectively. ERC benefits receivable of nil and $ 2.1 million were included in prepaid expenses and other current assets in the accompanying unaudited condensed consolidated balance sheet as of September 30, 2023 and December 31, 2022 , respectively. The Company received all ERC benefits receivables in January 2023, resulting in the ERC benefits receivable balance to be nil as of September 30, 2023. Laws and regulations concerning government programs, including the ERC, are complex and subject to varying interpretations. Claims made under these programs may also be subject to retroactive audit and review. While the Company does not believe there is a basis for estimation of an audit or recapture risk at this time, there can be no assurance that regulatory authorities will not challenge the Company’s claim to the ERC in a future period. |
Emerging Growth Company | Emerging Growth Company Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard, until such time the Company is no longer considered to be an emerging growth company. 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 | Use of Estimates The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the Company’s unaudited condensed consolidated financial statements and accompanying notes as of the date of the unaudited condensed consolidated financial statements. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. In the current macroeconomic and business environment affected by the Russia-Ukraine and Israel-Hamas conflicts and inflationary pressures, these estimates require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, these estimates may change materially in future periods. |
Principles of Consolidation | Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated on consolidation. |
Foreign Currency Translation and Transactions | Foreign Currency Translation and Transactions The Company has determined that the functional and reporting currency for its operations across the globe is the functional currency of the Company’s international subsidiaries. Accordingly, all foreign balance sheet accounts have been translated into United States dollars using the rate of exchange at the respective balance sheet date. Components of the unaudited condensed consolidated statements of income and comprehensive income have been translated at the average rates for the year of the reporting period. Translation gains and losses are recorded in accumulated other comprehensive loss as a component of stockholders’ equity. Gains or losses arising from currency exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in the unaudited condensed consolidated statements of income and comprehensive income. For the three and nine months ended September 30, 2023, the aggregate foreign currency translation included in the unaudited condensed consolidated statements of income and comprehensive income totaled approximately $ 0.1 million in gains and $ 0.1 million in losses, respectively. For the three and nine months ended September 30, 2022, the aggregate foreign currency translation included in the unaudited condensed consolidated statements of income and comprehensive income totaled $ 24 thousand and $ 0.1 million in losses, respectively. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue in accordance with Topic 842 (which addresses lease accounting) and Topic 606 (which addresses revenue from contracts with customers). The Company derives its revenue from two revenue types, tool rental services and product sales. Tool Rental Services Tool rental services consist of rental services, inspection services, and repair services. Tool rental services are accounted for under Topic 842. Owned tool rentals represent the most significant revenue type and are governed by the Company’s standard rental contract. The Company accounts for such rentals as operating leases. The lease terms are included in the contracts, and the determination of whether the Company’s contracts contain leases generally does not require significant assumptions or judgments. The Company’s lease revenues do not include material amounts of variable payments. Owned tool rentals represent revenue from renting tools that the Company owns. The Company does not generally provide an option for the lessee to purchase the rented equipment at the end of the lease. The Company recognizes revenues from renting tools on a straight-line basis. The Company’s rental contract periods are daily, monthly, per well, or based on footage. 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. The Company records the amounts billed to customers in excess of recognizable revenue as deferred revenue on its unaudited condensed consolidated balance sheet. As noted above, the Company is unsure of when the customer will return rented drilling tools. As such, the Company does not know how much the customer will owe the Company upon return of the tool and cannot provide a maturity analysis of future lease payments. The Company’s drilling tools are generally rented for short periods of time (significantly less than a year). Lessees do not provide residual value guarantees on rented equipment. The Company expects to derive significant future benefits from its drilling tools following the end of the rental term. The Company’s rentals are generally short-term in nature, and its tools are typically rented for the majority of the time that the Company owns them. Product Sales Product sales consist of charges for rented tools that are damaged beyond repair, charges for lost-in-hole, and charges for lost-in-transit while in the care, custody or control of the Company’s customers, and other charges for made to order product sales. Product sales are accounted for under Topic 606. 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. To determine revenue recognition for its arrangements with customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. 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. As each of the Company’s contracts with customers contain a single performance obligation to provide a product sale, the Company does not have any performance obligations requiring allocation of transaction prices. The performance obligation for made to order product sales is satisfied and revenue is recognized at a point in time 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 the Company’s shipping dock. Additionally, pursuant to the contractual terms with the Company’s customers, the customer must notify the Company of, and purchase from the Company, any rented tools that are damaged beyond repair, lost-in-hole, or lost-in-transit while in the care, custody or control of the Company’s customers. Revenue is recognized for these products at a point in time upon the customer’s notification to the Company of the occurrence of one of these noted events. The Company does not have any revenue expected to be recognized in the future related to remaining performance obligations or contracts with variable consideration related to undelivered performance obligations. There was no revenue recognized in the current period from performance obligations satisfied in previous periods. Revenue per geographic location Revenue generated was concentrated within the United States. For the three and nine months ended September 30, 2023, the revenue generated within the United States was $ 34.9 million and $ 106.6 million , respectively, or 92 % and 91 % of total revenues, respectively. For the three and nine months ended September 30, 2023, the revenue generated outside of the United States, in Canada and International, was $ 3.2 million and $ 10.2 million , respectively, or 8 % and 9 % of total revenues, respectively. For the three and nine months ended September 30, 2022, the revenue generated within the United States was $ 33.4 million and $ 84.9 million , respectively, or 91 % and 91 % of total revenues, respectively. For the three and nine months ended September 30, 2022, the revenue generated outside of the United States, in Canada and International, was $ 3.2 million and $ 8.0 million , respectively, or 9 % and 9 % of total revenues, respectively. |
Contract Assets and Contract Liabilities | Contract Assets and Contract Liabilities Contract assets represent the Company’s rights to consideration for work completed but not billed. As of September 30, 2023 and December 31, 2022, the Company had contract assets of $ 4.4 million and $ 4.8 million , respectively. Contract assets were recorded in accounts receivable, net in the accompanying unaudited condensed consolidated balance sheets. Contract liabilities consist of fees invoiced or paid by the Company’s customers for which the associated services have not been performed and revenue has not been recognized based on the Company’s revenue recognition criteria described above. As of September 30, 2023 and December 31, 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 unaudited condensed consolidated balance sheets. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company did no t have any cash equivalents as of September 30, 2023 and December 31, 2022 . |
Accounts Receivable, net | Accounts Receivable, net The Company’s accounts receivable consists principally of uncollateralized amounts billed to customers. These receivables are generally due within 30 to 60 days of the period in which the corresponding sales or rentals occur and do not bear interest. They are recorded at net realizable value less an allowance for doubtful accounts and are classified as account receivable, net on the unaudited condensed consolidated balance sheets. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The Company adopted ASU 2016-13, Financial Instruments - Credit Losses , on December 31, 2022, which was retroactively applied as of the first day of fiscal year 2022. This accounting standard requires companies to measure expected credit losses on financial instruments based on the total estimated amount to be collected over the lifetime of the instrument. Prior to the adoption of this accounting standard, the Company recorded incurred loss reserves against receivable balances based on current and historical information. Expected credit losses for uncollectible receivable balances consider both current conditions and reasonable and supportable forecasts of future conditions. Current conditions considered include predefined aging criteria, as well as specified events that indicate the balance due is not collectible. Reasonable and supportable forecasts used in determining the probability of future collection consider publicly available macroeconomic data and whether future credit losses are expected to differ from historical losses. The Company is not party to any off-balance sheet arrangements that would require an allowance for credit losses in accordance with this accounting standard. As of September 30, 2023 and December 31, 2022, the allowance for doubtful accounts totaled $ 1.8 million and $ 1.5 million , respectively. |
Inventories, net | Inventories, net Inventories are stated at the lower of cost or net realizable value. Cost is determined by using the specific identification method. Inventory that is obsolete or in excess of forecasted usage is written down to its net realizable value based on assumptions regarding future demand and market conditions. Inventory write-downs are charged to operating costs and establish a new cost basis for the inventory. Inventory includes raw material and finished goods. |
Property, Plant and Equipment, net | Property, Plant and Equipment, net 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 acquired as part of a business acquisition is recorded at acquisition date fair value with subsequent additions at cost. The cost of refurbishments and renewals are capitalized when the value of the property, plant or equipment is enhanced for an extended period. Expenditures to maintain and repair property, plant and equipment, which do not improve or extend the life of the related assets, are charged to operations when incurred. When property, plant and equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in operations. |
Leases | 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. Upon adoption, the Company elected the package of transition practical expedients, which allowed it to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. The Company elected the use-of-hindsight to reassess lease term. The Company elected not to recognize leases with an initial term of 12 months or less within the unaudited condensed consolidated balance sheets and to recognize those lease payments on a straight-line basis in the unaudited condensed consolidated statements of income and comprehensive income over the lease term. The new lease accounting standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the practical expedient to not separate lease and non-lease components for all leases. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and current operating lease liabilities and operating lease liabilities, net of current portion on the unaudited condensed consolidated balance sheets. 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. 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. Lease modifications are reassessed as of the effective date of the modification using an incremental borrowing rate based on the information available at the commencement date. For modified leases the Company also reassess the lease classification as of the effective date of the modification. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate because the interest rate implicit in the Company’s leases is not readily determinable. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The Company’s lease terms include periods under options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option in the measurement of its ROU assets and liabilities. The Company considers contractual-based factors such as the nature and terms of the renewal or termination, asset-based factors such as physical location of the asset and entity-based factors such as the importance of the leased asset to the Company’s operations to determine the lease term. The Company generally uses the base, noncancelable, lease term when determining the ROU assets and lease liabilities. The right-of-use asset is tested for impairment in accordance with Accounting Standards Codification Topic 360, Property, Plant, and Equipment. Lessor Accounting Our leased equipment primarily consists of rental tools and equipment. 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 lease contract periods are daily, monthly, per well or based on footage. Lease revenue is recognized on a straight-line basis based on these rates. We do not provide an option for the lessee to purchase the rented tools at the end of the lease and the lessees do not provide residual value guarantees on the rented assets. We recognized operating lease revenue within “Tool rental” on the unaudited condensed consolidated statements of income and comprehensive income. |
Intangible Assets | Intangible Assets Intangible assets with finite useful lives include customer relationships, trade name, patents, non-compete agreements and a supply agreement. These intangible assets are amortized either on a straight-line basis over the asset’s estimated useful life or on a basis that reflects the pattern in which the economic benefits of the intangible are realized. |
Accounting for Impairment of Long-lived Assets | Accounting for Impairment of Long-lived Assets Long-lived assets with finite lives include property, plant and equipment and acquired intangible assets. The Company evaluates long-lived assets, including acquired intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset exceeds these estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the assets exceeds the fair value of the asset or asset group. For the three and nine months ended September 30, 2023 and 2022 , management determined that there were no triggering events necessitating impairment testing of property, plant, and equipment or intangible assets. |
Investments - Equity Securities | Investments - Equity Securities Equity securities are stated at fair value. Unrealized gains and losses are reflected in the unaudited condensed consolidated statements of income and comprehensive income. The Company periodically reviews the securities for other than temporary declines in fair value below cost and more frequently when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. As of the three and nine months ended September 30, 2023 and September 30, 2022 , the Company believes the cost of the securities was recoverable in all material respects. |
Redeemable Convertible Preferred Stock | Redeemable Convertible Preferred Stock Prior to the closing of the Merger, there were outstanding shares of DTIH Series A redeemable convertible preferred stock ("the "redeemable convertible preferred stock"), which was classified outside of permanent equity in mezzanine equity on the unaudited condensed consolidated balance sheets as it was redeemable on a fixed date. 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 September 30, 2023. As of December 31, 2022, the carrying value of the redeemable convertible preferred stock outstanding was $ 17.9 million . |
Preferred Stock | Preferred Stock As of the closing of the Merger, the Board of Directors have expressly granted authority to issue shares of preferred stock, in one or more series, and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series and as may be permitted by the Delaware General Corporation Law. The number of authorized shares of preferred stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, without a separate vote of the holders of the preferred stock, or any series thereof, unless a vote of any such holders is required pursuant to any preferred stock designation. The Board of Directors of the Company has no t issued any shares of any classes or series of preferred stock as of September 30, 2023 , and through the date these financial statements were available to be issued. |
Cost of Revenue | Cost of Revenue The Company recorded all operating costs associated with its product sales and tool rental revenue streams in cost of product sale revenue and cost of tool rental revenue, respectively, in the unaudited condensed consolidated statements of income and comprehensive income. All indirect operating costs, including labor, freight, contract labor and others, are included in selling, general, and administrative expense in the unaudited condensed consolidated statements of income and comprehensive income. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”). 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. 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. Because the Company’s common stock was not yet publicly traded for any of its stock options granted to date, the Company estimated the fair value of its common stock as of the grant date and used these estimates as inputs into the Black-Scholes model. The Board of Directors considered numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting in which awards were approved. The factors considered include, but were not limited to: (i) the results of contemporaneous independent third-party valuations of the Company’s common stock; (ii) the prices, rights, preferences, and privileges of the redeemable convertible preferred stock relative to those of its common stock; (iii) the lack of marketability of the Company’s common stock; (iv) actual operating and financial results; (v) current business conditions and projections; (vi) the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company, given prevailing market conditions; and (vii) precedent transactions involving the Company’s shares. During the nine months ended September 30, 2023 and 2022 , the Company did no t 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. |
Earnings Per Share | Earnings Per Share Basic earnings per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted earnings is computed by adjusting net income (loss) to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted earnings is computed by dividing the diluted net income (loss) by the weighted-average number of common shares outstanding for the period, including potential dilutive common stock. For the purposes of this calculation, outstanding stock options and redeemable convertible preferred stock are considered potential dilutive common stock and are excluded from the computation of net loss per share if their effect is anti-dilutive. The redeemable convertible preferred stock did not contractually entitle its holders to participate in profits or losses. As such, it was not treated as a participating security in periods of net income or net loss. |
Income Taxes | Income Taxes Income taxes are provided for the tax effects of transactions reported in the unaudited condensed consolidated financial statements and consist of taxes currently due plus deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the unaudited condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and liabilities. The Company is subject to state income taxes in various jurisdictions. The Company follows guidance issued by the FASB in accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold an income tax position is required to meet before being recognized in the unaudited condensed consolidated financial statements and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits and upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the unaudited condensed 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 September 30, 2023 and December 31, 2022. The Company believes there are no tax positions taken or expected to be taken that would significantly increase or decrease unrecognized tax benefits within twelve months of the reporting date. The Company records income tax related interest and penalties, if applicable, as a component of the provision for income tax expense. However, there were no amounts recognized relating to interest and penalties in the unaudited condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2023 and 2022 . |
Derivative Financial Instruments | Derivative Financial Instruments From time to time, the Company may enter into derivative instruments to manage exposure to interest rate fluctuations. During 2016, the Company entered into an interest swap agreement with respect to amounts outstanding under its revolving line of credit. The Company’s interest rate swap is a pay-fixed, receive-variable interest rate swap based on SOFR swap rate. The SOFR swap rate is observable at commonly quoted intervals for the full term of the swap and therefore is considered a Level 2 item. For interest rate swaps in an asset position, the credit standing of the counterparty is analyzed and factored into the fair value measurement of the asset. 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 three and nine months ended September 30, 2023 and 2022, the application of valuation techniques applied to similar assets and liabilities has been consistent. This arrangement was designed to manage exposure to interest rate fluctuations by effectively exchanging existing obligations to pay interest based on floating rates for obligations to pay interest based on a fixed rate. These derivatives are marked-to-market at the end of each quarter and the realized/unrealized gain or loss is recorded as interest expense. For the three and nine months ended September 30, 2022, the Company recognized an unrealized gain due to the change in fair value of its interest rate swap of approximately $ 0.4 million and $ 1.4 million , respectively in its unaudited condensed consolidated statements of income and comprehensive income. The interest swap agreement was settled on July 10, 2023 . Upon settlement, the swap had a fair value of $ 0.4 million . For the three and nine months ended September 30, 2023 , the settlement resulted in a realized loss of $ 4 thousand . The realized losses are included in other expense, net in the unaudited condensed consolidated statements of income and comprehensive income. |
Fair Value Measurements | Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is a hierarchy based upon the transparency of inputs used in the valuation of an asset or liability. Classification within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuation hierarchy contains three levels: Level 1 – Valuation inputs are unadjusted quoted market prices for identical assets or liabilities in active markets. 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. The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are measured and reported on a fair value basis. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. Asset and liabilities measured at fair value are summarized as follows (in thousands): Assets at Fair Value as of September 30, 2023 Level 1 Level 2 Level 3 Total Investments, equity securities $ 995 $ — $ — $ 995 Total assets at fair value $ 995 $ — $ — $ 995 Assets at Fair Value as of December 31, 2022 Level 1 Level 2 Level 3 Total Investments, equity securities $ 1,143 $ — $ — $ 1,143 Interest rate swap — 476 — 476 Total assets at fair value $ 1,143 $ 476 $ — $ 1,619 As of September 30, 2023 and December 31, 2022 , the Company did no t have any Level 3 assets or liabilities. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable. The carrying amount of such instruments approximates fair value due to their short-term nature. |
Concentration of Credit Risk and Other Risks and Uncertainties | Concentration of Credit Risk and Other Risks and Uncertainties The Company’s customer concentration may impact its overall credit risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions affecting the oil and gas industry. During the three months ended September 30, 2023 and 2022, the Company generated approximately 28 % and 26 % , respectively, of its revenue from two customers. During the nine months ended September 30, 2023 and 2022, the Company generated approximately 28 % and 27 % , respectively, of its revenue from two customers. Amounts due from these customers included in accounts receivable at September 30, 2023 and December 31, 2022 were approximately $ 8.4 million and $ 8.6 million , respectively. During the three months ended September 30, 2023 and 2022, the Company had one and two vendors that represented approximately 15 % and 30 % of its vendor purchases, respectively. During the nine months ended September 30, 2023 and 2022, the Company had two and one vendors that represented approximately 21 % and 16 % of its vendor purchases, respectively. Amounts due to these vendors included in accounts payable at September 30, 2023 and December 31, 2022 were approximately $ 1.8 million and $ 1.0 million , respectively. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash. The Company maintains accounts in federally insured financial institutions in excess of federally insured limits. Management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which these deposits are held and of the money market funds in which these investments are made. |
Operating Segment | Operating Segment Operating segments are identified as components of an enterprise about which discrete financial information is available for evaluation by the chief operating decision-maker (“CODM”) in deciding resource allocation and assessing performance. The Company’s Chief Executive Officer and Chief Financial Officer work together as the CODM. The Company’s CODM reviews financial information presented on a consolidated basis for the purposes of making operations decisions, allocating resources and evaluating financial performance. Consequently, the Company has determined it operates in one operating and reportable segment. |
Accounting Standards Issued But Not Yet Effective | Accounting Standards Issued But Not Yet Effective The Company's management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
Summary of Asset and Liabilities Measured at Fair Value | Asset and liabilities measured at fair value are summarized as follows (in thousands): Assets at Fair Value as of September 30, 2023 Level 1 Level 2 Level 3 Total Investments, equity securities $ 995 $ — $ — $ 995 Total assets at fair value $ 995 $ — $ — $ 995 Assets at Fair Value as of December 31, 2022 Level 1 Level 2 Level 3 Total Investments, equity securities $ 1,143 $ — $ — $ 1,143 Interest rate swap — 476 — 476 Total assets at fair value $ 1,143 $ 476 $ — $ 1,619 |
MERGER (Tables)
MERGER (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Business Combinations [Abstract] | |
Summary of Common Stock Outstanding Immediately after Merger | The following table presents the total DTIC Common Stock outstanding immediately after the closing of the Merger: Exchange of ROC common stock not subject to possible redemption for DTIC Common Stock upon Merger 3,403,500 Conversion of ROC Public Rights into shares of DTIC Common Stock 2,070,000 Conversion of ROC Private Rights into shares of DTIC Common Stock 79,600 Exchange of ROC common stock subject to possible redemption that was not redeemed for DTIC Common Stock 158,621 Subtotal - Merger, net of redemptions 5,711,721 Issuance of DTIC Common Stock in connection with PIPE Financing 2,970,296 Exchange of DTIH common stock outstanding as of December 31, 2022 for DTIC Common Stock 11,951,137 Exchange of DTIH redeemable convertible preferred stock outstanding as of December 31, 2022 for DTIC Common Stock 6,719,641 Issuance of shares as stock-based compensation to former DTIH stockholders as part of transaction services agreement upon the Merger 337,429 Issuance of DTIC Common Stock to former holders of DTIH redeemable convertible preferred stock in connection with Exchange Agreements 2,042,181 Net exercise of stock options by DTIH stockholder 36,163 Total - DTIC Common Stock outstanding as a result of Merger, PIPE Financing, DTIH for DTIC share exchanges, transaction services agreement, Exchange Agreements, and exercise of stock options 29,768,568 |
INVESTMENTS - EQUITY SECURITI_2
INVESTMENTS - EQUITY SECURITIES (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Investments, Debt and Equity Securities [Abstract] | |
Summary of Cost and Fair Value of Investments in Equity Securities | The following table shows the cost and fair value of the Company’s investments in equity securities (in thousands): Cost Unrealized Fair Value September 30, 2023 $ 999 $ ( 4 ) $ 995 Cost Unrealized Fair Value December 31, 2022 $ 999 $ 144 $ 1,143 |
BALANCE SHEET DETAILS - CURRE_2
BALANCE SHEET DETAILS - CURRENT ASSETS AND CURRENT LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of Inventories, Net | Inventories, net The following table shows the components of inventory (in thousands): September 30, 2023 December 31, 2022 Raw materials $ 6,638 $ 3,377 Finished goods 108 115 Total inventories 6,746 3,492 Allowance for obsolete inventory ( 160 ) ( 211 ) Inventories, net $ 6,586 $ 3,281 |
Summary of Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets The following table shows the components of prepaid expenses and other current assets (in thousands): September 30, 2023 December 31, 2022 Prepaid expenses: ERC benefits receivable $ — $ 2,117 Deposits on inventory 2,040 680 Prepaid income tax 565 — Prepaid insurance 1,621 358 Prepaid rent 371 381 Prepaid equipment 178 179 Prepaid other 187 173 Other current assets: Interest rate swap asset $ — $ 476 Other 14 17 Total $ 4,976 $ 4,381 |
Summary of Accrued Expenses and Other Current Liabilities | Accrued expenses and other current liabilities The following table shows the components of accrued expenses and other current liabilities (in thousands): September 30, 2023 December 31, 2022 Accrued expenses: Accrued compensation and related benefits $ 5,306 $ 3,392 Accrued insurance 1,564 525 Accrued transaction advisory fees 1,500 — Accrued professional services 2 509 Accrued interest 58 62 Accrued property taxes 835 41 Other 111 38 Other current liabilities: Income tax payable $ 2,129 $ 1,780 Sales tax payable 204 587 Unbilled lost-in-hole revenue 155 282 Deferred revenue — 83 Total accrued expenses and other current liabilities $ 11,864 $ 7,299 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT, NET (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Property, Plant and Equipment [Abstract] | |
Summary of Component of Property, Plant and Equipment, Net | The following table shows the component of property, plant and equipment, net (in thousands): Estimated Useful September 30, 2023 December 31, 2022 Rental tools and equipment 5 - 10 186,042 160,973 Buildings and improvements 5 - 40 6,634 5,781 Office furniture, fixtures and equipment 3 - 5 2,362 2,101 Transportation and equipment 3 - 5 796 827 Total property, plant and equipment 195,834 169,682 Less: accumulated deprecation ( 131,265 ) ( 125,537 ) Property, plant and equipment, net (excluding construction in progress) 64,569 44,145 Construction in progress - 9 Property, plant and equipment, net $ 64,569 $ 44,154 |
INTANGIBLE ASSETS, NET (Tables)
INTANGIBLE ASSETS, NET (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Summary of Components of Intangible Assets, Net | The following table shows the components of intangible assets, net (in thousands): Useful Lives (in Years) September 30, 2023 December 31, 2022 Trade name 10 - 13 $ 1,280 $ 1,280 Technology 13 270 270 Total intangible assets 1,550 1,550 Less: accumulated amortization ( 1,322 ) ( 1,287 ) Intangible assets, net $ 228 $ 263 |
OTHER EXPENSES, NET (Tables)
OTHER EXPENSES, NET (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Other Income and Expenses [Abstract] | |
Summary of Components of Other Expenses, Net | The following table shows the components of other expenses, net for the three months ended September 30, 2023 and 2022 (in thousands): Three months ended September 30, 2023 Three months ended September 30, 2022 Transaction fees ( 124 ) — Other, net ( 11 ) ( 114 ) Other expense, net $ ( 135 ) $ ( 114 ) The following table shows the components of other expenses, net for the nine months ended September 30, 2023 and 2022 (in thousands): Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 HHLLC stock-based compensation $ ( 2,339 ) $ — Transaction fees ( 3,623 ) — Other, net ( 256 ) ( 209 ) Interest income 48 — Other expense, net $ ( 6,170 ) $ ( 209 ) |
LEASES (Tables)
LEASES (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Leases [Abstract] | |
Summary of Components of Lease Expense | For the three and nine months ended September 30, 2023, the components of the Company’s lease expense were as follows (in thousands): Three months ended September 30, 2023 Three months ended September 30, 2022 Operating Lease Cost $ 1,543 $ 1,449 Short-term Lease Cost 33 41 Variable Lease Cost 78 80 Sublease Income — ( 46 ) Total Lease Cost $ 1,654 $ 1,524 Nine months ended September 30, 2023 Nine months ended September 30, 2022 Operating Lease Cost $ 4,593 $ 4,322 Short-term Lease Cost 96 108 Variable Lease Cost 242 225 Sublease Income ( 76 ) ( 137 ) Total Lease Cost $ 4,855 $ 4,518 |
Summary of Supplemental Balance Sheet Information Related to Leases | Supplemental balance sheet information related to leases was as follows (in thousands): Nine months ended September 30, 2023 Weighted-average remaining lease term (in years) 6.65 Weighted average discount rate 5.79 % Nine months ended September 30, 2023 Right-of-use assets obtained in exchange for new operating lease liabilities $ 3,002 Cash paid for amounts included in the measurement of lease liabilities 4,153 |
Summary of Future Undiscounted Cash Flows | Future undiscounted cash flows for each of the next five years and thereafter and reconciliation to the lease liabilities recognized on the unaudited condensed consolidated balance sheet as of September 30, 2023 were as follows (in thousands): 2023 $ 1,283 2024 4,835 2025 4,036 2026 3,476 2027 2,439 Thereafter 7,545 Total lease payments $ 23,614 Less: imputed interest ( 3,921 ) Present value of lease liabilities $ 19,693 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Earnings Per Share [Abstract] | |
Summary of Computation of The Company's Basic and Diluted Net Earnings Per Share | The following table sets forth the computation of the Company’s basic and diluted net earnings per share for the three and nine months ended September 30, 2023 and 2022 (in thousands except share and per share data): Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 Numerator: Net income (loss) $ 4,287 $ 6,996 $ 10,925 $ 14,263 Less: Redeemable convertible preferred stock dividends — ( 294 ) ( 314 ) ( 883 ) Net income (loss) attributable to common shareholders — basic $ 4,287 $ 6,702 $ 10,611 $ 13,380 Add: Redeemable convertible preferred stock dividends — 294 314 883 Net income (loss) attributable to common shareholders — diluted $ 4,287 $ 6,996 $ 10,925 $ 14,263 Denominator Weighted-average common shares used in computing 29,768,568 11,951,137 18,608,708 11,951,137 Weighted-average effect of potentially dilutive securities: Effect of potentially dilutive time-based stock options 204,686 1,006,729 651,996 1,006,729 Effect of potentially dilutive performance-based stock options 70,292 — 60,269 — Effect of potentially dilutive redeemable convertible — 6,719,641 4,233,620 6,719,641 Weighted-average common shares outstanding — diluted 30,043,546 19,677,507 23,554,593 19,677,507 Earnings (net loss) per share — basic $ 0.14 $ 0.56 $ 0.57 $ 1.12 Earnings (net loss) per share — diluted $ 0.14 $ 0.36 $ 0.46 $ 0.72 |
Summary of Company's Potentially Dilutive Securities Excluded | As of September 30, 2023, the Company’s potentially dilutive securities consisted of options to purchase common stock. As of September 30, 2022, the Company's potentially dilutive securities consisted of redeemable convertible preferred stock and options to purchase common stock. Based on the amounts outstanding as of the three and nine months ended September 30, 2023 and 2022, the Company excluded the following potential common shares from the computation of diluted net loss per share because including them would have had an anti-dilutive effect: Three months ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Time-based options outstanding 140,135 140,135 140,135 140,135 Total 140,135 140,135 140,135 140,135 Our performance-based stock options were excluded from the diluted earnings per share calculations for the three and nine months ended September 30, 2022 because all necessary performance conditions were not satisfied by September 30, 2022. Our performance-based stock options excluded from diluted earnings per share for the three and nine months ended September 30, 2022 were as follows: Three months ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Performance-based options outstanding — 534,063 — 534,063 Total — 534,063 — 534,063 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2023 USD ($) shares | Sep. 30, 2022 USD ($) shares | Sep. 30, 2023 USD ($) Segment shares | Sep. 30, 2022 USD ($) shares | Jul. 10, 2023 USD ($) | Dec. 31, 2022 USD ($) shares | |
Accounting Policies [Line Items] | ||||||
Percentage of refundable tax credit against certain employment taxes equal to qualified wages paid | 50% | |||||
Maximum wages per employee annually paid under employee retention credit | $ 10,000 | |||||
Percentage of refundable tax credit against certain employment taxes extended and expanded qualified wage caps to qualified wages paid | 70% | |||||
Maximum wages per employee per quarterly paid under employee retention credit | $ 10,000 | |||||
Foreign currency translation adjustment, net of tax | $ 90,000 | $ (24,000) | (117,000) | $ (86,000) | ||
Cash equivalents | 0 | 0 | $ 0 | |||
Revenue | 38,138,000 | $ 36,547,000 | 116,845,000 | $ 92,896,000 | ||
Contract assets | 4,400,000 | 4,400,000 | 4,800,000 | |||
Allowance for doubtful accounts | $ 1,800,000 | $ 1,800,000 | $ 1,500,000 | |||
Redeemable convertible preferred stock, shares outstanding | shares | 6,719,641 | |||||
Carrying value of redeemable convertible preferred stock outstanding | $ 0 | $ 0 | $ 17,878,000 | |||
Preferred stock, shares issued | shares | ||||||
Stock options granted | shares | 0 | 0 | 0 | |||
Number of operating segment | Segment | 1 | |||||
Number of reportable segment | Segment | 1 | |||||
Minimum percentage of unrecognized tax benefits that would impact effective tax rate | 50% | |||||
Unrecognized tax benefits | $ 0 | $ 0 | $ 0 | |||
Unrecognized tax benefits accrued for interest and penalties | $ 0 | $ 0 | 0 | $ 0 | ||
Employee retention credit benefits receivable | 0 | |||||
Realized loss on settlement of interest swap | $ 4,000 | $ 0 | ||||
Derivative, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Other Nonoperating Expense | Other Nonoperating Expense | ||||
Assets fair value | $ 995,000 | $ 995,000 | 1,619,000 | |||
Redeemable Convertible Preferred Stock | ||||||
Accounting Policies [Line Items] | ||||||
Redeemable convertible preferred stock, shares outstanding | shares | 0 | 0 | ||||
Customer Concentration Risk | Sales Revenue | Two Customers | ||||||
Accounting Policies [Line Items] | ||||||
Concentration risk percentage | 28% | 26% | 28% | 27% | ||
Customer Concentration Risk | Vendor Purchases | One Vendor | ||||||
Accounting Policies [Line Items] | ||||||
Concentration risk percentage | 30% | 21% | 16% | |||
Customer Concentration Risk | Vendor Purchases | Two Vendors | ||||||
Accounting Policies [Line Items] | ||||||
Concentration risk percentage | 15% | |||||
Customer Concentration Risk | Accounts Receivable | ||||||
Accounting Policies [Line Items] | ||||||
Receivables from customers | $ 8,400,000 | $ 8,400,000 | 8,600,000 | |||
Customer Concentration Risk | Accounts Payable | ||||||
Accounting Policies [Line Items] | ||||||
Amounts due to vendors | 1,800,000 | $ 1,800,000 | 1,000,000 | |||
Interest Rate Swap | ||||||
Accounting Policies [Line Items] | ||||||
Unrealized gain (loss) due to change in fair value | $ 400,000 | $ 1,400,000 | ||||
Interest swap agreement settlement date | Jul. 10, 2023 | |||||
Fair value | $ 400,000 | |||||
Realized loss on settlement of interest swap | (4,000) | $ (4,000) | ||||
Level 3 | ||||||
Accounting Policies [Line Items] | ||||||
Assets fair value | 0 | 0 | 0 | |||
Liabilities fair value | 0 | 0 | 0 | |||
Prepaid Expenses and Other Current Assets | ||||||
Accounting Policies [Line Items] | ||||||
Employee retention credit benefits receivables | 0 | 0 | $ 2,100,000 | |||
Selling, General, and Administrative Expenses | ||||||
Accounting Policies [Line Items] | ||||||
Employee retention credit benefits | 0 | 4,300,000 | ||||
United States | ||||||
Accounting Policies [Line Items] | ||||||
Revenue | $ 34,900,000 | $ 33,400,000 | $ 106,600,000 | $ 84,900,000 | ||
Percentage of revenue | 92% | 91% | 91% | 91% | ||
Canada | ||||||
Accounting Policies [Line Items] | ||||||
Revenue | $ 3,200,000 | $ 3,200,000 | ||||
Percentage of revenue | 8% | 9% | ||||
International | ||||||
Accounting Policies [Line Items] | ||||||
Revenue | $ 10,200,000 | $ 8,000,000 | ||||
Percentage of revenue | 9% | 9% |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summary of Asset and Liabilities Measured at Fair Value (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, equity securities | $ 995,000 | $ 1,143,000 |
Total assets at fair value | 995,000 | 1,619,000 |
Interest Rate Swap | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Interest rate swap | 476,000 | |
Level 1 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, equity securities | 995,000 | 1,143,000 |
Total assets at fair value | 995,000 | 1,143,000 |
Level 1 | Interest Rate Swap | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Interest rate swap | 0 | |
Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, equity securities | 0 | 0 |
Total assets at fair value | 0 | 476,000 |
Level 2 | Interest Rate Swap | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Interest rate swap | 476,000 | |
Level 3 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments, equity securities | 0 | 0 |
Total assets at fair value | $ 0 | 0 |
Level 3 | Interest Rate Swap | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Interest rate swap | $ 0 |
MERGER (Details)
MERGER (Details) | 3 Months Ended | 9 Months Ended | ||||||
Jun. 20, 2023 USD ($) $ / shares shares | Jun. 19, 2023 $ / shares shares | Feb. 13, 2023 shares | Sep. 30, 2023 USD ($) $ / shares | Jun. 30, 2023 USD ($) shares | Sep. 30, 2023 USD ($) $ / shares | Sep. 30, 2022 USD ($) | Mar. 02, 2023 shares | |
Business Acquisition [Line Items] | ||||||||
Common stock shares issued in exchange | 36,163 | |||||||
Aggregate gross proceeds | $ | $ 30,000,000 | |||||||
Goodwill | $ | $ 0 | |||||||
Other intangible assets | $ | 0 | |||||||
Proceeds received from the Merger and PIPE Financing, net of transaction costs | $ | $ 23,200,000 | |||||||
Stock-based compensation expense | $ | $ 0 | |||||||
Other Expense | ||||||||
Business Acquisition [Line Items] | ||||||||
Stock-based compensation expense | $ | $ 2,300,000 | |||||||
Hicks Holdings Operating LLC | ||||||||
Business Acquisition [Line Items] | ||||||||
Percentage on transaction amount as services agreement transaction fee | 1.50% | |||||||
Stock-based compensation expense | $ | (2,339,000) | $ 0 | ||||||
Exchange Agreements | ||||||||
Business Acquisition [Line Items] | ||||||||
Issuance of shares after conversion of stock | 2,042,181 | |||||||
Cash consideration in exchange for cancellation | $ | $ 200,000 | |||||||
Common Stock | Hicks Holdings Operating LLC | ||||||||
Business Acquisition [Line Items] | ||||||||
Number of common stock authorized to issue | 1,149,830 | |||||||
Common Stock | Affiliated with HHLLC | ||||||||
Business Acquisition [Line Items] | ||||||||
Number of common stock authorized to issue | 328,611 | |||||||
Common Stock | Exchange Agreements | ||||||||
Business Acquisition [Line Items] | ||||||||
Cash consideration related to merger | $ | $ 11,000,000 | |||||||
DTIH | Employee Stock Option | ||||||||
Business Acquisition [Line Items] | ||||||||
Common stock cancelled due to exercise | $ / shares | $ 158,444 | |||||||
DTIH | Redeemable Convertible Preferred Stock | ||||||||
Business Acquisition [Line Items] | ||||||||
Stock issued and outstanding | 20,370,377 | |||||||
DTIH | Common Stock | ||||||||
Business Acquisition [Line Items] | ||||||||
Stock issued and outstanding | 52,363,876 | 337,429 | ||||||
DTIC | ||||||||
Business Acquisition [Line Items] | ||||||||
Common stock conversion basis | ten-for-one basis | |||||||
Stock-based compensation expense | $ | $ 2,300,000 | |||||||
Quoted market price | $ / shares | $ 6.95 | $ 6.95 | ||||||
DTIC | PIPE Financing | ||||||||
Business Acquisition [Line Items] | ||||||||
Aggregate gross proceeds | $ | $ 4,100,000 | |||||||
Amount received in cash in PIPE Financing | $ | $ 25,900,000 | |||||||
DTIC | Employee Stock Option | ||||||||
Business Acquisition [Line Items] | ||||||||
Common stock exchange ratio | 0.2282 | |||||||
Common stock shares issued in exchange | 36,163 | |||||||
DTIC | Public Rights | ||||||||
Business Acquisition [Line Items] | ||||||||
Right outstanding | 2,070,000 | |||||||
DTIC | Private Rights | ||||||||
Business Acquisition [Line Items] | ||||||||
Right outstanding | 79,600 | |||||||
DTIC | Redeemable Convertible Preferred Stock | ||||||||
Business Acquisition [Line Items] | ||||||||
Stock issued and outstanding | 6,719,641 | |||||||
Preferred exchange ratio | 0.3299 | |||||||
DTIC | Non-redeemable Share | ||||||||
Business Acquisition [Line Items] | ||||||||
Common stock conversion basis | one-for-one basis | |||||||
DTIC | Common Stock | ||||||||
Business Acquisition [Line Items] | ||||||||
Stock issued and outstanding | 337,429 | |||||||
Common stock exchange ratio | 0.2282 | |||||||
Issuance of shares after conversion of stock | 11,951,137 | |||||||
Common stock conversion basis | one-for-one basis | |||||||
DTIC | Common Stock | PIPE Financing | ||||||||
Business Acquisition [Line Items] | ||||||||
Stock issued | 2,970,296 | |||||||
Aggregate gross proceeds | $ | $ 30,000,000 | |||||||
Stock issued, shares price per share | $ / shares | $ 10.1 | |||||||
ROC | Public Rights | ||||||||
Business Acquisition [Line Items] | ||||||||
Right outstanding | 20,700,000 | |||||||
ROC | Private Rights | ||||||||
Business Acquisition [Line Items] | ||||||||
Right outstanding | 796,000 | |||||||
ROC | Non-redeemable Share | ||||||||
Business Acquisition [Line Items] | ||||||||
Stock issued and outstanding | 3,403,500 | |||||||
ROC | Common Stock | ||||||||
Business Acquisition [Line Items] | ||||||||
Redeemable convertible preferred stock issued and outstanding | 158,621 |
MERGER - Summary of Common Stoc
MERGER - Summary of Common Stock Outstanding Immediately after Merger (Details) - shares | Sep. 30, 2023 | Jun. 20, 2023 | Dec. 31, 2022 |
Business Acquisition [Line Items] | |||
Total - DTIC Common Stock outstanding as a result of Merger, PIPE Financing, DTIH for DTIC share exchanges, transaction services agreement, Exchange Agreements, and exercise of stock options | 29,768,568 | 11,951,137 | |
Merger Agreement | |||
Business Acquisition [Line Items] | |||
Exchange of ROC common stock not subject to possible redemption for DTIC Common Stock upon Merger | 3,403,500 | ||
Conversion of ROC Public Rights into shares of DTIC Common Stock | 2,070,000 | ||
Conversion of ROC Private Rights into shares of DTIC Common Stock | 79,600 | ||
Exchange of ROC common stock subject to possible redemption that was not redeemed for DTIC Common Stock | 158,621 | ||
Subtotal - Merger, net of redemptions | 5,711,721 | ||
Issuance of DTIC Common Stock in connection with PIPE Financing | 2,970,296 | ||
Exchange of DTIH common stock outstanding as of December 31, 2022 for DTIC Common Stock | 11,951,137 | ||
Exchange of DTIH redeemable convertible preferred stock outstanding as of December 31, 2022 for DTIC Common Stock | 6,719,641 | ||
Issuance of shares as stock-based compensation to former DTIH stockholders as part of transaction services agreement upon the Merger | 337,429 | ||
Issuance of DTIC Common Stock to former holders of DTIH redeemable convertible preferred stock in connection with Exchange Agreements | 2,042,181 | ||
Net exercise of stock options by DTIH stockholder | 36,163 | ||
Total - DTIC Common Stock outstanding as a result of Merger, PIPE Financing, DTIH for DTIC share exchanges, transaction services agreement, Exchange Agreements, and exercise of stock options | 29,768,568 |
INVESTMENTS - EQUITY SECURITI_3
INVESTMENTS - EQUITY SECURITIES - Summary of Cost and Fair Value of Investments in Equity Securities (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2023 | Dec. 31, 2022 | |
Net Investment Income [Line Items] | ||
Cost | $ 999 | $ 999 |
Unrealized gain (Loss) | (4) | 144 |
Fair value | $ 995 | $ 1,143 |
INVESTMENTS - EQUITY SECURITI_4
INVESTMENTS - EQUITY SECURITIES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2023 | Jun. 30, 2023 | Sep. 30, 2022 | Jun. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Investments, Debt and Equity Securities [Abstract] | ||||||
Unrealized holding losses on equity securities | $ (535) | $ (500) | $ (398) | $ (400) | $ (148) | $ (75) |
BALANCE SHEET DETAILS - CURRE_3
BALANCE SHEET DETAILS - CURRENT ASSETS AND CURRENT LIABILITIES - Summary of Inventories, Net (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Inventory, Net [Abstract] | ||
Raw materials | $ 6,638 | $ 3,377 |
Finished goods | 108 | 115 |
Total inventories | 6,746 | 3,492 |
Allowance for obsolete inventory | (160) | (211) |
Inventories, net | $ 6,586 | $ 3,281 |
BALANCE SHEET DETAILS - CURRE_4
BALANCE SHEET DETAILS - CURRENT ASSETS AND CURRENT LIABILITIES - Summary of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Prepaid expenses: | ||
ERC benefits receivable | $ 0 | $ 2,117 |
Deposits on inventory | 2,040 | 680 |
Prepaid income tax | 565 | 0 |
Prepaid insurance | 1,621 | 358 |
Prepaid rent | 371 | 381 |
Prepaid equipment | 178 | 179 |
Prepaid other | 187 | 173 |
Other current assets: | ||
Interest rate swap asset | 0 | 476 |
Other | 14 | 17 |
Total | $ 4,976 | $ 4,381 |
BALANCE SHEET DETAILS - CURRE_5
BALANCE SHEET DETAILS - CURRENT ASSETS AND CURRENT LIABILITIES - Summary of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Accrued expenses: | ||
Accrued compensation and related benefits | $ 5,306 | $ 3,392 |
Accrued insurance | 1,564 | 525 |
Accrued transaction advisory fees | 1,500 | 0 |
Accrued professional services | 2 | 509 |
Accrued interest | 58 | 62 |
Accrued property taxes | 835 | 41 |
Other | 111 | 38 |
Other current liabilities: | ||
Income tax payable | 2,129 | 1,780 |
Sales tax payable | 204 | 587 |
Unbilled lost-in-hole revenue | 155 | 282 |
Deferred revenue | 0 | 83 |
Total accrued expenses and other current liabilities | $ 11,864 | $ 7,299 |
PROPERTY, PLANT AND EQUIPMENT_3
PROPERTY, PLANT AND EQUIPMENT, NET - Summary of Component of Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | $ 195,834 | $ 169,682 |
Less: accumulated deprecation | (131,265) | (125,537) |
Property, plant and equipment, net (excluding construction in progress) | 64,569 | 44,145 |
Construction in progress | 0 | 9 |
Property, plant and equipment, net | 64,569 | 44,154 |
Rental Tools and Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | $ 186,042 | 160,973 |
Rental Tools and Equipment | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives (in years) | 5 years | |
Rental Tools and Equipment | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives (in years) | 10 years | |
Buildings and Improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | $ 6,634 | 5,781 |
Buildings and Improvements | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives (in years) | 5 years | |
Buildings and Improvements | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives (in years) | 40 years | |
Office Furniture, Fixtures and Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | $ 2,362 | 2,101 |
Office Furniture, Fixtures and Equipment | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives (in years) | 3 years | |
Office Furniture, Fixtures and Equipment | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives (in years) | 5 years | |
Transportation and Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | $ 796 | $ 827 |
Transportation and Equipment | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives (in years) | 3 years | |
Transportation and Equipment | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives (in years) | 5 years |
PROPERTY, PLANT AND EQUIPMENT_4
PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Property, Plant and Equipment [Line Items] | |||||
Depreciation expense | $ 5,300 | $ 4,800 | $ 15,000 | $ 14,700 | |
Property, plant and equipment, net | 64,569 | 64,569 | $ 44,154 | ||
United States | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, net | $ 62,400 | $ 62,400 | $ 41,800 | ||
Property, plant and equipment net, Percentage | 97% | 97% | 95% | ||
Canada | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, net | $ 2,200 | $ 2,200 | $ 2,300 | ||
Property, plant and equipment net, Percentage | 3% | 3% | 5% |
INTANGIBLE ASSETS, NET - Summar
INTANGIBLE ASSETS, NET - Summary of Components of Intangible Assets, Net (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Indefinite-Lived Intangible Assets [Line Items] | ||
Total intangible assets | $ 1,550 | $ 1,550 |
Less: accumulated amortization | (1,322) | (1,287) |
Intangible assets, net | 228 | 263 |
Trade Name | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Total intangible assets | $ 1,280 | 1,280 |
Trade Name | Maximum | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Useful lives (in years) | 13 years | |
Trade Name | Minimum | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Useful lives (in years) | 10 years | |
Technology | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Total intangible assets | $ 270 | $ 270 |
Useful lives (in years) | 13 years |
INTANGIBLE ASSETS, NET (Details
INTANGIBLE ASSETS, NET (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Indefinite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | $ 12 | $ 12 | $ 35 | $ 100 |
REVOLVING CREDIT FACILITY (Deta
REVOLVING CREDIT FACILITY (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2023 | Jun. 20, 2023 | Dec. 31, 2022 | |
Line of Credit Facility [Line Items] | ||||
Line of credit | $ 0 | $ 0 | $ 18,349,000 | |
Revolving Credit Facility | ||||
Line of Credit Facility [Line Items] | ||||
Revolving line of credit | 60,000,000 | $ 60,000,000 | $ 60,000,000 | |
Unfunded capital expenditures requirement removed | $ 20,000,000 | |||
Sublimit removed | $ 9,000,000 | |||
Credit Facility, collateral | The Credit Facility is collateralized by substantially all the assets of the Company and matures December 31, 2025. | |||
Line of credit | $ 0 | $ 0 | ||
Revolving Credit Facility | SOFR | ||||
Line of Credit Facility [Line Items] | ||||
Basis spread on variable rate (as a percent) | 8.32% | 8.32% | ||
Revolving Credit Facility | Base Rate | ||||
Line of Credit Facility [Line Items] | ||||
Basis spread on variable rate (as a percent) | 2% |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ 2,102,000 | $ 626,000 | $ 5,201,000 | $ 2,846,000 |
Effective tax rate | 32.90% | 8.20% | 32.30% | 16.60% |
Federal Statutory rate | 21% | 21% | 21% | 21% |
Change to the valuation allowance | $ 0 | $ 0 | $ 0 | $ 0 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||||
Jun. 20, 2023 | Jun. 19, 2023 | Feb. 13, 2023 | Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||
Stock options granted | 0 | 0 | 0 | ||||
Number of options exercised | 0 | 0 | |||||
Number of options forfeited | 0 | ||||||
Common stock canceled in exchange for options | 158,444 | ||||||
Common stock shares issued in exchange | 36,163 | ||||||
Share-Based Payment Arrangement, Expense | $ 0 | ||||||
Share-based compensation arrangement by share-based payment award, options, outstanding, number | 2,361,722 | 2,361,722 | |||||
Selling, General, and Administrative Expenses | |||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||
Share-Based Payment Arrangement, Expense | $ 1,700,000 | ||||||
Other Expense | |||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||
Share-Based Payment Arrangement, Expense | 2,300,000 | ||||||
Hicks Holdings Operating LLC | |||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||
Share-Based Payment Arrangement, Expense | $ (2,339,000) | $ 0 | |||||
Percentage on transaction amount as services agreement transaction fee | 1.50% | ||||||
Performance-based Stock Options | |||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||
Number of accelerated vesting stock options | 534,063 | ||||||
Number of stock options vested | 534,063 | ||||||
2023 Plan | |||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||
Maximum percentage of common stock issuable in accordance with outstanding Common stock | 10% | ||||||
Annual increase in percentage of common stock issuable in accordance with outstanding common stock | 3% | ||||||
Issued options to purchase shares of the common stock | 2,976,854 | ||||||
Common stock issuable in accordance with outstanding Common stock | 2,976,854 | ||||||
Shares of common stock available for issuance | 2,976,854 | 2,976,854 |
OTHER EXPENSES, NET - Summary o
OTHER EXPENSES, NET - Summary of Components of Other Expenses, Net (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Schedule Of Other Expenses [Line Items] | ||||
Stock-based compensation | $ 0 | |||
Transaction Fees | (124,000) | $ 0 | $ (3,623,000) | $ 0 |
Other, net | (11,000) | (114,000) | (256,000) | (209,000) |
Interest income | 48,000 | 0 | ||
Other expense, net | $ (135,000) | $ (114,000) | (6,170,000) | (209,000) |
Hicks Holdings Operating LLC | ||||
Schedule Of Other Expenses [Line Items] | ||||
Stock-based compensation | $ (2,339,000) | $ 0 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||||
Jun. 20, 2023 | Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Mar. 02, 2023 | Dec. 06, 2022 | |
Related Party Transaction [Line Items] | |||||||
Working capital loan amount | $ 400,000 | ||||||
PIPE Financing | |||||||
Related Party Transaction [Line Items] | |||||||
Payoff convertible promissory notes issued | $ 2,100,000 | $ 2,100,000 | |||||
Hicks Holdings Operating LLC | |||||||
Related Party Transaction [Line Items] | |||||||
Management fees paid to shareholder | $ 300,000 | $ 200,000 | $ 900,000 | $ 400,000 | |||
Cree Investments, LLC | |||||||
Related Party Transaction [Line Items] | |||||||
Rent expense paid to shareholder | $ 13,000 | 13,000 | $ 38,000 | 38,000 | |||
Heath Woodrum | |||||||
Related Party Transaction [Line Items] | |||||||
Payments for tools | $ 4,000 | $ 4,000 |
LEASES (Details)
LEASES (Details) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2023 USD ($) | Sep. 30, 2023 USD ($) | |
Lessee, Lease, Description [Line Items] | ||
Operating lease description | The Company leases various facilities and vehicles under noncancelable operating lease agreements. The remaining lease terms for our leases range from 1 month to 14 years. | |
Operating lease, existence of option to extend | true | |
Operating lease option to extend | These leases often include options to extend the term of the lease which may be for periods of up to 5 years. | |
Operating lease renewl term | 5 years | 5 years |
Tool rental revenue | $ 29.4 | $ 90.6 |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Remaining lease term | 1 month | 1 month |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Remaining lease term | 14 years | 14 years |
LEASES - Summary of Components
LEASES - Summary of Components of Lease Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Lease, Cost [Abstract] | ||||
Operating Lease Cost | $ 1,543 | $ 1,449 | $ 4,593 | $ 4,322 |
Short-term Lease Cost | 33 | 41 | 96 | 108 |
Variable Lease Cost | 78 | 80 | 242 | 225 |
Sublease Income | 0 | (46) | (76) | (137) |
Total Lease Cost | $ 1,654 | $ 1,524 | $ 4,855 | $ 4,518 |
LEASES - Summary of Supplementa
LEASES - Summary of Supplemental Balance Sheet Information Related to Leases (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Leases [Abstract] | ||
Weighted-average remaining lease term (in years) | 6 years 7 months 24 days | |
Weighted average discount rate | 5.79% | |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 3,002 | $ 5,246 |
Cash paid for amounts included in the measurement of lease liabilities | $ 4,153 |
LEASES - Summary of Future Undi
LEASES - Summary of Future Undiscounted Cash Flows (Details) $ in Thousands | Sep. 30, 2023 USD ($) |
Lessee, Operating Lease, Liability, to be Paid, Fiscal Year Maturity [Abstract] | |
2023 | $ 1,283 |
2024 | 4,835 |
2025 | 4,036 |
2026 | 3,476 |
2027 | 2,439 |
Thereafter | 7,545 |
Total lease payments | 23,614 |
Less: imputed interest | (3,921) |
Present value of lease liabilities | $ 19,693 |
EMPLOYEE BENEFITS (Details)
EMPLOYEE BENEFITS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Defined Benefit Plan [Abstract] | |||||
Maximum annual contributions per employee, percent | 3% | ||||
Employer matching contribution, percent of match | 150% | ||||
Defined contribution per employee | $ 2,000 | ||||
Total expense | $ 100,000 | $ 100,000 | $ 400,000 | $ 400,000 | |
Defined contribution plan nature and effect of change, description | All employees are auto enrolled at a 3% contribution, unless they opt out, beginning on the first plan entry date following six months of service. Plan entry dates are the first day of January and July. In March of 2020, the Company suspended any employee contribution match effective immediately and through the end of 2021. The match was reinstated on January 1, 2022. For 2022, the Company matched employee contributions 150% of the first 3% of employee contributions, not to exceed $2 thousand per participant per calendar year. Employees vest in employer contributions over six years. The contribution is limited to the maximum contribution allowed under the Internal Revenue Service Regulations. |
EARNINGS PER SHARE - Summary of
EARNINGS PER SHARE - Summary of Computation of Company's Basic and Diluted Net Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Numerator: | ||||||||
Net income | $ 4,287 | $ 937 | $ 5,701 | $ 6,996 | $ 5,934 | $ 1,333 | $ 10,925 | $ 14,263 |
Less: Redeemable convertible preferred stock dividends | 0 | (294) | (314) | (883) | ||||
Net income available to common shareholders | 4,287 | 6,702 | 10,611 | 13,380 | ||||
Add: Redeemable convertible preferred stock dividends | 0 | 294 | 314 | 883 | ||||
Net income (loss) attributable to common shareholders - diluted | $ 4,287 | $ 6,996 | $ 10,925 | $ 14,263 | ||||
Denominator | ||||||||
Weighted-average common shares used in computing earnings per share - basic | 29,768,568 | 11,951,137 | 18,608,708 | 11,951,137 | ||||
Weighted-average effect of potentially dilutive securities: | ||||||||
Effect of potentially dilutive redeemable convertible preferred stock | 0 | 6,719,641 | 4,233,620 | 6,719,641 | ||||
Weighted-average common shares outstanding - diluted | 30,043,546 | 19,677,507 | 23,554,593 | 19,677,507 | ||||
Earnings (net loss) per share - basic | $ 0.14 | $ 0.56 | $ 0.57 | $ 1.12 | ||||
Earnings (net loss) per share - diluted | $ 0.14 | $ 0.36 | $ 0.46 | $ 0.72 | ||||
Time-based Stock Options | ||||||||
Weighted-average effect of potentially dilutive securities: | ||||||||
Effect of potentially dilutive stock options | 204,686 | 1,006,729 | 651,996 | 1,006,729 | ||||
Performance-based Stock Options | ||||||||
Weighted-average effect of potentially dilutive securities: | ||||||||
Effect of potentially dilutive stock options | 70,292 | 0 | 60,269 | 0 |
EARNINGS PER SHARE - Summary _2
EARNINGS PER SHARE - Summary of Company's Potentially Dilutive Securities Excluded - Time-based Options Outstanding (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Time-based Options Outstanding | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total | 140,135 | 140,135 | 140,135 | 140,135 |
EARNINGS PER SHARE - Summary _3
EARNINGS PER SHARE - Summary of Company's Potentially Dilutive Securities Excluded - Performance-based Options Outstanding (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Performance-based Options Outstanding | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total | 0 | 534,063 | 0 | 534,063 |