FORUM ENERGY TECHNOLOGIES, INC. 10-Q

Item 1. Financial Statements Forum Energy Technologies, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Loss (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share information) 2020 2019 2020 2019 Revenue $ 103,606 $ 239,266 $ 399,513 $ 756,756 Cost of sales 90,496 176,632 351,411 560,836 Gross profit 13,110 62,634 48,102 195,920 Operating expenses Selling, general and administrative expenses 45,989 63,471 154,512 195,320 Transaction expenses 665 254 852 972 Impairments of goodwill, intangible assets, property and equipment 2,962 532,336 20,394 532,336 Contingent consideration benefit — — — ( 4,629 ) Loss (gain) on disposal of assets and other 541 ( 107 ) ( 180 ) ( 71 ) Total operating expenses 50,157 595,954 175,578 723,928 Loss from equity investment — ( 39 ) — ( 318 ) Operating loss ( 37,047 ) ( 533,359 ) ( 127,476 ) ( 528,326 ) Other expense (income) Interest expense 8,473 7,766 21,617 24,170 Foreign exchange and other losses (gains), net 3,445 ( 3,200 ) ( 931 ) ( 3,069 ) Gain realized on previously held equity investment — ( 1,567 ) — ( 1,567 ) Gain on extinguishment of debt ( 28,734 ) — ( 72,478 ) — Deferred loan costs written off 303 — 2,262 — Total other expense (income), net ( 16,513 ) 2,999 ( 49,530 ) 19,534 Loss before income taxes ( 20,534 ) ( 536,358 ) ( 77,946 ) ( 547,860 ) Income tax expense (benefit) 1,017 ( 3,371 ) ( 13,757 ) 6,749 Net loss ( 21,551 ) ( 532,987 ) ( 64,189 ) ( 554,609 ) Weighted average shares outstanding Basic 111,607 110,295 111,459 109,977 Diluted 111,607 110,295 111,459 109,977 Loss per share Basic $ ( 0.19 ) $ ( 4.83 ) $ ( 0.58 ) $ ( 5.04 ) Diluted ( 0.19 ) ( 4.83 ) ( 0.58 ) ( 5.04 ) Other comprehensive income (loss), net of tax: Net loss ( 21,551 ) ( 532,987 ) ( 64,189 ) ( 554,609 ) Change in foreign currency translation, net of tax of $ 0 5,942 ( 6,260 ) ( 1,004 ) ( 2,833 ) Loss on pension liability ( 55 ) ( 17 ) ( 56 ) ( 21 ) Comprehensive loss $ ( 15,664 ) $ ( 539,264 ) $ ( 65,249 ) $ ( 557,463 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Forum Energy Technologies, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except share information) September 30, 2020 December 31, 2019 Assets Current assets Cash and cash equivalents $ 20,020 $ 57,911 Accounts receivable—trade, net of allowances of $ 9,819 and $ 9,048 79,811 154,182 Inventories, net 364,655 414,640 Prepaid expenses and other current assets 33,031 33,820 Accrued revenue 1,617 1,260 Costs and estimated profits in excess of billings 6,340 4,104 Total current assets 505,474 665,917 Property and equipment, net of accumulated depreciation 120,266 154,836 Operating lease assets 33,907 48,682 Deferred financing costs, net 374 1,243 Intangible assets, net 247,298 272,300 Deferred income taxes, net 157 654 Other long-term assets 16,545 16,365 Total assets $ 924,021 $ 1,159,997 Liabilities and equity Current liabilities Current portion of long-term debt $ 1,295 $ 717 Accounts payable—trade 60,057 98,720 Accrued liabilities 70,143 86,625 Deferred revenue 5,495 4,877 Billings in excess of costs and profits recognized 169 5,911 Total current liabilities 137,159 196,850 Long-term debt, net of current portion 290,019 398,862 Deferred income taxes, net 2,153 2,465 Operating lease liabilities 46,299 49,938 Other long-term liabilities 21,109 25,843 Total liabilities 496,739 673,958 Commitments and contingencies Equity Common stock, $ 0.01 par value, 296,000,000 shares authorized, 119,614,808 and 118,840,611 shares issued 1,196 1,189 Additional paid-in capital 1,239,539 1,231,650 Treasury stock at cost, 8,217,553 and 8,211,919 shares ( 134,499 ) ( 134,493 ) Retained deficit ( 568,956 ) ( 503,369 ) Accumulated other comprehensive loss ( 109,998 ) ( 108,938 ) Total equity 427,282 486,039 Total liabilities and equity $ 924,021 $ 1,159,997 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Forum Energy Technologies, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, (in thousands) 2020 2019 Cash flows from operating activities Net loss $ ( 64,189 ) $ ( 554,609 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation expense 19,149 22,873 Amortization of intangible assets 19,934 25,621 Impairments of goodwill, intangible assets, property and equipment 20,394 532,336 Impairments of operating lease assets 14,096 2,187 Inventory write down 19,691 5,775 Stock-based compensation expense 7,726 11,923 Loss from unconsolidated subsidiary — 317 Contingent consideration benefit — ( 4,629 ) Gain on extinguishment of debt ( 72,478 ) — Gain realized on previously held equity investment — ( 1,567 ) Deferred loan costs written off 2,262 — Deferred income taxes 87 ( 1,438 ) Noncash losses and other, net 3,417 3,751 Changes in operating assets and liabilities Accounts receivable—trade 70,175 20,515 Inventories 29,572 28,200 Prepaid expenses and other assets 651 237 Cost and estimated profit in excess of billings ( 2,471 ) 4,190 Accounts payable, deferred revenue and other accrued liabilities ( 60,767 ) ( 21,328 ) Billings in excess of costs and estimated profits earned ( 5,548 ) 1,297 Net cash provided by operating activities $ 1,701 $ 75,651 Cash flows from investing activities Capital expenditures for property and equipment ( 2,168 ) ( 12,607 ) Proceeds from sale of business, property and equipment 4,187 39,805 Net cash provided by investing activities $ 2,019 $ 27,198 Cash flows from financing activities Borrowings of debt 85,000 97,000 Repayments of debt ( 113,441 ) ( 217,333 ) Bond exchange early participation payment ( 3,500 ) — Repurchases of stock ( 182 ) ( 1,050 ) Deferred financing costs ( 9,358 ) — Net cash used in financing activities $ ( 41,481 ) $ ( 121,383 ) Effect of exchange rate changes on cash ( 130 ) 190 Net decrease in cash, cash equivalents and restricted cash ( 37,891 ) ( 18,344 ) Cash, cash equivalents and restricted cash at beginning of period 57,911 47,241 Cash, cash equivalents and restricted cash at end of period $ 20,020 $ 28,897 Noncash activities Operating lease right of use assets obtained in exchange for lease obligations 4,382 9,603 Finance lease right of use assets obtained in exchange for lease obligations 1,401 1,478 Note receivable related to equity method investment transaction — 4,725 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Forum Energy Technologies, Inc. and Subsidiaries Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) Nine Months Ended September 30, 2020 (in thousands) Common stock Additional paid-in capital Treasury stock Retained deficit Accumulated other comprehensive income / (loss) Total equity Balance at December 31, 2019 $ 1,189 $ 1,231,650 $ ( 134,493 ) $ ( 503,369 ) $ ( 108,938 ) $ 486,039 Stock-based compensation expense — 3,223 — — — 3,223 Restricted stock issuance, net of forfeitures 5 ( 178 ) — — — ( 173 ) Shares issued in employee stock purchase plan 2 344 — — — 346 Adjustment for adoption of ASU 2016-13 — — — ( 1,398 ) — ( 1,398 ) Treasury stock — — ( 6 ) — — ( 6 ) Currency translation adjustment — — — — ( 8,846 ) ( 8,846 ) Change in pension liability — — — — 21 21 Net loss — — — ( 37,144 ) — ( 37,144 ) Balance at March 31, 2020 $ 1,196 $ 1,235,039 $ ( 134,499 ) $ ( 541,911 ) $ ( 117,763 ) $ 442,062 Stock-based compensation expense — 2,537 — — — 2,537 Restricted stock issuance, net of forfeitures — ( 2 ) — — — ( 2 ) Currency translation adjustment — — — — 1,900 1,900 Change in pension liability — — — — ( 22 ) ( 22 ) Net loss — — — ( 5,494 ) — ( 5,494 ) Balance at June 30, 2020 $ 1,196 $ 1,237,574 $ ( 134,499 ) $ ( 547,405 ) $ ( 115,885 ) $ 440,981 Stock-based compensation expense $ — $ 1,966 $ — $ — $ — $ 1,966 Restricted stock issuance, net of forfeitures $ — $ ( 1 ) $ — $ — $ — $ ( 1 ) Currency translation adjustment $ — $ — $ — $ — $ 5,942 $ 5,942 Change in pension liability $ — $ — $ — $ — $ ( 55 ) $ ( 55 ) Net loss $ — $ — $ — $ ( 21,551 ) $ — $ ( 21,551 ) Balance at September 30, 2020 $ 1,196 $ 1,239,539 $ ( 134,499 ) $ ( 568,956 ) $ ( 109,998 ) $ 427,282 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Forum Energy Technologies, Inc. and subsidiaries Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) Nine Months Ended September 30, 2019 (in thousands) Common stock Additional paid-in capital Treasury stock Retained earnings (deficit) Accumulated other comprehensive income / (loss) Total equity Balance at December 31, 2018 $ 1,174 $ 1,214,928 $ ( 134,434 ) $ 63,688 $ ( 115,230 ) $ 1,030,126 Stock-based compensation expense — 3,910 — — — 3,910 Restricted stock issuance, net of forfeitures 6 ( 931 ) — — — ( 925 ) Shares issued in employee stock purchase plan 2 682 — — — 684 Contingent shares issued for acquisition of Cooper Valves 1 374 — — — 375 Treasury stock — — ( 48 ) — — ( 48 ) Currency translation adjustment — — — — 4,834 4,834 Change in pension liability — — — — ( 9 ) ( 9 ) Net loss — — — ( 7,888 ) — ( 7,888 ) Balance at March 31, 2019 $ 1,183 $ 1,218,963 $ ( 134,482 ) $ 55,800 $ ( 110,405 ) $ 1,031,059 Stock-based compensation expense — 4,352 — — — 4,352 Restricted stock issuance, net of forfeitures — ( 64 ) — — — ( 64 ) Currency translation adjustment — — — — ( 1,407 ) ( 1,407 ) Change in pension liability — — — — 5 5 Net loss — — — ( 13,734 ) — ( 13,734 ) Balance at June 30, 2019 $ 1,183 $ 1,223,251 $ ( 134,482 ) $ 42,066 $ ( 111,807 ) $ 1,020,211 Stock-based compensation expense $ — $ 3,661 $ — $ — $ — $ 3,661 Restricted stock issuance, net of forfeitures $ — $ ( 8 ) $ — $ — $ — $ ( 8 ) Shares issued in employee stock purchase plan $ 3 $ 864 $ — $ — $ — $ 867 Treasury stock $ — $ — $ ( 5 ) $ — $ — $ ( 5 ) Currency translation adjustment $ — $ — $ — $ — $ ( 6,260 ) $ ( 6,260 ) Change in pension liability $ — $ — $ — $ — $ ( 17 ) $ ( 17 ) Net loss — — — ( 532,987 ) — ( 532,987 ) Balance at September 30, 2019 $ 1,186 $ 1,227,768 $ ( 134,487 ) $ ( 490,921 ) $ ( 118,084 ) $ 485,462 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 1. Organization and Basis of Presentation Forum Energy Technologies, Inc. (the “Company,” “we,” “our,” or “us”), a Delaware corporation, is a global oilfield products company, serving the drilling, downhole, subsea, completions and production sectors of the oil and natural gas industry. The Company's products include highly engineered capital equipment as well as products that are consumed in the drilling, well construction, production and transportation of oil and natural gas. Forum is headquartered in Houston, TX with manufacturing and distribution facilities strategically located around the globe. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its subsidiaries. All intercompany transactions have been eliminated in consolidation. Certain reclassifications have been made to prior year amounts to conform with the current year presentation. Prior to the sale of our aggregate 40 % interest in the third quarter of 2019, our investment in Ashtead Technology (”Ashtead”) was accounted for using the equity method of accounting as we had the ability to exert significant influence, but did not control operating and financial policies. Prior to the sale, our share of the net income (loss) from Ashtead was reported in “Loss from equity investment” in the condensed consolidated statements of comprehensive loss and the investment was included in “Investment in unconsolidated subsidiary” in the condensed consolidated balance sheets. Our share of equity earnings were reported within operating loss, as the investee’s operations were integral to the operations of the Company. See Note 4 Dispositions for further information related to the sale of our aggregate 40 % interest in Ashtead. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the Company’s financial position, results of operations and cash flows have been included. Operating results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or any other interim period. These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019, which are included in the Company’s 2019 Annual Report on Form 10-K filed with the SEC on February 25, 2020. COVID-19 Impacts On March 11, 2020, the World Health Organization declared the current COVID-19 outbreak to be a global pandemic, and on March 13, 2020, the United States declared a national emergency. In response to these declarations and the continued spread of COVID-19, federal, state and local governments imposed varying degrees of restrictions on business and social activities, including quarantine and “stay-at-home” orders. As a result of the imposition of these government orders, there was an adverse impact on the level of oil and natural gas demand and many companies have sought protection under Chapter 11 of the U.S. Bankruptcy Code. The full impacts of the COVID-19 outbreak will ultimately depend on future developments, including the consequences of governmental and other measures designed to prevent the spread of the virus, the establishment of effective treatments, the duration of the outbreak, actions taken by governmental authorities, customers, suppliers and other third parties, workforce availability, and the timing and extent to which economic and operating conditions resume. We have experienced resulting disruptions to our business operations, as these restrictions have significantly impacted many sectors of the economy, with businesses curtailing or ceasing normal operations. While we cannot estimate with any degree of certainty the full impact of the COVID-19 outbreak on our liquidity, financial condition and future results of operations, the adverse impacts on our financial results from COVID-19 will continue in future quarters. 2. Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), which we adopt as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on our consolidated financial statements upon adoption. 8 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) Accounting Standards Adopted in 2020 Financial Instruments—Credit Losses. In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments—Credit Losses (Topic 326), which introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis. It requires an entity to estimate credit losses expected over the life of an exposure based on historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. We adopted this new standard as of January 1, 2020. The adoption of this standard resulted in a noncash cumulative effect adjustment to increase our allowance for doubtful accounts and increase our retained deficit by $ 1.4 million. The new standard did not materially affect our unaudited Condensed Consolidated Statement of Comprehensive Loss for the nine months ended September 30, 2020. Accounting for Implementation Costs Related to a Cloud Computing Arrangement . In August 2018, the FASB issued ASU No. 2018-15 Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This new guidance aligns the requirements for capitalizing implementation costs incurred by an entity related to a cloud computing arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Accordingly, this guidance requires an entity to capitalize certain implementation costs incurred and then amortize them over the term of the cloud hosting arrangement. Furthermore, this guidance also requires an entity to present the expense, cash flows, and capitalized implementation costs in the same financial statement line items as the associated hosting service. We adopted this new standard as of January 1, 2020. The adoption of this new standard did not have a material impact on our unaudited condensed consolidated financial statements. Fair Value Measurement Disclosure . In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirement for Fair Value Measurement. This new guidance eliminated, modified and added certain disclosure requirements related to fair value measurements. We adopted this new standard as of January 1, 2020. This new standard did not have a material impact on our unaudited condensed consolidated financial statements. Subsidiary Guarantees. In March 2020, the SEC adopted amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees, in Rule 3-10 of Regulation S-X. The amended rule focuses on providing material, relevant and decision-useful information regarding guarantees and other credit enhancements, while eliminating certain prescriptive requirements. We adopted these amendments as of June 30, 2020. Accordingly, combined summarized financial information has been presented only for the issuers and guarantors of our registered securities for the most recent fiscal year and the year-to-date interim period. In addition, the previous disclosures have been removed from the Notes to Condensed Consolidated Financial Statements and the new required disclosures are included in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Accounting Standards Issued But Not Yet Adopted Income Tax. In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740) - Disclosure Framework - Simplifying the Accounting for Income Taxes, which simplified the accounting for income taxes by removing certain exceptions to the general principles of Topic 740 and clarifying and amending existing guidance. This guidance will take effect for public companies with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We are currently evaluating the impact of this new guidance. However, we currently expect that the adoption of this guidance will not have a material impact on our consolidated financial statements. Convertible Debt. In August 2020, the FASB issued ASU No. 2020-06 Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This update reduces the number of accounting models for convertible debt instruments resulting in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in-capital. In addition, this update also makes targeted changes to the disclosures for convertible instruments and earnings-per- 9 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) share guidance. This guidance may be adopted through either a modified retrospective or fully retrospective method of transition and will take effect for public companies with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, and must be adopted as of the beginning of the Company's fiscal year. We are currently evaluating the impact of this new guidance. However, we currently expect that the adoption of this guidance will not have a material impact on our consolidated financial statements. 3. Revenue Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services. For a detailed discussion of our revenue recognition policies, refer to the Company’s 2019 Annual Report on Form 10-K. Disaggregated Revenue Refer to Note 11 Business Segments for disaggregated revenue by product line and geography. Contract Balances Contract balances are determined on a contract by contract basis. Contract assets represent revenue recognized for goods and services provided to our customers when payment is conditioned on something other than the passage of time. Similarly, we record a contract liability when we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract. Such contract liabilities typically result from billings in excess of costs incurred on construction contracts and advance payments received on product sales. The following table reflects the changes in our contract assets and contract liabilities balances for the nine months ended September 30, 2020 (in thousands): September 30, 2020 December 31, 2019 Increase / (Decrease) $ % Accrued revenue $ 1,617 $ 1,260 Costs and estimated profits in excess of billings 6,340 4,104 Contract assets $ 7,957 $ 5,364 $ 2,593 48 % Deferred revenue $ 5,495 $ 4,877 Billings in excess of costs and profits recognized 169 5,911 Contract liabilities $ 5,664 $ 10,788 $ ( 5,124 ) ( 47 ) % During the nine months ended September 30, 2020, our contract assets increased by $ 2.6 million and our contract liabilities decreased by $ 5.1 million due to the timing of billings for significant projects within our Subsea product line. During the nine months ended September 30, 2020, we recognized revenue of $ 9.5 million that was included in the contract liability balance at the beginning of the period. As all of our contracts are less than one year in duration, we have elected to apply the practical expedient which allows an entity to exclude disclosures about its remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. 4. Dispositions 2019 Disposition of Cooper Alloy® On December 4, 2019, we sold certain assets of our Cooper Alloy® brand of valve products for total consideration of $ 4.0 million and recognized a gain on disposition totaling $ 2.3 million. Pro forma results of operations for this disposition have not been presented because the effects were not material to the unaudited condensed consolidated financial statements. 10 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 2019 Disposition of Equity Interest in Ashtead Technology On September 3, 2019, we sold our aggregate 40 % interest in Ashtead to the majority owners of Ashtead. Total consideration for Forum’s 40 % interest and the settlement of a £ 3.0 million British Pounds note receivable from Ashtead was $ 47.7 million. Forum received $ 39.3 million in cash proceeds and a new £ 6.9 million British Pounds note receivable with a three year maturity. In the third quarter of 2019, we recognized a gain of $ 1.6 million as a result of this transaction. Pro forma results of operations for this transaction have not been presented because the effects were not material to the unaudited condensed consolidated financial statements. 5. Inventories Our significant components of inventory at September 30, 2020 and December 31, 2019 were as follows (in thousands): September 30, 2020 December 31, 2019 Raw materials and parts $ 166,817 $ 172,082 Work in process 15,838 29,972 Finished goods 252,346 278,661 Gross inventories 435,001 480,715 Inventory reserve ( 70,346 ) ( 66,075 ) Inventories $ 364,655 $ 414,640 6. Intangible Assets Intangible assets consisted of the following as of September 30, 2020 and December 31, 2019, respectively (in thousands): September 30, 2020 Gross Carrying Amount Accumulated Amortization Net Intangibles Amortization Period (In Years) Customer relationships $ 270,005 $ ( 115,283 ) $ 154,722 10 - 15 Patents and technology 90,868 ( 24,424 ) 66,444 5 - 19 Non-compete agreements 190 ( 127 ) 63 2 - 6 Trade names 42,433 ( 21,930 ) 20,503 7 - 19 Distributor relationships 14,120 ( 12,625 ) 1,495 15 - 22 Trademarks 5,089 ( 1,018 ) 4,071 15 Intangible Assets Total $ 422,705 $ ( 175,407 ) $ 247,298 December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Intangibles Amortization Period (In Years) Customer relationships $ 281,052 $ ( 110,410 ) $ 170,642 10 - 15 Patents and technology 92,498 ( 20,819 ) 71,679 5 - 19 Non-compete agreements 190 ( 100 ) 90 2 - 6 Trade names 43,284 ( 21,015 ) 22,269 7 - 19 Distributor relationships 22,160 ( 18,866 ) 3,294 15 - 22 Trademarks 5,089 ( 763 ) 4,326 15 Intangible Assets Total $ 444,273 $ ( 171,973 ) $ 272,300 11 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 7. Impairments of Goodwill and Long-Lived Assets During the third quarter of 2019, there was a significant decline in the quoted market prices of our common stock and a continued decline in U.S. onshore drilling and completions activity, which led us to evaluate all of our reporting units for a triggering event as of September 30, 2019. Upon evaluation, we considered these developments to be a triggering event that required us to update our goodwill impairment evaluation and review long-lived assets for all reporting units as of September 30, 2019. As a result, and in connection with the preparation of our financial statements, we determined that certain long-lived assets were impaired as their carrying values exceeded their fair values. The amount of the impairment charges were measured as the difference between the carrying value and the estimated fair value of the assets. In addition, we determined that the remaining carrying value of our goodwill was fully impaired in the third quarter of 2019. The fair values used in each goodwill impairment analysis were determined using the net present value of the expected future cash flows for each reporting unit (classified within level 3 of the fair value hierarchy). We determined the fair value of each reporting unit using a combination of discounted cash flow and guideline public company methodologies, which required significant assumptions and estimates about the future operations of each reporting unit. The assumptions about future cash flows and growth rates were based on our strategic plans and management’s estimates for future activity levels. Forecasted cash flows in future periods were estimated using a terminal value calculation, which considered long-term earnings growth rates. During the nine months ended September 30, 2020, the COVID-19 pandemic and associated preventative actions taken around the world to mitigate its spread caused oil demand to deteriorate and economic activity to decrease. As a result, oil prices declined significantly during the period and created an extremely challenging market for all sub-sectors of the oil and natural gas industry. In addition, responses to the spread of COVID-19, including significant government restrictions on movement, have driven sharp declines in global economic activity. As a result, during the nine months ended September 30, 2020, we determined that certain long-lived assets were impaired as their carrying values exceeded their fair values. The amount of the impairment charges were measured as the difference between the carrying value and the estimated fair value of the assets. The fair value was determined either through analysis of discounted future cash flows or, for certain real estate, based on a third party's sales price estimate (classified within level 3 of the fair value hierarchy). Following is a summary of impairment charges recognized (in thousands) in our Drilling & Downhole (“D&D”), Completions (“C”), Production (“P”), and Corporate (“Corp”) segments: Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019 Impairments of: D&D C P Corp Total D&D C P Total Goodwill (1) $ — $ — $ — $ — $ — $ 191,485 $ 260,238 $ 19,287 $ 471,010 Intangible assets (1) 5,257 — — — 5,257 — 48,241 5,230 53,471 Property and equipment (1) 1,069 9,608 4,460 — 15,137 5,200 2,655 — 7,855 Operating lease right of use assets (2) 4,544 6,140 1,914 1,498 14,096 1,450 582 155 2,187 Total impairments $ 10,870 $ 15,748 $ 6,374 $ 1,498 $ 34,490 $ 198,135 $ 311,716 $ 24,672 $ 534,523 Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Impairments of: D&D C P Corp Total D&D C P Total Goodwill (1) $ — $ — $ — $ — $ — $ 191,485 $ 260,238 $ 19,287 $ 471,010 Intangible assets (1) — — — — — — 48,241 5,230 53,471 Property and equipment (1) — — 2,962 — 2,962 5,200 2,655 — 7,855 Operating lease right of use assets (2) 3,259 — — 1,498 4,757 165 — — 165 Total impairments $ 3,259 $ — $ 2,962 $ 1,498 $ 7,719 $ 196,850 $ 311,134 $ 24,517 $ 532,501 (1) These charges are included in Impairments of goodwill, intangible assets, property and equipment in the condensed consolidated statements of comprehensive loss. 12 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) (2) For the nine months ended September 30, 2020 and 2019, $ 10.4 million and $ 1.3 million, respectively, of these charges are included in Cost of sales, while $ 3.7 million and $ 0.9 million, respectively, are included in Selling, general and administrative expenses in the condensed consolidated statements of comprehensive loss. For the three months ended September 30, 2020 and 2019, $ 1.8 million and zero , respectively, of these charges are included in Cost of sales, while $ 2.9 million and $ 0.2 million, respectively, are included in Selling, general and administrative expenses in the condensed consolidated statements of comprehensive loss. 8. Debt Notes payable and lines of credit as of September 30, 2020 and December 31, 2019 consisted of the following (in thousands): September 30, 2020 December 31, 2019 2021 Notes $ 12,655 $ 400,000 2025 Notes 315,489 — Unamortized debt premium (discount) ( 31,856 ) 770 Debt issuance cost ( 7,588 ) ( 3,232 ) Senior secured revolving credit facility — — Other debt 2,614 2,041 Total debt 291,314 399,579 Less: current maturities ( 1,295 ) ( 717 ) Long-term debt $ 290,019 $ 398,862 2021 Notes In October 2013, we issued $ 300.0 million of 6.25 % unsecured notes due 2021 at par, and in November 2013, we issued an additional $ 100.0 million aggregate principal amount of the notes at a price of 103.25 % of par (the “2021 Notes”). The 2021 Notes bear interest at a rate of 6.25 % per annum, payable on April 1 and October 1 of each year, and mature on October 1, 2021. The 2021 Notes are unsecured obligations, and are guaranteed on an unsecured basis by our U.S. subsidiaries that guarantee our senior secured revolving credit facility ("Credit Facility") . During the first half of 2020, we repurchased an aggregate $ 71.9 million principal amount of our 2021 Notes for $ 27.7 million and recognized a net gain of $ 43.8 million, reflecting the difference in the amount paid and the net carrying value of the extinguished debt, including debt issuance costs and unamortized debt premium. In the third quarter of 2020, we exchanged $ 315.5 million principal amount of the remaining 2021 Notes for new 2025 Notes as discussed further below. Following these transactions, $ 12.7 million principal amount of 2021 Notes remained outstanding as of September 30, 2020. In October 2020, we provided notice of redemption relating to the $ 12.7 million principal amount of 2021 Notes outstanding and intend to redeem such notes in full in November 2020 at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, if any, to the redemption date (the “Redemption”). This information does not constitute a notice of redemption with respect to the 2021 Notes, nor does it constitute an offer to tender for, or purchase any, 2021 Notes or any other security. 2025 Notes In August 2020, we exchanged $ 315.5 million principal amount of the 2021 Notes for new 9.00 % convertible secured notes due August 2025 (the “2025 Notes”). This transaction was accounted for as an extinguishment of the 2021 Notes with the new 2025 Notes recorded at fair value on the transaction date. We estimated the fair value of the 2025 Notes to be $ 282.6 million at the issuance date, resulting in a $ 32.9 million discount (“Debt Discount”) at issuance. As a result, we recognized a $ 28.7 million gain on extinguishment of debt that reflects the difference in the $ 314.8 million net carrying value of the 2021 Notes exchanged, including debt issuance costs and unamortized debt premium, less the $ 282.6 million estimated fair value of 2025 Notes and a $ 3.5 million early participation fee paid to 13 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) bondholders that participated in the exchange. The Debt Discount is being amortized as non-cash interest expense over the term of the 2025 Notes using the effective interest method. The 2025 Notes pay interest at the rate of 9.00 %, of which 6.25 % will be payable in cash and 2.75 % will be payable in cash or additional notes, at the Company’s option. The 2025 Notes are secured by a first lien on substantially all of the Company’s assets, except for Credit Facility priority collateral, which secures the 2025 Notes on a second lien basis. A portion of the 2025 Notes, initially equal to $ 150.0 million total principal amount, is mandatorily convertible into shares of our common stock at a conversion rate of 740.7407 shares per $ 1,000 principal amount of 2025 Notes converted, equivalent to a conversion price of $ 1.35 per share, subject, however, to the condition that the average of the daily trading prices for the common stock over the preceding 20 -trading day period is at least $ 1.50 per share. Holders of the 2025 Notes also have optional conversion rights in the event that the Company elects to redeem the 2025 Notes in cash and at the final maturity of the new notes. Any interest that the Company elects to pay in additional notes are also subject to the mandatory and optional conversion rights. Credit Facility In connection with the issuance of the 2025 Notes, we amended our Credit Facility. Following such amendment, our Credit Facility provides revolving credit commitments of $ 250.0 million (with a sublimit of up to $ 45.0 million available for the issuance of letters of credit for the account of the Company and certain of its domestic subsidiaries) (the “U.S. Line”), of which up to $ 25.0 million is available to certain of our Canadian subsidiaries for loans in U.S. or Canadian dollars (with a sublimit of up to $ 3.0 million available for the issuance of letters of credit for the account of our Canadian subsidiaries) (the “Canadian Line”). Availability under the Credit Facility is subject to a borrowing base calculated by reference to eligible accounts receivable in the U.S., Canada and certain other jurisdictions (subject to a cap) and eligible inventory in the U.S. and Canada. Such eligible accounts receivable and eligible inventory serve as priority collateral for the Credit Facility, which is also secured on a second lien basis by substantially all of the Company's other assets. The amount of eligible inventory included in the borrowing base is restricted to the lesser of $ 130.0 million (subject to a quarterly reduction of $ 0.5 million that started on October 1, 2020) and 80.0 % of the total borrowing base. Our borrowing capacity under the Credit Facility could be reduced or eliminated, depending on future fluctuations in our receivables and inventory. As of September 30, 2020, our total borrowing base was $ 140.5 million, of which zero was drawn and $ 31.9 million was used for security of outstanding letters of credit, resulting in remaining availability of $ 108.6 million. Borrowings under the U.S. line bear interest at a rate equal to, at our option, either (a) the LIBOR rate, subject to a floor of 0.75 %, plus a margin of 2.50 % or (b) a base rate plus a margin of 1.50 %. The U.S. line base rate is determined by reference to the greatest of (i) the federal funds rate plus 0.50 % per annum, (ii) the one-month adjusted LIBOR plus 1.00 % per annum, and (iii) the rate of interest announced, from time to time, by Wells Fargo at its principal office in San Francisco as its prime rate, subject to a floor of 0.75 %. Borrowings under the Canadian Line bear interest at a rate equal to, at Forum Canada’s option, either (a) the CDOR rate, subject to a floor of 0.75 %, plus a margin of 2.50 % or (b) a base rate plus a margin of 1.50 %. The Canadian line base rate is determined by reference to the greater of (i) the one-month CDOR rate plus 1.00 % and (ii) the prime rate for Canadian dollar commercial loans made in Canada as reported by Thomson Reuters, subject to a floor of 0.75 %. The weighted average interest rate under the Credit Facility was approximately 2.40 % for the nine months ended September 30, 2020. The Credit Facility also provides for a commitment fee in the amount of (a) 0.375 % on the unused portion of commitments if average usage of the Credit Facility is greater than 50 % and (b) 0.500 % on the unused portion of commitments if average usage of the Credit Facility is less than or equal to 50 %. The Credit Facility is currently scheduled to mature on July 1, 2021, subject to extension to October 30, 2022 if, on or before July 1, 2021, the 2021 Notes are repaid or refinanced in their entirety with indebtedness maturing on or after January 31, 2023. Upon completion of the Redemption in the fourth quarter 2020, the maturity of our Credit Facility will be October 30, 2022. If excess availability under the Credit Facility falls below the greater of 12.5 % of the borrowing base and $ 31.25 million, we will be required to maintain a fixed charge coverage ratio of at least 1.00 :1.00 as of the end of each fiscal quarter until excess availability under the Credit Facility exceeds such 14 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) thresholds for at least 60 consecutive days. Furthermore, the Credit Facility includes an obligation to prepay outstanding loans with cash on hand in excess of certain thresholds and includes a cross-default to the 2025 Notes. Deferred Loan Costs We have incurred loan costs that have been deferred and are amortized to interest expense over the term of the 2025 Notes, 2021 Notes and the Credit Facility. During the nine months ended September 30, 2020, we capitalized a total of $ 9.7 million of deferred loan costs related to the exchange of the 2021 Notes. In the first quarter of 2020, we wrote-off $ 2.0 million of deferred loan costs for the termination of previous discussions related to a potential exchange offer for our 2021 Notes. In the third quarter of 2020, we wrote off $ 0.3 million of deferred loan costs related to amending our Credit Facility to, among other things, reduce the size of the commitments from $ 300.0 million to $ 250.0 million. Other Debt Other debt consists primarily of various capital leases. Letters of Credit and Guarantees We execute letters of credit in the normal course of business to secure the delivery of product from specific vendors and also to guarantee our fulfillment of performance obligations relating to certain large contracts. We had $ 31.9 million and $ 24.5 million in total outstanding letters of credit as of September 30, 2020 and December 31, 2019, respectively. 9. Income Taxes For interim periods, our income tax expense or benefit is computed based on our estimated annual effective tax rate and any discrete items that impact the interim periods. For the three and nine months ended September 30, 2020, we recorded a tax expense of $ 1.0 million and tax benefit of $ 13.8 million, respectively, compared to a tax benefit of $ 3.4 million and tax expense of $ 6.7 million for the three and nine months ended September 30, 2019, respectively. On March 27, 2020, President Trump signed the U.S. Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") in response to the COVID-19 pandemic. The CARES Act provides relief to corporate taxpayers by permitting a five-year carryback of 2018-2020 NOLs, increasing the 30% limitation on interest expense deductibility to 50% of adjusted taxable income for 2019 and 2020, and accelerating refunds for minimum tax credit carryforwards, among other provisions. The tax effects of changes in tax laws are recognized in the period in which the law is enacted. As such, the tax benefit for the nine months ended September 30, 2020 includes a $ 16.6 million benefit related to a carryback claim for U.S. federal tax losses based on new provisions in the CARES Act. These losses had previously been offset by a valuation allowance. The provisions in the CARES Act enabled the company to realize these losses and the related valuation allowance was released. The estimated annual effective tax rates for the nine months ended September 30, 2020 and 2019 were also impacted by losses in jurisdictions where the recording of a tax benefit is not available. For the nine months ended September 30, 2019, tax expense includes an increase in our valuation allowance of $ 5.9 million to write down our deferred tax assets in the U.S. and Saudi Arabia to what, in our judgment, is more likely than not realizable. Furthermore, the tax expense or benefit recorded can vary from period to period depending on the Company's relative mix of U.S. and non-U.S. earnings and losses by jurisdiction. We have deferred tax assets related to net operating loss carryforwards in the U.S. and in certain states and foreign jurisdictions. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning and recent operating results. As of September 30, 2020, we do not anticipate being able to fully utilize all of the losses prior to their expiration in the following jurisdictions: the U.S., the U.K., Germany, Singapore, Saudi Arabia and China. As a result, we have certain valuation allowances against our deferred tax assets as of September 30, 2020. 15 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 10. Fair Value Measurements The Company had no borrowings outstanding under the Credit Facility at both September 30, 2020 and December 31, 2019. The Credit Facility incurs interest at a variable interest rate, and therefore, the carrying amount approximates fair value. The fair value of the debt is classified as a Level 2 measurement because interest rates charged are similar to other financial instruments with similar terms and maturities. The fair value of our 2021 Notes is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for those or similar instruments. At September 30, 2020, the fair value and the carrying value of our 2021 Notes approximated $ 11.8 million and $ 12.7 million, respectively. At December 31, 2019, the fair value and the carrying value of our 2021 Notes approximated $ 354.0 million and $ 397.5 million, respectively. The fair value of our 2025 Notes is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for those or similar instruments. At September 30, 2020, the fair value and the carrying value of our 2025 Notes approximated $ 255.5 million and $ 276.1 million, respectively. There were no other outstanding financial assets as of September 30, 2020 and December 31, 2019 that required measuring the amounts at fair value. We did not change our valuation techniques associated with recurring fair value measurements from prior periods, and there were no transfers between levels of the fair value hierarchy during the nine months ended September 30, 2020. 11. Business Segments The Company reports results of operations in the following three reporting segments: Drilling & Downhole, Completions and Production. The amounts indicated below as “Corporate” relate to costs and assets not allocated to the reportable segments. Summary financial data by segment follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Revenue: Drilling & Downhole $ 43,164 $ 88,294 166,990 256,586 Completions 19,632 70,637 88,038 246,816 Production 40,836 81,022 145,038 256,272 Eliminations ( 26 ) ( 687 ) ( 553 ) ( 2,918 ) Total revenue $ 103,606 $ 239,266 $ 399,513 $ 756,756 Operating loss Drilling & Downhole $ ( 13,207 ) $ 4,342 $ ( 26,751 ) $ 3,185 Completions ( 11,896 ) ( 109 ) ( 47,027 ) 9,583 Production ( 70 ) 2,301 ( 9,306 ) 10,225 Corporate ( 7,706 ) ( 7,410 ) ( 23,326 ) ( 22,711 ) Segment operating income (loss) ( 32,879 ) ( 876 ) ( 106,410 ) 282 Transaction expenses 665 254 852 972 Impairments of goodwill, intangible assets, property and equipment 2,962 532,336 20,394 532,336 Contingent consideration benefit — — — ( 4,629 ) Loss (gain) on disposal of assets and other 541 ( 107 ) ( 180 ) ( 71 ) Operating loss $ ( 37,047 ) $ ( 533,359 ) $ ( 127,476 ) $ ( 528,326 ) 16 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) A summary of consolidated assets by reportable segment is as follows (in thousands): September 30, 2020 December 31, 2019 Drilling & Downhole $ 345,980 $ 407,779 Completions 406,325 496,714 Production 142,841 186,786 Corporate 28,875 68,718 Total assets $ 924,021 $ 1,159,997 Corporate assets primarily include cash, certain prepaid assets and deferred loan costs. The following table presents our revenues disaggregated by product line (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Drilling Technologies $ 17,467 $ 43,192 $ 74,076 $ 122,429 Downhole Technologies 13,376 29,031 51,000 88,241 Subsea Technologies 12,321 16,071 41,914 45,916 Stimulation and Intervention 9,375 36,396 42,371 134,605 Coiled Tubing 10,257 34,241 45,667 112,211 Production Equipment 15,498 29,143 53,677 98,720 Valve Solutions 25,338 51,879 91,361 157,552 Eliminations ( 26 ) ( 687 ) ( 553 ) ( 2,918 ) Total revenue $ 103,606 $ 239,266 $ 399,513 $ 756,756 The following table presents our revenues disaggregated by geography (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 United States $ 62,311 $ 159,407 $ 256,497 $ 540,074 Canada 5,574 19,256 25,125 49,473 Europe & Africa 6,153 13,837 25,757 49,249 Middle East 11,156 16,561 34,303 48,306 Asia-Pacific 11,337 21,662 34,160 47,880 Latin America 7,075 8,543 23,671 21,774 Total Revenue $ 103,606 $ 239,266 $ 399,513 $ 756,756 12. Commitments and Contingencies In the ordinary course of business, the Company is, and in the future could be, involved in various pending or threatened legal actions that may or may not be covered by insurance. Management reviewed such pending judicial and legal proceedings and the availability and limits of insurance coverage, and has established reserves that are believed to be appropriate in light of those outcomes that are considered to be probable and can be reasonably estimated. The reserves accrued at September 30, 2020 and December 31, 2019, respectively, are immaterial. It is management’s opinion that the Company’s ultimate liability, if any, with respect to these actions is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. 17 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 13. Loss Per Share The calculation of basic and diluted earnings per share for each period presented was as follows (dollars and shares in thousands, except per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net loss $ ( 21,551 ) $ ( 532,987 ) ( 64,189 ) ( 554,609 ) Basic - weighted average shares outstanding 111,607 110,295 111,459 109,977 Dilutive effect of stock options and restricted stock — — — — Dilutive effect of convertible notes due 2025 — — — — Diluted - weighted average shares outstanding 111,607 110,295 111,459 109,977 Loss per share Basic $ ( 0.19 ) $ ( 4.83 ) $ ( 0.58 ) $ ( 5.04 ) Diluted $ ( 0.19 ) $ ( 4.83 ) $ ( 0.58 ) $ ( 5.04 ) For all periods presented, we excluded all potentially dilutive stock options and restricted stock and the assumed conversion of the 2025 Notes in calculating diluted earnings per share as the effect was anti-dilutive due to the net losses incurred for these periods. 14. Stockholders' Equity Stock-based compensation During the nine months ended September 30, 2020, the Company granted 2,250,360 shares of restricted stock units that vest ratably over three years . The Company also granted 3,265,000 shares of contingent restricted stock units that vest ratably over three years dependent upon achieving a minimum stock price of $ 0.71 for 20 trading days in each performance period. In addition, the Company granted 489,750 shares of restricted stock units that cliff vest at the end of three years dependent upon achieving a minimum stock price of $ 1.50 for 20 consecutive trading days during the performance period. During the nine months ended September 30, 2020, the Company granted performance awards with a market condition that are payable in either cash or shares of the Company's common stock. The performance awards granted may settle for between zero and three times the award's cash target amount. The award amount issued pursuant to the performance award agreements will be determined based on the total shareholder return of the Company’s common stock as compared to a group of peer companies measured over a three year performance period. As our intention is to settle the awards in cash, we will account for these as liability classified awards. As such, compensation expense will be recognized over the requisite three-year service period with subsequent changes in the estimated fair value of the award recognized as a cumulative adjustment to compensation cost in the period in which the change in estimate occurs. Reverse stock split In October 2020, our Board of Directors approved a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the Company’s issued and outstanding shares of common stock, par value $ 0.01 per share, accompanied by a corresponding decrease in the Company’s authorized shares of common stock, such that, following the consummation of the Reverse Stock Split, the number of authorized shares of common stock will be reduced from 296,000,000 to 14,800,000 . The Company’s stockholders previously approved the Reverse Stock Split at the annual meeting of stockholders on May 12, 2020. The Company anticipates that the effective time of the Reverse Stock Split will be after market close on November 9, 2020, with the common stock trading on a post-split basis under the Company’s existing trading symbol, “FET,” at the market open on November 10, 2020. The Reverse Stock Split will increase the market price per share of the 18 Table of Contents Forum Energy Technologies, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) Company’s common stock, and is expected to bring the Company into compliance with the listing requirements of the New York Stock Exchange. 15. Related Party Transactions The Company has sold and purchased equipment to and from certain affiliates of our directors. The dollar amounts related to these related party activities are not material to the Company’s unaudited condensed consolidated financial statements.