3 unchanged sentences
(in thousands, except share data)
−Removed: March 31, 2024 December 31, 2023
+Added: June 30, 2024 December 31, 2023
Current assets:
1 unchanged sentence
Restricted cash 101 102
−Removed: Accounts receivable, net of allowance for credit losses of $ 374 and $ 745 at March 31, 2024 and December 31, 2023, respectively
+Added: Accounts receivable, net of allowance for credit losses of $ 410 and $ 745 at June 30, 2024 and December 31, 2023, respectively
13,316 13,687
−Removed: Accounts receivable, related party, net of allowance for credit losses of $ 0 at each of March 31, 2024 and December 31, 2023
+Added: Accounts receivable, related party, net of allowance for credit losses of $ 0 at each of June 30, 2024 and December 31, 2023, respectively
40,049 34,569
27 unchanged sentences
Common stock, $ 0.0001 par value, 240,000,000 shares authorized;
−Removed: 30,772,837 shares issued and 29,661,130 shares outstanding at March 31, 2024;
+Added: 30,866,597 shares issued and 29,759,154 shares outstanding at June 30, 2024;
30,772,837 shares issued and 29,664,130 shares outstanding at December 31, 2023 (As adjusted, see Note 13)
3 unchanged sentences
Treasury stock, at cost;
−Removed: 1,111,707 and 1,108,707 shares at March 31, 2024 and December 31, 2023, respectively (As adjusted, see Note 13)
+Added: 1,107,442 and 1,108,707 shares at June 30, 2024 and December 31, 2023, respectively (As adjusted, see Note 13)
( 34,528 ) ( 34,504 )
5 unchanged sentences
(in thousands, except per share data)
−Removed: Three months ended March 31,
+Added: Three months ended June 30, Six months ended June 30,
+Added: 2024 2023 2024 2023
Revenue from external customers $ 18,191 $ 17,820 $ 31,371 $ 29,472
8 unchanged sentences
Severance costs 20 ( 2,279 ) 23 ( 56 )
+Added: Gain on sale of property and equipment ( 34 ) — ( 34 ) —
Gain in fair value of Contract Consideration Convertible Notes Payable — ( 3,874 ) — ( 29,969 )
4 unchanged sentences
Interest expense ( 308 ) ( 705 ) ( 586 ) ( 2,377 )
−Removed: Other expense, net ( 26 ) ( 9 )
+Added: Other income, net 75 19 49 9
Total other income (expense) ( 233 ) ( 686 ) ( 537 ) 2,154
−Removed: Income before income taxes 1,804 21,352
+Added: Income (loss) before income taxes 1,989 ( 14 ) 3,793 21,338
Income tax expense ( 15 ) ( 7 ) ( 257 ) ( 16 )
−Removed: Net income $ 1,562 $ 21,343
+Added: Net income (loss) $ 1,974 $ ( 21 ) $ 3,536 $ 21,322
Income (loss) per common share (As adjusted, see Note 14):
6 unchanged sentences
FLOTEK INDUSTRIES, INC.
−Removed: CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
+Added: CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
−Removed: Three months ended March 31,
−Removed: Net income $ 1,562 $ 21,343
−Removed: Other comprehensive income:
+Added: Three months ended June 30, Six months ended June 30,
+Added: 2024 2023 2024 2023
+Added: Net income (loss) $ 1,974 $ ( 21 ) $ 3,536 $ 21,322
+Added: Other comprehensive income (loss):
Foreign currency translation adjustment 16 ( 13 ) 58 ( 34 )
−Removed: Comprehensive income $ 1,604 $ 21,322
+Added: Comprehensive income (loss) $ 1,990 $ ( 34 ) $ 3,594 $ 21,288
The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
1 unchanged sentence
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands)
−Removed: Three months ended March 31,
+Added: Six months ended June 30,
Cash flows from operating activities:
Net income $ 3,536 $ 21,322
−Removed: Adjustments to reconcile net income to net cash provided by operating activities:
+Added: Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Change in fair value of contingent consideration ( 27 ) ( 324 )
7 unchanged sentences
Provision for excess and obsolete inventory 433 497
−Removed: Lease expense 694 977
+Added: Gain on sale of property and equipment ( 34 ) —
+Added: Non-cash lease expense 1,236 1,621
Stock compensation expense 642 ( 836 )
−Removed: Deferred income tax expense (benefit) 209 ( 6 )
+Added: Deferred income tax expense 216 —
Paycheck protection plan loan forgiveness — ( 4,522 )
9 unchanged sentences
Interest payable — ( 8 )
−Removed: Net cash provided by operating activities 3,887 1,140
+Added: Net cash provided by (used in) operating activities 827 ( 2,234 )
Cash flows from investing activities:
Capital expenditures ( 229 ) ( 292 )
+Added: Proceeds from sale of assets 34 —
Net cash used in investing activities ( 195 ) ( 292 )
20 unchanged sentences
(in thousands)
−Removed: Three months ended March 31, 2024
+Added: Three months ended June 30, 2024
Common Stock Treasury Stock Additional
3 unchanged sentences
Value Shares Cost
+Added: Balance, March 31, 2024 30,773 $ 3 1,112 $ ( 34,514 ) $ 463,484 $ 169 $ ( 325,244 ) $ 103,898
+Added: Net income — — — — — — 1,974 1,974
+Added: Foreign currency translation adjustment — — — — — 16 — 16
+Added: Stock issued under employee stock purchase plan — — ( 9 ) — 28 — — 28
+Added: Restricted stock granted 94 — — — — — — —
+Added: Stock compensation expense — — — — 332 — — 332
+Added: Shares withheld to cover taxes — — 4 ( 14 ) — — — ( 14 )
+Added: Balance, June 30, 2024
+Added: 30,867 $ 3 1,107 $ ( 34,528 ) $ 463,844 $ 185 $ ( 323,270 ) $ 106,234
+Added: Three months ended June 30, 2023
+Added: Common Stock Treasury Stock Additional
+Added: Capital Accumulated
+Added: Comprehensive
+Added: Income Accumulated Deficit Total Stockholders’ Equity
+Added: Value Shares Cost
+Added: (As adjusted, see Note 13)
+Added: Balance, March 31, 2023 15,768 $ 2 1,074 $ ( 34,451 ) $ 421,603 $ 160 $ ( 330,176 ) $ 57,138
+Added: Net loss — — — — — — ( 21 ) ( 21 )
+Added: Foreign currency translation adjustment — — — — — ( 13 ) — ( 13 )
+Added: Stock issued under employee stock purchase plan — — ( 4 ) — 13 — — 13
+Added: Restricted stock forfeited — — 36 — — — — —
+Added: Restricted stock units vested 18 — — — — — — —
+Added: Stock compensation expense — — — — 276 — — 276
+Added: Shares withheld to cover taxes — — 7 ( 29 ) — — — ( 29 )
+Added: Conversion of Amended ProFrac Agreement Contract Consideration Convertible Notes Payable to Common Stock 10,583 1 — — 40,637 — — 40,638
+Added: Balance, June 30, 2023
+Added: 26,369 $ 3 1,113 $ ( 34,480 ) $ 462,529 $ 147 $ ( 330,197 ) $ 98,002
+Added: The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
+Added: FLOTEK INDUSTRIES, INC.
+Added: UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
+Added: (in thousands)
+Added: Six months ended June 30, 2024
+Added: Common Stock Treasury Stock Additional
+Added: Capital Accumulated
+Added: Comprehensive
+Added: Income Accumulated Deficit Total Stockholders’ Equity
+Added: Value Shares Cost
Balance, December 31, 2023 30,773 $ 3 1,109 $ ( 34,504 ) $ 463,140 $ 127 $ ( 326,806 ) $ 101,960
2 unchanged sentences
Stock issued under employee stock purchase plan — — ( 19 ) — 62 — — 62
+Added: Restricted stock granted 94 — — — — — — —
Restricted stock forfeited — — 11 — — — — —
1 unchanged sentence
Shares withheld to cover taxes — — 6 ( 24 ) — — — ( 24 )
−Removed: Balance, March 31, 2024
+Added: Balance, June 30, 2024
30,867 $ 3 1,107 $ ( 34,528 ) $ 463,844 $ 185 $ ( 323,270 ) $ 106,234
−Removed: Three months ended March 31, 2023
+Added: Six months ended June 30, 2023
Common Stock Treasury Stock Additional
16 unchanged sentences
Equity contribution — — — — 11,040 — — 11,040
−Removed: Conversion of notes to common stock 1,723 1 — — 8,996 — — 8,997
−Removed: Balance, March 31, 2023
+Added: Conversion of convertible notes payable to Common Stock 1,723 1 — — 8,996 — — 8,997
+Added: Conversion of Amended ProFrac Agreement Contract Consideration Convertible Notes Payable to Common Stock 10,583 1 — — 40,637 — — 40,638
+Added: Balance, June 30, 2023
26,369 $ 3 1,113 $ ( 34,480 ) $ 462,529 $ 147 $ ( 330,197 ) $ 98,002
5 unchanged sentences
A technology-driven, specialty green chemistry and data company, Flotek helps customers across industrial and commercial markets improve their environmental performance.
−Removed: The Company serves specialty chemistry needs for both domestic and international energy markets.
+Added: The Company serves customer needs for both domestic and international energy markets.
The Company’s Chemistry Technologies (“CT”) segment designs, develops, manufactures, packages and distributes green specialty chemicals that help customers improve their return on invested capital, lower operational costs and realize tangible environmental benefits aimed at enhancing the profitability of hydrocarbon producers.
The Company’s Data Analytics (“DA”) segment aims to enable users to maximize the value of their hydrocarbon associated processes by providing analytics associated with their hydrocarbon streams in seconds rather than minutes or days.
−Removed: The real-time access to information prevents waste, reduces reprocessing and allows users to pursue automation of their hydrocarbon streams to maximize their profitability.
+Added: The real-time access to information can prevent waste, reduce reprocessing and allow users to pursue automation of their hydrocarbon streams to maximize their profitability.
The Company’s two operating segments, CT and DA, are supported by its Research & Innovation advanced laboratory capabilities.
3 unchanged sentences
The use of these terms is not intended to connote any particular corporate status or relationship.
−Removed: Sources and Uses of Liquidity
−Removed: These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.
−Removed: GAAP”) assuming the Company will continue as a going concern.
−Removed: The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
−Removed: The Company currently funds its operations with cash on hand, availability under the ABL (see Note 9, “Debt and Convertible Notes Payable”) and other liquid assets.
−Removed: The Company recognized $ 8.8 million and $ 1.6 million of gross profit and net income, respectively, during the three months ended March 31, 2024.
−Removed: While we believe that our cash, liquid assets, and availability under the ABL will provide us with sufficient financial resources to fund operations to meet our capital requirements and anticipated obligations as they become due, uncertainty surrounding the long-term stability and strength of the oil and gas markets could have a negative impact on our liquidity.
−Removed: The availability of capital is dependent on the Company’s operating cash flow, which is currently expected to be principally derived from the ProFrac Agreement (see Note 9, “Debt and Convertible Notes Payable” and Note 16, “Related Party Transactions”).
−Removed: Related party revenues for the three months ended March 31, 2024 included Contract Shortfall Fees of $ 8.7 million.
−Removed: Related party receivables as of March 31, 2024 included accrued Contract Shortfall Fees of $ 13.7 million comprised of the remaining 2023 Contract Shortfall Fees payment of $ 5.0 million, which was collected in April 2024, and $ 8.7 million of accrued 2024 Contract Shortfall Fees, which will be due in the first quarter of 2025 under the terms of the ProFrac Agreement.
−Removed: Based upon our outlook for future cash flows from operations, which includes the collection of the Contract Shortfall Fees, combined with cash on hand and availability under the ABL, the Company believes it has sufficient financial resources to fund operations and meet its capital requirements and anticipated obligations as they become due in the next twelve months.
−Removed: While the Company cannot guarantee a sufficient level of cash flows in the future, the unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
−Removed: Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
1 unchanged sentence
All such adjustments are normal and recurring in nature.
−Removed: The financial statements, including selected notes, have been prepared in accordance with applicable rules and regulations of the SEC regarding interim financial reporting and do not include all information and disclosures required by accounting principles generally accepted in the United States of America (“U.S.
+Added: The financial statements, including selected notes, have been prepared in accordance with applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and do not include all information and disclosures required by accounting principles generally accepted in the United States of America (“U.S.
GAAP”) for comprehensive financial statement reporting.
−Removed: These interim financial statements should be read in conjunction with
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: the audited consolidated financial statements and notes included in the Company’s 2023 Annual Report.
+Added: These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s 2023 Annual Report .
A copy of the 2023 Annual Report is available on the SEC’s website, www.sec.gov, or on the Company’s website, www.flotekind.com.
2 unchanged sentences
The Company does not have investments in any unconsolidated subsidiaries.
−Removed: Cash Equivalents
−Removed: Cash equivalents consist of highly liquid investments with maturities of three months or less at the date of purchase.
−Removed: Restricted Cash
−Removed: The Company’s restricted cash was $ 0.1 million and $ 0.1 million as of March 31, 2024 and December 31, 2023, respectively.
−Removed: The Company’s restricted cash consists of cash that the Company is contractually obligated to maintain in accordance with the terms of its credit card program with a financial institution.
+Added: Sources and Uses of Liquidity
+Added: These unaudited condensed consolidated financial statements have been prepared in accordance with U.S.
+Added: GAAP assuming the Company will continue as a going concern.
+Added: The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
+Added: The Company currently funds its operations with cash on hand, availability under the ABL (defined below, see Note 9, “Debt and Convertible Notes Payable” and Note 18, “Subsequent Event”) and other liquid assets.
+Added: The Company recognized $ 9.2 million and $ 2.0 million of gross profit and net income, respectively, during the three months ended June 30, 2024 and recognized $ 18.0 million and $ 3.5 million of gross profit and net income, respectively, during the six months ended June 30, 2024.
+Added: Further, the Company recognized net cash provided by operating activities of $ 0.8 million during the six months ended June 30, 2024.
+Added: While we believe that our cash, liquid assets, and availability under the ABL will provide us with sufficient financial resources to fund operations to meet our capital requirements and anticipated obligations as they become due, uncertainty surrounding the long-term stability and strength of the oil and gas markets, and the resulting potential impact on our customers’ ability to pay their obligations to us in a timely manner, could have a negative impact on our liquidity.
+Added: The availability of capital is dependent on the Company’s operating cash flow, which is currently expected to be principally derived from the ProFrac Agreement (see Note 16, “Related Party Transactions”).
+Added: Related party revenues for the three and six months ended June 30, 2024 included Contract Shortfall Fees (defined below) of $ 8.4 million and $ 17.1 million, respectively (see Note 16, “Related Party Transactions”).
+Added: Related party receivables as of June 30, 2024 included accrued Contract Shortfall Fees of $ 17.1 million, which will be due in the first quarter of 2025 under the terms of the ProFrac Agreement.
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
+Added: Based upon our outlook for future cash flows from operations, which includes the collection of the Contract Shortfall Fees in the first quarter of 2025, combined with cash on hand and availability under the ABL, the Company believes it has sufficient financial resources to fund operations and meet its capital requirements and anticipated obligations as they become due in the next twelve months.
+Added: While the Company cannot guarantee a sufficient level of cash flows in the future, the unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
+Added: Note 2 — Summary of Significant Accounting Policies
+Added: Apart from those matters described in this note, there have been no updates to our significant accounting policies since those reported under Note 2 of the 2023 Annual Report.
Accounts Receivable and Allowance for Credit Losses
−Removed: Accounts receivable and accounts receivable, related party, arise from product sales and services and are stated at estimated net realizable value.
−Removed: This value incorporates an allowance for credit losses to reflect any loss anticipated on accounts receivable balances.
−Removed: The Company applies the current expected credit loss (CECL) model, which requires immediate recognition of expected credit losses over the contractual life of receivables and records the appropriate allowance for credit losses as a charge to Operating Cost and Expenses.
−Removed: The allowance for credit losses is based on a combination of the individual customer circumstances, credit conditions, and historical write-offs and collections.
−Removed: The Company writes off specific accounts receivable when they are determined to be uncollectible.
−Removed: The recovery of accounts receivable previously written off is recorded as a reduction to the allowance for credit losses charged to operating expense.
−Removed: The majority of the Company’s customers are engaged in the energy industry.
−Removed: The cyclical nature of the energy industry may affect customers’ operating performance and cash flows, which directly impact the Company’s ability to collect on outstanding obligations.
−Removed: Additionally, certain customers are located in international areas that are inherently subject to risks of economic, political, and civil instability, which can impact the collectability of receivables.
Changes in the allowance for credit losses are as follows (in thousands):
−Removed: March 31, 2024 December 31, 2023
+Added: June 30, 2024 December 31, 2023
Balance, beginning of year $ 745 $ 623
2 unchanged sentences
Balance, end of period $ 410 $ 745
−Removed: As of March 31, 2024 and December 31, 2023 the Company had not recorded an allowance for credit losses for the related party accounts receivable, including ProFrac Services, LLC (see Note 16, “Related Party Transactions”).
−Removed: Contract Assets
−Removed: The Company’s contract assets represent consideration issued in the form of convertible notes (Contract Consideration Convertible Notes Payable as discussed in Note 9, “Debt and Convertible Notes Payable”) and other incremental costs related to obtaining the ProFrac Agreement (see Note 16, “Related Party Transactions”).
−Removed: The contract assets are amortized over the term of the ProFrac Agreement (originally 10 years) based on forecasted revenues as goods are transferred to ProFrac Services, LLC, and the amortization is presented as a reduction of the transaction price included in related party revenue in the consolidated statements of operations.
−Removed: The contract assets are tested for recoverability on a recurring basis and the Company will recognize an impairment loss to the extent that the carrying amount of the contract assets exceeds the amount of consideration the Company expects to receive in the future for the transfer of goods under the ProFrac Agreement less the direct costs that relate to providing those goods in the future.
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Inventories consist of raw materials and finished goods and are stated at the lower of cost determined by using the weighted-average cost method, or net realizable value.
−Removed: Finished goods inventories include raw materials, direct labor and production overhead.
−Removed: The Company periodically reviews inventories on hand and current market conditions to determine if the cost of raw materials and finished goods inventories exceed current market prices and impairs the cost basis of the inventory accordingly.
−Removed: Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its net realizable value if those amounts are determined to be less than cost.
−Removed: Write-downs or write-offs of inventory are charged to cost of sales.
−Removed: Property and Equipment
−Removed: Property and equipment are stated at cost.
−Removed: Plant and equipment under finance leases are stated at the present value of the lease payments.
−Removed: The Company capitalizes costs associated with the acquisition of major software for internal use.
−Removed: The cost of ordinary maintenance and repair is charged to operating expense, while replacement of critical components and major improvements are capitalized.
−Removed: Depreciation or amortization of property and equipment, including operating lease right-of-use assets (“ROU”), is calculated using the straight-line method over the shorter of the lease term or the asset’s estimated useful life as follows:
−Removed: Buildings and leasehold improvements 2 - 30 years
−Removed: Machinery and equipment 7 - 10 years
−Removed: Furniture and fixtures 3 years
−Removed: Land improvements 20 years
−Removed: Transportation equipment 2 - 5 years
−Removed: Computer equipment and software 3 - 7 years
−Removed: Property and equipment, including ROU assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable.
−Removed: If events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable, the Company first compares the carrying amount of an asset or asset group to the sum of the undiscounted future cash flows expected to result from the use and eventual disposal of the asset.
−Removed: If the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the use and eventual disposal of the asset, the Company will determine the fair value of the asset or asset group.
−Removed: The amount of impairment loss recognized is the excess of the asset or asset group’s carrying amount over its fair value.
−Removed: Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary.
−Removed: Assets to be disposed of are reported as assets held for sale at the lower of the carrying amount or the asset’s fair value less cost to s ell and depreciation is ceased.
−Removed: Upon sale or other disposition of an asset, the Company recognizes a gain or loss on disposal measured as the difference between the net carrying amount of the asset and the net proceeds received.
−Removed: The Company leases certain facilities, land, vehicles, and equipment.
−Removed: The Company determines if an arrangement is classified as a lease at inception of the arrangement.
−Removed: The Company recognizes a ROU asset and a lease liability at the lease commencement date.
−Removed: ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the related lease.
−Removed: Finance leases are under the current and non-current liabilities and the underlying assets are included in property and equipment on the consolidated balance sheet.
−Removed: For operating and finance leases, the lease liability is initially measured at the present value of the unpaid lease payments at the lease commencement date.
−Removed: The lease liability is subsequently measured at amortized cost using the effective-interest method.
−Removed: As most of the Company’s leases do not provide an implicit rate of return, on a quarterly basis, the Company’s incremental borrowing rate is used, together with the lease term information available at commencement date of the lease, in determining the present value of lease payments .
−Removed: Operating lease liabilities include the noncancellable period of the lease plus related options to extend or terminate lease terms that are reasonably certain of being exercised.
−Removed: Lease payments included in the measurement of the lease liability comprise fixed payments owed over the lease term.
−Removed: Leases with an initial term of 12 months or less (“short term leases”) are not recorded on the balance sheet;
−Removed: and the lease expense on short-term leases is recognized on a straight-line basis over the lease term.
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The Company entered into a sublease for its former headquarters, which is being accounted for under lessor accounting.
−Removed: The nature of the sublease did not relieve the Company of its obligations under the original lease.
−Removed: The lease for the prior headquarters was an operating lease and, as such, the Company continues to account for the original lease as it did prior to entering the sublease.
−Removed: Since the former facility is not a component of the Company’s central operations, the income from the sublease and the expenses under the original lease are recorded in Other income, net on our Consolidated Statement of Operations.
−Removed: Convertible Notes Payable and Liability Classified Contract Consideration Convertible Notes Payable
−Removed: The Company accounted for the Convertible Notes Payable at amortized cost pursuant to Financial Accounting Standards Board (“FASB”) ASC Topic 470, Debt.
−Removed: The Company accounted for the Contract Consideration Convertible Notes Payable issued as consideration related to a related party contract (see Note 9, “Debt and Convertible Notes Payable”), as liability classified convertible instruments in accordance with FASB ASC 718, “Stock Compensation” (“ASC 718”).
−Removed: Under ASC 718, liability classified convertible instruments are measured at fair value at the grant date and at each reporting date (see Note 10, “Fair Value Measurements”) with the change in fair value included in the consolidated statements of operations.
−Removed: The Convertible Notes Payable and Contract Consideration Convertible Notes Payable were converted during 2023 through a series of transactions into the Company’s common stock.
−Removed: See Note 13, “Stockholders’ Equity” for additional information.
−Removed: Fair Value Measurements
−Removed: The Company categorizes financial assets and liabilities using a three-tier fair value hierarchy, based on the nature of the inputs used to determine fair value.
−Removed: Inputs refer broadly to assumptions that market participants would use to value an asset or liability and may be observable or unobservable.
−Removed: When determining the fair value of assets and liabilities, the Company uses the most reliable measurement available.
−Removed: See Note 10, “Fair Value Measurements.”
−Removed: Revenue Recognition
−Removed: The Company recognizes revenue when it satisfies performance obligations under the terms of the contract with a customer, and control of the promised goods are transferred to the customer or services are performed, in an amount that reflects the consideration the Company expects to be entitled in exchange for those goods or services.
−Removed: The Company recognizes revenue based on a five-step model when all of the following criteria have been met:
−Removed: (i) a contract with a customer exists, (ii) performance obligations have been identified, (iii) the price to the customer has been determined, (iv) the price to the customer has been allocated to the performance obligations, and (v) performance obligations are satisfied.
−Removed: Products and services are sold with fixed or determinable prices.
−Removed: Variable consideration is estimated for the Contract Shortfall Fees from the ProFrac Agreement (see Note 16, “Related Party Transactions”) using the most likely amount and the Company includes an estimated amount of variable consideration in the transaction price only if it is probable that a subsequent change in the estimate of the amount of variable consideration would not result in a significant revenue reversal.
−Removed: A significant revenue reversal would occur if a subsequent change in the estimate of the variable consideration would result in a significant downward adjustment to the amount of cumulative revenue recognized from that contract when the change in estimate occurs.
−Removed: Certain sales include right of return provisions, which are considered when recognizing revenue and deferred accordingly, and discounts are offered to customers for prompt payment.
−Removed: The Company does not act as an agent in any of its revenue arrangements.
−Removed: In recognizing revenue for products and services, the Company determines the transaction price of contracts with customers, which may consist of fixed and variable consideration.
−Removed: Determining the transaction price may require judgment by management, which includes identifying performance obligations, estimating variable consideration to include in the transaction price, and determining whether promised goods or services can be distinguished in the context of the contract.
−Removed: The timing of revenue recognition, billings and cash collections results in billed and unbilled accounts receivable included in accounts receivable, net and accounts receivable, related party on our Consolidated Balance Sheet.
−Removed: The majority of the CT segment revenue is chemical products that are sold at a point in time based on when control transfers to the customer determined by agreed upon delivery terms.
−Removed: Contracts with customers for the sale of products generally state the terms of the sale, including the quantity and price of each product purchased.
−Removed: Additionally, the CT segment offers various services associated to products sold, which includes field services, installation, maintenance, and other functions.
−Removed: These services are recognized upon completion of commissioning and installation due to the short-term nature of the performance obligation when the Company has a right to invoice the customer.
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The DA segment recognizes revenue for sales of equipment at the time of sale based on when control transfers to the customer based on agreed upon delivery terms.
−Removed: Additionally, the Company offers various services associated with products sold, which includes field services, installation, maintenance, and other functions.
−Removed: Services are recognized upon completion of commissioning and installation due to the short-term nature of the performance obligation.
−Removed: There may be additional performance obligations related to providing ongoing or reoccurring maintenance.
−Removed: Revenue for these types of arrangements is recognized ratably over time throughout the contract period.
−Removed: Additionally, the Company may provide subscription-type arrangements with customers in which monthly reoccurring revenue is recognized ratably over time in accordance with agreed upon terms and conditions.
−Removed: Customers may be invoiced for such maintenance and subscription-type arrangements, and revenue not yet recognizable is reported under accrued liabilities and deferred revenue on the consolidated balance sheets.
−Removed: Payment terms for both the CT and DA segments are customarily 30 - 60 days for domestic products or services and 60 - 90 days f or international products and services from invoice receipt.
−Removed: Under revenue contracts for both products and services, customers are invoiced once the performance obligations have been satisfied, at which point payment is unconditional.
−Removed: Contract assets associated with incomplete performance obligations are not material.
−Removed: The Company applies several practical expedients including:
−Removed: • Sales commissions are expensed as selling, general and administrative expenses when incurred because the amortization period is generally one year or less.
−Removed: • The Company’s payment terms are short-term in nature with settlements of one year or less.
−Removed: As a result, the Company does not adjust the promised amount of consideration for the effects of a significant financing component.
−Removed: • In most service contracts, the Company has the right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s performance obligations completed to date and as such the Company recognizes revenue in the amount to which it has a right to invoice.
−Removed: • The Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer.
−Removed: Such taxes are included in accrued liabilities on our consolidated balance sheet until remitted to the governmental agency.
−Removed: Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales in our consolidated statement of operations.
−Removed: Foreign Currency Translation
−Removed: The Company’s functional currency is primarily the U.S.
−Removed: The Company operates principally in the United States and substantially all assets and liabilities of the Company are denominated in U.S.
−Removed: Financial statements of foreign subsidiaries that are not U.S.
−Removed: dollar functional currency are prepared using the currency of the primary economic environment of the foreign subsidiaries as the functional currency.
−Removed: Assets and liabilities of those foreign subsidiaries are translated into U.S.
−Removed: dollars at exchange rates in effect as of the end of identified reporting periods.
−Removed: Revenue and expense transactions are translated using the average monthly exchange rate for the reporting period.
−Removed: Resultant translation adjustments are recognized as other comprehensive income (loss) within stockholders’ equity.
−Removed: Comprehensive Income
−Removed: Comprehensive income encompasses all changes in stockholders’ equity, except those arising from investments and distributions to stockholders.
−Removed: The Company’s comprehensive income loss includes consolidated net income (loss) and foreign currency translation adjustments.
−Removed: Research and Development Costs
−Removed: Expenditures for research activities relating to product development and improvement are charged to expense as incurred.
−Removed: Income taxes are accounted for under the asset and liability method.
−Removed: Deferred tax assets and liabilities are recognized for temporary differences between financial statement carrying amounts and the tax bases of assets and liabilities and are measured using the tax rates expected to be in effect when the differences reverse.
−Removed: Deferred tax assets are also recognized for operating loss and tax credit carry forwards.
−Removed: The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date.
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
−Removed: The establishment of a valuation allowance requires significant judgment and is impacted by various estimates.
−Removed: Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets.
−Removed: The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained.
−Removed: Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized.
−Removed: Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
−Removed: The Company’s policy is to record interest and penalties related to uncertain tax positions as income tax expense.
−Removed: Stock-Based Compensation
−Removed: Stock-based compensation expense, related to stock options, restricted stock awards and restricted stock units, is recognized based on their grant-date fair values.
−Removed: The Company recognizes compensation expense, net of estimated forfeitures, on a straight-line basis over the requisite service period of the award.
−Removed: Estimated forfeitures are based on historical experience.
−Removed: Stock Warrants
−Removed: The Company evaluated the Pre-Funded Warrants issued in February 2023 (the “February 2023 Warrants”) (see Note 13, “Stockholders’ Equity) in accordance with ASC 815-40, “Contracts in Entity’s Own Equity” and determined the February 2023 Warrants meet the criteria to be classified within stockholders’ equity.
−Removed: Accordingly, the Company reclassified the balance of the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable (see Note 9, “Debt and Convertible Notes Payable”) upon conversion for the February 2023 Warrants within additional paid in capital.
−Removed: Use of Estimates
−Removed: The preparation of financial statements in conformity with U.S.
−Removed: GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses.
−Removed: Actual results could differ from these estimates.
−Removed: Significant items subject to estimates and assumptions include estimated variable consideration included in contract transaction price;
−Removed: the useful lives of property and equipment;
−Removed: long lived asset impairment assessments;
−Removed: stock-based compensation expense;
−Removed: allowance for credit losses for accounts receivable;
−Removed: valuation allowances for inventories and deferred tax assets;
−Removed: recoverability and timing of the realization of contract assets;
−Removed: and, in 2023, the fair value of liability classified Contract Consideration Convertible Notes Payable.
+Added: As of June 30, 2024 and December 31, 2023 the Company had not recorded an allowance for credit losses for the related party accounts receivable, including ProFrac Services, LLC (see Note 16, “Related Party Transactions”).
Recent Accounting Pronouncements
Changes to U.S.
−Removed: GAAP are established by the FASB.
+Added: GAAP are established by the Financial Accounting Standards Board (“FASB”).
We evaluate the applicability and impact of all authoritative guidance issued by the FASB.
Guidance not listed below was assessed and determined to be either not applicable, clarifications of items listed below, immaterial or already adopted by the Company.
−Removed: New Accounting Standards Issued and Not Adopted as of March 31, 2024
+Added: New Accounting Standards Issued and Not Adopted as of June 30, 2024
+Added: The FASB issued Accounting Standards Update (“ASU”) No.
+Added: 2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures.” This standard improves reportable segment disclosure requirements through enhanced disclosures around significant segment expenses.
+Added: The amendments under this standard require interim and annual disclosures of significant segment expenses regularly provided to the chief operating decision maker (“CODM”).
+Added: In addition, public entities are required to disclose the amount of “other segment items” by segment and their composition;
+Added: make annual disclosures about a reportable segment’s profit/loss and assets;
+Added: and clarify if the CODM uses more than one measure of a segment’s profit or loss in assessing performance and resource allocation and disclose the name and title of the CODM.
+Added: This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.
+Added: Early adoption is permitted and the amendments are applied retrospectively to all prior periods presented.
+Added: The Company is currently evaluating the impact of the adoption of the ASU on the related disclosures.
The FASB issued ASU No.
13 unchanged sentences
The Company is currently evaluating the impact of the adoption of the ASU on the related disclosures.
−Removed: The FASB issued Accounting Standards Update (“ASU”) No.
−Removed: 2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures.” This standard improves reportable segment disclosure requirements through enhanced disclosures around significant segment expenses.
−Removed: The amendments under this standard require interim and annual disclosures of significant segment expenses regularly provided to the chief operating decision maker (“CODM”).
−Removed: In addition, public entities are required to disclose the amount of “other segment items” by segment and their composition;
−Removed: make annual disclosures about a reportable segment’s profit/loss and assets;
−Removed: and clarify if the CODM uses more than one measure of a segment’s profit or loss in assessing performance and resource allocation and disclose the name and title of the CODM.
−Removed: This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.
−Removed: Early adoption is permitted and the amendments are applied retrospectively to all prior periods presented.
−Removed: The Company is currently evaluating the impact of the adoption of the ASU on the related disclosures.
Note 3 — Revenue from Contracts with Customers
2 unchanged sentences
Total revenue disaggregated by revenue source is as follows (in thousands):
−Removed: Three months ended March 31,
+Added: Three months ended June 30, Six months ended June 30,
2024 2023 2024 2023
+Added: Products (1) $ 44,694 $ 49,062 $ 83,809 $ 95,829
Services 1,458 1,532 2,717 2,773
4 unchanged sentences
Total cost of sales disaggregated is as follows (in thousands):
−Removed: Three months ended March 31,
+Added: Three months ended June 30, Six months ended June 30,
+Added: 2024 2023 2024 2023
Cost of sales:
5 unchanged sentences
Examples of other costs of sales are certain personnel costs and equipment rental and insurance costs.
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Cost of sales split between external and related party sales is as follows (in thousands):
−Removed: Three months ended March 31,
+Added: Cost of sales, between external and related party, is as follows (in thousands):
+Added: Three months ended June 30, Six months ended June 30,
+Added: 2024 2023 2024 2023
Cost of sales:
2 unchanged sentences
$ 36,982 $ 46,690 $ 68,535 $ 92,817
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Contract Assets
Contract assets are as follows (in thousands):
−Removed: March 31, 2024 December 31, 2023
+Added: June 30, 2024 December 31, 2023
Contract assets $ 83,060 $ 83,060
4 unchanged sentences
In connection with entering into the Initial ProFrac Agreement and Amended ProFrac Agreement on February 2, 2022 and May 17, 2022, respectively, as discussed in Note 9, “Debt and Convertible Notes Payable” and Note 16, “Related Party Transactions,” the Company recognized contract assets of $ 10.0 million and $ 69.5 million, respectively, and associated fees of $ 3.6 million.
−Removed: As of March 31, 2024 and December 31, 2023, $ 66.4 million and $ 68.8 million, respectively, of the contract assets were classified as long term based upon our estimate of the forecasted revenues from the ProFrac Agreement which will not be realized within the next twelve months of the ProFrac Agreement.
+Added: As of June 30, 2024 and December 31, 2023, $ 66.1 million and $ 68.8 million, respectively, of the contract assets were classified as long term based upon our estimate of the forecasted revenues from the ProFrac Agreement which will not be realized within the next twelve months of the ProFrac Agreement.
The Company’s estimate of the timing of the future contract revenues is evaluated on a quarterly basis.
−Removed: During the three months ended March 31, 2024 and 2023, the Company recognized $ 1.3 million and $ 1.3 million, respectively, of contract assets amortization which is recorded as a reduction of the transaction price included in the related party revenue in the consolidated statement of operations.
+Added: During the three months ended June 30, 2024 and 2023, the Company recognized $ 1.5 million and $ 1.1 million, respectively, of contract assets amortization which is recorded as a reduction of the transaction price included in the related party revenue in the consolidated statement of operations.
+Added: During the six months ended June 30, 2024 and 2023, the Company recognized $ 2.7 million and $ 2.4 million, respectively, of contract assets amortization.
The below table reflects our estimated amortization per year (in thousands) based on the Company’s current forecasted revenues from the ProFrac Agreement.
Years ending December 31, Amortization
−Removed: 2024 (excluding the three months ended March 31, 2024)
+Added: 2024 (excluding the six months ended June 30, 2024)
Thereafter through May 2032 33,335
Total contract assets $ 71,907
−Removed: Based on our tests of recoverability, we did not recognize any impairment of such contract assets as of March 31, 2024.
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
+Added: Based on our tests of recoverability, we did not recognize any impairment of such contract assets as of June 30, 2024.
Note 5 — Inventories
Inventories are as follows (in thousands):
−Removed: March 31, 2024 December 31, 2023
+Added: June 30, 2024 December 31, 2023
Raw materials $ 5,163 $ 5,299
3 unchanged sentences
Inventories, net $ 12,142 $ 12,838
−Removed: The additional reserves recorded during the three months ended March 31, 2024 and 2023 were $ 0.3 million and $ 0.1 million, respectively, for the CT segment and $ 13 thousand and $ 0.1 million, respectively, for the DA segment.
+Added: The additional reserves recorded during the three months ended June 30, 2024 and 2023 were $ 0.1 million and $ 0.2 million, respectively, for the CT segment.
+Added: The Company recorded $ 6 thousand for the three months ended June 30, 2023 for the DA segment.
+Added: There were no additional reserves recorded for the three months ended June 30, 2024 for the DA segment.
+Added: During the six months ended June 30, 2024 and 2023, additional reserves recorded were $ 0.4 million and $ 0.4 million, respectively, for the CT segment and $ 13 thousand and $ 0.1 million, respectively, for the DA segment.
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6 — Property and Equipment
Property and equipment are as follows (in thousands):
−Removed: March 31, 2024 December 31, 2023
+Added: June 30, 2024 December 31, 2023
Land $ 886 $ 886
8 unchanged sentences
Property and equipment, net $ 4,987 $ 5,129
−Removed: Depreciation expense totaled $ 0.2 million and $ 0.2 million for the three months ended March 31, 2024 a nd 2023, respectively.
+Added: Depreciation expense totaled $ 0.2 million and $ 0.2 million for the three months ended June 30, 2024 a nd 2023, respectively, and $ 0.4 million and $ 0.3 million for the six months ended June 30, 2024 a nd 2023, respectively.
Note 7 — Leases
The components of lease expense and supplemental cash flow information are as follows (in thousands):
−Removed: Three months ended March 31,
+Added: Three months ended June 30, Six months ended June 30,
+Added: 2024 2023 2024 2023
Operating lease expense $ 752 $ 866 $ 1,536 $ 1,735
9 unchanged sentences
Financing cash flows from finance leases — 1 — 2
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Maturities of lease liabilities as of March 31, 2024 are as follows (in thousands):
+Added: Maturities of lease liabilities as of June 30, 2024 are as follows (in thousands):
Years ending December 31, Operating Leases Finance Leases
−Removed: 2024 (excluding the three months ended March 31, 2024)
+Added: 2024 (excluding the six months ended June 30, 2024)
Thereafter 3,048 —
2 unchanged sentences
Present value of lease liabilities $ 9,005 $ 3
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Supplemental balance sheet information related to leases is as follows (in thousands):
−Removed: March 31, 2024 December 31, 2023
+Added: June 30, 2024 December 31, 2023
Operating Leases
16 unchanged sentences
Finance leases 8.5 % 8.5 %
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Sublease Income
On April 1, 2023, the Company entered into an agreement to sublease its office and lab space in Houston, Texas beginning September 1, 2023 and continuing until October 30, 2030.
−Removed: The rental income from the sublease is included in the Company’s statement of operations in Other income (expense), net, and offsets the monthly rental expense of $ 86 thousand from the Company’s lease of the facility from the landlord.
+Added: The rental income from the sublease is included in the Company’s statement of operations in Other income (expense), net, and offsets the monthly rental expense of $ 86 thousand from the Company’s lease of the facility.
Sublease rental income for future years are as follows (in thousands):
Years ending December 31, Rental Income
−Removed: 2024 (excluding the three months ended March 31, 2024)
+Added: 2024 (excluding the six months ended June 30, 2024)
Thereafter 1,406
Total rental income $ 4,857
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 8 — Accrued Liabilities
Current accrued liabilities are as follows (in thousands):
−Removed: March 31, 2024 December 31, 2023
+Added: June 30, 2024 December 31, 2023
Severance costs $ 364 $ 648
3 unchanged sentences
Deferred revenue, current 530 550
−Removed: Taxes other than income taxes 182 656
+Added: Financed insurance 606 1,573
Other 294 888
3 unchanged sentences
On August 14, 2023, the Company entered into a 24-month revolving loan and security agreement in connection with an asset-based loan (the “ABL”).
−Removed: The ABL is classified, under ASC 470, as current debt on our consolidated balance sheet due to the nature of the payment arrangements where the lender is paid from customer payments received into the Company’s collections account.
−Removed: The ABL provides up to $ 13.8 million of credit availability, which is limited by a borrowing base consisting of (i) 85 % of eligible accounts receivable, plus (ii) 60 % of the value of eligible inventory not to exceed 100 % of the eligible accounts receivable.
−Removed: As of March 31, 2024, the Company had $ 3.1 million outstanding with approximately $ 6.0 million of available borrowings under the ABL.
−Removed: During the three months ended March 31, 2024, the Company incurred $ 0.2 million in interest and fees related to the ABL.
−Removed: As of March 31, 2024, the Company recorded $ 0.1 million of amortized deferred financing costs related to the ABL.
+Added: The ABL is classified as current debt on our consolidated balance sheet due to the nature of the payment arrangements where the lender is paid from customer payments received into the Company’s collections account.
+Added: As of June 30, 2024, the ABL provided up to $ 13.8 million of credit availability, which was limited by a borrowing base consisting of (i) 85 % of eligible accounts receivable, plus (ii) 60 % of the value of eligible inventory not to exceed 100 % of the eligible accounts receivable, plus (iii) 50 % of the value of certain real estate holdings.
+Added: Effective August 5, 2024, the Company entered into a second amendment to the ABL (see Note 18, “Subsequent Event” for additional information), which among other modifications, increased the loan commitment to $ 20.0 million.
+Added: As of June 30, 2024, the Company had $ 5.8 million outstanding with approximately $ 8.0 million of available borrowings under the ABL.
+Added: During the three and six months ended June 30, 2024, the Company incurred $ 0.2 million and $ 0.4 million, respectively, in interest and fees related to the ABL.
+Added: As of June 30, 2024, the Company recorded $ 0.2 million of amortized deferred financing costs related to the ABL.
Borrowings under the ABL bear interest at the Wall Street Journal Prime Rate (subject to a floor of 5.5 %) plus 2.5 % per annum.
−Removed: The interest rate under the ABL was 11.0 % as of March 31, 2024.
+Added: The interest rate under the ABL was 11.0 % as of June 30, 2024.
The ABL contains an annual commitment fee equal to 1.0 % of the ABL’s borrowing base.
1 unchanged sentence
If the ABL is terminated prior to the end of its 24-month term, the Company is required to pay an early termination fee of 2.50 % of the borrowing base limit of the ABL (if terminated with more than 12 months remaining until the maturity date) or 1.50 % of the borrowing base limit of the ABL (if terminated with less than 12 months remaining until the maturity date).
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The ABL contains customary representations, warranties, covenants and events of default, the occurrence of which would permit the lender to accelerate the payment of any amounts borrowed.
1 unchanged sentence
In addition, the ABL provides the lender a blanket security interest on all or substantially all of the Company’s assets.
−Removed: The Company was in compliance with all of the covenants under the ABL as of March 31, 2024.
+Added: The Company was in compliance with all of the covenants under the ABL as of June 30, 2024.
Paycheck Protection Program Loan
4 unchanged sentences
The remaining principal amount of $ 0.4 million and accrued interest is to be repaid in monthly installments of $ 15 thousand over the remaining term of the loan through April 15, 2025, beginning on March 15, 2023.
−Removed: The forgiveness of the Flotek PPP loan is accounted for as an extinguishment of the debt and the Company recorded a $ 4.5 million gain in the three months ended March 31, 2023, comprising the principal amount forgiven of $ 4.4 million and accrued interest of $ 0.1 million.
+Added: The forgiveness of the Flotek PPP loan was
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
+Added: accounted for as an extinguishment of the debt and the Company recorded a $ 4.5 million gain in the six months ended June 30, 2023, comprising the principal amount forgiven of $ 4.4 million and accrued interest of $ 0.1 million.
Long-term debt, including current portion, is as follows (in thousands):
−Removed: March 31, 2024 December 31, 2023
+Added: June 30, 2024 December 31, 2023
Flotek PPP loan
2 unchanged sentences
Total long-term debt, net of current portion
−Removed: Loan repayments are scheduled as follows (in thousands):
−Removed: Years ending December 31, Repayment
−Removed: 2024 (excluding the three months ended March 31, 2024)
−Removed: Total Flotek PPP loan $ 194
Convertible Notes Payable
3 unchanged sentences
The Convertible Notes Payable accrued paid-in-kind interest at a rate of 10 % per annum, had a maturity of one year , and were convertible into common stock of Flotek or Pre-Funded Warrants to purchase common stock of Flotek, (a) at the holder's option at any time prior to maturity, at a price of $ 1.088125 per share on a pre-Reverse Stock Split basis, (b) at Flotek's option, if the volume-weighted average trading price of Flotek's common stock equals or exceeds $ 2.50 per share on a pre-Reverse Stock Split basis, or $ 1.741 per share on a pre-Reverse Stock Split basis, for 20 trading days during a 30 consecutive trading day period, or (c) at maturity, at a price of $ 0.8705 per share on a pre-Reverse Stock Split basis.
−Removed: On March 21, 2022, a portion of of the Convertible Notes Payable, plus accrued paid-in-kind interest thereon, were converted at the holder’s option into shares of common stock.
+Added: On March 21, 2022, a portion of the Convertible Notes Payable, plus accrued paid-in-kind interest thereon, were converted at the holder’s option into shares of common stock.
The issuance cost was amortized on a straight-line basis over the term of the Convertible Notes Payable and the amortization was included in interest expense in the unaudited condensed consolidated statements of operations.
1 unchanged sentence
Upon maturity on February 2, 2023, the Convertible Notes Payable, excluding those held by ProFrac Holdings, LLC, with a carrying value of $ 9.0 million, including accrued paid-in-kind interest of $ 0.8 million, were converted on a pre-Reverse Stock Split basis into 10,335,840 shares of common stock ( 1,722,640 shares of the Company’s common stock on a post-Reverse Stock Split basis) at a price of $ 0.8705 per share.
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Convertible Notes Payable held by ProFrac Holding, LLC, with a carrying value of $ 11.0 million, including accrued paid-in-kind interest of $ 1.0 million, were converted on a pre-Reverse Stock Split basis, upon maturity, into 12,683,280 February 2023 Warrants with an exercise price of $ 0.0001 per share and were recorded as additional paid in capital upon conversion.
+Added: On September 6, 2023, the February 2023 Warrants were exercised and the Company issued, on a pre-Reverse Stock Split basis, 12,683,280 shares of the Company’s common stock ( 2,113,880 shares of the Company’s common stock on a post-Reverse Stock Split basis).
Initial ProFrac Agreement Contract Consideration Convertible Notes Payable
On February 2, 2022, the Company entered into a long-term supply agreement with ProFrac Services, LLC (the “Initial ProFrac Agreement”), a subsidiary of ProFrac Holdings LLC, in exchange for $ 10 million in aggregate principal amount of Contract Consideration Convertible Notes Payable (“Initial ProFrac Agreement Contract Consideration Convertible Notes Payable”), under the same terms as the Convertible Notes Payable issued in the PIPE transaction described above, including paid-in-kind interest at a rate of 10 % per annum and conversion features.
−Removed: The Initial ProFrac Agreement Contract Consideration Convertible Notes Payable were accounted for as liability classified convertible instruments and were initially recorded at fair value of $ 10.0 million on the issuance date with a corresponding contract asset.
−Removed: On February 2, 2023, the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable, remeasured to and carried at a fair value of $ 15.1 million, were converted on a pre-Reverse Stock Split basis, upon maturity, into 12,683,281 February 2023 Warrants with an exercise price of $ 0.0001 per share (see Note 10, “Fair Value Measurements”) and were recorded as additional paid in capital upon conversion.
+Added: On February 2, 2023, the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable, remeasured to and carried at a fair value of $ 15.1 million (see Note 10, “Fair Value Measurements”), were converted on a pre-Reverse Stock Split basis, upon maturity, into 12,683,281 February 2023 Warrants with an exercise price of $ 0.0001 per share and were recorded as additional paid in capital upon conversion.
+Added: On September 6, 2023, the February 2023 Warrants were exercised and the Company issued, on a pre-Reverse Stock Split basis, 12,683,281 shares of the Company’s common stock ( 2,113,881 shares of the Company’s common stock on a post-Reverse Stock Split basis).
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Amended ProFrac Agreement Contract Consideration Convertible Notes Payable
1 unchanged sentence
The Amended ProFrac Agreement Contract Consideration Convertible Notes Payable accrued paid-in-kind interest at a rate of 10 % per annum.
−Removed: The Amended ProFrac Agreement Contract Consideration Convertible Notes Payable were accounted for as liability classified convertible instruments and were initially recorded at fair value of $ 69.5 million on the issuance date with a corresponding contract asset.
−Removed: On May 17, 2023, the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable, remeasured to and carried at a fair value of $ 40.6 million, were converted on a pre-Reverse Stock Split basis, upon maturity, into 63,496,922 shares of common stock at a price of $ 0.8705 per share (see Note 10, “Fair Value Measurements”).
+Added: On May 17, 2023, the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable, remeasured to and carried at a fair value of $ 40.6 million (see Note 10, “Fair Value Measurements”), were converted on a pre-Reverse Stock Split basis, upon maturity, into 63,496,922 shares of common stock at a price of $ 0.8705 per share.
As a result of the Reverse Stock Split, these shares were converted into 10,582,821 common shares.
8 unchanged sentences
The carrying amounts of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accrued liabilities, accounts payable and ABL approximate fair value due to the short-term nature of these accounts.
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Liabilities Measured at Fair Value on a Recurring Basis
The following table presents the Company’s liabilities that are measured at fair value on a recurring basis and the level within the fair value hierarchy (in thousands):
−Removed: March 31, December 31,
+Added: June 30, December 31,
Level 1 Level 2 Level 3 2024 Level 1 Level 2 Level 3 2023
2 unchanged sentences
Contingent Earnout Consideration Key Inputs
−Removed: The estimated fair value of the remaining stock performance earn-out provision, with respect to the JP3 transaction, is included in accrued liabilities as of March 31, 2024 and December 31, 2023.
+Added: The estimated fair value of the remaining stock performance earn-out provision, with respect to the JP3 transaction, is included in accrued liabilities as of June 30, 2024 and December 31, 2023.
The estimated fair value of the earn-out provision at the end of each period was valued using a Monte Carlo model analyzing 20,000 simulations performed using Geometric Brownian Motion with inputs such as risk-neutral expected growth and volatility.
−Removed: March 31, 2024 December 31, 2023
+Added: June 30, 2024 December 31, 2023
Risk-free interest rate 5.15 % 4.58 %
1 unchanged sentence
Term until liquidation (years) 0.88 1.38
−Removed: Stock price (pre-Reverse Stock Split basis) $ 3.74 $ 3.92
+Added: Stock price $ 4.91 $ 3.92
Discount rate 14.66 % 11.86 %
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Initial ProFrac Agreement Contract Consideration Notes Payable Key Inputs
1 unchanged sentence
The Initial ProFrac Agreement Contract Consideration Convertible Notes Payable had an initial fair value of $ 10.0 million on February 2, 2022.
−Removed: The Initial ProFrac Agreement Contract Consideration Convertible Notes Payable were classified as Level 2 at the initial measurement upon issuance due to the use of a quoted price for a similar liability at that date (the PIPE transaction), and subsequently classified as Level 3 due to the use of unobservable inputs.
On February 2, 2023, the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable were remeasured, upon maturity, to a fair value of $ 15.1 million based on the pre-Reverse Stock Split closing price of the shares of common stock of $ 1.19 , on the date of conversion.
−Removed: The fair value adjustment was a $ 0.8 million increase for the three months ended March 31, 2023.
+Added: The fair value adjustment was a $ 0.8 million increase for the six months ended June 30, 2023.
Amended ProFrac Agreement Contract Consideration Convertible Notes Payable Key Inputs
On May 17, 2022, the Company measured the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable classified as Level 3 using a Monte Carlo simulation at an estimated fair value of $ 69.5 million.
−Removed: The Company reduced the discount rate assumed due to the reduced likelihood of occurrence of any of the default events in the shorter term remaining on the notes.
−Removed: The estimated value of the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable as of March 31, 2023 was remeasured using a Monte Carlo simulation resulting in a gain in fair value of Contract Consideration Convertible Notes Payable of $ 26.9 million for the three months ended March 31, 2023.
−Removed: On May 17, 2023, the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable were remeasured, at maturity, to a fair value of $ 40.6 million based on the pre-Reverse Stock Split closing price of the shares of common stock of $ 0.64 , on the date of conversion.
+Added: On May 17, 2023, the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable were remeasured, at maturity using a Monte Carlo simulation, to a fair value of $ 40.6 million based on the pre-Reverse Stock Split closing price of the shares of common stock of $ 0.64 , on the date of conversion resulting in a gain in fair value of Amended ProFrac Agreement Contract Consideration Convertible Note Payable of $ 3.9 million and $ 30.8 million for the three and six months ended June 30, 2023, respectively.
Assets Measured at Fair Value on a Nonrecurring Basis
The Company’s non-financial assets, including property and equipment and operating lease ROU assets, are measured at fair value on a non-recurring basis and are subject to adjustment to their fair value in certain circumstances.
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Level 3 Rollforward for Assets and Liabilities Measured at Fair Value on a Recurring Basis
−Removed: The following table presents the changes in balances of liabilities for the three months ended March 31, 2024 and 2023 classified as Level 3 (in thousands):
−Removed: Three months ended March 31,
+Added: The following table presents the changes in balances of liabilities for the three and six months ended June 30, 2024 and 2023 classified as Level 3 (in thousands):
+Added: Three months ended June 30, Six months ended June 30,
+Added: 2024 2023 2024 2023
Balance - beginning of period $ 30 $ 44,025 $ 56 $ 84,153
5 unchanged sentences
Conversion of Initial ProFrac Agreement Contract Consideration Convertible Notes Payable on maturity — — — ( 15,091 )
+Added: Conversion of Amended ProFrac Agreement Contract Consideration Convertible Notes Payable on maturity ( 40,638 ) — ( 40,638 )
Balance - end of period $ 30 $ 260 $ 30 $ 260
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11 — Income Taxes
1 unchanged sentence
federal income tax rate of 21% to income (loss) before income tax for the reasons set forth below:
−Removed: Three months ended March 31,
+Added: Three months ended June 30, Six months ended June 30,
+Added: 2024 2023 2024 2023
federal statutory tax rate
1 unchanged sentence
State income taxes, net of federal benefit
+Added: 0.7 120.4 6.8 % 0.1
income taxed at different rates
+Added: ( 3.1 ) ( 96.7 ) ( 4.1 ) % —
Increase (reduction) in tax benefit related to stock-based awards 0.8 1,291.8 1.0 % 0.7
2 unchanged sentences
Permanent differences related to CARES Act
+Added: — ( 3,779.4 ) — % ( 2.1 )
Non-deductible expenses 0.6 278.8 1.1 % 0.2
Effective income tax rate
−Removed: As of March 31, 2024, the Company had U.S.
+Added: 0.6 % 120.4 % 6.7 % 0.1 %
+Added: As of June 30, 2024, the Company had U.S.
net operating loss carryforwards (“NOLs”) of $ 191.6 million, including $ 45.1 million expiring in various amounts from 2029 through 2037 which can offset 100 % of taxable income and $ 146.6 million that has an indefinite carryforward period which can offset 80 % of taxable income per year.
Additionally, the Company has an estimated $ 92.8 million in certain state NOL carryforwards, $ 0.6 million in Section 163(j) interest limitation carryforwards and $ 3.8 million in tax credit carryforwards.
−Removed: As a result of the ownership change experienced in 2023, the Company’s ability to use NOLs to reduce taxable income is generally limited by Section 382 of the Internal Revenue Code of 1986 to an annual amount of $ 3.5 million plus an uplift of $ 24.5 million.
−Removed: NOLs that exceed the Section 382 limitation in any year continue to be allowed as carryforwards until they expire and can be used to offset taxable income for years within the carryover period subject to the limitation in each year.
+Added: As a result of the ownership change experienced in 2023, the Company’s ability to use NOLs to reduce taxable income is generally limited by Section 382 of the Internal Revenue Code of 1986 to an annual amount of $ 3.5 million plus net unrealized built in gain $ 24.5 million.
The Company’s use of NOLs arising after the date of the ownership change are not impacted by the Section 382 limitation.
+Added: NOLs that exceed the Section 382 limitation in any year continue to be allowed as carryforwards until they expire and can be used to offset taxable income for years within the carryover period subject to the limitation in each year.
If the Company does not generate a sufficient level of taxable income prior to the expiration of the pre-2018 NOL carryforward periods, then the ability to apply those NOLs as offsets to future taxable income is lost.
−Removed: Based on an analysis of the Section 382 limitation, the Company estimates that $ 31.3 million of the state NOL carryforwards (subject to additional state-by-state analysis) and $ 3.8 million of the tax credit carryforwards will expire unutilized.
+Added: Based on an analysis of the Section 382 limitation, the Company estimates that all carryforwards with the exception of $ 1.0 million of the state NOL carryforwards and $ 3.8 million of the tax credit carryforwards will be available for utilization if there is sufficient taxable income in subsequent periods.
Although the ownership change will significantly limit the ability of the Company to utilize the pre-change net operating losses and credits, the Company does not expect a significant impact to its financial statements given the valuation allowance that is recorded to estimate the realizability of the deferred tax assets.
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 12 — Commitments and Contingencies
1 unchanged sentence
Management is not aware of any pending or threatened lawsuits or proceedings that are expected to have a material effect on the Company’s financial position, results of operations or liquidity.
+Added: During the second quarter of 2023, the Company settled certain litigation resulting in the reversal of $ 2.3 million of accrued severance costs during the three and six months ended June 30, 2023.
Other Commitments and Contingencies
2 unchanged sentences
financial institutions and balances often exceed insurable amounts.
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 13 — Stockholders’ Equity
15 unchanged sentences
On September 6, 2023, the February 2023 Warrants issued upon the conversion of the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable were exercised and the Company issued on a pre-Reverse Stock Split basis, 12,683,281 shares of the Company’s common stock ( 2,113,881 shares of the Company’s common stock on a post-Reverse Stock Split basis).
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On May 17, 2023, the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable discussed in Note 9, “Debt and Convertible Notes Payable”, were converted on a pre-Reverse Stock Split basis, upon maturity, into 63,496,922 shares of common stock at a price of $ 0.8705 per share ( 10,582,821 shares of common stock on a post-Reverse Stock Split basis).
3 unchanged sentences
The June 2022 Warrants permit ProFrac Holdings II, LLC to purchase on a pre-Reverse Stock Split basis 13,104,839 shares of common stock of the Company ( 2,184,140 shares of the Company’s common stock on a post-Reverse Stock Split basis) at an exercise price equal to $ 0.0001 per share, subject to a $ 4.5 million exercise fee.
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ProFrac Holdings II, LLC and its affiliates may not receive any voting or consent rights in respect of the June 2022 Warrants or the underlying shares of common stock unless and until ProFrac Holdings II, LLC has paid an additional $ 4.5 million to the Company;
7 unchanged sentences
The dilutive effect of the Convertible Notes is computed using the if‑converted method.
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For all periods presented in the table below, weighted average shares and earnings (loss) per share reflect the effects of the Reverse Stock Split.
−Removed: The calculation of the basic and diluted earnings (loss) per share for the three months ended March 31, 2024 and 2023 is as follows (in thousands):
−Removed: Three months ended March 31,
−Removed: Net income for basic earnings per share $ 1,562 $ 21,343
+Added: The calculation of the basic and diluted earnings (loss) per share for the three and six months ended June 30, 2024 and 2023 is as follows (in thousands):
+Added: Three months ended June 30, Six months ended June 30,
+Added: 2024 2023 2024 2023
+Added: Net income (loss) for basic earnings per share $ 1,974 $ ( 21 ) $ 3,536 $ 21,322
Adjustments to net income available to shareholders
11 unchanged sentences
Average number of diluted shares for June 2022 stock warrants (1)
+Added: — 1,083 — 1,340
Average number of diluted shares for options and restricted stock (1)
−Removed: (1) These items were not included in the dilution calculation for the three months ended March 31, 2023 due to their anti-dilutive effect as it would reduce the loss per share.
+Added: (1) These items were not included in the dilution calculation for the three and six months ended June 30, 2023 due to their anti-dilutive effect as it would reduce the loss per share.
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 15 — Supplemental Cash Flow Information
Supplemental cash flow information is as follows (in thousands):
−Removed: Three months ended March 31,
+Added: Six months ended June 30,
Supplemental cash flow information:
4 unchanged sentences
Conversion of Initial Contract Consideration Convertible Notes Payable to February 2023 Warrants — 15,092
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
+Added: Conversion of Amended Contract Consideration Convertible Notes Payable to common stock — 40,638
Note 16 — Related Party Transactions
9 unchanged sentences
The current measurement period for Contract Shortfall Fees is January 1, 2024 through December 31, 2024.
−Removed: The Company does not expect that the minimum purchase requirements will be met during the current measurement period, and as a result, the revenues for three months ended March 31, 2024 reflect variable consideration for Contract Shortfall Fees of $ 8.7 million, which will be due in the first quarter of 2025 under the terms of the ProFrac Agreement.
−Removed: Because the measurement period for 2023 was June 1, 2023 through December 31, 2023, there are no Contract Shortfall Fees reflected in revenues for the first quarter of 2023.
+Added: The Company does not expect that the minimum purchase requirements will be met during the current measurement period, and as a result, the revenues for six months ended June 30, 2024 reflect variable consideration for Contract Shortfall Fees of $ 17.1 million, which will be due in the first quarter of 2025 under the terms of the ProFrac Agreement.
+Added: The measurement period for 2023 was June 1, 2023 through December 31, 2023.
+Added: Revenues for the six months ended June 30, 2023 included $ 2.0 million of Contract Shortfall Fees.
On February 2, 2023, the Convertible Notes Payable held by ProFrac Holding, LLC, with a carrying value of $ 11.0 million, including accrued paid-in-kind interest of $ 1.0 million, were converted on a pre-Reverse Stock Split basis, upon maturity, into 12,683,280 February 2023 Warrants (see Note 9, “Debt and Convertible Notes Payable” and Note 13, “Stockholders’ Equity”) and subsequently exercised on September 6, 2023.
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On February 2, 2023, the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable, with a carrying value of $ 11.0 million, including accrued interest of $ 1.0 million, were converted on a pre-Reverse Stock Split basis, upon maturity, into 12,683,281 February 2023 Warrants and subsequently exercised on September 6, 2023 (see Note 9, “Debt and Convertible Notes Payable” and Note 13, “Stockholders’ Equity”).
3 unchanged sentences
As a result of the Reverse Stock Split, these shares were converted into 10,582,821 common shares.
−Removed: During the three months ended March 31, 2024 and 2023, the Company’s revenues from ProFrac Services, LLC were $ 27.2 million and $ 36.4 million , respectively.
−Removed: For the three months ended March 31, 2024 and 2023, these revenues were net of amortization of contract assets of $ 1.3 million and $ 1.3 million , respectively .
−Removed: Cost of sales attributable to these revenues were $ 18.6 million and $ 34.9 million , respectively for the three months ended March 31, 2024 and 2023.
−Removed: As of March 31, 2024 and December 31, 2023 our accounts receivable from ProFrac Services, LLC was $ 38.7 million and $ 34.6 million , respectively which is recorded in accounts receivable, related party on the consolidated balance sheet.
−Removed: During the three months ended March 31, 2024, the Company collected $ 15.1 million of variable consideration of the $ 20.1 million related to the 2023 Contract Shortfall Fees which were included in accounts receivable, related party as of December 31, 2023.
−Removed: The remaining total of $ 5.0 million was collected subsequent to March 31, 2024.
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
+Added: During the three months ended June 30, 2024 and 2023, the Company’s revenues from ProFrac Services, LLC were $ 28.0 million and $ 32.8 million , respectively.
+Added: For the three months ended June 30, 2024 and 2023, these revenues were net of amortization of contract assets of $ 1.5 million and $ 1.1 million , respectively .
+Added: Cost of sales attributable to these revenues were $ 19.5 million and $ 30.2 million, respectively, for the three months ended June 30, 2024 and 2023.
+Added: During the six months ended June 30, 2024 and 2023, the Company’s revenues from ProFrac Services, LLC were $ 55.2 million and $ 69.1 million, respectively.
+Added: For the six months ended June 30, 2024 and 2023, these revenues were net of amortization of contract assets of $ 2.7 million and $ 2.4 million , respectively .
+Added: Cost of sales attributable to these revenues were $ 38.1 million and $ 65.1 million, respectively, for the six months ended June 30, 2024 and 2023.
+Added: As of June 30, 2024 and December 31, 2023 our accounts receivable from ProFrac Services, LLC was $ 40.0 million and $ 34.6 million , respectively, which is recorded in accounts receivable, related party on the consolidated balance sheet.
+Added: During the six months ended June 30, 2024, the Company collected variable consideration of $ 20.1 million related to the 2023 Contract Shortfall Fees, which were included in accounts receivable, related party as of December 31, 2023.
Note 17 — Business Segment, Geographic and Major Customer Information
16 unchanged sentences
Summarized financial information of the reportable segments is as follows (in thousands):
−Removed: As of and for the three months ended March 31,
+Added: As of and for the three months ended June 30,
Chemistry Technologies Data Analytics
11 unchanged sentences
Depreciation 161 35 26 222
−Removed: Interest on ABL — — 181 181
−Removed: Other interest — — 97 97
+Added: Interest expense — — 308 308
Income tax — — 15 15
14 unchanged sentences
Depreciation 155 18 1 174
+Added: Interest expense — — 705 705
Income tax — — 7 7
2 unchanged sentences
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
+Added: As of and for the six months ended June 30,
+Added: Chemistry Technologies Data Analytics
+Added: Corporate and Other Total
+Added: Revenue from external customers
+Added: Products $ 26,816 $ 2,238 $ — $ 29,054
+Added: Services 1,231 1,086 — 2,317
+Added: Total revenue from external customers 28,047 3,324 — 31,371
+Added: Revenue from related party
+Added: Products 54,755 — — 54,755
+Added: Services — 400 — 400
+Added: Total revenue from related parties 54,755 400 — 55,155
+Added: Gross profit 16,947 1,044 — 17,991
+Added: Income (loss) from operations 12,250 ( 782 ) ( 7,138 ) 4,330
+Added: Depreciation 320 70 52 442
+Added: Interest expense — — 586 586
+Added: Income tax — — 257 257
+Added: Additions to long-lived assets 104 105 20 229
+Added: Revenue from external customers
+Added: Products $ 23,654 $ 3,562 $ — $ 27,216
+Added: Services 1,039 1,217 — 2,256
+Added: Total revenue from external customers 24,693 4,779 — 29,472
+Added: Revenue from related party
+Added: Products 68,611 2 — 68,613
+Added: Services 272 245 — 517
+Added: Total revenue from related parties 68,883 247 — 69,130
+Added: Gross profit 3,038 2,747 — 5,785
+Added: Change in fair value of Contract Consideration Convertible Notes Payable ( 29,969 ) — — ( 29,969 )
+Added: Income (loss) from operations 27,174 587 ( 8,577 ) 19,184
+Added: Paid-in-kind interest on Contract Consideration Convertible Notes Payable 2,129 — — 2,129
+Added: Paid-in-kind interest on convertible notes payable — — 155 155
+Added: Depreciation 312 36 1 349
+Added: Interest expense — — 2,377 2,377
+Added: Income tax — — 16 16
+Added: Additions to long-lived assets 30 230 32 292
Assets of the Company by reportable segments are as follows (in thousands):
−Removed: March 31, 2024 December 31, 2023
+Added: June 30, 2024 December 31, 2023
Chemistry Technologies $ 138,649 $ 138,559
2 unchanged sentences
Total assets $ 156,040 $ 157,513
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Geographic Information
Revenue by country is based on the location where services are provided and products are sold.
−Removed: For the three months ended March 31, 2024 and 2023 no individual countries other than the U.S.
+Added: For the six months ended June 30, 2024 and 2023 no individual countries other than the U.S.
accounted for more than 10% of revenue.
Revenue by geographic location is as follows (in thousands):
−Removed: Three months ended March 31,
+Added: Three months ended June 30, Six months ended June 30,
2024 2023 2024 2023
+Added: (1) $ 44,008 $ 48,725 $ 83,266 $ 94,851
UAE 1,803 1,509 2,545 2,912
7 unchanged sentences
Revenue % of Total Revenue
−Removed: Three months ended March 31, 2024
−Removed: Customer A (Related Party) $ 27,194 67.4 %
−Removed: Three months ended March 31, 2023
−Removed: Customer A (Related Party) $ 36,355 75.7 %
+Added: Three months ended June 30, 2024
+Added: ProFrac Services, LLC
+Added: $ 27,961 60.6 %
+Added: Three months ended June 30, 2023
+Added: ProFrac Services, LLC
+Added: $ 32,774 64.8 %
+Added: Revenue % of Total Revenue
+Added: Six months ended June 30, 2024
+Added: ProFrac Services, LLC
+Added: $ 55,155 63.7 %
+Added: Six months ended June 30, 2023
+Added: ProFrac Services, LLC
+Added: $ 69,130 70.1 %
The concentration with ProFrac Services, LLC and in the oil and gas industry increases credit, commodity and business risk .
+Added: FLOTEK INDUSTRIES, INC.
+Added: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Major Suppliers
Expenditure with major suppliers, as a percentage of consolidated supplier expenditure, is as follows (in thousands):
−Removed: Three months ended March 31, Expenditure % of Total Expenditure
+Added: Three months ended June 30, Expenditure % of Total Expenditure
Supplier A $ 5,975 23.0 %
Supplier B 4,383 16.9 %
+Added: Supplier C 4,103 15.8 %
Supplier A $ 13,155 32.6 %
1 unchanged sentence
Supplier C 4,489 11.1 %
−Removed: FLOTEK INDUSTRIES, INC.
−Removed: NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Note 18 — Subsequent Events
−Removed: We have evaluated the effects of events that have occurred subsequent to March 31, 2024 through May 9, 2024, and there have been no material events that would require recognition in the March 31, 2024 interim financial statements or disclosure in the notes to the unaudited condensed consolidated financial statements.
+Added: Six months ended June 30, Expenditure % of Total Expenditure
+Added: Supplier B $ 12,120 23.3 %
+Added: Supplier A 10,543 20.3 %
+Added: Supplier C 4,103 7.9 %
+Added: Supplier A $ 30,109 36.4 %
+Added: Supplier B 15,194 18.4 %
+Added: Supplier C 8,993 10.9 %
+Added: Note 18 — Subsequent Event
+Added: The Company has evaluated the effects of events that have occurred subsequent to June 30, 2024 through August 8, 2024, the date at which the Company’s interim financial statements are available to be issued, and has determined that the following subsequent event required disclosure:
+Added: Entry into material definitive agreement
+Added: Effective August 5, 2024, the Company entered into a second amendment to the ABL (the “Second Amendment”).
+Added: Among other matters, the Second Amendment amends the ABL as follows:
+Added: (i) the total commitment of the loan is increased to $ 20,000,000 , (ii) the stated maturity date is extended for an additional 12 months, (iii) the applicable margin is decreased by 0.50 %, and (iv) various modifications are made to the borrowing base and criteria for eligible receivables and eligible pledged real estate.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.