Flotek(FTK) - 2024 Q1 - Quarterly Report

Forward-Looking Statements This section outlines the nature and inherent uncertainties of forward-looking statements, emphasizing potential material differences from actual results - This report contains forward-looking statements, which are not historical facts but represent current assumptions and beliefs about future events, inherently uncertain and outside the Company's control. These statements include estimates, projections, and information related to the Company's business plan, objectives, and expected operating results[11] - Forward-looking statements are subject to risks and uncertainties that can cause actual results to differ materially from projections, as discussed in the Annual Report on Form 10-K for the year ended December 31, 2023, and subsequent SEC filings[13] PART I - FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's analysis Item 1. Financial Statements This section presents Flotek Industries, Inc.'s unaudited condensed consolidated financial statements for Q1 2024 and 2023, with accompanying notes Unaudited Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time Unaudited Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total Current Assets | $78,268 | $76,447 | | Total Assets | $155,850 | $157,513 | | Total Current Liabilities | $44,781 | $47,782 | | Total Liabilities | $51,952 | $55,553 | | Total Stockholders' Equity | $103,898 | $101,960 | - Total assets decreased slightly from $157.5 million at December 31, 2023, to $155.9 million at March 31, 2024. Total liabilities also decreased from $55.6 million to $52.0 million, while total stockholders' equity increased from $102.0 million to $103.9 million[19] Unaudited Condensed Consolidated Statements of Operations This statement details the company's revenues, costs, and net income or loss, reflecting operational performance Unaudited Condensed Consolidated Statements of Operations (in thousands) | Metric | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | | :--------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Total Revenues | $40,374 | $48,007 | | Cost of Sales | $31,553 | $46,127 | | Gross Profit | $8,821 | $1,880 | | Income from Operations | $2,108 | $18,511 | | Net Income | $1,562 | $21,343 | | Basic Income per Common Share | $0.05 | $1.30 | | Diluted Income (Loss) per Common Share | $0.05 | $(0.12) | - Total revenues decreased by 16% from $48.0 million in Q1 2023 to $40.4 million in Q1 2024, primarily due to lower related party activity. However, gross profit significantly increased from $1.9 million to $8.8 million, driven by accrued Contract Shortfall Fees and improved cost management[20][177][178] - Net income decreased substantially from $21.3 million in Q1 2023 to $1.6 million in Q1 2024, mainly due to a $26.1 million gain in fair value of Contract Consideration Convertible Notes Payable in Q1 2023 with no corresponding gain in Q1 2024[20][181] Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) This statement presents net income alongside other comprehensive income items, showing non-owner changes in equity Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net Income | $1,562 | $21,343 | | Foreign currency translation adjustment | $42 | $(21) | | Comprehensive Income | $1,604 | $21,322 | - Comprehensive income for Q1 2024 was $1.6 million, a significant decrease from $21.3 million in Q1 2023, primarily reflecting the change in net income[22] Unaudited Condensed Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities Cash Flow Activity (in thousands) | Cash Flow Activity | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash provided by operating activities | $3,887 | $1,140 | | Net cash used in investing activities | $(152) | $(157) | | Net cash used in financing activities | $(4,411) | $(818) | | Net change in cash and cash equivalents and restricted cash | $(634) | $144 | - Net cash provided by operating activities increased to $3.9 million in Q1 2024 from $1.1 million in Q1 2023, despite lower net income, due to changes in working capital and non-cash adjustments[24][200][201] - Net cash used in financing activities significantly increased to $4.4 million in Q1 2024, primarily due to net payments on the Asset-Based Loan (ABL), compared to $0.8 million in Q1 2023[24][203] Unaudited Condensed Consolidated Statements of Stockholders' Equity This statement tracks changes in equity components, including net income and stock transactions Stockholders' Equity (in thousands) | Metric | Balance, December 31, 2023 (in thousands) | Balance, March 31, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------- | :------------------------------------- | | Total Stockholders' Equity | $101,960 | $103,898 | | Net Income | N/A | $1,562 | | Additional Paid-in Capital | $463,140 | $463,484 | | Accumulated Deficit | $(326,806) | $(325,244) | - Total stockholders' equity increased by $1.9 million from December 31, 2023, to March 31, 2024, primarily driven by net income and stock compensation expense, partially offset by shares withheld for taxes[27] Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations of accounting policies and significant financial disclosures Note 1 — Organization and Nature of Operations This note describes the company's business segments, operational structure, and primary funding sources - Flotek Industries, Inc. operates in two segments: Chemistry Technologies (CT), which designs, develops, manufactures, and distributes green specialty chemicals for energy markets, and Data Analytics (DA), which provides real-time analytics for hydrocarbon streams[30][31][32] - The Company funds operations with cash on hand, an Asset-Based Loan (ABL), and other liquid assets. Liquidity is significantly dependent on operating cash flow, primarily from the ProFrac Agreement, which includes Contract Shortfall Fees[35] - As of March 31, 2024, related party receivables included $13.7 million in accrued Contract Shortfall Fees, comprising $5.0 million from 2023 (collected in April 2024) and $8.7 million from 2024 (due Q1 2025)[35] Note 2 — Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing financial statements - The financial statements are prepared in accordance with U.S. GAAP, assuming the Company will continue as a going concern, and reflect management's necessary adjustments for fair statement[34][37] - Key accounting policies include the application of the current expected credit loss (CECL) model for accounts receivable, amortization of contract assets over the ProFrac Agreement term, and recognition of revenue based on a five-step model when performance obligations are satisfied[42][45][61] - Recent accounting pronouncements include ASU No. 2023-09 (Improvements to Income Tax Disclosures) and ASU No. 2023-07 (Segment Reporting), both effective for fiscal years beginning after December 15, 2024, and 2023, respectively, with early adoption permitted. The Company is evaluating their impact[79][82] Note 3 — Revenue from Contracts with Customers This note disaggregates revenue and cost of sales by source and customer type Total Revenue Disaggregated by Source (in thousands) | Revenue Source | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--------------- | :-------------------------------- | :-------------------------------- | | Products | $39,106 | $46,767 | | Services | $1,268 | $1,240 | | Total Revenue | $40,374 | $48,007 | Total Cost of Sales Disaggregated (in thousands) | Cost of Sales Category | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--------------------- | :-------------------------------- | :-------------------------------- | | Tangible goods sold | $27,025 | $41,529 | | Services | $94 | $141 | | Other | $4,434 | $4,457 | | Total Cost of Sales | $31,553 | $46,127 | Cost of Sales Split by Customer Type (in thousands) | Customer Type | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :-------------- | :-------------------------------- | :-------------------------------- | | External | $12,952 | $11,196 | | Related Parties | $18,601 | $34,931 | | Total | $31,553 | $46,127 | Note 4 - Contract Assets This note details the company's contract assets, their amortization, and recoverability Contract Assets (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :---------------- | | Contract assets | $83,060 | $83,060 | | Less accumulated amortization | $(9,672) | $(8,405) | | Contract assets, net | $73,388 | $74,655 | | Less current contract assets | $(7,019) | $(5,836) | | Contract assets, long term | $66,369 | $68,820 | - Contract assets, primarily related to the ProFrac Agreement, were $73.4 million net as of March 31, 2024. The Company recognized $1.3 million in amortization of contract assets for both Q1 2024 and Q1 2023, recorded as a reduction of related party revenue[88][89] - No impairment loss was recognized for contract assets as of March 31, 2024, based on recoverability tests[90] Note 5 — Inventories This note provides a breakdown of inventory components and related reserves Inventories (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | Raw materials | $5,618 | $5,299 | | Finished goods | $14,281 | $13,660 | | Inventories | $19,899 | $18,959 | | Less reserve for excess and obsolete inventory | $(6,028) | $(6,121) | | Inventories, net | $13,871 | $12,838 | - Net inventories increased to $13.9 million at March 31, 2024, from $12.8 million at December 31, 2023. Additional reserves for excess and obsolete inventory were $0.3 million in Q1 2024, primarily for the CT segment[92] Note 6 — Property and Equipment This note details the company's property and equipment, net of accumulated depreciation, and related expenses Property and Equipment (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :---------------- | | Property and equipment | $17,195 | $17,043 | | Less accumulated depreciation | $(12,134) | $(11,914) | | Property and equipment, net | $5,061 | $5,129 | - Net property and equipment remained relatively stable at $5.1 million as of March 31, 2024. Depreciation expense was $0.2 million for both Q1 2024 and Q1 2023[93] Note 7 — Leases This note outlines the company's lease expenses and related right-of-use assets and liabilities Lease Expense (in thousands) | Lease Type | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Operating lease expense | $784 | $869 | | Finance lease expense | $4 | $5 | | Short-term lease expense | $259 | $41 | | Total lease expense | $1,047 | $915 | Supplemental Balance Sheet Information Related to Leases (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | Operating lease right-of-use assets | $4,336 | $5,030 | | Total operating lease liabilities | $9,204 | $10,125 | | Total finance lease liabilities | $13 | $22 | - Total lease expense increased to $1.0 million in Q1 2024 from $0.9 million in Q1 2023, primarily due to higher short-term lease expenses. Operating lease right-of-use assets and liabilities decreased slightly[94][95] Note 8 — Accrued Liabilities This note details the composition of current accrued liabilities, including payroll and deferred revenue Current Accrued Liabilities (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | Severance costs | $417 | $648 | | Payroll and benefits | $937 | $2,138 | | Legal costs | $201 | $37 | | Contingent liability for earn-out provision | $30 | $56 | | Deferred revenue, current | $303 | $550 | | Taxes other than income taxes | $182 | $656 | | Other | $1,295 | $1,805 | | Total current accrued liabilities | $3,365 | $5,890 | - Total current accrued liabilities decreased significantly to $3.4 million at March 31, 2024, from $5.9 million at December 31, 2023, driven by decreases in payroll and benefits, taxes, and other accrued liabilities[97] Note 9 — Debt and Convertible Notes Payable This note describes the company's debt instruments, including the ABL and converted convertible notes - The Company entered into a 24-month Asset-Based Loan (ABL) on August 14, 2023, providing up to $13.8 million in credit availability. As of March 31, 2024, $3.1 million was outstanding with approximately $6.0 million available, bearing interest at Wall Street Journal Prime Rate plus 2.5% (11.0% at March 31, 2024)[98][99][100] - The remaining principal of the Paycheck Protection Program (PPP) loan was $0.19 million as of March 31, 2024, with $4.5 million of the loan and accrued interest forgiven in January 2023[102][103] - All Convertible Notes Payable and Contract Consideration Convertible Notes Payable were converted into common stock or warrants during 2023, eliminating these liabilities from the balance sheet[105][106][109][112] Note 10 — Fair Value Measurements This note explains the fair value hierarchy for financial instruments and contingent earn-out consideration - The Company categorizes financial assets and liabilities using a three-tier fair value hierarchy (Level 1, 2, 3). Most current financial instruments approximate fair value due to their short-term nature[113][114] Liabilities Measured at Fair Value on a Recurring Basis (in thousands) | Metric | March 31, 2024 (Level 3) | December 31, 2023 (Level 3) | | :------------------------ | :----------------------- | :-------------------------- | | Contingent earnout consideration | $30 | $56 | | Total | $30 | $56 | - The estimated fair value of the contingent earn-out provision decreased from $56 thousand at December 31, 2023, to $30 thousand at March 31, 2024, valued using a Monte Carlo model[115][116] Note 11 — Income Taxes This note reconciles the effective income tax rate and discusses net operating loss carryforwards Effective Income Tax Rate Reconciliation | Item | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | U.S. federal statutory tax rate | 21.0 % | 21.0 % | | State income taxes, net of federal benefit | 13.5 % | — % | | Change in valuation allowance | (18.8) % | (20.5) % | | Effective income tax rate | 13.5 % | — % | - As of March 31, 2024, the Company had U.S. net operating loss carryforwards (NOLs) of $194.8 million, with $46.4 million expiring from 2029-2037 and $148.4 million with an indefinite carryforward period. The ability to use pre-2023 NOLs is limited by Section 382 due to an ownership change in 2023[124] Note 12 — Commitments and Contingencies This note addresses potential impacts from litigation, credit risk, and cash concentrations - The Company is subject to routine litigation and other claims in the normal course of business, but management is not aware of any pending or threatened lawsuits expected to have a material effect on financial position, results of operations, or liquidity[125] - The Company faces concentrations of credit risk within trade accounts receivable and related party accounts receivable, as collateral is generally not required. Cash is concentrated in three major U.S. financial institutions, with balances often exceeding insurable amounts[126] Note 13 — Stockholders' Equity This note details changes in stockholders' equity, including the reverse stock split and convertible note conversions - A 1-to-6 reverse stock split was completed on September 25, 2023, converting 184,438,695 issued and outstanding shares into 30,772,837 shares, with no effect on par value or authorized shares[127][128] - All Convertible Notes Payable and Contract Consideration Convertible Notes Payable were converted into common stock or Pre-Funded Warrants during 2023, significantly impacting the number of outstanding shares and additional paid-in capital[131][133][134] - ProFrac Holdings II, LLC paid $19.5 million for June 2022 Warrants, allowing purchase of 2,184,140 post-Reverse Stock Split shares at $0.0001 per share, subject to a $4.5 million exercise fee[135] Note 14 — Earnings (Loss) Per Share This note presents basic and diluted earnings per share calculations, reflecting net income and outstanding shares Earnings (Loss) Per Common Share (in thousands, except per share data) | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income for basic earnings per share | $1,562 | $21,343 | | Adjusted net income (loss) for diluted earnings per share | $1,562 | $(3,181) | | Basic weighted average shares outstanding | 29,431 | 16,468 | | Diluted weighted average shares outstanding | 30,316 | 26,462 | | Basic earnings per share | $0.05 | $1.30 | | Diluted earnings (loss) per share | $0.05 | $(0.12) | - Basic EPS decreased from $1.30 in Q1 2023 to $0.05 in Q1 2024, while diluted EPS changed from a loss of $(0.12) to an income of $0.05, reflecting the significant non-cash gain in fair value of convertible notes in Q1 2023 and increased weighted average shares outstanding[139] Note 15 — Supplemental Cash Flow Information This note provides additional details on cash flow items, including interest paid and non-cash financing Supplemental Cash Flow Information (in thousands) | Item | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Interest paid | $210 | $18 | | Conversion of convertible notes payable to common stock | — | $8,996 | | Conversion of convertible notes payable to February 2023 Warrants | — | $11,040 | | Conversion of Initial Contract Consideration Convertible Notes Payable to February 2023 Warrants | — | $15,092 | - Interest paid increased significantly to $0.21 million in Q1 2024 from $0.018 million in Q1 2023. Non-cash financing activities in Q1 2023 included substantial conversions of convertible notes and warrants, which did not recur in Q1 2024[140] Note 16— Related Party Transactions This note details transactions with related parties, particularly the ProFrac Agreement - The Company has a long-term supply agreement (ProFrac Agreement) with ProFrac Services, LLC, which includes minimum purchase obligations and Contract Shortfall Fees if volumes are not met[141][142] - For Q1 2024, related party revenues included $8.7 million in accrued Contract Shortfall Fees, as the Company does not expect minimum purchase requirements to be met for the current measurement period (Jan 1 - Dec 31, 2024). No such fees were reflected in Q1 2023[144] Revenues and Accounts Receivable from ProFrac Services, LLC (in thousands) | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Revenues from ProFrac Services, LLC | $27,194 | $36,355 | | Cost of sales attributable to these revenues | $18,601 | $34,931 | | Accounts receivable from ProFrac Services, LLC (as of period end) | $38,655 | N/A (Dec 31, 2023: $34,569) | Note 17 — Business Segment, Geographic and Major Customer Information This note provides disaggregated financial information by business segment and major customer - Flotek operates in two reportable segments: Chemistry Technologies (CT) and Data Analytics (DA). Performance is assessed based on segment operating income (loss)[149][150][151] Segment Revenue and Operating Income (in thousands) | Segment | Three months ended March 31, 2024 Revenue | Three months ended March 31, 2023 Revenue | Three months ended March 31, 2024 Income (Loss) from Operations | Three months ended March 31, 2023 Income (Loss) from Operations | | :---------------- | :-------------------------------------- | :-------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Chemistry Technologies | $38,699 | $45,490 | $6,106 | $23,379 | | Data Analytics | $1,675 | $2,517 | $(424) | $457 | | Corporate and Other | — | — | $(3,574) | $(5,325) | | Total | $40,374 | $48,007 | $2,108 | $18,511 | - Customer A (ProFrac Services, LLC) accounted for 67.4% of consolidated revenue in Q1 2024, down from 75.7% in Q1 2023, indicating a continued high concentration of revenue from a single related party[157] Note 18 — Subsequent Events This note discloses any significant events that occurred after the balance sheet date - No material events requiring recognition or disclosure have occurred subsequent to March 31, 2024, through May 9, 2024[159] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's discussion and analysis of Flotek's financial condition and results Executive Summary This summary introduces Flotek as a technology-driven green chemistry and data company in energy markets - Flotek is a technology-driven, specialty green chemistry and data technology company focused on reducing the environmental impact of energy across industrial and commercial markets[162] - The Company operates through two segments: Chemistry Technologies (CT) and Data Analytics (DA), both supported by Research and Innovation (R&I) capabilities[163] Company Overview This section describes the Chemistry Technologies and Data Analytics segments and their offerings - The CT segment provides sustainable, optimized chemistry solutions, including proprietary green chemistries and logistics, to improve customers' return on invested capital, lower operational costs, and provide environmental benefits, serving energy and industrial markets[164][165] - The DA segment delivers real-time information and insights using field-deployable, in-line optical near-infra-red spectrometers with advanced chemometrics, AI, and machine learning, enabling operational optimization, emissions reduction, and carbon intensity reduction[168][169] - Research & Innovation (R&I) supports both segments through green chemistry formulation, EPA regulatory guidance, technical support, and new technology projects, with Q1 2024 R&D expense at $0.4 million[171] Outlook This section provides insights into the energy market, digital analytics, and supply chain challenges - The energy market outlook remains strong despite near-term volatility, with expected stable to increased activity in oil-weighted basins and stable to decreased activity in gas-weighted basins over the next 12 months[173] - Digital analytics, particularly Verax™ analyzers, are gaining traction in North American markets for real-time compositional data, with new applications like AIDA (Automated Interface Detection Algorithm) enhancing value by reducing transmix and optimizing field gas for diesel substitution[174] - Supply chain issues for the next 12 months include fluctuating freight costs, raw material availability, labor shortages, and demand forecasting, with military conflicts potentially causing disruptions[175][176] Consolidated Results of Operations This section analyzes the company's overall financial performance, including revenue, gross profit, and net income Consolidated Financial Performance (in thousands) | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Change (YoY) | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Total Revenues | $40,374 | $48,007 | -16% | | Cost of Sales | $31,553 | $46,127 | -32% | | Gross Profit | $8,821 | $1,880 | +369% | | Gross Profit % | 21.8% | 3.9% | +17.9 pp | | Income from Operations | $2,108 | $18,511 | -88.6% | | Net Income | $1,562 | $21,342 | -92.7% | - Consolidated revenue decreased by $7.6 million (16%) YoY, primarily due to lower related party activity, partially offset by $8.7 million in accrued Contract Shortfall Fees and increased external customer revenue[177] - Gross profit increased by $6.9 million, and gross profit percentage improved significantly to 21.8% from 3.9% YoY, driven by accrued Contract Shortfall Fees (which have no associated costs) and cost management initiatives[178][181] - Net income decreased by $19.8 million YoY, mainly due to a $26.1 million gain in fair value of Contract Consideration Convertible Notes Payable in Q1 2023 with no corresponding gain in Q1 2024[181] Results by Segment This section breaks down financial performance by Chemistry Technologies and Data Analytics segments Chemistry Technologies (CT) Segment Performance (in thousands) | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Revenue from external customers | $11,685 | $9,225 | | Revenue from related party | $27,014 | $36,265 | | Income from operations | $6,106 | $23,379 | - CT external customer revenue increased by 27% YoY, driven by domestic activity. Related party revenue decreased by 26% YoY, primarily due to decreased activity, partially offset by $8.7 million in accrued Contract Shortfall Fees[184] Data Analytics (DA) Segment Performance (in thousands) | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Revenue from external customers | $1,495 | $2,427 | | Revenue from related party | $180 | $90 | | (Loss) income from operations | $(424) | $457 | - DA external customer revenue decreased by 38% YoY due to reduced unit sales. The segment shifted from an operating income of $0.46 million in Q1 2023 to an operating loss of $(0.42) million in Q1 2024, driven by decreased activity[186][187] Capital Resources and Liquidity This section discusses the company's cash position, available credit, and ability to fund operations - As of March 31, 2024, the Company had $5.2 million in unrestricted cash and cash equivalents, down from $5.9 million at December 31, 2023. Available borrowings under the ABL were approximately $8.0 million at May 7, 2024[190] - The Company believes it has sufficient financial resources to fund operations and meet obligations for the next twelve months, based on future cash flows from operations (including Contract Shortfall Fees), cash on hand, and ABL availability[196][198] Consolidated Cash Flows (in thousands) | Cash Flow Activity | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $3,887 | $1,140 | | Net cash used in investing activities | $(152) | $(157) | | Net cash used in financing activities | $(4,411) | $(818) | | Net change in cash and cash equivalents and restricted cash | $(634) | $144 | Item 3. Quantitative and Qualitative Disclosures about Market Risk This section addresses the company's exposure to market risks, including raw material prices and foreign currency rates - The Company's primary market risks include changes in raw material prices, freight costs, and foreign currency exchange rates[205] - No material changes to quantitative or qualitative disclosures about market risk have occurred since the 2023 Annual Report[205] Item 4. Controls and Procedures This section details the evaluation of disclosure controls and internal control over financial reporting - The Company's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2024, ensuring timely and accurate reporting of information[206][207] - There have been no material changes in the Company's internal control over financial reporting during the three months ended March 31, 2024[208] PART II - OTHER INFORMATION This part covers additional disclosures including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings This section confirms no material changes in legal proceedings from the 2023 Annual Report - No material changes in legal proceedings have occurred since the 2023 Annual Report, other than those described in Note 12, 'Commitments and Contingencies'[211] Item 1A. Risk Factors This section directs readers to consider the risk factors outlined in the 2023 Annual Report - Readers should consider the risk factors detailed in 'Item 1A.-Risk Factors' of the 2023 Annual Report[212] - As of March 31, 2024, there have been no material changes to the Company's risk factors from those presented in the Annual Report[212] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities and details issuer repurchases - There were no unregistered sales of equity securities during the three months ended March 31, 2024[213] Issuer Repurchases of Equity Securities | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------------------------- | :----------------------------- | :--------------------------- | | January 1, 2024 to January 31, 2024 | 739 | $3.60 | | February 1, 2024 to February 29, 2024 | — | — | | March 1, 2024 to March 31, 2024 | 2,500 | $2.79 | | Total | 3,239 | | - The Company repurchases shares to satisfy tax withholding requirements and payment remittance obligations related to vesting of restricted shares and exercise of non-qualified stock options[214] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred during the period[215] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to Flotek Industries, Inc[215] Item 5. Other Information This section confirms that there is no other information to report for the period - No other information is reported in this section[216] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including agreements and certifications - The report includes exhibits such as the Membership Interest Purchase Agreement, Amended and Restated Certificate of Incorporation, Bylaws, Forms of Convertible Note and Pre-Funded Warrant, Employment Agreement, and various certifications (Rule 13a-14(a), Section 1350)[217] - XBRL Instance, Schema, Calculation, Label, Presentation, and Definition Linkbase Documents are also filed as exhibits[217]