Filing summary
Entity discrepancy: The supplied filing is ROC Energy Acquisition Corp.’s Form 10-Q, not a filing for Drilling Tools International Corp. This summary reflects ROC Energy’s filing for the quarter ended September 30, 2022.
Business context and reporting period
ROC Energy was a blank-check company seeking a business combination and had not begun operating activities. It reported the three and nine months ended September 30, 2022; the interim financial statements are unaudited. Its public offering proceeds were held principally in a trust account pending a transaction.
Financial highlights
| Metric | Three months ended September 30, 2022 | Nine months ended September 30, 2022 |
|---|---|---|
| Operating revenue | None | None |
| General and administrative expenses | $339,968 | $905,288 |
| Trust-account interest income | $830,040 | $1,091,041 |
| Net income (loss) | $326,264 | $(1,470) |
| Basic net income (loss) per share | $0.01 | $(0.00) |
| Cash used in operating activities | Not provided for the quarter | $1,108,878 |
At September 30, 2022, cash outside the trust was $307,310; trust assets were $210,111,564; total assets were $210,708,427; and total liabilities were $511,882. Public shares subject to possible redemption were recorded at $209,774,341. The filing reports no outstanding working-capital loans or other debt. Total stockholders’ equity was $422,204.
Changes versus prior period
For the nine-month period, the company reported a small net loss, compared with third-quarter net income, principally because third-quarter trust interest exceeded quarterly expenses and taxes. Cash outside the trust declined from $1,361,137 at December 31, 2021 to $307,310 at September 30, 2022. Trust assets increased from $209,086,874 to $210,111,564. The filing does not provide comparable 2021 quarterly or nine-month operating results.
Outlook, risks, and unusual items
- The company had until December 6, 2022 to complete a business combination, with possible extensions to June 6, 2023 subject to sponsor funding. Failure to complete a transaction within the applicable period would require redemption of public shares and liquidation.
- Management stated that uncertainty about completing a transaction by the deadline, limited working capital, and potential liquidation raised substantial doubt about the company’s ability to continue as a going concern.
- The company disclosed a potential 1% federal excise tax on certain stock repurchases after December 31, 2022. Depending on transaction structure and other factors, this could reduce funds available for a business combination.
- Management noted possible adverse effects from COVID-19, the Russia-Ukraine war, inflation, interest-rate increases, energy prices, and market or supply-chain disruption; the specific impact was not determinable.
- The trust held principally U.S. Treasury securities. The company said it could liquidate those securities and hold trust funds in cash to mitigate investment-company risk, which could reduce interest income and redemption proceeds.
- Management concluded disclosure controls and procedures were effective at period-end and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is for ROC Energy Acquisition Corp., not Drilling Tools International Corp.
- Verify whether a business combination was completed or an extension was obtained before the December 6, 2022 deadline, and any resulting redemption or liquidation terms.
- Assess whether the $307,310 of outside-trust cash was sufficient to fund transaction and public-company costs, or whether additional sponsor financing was needed.
- Review the potential effect of the excise tax and any trust-account investment changes on cash available for a transaction and public-share redemptions.