0000950170-23-063319 | 10-Q | XBRL Viewer | Drilling Tools International Corp

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

SUBSEQUENT EVENTS	9 Months Ended
Sep. 30, 2023
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	NOTE 16 – SUBSEQUENT EVENTS None.

SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2023

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 16 – SUBSEQUENT EVENTS

None.

LEASES (Details) $ in Millions	3 Months Ended	9 Months Ended
LEASES (Details) $ in Millions	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

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

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 Lives (in Years)	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.

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

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

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.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
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-URI https://asc.fasb.org//1943274/2147482603/740-30-50-2

+ Details

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 –SUMMARY OF SIGNIFICANT 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 not 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 not 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 not grant any stock options. For any grants of stock options subsequent to the Company being publicly traded, the Company will use the quoted market price as of the grant date as an input into the Black-Scholes model.

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 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

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 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 not have any Level 3 assets or liabilities.

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

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 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

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.

RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2023

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.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-2

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 5
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-5

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-6

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(g)(3))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483575/946-220-S99-1

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(c))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483575/946-220-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(e))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483575/946-220-S99-1

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//850/tableOfContent

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-6

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

+ Details

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 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 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 preferred stock		—		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

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.

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 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

REVOLVING CREDIT FACILITY (Details) - USD ($)	3 Months Ended	9 Months Ended
REVOLVING CREDIT FACILITY (Details) - USD ($)	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)		2.00%

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

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

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

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	)

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

INTANGIBLE ASSETS, NET (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
INTANGIBLE ASSETS, NET (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Indefinite-Lived Intangible Assets [Line Items]
Amortization expense	$ 12	$ 12	$ 35	$ 100

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 Lives (in Years)	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

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

STOCK-BASED COMPENSATION (Details) - USD ($)				3 Months Ended		9 Months Ended
STOCK-BASED COMPENSATION (Details) - USD ($)	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	10.00%
Annual increase in percentage of common stock issuable in accordance with outstanding common stock	3.00%
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

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

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

- Definition

Fair value, after the effects of master netting arrangements, of a financial asset or other contract with one or more underlyings, notional amount or payment provision or both, and the contract can be net settled by means outside the contract or delivery of an asset. Includes assets not subject to a master netting arrangement and not elected to be offset.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 210
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480524/946-210-50-12

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 210
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480524/946-210-50-6

Reference 3: http://www.xbrl.org/2003/role/exampleRef
-Topic 946
-SubTopic 210
-Name Accounting Standards Codification
-Section 55
-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480493/946-210-55-1

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 210
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Subparagraph (a)(1)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480524/946-210-50-6

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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Reference 21: http://www.xbrl.org/2003/role/disclosureRef
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-Publisher FASB
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+ Details

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

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

INCOME TAXES (Details) - USD ($)	3 Months Ended		9 Months Ended
INCOME TAXES (Details) - USD ($)	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	21.00%	21.00%	21.00%	21.00%
Change to the valuation allowance	$ 0	$ 0	$ 0	$ 0

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

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 Loss			Fair Value
September 30, 2023	$	999	$	(4	)	$	995

	Cost		Unrealized Gain			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.

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

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.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//470/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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-Name Accounting Standards Codification
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-Paragraph 1B
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-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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-Name Accounting Standards Codification
-Section 50
-Paragraph 1E
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
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-Paragraph 1I
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

+ Details

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	)

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

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.

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



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

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	3 Months Ended		9 Months Ended
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	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			50.00%
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			70.00%
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			50.00%
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	28.00%	26.00%	28.00%	27.00%
Customer Concentration Risk \| Vendor Purchases \| One Vendor
Accounting Policies [Line Items]
Concentration risk percentage		30.00%	21.00%	16.00%
Customer Concentration Risk \| Vendor Purchases \| Two Vendors
Accounting Policies [Line Items]
Concentration risk percentage	15.00%
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	92.00%	91.00%	91.00%	91.00%
Canada
Accounting Policies [Line Items]
Revenue	$ 3,200,000	$ 3,200,000
Percentage of revenue	8.00%	9.00%
International
Accounting Policies [Line Items]
Revenue			$ 10,200,000	$ 8,000,000
Percentage of revenue			9.00%	9.00%

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

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

MERGER (Details)				3 Months Ended		9 Months Ended
MERGER (Details)	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

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.


	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 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 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 preferred stock		—		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


	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


	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

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	97.00%		97.00%		95.00%
Canada
Property, Plant and Equipment [Line Items]
Property, plant and equipment, net	$ 2,200		$ 2,200		$ 2,300
Property, plant and equipment net, Percentage	3.00%		3.00%		5.00%

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 Loss			Fair Value
September 30, 2023	$	999	$	(4	)	$	995

	Cost		Unrealized Gain			Fair Value
December 31, 2022	$	999	$	144		$	1,143

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 options 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.

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.

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

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

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)

EMPLOYEE BENEFITS (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
EMPLOYEE BENEFITS (Details) - USD ($)	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					3.00%
Employer matching contribution, percent of match					150.00%
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.

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	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

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

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

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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Organization and Nature of Operations

Basis of Presentation

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

COVID-19 Related Credits and Relief

Emerging Growth Company

Use of Estimates

Principles of Consolidation

Foreign Currency Translation and Transactions

Revenue Recognition

Tool Rental Services

Tool rental services consist of rental services, inspection services, and repair services. Tool rental services are accounted for under Topic 842.

The Company records the amounts billed to customers in excess of recognizable revenue as deferred revenue on its unaudited condensed consolidated balance sheet.

Product Sales

Revenue per geographic location

Contract Assets and Contract Liabilities

Cash and Cash Equivalents

Accounts Receivable, net

Allowance for Doubtful Accounts

based on current and historical information.

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

Property, Plant and Equipment, net

Property, plant and equipment acquired as part of a business acquisition is recorded at acquisition date fair value with subsequent additions at cost.

Leases

Lessor Accounting

We recognized operating lease revenue within “Tool rental” on the unaudited condensed consolidated statements of income and comprehensive income.

Intangible Assets

Accounting for Impairment of Long-lived Assets

Investments - Equity Securities

Redeemable Convertible Preferred Stock

Preferred Stock

Cost of Revenue

Stock-Based Compensation

Earnings Per Share

Income Taxes

The Company is subject to state income taxes in various jurisdictions.

Derivative Financial Instruments

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.

Fair Value Measurements

Level 1 – Valuation inputs are unadjusted quoted market prices for identical assets or liabilities in active markets.

Level 3 – Valuation inputs are unobservable and significant to the fair value measurement.

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 not have any Level 3 assets or liabilities.

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

Operating Segment

Accounting Standards Issued But Not Yet Effective

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

RELATED PARTY TRANSACTIONS (Details) - USD ($)		3 Months Ended		9 Months Ended
RELATED PARTY TRANSACTIONS (Details) - USD ($)	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

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