0000950170-24-094837 | 10-Q | XBRL Viewer | Drilling Tools International Corp

INVESTMENTS - EQUITY SECURITIES (Tables)

6 Months Ended

Jun. 30, 2024

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 Gain			Fair Value
June 30, 2024	$	999	$	618		$	1,617

	Cost		Unrealized Loss			Fair Value
December 31, 2023	$	999	$	(111	)	$	888

INVESTMENTS - EQUITY SECURITIES

6 Months Ended

Jun. 30, 2024

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 Gain			Fair Value
June 30, 2024	$	999	$	618		$	1,617

	Cost		Unrealized Loss			Fair Value
December 31, 2023	$	999	$	(111	)	$	888

Unrealized holding gains on equity securities for the three months ended June 30, 2024 and 2023 were approximately $0.5 million and $0.4 million, respectively. Unrealized holding gains on equity securities for the six months ended June 30, 2024 and 2023 were approximately $0.7 million and $0.4 million, respectively.

LEASES - Summary of Future Undiscounted Cash Flows (Details) $ in Thousands	Jun. 30, 2024 USD ($)
Lessee, Operating Lease, Liability, to be Paid, Fiscal Year Maturity [Abstract]
2024	$ 2,874
2025	5,007
2026	4,477
2027	3,263
2028	2,686
Thereafter	9,636
Total lease payments	27,943
Less: imputed interest	(5,996)
Present value of lease liabilities	$ 21,947

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2024	Aug. 09, 2024
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2024
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		34,704,696
Entity Central Index Key	0001884516
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q2
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	false

INVESTMENTS - EQUITY SECURITIES - Summary of Cost and Fair Value of Investments in Equity Securities (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2024	Dec. 31, 2023
Net Investment Income [Line Items]
Cost	$ 999	$ 999
Unrealized gain (Loss)	618	(111)
Fair value	$ 1,617	$ 888

LEASES - Summary of Supplemental Balance Sheet Information Related to Leases (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2024 USD ($)
Leases [Abstract]
Weighted-average remaining lease term (in years)	7 years 2 months 8 days
Weighted average discount rate	7.35%
Cash paid for amounts included in the measurement of lease liabilities	$ 2,981

BUSINESS COMBINATION - Summary of Unaudited Supplemental Pro Forma Financial Information (Details) - Casing Technologies Group Limited - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Business Acquisition [Line Items]
Pro forma revenue	$ 37,533	$ 47,524	$ 77,879	$ 92,831
Pro forma net income	$ 299	$ 2,276	$ 2,928	$ 8,468

INTANGIBLE ASSETS, NET

6 Months Ended

Jun. 30, 2024

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)	June 30, 2024			December 31, 2023
Trade name	10-15	$	2,081		$	1,280
Developed Technology	13-20		3,468			270
Customer Relationships	20		3,890			—
Total intangible assets			9,439			1,550
Less: accumulated amortization			(1,477	)		(1,334	)
Intangible assets, net		$	7,962		$	216

Total amortization expense for the three months ended June 30, 2024 and 2023 was approximately $112 thousand and $12 thousand, respectively. Total amortization expense for the six months ended June 30, 2024 and 2023 was approximately $143 thousand and $24 thousand, respectively.

PROPERTY, PLANT AND EQUIPMENT, NET

6 Months Ended

Jun. 30, 2024

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)	June 30, 2024			December 31, 2023
Rental tools and equipment	5-10		198,349			188,949
Buildings and improvements	5-40		6,739			6,672
Office furniture, fixtures and equipment	3-5		2,356			2,389
Transportation and equipment	3-5		746			793
Total property, plant and equipment			208,190			198,803
Less: accumulated deprecation			(136,976	)		(133,003	)
Property, plant and equipment, net (excluding construction in progress)			71,214			65,800
Construction in progress			9			-
Property, plant and equipment, net		$	71,223		$	65,800

Total depreciation expense for the three months ended June 30, 2024 and 2023 was approximately $5.6 million and $4.7 million, respectively. Total depreciation expense for the six months ended June 30, 2024 and 2023 was approximately $10.9 million and $9.7 million, respectively. The Company has not acquired any property, plant and equipment under capital leases.

Property, plant and equipment, net, were concentrated within the U.S. As of June 30, 2024 and December 31, 2023, property, plant and equipment, net held within the U.S was $66.3 million and $63.0 million, respectively, or 93% and 96%, respectively, of total property, plant and equipment, net. As of June 30, 2024 and December 31, 2023 property, plant and equipment, net held outside of the United States was $4.9 million and $2.8 million, or 7% and 4%, respectively, of total property, plant and equipment, net for both periods.

BUSINESS COMBINATION

6 Months Ended

Jun. 30, 2024

Business Combinations [Abstract]

BUSINESS COMBINATION

NOTE 2 – BUSINESS COMBINATION

On the CTG Acquisition Date, the Company’s wholly owned subsidiary, Drilling Tools International, Inc., entered into and consummated the Share Purchase Agreement with CTG, the shareholders of CTG, and a representative of CTG, to acquire 100% of the shares of CTG for a gross cash purchase consideration of £16.2 million, or approximately $20.9 million, based on the British pound sterling to United States dollar exchange rate on the CTG Acquisition Date. CTG is incorporated in the United Kingdom and is the holding company of its wholly owned subsidiary, Deep Casing. Deep Casing specializes in the design, engineering, and manufacturing of a range of patented and innovative products for well construction, well completion, and casing installation processes for the global oil and gas sector. The CTG Acquisition allows the Company to further expand its geographical presence globally, especially in the Middle East, provides accretive earnings to consolidated results of operations, and expands the Company’s portfolio of intellectual property rights, through the acquisition of over 60 patents.

The £16.2 million, or approximately $20.9 million, gross cash purchase consideration was used on the CTG Acquisition Date to (i) settle Deep Casing’s outstanding debt of £15.3 million, or approximately $19.8 million; (ii) pay Deep Casing’s legacy shareholders £0.3 million, or approximately $0.3 million, in accordance with the Share Purchase Agreement; and (iii) pay Deep Casing’s acquisition-related costs of £0.6 million, or approximately $0.8 million.

The CTG Acquisition has been accounted for as a business combination in accordance with ASC 805, Business Combinations (“ASC 805”). Drilling Tools International, Inc. has been treated as the accounting acquirer. Accordingly, CTG’s tangible and identifiable intangible assets acquired and its liabilities assumed were recorded at their estimated fair values on the CTG Acquisition Date.

The preliminary allocation of the purchase is as follows:


Assets	Preliminary March 15, 2024			Measurement Period Adjustments		As adjusted March 15, 2024
Cash	$	2,674			—	$	2,674
Accounts receivable, net		3,781			—		3,781
Inventories, net		4,282			—		4,282
Prepaid expenses and other current assets		189			—		189
Property, plant and equipment , net		1,647			—		1,647
Operating lease ROU asset		315			—		315
Intangible assets, net		8,065			—		8,065
Goodwill		2,618		526			3,144
Total assets acquired	$	23,571		$	526	$	24,097

Liabilities
Accounts payable		2,656			—		2,656
Accrued expenses and other current liabilities		(295	)		526		231
Current portion of operating lease liabilities		95			—		95
Operating lease liabilities, less current portion		180			—		180
Total liabilities assumed	$	2,636		$	526	$	3,162
Total consideration transferred	$	20,935		$	—	$	20,935

The excess of the purchase price over the fair values of the net identifiable tangible and intangible assets acquired has been assigned to goodwill. Goodwill represents the future benefits as a result of the acquisition that will enhance the services available to both new and existing customers and increase the Company’s competitive position. Goodwill will be evaluated for impairment at least annually. Goodwill attributable to the CTG Acquisition is not deductible for tax purposes. During the three months ended June 30, 2024, a measurement period adjustment was identified as it relates to assumed accrued liabilities. The total measurement period adjustment was $0.5 million. The measurement period adjustment impacted the goodwill recognized on March 15, 2024. As of June 30, 2024, the Company is substantially complete with the process of allocating the purchase price and valuing the acquired assets and liabilities assumed.

The following table sets forth the amounts allocated to the identified intangible assets, the estimated useful lives of those intangible assets as of the CTG Acquisition Date, and the methodologies used to determine the fair values of those intangible assets ($ in thousands):


	Fair value		Useful life (in years)	Fair value methodology
Intangible assets
Trade names	$	819	15	Relief from royalty method
Developed Technology		3,269	20	Relief from royalty method
Customer relationships		3,977	20	Multi-period excess earnings method of the income approach
Total intangible assets	$	8,065

The intangible assets acquired are expected to be amortized over their useful lives on a straight-line basis.

The Company incurred acquisition-related costs of $0.3 million during the six months ended June 30, 2024, which are included in other income (expense), net in the condensed consolidated statement of income and comprehensive income.

The Company’s condensed consolidated statement of income and comprehensive income for the six months ended June 30, 2024 includes CTG’s revenues of $4.8 million and net income of $0.7 million from the CTG Acquisition Date through June 30, 2024.

Supplemental Pro Forma Information

The unaudited supplemental pro forma financial results below for the three and six months ended June 30, 2024 and 2023, combine the consolidated results of the Company and CTG, giving effect to the CTG Acquisition as if it had been completed on January 1, 2023. This unaudited supplemental pro forma financial information is presented for informational purposes only and is not indicative of future operations or results had the acquisition been completed as of January 1, 2023, or any other date.


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2024		2023		2024		2023
Pro forma revenue	$	37,533	$	47,524	$	77,879	$	92,831
Pro forma net income	$	299	$	2,276	$	2,928	$	8,468

The unaudited supplemental pro forma financial information in the table above contains material nonrecurring pro forma adjustments to remove interest expense on CTG's debt as it is assumed that the business combination occurred and the debt was paid off on January 1, 2023.

EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2024

Earnings Per Share [Abstract]

EARNINGS PER SHARE

NOTE 15 – EARNINGS PER SHARE

Basic earnings per share is computed using the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed using the weighted-average number of common shares outstanding for the period plus dilutive potential common shares, including performance share awards, using the treasury stock method. Performance share awards are included based on the number of shares that would be issued as if the end of the reporting period was the end of the performance period and the result was dilutive.

The following table sets forth the computation of the Company’s basic and diluted net earnings per share for the three and six months ended June 30, 2024 and 2023 (in thousands except share and per share data):


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Numerator:
Net income	$	365	$	937	$	3,492	$	6,638
Less: Redeemable Convertible Preferred Stock dividends		—		—		—		(314	)
Net income attributable to common shareholders — basic	$	365	$	937	$	3,492	$	6,324
Add: Redeemable Convertible Preferred Stock dividends		—		—		—		314
Net income attributable to common shareholders — diluted	$	365	$	937	$	3,492	$	6,638
Denominator
Weighted-average common shares used in computing earnings per share — basic		29,816,202		13,910,670		29,792,385		12,936,310
Weighted-average effect of potentially dilutive securities:
Effect of potentially dilutive time-based stock options		873,348		744,573		436,674		875,651
Effect of potentially dilutive performance-based stock options		164,132		110,514		82,066		55,257
Effect of potentially dilutive restricted stock units		19,754		—		9,877		—
Effect of potentially dilutive redeemable convertible preferred stock		—		5,981,219		—		6,350,430
Weighted-average common shares outstanding — diluted		30,873,436		20,746,976		30,321,002		20,217,648
Earnings per share — basic	$	0.01	$	0.07	$	0.12	$	0.49
Earnings per share — diluted	$	0.01	$	0.05	$	0.12	$	0.33

As of June 30, 2024, the Company’s potentially dilutive securities consisted of options to purchase common stock. Based on the amounts outstanding as of the three and six months ended June 30, 2024 and 2023, the Company excluded the following potential common shares from the computation of diluted net income per share because including them would have had an anti-dilutive effect:


	Three months ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Time-based options outstanding		140,135		140,135		140,135		140,135
Total		140,135		140,135		140,135		140,135

OTHER EXPENSES, NET - Summary of Components of Other Expenses, Net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Schedule Of Other Expenses [Line Items]
Transaction Fees	$ (2,019)	$ (1,803)	$ (2,909)	$ (3,499)
Interest income	24	0	76	48
Other, net	323	(240)	35	(245)
Other expense, net	(1,672)	(4,382)	(2,798)	(6,035)
Hicks Holdings Operating LLC
Schedule Of Other Expenses [Line Items]
Stock-based compensation	$ 0	$ (2,339)	$ 0	$ (2,339)

BUSINESS COMBINATION - Summary of Preliminary Allocation of the Purchase (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Mar. 15, 2024	Dec. 31, 2023
Business Acquisition [Line Items]
Goodwill	$ 3,076		$ 0
Casing Technologies Group Limited
Business Acquisition [Line Items]
Cash		$ 2,674
Accounts receivable, net		3,781
Inventories, net		4,282
Prepaid expenses and other current assets		189
Property, plant and equipment , net		1,647
Operating lease ROU asset		315
Intangible assets, net		8,065
Goodwill		3,144
Total assets acquired		24,097
Accounts payable		2,656
Accrued expenses and other current liabilities		231
Current portion of operating lease liabilities		95
Operating lease liabilities, less current portion		180
Total liabilities assumed		3,162
Total consideration transferred		20,935
Casing Technologies Group Limited \| Preliminary
Business Acquisition [Line Items]
Cash		2,674
Accounts receivable, net		3,781
Inventories, net		4,282
Prepaid expenses and other current assets		189
Property, plant and equipment , net		1,647
Operating lease ROU asset		315
Intangible assets, net		8,065
Goodwill		2,618
Total assets acquired		23,571
Accounts payable		2,656
Accrued expenses and other current liabilities		(295)
Current portion of operating lease liabilities		95
Operating lease liabilities, less current portion		180
Total liabilities assumed		2,636
Total consideration transferred		20,935
Casing Technologies Group Limited \| Measurement Period Adjustments
Business Acquisition [Line Items]
Cash		0
Accounts receivable, net		0
Inventories, net		0
Prepaid expenses and other current assets		0
Property, plant and equipment , net		0
Operating lease ROU asset		0
Intangible assets, net		0
Goodwill		526
Total assets acquired		526
Accounts payable		0
Accrued expenses and other current liabilities		526
Current portion of operating lease liabilities		0
Operating lease liabilities, less current portion		0
Total liabilities assumed		526
Total consideration transferred		$ 0

SUBSEQUENT EVENTS (Details) - Subsequent Event - Superior Drilling Products, Inc $ in Millions	Aug. 01, 2024 USD ($) shares
Subsequent Event [Line Items]
Common stock issued, value \| $	$ 14.9
Common stock issued, shares \| shares	4,845,132

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total	As Previously Reported	Redeemable Convertible Preferred Stock	Redeemable Convertible Preferred Stock As Previously Reported	Redeemable Convertible Preferred Stock Revision of Prior Period, Adjustment	Common Stock	Common Stock As Previously Reported	Common Stock Revision of Prior Period, Adjustment	Treasury Stock As Previously Reported	Treasury Stock Revision of Prior Period, Adjustment	Additional Paid-In Capital	Additional Paid-In Capital As Previously Reported	Additional Paid-In Capital Revision of Prior Period, Adjustment	Accumulated Deficit	Accumulated Deficit As Previously Reported	Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss As Previously Reported
Temporary equity, beginning balance at Dec. 31, 2022			$ 17,878	$ 17,878
Temporary equity, beginning balance, shares at Dec. 31, 2022			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 (Loss)	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	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
Exercise of stock options/ Net exercise of DTIH stockholders stock options, shares	0
Net Income (Loss)	$ 6,638
Ending balance at Jun. 30, 2023	80,487					$ 3					95,218			(14,416)		(318)
Ending balance, shares at Jun. 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
Exercise of stock options/ Net exercise of DTIH stockholders stock options, shares	0					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 (Loss)	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
Beginning balance at Dec. 31, 2023	88,690					$ 3					95,218			(6,306)		(225)
Beginning balance, shares at Dec. 31, 2023						29,768,568
Stock-based compensation	208										208
Foreign currency translation adjustment, net of tax	(511)															(511)
Net Income (Loss)	3,126													3,126
Ending balance at Mar. 31, 2024	91,513					$ 3					95,426			(3,180)		(736)
Ending balance, shares at Mar. 31, 2024						29,768,568
Beginning balance at Dec. 31, 2023	$ 88,690					$ 3					95,218			(6,306)		(225)
Beginning balance, shares at Dec. 31, 2023						29,768,568
Exercise of stock options/ Net exercise of DTIH stockholders stock options, shares	68,470
Net Income (Loss)	$ 3,492
Ending balance at Jun. 30, 2024	92,800					$ 3					96,536			(3,105)		(634)
Ending balance, shares at Jun. 30, 2024						29,859,564
Beginning balance at Mar. 31, 2024	91,513					$ 3					95,426			(3,180)		(736)
Beginning balance, shares at Mar. 31, 2024						29,768,568
Exercise of stock options/ Net exercise of DTIH stockholders stock options	(35)										255			(290)
Exercise of stock options/ Net exercise of DTIH stockholders stock options, shares						16,556
Shares issued due to vesting of restricted stock units	442										442
Shares issued due to vesting of restricted stock units, shares						74,440
Stock-based compensation	413										413
Foreign currency translation adjustment, net of tax	102															102
Net Income (Loss)	365													365
Ending balance at Jun. 30, 2024	$ 92,800					$ 3					$ 96,536			$ (3,105)		$ (634)
Ending balance, shares at Jun. 30, 2024						29,859,564

STOCK-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2024

Share-Based Payment Arrangement [Abstract]

Summary of Stock Option Activity

The following table summarizes our stock option activity for the six months ended June 30, 2024:


	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
OUTSTANDING, December 31, 2023		2,361,722	$	4.02		3.12	$	—
Granted		2,600,000		3.02		—		—
Exercised		68,470		3.72		—		130
Forfeited		—	$	—		—		—
OUTSTANDING, June 30, 2024		4,893,252	$	3.49		6.41	$	10,847
UNVESTED, June 30, 2024		2,600,000	$	3.02		9.63	$	6,765
EXERCISABLE, June 30, 2024		2,293,252	$	4.03		2.74	$	4,082

BUSINESS COMBINATION - Summary of Identified Intangible Assets, Estimated Useful Lives and Methodologies Used to Determine Fair Values (Details) - Casing Technologies Group Limited $ in Thousands	Mar. 15, 2024 USD ($)
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets, fair value	$ 8,065
Trade Names
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets, fair value	$ 819
Intangible assets, useful life	15 years
Developed Technology
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets, fair value	$ 3,269
Intangible assets, useful life	20 years
Customer Relationships
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible assets, fair value	$ 3,977
Intangible assets, useful life	20 years

PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Property, Plant and Equipment [Line Items]
Depreciation expense	$ 5,600	$ 4,700	$ 10,900	$ 9,700
Property, plant and equipment, net	71,223		71,223		$ 65,800
United States
Property, Plant and Equipment [Line Items]
Property, plant and equipment, net	$ 66,300		$ 66,300		$ 63,000
Property, plant and equipment net, Percentage	93.00%		93.00%		96.00%
Outside of the United States
Property, Plant and Equipment [Line Items]
Property, plant and equipment, net	$ 4,900		$ 4,900		$ 2,800
Property, plant and equipment net, Percentage	7.00%		7.00%		4.00%

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Jun. 30, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false
Rule 10b5-1 Arrangement Modified	false
Non-Rule 10b5-1 Arrangement Modified	false

STOCK-BASED COMPENSATION - Summary of Stock Option Activity (Details) - USD ($)	3 Months Ended	6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding [Roll Forward]
OUTSTANDING, December 31, 2023		2,361,722
Number of shares granted	0	2,600,000	0
Number of shares exercised	0	68,470	0
Number of shares forfeited	0	0	0
OUTSTANDING, June 30, 2024		4,893,252		2,361,722
UNVESTED, June 30, 2024		2,600,000
EXERCISABLE, June 30, 2024		2,293,252
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Weighted average exercise price, beginning balance		$ 4.02
Weighted average exercise price, Granted		3.02
Weighted average exercise price, Exercised		3.72
Weighted average exercise price, Forfeited		0
Weighted average exercise price, ending balance		3.49		$ 4.02
Weighted average exercise price, Unvested		3.02
Weighted average exercise price, Exercisable		$ 4.03
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Additional Disclosures [Abstract]
Weighted Average Remaining Contractual Life (in Years)		6 years 4 months 28 days		3 years 1 month 13 days
Weighted average remaining contractual life (in years), unvested		9 years 7 months 17 days
Weighted average remaining contractual life (in years), exercisable		2 years 8 months 26 days
Aggregate Intrinsic Value		$ 10,847		$ 0
Aggregate Intrinsic Value, Exercised		130
Aggregate Intrinsic Value, Unvested		6,765
Aggregate intrinsic value, exercisable		$ 4,082

OTHER EXPENSES, NET

6 Months Ended

Jun. 30, 2024

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 June 30, 2024 and 2023 (in thousands):


	Three months ended June 30, 2024			Three months ended June 30, 2023
Transaction fees		(2,019	)		(1,803	)
HHLLC stock-based compensation		—			(2,339	)
Interest income		24			—
Other, net		323			(240	)
Other expense, net	$	(1,672	)	$	(4,382	)

The following table shows the components of other expenses, net for the six months ended June 30, 2024 and 2023 (in thousands):


	Six Months Ended June 30, 2024			Six Months Ended June 30, 2023
Transaction fees		(2,909	)		(3,499	)
HHLLC stock-based compensation		—			(2,339	)
Other, net		35			(245	)
Interest income		76			48
Other expense, net	$	(2,798	)	$	(6,035	)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Revenue, net:
Revenue, net	$ 37,533	$ 37,908	$ 74,507	$ 78,707
Operating costs and expenses:
Selling, general, and administrative expense	19,619	17,718	37,560	34,447
Depreciation and amortization expense	5,681	4,717	11,047	9,732
Total operating costs and expenses	35,298	31,284	67,142	62,468
Income from operations	2,235	6,624	7,365	16,239
Other expense, net:
Interest expense, net	(811)	(348)	(992)	(922)
Gain (loss) on sale of property	51	(1)	42	68
Unrealized gain on investments in equity securities	480	420	729	387
Other (expense)	(1,672)	(4,382)	(2,798)	(6,035)
Total other expense, net	(1,952)	(4,311)	(3,019)	(6,502)
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total	283	2,313	4,346	9,737
Income tax (expense)/benefit	82	(1,376)	(854)	(3,099)
Net income	365	937	3,492	6,638
Accumulated dividends on redeemable convertible preferred stock	0	0	0	314
Net income available to common shareholders	$ 365	$ 937	$ 3,492	$ 6,324
Basic earnings per share	$ 0.01	$ 0.07	$ 0.12	$ 0.49
Diluted earnings per share	$ 0.01	$ 0.05	$ 0.12	$ 0.33
Basic weighted-average common shares outstanding	29,816,202	13,910,670	29,792,385	12,936,310
Diluted weighted-average common shares outstanding	30,873,436	20,746,976	30,321,002	20,217,648
Other comprehensive income (loss):
Net income	$ 365	$ 937	$ 3,492	$ 6,638
Foreign currency translation adjustment, net of tax	102	(207)	(408)	(207)
Comprehensive income	467	730	3,084	6,431
Tool Rental
Revenue, net:
Revenue, net	28,328	29,002	58,294	61,278
Operating costs and expenses:
Operating costs and expenses	7,454	7,692	14,455	15,829
Product Sale
Revenue, net:
Revenue, net	9,205	8,906	16,213	17,429
Operating costs and expenses:
Operating costs and expenses	$ 2,544	$ 1,157	$ 4,080	$ 2,460

EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2024

Earnings Per Share [Abstract]

Summary of Computation of The Company's Basic and Diluted Net Earnings Per Share


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Numerator:
Net income	$	365	$	937	$	3,492	$	6,638
Less: Redeemable Convertible Preferred Stock dividends		—		—		—		(314	)
Net income attributable to common shareholders — basic	$	365	$	937	$	3,492	$	6,324
Add: Redeemable Convertible Preferred Stock dividends		—		—		—		314
Net income attributable to common shareholders — diluted	$	365	$	937	$	3,492	$	6,638
Denominator
Weighted-average common shares used in computing earnings per share — basic		29,816,202		13,910,670		29,792,385		12,936,310
Weighted-average effect of potentially dilutive securities:
Effect of potentially dilutive time-based stock options		873,348		744,573		436,674		875,651
Effect of potentially dilutive performance-based stock options		164,132		110,514		82,066		55,257
Effect of potentially dilutive restricted stock units		19,754		—		9,877		—
Effect of potentially dilutive redeemable convertible preferred stock		—		5,981,219		—		6,350,430
Weighted-average common shares outstanding — diluted		30,873,436		20,746,976		30,321,002		20,217,648
Earnings per share — basic	$	0.01	$	0.07	$	0.12	$	0.49
Earnings per share — diluted	$	0.01	$	0.05	$	0.12	$	0.33

Summary of Company's Potentially Dilutive Securities Excluded


	Three months ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Time-based options outstanding		140,135		140,135		140,135		140,135
Total		140,135		140,135		140,135		140,135

REVOLVING CREDIT FACILITY AND TERM LOAN

6 Months Ended

Jun. 30, 2024

Line of Credit Facility [Abstract]

REVOLVING CREDIT FACILITY AND TERM LOAN

NOTE 7 – REVOLVING CREDIT FACILITY AND TERM LOAN

In December 2015, the Company entered into a credit facility with PNC Bank, National Association (the "Existing Credit Facility"). The facility provided for a revolving line of credit with a maximum borrowing amount totaling $60.0 million.

On March 15, 2024, the Company refinanced its revolving credit facility (the “Refinancing”) by entering into a Second Amended and Restated Revolving Credit, Term Loan and Security and Guaranty Agreement (the “Credit Facility”) with certain of the Company’s subsidiaries and PNC Bank, National Association as lender and as agent. Pursuant to the terms of the Credit Facility, the Company will be provided a revolving line of credit in a principal amount up to $80.0 million and a single draw term loan (the "Term Loan") in a principal amount of $25.0 million. The Credit Facility and the Term Loan mature in March 2029. The Credit Facility amends and restates

the Company’s Existing Credit Facility under that certain Amended and Restated Revolving Credit, Term Loan, and Security Agreement, dated as of June 20, 2023, by and among the Company, certain of its subsidiaries, and PNC Bank National Association.

For the three and six months ended June 30, 2024, the interest on the amount drawn on the Credit Facility and the outstanding Term Loan balance are based on the Secured Overnight Financing Rate ("SOFR") or the bank’s base lending rate plus applicable margin (approximately 7.82% and 9.32%, respectively, at June 30, 2024). The Credit Facility is collateralized by substantially all the assets of the Company.

As of June 30, 2024, 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 June 30, 2024, 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 June 30, 2024 and December 31, 2023 and therefore no amounts were recorded as of June 30, 2024 or December 31, 2023.

- 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
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 405
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-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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Reference 8: 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://fasb.org/us-gaap/role/ref/legacyRef
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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Reference 12: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1B

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1B

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
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Reference 15: http://www.xbrl.org/2003/role/disclosureRef
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Reference 16: http://www.xbrl.org/2003/role/disclosureRef
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Reference 17: http://www.xbrl.org/2003/role/disclosureRef
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Reference 18: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1E

Reference 19: http://www.xbrl.org/2003/role/disclosureRef
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Reference 20: http://www.xbrl.org/2003/role/disclosureRef
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Reference 21: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2024

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. The 2023 Plan provides for the issuance of shares of Common Stock up to ten percent (10%) of the shares of outstanding Common Stock as of the closing of the Merger and automatically increases on the first trading day of each calendar year by the number of shares of Common Stock equal to three percent (3%) of the total number of outstanding Common Stock on the last day of the prior calendar year. 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 June 30, 2024, there were 1,126,910 shares of Common Stock available for issuance under the 2023 Plan.

Stock Options

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. 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 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.

During the three and six months ended June 30, 2023, there were no options granted, exercised or forfeited.

During the three and six months ended June 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 three and six months ended June 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 Transaction Service Agreement.

The following table summarizes our stock option activity for the six months ended June 30, 2024:


	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
OUTSTANDING, December 31, 2023		2,361,722	$	4.02		3.12	$	—
Granted		2,600,000		3.02		—		—
Exercised		68,470		3.72		—		130
Forfeited		—	$	—		—		—
OUTSTANDING, June 30, 2024		4,893,252	$	3.49		6.41	$	10,847
UNVESTED, June 30, 2024		2,600,000	$	3.02		9.63	$	6,765
EXERCISABLE, June 30, 2024		2,293,252	$	4.03		2.74	$	4,082

During the three months ended June 30, 2024, the Company recognized $0.4 million of stock-based compensation expense related to stock options within selling, general, and administrative expenses on the unaudited condensed consolidated statements of income and comprehensive income. During the six months ended June 30, 2024, the Company recognized $0.6 million of stock-based compensation expense within selling, general, and administrative expenses on the unaudited condensed consolidated statements of income and comprehensive income. As of June 30, 2024, total unrecognized compensation expense related to the stock options totaled $4.0 million.

Restricted Stock Units

In May 2024, the Company issued an aggregate 143,000 restricted stock units (“RSUs”) to five members of the Board (the “Directors”). Of the awards, 74,440 RSUs were deemed to be related to services performed during the year ended December 31, 2023, and were to vest immediately, while the remaining 68,560 RSUs are subject to a vesting term of one year. The Directors are considered to be employees of the Company under ASC 718.

During the three and six months ended June 30, 2024, the Company recognized $0.4 million of stock based compensation related to RSUs within selling, general, and administrative expenses on the unaudited condensed consolidated statements of income and comprehensive income related to the RSUs. As of June 30, 2024, unrecognized compensation expense related to the RSUs totaled $0.3 million

PROPERTY, PLANT AND EQUIPMENT, NET (Tables)

6 Months Ended

Jun. 30, 2024

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)	June 30, 2024			December 31, 2023
Rental tools and equipment	5-10		198,349			188,949
Buildings and improvements	5-40		6,739			6,672
Office furniture, fixtures and equipment	3-5		2,356			2,389
Transportation and equipment	3-5		746			793
Total property, plant and equipment			208,190			198,803
Less: accumulated deprecation			(136,976	)		(133,003	)
Property, plant and equipment, net (excluding construction in progress)			71,214			65,800
Construction in progress			9			-
Property, plant and equipment, net		$	71,223		$	65,800

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2024

Accounting Policies [Abstract]

Organization and Nature of Operations

Drilling Tools International Corporation, a Delaware corporation ("DTIC" or the "Company"), is a global oilfield services company that designs, engineers, manufactures and provides a differentiated, rental-focused offering of tools for use in onshore and offshore horizontal and directional drilling operations, as well as other cutting-edge solutions across the well life cycle.

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”) 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.

On March 15, 2024 (the “CTG Acquisition Date”), we entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with Casing Technologies Group Limited (“CTG”), certain shareholders of CTG, and a representative of CTG. Pursuant to the terms of the Share Purchase Agreement, the Company acquired one hundred percent (100%) of the shares of CTG (the “CTG Acquisition”), which wholly owns Deep Casing Tools Limited (“Deep Casing”), an energy technology development company, for approximately £16.2 million, or $20.9 million, based on the British pound sterling to United States dollar exchange rate on the CTG Acquisition Date. For further details regarding the acquisition, refer to Note 2 – “Business Combinations.”

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, United Kingdom, Germany, United Arab Emirates, Saudi Arabia, Kuwait, Oman, Malaysia, and Australia. 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 U.S (“U.S. GAAP”) as set forth by the Financial Accounting Standards Board ("FASB") and pursuant to the rules and regulations of the U.S. 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 Codification (“ASC”) and Accounting Standards Update (“ASUs”).

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 June 30, 2024, and its results of operations for the three and six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023. The condensed consolidated balance sheet at December 31, 2023, was derived from the audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.

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. Further, the basis of consolidation incorporates the financial statements of our foreign entity, Casing Technologies Group Limited, which operates under UK Generally Accepted Accounting Principles ("UK GAAP"). Those financial statements are translated into U.S. GAAP for consolidation purposes. The translation process adheres to established accounting standards and guidelines to ensure consistency and comparability across our consolidated financial statements. This approach enables us to accurately reflect the financial position, results of operations, and cash flows of our consolidated operations.

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 U.S. 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 during 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 six months ended June 30, 2024, the aggregate foreign currency translation included in the unaudited condensed consolidated statements of income and comprehensive income totaled approximately $24 thousand in losses and $4.7 thousand in gains, respectively. For the three and six months ended June 30, 2023, the aggregate foreign currency translation included in the unaudited condensed consolidated statements of income and comprehensive income totaled $0.2 million and $0.2 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. Revenue from tool rental services are accounted for in accordance with 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, or per well. As part of this straight-line methodology, when the equipment is returned, the Company recognizes as incremental revenue the excess, if any, between the amount the customer is contractually required to pay, which is based on the rental contract period applicable to the actual number of days the drilling tool was out on rent, over the cumulative amount of revenue recognized to date. In any given accounting period, the Company will have customers return the drilling tool and be contractually required to pay the Company more than the cumulative amount of revenue recognized to date under the straight-line methodology. Additionally, the Company has rental contracts that are based on usage, either on a per footage or per well basis. As these types of rental contracts primarily consist of variable lease payments, which are unknown at commencement, revenue is recognized when the changes in the factor on which the contingent lease payments are based occur. When the customer returns the rental equipment and the footage or usage becomes known, the Company recognizes revenue.

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 six months ended June 30, 2024, the revenue generated within the United States was $30.5 million and $62.8 million respectively, or 81% and 84% of total revenues. For the three and six months ended June 30, 2024, the revenue generated by our international operations was $7.0 million and $11.7 million, respectively, or 19% and 16% of total revenues. For the three and six months ended June 30, 2023, the revenue generated within the United States was $35.1 million and $71.6 million , respectively, or 92% and 91% of total revenues. For the three and six months ended June 30, 2023, the revenue generated by our international operations was $2.9 million and $7.1 million, respectively, or 8% and 9% of total revenues.

Contract Assets and Contract Liabilities

Contract assets represent the Company’s rights to consideration for work completed but not billed. As of June 30, 2024 and December 31, 2023, the Company had contract assets of $3.8 million and $4.2 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 June 30, 2024 and December 31, 2023, the Company did not have any material contract liabilities. All deferred revenues are 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 June 30, 2024 and December 31, 2023.

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 credit losses and are classified as accounts receivable, net on the unaudited condensed consolidated balance sheets.

Business Combinations

The Company applies the acquisition method of accounting for business combinations, which requires us to make use of estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the assets and liabilities acquired. We account for contingent assets and liabilities at fair value on the acquisition date, and record changes to fair value associated with these assets and liabilities as a period cost as incurred. We use established valuation techniques and engage reputable valuation specialists to assist us with these valuations. We use a reasonable measurement period to record any adjustment related to the opening balance sheet (generally, less than one year). After the measurement period, changes to the opening balance sheet can result in the recognition of income or expense as period costs. To the extent these items stem from contingencies that existed at the balance sheet date, but are contingent upon the realization of future events, the cost is charged to expense at the time the future event becomes known.

Allowance for Credit Losses

The Company considers both current conditions and reasonable and supportable forecasts of future conditions when evaluating expected credit losses for uncollectible receivable balances. In our determination of the allowance for credit losses, we pool receivables by days outstanding and apply an expected credit loss percentage to each pool. The expected credit loss percentage is determined using historical loss data adjusted for current conditions and forecasts of future economic 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.

As of June 30, 2024 and December 31, 2023, the allowance for credit losses totaled $1.3 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 or the first-in-first-out ("FIFO") method, depending on the type of inventory. 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 cost of rental revenue and cost of product sale revenue within operating costs section of the unaudited condensed consolidated statements of income and comprehensive income 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.

Goodwill

Goodwill represents the excess of purchase price paid over the fair value of the net assets of acquired businesses. We evaluate Goodwill at least annually for impairment. Goodwill is considered impaired if the carrying amount of the reporting unit exceeds its estimated fair value. We conduct our annual assessment of the recoverability of goodwill as of December 31 of each year. We first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the goodwill impairment test. If the qualitative assessment indicates that it is more likely than not that the fair value of the reporting unit is less than its carrying amount or we elect not to perform a qualitative assessment, the quantitative assessment of goodwill test is performed. The goodwill impairment test is also performed whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If it is necessary to perform the quantitative assessment to determine if our goodwill is impaired, we will utilize a discounted cash flow analysis using management’s projections that are subject to various risks and uncertainties of revenues, expenses and cash flows as well as assumptions regarding discount rates, terminal value and control premiums. Estimates of future cash flows and fair value are highly subjective and inherently imprecise. These estimates can change materially from period to period based on many factors. Accordingly, if conditions change in the future, we may record impairment losses, which could be material to any particular reporting period.

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 six months ended June 30, 2024 and 2023, 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 June 30, 2024 and December 31, 2023, 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 ("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 June 30, 2024 and December 31, 2023.

Preferred Stock

As of the closing of the Merger, the Board of Directors (the "Board") has 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 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 has not issued any shares of any classes or series of preferred stock as of June 30, 2024, 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 recognizes stock-based compensation expenses over the requisite service period. The Company historically granted stock-based compensation awards with performance based vesting conditions. These options all vested upon the closing of the Merger with ROC. Subsequent to the closing of the merger with ROC, the Company’s stock-based compensation awards are subject only to service based vesting conditions. Pursuant to ASC 718-10-35-8, the Company recognizes compensation cost for stock awards with only service conditions that have a graded vesting schedule on a straight-line basis over the service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards. 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. The Board 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 the sale of the Company, given prevailing market conditions; and (vii) precedent transactions involving the Company’s shares.

For restricted stock units, the grant date fair value is determined based on quoted market price for the Company's common stock as of the grant date and the grant date fair value of the awards are recognized as compensation cost as awards vest over the requisite service period.

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 June 30, 2024 and December 31, 2023. 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 six months ended June 30, 2024 and 2023.

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 six months ended June 30, 2023, 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 six months ended June 30, 2023, the Company recognized an unrealized gain due to the change in fair value of its interest rate swap of approximately $13 thousand and a loss of $0.1 million, respectively. The interest swap agreement was settled on July 10, 2023. No new interest swaps were entered into subsequently or during the six months ended June 30, 2024.

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 June 30, 2024
	Level 1		Level 2		Level 3		Total
Investments, equity securities	$	1,617	$	—	$	—	$	1,617
Total assets at fair value	$	1,617	$	—	$	—	$	1,617


	Assets at Fair Value as of December 31, 2023
	Level 1		Level 2		Level 3		Total
Investments, equity securities	$	888	$	—	$	—	$	888
Total assets at fair value	$	888	$	—	$	—	$	888

As of June 30, 2024 and December 31, 2023, the Company did not have any Level 2 or 3 assets or liabilities.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash, accounts receivable, and 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 June 30, 2024 and 2023, the Company generated approximately 25% and 29%, respectively, of its revenue from 2 customers. During the six months ended June 30, 2024 and 2023, the Company generated approximately 27% and 30%, respectively, of its revenue from 2 customers. Amounts due from these customers included in accounts receivable at June 30, 2024 and December 31, 2023 were approximately $5.7 million and $9.3 million, respectively.

During the three and six months ended June 30, 2024, the Company did not have any vendors that represented over 10% of total vendor purchases. During the three months ended June 30, 2023, the Company had 2 vendors that represented approximately 25% of its vendor purchases. During the six months ended June 30, 2023, the Company had 1 vendor that represented approximately 10% of its vendor purchases. Amounts due from these vendors included in accounts payable at December 31, 2023 was approximately $4.5 thousand

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

In December 2023, FASB issued Accounting Standard Update (“ASU”) 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures, which requires enhanced income tax disclosures that reflect how operations and related tax risks, as well as how tax planning and operational opportunities, affect the tax rate and prospects for future cash flows. This standard is effective for the Company beginning January 1, 2025 with early adoption permitted. The Company is evaluating the effects of adopting this new accounting guidance on its disclosures but does not currently expect adoption will have a material impact on the Company’s consolidated financial statements. The Company does not intend to early adopt this ASU.

In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures, which includes requirements for more robust disclosures of significant segment expenses and measures of a segment’s profit and loss used in assessing performance. This standard is effective for the Company’s annual period beginning January 1, 2024 and interim periods beginning January 1, 2025 with early adoption permitted. The Company is still evaluating the effects of adopting this new accounting guidance on its disclosures.

INCOME TAXES (Details) - USD ($)	3 Months Ended		6 Months Ended
INCOME TAXES (Details) - USD ($)	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Income Tax Disclosure [Abstract]
Income tax expense (benefit)	$ (82,000)	$ 1,376,000	$ 854,000	$ 3,099,000
Effective tax rate			19.60%	31.80%
Federal Statutory rate			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

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 270
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (i)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482964/270-10-50-1

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 32
-Subparagraph (ee)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482810/280-10-50-32

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-12

Reference 4: http://www.xbrl.org/2003/role/exampleRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 55
-Paragraph 231
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482663/740-10-55-231

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483443/250-10-50-9

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB Topic 6.I.7)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479360/740-10-S99-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 8
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483443/250-10-50-8

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 10
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-10

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 22
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482810/280-10-50-22

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 944
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-04(9))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477250/944-220-S99-1

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Section 45
-Paragraph 2
-Subparagraph (a)
-SubTopic 20
-Topic 740
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482659/740-20-45-2

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h))
-SubTopic 10
-Topic 235
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480678/235-10-S99-1

+ Details

INVESTMENTS - EQUITY SECURITIES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Investments, Debt and Equity Securities [Abstract]
Unrealized holding gains on equity securities	$ 480	$ 420	$ 729	$ 387

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summary of Asset and Liabilities Measured at Fair Value (Details) - USD ($)	Jun. 30, 2024	Dec. 31, 2023
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments, equity securities	$ 1,617,000	$ 888,000
Total assets at fair value	1,617,000	888,000
Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments, equity securities	1,617,000	888,000
Total assets at fair value	1,617,000	888,000
Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments, equity securities	0	0
Total assets at fair value	0	0
Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investments, equity securities	0	0
Total assets at fair value	$ 0	$ 0

REVOLVING CREDIT FACILITY AND TERM LOAN (Details) - Revolving Credit Facility - USD ($)		3 Months Ended	6 Months Ended
	Mar. 15, 2024	Jun. 30, 2024	Jun. 30, 2024	Dec. 31, 2015
Line of Credit Facility [Line Items]
Revolving line of credit	$ 80,000,000			$ 60,000,000
Line of credit	$ 25,000,000
Date the credit facility mature	Mar. 31, 2029
Credit Facility, collateral			The Credit Facility is collateralized by substantially all the assets of the Company.
Line of credit		$ 0	$ 0
SOFR
Line of Credit Facility [Line Items]
Basis spread on variable rate (as a percent)		7.82%	9.32%
Base Rate
Line of Credit Facility [Line Items]
Basis spread on variable rate (as a percent)			2.00%

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2024

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 June 30, 2024
	Level 1		Level 2		Level 3		Total
Investments, equity securities	$	1,617	$	—	$	—	$	1,617
Total assets at fair value	$	1,617	$	—	$	—	$	1,617


	Assets at Fair Value as of December 31, 2023
	Level 1		Level 2		Level 3		Total
Investments, equity securities	$	888	$	—	$	—	$	888
Total assets at fair value	$	888	$	—	$	—	$	888

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References + Details

INTANGIBLE ASSETS, NET - Summary of Components of Intangible Assets, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Indefinite-Lived Intangible Assets [Line Items]
Total intangible assets	$ 9,439	$ 1,550
Less: accumulated amortization	(1,477)	(1,334)
Intangible assets, net	7,962	216
Trade Name
Indefinite-Lived Intangible Assets [Line Items]
Total intangible assets	$ 2,081	1,280
Trade Name \| Maximum
Indefinite-Lived Intangible Assets [Line Items]
Useful lives (in years)	15 years
Trade Name \| Minimum
Indefinite-Lived Intangible Assets [Line Items]
Useful lives (in years)	10 years
Developed Technology
Indefinite-Lived Intangible Assets [Line Items]
Total intangible assets	$ 3,468	270
Developed Technology \| Maximum
Indefinite-Lived Intangible Assets [Line Items]
Useful lives (in years)	20 years
Developed Technology \| Minimum
Indefinite-Lived Intangible Assets [Line Items]
Useful lives (in years)	13 years
Customer Relationships
Indefinite-Lived Intangible Assets [Line Items]
Total intangible assets	$ 3,890	$ 0
Useful lives (in years)	20 years

BALANCE SHEET DETAILS - CURRENT ASSETS AND CURRENT LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Inventories, Net

Inventories, net

The following table shows the components of inventory (in thousands):


	June 30, 2024			December 31, 2023
Raw materials	$	11,860		$	5,022
Finished goods		2,874			16
Total inventories		14,734			5,038
Allowance for obsolete inventory		(125	)		(4	)
Inventories, net	$	14,609		$	5,034

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):


	June 30, 2024		December 31, 2023
Prepaid expenses:
Deposits on inventory	$	831	$	2,146
Prepaid income tax		362		362
Prepaid insurance		589		1,110
Prepaid rent		385		372
Prepaid equipment		376		331
Prepaid other		159		214
Other current assets:
Other		—		18
Total	$	2,702	$	4,553

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):


	June 30, 2024			December 31, 2023
Accrued expenses:
Accrued compensation and related benefits	$	3,024		$	4,999
Accrued insurance		317			978
Accrued transaction advisory fees		—			1,000
Accrued professional services		35			189
Accrued interest		251			58
Accrued property taxes		619			60
Accrued monitoring fees		373			373
Other		880			147
Other current liabilities:
Income tax payable	$	2,220		$	1,586
Sales tax payable		(49	)		71
Unbilled lost-in-hole revenue		49			76
Deferred revenue		—			1,042
Total accrued expenses and other current liabilities	$	7,719		$	10,579

EARNINGS PER SHARE - Summary of Company's Potentially Dilutive Securities Excluded - Time-based Options Outstanding (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Time-based Options Outstanding
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	140,135	140,135	140,135	140,135

OTHER EXPENSES, NET (Tables)

6 Months Ended

Jun. 30, 2024

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 June 30, 2024 and 2023 (in thousands):


	Three months ended June 30, 2024			Three months ended June 30, 2023
Transaction fees		(2,019	)		(1,803	)
HHLLC stock-based compensation		—			(2,339	)
Interest income		24			—
Other, net		323			(240	)
Other expense, net	$	(1,672	)	$	(4,382	)

The following table shows the components of other expenses, net for the six months ended June 30, 2024 and 2023 (in thousands):


	Six Months Ended June 30, 2024			Six Months Ended June 30, 2023
Transaction fees		(2,909	)		(3,499	)
HHLLC stock-based compensation		—			(2,339	)
Other, net		35			(245	)
Interest income		76			48
Other expense, net	$	(2,798	)	$	(6,035	)

BUSINESS COMBINATION (Tables)

6 Months Ended

Jun. 30, 2024

Business Combinations [Abstract]

Summary of Preliminary Allocation of the Purchase

The preliminary allocation of the purchase is as follows:


Assets	Preliminary March 15, 2024			Measurement Period Adjustments		As adjusted March 15, 2024
Cash	$	2,674			—	$	2,674
Accounts receivable, net		3,781			—		3,781
Inventories, net		4,282			—		4,282
Prepaid expenses and other current assets		189			—		189
Property, plant and equipment , net		1,647			—		1,647
Operating lease ROU asset		315			—		315
Intangible assets, net		8,065			—		8,065
Goodwill		2,618		526			3,144
Total assets acquired	$	23,571		$	526	$	24,097

Liabilities
Accounts payable		2,656			—		2,656
Accrued expenses and other current liabilities		(295	)		526		231
Current portion of operating lease liabilities		95			—		95
Operating lease liabilities, less current portion		180			—		180
Total liabilities assumed	$	2,636		$	526	$	3,162
Total consideration transferred	$	20,935		$	—	$	20,935

Summary of Identified Intangible Assets, Estimated Useful Lives and Methodologies Used to Determine Fair Values


	Fair value		Useful life (in years)	Fair value methodology
Intangible assets
Trade names	$	819	15	Relief from royalty method
Developed Technology		3,269	20	Relief from royalty method
Customer relationships		3,977	20	Multi-period excess earnings method of the income approach
Total intangible assets	$	8,065

Summary of Unaudited Supplemental Pro Forma Financial Information


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2024		2023		2024		2023
Pro forma revenue	$	37,533	$	47,524	$	77,879	$	92,831
Pro forma net income	$	299	$	2,276	$	2,928	$	8,468

COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2024

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.

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 (refer to Note 11 – Related Parties Transactions).

SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2024

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 16 – SUBSEQUENT EVENTS

Acquisition of Superior Drilling Products, Inc.

On August 1, 2024, the Company announced the closing (the “SDPI Closing”) of the acquisition of Superior Drilling Products, Inc. (“SDPI”) pursuant to the Agreement and Plan of Merger, dated March 6, 2024 (the “Merger Agreement”), by and among the Company, SDPI, DTI Merger Sub I, Inc., a Delaware corporation and direct wholly owned subsidiary of the Company, and Merger DTI Merger Sub II, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Merger Sub II”), pursuant to which Merger Sub I merged with and into SDPI (the “First Merger”), with SDPI surviving as a wholly owned subsidiary of DTI and upon the effective time of the First Merger (the “First Effective Time”), SDPI, as the surviving corporation of the First Merger, merged with and into Merger Sub II (the “Second Merger,” and together with the First Merger, the “Merger”), with Merger Sub II surviving as a wholly owned subsidiary of the Company. In connection with the Closing, the Company issued (i) $14.9 million and (ii) 4,845,132 shares of DTI common stock to former shareholders of SDPI as merger consideration. The initial accounting for this business combination is in process, which includes a valuation analysis to value the assets and liabilities assumed as a result of the transaction. As such, the impact on the consolidated financial statements cannot be estimated at this time.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023
Cash flows from operating activities:
Net income	$ 3,492	$ 6,638
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	11,047	9,732
Amortization of deferred financing costs	139	37
Non-cash lease expense	2,315	2,275
Provision for excess and obsolete inventory	0	19
Provision for excess and obsolete property and equipment	179	238
Provision for credit losses	(16)	418
Deferred tax expense	(400)	2,008
Gain on sale of property	(51)	(68)
Loss on asset disposal	9	0
Unrealized loss on interest rate swap	0	91
Unrealized gain on equity securities	(729)	(387)
Gross profit from sale of lost-in-hole equipment	(4,987)	(9,146)
Stock-based compensation expense	1,064	3,986
Changes in operating assets and liabilities:
Accounts receivable, net	(1,449)	(1,777)
Prepaid expenses and other current assets	1,958	(1,531)
Inventories, net	(49)	1,409
Operating lease liabilities	(2,226)	(2,179)
Accounts payable	(2,158)	1,982
Accrued expenses and other current liabilities	(3,745)	316
Net cash flows from operating activities	4,391	14,061
Cash flows from investing activities:
Acquisition of a business, net of cash acquired	(18,261)	0
Proceeds from sale of property and equipment	59	126
Purchase of property, plant and equipment	(16,312)	(24,617)
Proceeds from sale of lost-in-hole equipment	7,786	11,103
Net cash from investing activities	(26,728)	(13,388)
Cash flows from financing activities:
Proceeds from Merger and PIPE Financing, net of transaction costs	0	23,162
Payment of deferred financing costs	(672)	(281)
Proceeds from revolving line of credit	1,469	71,646
Payments on revolving line of credit	(1,469)	(89,995)
Proceeds from Term Loan	25,000	0
Repayment of Term Loan	(833)	0
Payments to holders of DTIH redeemable convertible preferred stock in connection with retiring their DTI stock upon the Merger	0	(194)
Net cash from financing activities	23,495	4,338
Effect of changes in foreign exchange rates	(377)	(207)
Net change in cash	781	4,804
Cash at beginning of period	6,003	2,352
Cash at end of period	6,784	7,156
Supplemental cash flow information:
Cash paid for interest	660	851
Cash paid for income taxes	256	2,139
Non-cash investing and financing activities:
Fair value of CTG liabilities assumed in CTG Acquisition	3,162	0
ROU assets obtained in exchange for operating lease liabilities	5,054	2,635
Net exercise of stock options	255	0
Shares withheld from exercise of stock options for payment of taxes	35	0
Purchases of inventory included in accounts payable and accrued expenses and other current liabilities	5,082	4,076
Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities	1,402	7,640
Deferred financing fees included in accounts payable	49	2
Non-cash directors and officers insurance	0	1,472
Non-cash Merger financing	0	2,000
Exchange of DTIH redeemable convertible preferred stock for DTIC Common Stock in connection with Merger	0	7,193
Issuance of DTIC common stock to former holders of DTIH redeemable convertible preferred stock in connection with Exchange Agreements	0	10,805
Accretion of redeemable convertible preferred stock to redemption value	$ 0	$ 314

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2024	Dec. 31, 2023
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	29,859,564	29,768,568
Common stock, shares outstanding	29,859,564	29,768,568

RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2024

RELATED PARTY TRANSACTIONS

NOTE 11 – RELATED PARTY TRANSACTIONS

Management fees

For the three months ended June 30, 2024 and 2023, management fees paid to Hicks Holdings Operating LLC ("HHLLC"), a shareholder of the Company, were approximately $0.2 million and $0.3 million, respectively. For the six months ended June 30, 2024 and 2023, management fees paid to Hicks Holdings Operating LLC were approximately $0.4 million and $0.5 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.

Director fees

Director fees For the three months ended June 30, 2024 and 2023, director fees paid to Board were approximately $0.2 million and $0.1 million , respectively. Director fees For the six months ended June 30, 2024 and 2023, director fees paid to Board members were approximately $0.3 million and $0.1 million, respectively. Director fees 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 June 30, 2024 and 2023, the Company paid rent 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 six months ended June 30, 2024 and 2023, the Company paid rent expense to Cree Investments, LLC of approximately $26 thousand and $26 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.

Promissory Notes

Upon consummation of the Merger, 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. 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, 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
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-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
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-URI https://asc.fasb.org/1943274/2147480990/946-20-50-6

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
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-Section 50
-Paragraph 2
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-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477968/946-235-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Section 50
-Paragraph 2
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477968/946-235-50-2

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
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-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))
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-URI https://asc.fasb.org/1943274/2147479134/946-220-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))
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-URI https://asc.fasb.org/1943274/2147479134/946-220-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
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-Name Accounting Standards Codification
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-Paragraph 1
-Subparagraph (SX 210.6-07(2)(e))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479134/946-220-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

INCOME TAXES

6 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 8 – INCOME TAXES

The Company recorded an income tax benefit and expense on the unaudited condensed consolidated statements of income and comprehensive income of $0.1 million and $1.4 million for the three months ended June 30, 2024 and 2023, respectively. The Company recorded income tax expense on the unaudited condensed consolidated statements of income and comprehensive income of $0.9 million and $3.1 million for the six months ended June 30, 2024 and 2023, respectively.

The income tax expense for the six months ended June 30, 2024 was calculated using a discrete approach. This methodology was used because changes in the Company's results of operations and acquisitions can materially impact the estimated annual effective tax rate. The Company’s effective tax rate for the six months ended June 30, 2024 and 2023 were provisions of 19.6% and 31.8%, respectively. Such rates differed from the Federal Statutory rate of 21.0% primarily due to the state taxes, foreign income taxes on the Company’s international operations, and permanent differences.

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 six months ended June 30, 2024 and 2023.

The Company is still evaluating the tax impact of the CTG Acquisition, including the impact of the transaction costs. Additionally, the Company continues to evaluate the deferred tax assets and liabilities and corresponding valuation allowance in connection with the CTG Acquisition.

- Definition

The entire disclosure for income tax.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-12

Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Topic 740
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-Name Accounting Standards Codification
-Section 55
-Paragraph 231
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
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-Name Accounting Standards Codification
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-URI https://asc.fasb.org/1943274/2147482685/740-10-50-12C

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
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-Name Accounting Standards Codification
-Section S99
-Paragraph 1
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
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-Section 50
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-Publisher FASB
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
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-Subparagraph (SX 210.4-08(h)(2))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480678/235-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org/740/tableOfContent

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-14

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 21
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-21

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
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-Section 50
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-URI https://asc.fasb.org/1943274/2147482685/740-10-50-17

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
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-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479360/740-10-S99-2

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482603/740-30-50-2

+ Details

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Assets, Current [Abstract]
Cash	$ 6,784	$ 6,003
Accounts receivable, net	35,122	29,929
Inventories, net	14,609	5,034
Prepaid expenses and other current assets	2,702	4,553
Investments - equity securities, at fair value	1,617	888
Total current assets	60,834	46,408
Property, plant and equipment, net	71,223	65,800
Operating lease right-of-use assets	21,827	18,786
Intangible assets, net	7,962	216
Goodwill	3,076	0
Deferred financing costs, net	991	409
Deposits and other long-term assets	961	879
Total assets	166,874	132,498
Current liabilities
Accounts payable	14,014	7,751
Accrued expenses and other current liabilities	7,719	10,579
Current portion of operating lease liabilities	4,133	3,958
Current maturities of long-term debt	5,000	0
Total current liabilities	30,866	22,288
Operating lease liabilities, less current portion	17,814	14,893
Long-term debt	19,167	0
Deferred tax liabilities, net	6,227	6,627
Total liabilities	74,074	43,808
Commitments and contingencies (See Note 14)
Shareholders' equity
Common stock, $0.0001 par value, shares authorized 500,000,000 as of June 30, 2024 and December 31, 2023, 29,859,564 shares issued and outstanding as of June 30, 2024 and 29,768,568 shares issued and outstanding as of December 31, 2023	3	3
Additional paid-in-capital	96,536	95,218
Accumulated deficit	(3,105)	(6,306)
Accumulated other comprehensive loss	(634)	(225)
Total shareholders' equity	92,800	88,690
Total liabilities and shareholders' equity	$ 166,874	$ 132,498

INTANGIBLE ASSETS, NET (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
INTANGIBLE ASSETS, NET (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Indefinite-Lived Intangible Assets [Line Items]
Amortization expense	$ 112	$ 12	$ 143	$ 24

RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Jun. 20, 2023	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Mar. 02, 2023	Dec. 06, 2022
Related Party Transaction [Line Items]
Working capital loan amount	$ 400
PIPE Financing
Related Party Transaction [Line Items]
Payoff convertible promissory notes issued						$ 2,100	$ 2,100
Board of Directors
Related Party Transaction [Line Items]
Director fees paid		$ 200	$ 100	$ 300	$ 100
Hicks Holdings Operating LLC
Related Party Transaction [Line Items]
Management fees paid to shareholder		200	300	400	500
Cree Investments, LLC
Related Party Transaction [Line Items]
Rent paid to shareholder		$ 13	$ 13	$ 26	$ 26

BALANCE SHEET DETAILS - CURRENT ASSETS AND CURRENT LIABILITIES - Summary of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Accrued expenses:
Accrued compensation and related benefits	$ 3,024	$ 4,999
Accrued insurance	317	978
Accrued transaction advisory fees	0	1,000
Accrued professional services	35	189
Accrued interest	251	58
Accrued property taxes	619	60
Accrued monitoring fees	373	373
Other	880	147
Other current liabilities:
Income tax payable	2,220	1,586
Sales tax payable	(49)	71
Unbilled lost-in-hole revenue	49	76
Deferred revenue	0	1,042
Total accrued expenses and other current liabilities	$ 7,719	$ 10,579

BALANCE SHEET DETAILS - CURRENT ASSETS AND CURRENT LIABILITIES

6 Months Ended

Jun. 30, 2024

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):


	June 30, 2024			December 31, 2023
Raw materials	$	11,860		$	5,022
Finished goods		2,874			16
Total inventories		14,734			5,038
Allowance for obsolete inventory		(125	)		(4	)
Inventories, net	$	14,609		$	5,034

Prepaid expenses and other current assets

The following table shows the components of prepaid expenses and other current assets (in thousands):


	June 30, 2024		December 31, 2023
Prepaid expenses:
Deposits on inventory	$	831	$	2,146
Prepaid income tax		362		362
Prepaid insurance		589		1,110
Prepaid rent		385		372
Prepaid equipment		376		331
Prepaid other		159		214
Other current assets:
Other		—		18
Total	$	2,702	$	4,553

Accrued expenses and other current liabilities

The following table shows the components of accrued expenses and other current liabilities (in thousands):


	June 30, 2024			December 31, 2023
Accrued expenses:
Accrued compensation and related benefits	$	3,024		$	4,999
Accrued insurance		317			978
Accrued transaction advisory fees		—			1,000
Accrued professional services		35			189
Accrued interest		251			58
Accrued property taxes		619			60
Accrued monitoring fees		373			373
Other		880			147
Other current liabilities:
Income tax payable	$	2,220		$	1,586
Sales tax payable		(49	)		71
Unbilled lost-in-hole revenue		49			76
Deferred revenue		—			1,042
Total accrued expenses and other current liabilities	$	7,719		$	10,579

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2024

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations

Basis of Presentation

Unaudited Interim Financial Information

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. Revenue from tool rental services are accounted for in accordance with Topic 842.

The Company does not generally provide an option for the lessee to purchase the rented equipment at the end of the lease.

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 Credit Losses

As of June 30, 2024 and December 31, 2023, the allowance for credit losses totaled $1.3 million and $1.5 million, respectively.

Business Combinations

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

Goodwill

Accounting for Impairment of Long-lived Assets

Investments - Equity Securities

Redeemable Convertible Preferred Stock

consolidated balance sheets as it was redeemable on a fixed date.

Preferred Stock

The Board has not issued any shares of any classes or series of preferred stock as of June 30, 2024, and through the date these financial statements were available to be issued.

Cost of Revenue

Stock-Based Compensation

Earnings Per Share

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

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

Derivative Financial Instruments

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 June 30, 2024
	Level 1		Level 2		Level 3		Total
Investments, equity securities	$	1,617	$	—	$	—	$	1,617
Total assets at fair value	$	1,617	$	—	$	—	$	1,617


	Assets at Fair Value as of December 31, 2023
	Level 1		Level 2		Level 3		Total
Investments, equity securities	$	888	$	—	$	—	$	888
Total assets at fair value	$	888	$	—	$	—	$	888

As of June 30, 2024 and December 31, 2023, the Company did not have any Level 2 or 3 assets or liabilities.

Fair Value of Financial Instruments

Concentration of Credit Risk and Other Risks and Uncertainties

Operating Segment

Accounting Standards Issued But Not Yet Effective

EMPLOYEE BENEFITS

6 Months Ended

Jun. 30, 2024

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 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 June 30, 2024 and 2023 was approximately $0.2 million and $0.2 million, respectively. The total expense for the six months ended June 30, 2024 and 2023 was approximately $0.4 million and $0.4 million, respectively.

BALANCE SHEET DETAILS - CURRENT ASSETS AND CURRENT LIABILITIES - Summary of Inventories, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Inventory, Net [Abstract]
Raw materials	$ 11,860	$ 5,022
Finished goods	2,874	16
Total inventories	14,734	5,038
Allowance for obsolete inventory	(125)	(4)
Inventories, net	$ 14,609	$ 5,034

PROPERTY, PLANT AND EQUIPMENT, NET - Summary of Component of Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	$ 208,190	$ 198,803
Less: accumulated deprecation	(136,976)	(133,003)
Property, plant and equipment, net (excluding construction in progress)	71,214	65,800
Construction in progress	9	0
Property, plant and equipment, net	71,223	65,800
Rental Tools and Equipment
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	$ 198,349	188,949
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	$ 6,739	6,672
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	$ 2,356	2,389
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	$ 746	$ 793
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

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Jun. 30, 2024	Mar. 31, 2024	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2024	Jun. 30, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ 365	$ 3,126	$ 937	$ 5,701	$ 3,492	$ 6,638

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483443/250-10-50-6

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
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-URI https://asc.fasb.org/1943274/2147483443/250-10-50-9

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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Reference 8: 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
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

INTANGIBLE ASSETS, NET (Tables)

6 Months Ended

Jun. 30, 2024

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)	June 30, 2024			December 31, 2023
Trade name	10-15	$	2,081		$	1,280
Developed Technology	13-20		3,468			270
Customer Relationships	20		3,890			—
Total intangible assets			9,439			1,550
Less: accumulated amortization			(1,477	)		(1,334	)
Intangible assets, net		$	7,962		$	216

EMPLOYEE BENEFITS (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
EMPLOYEE BENEFITS (Details) - USD ($)	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	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	$ 200,000	$ 200,000	$ 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 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.

LEASES - Summary of Components of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Lease, Cost [Abstract]
Operating Lease Cost	$ 1,588	$ 1,532	$ 3,041	$ 3,050
Short-term Lease Cost	35	33	70	63
Variable Lease Cost	74	81	162	165
Sublease Income	0	(30)	0	(76)
Total Lease Cost	$ 1,697	$ 1,616	$ 3,273	$ 3,202

LEASES

6 Months Ended

Jun. 30, 2024

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 June 30, 2024.

For the three and six months ended June 30, 2024, the components of the Company’s lease expense were as follows (in thousands):


	Three months ended June 30. 2024		Three months ended June 30. 2023
Operating Lease Cost	$	1,588	$	1,532
Short-term Lease Cost		35		33
Variable Lease Cost		74		81
Sublease Income		—		(30	)
Total Lease Cost	$	1,697	$	1,616


	Six months ended June 30, 2024		Six months ended June 30, 2023
Operating Lease Cost	$	3,041	$	3,050
Short-term Lease Cost		70		63
Variable Lease Cost		162		165
Sublease Income		—		(76	)
Total Lease Cost	$	3,273	$	3,202

Supplemental balance sheet information related to leases was as follows (in thousands):


	Six months ended June 30, 2024

Weighted-average remaining lease term (in years)		7.19
Weighted average discount rate		7.35	%


	Six months ended
	June 30, 2024
Cash paid for amounts included in the measurement of lease liabilities		2,981

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 June 30, 2024 were as follows (in thousands):



2024	$	2,874
2025		5,007
2026		4,477
2027		3,263
2028		2,686
Thereafter		9,636
Total lease payments	$	27,943
Less: imputed interest		(5,996	)
Present value of lease liabilities	$	21,947

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 six months ended June 30, 2024, tool rental revenue was approximately $28.3 million and $58.3 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 (Details) $ in Millions	3 Months Ended	6 Months Ended
LEASES (Details) $ in Millions	Jun. 30, 2024 USD ($)	Jun. 30, 2024 USD ($)
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	$ 28.3	$ 58.3
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

BUSINESS COMBINATION (Details) $ in Thousands, £ in Millions			3 Months Ended		4 Months Ended	6 Months Ended
	Mar. 15, 2024 GBP (£) Patent	Mar. 15, 2024 USD ($) Patent	Jun. 30, 2024 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2024 USD ($)	Jun. 30, 2024 USD ($)	Jun. 30, 2023 USD ($)
Business Acquisition [Line Items]
Acquisition-related costs						$ 300
Revenue			$ 37,533	$ 37,908		74,507	$ 78,707
Net income			365	$ 937		$ 3,492	$ 6,638
Casing Technologies Group Limited
Business Acquisition [Line Items]
Total measurement period adjustments related to assumed accrued liabilities			$ 500
Revenue					$ 4,800
Net income					$ 700
Casing Technologies Group Limited \| CTG Purchase Agreement
Business Acquisition [Line Items]
Business acquisition percentage	100.00%	100.00%
Gross cash purchase consideration	£ 16.2	$ 20,900
Number of intellectual property rights patent \| Patent	60	60
Casing Technologies Group Limited \| Deep Casing
Business Acquisition [Line Items]
Gross cash purchase consideration	£ 16.2	$ 20,900
Settlement of outstanding debt	(15.3)	(19,800)
Payment to legacy shareholders	0.3	300
Acquisition-related costs	£ 0.6	$ 800

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				6 Months Ended
	Jun. 30, 2024	Mar. 31, 2024	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2024	Jun. 30, 2023
Numerator:
Net Income (Loss)	$ 365	$ 3,126	$ 937	$ 5,701	$ 3,492	$ 6,638
Less: Redeemable Convertible Preferred Stock dividends	0		0		0	(314)
Net income available to common shareholders	365		937		3,492	6,324
Add: Redeemable Convertible Preferred Stock dividends	0		0		0	314
Net income attributable to common shareholders - diluted	$ 365		$ 937		$ 3,492	$ 6,638
Denominator
Weighted-average common shares used in computing earnings per share - basic	29,816,202		13,910,670		29,792,385	12,936,310
Weighted-average effect of potentially dilutive securities:
Effect of potentially dilutive redeemable convertible preferred stock	0		5,981,219		0	6,350,430
Weighted-average common shares outstanding - diluted	30,873,436		20,746,976		30,321,002	20,217,648
Earnings per share - basic	$ 0.01		$ 0.07		$ 0.12	$ 0.49
Earnings per share - diluted	$ 0.01		$ 0.05		$ 0.12	$ 0.33
Time-based Stock Options
Weighted-average effect of potentially dilutive securities:
Effect of potentially dilutive stock options	873,348		744,573		436,674	875,651
Performance-based Stock Options
Weighted-average effect of potentially dilutive securities:
Effect of potentially dilutive stock options	164,132		110,514		82,066	55,257
Restricted Stock Units
Weighted-average effect of potentially dilutive securities:
Effect of potentially dilutive stock options	19,754		0		9,877	0

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) £ in Millions			3 Months Ended		4 Months Ended	6 Months Ended
	Mar. 15, 2024 GBP (£)	Mar. 15, 2024 USD ($)	Jun. 30, 2024 USD ($) shares	Jun. 30, 2023 USD ($)	Jun. 30, 2024 USD ($) shares	Jun. 30, 2024 USD ($) Segment shares	Jun. 30, 2023 USD ($)	Dec. 31, 2023 USD ($) shares
Accounting Policies [Line Items]
Unrealized foreign currency gain loss			$ (24,000)	$ (200,000)		$ 4,700	$ (200,000)
Cash equivalents			0		$ 0	0		$ 0
Revenue			37,533,000	37,908,000		74,507,000	78,707,000
Contract assets			3,800,000		3,800,000	3,800,000		4,200,000
Contract liabilities			0		0	0		0
Allowance for credit losses			$ 1,300,000		$ 1,300,000	$ 1,300,000		1,500,000
Preferred stock, shares issued \| shares
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		0
Unrecognized tax benefits accrued for interest and penalties			0	$ 0	0	0	$ 0
Assets fair value			$ 1,617,000		$ 1,617,000	$ 1,617,000		$ 888,000
Redeemable Convertible Preferred Stock
Accounting Policies [Line Items]
Redeemable convertible preferred stock, shares outstanding \| shares			0		0	0		0
Customer Concentration Risk \| Sales Revenue \| Two Customers
Accounting Policies [Line Items]
Concentration risk percentage			25.00%	29.00%		27.00%	30.00%
Customer Concentration Risk \| Vendor Purchases \| No Vendors
Accounting Policies [Line Items]
Concentration risk percentage			10.00%			10.00%
Customer Concentration Risk \| Vendor Purchases \| One Vendor
Accounting Policies [Line Items]
Concentration risk percentage							10.00%
Customer Concentration Risk \| Vendor Purchases \| Two Vendors
Accounting Policies [Line Items]
Concentration risk percentage				25.00%
Customer Concentration Risk \| Accounts Receivable
Accounting Policies [Line Items]
Receivables from customers			$ 5,700,000		$ 5,700,000	$ 5,700,000		$ 9,300,000
Customer Concentration Risk \| Accounts Payable
Accounting Policies [Line Items]
Amounts due from vendors								4,500
Interest Rate Swap
Accounting Policies [Line Items]
Unrealized gain (loss) due to change in fair value				$ 13,000			$ 100,000
Interest swap agreement settlement date						Jul. 10, 2023
Level 3
Accounting Policies [Line Items]
Assets fair value			0		0	$ 0		0
Liabilities fair value			0		0	0		$ 0
CTG
Accounting Policies [Line Items]
Business acquisition percentage	100.00%	100.00%
Casing Technologies Group Limited
Accounting Policies [Line Items]
Revenue					$ 4,800,000
Casing Technologies Group Limited \| Deep Casing Tools Limited
Accounting Policies [Line Items]
Purchase consideration	£ 16.2	$ 20,900,000
United States
Accounting Policies [Line Items]
Revenue			$ 30,500,000	$ 35,100,000		$ 62,800,000	$ 71,600,000
Percentage of revenue			81.00%	92.00%		84.00%	91.00%
International
Accounting Policies [Line Items]
Revenue			$ 7,000,000	$ 2,900,000		$ 11,700,000	$ 7,100,000
Percentage of revenue			19.00%	8.00%		16.00%	9.00%

STOCK-BASED COMPENSATION (Details) $ in Millions		1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
STOCK-BASED COMPENSATION (Details) $ in Millions	Jun. 20, 2023 shares	May 31, 2024 Director shares	Jun. 30, 2024 USD ($) shares	Jun. 30, 2023 USD ($) shares	Jun. 30, 2024 USD ($) shares	Jun. 30, 2023 USD ($) shares	Dec. 31, 2023 shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of directors \| Director		5
Stock options granted				0	2,600,000	0
Number of options exercised				0	68,470	0
Number of options forfeited				0	0	0
Share-based compensation arrangement by share-based payment award, options, outstanding, number			4,893,252		4,893,252		2,361,722
Selling, General, and Administrative Expenses
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-Based Payment Arrangement, Expense \| $				$ 1.7	$ 0.6	$ 1.7
Other Expense
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-Based Payment Arrangement, Expense \| $				$ 2.3		$ 2.3
Performance-based Stock Options
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of accelerated vesting stock options				534,063		534,063
Number of stock options vested	534,063
Employee Stock Option
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unrecognized compensation expense \| $					4.0
Employee Stock Option \| Selling, General, and Administrative Expenses
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-Based Payment Arrangement, Expense \| $			$ 0.4
Restricted Stock Units
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unrecognized compensation expense \| $					0.3
Number of restricted stock units deemed to be related to services performed vested							74,440
Remaining restricted stock units		68,560
Restricted stock units issued		143,000
Vesting term		1 year
Restricted Stock Units \| Selling, General, and Administrative Expenses
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-Based Payment Arrangement, Expense \| $			$ 0.4		$ 0.4
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%
Shares of common stock available for issuance			1,126,910		1,126,910

LEASES (Tables)

6 Months Ended

Jun. 30, 2024

Leases [Abstract]

Summary of Components of Lease Expense

For the three and six months ended June 30, 2024, the components of the Company’s lease expense were as follows (in thousands):


	Three months ended June 30. 2024		Three months ended June 30. 2023
Operating Lease Cost	$	1,588	$	1,532
Short-term Lease Cost		35		33
Variable Lease Cost		74		81
Sublease Income		—		(30	)
Total Lease Cost	$	1,697	$	1,616


	Six months ended June 30, 2024		Six months ended June 30, 2023
Operating Lease Cost	$	3,041	$	3,050
Short-term Lease Cost		70		63
Variable Lease Cost		162		165
Sublease Income		—		(76	)
Total Lease Cost	$	3,273	$	3,202

Summary of Supplemental Balance Sheet Information Related to Leases

Supplemental balance sheet information related to leases was as follows (in thousands):


	Six months ended June 30, 2024

Weighted-average remaining lease term (in years)		7.19
Weighted average discount rate		7.35	%


	Six months ended
	June 30, 2024
Cash paid for amounts included in the measurement of lease liabilities		2,981

Summary of Future Undiscounted Cash Flows



2024	$	2,874
2025		5,007
2026		4,477
2027		3,263
2028		2,686
Thereafter		9,636
Total lease payments	$	27,943
Less: imputed interest		(5,996	)
Present value of lease liabilities	$	21,947

BALANCE SHEET DETAILS - CURRENT ASSETS AND CURRENT LIABILITIES - Summary of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Prepaid expenses:
Deposits on inventory	$ 831	$ 2,146
Prepaid income tax	362	362
Prepaid insurance	589	1,110
Prepaid rent	385	372
Prepaid equipment	376	331
Prepaid other	159	214
Other current assets:
Other	0	18
Total	$ 2,702	$ 4,553