Greetings. Welcome to Superior Drilling Products, Inc. second quarter fiscal year 2022 financial results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Craig Mychajluk, Investor Relations for Superior Drilling Products, Inc. Thank you. You may begin. Yeah. Thank you. Welcome everyone to our second quarter 2022 earnings call. We certainly appreciate you joining us today. I have joining me, Troy Meier, our Chairman and Chief Executive Officer, and Christopher Cashion, our Chief Financial Officer. You should have a copy of the financial results that were released before the market this morning. You should also have the slides that accompany our conversation today. If you do not, both can be found on our website at sdpi.com. Turning to slide two, I'll point out that we may make some forward-looking statements during the formal discussion as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties are provided in the earnings release, the slides and other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov. I wanna point out also that during today's call, we'll discuss some non-GAAP financial measures which we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP with comparable GAAP measures in the tables accompanying the earnings release, as well as in the slide deck. With that, please turn to slide three, and I'll turn it over to Troy to begin. Troy. Thanks, Craig. Thanks everybody for joining us for our second quarter 2022 call. When we look at the second quarter, I'd like to highlight four items that we spent a good majority of our time and resources doing. One of the things that I think first thing to highlight is the hiring and training of new talent. As you all know, as the business grows, we've got to bring on more personnel and our management team has been doing a good job picking up talent and getting them trained. A lot of the services that we provide here take a special talent, you know, especially working with heat. I wanna tell our team good job for what they've been doing there and that we're building a good strong team here. The next thing I'd like to to make sure that we mention today is the securing of additional opportunity with our legacy customer. That's another biggie that we'll be talking about. Securing the MENA channel partner is another bullet point I'd like us to discuss or talk about today. In the second quarter, we did a lot of repair and maintenance of equipment that, as you well know, over the last few years we haven't had the opportunity to get to that. We spent some resources taking care of the plant and equipment here. I want you to all be aware of that as well. As we look at what we've got going on in 2Q or what we had going on in 2Q, a very, very strong demand for our services. When we look at our legacy side of the business, you know, on the refurbishment of tools, that is very strong and it's growing every day. That demand continues to strengthen both on the, you know, the flagship tool, the Drill-N-Ream, as we see DTI keep a strong presence in the North American markets as they, you know, bring on new customers and they're doing a good job there. We also have the legacy bit refurbishment, as you know, with Baker Hughes and they've been keeping us very busy as they get stronger and stronger in their position in that market. You know, we see improved market conditions as we see rig count go up. You know, of course, there's more of a demand for our services. I think that even though, you know, when we look at rig count, it's nowhere near where it was a few years back. However, the rigs that are there are drilling a lot of footage. Keep that in mind. The demand for tools at the current rig levels is tremendous. You know, be very aware that the footage being drilled per rig is very impressive. The strengthening of our balance sheet, you know, Chris will talk about that. We continue to keep focused on that as we pay down debt and build cash, and he'll talk about that. When we look at the work to improve capacity and demand, we've brought on additional shifts to supply both new tools that we're manufacturing in our machine shop, as well as when we look at the people that we need for that, it's a very talented operator that we're looking for that not only do they program and run the CNCs, but they're very talented in the design side as well. We've been picking up some good talent there, and we continue to look. You know, we have issues like everybody else does in the labor market today, you know, finding talent and getting them aboard. Our team's doing a good job, and they're doing that every single day, trying to find better ways to attract some good talent. We spent a lot of time in the international side of the business. You all know that we signed on a channel partner in the MENA region, the Bin Zayed Petroleum Group. We work with them, you know, on a weekly basis, as our teams are getting to know one another and how we're going to work together to saturate the markets with the Drill-N-Ream technology and other technologies that they may need. It's been a very refreshing opportunity to deal with such a world-class organization. We're very pleased with the individuals we deal with, and we think it's gonna be good, sure, steady steps as we go forward. Keep in mind, you know, we talked about the turnkey process. We've purchased a new machining center. It was a $1 million machining center that we've put into place. We now have it in place. We're making the jigs and fixtures that are going to allow us to do this turnkey process that we've talked about where, you know, right now today, we machine new product, but we don't finish the product. We ship it off to Houston, where it's brazed and hard-faced. This new turnkey process that this machine will be addressing is going to keep those products that we machine and then keep them here so that we can also finish this product and then ship it out. We think it's going to be a great opportunity for this company. Like I say, that machine's in place, and we're running the programs right now, and we'll start turning our first products off of there this month, actually. We're excited for that. With that being said, I'm gonna go ahead and turn it over to Chris to talk about the financials. Chris? Thank you, Troy, and welcome everyone. Let's continue our review by turning to slide four, where we will review our strength and top line. Q2 revenue rose 34% to $4.5 million over the prior year period and grew 10% sequentially. While we are certainly benefiting from the continued improvement in the oil and gas industry, we also equate our success to our manufacturing processes and business development effort that have resulted in obtaining additional business with existing customers. North America revenue was about 89% of our total revenue, which has been increasing thanks to improving industry conditions, the growing demand for other related tool and contract services, and more rigs utilizing our flagship tool, the Drill-N-Ream, which continues to demonstrate its value to operators by improving drilling efficiencies, which serve to reduce oil and gas drilling and production costs. The U.S. rig count continues to increase, leading to a number of customers recognizing the value of our technologies and expertise. The average U.S. rig count of 715 in Q2 2022 was up 82 rigs sequentially, or 13%, and up 264 rigs since last year's second quarter, a 59% increase. We expect this steady trend in North America to continue, and as of last Friday, the U.S. rig count was 764. Over the last year, the international market growth has been at a slower rate compared to our domestic growth due to ongoing pandemic-related restrictions, which have impacted travel and labor recruitment in that part of the world. We are really excited about our new marketing and distribution agreement with Bin Zayed, as Troy mentioned. We believe this will accelerate our international growth. As we previously announced, this agreement provides that Bin Zayed Petroleum will initially purchase the company's existing Middle East Drill-N-Ream tool fleet, and they will purchase new Drill-N-Ream tools as they penetrate the Middle East and North African markets. The company will repair and maintain Bin Zayed's purchased tool fleet and will share in the revenue that Bin Zayed receives from the rental of the tools to the end users. In total, through the purchase of tools and the revenue share model, the company expects to realize roughly $13 million in revenue over the 12-month period beginning July 2022 through its relationship with Bin Zayed. The initial tranche of purchased inventory of approximately $4 million will be recognized in revenue in the third quarter of this year. Market penetration expectations are still being agreed and will be adjusted on an annual basis. Now please turn to slide five to review our tool and contract services revenue, which are both appreciably higher. Total tool revenue, which is the sum of other related tool revenue and tool sales and rental revenue, increased 27% to $2.9 million from the prior year period and was largely driven by higher Drill-N-Ream royalty and repair revenue, given the increase in the end users of the tool. Contract services were up 47% to $1.6 million, as we have leveraged our improved capacity to support our customers' increasing demand. They continue to recognize the value of our high-quality PDC bits and other tool manufacturing capabilities, as well as our PDC bit refurbishment services. On slide six, you will see that our costs and expenses have increased. We are working hard to keep up with the demand for our products in the face of global inflationary headwinds, which specifically have impacted us in payroll expenses, raw materials used in our manufacturing operations, supplies, and repair and maintenance costs. We've also expanded our workforce to accommodate our current growth, with talent being added to quality, safety, and general manufacturing support areas. We continue to demonstrate strong leverage on the SG&A line, which declined 160 basis points as a percent of revenue from the prior year. Depreciation and amortization expense decreased approximately $180,000, or 31% year-over-year, primarily as a result of fully amortizing a portion of our intangible assets and fully depreciating some of our manufacturing center equipment. We remain focused on our cost control efforts but are making the necessary investments to help capture the tremendous demand for our products and services. Inflationary pressures are expected to endure for at least the near term, but our teams are working to optimize processes and build relationships to expand our global presence. While we have had some success in adding talent, labor constraints are still an issue as we move forward and prepare for additional demand. To help combat the inflationary headwinds around materials and labor, we implemented customer price increases effective July 2022 and expect to make further pricing adjustments this fall and into next year. Now let's go to slide seven, and we see that our bottom line and Adjusted EBITDA were pressured by these increased costs as we just noted on the previous slide. Net loss for the quarter was near breakeven, slightly negative. Adjusted EBITDA of $831,000 was 18% of sales. Now moving to slide eight, we see that our balance sheet remains strong with reduced debt and stable cash levels. For the first half of this year, our cash balances exceeded our debt. Cash generated from operations for the year-to-date period was $1.4 million, compared with $335,000 in the year-ago period, largely reflecting the improvement in net income. We have utilized some of our cash to support an increasing capital plan, which to date, $1.2 million spent in the first six months of 2022. This reflects the down payment of roughly $300,000 to secure a new CNC machine in Q1 of this year, an increase in maintenance and capacity improvement projects, and an increase in our Middle East Drill-N-Ream tool fleet. CapEx for the comparable period of 2021 was $55,000. We expect our increased level of capital spending to continue into the rest of this year and total approximately $2-$2.5 million over the last two quarters. Troy will review our capital priorities in just a few moments as he goes over our outlook. Total debt of $2.4 million was 2% lower from the end of calendar year 2021. We have sufficient cash and expect to pay off our Hard Rock note, our final payment on our Hard Rock note, I might add, of $750,000. We'll make that payment in October, and that will retire this portion of our debt. In addition, with the cash from stage one Drill-N-Ream inventory sale to Bin Zayed, we will consider retiring other high-interest rate debt. Now let's continue on slide nine and take a look at our guidance going forward for the rest of this year. We're guiding 2022 revenue of between $22 million-$25 million. As a point of reference, I might add in 2021, we did $13 million in revenue for the year. We believe SG&A expenses will be between $7 million-$7.3 million. We believe Adjusted EBITDA will be between $6 million-$8 million. Our capital expenditures for the year will be between $3 million-$4 million. As we would like to note, in Q3, as we mentioned, we'll be selling roughly $4 million of our existing inventory in the Middle East of Bin Zayed Petroleum. We expect that to happen this quarter, Q3. With that sale of tools, our revenue in Q3 would be between $8 million and $9 million. Adjusted EBITDA in Q3 would be between $3.5 million and $4 million. Now with that, I'm gonna turn the presentation back over to Troy as he goes through our outlook and opportunities. Troy? Thanks, Chris. As we look at our opportunities that we see throughout the remainder of this year, like I said earlier, there's a tremendous need for our legacy skill set, what we've been doing, and we're building out that part of our business. When you look at the facility here, we're increasing our braze capacity. We're building new braze stations. We're moving some equipment from one building into another as we find more efficiencies and teaming up with the braze stations from the Drill-N-Ream and then into the drill bit side of things. You know, we're gonna see some CapEx spending there. We're looking at bringing on another large five-axis machining center to support the activities that we have there. You're all aware that we've got several large, we call them five-axis, but they're seven and actually nine-axis machining centers. We're gonna be duplicating the two large ones due to the backlog and WIP that we have on those machines. It'll also give us a good backup machine in case something was to happen on these two main machines. There'll be some CapEx spending there as well. You know, with that, when we bring these machines in, we also have got to do some work to our foundations, you know, to support these large machines and that allow us to keep the accuracy that we keep. We, you know, do modifications. We cut out the existing floor and then lay in a really good support structure for these machines. We've got to get a refurbishment, a service center done and running in the MENA in Dubai. Our team is very focused on that. We're identifying the equipment that we've got to get purchased and get over there and get installed, as well as getting a workforce over there trained to refurbish the tools, inspect and refurbish along the same lines as what we do here. You know, of course, that'll start off being for the Drill-N-Ream tools, but there's a lot of drill bits that get run over there as well. I'm sure that'll come in right behind the Drill-N-Reams, the need to also service those type of tools. We'll also, you know, we expect the drill and ream demand to increase, which is wonderful. We're making sure we have the equipment and the personnel in place to service that demand. Keep in mind the turnkey process that we've talked about. We expect that to be up and running, and by the time we get to Q4, it should be a meaningful addition to the services we provide here. The contract services, like we've said, we've got a massive demand for that service. Lots of opportunities. We've got to continue to expand our manufacturing capabilities. With that, again, I think the biggest part of all this expansion is going to be the hiring and training of qualified personnel. We'll continue to get creative on how we attract a high-end workforce and retain this workforce. With that being said, I'd like to turn it over to Q&A. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question is from John Stoltzfus with Oppenheimer & Company. Please proceed. Thank you very much. Nice quarter, gentlemen. I'm curious about if you can provide an update on Strider. Where is it in the other tools that you have? Are they, some of them ready to go into distributorship? And then the second question which fits in with that, fourth quarter typically in the U.S. is slower for you. I would imagine MENA's business would offset a bit of that. But with the pace of drilling, fourth quarter may not be that weak. I'm just curious as to what you're seeing at this point in time versus the fourth quarter. Okay. Regarding your first question on the Strider, you know, I don't talk much about that tool just because we kinda put that on the back burner in 2020. You know, we started off Q1 of 2020, and we were really excited about the Strider. Sold our first four tools, and then you know what happened. Since that time, we've had a very high-end customer that took those tools that we sold in Q1 of 2020 and actually ran them in Q1 of this year, and they performed very, very well. We've since brought that product in. Everybody that we had that was involved in that product line, when we did our reduction in force, we lost those individuals. It was a pleasant surprise for us. We've now got a manager in that department who has taken that on. We refurbished those tools that came in, that performed well, and we've put them back out, and they've performed well again. We know that there's a need for that product line, and we are addressing it. We haven't put anything in our budget for that, although we are doing it on a small basis. We've now gone to, we're moving that product line. Instead of having an elastomer power section is what we started that design with many years ago. The relining and the elastomer in that product line has gotten very expensive. We're moving that to a metal-on-metal. It's very exciting for us. The metal-on-metal, we believe, will last at least 10 times longer than the elastomer that were used. We're just now modifying those power sections. We've got four of those that we're going to be getting out here over the next month. We're excited to get those out and get them in the field and see some wonderful performance on those. We'll probably be talking a lot more about that in our Q3 in November. Really, it's gonna be Q4 where we start to see these tools getting out and getting multiple runs on them. Then we start to look at addressing a really good buildup in that side of the business and starting in Q1, Q2 of next year. Regarding Q4 and the typical slowdown that you see there, you know, we're not expecting that at all. You know, in the past, what would really affect the Q4 is the fact that the drilling efficiencies were becoming so great from year- to- year that, you know, these companies, the E&Ps, would say, "We're gonna drill 100 wells this year." They were looking at wells that may take them 25 days from spud to TD. They'd plan that out throughout the year, and then they'd find out that they'd have that drilled up because of the efficiencies. You know, it's drilled up by September, October. Those gains kept happening year after year after year. What we're seeing now is the wells are being drilled very, very efficiently, but we're not seeing those days come off of wells that we've been seeing in years past. Even though they're getting better at it and more efficient, I think we're reaching the point where we can only put pipe in the hole so quick. The efficiencies of drilling wells are being recognized in other places than just days off of wells. I don't think we'll see budgets drilled up come October. I think we'll continue to see some good activity throughout Q4. You know, when you look at the rig count, you see it's trying to get pushed towards that 800 mark. I think one of the issues that you have with that is, you know, what we see here past 750 now, it seems like, you know, we go up a few rigs, and then we come down a few rigs. I know when you're talking to the service, the servcos, when these E&Ps wanna put up more rigs, those hands are coming from the service companies. It's a trade-off now of if you want the tools, quit taking the hands, right? You gotta have the hands to stand up the rigs. It's a really interesting dynamics where we're at right now with the rigs and the servcos. I think we're gonna see a strong Q4 in the drilling activity, and we plan on participating in that with, you know, some of the other things that we've been talking about with the new product line adoptions that we're bringing on and the new services that we're adding. I hope that answered your question. You did. That was a great lot of color. I really appreciate that. Just one little follow-up, and that is the DUC inventory that was usable seems to have, you know, they've worked it down. All new production pretty much is coming from fresh greenfield drilling or something close to that. Which would imply, just to keep up with current production, you'd have to have either longer laterals or more wells. I'm just trying to get a sense of what you see along those lines. You know, it seems to me like a 2-mile lateral is commonplace now. You know, it used to. When we first started, you know, getting out there, you know, we were doing 1,000-foot laterals, and then 2,000-foot laterals. Now we do laterals that follow property boundaries in a square U. But it seems to me that, you know, the talk that we hear is a lot about, you know, these 2-mile laterals. And I'm not quite sure how much further they can go to be productive. I know there's a. You know, when you get to the toe of the well, which is the end of the lateral, I don't know if you get as much energy from your frack as you do at the heel. We may not have the efficiencies and not get the return if the well gets too long. You know, I'm not an expert in that field, but just from talking with people, that's what I hear. Our next question is from Benjamin Piggott with EF Hutton. Please proceed. Thanks, guys. Nice quarter. Just on Bin Zayed, if we can peel that back a little bit more. I mean, it looks like margins will explode to the upside Q3 as that transition occurs. Just can you talk a little bit more about the longer term implications to just the capital intensity and the margin profile of the business as the Middle East looks a lot more like North America? Then a follow-on. You mentioned that there could be a nice opportunity to have a drill bit refurbishment business in the Middle East as you open up the center in Dubai. Maybe just, you know, define the fairway or how big of an opportunity could that be for the company over the next couple years? Thanks. Okay. All right. When you look at the opportunity that we believe we have with Bin Zayed Group, it's. You know, they're new into the upstream, right? They sell oil, and they're now entering into the upstream market. They're as they go into this market, they're looking for a lot of support from us, and we're looking for a lot of support from them. You know, they have the contacts in these, you know, oil and gas companies that we didn't have. You know, we didn't have those contacts up in these companies that we could just go and call on, like maybe we could do here in the U.S. That's always been a struggle for us, you know, being foreigners over there and trying to break into a market. They're very much into that market, as you're well aware. When they look at the services that they expect from us, you know, not only are they looking at, you know, the Drill-N-Ream tool to be one of those first tools that are getting them into the service side or the upstream side of the market, they also have needs for products in their side of the things, you know, in the production and the downstream side of things that they would like us to look at as well. I'm not quite sure what all those products are, but they're very interested in our machining talents that we have here. I know they have mentioned that multiple times, as we look past just the Drill-N-Ream and the drilling tools that we may be able to provide them. They have a directional drilling team, a very small directional drilling team that they're going to expand on. As you well know, when a directional drilling team goes out, they need bits, motors, rotary steerable systems, and all that stuff serviced. As we set up our service center in Dubai, we'll be looking at all of those things. You know, we know what we're going there for, is to service the Drill-N-Ream, but we also know there's a lot of additional opportunities. In our first trip over into that region, this will touch on your second question. Our first trip over there, I wanna say it was probably 2018. It might've been 2018. No, I think it was around 2016. It was over there. When we went over there, it was to look at the drill bit refurbishment market for ADNOC, Abu Dhabi. At the time, you know, we looked at that, and we couldn't really justify going over there and setting up a facility just for the volume that we'd be getting, you know, just from the UAE. Now, you know, as we look at the volume that we could be getting from the MENA region, it looks a lot more appealing. As we set up this facility that we're looking to have open by year-end is our goal, and I'm hoping we can have it up and going by the first week in December. You know, we still have a lot of issues we're dealing with with the supply chain and logistics. You know, putting equipment in sea cans and trying to get it over there. There's nobody can give you a timeframe on when that sea can will arrive at its destination. It's just kind of. You just kind of got to go along and hope that it gets there in some meaningful manner. We're trying to fabricate the stuff we can over there and try not to get stuff on the sea can. When we open up that service center, we're designing things in a way that we know there's gonna be additional products. When we look at amperage, when we look at, you know, cleaning stations, when we look at inspection stations, this whole facility is being laid out based upon other tools and equipment coming in there. Did that answer your question, Ben? Yeah. That's helpful. Just to try to dig in on the margins a little bit more, just conceptually, should the margins as you expand the opportunity with these folks in the Middle East, should it be better than the margins in North America or similar, or maybe it's not as good? Just any color on kind of profit profile as incremental growth comes from part of the business. You know, I think when you look at the margins, you can consider them to be about the same. When we look at, you know, the rental of products over there is a little higher. We get a little more per foot, but it costs us a little more to do business over there. I think it's gonna be a wash. We expect good margins on the products that we do over there, but I think they're gonna be really close to what we get here. Got it. Thanks, Troy, and again, congrats. Thank you. Our next question is from John Baer with Ascend Wealth Advisors. Please proceed. Thank you. Good morning, Troy and Chris. Good morning. Good morning, John. How are you? Given the strong demand on your services as well as the tools and so forth, I'm wondering how that plays into your pricing environment and whether you're able to, you know, raise prices, you know, to accommodate that. We are. You know, as Chris mentioned, we had a price increase of 10% in July on the Drill-N-Ream service part of our business, and we expect a price increase on the bit refurbishment side of our business in September, is what we're shooting for. Yes. You know, everybody understands that they're going through the same situation as we are, you know, with the price of steel, the price of soda, the price of cutters. Everything that we use has gone up, and they're sharing that. What we're charging, it's going on to the end user. The price of drilling a well is definitely going up, and I think you're probably very aware that, you know, the E&Ps have talked about how, you know, the price of drilling a well, they expect to continue to rise. Right. Are you seeing any leveling off in general, component prices or metals or so forth? Metals, we are. They peaked around November, December timeframe. You know, we're starting to see a little bit of easing on metals pricing. I don't know how that's gonna play into, you know, this third and fourth quarter. It's not a bunch. But when you look at, you know, the raw metals per ton, it's coming down. I wanna say it peaked at $2,000 a metric ton, sometime back in October, November timeframe, and I think we're back down to about $800. It's come down quite a bit from the foundry, but we're not seeing that big of a price decrease from the supplier. Okay. The last couple of years, you'd mentioned that you were having trouble getting folks into the Middle East. How's the situation there? Has that been alleviated somewhat to where you are able to get your folks over there more easily? Well, in Dubai, we can get people in and out of there. You know, they've got less restrictions than, say, Kuwait. Kuwait was where we were really strong pre-COVID. It's where we were making our best headway was in Kuwait. Then that locked down pretty hard. I think it's just not for our services. Keep in mind that a lot of these wells are being drilled with the support of expats, right? When they went into lockdown mode, some of the expats were over there, had to stay in there a lot longer than what they were planning. There's some concerns with people going over there and maybe getting involved in another lockdown where you maybe have to stay longer than what you wanted. I think that's why we're not seeing a big increase in rig count over there is just the fact that it's just not real desirable right now with you know the new world of pandemics. We are seeing you know like what you've seen in the news here lately you know where they're easing up on you know on what happens with COVID and you know we're starting to see a lot of easing here. I hope that... It seems like the UAE follows really close to what happens here in the US and then when you get into countries like Kuwait, they may follow a little bit later. With the exception of getting materials in and out of there and sea cans in and out of there, I don't think we'll have an issue getting personnel in and out of Dubai. I think that we're gonna be okay with that, you know, for training purposes. Remember, you know, we have a whole drill and ream fleet over there. As it gets used, we gotta get it repaired. We're not gonna ship it back here to the States like we've done in the past because you just can't rely on that at all. There's tools that need to be repaired, and they're building up, and we've gotta get it done. I think we'll get a facility put in place over there and get people moving in and out of there as we hire and train people over there to do this service work. Okay, great. One last question, and I've asked this in the past. What opportunities do you see perhaps in South America? There seems to be. You know, there's a robust industry over there, Brazil and of course Guyana now with that. Do you see any opportunities there or looking at that, maybe a channel partner or whatever that can help you break into that market? We have. We've talked to several companies that would like to rep the Drill-N-Ream down there. One of the issues we have with that is we don't have a service center down there. You know, the Drill-N-Ream, one of the reasons it's a successful product is we really keep tight reins on the procedures and processes that are followed after it's run. It goes through a really rigorous inspection process and then repair process, and we just don't hand that off to anybody. We have been in talks with companies that would like to support it. Our bandwidth just hasn't allowed us to get too aggressive with it. You know, when companies run a tool down there, which we've done, and they've worked very well, then they're faced with shipping the tool back to the States and having us repair it, and it's, you know, it kills that opportunity. We're gonna be sending some tools down to Guyana on a test well down there for a large company. I think we'll be shipping those tools out this month actually. We can update you on our next earnings call on that. Great. Thanks very much. Good luck. You bet. Our next question is from Matthew Reiner with Adirondack Funds. Please proceed. Hi, guys. Hi, Matt. Hey. My first question is on the capacity. You know, obviously you're making some big investments in it this quarter. How much or I guess what can you share with us about, like, what your current capacity is and what these extra investments will add to it? Okay. Well, our current capacity, what it is, we've got machines, you know, that's not what's holding our capacity back. It's been the human capital side of things. I say that, but we're going to be investing in machines as well because of the opportunity for turnkey processes and also to facilitate more capacity with units coming through. That probably sounds real wishy-washy, but what I mean is if you look at our B750, you know, if you look at the machines that make the Drill-N-Ream, we have two machines that produce those tools, and they're very unique machines. The large tools, we only have one machine that produces those tools. Once you start getting over a 10-inch size range, they all get made on this one machine. It's called the B750. We're gonna duplicate that. Our goal is to get that duplicated in place, you know, before year-end. We'd like to have that done. What that does is it supports the 750 that we currently have. If it goes down for any reason, whether it's operator error or maintenance, we can. We're not stuck with hurting or increasing our backlog or delivery time. That machine can be run simultaneously with an operator running both machines. That's why I said we're building another machine, but the same operator can run both machines. Mm-hmm. That's a big benefit. The human side of capital that we're looking at. Well, let me go back to also your turnkey process. That machine there that we've put in place. Right now, we have one manager that's working all the bugs out and designing and manufacturing the jigs and fixtures that we need for this turnkey process. Once that gets going, now we're going to run three shifts. We're looking at going 24/7, and so the people that will be supporting that machine is going to be you know the growth in our human capital. If you look at the current machines that we have, we run what we do run. When we get into second and third shift, we're running about 40% capacity on those machines. That's because we don't have the operators standing in front of all those machines. We have more operators on day shift that have been doing that, and it's been handling the workload that we've had to this point. The demand has become so strong that we now gotta look at running all those machines and putting people in front of them, looking more on a 24/7 on those as well. Okay. Our capacity will increase a bunch on the existing equipment that we have by putting more people in front of them on more shifts. We also will be increasing our capacity by the additional B750 that we're looking at, as well as the big Mazak turning center that we just put in place. We're gonna be increasing our capacity quite a bit. Yeah. Okay. I guess, and maybe this is a question for Chris, but looking at, from a, you know, a free cash flow perspective or whatnot as we look out, you know, at least for the second half of 2022, you know, clearly with the large order in the third quarter, you know, your Adjusted EBITDA, you know, if we even go at the midpoint of that's a fairly healthy Adjusted EBITDA. You're also looking at, you know, roughly $6 million in CapEx in the back half. I'm assuming some of that is gonna get eaten up by the CapEx. Then I was curious as to how much gets eaten up by working capital or. However you wanna answer that, either if you could tell me how much free cash flow you expect to generate from in the third quarter in the back half, or if you wanna approach it from a working capital and break it down that way. Either way is fine for me. Yeah. Just think in terms of doubling our existing cash balance. Another way of saying that is we're about $3 million right now, June 30th. As you just noted, we've got the large order in Q3, and we'll be collecting on that. Just as a point of reference, that's existing. Those are existing tools, fleet of tools that we have on our balance sheet, so that's monetizing an asset. That sale will go right to the cash line. We do have some CapEx that we're putting in place. That’s why I say, you know, just think in terms of doubling the cash balance from three to six by the end of the year. Okay. You were saying that you may so besides the Hard Rock note, you may look at taking out some higher interest rate debt. I assume some of that. Yeah. That extra- Yeah. Cash can go towards that. Yeah. How high is the interest rate on that extra debt? It's prime plus and with some fees, it's about 10.5 right now. Okay. All right. That's why we'll probably take that out. It's not much money. It's about $1 million. Okay. We'd like to pay that off. Yep. Okay. All right. Well, that's my questions for now. Thanks, guys. Thank you. You bet. As a reminder to star one on your telephone keypad if you would like to ask a question. Our next question is from Brett Davidson, Private Investor. Please proceed. Good morning for you guys. Good afternoon here out on the East Coast. I'm relatively. Good morning. New to the company and, pretty ignorant as far as, operations, excuse me, and so on. You'll have to excuse me if some of these are a little simplistic on my side here. Cost of goods sold. I believe you indicated that the equipment that was delivered in the Middle East had already been manufactured. With existing equipment, how is that going to impact cost of goods sold in this quarter? Favorably. Our carrying value on that equipment was, had been depreciated quite a bit. Those carrying costs will become COGS when we monetize this asset. It'll be an improvement to the margin, gross margin. Okay. Would you have a ballpark idea, maybe, 25% appreciated or? Yeah, something like that. All right. Yeah. Good enough. I'm not too interested in the precision. All right, the machine tools you guys have on order and how are the delivery times looking on those? Are you guys getting the stuff, you know, in a timely fashion, or has that been impacted by supply chain? You know, we've been very fortunate. Our procurement group, our steel purchasing is, you know, we have a very good team there that's been out in front of this. We're continually buying at good prices and looking ahead, you know. We're constantly looking for opportunities to buy, you know, mill runs. Not a full mill run, but what's left of a mill run. You know, we look at mills, high-end mills globally, whether it's, you know, out of South Korea or Ohio or Brazil, or Spain, Germany. We tap into all of them. Our team has done a fantastic job there. The steel hasn't been an issue. We've had a couple scares, but it hasn't. Nothing has tripped us up. The supplies, when you look at the PDC cutters, that's the next big component and probably most expensive, the diamond cutters we put in products. We've been very fortunate there that we've kept, you know, enough suppliers of that product online so that again, we've had a couple scares, more so in 2021 than we have this year. The toughest thing for us when we try to predict a manufacturing time is probably. Well, the hardest area for us is definitely the Middle East. You know, how do we get things over there? We can always put it on a jet at a very high expense. Sea-Cans are pretty much out of the question right now because of the backup. We haven't been hurt with the supply chain, but it has caused a lot of scares, let me put it that way. We haven't been hurt with it yet. The supply chain, the hang-up is all live bodies with pulses then. It's the big issue. Right. It just takes a lot more effort on our part. When you go to place an order, this supplier doesn't have it because of these reasons, and so we've got to start really, you know, kicking bushes and trying to find what else we can get in a timely manner. Of course, you know, you've got to increase your inventory, which isn't something we like to do, but we do. Switching back to the production side. The existing equipment was sold, that's already booked. Are you currently producing products for the Middle East customer for shipment this quarter or at some point next quarter? Is additional production already, you know, in place? No. We have. There's some tools here that we plan on selling in another stage of this agreement that we need to finish, just putting the cutters on and then getting them over there. We were looking at that in stage three. Most of those tools have been done and sitting over there. As they get their feet under them and start calling on customers, I'm quite certain we'll have a demand for new drill and ream tools. Right now, you know, as we prepared for this, we built up an inventory. We've got them in place in various countries and, you know, there was a method to our madness, and it's very beneficial for us now. For the, you know, the remaining portion of this contract, how do you see it playing out? I mean, is it gonna start production in fourth quarter for the add-on tools, or it, you know, might extend out further before you guys need to step up and start producing new equipment. Think of the three ways that we get that contract, how we get our revenue from that contract. We still get a percentage of every time the tools run. We get our percentage of that revenue. When we repair those tools over in the Middle East, we get paid for that. Then on top of that, when we get into next year and you might see a little bit this year of new tool purchases, but we're not banking on it. When you start getting into Q1, Q2 of next year and they've got their customer base growing, that's when we see that there's gonna be a need for new products. Got it. You guys got a little cushion before you have to worry about an onslaught of, you know, new revenue from new production. Correct. Again, you heard me mention earlier the additional B750 machining center. That's also what that's for. Got it. All right. Thanks so much. I appreciate the time. Hey, thank you, Brett. You bet. Thank you. We have reached the end of our question and answer session. I would like to turn the conference back over to management for closing comments. Hey again. Thanks everybody for joining us and we appreciate the support that we get from you. We're looking forward to visiting again in November regarding Q3, and we've got a lot of opportunity ahead of us, and we're gonna do our best to capitalize on it. Thanks again. We appreciate you. Thank you. Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.