# EDGAR Filing Document

**Accession Number:** 0001699136
**File Stem:** 0001104659-23-002772
**Filing Date:** 2023-1
**Character Count:** 176119
**Document Hash:** a9172b9f08c89dec7b959a7efea44979
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001104659-23-002772.hdr.sgml**: 20230110

**ACCESSION NUMBER**: 0001104659-23-002772

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 20

**CONFORMED PERIOD OF REPORT**: 20230110

**ITEM INFORMATION**: Regulation FD Disclosure

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230110

**DATE AS OF CHANGE**: 20230110

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Cactus, Inc.
- **CENTRAL INDEX KEY:** 0001699136
- **STANDARD INDUSTRIAL CLASSIFICATION:** OIL & GAS FILED MACHINERY & EQUIPMENT [3533]
- **IRS NUMBER:** 352586106
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38390
- **FILM NUMBER:** 23521676

**BUSINESS ADDRESS:**
- **STREET 1:** 920 MEMORIAL CITY WAY
- **STREET 2:** SUITE 300
- **CITY:** HOUSTON
- **STATE:** TX
- **ZIP:** 77024
- **BUSINESS PHONE:** 713-626-8800

**MAIL ADDRESS:**
- **STREET 1:** 920 MEMORIAL CITY WAY
- **STREET 2:** SUITE 300
- **CITY:** HOUSTON
- **STATE:** TX
- **ZIP:** 77024

?xml version="1.0" encoding="utf-8"?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 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): January 10, 2023**

**Cactus, Inc.**

(Exact name of registrant as specified in its charter)

---

| | | |
|:---|:---|:---|
| **Delaware** | **001-38390** | **35-2586106** |
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |

---

**920 Memorial City Way, Suite 300**

**Houston, Texas 77024**

(Address of principal executive offices)

(Zip Code)

**(713) 626-8800**

(Registrant's telephone number, including area code)

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))

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Class A Common Stock, par value $0.01 | WHD | New York Stock Exchange |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company&nbsp;&nbsp;&nbsp;&nbsp;◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

**Item 7.01 Regulation FD Disclosure.**

On January 10, 2023, Cactus, Inc., a Delaware corporation (the "Company") issued a press release announcing the commencement of an underwritten public offering of shares of the Company's Class A common stock, par value $0.01 per share, by the Company. A copy of this press release is furnished with this Current Report on Form 8-K as Exhibit 99.4 and incorporated into this Item 7.01 by reference.

The information in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.4, is being furnished, and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

**Item 9.01 Financial Statements and Exhibits.**

(a) Financial Statements of Businesses
Acquired

Attached as Exhibit 99.1 hereto are the audited consolidated financial statements as of and for the years ended December 31, 2021 and 2020 of HighRidge Resources, Inc.

Attached as Exhibit 99.2 hereto are the unaudited interim condensed consolidated financial statements for the nine months ended September 30, 2022 and 2021 of HighRidge Resources, Inc.

(b) Pro Forma Financial Information

Attached as Exhibit 99.3 hereto is the unaudited pro forma condensed combined financial information of Cactus, Inc. and subsidiaries for the year ended December 31, 2021 and as of and for the nine months ended September 30, 2022.

(d) <u>Exhibits</u>.

---

| | |
|:---|:---|
| **Exhibit No.** | **Description** |
| [23.1](tm232262d2_ex23-1.htm) | [Consent of Deloitte & Touche LLP](tm232262d2_ex23-1.htm) |
| [99.1](tm232262d2_ex99-1.htm) | [Audited consolidated financial statements as of and for the years ended December 31, 2021 and 2020 of HighRidge Resources, Inc.](tm232262d2_ex99-1.htm) |
| [99.2](tm232262d2_ex99-2.htm) | [Unaudited interim condensed consolidated financial statements for the nine months ended September 30, 2022 of HighRidge Resources, Inc.](tm232262d2_ex99-2.htm) |
| [99.3](tm232262d2_ex99-3.htm) | [Unaudited pro forma condensed combined financial information of Cactus, Inc. and subsidiaries for the year ended December 31, 2021 and as of and for the nine months ended September 30, 2022](tm232262d2_ex99-3.htm) |
| [99.4](tm232262d2_ex99-4.htm) | [Press release dated January 10, 2023](tm232262d2_ex99-4.htm) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

**Signatures**

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.

---

| | | |
|:---|:---|:---|
|  | **Cactus, Inc.** |  |
| January 10, 2023 | By: | /s/ Stephen Tadlock |
| Date | Name: | Stephen Tadlock |
|  | Title: | Vice President, Chief Financial Officer and Treasurer |

---

## Exhibit 23.1

**Exhibit 23.1**

**CONSENT OF INDEPENDENT AUDITOR**

We consent to the incorporation by reference in Registration Statement No. 333-263106 on Form S-3 of Cactus, Inc. of our report dated November 8, 2022, relating to the financial statements of Highridge Resources, Inc. included in this Current Report on Form 8-K dated January 10, 2023.

---

| |
|:---|
| /s/ Deloitte & Touche LLP |
| Houston, Texas |
| January 10, 2023 |

---

## Exhibit 99.1

**Exhibit 99.1**

**HIGHRIDGE RESOURCES, INC.**

Consolidated Financial Statements

December 31, 2021 and 2020

(With Independent Auditors' Report Thereon)

**HIGHRIDGE RESOURCES, INC.**

**Table of Contents**

**Page**

---

| | |
|:---|:---|
| Independent Auditors' Report | 1 |
| Consolidated Balance Sheets | 3 |
| Consolidated Statements of Operations and Comprehensive Income | 4 |
| Consolidated Statements of Stockholder's Equity | 5 |
| Consolidated Statements of Cash Flows | 6 |
| Notes to Consolidated Financial Statements | 7 |

---

![](tm232262d2_ex99-1img001.jpg)

**INDEPENDENT AUDITOR'S REPORT**

The Board of Directors

HighRidge Resources, Inc.:

**Opinion**

We have audited the consolidated financial statements of HighRidge Resources, Inc. and subsidiaries (the "Company"), which comprise the consolidated balance sheets as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive income, stockholder's equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

**Basis for Opinion**

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

**Responsibilities of Management for the Financial Statements**

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date that the financial statements available to be issued.

**Auditor's Responsibilities for the Audit of the Financial Statements**

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

· Exercise professional judgment and maintain
 professional skepticism throughout the audit.

· Identify and assess the risks of material
 misstatement of the financial statements, whether due to fraud or error, and design and perform
 audit procedures responsive to those risks. Such procedures include examining, on a test
 basis, evidence regarding the amounts and disclosures in the financial statements.

· Obtain an understanding of internal control
 relevant to the audit in order to design audit procedures that are appropriate in the circumstances,
 but not for the purpose of expressing an opinion on the effectiveness of the Company's
 internal control. Accordingly, no such opinion is expressed.

· Evaluate the appropriateness
 of accounting policies used and the reasonableness of significant accounting estimates made
 by management, as well as evaluate the overall presentation of the financial statements.

· Conclude whether, in our judgment, there
 are conditions or events, considered in the aggregate, that raise substantial doubt about
 the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

![](tm232262d2_ex99-1img002.jpg)

November 8, 2022

**HIGHRIDGE RESOURCES, INC.**

Consolidated Balance Sheets

December 31, 2021 and 2020

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $76340540 | $43511050 |
| &nbsp;&nbsp;&nbsp;Restricted cash | 162000 | 162000 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net (note 2e) | 42629169 | 19431614 |
| &nbsp;&nbsp;&nbsp;Inventory (note 2f) | 61541692 | 76642568 |
| &nbsp;&nbsp;&nbsp;Income taxes receivable |  | 25810 |
| &nbsp;&nbsp;&nbsp;Notes and interest receivable - related party (note 6) | 1587592 | 1512517 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 3574089 | 2465127 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 185835082 | 143750686 |
| Property and equipment, net (note 4) | 128482050 | 133624234 |
| Intangible assets, net (note 5) | 3113139 | 3407344 |
| Security deposits | 54555 | 100235 |
| Notes receivable | 48734 | 38100 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $317533560 | $280920599 |
| **Liabilities and Stockholder's Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $25745613 | $7297440 |
| &nbsp;&nbsp;&nbsp;Accounts payable – related party | 4857216 | 3046438 |
| &nbsp;&nbsp;&nbsp;Income taxes payable | 668978 |  |
| &nbsp;&nbsp;&nbsp;Accrued liabilities | 14419459 | 10987927 |
| &nbsp;&nbsp;&nbsp;Current portion of capital leases (note 8) | 741964 | 664263 |
| &nbsp;&nbsp;&nbsp;Deferred revenue | 8061660 | 9230194 |
| &nbsp;&nbsp;&nbsp;Customer deposits | 5473634 | 5136102 |
| &nbsp;&nbsp;&nbsp;Other current liabilities | 449913 | 449913 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 60418437 | 36812277 |
| Capital lease liability – long term (note 8) | 1004778 | 1276978 |
| Deferred rent payable | 47608 | 65348 |
| Notes payable - related party (note 7) | 396329075 | 368214479 |
| Long-term debt (note 7) |  |  |
| Long-term accrued interest | 589987 | 421803 |
| Deferred compensation | 17005905 | 8641034 |
| Deferred tax liability (note 10) |  | 578508 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 475395790 | 416010427 |
| Commitments and contingencies (note 9) |  |  |
| Stockholder's equity: |  |  |
| &nbsp;&nbsp;&nbsp;Common stock ($.01 par, 1,000 shares authorized, 288 shares issued and outstanding) | 3 | 3 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 144542757 | 144542757 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (303353870) | (280307539) |
| &nbsp;&nbsp;&nbsp;Accumulated other comprehensive income | 948880 | 674951 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholder's equity | (157862230) | (135089828) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholder's equity | $317533560 | $280920599 |

---

See accompanying notes to consolidated financial statements.

**HIGHRIDGE RESOURCES, INC.**

Consolidated Statements of Operations and Comprehensive Income

Years Ended December 31, 2021 and 2020

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Revenue: |  |  |
| &nbsp;&nbsp;&nbsp;Product sales | $202483523 | $135165167 |
| &nbsp;&nbsp;&nbsp;Field service and installation | 15231491 | 11859646 |
| &nbsp;&nbsp;&nbsp;Distribution, reel sales, rentals and other | 17864247 | 14106492 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenue | 235579261 | 161131305 |
| Costs and expenses: |  |  |
| &nbsp;&nbsp;&nbsp;Cost of product sales, exclusive of depreciation and amortization | 112128405 | 68187168 |
| &nbsp;&nbsp;&nbsp;Cost of field service and installation, exclusive of depreciation and amortization | 14923467 | 10825599 |
| &nbsp;&nbsp;&nbsp;Cost of distribution, reel sales, rentals and other, exclusive of depreciation and amortization | 13979656 | 8808959 |
| &nbsp;&nbsp;&nbsp;Research and development | 8394184 | 8532081 |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 26704376 | 25917833 |
| &nbsp;&nbsp;&nbsp;Sales and marketing | 14935467 | 13027884 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 15792792 | 15520792 |
| &nbsp;&nbsp;&nbsp;(Gain) Loss on sale of property and equipment | (101895) | (8426) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other costs and expenses | 206756452 | 150811890 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income from operations | 28822809 | 10319415 |
| Other income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense, net | (51024316) | (53873483) |
| &nbsp;&nbsp;&nbsp;Foreign currency exchange loss | (80363) | (164589) |
| &nbsp;&nbsp;&nbsp;Other income, net | 65291 | 47435 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income (expense), net | (51039388) | (53990637) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes | (22216579) | (43671222) |
| Income tax expense (benefit) | 829752 | (9078918) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss | (23046331) | (34592304) |
| Other comprehensive income (loss), net of tax: |  |  |
| &nbsp;&nbsp;&nbsp;Foreign currency translation adjustments | 273929 | 936818 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive loss | $(22772402) | $(33655486) |

---

See accompanying notes to consolidated financial statements.

**HIGHRIDGE RESOURCES, INC.**

Consolidated Statements of Stockholder's Equity

Years Ended December 31, 2021 and 2020

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common stock** | **Common stock** | | | | |
|  | **Shares** | **Amount** |<br>**Additional**<br>**paid-in capital** |<br>**Accumulated**<br>**deficit** | **Other**<br>**comprehensive**<br>**income** | **Total**<br>**stockholder's**<br>**equity** |
| Balance, January 1, 2020 | 288 | 3 | 144542757 | (245715235) | (261867) | (101434342) |
| &nbsp;&nbsp;&nbsp;Foreign currency translation adjustment |  |  |  |  | 936818 | 936818 |
| &nbsp;&nbsp;&nbsp;Net loss |  |  |  | (34592304) |  | (34592304) |
| Balance, December 31, 2020 | 288 | 3 | 144542757 | (280307539) | 674951 | (135089828) |
| &nbsp;&nbsp;&nbsp;Foreign currency translation adjustment |  |  |  |  | 273929 | 273929 |
| &nbsp;&nbsp;&nbsp;Net loss |  |  |  | (23046331) |  | (23046331) |
| Balance, December 31, 2021 | 288 | $3 | 144542757 | (303353870) | 948880 | (157862230) |

---

See accompanying notes to consolidated financial statements.

**HIGHRIDGE RESOURCES, INC.**

Consolidated Statements of Cash Flows

Years Ended December 31, 2021 and 2020

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Cash flows from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Net loss | $(23046331) | $(34592304) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 15792792 | 15520792 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of deferred financing costs | 67605 | 75077 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bad debt (expense) recovery, net | (1090892) | (1908274) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Gain) Loss on disposal of assets | (101895) | (8426) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes | (578509) | (9434410) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (23327348) | 62576947 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | 15171514 | (13969561) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | (889592) | 158413 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 18238503 | (2172262) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable - related party | 1810778 | 2979591 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities | 31824826 | (5563966) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes payable | 705840 | 1717014 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred compensation | 8364871 | 8641034 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | (832011) | (495828) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 42110151 | 23523837 |
| Cash flows from investing activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of property and equipment | 121064 | 16361 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additions of patents | (383559) | (1133128) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additions of property and equipment | (8105824) | (21234911) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | (8368319) | (22351678) |
| Cash flows from financing activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Repayments of long-term debt |  | (500000) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments on revolving line of credit, net |  | (250000) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment of deferred financing costs | (326857) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments on capital leases | (839908) | (909042) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in financing activities | (1166765) | (1659042) |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 254423 | 1050851 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net increase in cash, cash equivalents, and restricted cash | 32829490 | 563968 |
| Cash, cash equivalents, and restricted cash beginning of year | 43673050 | 43109082 |
| Cash, cash equivalents, and restricted cash end of year | $76502540 | $43673050 |
| Supplemental cash flow information: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxes paid | $334398 | $236536 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest paid | 22617279 | 53142079 |
| Non-cash disclosures: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transfer of fixed assets to inventory | $39129 | $51092 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital Expenditures included in Accounts Payable | 2763208 | 1354449 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital lease additions | 545260 | 330686 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Paid-in-kind accrued interest - related party | 28410711 | 767885 |

---

See accompanying notes to consolidated financial statements.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

**(1)** **Business and Basis of Presentation** 

HighRidge Resources, Inc. (HighRidge or together with its subsidiaries, the Company) was formed in Delaware on November 13, 2000. HighRidge's primary purpose is to own 100% of the equity of FlexSteel Holdings, Inc. (FlexSteel Holdings or FSH). These consolidated financial statements include the consolidated accounts of HighRidge and FlexSteel Holdings. All intercompany transactions and balances have been eliminated in consolidation.

FlexSteel Holdings was formed in Delaware on December 30, 2011 and consists of the following subsidiaries: FlexSteel Pipeline Technologies, Inc. (FlexSteel), FlexSteel Pipeline Technologies, Ltd. (FlexSteel Ltd.), Trinity Bay Equipment Holdings, LLC (Trinity Bay), Rubiales Consulting, Inc. (Rubiales), Talon Bridge Holdings, LLC (Talon Bridge), FlexSteel USA, LLC (FlexSteel USA), FlexSteel Europe Limited (FlexSteel Europe), FlexSteel Middle East, LLC (FlexSteel Middle East), FlexSteel FZE, FlexSteel Bahrain, W.L.L. (FlexSteel Bahrain), and HighRidge S. de R.L. de C.V. (HighRidge Mexico) (collectively, the FlexSteel Subsidiaries).

FSH was formed for the primary purpose of owning 100% of the outstanding equity interests in each of the subsidiaries that existed at the time of its formation. These subsidiaries included Rubiales, Trinity Bay, and FlexSteel, which owns 100% of the equity of FlexSteel Ltd. Because the formation of FSH and the subsequent transfer of equity interests in the three subsidiaries to FSH were executed by the common control owner, HighRidge, these accounts were transferred to FSH at their respective historical carrying amounts, and no gain or loss was recognized as a result of the transfers. Talon Bridge, FlexSteel USA, and FlexSteel Europe were formed after the formation of FSH, as described below.

FlexSteel was formed in Texas in January 2003 and was acquired by HighRidge in October 2009. FlexSteel maintains operating locations in the United States and Canada. FlexSteel's spooled, flexible pipeline technology combines the manufacturing, transportation, and installation advantages of flexible pipe with the strength of steel and the corrosion-resistance of polymer liners. Its principal customers are oil and natural gas exploration and production companies, which use its products in various onshore and shallow water applications. Our Canadian operations are conducted through our FlexSteel Ltd. entity.

Rubiales was formed in Texas in September 2003 and owns the land and building of our Baytown, Texas manufacturing facility that was completed in 2012.

Trinity Bay was formed in Delaware in March 2011 and owns the machinery and equipment that is used in our manufacturing facility in Baytown, Texas.

Talon Bridge was formed in Delaware in March 2013 and owns the land and building of our Pleasanton, Texas service center.

FlexSteel USA was formed in Nevada in October 2015 for the purpose of conducting our domestic and international rental, installation, and field service operations.

FlexSteel Europe was formed in the United Kingdom in December 2015 for the purpose of facilitating purchase and sale transactions with customers and vendors located in the European Union.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

FlexSteel Middle East was formed in Nevada in September 2018, FlexSteel FZE was formed in the United Arab Emirates in May 2019, and FlexSteel Bahrain was formed in Bahrain in May 2019 for the purpose of facilitating purchase and sale transactions with customers and vendors located in the Middle East.

HighRidge Mexico was formed in Mexico in February 2019 for the purpose of facilitating purchase and sales transactions with customers and vendors located in Mexico.

**(2)** **Summary of Significant Accounting Policies** 

&nbsp;&nbsp;&nbsp;&nbsp;***(a)***  ***Basis of Accounting*** 

These consolidated financial statements are presented in accordance with generally accepted accounting principles (GAAP) in the United States of America.

&nbsp;&nbsp;&nbsp;&nbsp;***(b)***  ***Revenue Recognition*** 

*Revenue from Contracts with Customers:*

The Company defines a contract as an agreement that has approval and commitment from both parties, defined rights and identifiable payment terms, which ensures the contract has commercial substance and that collectability is reasonably assured.

The Company's standard revenue transactions are classified in four main categories:

Products – which include pipe and connections

Installation Services – which include the installation of our products

Rentals – which include equipment used for installation

Distribution – which include shipping and handling of our products

The Company recognizes revenue based on the transfer of control of our products or our customer's ability to benefit from our services in an amount that reflects the consideration we expect to receive in exchange for that product or services. The Company bills for products once delivered to customer designated location and for installation services and equipment rentals based on contractual daily billing rates. The duration of installation services and equipment rentals is generally one week or less.

A breakdown of our revenue by region for the years ended December 31, 2021 and 2020:

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| United States | $200088968 | $137015842 |
| Canada | 11173687 | 7147964 |
| Latin America | 3952650 | 3292284 |
| Middle East | 18388255 | 7196509 |
| Africa | 1935069 | 5652932 |
| Rest of World | 40632 | 825774 |
| &nbsp;&nbsp;&nbsp;Total Revenues | $235579261 | $161131305 |

---

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

*Contract Liabilities*

Contract liabilities represent billings in excess of the satisfaction of the performance obligation(s) of a contract. A deferred revenue liability account is maintained for contract liabilities. These liabilities are for customers' deposits for reusable shipping reels and skids used for transporting and storing flexible pipe and the related freight return costs, and for advance payments received from customers. Customer reel and skid deposits were $5,473,634 and $5,136,102 at December 31, 2021 and 2020, respectively. Return freight advances were $1,174,945 and $1,102,098 at December 31, 2021 and 2020, respectively. Customer advances were 6,771,816 and $7,850,366 at December 31, 2021 and 2020, respectively. Return freight advances and customer advances are included in deferred revenue liability on balance sheet. The deferred revenue liability decreases, and revenue is recognized, as shipments are made to customers or reels and skids are returned.

As the Company's contracts are less than one year, the Company has applied the practical expedient regarding disclosure of the aggregate amount and future timing of performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period.

&nbsp;&nbsp;&nbsp;&nbsp;***(c)***  ***Cash and Cash Equivalents*** 

Cash and cash equivalents consist of cash in banks located in the United States, Canada, Bahrain, United Kingdom, United Arab Emirates and Mexico.

&nbsp;&nbsp;&nbsp;&nbsp;***(d)***  ***Restricted Cash*** 

The Company classifies cash balances as restricted cash when cash is restricted as to withdrawal or use. We maintain a fixed restricted cash balance to fund obligations under our self-funded medical coverage plan.

&nbsp;&nbsp;&nbsp;&nbsp;***(e)***  ***Accounts Receivable*** 

Accounts receivable are stated at invoiced amounts. An allowance for doubtful accounts is established based on the specific assessment of all invoices that remain unpaid following normal customer payment terms. All receivables deemed to be uncollectible are charged against the allowance for doubtful accounts in the period in which that determination is made. The allowance for doubtful accounts was $227,636 and $3,338,814 at December 31, 2021 and 2020, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;***(f)***  ***Inventory*** 

Our inventory consists of specialized pipeline products, installation equipment, work in process, and raw materials to support our manufacturing operations. Inventory is carried at the lower of cost or net realizable value. Cost is determined using the first-in first-out (FIFO) standard cost method and consists of materials, labor, and direct overhead. Net realizable value represents the estimated selling price less all estimated costs of completion and cost to be incurred in marketing, selling, and distribution.

The Company calculates reserves for inventory based on historical sales of inventory on hand and assumptions about future demand and market conditions. The estimated carrying value of inventory depends on demand driven by oil and natural gas drilling and well remediation activity, which is heavily influenced by oil and natural gas prices, the general outlook for economic growth worldwide, available financing for the Company's customers, political stability in major petroleum production areas, and the potential obsolescence of the equipment we sell, among other factors. At December 31, 2021 and 2020, inventory reserve write-downs were $135,781 and $574,040, respectively. Changes in worldwide drilling and development activity or the advancement of new technologies may require the Company to record additional allowances in future periods to reduce the value of its inventory.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

Inventory at December 31, 2021 and 2020 consists of the following:

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Raw materials | $16148266 | $21324575 |
| Subassemblies | 3149737 | 3354460 |
| Work in process | 3806243 | 2670874 |
| Finished goods | 38437446 | 49292659 |
| &nbsp;&nbsp;&nbsp;Total inventory | 61541692 | 76642568 |

---

&nbsp;&nbsp;&nbsp;&nbsp;***(g)***  ***Prepaid Expenses and Other Current Assets*** 

Prepaid expenses and other current assets primarily include prepaid insurance and subscription-based services.

&nbsp;&nbsp;&nbsp;&nbsp;***(h)***  ***Property and Equipment*** 

Property and equipment are stated at historical cost except for assets acquired in conjunction with an acquisition of a business from an unrelated party, when applicable. Those assets are recorded at fair value as of the date of acquisition.

Depreciation of property and equipment is computed using the straight-line method over the following estimated useful lives once an asset is placed in service.

---

| | |
|:---|:---|
| Buildings and leasehold imporvements | 39 years |
| Machinery and equipment | 7 - 10 years |
| Shipping reels | 3 - 7 years |
| Vehicles | 5 years |
| Office furniture and equipment | 3 - 5 years |

---

Leasehold improvements are amortized over the shorter of their estimated useful lives or the lease terms. The cost of maintenance and repairs, including the cost of replacing minor items not constituting substantial betterments, are charged to expense as these costs are incurred.

&nbsp;&nbsp;&nbsp;&nbsp;***(i)***  ***Intangible Assets and Goodwill*** 

Intangible assets are stated at historical cost except for assets acquired in conjunction with an acquisition of a business from an unrelated party. Those assets are recorded at their fair value as of the date of acquisition. Intangible assets are amortized over their estimated useful lives, unless such life is deemed to be indefinite.

Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the net assets acquired. Goodwill is not amortized, rather it is tested for impairment annually or if events or changes in circumstances indicate that the asset may be impaired. The impairment test requires allocating goodwill and all other assets and liabilities to an operating segment referred to as a reporting unit. If the estimated fair value of the reporting unit is less than its book value, including goodwill, then the goodwill is written down to the implied fair value of the goodwill through a charge to impairment expense. Because quoted market prices are not available for the Company's reporting units, the fair values of the reporting units are estimated based upon several valuation analyses.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

The Company holds patents and patents pending related to our manufacturing and installation equipment. The Company actively uses and defends these patents. The weighted average remaining useful lives of the patents at December 31, 2021 and 2020 was 12.0 and 9.7 years, respectively. In 2013, the Company acquired technology from an unrelated party. The weighted average remaining useful lives of the technology were 6.4 years and 7.4 years as of December 31, 2021 and 2020, respectively.

Goodwill is reviewed for impairment annually on December 31 of each year, or if events or changes in circumstances indicate that the asset may be impaired. No impairment charges have been incurred to date.

&nbsp;&nbsp;&nbsp;&nbsp;***(j)***  ***Impairment of Assets*** 

Long-lived assets used in operations, such as property and equipment and definite lived intangibles, are assessed for impairment whenever changes in facts and circumstances indicate a possible significant deterioration in the future cash flows expected to be generated by an asset group. If, upon review, the sum of the undiscounted pretax cash flows is less than the carrying value of the asset group, the carrying value is written down to estimated fair value.

&nbsp;&nbsp;&nbsp;&nbsp;***(k)***  ***Product Warranties*** 

The Company provides warranties ranging from one to two years on its pipeline products. Estimated future warranty costs are accrued and charged to cost of goods sold in the period that the related revenue is recognized. These estimates are derived from historical data and trends of product reliability and costs of repairing and replacing defective products. Warranty liabilities are included in our consolidated balance sheets as other current liabilities.

A reconciliation of changes to warranty liability for December 31 2021 and 2020:

---

| | |
|:---|:---|
| Balance at January 1, 2020 | $4537265 |
| Issuances | 2207023 |
| Expirations | (4364104) |
| Claims | (268787) |
| Balance at December 31, 2020 | 2111397 |
| Issuances | 3228048 |
| Expirations | (2185404) |
| Claims | (458038) |
| Balance at December 31, 2021 | $2696003 |

---

&nbsp;&nbsp;&nbsp;&nbsp;***(l)***  ***Research and Development Costs*** 

Research and development costs are expensed as incurred and primarily include salaries and related payroll taxes, qualification testing charges, and third-party consulting fees.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

&nbsp;&nbsp;&nbsp;&nbsp;***(m)***  ***Income Taxes*** 

The Company accounts for income taxes in accordance with Accounting Standards Codification (ASC) 740, Income Taxes. Deferred income taxes are recorded to reflect the tax consequences on future years of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end, based on the provisions of enacted tax laws. Deferred tax assets may be reduced by a valuation allowance when, based on management's estimates, it is more likely than not that a portion of the deferred tax assets will not be realized in a future period.

The Company recognizes the impact of a tax position when it is more likely than not to be sustained upon examination based upon the technical merits of the position, including resolution of any appeals in its consolidated financial statements. Based on management's evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in the accompanying consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;***(n)***  ***Financial Instruments*** 

The Company's financial instruments consist of cash and cash equivalents, restricted cash, accounts receivables, accounts payables, and long-term debt. The carrying amount of cash, accounts receivables, and accounts payables approximates fair value because of the short-term nature of these items.

&nbsp;&nbsp;&nbsp;&nbsp;***(o)***  ***Use of Estimates*** 

The preparation of consolidated financial statements in conformity with GAAP in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include allowance for doubtful accounts, inventory reserves, valuations of property, goodwill and intangible assets, income taxes, contingencies, and litigation accruals. Actual results may differ from these estimates.

&nbsp;&nbsp;&nbsp;&nbsp;***(p)***  ***Business Combinations*** 

The Company accounts for business combinations under ASC 805, Business Combinations. For acquisitions of businesses not considered to be under common control, the Company recognizes and measures the fair value of all identifiable assets acquired, the liabilities assumed, any noncontrolling interests in the acquired entities, and the goodwill acquired in all transactions in which control of one or more businesses is obtained in its consolidated financial statements.

**(3)** **Recently Issued Accounting Pronouncements** 

***Leases***

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 supersedes the current accounting for leases, providing a comprehensive new lease model that requires lessees to recognize assets and liabilities for most leases and changes certain aspects of lessor accounting. The Company will adopt the provisions of ASU 2016-02 and will reflect adoption in December 31, 2022 consolidated financial statements. The Company has identified its lease commitments and finalized its evaluation on the financial statements and internal accounting processes. The Company elected the practical expedient to not apply the recognition requirements of ASU 2016-02 to short-term leases, defined as leases with a lease term of 12 months or less. The Company elected the transition option provided by ASU 2018-11 to not apply the new lease standards in the comparative financial statements presented in the year of adoption and will continue disclosing lease commitments for the comparative periods under the standards of ASC 840. The Company is still evaluating additional impacts of adoption.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

**(4)** **Property and Equipment** 

Property and equipment at December 31, 2021 and 2020 consist of the following:

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Land | $8187141 | $8187141 |
| Building and leasehold improvements | 66127964 | 65590293 |
| Machinery and equipment | 99437391 | 94848207 |
| Reels and Skids | 42346623 | 42222581 |
| Vehicles | 2949416 | 2820992 |
| Office furniture and equipment | 5072287 | 4832597 |
| Construction in progress | 16875163 | 13112542 |
| &nbsp;&nbsp;&nbsp;Total property and equipment | 240995985 | 231614353 |
| Accumulated depreciation and amortization | (112513935) | (97990119) |
| &nbsp;&nbsp;&nbsp;Property and equipment, net | $128482050 | $133624234 |

---

Total depreciation and amortization expense related to property and equipment for the years ended December 31, 2021 and 2020 was $15,115,028 and $14,919,540, respectively.

**(5)** **Intangible Assets** 

Intangible assets at December 31, 2021 and 2020 consist of the following:

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Goodwill | $431594 | $431594 |
| Patents | 9366687 | 8983128 |
| Technology | 608071 | 608071 |
| &nbsp;&nbsp;&nbsp;Total intangible assets | 10406352 | 10022793 |
| Accumulated amortization | (7293213) | (6615449) |
| &nbsp;&nbsp;&nbsp;Intangible assets, net | $3113139 | $3407344 |

---

Total amortization expense related to intangible assets for the years ended December 31, 2021 and 2020 was $677,764 and $601,252, respectively.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

The estimated future annual amortization expense related to the intangible assets is as follows:

---

| | |
|:---|:---|
| 2022 | $677088 |
| 2023 | 536909 |
| 2024 | 116374 |
| 2025 | 116374 |
| 2026 and thereafter | 1234800 |
| &nbsp;&nbsp;&nbsp;Total | $2681545 |

---

**(6)** **Notes Receivable** 

On April 2, 2013, HighRidge entered into a note receivable with Northeast Real Estate Holdings (Northeast), a related party. Under the terms of the note receivable, HighRidge loaned NorthEast $1,031,250 to finance the purchase of a commercial property in Eagle Lake, Texas. This property secured the note receivable. The note bears interest at 7.2% per annum and does not compound. The note has a maturity date of either (i) upon being called by HighRidge or (ii) upon Northeast securing separate financing for the real estate property. Principal and interest payments on the note can be paid in arrears or prepaid at any time without penalty.

As of December 31, 2021 and 2020, the principal balance of the note receivable was $1,031,250, and accrued interest receivable was $556,342 and $481,267, respectively. Interest income on the note receivable was $75,075 per year for both of the years ended December 31, 2021 and 2020.

**(7)** **Long-Term Debt** 

Long term debt on December 31, 2021 and 2020 consists of the following:

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| 2019 Promissory Notes Payable - Related Party | $386381003 | $358266407 |
| 2015 Notes Payable - Related Party | 9948072 | 9948072 |
| Installation equipment |  |  |
| &nbsp;&nbsp;&nbsp;Total notes payable | $396329075 | 368214479 |

---

Deferred financing costs related to revolving credit line and included in our consolidated balance sheets as other current assets was $259,252 at December 31, 2021.

Total interest expense related to our outstanding loan instruments was $50,941,137 and $53,692,766 for the years ended December 31, 2021 and 2020, respectively. This includes $67,605 and $75,077 associated with the amortization of deferred financing charges and $127,930 and $390,323 associated with prepayment penalties. No interest expense was capitalized for construction in progress in either year.

&nbsp;&nbsp;&nbsp;&nbsp;***(a)***  ***2019 Promissory Notes Payable*** 

On November 1, 2019, HighRidge simultaneously entered into two promissory notes payable agreements with FlexSteel LTIP, LP (FlexSteel LTIP), a related party. Collectively, these notes payable are referred to as the "2019 Promissory Notes Payable". The 2019 Promissory Notes Payable were issued in conjunction with the refinancing of previously existing HighRidge preferred stock that was held by FlexSteel LTIP, and no cash funds were actually transacted between the two parties.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

Under the terms of the 2019 Promissory Notes Payable, HighRidge was allocated notes payable of $295,615,000 and $54,385,000 from FlexSteel LTIP at an interest rate of 14.0% per annum. Interest is computed and compounded quarterly. Repayment terms call for interest to be repaid in arrears at the end of each quarter, or the payments may be paid in kind and added to the balance of the note payable without penalty. Principal prepayments, including paid in kind interest, are subject to a 2% penalty until the first anniversary of the agreement and a 1% penalty between the first and second anniversary of the agreement. Thereafter, principal repayments can me made without penalty. The maturity date of the 2019 Promissory Notes Payable is November 1, 2024. If a change of control occurs, the unpaid principal and accrued interest shall be immediately due and payable, together with an additional premium of 1% of the outstanding principal balance on that date.

On November 1, 2019, the $295,615,000 note was assigned by FlexSteel LTIP to Prime HoldCo LP, also a related party.

Interest paid in kind was $40,779,710 and $52,821,290 for the years ended December 31, 2021 and 2020, respectively. These amounts were added to the outstanding principal balance of the 2019 Promissory Notes Payable.

HighRidge made a $53,000,000 payment on the 2019 Note Payable in December 2020. This payment included $52,609,677 of accrued interest and a prepayment penalty of $390,323.

HighRidge made a $22,000,000 payment on the 2019 Note Payable in March 2021. This payment included $21,872,070 of accrued interest and a prepayment penalty of $127,930.

HighRidge made a $48,084,065 payment on the 2019 Note Payable in May 2022. This payment was for accrued interest with no prepayment penalty assessed because the second anniversary of the note payable has passed.

HighRidge also made interest only payments of $329,101 and $134,743 in May 2021 and March 2022, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;***(b)***  ***2015 Notes Payable / 2022 Notes Payable*** 

On June 24, 2015, HighRidge simultaneously entered into two notes payable agreements with PCV International Limited ("PCV-I") and PCV Associates, LLC ("PCV-A"). Both PCV-I and PCV-A are related parties, and all terms of the notes payable were identical. Collectively, these notes payable are referred to as the "2015 Notes Payable".

Under the terms of the 2015 Notes Payable, HighRidge borrowed $13,364,273 and $7,196,147 from PCV-I and PCV-A, respectively, at an interest rate of 1.59% per annum. Interest is computed and compounded quarterly. Repayment terms call for interest to be repaid in arrears on the anniversary of the note payable agreement, or the payments may be deferred without penalty. Principal prepayments are also allowed at any time without penalty. The maturity date of the 2015 Notes Payable is June 24, 2022. The original balances of the 2015 Notes Payable reflected a 65% and 35% balance allocation between PVC-I and PCV-A. Effective July 17, 2021, the outstanding 2015 Notes Payable balances were reallocated by PCV-I and PCV-A to reflect a 70% and 30% allocation, respectively. All other terms of the note payable agreement remained the same.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

HighRidge made combined principal and interest payments totaling $1,500,000 and $10,000,000 in July 2017 and June 2018, respectively. These payments were applied to the PCV-I and PCV-A balances based on the allocations in place on those dates.

On June 24, 2022, the 2015 Notes Payable matured, and at that time, the notes were refinanced. Collectively, these notes payable are referred to as the "2022 Notes Payable". Under the terms of the 2022 Notes Payable, HighRidge refinanced $7,433,766 and $3,185,900 from PCV-I and PCV-A, respectively at an interest rate of 3.12%. Interest is computed and compounded quarterly. Repayment terms call for interest to be repaid in arrears on the anniversary of the note payable agreement, or the payments may be deferred without penalty. Principal prepayments are also allowed at any time without penalty. The maturity date of the 2022 Notes Payable is June 24, 2027.

&nbsp;&nbsp;&nbsp;&nbsp;***(c)***  ***Term Loan and Revolving Line of Credit*** 

On March 9, 2015, FlexSteel and Trinity Bay, as co-borrowers, entered into a new credit agreement for which included a $15,000,000 term loan (the 2015 Term Loan) and a revolving line of credit (the Revolver) with availability of up to $110,000,000 dependent on our accounts receivable and inventory balances. On June 14, 2016, the co-borrowers were granted an amendment to the credit agreement that lowered the maximum availability to $60,000,000, reduced covenant testing thresholds and redefined eligible accounts receivable accounts. On June 11, 2018, the co-borrowers were granted an amendment to the credit agreement that increased the maximum availability back to $110,000,000. On March 6, 2020, the co-borrowers were granted an amendment to the credit agreement that extended the maturity date to March 9, 2021 and reduced the maximum availability to $75,000,000. On March 8, 2021, the co-borrowers were granted an amendment to the credit agreement that extended the maturity date to March 9, 2025 and reduced the maximum availability to $50,000,000.

The interest rate with respect to 2015 Term Loan is either 1) the Prime Rate plus an applicable margin of 0.50% to 1.25% based on our availability, 2) the Federal Funds rate plus 0.50% or 3) LIBOR plus an applicable margin of 2.00% to 2.75% based on availability. The Term Loan was paid in full on January 28, 2020. The interest rate with respect to Revolver is either 1) the Prime Rate plus an applicable margin of 0.00% to 0.75% based on our availability, 2) the Federal Funds rate plus 0.5% or 3) LIBOR plus an applicable margin of 1.50% to 2.25% based on availability. As of December 31, 2021, the interest rate on the Revolver was 4.00%.

Under the terms of the 2015 Term Loan, the Company repaid the principal balance by $250,000 per month, plus accrued interest until it was fully repaid in January 2020.

The co-borrowers are required to maintain compliance with a variety of performance and financial covenants for both the 2015 Term Loan and the Revolver, including a minimum fixed-charge coverage ratio. The co-borrowers were in compliance with all covenants at December 31, 2021. As of December 31, 2021, our calculated availability under the Revolver based on accounts receivable and inventory balances was approximately $48 million.

&nbsp;&nbsp;&nbsp;&nbsp;***(d)***  ***Deferred Financing Costs*** 

Costs incurred in connection with the issuance of debt are deferred and amortized using the straight-line method, which approximates the effective-interest method over the term of the related debt. Amortization of deferred financing costs in 2021 and 2020 was $67,605 and $75,077, respectively. During 2015, we refinanced our existing credit facilities. In conjunction with this refinancing, we wrote off deferred financing costs of $831,071 associated with the previous debt facility, and we capitalized $1,549,992 associated with the new debt facility. During 2021, we incurred $326,857 for commitment and advisory fees to extend revolving line of credit. During 2019, we incurred additional advisory expenses and capitalized $27,622 associated with these services. During 2018, we amended our debt facility again, and we capitalized $178,621 associated with this amendment. The Company has net deferred financing costs of $259,252 and $0 as of December 31, 2021 and 2020.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

&nbsp;&nbsp;&nbsp;&nbsp;***(e)***  ***Scheduled Maturities*** 

Scheduled maturities of the Company's notes payables at December 31, 2021, exclusive of consideration of contingent events, are as follows:

---

| | |
|:---|:---|
| 2022 | $9948072 |
| 2023 |  |
| 2024 | 386381003 |
| &nbsp;&nbsp;&nbsp;Total | $396329075 |

---

**(8)** **Capital Lease Obligations – Future Minimum Lease Payments** 

The Company leases certain machinery and equipment under agreements that are classified as capital leases. The cost of equipment under capital leases is included in our consolidated balance sheets as property and equipment was $4,011,088 and $3,511,714 at December 31, 2021 and 2020, respectively. Depreciation of assets under capital leases is included in depreciation and amortization expense.

Total payments under capital leases during the years ended 2021 and 2020 were $838,242 and $909,042, respectively. Interest expense related to the capital lease obligations in the amount of $127,265 and $161,460 was incurred for the years ended December 31, 2021 and 2020, respectively.

The future minimum lease payments required under capital leases as of December 31, 2021 are as follows:

---

| | |
|:---|:---|
| 2022 | $822780 |
| 2023 | 593859 |
| 2024 | 183364 |
| 2025 | 146739 |
| 2026 and thereafter | - |
| &nbsp;&nbsp;&nbsp;Total | $1746742 |

---

**(9)** **Commitments and Contingencies** 

The Company is, from time to time, party to certain legal actions and claims arising in the ordinary course of business. While the outcome of these events cannot be predicted with certainty, management does not expect these matters to have a material adverse effect on the financial position, results of operations, or cash flows of the Company.

In the case of all known contingencies, a liability is accrued when the loss is probable, and the amount is reasonably estimable. These liabilities are not reduced for potential insurance or third-party recoveries. If applicable, a receivable for probable insurance or other third-party recoveries is recorded. Based on currently available information, the Company believes that the probability is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse effect on the financial position, results of operations, or cash flows of the Company.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

As new facts concerning contingencies arise, the Company's position both with respect to accrued liabilities and other potential exposures is reassessed. Estimates that are particularly sensitive to future changes include contingent liabilities related to environmental remediation, tax, and legal matters.

*Leases*

As of December 31, 2021 and 2020, the Company was party to noncancelable operating leases for various office and equipment rentals. Rent expense for the years ended December 31, 2021 and 2020 was $1,217,466 and $952,767, respectively.

Future minimum lease payments due under these leases are as follows:

---

| | |
|:---|:---|
| 2022 | $227320 |
| 2023 | 22816 |
| 2024 and thereafter | - |
| &nbsp;&nbsp;&nbsp;Total | $250136 |

---

**(10)** **Income Taxes** 

The Company is included in the consolidated financial statements and tax return of its parent company, HRI, and has tax-sharing agreements with HRI, in which the Company pays its share of income taxes as if it were a stand-alone filer.

The income tax provision for the years ended December 31, 2021 and 2020 consists of the following:

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Current U.S. federal income tax | $156914 | $— |
| Current U.S. state income tax | 57458 | 148715 |
| Deferred U.S. federal income tax | (1084661) | (9524436) |
| Deferred U.S. state income tax | (95309) | 90026 |
| Current foreign income tax | 1193889 | 206777 |
| Deferred foreign income tax | 601461 |  |
| &nbsp;&nbsp;&nbsp;Total income tax provision (benefit) | $829752 | $(9078918) |

---

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

The following table summarizes the reconciliation of the Company's income tax provision computed by applying the U.S. federal income tax rate of 21% to income before income taxes for the years ended December 31, 2021 and 2020 to the actual effective rate.

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Income tax expense at federal statutory rate | 21.0% | 21.0% |
| Valuation allowance | (24.1) |  |
| State income tax (expense) benefit, net of federal benefit | 1.7 | (0.5) |
| Foreign unremitted earnings | (2.7) |  |
| Tax credits | 1.5 | 1.1 |
| Foreign tax differential | (0.1) | 0.1 |
| Other | (1.0) | (0.9) |
| &nbsp;&nbsp;&nbsp;Total income tax (provision) benefit | (3.7)% | 20.8% |

---

The Company's net deferred tax liability as of December 31, 2021 and 2020 consists of the following:

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Deferred tax assets: |  |  |
| &nbsp;&nbsp;&nbsp;Net operating loss carrforward | $4485787 | $7912038 |
| &nbsp;&nbsp;&nbsp;R&D credit carryforward | 228773 | 565873 |
| &nbsp;&nbsp;&nbsp;Inventory | 548102 | 2081824 |
| &nbsp;&nbsp;&nbsp;Product warranty liability | 560943 | 446170 |
| &nbsp;&nbsp;&nbsp;Interest Limitation | 10164850 | 1739370 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 4458955 | 2190761 |
| &nbsp;&nbsp;&nbsp;Other assets | 42904 | 566112 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred tax assets | 20490314 | 15502148 |
| Deferred tax liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Other liabilities | (24437) | (23997) |
| &nbsp;&nbsp;&nbsp;Unremitted earnings | (601461) |  |
| &nbsp;&nbsp;&nbsp;Property, equipment and intangible assets | (14521641) | (16056659) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred tax liabilities | (15147539) | (16080656) |
| Less: valuation allowance | (5342775) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net deferred tax liability | $— | $(578508) |

---

In determining the need for a valuation allowance, we consider current and historical financial results, expectations for future taxable income and the availability of tax planning strategies that can be implemented, if necessary, to realize deferred tax assets.

Based upon the taxable income during the year ended December 31, 2020, and projections of positive future results of operations over the periods in which the deferred tax assets are deductible, among other factors, management concluded that the scheduled reversal of the deferred tax liabilities and sufficient taxable income will be available to realize the existing deferred tax assets. As of December 31, 2021, the Company recorded a valuation allowance of $5,342,775 for our net operating losses and other net deferred tax assets for which the tax benefits are not likely to be realized. We intend to maintain a valuation allowance on our net federal and foreign deferred tax assets until there is sufficient evidence to support the reversal of these allowances.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

As of December 31, 2021, the Company is not permanently reinvested in its Canadian business and therefore has recognized a deferred tax liability of $601,461 related to withholding taxes on unremitted earnings of its Canadian business.

For other foreign subsidiaries, the Company maintains its position for undistributed foreign earnings to be indefinite and does not provide for outside basis differences under the indefinite reinvestment assertion of ASC 740-30. Accordingly, the Company does not anticipate the need to provide for additional taxes for basis differences or withholding taxes on remitted foreign earnings in the immediate future.

The Company follows applicable provisions of ASC 740-10, which requires the recognition, measurement, and disclosure of any uncertain tax positions in the financial statements. Under the applicable FASB Interpretation, tax positions must meet a "more-likely than-not" recognition threshold at the effective date to be recognized. At December 31, 2021 and 2020, there were no uncertain tax positions.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. No interest and penalties related to uncertain tax positions were accrued at December 31, 2021 or 2020.

Tax years 2019 through 2021 for federal, foreign, and state returns of the Company and its parent remain open to examination by the major taxing jurisdictions in which we operate.

**(11)** **Employee Benefit Plans** 

The Company's employees participate in one of our affiliate's 401(k) plans. During the years ended December 31, 2021 and 2020, the Company's employer matching contributions totaled $1,125,078 and $996,971, respectively.

On December 4, 2019, the Company executed a binding term sheet establishing two long-term incentive plans for key employees of FlexSteel Holdings, Inc, the Incentive Equity Plan and the Cash Bonus Plan. The Incentive Equity Plan establishes Series B equity units which allow participants to receive an interest in the distributed profits of the Company. Series B units do not have voting rights. The Cash Bonus Plan was established to provide cash bonuses to holders of Series B equity units at the earlier of a monetization event in connection with a sale to a third-party of at least 51% of the Company or January 1, 2026.

The Company accounts for the compensation cost related to the long-term incentive plans in accordance with the provisions of ASC 718. In following these provisions, the Company recognizes compensation cost of granted Series B units (the "units") ratably over the service period of the plans. These provisions further require the units that settle in cash to be recorded as a liability in the Company's balance sheet and be remeasured at their fair value in each reporting period until settled. The binding term sheet establishes the fair value of the units to represent the units portion of the enterprise value of the Company, as determined by the Company's owner, using an income-based valuation approach.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

Compensation cost of $8,364,871 and $8,641,034 relating to the long-term incentive plans were recorded to general and administrative expenses for the years ended December 31, 2021 and 2020, respectively and the Company has deferred compensation liabilities of $17,005,905 and $8,641,034 in the December 31, 2021 and 2020 balance sheet, respectively.

**(12)** **Customer Concentration** 

The majority of the Company's business is conducted with major and independent oil and natural gas exploration companies. The Company evaluates the financial strength and viability of its customers and provides allowances for probable credit losses when deemed necessary.

For the year ended December 31, 2021, two customers accounted for approximately 31% of the Company's revenue. There were outstanding accounts receivable associated with these customers as of December 31, 2021 of $10,262,102. No other customer accounted for more than 10% of the Company's revenue during 2021.

For the year ended December 31, 2020, one customer accounted for approximately 27% of the Company's revenue. There were outstanding accounts receivable associated with this customer as of December 31, 2020 of $7,752,105. No other customer accounted for more than 10% of the Company's revenue during 2020.

**(13)** **Credit Risks** 

The Company's financial instruments that are potentially exposed to concentrations of credit risk consist primarily of cash equivalents and trade receivables. Cash equivalents are placed on deposit with major international banks and financial institutions. All of the Company's cash accounts in the United States are federally insured up to $250,000 per depositor at each financial institution; however, cash balances may exceed such limits from time to time.

Trade receivables result primarily from the sale of products and services to major and independent oil and natural gas exploration companies. The majority of these receivables have payment terms of 30 to 45 days. Management continually monitors this exposure and the creditworthiness of the counterparties. The Company generally does not require collateral to limit our exposure to loss; however, we sometimes use letters of credit or prepayments to mitigate credit risk with counterparties.

The Company's overall credit risk may be affected by changes in economic and other conditions. Historically, the Company has not experienced significant credit losses on such receivables. The Company cannot ensure that such losses will not be realized in the future.

**(14)** **Foreign Currency Exchange Risk** 

The Company is exposed to foreign currency fluctuations as certain transactions are consummated in foreign currencies, primarily Canadian dollars.

The Company also holds Canadian assets and liabilities. Monetary values and liabilities are revalued each period-end at the then-current exchange rate. Foreign currency translation adjustments are recognized in the consolidated statements of operations and comprehensive income.

**HIGHRIDGE RESOURCES, INC.**

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

**(15)** **Related-Party Transactions** 

Accounts payable balance includes amounts due to related parties of $4,857,216 and $3,046,438 as of December 31, 2021 and 2020, respectively. These amounts represent funds owed by the Company to Prime Natural Resources and to an affiliate for rent, management services, taxes, and administrative expenses paid on the Company's behalf.

Other current liability balances of $449,913 as of both December 31, 2021 and 2020, respectively were owed to TitanLiner LLC, a related party.

As previously discussed in Footnote 6, the Notes Receivable from Northeast is a related party and as such the annual interest income and the related receivable balances are considered related party transactions.

As previously discussed in Footnote 7, the 2019 Notes Payable are held by Prime Holdco LP and FlexSteel LTIP, both related parties, and the 2015 Notes Payable are held by PCV-I and PCV-A, also related parties. As such the annual interest expense and the related receivable balances are considered related party transactions.

**(16)** **Subsequent Events** 

In preparing the consolidated financial statements, the Company has reviewed, as determined by the Company's management, events that have occurred after December 31, 2021, up until the issuance of the consolidated financial statements, which occurred on or about November 8, 2022.

On August 16, 2022, Northeast paid HighRidge $1,635,104 to settle the principal and accrued interest balance in full. The note receivable was terminated at that time.

Management has determined that there are no additional subsequent events since December 31, 2021 that require disclosure in the Company's consolidated financial statements.

## Exhibit 99.2

**Exhibit 99.2**

**HIGHRIDGE RESOURCES, INC.**

Condensed Consolidated Financial Statements

Nine Months Ended September 30, 2022 and 2021

(unaudited)

**HIGHRIDGE RESOURCES, INC.**

**Table of Contents**

---

| | |
|:---|:---|
|  | **Page** |
| Condensed Consolidated Balance Sheets | 1 |
| Condensed Consolidated Statements of Operations and Comprehensive Income | 2 |
| Condensed Consolidated Statements of Stockholder's Equity | 3 |
| Condensed Consolidated Statements of Cash Flows | 4 |
| Notes to Condensed Consolidated Financial Statements | 5 |

---

**HIGHRIDGE RESOURCES, INC.**

Condensed Consolidated Balance Sheets

(unaudited)

---

| | | |
|:---|:---|:---|
|  | **September 30,**<br>**2022** | **December 31,**<br>**2021** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $50008820 | $76340540 |
| &nbsp;&nbsp;&nbsp;Restricted cash | 162000 | 162000 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net (note 2e) | 66811683 | 42629169 |
| &nbsp;&nbsp;&nbsp;Inventory (note 2f) | 66811359 | 61541692 |
| &nbsp;&nbsp;&nbsp;Notes and interest receivable - related party (note 6) |  | 1587592 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 3212176 | 3574089 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 187006038 | 185835082 |
| Property and equipment, net (note 4) | 121002871 | 128482050 |
| Intangible assets, net (note 5) | 2605324 | 3113139 |
| Security deposits | 52599 | 54555 |
| Notes receivable | 43350 | 48734 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $310710182 | $317533560 |
| **Liabilities and Stockholder's Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $14107292 | $25745613 |
| &nbsp;&nbsp;&nbsp;Accounts payable – related party | 2935456 | 4857216 |
| &nbsp;&nbsp;&nbsp;Income taxes payable | 2230363 | 668978 |
| &nbsp;&nbsp;&nbsp;Accrued liabilities | 16226984 | 14419459 |
| &nbsp;&nbsp;&nbsp;Current portion of capital leases (note 8) | 605978 | 741964 |
| &nbsp;&nbsp;&nbsp;Deferred revenue | 8164950 | 8061660 |
| &nbsp;&nbsp;&nbsp;Customer deposits | 5786541 | 5473634 |
| &nbsp;&nbsp;&nbsp;Other current liabilities | 449913 | 449913 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 50507477 | 60418437 |
| Capital lease liability – long term (note 8) | 811083 | 1004778 |
| Deferred rent payable | 47119 | 47608 |
| Notes payable - related party | 387683082 | 396329075 |
| Long-term debt (note 7) |  |  |
| Long-term accrued interest | 761835 | 589987 |
| Deferred compensation | 29542200 | 17005905 |
| Deferred tax liability (note 10) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 469352796 | 475395790 |
| Commitments and contingencies (note 9) |  |  |
| Stockholder's equity: |  |  |
| &nbsp;&nbsp;&nbsp;Common stock ($.01 par, 1,000 shares authorized, 288 shares issued and outstanding) | 3 | 3 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 144542757 | 144542757 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (302757870) | (303353870) |
| &nbsp;&nbsp;&nbsp;Accumulated other comprehensive income | (427504) | 948880 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholder's equity | (158642614) | (157862230) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholder's equity | $310710182 | $317533560 |

---

See accompanying notes to condensed consolidated financial statements.

**HIGHRIDGE RESOURCES, INC.**

Condensed Consolidated Statements of Operations and Comprehensive Income

(unaudited)

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended <br> September 30,** | **Nine Months Ended <br> September 30,** |
|  | **2022** | **2021** |
| Revenue: |  |  |
| &nbsp;&nbsp;&nbsp;Product sales | $224633093 | $147138026 |
| &nbsp;&nbsp;&nbsp;Field service and installation | 17573398 | 10815689 |
| &nbsp;&nbsp;&nbsp;Distribution, reel sales, rentals and other | 23243905 | 11680485 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenue | 265450396 | 169634200 |
| Other costs and expenses: |  |  |
| &nbsp;&nbsp;&nbsp;Cost of product sales, exclusive of depreciation and amortization | 131493493 | 75068515 |
| &nbsp;&nbsp;&nbsp;Cost of field service and installation, exclusive of depreciation and amortization | 13678191 | 9188180 |
| &nbsp;&nbsp;&nbsp;Cost of distribution, reel sales, rentals and other, exclusive of depreciation and amortization | 17215555 | 8869079 |
| &nbsp;&nbsp;&nbsp;Research and development | 5539555 | 5958331 |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 26661536 | 19750781 |
| &nbsp;&nbsp;&nbsp;Sales and marketing | 11349826 | 11737724 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 12123949 | 11736977 |
| &nbsp;&nbsp;&nbsp;Gain on sale of property and equipment | (3550) | (102575) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other costs and expenses | 218058555 | 142207012 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income from operations | 47391841 | 27427188 |
| Other income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense, net | (40081912) | (37695506) |
| &nbsp;&nbsp;&nbsp;Foreign currency exchange gain (loss) | 900835 | (59476) |
| &nbsp;&nbsp;&nbsp;Other income, net | 876173 | 65291 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income (expense), net | (38304904) | (37689691) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income (loss) before income taxes | 9086937 | (10262503) |
| Income tax expense | 8490937 | 362719 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) | 596000 | (10625222) |
| Other comprehensive income (loss), net of tax: |  |  |
| &nbsp;&nbsp;&nbsp;Foreign currency translation adjustments | (1376384) | 290302 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive loss | $(780384) | $(10334920) |

---

See accompanying notes to condensed consolidated financial statements.

**HIGHRIDGE RESOURCES, INC.**

Condensed Consolidated Statements of Stockholder's Equity

(unaudited)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common stock** | **Common stock** | | | | |
|  | **Shares** | **Amount** |<br>**Additional**<br>**paid-in capital** |<br>**Accumulated**<br>**deficit** | **Other**<br>**comprehensive**<br>**income** | **Total**<br>**stockholder's**<br>**equity** |
| Balance, January 1, 2020 | 288 | 3 | 144542757 | (280307539) | 674951 | (135089828) |
| &nbsp;&nbsp;&nbsp;Foreign currency translation adjustment |  |  |  |  | 290302 | 290302 |
| &nbsp;&nbsp;&nbsp;Net income (loss) |  |  |  | (10625222) |  | (10625222) |
| Balance, September 30, 2021 | 288 | $3 | 144542757 | (290932761) | 965253 | (145424748) |
| Balance, December 31, 2021 | 288 | $3 | 144542757 | (303353870) | 948880 | (157862230) |
| &nbsp;&nbsp;&nbsp;Foreign currency translation adjustment |  |  |  |  | (1376384) | (1376384) |
| &nbsp;&nbsp;&nbsp;Net income (loss) |  |  |  | 596000 |  | 596000 |
| Balance, September 30, 2022 | 288 | $3 | 144542757 | (302757870) | (427504) | (158642614) |

---

See accompanying notes to condensed consolidated financial statements.

**HIGHRIDGE RESOURCES, INC.**

Condensed Consolidated Statements of Cash Flows

(unaudited)

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended <br> September 30,** | **Nine Months Ended <br> September 30,** |
|  | **2022** | **2021** |
| Cash flows from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Net income (loss) | $596000 | $(10625222) |
| Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 12123949 | 11736977 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of deferred financing costs | 61402 | 47138 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bad debt expense (recovery), net | 396631 | (300116) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on disposal of assets | (3550) | (102575) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes |  | 58189 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (24841815) | (35435599) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | (5386830) | 23593432 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 246034 | (1183196) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets – security deposits and notes receivable |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | (8918871) | 1925960 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable - related party | (1921760) | 900765 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities | (6636237) | 23526018 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes payable | 1542241 | 192281 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred compensation | 12536295 | 6480775 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | 552534 | (1195287) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided (used) by operating activities | (19653977) | 19619540 |
| Cash flows from investing activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of property and equipment | 7980 | 121056 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from notes receivable - related party | 1635104 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additions of patents |  | (310567) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additions of property and equipment | (6593629) | (6672214) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | (4950545) | (6861725) |
| Cash flows from financing activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment of deferred financing costs |  | (326857) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments on capital leases | (629180) | (529315) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in financing activities | (629180) | (856172) |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (1098018) | 257342 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net increase (decrease) in cash, cash equivalents, and restricted cash | (26331720) | 12158985 |
| Cash, cash equivalents, and restricted cash beginning of year | 76502540 | 43673050 |
| Cash, cash equivalents, and restricted cash end of year | $50170820 | $55832035 |
| Supplemental cash flow information: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxes paid | $6961898 | $284133 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest paid | 48540605 | 22520201 |
| Non-cash disclosures: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transfer of fixed assets to inventory | $16293 | $7327 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital Expenditures included in Accounts Payable | 31319 | 115625 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital lease additions | 361905 | 309332 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Paid-in-kind accrued interest - related party | (8474145) | 15070379 |

---

See accompanying notes to condensed consolidated financial statements.

**HIGHRIDGE RESOURCES, INC.**

Notes to Condensed Consolidated Financial Statements

September 30, 2022 and 2021

(unaudited)

**(1)** **Business and Basis of Presentation** 

HighRidge Resources, Inc. (HighRidge or together with its subsidiaries, the Company) was formed in Delaware on November 13, 2000. HighRidge's primary purpose is to own 100% of the equity of FlexSteel Holdings, Inc. (FlexSteel Holdings or FSH). These condensed consolidated financial statements include the consolidated accounts of HighRidge and FlexSteel Holdings. All intercompany transactions and balances have been eliminated in consolidation.

FlexSteel Holdings was formed in Delaware on December 30, 2011 and consists of the following subsidiaries: FlexSteel Pipeline Technologies, Inc. (FlexSteel), FlexSteel Pipeline Technologies, Ltd. (FlexSteel Ltd.), Trinity Bay Equipment Holdings, LLC (Trinity Bay), Rubiales Consulting, Inc. (Rubiales), Talon Bridge Holdings, LLC (Talon Bridge), FlexSteel USA, LLC (FlexSteel USA), FlexSteel Europe Limited (FlexSteel Europe), FlexSteel Middle East, LLC (FlexSteel Middle East), FlexSteel FZE, FlexSteel Bahrain, W.L.L. (FlexSteel Bahrain), and HighRidge S. de R.L. de C.V. (HighRidge Mexico) (collectively, the FlexSteel Subsidiaries).

FSH was formed for the primary purpose of owning 100% of the outstanding equity interests in each of the subsidiaries that existed at the time of its formation. These subsidiaries included Rubiales, Trinity Bay, and FlexSteel, which owns 100% of the equity of FlexSteel Ltd. Because the formation of FSH and the subsequent transfer of equity interests in the three subsidiaries to FSH were executed by the common control owner, HighRidge, these accounts were transferred to FSH at their respective historical carrying amounts, and no gain or loss was recognized as a result of the transfers. Talon Bridge, FlexSteel USA, and FlexSteel Europe were formed after the formation of FSH, as described below.

FlexSteel was formed in Texas in January 2003 and was acquired by HighRidge in October 2009. FlexSteel maintains operating locations in the United States and Canada. FlexSteel's spooled, flexible pipeline technology combines the manufacturing, transportation, and installation advantages of flexible pipe with the strength of steel and the corrosion-resistance of polymer liners. Its principal customers are oil and natural gas exploration and production companies, which use its products in various onshore and shallow water applications. Our Canadian operations are conducted through our FlexSteel Ltd. entity.

Rubiales was formed in Texas in September 2003 and owns the land and building of our Baytown, Texas manufacturing facility that was completed in 2012.

Trinity Bay was formed in Delaware in March 2011 and owns the machinery and equipment that is used in our manufacturing facility in Baytown, Texas.

Talon Bridge was formed in Delaware in March 2013 and owns the land and building of our Pleasanton, Texas service center.

FlexSteel USA was formed in Nevada in October 2015 for the purpose of conducting our domestic and international rental, installation, and field service operations.

FlexSteel Europe was formed in the United Kingdom in December 2015 for the purpose of facilitating purchase and sale transactions with customers and vendors located in the European Union.

**HIGHRIDGE RESOURCES, INC.**

Notes to Condensed Consolidated Financial Statements

September 30, 2022 and 2021

(unaudited)

FlexSteel Middle East was formed in Nevada in September 2018, FlexSteel FZE was formed in the United Arab Emirates in May 2019, and FlexSteel Bahrain was formed in Bahrain in May 2019 for the purpose of facilitating purchase and sale transactions with customers and vendors located in the Middle East.

HighRidge Mexico was formed in Mexico in February 2019 for the purpose of facilitating purchase and sales transactions with customers and vendors located in Mexico.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. All adjustments which, in the opinion of the Company's management, are considered necessary for a fair presentation of the results of operations for the periods shown are of a normal recurring nature and have been reflected in the condensed consolidated financial statements. The results of operations for the periods presented are not necessarily indicative of the results expected for the full fiscal year 2022 or for any future period. The information included in these condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and accompanying notes as of and for the years ended December 31, 2021 and 2020.

**(2)** **Summary of Significant Accounting Policies** 

&nbsp;&nbsp;&nbsp;&nbsp;***(a)***  ***Revenue Recognition*** 

*Revenue from Contracts with Customers:*

The Company recognizes revenue based on the transfer of control of our products or our customer's ability to benefit from our services in an amount that reflects the consideration we expect to receive in exchange for that product or services. The Company bills for products once delivered to customer designated location and for installation services and equipment rentals based on contractual daily billing rates. The duration of installation services and equipment rentals is generally one week or less.

A breakdown of our revenue by region for the nine months ended September 30, 2022 and 2021:

---

| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| United States | $243770724 | $140103620 |
| Canada | 12297131 | 7240957 |
| Latin America | 2785947 | 2030832 |
| Middle East | 6566421 | 18137671 |
| Africa |  | 1935069 |
| Rest of World | 30173 | 186051 |
| &nbsp;&nbsp;&nbsp;Total Revenues | $265450396 | $169634200 |

---

*Contract Liabilities*

Contract liabilities represent billings in excess of the satisfaction of the performance obligation(s) of a contract. A deferred revenue liability account is maintained for contract liabilities. These liabilities are for customers' deposits for reusable shipping reels and skids used for transporting and storing flexible pipe and the related freight return costs, and for advance payments received from customers. Customer reel and skid deposits were $5,786,541 and $5,473,634 at September 30, 2022 and December 31, 2021, respectively. Return freight advances were $976,214 and $1,174,945 at September 30, 2022 and December 31, 2021, respectively. Customer advances were $7,168,820 and $6,771,816 at September 30, 2022 and December 31, 2021, respectively. Return freight advances and customer advances are included in deferred revenue liability on balance sheet. The deferred revenue liability decreases, and revenue is recognized, as shipments are made to customers or reels and skids are returned.

**HIGHRIDGE RESOURCES, INC.**

Notes to Condensed Consolidated Financial Statements

September 30, 2022 and 2021

(unaudited)

As the Company's contracts are less than one year, the Company has applied the practical expedient regarding disclosure of the aggregate amount and future timing of performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period.

&nbsp;&nbsp;&nbsp;&nbsp;***(b)***  ***Accounts Receivable*** 

The allowance for doubtful accounts was $623,435 and $227,636 at September 30, 2022 and December 31, 2021, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;***(c)***  ***Inventory*** 

At September 30, 2022 and December 31, 2021, inventory reserve write-downs were $806,611 and $135,781, respectively.

Inventory consists of the following:

---

| | | |
|:---|:---|:---|
|  | **September 30,**<br>**2022** | **December 31,**<br>**2021** |
| Raw materials | $19893198 | $16148266 |
| Subassemblies | 2881207 | 3149737 |
| Work in process | 3156564 | 3806243 |
| Finished goods | 40880390 | 38437446 |
| &nbsp;&nbsp;&nbsp;Total inventory | 66811359 | 61541692 |

---

&nbsp;&nbsp;&nbsp;&nbsp;***(d)***  ***Product Warranties*** 

The Company provides warranties ranging from one to two years on its pipeline products. Estimated future warranty costs are accrued and charged to cost of goods sold in the period that the related revenue is recognized. These estimates are derived from historical data and trends of product reliability and costs of repairing and replacing defective products. Warranty liabilities are included in our condensed consolidated balance sheets as accrued liabilities.

**HIGHRIDGE RESOURCES, INC.**

Notes to Condensed Consolidated Financial Statements

September 30, 2022 and 2021

(unaudited)

A reconciliation of changes to warranty liability:

---

| | |
|:---|:---|
| Balance at December 31, 2020 | 2111397 |
| Issuances | 3228048 |
| Expirations | (2185404) |
| Claims | (458038) |
| Balance at December 31, 2021 | $2696003 |
| Issuances | 1380292 |
| Expirations | (2297202) |
| Claims | (287022) |
| Balance at September 30, 2022 | 1492071 |

---

&nbsp;&nbsp;&nbsp;&nbsp;***(e)***  ***Use of Estimates*** 

The preparation of condensed consolidated financial statements in conformity with GAAP in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include allowance for doubtful accounts, inventory reserves, valuations of property, goodwill and intangible assets, income taxes, contingencies, and litigation accruals. Actual results may differ from these estimates.

**(3)** **Recently Issued Accounting Pronouncements** 

***Leases***

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 supersedes the current accounting for leases, providing a comprehensive new lease model that requires lessees to recognize assets and liabilities for most leases and changes certain aspects of lessor accounting. The Company will adopt the provisions of ASU 2016-02 and will reflect adoption in December 31, 2022 consolidated financial statements. The Company has identified its lease commitments and finalized its evaluation on the financial statements and internal accounting processes. The Company elected the practical expedient to not apply the recognition requirements of ASU 2016-02 to short-term leases, defined as leases with a lease term of 12 months or less. The Company elected the transition option provided by ASU 2018-11 to not apply the new lease standards in the comparative financial statements presented in the year of adoption and will continue disclosing lease commitments for the comparative periods under the standards of ASC 840. The Company is still evaluating additional impacts of adoption.

**HIGHRIDGE RESOURCES, INC.**

Notes to Condensed Consolidated Financial Statements

September 30, 2022 and 2021

(unaudited)

**(4)** **Property and Equipment** 

Property and equipment consists of the following:

---

| | | |
|:---|:---|:---|
|  | **September 30,**<br>**2022** | **December 31,**<br>**2021** |
| Land | $8187052 | $8187141 |
| Building and leasehold improvements | 72225075 | 66127964 |
| Machinery and equipment | 103819050 | 99437391 |
| Reels and Skids | 42137756 | 42346623 |
| Vehicles | 3266209 | 2949416 |
| Office furniture and equipment | 5228784 | 5072287 |
| Construction in progress | 9990227 | 16875163 |
| &nbsp;&nbsp;&nbsp;Total property and equipment | 244854153 | 240995985 |
| Accumulated depreciation and amortization | (123851282) | (112513935) |
| &nbsp;&nbsp;&nbsp;Property and equipment, net | $121002871 | $128482050 |

---

Total depreciation and amortization expense related to property and equipment for the nine months ended September 30, 2022 and 2021 was $11,616,134 and $11,286,038, respectively.

**(5)** **Intangible Assets** 

Intangible assets consist of the following:

---

| | | |
|:---|:---|:---|
|  | **September 30,**<br>**2022** | **December 31,**<br>**2021** |
| Goodwill | $431594 | $431594 |
| Patents | 9366687 | 9366687 |
| Technology | 608071 | 608071 |
| &nbsp;&nbsp;&nbsp;Total intangible assets | 10406352 | 10406352 |
| Accumulated amortization | (7801028) | (7293213) |
| &nbsp;&nbsp;&nbsp;Intangible assets, net | $2605324 | $3113139 |

---

Total amortization expense related to intangible assets for the nine months ended September 2022 and 2021 was $507,815 and $450,939, respectively.

**(6)** **Notes Receivable** 

On April 2, 2013, HighRidge entered into a note receivable with Northeast Real Estate Holdings (Northeast), a related party. Under the terms of the note receivable, HighRidge loaned NorthEast $1,031,250 to finance the purchase of a commercial property in Eagle Lake, Texas. This property secured the note receivable. The note bears interest at 7.2% per annum and does not compound. The note has a maturity date of either (i) upon being called by HighRidge or (ii) upon Northeast securing separate financing for the real estate property. Principal and interest payments on the note can be paid in arrears or prepaid at any time without penalty.

**HIGHRIDGE RESOURCES, INC.**

Notes to Condensed Consolidated Financial Statements

September 30, 2022 and 2021

(unaudited)

On August 16, 2022, Northeast paid HighRidge $1,635,104 to settle the principal and accrued interest balance in full. The note receivable was terminated at that time. Interest income on the note receivable was $47,512 and $56,152 for the nine months ended September 30, 2022 and 2021, respectively.

**(7)** **Long-Term Debt** 

Long term debt on consists of the following:

---

| | | |
|:---|:---|:---|
|  | **September 30,**<br>**2022** | **December 31,**<br>**2021** |
| 2019 Promissory Notes Payable - Related Party | $377735011 | $386381003 |
| 2022/2015 Notes Payable - Related Party | 10709906 | 9948072 |
| &nbsp;&nbsp;&nbsp;Total notes payable | $388444917 | 396329075 |

---

Deferred financing costs related to revolving credit line and included in our condensed consolidated balance sheets as other current assets was $197,850 and $259,252 at September 30, 2022 and December 31, 2021, respectively.

Total interest expense related to our outstanding loan instruments was $40,019,841 and $37,635,931 for the nine months ended September 30, 2022 and 2021, respectively. This includes $61,402 and $47,137 associated with the amortization of deferred financing charges for the nine months ended September 30, 2022 and 2021, respectively and $127,930 associated with prepayment penalties for the nine months ended September 30, 2021. No interest expense was capitalized for construction in progress in either year.

&nbsp;&nbsp;&nbsp;&nbsp;***(a)***  ***2019 Promissory Notes Payable*** 

On November 1, 2019, HighRidge simultaneously entered into two promissory notes payable agreements with FlexSteel LTIP, LP (FlexSteel LTIP), a related party. Collectively, these notes payable are referred to as the "2019 Promissory Notes Payable". The 2019 Promissory Notes Payable were issued in conjunction with the refinancing of previously existing HighRidge preferred stock that was held by FlexSteel LTIP, and no cash funds were actually transacted between the two parties.

Under the terms of the 2019 Promissory Notes Payable, HighRidge was allocated notes payable of $295,615,000 and $54,385,000 from FlexSteel LTIP at an interest rate of 14.0% per annum. Interest is computed and compounded quarterly. Repayment terms call for interest to be repaid in arrears at the end of each quarter, or the payments may be paid in kind and added to the balance of the note payable without penalty. Principal prepayments, including paid in kind interest, are subject to a 2% penalty until the first anniversary of the agreement and a 1% penalty between the first and second anniversary of the agreement. Thereafter, principal repayments can me made without penalty. The maturity date of the 2019 Promissory Notes Payable is November 1, 2024. If a change of control occurs, the unpaid principal and accrued interest shall be immediately due and payable, together with an additional premium of 1% of the outstanding principal balance on that date.

**HIGHRIDGE RESOURCES, INC.**

Notes to Condensed Consolidated Financial Statements

September 30, 2022 and 2021

(unaudited)

On November 1, 2019, the $295,615,000 note was assigned by FlexSteel LTIP to Prime HoldCo LP, also a related party.

Interest paid in kind was $39,572,815 and $40,779,710 for nine months ended September 30, 2022 and the year ended December 31, 2021, respectively. These amounts were added to the outstanding principal balance of the 2019 Promissory Notes Payable.

HighRidge made a $22,000,000 payment on the 2019 Note Payable in March 2021. This payment included $21,872,070 of accrued interest and a prepayment penalty of $127,930.

HighRidge made a $48,084,065 payment on the 2019 Note Payable in May 2022. This payment was for accrued interest with no prepayment penalty assessed because the second anniversary of the note payable has passed.

HighRidge also made interest only payments of $329,101 and $134,743 in May 2021 and March 2022, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;***(b)***  ***2015 Notes Payable / 2022 Notes Payable*** 

On June 24, 2015, HighRidge simultaneously entered into two notes payable agreements with PCV International Limited ("PCV-I") and PCV Associates, LLC ("PCV-A"). Both PCV-I and PCV-A are related parties, and all terms of the notes payable were identical. Collectively, these notes payable are referred to as the "2015 Notes Payable".

Under the terms of the 2015 Notes Payable, HighRidge borrowed $13,364,273 and $7,196,147 from PCV-I and PCV-A, respectively, at an interest rate of 1.59% per annum. Interest is computed and compounded quarterly. Repayment terms call for interest to be repaid in arrears on the anniversary of the note payable agreement, or the payments may be deferred without penalty. Principal prepayments are also allowed at any time without penalty. The maturity date of the 2015 Notes Payable is June 24, 2022. The original balances of the 2015 Notes Payable reflected a 65% and 35% balance allocation between PVC-I and PCV-A. Effective July 17, 2021, the outstanding 2015 Notes Payable balances were reallocated by PCV-I and PCV-A to reflect a 70% and 30% allocation, respectively. All other terms of the note payable agreement remained the same.

HighRidge made combined principal and interest payments totaling $1,500,000 and $10,000,000 in July 2017 and June 2018, respectively. These payments were applied to the PCV-I and PCV-A balances based on the allocations in place on those dates.

On June 24, 2022, the 2015 Notes Payable matured, and at that time, the notes were refinanced. Collectively, these notes payable are referred to as the "2022 Notes Payable". Under the terms of the 2022 Notes Payable, HighRidge refinanced $7,433,766 and $3,185,900 from PCV-I and PCV-A, respectively at an interest rate of 3.12%. Interest is computed and compounded quarterly. Repayment terms call for interest to be repaid in arrears on the anniversary of the note payable agreement, or the payments may be deferred without penalty. Principal prepayments are also allowed at any time without penalty. The maturity date of the 2022 Notes Payable is June 24, 2027.

**HIGHRIDGE RESOURCES, INC.**

Notes to Condensed Consolidated Financial Statements

September 30, 2022 and 2021

(unaudited)

&nbsp;&nbsp;&nbsp;&nbsp;***(c)***  ***Term Loan and Revolving Line of Credit*** 

On March 9, 2015, FlexSteel and Trinity Bay, as co-borrowers, entered into a new credit agreement for a revolving line of credit (the Revolver) with availability of up to $110,000,000 dependent on our accounts receivable and inventory balances. On June 14, 2016, the co-borrowers were granted an amendment to the credit agreement that lowered the maximum availability to $60,000,000, reduced covenant testing thresholds and redefined eligible accounts receivable accounts. On June 11, 2018, the co-borrowers were granted an amendment to the credit agreement that increased the maximum availability back to $110,000,000. On March 6, 2020, the co-borrowers were granted an amendment to the credit agreement that extended the maturity date to March 9, 2021 and reduced the maximum availability to $75,000,000. On March 8, 2021, the co-borrowers were granted an amendment to the credit agreement that extended the maturity date to March 9, 2025 and reduced the maximum availability to $50,000,000.

The interest rate with respect to Revolver is either 1) the Prime Rate plus an applicable margin of 0.00% to 0.75% based on our availability, 2) the Federal Funds rate plus 0.5% or 3) LIBOR plus an applicable margin of 1.50% to 2.25% based on availability. As of September 30, 2022, the interest rate on the Revolver was 6.25%.

The co-borrowers are required to maintain compliance with a variety of performance and financial covenants for the Revolver, including a minimum fixed-charge coverage ratio. The co-borrowers were in compliance with all covenants at September 30, 2022. As of September 30, 2022, our calculated availability under the Revolver based on accounts receivable and inventory balances was approximately $47 million.

&nbsp;&nbsp;&nbsp;&nbsp;***(d)***  ***Deferred Financing Costs*** 

Costs incurred in connection with the issuance of debt are deferred and amortized using the straight-line method, which approximates the effective-interest method over the term of the related debt. Amortization of deferred financing costs for nine months ended September 30, 2022 and 2021 was $61,402 and $47,137, respectively. During 2021, we incurred $326,857 for commitment and advisory fees to extend revolving line of credit. The Company has net deferred financing costs of $197,850 and $259,252 as of September 30, 2022 and December 31, 2021, respectively.

**(8)** **Capital Lease Obligations – Future Minimum Lease Payments** 

The Company leases certain machinery and equipment under agreements that are classified as capital leases. The cost of equipment under capital leases is included in our condensed consolidated balance sheets as property and equipment was $4,125,560 and $4,011,088 at September 30, 2022 and December 31, 2021, respectively. Depreciation of assets under capital leases is included in depreciation and amortization expense.

Total payments under capital leases during the nine months ended September 30, 2022 and 2021 were $629,180 and $529,315, respectively. Interest expense related to the capital lease obligations in the amount of $109,989 and $115,747 was incurred for the nine months ended September 30, 2022 and 2021, respectively.

**HIGHRIDGE RESOURCES, INC.**

Notes to Condensed Consolidated Financial Statements

September 30, 2022 and 2021

(unaudited)

**(9)** **Commitments and Contingencies** 

The Company is, from time to time, party to certain legal actions and claims arising in the ordinary course of business. While the outcome of these events cannot be predicted with certainty, management does not expect these matters to have a material adverse effect on the financial position, results of operations, or cash flows of the Company.

In the case of all known contingencies, a liability is accrued when the loss is probable, and the amount is reasonably estimable. These liabilities are not reduced for potential insurance or third-party recoveries. If applicable, a receivable for probable insurance or other third-party recoveries is recorded. Based on currently available information, the Company believes that the probability is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse effect on the financial position, results of operations, or cash flows of the Company.

As new facts concerning contingencies arise, the Company's position both with respect to accrued liabilities and other potential exposures is reassessed. Estimates that are particularly sensitive to future changes include contingent liabilities related to environmental remediation, tax, and legal matters.

*Leases*

Rent expense for the nine months ended September 30, 2022 and 2021 was $888,965 and $876,321, respectively.

**(10)** **Income Taxes** 

Our effective tax rates for the nine months ended September 30, 2022 and 2021 were 93.4% and (3.5%), respectively. The effective tax rates were impacted by the valuation allowance placed on deferred tax assets for the nine months ended September 30, 2021 and maintained for the nine months ended September 30, 2022.

In determining the need for a valuation allowance, we consider current and historical financial results, expectations for future taxable income and the availability of tax planning strategies that can be implemented, if necessary, to realize deferred tax assets.

During 2021, the Company recorded a valuation allowance for our net operating losses and other net deferred tax assets for which the tax benefits are not likely to be realized. We intend to maintain a valuation allowance on our net federal and foreign deferred tax assets until there is sufficient evidence to support the reversal of these allowances.

As of September 30, 2022 and December 31, 2021, the Company is not permanently reinvested in its Canadian business and therefore has recognized a deferred tax liability of $601,461 related to withholding taxes on unremitted earnings of its Canadian business.

For other foreign subsidiaries, the Company maintains its position for undistributed foreign earnings to be indefinite and does not provide for outside basis differences under the indefinite reinvestment assertion of ASC 740-30. Accordingly, the Company does not anticipate the need to provide for additional taxes for basis differences or withholding taxes on remitted foreign earnings in the immediate future.

**HIGHRIDGE RESOURCES, INC.**

Notes to Condensed Consolidated Financial Statements

September 30, 2022 and 2021

(unaudited)

The Company follows applicable provisions of ASC 740-10, which requires the recognition, measurement, and disclosure of any uncertain tax positions in the financial statements. Under the applicable FASB Interpretation, tax positions must meet a "more-likely than-not" recognition threshold at the effective date to be recognized. At September 30, 2022 and December 31, 2021, there were no uncertain tax positions.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. No interest and penalties related to uncertain tax positions were accrued at September 30 2022 and December 31, 2021.

Tax years 2019 through 2021 for federal, foreign, and state returns of the Company and its parent remain open to examination by the major taxing jurisdictions in which we operate.

**(11)** **Employee Benefit Plans** 

The Company's employees participate in one of our affiliate's 401(k) plans. During the nine months ended September 30, 2022 and 2021, the Company's employer matching contributions totaled $801,459 and $750,992, respectively.

On December 4, 2019, the Company executed a binding term sheet establishing two long-term incentive plans for key employees of FlexSteel Holdings, Inc, the Incentive Equity Plan and the Cash Bonus Plan. The Incentive Equity Plan establishes Series B equity units which allow participants to receive an interest in the distributed profits of the Company. Series B units do not have voting rights. The Cash Bonus Plan was established to provide cash bonuses to holders of Series B equity units at the earlier of a monetization event in connection with a sale to a third-party of at least 51% of the Company or January 1, 2026.

The Company accounts for the compensation cost related to the long-term incentive plans in accordance with the provisions of ASC 718. In following these provisions, the Company recognizes compensation cost of granted Series B units (the "units") ratably over the service period of the plans. These provisions further require the units that settle in cash to be recorded as a liability in the Company's balance sheet and be remeasured at their fair value in each reporting period until settled. The binding term sheet establishes the fair value of the units to represent the units portion of the enterprise value of the Company, as determined by the Company's owner, using an income-based valuation approach.

Compensation cost of $12,536,295 and $6,480,776 relating to the long-term incentive plans were recorded to general and administrative expenses for the nine months ended September 30, 2022 and 2021, respectively and the Company has deferred compensation liabilities of $29,542,200 and $17,005,905 in the September 30, 2022 and December 31, 2021 balance sheet, respectively.

**(12)** **Customer Concentration** 

The majority of the Company's business is conducted with major and independent oil and natural gas exploration companies. The Company evaluates the financial strength and viability of its customers and provides allowances for probable credit losses when deemed necessary.

For the nine months ended September 30, 2022, one customer accounted for approximately 17% of the Company's revenue. There were outstanding accounts receivable associated with this customer as of September 30, 2022 of $5,380,457. No other customer accounted for more than 10% of the Company's revenue during the nine months ended September 30, 2022.

**HIGHRIDGE RESOURCES, INC.**

Notes to Condensed Consolidated Financial Statements

September 30, 2022 and 2021

(unaudited)

For the nine months ended September 30, 2021, four customers accounted for approximately 53% of the Company's revenue. There were outstanding accounts receivable associated with these customers as of September 30, 2021 of $29,996,204. No other customer accounted for more than 10% of the Company's revenue during the nine months ended September 30, 2021.

**(13)** **Credit Risks** 

The Company's financial instruments that are potentially exposed to concentrations of credit risk consist primarily of cash equivalents and trade receivables. Cash equivalents are placed on deposit with major international banks and financial institutions. All of the Company's cash accounts in the United States are federally insured up to $250,000 per depositor at each financial institution; however, cash balances may exceed such limits from time to time.

Trade receivables result primarily from the sale of products and services to major and independent oil and natural gas exploration companies. The majority of these receivables have payment terms of 30 to 45 days. Management continually monitors this exposure and the creditworthiness of the counterparties. The Company generally does not require collateral to limit our exposure to loss; however, we sometimes use letters of credit or prepayments to mitigate credit risk with counterparties.

The Company's overall credit risk may be affected by changes in economic and other conditions. Historically, the Company has not experienced significant credit losses on such receivables. The Company cannot ensure that such losses will not be realized in the future.

**(14)** **Foreign Currency Exchange Risk** 

The Company is exposed to foreign currency fluctuations as certain transactions are consummated in foreign currencies, primarily Canadian dollars.

The Company also holds Canadian assets and liabilities. Monetary values and liabilities are revalued each period-end at the then-current exchange rate. Foreign currency translation adjustments are recognized in the condensed consolidated statements of operations and comprehensive income.

**(15)** **Related-Party Transactions** 

Accounts payable balance includes amounts due to related parties of $2,935,456 and $4,857,216 as of September 30, 2022 and December 31, 2021, respectively. These amounts represent funds owed by the Company to Prime Natural Resources and to an affiliate for rent, management services, taxes, and administrative expenses paid on the Company's behalf.

Other current liability balances of $449,913 as of both September 30, 2022 and December 31, 2021, respectively were owed to TitanLiner LLC, a related party.

As previously discussed in Footnote 6, the Notes Receivable from Northeast is a related party and as such the annual interest income and the related receivable balances are considered related party transactions.

**HIGHRIDGE RESOURCES, INC.**

Notes to Condensed Consolidated Financial Statements

September 30, 2022 and 2021

(unaudited)

As previously discussed in Footnote 7, the 2019 Notes Payable are held by Prime Holdco LP and FlexSteel LTIP, both related parties, and the 2015 Notes Payable are held by PCV-I and PCV-A, also related parties. As such the annual interest expense and the related receivable balances are considered related party transactions.

**(16)** **Subsequent Events** 

In preparing the condensed consolidated financial statements, the Company has reviewed, as determined by the Company's management, events that have occurred after September 30, 2022, up until the issuance of the condensed consolidated financial statements, which occurred on or about December 8, 2022.

Management has determined that there are no additional subsequent events since September 30, 2022 that require disclosure in the Company's condensed consolidated financial statements.

## Exhibit 99.3

**Exhibit 99.3**

**<u>UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION</u>**

The following unaudited pro forma condensed combined financial information presents information about Cactus Inc.'s (the "Company" or "Cactus") consolidated balance sheet and statements of income, after giving effect to the acquisition of FlexSteel Technologies Holdings, Inc. and its affiliates through a merger with its holding company, HighRidge Resources, Inc. ("HighRidge") and Atlas Merger Sub, LLC, a newly-formed subsidiary of Cactus (the "Merger"), and related financing transactions (collectively, the "Transactions") as further described in "Note 1. Description of the Transactions". The unaudited pro forma condensed combined financial information is derived from and should be read in conjunction with:

· the Company's audited financial statements included in
its most recently filed annual report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28,
2022, and incorporated by reference.

· the Company's unaudited financial statements included
in its quarterly report on Form 10-Q for the nine months ended September 30, 2022, filed with the SEC on November 7, 2022,
and incorporated by reference.

· HighRidge's audited financial statements for the year
ended December 31, 2021, included elsewhere in this Form 8-K; and

· HighRidge's unaudited financial statements for the nine
months ended September 30, 2022, included elsewhere in this Form 8-K.

The accompanying unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X and reflects the impact of the Transactions on the historical financial information of Cactus.

The unaudited pro forma condensed combined balance sheet and the unaudited pro forma condensed combined statements of income, referred to collectively as the unaudited pro forma condensed combined financial information, were prepared using the acquisition method of accounting for the Merger. Under this method of accounting, which is in accordance with Accounting Standards Codification 805 – Business Combinations ("ASC 805") under generally accepted accounting principles in the United States ("U.S. GAAP"), Cactus is the accounting acquirer of HighRidge and the purchase price for HighRidge is allocated to the underlying assets acquired and liabilities assumed based on their respective fair values, with any excess purchase price allocated to goodwill.

The unaudited pro forma condensed combined balance sheet reflects the estimated effects of the Transactions as if they had been completed on September 30, 2022, and the unaudited pro forma condensed combined statements of income reflect the estimated effects of the Transactions as if they had been completed on January 1, 2021.

The unaudited pro forma condensed combined statements of income were derived from Cactus' and HighRidge's historical financial statements, and give effect to the following:

· the Merger and the impact of preliminary purchase accounting
for the acquired assets and assumed liabilities;

· the reclassification of certain HighRidge historical financial
information to conform to Cactus' presentation;

· adjustments to reflect the expected financing under an amended
asset-based loan revolving credit facility to be entered into with JPMorgan Chase Bank, N.A. (the "Revolving Facility"),
a Term Loan A Facility to be entered into with certain lenders (the "Term Loan A Facility") and an equity offering;

· transaction costs incurred in connection with the Merger; and

· the related income tax effects of the pro forma adjustments.

The unaudited pro forma condensed combined financial information has been presented for informational purposes only and is not necessarily indicative of what the Company's combined financial position or results of operations would have been had the Transactions been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company.

The unaudited pro forma condensed combined financial information contains adjustments that are preliminary and may be revised. There can be no assurance that such revisions will not result in material changes to the information presented in the unaudited condensed combined pro forma financial information. The assumptions underlying the pro forma adjustments are described in greater detail in the accompanying notes to the unaudited pro forma condensed combined financial information.

Additional information about the basis of presentation of this information is provided in "Note 2. Basis of Presentation" hereto.

**CACTUS, INC. AND SUBSIDIARIES<br> UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET**

**As of September 30, 2022**

**(in thousands)**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Cactus, Inc.<br> (Historical)** | **HighRidge<br> Resources Inc. <br> (Adjusted<br> Historical) <br> (Note 3)** | **Transaction<br> Accounting <br> Adjustments - <br> Financing <br> (Note 5)** |  | **Transaction<br> Accounting <br> Adjustments -<br> Merger <br> (Note 5)** |  | **Pro forma<br> Combined for <br> Transaction <br> Accounting <br> Adjustments** |
| **ASSETS** |  |  |  |  |  |  |  |
| Current assets |  |  |  |  |  |  |  |
| Cash and cash equivalents | $320623 | $50009 | $371412 | **A** | $(671169) | **B** | $77375 |
|  |  |  |  |  | 6500 | **Q** |  |
| Restricted cash |  | 162 |  |  | (162) | **B** |  |
| Accounts receivable, net | 131748 | 66812 |  |  |  |  | 198560 |
| Inventories | 162730 | 66811 |  |  | 23689 | **C** | 253230 |
| Prepaid expenses and other current assets | 11849 | 3212 | - |  | (198) | **M** | 14863 |
| Total Current assets | 626950 | 187006 | 371412 |  | (641340) |  | 544028 |
| Noncurrent assets |  |  |  |  |  |  |  |
| Property and equipment, net | 130099 | 121003 |  |  | 62047 | **D** | 313149 |
| Operating lease right-of-use assets, net | 22232 |  |  |  | 568 | **E** | 22800 |
| Intangible assets, net |  | 2173 |  |  | 183827 | **F** | 186000 |
| Goodwill | 7824 | 432 |  |  | 239342 | **G** | 247598 |
| Deferred tax asset, net | 306789 |  | 5524 | **H** | (89357) | **H** | 222956 |
| Other noncurrent assets | 1307 | 96 | 3008 | **I** |  |  | 4411 |
| Total noncurrent assets | 468251 | 123704 | 8532 |  | 396427 |  | 996914 |
| **Total assets** | $**1095201** | $**310710** | $**379944** |  | $**(244913)** |  | $**1540942** |
| **LIABILITIES** |  |  |  |  |  |  |  |
| Current liabilities |  |  |  |  |  |  |  |
| Accounts payable | $62398 | $14107 | $- |  | $- |  | $76505 |
| Accounts payable — related party |  | 2935 |  |  | (2935) | **J** |  |
| Accrued expenses and other current liabilities | 31659 | 32859 | 900 | **K** | 17541 | **K** | 82509 |
|  |  |  |  |  | (450) | **J** |  |
| Current portion of liability related to tax receivable agreement | 27696 |  |  |  |  |  | 27696 |
| Finance lease obligations, current portion | 5757 | 606 |  |  | (606) | **L** | 5757 |
| Operating lease liabilities, current portion | 4677 |  |  |  | 303 | **E** | 4980 |
| Long-term debt, current portion | - | - | 40175 | **A** | - |  | 40175 |
| **Total current liabilities** | **132187** | **50507** | **41075** |  | **13853** |  | **237622** |
| Noncurrent liabilities |  |  |  |  |  |  |  |
| Deferred tax liability, net | 2099 |  |  |  |  |  | 2099 |
| Liability related to tax receivable agreement, net of current portion | 260844 |  |  |  |  |  | 260844 |
| Finance lease obligations, net of current portion | 6837 | 811 |  |  | (811) | **L** | 6837 |
| Operating lease liabilities, net of current portion | 17584 |  |  |  | 265 | **E** | 17849 |
| Long-term debt, net of current portion |  |  | 214245 | **A** |  |  | 214245 |
| Notes payable - related party |  | 387683 |  |  | (387683) | **M** |  |
| Other noncurrent liabilities |  | 30352 |  |  | (47) | **E** | 11247 |
|  |  |  |  |  | (762) | **M** |  |
|  |  |  |  |  | 11247 | **N** |  |
|  |  |  | - |  | (29543) | **O** |  |
| Total noncurrent liabilities | 287364 | 418846 | 214245 |  | (407334) |  | 513121 |
| **Total liabilities** | **419551** | **469353** | **255320** |  | **(393481)** |  | **750743** |
| **EQUITY** |  |  |  |  |  |  |  |
| Stockholders' equity (deficit) |  |  |  |  |  |  |  |
| Preferred stock |  |  |  |  |  |  |  |
| Class A common stock | 607 |  | 24 | **P** | 1 | **P,Q** | 632 |
| Class B common stock |  |  |  |  |  |  |  |
| Common stock |  |  |  |  |  |  |  |
| Additional paid-in capital | 307698 | 144543 | 119976 | **P** | (971) | **H,P** | 398046 |
|  |  |  | 5524 | **H,P** | (144543) | **P** |  |
|  |  |  | (900) | **K,P** | 6499 | **P,Q** |  |
|  |  |  | (19138) | **P,R** | (20642) | **P,R** |  |
| Retained earnings | 237551 | (302758) |  |  | (17541) | **K,P** | 221947 |
|  |  |  |  |  | 1937 | **H,P** |  |
|  |  |  |  |  | 302758 | **P** |  |
| Accumulated other comprehensive income (loss) | (1617) | (428) | - |  | 428 | **P** | (1617) |
| Total stockholders' equity (deficit) attributable to Cactus Inc. | 544239 | (158643) | 105486 |  | 127926 |  | 619008 |
| Total non-controlling interest | 131411 | - | 19138 | **R** | 20642 | **R** | 171191 |
| **Total stockholders' equity** | **675650** | **(158643)** | **124624** |  | **148568** |  | **790199** |
| **Total liabilities and equity** | $**1095201** | $**310710** | $**379944** |  | $**(244913)** |  | $**1540942** |

---

See accompanying notes to unaudited pro forma condensed combined financial information.

**CACTUS, INC. AND SUBSIDIARIES<br> UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME**

**For the Period Ended September 30, 2022**

**(in thousands, except per share data)**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Cactus, Inc.<br> (Historical)** | **HighRidge <br> Resources Inc.<br> (Adjusted<br> Historical) <br> (Note 3)** | **Transaction<br> Accounting <br> Adjustment - <br> Financing <br> (Note 5)** | **Transaction<br> Accounting <br> Adjustment -<br> Merger <br> (Note 6)** | **Pro forma<br> Combined for <br> Transaction <br> Accounting <br> Adjustment** |
| **Revenues** |  |  |  |  |  |
| Product revenue | $328054 | $240486 | $- | $- | $568540 |
| Rental revenue | 73143 | 7391 |  |  | 80534 |
| Field service and other revenue | 99398 | 17573 | - | - | 116971 |
| Total revenues | 500595 | 265450 |  |  | 766045 |
| **Costs and expenses** |  |  |  |  |  |
| Cost of product revenue | 203839 | 154820 |  | 1210 **BB** | 359869 |
| Cost of rental revenue | 46740 | 4630 |  | 527 **BB** | 51897 |
| Cost of field service and other revenue | 78685 | 14163 |  | 78 **BB** | 92926 |
| Selling, general and administrative expenses | 44804 | 38005 |  | 13442 **EE** | 92411 |
|  |  |  |  | 137 **BB** |  |
|  |  |  |  | (3977) **DD** |  |
| Research and development expenses | - | 5540 | - | - | 5540 |
| Total costs and expenses | 374068 | 217158 | - | 11417 | 602643 |
| **Income from operations** | **126527** | **48292** | **-** | **(11417)** | **163402** |
| Interest income (expense), net | 1344 | (40081) | (14716) **GG** | 40081 **FF** | (13372) |
| Other income | 10 | 876 | - | - | 886 |
| **Income before income taxes** | $**127881** | $**9087** | $**(14716)** | $**28664** | $**150916** |
| Income tax expense (benefit) | 23498 | 8491 | (2683) **HH** | (1095) **HH** | 28211 |
| **Net income** | $**104383** | $**596** | $**(12033)** | $**29759** | $**122705** |
| Less: net income attributable to non-controlling interest | 25198 | - | (3238) **II** | 6066 **II** | 28026 |
| **Net income attributable to Cactus Inc.** | $**79185** | $**596** | $**(8795)** | $**23693** | $**94679** |
| Earnings per Class A share - basic | 1.32 |  |  |  | 1.51 |
| Earnings per Class A share - diluted | 1.30 |  |  |  | 1.49 |
| Weighted average Class A shares outstanding - basic | 60164 |  |  |  | 62760 **JJ** |
| Weighted average Class A shares outstanding - diluted | 76296 |  |  |  | 78925 **JJ** |

---

See accompanying notes to unaudited pro forma condensed combined financial information.

**CACTUS, INC. AND SUBSIDIARIES**

**UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME**

**For the Year Ended December 31, 2021**

**(in thousands, except per share data)**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Cactus, Inc.<br> (Historical)** | **HighRidge<br> Resources Inc.<br> (Adjusted<br> Historical)<br> (Note 3)** | **Transaction<br> Accounting<br> Adjustment -<br> Financing<br> (Note 5)** | **Transaction<br> Accounting<br> Adjustment -<br> Merger<br> (Note 6)** | **Pro forma<br> Combined for<br> Transaction<br> Accounting<br> Adjustment** |
| **Revenues** | | | | | |
| Product revenue | $280907 | $214044 | $- | $- | $494951 |
| Rental revenue | 61629 | 6304 |  |  | 67933 |
| Field service and other revenue | 96053 | 15231 | - | - | 111284 |
| Total revenues | 438589 | 235579 |  |  | 674168 |
| **Costs and expenses** |  |  |  |  |  |
| Cost of product revenue | 189083 | 134972 |  | 1934 **BB** | 349678 |
|  |  |  |  | 23689 **AA** |  |
| Cost of rental revenue | 54377 | 5953 |  | 863 **BB** | 61193 |
| Cost of field service and other revenue | 73681 | 15429 |  | 89 **BB** | 89199 |
| Selling, general and administrative expenses | 46021 | 42087 |  | 17541 **CC** | 122054 |
|  |  |  |  | 17923 **EE** |  |
|  |  |  |  | 90 **BB** |  |
|  |  |  |  | (1608) **DD** |  |
| Research and development expenses | - | 8394 | - | - | 8394 |
| Total costs and expenses | 363162 | 206835 | - | 60521 | 630518 |
| **Income from operations** | **75427** | **28744** | **-** | **(60521)** | **43650** |
| Interest income (expense), net | (774) | (51024) | (19144) **GG** | 51024 **FF** | (19918) |
| Other income | 492 | 65 | - | - | 557 |
| **Income (loss) before income taxes** | $**75145** | $**(22215)** | $**(19144)** | **(9497)** | **24289** |
| Income tax expense (benefit) | 7675 | 830 | (3490) **HH** | (5364) **HH** | (349) |
| **Net income (loss)** | $**67470** | $**(23045)** | $**(15654)** | $**(4133)** | $**24638** |
| Less: net income attributable to non-controlling interest | 17877 | - | (4648) **II** | (7057) **II** | 6172 |
| **Net income (loss) attributable to Cactus Inc.** | $**49593** | $**(23045)** | $**(11006)** | $**2924** | $**18466** |
| Earnings per Class A share - basic | 0.90 |  |  |  | 0.32 |
| Earnings per Class A share - diluted | 0.83 |  |  |  | 0.28 |
| Weighted average Class A shares outstanding - basic | 55398 |  |  |  | 57955 **JJ** |
| Weighted average Class A shares outstanding - diluted | 76107 |  |  |  | 78617 **JJ** |

---

See accompanying notes to unaudited pro forma condensed combined financial information.

**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

**<u>Note 1. Description of the Transactions</u>**

The Company intends to complete the Merger pursuant to the Agreement and Plan of Merger ("Merger Agreement"), dated December 30, 2022, by and among Cactus, a Delaware corporation ("Parent"), Atlas Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of Parent ("Merger Sub"), HighRidge, a Delaware corporation, and FlexSteel LTIP LP, a Delaware limited partnership, in its capacity as the Seller Representative (collectively, the "Sellers"). The Merger is expected to close on or before March 31, 2023 (the "Merger Date") with HighRidge being the surviving entity and becoming a wholly-owned subsidiary of Cactus.

The aggregate consideration to be paid by the Company in the Merger to the Sellers will be approximately $621.2 million in cash ("Merger Consideration"). The Merger Consideration is expected to be financed with proceeds from the following transactions:

(i) $125.0 million in proceeds from a Term Loan A Facility to be entered into with JPMorgan
 Chase Bank, N.A. ("JPMorgan") with a three-year term and an interest rate of the latest adjusted secured overnight
 financing rate ("SOFR") plus a specified margin,

(ii) $133.0 million in proceeds from an amended Asset Based Loan ("ABL")
 revolving credit facility to be entered into with JPMorgan (the "Revolving Facility") with a five-year term and an
 interest rate of the latest adjusted SOFR plus a specified margin,

(iii) $125.0 million in proceeds from a public offering of approximately
2.4 million of the Company's Class A common stock, par value $0.01 per share ("Cactus Class A common shares"),
and

(iv) the remaining amount funded from cash on hand.

The amount and terms of the expected financing are based on those the Company expects to achieve based on current market rates, agreements and/or term sheets. The actual financing transactions and terms of the financing transactions will be subject to market conditions, and actual amounts may differ from the amounts reflected in the condensed combined pro forma financial information and accompanying notes, and any differences may be material. In addition, the Company obtained a commitment (the "Bridge Facility") from JPMorgan in an aggregate amount of up to $375 million, subject to customary conditions set forth in the Bridge Facility, with a maturity date of 364 days following the closing with an option for an additional three-month period. The Company expects to obtain long-term debt and equity financing in the capital markets pursuant to the probable financing transactions described above to fund the Merger in lieu of utilizing the funds available under the Bridge Facility; however, if the Company is unable to obtain long-term financing prior to the consummation of the Merger, the Company would fund any shortfall with borrowings under the Bridge Facility.

Additionally, pursuant to the terms of the Merger Agreement, the Sellers are eligible for the potential payment of up to $75.0 million of contingent consideration, payable no later than sometime in the third quarter of 2024 to the extent HighRidge achieves certain cumulative revenue targets over the 18 months starting January 1, 2023. Based on the estimated fair value of the contingent consideration, Cactus recorded an $11.2 million liability as of the date of the Merger.

Refer to "Note 4. Estimated Purchase Price Consideration and Preliminary Allocation" of the unaudited pro forma condensed combined financial information for the purchase price consideration calculation.

**<u>Note 2. Basis of Presentation</u>**

The accompanying unaudited pro forma condensed combined financial information and related notes were prepared pursuant to Article 11 of SEC Regulation S-X.

The unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2022 and the year ended December 31, 2021 combine the historical consolidated statements of income of Cactus and HighRidge giving effect to the Merger and related Transactions as if they had been completed on January 1, 2021. The accompanying unaudited pro forma condensed combined balance sheet as of September 30, 2022 combines the historical consolidated balance sheets of Cactus and HighRidge, giving effect to the Merger and related Transactions as if they had been completed on September 30, 2022.

**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

Both Cactus' and HighRidge's historical financial statements were prepared in accordance with U.S. GAAP and presented in U.S. dollars. Certain reclassifications have been made to HighRidge's historical financial information to conform to Cactus' financial statement presentation. Such reclassifications had no effect on HighRidge's previously reported financial results. See "Note 3. Accounting Policies and Reclassifications of HighRidge Historical Financial Statements" herein for additional information on the reclassifications.

The pro forma adjustments presented in this unaudited pro forma condensed combined financial information represent management's estimates based on information available as of the date of this Form 8-K and such estimates are subject to revision as further information is obtained. Accordingly, the pro forma adjustments for the Merger are preliminary and subject to further adjustment as additional information becomes available and the various analyses and other valuations are performed. Any adjustments may have a significant effect on total assets, total liabilities, total equity, operating expenses, and depreciation and amortization expenses, and such results may be significant.

The assumptions underlying the pro forma adjustments are described in the accompanying notes to this unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information may not be indicative of Cactus' future performance and does not necessarily reflect what Cactus' financial position and results of operations would have been had these transactions occurred at the beginning of the period presented.

Further, the unaudited pro forma condensed combined financial information does not purport to project the future operating results or financial position of Cactus following the completion of the Transactions. Additionally, the unaudited pro forma condensed combined financial information does not reflect any revenue enhancements, anticipated synergies, operating efficiencies, or cost savings that may be achieved related to the Transactions, nor does it reflect any costs or expenditures that may be required to achieve any possible synergies.

Cactus will finalize the accounting for the Merger as soon as practicable within the measurement period, but in no event later than one year from the Merger Date, in accordance with ASC 805.

**<u>Note 3. Accounting Policies and Reclassifications of HighRidge Historical Financial Statements</u>**

The accounting policies used in the preparation of the unaudited pro forma condensed combined financial information are those described in Cactus' audited consolidated financial statements as of and for the year ended December 31, 2021, and subsequent unaudited interim periods. Cactus performed a preliminary review of HighRidge's accounting policies to determine whether any adjustments were necessary to ensure comparability in the unaudited pro forma condensed combined financial information.

The Company had adopted ASC 842, Leases, prior to the Merger as reflected in its annual report on Form 10-K for the year ended December 31, 2021 filed with the SEC; however, as of September 30, 2022, HighRidge had not adopted ASC 842. As a result, the Company has reflected the adoption of ASC 842 by HighRidge in the unaudited pro forma condensed combined financial information. These adjustments have been reflected within the Transaction Accounting Adjustments - Merger column in the Unaudited Pro Forma Condensed Combined Balance Sheet with no impact to the Unaudited Pro Forma Condensed Combined Statements of Income. Refer to "Note 5 - Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2022".

Currently, the Company is not aware of any other material differences between the accounting policies of the Company and HighRidge that would continue to exist subsequent to the application of acquisition accounting.

Reclassification adjustments have been made to the historical presentation of HighRidge to conform to the financial statements presentation of Cactus for the unaudited pro forma condensed combined financial information as noted below.

**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

*Balance sheet reclassifications -*

The reclassification adjustments to conform HighRidge's balance sheet presentation to Cactus' balance sheet presentation are summarized below:

**Balance sheet reclassification as of September 30, 2022** 

**(in thousands)**

---

| | | | |
|:---|:---|:---|:---|
| **Financial Statement Line Items** | **HighRidge<br> Resources,<br> Inc.<br> (Historical)** | **Reclassification<br> adjustment** | **HighRidge<br> Resources,<br> Inc. <br> (As Adjusted)** |
| **ASSETS** |  |  |  |
| **Current assets** |  |  |  |
| Cash and cash equivalents | $50009 | $- | $50009 |
| Restricted cash | 162 |  | 162 |
| Accounts receivable, net | 66812 |  | 66812 |
| Inventories\* | 66811 |  | 66811 |
| Prepaid expenses and other current assets | 3212 |  | 3212 |
| Total current assets | 187006 |  | 187006 |
| Noncurrent assets |  |  |  |
| Property and equipment, net | 121003 |  | 121003 |
| Intangible assets, net | 2605 | (432) (a) | 2173 |
| Goodwill |  | 432 (a) | 432 |
| Security deposits | 53 | (53) (b) |  |
| Notes receivable | 43 | (43) (b) |  |
| Other noncurrent assets |  | 96 (b) | 96 |
| **Total assets** | $**310710** | $**-** | $**310710** |
| **LIABILITIES** |  |  |  |
| Current liabilities |  |  |  |
| Accounts payable | $14107 | $- | $14107 |
| Accounts payable — related party | 2935 |  | 2935 |
| Income taxes payable | 2230 | (2230) (c) |  |
| Accrued liabilities | 16227 | (16227) (c) |  |
| Deferred revenue | 8165 | (8165) (c) |  |
| Customer deposits | 5787 | (5787) (c) |  |
| Other current liabilities | 450 | (450) (c) |  |
| Accrued expenses and other current liabilities |  | 32859 (c) | 32859 |
| Current portion of capital leases | 606 | (606) (d) |  |
| Finance lease obligations, current portion |  | 606 (d) | 606 |
| Total current liabilities | 50507 |  | 50507 |
| Noncurrent liabilities |  |  |  |
| Capital lease liability — long term | 811 | (811) (e) |  |
| Finance lease obligations, net of current portion |  | 811 (e) | 811 |
| Notes payable - related party | 387683 |  | 387683 |
| Deferred rent payable | 47 | (47) (f) |  |
| Long-term accrued interest | 762 | (762) (f) |  |
| Deferred compensation | 29543 | (29543) (f) |  |
| Other noncurrent liabilities |  | 30352 (f) | 30352 |
| **Total liabilities** | **469353** | **-** | **469353** |
| **EQUITY** |  |  |  |
| Common stock |  |  |  |
| Additional paid-in capital | 144543 |  | 144543 |
| Retained earnings\* | (302758) |  | (302758) |
| Accumulated other comprehensive income | (428) |  | (428) |
| Total stockholders' equity (deficit)\* | (158643) |  | (158643) |
| **TOTAL LIABILITIES AND EQUITY** | $**310710** | $**-** | $**310710** |

---

\* Financial statement line-item descriptions revised to conform to Cactus presentation.

The following reclassifications were made to conform HighRidge to Cactus presentation:

(a) Reclassification to goodwill.

(b) Reclassification to other noncurrent assets.

(c) Reclassification to accrued expenses and other current liabilities.

(d) Reclassification to finance lease obligations, current portion.

(e) Reclassification to finance lease obligations, net of current portion.

(f) Reclassification to other noncurrent liabilities.

**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

*Income statement reclassifications*

The reclassification adjustments to conform HighRidge's income statement presentation to Cactus' income statement presentation are summarized below:

**Income statement reclassification for the period ended September 30, 2022** 

**(in thousands)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Financial Statement Line Items** | **HighRidge<br> Resources,<br> Inc.<br> (Historical)** | **Reclassification<br> adjustment** |  | **HighRidge<br> Resources,<br> Inc. <br> (As Adjusted)** |
| **Revenues** |  |  |  |  |
| Product revenue\* | $224633 | $15853 | (a) | $240486 |
| Field service and other revenue\* | 17573 |  | (a) | 17573 |
| Rental revenue\* | 23244 | (15853) | (a) | 7391 |
| **Total revenues** | **265450** | **-** |  | **265450** |
| Cost of product revenue\* | 131493 | 23327 | (a),(b) | 154820 |
| Cost of field service and other revenue\* | 13678 | 485 | (a),(b) | 14163 |
| Cost of rental revenue\* | 17216 | (12586) | (a),(b) | 4630 |
| Research and development expenses | 5540 |  |  | 5540 |
| General and administrative expenses | 26662 | (26662) | (c) |  |
| Sales and marketing | 11350 | (11350) | (c) |  |
| Gain on sale of property and equipment | (4) | 4 | (c) |  |
| Selling, general and administrative expenses |  | 38005 | (b),(c) | 38005 |
| Depreciation and amortization | 12124 | (12124) | (b),(c) |  |
| **Total other costs and expenses** | **218059** | **(901)** |  | **217158** |
| **Income from operations** | **47391** | **901** |  | **48292** |
| Interest expense, net | (40081) |  |  | (40081) |
| Foreign currency exchange gain (loss) | 901 | (901) | (c) |  |
| Other income, net | 876 |  |  | 876 |
| **Other income (expense), net** | **(38304)** | **(901)** |  | **(39205)** |
| **Income before income taxes** | **9087** | **-** |  | **9087** |
| Income tax expense | 8491 |  |  | 8491 |
| **Net income** | $**596** | $**-** |  | $**596** |

---

\* Financial statement line-item descriptions revised to conform to Cactus presentation.

The following reclassifications were made to conform HighRidge to Cactus presentation:

(a) Reclassification of revenue line items as well as the corresponding cost of revenue line items.

(b) Reclassification of depreciation & amortization to cost of revenue line items as Cactus includes depreciation and amortization expense in its applicable cost of revenue line items.

(c) Reclassification to selling, general and administrative expenses.

**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

**Income statement reclassification for the period ended December 31, 2021**

**(in thousands)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Financial Statement Line Items** | **HighRidge Resources, Inc.<br> (Historical)** | **Reclassification adjustment** |  | **HighRidge Resources, Inc. (As Adjusted)** |
| **Revenues** |  |  |  |  |
| Product revenue\* | $202484 | $11560 | (a) | $214044 |
| Field service and other revenue\* | 15231 |  | (a) | 15231 |
| Rental revenue\* | 17864 | (11560) | (a) | 6304 |
| **Total revenues** | **235579** | **-** |  | **235579** |
| Cost of product revenue\* | 112128 | 22844 | (a),(b) | 134972 |
| Cost of field service and other revenue\* | 14923 | 506 | (a),(b) | 15429 |
| Cost of rental revenue\* | 13980 | (8027) | (a),(b) | 5953 |
| Research and development expenses | 8394 |  |  | 8394 |
| General and administrative expenses | 26704 | (26704) | (c) |  |
| Sales and marketing | 14935 | (14935) | (c) |  |
| (Gain) Loss on sale of property and equipment | (102) | 102 | (c) |  |
| Selling, general and administrative expenses |  | 42087 | (b),(c) | 42087 |
| Depreciation and amortization | 15793 | (15793) | (b),(c) |  |
| **Total other costs and expenses** | **206755** | **80** |  | **206835** |
| **Income from operations** | **28824** | **(80)** |  | **28744** |
| Interest expense, net | (51024) |  |  | (51024) |
| Foreign currency exchange (loss) | (80) | 80 | (c) |  |
| Other income, net | 65 |  |  | 65 |
| **Other income (expense), net** | **(51039)** | **80** |  | **(50959)** |
| **Income before income taxes** | **(22215)** | **-** |  | **(22215)** |
| Income tax expense | 830 |  |  | 830 |
| **Net (loss)** | $**(23045)** | $**-** |  | $**(23045)** |

---

\* Financial statement line-item descriptions revised to conform to Cactus presentation.

****

<br> The following reclassifications were made to conform HighRidge to Cactus presentation:

(a) Reclassification of revenue line items as well as the corresponding cost of revenue line items.

(b) Reclassification of depreciation & amortization to cost of revenue line items as Cactus includes depreciation and amortization expense in its applicable cost of revenue line items.

(c) Reclassification to selling, general and administrative expenses.

**<u>Note 4. Estimated Purchase Price Consideration and Preliminary Allocation</u>**

**Purchase Price Consideration**

The estimated purchase price consideration for the Merger is approximately $632.4 million. The following table summarizes the components of the preliminary purchase price consideration reflected in the unaudited pro forma condensed combined financial information:

---

| | |
|:---|:---|
| **(in thousands)** | |
| **Purchase Price Consideration** | |
| Cash <sup>(1)(2)</sup> | $621160 |
| Add: Estimated Contingent Consideration Payment <sup>(3)</sup> | 11247 |
| **Fair value of consideration transferred or estimated to be transferred** | $**632407** |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) The cash consideration is expected to be funded utilizing
cash on hand of $249.7 million, proceeds borrowed under the Term Loan A Facility of $125.0 million, proceeds from the Revolving Facility
of $133.0 million offset by deferred financing costs of $3.6 million and $3.0 million, respectively, and net proceeds from a public offering
of $120.0 million. As described in "Note 1. Description of the Transactions", these financing sources were determined based
on the Company's current estimates of market rates and terms and there is no assurance that the Company will complete these financing
transactions. To the extent they are not completed, the Company would finance the Merger through the Bridge Facility of up to $375.0 million.

&nbsp;&nbsp;&nbsp;&nbsp;(2) The total cash consideration transferred is subject to a potential working capital adjustment.

&nbsp;&nbsp;&nbsp;&nbsp;(3) Represents the estimated
 fair value of payment of up to $75.0 million of additional cash consideration as an
 earn-out to the Sellers.

**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

**Preliminary Allocation of Purchase Price Consideration to Assets Acquired and Liabilities Assumed**

The purchase price allocation applied in this unaudited pro forma condensed combined financial information is preliminary and does not reflect final values that will be determined after the closing of the Merger. Valuation assessments of specifically identifiable tangible and intangible assets, including any assessment of economic useful lives, have not been completed and such valuation exercises are not expected to be completed until after closing when final records and assumptions have been fully analyzed as of the Merger Date. Additionally, due to normal pre-close commercial restrictions to the books and records of HighRidge, not all valuation assumptions can be fully confirmed as of the filing of this Form 8-K, leaving such assumptions utilized in these pro forma adjustments as preliminary and subject to change.

The fair values of the assets and liabilities in the unaudited pro forma condensed combined financial information are based upon a preliminary assessment of fair value and may change when the final valuation of assets acquired and liabilities assumed as well as working capital settlements are made. Cactus expects to finalize the purchase price allocation as soon as practicable, but no later than one year from the Merger Date. As such, the purchase price allocation may change. There can be no assurance that such revisions will not result in material changes.

The preliminary allocation of the purchase price consideration is as follows:

---

| | |
|:---|:---|
| **(in thousands)** | |
| **Purchase price is allocated as follows:** | |
| **Consideration transferred** | $**632407** |
| Total current assets | 160326 |
| Property and equipment, net | 183050 |
| Intangible assets, net | 186000 |
| Other assets | 664 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total assets acquired** | **530040** |
| Total current liabilities | 46819 |
| Deferred tax liability, net | 90323 |
| Other liabilities assumed | 265 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities assumed** | **137407** |
| **Net identifiable assets acquired, excluding goodwill** | **392633** |
| Goodwill | 239774 |
| Less: historical HighRidge goodwill | (432) |
| **Pro forma adjustment** | $**239342** |

---

**<u>Note 5. Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2022</u>**

As stated above, the unaudited pro forma condensed combined balance sheet as of September 30, 2022 is prepared as if the Transactions had occurred on September 30, 2022 and combines the historical balance sheet of Cactus as of September 30, 2022 with the historical balance sheet of HighRidge as of September 30, 2022.

**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

**A. Cash and Cash Equivalents - Transaction Accounting Adjustments - Financing**

Reflects the adjustment to incorporate the estimated effects of the following inflows and outflows as a result of the Merger:

---

| | |
|:---|:---|
| Proceeds from Term Loan A Facility <sup>(1)</sup> | $125000 |
| Debt issuance costs incurred related to Term Loan A Facility <br> (classified as reduction to debt) | (3580) |
| Proceeds from Revolving Facility <sup>(1)</sup> | 133000 |
| Debt issuance costs related to Revolving Facility (classified as an asset) | (3008) |
| Proceeds from the equity offering, net of equity issuance cost <sup>(2)</sup> | 120000 |
| **Pro forma adjustment** | $**371412** |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) Prior to the Merger
 Date, the Company plans to enter into the Term Loan A Facility and Revolving Facility. The
 Company plans to borrow $125.0 million under the Term Loan A Facility and $133.0 million
 under the Revolving Facility to finance the Merger Consideration. The Company does not expect
 to have any debt outstanding under the previous ABL credit facility on the closing date of
 the Merger. In the event these financing transactions are not completed, the Company will
 use the Bridge Facility to fund the Merger.

&nbsp;&nbsp;&nbsp;&nbsp;(2) Prior to the Merger
 Date, the Company plans to complete a public offering of approximately 2.4 million of Cactus
 Class A common shares for gross proceeds of $125.0 million, net of underwriters'
 fees of $5.0 million for net proceeds of $120.0 million. The actual number of Cactus Class A
 common shares to be issued in the equity offering will depend on the offering price of Cactus
 Class A common shares. For purposes of the pro forma condensed combined financial information,
 the offering price was assumed to equal the closing price of Cactus Class A common shares
 on January 5, 2023 of $51.28. A percentage increase or decrease of 2.4% in the offering
 price per share of Cactus Class A common shares would decrease or increase the number
 of shares by approximately 57,000 or 60,000, respectively, assuming all other factors are held constant.

**B. Cash and Cash Equivalents - Transaction Accounting Adjustments - Merger**

Reflects a decrease in cash and cash equivalents of $671.3 million, which includes payment of the Merger Consideration and removal of $50.0 million of historical HighRidge cash and cash equivalents and $0.2 million of historical HighRidge restricted cash that will not be assumed by the Company.

---

| | |
|:---|:---|
| **(in thousands)** | **As of the nine months ended<br> September 30, 2022** |
| Merger Consideration | $621160 |
| HighRidge historical cash and cash equivalents not assumed | 50009 |
| HighRidge historical restricted cash not assumed | 162 |
| **Pro Forma cash and cash equivalents adjustment** | $**671331** |

---

**C. Inventory Step-up Adjustment**

Represents an adjustment to the inventory balance of $23.7 million to account for the preliminary adjustment to fair value of the inventory acquired as of the Merger Date. The estimated range of calculated value for inventory is based on preliminary estimates and assumptions. The final value determination of the acquired inventory may differ from this preliminary determination. The related assumptions and inputs will be refined as more data becomes available to determine the fair value indication.

**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

**D. Property and Equipment**

Represents an adjustment of approximately $62.0 million to HighRidge's historical property and equipment balances to record the preliminary estimated fair value.

**E. Operating Lease Right-of-Use Assets and Operating Lease Liabilities**

Represents an adjustment to reflect the estimated impact of the adoption of ASC 842 and fair value of operating leases as of September 30, 2022 for HighRidge's leases that will be assumed by the Company as part of the Merger, resulting in an increase in operating lease right-of-use assets of $0.6 million with an equal and offsetting increase in operating lease liabilities. This adjustment includes a reduction to other noncurrent liabilities relating to historical deferred rent payable.

**F. Intangible Assets**

Reflects the net adjustment to remove the HighRidge historical intangible assets of $2.2 million and record the fair value of intangible assets acquired in the Merger to their estimated fair values of $186.0 million. The preliminary fair value assigned to the acquired intangible assets and their estimated useful lives are as follows:

---

| | | |
|:---|:---|:---|
| **(in thousands)** | **Estimated useful life** | **Preliminary fair value** |
| Tradename | 10.0 years | $16000 |
| Developed technology | 10.0 years | 45000 |
| Customer relationships | 10.0 years | 125000 |
| **Total fair value of HighRidge intangible assets** |  | $**186000** |

---

The estimated calculations of fair value for the identified acquired intangible assets are determined primarily through the use of the income-based valuation approach.

**G. Goodwill**

Reflects the net increase in goodwill, representing the excess of the purchase consideration over the fair value of HighRidge's net assets acquired based on the estimated preliminary purchase price allocation. The estimated goodwill to be recognized is attributable primarily to expanded market opportunities, both domestic and international, increased product diversification and increased exposure to additional end-market streams. The goodwill created in the Merger is not expected to be deductible for tax purposes and is subject to material revision as the purchase price allocation is completed.

**H. Deferred Taxes**

Represents the preliminary adjustment to reflect tax adjustments for the following:

---

| | | |
|:---|:---|:---|
| **(in thousands)** | **Deferred tax asset<br> Accounting<br> Adjustments -<br> Financing** | **Deferred tax asset<br> Accounting<br> Adjustments -<br> Merger** |
| Purchase accounting adjustment | $- | $(90323) |
| Transaction cost adjustment |  | 1937 |
| Additional sale of Cactus Class A shares |  | (971) |
| Equity offering and contribution adjustment | 5524 | - |
| **Pro forma adjustment** | $**5524** | $**(89357)** |

---

The deferred tax liability was assumed at $90.3 million which resulted in a reduction in the net deferred tax asset.

**I. Other Noncurrent Assets**

Represents the addition of deferred financing costs of $3.0 million expected to be incurred related to an Amended ABL Revolving Credit Facility.

**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

**J. Accounts Payable - Related Party**

Reflects the elimination of $2.9 million of HighRidge's historical accounts payable and $0.5 million of other current liabilities to a previous related party which will not be assumed by Cactus as part of the Merger.

**K. Accrued Expenses and Other Current Liabilities**

Represents the accrual for estimated additional non-recurring Merger related costs of $17.5 million and $0.9 million of equity offering costs, primarily consisting of professional fees, not reflected in the historical financial information and estimated to be incurred by the Company subsequent to September 30, 2022.

**L. Finance Leases**

Reflects the elimination of $1.4 million of HighRidge's historical liability related to its capital leases which will not be assumed by the Company as part of the Merger.

**M. Debt - Transaction Accounting Adjustments – Merger**

Represents the pro forma transaction adjustments made to remove certain debt balances included in HighRidge's historical results that will not be assumed by the Company on the Merger Date.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **(in thousands)** | **Other current<br> assets** | **Notes payable –<br> related party** | **Other <br> noncurrent<br> liabilities** | **Total** |
| Elimination of HighRidge historical debt | $- | $387683 | $- | $387683 |
| Elimination of HighRidge historical long-term accrued interest |  |  | 762 | 762 |
| Elimination of HighRidge historical deferred financing costs | 198 | - | - | 198 |
| **Pro forma adjustment** | $**198** | $**387683** | $**762** | $**388643** |

---

**N. Contingent Consideration**

An increase in other non-current liabilities, to be measured at fair value in subsequent reporting periods, of $11.2 million relating to the estimated payment of up to $75.0 million of additional cash consideration in the form of an earn-out as a contingent consideration to the Sellers based on the estimated preliminary purchase price allocation.

**O. Deferred Compensation**

Reflects the elimination of $29.5 million of HighRidge's historical deferred compensation liability that will not be assumed by the Company as part of the Merger.

**P. Stockholders' Equity**

Reflects the adjustment to equity balances as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **(in thousands)** | **Adjustments to<br> eliminate<br> HighRidge's<br> historical equity<br> balances** | **Adjustments to<br> equity related to<br> the Transaction -<br> Financing** | **Adjustments to<br> equity related to<br> the Merger** | **Total pro forma<br> adjustments to<br> equity** |
| Common stock | $- | $24 | $1 | $25 |
| Additional paid-in capital | (144543) | 105462<sup>(1)</sup> | (15114)<sup>(1)</sup> | (54195) |
| Retained earnings | 302758 |  | (15604)<sup>(2)</sup> | 287154 |
| Accumulated other comprehensive income | 428 | - | - | 428 |
| **Pro forma adjustment** | $**158643** | $**105486** | $**(30717)** | $**233412** |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) Adjustments to additional paid-in capital are reflected below:

---

| | | |
|:---|:---|:---|
| **(in thousands)** | **Adjustments to equity <br> related to the<br> Transaction - Financing** | **Adjustments to equity<br> related to the Merger** |
| Equity offering | $124976 | $- |
| Underwriting discount and commissions | (5000) |  |
| Equity offering costs | (900) | - |
| **Additional paid-in capital adjustment from equity offering** | **119076** | **-** |
| Additional sale of Cactus Class A common shares |  | 6499 |
| Deferred taxes | 5524 | (971) |
| Non-controlling interests | (19138) | (20642) |
| **Pro forma adjustment** | $**105462** | $**(15114)** |

---

&nbsp;&nbsp;&nbsp;&nbsp;(2) Retained earnings
 reflects a net adjustment of $15.6 million which includes an adjustment to accrue certain
 estimated transaction costs of $17.5 million which are expected to be incurred by the Company
 subsequent to September 30, 2022 offset by deferred tax of $1.9 million relating to
 the transaction costs.

**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

**Q. Equity**

Reflects the purchase of approximately 127,000 shares of Cactus Class A common shares (with a par value of $0.01 per share), with an increase to Class A common stock and additional paid-in capital. For purposes of the pro forma condensed combined financial information, a $51.28 price per share was used, based on the January 5, 2023 closing price.

**R. Non-Controlling Interest**

Reflects the change in non-controlling interest as a result of the Transactions described throughout this pro forma narrative. The balance of the non-controlling interest changed primarily due to estimated contributions of cash and other assets associated with the Merger from Cactus, Inc. to its subsidiaries that are not wholly-owned. Additional changes to the non-controlling interest result from anticipated changes in Cactus, Inc.'s ownership of its subsidiaries that are not wholly-owned.

**<u>Note 6. Adjustments to Unaudited Pro Forma Condensed Combined Statements of Income</u>**

The following describes the adjustments to the unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2022, and fiscal year ended December 31, 2021:

**AA. Inventory Step-up Adjustment**

Represents the additional cost of product revenue recognized in connection with the step-up of inventory to fair value. Cactus will recognize the increased value of inventory in cost of product revenue as the inventory is sold, which for purposes of this pro forma condensed combined financial information is assumed to occur within six months, based on the average historical inventory turnover, after the Merger Date.

**BB. Depreciation Expense**

Represents a net increase in depreciation expense on a straight-line basis of $2.0 million and $3.0 million, based on the preliminary step-up in fair value of the property and equipment and the respective assigned estimated useful lives for the nine months ended September 30, 2022 and twelve months ended December 31, 2021, respectively.

The total increase in depreciation expense for the periods presented is the following:

---

| | | |
|:---|:---|:---|
| **(in thousands)** | **For the nine months <br> ended September 30,<br> 2022** | **For the twelve months <br> ended December 31,<br> 2021** |
| Cost of product revenue | $1210 | $1934 |
| Cost of rental revenue | 527 | 863 |
| Cost of field service and other revenue | 78 | 89 |
| Selling, general and administrative expenses | 137 | 90 |
| **Pro forma adjustment** | $**1952** | $**2976** |

---

**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

**CC. Merger-Related Costs**

Represents non-recurring transaction expenses of $17.5 million that are estimated to be incurred by Cactus subsequent to the nine-month period ended September 30, 2022.

**DD. Management Fees**

This adjustment reflects the elimination of expense of HighRidge's management fee agreement that will be terminated upon closing of the Merger. The historical HighRidge management fees included certain payments to affiliated individuals of HighRidge who will become employees of Cactus following the Merger. Accordingly, pro forma adjustments reflect the additional compensation expense based on employment agreements and stock compensation awards expected to be issued to these individuals at closing. Additionally, upon termination of the management fee agreement, there will be an increase in rent expense as Cactus will assume the full rental agreement of a HighRidge affiliate.

---

| | | |
|:---|:---|:---|
| **5 min(in thousands)** | **For the nine months<br> ended September 30,<br> 2022** | **For the twelve months<br> ended December 31,<br> 2021** |
| Adjustment to remove historical management fees | $(6300) | $(6523) |
| Adjustment to add new employment agreement and stock compensation awards | 2221 | 4779 |
| Adjustment to add incremental rent expense | 102 | 136 |
| **Pro forma adjustment** | $**(3977)** | $**(1608)** |

---

**EE. Intangibles Amortization Expense**

Represents the pro forma adjustment to record amortization expense of $14.0 million and $18.6 million, for the nine months ended September 30, 2022 and twelve months ended December 31, 2021, respectively, based on the fair value of identified intangible assets less historical HighRidge amortization expense of $0.6 million and $0.7 million, respectively, associated with the historical intangible assets.

**FF. Interest Expense - Transaction Accounting Adjustments – Merger**

Represents a decrease to historical interest income (expense), net of $40.1 million and $51.0 million for the nine months ended September 30, 2022 and the twelve months ended December 31, 2021, respectively, which includes the following:

---

| | | |
|:---|:---|:---|
| **(in thousands)** | **For the nine months<br> ended September 30,<br> 2022** | **For the twelve months<br> ended December 31,<br> 2021** |
| Elimination of HighRidge historical interest income (expense), net <sup>(1)</sup> | $(40020) | $(50956) |
| Elimination of HighRidge historical deferred financing charges <sup>(2)</sup> | (61) | (68) |
| **Pro forma adjustment** | $**(40081)** | $**(51024)** |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) Reflects the removal
 of interest income (expense), net that was incurred by HighRidge for certain obligations
 outstanding as of September 30, 2022 and December 31, 2021 that were not assumed
 as part of the Merger.

&nbsp;&nbsp;&nbsp;&nbsp;(2) Represents the elimination
 of amortization of deferred financing charges associated with the HighRidge debt that will
 not be assumed in the Merger.

**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**

**GG. Interest Expense - Transaction Accounting Adjustments – Financing**

Reflects interest expense for the nine months ended September 30, 2022 and the twelve months ended December 31, 2021 resulting from the new debt expected to be incurred under the Term Loan A Facility and the Revolving Facility to finance the Merger, as well as amortization of the associated debt issuance costs.

For purposes of preparing this pro forma adjustment, an interest rate of 7.8% and 6.1% was applied to the Term Loan A Facility and Revolving Facility, respectively, which represents the variable rate in effect as of January 5, 2023. An increase or decrease of 0.125% change in the interest rate applied to the Term Loan A Facility and drawdown from the Revolving Facility would have impacted the total pro forma annual interest expense by an increase or decrease of $0.3 million, respectively. As described in "Note 1. Description of the Transactions", if the Company is unable to complete the expected financing transaction, the Merger will be financed with the Bridge Facility, assuming a drawdown of $258.0 million. If the Bridge Facility is used in lieu of these financing transactions, there would be additional interest expense of $3.2 million annually.

This pro forma adjustment also reflects the income tax expense impact of the change in interest expense.

---

| | | |
|:---|:---|:---|
| **(in thousands)** | **For the nine months<br> ended September 30,<br> 2022** | **For the twelve months<br> ended December 31,<br> 2021** |
| Term Loan A Facility | $8220 | $10482 |
| Revolving Facility | 6496 | 8662 |
| **Pro forma adjustment** | $**14716** | $**19144** |

---

**HH. Provision for Income Taxes**

Reflects an adjustment to income tax expense related to the pre-tax pro forma adjustments to the income statement. The tax-related adjustments are based on an estimated tax rate of 22.6%. This adjustment also reflects a recalculation of HighRidge's income tax expense to reflect the ownership structure resulting from the Merger. HighRidge will be treated as a disregarded entity under partnership rules for U.S. federal and state income tax purposes.

**II. Non-controlling Interest**

Reflects changes in the pro forma income attributable to non-controlling interests due to the Transaction Accounting Adjustments presented herein based on the applicable Cactus, Inc. pro forma ownership for the periods presented.

**JJ. Earnings per Share**

Reflects the weighted average shares outstanding used to compute basic and diluted net income per share attributable to Cactus for the nine months ended September 30, 2022 and year ended December 31, 2021 that have been adjusted to give effect to the shares issued as part of the financing as if such issuance had occurred on January 1, 2021.

## Exhibit 99.4

**Exhibit 99.4**

![](tm232262d2_ex99-4img01.jpg)

**Cactus Announces Public Offering of Common Stock**

**HOUSTON — January 10, 2023 —** Cactus, Inc. (NYSE: WHD) ("Cactus") announced today the commencement of an underwritten offering (the "Offering") of $125,000,000 of its Class A common stock ("common stock"). Cactus intends to offer the underwriters an option to purchase up to $18,750,000 of additional shares of common stock at the public offering price, less the underwriting discounts and commissions.

Cactus intends to use the net proceeds from this offering to finance a portion of its previously announced acquisition of FlexSteel Technologies Holdings, Inc. and its affiliates.

J.P. Morgan is acting as sole book-running manager for the Offering.

The securities are being offered and will be sold pursuant to an automatic shelf registration statement (including a prospectus) that was previously filed with the Securities and Exchange Commission (the "SEC") and became effective upon filing. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction. The Offering is being made only by means of a prospectus and related prospectus supplement.

Copies of the preliminary prospectus supplement and accompanying base prospectus related to the Offering may be obtained, free of charge, at the SEC's website at *www.sec.gov.* Alternatively, copies of the preliminary prospectus supplement and accompanying base prospectus may be obtained from:

J.P. Morgan Securities LLC<br> Attention: Broadridge Financial Solutions

1155 Long Island Avenue<br> Edgewood, New York 11717<br> Telephone: (866) 803-9204

prospectus-eq_fi@jpmchase.com

**About Cactus, Inc.**

Cactus designs, manufactures, sells and rents a range of highly engineered wellhead and pressure control equipment. Its products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of its customers' wells. In addition, it provides field services for all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates service centers throughout the United States and Australia, while also providing equipment and services in select international markets.

***Cautionary Statement Concerning Forward-Looking Statements***

*Certain statements contained in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements regarding the size, timing or results of the Offering, represent Cactus' expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Cactus' control, that could cause actual results to differ materially from the results discussed in the forward-looking statements.*

 

*Forward-looking statements can be identified by the use of forward-looking terminology including "may," "believe," "expect," "intend," "anticipate," "estimate," "continue," "potential," "will," "hope" or other similar words and include the Company's expectation of future performance contained herein. These statements discuss future expectations, contain projections of results of operations or of financial condition, or state other "forward-looking" information. You are cautioned not to place undue reliance on any forward-looking statements, which can be affected by assumptions used or by risks or uncertainties, including unanticipated challenges relating to the proposed transaction and related financing. Consequently, no forward-looking statements can be guaranteed. When considering these forward-looking statements, you should keep in mind the risk factors and other factors noted in the prospectus and related preliminary prospectus supplement filed with the SEC in connection with the Offering, the Company's Annual Report on Form 10-K, any Quarterly Reports on Form 10-Q and the other documents that the Company files with the Securities and Exchange Commission. The risk factors and other factors noted therein could cause actual results to differ materially from those contained in any forward-looking statement. Cactus disclaims any duty to update and does not intend to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this presentation.*

**Cactus, Inc.**

John Fitzgerald, 713-904-4655

Director of Corporate Development and Investor Relations

IR@CactusWHD.com

Source: Cactus, Inc.