SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2016

NOTE 9. SUBSEQUENT EVENTS

On May 12, 2016, the Company and FNCC signed an second amendment to the loan and security agreement changing the dates of the covenant calculations to the following: (a) Fixed Charge Coverage Ratio of not less than 0.10 tested monthly from July 30 through August 31, 2016, then 0.35 for September 30 and October 31, 2016, and then 1.00 for November 30, 2016 and each month thereafter; (b) Debt-to-Tangible Net Worth of not greater than 4.35 tested monthly from June 30 through August 31, 2016 and then 4.25 for September 30, 2016 and each month thereafter; and (c) Liquid Ratio of at least 0.325 tested monthly from June 30 through September 30, 2016 and then 0.40 for October 30, 2016 and each month thereafter.

On May 12, 2016, the Company entered into a distribution agreement with Drilling Tools International, Inc. (“DTI”) establishing DTI as the exclusive distributor of SDP’s patented Drill-N-Ream tool. In exchange for the distribution rights, DTI has agreed to purchase a minimum operating fleet of Drill-N-Ream tools in 2016. DTI’s exclusive rights to provide the Drill-N-Ream to customers in the distribution territory are dependent upon achievement of certain sales objectives. The agreement is a multi-year agreement and will remain in effect subject to the performance targets being met during the term of the agreement.