UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

 

FORM 8-K

 

Current Report

 

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):

 

February 9, 2017

 

 

 

SUPERIOR DRILLING PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

 

Utah

(State of

Incorporation)

 

46-4341605

(I.R.S. Employer

Identification No.)

     
1583 South 1700 East    

 

Vernal, Utah

(Address of principal executive offices)

 

84078

(Zip code)

 

Commission File Number: 001-36453

 

Registrant’s telephone number, including area code: (435) 789-0594

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

   
   

 

Item 1.01. Entry into a Material Definitive Agreement.

 

On February 9, 2017, Meier Properties, Series LLC, a Utah limited liability company (“MPS”), and a wholly-owned subsidiary of Superior Drilling Products, Inc. (the “Company”), sold to Superior Auto Body and Paint, LLC, a Utah limited liability company (“SABP”), certain real estate located at 3978 West 12600 South, Riverton, Utah 84096 (the “Real Property”) pursuant to the terms and conditions of a special warranty deed between SABP and MPS (the “Deed”). Prior to the sale, MPS leased the Real Property to SABP pursuant to that certain lease dated May 25, 2012 (the “Lease”). The Lease was terminated in connection with closing of the transactions contemplated by the Deed (the “Lease Termination”). The purchase price for the Real Property was approximately $2.5 million, which is substantially equal to the appraised value of the Real Property, plus any prepayment fees and accrued interest associated with the Existing Loans Balance, as such term is defined below. The purchase price for the purchase was financed by Zions First National Bank (the “Zion’s Loan”). The proceeds of the sale were utilized by MPS to repay in full the outstanding balance for the loans of MPS outstanding on the Real Property with a cumulative payoff balance of approximately $2.5 million. In connection with the repayment in full of such loans, the guaranty of the Company of such loans was released.

 

As part of the transaction, Troy Meier, the Company’s Chief Executive Officer, and Annette Meier, the Company’s Chief Operating Officer, were required to pledge 547,000 of their shares of the Company’s common stock to partially collateralize the Zion’s Loan, as the Meiers have a direct ownership interest in SABP. These shares were previously held as a portion of the collateral for that certain amended and restated promissory note dated December 31, 2015 in the original principal amount of approximately $8.3 million issued to the Company by Tronco Energy Corporation, which the Company refers to in its SEC filings as the Tronco loan. Zions has agreed to transfer the stock pledge back to the Company for security under the Tronco loan after repayment in full of the Zion’s Loan.

 

The foregoing descriptions of the Lease, the Lease Termination, the Zion’s Loan and the Deed are qualified in their entirety by reference to the text of the Lease, the Lease Termination, the Zion’s Loan and the Deed, which are filed or included, as applicable, as Exhibits 10.1 through 10.4, respectively, to this Form 8-K and are incorporated herein by reference.

 

Item 1.02 Termination of a Material Definitive Agreement.

 

The text set forth in Item 1.01 regarding the Lease Termination is incorporated into this section by reference.

 

Item 8.01 Other Events.

 

On February 14, 2017, the Company issued a press release announcing the execution of the Deed and the related transactions, along with preliminary revenue for the fourth calendar quarter of 2016. A copy of the press release is filed herewith as Exhibit 99.1.

 

   
   

 

Item 9.01 Financial Statements and Exhibits.

 

Exhibit Number   Description
     
10.1   Lease, dated May 25, 2012, between MPS, as lessor, and SABP, as lessee (incorporated by reference to Exhibit 10.56 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-195085) filed with the SEC on April 7, 2014).
     
10.2   Loan Agreement, dated April 3, 2012, between MPS and SABP as co-borrowers, and Mountain West Small Business Finance, as lender; Change in Terms Agreement dated March 19, 2012, between SABP, as borrower and Mountain America Credit Union, as Lender; and Change in Terms Agreement dated March 19, 2012, between SABP, as borrower and Mountain America Credit Union, as Lender (incorporated by reference to Exhibit 10.50 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-195085) filed with the SEC on April 30, 2014).
     
10.3   Loan Agreement, dated May 25, 2012, between MPS and SABP, as co-borrowers and Mountain West Small Business Finance, as lender (incorporated by reference to Exhibit 10.52 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-195085) filed with the SEC on April 7, 2014).
     
10.4   Special Warranty Deed between MPS and SABP dated February 9, 2017.*
     
10.5   Termination of Real Property Lease between MPS and SABP dated February 9, 2017.*
     
99.1   Press release issued on February 14, 2017 regarding the Purchase Agreement and preliminary revenue for the fourth calendar quarter of 2016.*

 

* Filed herewith.

 

   
   

 

SIGNATURE

 

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 hereunto duly authorized.

 

Date: February 14, 2017

 

  SUPERIOR DRILLING PRODUCTS, INC.
   
/s/ Christopher D. Cashion
  Christopher D. Cashion
  Chief Financial Officer

 

   
   

 

 

 

When Recorded, Mail to:

 

Superior Auto Body and Paint, LLC

3978 West 12600 South

Riverton, UT 84065

 

SPECIAL WARRANTY DEED

 

Meier Properties, Series LLC, Grantor, hereby CONVEYS and WARRANTS against all claiming by, through or under to Superior Auto Body and Paint, LLC, Grantee, of:

 

3978 West 12600 South Riverton, Utah 84096

 

For the sum of Ten Dollars ($10.00) and other good and valuable consideration, the following tract of land in Salt Lake County, Utah:

 

LOT 2, RIVERTON CROSSING COMMERCIAL SUBDIVISION, ACCORDING TO THE OFFICIAL PLAT THEREOF RECORDED IN THE OFFICE OF THE SALT LAKE COUNTY RECORDER, STATE OF UTAH

 

Serial Number 27-29-351-009

 

Subject to easements, restrictions and rights of way of record.

 

Witness the hands of said grantor, February 9, 2017

 

Signed in the presence of:   MEIER PROPERTIES, SERIES LLC
     
    /s/ Annette D. Meier
    Annette D. Meier, Manager

 

STATE OF UTAH

 

COUNTY OF Salt Lake

 

On the 9th day of February, 2017, personally appeared before me, Annette D. Meier, Manager, known to me to be a manager or designated agent of Meier Properties, Series LLC, the limited liability company that executed the instrument and acknowledged the instrument to be the free and voluntary act and deed of the limited liability company, by authority of statute, its articles of organization or its operating agreement, for the uses and purposes therein mentioned, and on oath state that she, Annette Meier is authorized to execute this instrument and in fact executed the instrument on behalf of the limited liability company.

 

  /s/ Laura L. Lee
  Notary Public

 

 
 

 

 

 

TERMINATION OF REAL PROPERTY LEASE

 

THIS TERMINATION OF REAL PROPERTY LEASE (this “ Termination ”) is executed effective as of the 9th day of February 2017, by and between Meier Properties, Series LLC , a Utah limited liability company (“ Lessor ”), and Superior Auto Body and Paint, LLC , a Utah limited liability company (“ Lessee ”). This Termination shall terminate that certain Lease dated effective May 25, 2012 by and between Lessor and Lessee (the “ Lease ”) covering that certain land and improvements thereon located at 3978 West 12600 South, Riverton, Utah 84065 (the “ Property ”).

 

In consideration of the mutual benefits to be derived from the termination of the Lease, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows:

 

1.        Termination . The parties hereby agree that the Lease shall terminate on February 9, 2017 (the “ Termination Date ”). Lessee covenants and agrees that it will tender exclusive possession of the Property to Lessor on the Termination Date.

 

2.        Release . Lessee and Lessor hereby release each other from any obligations, covenants, agreements, stipulations, and every other liability of a similar or dissimilar nature at law or under the terms of the Lease, or in any manner connected therewith arising after the Termination Date.

 

3.        Governing Law . All matters arising out of or relating to this Termination (including without limitation its interpretation, construction and enforcement) shall be governed by and construed in accordance with the laws of the State of Utah without giving effect to any choice or conflict of law rules.

 

4.        Time of Essence . In all instances where one of the parties hereto is required hereunder to pay any sum or perform any act at a particular time or within an indicated period, it is expressly acknowledged, agreed and understood that time shall be of the essence.

 

5.        Successors and Assigns . This Termination shall inure to the benefit of and be binding upon the parties and their respective heirs, executors, administrators, successors and assigns, including without limitation, any purchaser of the Property.

 

6.        Entire Agreement . This Termination embodies the entire agreement and understanding between the parties relating to the subject matter hereof, and supersedes all prior proposals, negotiations, oral and written agreements, commitments and understandings relating to such subject matter.

 

7.        Severability . If any term or provision of this Termination or any application thereof shall be invalid or enforceable, the remainder of this Termination and any other application of such term or provision shall not be affected thereby.

 

     
 

 

8.        Multiple Counterparts . This Termination may be executed in multiple counterparts, each of which shall have the force and effect of an original, and all of which together shall constitute but one and the same agreement. For purposes of this Termination and all documents, instruments and agreements executed in connection herewith, facsimile or PDF signatures shall be deemed to be original signatures.

 

 

[ Signature Page Follows ]

 

    2
 

 

EXECUTED AND DELIVERED effective as of the date first set forth above.

 

  LESSOR :
     
  MEIER PROPERTIES, SERIES LLC
     
  By: /s/ Annette Meier
    Annette Meier, Manager
     
  LESSEE :
     
  SUPERIOR AUTO BODY AND PAINT, LLC
     
  By: /s/ Justin R. Vincent
    Justin R. Vincent, Manager

 

 

Signature Page to Lease Termination

 

     
 

 

 

NEWS

RELEASE

1583 S. 1700 E. ● Vernal, UT 84074 ● (435)789-0594

 

FOR IMMEDIATE RELEASE

Superior Drilling Products Announces
Preliminary Fourth Quarter 2016 Revenue

 

Also announces divestment of non-core property

 

VERNAL, UT, February 14, 2017 — Superior Drilling Products, Inc. (NYSE MKT: SDPI) (“SDP” or the “Company”), a designer and manufacturer of drilling tool technologies, today announced preliminary unaudited revenue for the fourth quarter of 2016, which ended December 31, 2016. The Company plans to report its fourth quarter and full year financial results for 2016 on March 10, 2017.

 

Preliminary revenue in the 2016 fourth quarter was approximately $2.2 to $2.3 million, similar to the trailing third quarter which had revenue of $2.26 million. The prior year’s fourth quarter had revenue of $2.73 million. Revenue for the full-year 2016 was approximately $7 million. Preliminary results are subject to change pending the completion of the Company’s annual financial audit.

 

Troy Meier, Chairman and CEO of Superior Drilling Products, noted, “We had a strong second half to 2016 as the sales of our flagship tool, the Drill-N-Ream ® , gained greater recognition in the marketplace, thanks to the excellent efforts of our channel partner. The rig count continues to build, providing wind to our back, as the reputation of the Drill-N-Ream and its capabilities support our expanding market share. Our tool is being standardized on the fleets of premier operators and that is driving the interests of others in the field. As a result, we believe that we are entering 2017 in a much better position than last year.”

 

Divesture of Non-Core Real Estate and Debt Reduction

 

SDP also announced the sale of non-core real estate property on February 9, 2017, for net proceeds of $2.5 million. The property had been appraised in November 2016 at $2.5 million and at the time had a net asset value of $3.3 million. As a result, a $0.8 million valuation allowance adjustment was recorded in the fourth quarter of 2016. The cash received from the sale was used to pay down the $2.5 million outstanding related loan balance for the property, reducing total debt to approximately $14.2 million and eliminating about $0.22 million in annual debt service.

 

The property was purchased by Superior Auto Body and Paint, LLC (“SABP”), an entity in which the Meiers have a direct ownership interest, in a related-party transaction.

 

Teleconference and Webcast

 

On March 10, 2017, the Company will release its complete financial results for the fourth quarter and full year 2016 and host a conference call and webcast. The call/webcast will be held at 10:00 a.m. Mountain Time (12:00 p.m. Eastern Time) and can be accessed on the phone at (201) 689-8470 or at the company’s website: www.sdpi.com. A telephonic replay will be available from 1:00 p.m. MT (3:00 p.m. ET) the day of the teleconference until Friday, March 17, 2017. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13653292, or access the webcast replay via the Company’s website at www.sdpi.com, where a transcript will be posted once available.

 

- MORE -

 

     

 

 

Superior Drilling Products Announces Preliminary Fourth Quarter 2016 Revenue

August 11, 2016
Page 2 of 2

 

About Superior Drilling Products, Inc.

Superior Drilling Products, Inc. is an innovative, cutting-edge drilling tool technology company providing cost saving solutions that drive production efficiencies for the oil and natural gas drilling industry. The Company designs, manufactures, repairs, sells and rents drilling tools. SDP drilling solutions include the patented Drill-N-Ream® well bore conditioning tool and the patented StriderTM Drill String Oscillation System. In addition, SDP is a manufacturer and refurbisher of PDC (polycrystalline diamond compact) drill bits for a leading oil field services company. SDP operates a state-of-the-art drill tool fabrication facility, manufacturing for its customer’s custom products and solutions for the drilling industry. The Company’s strategy is to leverage its technological expertise in drill tool technology and innovative, precision machining to broaden its drill tool technology offerings for exploration and production companies, oilfield services companies and rental tool companies.

 

Additional information about the Company can be found at its website: www.sdpi.com.

 

Safe Harbor Regarding Forward Looking Statements

This news release contains “forward-looking statements” within the meaning of the safe harbor provisions, 15 U.S.C. § 78u-5, of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact included in this release, regarding our strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects, plans and objectives of management, are forward-looking statements. The use of words “preliminary,” “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project”, “forecast,” “should” or “plan”, and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Certain statements in this release may constitute forward-looking statements, including statements regarding the Company’s market success with specialized tools, effectiveness of its sales efforts, success of its distribution partner, customer acceptance of the drilling technology and the Company’s effectiveness at executing its business strategy and plans. These statements reflect the current beliefs and expectations of the Company and are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors, SDP’s business strategy and prospects for growth; customer acceptance of the Company’s technologies, the status of the Oil & Gas industry, cash flows and liquidity; financial strategy, budget, projections and operating results; the amount, nature and timing of capital expenditures; the availability and terms of capital; competition and government regulations; and general economic conditions. These and other factors could adversely affect the outcome and financial effects of the Company’s plans and described herein. Therefore, you should not rely on any of these forward-looking statements. Any forward-looking statement made by the Company in this news release is based only on information currently available to the Company and speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

 

For more information, contact investor relations:

 

Deborah K. Pawlowski
Kei Advisors LLC
(716) 843-3908
dpawlowski@keiadvisors.com

 

- END -