v3.26.1
BUSINESS COMBINATION
 3 Months Ended
Mar. 31, 2026
Business Combination [Abstract]  
BUSINESS COMBINATION

NOTE 3 – BUSINESS COMBINATION

Titan Tools Group Limited

On January 2, 2025, the Company’s wholly owned subsidiary, Drilling Tools International, Inc., completed the acquisition of 100% of the shares of Titan Tools Group Limited (“Titan”). Titan is a full-service, down-hole tool rental company for land and offshore operations focused on wellbore construction rental items for both traditional hydrocarbon extraction and geothermal industries. Titan's primary operations are located in the United Kingdom, Europe, and Africa.

In accordance with the terms of the acquisition, the closing of the acquisition occurred on January 2, 2025 (the “Titan Closing Date” or “Titan Closing”) for total consideration of $10.8 million. The consideration for the acquisition of $10.8 million is comprised of the following items (in thousands):

 

Cash paid to Titan shareholders

$

6,002

 

Titan transaction costs to be paid by DTI

 

175

 

Closing date equity consideration (1)

 

2,922

 

Effective settlement of preexisting relationship between DTI and Titan (2)

 

1,675

 

Fair value of consideration transferred

$

10,774

 

 

(1) Represents the value, as of the Titan Closing Date, of the DTI common stock transferred as purchase consideration.

 

(2) Represents the effective settlement of DTI’s accounts receivable from Titan and DTI’s accounts payable to Titan as Titan and DTI were customers of each other prior to the Titan Closing.

 

 

The acquisition of Titan 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, Titan’s tangible and identifiable intangible assets acquired, and its liabilities assumed were recorded at their estimated fair values on the Titan Closing Date. The purchase price allocation for the acquisition is final as of December 31, 2025.

The allocation of the purchase price is as follows (in thousands):

Assets acquired:

 

 

Cash

$

559

 

Accounts receivable

 

3,670

 

Inventory

 

658

 

Other current assets

 

93

 

Property, plant and equipment

 

3,927

 

Operating lease right-of-use asset

 

919

 

Intangible assets

 

2,657

 

Total assets acquired

 

12,484

 

Liabilities assumed:

 

 

Accounts payable

 

1,090

 

Operating lease liabilities, current

 

226

 

Other current liabilities

 

1,965

 

Operating lease liabilities, less current portion

 

694

 

Deferred tax liabilities, net

 

71

 

Total liabilities assumed

 

4,045

 

Total identifiable net assets

 

8,439

 

Goodwill

 

2,335

 

Total net assets acquired and goodwill

$

10,774

 

 

The excess of the fair value of the consideration transferred over the fair values of the net identifiable tangible and intangible assets acquired has been assigned to goodwill. Goodwill represents the future benefits of acquiring Titan as the acquisition not only enhances DTI's competitive edge, but also reinforces its position as a leader in providing innovative drilling solutions to the global oil and gas industry. Goodwill attributable to the acquisition of Titan is not deductible for tax purposes.

The following table sets forth the amounts allocated to the identified intangible assets, the estimated useful lives of those intangible assets as of the Titan Closing 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

Customer Relationship

 

 

 

 

$

2,657

 

25

Multi-period Excess Earnings Method

Total intangible assets

 

 

 

 

$

2,657

 

 

 

 

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 three months ended March 31, 2025, which is included in other operating and non-operating expenses, net in the consolidated statements of comprehensive income (loss).

The Company’s consolidated statements of comprehensive income (loss) for the three months ended March 31, 2026 and 2025 include Titan’s revenues of $2.1 million and $2.6 million, respectively, and net income of $0.1 million and $0.1 million, respectively.