Drilling Tools International Corp quarterly report, Q2 FY2022

Filing identity and reporting period

Important issuer mismatch: The supplied filing is ROC Energy Acquisition Corp.’s Form 10-Q, not a filing by Drilling Tools International Corp. ROC Energy was a blank-check company seeking a business combination. This unaudited report covers the quarter and six months ended June 30, 2022; it was signed August 12, 2022.

Financial performance and position

  • Revenue: No operating revenue; the company had not begun operations beyond its search for a business combination.
  • Net loss: $101,620 for Q2 2022 and $327,734 for the six months ended June 30, 2022. Q2 general and administrative expense was $275,968; six-month expense was $565,295. Trust-account interest income was $197,788 and $261,001, respectively.
  • Cash flow: Operating activities used $1,014,287 in the first half. Cash declined by $959,236, from $1,361,137 at year-end 2021 to $401,901 at June 30, 2022. The company withdrew $66,351 of trust interest for franchise and income taxes.
  • Liquidity and assets: The Trust Account held $209,281,524, mostly U.S. Treasury securities; this was largely earmarked for a business combination or shareholder redemptions, not general operating expenses. Total assets were $210,101,506.
  • Debt and liabilities: No debt or working-capital loans were outstanding. Total liabilities were $231,225, including $23,415 of income taxes payable. Stockholders’ equity was $800,281, excluding $209,070,000 of redeemable shares classified as temporary equity.
  • Margins: Not meaningful because the company had no operating revenue.

Changes versus prior period

The filing does not provide prior-year quarterly or six-month operating results for comparison. Compared with December 31, 2021, outside cash fell by $959,236, prepaid expenses rose to $418,081 from zero, and total assets declined by $346,505. Redeemable shares remained at $209,070,000.

Outlook, risks, and unusual items

  • ROC Energy had until December 6, 2022 to complete a business combination, with potential extensions to June 6, 2023 if the Sponsor funded two $2,070,000 loans, one for each three-month extension. Failure to complete a transaction would require liquidation and redemption of public shares.
  • Management stated that uncertainty over completing a transaction and potentially inadequate working capital raised substantial doubt about the company’s ability to continue as a going concern. The company warned that it might not have sufficient liquidity to fund operations through liquidation or one year from issuance of the statements.
  • Risks included proposed SEC SPAC rules and possible Investment Company Act treatment, which could increase costs, delay or prevent a transaction, or lead to liquidation. The filing also cited inflation, interest rates, market volatility, the COVID-19 pandemic, the Russia-Ukraine war, and possible CFIUS or foreign-ownership review of certain U.S. targets.
  • The company reported no pending or contemplated litigation known to management, no off-balance-sheet arrangements, and no material subsequent events. Management assessed disclosure controls as effective and reported no material changes in internal control during the quarter.

Key facts for investors to verify

  1. Confirm the filing belongs to ROC Energy Acquisition Corp.; it does not report Drilling Tools International’s results.
  2. Check whether ROC Energy completed a business combination or extended its deadline, given the December 6, 2022 deadline and going-concern warning.
  3. Distinguish the $209.3 million Trust Account from the $401,901 of cash available outside the Trust Account.
  4. Review the potential effect of redemptions, extension loans, transaction fees, and regulatory requirements on funds and post-combination ownership.