UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM
(Mark One)
For
the Quarterly Period Ended
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(IRS
Employer Identification No ) |
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Securities Registered Pursuant to Section 12(b) of the Exchange Act:
| Title of each class: | Trading Symbol(s) | Name of each exchange on which registered: | ||
Securities Registered Pursuant to Section 12(g) of the Exchange Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, during the preceding 12 months (or such shorter period that the Registrant was required to file such report(s)), and (2) has been subject to such filing requirements for the past 90 days.
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There were shares of common stock, $0.001 par value, issued and outstanding as of November 12, 2021.
Superior Drilling Products, Inc.
FORM 10-Q
QUARTER ENDED September 30, 2021
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION.
Item 1. Financial Statements
Superior Drilling Products, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| September 30, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses | ||||||||
| Inventories | ||||||||
| Asset held for sale | - | |||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Right of use assets | ||||||||
| Other noncurrent assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Income tax payable | ||||||||
| Current portion of operating lease liability | ||||||||
| Current portion of financial obligation | ||||||||
| Current portion of long-term debt, net of discounts | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability | ||||||||
| Long-term financial obligation, less current portion | ||||||||
| Long-term debt, less current portion, net of discounts | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 11) | ||||||||
| Shareholders’ equity | ||||||||
| Common stock - $ par value; shares authorized; and shares issued and outstanding | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
| 3 |
Superior Drilling Products, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| For the Three Months | For the Nine Months | |||||||||||||||
| Ended September 30, | Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | ||||||||||||||||
| Tool revenue | $ | $ | $ | $ | ||||||||||||
| Contract services | ||||||||||||||||
| Total Revenue | ||||||||||||||||
| Operating costs and expenses | ||||||||||||||||
| Cost of revenue | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Depreciation and amortization expense | ||||||||||||||||
| Total operating costs and expenses | ||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Impairment on asset held for sale | - | - | - | ( | ) | |||||||||||
| Loan forgiveness | - | - | ||||||||||||||
| Gain (loss) on disposition of assets, net | - | - | ( | ) | ||||||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic loss earnings per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic weighted average common shares outstanding | ||||||||||||||||
| Diluted loss per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted weighted average common shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
| 4 |
Superior Drilling Products, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)
| Common Stock | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Par Value | Capital | Deficit | Equity | ||||||||||||||||
| Balance - December 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance – March 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance – June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance – September 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
Balance - December 31, 2019 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance – March 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance – June 30, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance – September 30, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
Superior Drilling Products, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the Nine Months | ||||||||
| Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash from operating activities: | ||||||||
| Depreciation and amortization expense | ||||||||
| Stock-based compensation expense | ||||||||
| Impairment on asset held for sale | - | |||||||
| (Gain) loss on disposition of assets, net | ( | ) | ||||||
| Gain on forgiveness of loan | - | ( | ) | |||||
| Amortization of deferred loan costs | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses and other noncurrent assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Income tax payable | ( | ) | ||||||
| Other long-term liabilities | - | ( | ) | |||||
| Net Cash From Operating Activities | ||||||||
| Cash Flows From Investing Activities | ||||||||
| Purchases of property, plant and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of fixed assets | ||||||||
| Net Cash From Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Principal payments on debt | ( | ) | ( | ) | ||||
| Proceeds received from debt borrowings | - | |||||||
| Payments on revolving loan | ( | ) | ( | ) | ||||
| Proceeds received on revolving loan | ||||||||
| Net Cash From Financing Activities | ( | ) | ( | ) | ||||
| Net Change in Cash | ||||||||
| Cash at Beginning of Period | ||||||||
| Cash at End of Period | $ | $ | ||||||
| Supplemental information: | ||||||||
| Cash paid for Interest | $ | $ | ||||||
| Inventory converted to property, plant and equipment | $ | $ | ||||||
| Reduction of debt with sale of asset | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
| 6 |
Superior Drilling Products, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2021
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
Superior Drilling Products, Inc. (the “Company”, “SDPI”, “we”, “our” or “us”) is an innovative drilling and tool technology company providing cost saving solutions that drive production efficiencies for the oil and natural gas drilling industry. Our headquarters and manufacturing operations are located in Vernal, Utah. Our drilling solutions include the patented Drill-N-Ream® well bore conditioning tool (“Drill-N-Ream tool”) and the patented Strider™ Drill String Oscillation System technology (“Strider technology” or “Strider”). In addition, the Company is a manufacturer and refurbisher of PDC (polycrystalline diamond compact) drill bits and other tools for a leading oil field services company and other customers including other oil field service companies and operators. We operate a state-of-the-art drill tool fabrication facility, where we manufacture solutions for the drilling industry, as well as customers’ custom products for other applications.
Our subsidiaries include (a) Superior Drilling Solutions, LLC (previously known as Superior Drilling Products, LLC), a Utah limited liability company (“SDS”), together with its wholly owned subsidiary Superior Design and Fabrication, LLC, a Utah limited liability company (“SDF”), (b) Extreme Technologies, LLC, a Utah limited liability company (“ET”), (c) Meier Properties Series, LLC, a Utah limited liability company (“MPS”), (d) Meier Leasing, LLC, a Utah limited liability company (“ML”), and (e) Hard Rock Solutions, LLC (“HR” or “Hard Rock”).
Basis of Presentation
The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the accounts of Superior Drilling Products Inc. and all of its wholly-owned subsidiaries. All significant intercompany accounts have been eliminated in consolidation. The Company does not have investments in any unconsolidated subsidiaries.
Unaudited Interim Financial Presentation
These interim consolidated condensed financial statements for the three and nine months ended September 30, 2021 and 2020, and the related footnote disclosures included herein, are unaudited. However, in the opinion of management, these unaudited interim financial statements have been prepared on the same basis as the audited financial statements, and reflect all adjustments necessary to fairly state the results for such periods. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results of operations expected for the year ended December 31, 2021. These interim consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the years ended December 31, 2020 and 2019 and the notes thereto, which were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. Significant items subject to estimates and assumptions include the carrying amount and useful lives of property and equipment and intangible assets, impairment assessments, share-based compensation expense, and valuation allowances for accounts receivable, inventories, and deferred tax assets.
| 7 |
Concentrations of Credit Risk
The
Company has two significant customers that represented
The
Company had two vendors that represented
Impact of COVID-19
The COVID-19 pandemic has impacted and may further impact the Company’s operations, and the operations of the Company’s suppliers and vendors, as a result of quarantines, facility closures, and travel and logistics restrictions. The extent to which the COVID-19 pandemic will continue to impact the Company’s business, financial condition and results of operations will depend on future developments, which are highly uncertain and depend on, among other things, the duration, spread, severity, and impact of the COVID-19 pandemic and the success and speed of vaccination efforts both in the United States and globally, the effects of the COVID-19 pandemic on the Company’s customers, suppliers, and vendors and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and operating conditions can resume. Therefore, the Company cannot reasonably estimate future impacts of the COVID-19 pandemic at this time.
Uncertain Tax Matters
The Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes ultimately expected to be paid; however, these liabilities may need to be adjusted as new information becomes known and as tax examinations continue to progress, or as settlements or litigations occur.
Reclassifications
Certain prior year amounts have been reclassified to the balance sheet to conform to the current year presentation. The reclassifications were within accounts payable and income tax payable and did not impact net income.
Recent Accounting Pronouncements
There are no recently issued accounting pronouncements that we have not yet adopted that we believe will have a material effect on our financial statements.
Income Tax Expense
The
Company recorded income tax expense during the quarter of $
| 8 |
NOTE 2. LIQUIDITY
We believe that our cash on hand, cash generated from operations and our borrowing capacity under our current credit facility will be sufficient to fund our operations for the next 12 months. To enhance liquidity, our operational and financial strategies include managing our operating costs, accelerating collections of international receivables, and reducing working capital requirements. If we are unable to do this, we may not be able to, among other things, (i) maintain our revised general and administrative spending levels; (ii) fund certain obligations as they become due; and (iii) respond to competitive pressures or unanticipated capital requirements. We cannot provide any assurance that financing will be available to us in the future on acceptable terms, if at all.
In
2020, the Company filed a Form S-3 Shelf Registration that will allow the Company to offer and sell, from time to time, up to $
Also
in 2020, the Company received notification from the NYSE American to the Company indicating that, as a result of the Company’s
stockholders’ equity of $
NYSE American Regulations staff will review the Company periodically for compliance with the initiatives outlined in the plan. If the Company does not make progress consistent with the plan during the plan period, NYSE Regulation staff may initiate delisting proceedings as appropriate. The Company’s first quarterly plan update was submitted to the NYSE American in April 2021 and was subsequently approved by the NYSE compliance committee on May 21, 2021. On August 16, 2021, the Company submitted its second quarterly plan update which was approved by the NYSE on September 10, 2021.
NOTE 3. REVENUE
Our revenue is derived from short-term contracts. Revenue is recognized when we satisfy a performance obligation by transferring control of the promised goods or services to our customers at a point in time, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. We also assess our customer’s ability and intention to pay, which is based on a variety of factors including our customer’s historical payment experience and financial condition. Payment terms and conditions vary, although terms generally include a requirement of payment within 30 days.
Revenue generally does not include right of return or other significant post-delivery obligations. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. We elected to treat shipping and handling costs as a fulfillment cost instead of as a separate performance obligation. We recognize the cost for shipping and handling when incurred as an expense in cost of sales.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer under Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts with customers contain a single performance obligation to provide agreed-upon products or services. For contracts with multiple performance obligations, we allocate revenue to each performance obligation based on its relative standalone selling price. In accordance with Topic 606, we do not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer.
| 9 |
Disaggregation of Revenue
Approximately
Revenue disaggregated by revenue source are as follows:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Tool Revenue: | ||||||||||||||||
| Tool and product sales | $ | $ | ||||||||||||||
| Tool rental | ||||||||||||||||
| Other related revenue | ||||||||||||||||
| Total Tool Revenue | ||||||||||||||||
| Contract Services | ||||||||||||||||
| Total Revenue | $ | $ | $ | $ | ||||||||||||
Contract Costs
We do not incur any material costs of obtaining contracts.
Contract Balances
Under our sales contracts, we invoice customers after our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our contracts do not give rise to contract assets or liabilities under Topic 606.
| 10 |
NOTE 4. INVENTORIES
Inventories are comprised of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| Raw material | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| $ | $ | |||||||
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| Land | $ | $ | ||||||
| Buildings | ||||||||
| Building improvements | ||||||||
| Machinery and equipment | ||||||||
| Office equipment, fixtures and software | ||||||||
| Transportation assets | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
The
Company sold its airplane for a gain of approximately $
Depreciation
expense related to property, plant and equipment for the three and nine months ended September 30, 2021 was $
NOTE 6. INTANGIBLE ASSETS
Intangible assets are comprised of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| Developed technology | $ | $ | ||||||
| Customer contracts | ||||||||
| Trademarks | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Amortization
expense related to intangible assets for the three and nine months ended September 30, 2021 was $
NOTE 7. RELATED PARTY NOTE RECEIVABLE
In
January 2014, we entered into a Note Purchase and Sale Agreement under which we agreed to purchase a loan made to Tronco Energy Corporation
(“Tronco”), a party related to us through common control, in order to take over the legal position as Tronco’ s senior
secured lender. Tronco is an entity owned by Troy and Annette Meier. Effective August 2017, the Company fully reserved the related party
note receivable of $
| 11 |
NOTE 8. LONG-TERM DEBT
Long-term debt is comprised of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| Hard Rock Note | $ | $ | ||||||
| Credit Agreement | ||||||||
| Machinery loans | ||||||||
| Transportation loans | ||||||||
| Less: | ||||||||
| Current portion | ( | ) | ( | ) | ||||
| Long-term debt, net | $ | $ | ||||||
Hard Rock Note
In
2014, the Company purchased all of the interests of Hard Rock Solutions, LLC (“Hard Rock”). Consideration consisted of $
The
Hard Rock Note has a remaining balance of $
| 12 |
Credit Agreement
In
February 2019, the Company entered into a Loan and Security Agreement (the “Credit Agreement”) with Austin Financial Services,
Inc. (“AFS”). The Credit Agreement provides a $
The Credit Agreement contains various restrictive covenants that, among other things, limit or restrict the ability of the Company to incur additional indebtedness; incur additional liens; make dividends and other restricted payments; make investments; engage in mergers, acquisitions and dispositions; make optional prepayments of other indebtedness; engage in transactions with affiliates; and enter into restrictive agreements. The Credit Agreement does not include any financial covenants. If an event of default occurs, the lenders are entitled to accelerate the advances made thereunder and exercise rights against the collateral. Borrowing under the Revolving Loan is classified as current debt as a result of the required lockbox arrangement and the subjective acceleration clause. At September 30, 2021, we were in compliance with the covenants in the Credit Agreement.
The
interest rate for the Term Loan and the Revolving Loan is prime plus
NOTE 9. FINANCING OBLIGATION
On
December 7, 2020, the Company entered into a sale agreement (the “Sale Agreement”). Pursuant to the terms of the Sale Agreement,
the Company sold land and property related to the Company’s headquarters and manufacturing facility in Vernal, Utah (the “Property”)
for a purchase price of $
The
Company received cash of $
The financing obligation is summarized below:
| September 30, 2021 | December 31, 2020 | |||||||
| Finance obligations for sale-leaseback transactions | $ | $ | ||||||
| Current principal portion of finance obligation | ( | ) | ( | ) | ||||
| Non-current portion of finance obligation | $ | $ | ||||||
| 13 |
NOTE 10. GEOGRAPHICAL OPERATIONS INFORMATION
The following summarizes revenue by geographic location:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue: | ||||||||||||||||
| North America | $ | $ | $ | $ | ||||||||||||
| Middle East | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
The following summarizes net property, plant and equipment by geographic location:
| September 30, 2021 | December 31, 2020 | |||||||
| Property, plant and equipment, net: | ||||||||
| North America | $ | $ | ||||||
| Middle East | ||||||||
| $ | $ | |||||||
NOTE 11. COMMITMENTS AND CONTINGENCIES
We are subject to litigation that arises from time to time in the ordinary course of our business activities. In February 2019, the Company filed a patent infringement lawsuit in the United States District Court for the Western District of Louisiana Lafayette Division asserting Stabil Drill Specialties, LLC (“Stabil Drill”) infringed on our patent that covers the Company’s well bore conditioning tool, the Drill-N-Ream. The lawsuit was subsequently moved from Louisiana to the United States District Court for the Southern District of Texas, Houston Division. Additionally, on May 20, 2019, Extreme Technologies, LLC sued Short Bit & Tool Co. and Lot William Short, Jr. (“Defendants”) in the Northern District of Texas-Dallas Division. Extreme sued for patent infringement based on the same patents discussed in the Stabil Drill litigation. On December 23, 2019, the Court stayed Extreme’s patent infringement claim against Defendants pending resolution of the Southern District of Texas Stabil Drill case. The court ordered the Company to serve discovery requests upon Stabil Drill and gave Stabil Drill deadlines to respond and produce documents and permit product inspection. Stabil Drill filed a motion for summary judgement for non-infringement. On October 1, 2020, Superior Energy Services, Stabil Drill’s parent company, filed for bankruptcy, which resulted in a brief, automatic stay of the litigation. Superior Energy Services announced on February 2, 2021 that it successfully completed its financial restructuring and emerged from Chapter 11 bankruptcy. On March 9, 2021, the Court lifted the automatic bankruptcy stay. On May 12, 2021, the Court denied Stabil Drill’s non-infringement summary judgment motion. The parties are preparing this case for trial and expect a jury trial setting in 2022. We are not currently involved in any other litigation which management believes could have a material effect on our financial position or results of operations.
NOTE 12. SHAREHOLDERS’ EQUITY
On
August 9, 2021, the Board of Directors granted
NOTE 13. SUBSEQUENT EVENTS
On
October 19, 2021, the Company completed an equity offering of shares of our common stock to certain institutional investors,
at a purchase price of $ per share. The Company paid approximately $
| 14 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
Introduction
The following discussion and analysis was prepared to supplement information contained in the accompanying financial statements and is intended to provide certain details regarding our financial condition as of September 30, 2021, and our results of operations for the three and nine months ended September 30, 2021 and 2020. It should be read in conjunction with the unaudited financial statements and notes thereto contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”) as well as our audited financial statements for the years ended December 31, 2020 and 2019, which were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission (the “SEC”).
Unless the context requires otherwise, references to the “Company” or to “we,” “us,” or “our” and other similar terms are to Superior Drilling Products, Inc. and all of its subsidiaries.
Forward- Looking Statements
This Quarterly Report on Form 10-Q includes certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements contained in all parts of this document that are not historical facts are forward-looking statements that involve risks and uncertainties that are beyond the control of the Company. You can identify the Company’s forward-looking statements by the words “anticipate,” “estimate,” “expect,” “may,” “project,” “believe” and similar expressions, or by the Company’s discussion of strategies or trends. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurances can be given that these expectations will prove to be correct. These forward-looking statements include the following types of information and statements as they relate to the Company:
| ● | future operations, financial results, business plans, cash flow and cash requirements; | |
| ● | scheduled, budgeted and other future capital expenditures; | |
| ● | working capital requirements; | |
| ● | the availability of expected sources of liquidity; | |
| ● | the introduction into the market of the Company’s future products; | |
| ● | the market for the Company’s existing and future products; | |
| ● | the opportunity to diversify the markets served by the Company or products provided within the existing oil and gas industry as a result of receiving the ISO-9001 certification; | |
| ● | the Company’s ability to develop new applications for its technologies; | |
| ● | the exploration, development and production activities of the Company’s customers; | |
| ● | compliance with present and future environmental regulations and costs associated with environmentally related penalties, capital expenditures, remedial actions and proceedings; | |
| ● | effects of potential legal proceedings; and | |
| ● | changes in customers’ future product and service requirements that may not be cost effective or within the Company’s capabilities. |
| 15 |
These statements are based on assumptions and analyses in consideration of the Company’s experience and perception of historical trends, current conditions, expected future developments and other factors the Company believes were appropriate in the circumstances when the statements were made. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those described in such statements.
While it is not possible to identify all factors, the Company continues to face many risks and uncertainties. Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed under “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and the following:
| ● | the volatility of oil and natural gas prices; | |
| ● | the cyclical nature of the oil and gas industry; | |
| ● | availability of financing, flexibility in restructuring existing debt and access to capital markets; | |
| ● | our reliance on significant customers; | |
| ● | consolidation within our customers’ industries; | |
| ● | competitive products and pricing pressures; | |
| ● | our ability to develop and commercialize new and/or innovative drilling and completion tool technologies; | |
| ● | our ability to diversify products/services provided to customers and markets in which we operate; | |
| ● | the continued impact of COVID-19 on domestic and global economic conditions and the future impact of such conditions on the oil and gas industry and the demand for our services; | |
| ● | fluctuations in our operating results; | |
| ● | our dependence on key personnel; | |
| ● | costs of raw materials; | |
| ● | our dependence on third party suppliers; | |
| ● | unforeseen risks in our manufacturing processes; | |
| ● | the need for skilled workers; | |
| ● | our ability to successfully manage our growth strategy; | |
| ● | unanticipated risks associated with, and our ability to integrate, acquisitions; | |
| ● | current and potential governmental regulatory actions in the United States and regulatory actions and political unrest in other countries; | |
| ● | the potential impact of major health crises on our business and results of operations; | |
| ● | terrorist threats or acts, war and civil disturbances; | |
| ● | our ability to protect our intellectual property; | |
| ● | impact of environmental matters, including future environmental regulations; | |
| ● | implementing and complying with safety policies; | |
| ● | breaches of security in our information systems and other cybersecurity risks; | |
| ● | related party transactions with our founders; and | |
| ● | risks associated with our common stock. |
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Many of such factors are beyond the Company’s ability to control or predict. Any of the factors, or a combination of these factors, could materially affect the Company’s future results of operations and the ultimate accuracy of the forward-looking statements. Management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels. Every forward-looking statement speaks only as of the date of the particular statement, and the Company undertakes no obligation to publicly update or revise any forward-looking statement.
Executive Summary
We innovate, design, engineer, manufacture, sell, and repair drilling and completion tools in the United States, Canada, and the Middle East.
We currently have three basic operations:
| ● | Our PDC drill bit and other tool refurbishing and manufacturing service, | |
| ● | Our emerging technologies business that manufactures the Drill-N-Ream tool, our innovative drill string enhancement tool, the Strider technology and other tools, and | |
| ● | Our new product development business that conducts our research and development, and designs our horizontal drill string enhancement tools, other down-hole drilling technologies, and drilling tool manufacturing technologies. |
Our strategy for growth is to expand the global market penetration of our current drilling tool solutions and to leverage our expertise in drilling tool technologies and precision machining in order to broaden our product offerings and solutions for the oil and gas industry, as well as other industries that require precision machining and quality. We believe through our patented technologies, as well as technologies under development, that we can offer the oil and gas industry the solutions it demands to improve drilling efficiencies and reduce production costs.
Recent Developments and Trends
The COVID-19 pandemic has caused and continues to cause disruption to the U.S. and global economies, including the impact of government and company actions to reduce the spread of the virus and consumer behavior in response to the same; and, although the United States and other countries have continued to roll out vaccinations, it is uncertain how quickly and effectively such vaccinations will be distributed or help to control the spread of COVID-19 and its variants. We continue to actively monitor the impacts and potential impacts of the COVID-19 pandemic in all aspects of our business. Although we are unable to predict the total impact of the COVID-19 pandemic on our business, results of operations, liquidity or capital resources at this time, we expect we may be negatively affected if the pandemic and related public health measures result in substantial manufacturing or supply chain problems, disruptions in local and global future economies, volatility in the global financial markets, overall reductions in demand, delays in payment, restrictions on the shipment of our products, or other ramifications. Currently we are experiencing raw material delays and difficulties in hiring and retaining direct laborers. These current conditions are a result of COVID-19.
The total U.S. rig count as reported by Baker Hughes as of October 29, 2021 was 544 rigs, an increase of 248 rigs from a year ago, as well as an increase of 150 rigs from the rig count as of December 31, 2020. We expect North American onshore activity to continue to improve in 2021 and into 2022 compared with the fourth quarter of 2020.
The Middle East market is a softer market due to the COVID-19 impact. Although this segment of our business is rebounding, the improvements are at a slower rate compared to the Company’s domestic market.
CONSOLIDATED RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 2021Compared with the Three and Nine Months Ended September 30, 2020
The following table represents summary consolidated operating results for the periods indicated:
| Three-Months Ended September 30, | Nine-Months Ended September 30, | |||||||||||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||
| Tool revenue | 2,346 | 66 | % | 1,191 | 77 | % | 6,284 | 67 | % | 6,147 | 69 | % | ||||||||||||||||||||
| Contract services | 1,216 | 34 | % | 356 | 23 | % | 3,102 | 33 | % | 2,782 | 31 | % | ||||||||||||||||||||
| Revenue | $ | 3,562 | 100 | % | $ | 1,547 | 100 | % | 9,386 | 100 | % | 8,929 | 100 | % | ||||||||||||||||||
| Operating costs and expenses | 3,399 | 95 | % | 3,094 | 200 | % | 10,063 | 107 | % | 11,307 | 127 | % | ||||||||||||||||||||
| Operating income (loss) | 163 | 5 | % | (1,546 | ) | (100 | )% | (677 | ) | (7 | )% | (2,378 | ) | (27 | )% | |||||||||||||||||
| Other expense | (130 | ) | (4 | )% | (85 | ) | (5 | )% | (415 | ) | (4 | )% | (291 | ) | (3 | )% | ||||||||||||||||
| Income tax expense | (39 | ) | (1 | )% | (100 | ) | (6 | )% | (83 | ) | (1 | )% | (106 | ) | (1 | )% | ||||||||||||||||
| Net income (loss) | $ | (6 | ) | 0 | % | $ | (1,731 | ) | (111 | )% | (1,175 | ) | (12 | )% | (2,775 | ) | (31 | )% | ||||||||||||||
Material changes of certain items in our statements of operations included in our financial statements for the comparative periods are discussed below. Comparisons are to the prior-year period unless stated otherwise.
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Three Months Ended September 30, 2021 Compared with the Three Months Ended September 30, 2020
Revenue. Our revenue increased approximately $2,014,000 or 130%. Tool revenue increased $1,155,000 or 97% from the prior-year period while contract services increased $859,000 or 241%. The increase in revenue was due to increased demand from continued growth in the number of end users and percentage of rigs using our Drill-N-Ream tool combined with an improvement in market conditions and increased drilling activity.
Operating Costs and Expenses. Total operating costs and expenses increased approximately $272,000 for the September 30, 2021 three-month period.
| ● | Cost of revenue increased approximately $571,000 due to higher volume. As a percentage of revenue, cost of revenue was 40% and 56% of revenue for the three months ended September 30, 2021 and 2020, respectively. The decline in the cost of revenue as a percent of revenue was the result of strong operating leverage from higher volume. | |
| ● | Selling, general and administrative expenses increased approximately $21,000 due to an increase in long-term equity compensation expense. | |
| ● | Depreciation and amortization expense decreased approximately $288,000, or 41%, to $405,000. The decrease was primarily a result of fully amortizing a portion of the Company’s intangible assets and fully depreciating manufacturing center equipment. |
Other Expense. Other expense primarily consists of interest expense and interest income.
| ● | Interest expense for the three months ended September 30, 2021 and 2020 was approximately $130,000 and $126,000, respectively. |
Income Tax Expense. The decrease in income tax expense from the prior year is due to a year-to-date foreign income tax adjustment in 2020.
Nine Months Ended September 30, 2021 Compared with the Nine Months Ended September 30, 2020
Revenue. Our revenue increased approximately $457,000 or 5% to $9,386,000. Tool revenue was $6,283,000, an increase of 2% or $137,000, from the prior-year period. Contract services increased approximately $320,000, or 12%, to $3,102,000.
Operating Costs and Expenses. Total operating costs and expenses decreased approximately $1,277,000 for the September 30, 2021 nine-month period.
| ● | Cost of revenue decreased approximately $444,000 due to reduced costs resulting from the Company’s reduction in force implemented throughout 2020. As a percentage of revenue, cost of revenue was 41% and 48% of revenue for the nine months ended September 30, 2021 and 2020, respectively. | |
| ● | Selling, general and administrative expenses decreased approximately $380,000 to $4,508,000 and was 48% of revenue compared with 55% in the prior-year period. The decline in expenses was due to cost reduction measures implemented in 2020 in response to the impact on demand resulting from the rapid decline in the oil & gas industry due to the global COVID-19 pandemic. | |
| ● | Depreciation and amortization expense decreased approximately $454,000, or 21%, to $1,681,000. The decrease was primarily a result of fully amortizing a portion of the Company’s intangible assets and fully depreciating manufacturing center equipment. |
Other Expense. Other expense primarily consists of interest expense, interest income, and gain/loss on sale of assets.
| ● | Interest expense for the nine months ended September 30, 2021 and 2020 was approximately $414,000 and $450,000, respectively. | |
| ● | The Company recorded a loss of approximately $1,000 on assets disposed during the nine months ended September 30, 2021. The Company sold its airplane in February 2020 for a gain of approximately $142,000. |
Income Tax Expense. The decrease in income tax expense from the prior year is due to a foreign income tax adjustments in 2020.
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Liquidity and Capital Resources
At September 30, 2021, we had working capital of approximately $1,500,000. Our principal uses of cash are operating expenses, working capital requirements, capital expenditures and debt service payments. Our operational and financial strategies include managing our operating costs and capital spending to match revenue trends, accelerating collections of international receivables, and managing our working capital and debt to enhance liquidity. If we are unable to continue generating positive cash flow, we may not be able to, among other things, (i) maintain our current general and administrative spending levels; (ii) fund certain obligations as they become due; and (iii) respond to competitive pressures or unanticipated capital requirements. We cannot provide any assurance that financing will be available to us in the future on acceptable terms. However, on October 19, 2021, the Company completed an equity offering of 1,739,131 shares of our common stock to certain institutional investors, at a purchase price of $1.15 per share. The Company paid approximately $261,000 in total offering costs. Net proceeds from the equity offering were approximately $1,700,000.
In addition, the significant decline in demand for oil due to the impacts of COVID-19 on the global economy, the instability of oil prices caused by geopolitical issues and over supply have resulted in the announcements by our customers and end users of our tools and technology of significant reductions to their capital expenditure budgets. Our expectation is that demand for our products and services may continue to be impacted in 2021 and potentially beyond; however, we are currently unable to estimate the full impact to our business, how long this significant drop in demand will last or the depth of the decline. We have minimal planned capital expenditures for the remainder of 2021 of $600,000.
The Hard Rock Note had a remaining balance of $750,000 as of September 30, 2021. It accrues interest at 8.00% per annum and is due in full by October 5, 2022. In October 2021, the Company made a payment of $15,123 related to accrued interest. Under the amended terms of the Hard Rock Note, we are required to make the following payments: accrued interest on January 5, April 5, July 5 and October 5 in 2022; with the remaining balance of principal and accrued interest on the Hard Rock Note due on October 5, 2022. For the nine months ended September 30, 2021, the Company has made a total of $839,754 in principal and interest payments related to the Hard Rock Note.
Our Credit Agreement is comprised of $1,000,000 Term Loan and $3,500,000 Revolving Loan. As of September 30, 2021, we had $416,662 outstanding on the Term Loan and $1,000,462 outstanding on the Revolving Loan. Amounts outstanding under the Revolving Loan at any time may not exceed the sum of: (a) up to 85% of accounts receivable or such lesser percentage as AFS in its sole discretion may deem appropriate if it determines that there has been a material adverse effect (less a dilution reserve as determined by AFS in its sole good faith discretion), plus (b) the lesser of (i) up to 50% of inventory or such lesser percentage as AFS in its sole discretion may deem appropriate if it determines that there has been a material adverse effect, or (ii) the inventory sublimit, minus (c) the borrowing base reserve as may be determined from time to time by AFS. Amounts outstanding on the Revolving Loan as of September 30, 2021, may not exceed $1,000,000, which is based on a calculation applying 85% of accounts receivable and 50% of inventory. A collateral management fee is payable monthly on the used portion of the Revolving Loan and Term Loan. If our borrowings are less than $1,000,000, we still pay interest as if we had borrowed $1,000,000. At September 30, 2021, we had approximately $12,000 of accrued interest.
The interest rate for the Term Loan and the Revolving Loan is prime plus 2%. At September 30, 2021, the interest rate for the Term Loan was 8.85%, which includes a 3.6% management fee rate. The effective interest rate for the Revolving Loan for the quarter ending September 30, 2021 was 9.78%. The obligations of the Company under the agreement are secured by a security interest in substantially all of the tangible and intangible assets of the Company, other than any assets owned by the Company that constitute real property (and fixtures affixed to such real property), certain excluded equipment, intellectual property, or aircraft. The Credit Agreement matures on February 20, 2023.
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Cash Flows
Nine Months Ended September 30, 2021 Compared with the Nine Months Ended September 30, 2020
Net cash provided by operating activities was approximately $878,000 and $1,269,000 for the nine months ended September 30, 2021 and 2020, respectively. For the nine months ended September 30, 2021, the Company had approximately $1,175,000 of net loss, approximately $1,168,000 increase in accounts payable and accrued expenses, depreciation and amortization expense of approximately $1,681,000, which were offset by an approximately $700,000 decrease in accounts receivable. For the nine months ended September 30, 2020, the Company had approximately $2,775,000 of net loss, an approximately $2,409,000 increase in accounts receivable, and depreciation and amortization expense of approximately $2,134,000.
Net cash used in investing activities was approximately $26,000 for the nine months ended September 30, 2021 and $37,000 for the nine months ended September 30, 2020.
Net cash used in financing activities was approximately $345,000 for the nine months ended September 30, 2021. Net cash used in financing activities was approximately $1,037,000 for the nine months ended September 30, 2020.
Critical Accounting Policies
The discussion of our financial condition and results of operations is based upon our consolidated condensed financial statements, which have been prepared in accordance with U.S. GAAP. During the preparation of our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions, including those discussed below. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results of our analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. While we believe that the estimates and assumptions used in the preparation of our consolidated condensed financial statements are appropriate, actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to our consolidated condensed financial statements. Our estimates and assumptions are evaluated periodically and adjusted when necessary. The more significant estimates affecting amounts reported in our consolidated condensed financial statements include, but are not limited to: stock based compensation, determining the allowance for doubtful accounts, valuation of inventories, recoverability of long-lived assets, useful lives used in calculating depreciation and amortization, and valuation of intangible assets.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2021.
Changes in Internal Controls over Financial Reporting
None
Internal Controls and Procedures
This quarterly report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the Company’ s registered public accounting firm due to a transaction period established by the rules of the Securities and Exchange Commission for newly public companies. Under these rules, we will not be required to include an attestation report for so for as long as we are a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act.
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PART II
Item 1. Legal Proceedings
We are subject to litigation that arises from time to time in the ordinary course of our business activities. In February 2019, the Company filed a patent infringement lawsuit in the United States District Court for the Western District of Louisiana Lafayette Division asserting Stabil Drill Specialties, LLC (“Stabil Drill”) infringed on our patent that covers the Company’s well bore conditioning tool, the Drill-N-Ream. The lawsuit was subsequently moved from Louisiana to the United States District Court for the Southern District of Texas, Houston Division. Additionally, on May 20, 2019, Extreme Technologies, LLC sued Short Bit & Tool Co. and Lot William Short, Jr. (“Defendants”) in the Northern District of Texas - Dallas Division. Extreme sued for patent infringement based on the same patents discussed in the Stabil Drill litigation. On December 23, 2019, the Court stayed Extreme’s patent infringement claim against Defendants pending resolution of the Southern District of Texas Stabil Drill case. The court ordered the Company to serve discovery requests upon Stabil Drill and gave Stabil Drill deadlines to respond and produce documents and permit product inspection. Stabil Drill filed a motion for summary judgement for non-infringement. On October 1, 2020, Superior Energy Services, Stabil Drill’s parent company, filed for bankruptcy, which resulted in a brief, automatic stay of the litigation. Superior Energy Services announced on February 2, 2021 that it successfully completed its financial restructuring and emerged from Chapter 11 bankruptcy. On March 9, 2021, the Court lifted the automatic bankruptcy stay. On May 12, 2021, the Court denied Stabil Drill’s non-infringement summary judgment motion. The parties are preparing this case for trial and expect a jury trial setting in 2022. We are not currently involved in any other litigation which management believes could have a material effect on our financial position or results of operations.
Item 1A. Risk Factors
As of the date of this filing, the Company remains subject to the risk factors previously disclosed in Part I, Item 1A “Risk Factors” in our 2020 Annual Report on Form 10-K. The risk factors below updates or expands upon those risk factors.
We may be unable to maintain adequate liquidity and make payments on our debt.
At September 30, 2021, we had working capital of approximately $1,500,000. Our principal uses of cash are operating expenses, working capital requirements, capital expenditures and debt service payments. Our operational and financial strategies include lowering our operating costs and capital spending to match revenue trends, managing our working capital and debt to enhance liquidity. Subsequent to the end of the quarter on October 19, 2021, the Company completed an equity offering of 1,739,131 shares of our common stock to certain institutional investors, at a purchase price of $1.15 per share. The Company paid approximately $261,000 in total offering costs. Net proceeds from the equity offering were approximately $1,700,000.
While we believe that our cash generated from operations and our borrowing capacity under our current credit facility will be sufficient to fund our operations for the next twelve months, our operational and financial strategies include managing our operating costs, working capital and debt to enhance liquidity. We will continue to work to grow revenue and review additional cost containment measures in order to be cash flow positive in 2021. If we are unable to do this, we may not be able to, among other things, (i) maintain our current general and administrative spending levels; (ii) fund certain obligations as they become due; and (iii) respond to competitive pressures or unanticipated capital requirements. We cannot provide any assurance that financing will be available to us in the future on acceptable terms.
On May 6, 2020, certain subsidiaries of the Company amended and restated the outstanding note (the “Hard Rock Note”) with the seller in our acquisition of Hard Rock Solutions, LLC. As amended, the Hard Rock Note accrues interest at 8.00% per annum and matures and is now fully payable on October 5, 2022. Under the amended terms of the Hard Rock Note, we are required to make the following payments: accrued interest on each January 5, April 5, July 5, and October 5 in 2022; with the remaining principal balance of $750,000 plus accrued interest on the Hard Rock Note due on October 5, 2022. For the nine months ended September 30, 2021, the Company has made a total of $839,754 in principal and interest payments related to the Hard Rock Note. If we are unable to make the payments required, we could lose our rights to market the Drill-N-Ream.
Our Credit Agreement is comprised of $1,000,000 Term Loan and $3,500,000 Revolving Loan. As of September 30, 2021, we had $416,662 outstanding on the Term Loan and $1,000,462 outstanding on the Revolving Loan. If we are unable to make required payments under the Credit Agreement, we would be in default thereunder, which would permit the holders of the indebtedness to accelerate the maturity thereof, unless we are able to obtain, on a timely basis, a necessary waiver or amendment. Any waiver or amendment may require us to revise the terms of the Credit Agreement which could increase the cost of our borrowings, require the payment of additional fees, and adversely impact the results of our operations. Upon the occurrence of any event of default that is not waived, the lenders could elect to exercise any of their available remedies, which include the right to not lend any additional amounts or, in the event we have outstanding indebtedness under the Credit Agreement, to declare any outstanding indebtedness, together which any accrued interest and other fees, to be immediately due and payable. If we are unable to repay the outstanding indebtedness, if any, under the Credit Agreement when due, the lenders would be permitted to proceed against their collateral, and this could have a material adverse effect on our business and financial condition.
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Our level of indebtedness could adversely affect our future ability to raise additional capital to fund growth, limit our ability to react to changes in our business or our industry and place us at a competitive disadvantage.
We are required to make a payment on the Hard Rock Note of $750,000 (plus accrued interest) in October 2022. In addition, we are required to make monthly payments of approximately $46,000 on our other indebtedness.
Our level of debt and debt service requirements could have important consequences. For example, it could (i) result in a foreclosure upon our key assets, (ii) increase our vulnerability to general adverse economic and industry conditions, (iii) limit our ability to fund future capital expenditures and working capital, to engage in future acquisitions or development activities, or to otherwise realize the value of our assets and opportunities fully because of the need to dedicate a substantial portion of our cash flow from operations to payments on our debt, (iv) increase our cost of borrowing, (v) restrict us from making strategic acquisitions or causing us to make non-strategic divestitures, (vi) limit our flexibility in planning for, or reacting to, changes in our business or industry in which we operate, placing us at a competitive disadvantage compared with our competitors who are less leveraged and (vii) impair our ability to obtain additional financing in the future.
Our customer base is concentrated and the loss of, or nonperformance by, one or more of our significant customers, or our failure to expand our channels to market and further commercialize could cause our revenue to decline substantially.
We have two large customers that currently comprise 86% of our total revenue. It is likely that we will continue to derive a portion of our revenue from a relatively small number of customers in the future. If a major customer decided not to continue to use our services or significantly reduces its drilling plans, or if we are unable to expand our channels to market or further commercialize, our revenue would decline and our operating results and financial condition could be harmed. In addition, we are subject to credit risk due to the concentration of our customer base. Any increase in the nonpayment of and nonperformance by our counterparties, either as a result of changes in financial and economic conditions or otherwise, could have a material effect on our business, results of operations and financial condition and could adversely affect our liquidity.
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Item 6. Exhibits
The exhibits listed below are filed as part of this report:
| Exhibit No. | Description | |
| 31.1* | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for G. Troy Meier. | |
| 31.2* | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Christopher D. Cashion. | |
| 32.1** | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for G. Troy Meier.** | |
| 32.2** | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Christopher D. Cashion.** | |
| 101.INS * | Inline XBRL Instance | |
| 101.XSD * | Inline XBRL Schema | |
| 101.CAL * | Inline XBRL Calculation | |
| 101.DEF * | Inline XBRL Definition | |
| 101.LAB * | Inline XBRL Label | |
| 101.PRE * | Inline XBRL Presentation | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
** Furnished herewith.
* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SUPERIOR DRILLING PRODUCTS, INC. | ||
| November 12, 2021 | By: | /s/ G. TROY MEIER |
| G. Troy Meier, Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| November 12, 2021 | By: | /s/ CHRISTOPHER CASHION |
| Christopher Cashion, Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||
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