FLOTEK INDUSTRIES INC/CN/ [FTK] Filings

10-Q 1 ftk-20240630.htm 10-Q ftk-20240630


UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-Q

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended June 30, 2024
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)

Delaware

90-0023731

(State of other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

5775 N. Sam Houston Parkway W., Suite 400, Houston, TX

77086

(Address of principal executive offices)

(Zip Code)

(713) 849-9911

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	FTK	New 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 ☐ 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 ☒

At August 5, 2024, there were 29,810,978 outstanding shares of the registrant’s common stock, $0.0001 par value.

TABLE OF CONTENTS


Forward-Looking Statements		3

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023	4
	Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023	5
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2024 and 2023	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023	7
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023	8
	Notes to Unaudited Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36

Item 4.	Controls and Procedures	36

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults Upon Senior Securities	37

Item 4.	Mine Safety Disclosures	37

Item 5.	Other Information	37

Item 6.	Exhibits	38


SIGNATURES		39

FORWARD-LOOKING STATEMENTS

In this Quarterly Report on Form 10-Q (this “Quarterly Report”), unless the context otherwise requires, the terms “Flotek,” the "Company," "we," "us" and "our" refer to Flotek Industries, Inc. and its wholly-owned subsidiaries.

This Quarterly Report on Form 10-Q, 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. Forward-looking statements are not historical facts, but instead represent the current assumptions and beliefs regarding future events of Flotek, 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,” “commit,” “budget,” “aim,” “potential,” “schedule,” “continue,” “intend,” “expect,” “plan,” “forecast,” “target,” “think,” “likely,” “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 may also include statements regarding the anticipated performance under long-term supply agreements or amendments thereto and the potential value thereof or potential revenue or liquidated damages thereunder. 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, 2023 (“Annual Report” or “2023 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 15, 2024, 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.

In certain places in this Quarterly Report on Form 10-Q, we may refer to statements provided by third parties that purport to describe trends or developments in supply chain or energy exploration and production activity and we specifically disclaim any responsibility for the accuracy and completeness of such information and have undertaken no steps to update or independently verify such information.

The following information contained in this Quarterly Report on Form 10-Q should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in Part 1, Item 1 of this Quarterly Report on Form 10-Q and related disclosures and our 2023 Annual Report.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

FLOTEK INDUSTRIES INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	June 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	4,777	$	5,851
Restricted cash	101		102
Accounts receivable, net of allowance for credit losses of $410 and $745 at June 30, 2024 and December 31, 2023, respectively	13,316		13,687
Accounts receivable, related party, net of allowance for credit losses of $0 at each of June 30, 2024 and December 31, 2023, respectively	40,049		34,569
Inventories, net	12,142		12,838


Other current assets	2,834		3,564
Current contract assets	5,786		5,836
Total current assets	79,005		76,447
Long-term contract assets	66,121		68,820
Property and equipment, net	4,987		5,129
Operating lease right-of-use assets	4,184		5,030
Deferred tax assets, net	84		300
Other long-term assets	1,659		1,787
TOTAL ASSETS	$	156,040	$	157,513

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	31,755	$	31,705
Accrued liabilities	3,026		5,890
Income taxes payable	35		45

Current portion of operating lease liabilities	1,866		2,449
Current portion of finance lease liabilities	3		22
Asset-based loan	5,798		7,492
Current portion of long-term debt	149		179


Total current liabilities	42,632		47,782
Deferred revenue, long-term	35		35
Long-term operating lease liabilities	7,139		7,676

Long-term debt	—		60
TOTAL LIABILITIES	49,806		55,553
Stockholders’ equity:
Preferred stock, $0.0001 par value, 100,000 shares authorized; no shares issued and outstanding	—		—
Common stock, $0.0001 par value, 240,000,000 shares authorized; 30,866,597 shares issued and 29,759,154 shares outstanding at June 30, 2024; 30,772,837 shares issued and 29,664,130 shares outstanding at December 31, 2023 (As adjusted, see Note 13)	3		3
Additional paid-in capital (As adjusted, see Note 13)	463,844		463,140
Accumulated other comprehensive income	185		127
Accumulated deficit	(323,270)		(326,806)
Treasury stock, at cost; 1,107,442 and 1,108,707 shares at June 30, 2024 and December 31, 2023, respectively (As adjusted, see Note 13)	(34,528)		(34,504)
Total stockholders’ equity	106,234		101,960
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	156,040	$	157,513

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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,
	2024		2023		2024		2023
Revenue:
Revenue from external customers	$	18,191	$	17,820	$	31,371	$	29,472
Revenue from related party	27,961		32,774		55,155		69,130
Total revenues	46,152		50,594		86,526		98,602
Cost of sales	36,982		46,690		68,535		92,817
Gross profit	9,170		3,904		17,991		5,785
Operating costs and expenses:
Selling, general, and administrative	6,259		8,351		12,342		14,803
Depreciation	222		174		442		349
Research and development	481		860		888		1,474
Severance costs	20		(2,279)		23		(56)
Gain on sale of property and equipment	(34)		—		(34)		—
Gain in fair value of Contract Consideration Convertible Notes Payable	—		(3,874)		—		(29,969)
Total operating costs and expenses	6,948		3,232		13,661		(13,399)
Income from operations	2,222		672		4,330		19,184
Other income (expense):
Paycheck protection plan loan forgiveness	—		—		—		4,522
Interest expense	(308)		(705)		(586)		(2,377)
Other income, net	75		19		49		9
Total other income (expense)	(233)		(686)		(537)		2,154
Income (loss) before income taxes	1,989		(14)		3,793		21,338
Income tax expense	(15)		(7)		(257)		(16)
Net income (loss)	$	1,974	$	(21)	$	3,536	$	21,322










Income (loss) per common share (As adjusted, see Note 14):
Basic	$	0.07	$	—	$	0.12	$	1.06
Diluted	$	0.06	$	(0.11)	$	0.12	$	(0.23)










Weighted average common shares (As adjusted, see Note 14):
Weighted average common shares used in computing basic income (loss) per common share	29,449		23,906		29,440		20,207
Weighted average common shares used in computing diluted income (loss) per common share	30,668		28,250		30,512		27,361

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

FLOTEK INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Net income (loss)	$	1,974	$	(21)	$	3,536	$	21,322
Other comprehensive income (loss):
Foreign currency translation adjustment	16		(13)		58		(34)

Comprehensive income (loss)	$	1,990	$	(34)	$	3,594	$	21,288

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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


	Six months ended June 30,
	2024		2023
Cash flows from operating activities:
Net income	$	3,536	$	21,322
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Change in fair value of contingent consideration	(27)		(324)
Change in fair value of Contract Consideration Convertible Notes Payable	—		(29,969)
Amortization of convertible note issuance cost	—		83
Paid-in-kind interest expense	—		2,284
Amortization of contract assets	2,749		2,390
Depreciation	442		349
Amortization of asset-based loan origination costs	170		—
Provision for credit losses, net of recoveries	79		63
Provision for excess and obsolete inventory	433		497
Gain on sale of property and equipment	(34)		—

Non-cash lease expense	1,236		1,621
Stock compensation expense	642		(836)
Deferred income tax expense	216		—
Paycheck protection plan loan forgiveness	—		(4,522)
Changes in current assets and liabilities:
Accounts receivable	292		2,218
Accounts receivable, related party	(5,480)		(350)
Inventories	192		(3,158)
Other assets	688		(6)

Accounts payable	50		11,574
Accrued liabilities	(2,837)		(3,491)
Operating lease liabilities	(1,510)		(1,886)
Income taxes payable	(10)		(85)
Interest payable	—		(8)

Net cash provided by (used in) operating activities	827		(2,234)
Cash flows from investing activities:
Capital expenditures	(229)		(292)
Proceeds from sale of assets	34		—



Net cash used in investing activities	(195)		(292)
Cash flows from financing activities:
Payment for forfeited stock options	—		(617)
Payments on long term debt	(90)		(60)
Proceeds from asset-based loan	83,300		—
Payments on asset-based loan	(84,994)		—





Payments to tax authorities for shares withheld from employees	(24)		(229)
Proceeds from issuance of stock	62		33
Payments for finance leases	(19)		(15)

Net cash used in financing activities	(1,765)		(888)




Effect of changes in exchange rates on cash and cash equivalents	58		(34)
Net change in cash and cash equivalents and restricted cash	(1,075)		(3,448)
Cash and cash equivalents at the beginning of period	5,851		12,290
Restricted cash at the beginning of period	102		100
Cash and cash equivalents and restricted cash at beginning of period	5,953		12,390
Cash and cash equivalents at end of period	4,777		8,841
Restricted cash at the end of period	101		101
Cash and cash equivalents and restricted cash at end of period	$	4,878	$	8,942

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

FLOTEK INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)


Three months ended June 30, 2024
	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares Issued	Par Value		Shares	Cost
Balance, March 31, 2024	30,773	$	3	1,112	$	(34,514)	$	463,484	$	169	$	(325,244)	$	103,898
Net income	—	—		—	—		—		—		1,974		1,974
Foreign currency translation adjustment	—	—		—	—		—		16		—		16
Stock issued under employee stock purchase plan	—	—		(9)	—		28		—		—		28
Restricted stock granted	94	—		—	—		—		—		—		—



Stock compensation expense	—	—		—	—		332		—		—		332
Shares withheld to cover taxes	—	—		4	(14)		—		—		—		(14)
Balance, June 30, 2024	30,867	$	3	1,107	$	(34,528)	$	463,844	$	185	$	(323,270)	$	106,234


Three months ended June 30, 2023
	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares Issued	Par Value		Shares	Cost
	(As adjusted, see Note 13)
Balance, March 31, 2023	15,768	$	2	1,074	$	(34,451)	$	421,603	$	160	$	(330,176)	$	57,138
Net loss	—	—		—	—		—		—		(21)		(21)
Foreign currency translation adjustment	—	—		—	—		—		(13)		—		(13)
Stock issued under employee stock purchase plan	—	—		(4)	—		13		—		—		13

Restricted stock forfeited	—	—		36	—		—		—		—		—
Restricted stock units vested	18	—		—	—		—		—		—		—

Stock compensation expense	—	—		—	—		276		—		—		276
Shares withheld to cover taxes	—	—		7	(29)		—		—		—		(29)


Conversion of Amended ProFrac Agreement Contract Consideration Convertible Notes Payable to Common Stock	10,583	1		—	—		40,637		—		—		40,638
Balance, June 30, 2023	26,369	$	3	1,113	$	(34,480)	$	462,529	$	147	$	(330,197)	$	98,002

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

FLOTEK INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(continued)

(in thousands)


Six months ended June 30, 2024
	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares Issued	Par Value		Shares	Cost
Balance, December 31, 2023	30,773	$	3	1,109	$	(34,504)	$	463,140	$	127	$	(326,806)	$	101,960
Net income	—	—		—	—		—		—		3,536		3,536
Foreign currency translation adjustment	—	—		—	—		—		58		—		58
Stock issued under employee stock purchase plan	—	—		(19)	—		62		—		—		62
Restricted stock granted	94	—		—	—		—		—		—		—
Restricted stock forfeited	—	—		11	—		—		—		—		—


Stock compensation expense	—	—		—	—		642		—		—		642
Shares withheld to cover taxes	—	—		6	(24)		—		—		—		(24)
Balance, June 30, 2024	30,867	$	3	1,107	$	(34,528)	$	463,844	$	185	$	(323,270)	$	106,234


Six months ended June 30, 2023
	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares Issued	Par Value		Shares	Cost
	(As adjusted, see Note 13)
Balance, December 31, 2022	13,986	$	1	1,021	$	(34,251)	$	388,184	$	181	$	(351,519)	$	2,596
Net income	—	—		—	—		—		—		21,322		21,322
Foreign currency translation adjustment	—	—		—	—		—		(34)		—		(34)

Stock issued under employee stock purchase plan	—	—		(8)	—		33		—		—		33



Restricted stock granted	2	—		—	—		—		—		—		—
Restricted stock forfeited	(7)	—		64	—		—		—		—		—
Restricted stock units vested	82	—		—	—		—		—		—		—
Forfeited stock options purchased	—	—		—	—		(617)		—		—		(617)
Stock compensation expense	—	—			—		(836)		—		—		(836)
Shares withheld to cover taxes	—	—		36	(229)		—		—		—		(229)
Issuance of stock warrants, net of transaction fee	—	—		—	—		15,092		—		—		15,092
Equity contribution	—	—		—	—		11,040		—		—		11,040
Conversion of convertible notes payable to Common Stock	1,723	1		—	—		8,996		—		—		8,997
Conversion of Amended ProFrac Agreement Contract Consideration Convertible Notes Payable to Common Stock	10,583	1		—	—		40,637		—		—		40,638
Balance, June 30, 2023	26,369	$	3	1,113	$	(34,480)	$	462,529	$	147	$	(330,197)	$	98,002

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

FLOTEK INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Organization and Nature of Operations

General

Flotek creates unique solutions to reduce the environmental impact of energy on air, water, land and people. A technology-driven, specialty green chemistry and data company, Flotek helps customers across industrial and commercial markets improve their environmental performance. The Company serves customer needs for both domestic and international energy markets.

The Company’s Chemistry Technologies (“CT”) segment designs, develops, manufactures, packages and distributes green specialty chemicals that help customers improve their return on invested capital, lower operational costs and realize tangible environmental benefits aimed at enhancing the profitability of hydrocarbon producers.

The Company’s Data Analytics (“DA”) segment aims to enable users to maximize the value of their hydrocarbon associated processes by providing analytics associated with their hydrocarbon streams in seconds rather than minutes or days. The real-time access to information can prevent waste, reduce reprocessing and allow users to pursue automation of their hydrocarbon streams to maximize their profitability.

The Company’s two operating segments, CT and DA, are supported by its Research & Innovation advanced laboratory capabilities. For further discussion of our operations and segments, see Note 17, “Business Segment, Geographic and Major Customer Information.”

As used herein, “Flotek,” the “Company,” “we,” “our” and “us” refers to Flotek Industries, Inc. and/or the Company’s wholly-owned subsidiaries. The use of these terms is not intended to connote any particular corporate status or relationship.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements reflect all adjustments, in the opinion of management, necessary for the fair statement of the financial condition and results of operations for the periods presented. All such adjustments are normal and recurring in nature. The financial statements, including selected notes, have been prepared in accordance with applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and do not include all information and disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for comprehensive financial statement reporting. These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s 2023 Annual Report. A copy of the 2023 Annual Report is available on the SEC’s website, www.sec.gov, or on the Company’s website, www.flotekind.com. The information contained on the SEC’s website and the Company’s website does not form a part of this Quarterly Report.

All significant intercompany accounts and transactions have been eliminated in consolidation. The Company does not have investments in any unconsolidated subsidiaries.

Sources and Uses of Liquidity

These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company currently funds its operations with cash on hand, availability under the ABL (defined below, see Note 9, “Debt and Convertible Notes Payable” and Note 18, “Subsequent Event”) and other liquid assets. The Company recognized $9.2 million and $2.0 million of gross profit and net income, respectively, during the three months ended June 30, 2024 and recognized $18.0 million and $3.5 million of gross profit and net income, respectively, during the six months ended June 30, 2024. Further, the Company recognized net cash provided by operating activities of $0.8 million during the six months ended June 30, 2024. While we believe that our cash, liquid assets, and availability under the ABL will provide us with sufficient financial resources to fund operations to meet our capital requirements and anticipated obligations as they become due, uncertainty surrounding the long-term stability and strength of the oil and gas markets, and the resulting potential impact on our customers’ ability to pay their obligations to us in a timely manner, could have a negative impact on our liquidity. The availability of capital is dependent on the Company’s operating cash flow, which is currently expected to be principally derived from the ProFrac Agreement (see Note 16, “Related Party Transactions”). Related party revenues for the three and six months ended June 30, 2024 included Contract Shortfall Fees (defined below) of $8.4 million and $17.1 million, respectively (see Note 16, “Related Party Transactions”). Related party receivables as of June 30, 2024 included accrued Contract Shortfall Fees of $17.1 million, which will be due in the first quarter of 2025 under the terms of the ProFrac Agreement.

FLOTEK INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Based upon our outlook for future cash flows from operations, which includes the collection of the Contract Shortfall Fees in the first quarter of 2025, combined with cash on hand and availability under the ABL, the Company believes it has sufficient financial resources to fund operations and meet its capital requirements and anticipated obligations as they become due in the next twelve months. While the Company cannot guarantee a sufficient level of cash flows in the future, the unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

Note 2 — Summary of Significant Accounting Policies

Apart from those matters described in this note, there have been no updates to our significant accounting policies since those reported under Note 2 of the 2023 Annual Report.

Accounts Receivable and Allowance for Credit Losses

Changes in the allowance for credit losses are as follows (in thousands):


	June 30, 2024		December 31, 2023
Balance, beginning of year	$	745	$	623
Charges to provision for credit losses, net of recoveries	79		138
Write-offs	(414)		(16)
Balance, end of period	$	410	$	745

As of June 30, 2024 and December 31, 2023 the Company had not recorded an allowance for credit losses for the related party accounts receivable, including ProFrac Services, LLC (see Note 16, “Related Party Transactions”).

Recent Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”). We evaluate the applicability and impact of all authoritative guidance issued by the FASB. Guidance not listed below was assessed and determined to be either not applicable, clarifications of items listed below, immaterial or already adopted by the Company.

New Accounting Standards Issued and Not Adopted as of June 30, 2024

The FASB issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures.” This standard improves reportable segment disclosure requirements through enhanced disclosures around significant segment expenses. The amendments under this standard require interim and annual disclosures of significant segment expenses regularly provided to the chief operating decision maker (“CODM”). In addition, public entities are required to disclose the amount of “other segment items” by segment and their composition; make annual disclosures about a reportable segment’s profit/loss and assets; and clarify if the CODM uses more than one measure of a segment’s profit or loss in assessing performance and resource allocation and disclose the name and title of the CODM. This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments are applied retrospectively to all prior periods presented. The Company is currently evaluating the impact of the adoption of the ASU on the related disclosures.

The FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”). The amendments under ASU 2023-09 were created as a response to requests from investors, lenders, creditors and other parties to enhance transparency and effectiveness of tax disclosures to help them better assess how an entity’s operations and related tax risks affect an entity’s tax rate and potential future cash flows. ASU 2023-09 requires that entities annually disclose the amount of taxes paid (net of refunds received) disaggregated by federal, state and foreign jurisdictions and that those amounts are also disaggregated by individual jurisdictions equal to or greater than 5% of total income taxes paid (net of funds received). ASU 2023-09 adds a requirement that entities disaggregate income (loss) from continuing operations before income tax expense (benefit) between domestic and foreign. The amendments also require entities to disaggregate income tax expense (benefit) by federal, state and foreign jurisdictions.

The amendments under ASU 2023-09 also remove certain prior requirements. Public business entities are no longer required to disclose the nature and estimate of change in the unrecognized tax benefits balance in the next 12 months or make a statement that an estimate cannot be determined. In addition, public business entities are no longer required to disclose the cumulative amount of each type of temporary difference for which a deferred tax liability has not been recognized due to the exception to recognizing deferred taxes related to subsidiaries and corporate joint ventures. ASU 2023-09 goes into effect for annual periods beginning after December 15, 2024 and early adoption is permitted for annual financial statements not yet issued or made

FLOTEK INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

available for issuance. Adoption of the ASU is on a prospective basis, with the option to apply retrospectively. The Company is currently evaluating the impact of the adoption of the ASU on the related disclosures.

Note 3 — Revenue from Contracts with Customers

Disaggregation of Revenue

The Company differentiates revenue based on whether the source of revenue is attributable to product sales or service revenue.

Total revenue disaggregated by revenue source is as follows (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Revenue:
Products (1)	$	44,694	$	49,062	$	83,809	$	95,829
Services	1,458		1,532		2,717		2,773
	$	46,152	$	50,594	$	86,526	$	98,602

(1) Product revenue includes sales to related parties as described in Note 16, “Related Party Transactions.”

Disaggregation of Cost of Sales

The Company differentiates cost of sales based on whether the cost is attributable to tangible goods sold, cost of services sold or other costs which cannot be directly attributable to either tangible goods or services.

Total cost of sales disaggregated is as follows (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Cost of sales:
Tangible goods sold	$	32,215	$	41,878	$	59,240	$	83,407
Services	88		156		182		296
Other	4,679		4,656		9,113		9,114
	$	36,982	$	46,690	$	68,535	$	92,817

Other cost of sales represent costs directly associated with the generation of revenue but which cannot be attributed directly to tangible goods sold or services. Examples of other costs of sales are certain personnel costs and equipment rental and insurance costs.

Cost of sales, between external and related party, is as follows (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Cost of sales:
Cost of sales for external customers	$	17,486	$	16,445	$	30,439	$	27,743
Cost of sales for related parties	19,496		30,245		38,096		65,074
	$	36,982	$	46,690	$	68,535	$	92,817

FLOTEK INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4 - Contract Assets

Contract assets are as follows (in thousands):


	June 30, 2024		December 31, 2023
Contract assets	$	83,060	$	83,060
Less accumulated amortization	(11,153)		(8,404)
Contract assets, net	71,907		74,656
Less current contract assets	(5,786)		(5,836)
Contract assets, long term	$	66,121	$	68,820

In connection with entering into the Initial ProFrac Agreement and Amended ProFrac Agreement on February 2, 2022 and May 17, 2022, respectively, as discussed in Note 9, “Debt and Convertible Notes Payable” and Note 16, “Related Party Transactions,” the Company recognized contract assets of $10.0 million and $69.5 million, respectively, and associated fees of $3.6 million. As of June 30, 2024 and December 31, 2023, $66.1 million and $68.8 million, respectively, of the contract assets were classified as long term based upon our estimate of the forecasted revenues from the ProFrac Agreement which will not be realized within the next twelve months of the ProFrac Agreement. The Company’s estimate of the timing of the future contract revenues is evaluated on a quarterly basis.

During the three months ended June 30, 2024 and 2023, the Company recognized $1.5 million and $1.1 million, respectively, of contract assets amortization which is recorded as a reduction of the transaction price included in the related party revenue in the consolidated statement of operations. During the six months ended June 30, 2024 and 2023, the Company recognized $2.7 million and $2.4 million, respectively, of contract assets amortization. The below table reflects our estimated amortization per year (in thousands) based on the Company’s current forecasted revenues from the ProFrac Agreement.


Years ending December 31,	Amortization
2024 (excluding the six months ended June 30, 2024)	$	2,738
2025	6,332
2026	8,990
2027	10,256
2028	10,256
Thereafter through May 2032	33,335
Total contract assets	$	71,907

Based on our tests of recoverability, we did not recognize any impairment of such contract assets as of June 30, 2024.

Note 5 — Inventories

Inventories are as follows (in thousands):



	June 30, 2024		December 31, 2023
Raw materials	$	5,163	$	5,299
Finished goods	12,690		13,660
Inventories	17,853		18,959
Less reserve for excess and obsolete inventory	(5,711)		(6,121)
Inventories, net	$	12,142	$	12,838

The additional reserves recorded during the three months ended June 30, 2024 and 2023 were $0.1 million and $0.2 million, respectively, for the CT segment. The Company recorded $6 thousand for the three months ended June 30, 2023 for the DA segment. There were no additional reserves recorded for the three months ended June 30, 2024 for the DA segment. During the six months ended June 30, 2024 and 2023, additional reserves recorded were $0.4 million and $0.4 million, respectively, for the CT segment and $13 thousand and $0.1 million, respectively, for the DA segment.

FLOTEK INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 6 — Property and Equipment

Property and equipment are as follows (in thousands):


	June 30, 2024		December 31, 2023
Land	$	886	$	886
Land improvements	520		520
Buildings and leasehold improvements	5,487		5,483
Machinery and equipment	7,216		6,993
Furniture and fixtures	520		520
Transportation equipment	830		945
Computer equipment and software	1,768		1,696
Property and equipment	17,227		17,043
Less accumulated depreciation	(12,240)		(11,914)
Property and equipment, net	$	4,987	$	5,129

Depreciation expense totaled $0.2 million and $0.2 million for the three months ended June 30, 2024 and 2023, respectively, and $0.4 million and $0.3 million for the six months ended June 30, 2024 and 2023, respectively.

Note 7 — Leases

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,
	2024		2023		2024		2023
Operating lease expense	$	752	$	866	$	1,536	$	1,735
Finance lease expense:
Amortization of assets	4		4		7		7
Interest on lease liabilities	—		1		1		2
Total finance lease expense	4		5		8		9
Short-term lease expense	312		41		571		81



Total lease expense	$	1,068	$	912	$	2,115	$	1,825

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,334	$	1,550	$	2,988	$	2,915
Operating cash flows from finance leases	10		7		23		17
Financing cash flows from finance leases	—		1		—		2

Maturities of lease liabilities as of June 30, 2024 are as follows (in thousands):


Years ending December 31,			Operating Leases				Finance Leases
2024 (excluding the six months ended June 30, 2024)	$	1,301			$	3
2025			2,121				—
2026			1,810				—
2027			1,741				—
2028			1,602				—
Thereafter			3,048				—
Total lease payments			$	11,623			$	3
Less: Interest			(2,618)				—
Present value of lease liabilities			$	9,005			$	3

FLOTEK INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental balance sheet information related to leases is as follows (in thousands):


	June 30, 2024			December 31, 2023
Operating Leases
Operating lease right-of-use assets	$	4,184		$	5,030

Current portion of operating lease liabilities	1,866			2,449
Long-term operating lease liabilities	7,139			7,676
Total operating lease liabilities	$	9,005		$	10,125

Finance Leases
Property and equipment	$	147		$	147
Accumulated depreciation	(77)			(70)
Property and equipment, net	$	70		$	77

Current portion of finance lease liabilities	$	3		$	22
Long-term finance lease liabilities	—			—
Total finance lease liabilities	$	3		$	22

Weighted Average Remaining Lease Term
Operating leases	5.6 years			5.5 years
Finance leases	0.1 years			0.6 years

Weighted Average Discount Rate
Operating leases	9.5		%	9.5		%
Finance leases	8.5		%	8.5		%

Sublease Income

On April 1, 2023, the Company entered into an agreement to sublease its office and lab space in Houston, Texas beginning September 1, 2023 and continuing until October 30, 2030. The rental income from the sublease is included in the Company’s statement of operations in Other income (expense), net, and offsets the monthly rental expense of $86 thousand from the Company’s lease of the facility. Sublease rental income for future years are as follows (in thousands):


Years ending December 31,			Rental Income
2024 (excluding the six months ended June 30, 2024)	$	383
2025			767
2026			767
2027			767
2028			767
Thereafter			1,406
Total rental income			$	4,857

FLOTEK INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 8 — Accrued Liabilities

Current accrued liabilities are as follows (in thousands):


	June 30, 2024		December 31, 2023
Severance costs	$	364	$	648
Payroll and benefits	1,172		2,138
Legal costs	30		37
Contingent liability for earn-out provision	30		56
Deferred revenue, current	530		550
Financed insurance	606		1,573
Other	294		888
Total current accrued liabilities	$	3,026	$	5,890

Note 9 — Debt and Convertible Notes Payable

Asset Based Loan

On August 14, 2023, the Company entered into a 24-month revolving loan and security agreement in connection with an asset-based loan (the “ABL”). The ABL is classified as current debt on our consolidated balance sheet due to the nature of the payment arrangements where the lender is paid from customer payments received into the Company’s collections account. As of June 30, 2024, the ABL provided up to $13.8 million of credit availability, which was limited by a borrowing base consisting of (i) 85% of eligible accounts receivable, plus (ii) 60% of the value of eligible inventory not to exceed 100% of the eligible accounts receivable, plus (iii) 50% of the value of certain real estate holdings. Effective August 5, 2024, the Company entered into a second amendment to the ABL (see Note 18, “Subsequent Event” for additional information), which among other modifications, increased the loan commitment to $20.0 million.

As of June 30, 2024, the Company had $5.8 million outstanding with approximately $8.0 million of available borrowings under the ABL. During the three and six months ended June 30, 2024, the Company incurred $0.2 million and $0.4 million, respectively, in interest and fees related to the ABL. As of June 30, 2024, the Company recorded $0.2 million of amortized deferred financing costs related to the ABL.

Borrowings under the ABL bear interest at the Wall Street Journal Prime Rate (subject to a floor of 5.5%) plus 2.5% per annum. The interest rate under the ABL was 11.0% as of June 30, 2024. The ABL contains an annual commitment fee equal to 1.0% of the ABL’s borrowing base. Additionally, the Company will be assessed a non-usage fee of 0.25% per quarter based on the difference between the average daily outstanding balance and the borrowing base limit of the ABL. If the ABL is terminated prior to the end of its 24-month term, the Company is required to pay an early termination fee of 2.50% of the borrowing base limit of the ABL (if terminated with more than 12 months remaining until the maturity date) or 1.50% of the borrowing base limit of the ABL (if terminated with less than 12 months remaining until the maturity date).

The ABL contains customary representations, warranties, covenants and events of default, the occurrence of which would permit the lender to accelerate the payment of any amounts borrowed. The ABL requires the Company to maintain a minimum Tangible Net Worth (as defined in the ABL) of not less than $11 million. In addition, the ABL provides the lender a blanket security interest on all or substantially all of the Company’s assets. The Company was in compliance with all of the covenants under the ABL as of June 30, 2024.

Paycheck Protection Program Loan

In April 2020, the Company received a $4.8 million loan (the “Flotek PPP loan”) under the Paycheck Protection Program (“PPP”), which was created through the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). In October 2021, the Flotek PPP loan maturity date was extended from April 15, 2022 to April 15, 2025. On January 5, 2023, the Company received notice from the SBA that $4.4 million of the $4.8 million principal amount and accrued interest to that date of $0.1 million were forgiven. The remaining principal amount of $0.4 million and accrued interest is to be repaid in monthly installments of $15 thousand over the remaining term of the loan through April 15, 2025, beginning on March 15, 2023. The forgiveness of the Flotek PPP loan was

FLOTEK INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

accounted for as an extinguishment of the debt and the Company recorded a $4.5 million gain in the six months ended June 30, 2023, comprising the principal amount forgiven of $4.4 million and accrued interest of $0.1 million.

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


	June 30, 2024		December 31, 2023
Flotek PPP loan	$	149	$	239
Less current maturities	(149)		(179)
Total long-term debt, net of current portion	$	—	$	60

Convertible Notes Payable

On February 2, 2022, Flotek entered into a Private Investment in Public Equity transaction (the “PIPE transaction”) with a consortium of investors to secure growth capital for the Company. Pursuant to the PIPE transaction, Flotek issued $21.2 million in aggregate initial principal amount of Convertible Notes Payable for net cash proceeds of approximately $20.1 million (the “Convertible Notes Payable”). The investors were ProFrac Holdings, LLC, Burlington Ventures Ltd., entities associated with North Sound Management, certain funds associated with one of Flotek's directors including the D3 Family Fund and the D3 Bulldog Fund, and Firestorm Capital LLC. The Convertible Notes Payable accrued paid-in-kind interest at a rate of 10% per annum, had a maturity of one year, and were convertible into common stock of Flotek or Pre-Funded Warrants to purchase common stock of Flotek, (a) at the holder's option at any time prior to maturity, at a price of $1.088125 per share on a pre-Reverse Stock Split basis, (b) at Flotek's option, if the volume-weighted average trading price of Flotek's common stock equals or exceeds $2.50 per share on a pre-Reverse Stock Split basis, or $1.741 per share on a pre-Reverse Stock Split basis, for 20 trading days during a 30 consecutive trading day period, or (c) at maturity, at a price of $0.8705 per share on a pre-Reverse Stock Split basis. On March 21, 2022, a portion of the Convertible Notes Payable, plus accrued paid-in-kind interest thereon, were converted at the holder’s option into shares of common stock. The issuance cost was amortized on a straight-line basis over the term of the Convertible Notes Payable and the amortization was included in interest expense in the unaudited condensed consolidated statements of operations. The carrying value was recorded as additional paid in capital.

Upon maturity on February 2, 2023, the Convertible Notes Payable, excluding those held by ProFrac Holdings, LLC, with a carrying value of $9.0 million, including accrued paid-in-kind interest of $0.8 million, were converted on a pre-Reverse Stock Split basis into 10,335,840 shares of common stock (1,722,640 shares of the Company’s common stock on a post-Reverse Stock Split basis) at a price of $0.8705 per share.

The Convertible Notes Payable held by ProFrac Holding, LLC, with a carrying value of $11.0 million, including accrued paid-in-kind interest of $1.0 million, were converted on a pre-Reverse Stock Split basis, upon maturity, into 12,683,280 February 2023 Warrants with an exercise price of $0.0001 per share and were recorded as additional paid in capital upon conversion. On September 6, 2023, the February 2023 Warrants were exercised and the Company issued, on a pre-Reverse Stock Split basis, 12,683,280 shares of the Company’s common stock (2,113,880 shares of the Company’s common stock on a post-Reverse Stock Split basis).

Initial ProFrac Agreement Contract Consideration Convertible Notes Payable

On February 2, 2022, the Company entered into a long-term supply agreement with ProFrac Services, LLC (the “Initial ProFrac Agreement”), a subsidiary of ProFrac Holdings LLC, in exchange for $10 million in aggregate principal amount of Contract Consideration Convertible Notes Payable (“Initial ProFrac Agreement Contract Consideration Convertible Notes Payable”), under the same terms as the Convertible Notes Payable issued in the PIPE transaction described above, including paid-in-kind interest at a rate of 10% per annum and conversion features.

On February 2, 2023, the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable, remeasured to and carried at a fair value of $15.1 million (see Note 10, “Fair Value Measurements”), were converted on a pre-Reverse Stock Split basis, upon maturity, into 12,683,281 February 2023 Warrants with an exercise price of $0.0001 per share and were recorded as additional paid in capital upon conversion. On September 6, 2023, the February 2023 Warrants were exercised and the Company issued, on a pre-Reverse Stock Split basis, 12,683,281 shares of the Company’s common stock (2,113,881 shares of the Company’s common stock on a post-Reverse Stock Split basis).

FLOTEK INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Amended ProFrac Agreement Contract Consideration Convertible Notes Payable

On May 17, 2022, the Company entered into an amendment to the Initial ProFrac Agreement (the “Amended ProFrac Agreement” and collectively with the Initial ProFrac Agreement, the “ProFrac Agreement”) upon issuance of $50 million in aggregate principal amount of Contract Consideration Convertible Notes Payable (“Amended ProFrac Agreement Contract Consideration Convertible Notes Payable”) to ProFrac. The Amended ProFrac Agreement Contract Consideration Convertible Notes Payable accrued paid-in-kind interest at a rate of 10% per annum.

On May 17, 2023, the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable, remeasured to and carried at a fair value of $40.6 million (see Note 10, “Fair Value Measurements”), were converted on a pre-Reverse Stock Split basis, upon maturity, into 63,496,922 shares of common stock at a price of $0.8705 per share. As a result of the Reverse Stock Split, these shares were converted into 10,582,821 common shares.

Note 10 — 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, restricted cash, accounts receivable, accrued liabilities, accounts payable and ABL approximate fair value due to the short-term nature of these accounts.

Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the Company’s liabilities that are measured at fair value on a recurring basis and the level within the fair value hierarchy (in thousands):


							June 30,								December 31,
	Level 1		Level 2		Level 3		2024		Level 1		Level 2		Level 3		2023
Contingent earnout consideration	$	—	$	—	$	30	$	30	$	—	$	—	$	56	$	56


Total	$	—	$	—	$	30	$	30	$	—	$	—	$	56	$	56

Contingent Earnout Consideration Key Inputs

The estimated fair value of the remaining stock performance earn-out provision, with respect to the JP3 transaction, is included in accrued liabilities as of June 30, 2024 and December 31, 2023. The estimated fair value of the earn-out provision at the end of each period was valued using a Monte Carlo model analyzing 20,000 simulations performed using Geometric Brownian Motion with inputs such as risk-neutral expected growth and volatility.


	June 30, 2024			December 31, 2023
Risk-free interest rate	5.15		%	4.58		%
Expected volatility	65.0		%	70.0		%
Term until liquidation (years)	0.88			1.38
Stock price	$	4.91		$	3.92
Discount rate	14.66		%	11.86		%

FLOTEK INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Initial ProFrac Agreement Contract Consideration Notes Payable Key Inputs

The Initial ProFrac Agreement Contract Consideration Convertible Notes Payable were measured at fair value at issuance and on a recurring basis. The Initial ProFrac Agreement Contract Consideration Convertible Notes Payable had an initial fair value of $10.0 million on February 2, 2022.

On February 2, 2023, the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable were remeasured, upon maturity, to a fair value of $15.1 million based on the pre-Reverse Stock Split closing price of the shares of common stock of $1.19, on the date of conversion. The fair value adjustment was a $0.8 million increase for the six months ended June 30, 2023.

Amended ProFrac Agreement Contract Consideration Convertible Notes Payable Key Inputs

On May 17, 2022, the Company measured the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable classified as Level 3 using a Monte Carlo simulation at an estimated fair value of $69.5 million.

On May 17, 2023, the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable were remeasured, at maturity using a Monte Carlo simulation, to a fair value of $40.6 million based on the pre-Reverse Stock Split closing price of the shares of common stock of $0.64, on the date of conversion resulting in a gain in fair value of Amended ProFrac Agreement Contract Consideration Convertible Note Payable of $3.9 million and $30.8 million for the three and six months ended June 30, 2023, respectively.

Assets Measured at Fair Value on a Nonrecurring Basis

The Company’s non-financial assets, including property and equipment and operating lease ROU assets, are measured at fair value on a non-recurring basis and are subject to adjustment to their fair value in certain circumstances.

Level 3 Rollforward for Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the changes in balances of liabilities for the three and six months ended June 30, 2024 and 2023 classified as Level 3 (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Balance - beginning of period	$	30	$	44,025	$	56	$	84,153


Increase in principal of Initial ProFrac Agreement Contract Consideration Convertible Notes Payable for paid-in-kind interest	—		—		—		85
Increase in principal of Amended ProFrac Agreement Contract Consideration Convertible Notes Payable for paid-in-kind interest	—		712		—		2,043
Change in fair value of contingent earnout consideration	—		35		(26)		(323)
Change in fair value of Initial ProFrac Agreement Contract Consideration Convertible Notes Payable	—		—		—