UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20202021
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 1-13270
FLOTEK INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)
Delaware90-0023731
(State of other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
Delaware
90-0023731
(State of other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
8846 N. Sam Houston Parkway W.Houston,TX
77064
Houston, TX77064
(Address of principal executive offices)(Zip Code)
(713) (713) 849-9911
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par valueFTKNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated Filer☒
Large accelerated filer☐Accelerated Filer☒
Non-accelerated filer☐Smaller reporting company☒
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
As of August 4, 2020,5, 2021, there were 71,306,77074,098,258 outstanding shares of Flotek Industries, Inc. common stock, $0.0001 par value.





TABLE OF CONTENTS
 
Forward-Looking Statements
3
Item 1.
34
Unaudited Condensed Consolidated Balance Sheets atJune 30, 20202021 and December 31, 20192020
34
Unaudited Condensed Consolidated Statements of Operations for the threeand sixsix months ended June 30, 20202021 and 20192020
45
Unaudited Condensed Consolidated Statements of Comprehensive IncomeLoss for the three and six months ended June 30, 20202021 and 20192020
56
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 20202021 and 20192020
67
Unaudited Condensed Consolidated StatementStatements of Stockholders’ Equity for the three and six months ended June 30, 20202021 and 20192020
8
Notes to Unaudited Condensed Consolidated Financial Statements
10
Item 2.
3125
Item 3.
3933
Item 4.
3933
Item 1.
4135
Item 1A.
4135
Item 2.
4235
Item 3.
4235
Item 4.
4236
Item 5.
4236
Item 6.
4337
4438




2


FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”), and in particular, Part I, Item 2 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are not historical facts, but instead represent the current assumptions and beliefs regarding future events of Flotek Industries, Inc. (“Flotek” or the “Company”), many of which, by their nature, are inherently uncertain and outside the Company’s control. Such statements include estimates, projections, and statements related to the Company’s business plan, objectives, expected operating results, and assumptions upon which those statements are based. The forward-looking statements contained in this Quarterly Report are based on information available as of the date of this Quarterly Report.
The forward-looking statements relate to future industry trends and economic conditions, forecast performance or results of current and future initiatives and the outcome of contingencies and other uncertainties that may have a significant impact on the Company’s business, financial conditions, future operating results and liquidity, including but not limited to the impact of the COVID-19 pandemic, pending litigation, commodity prices and other circumstances. These forward-looking statements generally are identified by words including but not limited to, “anticipate,” “believe,” “estimate,” “commit,” “budget,” “aim,” “potential,” “schedule,” “continue,” “intend,” “expect,” “plan,” “forecast,” “project” and similar expressions, or future-tense or conditional constructions such as “will,” “may,” “should,” “could,” and “would,” or the negative thereof or other variations thereon or comparable terminology. The Company cautions that these statements are merely predictions and are not to be considered guarantees of future performance. Forward-looking statements are based upon current expectations and assumptions that are subject to risks and uncertainties that can cause actual results to differ materially from those projected, anticipated, or implied.
A detailed discussion of potential risks and uncertainties that could cause actual results and events to differ materially from forward-looking statements include, but are not limited to, those discussed in Part I, Item 1A — “Risk Factors” of the Annual Report on Form 10-K for the year ended December 31, 2020 (“Annual Report” or “2020 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 16, 2021, and periodically in subsequent reports filed with the SEC. The Company has no obligation, and we disclaim any obligation, to publicly update or revise any forward-looking statements, whether as a result of new information or future events, except as required by law.



3





PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, 2021December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$27,781 $38,660 
Restricted cash40 664 
Accounts receivable, net of allowance for doubtful accounts of $1,329 and $1,316 at June 30, 2021 and December 31, 2020, respectively9,713 11,764 
Inventories, net11,499 11,837 
Income taxes receivable71 403 
Other current assets3,255 3,127 
Assets held for sale546 0 
Total current assets52,905 66,455 
Property and equipment, net8,017 9,087 
Operating lease right-of-use assets2,162 2,320 
Goodwill8,092 8,092 
Deferred tax assets, net213 223 
Other long-term assets29 33 
TOTAL ASSETS$71,418 $86,210 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$6,587 $5,787 
Accrued liabilities17,221 18,275 
Income taxes payable39 21 
Interest payable58 34 
Current portion of operating lease liabilities589 636 
Current portion of finance lease liabilities55 60 
Current portion of long-term debt4,788 4,048 
Total current liabilities29,337 28,861 
Deferred revenue, long-term104 117 
Long-term operating lease liabilities8,011 8,348 
Long-term finance lease liabilities72 96 
Long-term debt0 1,617 
TOTAL LIABILITIES37,524 39,039 
Commitments and contingencies (See Note 13)00
Stockholders’ equity:
Preferred stock, $0.0001 par value, 100,000 shares authorized; 0 shares issued and outstanding0 0 
Common stock, $0.0001 par value, 140,000,000 shares authorized; 79,606,743 shares issued and 70,152,591 shares outstanding at June 30, 2021; 78,669,414 shares issued and 73,088,494 shares outstanding at December 31, 20208 8 
Additional paid-in capital361,424 359,721 
Accumulated other comprehensive income (loss)13 (19)
Accumulated deficit(293,534)(278,688)
Treasury stock, at cost; 5,627,646 and 5,580,920 shares at June 30, 2021 and December 31, 2020, respectively(34,017)(33,851)
Total stockholders’ equity33,894 47,171 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$71,418 $86,210 
The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
4
 June 30, 2020 December 31, 2019
ASSETS   
Current assets:   
Cash and cash equivalents$59,926
 $100,575
Restricted cash664
 663
Accounts receivable, net of allowance for doubtful accounts of $1,383 and $1,527 at June 30, 2020 and December 31, 2019, respectively8,108
 15,638
Inventories, net23,338
 23,210
Income taxes receivable6,846
 631
Other current assets2,407
 13,191
Total current assets101,289
 153,908
Property and equipment, net8,017
 39,829
Operating lease right-of-use assets2,422
 16,388
Goodwill17,522
 —
Deferred tax assets, net152
 152
Other intangible assets, net12,777
 20,323
Other long-term assets17
 —
TOTAL ASSETS$142,196
 $230,600
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$7,876
 $16,231
Accrued liabilities10,474
 24,552
Income taxes payable12
 —
Current portion of long-term debt2,527
 —
Current portion of operating lease liabilities654
 486
Current portion of finance lease liabilities57
 55
Total current liabilities21,600
 41,324
Long-term debt, less current portion3,144
 —
Deferred revenue, long-term111
 —
Long-term operating lease liabilities8,497
 16,973
Long-term finance lease liabilities127
 158
Deferred tax liabilities, net11
 116
Total liabilities33,490
 58,571
Commitments and contingencies (See Note 19)

 

Stockholders’ equity:   
Preferred stock, $0.0001 par value, 100,000 shares authorized; no shares issued and outstanding—
 —
Common stock, $0.0001 par value, 140,000,000 shares authorized; 77,626,135 shares issued and 73,166,719 shares outstanding at June 30, 2020; 63,656,897 shares issued and 59,511,416 shares outstanding at December 31, 20197
 6
Additional paid-in capital357,980
 347,564
Accumulated other comprehensive income51
 181
Retained earnings (accumulated deficit)(215,766) (142,238)
Treasury stock, at cost; 4,459,416 and 4,145,481 shares at June 30, 2020 and December 31, 2019, respectively(33,566) (33,484)
Total stockholders’ equity108,706
 172,029
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$142,196
 $230,600





FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 Three months ended June 30,Six months ended June 30,
 2021202020212020
Revenue$9,165 $8,880 $20,935 $28,296 
Costs and expenses:
Operating expenses (excluding depreciation and amortization)12,110 11,632 25,911 34,473 
Corporate general and administrative2,868 5,395 7,229 9,888 
Depreciation and amortization253 468 560 2,659 
Research and development1,466 1,638 3,008 4,193 
Gain on disposal of long-lived assets(71)(22)(69)(55)
Impairment of fixed, long-lived and intangible assets0 0 0 57,454 
Total costs and expenses16,626 19,111 36,639 108,612 
Loss from operations(7,461)(10,231)(15,704)(80,316)
Other (expense) income:
Payment Protection Program forgiveness881 0 881 0 
Gain on lease termination0 576 0 576 
Interest expense(17)(16)(35)(20)
Other income, net72 78 39 31 
Total other income, net936 638 885 587 
Loss before income taxes(6,525)(9,593)(14,819)(79,729)
Income tax (expense) benefit(21)32 (27)6,201 
Net loss$(6,546)$(9,561)$(14,846)$(73,528)
Loss per common share:
Basic$(0.09)$(0.14)$(0.22)$(1.17)
Diluted$(0.09)$(0.14)$(0.22)$(1.17)
Weighted average common shares:
Weighted average common shares used in computing basic loss per common share69,531 66,035 69,001 62,828 
Weighted average common shares used in computing diluted loss per common share69,531 66,035 69,001 62,828 


The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
5
 Three months ended June 30, Six months ended June 30,
 2020 2019 2020 2019
Revenue$8,880
 $34,692
 $28,296
 $77,949
Costs and expenses:       
Operating expenses (excluding depreciation and amortization)11,632
 38,121
 34,473
 82,089
Corporate general and administrative5,395
 6,054
 9,888
 13,335
Depreciation and amortization468
 2,119
 2,659
 4,379
Research and development1,638
 2,076
 4,193
 4,360
(Gain) loss on disposal of long-lived assets(22) (4) (55) 1,093
Impairment of fixed and long-lived assets—
 —
 57,454
 —
Total costs and expenses19,111
 48,366
 108,612
 105,256
Loss from operations(10,231) (13,674) (80,316) (27,307)
Other (expense) income:       
Gain on lease termination576
 —
 576
 —
Interest expense(16) (16) (20) (2,013)
Other income, net78
 693
 31
 800
Total other expense, net638
 677
 587
 (1,213)
Loss before income taxes(9,593) (12,997) (79,729) (28,520)
Income tax benefit32
 192
 6,201
 503
Loss from continuing operations(9,561) (12,805) (73,528) (28,017)
(Loss) income from discontinued operations, net of tax—
 (1,608) —
 44,466
Net (loss) income$(9,561) $(14,413) $(73,528) $16,449
        
Basic earnings (loss) per common share:      
Continuing operations$(0.14) $(0.22) $(1.17) $(0.48)
Discontinued operations, net of tax—
 (0.03) —
 0.76
Basic earnings (loss) per common share$(0.14) $(0.25) $(1.17) $0.28
        
Diluted earnings (loss) per common share:      
Continuing operations$(0.14) $(0.22) $(1.17) $(0.48)
Discontinued operations, net of tax—
 (0.03) —
 0.76
Diluted earnings (loss) per common share$(0.14) $(0.25) $(1.17) $0.28
        
Weighted average common shares:       
Weighted average common shares used in computing basic earnings (loss) per common share66,035
 58,608
 62,828
 58,491
Weighted average common shares used in computing diluted earnings (loss) per common share66,035
 58,608
 62,828
 58,491






FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMELOSS
(in thousands)
    
 Three months ended June 30,Six months ended June 30,
 2021202020212020
Net loss$(6,546)$(9,561)$(14,846)$(73,528)
Other comprehensive (loss) income:
Foreign currency translation adjustment(17)(7)32 (130)
Comprehensive loss$(6,563)$(9,568)$(14,814)$(73,658)

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
6
 Three months ended June 30, Six months ended June 30,
 2020 2019 2020 2019
Loss from continuing operations$(9,561) $(12,805) $(73,528) $(28,017)
(Loss) income from discontinued operations, net of tax—
 (1,608) —
 44,466
Net (loss) income(9,561) (14,413) (73,528) 16,449
Other comprehensive (loss) income:       
Foreign currency translation adjustment(7) 24
 (130) 118
Comprehensive (loss) income$(9,568) $(14,389) $(73,658) $16,567






FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 Six months ended June 30,
 20212020
Cash flows from operating activities:
Net loss$(14,846)$(73,528)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of contingent consideration(302)0 
Depreciation and amortization560 2,659 
Provision for doubtful accounts(1)474 
Provision for excess and obsolete inventory580 529 
Impairment of right-of-use assets0 7,434 
Impairment of fixed assets0 30,178 
Impairment of intangible assets0 19,842 
Gain on sale of assets(69)(631)
Non-cash lease expense163 242 
Stock compensation expense1,750 1,521 
Deferred income tax provision (benefit)10 (105)
PPP loan forgiveness(881)0 
Changes in current assets and liabilities:
Accounts receivable, net1,995 7,252 
Inventories, net(222)6,418 
Income taxes receivable207 (6,351)
Other current assets(672)1,715 
Other long-term assets541 0 
Accounts payable801 (10,229)
Accrued liabilities(1,048)(16,755)
Income taxes payable168 119 
Interest payable24 0 
Net cash used in operating activities(11,242)(29,216)
Cash flows from investing activities:
Capital expenditures(31)(42)
Proceeds from sale of business0 9,844 
Proceeds from sale of assets74 66 
Purchase of JP3, net of cash acquired0 (26,284)
Abandonment of patents and other intangible assets0 (8)
Net cash provided (used in) by investing activities43 (16,424)
Cash flows from financing activities:
Proceeds from Paycheck Protection Program loan0 4,798 
Purchase of treasury stock(78)(82)
Proceeds from sale of common stock(166)358 
Payments for finance leases(29)(51)
Net cash (used in) provided by financing activities(273)5,023 
Effect of changes in exchange rates on cash and cash equivalents(31)(31)
Net change in cash, cash equivalents and restricted cash(11,503)(40,648)
Cash and cash equivalents at the beginning of period38,660 100,575 
Restricted cash at the beginning of period664 663 
Cash and cash equivalents and restricted cash at beginning of period39,324 101,238 
Cash and cash equivalents at end of period27,781 59,926 
Restricted cash at the end of period40 664 
Cash, cash equivalents and restricted cash at end of period$27,821 $60,590 
The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
7
 Six months ended June 30,
 2020 2019
Cash flows from operating activities:   
Net (loss) income attributable to Flotek Industries, Inc.$(73,528) $16,449
Less: Income from discontinued operations, net of tax—
 44,466
Loss from continuing operations(73,528) (28,017)
Adjustments to reconcile loss from continuing operations to net cash used in operating activities:   
Depreciation and amortization2,659
 4,379
Amortization of deferred financing costs—
 1,428
Provision for doubtful accounts474
 102
Provision for excess and obsolete inventory529
 —
Impairment of right-of-use assets7,434
 —
Impairment of fixed assets30,178
 —
Impairment of intangible assets19,842
 —
(Gain)/loss on disposal of long-lived assets(631) 1,093
Non-cash lease expense242
 464
Stock compensation expense1,521
 1,669
Deferred income tax provision(105) 17,855
Reduction in tax benefit related to share-based awards—
 24
Changes in current assets and liabilities:   
Accounts receivable, net7,252
 6,289
Inventories, net6,418
 554
Income taxes receivable(6,351) (281)
Other current assets1,715
 (1,990)
Other long-term assets—
 3,286
Accounts payable(10,229) (4,157)
Accrued liabilities(16,755) (10,216)
Income taxes payable119
 1,182
Interest payable—
 (8)
Net cash used in operating activities(29,216) (6,344)
Cash flows from investing activities:   
Capital expenditures(42) (767)
Proceeds from sale of business9,844
 152,217
Proceeds from sale of assets66
 140
Purchase of JP3, net of cash acquired(26,284) —
Purchase of patents and other intangible assets(8) (227)
Net cash (used in) provided by investing activities(16,424) 151,363
Cash flows from financing activities:   
Borrowings on revolving credit facility—
 42,984
Repayments on revolving credit facility—
 (92,715)
Proceeds from Paycheck Protection Program loan4,798
 —
Purchase of treasury stock related to share-based awards(82) (142)
Proceeds from sale of common stock358
 —
Payments for finance leases(51) (38)
Net cash provided by (used in) financing activities5,023
 (49,911)
Discontinued operations:   
Net cash used in operating activities—
 (321)
Net cash provided by investing activities—
 337
Net cash flows provided by discontinued operations—
 16
Effect of changes in exchange rates on cash and cash equivalents(31) 2




Net (decrease) increase in cash and cash equivalents and restricted cash(40,648) 95,126
Cash and cash equivalents at the beginning of period100,575
 3,044
Restricted cash at the beginning of period663
 —
Cash and cash equivalents and restricted cash at beginning of period101,238
 3,044
Cash and cash equivalents at end of period59,926
 97,509
Restricted cash at the end of period664
 661
Cash and cash equivalents and restricted cash at the end of period$60,590
 $98,170





FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)

Three months ended June 30, 2021
 Common StockTreasury StockAdditional
Paid-in
Capital		Accumulated
Other
Comprehensive
Income (Loss)		Accumulated DeficitTotal Stockholders’ Equity
 Shares
Issued		Par
Value		SharesCost
Balance, March 31, 202178,276 $8 5,573 $(33,956)$360,537 $30 $(286,988)$39,631 
Net loss— — — — — — (6,546)(6,546)
Foreign currency translation adjustment— — — — — (17)— (17)
Stock issued under employee stock purchase plan— — (26)(38)(2)— — (40)
Restricted stock granted1,465 — — (7)— — (7)
Restricted stock forfeited(134)25 54 (54)— — 0 
Treasury stock purchased— — — — — — — 
Stock compensation expense— — — — 969 — — 969 
Excess tax benefit related to share-based awards— — 56 (77)(19)— — (96)
Balance, June 30, 202179,607 $8 5,628 $(34,017)$361,424 $13 $(293,534)$33,894 


Six months ended June 30, 2021
 Common StockTreasury StockAdditional
Paid-in
Capital		Accumulated
Other
Comprehensive
Income (Loss)		Accumulated DeficitTotal Stockholders’ Equity
 Shares
Issued		Par
Value		SharesCost
Balance, December 31, 202078,669 $8 5,581 $(33,851)$359,721 $(19)$(278,688)$47,171 
Net loss— — — — — — (14,846)(14,846)
Foreign currency translation adjustment— — — — — 32 — 32 
Stock issued under employee stock purchase plan— — (84)(130)(47)— — (177)
Restricted stock granted1,684 — — — — — — — 
Restricted stock forfeited(133)— 30 64 — — — 64 
Treasury stock purchased— — — — — — — — 
Stock compensation expense— — — — 1,750 — — 1,750 
Excess tax benefit related to share-based awards— — 101 (100)— — — (100)
Other (1)(613)— — — — — — — 
Balance, June 30, 202179,607 $8 5,628 $(34,017)$361,424 $13 $(293,534)$33,894 
(1) See Note 14, “Stockholders’ Equity” for further discussion.
The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
8


 Three months ended June 30, 2020
 Common Stock Treasury Stock 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity
 
Shares
Issued
 
Par
Value
 Shares Cost 
Balance, March 31, 202064,338
 $6
 4,395
 $(33,529) $348,375
 $58
 $(206,205) $108,705
Net loss—
 —
 —
 —
 —
 —
 (9,561) (9,561)
Foreign currency translation adjustment—
 —
 —
 —
 —
 (7) —
 (7)
Stock issued under employee stock purchase plan—
 —
 (12) —
 9
 —
 —
 9
Restricted stock granted1,788
 —
 —
 —
 —
 —
 —
 —
Restricted stock forfeited—
 —
 37
 —
 —
 —
 —
 —
Treasury stock purchased—
 —
 39
 (37) —
 —
 —
 (37)
Stock compensation expense—
 —
 —
 —
 1,059
 —
 —
 1,059
Stock issued in JP3 acquisition11,500
 1
 —
 —
 8,537
 —
 —
 8,538
Balance, June 30, 202077,626
 $7
 4,459
 $(33,566) $357,980
 $51
 $(215,766) $108,706

Three months ended June 30, 2020
 Common StockTreasury StockAdditional
Paid-in
Capital		Accumulated
Other
Comprehensive
Income (Loss)		Accumulated DeficitTotal Stockholders’ Equity
 Shares
Issued		Par
Value		SharesCost
Balance, March 31, 202064,338 $6 4,395 $(33,529)$348,375 $58 $(206,205)$108,705 
Net loss— — — — — — (9,561)(9,561)
Foreign currency translation adjustment— — — — — (7)— (7)
Stock issued under employee stock purchase plan— — (12)— 9 — — 9 
Restricted stock granted1,788 — — — — — — — 
Restricted stock forfeited— — 37 — — — — — 
Treasury stock purchased— — 39 (37)— — — (37)
Stock compensation expense— — — — 1,059 — — 1,059 
Stock issued in JP3 acquisition11,500 1 — — 8,537 — — 8,538 
Balance, June 30, 202077,626 7 4,459 (33,566)357,980 51 (215,766)108,706 
Six months ended June 30, 2020
 Common StockTreasury StockAdditional
Paid-in
Capital		Accumulated
Other
Comprehensive
Income (Loss)		Retained Earnings (Accumulated Deficit)Total Stockholders’ Equity
 Shares
Issued		Par
Value		SharesCost
Balance, December 31, 201963,657 $6 4,145 $(33,484)$347,564 $181 $(142,238)$172,029 
Net loss— — — — — — (73,528)(73,528)
Foreign currency translation adjustment— — — — — (130)— (130)
Stock issued under employee stock purchase plan— — (25)— 20 — — 20 
Restricted stock granted2,469 — — — 338 — — 338 
Restricted stock forfeited— — 278 — — — — — 
Treasury stock purchased— — 61 (82)— — — (82)
Stock compensation expense— — — — 1,521 — — 1,521 
Stock issued in JP3 acquisition11,500 1 — — 8,537 — — 8,538 
Balance, June 30, 202077,626 $7 4,459 $(33,566)$357,980 $51 $(215,766)$108,706 
The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
9
 Three months ended June 30, 2019
 Common Stock Treasury Stock 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity
 
Shares
Issued
 
Par
Value
 Shares Cost 
Balance, March 31, 201962,199
 $6
 3,845
 $(33,368) $344,004
 $125
 $(77,461) $233,306
Net income—
 —
 —
 —
 —
 —
 (14,413) (14,413)
Foreign currency translation adjustment—
 —
 —
 —
 —
 24
 —
 24
Restricted stock granted757
 —
 —
 —
 —
 —
 —
 —
Restricted stock forfeited—
 —
 99
 —
 —
 —
 —
 —
Treasury stock purchased—
 —
 4
 (10) —
 —
 —
 (10)
Stock compensation expense—
 —
 —
 —
 1,213
 —
 —
 1,213
Balance, June 30, 201962,956
 $6
 3,948
 $(33,378) $345,217
 $149
 $(91,874) $220,120



FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)

 Six months ended June 30, 2020
 Common Stock Treasury Stock 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity
 
Shares
Issued
 
Par
Value
 Shares Cost 
Balance, December 31, 201963,657
 $6
 4,145
 $(33,484) $347,564
 $181
 $(142,238) $172,029
Net loss—
 —
 —
 —
 —
 —
 (73,528) (73,528)
Foreign currency translation adjustment—
 —
 —
 —
 —
 (130) —
 (130)
Stock issued under employee stock purchase plan—
 —
 (25) —
 20
 —
 —
 20
Restricted stock granted2,469
 —
 —
 —
 338
 —
 —
 338
Restricted stock forfeited—
 —
 278
 —
 —
 —
 —
 —
Treasury stock purchased—
 —
 61
 (82) —
 —
 —
 (82)
Stock compensation expense—
 —
 —
 —
 1,521
 —
 —
 1,521
Stock issued in JP3 acquisition11,500
 1
 —
 —
 8,537
 —
 —
 8,538
Balance, June 30, 202077,626
 $7
 4,459
 $(33,566) $357,980
 $51
 $(215,766) $108,706

 Six months ended June 30, 2019
 Common Stock Treasury Stock 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity
 
Shares
Issued
 
Par
Value
 Shares Cost 
Balance, December 31, 201862,163
 $6
 3,770
 $(33,237) $343,536
 $31
 $(108,323) $202,013
Net income—
 —
 —
 —
 —
 —
 16,449
 16,449
Foreign currency translation adjustment—
 —
 —
 —
 —
 118
 —
 118
Restricted stock granted793
 —
 —
 —
 —
 —
 —
 —
Restricted stock forfeited—
 —
 133
 —
 —
 —
 —
 —
Treasury stock purchased—
 —
 45
 (141) —
 —
 —
 (141)
Stock compensation expense—
 —
 —
 —
 1,681
 —
 —
 1,681
Balance, June 30, 201962,956
 $6
 3,948
 $(33,378) $345,217
 $149
 $(91,874) $220,120


FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1 — Organization and Significant Accounting Policies
Organization and Nature of Operations

Flotek Industries, Inc. (“Flotek” or the “Company”) is acreates solutions to reduce the environmental impact of energy on air, water, land and people. A technology-driven, internationalspecialty green chemistry and data company, that develops and supplies chemistries, services, equipment and data analytics toFlotek helps customers across industrial, commercial, and consumer markets.markets improve their Environmental, Social, and Governance (ESG) performance.

The Company’s Chemistry Technologies (“CT”) segment develops, manufactures, packages, distributes, delivers, and markets green specialty chemicals that enhance the profitability of hydrocarbon producers and cleans surfaces in both commercial and personal settings to help reduce the spread of bacteria, viruses and germs.
DuringThe Company’s Data Analytics (“DA”) segment enables users to maximize the value of their hydrocarbon associated processes by providing analytics associated with the streams in seconds rather than minutes or days. The real-time access to information prevents waste, reduces reprocessing and allows users to pursue automation of their hydrocarbon streams to maximize their profitability, reducing their carbon footprint, energy consumption and emissions.
The Company formed the DA segment during the second quarter of 2020, the Company acquired 100% ownership ofafter acquiring JP3 Measurement, LLC (“JP3”), a privately-held leading data. The Company’s 2 operating segments, CT and analytics technology company, in a cash-and-stock transaction. JP3’s real-time data platforms combine the energy industry’s only field-deployable, inline optical analyzer with proprietary cloud visualization and analytics, targeting an increase of processing efficiencies and valuation of natural gas, crude oil, and refined fuels. The transaction was valued at approximately $36.6 million, as of the transaction closing date, comprised of $25.0 million in cash subject to certain adjustments and contingent consideration and 11.5 million shares in Flotek common stock with an estimated fair value of $8.5 million, net of a discount for marketability due to a lock-up period. The payment of $25.0 million was subject to certain purchase price adjustments, and the total non-equity consideration at closing was comprised of $25.0 million plus net working capital in excess of the target net working capital of $1.9 million and contingent consideration of an estimated $1.2 million for two potential earn-out provisions totaling $5.0 million based on certain stock performance targets.

With the acquisition of JP3, the Company evaluated its segment information and determined that there were two segments: Chemistry Technologies and Data Analytics, whichDA, are both supported by its continuing Research & Innovation advanced laboratory capabilities. For further discussion of our operations and segments, see Note 18, “Business Segment, Geographic and Major Customer Information.” For further discussion of the JP3 acquisition, see Note 3, “Business Combination.”
The Company’s Chemistry Technologies segment includes specialty chemistries, logistics and technology services. The Company designs, develops, manufactures, packages, distributes, delivers, and markets reservoir-centric fluid systems, including specialty and conventional chemistries, for use in oil and gas well drilling, cementing, completion, remediation, and stimulation activities designed to maximize recovery in both new and mature fields. Customers of the Chemistry Technologies business segment include major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, pressure-pumping service companies, national and state-owned oil companies, and international supply chain management companies.
In the second quarter of 2020, the Chemistry Technologies segment launched a line of sanitizers and disinfectants for commercial and personal consumer use. These products build on the Company’s historical expertise in chemistry and leverage its infrastructure, personnel, competencies, supply chain, research, and historic consumer market experiences, yielding a competitive product offering in this rapidly growing area. The newly-launched products include hand sanitizers for retail and e-commerce sales and disinfecting liquids for use in and by hospitals, first responders, the travel and hospitality industry, food services, sporting facilities, and other commercial and industrial applications.
The Company’s Data Analytics segment, created in conjunction with the acquisition of JP3, includes the design, development, production, sale and support of equipment and services that create and provide valuable information about the composition of its energy customers’ hydrocarbon streams.
The customers of the Data Analytics segment span across the entire market, from production upstream to midstream facilities to refineries and distribution networks. To date, the Data Analytics segment has focused solely on North American markets. The Data Analytics segment provides real-time hydrocarbon composition data that helps its customers generate additional profit by enhancing blending, increasing efficiencies of towers, enabling automation and robotization of fluid handling, and reducing losses due to give-away.
Flotek was initially incorporated under the laws of the Province of British Columbia on May 17,in 1985. OnIn October 23, 2001, Flotekthe Company changed its corporate domicile to the stateState of Delaware.
Basis of Presentation
The accompanying Financial Statementsunaudited financial statements reflect all adjustments, in the opinion of management, necessary for fair presentationstatement of the financial condition and results of operations for the periods presented. All such adjustments are normal and recurring in nature. The Financial Statements,financial statements, including selected notes, have been prepared in accordance with applicable rules and regulations of the Securities and Exchange Commission (“SEC”)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. These interim Financial Statementsfinancial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,


10

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2019 (“2019Annual Report”) as amended by the Amendment No. 2 on Form 10-K/A to the 2019 Annual Report, filed with the SEC on June 11, 2020.Report. A copy of the 20192020 Annual Report is available on the SEC’s website, www.sec.gov, under the Company’s ticker symbol (“FTK”) or on Flotek’s website, www.flotekind.com. The information contained on the Company’s website does not form a part of this Quarterly Report.
During the first quarter of 2021, the Company classified its warehouse facility in Monahans, Texas, as held for sale based on the criteria outlined inAccounting Standard Codification (“ASC”) 360, Property, Plant and Equipment. During the first quarter, the Company committed to a plan to sell the asset in its present condition. The Company engaged with a commercial real estate agent and is actively looking for a buyer. As such, the Company reclassified the related property, plant and equipment of $0.5 million as held for sale in the current assets of the consolidated balance sheet, as the Company expects to complete the asset sale within one year.
All significant intercompany accounts and transactions have been eliminated in consolidation. The Company does not have investments in any unconsolidated subsidiaries.
The consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
Impact of COVID-19
In March 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a global pandemic. The pandemic negatively impacted the U.S. and global economy, disrupted domestic and international oil and gas markets, and increased volatility in financial markets. These effects materially and adversely affected, and may continue to materially and adversely affect, the demand for oil and natural gas as well as for our services and products. The Company’s primary markets in the U.S. are particularly subject to the impacts on the oil and gas industry. In the first quarter of 2020, the Company recorded impairments to property, plant and equipment; intangible assets; and operating right-of-use assets. In the second half of 2020 the Company recorded additional impairment charges of goodwill and intangible assets as well as an increase to the provision of excess and obsolete inventory.

10

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company expects the current economic situation to negatively impact the energy sector for an extended period of time, with oil demand recovering during 2021 but not returning to the pre-COVID-19 level. Any further material COVID-19 disruption or significant setback in oil and gas demand arising from a slower economic recovery could negatively impact the Company and could result in additional impairments in the future. Future developments of the COVID-19 crisis are uncertain and related implications could materially and adversely affect the Company’s business, operations, operating results, financial condition, liquidity and/or capital levels.
The Company continues to monitor the impact of COVID-19 on the business, suppliers and customers. Future developments and effects are highly uncertain and cannot be predicted, including the scope and duration of the pandemic. This uncertainty could have a material impact on accounting estimates and assumptions used in our consolidated financial statements.
Under the provisions of the CARES Act, the Company is eligible for a refundable employee retention credit subject to certain criteria. In connection with the CARES Act, the Company adopted a policy to recognize the employee retention credit when earned and to offset the credit against the related payroll tax liability. Accordingly, the Company recorded a $1.9 million employee retention credit during the three months ended June 30, 2021 in other current assets with the offset recorded in accrued liabilities. In the second quarter of 2021, the Company used $0.8 million of the total employee retention credit leaving a $1.1 million credit to be applied against future payroll tax liabilities.
Sources and Uses of Liquidity
The Company currently funds its operations and growth primarily from cash on hand. The ability of the Company to grow and be competitive in the marketplace is dependent on the availability of adequate capital. Access to capital is dependent, in large part, on the Company’s operating cash flows, the monetization of excess and non-core assets, and the availability of and access to debt and equity financing. The Company has a history of losses and negative operating cash flows from operations and expects to utilize a significant amount of cash in operations in the following year. While we believe that our cash and liquid assets will provide us with sufficient financial resources to fund operations and meet our capital requirements and anticipated obligations as they become due, a prolonged COVID-19 impact, a slower than expected recovery of oil and gas markets, or reduced spending by our customers could have a negative impact on our liquidity.
Accordingly, while the Company believes that its existing cash will enable it to fund its operations and growth, the Company cannot guarantee the level of cash flows in the future. In the event that the Company’s existing cash on hand is not sufficient to fund operations, meet its capital requirements or satisfy the anticipated obligations as they become due, the Company expects to take further action to protect its liquidity position. Such actions may include, but are not limited to:
•Sale of non-core real estate properties;
•Sale-leaseback transactions of facilities;
•Sale of excess inventory and/or raw materials;
•Entry into a borrowing facility with one or more lenders;
•Reducing executive salaries and/or board of directors’ fees, or making a portion of those fees or salaries in equity instead of cash;
•Reducing professional advisory fees and headcount; and
•Raising equity either in the public markets or via a private placement offering.
However, with respect to anticipated transactions, there can be no assurance that such matters can be implemented on acceptable terms or at all.
Use of Estimates

The preparation of financial statements in conformity with U.S. 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. Actual results could differ from these estimates.

Potential Impact of COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a global pandemic, which continues to spread throughout the United States and around the world. This outbreak has severely impacted global economic activity, and many countries and many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel. In addition, global oil producers, including the Organization of Petroleum Exporting Countries and other oil producing nations, have experienced disagreements relating to oil production which has led to downward pressure on commodity prices.

The effects of the COVID-19 pandemic, including actions taken by businesses and governments, have resulted in a significant and swift reduction in international and U.S. economic activity. These effects and the volatility in oil prices have materially and adversely affected, and may continue to materially and adversely affect, the demand for oil and natural gas. The Company’s primary markets in Texas are particularly subject to the financial impact of a collapse in oil prices. In the second quarter of 2020, these conditions and the related financial impact have continued and, in some cases, worsened. As a result, the Company has recorded an impairment to property, plant and equipment, intangible assets, and operating right-of-use assets during the first quarter of 2020. In addition, the Company adopted social distancing and work-from-home procedures, which have had and may continue to have an impact on the ability of employees and management of the Company to communicate and work efficiently.

In response to the deteriorating market conditions and anticipating ongoing volatility, the Company has also reduced its cost structure to meet anticipated market activity and reduce the Company’s break-even levels. Among other cost-cutting initiatives:

• The Company’s CEO, John W. Gibson, Jr., reduced his base salary by 20%, and each of the other executive officers reduced his or her salary by 10% , through December 31, 2020 in exchange for restricted stock, effective as of April 1, 2020.
• The board of directors of Flotek approved a 20% reduction in the fees to be paid to the directors, effective as of April 1, 2020.
• The Company consolidated office space by moving all employees at its corporate headquarters into the Houston Global Resource and Innovation Center, (“GRIC”) facility and buying out the remaining term of the corporate headquarters lease for a significant discount, with the move completed by the end of June 2020.
• The Company reduced headcount by 35% on March 30, 2020.

While the full impact of the COVID-19 outbreak is not yet known, we are closely monitoring the effects of the pandemic on commodity demands and on our customers, as well as on our operations and employees. Any future development and effects will be highly uncertain and cannot be predicted, including the scope and duration of the pandemic; further adverse revenue and net income effects; disruptions to our operations; third party providers’ ability to support our operations; customer shutdowns of oil and gas exploration and production; the effectiveness of our work from home arrangements; employee impacts from illness, school closures and other community response measures; any actions taken by governmental authorities and other third parties in response to the pandemic; and temporary closures of our facilities or the facilities of our customers and suppliers.
Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. The reclassifications did not impact previously reported net loss and stockholders’ equity.



11

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 — Recent Accounting Pronouncements
Application of New Accounting Standards
Effective January 1, 2019, the Company adopted the accounting guidance in Accounting Standards Update (“ASU”) No. 2016-02, “Leases.” This standard (ASC 842) requires the recognition of Right-Of-Use (“ROU”) assets and lease liabilities by lessees for those leases classified as operating leases under previousChanges to U.S. GAAP (ASC 840). Upon adoption,are established by the Company recorded operating lease ROU assets and corresponding operating lease liabilities, net of deferred rent, representing the present value of future lease payments under operating leases with terms of greater than twelve months. The adoption of this standard did not have a material impact on the consolidated statements of operations or cash flows. Refer to Note 5 — “Leases” for further information surrounding adoption of this new standard.
Effective January 1, 2019, the Company adopted ASU No. 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures.
Effective January 1, 2019, the Company adopted ASU No. 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting.” This standard expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures.
New Accounting Requirements and Disclosures
Effective January 1, 2020, the Company adopted ASU No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement.” This standard removes, modifies, and adds additional requirements for disclosures related to fair value measurement in ASC 820. The pronouncement is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted in any interim period. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures.
New Accounting Standards to be Adopted
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.
New Accounting Standards Issued But Not Adopted as of June 30, 2021
The FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This standard removes specific exceptions to the general principles in Topic 740. The pronouncement is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, with early adoption permitted for public companies for periods in which financial statements have not yet been issued. The Company is currently evaluatinghas evaluated the impact of this standard and determined that there is no impact on the consolidated financial statements and related disclosures.
The FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments.” This standard replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects estimates of expected credit losses over their contractual life that are recorded at inception based on historical information, current conditions, and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.forecasts. The pronouncement is effective for smaller reporting companies for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact of this standard, including subsequent amendments, on the consolidated financial statements and related disclosures.
Note 3 — Business Acquisition of JP3 Measurement LLC
During the second quarter of 2020, the Company acquired 100% ownership of JP3, a privately-held data and analytics technology company, in a cash-and-stock transaction. JP3’s real-time data platforms combine the energy industry’s only field-deployable, inline optical analyzer with proprietary cloud visualization and analytics, targeting an increase of processing efficiencies and valuation of natural gas, crude oil and refined fuels. The transaction was valued at approximately $36.6 million as of the transaction closing date, comprised of $25.0 million in cash, subject to certain adjustments and contingent consideration as described below, and 11.5 million shares in Flotek common stock with an estimated fair value of $8.5 million, net of a discount for marketability due to a lock-up period. The payment of $25.0 million was subject to certain purchase price adjustments, and the total non-equity consideration at closing was comprised of $25.0 million plus net working capital in excess of the target net working capital of $1.9 million andmillion. Additionally, the Company was subject to contingent consideration ofwith an estimated fair value of $1.2 million at acquisition date for two2 potential earn-out provisions totaling $5.0 million based on certain stock performance targets. The first and second earn-out provisions occur if the ten-day volume-weighted average share price equals or exceeds $2 per share and $3 per share, respectively, before May 18, 2025. See Note 11, “Fair Value Measurements,” for additional information on the current estimated fair value of the contingent consideration.






FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the fair value of JP3’s assets acquired as of the closing date of May 18, 2020 (in thousands):
Tradenames and trademarks $1,100
Technology and know-how 5,000
Customer relationships 6,800
Inventory 7,100
Cash 604
Net working capital, net of cash and inventory (1,063)
Fixed assets 426
Long-term debt assumed and other assets (liabilities) (893)
Goodwill 17,522
Net assets acquired $36,596

These amounts are preliminary in nature and subject to adjustments from the final determination of working capital, which could be material. Any necessary adjustments are expected to be finalized within one year from the date of acquisition. The Company recorded transaction costs of $0.5 million for professional services including legal, accounting, and other professional or consulting fees to the Company’s Operating expenses (excluding depreciation and amortization) in the consolidated statement of income for the three and six months ended June 30, 2020.
Pro forma information for JP3 is not provided as the impact is not considered material.
Note 4 — Discontinued Operations
On January 10, 2019, the Company entered into a Share Purchase Agreement with Archer-Daniels-Midland Company (“ADM”) for the sale of all of the shares representing membership interests in its wholly owned subsidiary, Florida Chemical Company, LLC (“FCC”), which represented the Consumer and Industrial Chemistry Technologies (“CICT”) segment.
Effective February 28, 2019, the Company completed the sale of FCC to ADM for $175.0 million in cash consideration, with $4.4 million temporarily held in escrow by ADM for post-closing working capital adjustments for up to 90 days and $13.1 million temporarily held in escrow to satisfy potential indemnification claims by ADM with anticipated releases at 6 months, 12 months, and 15 months. Pursuant to the terms of the Share Purchase Agreement, Flotek Chemistry, LLC (“Flotek Chemistry”), a wholly owned subsidiary of the Company, entered into a supply agreement with FCC who will supply terpene at specified prices for specified quantities. The agreement will expire on December 31, 2023.

As of December 31, 2019, the Company concluded that the original long-term supply agreement met the definition of a loss contract. As such, the Company recognized a loss of $19 million as of December 31, 2019, capped by the price paid for the terpene supply agreement amendment, executed in February 2020, which aligned purchase commitments to expected usage for blended products as of December 31, 2019. The Company has classified the assets, liabilities, and results of operations for this segment as “Discontinued Operations” for all periods presented.
Pursuant to the post-closing working capital dispute resolution procedures set forth in the Share Purchase Agreement, the Company and ADM engaged a neutral third party auditor to help reach agreement on the final post-closing working capital adjustment. In February 2020, the third party auditor ruled in favor of awarding ADM the entire disputed amount. As a result, the working capital adjustment escrow balance was released to ADM and a corresponding reduction was made to the gain on sale of business as of December 31, 2019.

On February 26, 2020, Flotek Chemistry entered into an amendment to the terpene supply agreement between Flotek Chemistry and FCC. Pursuant to the terms and conditions of the amendment, the terpene supply agreement is amended to, among other things, (a) reduce the minimum quantity of terpene that Flotek Chemistry is required to purchase by approximately 3/4ths in 2020 and by approximately half in each of 2021, 2022 and 2023, (b) provide a fixed per pound price for terpene in 2020, (c) reduce the maximum amount of terpene subject to the terpene supply agreement by approximately 1/3rd, and (d) change the payment terms to net 45 days. In order to make the terms and conditions of the amendment to the terpene supply agreement effective, Flotek Chemistry made a one-time payment in February 2020 of $15.8 million to ADM. The expense associated with the terpene supply agreement amendment payment was recorded as a loss on contract purchase commitments, reported in operating expenses in continuing operations in December 2019.


13

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


For the six months ended June 30, 2020, the Company recognized a loss of $0.8 million associated with the amended terpene supply agreement due to adjustments in the Company’s expected usage of terpene in blended products in 2020.
During the first quarter 2020, as scheduled, $3.3 million of the indemnity escrow was released to the Company. During the second quarter 2020 the remaining indemnity escrow of $6.6 million was released to the Company.
The following summarized financial information has been segregated from continuing operations and reported as Discontinued Operations for the three and six months ended June 30, 2020 and 2019 (in thousands):
 Three months ended June 30, Six months ended June 30,
 2020 2019 2020 2019
Consumer and Industrial Chemistry Technologies       
Revenue$—
 $—
 $—
 $10,877
Operating expenses—
 —
 —
 (11,447)
Research and development—
 —
 —
 (69)
(Loss) income from operations—
 —
 —
 (639)
Other income—
 —
 —
 35
Gain on sale of business—
 (2,100) —
 64,934
(Loss) Income before income taxes—
 (2,100) —
 64,330
Income tax benefit (expense)—
 492
 —
 (19,864)
Net (loss) income from discontinued operations$—
 $(1,608) $—
 $44,466
Tradenames and trademarks$1,100 
Technology and know-how5,000 
Customer lists6,800 
Inventories7,100 
Cash604 
Net working capital, net of cash and inventories(1,063)
Fixed assets426 
Long-term debt assumed and other assets (liabilities)(893)
Goodwill17,522 
Net assets acquired$36,596 

Note 5 — Leases
During the first quarter 2020, the Company made the decision to cease use of the corporate headquarters leased offices and move corporate employees to the GRIC during second quarter of 2020. In addition, the lease liability and corresponding ROU assets for the corporate headquarters and GRIC were remeasured to remove the anticipated term extensions as it was determined the Company was no longer reasonably certain to utilize the extension at the GRIC. The remeasurement resulted in adjustments to lease liabilities and ROU assets totaling of $6.2 million each as of March 31, 2020.
In addition, during the three months ended March 31, 2020, the Company recorded an impairment of the ROU assets totaling $7.4 million. See Note 10 - Impairment of Fixed and Long-lived Assets for further discussion of the impairment charge booked in the first quarter 2020.
During the second quarter of 2020, the Company terminated the lease of the corporate headquarters office in exchange for a one-time payment of $1.0 million and moved all employees to the GRIC facility effective as of June 29, 2020. As a result of terminating the corporate headquarters office lease and making the one-time payment, the Company recorded a gain on lease termination of $0.6 million million recorded in gain on lease termination.


14

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The components of lease expense and supplemental cash flow information are as follows (in thousands):
 Three months ended June 30, Six months ended June 30,
 2020 2019 2020 2019
Operating lease expense$283
 $653
 $854
 $1,306
Finance lease expense:       
Amortization of right-of-use assets4
 220
 9
 220
Interest on lease liabilities5
 3
 9
 3
Total finance lease expense9
 223
 18
 223
Short-term lease expense54
 32
 86
 75
Total lease expense$346
 $908
 $958
 $1,604
        
Cash paid for amounts included in the measurement of lease liabilities:       
Operating cash flows from operating leases$1,411
 $583
 $1,024
 $1,165
Operating cash flows from finance leases5
 3
 9
 3
Financing cash flows from finance leases14
 38
 51
 38

Maturities of lease liabilities are as follows (in thousands):
Years ending December 31, Operating Leases Finance Leases
2020 (excluding the six months ended June 30, 2020)$617
 $33
2021 1,330
 70
2022 1,283
 47
2023 1,311
 39
2024 1,341
 23
Thereafter 8,185
 —
Total lease payments $14,067
 $212
Less: Interest (4,916) (28)
Present value of lease liabilities $9,151
 $184



15

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Supplemental balance sheet information related to leases is as follows (in thousands):
 June 30, 2020December 31, 2019
Operating Leases  
Operating lease right-of-use assets$2,422
$16,388
   
Current portion of operating lease liabilities$654
$486
Long-term operating lease liabilities8,497
16,973
Total operating lease liabilities$9,151
$17,459
   
Finance Leases  
Property and equipment$147
$293
Accumulated depreciation(18)(28)
Property and equipment, net$129
$265
   
Current portion of finance lease liabilities$57
$55
Long-term finance lease liabilities127
158
Total finance lease liabilities$184
$213
   
Weighted Average Remaining Lease Term  
Operating leases10.1 years
16.6 years
Finance leases4.1 years
4.6 years
   
Weighted Average Discount Rate  
Operating leases8.9%8.9%
Finance leases8.5%9.0%

Note 64 — Revenue from Contracts with Customers
Revenues are recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. In recognizing revenue for products and services, the Company determines the transaction price of purchase orders or contracts with customers, which may consist of fixed and variable consideration. Determining the transaction price may require significant judgment by

12

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
management, which includes identifying performance obligations, estimating variable consideration to include in the transaction price, and determining whether promised goods or services are distinct withincan be distinguished in the context of the contract. Variable consideration typically consists of product returns and is estimated based on the amount of consideration the Company expects to receive. Revenue accruals are recorded on an ongoing basis to reflect updated variable consideration information.
The vast majority of the Chemistry Technologies’products from the CT segment products are sold at a point in time and service contracts are short-term in nature. Sales are billedThe DA segment recognizes revenue for sales of equipment at the time of sale. Revenue related to service and support is recognized over time. The Company bills sales on a monthly basis with payment terms customarily 30-45 days for domestic and 60 day fordays for international from invoice receipt. In addition, sales taxes are excluded from revenues.

The Data Analytics segment provides services over a period of time and for those services, the revenues are recognized over time. 
Disaggregation of Revenue
The Company has disaggregated revenues bydifferentiates revenue based on whether the source of revenue is attributable to product sales (point-in-time revenue recognition) andor service revenue (over-time revenue recognition), where product. Product sales accounted for over 90% of total revenue for the three and six months ended June 30, 20202021 and 2019.2020.


16

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company differentiates revenue and operating expenses (excluding depreciation and amortization) based on whether the source of revenue is attributable to products or services. Revenue and operating expenses (excluding depreciation and amortization) disaggregated by revenue source areis as follows (in thousands):
 Three months ended June 30, Six months ended June 30,
 2020 2019 2020 2019
Revenue:       
Products$8,176
 $33,632
 $26,976
 $75,703
Services704
 1,060
 1,320
 2,246
 $8,880
 $34,692
 $28,296
 $77,949
Operating expenses (excluding depreciation and amortization):      
Products$11,278
 $37,613
 $33,825
 $81,062
Services354
 508
 648
 1,027
 $11,632
 $38,121
 $34,473
 $82,089

 Three months ended June 30,Six months ended June 30,
 2021202020212020
Revenue:
Products$8,444 $8,176 $19,524 $26,976 
Services721 704 1,411 1,320 
$9,165 $8,880 $20,935 $28,296 
Arrangements with Multiple Performance Obligations
The Company’s contractsCT and DA segments primarily sell chemicals and equipment recognized at a point in time based on when control transfers to the customer determined by agreed upon delivery terms. Additionally, both segments offer various services associated to products sold which includes field services, installation, maintenance, and other functions. Service revenue is recognized on an over time basis for CT as services are performed as the customer is simultaneously benefiting as the Company performs. For DA, services are recognized upon completion of commissioning and installation due to the short-term nature of the performance obligation. DA has additional performance obligations related to providing ongoing or reoccurring maintenance. Revenue for these types of arrangements is recognized ratably over time throughout the contract period. Additionally, DA may provide subscription-type arrangements with customers may include multiple performance obligations. For suchin which monthly reoccurring revenue is recognized ratably over time in accordance with agreed upon terms and conditions. Subscription-type arrangements the total transaction price is allocated to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. Standalone selling prices are generally determined based on the prices charged to customers (“observable standalone price”) or an expected cost pluswere not a margin approach. For combined products and services within a contract, the Company accounts for individual products and services separately if they are distinct (i.e. if a product or service is separately identifiable from other itemsmaterial revenue stream in the contractthree and if a customer can benefit from it on its own or with other resources that are readily available to the customer). The consideration is allocated between separate productssix months June 30, 2021 and services within a contract based on the prices at the observable standalone price. For items that are not sold separately, the expected cost plus a margin approach is used to estimate the standalone selling price of each performance obligation.2020.
Contract Balances
Under revenue contracts for both products and services, customers are invoiced once the performance obligations have been satisfied, at which point payment is unconditional. The Company has an immaterial amount of contractContract liabilities associated towith incomplete performance obligations.obligations are not material.
Note 75 — Supplemental Cash Flow InformationInventories
Supplemental cash flow information isInventories are as follows (in thousands):
June 30, 2021December 31, 2020
Raw materials$7,203 $7,190 
Finished goods16,198 15,705 
Inventories23,401 22,895 
Less reserve for excess and obsolete inventory(11,902)(11,058)
Inventories, net$11,499 $11,837 
 Six months ended June 30,
 2020 2019
Supplemental cash payment information:   
Interest paid$20
 $594
Income taxes paid, net of refunds149
 627
Supplemental schedule of non-cash investing and financing activities:   
Equity issued - acquisition of JP38,538
 —
The provision recorded in the three and six months ended June 30, 2021 were $0.1 million for the CT segment and $0.1 million for the DA segment and $0.4 million for the CT segment and $0.1 million of the DA segment, respectively. The increase in excess and obsolescence is attributable to the Company’s continued product rationalization efforts, which included a reduction


13

17

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 8 — Inventories
Inventories are as follows (in thousands):
 June 30, 2020 December 31, 2019
Raw materials$4,810
 $4,339
Finished goods20,155
 24,569
Inventories24,965
 28,908
Less reserve for excess and obsolete inventory(1,627) (5,698)
Inventories, net$23,338
 $23,210


Thein the number of materials carried within the portfolio and identification of those materials for which the Company periodically reviews the value of items in inventory and provides write-downswill no longer actively market or write-offs of inventory based on an assessment of market values. Write-downs of inventory are charged to cost of goods sold. Low-turn inventory or inventorycarry quantities in excess of management'scurrent and estimated future usage requirement are analyzed for sale before conducting an analysis to write off or write down inventory to the estimated market value if those amounts are determined to be less than cost.requirements.

Note 96 — Property and Equipment
Property and equipment are as follows (in thousands):
 June 30, 2020 December 31, 2019
Land$3,282
 $4,440
Buildings and leasehold improvements6,048
 38,741
Machinery and equipment7,227
 27,694
Furniture and fixtures643
 1,671
Transportation equipment1,190
 1,440
Computer equipment and software1,296
 3,348
Property and equipment19,686
 77,334
Less accumulated depreciation(11,669) (37,505)
Property and equipment, net$8,017
 $39,829

June 30, 2021December 31, 2020
Land$1,986 $2,415 
Land improvements861 867 
Buildings and leasehold improvements6,367 6,364 
Machinery and equipment7,782 7,760 
Furniture and fixtures651 649 
Transportation equipment1,045 1,190 
Computer equipment and software1,304 1,296 
Property and equipment19,996 20,541 
Less accumulated depreciation(11,979)(11,454)
Property and equipment, net$8,017 $9,087 
Depreciation expense totaled $0.3 million and $1.6$0.5 million for the three months ended June 30, 2021 and 2020, and 2019,$0.3 million and $2.0 million and $3.4 million for the six months ended June 30, 2021 and 2020, and 2019.respectively.
During the six months ended June 30,first quarter of 2020, the Company recognized an impairment was recognized forof property and equipment of $30.2 million. See Note 8, “Impairment of Fixed and Long-lived Assets.” NaN impairment was recognized for the three and six months ended June 30, 2020.2021.
Note 107 — Leases
During the first quarter of 2020, the Company ceased use of the corporate headquarters leased offices and moved corporate employees to the Global Research and Innovation Center (“GRIC”) during the second quarter of 2020. In addition, the lease liability and corresponding right-of-use (“ROU”) assets for the corporate headquarters and GRIC were remeasured to remove the anticipated term extensions as the Company determined it was no longer reasonably certain to utilize the extension at the GRIC. The remeasurement resulted in adjustments to lease liabilities and ROU assets totaling of $6.2 million each as of March 31, 2020. During the second quarter of 2020, the Company terminated the lease of the corporate headquarters office and moved all employees to the GRIC facility effective June 29, 2020.
In addition, during the three months ended March 31, 2020, the Company recorded an impairment of the ROU assets totaling $7.4 million. For further discussion, refer to Note 8, “Impairment of Fixed and Long-lived Assets.” NaN impairment was recognized for the three and six months ended June 30, 2021.

14

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The components of lease expense and supplemental cash flow information are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2021202020212020
Operating lease expense$250 $283 $488 $854 
Finance lease expense:
Amortization of right-of-use assets4 4 7 9 
Interest on lease liabilities3 5 6 9 
Total finance lease expense7 9 13 18 
Short-term lease expense61 54 55 86 
Total lease expense$318 $346 $556 $958 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$394 $1,411 $727 $1,024 
Operating cash flows from finance leases43 5 53 9 
Financing cash flows from finance leases3 14 29 51 
Maturities of lease liabilities are as follows (in thousands):
Years ending December 31,Operating LeasesFinance Leases
2021 (excluding the six months ended June 30, 2021)$581 $35 
20221,256 47 
20231,321 39 
20241,351 25 
20251,378 0 
Thereafter6,891 0 
Total lease payments$12,778 $146 
Less: Interest(4,178)(19)
Present value of lease liabilities$8,600 $127 

15

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental balance sheet information related to leases is as follows (in thousands):
June 30, 2021December 31, 2020
Operating Leases
Operating lease right-of-use assets$2,162 $2,320 
Current portion of operating lease liabilities$589 $636 
Long-term operating lease liabilities8,011 8,348 
Total operating lease liabilities$8,600 $8,984 
Finance Leases
Property and equipment$147 $147 
Accumulated depreciation(33)(26)
Property and equipment, net$114 $121 
Current portion of finance lease liabilities$55 $60 
Long-term finance lease liabilities72 96 
Total finance lease liabilities$127 $156 
Weighted Average Remaining Lease Term
Operating leases9.3 years9.9 years
Finance leases3.1 years3.1 years
Weighted Average Discount Rate
Operating leases4.5 %8.9 %
Finance leases8.5 %9.0 %

Note 8 — Impairment of Fixed and Long-lived Assets

During the first quarter of 2020, the price of crude oil declined by over 50%, trading below $25 per barrel, causing a significant disruption across the energy industry, which began to negatively impact the Company’s results of operations. These declinesThe decline of results of operations were driven by market factors, including an oversupply of oil, insufficient storage and demand destruction resulting from the reaction to COVID-19. Based on these factors, the Company concluded that a triggering event occurred and, accordingly, an interim quantitative impairment test was performed as of March 31, 2020.

The impairment loss of fixed and intangible assets as of March 31, 2020 was recorded as follows (in thousands):
March, 31, 2020
Property and equipment, net$30,178 
Operating lease right-of-use assets7,434 
Other Intangibles:
   Patents and technology9,902 
   Customer relationships9,165 
   Intangible assets in progress596 
   Trademarks and brand names179 
Total other intangibles19,842 
Total impairment of fixed, long-lived and intangible assets$57,454 


16

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Using the income approach, the fair value of the reporting unit was determined based on the present value of future cash flows. The Company utilized internal forecast trends and potential growth rates to estimate future cash flows of the asset group. Based on the results of the quantitative assessment, the Company concluded the carrying value of the asset group exceeded its fair value as of March 31, 2020, and an impairment loss of $57.5 million was recorded as a result of the adverse effect of the COVID-19 pandemic, estimated effect on the economy, and the related negative impact on oil and natural gas prices on projections of future cash flows. Prior to the impairment, the Company recognized amortization expense for finite-lived intangible assets acquired of $0.5 million for the three months ended March 31, 2020.

The Company recorded impairment chargesconcluded no triggering events during the first and second quarters of 2021.

Note 9 — Accrued Liabilities
Current accrued liabilities are as follows (in thousands):
June 30, 2021December 31, 2020
Loss on purchase commitments (Note 13)$9,383 $9,402 
Severance costs3,419 3,558 
Payroll and benefits994 1,789 
Contingent liability for earn-out provision1,115 1,416 
Taxes other than income taxes633 544 
Due to third parties504 434 
Legal costs721 333 
Deferred revenue, current152 146 
Other300 653 
Total current accrued liabilities$17,221 $18,275 
Note 10 — Debt

In April 2020, the Company received a $4.8 million loan under the Payroll Protection Program (“PPP”), which was created through the Coronavirus Aid, Relief, and Economic Act (“CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). In connection with the acquisition of JP3 in May 2020, the Company assumed a PPP loan of $0.9 million obtained by JP3 in April 2020. The PPP loans have a fixed interest rate of 1% and have a two-year term, maturing in 2022. No payments of principal or interest were required during the year ended December 31, 2020, or the six months ended June 30, 20202021.

A portion of the loans may be eligible for forgiveness by the SBA depending on the extent of proceeds used for payroll costs and other designated expenses incurred for up to 24 weeks following loan origination, subject to adjustments for headcount reductions and compensation limits and provided that at least 60% of the eligible costs incurred are used for payroll. Receipt of these funds required the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support ongoing operations of the Company. This certification further required the Company to take into account current business activity and the ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. During the second quarter, the Company applied for forgiveness on the PPP loans. The receipt of these funds, and the forgiveness of the loans attendant to these funds, is dependent on the Company having initially qualified for the loans and qualifying for the forgiveness of such loans based on our past and future adherence to the forgiveness criteria. The PPP loans are subject to any new guidance and new requirements released by the Department of the Treasury, which initially indicated that all companies that have received funds in excess of $2.0 million will be subject to audit by the SBA to further ensure PPP loans are limited to eligible borrowers in need.

In June 2021, the Company received notice from the SBA that the JP3 PPP loan and accrued interest was fully forgiven. During the second quarter, the Company recorded $0.9 million in other income on the consolidated statement of operations. The Company has submitted to the SBA for partial forgiveness on the Flotek PPP loan but as follows (in thousands):of the date of this filing, no conclusion has been reached. The Flotek PPP loan is classified as current portion of long term debt as of June 30, 2021 on the consolidated balance sheet.



1817

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Property and equipment, net$30,178
Operating lease right-of-use assets7,434
  
Other Intangibles: 
Patents9,902
Customer Lists9,165
Intangibles assets in progress596
Trademarks and brand names179
Total Other Intangibles19,842
  
Total Impairment of fixed and long-lived assets$57,454


With the acquisition of JP3, the Company evaluated its segment information and determined that there were 2 segments: Chemistry Technologies and Data Analytics, which are both supported by its Research & Innovation advanced laboratory capabilities.
Note 11 - Goodwill

Goodwill associated with the acquisition of JP3 on May 18, 2020Long-term debt, including current portion, is as follows (in thousands):
Goodwill at December 31, 2019 $—
Goodwill from acquisition of JP3 17,522
Goodwill at June 30, 2020 $17,522

June 30, 2021December 31, 2020
Long-term debt
    Flotek PPP loan$0 $4,788 
    JP3 PPP loan0 877 
Total0 5,665 
Less current maturities0 (4,048)
Total long-term debt, net of current portion$0 $1,617 
Note 12 — Other Intangible Assets
Other intangible assets are as follows (in thousands):
 June 30, 2020 December 31, 2019
 Cost Accumulated Amortization Cost Accumulated Amortization
Finite-lived intangible assets:       
Patents and technology$5,000
 $55
 $17,493
 $6,715
Customer lists6,800
 55
 15,367
 6,013
Trademarks and brand names1,100
 13
 1,351
 1,160
Total finite-lived intangible assets$12,900
 123
 $34,211
 13,888
        
Carrying value:       
Other intangible assets, net$12,777
   $20,323
  

Amortization of finite-lived intangible assets acquired totaled $0.1 million and $0.5 million for the three months and six months ended June 30, 2019 and 2019 respectively.


19

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 13 — Earnings (Loss) Per Share
Basic earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding combined with dilutive common share equivalents outstanding, if the effect is dilutive.
Potentially dilutive securities were excluded from the calculation of diluted loss per share for the three and six months ended June 30, 2020 and 2019, since including them would have an anti-dilutive effect on loss per share due to the net loss incurred during the periods. Securities convertible into shares of common stock that were not considered in the diluted loss per share calculations were 0.4 million restricted stock units and 4.0 million stock options for the three and six months ended June 30, 2020 and 0.7 million restricted stock units for the three and six months ended June 30, 2019.

Note 1411 — Fair Value Measurements
Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company categorizes financial assets and liabilities into the three levels of the fair value hierarchy. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value and bases categorization within the hierarchy on the lowest level of input that is available and significant to the fair value measurement.
•Level 1 — Quoted prices in active markets for identical assets or liabilities;
•Level 2 — Observable inputs other than Level 1, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
•Level 3 — Significant unobservable inputs that are supported by little or no market activity or that are based on the reporting entity’s assumptions about the inputs.
Fair Value of Other Financial Instruments
The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable and Flotek’s Payroll Protection Program (“PPP”) loan approximate fair value due to the short-term nature of these accounts. The PPP loan for Flotek approximate fair value due to maturity in less than fifteen months.
Liabilities Measured at Fair Value on a Recurring Basis

The following tables presenttable presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2020 and December 31, 2019, and the level within the fair value hierarchy:hierarchy (in thousands):
      Balance at June 30,       Balance at December 31,
 Level 1 Level 2 Level 32020 Level 1 Level 2 Level 3 2019
Contingent consideration$—
 $—
 $1,200
$1,200
 $—
 $—
 $—
 $—

Balance at June 30,Balance at December 31,
Level 1Level 2Level 32021Level 1Level 2Level 32020
Contingent consideration$0 $0 $1,115 $1,115 $0 $0 $1,416 $1,416 
At June 30, 2021, and December 31, 2020, the estimated fair value of the remaining stock performance earn-out provision, with respect to the JP3 transaction, was recorded as a contingent liability. The estimated fair value of the earn-out provision at the end of each period was valued using the Monte Carlo model analyzing 20,000 simulations performed using Geometric Brownian Motion with inputs such as risk-neutral expected growth and volatility. There were no transfers in or out of either Level 1, Level 2, or Level 3 fair value measurements during the periods ending June 30, 20202021 and December 31, 2019.2020.
Assets Measured at Fair Value on a Nonrecurring Basis
The Company’s non-financial assets, including property and equipment, goodwill and other intangible assets, are measured at fair value on a non-recurring basis and are subject to fair value adjustment in certain circumstances. During the three months ended March 31, 2020, the Company recorded an impairment of $57.5 million for impairment onof long-lived assets. Management inputs used in fair value measurementmeasurements were classified as Level 3.

The fair values of the JP3 long-lived assets, and intangibles were determined using the income approach. The fair value of the JP3 contingent consideration was determined using a Monte Carlo simulation. The fair value of the JP3 inventory was determined using the comparative sales method. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement, other than cash and working capital accounts which carrying amounts were determined to approximate fair value due to their short-term nature.


2018

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


During the quarter ended June 30, 2020, the Company assumed long-term debt of $0.9 million comprised of the PPP loan held by JP3. Management inputs used in fair value measurement were classified as Level 3.

Level 3 Rollforward for Assets and Liabilities Measured at Fair Value on a Recurring Basis
In conjunction with the May 2020 acquisition of JP3, the Company recorded contingent consideration of $1.2 million. Management inputs used in the fair value measurement were classified as Level 3. During 2020, the first stock performance target for the contingent consideration was achieved and settled. The Company estimated the fair value of the remaining stock performance earn-out provision at June 30, 2021, and decreased the estimated fair value of the contingent liability to $1.1 million. The Company records changes in the fair value of the contingent consideration and achievement of performance targets in operating expenses.
The following table presents the changes in contingent consideration balances classified as Level 3 balances for the three and six months ended June 30, 20202021 and 2019:
 Three months ended June 30, Six months ended June 30,
 2020 2019 2020 2019
Balance - beginning of period$—
 $—
 $—
 $—
Additions / issuances1,200
 —
 1,200
 —
Gains (losses) recognized in earnings—
 —
 —
 —
Payments—
 —
 —
 —
Balance - end of period$1,200
 $—
 $1,200
 $—


Note 15 — Debt

In April 2020 the Company received a $4.8 million loan, under the PPP, which was created through the Coronavirus Aid, Relief, and Economic Act (“CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). The loans have a fixed interest rate of 1%, mature in two years and payments are deferred for six months. In addition, in connection with the acquisition of JP3, the Company assumed a PPP loan of $0.9 million

A portion of the loans are eligible for forgiveness by the SBA depending on the extent of proceeds used for payroll costs and other designated expenses incurred for up to 24 weeks following loan origination, subject to adjustments for headcount reductions and compensation limits and provided that at least 60% of the eligible costs incurred are used for payroll. Receipt of these funds required the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support ongoing operations of the Company. This certification further requires the Company to take into account current business activity and the ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. As of June 30, 2020, the Company has not applied for or estimated the potential forgiveness on the PPP loans. The receipt of these funds, and the forgiveness of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria. The term of the Company’s PPP Loan is two years. The annual interest rate on the PPP Loan is 1% and no payments of principal or interest are due during the six-month period beginning on the date of the PPP Loan. The PPP Loan is subject to any new guidance and new requirements released by the Department of the Treasury who has recently indicated that all companies that have received funds in excess of $2.0 million will be subject to a government (Small Business Administration) audit to further ensure PPP loans are limited to eligible borrowers in need.

Long-term debt, including current portion is as follows (in thousands):

Three months ended June 30,Six months ended June 30,
2021202020212020
Balance - beginning of period$1,081 $0 $1,416 $0 
Additions / issuances0 1,200 0 1,200 
Change in fair value34 0 (301)0 
Transfer out of Level 30 0 0 0 
Balance - end of period$1,115 $1,200 $1,115 $1,200 


21

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 June 30, 2020
Current Portion of Long-Term Debt 
    Flotek PPP Loan$2,138
    JP3 PPP Loan389
Total current portion of long-term debt$2,527
 
Long-term debt: 
    Flotek PPP Loan$2,660
    JP3 PPP Loan484
Total long-term debt$3,144



Note 1612 — Income Taxes
A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate is as follows:
Three months ended June 30,Six months ended June 30,
2021202020212020
U.S. federal statutory tax rate21.0 %21.0 %21.0 %21.0 %
State income taxes, net of federal benefit(0.3)0.4 (0.2)0 
Non-U.S. income taxed at different rates(0.1)0.9 0.3 0.2 
Increase (reduction) in tax benefit related to stock-based awards2.2 0.9 1.2 (0.1)
Non-deductible expenses3.6 0.7 1.1 0 
Research and development credit0 0.1 0 0 
Increase in valuation allowance(26.5)(23.7)(23.6)(16.0)
Effect of tax rate differences of NOL carryback0 0 0 2.6 
Effective income tax rate(0.1)%0.3 %(0.2)%7.7 %
 Three months ended June 30,
Six months ended June 30,
 2020 2019 2020 2019
U.S. federal statutory tax rate21.0 % 21.0 % 21.0 % 21.0 %
State income taxes, net of federal benefit0.4
 1.7
 —
 1.0
Non-U.S. income taxed at different rates0.9
 0.7
 0.2
 1.0
Reduction in tax benefit related to stock-based awards0.9
 (1.1) (0.1) (1.8)
Non-deductible expenses0.7
 —
 —
 (0.3)
Research and development credit0.1
 0.4
 —
 0.6
Increase in valuation allowance(23.7) (20.7) (16.0) (17.9)
Effect of tax rate differences of NOL carryback—
 —
 2.6
 —
Other—
 (0.4) —
 (0.3)
Effective income tax rate0.3 % 1.6 % 7.7 % 3.3 %


On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. Among other things, the CARES Act provided the ability for taxpayers to carryback a net operating loss (“NOL”) arising in a taxable year beginning after December 31, 2017 and before January 1, 2021 to each of the five years preceding the year of the loss. Based on the Company’s analysis of the extended NOL carryback provision, it recorded a tax receivable of $6.1 million as of March 31, 2020, which was received in July 2020.
Fluctuations in effective tax rates have historically been impacted by permanent tax differences with no associated income tax impact, changes in the valuation allowance, changes in state apportionment factors, including the effect on state deferred tax assets and liabilities, and non-U.S. income taxed at different rates, except for the NOL carryback claim discussed above.
Deferred income taxes reflect the tax assets and liabilities are determined based oneffect of temporary differences between financial reporting and tax basesthe carrying amount of assets and liabilities for financial reporting purposes and are measured usingthe value reported for income tax purposes, at the enacted tax rates and laws that willexpected to be in effect when the differences are expected to reverse. ASC 740, Income Taxes,GAAP provides for the recognition of deferred tax assets if realization of such assets is more likely than not. In assessing the need for a valuation allowance, the Company considers all available objective and verifiable evidence, both positive and negative, including historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis, legislative developments, and expectations and risks associated with estimates of future pre-tax income.
As of December 31, 2019, the Company determined that it was more likely than not that it would not realize the benefits of certain deferred tax assets and, therefore, it recorded a $19.9 million valuation allowance against the carrying value of net deferred tax assets, except for deferred tax liabilities related to certain state jurisdictions. As a result of the NOL carryback allowed by the CARES Act, the Company released a valuation allowance of $4.0 million related to its deferred tax assets attributable to its U.S.


22

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

federal NOLs. The Company continues to have a full valuation allowance against net deferred tax assets as it is not more-likely-than-not they will be utilized.

19

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1713 — Common StockCommitments and Contingencies
Litigation
On March 26, 2021, the Company and Flotek Chemistry, LLC (“Flotek Chemistry”), a wholly-owned subsidiary of the Company, filed a lawsuit against Archer-Daniels-Midland Company (“ADM”), Florida Chemical Company, LLC (“FCC”) and Joshua A. Snively in state court in Harris County, Texas. The lawsuit claims damages relating to the terpene supply agreement between Flotek Chemistry and FCC and related breaches of fiduciary duty by Mr. Snively. Contemporaneously with the filing of the suit, Flotek Chemistry delivered a notice of termination of the terpene supply agreement.
Subsequent to the lawsuit described above, on April 5, 2021, ADM and FCC filed a lawsuit in the Delaware Court of Chancery seeking to enjoin the lawsuit filed in Texas and claiming damages under the terpene supply agreement and other matters.
The Company is subject to other routine litigation and other claims that arise in the normal course of business. Except as disclosed above, 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.

Other Commitments and Contingencies
Terpene Supply Agreement
At December 31, 2020, the Company’s balance sheet included an accrued liability of $9.4 million associated with the terpene supply agreement with FCC. The Company calculated the liability based on the Company’s expected usage of terpene in blended products being less than the minimum quantities of terpene required to be purchased and expected selling prices of the excess terpene as such loss was not considered recoverable.
The Company’s balance sheet at June 30, 2021 included an accrued liability of $9.4 million as it did not make any payments for, or purchases of, terpene during the first and second quarters of 2021. The Company expects that settlement of the accrued liability, if any, will be determined through the litigation disclosed in the “Litigation” section of this Note.
Indemnification
The Company agreed to provide indemnification to National Oilwell DHT, L.P. for certain intellectual property-related claims in connection with sale of its Teledrift business unit in 2017. The total expenses in this matter are estimated at a range of $0.2 million to $0.5 million as of June 30, 2021.
Concentrations and Credit Risk
The majority of the Company’s revenue is derived from its CT segment, which consists predominantly of customers within the oil and gas industry and the surface cleaner and disinfectant industry. Customers within the oil and gas industry include oilfield services companies, integrated oil and natural gas companies, independent oil and natural gas companies, and state-owned national oil companies. Customers within the surface cleaner and disinfectant industry typically include industrial and consumer markets, including hospitals, travel and hospitality, food services, e-commerce and retail, sports and entertainment. The concentration in the oil and gas industry increases credit and business risk. See Note 18, “Business Segment, Geographic and Major Customer Information,” for concentration of segment revenue from major customers.
The Company is subject to concentrations of credit risk within trade accounts receivable, as the Company does not generally require collateral as support for trade receivables. In addition, the majority of the Company’s cash is invested in three major U.S. financial institutions and balances often exceed insurable amounts.
Note 14 — Stockholders’ Equity
On May 5, 2020, the shareholders of the Company approved an amendment to the Company’s Amended and Restated Certificate of Incorporation, as previously amended, to increase the authorized shares of common stock from 80,000,000 to 140,000,000, par value $0.0001 per share, and 100,000 of preferred stock, par value $0.0001 per share. The additional authorized shares are available for corporate purposes, including acquisitions.

A reconciliationDuring the first quarter 2021, the Company identified 0.6 million shares that were improperly included in the December 31, 2020 issued share count, and the Company adjusted the issued share count presented on the statement of changes in common shares issued duringstockholders’ equity. This adjustment was not material to the six months ended June 30,December 31, 2020 is as follows:consolidated financial statements or basic and diluted earnings per share.
Shares issued at December 31, 201963,656,897
Issued to purchase JP311,500,000
Issued as restricted stock award grants2,469,238
Shares issued at June 30, 202077,626,135


20
On June 9, 2020, the board of directors of the Company rescinded the authorization to repurchase the Company’s stock that had been previously approved in June 2015.
Note 18 — Business Segment, Geographic and Major Customer Information
Segment Information
Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by chief operating decision-makers in deciding how to allocate resources and assess performance. The operations of the Company are categorized into 2 reportable segments: Chemistry Technologies and Data Analytics.

The Chemistry Technologies segment includes specialty chemistries and logistics which enable its customers to pursue improved efficiencies in the drilling and completion of their wells.

In the second quarter of 2020, the Company launched a line of sanitizers and disinfectants for commercial and personal consumer use. These products build on the Company’s historical expertise in chemistry and leverage its infrastructure, personnel, competencies, supply chain, research, and historic consumer market experiences yielding a competitive product offering in this rapidly growing segment. The newly launched products, which include hand and surface sanitizers, target growth opportunities across diverse sectors including hospitals, travel and hospitality, food services, e-commerce and retail, sports and entertainment and other industrial and commercial markets.
The Data Analytics segment, created in conjunction with the acquisition of JP3, includes the design, development, production, sale and support of equipment and services that create and provide valuable information about the composition of its energy customers’ hydrocarbon fluids.
The Company evaluates performance based upon a variety of criteria. The primary financial measure is segment operating income. Various functions, including certain sales and marketing activities and general and administrative activities, are provided centrally by the corporate office. Costs associated with corporate office functions, other corporate income and expense items, and income taxes are not allocated to the reportable segment.


23

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 15 — Earnings (Loss) Per Share
Summarized financial informationBasic earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of the reportable segments is as follows (in thousands):
For the three months ended June 30,Chemistry Technologies 
Data Analytics (1)
 Corporate and Other Total
2020       
Net revenue from external customers$7,962
 $918
 $—
 $8,880
Loss from operations, including impairment(3,596) (1,151) (5,484) (10,231)
Depreciation and amortization246
 131
 91
 468
Capital expenditures—
 —
 —
 —
        
2019       
Net revenue from external customers$34,692
 $—
 $—
 $34,692
Loss from operations(7,651) —
 (6,023) (13,674)
Depreciation and amortization1,933
 —
 186
 2,119
Capital expenditures306
 —
 —
 306
For the six months ended June 30,Chemistry Technologies 
Data Analytics (1)
 Corporate and Other Total
2020       
Net revenue from external customers$27,378
 $918
 $—
 $28,296
Loss from operations, including impairment(66,257) (1,151) (12,908) (80,316)
Depreciation and amortization2,056
 131
 472
 2,659
Capital expenditures42
 —
 —
 42
        
2019       
Net revenue from external customers$77,949
 $—
 $—
 $77,949
Loss from operations(12,984) —
 (14,323) (27,307)
Depreciation and amortization3,718
 —
 661
 4,379
Capital expenditures767
 —
 —
 767


(1) The financial information disclosed above for Data Analytics iscommon shares outstanding for the period May 18, 2020 toperiod. Diluted earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding combined with dilutive common share equivalents outstanding, if the effect is dilutive.
Potentially dilutive securities were excluded from the calculation of diluted loss per share for the three and six months ended June 30, 2020.2021 and 2020, since including them would have an anti-dilutive effect on loss per share due to the net loss incurred during the periods.

Assets of the Company by reportable segments are as follows (in thousands):
 June 30, 2020 December 31, 2019
Chemistry Technologies$34,439
 $116,110
Data Analytics40,922
 —
Corporate and Other66,835
 114,490
Total assets$142,196
 $230,600



24

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

GeographicNote 16 — Supplemental Cash Flow Information
Revenue by country is based on the location where services are provided and products are used. No individual country other than the United States (“U.S.”) accounted for more than 10% of revenue. Revenue by geographic locationSupplemental cash flow information is as follows (in thousands):
        
 Six months ended June 30,
 20212020
Supplemental cash payment information:
Interest paid$11 $20 
Income taxes (received, net of payments) paid(351)149 
Supplemental non-cash activities:
Employee retention credit$1,164 $0 
JP3 PPP loan forgiveness881 0 
Supplemental non-cash investing and financing activities:
Equity issued - acquisition of JP3$0 $8,538 
 Three months ended June 30, Six months ended June 30,
 2020 2019 2020 2019
U.S.$6,936
 $31,114
 $22,711
 $69,990
Other countries1,944
 3,578
 5,585
 7,959
Total$8,880
 $34,692
 $28,296
 $77,949

Long-lived assets held in countries other than the U.S. are not considered material to the consolidated financial statements.
Major Customers
Revenue from major customers, as a percentage of consolidated revenue, is as follows:
 Three months ended June 30, Six months ended June 30,
 2020 2019 2020 2019
Customer A22.6% 17.6% 29.4% 15.4%
Customer B14.0% 11.0% 12.5% 11.3%
Customer C*
 *
 12.3% 10.7%

* This customer did not account for more than 10% of revenue during this period.
Note 19 — Commitments and Contingencies
Litigation
The Company is subject to routine litigation and other claims that arise in the normal course of business. 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.

Concentrations and Credit Risk

The majority of the Company’s revenue is derived from its Chemistry Technologies segment which consist predominantly of customers within the oil and gas industry and the sanitizer industry to a lesser extent.  Customers within the oil and gas industry include oilfield services companies, integrated oil and natural gas companies, independent oil and natural gas companies, and state-owned national oil companies. Customers within the hand sanitizer industry typically include healthcare institutions such as hospitals, distributors, and various public entities. Given the increase in global demand for sanitizer products due to COVID-19, the Company's concentration of customers is shifting and diversifying, which helps to reduce credit and business risk. Customers within the sanitizer industry are not significantly impacted by commodity prices and typically are financially stable or public institutions.

The Company is subject to concentrations of credit risk within trade accounts receivable, as the Company does not generally require collateral as support for trade receivables.  In addition, the majority of the Company’s cash is invested in accounts in two major financial institutions and balances often exceed insurable amounts.




25

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2017 — Related Party Transaction
In January 2017, the Internal Revenue Service (“IRS”) notified the Company that it was examining the Company’s federal tax returns for the year ended December 31, 2014. As a result of this examination, the IRS informed the Company on May 1, 2019, that certain employment taxes related to the compensation of our former CEO, Mr. Chisholm, were not properly withheld in 2014 and proposed an adjustment. Mr. Chisholm’s affiliated companies through which he provided his services have agreed to indemnify the Company for any such taxes, and Mr. Chisholm has executed a personal guaranty in favor of the Company, supporting this indemnification.
At June 30, 2019, the Company recorded a liability of $2.4 million related to the estimated employment tax under-withholding for the years 2014 through 2018. By September 30, 2019, the liability totaled $1.8 million, after the Company paid $0.6 million to the IRS for these taxes and made an additional accrual covering the estimated under-withholding tax liability through 2019. In addition, at September 30, 2019 the Company recorded a receivable from the affiliated companies totaling $2.4 million. In October 2019, an amendment to the employment agreement of Mr. Chisholm was executed, giving the Company the contractual right of offset for any amounts owed to the Company, and giving the Company the right to withhold payments equal to amounts reasonably estimated to potentially become due to the Company by the affiliated companies from any amounts owed under the employment agreement. At December 31, 2019, the Company netted the related party receivable against the severance payable and recorded $1.8 million for potential liability to the IRS. On January 5, 2020, Mr. Chisholm ceased to be an employee of the Company. In September 2020, the Company informed Mr. Chisholm it would cease payment of future severance.
During the three months ended March 31,first quarter of 2020, an additional accrual was recorded for $0.2 million related to potential penalties and interest on the IRS obligation. As of June 30, 2021 and December 31, 2020, the receivable from Mr. Chisholm was $1.4 million, which is equal toequaled the payable to the IRS and was netted with Mr. Chisholm’s severance liability. Both the IRS and severance liabilities are recorded in accrued liabilities on the consolidated balance sheet.
On January 5, 2020, Mr. Chisholm ceased to be an employee of the Company.
Note 21 — Revision of Prior Financial Statements

During preparation of June 30, 2020 financial statements, two additional errors impacting the prior financial statements were identified, as follows:
Currency Translation Adjustment and Other Comprehensive Income of $1.1 million was not recognized in earnings in connection with the dissolution of the Company’s wholly owned foreign entity, PetroValve International in 2015.

Cash flow presentation relating to proceeds received from the sale of FCC (which occurred in the first quarter of 2019) and subsequent release of escrow amounts in subsequent periods that were improperly classified between operating and investing activities.

Consolidated Balance Sheets - The revision relating to currency translation discussed above had no impact on total stockholders’ equity, but impacted the components of stockholders’ equity as follows (in thousands):

21
  As of December 31, 2018
  As previously reportedRevisionsAs revised
Accumulated other comprehensive loss $(1,116)$1,147
$31
Retained earnings (accumulated deficit) (107,176)(1,147)(108,323)

  As of March 31, 2019
  As previously reported*RevisionsAs revised
Accumulated other comprehensive loss $(1,022)$1,147
$125
Retained earnings (accumulated deficit) (76,314)(1,147)(77,461)


26

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 18 — Business Segment, Geographic and Major Customer Information
Segment Information
  As of June 30, 2019
  As previously reported*RevisionsAs revised
Accumulated other comprehensive loss $(998)$1,147
$149
Retained earnings (accumulated deficit) (90,727)(1,147)(91,874)
  As of September 30, 2019
  As previously reported*RevisionsAs revised
Accumulated other comprehensive loss $(962)$1,147
$185
Retained earnings (accumulated deficit) (101,770)(1,147)(102,917)

  As of December 31, 2019
  As previously reported*RevisionsAs revised
Accumulated other comprehensive loss $(966)$1,147
$181
Retained earnings (accumulated deficit) (141,091)(1,147)(142,238)

  As of March 31, 2020
  As previously reported*RevisionsAs revised
Accumulated other comprehensive loss $(1,089)$1,147
$58
Retained earnings (accumulated deficit) (205,058)(1,147)(206,205)

*As previously reported numbers reflectOperating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the revised balances for eachchief operating decision-maker in deciding how to allocate resources and assess performance. The operations of the periodsCompany are categorized into the following reportable segments: CT and DA.

Chemistry Technologies. The CT segment includes green specialty chemistries, logistics and technology services, which enable its customers to pursue improved efficiencies and performance throughout the life cycle of their wells, helping customers improve their ESG and operational goals.The Company designs, develops, manufactures, packages, distributes, delivers and markets optimized fluid systems, including specialty and conventional chemistries, for use in oil and gas well drilling, cementing, completion, remediation and stimulation activities designed to maximize recovery in both new and mature fields, as disclosedwell as to reduce health and environmental risk by utilization of greener chemicals. Customers of the CT segment include major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, national and state-owned oil companies, and international supply chain management companies.

In 2020, the Company leveraged historical expertise, existing infrastructure, personnel, supply chain, research and resident consumer market experience to address the emerging demand for disinfectants, surface cleaners, degreasers and solvents for industrial, commercial and consumer use. The Company produces Food and Drug Administration and Environmental Protection Agency compliant products its ISO 9001:2015 certified facility in Marlow, Oklahoma. Today the Company has a portfolio of specialty chemical products to address the long-term challenges in the period ended March 31, 2020.


janitorial and sanitization (JanSan), food service and adjacent markets.
Consolidated Statements of Cash Flows -
Data Analytics. The revision discussed above impactedDA segment, created in the statementsecond quarter of cash flow as follows (in thousands):2020 in conjunction with the acquisition of JP3 on May 18, 2020, includes the design, development, production, sale and support of equipment and services that create and provide valuable information on the composition and properties of energy customers’ hydrocarbon fluids. The real-time information on hydrocarbon composition and properties helps customers generate additional profits by enhancing their operations including crude/condensates stabilization, blending, optimization of transmix, increasing efficiencies of gas processing plants, ensuring product quality while enabling automation of fluid handling and reducing losses through give-aways (i.e., that portion of a product of higher value than what is specified). The customers of the DA segment span across the entire oil and gas market, from upstream production to midstream facilities to refineries and distribution networks.

The Company evaluates performance based upon a variety of criteria. The primary financial measure is segment operating income. Various functions, including certain sales and marketing activities and general and administrative activities, are provided centrally by the corporate office. Costs associated with corporate office functions, other corporate income and expense items, and income taxes are not allocated to the reportable segment.

  For the three months ended March 31, 2019
  As previously reportedRevisionsAs revised
Adjustment to reconcile net cash in operating activities 





   Other current assets $(18,661)$14,219
$(4,442)
   Other long-term assets —
3,286
3,286
Net cash used in operating activities (25,721)17,505
(8,216)
Proceeds from sale of business 169,722
(17,505)152,217
Net cash provided by investing activities 169,290
(17,505)151,785
22



27

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summarized financial information of the reportable segments is as follows (in thousands):
For the three months ended June 30,Chemistry Technologies
Data Analytics (1)
Corporate and OtherTotal
2021
Net revenue from external customers$7,688 $1,477 $0 $9,165 
Loss from operations, including impairment(3,819)(773)(2,869)(7,461)
Depreciation and amortization233 20 0 253 
Additions to long-lived assets13 0 0 13 
2020
Net revenue from external customers$7,962 $918 $0 $8,880 
Loss from operations, including impairment(3,596)(1,151)(5,484)(10,231)
Depreciation and amortization246 131 91 468 
Additions to long-lived assets0 0 0 0 
(1) The Company formed the Data Analytics segment in the second quarter of 2020 upon acquiring JP3.
  For the six months ended June 30, 2019
  As previously reportedRevisionsAs revised
Adjustment to reconcile net cash in operating activities 





   Other current assets $(16,209)$14,219
$(1,990)
   Other long-term assets —
3,286
3,286
Net cash used in operating activities (23,849)17,505
(6,344)
Proceeds from sale of business 169,722
(17,505)152,217
Net cash provided by investing activities 168,868
(17,505)151,363
For the six months ended June 30,Chemistry Technologies
Data Analytics (1)
Corporate and OtherTotal
2021
Net revenue from external customers$17,990 $2,945 $0 $20,935 
Loss from operations, including impairment(7,407)(1,067)(7,230)$(15,704)
Depreciation and amortization524 35 1 $560 
Additions to long-lived assets31 0 0 $31 
2020
Net revenue from external customers$27,378 $918 $0 $28,296 
Loss from operations, including impairment(66,257)(1,151)(12,908)(80,316)
Depreciation and amortization2,056 131 472 2,659 
Additions to long-lived assets42 0 0 42 

 (1) The Company formed the Data Analytics segment in the second quarter of 2020 upon acquiring JP3.

  For the nine months ended September 30, 2019
  As previously reportedRevisionsAs revised
Adjustment to reconcile net cash in operating activities 





   Other current assets $(14,974)$10,938
$(4,036)
   Other long-term assets —
3,286
3,286
Net cash used in operating activities (14,348)14,224
(124)
Proceeds from sale of business 169,722
(14,224)155,498
Net cash provided by investing activities 167,497
(14,224)153,273

  For the year ended December 31, 2019
  As previously reportedRevisionsAs revised
Adjustment to reconcile net cash in operating activities 





   Other current assets $(8,359)$10,938
$2,579
   Other long-term assets 1,131
3,286
4,417
Net cash used in operating activities (18,769)14,224
(4,545)
Proceeds from sale of business 169,722
(14,224)155,498
Net cash provided by investing activities 166,937
(14,224)152,713

  For the three months ended March 31, 2020
  As previously reportedRevisionsAs revised
Adjustment to reconcile net cash in operating activities 





   Other current assets $6,926
$(3,281)$3,645
Net cash used in operating activities (20,496)(3,281)(23,777)
Proceeds from sale of business —
3,281
3,281
Net cash provided by investing activities 41
3,281
3,322


Assets of the Company by reportable segments are as follows (in thousands):
In our March 31, 2020 financial statements, we disclosed the correction of two immaterial errors relating to intangibles that should have been written off in prior periods and improper elimination of profit on intercompany inventory transactions. Such revisions were not material to the previously issued financial statements.

June 30, 2021December 31, 2020
Chemistry Technologies$41,950 $43,346 
Data Analytics5,154 13,201 
Corporate and Other24,314 29,663 
Total assets$71,418 $86,210 

2823

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Geographic Information

Revenue by country is based on the location where services are provided and products are used. No individual countries other than the U.S. and the United Arab Emirates (“UAE”) accounted for more than 10% of revenue. Revenue by geographic location is as follows (in thousands):
Management evaluated
 Three months ended June 30,Six months ended June 30,
 2021202020212020
U.S.$6,869 $6,936 $16,530 $22,711 
UAE1,319 847 2,422 2,308 
Other countries977 1,097 1,983 3,277 
Total revenue$9,165 $8,880 $20,935 $28,296 
Long-lived assets held in countries other than the impact of these errors, individually and in the aggregate, on previously issued financial statements and concluded the impact wasU.S.are not material. Dueconsidered material to the currency translation error, net lossconsolidated financial statements.
Major Customers
Revenue from major customers, as a percentage of consolidated revenue, is as follows (in thousands):
For the three months ended June 30,Chemistry Technologies% of Total RevenueData Analytics% of Total Revenue
2021
Customer C$1,038 11.3 %**
Customer D1,810 19.8 %**
2020   
Customer A$2,004 22.6 %
* (1)
* (1)
Customer B1,246 14.0 %
* (1)
* (1)

For the six months ended June 30,Chemistry Technologies% of Total RevenueData Analytics% of Total Revenue
2021
Customer C$4,067 19.4 %**
Customer D4,660 22.3 %**
 2020   
Customer C$8,324 29.4 %
* (1)
* (1)
Customer A3,536 12.5 %
* (1)
* (1)
Customer D3,485 12.3 %
* (1)
* (1)
* This customer did not account for more than 10% of revenue during this period.
*(1) Not applicable, as the year ended December 31, 2015 was originally reported as $13.5 million and would be revised to $14.6 million.Company did not form the Data Analytics segment until May 2020 upon acquiring JP3.




29

FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2219 — Subsequent Events

In April 2020,On July 27, 2021, the Company was notified byentered into a long-term rental agreement with Resolute Oil to leverage capabilities and facilities to drive growth in adjacent green chemistry markets. The agreement includes options to renew until 2036.

Through the NYSE that the average closing stock price had fallen below the continued listing standard of a share price of $1.00 (measured over a 30 day trading average).  The Company had until October 2020 (later extended to December 2020) to cure the deficiency.  On July 1, 2020, the Company was notified by the NYSE that the deficiency had been cured, and the noncompliance indicator was removed fromagreement, Resolute Oil will fully utilize the Company’s common shares.entire 15-acre campus, including the 38,000 square foot chemical blending facility, based in Waller, TX, to manufacture United States Pharmacopeia-National Formulary (USP-NF)-grade white mineral oil distributed globally to customers in the agricultural, energy, food & beverage, cosmetic, and personal care markets.

On July 28, 2020, the Company received a $6.3 million tax refund, including $0.2 million of interest, pursuant to the CARES Act that extended NOL carryback provisions related to the filing of Form 1139 requesting a refund as a result of an analysis related to the extended NOL carryback provision.







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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking StatementsExecutive Summary

This Quarterly Report on Form 10-Q (“Quarterly Report”), and in particular, Part I, Item 2 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains “forward-looking statements” within the meaning of the safe harbor provisions, 15 U.S.C. § 78u-5, of the Private Securities Litigation Reform Act of 1995 (“Reform Act”). Forward-looking statements are not historical facts, but instead represent Flotek Industries, Inc.’s (“Flotek” or “Company”) current assumptions and beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside the Company’s control. Such statements include estimates, projections, and statements related to the Company’s business plan, objectives, expected operating results, and assumptions upon which those statements are based. The forward-looking statements contained in this Quarterly Report are based on information available as of the date of this Quarterly Report.
The forward-looking statements relate to future industry trends and economic conditions, forecast performance or results of current and future initiatives and the outcome of contingencies and other uncertainties that may have a significant impact on the Company’s business, future operating results and liquidity. These forward-looking statements generally are identified by words including, but not limited to, “anticipate,” “believe,” “estimate,” “continue,” “intend,” “expect,” “plan,” “forecast,” “project,” and similar expressions, or future-tense or conditional constructions such as “will,” “may,” “should,” “could,” etc. The Company cautions that these statements are merely predictions and are not to be considered guarantees of future performance. Forward-looking statements are based upon current expectations and assumptions that are subject to risks and uncertainties that can cause actual results to differ materially from those projected, anticipated, or implied.
A detailed discussion of potential risks and uncertainties that could cause actual results and events to differ materially from forward-looking statements is included in Part I, Item 1A — “Risk Factors” of the Annual Report on Form 10-K for the year ended December 31, 2019, as amended (“Annual Report”) and periodically in subsequent reports filed with the Securities and Exchange Commission (“SEC”). The Company has no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events, except as required by law.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto of this Quarterly Report, as well as the Annual Report. Phrases such as “Company,” “we,” “our,” and “us” refer to Flotek Industries, Inc. and its subsidiaries.
Executive Summary

Flotek is aIndustries, Inc. (“Flotek” or the “Company”) creates solutions to reduce the environmental impact of energy on air, water, land and people. A technology-driven, globalspecialty green chemistry and data company, that develops and supplies engineered chemistry solutions, equipment, data and analytical services toFlotek helps customers across industrial, commercial, and consumer markets.markets improve their Environmental, Social, and Governance (ESG) performance. The Company continued its reinvention, which beganserves specialty chemistry needs that span from downstream, midstream and upstream, both domestic and international, energy markets to applications of U.S. manufactured surface cleaners, disinfectants for industrial, commercial and consumer use.
The Company’s CT segment develops, manufactures, packages, distributes, delivers, and markets green, specialty chemicals that help their customers meet their ESG and operational goals, enhancing the profitability of hydrocarbon producers and supplying professional chemistries that cleans surfaces in both commercial and personal settings to help reduce the firstspread of bacteria, viruses and germs.

The Company’s DA segment enables users to maximize the value of their hydrocarbon associated processes by providing real-time data and analytics associated with the streams in seconds rather than minutes or days. These real-time data and analytics prevents waste, reduces reprocessing, and allows users to pursue automation of their hydrocarbon streams to maximize their profitability, thereby improving ESG performance. During the second quarter of 2020, by reducing expenses, scrutinizing capital spending to ensure alignment to near-term revenue, acquiringthe Company acquired 100% ownership of JP3 to securein a footprint incash-and-stock transaction. JP3’s real-time data platforms combine the emerging dataenergy industry’s only field-deployable, inline optical analyzer with proprietary cloud visualization and analytics, market, and aggressively launching a sustainable line of sanitizer and disinfectant products built ondelivers increased profitability for its expertise in high-quality, specialized chemistry technologies.
Continuing Operations

Withcustomers. In conjunction with the acquisition of JP3, in May 2020, the Company nowcreated the DA segment.
The Company was impacted as a result of the outbreak of COVID-19 that spread throughout the U.S. and the world during 2020, with effects continuing into 2021. For a discussion of the impacts of COVID-19, see “COVID-19 Effects and Actions” and “Outlook” in this Quarterly Report.

Company Overview
The Company has two operating segments: Chemistry Technologiessegments, CT and Data Analytics,DA, which are both supported by itsthe Company’s continuing Research & Innovation (“R&I”) advanced laboratory capabilities.
Chemistry Technologies
The Company’s Chemistry TechnologiesCT segment includes energy-focused products and services comprised of proprietary green chemistries, specialty chemistries, logistics and technology services.services, which enable its customers to pursue improved efficiencies and performance throughout life cycle their wells, helping customers improve their ESG and operational goals. The Company designs, develops, manufactures, packages, distributes, delivers and markets reservoir-centricoptimized fluid systems, including specialty and conventional chemistries, for use in oil and gas well drilling, cementing, completion, remediation and stimulation activities designed to maximize recovery in both new and mature fields. fields, as well as to reduce health and environmental risk by using greener chemicals.
Customers of this product line of the Chemistry Technologies businessCT segment include major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, pressure-pumping service companies, national and state-owned oil companies and international supply chain management companies.
In 2020, the secondCompany leveraged historical expertise, existing infrastructure, personnel, supply chain, research and resident consumer market experience to address the emerging demand for disinfectants, surface cleaners, degreasers and solvents for both commercial and personal use. The Company produces FDA and EPA compliant products by completing all necessary upgrades to its already ISO 9001:2015 certified facility in Marlow, Oklahoma. Today, the Company has a portfolio of specialty green chemical products designed to address the long-term challenges in the janitorial and sanitization (JanSan), food service and adjacent markets. The Company has made a commitment of being in this market for the long-term.

Data Analytics
The DA segment, created in conjunction with the acquisition of JP3 in May 2020, includes the design, development, production, sale and support of equipment and services that create and provide valuable real time information on the

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composition and properties for customers' oil, natural gas and refined products. The DA segment is transitioning to a recurring revenue subscription model of selling its application packages while continuing to sell its line of Verax analyzers, deployed in the field across the oil and gas sector.

The customers of the DA segment diversify the revenues of the Company and span across the entire oil and gas market, including upstream, midstream, refineries and distribution networks. The segment helps its customers generate additional profit by enhancing their operations including crude/condensates stabilization, blending, optimization of transmix, increasing efficiencies of gas plants, and ensuring product quality while enabling automation of fluid handling and reducing losses through give-aways (i.e., that portion of a product of higher value than what is specified) . While the DA segment was focused entirely on North American markets in the past, business development activities started in late third quarter 2020 in the international markets. This segment began preparing the Verax analyzers for international deployment including product design modifications, certifications and export controls.

Research & Innovation
R&I supports the acceleration of ESG solutions for both segments through green chemistry formulation, specialty chemical formulations, FDA and EPA regulatory guidance, technical support, basin and reservoir studies, data analytics and new technology projects. The purpose of R&I is to supply the Company’s segments with enhanced products and services that generate current and future revenues, while advising Company management on opportunities concerning technology, environmental and industry trends. The R&I facilities support advances in chemistry performance, detection, optimization and manufacturing.
COVID-19 Effects and Actions
In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic that spread throughout the U.S. and the world. In late 2020, major pharmaceutical companies developed vaccines and received approval for wide-scale distribution in the U.S. and other countries. The vaccination effort is proceeding in the U.S. and the world. However, variant strains of the virus have emerged, which create additional uncertainty on the extent and the duration of the pandemic.
The pandemic negatively impacted the U.S. and global economy, disrupted global supply chains and the domestic and international oil and gas markets, and increased volatility in financial markets in 2020. These effects materially and adversely affected, and may continue to materially and adversely affect, the demand for oil and natural gas as well as for the Company’s services and products.
The Company’s CT segment is energy-focused with product lines comprised of specialty chemistries, logistics and technology services. Customers of the CT segment include major integrated oil and gas companies, oilfield services companies, independent exploration and production companies, national and state-owned oil companies, and international supply chain management companies. Due to customer activity levels in this industry, the Company experienced materially reduced revenues and cash flows during 2020, which continued for the first half of 2021.
Outside the oil and gas sector, the COVID-19 pandemic increased demand for certain specialty chemicals, particularly surface cleaners and disinfectants. In 2020, the Company launched a diversified line of sanitizersFDA and EPA-compliant disinfectants, surface cleaners, degreasers and solvents for industrial, commercial and personal consumer use. These products build on the Company’s historical expertise in chemistry and leverage its infrastructure, personnel, competencies, supply chain, research and historic consumer market experiences yieldingexperience. The continued impact of COVID-19 and subsequent modification of social behavior in regard to the heightened attention to hygiene and sanitation provide a competitive product offering in this rapidly growing segment. Givensustainable yet challenging market to expand the increase in global demand for sanitizer products due to COVID-19, the Company's concentration of customers is shifting and diversifying, which helps to reduce credit and business risk.


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Data AnalyticsCompany’s portfolio.
The Company’s Data Analytics segment, created in conjunction with the acquisition of JP3, includes the design, development, production, sale and support of equipment and services that create and provide valuable information about the composition of its energy customers’ hydrocarbon streams. JP3 is continuing its transition to a Data-as-a-Service (DaaS) subscription model of selling data generated by its line of Verax analyzers, deployed remotely “at the edge” acrossDA segment’s largest customer base, the oil and gas sector,midstream market, reduced gathering and software services via its cloud-based Viper software platform.
JP3 creates and sells data systems and analytics services intoinfrastructure capital spending in 2020. In addition, the oil and gas market. The Company sells equipment with a software license and (DaaS) subscriptions. The data is provided in real time, every fifteen seconds, atpandemic impacted the point-of-use and via the cloud,DA segment due to end use customers. This composition and physical properties information increases efficiency and decreases operating costs for producers, midstream operators, refiners and distribution companies.
The customers of JP3 span across the entire market, from production upstreamreduced access to midstream facilities to refineries and distribution networks. To date, JP3 has focused sales solely on North American markets. The Data Analytics segment provides real-time hydrocarbon composition data that helps its customers generate additional profit by enhancing blending, increasing efficiencies of towers, enabling automation and robotization of fluid handling, and reducing losses due to give-away.
Research & Innovation
Flotek Research and Innovation supports both segments through formulations, technical support, basin & reservoir studies, data analytics, andcomplete new technology projects. The purposeinstallations for a portion of the organization is to supplyyear. As a result, spending for the segments with enhancedDA segment’s products and services that generate current and future revenues, while advising company management on opportunities concerning technology, environmental, and industry trends. The Research and Innovation facilities support advances in chemistry performance, detection, optimization, and manufacturing.
Discontinued Operations

As previously disclosed, the Company sold Florida Chemical Company, LLC (“FCC”) effective as of February 28, 2019.has also been impacted by lower consumer demand. As a result, the Company’s CICT segment was classified as discontinued operations. Financial resultssales and cash flows were below target for the first three and six months of 2019 include results from the Company’s CICT segment during that time period.DA segment.
Outlook on Economic Conditions

On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a global pandemic, which continues to spread throughout the United States and around the world. This outbreak has severely impacted global economic activity, and many countries and many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel.

During the first and second quarters of 2020, the oil and gas markets experienced significant impacts from both the supply and the demand side. On the demand side, the COVID-19 pandemic resulted in a drop in economic activity and a corresponding destruction of global demand for oil, gas and associated products. On the supply side, pricing and production wars between key oil-producing countries led to global oversupply.
The demand destruction and oversupply together caused unprecedented disruption to all sectors of the oil and gas markets. Prices for crude oil fell from over $60/bbl. in January 2020 to nearly $20/bbl. by May 2020, with futures turning negative for a brief period in April 2020. Oil and gas operators announced budget cuts of more than 40%, or $42 billion year-over-year, according to RS Energy Group, and announced shut-ins of more than 1.4 million barrels of production. The North American rig count declined approximately 70% from January 2020 to the end of June 2020, based on the Baker Hughes rig count figures, reflecting disproportionate impact to domestic markets.
Midstream and downstream markets were affected as well, as domestic gasoline demand fell by approximately 45% in April 2020 (almost 5 million barrels per day) and refinery utilization dropped below 70%. The Company expects negative impactsthe current economic situation to all facets ofnegatively impact the oil and gas markets to continueenergy sector for an extended period beforeof time, with oil demand recovering during 2021 but not returning to pre-crash levels.the pre-COVID-19 level. Any further material COVID-19 disruption or significant setback in oil and gas demand arising from a slower economic recovery could present downside risks to this outlook.
Conversely,negatively impact the Company and could result in additional impairments in the future. Future developments of the COVID-19 pandemic has created increased demand for certain specialty chemicals,crisis are uncertain and in particular disinfectantsrelated implications could materially and sanitizers. The increased usage globally of personal protection equipment has expanded beyond masks, face shields, and gloves to include both disinfectants and sanitizers. Withadversely affect the outbreak of COVID-19, sales of hand sanitizers and disinfectants has swelled

Company’s business, operations, operating results, financial condition, liquidity and/or capital levels.

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across every region in the world, which led to a global shortage. Consequently, the market has experienced shortages of key raw materials used to make these products, including USP-grade alcohol, woven cellulosics for wipes, and various active ingredients. This rapid growth is accompanied by a need for sustained higher volumes of sanitizing products as COVID-19 is expected to have a long-term impact on social awareness, personal hygiene habits and consumer and commercial cleaning protocols.

Company Outlook
In response to the deteriorating market conditions and anticipating ongoing volatility, Flotek has reduced its cost structure to meet anticipated market activity and reduce the Company’s break-even levels. Among other cost-cutting initiatives:
The Company’s CEO, John W. Gibson, Jr., reduced his base salary by 20%, and each of the other executive officers reduced his or her salary by 10%, through December 31, 2020 in exchange for restricted stock, effective as of April 1, 2020.
The board of directors of Flotek approved a 20% reduction in the fees to be paid to the directors, effective as of April 1, 2020.
The Company consolidated office space by moving all employees at its corporate headquarters into its GRIC facility and buying out the remaining term of the corporate headquarters lease for a significant discount, with the move completed by the end of June 2020.
The Company reduced headcount by 35% on March 30, 2020.
The Company decreased discretionary spending across all business operations.

These efforts were in addition to the previously-announced restructuring of the Company’s terpene supply agreement in February of 2020, which more closely matched the Company’s ongoing obligations for terpene with expected need, and bringing more legal work in-house to reduce outside legal expenses.
While the full impact of the COVID-19 outbreakpandemic continues to evolve and the full extent of the impact is not yet known, we arethe Company continues to closely monitoringmonitor the effects of the pandemic on commodity demands, and on ourits customers, as well as on our operations and employees. Any future developmentdevelopments and effects will beare highly uncertain and cannot be predicted, including including:
•the scope and duration of the pandemic;
•effectiveness of vaccines;
•emergence of new coronavirus variants;
•further adverse revenue and net income effects; impairments;
•disruptions to ourthe Company’s operations; third party
•third-party providers’ ability to support ourthe Company’s operations;
•limitations on domestic and international travel for sales, system installations, and support;
•customer shutdowns of oil and gas exploration and production;
•the effectiveness of our work from home arrangements; employee
•modifications to work schedules, including manufacturing shifts;
•impacts on employees from illness, school closures and other community response measures;
•any actions taken by governmental authorities and other third parties in response to the pandemic; and
•temporary closures of ourthe Company’s facilities or the facilities of ourits customers and suppliers.

The uncertain future developmentpandemic caused the Company to alter its business working practices, including work schedules, manufacturing shifts, employee travel, work locations, meetings and participation in events and conferences. In addition, the Company and most of this crisis could materiallyits customers continued the practice of social distancing and adversely affect our business, operations, operating results, financial condition, liquidity or capital levels.

Flotek has also focusedwork-from-home procedures, which have had, and may continue to have, an impact on ongoing needsthe ability of customersemployees and management of the Company to communicate and work efficiently. These practices are gradually changing with increased vaccination levels in the U.S. and the world. There is no certainty that these actions will mitigate risks posed by the virus to the Company’s workforce.
In response to market conditions and the anticipating ongoing volatility, the Company reduced its cost structure in 2020 to diversify itsmeet anticipated market activity and reduce the Company’s break-even level. In the second half of 2020 the Company recorded additional impairment charges of goodwill and intangible assets as well as an increase to the provision of excess and obsolete inventory.
Outlook
The COVID-19 pandemic negatively impacted the U.S. and global economy, disrupted global supply chains and the domestic and international oil and gas markets, and increased volatility in financial markets. While market prices for West Texas Intermediate and Brent crude oil rebounded from lows during the initial months of the pandemic in 2020 to exceed $50 per barrel during the first quarter of 2021 and $70 per barrel during the second quarter of 2021, many major integrated oil and gas companies and independent oil and gas companies have kept their 2021 budgets generally unchanged, though such budgets may change if crude oil prices increase. Uncertainty exists about the extent and the duration of the resulting industry contraction and consolidation. In addition, the oilfield services industry remains over supplied and the timing of returns to pre-pandemic pricing levels remains uncertain. While uncertainty remains around the extent and duration of the pandemic, there are positive indicators that the U.S. economy is recovering, including improvements in oil and gas demand, rising COVID-19 vaccination levels, and resumption of travel and business activities.
ESG solutions continue to be a focus for the Company as the energy industry is seeking to accelerate their focus on cleaner energy and sustainability. The impact of the actions of the new presidential administration and Congress on the economy and financial markets is uncertain in the current year and longer term. During his first months in office, the President signed many executive orders, including ones with implications for stakeholders in the energy industry, such as canceling the Keystone XL Pipeline and another for the U.S. to rejoin the Paris Agreement on climate change. The U.S. Department of Interior (“DOI”) issued an order in January, placing a 60-day freeze on agency permit approvals and pausing federal oil and gas leasing for a review of all existing leasing and permitting practices related to fossil fuel development on public lands and waters. In March 2021, the DOI allowed the suspension to expire. In addition, the President announced proposed plans to raise the corporate tax rate to help finance his proposed infrastructure plan. These and other potential actions by the new administration could have negative and/or positive impacts on the Company’s business and accelerate growth through deploymentcustomers.
Amid the current environment with increased business commitments related to ESG, the Company’s products and services offer a significant benefit to businesses seeking to improve their ESG performance, including improving the safety, reliability and

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efficiency of capital, with an emphasis on digital transformationtheir operations. The Company offers sustainable chemistry solutions, tailoring product selection to enable operational efficiencies, improve water management and reduce greenhouse gas emissions for its customers in the exploration and production sector of the oil and gas markets. On May 18,industry. Further, the Company’s patented line of Complex nano-Fluid® (also known as CnF®) products are formulated with highly effective, plant-based solvents offering safer, renewable and sustainable alternatives to toxic BTEX-based (benzene, toluene, ethylbenzene and xylene) chemicals. Additionally, the Company’s real-time sensor technology helps to enable process and operational efficiencies, minimize waste and processing and reduce emissions.
The Company believes that an increase in the adoption of green specialty chemicals could benefit our business and reduce the impact of the slow recovery from the 2020 lows in drilling and completions activity. The key sales focus of the Company is growing market share by improving returns for current customers, rebuilding relationships with past customers and identifying new customers that could benefit from collaborative and innovative chemistry solutions. Additionally, the Company is focused on optimizing total cost of recovery per barrel of oil, reducing both financial cost and environmental risk associated with operations.
The disinfectants and surface cleaners industry is expanding, associated with the continued impact of the COVID-19 pandemic and the need for individuals, businesses, schools and governments to minimize the spread of the coronavirus, as well preparing for emerging variants. Industry growth is also anticipated due to the modification of social behaviors in regard to the heightened attention to hygiene and sanitation. In 2020, the Company closedlaunched a diversified line of EPA and FDA-compliant disinfectants, surface cleaners, degreasers and solvents for industrial, commercial and consumer use. The Company believes this market provides an opportunity to expand the acquisitionCompany’s portfolio of chemistry products to meet the growing demand. The use of data and analytics is a growing trend in all industries where technology is used to analyze large datasets of operational information to improve performance, as well as predictive maintenance, advanced safety measures and reduced environmental impact of operations. The Company believes that data and analytics is an area for growth. Hence, in 2020, the ownership interestsCompany acquired JP3 and formed the DA segment. Prior to and throughout the majority of JP3, which gives Flotek access to2020, the midstream and downstream markets and diversifies exposure to volatility inDA segment focused sales solely on North American markets; however, the upstream sector. As Flotek’s newly-created Data Analytics segment, JP3 is positioned for growth both domestically and internationally. In addition to increasing market share, the Data Analytics segment is pursuingpreparing for international deployments, including export control investigations, certifications and product enhancements that enable growth opportunities with current and prospective customers.design modifications to meet the demands of overseas installations.
The Company’s Chemistry Technologies segment hasCompany continues to develop technologies to ensure its ability to provide differentiated products and services to its customers. The Company remains focused on developmentpartnering closely with its customers to create and implement specialty chemical products and compositional analyzers. Differentiated products and services are the result of competitively-priced product lines that are responsive to current market including wellbore protectionthe deployment of the organization’s technical capabilities and damage mitigation products as the domestic market has shifted to shutting in wells. In response to a forecasted reduction in capital available to customers for drilling with a shift to optimizing existing infrastructure, the Company initiated several efforts to use specialty chemicals to improve enhanced oil recovery (EOR). The Company has also leveraged its international footprint in the Middle East to include unconventional, conventional, and enhanced oil recovery programs.
The Chemistry Technologies segment has also used its expertise in specialty chemistry, existing chemistry infrastructure and facilities, and historical consumer market experience to launch a product line of sanitizers and disinfectants, as discussed above.alignment with customer success. The Company believes the pursuit of new sanitizersolutions to help make its customers successful will continue to position Flotek as a leader in advanced chemicals and disinfectant products slot into the premium market and will be competitive over the long-term.technology.
The Company has also made changes to itsCompany’s emphasis in 2021 is executing the plan established by the executive team to align withrecover from the varied impacts of COVID-19 and grow the Company’s businesses. The CT segment is focused on marketing our products and services to new and existing customers, while expanding the disinfectants, surface cleaners, degreasers and solvents product line. The DA segment is enhancing its growth focus. TengBeng Koid, an experienced energy executive with significant upstream, midstream, downstreamproduct offerings and digital experience, joined Flotek as President of Global Businesscustomer service while accelerating the business development and sales effort in June 2020 and oversees allboth the domestic and international sales and business development efforts for bothmarkets. The Company does not anticipate a material increase in our maintenance capital spending year-over-year. In 2021, the Chemistry TechnologiesCompany is enhancing its focus on ESG and the Data Analytics segments. Additionally, Michael E. Borton joined the Company as Chief Financial Officer in August 2020, bringing 35 yearsresponsible management of experience serving in financialproducts and operational leadership roles for high-growth, Software as a Service (SaaS)

services through our Quality Assurance and Quality Control Program and Chemical Spill Prevention Program, adhering to ISO 9001:2015 standards.

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technology companies in a wide range of industries. Finally, Ryan Ezell, Ph.D, has been promoted to the role of President of Chemistry Technologies from Senior Vice President of Operations at Flotek.
Consolidated Results of Operations (in thousands):
 Three months ended June 30, Six months ended June 30,
 2020 2019 2020 2019
Revenue$8,880
 $34,692
 $28,296
 $77,949
Operating expenses (excluding depreciation and amortization)11,632
 38,121
 34,473
 82,089
Operating expenses %131.0 % 109.9 % 121.8 % 105.3 %
Corporate general and administrative5,395
 6,054
 9,888
 13,335
Corporate general and administrative %60.8 % 17.5 % 34.9 % 17.1 %
Depreciation and amortization468
 2,119
 2,659
 4,379
Research and development costs1,638
 2,076
 4,193
 4,360
(Gain) loss on disposal of long-lived assets(22) (4) (55) 1,093
Impairment of fixed assets and long-lived assets—
 —
 57,454
 —
Loss from operations(10,231) (13,674) (80,316) (27,307)
Operating margin %(115.2)% (39.4)% (283.8)% (35.0)%
Gain on lease termination576
 —
 576
 —
Interest and other income (expense), net62
 677
 11
 (1,213)
Loss before income taxes(9,593) (12,997) (79,729) (28,520)
Income tax benefit32
 192
 6,201
 503
Loss from continuing operations(9,561) (12,805) (73,528) (28,017)
(Loss) income from discontinued operations, net of tax—
 (1,608) —
 44,466
Net (loss) income$(9,561) $(14,413) $(73,528) $16,449
    Net (loss) income %(107.7)% (36.9)% (259.9)% (35.9)%
ConsolidatedResults of Operations: Three and Six Months Ended June 30, 2020,2021, Compared to the Three and Six Months Ended June 30, 20192020
Three months ended June 30,Six months ended June 30,
 2021202020212020
Revenue$9,165$8,880 $20,935 $28,296 
Operating expenses (excluding depreciation and amortization)12,110 11,632 25,911 34,473 
Operating expenses %132.1 %131.0 %123.8 %121.8 %
Corporate general and administrative costs2,868 5,395 7,229 9,888 
Corporate general and administrative %31.3 %60.8 %34.5 %34.9 %
Depreciation and amortization253 468 560 2,659 
Research and development1,466 1,638 3,008 4,193 
Gain on disposal of long-lived assets(71)(22)(69)(55)
Impairment of fixed assets and long-lived assets— — — 57,454 
Loss from operations(7,461)(10,231)(15,704)(80,316)
Operating margin %(81.4)%(115.2)%(75.0)%(283.8)%
PPP forgiveness881 — 881 — 
Gain on lease termination— 576 — 576 
Interest and other income (expense), net55 62 4 11 
Loss before income taxes(6,525)(9,593)(14,819)(79,729)
Income tax (expense) benefit(21)32 (27)6,201 
Net loss$(6,546)$(9,561)$(14,846)$(73,528)
Net loss % for continuing operations(71.4)%(107.7)%(70.9)%(259.9)%

Consolidated revenue for the three andmonths ended June 30, 2021, increased $0.3 million, or 3.2%, primarily due to the acquisition of JP3 in mid-May of the second quarter of 2020, which was partially offset by the loss of two major energy customers that were purchased by non-customers during the second quarter of 2021. Consolidated revenue for the six months ended, June 30, 2020,2021, decreased $25.8$7.4 million, or 74.4%26.0%, and $49.7 million or 63.7%, respectively, and versus the same periodsperiod of 2019. The decrease2020. First half 2020 revenues experienced less COVID-19 impact than first half 2021 results. Second quarter 2021 experienced a loss of revenue in the CT segment associated with two major customers changing ownership during the quarter, partially offset by full-quarter revenue was largely a result ofin the continued volatile macro-environmentsecond quarter 2021 for U.S. onshore drilling and completion activity, impacted by political and economic events in foreign markets. In addition, concerns related to the COVID-19 virus impacted productivity and customers demand for products.JP3.

Consolidated operating expenses (excluding depreciation and amortization) for the three and six months ended June 30, 2020, decreased $26.52021, increased $0.5 million, or 69.5%4.1%, and $48 million or 58.0%, respectively, versus the same periodsperiod of 2019,2020, and as a percentage of revenue, increased by 21.1%,remained flat. The increase was primarily due to an unfavorable product mix in the second quarter of 2021 versus second quarter of 2020. Consolidated operating expenses (excluding depreciation and 16.5%, respectivelyamortization) for the three and six months ended June 30, 2020.2021 decreased $8.6 million, or 24.8% versus the same period of 2020, and 2.0% as a percentage of revenue. The decrease in operating expenses is primarily due tofor the lowerfirst half of 2021 resulted from reduced cost of sales as a resultdue to lower sales activity during 2021 compared to 2020 associated with COVID-19 impacts and related declines in activity. The Company’s operating expenses benefited from actions taken in 2020. Actions taken to reduce operating expenses include reducing the Company’s facility footprint and improving operational efficiencies. These reduced costs were partially offset by new operating expenses for the DA segment acquired in the second quarter of reduced revenues and lower freight, personnel, and travel and entertainment expenses.2020.

Corporate general and administrative (“CG&A”) expenses are those expenses not directly attributable to products sold or services provided. CG&A costs for the three and six months ended June 30, 2020,2021, decreased $0.7$2.5 million, or 10.9%46.8%, and $3.4$2.7 million, or 25.8%, respectively,26.9% versus the same period of 2019. As2020.CG&A costs declined as a percentageresult of revenue, CG&A increased 43.3%lower compensation costs following a reduction in force, a one-time employee retention credit related to the CARES Act and 17.8%a reduction in professional fees.
Depreciation and amortization expense decreased $0.2 million, or 45.9% and $2.1 million, or 78.9% for the three and six months ended June 30, 2020. The decrease in CG&A costs were2021, versus the same period of 2020, primarily due to lower personnel costs, lower software licensing fees, lower stock based compensation and lower professional fees.
Depreciation and amortization expense decreased $1.7 million, or 77.9%, and $1.7 million, or 39.3%, for the three and six months ended June 30, 2020, respectively, and versus the same periods of 2019 primarily due to impairmentimpairments of fixed and long-lived assets recorded in the first quarter of 2020.


29
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Research and development costs decreased $0.4 million, or 21.1%, and $0.2 million, or 3.8%,10.5% and $1.1 million, or 28.3% for the three and six months ended June 30, 2020, respectively, and2021, versus the same periodsperiod of 20192020 due to lower personnel costs as a result of our reduction in force inworkforce during the first quarter 2020.
Gain on disposalImpairment of fixed and long-lived assets had no changedecreased due to the first quarter 2020 write-down of $54.7 million in the CT segment and increased $1.1a corporate-level write-down of $2.8 million. See Note 8, “Impairment of Fixed and Long-lived Assets, in Item 1, Financial Statements, of this Quarterly Report.” No impairments of fixed and long-lived assets occurred in the first half of 2021.
Loss from operations decreased $2.8 million, or 105.0%27.1%, for the three months ended June 30, 2021 and $64.6 million, or 80.4% for the six months ended June 30, 2020, respectively, and2021, versus the same periodsperiod in 2020. The loss from operations improvement is primarily a result of 2019.
Impairmentthe $57.5 million impairment of fixed asset and long-lived assets was $57.5 million due to a write-down of fixed assets, operating right-of-use (“ROU”) assets and intangible assets to estimated fair market value and recorded in the first quarter of 2020.
Loss from operations decreased $3.4 million, or 25.2%,2020 and increased $53.0 million, or 194.1% and for the three and six months ended June 30, 2020, respectively, and versus the same period in 2019. The change in loss is primarily the result of the impairment charges, lower margins, lower sales volumes and lower plant utilization.
Interest and other income (expense), net increased $0.6 million, or 90.8%, and decreased $1.2 million, or 100.9% for the three and six months ended June 30, 2020, respectively, and versus the same period of 2019, primarily due to the termination of the Amended and Restated Revolving Credit, Term Loan and Security Agreement (as amended, the “Credit Facility”) with PNC Bankno impairments in the first half of 2021. Additionally, the decrease in loss from operations is attributable to the forgiveness of the JP3 PPP loan for $0.8 million and a one-time employee retention credit to the CARES Act of $1.9 million, both recorded in the second quarter 2019.of 2021.
The Company’s income tax expense for the second quarter of 2021 and 2020 was minimal. The Company recorded an income tax benefit of $6.2 million for the first quarter of 2020, primarily as a result of the extended net operating loss carryback provisions included in the CARES Act yielding an effective tax benefit rate of 0.3%, and 7.7%, forinitially recorded in the three and six months ended June 30, 2020, respectively, compared to an income tax benefit of $0.5 million, yielding an effective tax benefit rate of 1.6% and and 3.3% for the comparable periods in 2019.first quarter 2020.


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Results by Segment (in thousands):

Chemistry Technologies

 Three months ended June 30, Six months ended June 30,
 2020 2019 2020 2019
Revenue7,962
 $34,692
 $27,378
 $77,949
Gross margin1,301
 18,180
 2,539
 54,609
Gross margin %16.3 % 52.4 % 9.3 % 70.1 %
Income from operations(3,596) (7,651) (66,257) (12,984)
Income from operations %(45.2)% (22.1)% (242.0)% (16.7)%

Chemistry TechnologiesResults of Operations: Three and Six Months Ended June 30, 2020,2021, Compared to the Three and Six Months Ended June 30, 20192020
Chemistry Technologies
Three months ended June 30,Six months ended June 30,
2021202020212020
Revenue$7,688 $7,962 $17,990 $27,378 
Loss from operations(3,819)(3,596)(7,407)(66,257)
CT revenue for the three and six months ended June 30, 20202021, decreased $26.7$0.3 million, or 77.0%,3.4% and $50.6$9.4 million, or 64.9%34.3%, respectively, versus the same periodperiods of 2019.2020. The decrease in revenue during the second quarter of 2020 and2021 compared to the majority of the first halfsecond quarter of 2020 was significantly driven by impacts from both the supply and the demand side. The COVID-19 pandemic resulted in a sharp decline innegatively impacted economic activity and a corresponding destruction ofreduced global demand for oil and gas, while pricing and production wars betweena key oil-producing countries led to global oversupply. The demand destruction and oversupply together caused unprecedented disruption to all sectors of the oil and gas markets, with a significant reduction in North American drilling and completion activity and its need for chemicals. While experiencing pricing and overall market compression in the oil and gas sector of the Chemistry Technologies segment, growth in the sanitizerour customer base. The Company’s domestic and disinfectant sector evolved as a natural fit with the Company’s core technical and manufacturing capabilities, with potential positive long-term opportunity for diversification and sustainability of the portfolio, representinginternational revenue for the Companyfirst half of 2021 decreased as demand from major customers and smaller operators has not returned to the pre-pandemic levels of first quarter 2020. In addition, revenue from two major customers was lost as a result of market consolidation in the second quarter of 2020.Permian basin. CT also granted price concessions due to maintain and obtain market share.
Chemistry Technologies gross margin (excluding depreciation and amortization)Loss from operations for the CT segment for the three and six months ended June 30, 2020, decreased $16.92021, increased $0.2 million, or 92.8%6.2%, and $52.1decreased $58.9 million, or 95.4%88.8%, respectively versus the same period of 2019, and as a percentage of revenue, decreased 36.1%, and 60.8% for the three and six months ended June 30, 2020. Gross margins were influenced by shifts in completion technologies to more cost efficient and simplified chemistry and engineering packages, as well as continued pressure on market pricing to maintain key accounts and available market share. Subsequently, the Company executed on a number of activities to reduce cost of sales, freight, personnel, and its operational cost structure to minimize the impacts of revenue declines and modified product mix.
Chemistry Technologies income from operations (excluding depreciation and amortization) for the three and six months ended June 30, 2020, improved $4.1 million, or 53.0%, and decreased $53.3 million or 410.3%, respectively versus the same period of 2019, and as a percentage of revenue, decreased 23.1%, and 225.4% for the three and six months ended June 30, 2020. The increase in loss during the six months ended June 20, 2020from operations is due to lower revenue and significantly lower expenses, primarily the result of no impairments in the first half of 2021 versus impairment charges of fixed and long-lived assets of $57.5 million and lower marginsin the same period of 2020. Additionally, unfavorable product mix contributed to the increased loss from operations as compared to 2021. Secondly, expenses decreased due to sales volumes and plant utilization recorded in the first quarter of 2020.2020 including a $2.3 million terpene purchase commitment loss with no comparable activity in 2021. Personnel costs declined period over period by $1.0 million, which included first quarter 2020 severance costs of $0.6 million for reduction in force actions. Office costs and equipment and facilities costs decreased a combined $0.6 million period over period from the consolidation of the Company’s physical facilities and equipment rentals to align with activity.

Data Analytics

 May 18 - June 30
 2020
Revenue$918
Gross margin370
Gross margin %40.3 %
Income from operations(1,151)
Income from operations %(125.4)%



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Data AnalyticsResults of Operations: Three and Six Months ended June 30, 2021 and May 18 -June 30, 2020
Three months ended June 30,Period May 18- June 30,Six months ended June 30,Period May 18- June 30,
2021202020212020
Revenue1,477 918 $2,945 $918 
Loss from operations(773)(1,151)(1,067)(1,151)

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On May 18, 2020, to June 30, 2020

Duringthe Company purchased JP3 and formed the DA segment. Segment revenue for the second quarter of 2020, the Company announced the purchase of JP3, an equipment and data company that automates real-time data and analytics to the energy industry to maximize the value of their hydrocarbons.

During the second quarter, revenue2021 was hindered by sluggish-to-nonexistent capital spending across the entire oil and gas market. The second quarter came with site lockdowns and extreme caution to prevent the spread of COVID-19. The segment finished the quarter with $0.9$1.5 million of revenue that came from existing JP3 customers.

Off-Balance Sheet Arrangements
There have been no transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “structured finance” or “special purpose entities” (“SPEs”), established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of June 30, 2020, which remained flat from the Company was not involved in any unconsolidated SPEs.first quarter 2021.
The Company has not made any guarantees to customers or vendors nor does the Company have any off-balance sheet arrangements or commitments that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, change in financial condition, revenue, expenses, results of operations, liquidity, capital expenditures, or capital resources that would be material to investors other than the long term terpene agreement discussed in Note 3 in Part I, Item I - Financial Statements of this Quarterly Report.
Critical Accounting Policies and Estimates
The Company’s Financial Statementsfinancial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).America. Preparation of these statements requires management to make judgments, estimates, and assumptions that affect the amounts reported in the financial statements and accompanying footnotes. Part II, Item 8 — Financial Statements and Supplementary Data, Note 2 of “Notes to Consolidated Financial Statements” and Part II, Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Critical Accounting Policies and Estimates” of the Company’s Annual Report, and the “Notes to Unaudited Condensed Consolidated Financial Statements” of this Quarterly Report describe the significant accounting policies and critical accounting estimates used to prepare the consolidated financial statements. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of the Company’s financial condition and results of operations and require management’s most subjective judgments. The Company regularly reviews and challenges judgments, assumptions and estimates related to critical accounting policies. The Company’s estimatespolicies, including goodwill and assumptions are based on historical experience and expected changes in the business environment; however, actual results may materially differ from the estimates.other intangible assets. There have been no significant changes in the Company’s critical accounting policies and estimates during the six months ended June 30, 2020. However, during the six months ended June 30, 2020, the Company evaluated and recorded remeasurement and impairment charges on right of use assets and fixed assets, respectively. Secondly, during the six months ended June 30, 2020, the Company acquired JP3 and recorded the fair value of net assets acquired as of the closing date of May 18, 2020.2021.
Recent Accounting Pronouncements
Recent accounting pronouncements which may impact the Company are described in Note 2, — “Recent Accounting Pronouncements”Pronouncements,” in Part I, Item 1 — “Financial Statements” of this Quarterly Report.
Capital Resources and Liquidity
Overview
The Company’s ongoing capital requirements relate to the Company's need to to acquire and maintain equipment and fund working capital requirements, and when the opportunities arise, to make strategic acquisitions and repurchase Company stock.requirements. During the first six months of 2020,2021, the Company funded capital requirements primarily with cash from operations and cash on hand, including proceeds from the sale of the CICT segment, received on March 1, 2019.
Historically, the Company’s primary source of debt financing was its $75 million Credit Facility with PNC Bank. Upon closing of the sale of the CICT segment, on March 1, 2019, the Company repaid the outstanding balance, interest, and fees related to the revolving credit facility, and subsequently terminated the Credit Facility.


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hand.
As of June 30, 2020,2021, the Company had available cash and cash equivalents of $59.9 million.$27.8 million, as compared to $38.7 million at December 31, 2020. The Company recorded an operating loss for the six months ended June 30, 2021 and recorded $11.2 million of net cash used for operating activities and $0.3 million of net cash used for financing activities. Cash used in investing activities was minimal.
Liquidity
The effects of the COVID-19 pandemic and the volatility in oil prices during 2020 and the first half of 2021 materially and adversely affected, and may continue to materially and adversely affect, the demand for oil and natural gas as well as for our services and products. While the full impact and duration of the COVID-19 outbreak is not yet known, we are closely monitoring the effects of the pandemic on commodity demands and on our customers, as well as on our operations and employees. See “COVID-19 Effects and Actions” for developments and possible effects.
The Company currently funds its operations and growth primarily from cash on hand. The ability of the Company to grow and be competitive in the marketplace is dependent on the availability of adequate capital. Access to capital is dependent, in large part, on the Company’s cash flows and the availability of and access to debt and equity financing. The Company has a history of losses and negative cash flows from operations and expects to utilize a significant amount of cash in operations in the following year. While we believe that our cash and liquid assets will provide us with sufficient financial resources to fund operations and meet its capital requirements and anticipated obligations as they become due, a prolonged COVID-19 impact, a slower than expected recovery of oil and gas markets, or reduced spending by our customers could have a negative impact on our liquidity.
Accordingly, while the Company believes that its existing cash will enable it to fund its operations and growth, the Company cannot guarantee the level of cash flows in the future. In the event that the Company’s existing cash on hand is not sufficient to fund operations, meet our capital requirements or satisfy the anticipated obligations as they become due, the Company expects to take further action to protect its liquidity position. Such actions may include, but are not limited to:
•Sale of non-core real estate properties;
•Sale-leaseback transactions of facilities;
•Sale of excess inventory and/or raw materials;

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•Entry into a borrowing facility with one or more lenders;
•Reducing executive salaries and/or board of directors’ fees, or making a portion of those fees or salaries in equity instead of cash;
•Reducing professional advisory fees and headcount; and
•Raising equity either in the public markets or via a private placement offering.
However, with respect to anticipated transactions, there can be no assurance that such matters can be implemented on acceptable terms. For a further discussion of the remainder of 2020,risks surrounding the Company’s access to capital, please see Item 1A, “Risk Factors” in the Company’s Annual Report.
The Company expects capital spending of approximately $2.0 million to $3.0 million for the Company’s Chemistry segment andbe less than $1.0 million to $2.0 million for the Company’s Data Analytics segment. The Company expects to fund operations and capital expenditures with internal cash on hand, including the PPP loan funded in April 2020 for $4.8 million to Flotek and $0.9 million to JP3, the tax refund of $6.1 million, and the release of $6.6 million from the indemnity escrow established pursuant to the sale of FCC to ADM effective February 28, 2019.
Any excess cash generated may be used for outside growth opportunities or retained for future use.2021.
Cash Flows
Consolidated cash flows by type of activity are noted below (in thousands):
 Six months ended June 30,
 2020 2019
Net cash used in operating activities$(29,216) $(6,344)
Net cash (used in) provided by investing activities(16,424) 151,363
Net cash provided by (used in) financing activities5,023
 (49,911)
Net cash provided by discontinued operations—
 16
Effect of changes in exchange rates on cash and cash equivalents(31) 2
Net (decrease) increase in cash and cash equivalents and restricted cash$(40,648) $95,126
 Six months ended June 30,
 20212020
Net cash used in operating activities$(11,242)$(29,216)
Net cash provided (used in) by investing activities43 (16,424)
Net cash (used in) provided by financing activities(273)5,023 
Effect of changes in exchange rates on cash and cash equivalents(31)(31)
Net change in cash, cash equivalents and restricted cash$(11,503)$(40,648)
Operating Activities
Net cash used in operating activities was $29.2$11.2 million and $6.3$29.2 million during the six months ended June 30, 20202021 and 2019,2020, respectively. Consolidated net loss for the six months ended June 30, 2021 and 2020, totaled $6.5 million and $73.5 million, respectively.
During the six months ended June 30, 2021, non-cash adjustments to net income totaled $1.8 million as compared to $62.1 million for the same period of 2020.
•For the six months ended June 30,2021, non-cash charges included $0.6 million for depreciation, which was lower than the six months ended June 30, 2020 due to asset impairments taken in 2020, and 2019, totaled $73.5a $0.3 million charge related to the fair value of contingent consideration, stock based compensation of $1.8 million and $28.0JP3 PPP loan forgiveness of $0.9 million.
•For the six months ended June 30, 2020, contributory non-cash adjustments consisted primarily of $57.5 million respectively. Theof impairment charges, which included a $30.2 million impairment of fixed assets, $19.9 million impairment of intangible assets and $7.4 million of impairment of right-of-use assets. In addition, non-cash charges included $2.7 million for depreciation and amortization.
During the six months ended June 30, 2021, changes in working capital provided $1.8 million of cash usedas compared to using $17.8 million for the same period of 2020.
•For the six months ended June 2021, the cash provided by working capital primarily resulted from routine operations, including a reduction in operating activities isaccounts receivable of $2.0 million, partially offset by a decrease in accrued liabilities of $1.0 million.
•For the six months ended June 30, 2020, the use of cash in working capital primarily due toresulted from a reduction in accrued liabilities and accounts payable of $26.9 million, which included two one-time payments made: one to FCCpayment of $15.8 million to amend the Company’sa long-term terpene supply agreement and one to ADM related topay $4.1 million for the final post-closing working capital adjustment related to the 2019 sale of the CICT segment in 2019.
During the six months ended June 30, 2020, non-cash adjustments to net income totaled $62.1 million. Contributory non-cash items consisted primarily of a $57.5 million impairment charge consisting of $30.2 million impairment on fixed assets, $15.2 million on impairment of intangibles, and$7.4 million impairment on ROU assets. Additional non-cash charges included $2.7 million for depreciationCompany’s Consumer and amortization, $0.5 million for allowance for doubtful accounts, $1.5 million for stock compensation expense, and $0.5 million for provision for excess and obsolete inventory.
During the six months ended June 30, 2019, non-cash adjustments to net income totaled $27.0 million. Contributory non-cash items consisted primarily of $17.9 million for changes to deferred income taxes driven by the valuation allowance recorded against deferred tax assets, $4.4 million for depreciation and amortization, $1.1 million on loss of disposal of assets,$0.5 million non-cash lease expense, and $1.7 million for stock compensation expense.
During the six months ended June 30, 2020, changes in working capital used $17.8 million in cash, primarily resulting from a decrease in accrued liabilities and accounts payable of $27.3 million, increaseIndustrial Chemistry Technologies segment. Decreases in accounts receivable, inventories and other current assets provided cash of $25.2 million, offset$15.4 million.

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Investing Activities
Net cash provided by an increase in income tax payable of $0.1 million and reducing income tax receivable by $6.3 million.
Duringinvesting activities for the six months ended June 30, 2019, changes in working capital used $5.3 million in cash, primarily resulting from a decrease in accrued liabilities and accounts payable of $14.4 million, increase in accounts receivable and inventories of $7.2 million partially offset by an increase in income tax payable of $1.2 million, and reducing income tax receivable , other current assets and restricted cash by $17.2 million.
Investing Activities
2021 was not material. Net cash used in investing activities was $16.4 million for the six months ended June 30, 2020. The cashCash used in investing activities is primarilyincluded $26.3 million from purchase of JP3 offset by cash provided of $9.8 million due to the acquisitionrelease of JP3 duringescrow amounts from the second quarter 2020.sales of Florida Chemical Company.
Financing Activities
Net cash provided by investingused in financing activities was $151.4$0.3 million for the six months ended June 30, 2019. Cash2021, primarily for purchases of common stock related to tax withholding requirements. Net cash provided by investing activities primarily included $152.2 million of proceeds from sale of business and $0.1 million of proceeds received from the sale of assets, partially offset by $0.8 million for capital expenditures and $0.2 million for the purchase of various patents.


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Financing Activities
Net cash generated through financing activities was $5.0 million for the six months ended June 30, 2020. Cash generated through financing activities2020, primarily included $4.8 million proceeds from borrowings under the PPP, and $0.4 million proceeds from the sale of common stock partially offset by $0.1 million cash used inproceeds received from the purchase of treasury stock.Paycheck Protection Program.
Net cash used in financing activities was $49.9 millionOff-Balance Sheet Arrangements

There have been no transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “structured finance” or “special purpose entities” (“SPEs”), established for the six months endedpurpose of facilitating off balance sheet arrangements or other contractually narrow or limited purposes. As of June 30, 2019, primarily due2021, the Company was not involved in any unconsolidated SPEs.

The Company has not made any guarantees to using $92.7 million for repayments of debt, offset by borrowings on revolving credit facility of $42.9 million.
Contractual Obligations
Cash flows from operationscustomers or vendors nor does the Company have any off-balance sheet arrangements or commitments that have, or are dependent onreasonably likely to have, a variety of factors, including fluctuations in operating results, accounts receivable collections, inventory management, and the timing of payments for goods and services. Correspondingly, the impact of contractual obligationscurrent or future effect on the Company’s financial condition, change in financial condition, revenue, expenses, results of operations, liquidity, andcapital expenditures, or capital resources that would be material to investors other than the long term terpene agreement discussed in future periods is analyzedNote 13 in conjunction with such factors.Part I, Item I – Financial Statements of this Quarterly Report.
Material contractual obligations consist of payments of finance and operating lease obligations. Contractual obligations at June 30, 2020, are as follows (in thousands):
 Payments Due by Period
 Total Less than 1 year 1 - 3 years 3 - 5 years More than 5 years
Finance lease obligations$213
 $70
 $101
 $42
 $—
Operating lease obligations13,969
 1,371
 2,593
 2,684
 7,321
Supply commitments for raw materials17,724
 1,974
 15,750
 —
 —
Total$32,390
 $3,899
 $18,444
 $2,726
 $7,321

Item  3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest rates, commodity prices and foreign currency exchange rates. There have been no material changes to the quantitative or qualitative disclosures about market risk set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of the Company’s Annual Report.
Item  4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures

The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The Company’s disclosure controls and procedures are also designed to ensure such information is accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance that control objectives are attained.

The Company previously identified material weaknessesdeficiencies in its internal control over financial reporting relating tothat represented material weaknesses as of December 31, 2020. Specifically, the ineffectiveCompany’s management determined that the Company did not, as of December 31, 2020, design and operating effectiveness ofmaintain effective internal controls over the elimination of intercompany profits in inventory, the recording of certain intangible assets and the operating effectiveness of controls relating to impairment analyses of fixed and long-lived assets.

In addition to thefinancial reporting. The material weaknesses mentioned above, during the preparation of the financial statements for the quarter ended June 30, 2020 the Company identified an error relating to the classification of cash flows from the Florida Chemical Company sale in 2019. Specifically, errors were identified relating to the classification of proceeds from the sale and treatment of funds released from escrow subsequent to the sale. Based on these evaluations, the Company has identified the material weaknesses in internal control of financial reporting relating torelate to: (1) ineffective design and operation of controls over nonrecurring transactions, including derecognitionrecognition of items and cash flow presentation relating to disposal transactions, ineffective design and operation of


39



controls over the elimination of intercompany profits in inventory, and operating ineffectiveness of controls relating to impairment evaluations.

evaluations; (2) ineffective design and operating effectiveness over forecasts used in business combinations and impairment evaluations; and (3) the ineffective design and operating effectiveness of the assessment of going concern.
The Company believes that, notwithstanding the material weaknesses mentioned above, the consolidated financial statements contained in this Form 10-Q and its previously issued financial statements,Quarterly Report present fairly, in all material respects, the consolidated financial positions,position, results of operations, comprehensive loss, stockholders’ equity, and cash flows of the Company and its subsidiaries in conformity with generally accepted accounting principles in the United States as of the dates and for the periods stated therein.

The Company’s management, including its principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures, as requireddefined by Rule 13a-15(e) and 15d-15(c)15d-15(e) of the

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Exchange Act as of June 30, 20202021, and has concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 20202021, due to the material weaknesses in internal control over financial reporting described above.

Remediation Plan and Status
As of June 30, 2020,The Company has implemented a remediation plan to address the material weaknesses discussed above have not been remediated. The Company implemented certain remediation action and continues to test and evaluate theidentified at December 31, 2020. Key elements of the remediation plan.
These elementsthis ongoing plan include:
•Implementing monitoring controls over the review and validation of both tangible and intangible assetsassets;
Expanding monthly close and consolidation procedures
Modifying the chart of accounts
Expanded monthly management review controls
•Expanding controls over impairments of goodwill and long-lived assetsassets;

•Enhancing specificity in the design and implementation of controls around nonrecurring, complex accounting activities, with the assistance of technical subject-matter experts;
•Implementing controls for forecasting and budgeting, to include additional process documentation and precision;
•Expanding monthly management review controls; and
•Enhancing existing control procedures around the quarterly going concern analysis process.
In 2021, the Company made a strategic decision to bring internal audit in-house and hired a director of internal audit to manage internal controls and the remediation plan. Through a structured process of testing and monitoring elements of the remediation plan, we expect the identified material weaknesses to be fully remediated by the end of 2021.
Changes in Internal Control Over Financial Reporting
Except for the remediation actions discussed above, thereThere have been no changes in the Company’s system of internal control over financial reporting (identified in connection with the evaluation required by Rule 13a-15(d) and Rule 15d-15(d) under the Exchange Act) during the three months ended June 30, 2020,2021, that have materially affected, or are reasonably likely to materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


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PART II - OTHER INFORMATION
Item  1. Legal Proceedings
Litigation
On March 26, 2021, the Company and Flotek Chemistry, LLC (“Flotek Chemistry”), a wholly-owned subsidiary of the Company, filed a lawsuit against Archer-Daniels-Midland Company (“ADM”), Florida Chemical Company, LLC (“FCC”) and Joshua A. Snively in state court in Harris County, Texas. The lawsuit claims damages relating to the terpene supply agreement between Flotek Chemistry and FCC and related breaches of fiduciary duty by Mr. Snively. Contemporaneously with the filing of the suit, Flotek Chemistry delivered a notice of termination of the terpene supply agreement.
Subsequent to the lawsuit described above, on April 5, 2021, ADM and FCC filed a lawsuit in the Delaware Court of Chancery seeking to enjoin the lawsuit filed in Texas and claiming damages under the terpene supply agreement and other matters. The Company views this lawsuit as a strategic response to the March 26, 2021 lawsuit filed by Flotek Chemistry and the Company in Texas.
The Company believes that, notwithstanding the termination of the supply agreement, it has sufficient terpene inventory and alternate terpene supply sources to meet its requirements for the foreseeable future. The Company does not expect that termination of the terpene supply agreement will have a material effect on its operations or ability to meet customer needs.
The Company is subject to other routine litigation and other claims that arise in the normal course of business. ManagementExcept as disclosed above, 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.

Item  1A. Risk Factors

The followingThere have been no material changes to the risk factor supplements the “Risk Factors” sectionfactors set forth in Part 1,I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed on March 16, 2020:Report.

The COVID-19 pandemic has significantly reduced demand for our services and may have a material adverse impact on our financial condition, results of operations and cash flows.

The effects of the COVID-19 (coronavirus) pandemic, including actions taken by businesses and governments, have resulted in a significant and swift reduction in international and U.S. economic activity. These effects have materially and adversely affected, and may continue to materially and adversely affect, the demand for oil and natural gas, as well as for our services and products. The decline in our customers’ demand for our services and products is likely to have a material adverse impact on our financial condition, results of operations and cash flows. In addition, we have adopted social distancing and work-from-home procedures, which have had and may continue to have an impact on the ability of employees and management of the Company to communicate and work efficiently.

While the full impact of the COVID-19 outbreak is not yet known, we are closely monitoring the effects of the pandemic on commodity demands and on our customers, as well as on our operations and employees. Any future development and effects will be highly uncertain and cannot be predicted, including the scope and duration of the pandemic; further adverse revenue, accounts receivable aging and collections, and net income effects; disruptions to our operations; third party providers’ ability to support our operations; customer shutdowns of oil and gas exploration and production; the effectiveness of our work from home arrangements; employee impacts from illness, school closures and other community response measures; any actions taken by governmental authorities and other third parties in response to the pandemic; and temporary closures of our facilities or the facilities of our customers and suppliers. The uncertain future development of this crisis could materially and adversely affect our business, operations, operating results, financial condition, liquidity or capital levels.




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Item  2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities

The Company’s stock compensation plans allow employees to elect to have shares withheld to satisfy their tax liabilities related to non-qualified stock options exercised or restricted stock vested or to pay the exercise price of the options. When this settlement method is elected by the employee, the Company repurchases the shares withheld upon vesting of the award stock.

On June 9, 2020, the board of directors of the Company rescinded the authorization to repurchase the Company’s stock that had been previously approved in June 2015.

Repurchases of the Company’s equity securities during the three months ended June 30, 20202021, that the Company made or were made on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act are as follows:
        
Period
Total Number of Shares Purchased (1)
Average Price Paid per Share
April 1, 2021 to April 30, 202156,219 $1.75 
May 1, 2021 to May 31, 2021— — 
June 1, 2021 to June 30, 2021— — 
Total56,219 
(1)     The Company purchases shares of its common stock (a) to satisfy tax withholding requirements and payment remittance obligations related to period vesting of restricted shares and exercise of non-qualified stock options and (b) to satisfy payments required for common stock upon the exercise of stock options.

Period
Total Number of Shares Purchased (1)
 Average Price Paid per Share
April 1, 2020 to April 30, 2020562
 $0.81
May 1, 2020 to May 31, 202040,040
 $0.99
June 1, 2020 to June 30, 20201,779
 $1.02
Total42,381
 
(1)The Company purchases shares of its common stock (a) to satisfy tax withholding requirements and payment remittance obligations related to period vesting of restricted shares and exercise of non-qualified stock options, (b) to satisfy payments required for common stock upon the exercise of stock options, and (c) as part of a publicly announced repurchase program on the open market.

Item  3. Defaults Upon Senior Securities
None.

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Item  4. Mine Safety Disclosures
Not applicable.

Item  5. Other Information
None.


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Item  6. Exhibits
Exhibit

Number
Description of Exhibit
2.1
Share Purchase Agreement, dated as of January 10, 2019, by and between the Company and ADM (portions of this exhibit have been omitted pursuant to a confidential treatment request, which has been granted) (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on March 4, 2019).1
2.2
Membership Interest Purchase Agreement, dated as of May 18, 2020, by and between the Company, JP3 Measurement, LLC, the Sellers party thereto, and John A. Cardwell, as Seller Representative) (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on May 19, 2020).1

3.1
Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q for the quarter ended September 30, 2007).
3.2
Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q for the quarter ended September 30, 2009).
3.3
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Flotek Industries, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on May 7, 2020).
3.4
Second Amended and Restated Bylaws, dated October 11, 2017as amended (incorporated by reference to Exhibit 3.13.4 to the Company’s Form 8-K10-K filed on October 17, 2017)March 16, 2021).
4.1
Form of Certificate of Common Stock (incorporated by reference to Appendix E to the Company’s Definitive Proxy Statement filed on September 27, 2001).
10.1
Promissory Note dated April 16, 2020 in favor of PNC Bank, National AssociationFlotek Industries, Inc. 2018 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on March 3,April 17, 2020). 1

10.2
Employment Agreement, dated May 18, 2020, between the Company and Matthew R. Thomas (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on May 19, 2020).

10.3
Employment Agreement, dated June 4, 2020, between the Company and TengBeng Koid (incorporated by reference toin Exhibit 10.1 to the Company’s Form 8-K filed on June 22, 2020).7, 2021)

10.4*
Separation and Release Agreement, dated July 28, 2020, between the Company and Elizabeth Wilkinson
31.1
31.1*
Rule 13a-14(a) Certification of Principal Executive Officer.
31.2*
Rule 13a-14(a) Certification of Principal Financial Officer.
32.1
32.1**
Section 1350 Certification of Principal Executive Officer.
32.2**
Section 1350 Certification of Principal Financial Officer.
101.INS*XBRL Instance Document.
101.SCH101*XBRL Schema Document.The following financial information from Flotek Industries, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2021, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Unaudited Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020, (ii) the Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020, (iii) the Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended June 30, 2021 and 2020, (iv) the Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020, (v) the Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020, and (vi) Notes to Condensed Consolidated Financial Statements.
101.CAL104*XBRL Calculation Linkbase Document.
101.LAB*XBRL Label Linkbase Document.
101.PRE*XBRL Presentation Linkbase Document.
101.DEF*XBRL Definition Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Filed herewith.
**
This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

1Schedules have been omitted pursuant to Item 601(b)(2)601(a)(5) of Regulation S-K. The Company undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC.



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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
FLOTEK INDUSTRIES, INC.
By:/s/    JOHN W. GIBSON, JR.
John W. Gibson, Jr.
President, Chief Executive Officer and
Chairman of the Board
FLOTEK INDUSTRIES, INC.
Date:
By:/s/    JOHN W. GIBSON, JR.
John W. Gibson, Jr.
President, Chief Executive Officer and
Chairman of the Board
Date:August 17, 20209, 2021
 
FLOTEK INDUSTRIES, INC.
By:/s/ MICHAEL E. BORTON
Michael E. Borton
Chief Financial Officer
FLOTEK INDUSTRIES, INC.
Date:
By:/s/ Michael Borton
Chief Financial Officer
Date:August 17, 20209, 2021


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