10q10k10q10k.net

What changed in FLOTEK INDUSTRIES INC/CN/'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of FLOTEK INDUSTRIES INC/CN/'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+258 added−266 removedSource: 10-K (2025-03-12) vs 10-K (2024-03-15)

Top changes in FLOTEK INDUSTRIES INC/CN/'s 2024 10-K

258 paragraphs added · 266 removed · 203 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

53 edited+14 added−8 removed21 unchanged
Biggest changeOn August 14, 2023, the Company entered into an asset-based loan (the “ABL”) providing for a 24-month term with up to $10 million of initial credit availability for eligible accounts receivable and eligible inventory. On October 5, 2023, the maximum credit availability under the ABL was increased by $3.8 million to a total of $13.8 million.
Biggest changeRecent Developments In August 2023, the Company entered into a 24-month revolving loan and security agreement in connection with an asset-based loan (the “ABL”). In connection with the second amendment to the ABL effective August 5, 2024, the maturity date was extended to August 2026, the credit availability was increased and the interest rate spread was reduced.
While the Company’s primary marketing efforts remain focused in North America, resources and efforts are also deployed on emerging international markets, especially in the Middle East. Product revenues include significant sales to related parties as described in Note 17, “Related Party Transactions” in Part II, Item 8 - “Financial Statements and Supplementary Data” of this Annual Report.
While the Company’s primary marketing efforts remain focused in North America, resources and efforts are also deployed on emerging international markets, especially in the Middle East and Latin America. Product revenues include significant sales to related parties as described in Note 17, “Related Party Transactions” in Part II, Item 8 - “Financial Statements and Supplementary Data” of this Annual Report.
We believe Verax ™ analyzers have gained a foothold in North American markets for critical applications where compositional information is needed in real-time. The technology delivers insight on valuable operations data like vapor pressure, boiling point, flash point, octane level, API (American Petroleum Institute) gravity, viscosity, BTU (British Thermal Unit) and more, simultaneously.
We believe Verax ™ analyzers have gained a foothold in North American markets for critical applications where compositional information is needed in real-time. The technology delivers insight on valuable operations data like vapor pressure, boiling point, flash point, octane level, API (American Petroleum Institute) gravity, 8 viscosity, BTU (British Thermal Unit) and more, simultaneously.
In addition, the Company had 41 registered trademarks in the U.S. and abroad, covering a variety of its goods and services. Competition Our ability to compete is dependent upon the Company’s ability to differentiate its products and services by providing superior quality and service, and maintaining a competitive cost structure with sufficient and reliable access to raw material supplies.
In addition, the Company had 41 registered trademarks in the U.S. and abroad, covering a variety of its goods and services. Competition Our ability to compete is dependent upon our ability to differentiate our products and services by providing superior quality and service, and maintaining a competitive cost structure with sufficient and reliable access to raw material supplies.
We believe that green chemistry and digital transformation reduce the total cost of ownership and environmental risk of our customers and can transform business by reducing carbon footprints, energy consumption, emissions and overall environmental impact. We have green, sustainable chemistry at our core, and we focus on providing responsible specialty chemistry solutions that are environmentally friendly and cost-competitive.
We believe that targeted specialty chemistry and digital transformation reduce the total cost of ownership and environmental risk of our customers and can transform business by reducing carbon footprints, energy consumption, emissions and overall environmental impact. We have green, sustainable chemistry at our core, and we focus on providing responsible specialty chemistry solutions that are environmentally friendly and cost-competitive.
In the event of a leak or spill in association with Company operations, the Company could be exposed to risk of material cost, net of insurance proceeds, if any, to remediate any contamination. To the Company’s knowledge, no environmental claims are currently being litigated or investigated.
In the event of a leak or spill in association with Company operations, the Company could be exposed to risk of material cost, net of insurance proceeds, if any, to remediate any contamination. To the Company’s knowledge, no environmental claims are currently being litigated or investigated with respect to the Company.
The Company believes its patent and trademark 5 portfolio, combined with confidentiality agreements, EPA registrations and licensing, trade secrets, proprietary designs, and manufacturing and operational expertise, are sufficient to protect its intellectual property and provide continued strategic advantage.
The Company believes its patent and trademark portfolio, combined with confidentiality agreements, EPA registrations and licensing, trade secrets, proprietary designs, and manufacturing and operational expertise, are sufficient to protect its intellectual property and provide continued strategic advantage.
If the minimum volumes are not achieved within the applicable measurement period, ProFrac Services, LLC is required to pay to the Company, as liquidated damages, an amount equal to twenty-five percent (25%) of the difference between (i) the aggregate purchase price of the quantity of products comprising the minimum purchase obligation and (ii) the actual purchased volume during the measurement period (“Contract Shortfall Fees”).
If the minimum volume purchases are not achieved within the applicable measurement period, ProFrac Services, LLC is required to pay to the Company, as liquidated damages, an amount equal to twenty-five percent (25%) of the difference between (i) the aggregate purchase price of the quantity of products comprising the minimum purchase obligation and (ii) the actual purchased volume during the measurement period (“Contract Shortfall Fees”).
AIDA (Automated Interface Detection Algorithm) provides real-time detection of interfaces in a liquids pipeline without the need for additional sampling or chemometric modeling. The application can identify products such as refined fuels, crude and NGLs with its advanced machine learning algorithms and detect interfaces real-time versus traditional lab analysis.
Automated Interface Detection Algorithm (“AIDA”) provides real-time detection of interfaces in a liquids pipeline without the need for additional sampling or chemometric modeling. The application can identify products such as refined fuels, crude and NGLs with its advanced machine learning algorithms and detect interfaces real-time versus traditional lab analysis.
As of December 31, 2023, the Company had 138 granted patents, including 114 patents in our CT segment and 24 patents in our DA segment. In addition, the Company also had 4 pending patent applications filed in the U.S. and abroad, including 1 for the CT segment and 3 for the DA segment.
As of December 31, 2024, the Company had 138 granted patents, including 114 patents in our CT segment and 24 patents in our DA segment. In addition, the Company also had 4 pending patent applications filed in the U.S. and abroad, including 1 for the CT segment and 3 for the DA segment.
Chemistry Technologies We believe that the Company’s CT segment provides sustainable, optimized chemistry solutions that maximize our customers value by improving return on invested capital, lowering operational costs, and providing tangible environmental benefits.
Chemistry Technologies The Company’s CT segment provides sustainable, optimized chemistry solutions that we believe maximize our customers’ value by improving return on invested capital, lowering operational costs and providing tangible environmental benefits.
Activity levels in the oilfield goods and services industry are impacted by current and expected oil and natural gas prices, oil and natural gas drilling activity, production levels, customer drilling and completion-designated capital spending, and customer commitment to improved environmental performance.
Activity levels in the oilfield goods and services industry are impacted by current and expected oil and natural gas prices, oil and natural gas drilling activity, production levels, customer drilling and completion-designated capital spending, the regulatory environment and customer commitment to improved environmental performance.
The Company designs, develops, manufactures, packages, distributes and markets optimized chemistry solutions that accelerate existing sustainability practices to reduce the environmental impact of energy on the air, water, land and people.
The Company designs, develops, manufactures, packages, distributes and markets optimized chemistry solutions that are designed to accelerate existing sustainability practices to reduce the environmental impact of energy on the air, water, land and people.
Customers of the CT segment include those of energy related markets, such as our related party ProFrac Services, LLC, with whom we have a long-term supply agreement, as well as industrial applications.
Customers of the CT segment include those of energy related markets, such as our related party ProFrac Services, LLC, with whom we have a long-term supply agreement, as well as industrial companies.
Product Demand and Marketing Demand for the Company’s energy-focused product s and services in both the CT and DA segments is driven by energy supply and demand, as well as operator desire to improve profitability and returns.
Product Demand and Marketing Demand for the Company’s energy-focused products and services in both the CT and DA segments is driven by energy supply and demand, as well as operator desire to improve profitability and returns.
Information with respect to the Company’s executive officers and directors is incorporated herein by reference to information to be included in the definitive proxy statement for the Company’s 2024 Annual Meeting of Stockholders.
Information with respect to the Company’s executive officers and directors is incorporated herein by reference to information to be included in the definitive proxy statement for the Company’s 2025 Annual Meeting of Stockholders.
Supply Chain The principal supply issues facing our industry for the next twelve months will include: • Fluctuating freight costs for shipping to our customers; • Availability of raw materials; • Labor shortages; and • Demand forecasting. All bidding will require the risk of shipping costs and delays to be factored into proposals.
Supply Chain The principal supply issues facing our industry for the next twelve months will include: • Fluctuating freight costs for shipping to our customers; • Availability of raw materials; • Labor shortages; • Demand forecasting; and • Unknown impact of tariffs. All bidding will require the risk of shipping costs and delays to be factored into proposals.
We believe customers using this technology have obtained significant benefits, including additional profits, by enhancing operations in crude/condensates stabilization, blending operations, reduction of transmix, increasing efficiencies and optimization of gas plants, allowing for the use of significantly lower cost field gas instead of diesel to generate power, lower emissions and protect equipment, and ensuring product quality while reducing giveaways, i.e., providing higher value products at the lower value products prices.
We believe customers using this technology have obtained significant benefits, including additional profits, by enhancing operations in crude/condensates stabilization, enhancing blending operations, reducing time impacting transmix operations, increasing efficiencies and optimization of gas plants, allowing for the use of significantly lower cost field gas instead of diesel to generate power, lowering emissions and protecting equipment, and ensuring product quality while reducing giveaways, i.e., providing higher value products at the lower value products prices.
Corporate governance materials, including but not limited to our corporate governance guidelines, board committee charters, bylaws, certain policies, and code of business conduct and ethics are also available on the website. A copy of corporate governance materials is also available upon written request to the Company.
Corporate governance materials, including but not limited to, our Corporate Governance Guidelines, our Board of Directors committee charters, our Bylaws, certain policies, and the Company’s Code of Conduct are also available on the Company’s website. A copy of corporate governance materials is also available upon written request to the Company.
We have developed a line of Verax™ analyzers for deployment internationally which was certified for compliance in hazardous locations and harsh weather conditions. Research & Innovation R&I supports both business segments through green chemistry formulation, specialty chemical formulations and Environmental Protection Agency (“EPA”) regulatory guidance, technical support, basin and reservoir studies, data analytics and new technology projects.
We have developed a line of Verax™ analyzers for deployment internationally which was certified for compliance in hazardous locations and harsh weather conditions. Research & Innovation R&I supports both our business segments through green chemistry formulation, specialty chemical formulations 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 business 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.
The purpose of R&I is to supply the Company’s business 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 CT and DA segment performance, optimization and manufacturing.
More efficient operations have the benefit of reducing their carbon footprint, e.g., less flaring and reduction in energy expenditure for compression and re-processing. Our customers in North America include the 4 supermajors, some of the largest midstream companies and large gas processing plants.
More efficient operations have the benefit of reducing carbon footprint, e.g., less flaring and reduction in energy expenditure for compression and re-processing. Our customers in North America include oil and gas supermajors, some of the largest midstream oil and gas companies, large gas processing plants and independent exploration and production companies.
Real-time composition and physical properties are delivered simultaneously on their refined fuels, natural gas liquids (NGLs), natural gas, crude oil, and condensates using the industry’s only field-deployable, in-line optical near-infra-red spectrometer that generates no emissions. The instrument's response is processed with advanced chemometrics modeling, artificial intelligence, and machine learning algorithms to deliver these valuable insights every 15 seconds.
Real-time composition and physical property measurements are delivered simultaneously on refined fuels, natural gas liquids (NGLs), natural gas, crude oil, and condensates using the industry’s only field-deployable, in-line optical near-infrared spectrometer that generates no emissions. The instrument's response is processed with advanced chemometrics modeling, artificial intelligence, and machine learning algorithms to deliver these valuable insights every fifteen seconds.
Item 1. Business. 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 specialty chemistry needs for both domestic and international energy markets.
Item 1. Business General Flotek creates unique solutions to reduce the environmental impact of energy on air, water, land and people. A technology-driven, specialty chemistry and data company, Flotek helps customers across industrial and commercial markets improve their environmental performance. The Company seeks to provide sustainable and optimized chemistry and data technology solutions for both domestic and international energy markets.
Facilities and Offices See Part 1, Item 2 - “Properties”, for information regarding our manufacturing, warehouse and research facilities and sales offices. Intellectual Property The Company endeavors to protect its intellectual property, both within and outside of the U.S.
Facilities and Offices See Part I, Item 2 - “Properties,” for information regarding our manufacturing, warehouse and research facilities and sales offices. Intellectual Property The Company endeavors to protect its intellectual property, both within and outside of the U.S.
Annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available (see the “Investor Relations” section of the Company’s website), as soon as reasonably practicable, subsequent to electronically filing or otherwise providing reports to the SEC.
Annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge on the Company’s website, as soon as reasonably practicable, subsequent to electronically filing or otherwise providing such material to the SEC.
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 Chemistry Technologies (“CT”) segment designs, develops, manufactures, packages and distributes 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 provides innovative analytical measurement solutions.
The Company has disclosed and will continue to disclose any changes or amendments to the Company’s code of business conduct and ethics as well as waivers to the code of ethics applicable to executive management by posting such changes or waivers on the Company’s website in the “Corporate Governance” section under “Investor Relations” or in filings with the SEC.
The Company has disclosed and will continue to disclose any changes or amendments to the Company’s Code of Conduct as well as waivers to the Code of Conduct applicable to executive management by posting such changes or waivers on the Company’s website or in filings with the SEC.
The sale of the Company’s products and performance of the Company’s services can be susceptible to both weather and naturally occurring phenomena, including, but not limited to, the following: • the severity and duration of winter temperatures in North America, which impacts natural gas storage levels, drilling activity, commodity prices and operations at the Company’s facilities; • material deviations from normal seasonality for an extended period, which can impact access to operations, reduced performance at manufacturing facilities, inability to deploy required personnel, supply chain interruptions, facility damage and customer activity levels; • hurricanes upon coastal and offshore operations, which can impact access to operations, reduced performance at manufacturing facilities, inability to deploy required personnel, supply chain interruptions, facility damage and customer activity levels; and • pandemics or similar phenomena, which may impact seasonal purchasing and selling cycles.
The sale of the Company’s products and performance of the Company’s services can be susceptible to both weather and naturally occurring phenomena, including, but not limited to, the following: • the severity and duration of winter temperatures in North America, which impacts natural gas storage levels, drilling activity, commodity prices and operations at the Company’s facilities; • material deviations from normal seasonality for an extended period, which can impact access to operations, reduce performance at manufacturing facilities, restrict our ability to deploy required personnel, cause supply chain interruptions, cause facility damage and impact customer activity levels; • tropical storms and hurricanes, affecting coastal and offshore operations, flash floods, blizzards, extreme cold weather and other severe weather conditions, which can impact access to operations, reduce performance at manufacturing facilities, restrict our ability to deploy required personnel, cause supply chain interruptions, cause facility damage and impact customer activity levels; and 5 • pandemics or similar phenomena, which may impact seasonal purchasing and selling cycles.
Our safety, health and environmental goals are designed to sustain our drive to zero incidents. As a result, safety is woven into the fabric of the Company, from our robust training programs, to our safety moments that begin team meetings, to our Hazardous Observation Card program. Our training program is fundamental to operating safely and protecting people and the environment.
As a result, safety is woven into the fabric of the Company, from our robust training programs, to our safety moments that begin team meetings, to our Hazardous Observation Card program. Our training program is fundamental to operating safely and protecting people and the environment.
Additionally, the Company offers flexible spending and health savings accounts, life and disability/accident coverage, telemedicine, critical illness insurance and paid leave. Eligible employees may elect to participate in the Company’s employee stock purchase plan and retirement plans, including its 401(k) plan in the U.S. The Company currently matches 401(k) contributions at 100% of up to 2% of an employee’s compensation.
Additionally, the Company offers flexible spending and health savings accounts, life and disability/accident coverage, telemedicine, critical illness insurance and paid leave. Eligible employees may elect to participate in the Company’s employee stock purchase plan and retirement plans, including its 401(k) plan in the U.S.
For the years ended December 31, 2023 and 2022, the Company incurred $2.5 million and $4.4 million, respectively, of research and development expense. The Company expects that its 2024 research and development investment will continue to support new product development, especially in support of enhanced environmental demands, increased adoption of green chemistry and conventional customization initiatives for its clients.
For the years ended December 31, 2024 and 2023, the Company incurred $1.7 million and $2.5 million, respectively, of research and development expense. The Company expects that its 2025 research and development investments will continue to support new product development, especially in support of enhanced environmental demands and customization initiatives for its clients.
In addition to competitive base wages, all employees are eligible for a discretionary bonus, which is based upon individual performance and triggered by company performance, subject to the Company’s liquidity position. Benefits are a key component of our compensation program.
In addition to competitive base wages, all employees are eligible for an annual cash performance bonus, which is based upon both individual performance and certain annual Company financial performance metrics, subject to the Company’s liquidity position and approval by the Company’s Compensation Committee of the Board of Directors. Benefits are a key component of our compensation program.
Outlook Our business is subject to numerous variables which impact our outlook and expectations given the shifting conditions of the industry. We have based our outlook on the market conditions we perceive today. Changes often occur. Energy The demand for oil and gas and related services fluctuates due to numerous factors including weather and macroeconomic and geopolitical conditions.
We have based our outlook on the market conditions we perceive today. The oil and gas industry is highly cyclical. Energy Industry The demand for oil and gas and related services fluctuates due to numerous factors including weather and macroeconomic and geopolitical conditions.
In 2023, the Company recorded a Total Recordable Incident Rate (TRIR) of 0.00. The TRIR is a key safety performance metric which calculates the number of recordable incidents per full-time workers during a one-year period.
For the year ended December 31, 2024, the Company achieved a total recordable incident rate (“TRIR”) of 0.50. TRIR is a key safety performance metric that calculates the number of recordable incidents per full-time workers during a one-year period.
These sales channels are accessed using a mix of in-house sales professionals as well as certain contractual agency agreements. The Company also actively participates in industry trade shows, both live and virtual, publishes articles in industry publications, and participates in podcasts and creates other online content to educate the market on its product and service offerings.
The Company also actively participates in industry trade shows, both live and virtual, publishes articles in industry publications, and participates in podcasts and creates other online content to educate the market on its product and service offerings.
Each employee is responsible for working towards the health, safety and environment (“HSE”) goals, as they are not isolated to certain individuals or roles. We aim to hold each other accountable to a high standard. Thus, every employee is empowered and expected to stop any activity, big or small, that could jeopardize people, the environment or assets.
We aim to hold each other accountable to a high standard. Thus, every employee is empowered and expected to stop any activity that could jeopardize people, the environment or assets. Our safety, health and environmental goals are designed to sustain our drive to zero incidents.
Raw Materials Materials and components used in the Company’s servicing and manufacturing operations, as well as those purchased for sale, are generally avail able on the open market from multiple sources. When able, the Company uses multiple suppliers, both domestically and internationally, to purchase raw materials on the open market.
The CT segment faces competition from traditional competitors and from wholesalers who are selling directly to customers. Raw Materials Materials and components used in the Company’s servicing and manufacturing operations, as well as those purchased for sale, are generally avail able on the open market from multiple sources.
Analyzing this in real-time allows companies to maximize the field gas for diesel substitution rate providing significant cost savings while lowering emissions, reducing fuel consumption/costs, and protecting the equipment from damage.
Analyzing this in real-time allows companies to maximize the field gas for diesel substitution rate providing significant cost savings while lowering emissions, reducing fuel consumption/costs, and protecting the equipment from damage. During the second quarter of 2024, the EPA designated the Company’s near-infrared spectrometer measurement system as an approved measurement technology with respect to recently enacted flare monitoring regulations.
Major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, national and state-owned oil companies, geothermal energy companies, solar energy companies and advanced alternative energy companies benefit from our best-in-class technology, field operations, and continuous improvement exercises that go beyond existing sustainability practices.
Major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, national and state-owned oil companies, geothermal energy companies, solar energy companies and advanced alternative energy companies may benefit from our best-in-class technology, field operations, and continuous improvement exercises that go beyond existing sustainability practices. 4 ProFrac Supply Agreement On February 2, 2022, the Company entered into a Chemical Products Supply Agreement with ProFrac Services, LLC, which was subsequently amended on May 17, 2022 and February 1, 2023 (collectively, the “ProFrac Agreement”).
The SEC maintains the www.sec.gov website, which contains reports, proxy and information statements, and other registrant information filed electronically with the SEC. The Company filed, or furnished, as applicable, all principal executive officer and financial officer certifications as required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 with this Annual Report.
Information contained in the Company’s website is not to be considered as part of any regulatory filing. The Company filed, or furnished, as applicable, all principal executive officer and financial officer certifications as required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 with this Annual Report.
Information contained in the Company’s website is not to be considered as part of any regulatory filing. 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. 3 Recent Developments The Board appointed Dr.
In December 2007, the Company’s common stock began trading on the New York Stock Exchange (“NYSE”) under the stock ticker symbol “FTK.” 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.
The prices paid for raw materials vary based on availability, weather, other commodity price fluctuations, contractual obligations, tariffs, duties on imported materials, foreign currency exchange rates, business cycle position and global demand. Higher prices for chemistries and certain raw materials could adversely impact future sales, contract fulfillment and product margins.
When able, the Company uses multiple suppliers, both domestically and internationally, to purchase raw materials on the open market. The prices paid for raw materials vary based on availability, weather, other commodity price fluctuations, contractual obligations, tariffs, duties on imported materials, foreign currency exchange rates, business cycle position and global demand.
The Company was initially incorporated under the laws of the Province of British Columbia in 1985. In October 2001, the Company changed its corporate domicile to the State of Delaware.
The DA segment seeks to deliver real-time information and insights to our customers to enable optimization of operations and reduction of emissions and their carbon intensity. The Company was initially incorporated under the laws of the Province of British Columbia in 1985. In October 2001, the Company changed its corporate domicile to the State of Delaware.
Compensation: Wages & Benefits The Company’s compensation programs are designed to provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location. We align our programs to attract, retain and motivate employees to achieve high-impact results that create value for all of our stakeholders.
We align our programs to attract, retain and motivate employees to achieve high-impact results that create value for all of our stakeholders.
In addition, our analyzers’ ability to determine the mixing of two batches of product (“transmix”) in real-time results in less time, energy and resources spent processing the transmix.
In addition, our analyzers’ ability to determine the mixing of two batches of product (“transmix”) in real-time results in less time, energy and resources spent processing the transmix. Finally, our analyzers, when used to monitor field gas for well-site power generation, allow customers to significantly reduce the use of higher emission and more expensive diesel.
The Company also offers access to online and personalized financial planning services as a component of its retirement plan benefit. The Company continues to prioritize mental health and wellness for employees, maintaining an ongoing dialogue with employees and providing resources through its employee assistance program, which is available to all employees and their families.
The Company continues to prioritize mental health and wellness for employees, maintaining an ongoing dialogue with employees and providing resources through its employee assistance program, which is available to all employees and their families. Outlook Our business is subject to numerous variables that impact our outlook and expectations given the shifting conditions of the oil and gas industry.
Demand for the Company’s energy chemistry products and services is dependent on levels of conventional and unconventional oil and natural gas well drilling and completion activity, both domestically and internationally. The Company markets its products to end user customers using both direct and indirect sales channels.
Demand for the CT segment’s and, to a lesser extent, the DA segment’s products and services is dependent on levels of conventional and unconventional oil and natural gas well drilling and completion activity, both domestically and internationally. Demand for the Company’s DA segment products and services is also impacted by applicable regulatory requirements.
The Company is diligent in its efforts to identify alternate suppliers in its contingency planning utilizing competitive bidding practices to proactively reduce costs and potential supply shortages. The Company has worked to broaden the technical specifications of some products to help ensure that required molecules can be sourced from more than one supplier.
The Company has worked to broaden the technical specifications of some products to help ensure that 6 required molecules can be sourced from more than one supplier. The Company has identified multiple supply sources with respect to certain materials used in the DA segment in order to mitigate the potential supply chain risk.
The minimum purchase requirements were not met during the current measurement period, and as a result, related party revenues for the year ended December 31, 2023 reflect Contract Shortfall Fees of $20.1 million, of which $10.0 million was collected through March 11, 2024, with the remainder due on or before April 8, 2024.
The minimum purchase requirements were not met during the 2024 measurement period of January 1, 2024 through December 31, 2024, and as a result, the Company recorded revenue related to Contract Shortfall Fees of $32.4 million.
None of the Company’s employees are covered by a collective bargaining agreement and labor relations are generally good. Employees & Health, Safety & Environment The Company is committed to acting with care to protect the health and safety of people, resources and the environment.
Employees & Health, Safety & Environment The Company is committed to acting with care to protect the health and safety of people, resources and the environment. Each employee is responsible for working towards the Company’s health, safety and environment (“HSE”) goals, as they are not isolated to certain individuals or roles.
In general, we expect the major exploration and production companies to maintain activity levels over the next 12 months.
In the current commodity price environment, we generally expect these companies, as well as major exploration and production companies, to maintain current activity levels over the next 12 months. Chemistry Technologies The CT segment is actively advancing integrated solutions to enhance capital efficiency for exploration and production (“E&P”) operators and service companies.
Despite the near term volatility in commodity pricing, leading to the recent weakness in onshore drilling and completion activity, the fundamentals for energy related services remain strong. The overall expansion of the global economy should continue to create substantial demand for all forms of energy which will increase service intensity.
Despite the near-term volatility in commodity pricing, leading to the softening in onshore completion activity, the fundamentals for energy-related services remain fairly stable. Independent exploration and production companies operate the majority of U.S. land rigs and react quickly to changing commodity prices.
Removed
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 prevents waste, reduces reprocessing and allows users to pursue automation of their hydrocarbon streams to increase their profitability.
Added
During the second quarter of 2024, the Environmental Protection Agency (“EPA”) designated the Company’s near-infrared spectrometer measurement system as an approved measurement technology with respect to recently enacted flare monitoring regulations. The Company believes this approval could provide new opportunities to grow the DA segment as the Company’s customers evaluate compliance options with respect to the new regulations.
Removed
In December 2007, the Company’s common stock began trading on the New York Stock Exchange (“NYSE”) under the stock ticker symbol “FTK.” Annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are posted to the Company’s website, www.flotekind.com , as soon as practicable subsequent to electronically filing or furnishing to the SEC.
Added
The ProFrac Agreement contains minimum requirements for chemistry purchases.
Removed
Ryan Ezell, the Company’s then existing President, as its Chief Executive Officer, effective as of June 6, 2023. Dr. Ezell was also appointed to the Board, effective as of June 8, 2023.
Added
The ProFrac Agreement provides that payment of Contract Shortfall Fees is to be made within 30 days after the applicable measurement period. The minimum purchase requirements were not met during the 2023 measurement period of June 1, 2023 through December 31, 2023, and as a result, the Company collected $20.1 million of Contract Shortfall Fees.
Removed
In order to regain compliance with New York Stock Exchange rules regarding minimum share price, the Company completed a 1-for-6 reverse split of its common stock (the “Reverse Stock Split”). The shares of common stock began trading on the split-adjusted basis under the Company’s existing trading symbol, “FTK” on September 26, 2023.
Added
The Company markets its products to end user customers using both direct and indirect sales channels. These sales channels are accessed using a mix of in-house sales professionals as well as certain contractual agency agreements.
Removed
ProFrac Supply Agreement On February 2, 2022, the Company entered into the Initial ProFrac Agreement, which was subsequently amended on May 17, 2022 and February 1, 2023 (collectively, the “ProFrac Agreement”). The ProFrac Agreement contains minimum requirements for chemistry purchases.
Added
Higher prices for chemistries and certain raw materials could adversely impact future sales, contract fulfillment and product margins. The Company is diligent in its efforts to identify alternate suppliers in its contingency planning utilizing competitive bidding practices to proactively reduce costs and potential supply shortages.
Removed
The current measurement period for Contract Shortfall Fees is June 1, 2023 through December 31, 2023.
Added
Human Capital Employee Overview As of December 31, 2024, the Company had approximately 142 employees, exclusive of existing worldwide agency relationships. None of the Company’s employees are covered by a collective bargaining agreement and labor relations are generally good.
Removed
Finally, our analyzers, when used to monitor field gas for well-site power generation, allow customers to significantly reduce the use of higher emission and more expensive diesel. 6 Human Capital Employee Overview As of December 31, 2023, the Company had approximately 146 employees, exclusive of existing worldwide agency relationships.
Added
Generally a score of less than 1.0 is considered an indication of safe operations. 7 Compensation: Wages & Benefits The Company’s compensation programs are designed to provide employee wages that we believe are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location.
Removed
Independent exploration and production companies operate the majority of U.S. land rigs and react quickly to changing commodity prices. In the current commodity price environment, we expect these companies in oil-weighted basins to maintain or increase activity while companies in gas-weighted basins are expected to maintain or decrease activity over the next 12 7 months.
Added
The Company currently matches U.S. employees’ 401(k) contributions at 100% of up to 2% of an employee’s compensation. The Company also offers access to online and personalized financial planning services as a component of its retirement plan benefit.
Added
Our approach combines technical leadership, exceptional service quality, reliable delivery, and a strong safety record. We believe that we have optimized service delivery across key North American basins and are well-positioned to adapt to fluctuations in activity levels.
Added
Based upon our strong results during the fourth quarter of 2024, and customer commitments in early 2025, we anticipate steady demand for our chemistry during 2025.
Added
We believe the expected rise in natural gas demand in the second half of 2025 is likely to drive activity in the Haynesville shale basin, and we expect our established presence, expertise and capabilities to drive growth in this area.
Added
Internationally, we are seeing an increase in unconventional activity in the Middle East and Argentina, where we expect demand for our chemistry to grow throughout 2025. We remain focused on driving innovation between the CT and DA segments, promoting opportunities in upstream applications designed to deliver enhanced efficiencies for E&P operators and service companies.
Added
We believe that these initiatives will lead to deeper integration between our CT and DA segments, creating a pathway for future growth.
Added
The optical measurement system, designed for precise measurement of net heating values in flare gases, was the first to be approved as an alternative method under the New Source Performance Standards OOOOb regulations. The Company believes that this approval will facilitate opportunities to provide flare monitoring services, which could become a source of future growth.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

78 edited+24 added−31 removed91 unchanged
Biggest changeDemand for and prices of the Company’s products are subject to a variety of factors, including, but not limited to: • global demand for energy as a result of population growth, economic development, and general economic and business conditions; • political and economic uncertainty, and sociopolitical unrest including the current military conflicts in Ukraine and Middle East and ongoing sanctions imposed on Russia; • the ability of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and the impact of non-OPEC producers on global supply; • availability and quantity of natural gas storage; • import and export volumes and pric ing of liquefied n atural gas; • domestic and international refining activity; • pipeline capacity to critical markets and out of producing regions; • cost of exploration, production and transport of oil and natural gas; • sustained market adoption of green chemistry solutions; • technological advances impacting energy production and consumption; • interest rates; • the timing and rate of economic recovery from the effects of the pandemic; • weather conditions; and • foreign exchange rates.
Biggest changeDemand for and prices of the Company’s products are subject to a variety of factors, including, but not limited to: • global demand for energy as a result of population growth, economic development, and general economic and business conditions; • political and economic uncertainty, and sociopolitical unrest including the current military conflicts in Ukraine and Middle East and ongoing sanctions imposed on Russia; • the ability of the Organization of Petroleum Exporting Countries (“OPEC”) to influence production levels and the impact of non-OPEC producers on global supply; • availability and quantity of natural gas storage; • import and export volumes and pricing of liquefied natural gas; • domestic and international refining activity; • rising demand for electricity in the U.S. and technological improvements to competing sources of power generation, including wind, solar and hydrogen; • pipeline capacity to critical markets and out of producing regions; • cost of exploration, production and transport of oil and natural gas; • sustained market adoption of green chemistry solutions; • technological advances impacting energy production and consumption; • new or increased governmental regulation or changes to existing governmental regulations; • expectations for inflation and the resulting impact on interest rates; • the imposition of tariffs or trade sanctions; • weather conditions; and • foreign exchange rates.
Materials used in servicing and manufacturing operations, as well as those purchased for sale, are generally available on the open market from multiple sources. Acquisition costs and transportation of raw materials to the Company’s facilities have historically been impacted by extreme weather conditions.
Raw materials used in servicing and manufacturing operations, as well as those purchased for sale, are generally available on the open market from multiple sources. Acquisition costs and transportation of raw materials to the Company’s facilities have historically been impacted by extreme weather conditions.
In addition to being the Company’s largest customer, certain affiliates of ProFrac Services LLC, entered into various convertible debt transactions with the Company during 2022, which were subsequently converted into shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock in 2023 (see Note 9, “Debt and Convertible Notes Payable” and Note 17, “Related Party Transactions,” in Part II, Item 8 - “Financial Statements and 17 Supplementary Data” of this Annual Report).
In addition to being the Company’s largest customer, certain affiliates of ProFrac Services LLC, entered into various convertible debt transactions with the Company during 2022, which were subsequently converted into shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock in 2023 (see Note 9, “Debt and Convertible Notes Payable” and Note 17, “Related Party Transactions,” in Part II, Item 8 - “Financial Statements and Supplementary Data” of this Annual Report).
Disclaimer of Obligation to Update Except as required by applicable law or regulation, the Company assumes no obligation (and specifically disclaims any such obligation) to update these risk factors or any other forward-looking statement contained in this Annual Report to reflect actual results, changes in assumptions, or other factors affecting such forward-looking statements. Item 1B. Unresolved Staff Comments .
Disclaimer of Obligation to Update Except as required by applicable law or regulation, the Company assumes no obligation (and specifically disclaims any such obligation) to update these risk factors or any other forward-looking statement contained in this Annual Report to reflect actual results, changes in assumptions, or other factors affecting such forward-looking statements. Item 1B. Unresolved Staff Comments Not applicable.
The industries in which the Company does business are characterized by technological advancements that have historically resulted in, and will likely continue to result in, substantial improvements in the scope and quality of specialty chemistries and analytical services. Consequently, the Company’s future success is dependent, in part, upon the Company’s continued ability to timely develop innovative products and services.
The industries in which the Company does business are characterized by technological advancements that have historically resulted in, and will likely continue to result in, substantial improvements in the scope and quality of specialty chemistries and data analytical services. Consequently, the Company’s future success is dependent, in part, upon the Company’s continued ability to timely develop innovative products and services.
Item 1A. Risk Factors The Company’s business, financial condition, results of operations, cash flows, liquidity and prospects are subject to various risks and uncertainties. Readers of this Annual Report should not consider any descriptions of these risk factors to be a 8 complete set of all potential risks that could affect the Company.
Item 1A. Risk Factors The Company’s business, financial condition, results of operations, cash flows, liquidity and prospects are subject to various risks and uncertainties. Readers of this Annual Report should not consider any descriptions of these risk factors to be a complete set of all potential risks that could affect the Company.
Severe weather could have an adverse impact on the Company’s business. The Company’s business could be materially and adversely affected by severe weather conditions. Hurricanes, tropical storms, flash floods, blizzards, cold weather, and other severe weather conditions could result in curtailment of services, damage to equipment and facilities, interruption in transportation of products and materials, and loss of productivity.
Severe weather could have an adverse impact on the Company’s business. The Company’s business could be materially and adversely affected by severe weather conditions. Hurricanes, tropical storms, flash floods, blizzards, extreme cold weather, and other severe weather conditions could result in curtailment of services, damage to equipment and facilities, interruption in transportation of products and materials, and loss of productivity.
The U.S. government could also change these laws or enact new laws that could restrict or prohibit the Company from doing business in identified foreign countries. The Company conducts, and will continue to 14 conduct, business in currencies other than the U.S. dollar. Historically, the Company has not hedged against foreign currency fluctuations.
The U.S. government could also change these laws or enact new laws that could restrict or prohibit the Company from doing business in identified foreign countries. The Company conducts, and will continue to conduct, business in currencies other than the U.S. dollar. Historically, the Company has not hedged against foreign currency fluctuations.
In addition, the potential issuance of additional shares of common stock or other securities in connection with anticipated acquisitions could lessen demand for our common stock or other securities and result in a lower price than would otherwise be obtained. The Company may issue shares of preferred stock or debt securities with greater rights than the Company’s common stock.
In addition, the potential issuance of additional shares of common stock or other securities in connection with anticipated acquisitions could lessen demand for our common stock or other securities and result in a lower price than would otherwise be obtained. 19 The Company may issue shares of preferred stock or debt securities with greater rights than the Company’s common stock.
Similar rules and limitations may apply for state income tax purposes. The Company is subject to complex foreign, federal, state and local environmental, health, and safety laws and regulations, which expose the Company to liabilities that could adversely affect the Company’s business, financial condition, and results of operations.
Similar rules and limitations may apply for state income tax purposes. 14 The Company is subject to complex foreign, federal, state and local environmental, health, and safety laws and regulations, which expose the Company to liabilities that could adversely affect the Company’s business, financial condition, and results of operations.
The Company currently does not hedge commodity prices, but may consider such strategies in 11 the future, and there is no guarantee that the Company’s purchasing strategies will prevent cost increases from resulting in materially adverse impacts on margins and operating profits.
The Company currently does not hedge commodity prices, but may consider such strategies in the future, and there is no guarantee that the Company’s purchasing strategies will prevent cost increases from resulting in materially adverse impacts on margins and operating profits.
Although the Company believes that existing measures are 10 reasonably adequate to protect intellectual property rights, there is no assurance that the measures taken will prevent misappropriation of proprietary information or dissuade others from independent development of similar products or services.
Although the Company believes that existing measures are reasonably adequate to protect intellectual property rights, there is no assurance that the measures taken will prevent misappropriation of proprietary information or dissuade others from independent development of similar products or services.
A continuous period of swings in oil and natural gas prices could result in further reductions in demand for the Company’s products and services and adversely affect the Company’s business, financial condition, and results of operations. The markets for the Company’s products, especially oil and gas markets, have historically been volatile.
A continuous period of swings in oil and natural gas prices could result in further reductions in demand for the Company’s products and services and adversely affect the Company’s business, financial condition, and results of operations. The markets for the Company’s products, especially oil and gas markets, have historically been very volatile.
If the Company became unable to execute the requirements of the agreement financially and operationally, from procuring inventory to meet the needs of ProFrac Services, LLC under the ProFrac Agreement and executing timely billing and collection, the Company’s 9 liquidity could be adversely impacted.
If the Company became unable to execute the requirements of the agreement financially and operationally, from procuring inventory to meet the needs of ProFrac Services, LLC under the ProFrac Agreement to executing timely billing and collection, the Company’s liquidity could be adversely impacted.
In the event that the Company cannot maintain its registrations or licenses or is unable to procure new licenses or registrations for new products or in response to changes to regulatory requirements, the ability of the Company to sell its products and obtain revenue may be adversely affected.
In the event that the Company cannot maintain its qualifications, registrations or licenses or is unable to procure new qualifications, licenses or registrations for new products or in response to changes to regulatory requirements, the ability of the Company to sell its products and obtain revenue may be adversely affected.
ProFrac Services, LLC has the right to terminate the ProFrac Agreement by providing written notice to the Company after the occurrence of any of the following events: (i) the Company’s bankruptcy; (ii) the Company’s failure to produce and deliver the product in accordance with the specifications, or failure to timely deliver product, and the Company has been unable to cure such failure within a commercially reasonable period determined by ProFrac Services, LLC; (iii) the Company fails to meet pricing requirements set forth in the ProFrac Agreement; or (iv) the Company is affected by a force majeure event, and such force majeure event has not been remedied within 30 days of the initial occurrence of such event.
ProFrac Services, LLC has the right to terminate the ProFrac Agreement by providing written notice to the Company after the occurrence of any of the following events: (i) the Company’s bankruptcy; (ii) the Company’s failure to produce and deliver the products in accordance with the specifications, or failure to timely deliver products, and the Company has been unable to cure such failure within a commercially reasonable period determined by ProFrac Services, LLC; (iii) the Company fails to meet pricing requirements set forth in the ProFrac Agreement; or (iv) the Company is affected by a force majeure event, and such force majeure event has not been remedied within 30 days of the initial occurrence of such event.
The Company has no plans to pay dividends on the Company’s common stock, and, therefore, investors will have to look to stock appreciation for return on investments. The Company does not anticipate paying any cash dividends on the Company’s common stock within the foreseeable future.
The Company has no current plans to pay dividends on the Company’s common stock, and, therefore, investors will have to look to stock appreciation for return on investments. The Company does not anticipate paying any cash dividends on the Company’s common stock within the foreseeable future.
From time to time, taxing authorities conduct audits of the Company’s tax filings and may make claims for increased taxes and, in some cases, assess interest and penalties. The assessments for back taxes, interest, and penalties could be significant.
From time to time, taxing authorities conduct audits of the Company’s tax filings and may make claims for increased taxes and, in some cases, assess interest and penalties. The assessments for back taxes, interest, and penalties could be 20 significant.
During 2023, the conversion of various debt instruments into the Company’s common stock and warrants to purchase the Company’s common stock resulted in an ownership change limiting the Company’s ability 13 to utilize existing NOLs and tax attribute carryforwards.
During 2023, the conversion of various debt instruments into the Company’s common stock and warrants to purchase the Company’s common stock resulted in an ownership change limiting the Company’s ability to utilize existing NOLs and tax attribute carryforwards.
Pursuant to this right, Matt Wilks was nominated and elected to serve on the Board at the Company’s 2022 annual meeting of shareholders and Evan Farber was appointed to the Board on October 11, 2022.
Pursuant to this right, Matt Wilks was nominated and elected to serve on our Board at the Company’s 2022 annual meeting of shareholders and Evan Farber was appointed to our Board on October 11, 2022.
The Company’s results could differ materially from those anticipated in the forward-looking statements as a result of a variety of factors, including r isks described below and elsewhere. See “Forward-Looking Statements” at the beginning of this Annual Report. Risks Related to the Company’s Business The Company’s business is largely dependent upon its customers’ spending in the oil and gas industry.
The Company’s results could differ materially from those anticipated in the forward-looking statements as a result of a variety of factors, including risks described below and elsewhere. See “Forward-Looking Statements” at the beginning of this Annual Report. Risks Related to the Company’s Business The Company’s business is largely dependent upon its customers’ spending in the oil and gas industry.
Some environmental laws and regulations could also impose joint and strict liability, meaning that the Company could be exposed in certain situations to increased liabilities as a result of the Company’s conduct that was lawful at the time it occurred or conduct of, or conditions caused by, prior operators or other third parties.
Some environmental laws and regulations could also impose joint and strict liability, meaning that the Company could be exposed in certain situations to increased liabilities as a result of the Company’s conduct that was lawful at the time it occurred or conduct of, or conditions caused by, third parties.
Furthermore, collectability of international sales can be subject to the laws of foreign countries, which may provide more limited protection to the Company in the event of a dispute over payment. Because sales to domestic and international customers are generally made on an unsecured basis, there can be no assurance of collectability.
Furthermore, collectability of international sales can be subject to the laws of foreign countries, which may provide less protection to the Company in the event of a dispute over payment. Because sales to domestic and international customers are generally made on an unsecured basis, there can be no assurance of collectability.
Negotiations of potential acquisitions, joint ventures, or other strategic relationships, integration of newly acquired businesses, and/or sales of existing businesses could be time consuming and divert management’s attention from other business concerns. Acquisitions and joint ventures could also expose the Company to unforeseen liabilities or risks associated with new markets or businesses.
Negotiations of potential acquisitions, joint ventures, or other strategic relationships, integration of newly acquired businesses, and/or dispositions of existing businesses or assets could be time consuming and divert management’s attention from other business concerns. Acquisitions and joint ventures could also expose the Company to unforeseen liabilities or risks associated with new markets or businesses.
These could result in the Company having to discontinue the use, manufacture and sale of certain products and services, increase the cost of selling certain products and services, or result in damage to the Company’s reputation.
These could result in the Company having to discontinue the use, manufacture and sale of certain products and services, increases in the cost of selling certain products and services, or damage to the Company’s reputation.
Further, the U.S. periodically enacts laws and imposes regulations prohibiting or restricting trade with certain nations. The current sanctions imposed on trade with Russia does not currently impact because the Company does not have any activity within that region.
Further, the U.S. periodically enacts laws and imposes regulations prohibiting or restricting trade with certain nations. The current sanctions imposed on trade with Russia do not currently directly impact us because the Company does not have any activity within that region.
It is difficult to predict the pace of industry growth, the direction of oil and natural gas prices, the direction and magnitude of economic activity, the demand for professional chemistry products, and to what extent these conditions could affect the Company.
It is difficult to predict the pace of industry growth, the direction of oil and natural gas prices, the direction and magnitude of economic activity, the demand for chemistry and data analytics products, and to what extent these conditions could affect the Company.
Factors that could result in strategic business difficulties include, but are not limited to: • failure to effectively integrate acquisitions, joint ventures or strategic alliances; • failure to effectively execute on the ProFrac Agreement; • failure to effectively plan for risks associated with expansion into areas in which management lacks prior experience; • lack of experienced management personnel; • increased administrative burdens; • lack of customer retention; • technological obsolescence; and • infrastructure, technological, communication and logistical problems associated with large, expansive operations.
Factors that could result in strategic business difficulties include, but are not limited to: • failure to effectively integrate acquisitions, joint ventures or strategic alliances; • failure to effectively execute on the ProFrac Agreement; • failure to effectively plan for risks associated with expansion into areas in which management lacks prior experience; • lack of experienced management personnel; • increased administrative burdens; • lack of customer retention; • lack of familiarity with applicable legal, regulatory and compliance requirements; • technological obsolescence; and • infrastructure, technological, communication and logistical problems associated with large, expansive operations.
Our financial condition, results of operations and cash flows may be adversely impacted if ProFrac Services, LLC’s financial condition or its spending level under the ProFrac Agreement is negatively impacted and they are unable to pay their outstanding obligations to the Company, including those payments related to Contract Shortfall Fees.
Our financial condition, results of operations and cash flows may be adversely impacted if ProFrac Services, LLC’s financial condition or its spending level under the ProFrac Agreement is negatively impacted and it is unable to pay its outstanding obligations to the Company, including those payments related to Contract Shortfall Fees.
The majority of the Company’s revenue in its CT segment is derived from customers engaged in hydraulic fracturing services. Some states have adopted regulations which require operators to publicly disclose certain non-proprietary information. These regulations could require the reporting and public disclosure of the Company’s proprietary chemistry formulas.
The majority of the Company’s revenue is generated from its CT segment and the majority of the CT segment’s revenue is derived from customers engaged in hydraulic fracturing services. Some states have adopted regulations which require operators to publicly disclose certain formulation information. These regulations could require the reporting and public disclosure of the Company’s proprietary chemistry formulas.
Less than 10 % of the Company’s revenue for the year ended December 31, 2023 was from customers based outside of the U.S.
Less than 10 % of the Company’s revenue for the year ended December 31, 2024 was from customers based outside of the U.S.
Worldwide economic uncertainty can reduce the availability of liquidity and credit markets to fund the continuation and expansion of industrial business operations worldwide. The shortage of liquidity and credit combined with pressure on worldwide equity markets could continue to impact the worldwide economic climate.
Worldwide economic uncertainty can reduce the availability of liquidity and credit markets to fund the continuation and expansion of industrial business operations worldwide. The shortage of liquidity and credit combined with pressure on worldwide equity markets may impact the worldwide economic climate.
Spending could be adversely affected by industry conditions or by new or increased governmental regulations; global economic conditions; the availability of credit; and oil and natural gas prices.
Spending could be adversely affected by industry conditions; new or increased governmental regulations; changes to existing governmental regulations; global economic conditions; the availability of credit; and oil and natural gas prices.
Furthermore, if key suppliers were to experience significant cash flow constraints or become insolvent as a result of such conditions, a reduction or interruption in supplies or a significant increase in the price of supplies could occur, adversely impacting the Company’s results of operations and cash flows.
Furthermore, if key suppliers were to experience significant cash flow constraints or become insolvent, a reduction or interruption in supplies or a significant increase in the price of supplies could occur, adversely impacting the Company’s results of operations and cash flows.
Divestitures could result in the loss of future earnings without adequate compensation and the loss of unrealized strategic opportunities. The Company’s ability to use net operating losses and tax attribute carryforwards to offset future taxable income has become limited due to an “ownership change” in 2023.
Dispositions could result in the loss of future earnings without adequate compensation and the loss of unrealized strategic opportunities. The Company’s ability to use net operating losses and tax attribute carryforwards to offset future taxable income became limited due to an “ownership change” in 2023.
Certain financial institutions, institutional investors and other sources of capital have begun to limit or eliminate their investment in financing of conventional energy-related activities due to concerns about climate change, which could make it more difficult for our customers and for the Company to finance our respective businesses.
Certain financial institutions, institutional investors and other sources of capital have limited or eliminated their investment in financing of certain energy-related activities due to concerns about climate change, which could make it more difficult for our customers and for the Company to finance our respective businesses.
The Company has seen customer concentration risk increase due to the entry int o the ProFrac Agreement. Unlike the ProFrac Agreement, customer relationships are substantially governed by purchase orders or other short-term contractual obligations as opposed to long-term contracts. Losses of customers also may occur due to product, service or pricing issues, as well as industry consolidation.
The Company has seen customer concentration risk increase substantially due to its entry into the ProFrac Agreement. Unlike the ProFrac Agreement, our other large customer relationships are typically governed by purchase orders or other short-term contractual obligations as opposed to long-term contracts. Losses of customers also may occur due to product, service or pricing issues, as well as industry consolidation.
Our DA segment may be materially and negatively affected by government regulations and/or facility disruptions. The demand for our equipment and services offerings in our DA segment could be materially affected by additional regulations on the upstream, midstream, and downstream portions of the oil and gas sectors.
Our DA segment may be negatively affected by government regulations. The demand for our equipment and services offerings in our DA segment could be materially affected by additional regulations or changes to existing regulations on the upstream, midstream, and downstream portions of the oil and gas sectors.
The loss of key customers could have an adverse impact on the Company’s results of operations and could result in a decline in the Company’s revenue. In the CT segment in aggregate, revenue derived from the Company’s three largest customers as a percentage of consolidated revenue for the years ended December 31, 2023 and 2022, totaled 73% and 44%, respectively.
The loss of key customers could have an adverse impact on the Company’s results of operations and could result in a decline in the Company’s revenue. Revenue derived from the Company’s three largest customers as a percentage of consolidated revenue for the years ended December 31, 2024 and 2023, totaled 75% and 73%, respectively.
Changes in the perception of citrus oils as a preferred VOC, increased consumer activism against hydraulic fracturing or other regulatory or legislative actions by governments could potentially result in materially reduced demand for the Company’s products and services and could adversely affect the Company’s business, financial condition, and results of operations.
Changes in the perception of VOCs, increased consumer activism against hydraulic fracturing or other regulatory or legislative actions by governments could potentially result in materially reduced demand for the Company’s products and services and could adversely affect the Company’s business, financial condition, and results of operations.
If the Company cannot access capital on acceptable terms when required, the Company’s business, financial conditions and operating results may be adversely affected.
If the Company cannot access capital on acceptable terms, the Company’s business, financial condition and operating results may be adversely affected.
The Company’s reliance on the ProFrac Agreement could adversely impact our financial condition, results of operations and cash flows. The ProFrac Agreement is a major source of the Company’s liquidity and we expect it to remain so over the term of the contract. Revenues attributable to the ProFrac Agreement represented 65% of our total revenues during 2023.
The Company’s reliance on the ProFrac Agreement could adversely impact our financial condition, results of operations and cash flows. The ProFrac Agreement is a major source of the Company’s liquidity and we expect it to remain so over the term of the contract.
Such a combination could materially increase the severity of the impact of these risks on the Company’s business, results of operations, financial condition, cash flows, liquidity or prospects. This Annual Report contains “forward-looking statements,” as defined in the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties.
Such a combination could materially increase the severity of the impact of these risks on the Company’s business, results of operations, financial condition, cash flows, liquidity or prospects. 9 This Annual Report contains “forward-looking statements,” as defined in Section 27A of the Securities Act and Section 21E of the Exchange Act that involve risks and uncertainties.
If one or more major customers, including ProFrac Services, LLC, are unwilling or unable to pay their obligations to the Company, it could have an adverse effect on the Company’s financial results, liquidity and cash flows.
If one or more major customers, including ProFrac Services, LLC, are unwilling or unable to pay their obligations to the Company, it could have an adverse effect on the Company’s financial results, liquidity and cash flows. Cyberattacks may have a significant and adverse impact on the Company’s operations and related financial condition.
If the Company is unable to adequately protect intellectual property rights or is found to infringe upon the intellectual property rights of others, or is unable to maintain the registrations and certifications of its products and facilities, the Company’s business is likely to be adversely affected.
Thus, competition could have a detrimental impact on the Company’s business. If the Company is unable to adequately protect intellectual property rights or is found to infringe upon the intellectual property rights of others, or is unable to maintain the registrations and certifications of its products and facilities, the Company’s business is likely to be adversely affected.
Certain of the Company’s products and facilities, especially those related to the professional chemistry products, have been registered with the EPA. The failure of the Company to maintain such EPA registrations could result in the inability of the Company to market or sell its products.
Certain of the Company’s products and facilities have been qualified or registered with the EPA. The failure of the Company to maintain such EPA qualifications or registrations could result in the inability of the Company to market or sell its products.
The following factors, among others, could cause the price of the Company’s common stock to fluctuate: • variations in the Company’s quarterly results of operations; • changes in market valuations of companies within the Company’s industry; • fluctuations in stock market prices and volume; • fluctuations in oil and natural gas prices; • issuances of common stock or other securities in the future, including debt or warrants convertible into the Company’s common stock and earnings per share; • additions or departures of key personnel; • inability to execute the ProFrac Agreement • announcements by the Company or the Company’s competitors of new business, acquisitions, or joint ventures; and • negative statements made by external parties about the Company’s business in public forums.
The following factors, among others, could cause the price of the Company’s common stock to fluctuate: • variations in the Company’s quarterly results of operations; • changes in market valuations of companies within the Company’s industry; • fluctuations in stock market prices and volume; • fluctuations in oil and natural gas prices; • issuances of common stock or other securities in the future, including warrants convertible into the Company’s common stock; • additions or departures of key personnel; • inability of either party to perform its obligations under our agreement with ProFrac Services, LLC regarding the purchase of our chemicals; • announcements by the Company or the Company’s competitors of new business, acquisitions, or joint ventures; and • negative statements made by external parties about the Company’s business in public forums.
The Company’s sales revenues are concentrated among customers operating in the oil and gas industry. Furthermore, the Company has seen an increase in concentration risk in 2022 and 2023, which it anticipates will continue in 2024 and beyond as a result of the Company’s entry into the ProFrac Agreement.
The Company’s sales revenues are concentrated among customers operating in the oil and gas industry. Furthermore, the Company has seen an increase in concentration risk as a result of the Company’s entry into the ProFrac Agreement.
Additionally, prices paid for raw materials could be affected by energy products and other commodity prices; weather and disease associated with our crop dependent raw materials; tariffs and duties on imported materials; evolving geopolitical risks; foreign currency exchange rates; and phases of the general business cycle and global demand.
Additionally, prices paid for raw materials could be affected by energy products and other commodity prices; weather and disease associated with our crop dependent raw materials; tariffs and duties on imported materials; evolving geopolitical risks; foreign currency exchange rates; and phases of the general business cycle and global demand. 12 The prices of key raw materials are subject to market fluctuations, which at times can be significant and unpredictable.
Additional regulation on oil and gas 16 production, transportation, or processing of hydrocarbons may result in significantly reduced demand for our offerings, either individually or as a result of a decline in the overall oil and gas markets in the United States and abroad.
Additional regulation on oil and gas production, transportation, or processing of hydrocarbons may result in significantly reduced demand for our offerings, either individually or as a result of a decline in the overall oil and gas markets in the United States and abroad. Changes to existing regulations related to the energy industry could also materially affect our DA segment.
The Company’s industry has a high rate of employee turnover. Difficulty attracting or retaining personnel or agents could adversely affect the Company’s business. The Company operates in an industry that has historically been highly competitive in securing qualified personnel with the required technical skills and experience. The Company’s services require skilled personnel able to perform physically demanding work.
The Company operates in an industry that has historically been highly competitive in securing qualified personnel with the required technical skills and experience. The Company’s services require skilled personnel able to perform physically demanding work.
This could be expensive and divert management’s attention and Company resources, as well as have an adverse effect on the Company’s business, operating results, cash flows, financial condition or securities. The Company’s relationship with ProFrac Services, LLC and certain of its affiliates may create a conflict of interest.
This could be expensive and divert management’s attention and Company resources, as well as have an adverse effect on the Company’s business, operating results, cash flows, financial condition or securities.
Cyberattacks may have a significant and adverse impact on the Company’s operations and related financial condition. The Company relies on access to information systems for operational, reporting and communication functions. Impairments of these systems, such as ransomware and network communications disruptions, could have an adverse effect on our ability to conduct operations and could directly impact consolidated reporting.
The Company relies on access to information systems for operational, reporting and communication functions. Impairments of these systems, such as ransomware and network communications disruptions, could have an adverse effect on our ability to conduct operations and could directly impact consolidated reporting. Phishing attacks could result in sensitive or confidential information being released by the Company.
The demand for the Company’s products and services is, in large part, driven by general levels of exploration and production spending and drilling activity by its customers. Future declines in oil or gas prices could adversely affect the Company’s business, financial condition, and results of operations. The Company presently does not hedge oil and natural gas prices.
Such volatility in oil and natural gas prices, or the perception by the Company’s customers of unpredictability in oil and natural gas prices, could adversely affect spending levels. The demand for the Company’s products and services is, in large part, driven by general levels of exploration and production spending and drilling activity by its customers.
During a period of scarcity of supply the Company may also be negatively impacted by prioritization decisions enacted by its suppliers. The Company may be unable to pass along price increases to its customers, which could result in a materially adverse impact on margins and operating profits.
The Company may be unable to pass along price increases to its customers, which could result in a materially adverse impact on margins and operating profits.
In the future, if the Company is not able to meet the continued listing requirements of the NYSE, the Company’s common stock may be delisted. If the Company is unable to satisfy the NYSE criteria for continued listing, its common stock would be subject to delisting.
The Company’s common stock is currently listed on the NYSE. In the future, if the Company is not able to meet the continued listing requirements of the NYSE, the Company’s common stock may be delisted.
Failure to collect for goods and services sold to key customers could have an adverse effect on the Company’s financial results, liquidity and cash flows. The Company performs credit analysis on potential customers; however, credit analysis does not provide full assurance that customers will be willing and/or able to pay for goods and services purchased from the Company.
The Company performs credit analysis on potential customers; however, credit analysis does not provide full assurance that customers will be willing and/or able to pay for goods and services purchased from the Company.
We are also dependent on ProFrac Services, LLC’s compliance in meeting their committed activity levels and paying for products provided, including any Contract Shortfall Fees, in a timely basis, in accordance with the terms of the ProFrac Agreement.
Further, our relationship with ProFrac Services, LLC may impact their competitors’ willingness to purchase products from the Company or to seek price concessions from the Company. 10 We are also dependent on ProFrac Services, LLC’s compliance in meeting their committed activity levels and paying for our products, including any Contract Shortfall Fees, on a timely basis, in accordance with the terms of the ProFrac Agreement.
The Company operates in a competitive environment populated by large and small competitors. Competitors with greater resources and lower cost structures or who are trying to gain market share may be successful in providing competing products and services to the Company’s customers at lower prices than the Company currently charges.
Competitors with greater resources and lower cost structures or who are trying to gain market share may be successful in providing competing products and services to the Company’s customers at lower prices than the Company 11 currently charges. This may require the Company to lower its prices, resulting in an adverse impact on revenues, margins, and operating results.
Termination of the ProFrac Agreement would have a material adverse impact on the Company’s financial condition, results of operations and cash flows.
Termination of the ProFrac Agreement would have a material adverse impact on the Company’s financial condition, results of operations and cash flows. In addition, ProFrac Services, LLC has customary rights to audit our compliance with the terms of the ProFrac Agreement.
The Company is, and from time to time may become, a party to legal proceedings incidental to the Company’s business involving alleged injuries arising from the use of Company products, exposure to hazardous substances, patent infringement, employment matters, commercial disputes, claims related to adverse physical reactions to the Company’s products such as rashes or allergic reactions and shareholder lawsuits.
Unforeseen contingencies such as litigation could adversely affect the Company’s financial condition. The Company is, and from time to time may become, a party to legal proceedings incidental to the Company’s business involving, among other matters, alleged injuries, exposure to hazardous substances, patent infringement, employment matters, commercial disputes and shareholder lawsuits.
The defense of these lawsuits may require significant expenses, divert management’s attention, and may require the Company to pay damages that could adversely affect the Company’s financial condition. In addition, any insurance or indemnification rights that the Company may have might be insufficient or unavailable to protect against potential loss exposures.
The defense of these lawsuits may require significant expenses, divert management’s attention, and may require the Company to pay damages that could adversely affect the Company’s financial condition.
Any preferred stock that is issued may rank senior to common stock in terms of dividends, priority and liquidation premiums, and may have greater voting rights than holders of common stock. 18 Certain anti-takeover provisions of the Company’s certificate of incorporation and applicable Delaware law could discourage or prevent others from acquiring the Company, which may adversely affect the market price of the Company’s common stock.
Certain anti-takeover provisions of the Company’s certificate of incorporation and applicable Delaware law could discourage or prevent others from acquiring the Company, which may adversely affect the market price of the Company’s common stock.
The Company derived 65% and 60% of its revenue for the years ended December 31, 2023 and 2022, respectively, from ProFrac Services LLC.
The Company’s relationship with ProFrac Services, LLC and certain of its affiliates may create a conflict of interest. The Company derived 62% and 65% of its revenue for the years ended December 31, 2024 and 2023, respectively, from ProFrac Services LLC.
These conditions can result in personal injury or loss of life, damage to property, equipment and the environment, as well as suspension of customers’ oil and gas operations.
The Company’s operations are subject to risks inherent in the oil and gas industry, such as, but not limited to, accidents, explosions, fires, severe weather, oil and chemical spills, and other hazards. These conditions can result in personal injury or loss of life, damage to property, equipment and the environment, as well as suspension of customers’ oil and gas operations.
If the Company fails to successfully develop and introduce innovative products and services that appeal to customers, or if existing or new market competitors develop superior products and services, the Company’s revenue and profitability could deteriorate. The Company’s business, financial condition, operating results and ability to grow and compete may be affected adversely if adequate capital is not available.
If the Company fails to successfully develop and introduce innovative products and services at price points that appeal to customers, or if existing or new market competitors develop superior products and services, the Company’s revenue and profitability could deteriorate.
As a result, ProFrac Holdings, LLC or its affiliates owns approximately 51% of the Company’s common stock as of December 31, 2023 making them the Company’s largest shareholder. In addition, ProFrac Holdings, LLC also has the right to elect four out of seven Board members and currently consolidates Flotek in their financial results.
In addition, ProFrac Holdings, LLC currently consolidates the Company’s financial results in its financial results and also has the right to elect four out of seven members of the Company’s Board of Directors.
These events could limit our liquidity and access to capital markets, adversely affect our business and investor confidence in our financial statements, and adversely impact our stock price. General Risk Factors If the Company loses the services of key members of management, the Company may not be able to manage operations and implement growth strategies.
General Risk Factors If the Company loses the services of key members of management, the Company may not be able to manage operations and implement growth strategies.
Risks Related to the Company’s Industry General economic declines or recessions, limits to credit availability, and industry specific factors could have an adverse effect on energy industry activity resulting in lower demand for the Company’s products and services.
Any or all of these ESG and sustainability initiatives may result in significant operational changes and expenditures, reduced demand for the Company’s products and services, and could materially adversely affect the Company’s business, financial condition, results of operations, stock price or access to capital markets. 16 Risks Related to the Company’s Industry General economic declines or recessions, limits to credit availability, and industry specific factors could have an adverse effect on energy industry activity resulting in lower demand for the Company’s products and services.
Demand for the Company’s goods and services may be adversely impacted if volatile economic conditions weaken customer expenditures, specifically as it concerns the continued adoption of chemistry solutions with lower overall impact on the environment.
Volatile commodity prices could adversely impact the activity levels of the Company’s customers. Demand for the Company’s goods and services may be adversely impacted if volatile economic conditions weaken customer expenditures.
The prices of key raw materials are subject to market fluctuations, which at times can be significant and unpredictable. Availability of key raw materials, weather events, natural disasters, and health epidemics in countries from which the Company sources raw materials may significantly impact prices.
Availability of key raw materials, weather events, natural disasters, and health epidemics in countries from which the Company sources raw materials may significantly impact prices. During a period of scarcity of supply the Company may also be negatively impacted by prioritization decisions enacted by its suppliers.
As a result of the operational and financial relationship with ProFrac Services LLC and its affiliates, as both the largest customer and a majority shareholder, certain conflicts of interest may occur. An active market for the Company’s common stock may not continue to exist or may not continue to exist at current trading levels.
As a result of the operational and financial relationship with ProFrac Services LLC and its affiliates, as the Company’s largest customer, a Board member and the Company’s majority shareholder, certain conflicts of interest may occur. If the Company cannot meet the New York Stock Exchange (“NYSE”) continued listing requirements, the NYSE may delist the Company’s common stock.
Regulatory pressures, environmental activism, and legislation could result in reduced demand for the Company’s products and services, increase the Company’s costs, and adversely affect the Company’s business, financial condition and results of operations. Regulations restricting volatile organic compounds (“VOC”) exist in many states and/or communities which limit demand for certain products.
Regulations restricting volatile organic compounds (“VOC”) exist in many states and/or communities, which limit demand for certain products.
Accordingly, the Company’s profitability could be affected by fluctuations in foreign exchange rates. The Company has no control over and can provide no assurances that future laws and regulations will not materially impact the Company’s ability to conduct international business.
The Company has no control over and can provide no assurances that future laws and regulations will not materially impact the Company’s ability to conduct international business. 15 Regulatory pressures, environmental activism, and legislation could result in reduced demand for the Company’s products and services, increase the Company’s costs, and adversely affect the Company’s business, financial condition and results of operations.
Phishing attacks could result in sensitive or confidential information being released by the Company. Security breaches pose a risk to confidential data and intellectual property, which could result in damages to our competitiveness and reputation.
Security breaches pose a risk to confidential data and intellectual property, which could result in damages to our competitiveness and reputation. The Company’s policies and procedures, system monitoring and data back-up processes may not prevent or detect potential disruptions or breaches in a timely or effective manner.
While the Company does carry cybersecurity insurance, the coverage and amount of such insurance may not be sufficient to adequately compensate the Company for cybersecurity loss. See “Item 1C. Cybersecurity” within this Part I. 12 Unforeseen contingencies such as litigation could adversely affect the Company’s financial condition.
There can be no assurance that existing or emerging threats will not have an adverse impact on our systems or communications networks. While the Company does carry cybersecurity insurance, the coverage and amount of such insurance may not be sufficient to adequately compensate the Company for cybersecurity loss. See “Item 1C. Cybersecurity” in Part I of this Annual Report.
The Company’s existing resources including cash on hand and availability under its ABL, may not be sufficient to finance operations and strategies. The Company may therefore need to rely on external financing sources, including commercial borrowings and issuances of debt and equity securities.
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. The Company may need additional financing sources, including commercial borrowings and issuances of debt and/or equity securities.
The Company operates in an environment with relatively low barriers to entry; employees of the Company may leave and compete directly with the Company. This may require the Company to lower its prices, resulting in an adverse impact on revenues, margins, and operating results. Thus, competition could have a detrimental impact on the Company’s business.
The Company operates in a competitive environment populated by large and small competitors and with relatively low barriers to entry. Absent an applicable restrictive covenant, employees of the Company may leave and compete directly with the Company.
Removed
The volatility of commodity prices and the consequential effect on the activities of the Company’s target customer base could adversely impact the activity levels of the Company’s customers.
Added
Revenues attributable to the ProFrac Agreement represented 62% and 65% of our total revenues during 2024 and 2023, respectively.

… 53 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+5 added−2 removed1 unchanged
Biggest changeThe Company’s information technology team is tasked with the initial assessment of a suspected incident and evaluates the suspected incident based on the Company’s cybersecurity policy. In the event of an incident, we intend to follow our cyber incident response plan. Any assessment that is deemed an actionable incident would trigger an alert to the CIRT.
Biggest changeIn the event of an incident, we intend to follow our cyber incident response plan. Any assessment that is deemed an actionable incident would trigger an alert to the CIRT. The CIRT will further assesses the incident according to a predefined scale (e.g., low, medium, high and critical) and initiate the Company’s incident response plan and communication protocols.
See “Risk Factors” in Item 1A of this Annual Report. As of 20 December 31, 2023, we have not identified any risks from known cybersecurity threats that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition.
As of December 31, 2024, we have not identified any risks from known cybersecurity threats that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition.
The CIRT is charged with the evaluation and implementation of incident response tools, and the implementation of training procedures and exercises to mitigate and remediate potential cybersecurity incidents.
The CIRT is charged with the evaluation and implementation of incident response tools, and the implementation of mandatory training procedures and exercises to mitigate and remediate potential cybersecurity incidents. The CIRT members are comprised of representatives from management, including the Company’s Chief Executive and Financial Officers, information technology, legal and communications teams.
The Board has an active role in overseeing management of the Company’s risks and regularly reviews information regarding the Company’s operations, liquidity and associated risks. While each committee of the board is responsible for evaluating certain risks and overseeing the management of those risks, the entire board is regularly informed through committee reports.
The CIRT reports to the Risk & Sustainability Committee of the Company’s Board of Directors, which is tasked with oversight of the general risk and sustainability programs of the Company. The Board has an active role in overseeing management of the Company’s risks and regularly reviews information regarding the Company’s operations, liquidity and associated risks.
The CIRT will further assesses the incident according to a predefined scale (e.g., low, medium, high and critical) and initiate the Company’s incident response plan and communication protocols. The CIRT, in conjunction with the Risk and Sustainability Committee, will assess the materiality of the incident with respect to the rules, regulations and disclosure requirements of the SEC and NYSE.
The CIRT, in conjunction with the Risk and Sustainability Committee, will assess the materiality of the incident with respect to the rules, regulations and disclosure requirements of the SEC and NYSE. See “Risk Factors” in Item 1A of this Annual Report.
Removed
The CIRT members are comprised of representatives from management, including the Company’s Chief Executive and Financial Officers, information technology, legal and communications teams and reports to the Risk & Sustainability Committee of the Company’s Board of Directors, which is tasked with oversight of the general risk and sustainability programs of the Company.
Added
The CIRT is led by the Company’s Director of Information Technology (the “Director of IT”), who reports to the Company’s Chief Financial Officer. The Director of IT has a formal education in Computer Information Systems and is a Microsoft Certified Information Systems Professional with 28 years of experience.
Removed
The Company uses several real-time systems for detecting potential threats to its systems, devices and user accounts. The Company also engages third-party consultants to evaluate its security and disclose any potential weaknesses within the Company’s systems. The CIRT will review the steps required to minimize the effects of any discovered weaknesses and implement changes as deemed necessary.
Added
The Director of IT has comprehensive experience in cybersecurity controls, including intrusion detection, network security, operating systems, incident response and a track record of identifying cyber risks and implementing countermeasures to mitigate cyber attacks.
Added
While each committee of the Board is responsible for evaluating certain risks and overseeing the management of those risks, the entire Board is regularly informed through committee reports. The Company uses several real-time systems for detecting potential threats to its systems, devices and user accounts.
Added
In addition, the Company reviews controls implemented by its third-party service providers to ensure that the providers’ controls have been designed to effectively mitigate cybersecurity risks that could affect the Company’s systems. The Company also engages third-party consultants to evaluate its security and disclose any potential weaknesses within the Company’s systems.
Added
The CIRT reviews the findings of these evaluations and will determine the steps required to minimize the effects of any discovered weaknesses and implement changes as deemed necessary. The Company’s information technology team is tasked with the initial assessment of a suspected incident and evaluates the suspected incident based on the Company’s cybersecurity policy.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeItem 2. Properties. The Company operates two manufacturing, warehouse and research facilities in the U.S. Internationally, the Company has a warehouse and a sales office in Dubai, United Arab Emirates. The Company owns two of these facilities and the remainder are leased with lease terms that expire from 2024 through 2030. In addition, the Company’s corporate office at 5775 N.
Biggest changeItem 2. Properties The Company operates three manufacturing facilities, a corporate headquarters and a research facility in the U.S. The Company owns two of these facilities and the remainder are leased with lease terms that expire from 2025 through 2030. Internationally, the Company leases a warehouse and a sales office in Dubai, United Arab Emirates.
Sam Houston Parkway W., Suite 400, Houston, Texas is a leased facility. The following table sets forth facility locations: Segment Owned/Leased Location Chemistry Technologies Owned Marlow, Oklahoma Chemistry Technologies Owned Raceland, Louisiana Chemistry Technologies Leased Dubai, United Arab Emirates Chemistry Technologies Leased Houston, Texas Data Analytics Leased Austin, Texas Corporate Headquarters Leased Houston, Texas
The following table sets forth our facility locations: 21 Segment Owned/Leased Location Chemistry Technologies Owned Marlow, Oklahoma Chemistry Technologies Owned Raceland, Louisiana Chemistry Technologies Leased Dubai, United Arab Emirates Chemistry Technologies Leased Dubai, United Arab Emirates Chemistry Technologies Leased Houston, Texas Data Analytics Leased Austin, Texas Corporate Headquarters Leased Houston, Texas

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−2 removed0 unchanged
Biggest changeSee Note 12, “Commitments and Contingencies” in Part II, Item 8 – “Financial Statements and Supplementary Data” of this Annual Report for additional information. Item 4. Mine Safety Disclosures Not applicable. 21 PART II
Biggest changeItem 3. Legal Proceedings For a discussion of our legal proceedings, please refer to Note 12, “Commitments and Contingencies” in Part II, Item 8 — “Financial Statements and Supplementary Data” of this Annual Report. Item 4. Mine Safety Disclosures Not applicable. PART II
Removed
Item 3. Legal Proceedings The Company is subject to routine litigation and other claims that arise in the normal course of business.
Removed
Except as set forth in Note 12, “Commitments and Contingencies” in Part II, Item 8 — “Financial Statements and Supplementary Data” of this Annual Report, 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 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−1 removed2 unchanged
Biggest changeRepurchases of the Company’s equity securities during the three months ended December 31, 2023 , 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 October 1, 2023 to October 31, 2023 — $ — November 1, 2023 to November 30, 2023 124 $ 4.08 December 1, 2023 to December 31, 2023 5,627 $ 3.83 Total 5,751 (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.
Biggest changeRepurchases of the Company’s equity securities during the three months ended December 31, 2024, 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 October 1, 2024 to October 31, 2024 — $ — November 1, 2024 to November 30, 2024 102 $ 6.56 December 1, 2024 to December 31, 2024 15,700 $ 8.35 Total 15,802 (1) The Company purchases shares of its common stock to satisfy tax withholding requirements and payment remittance obligations related to period vesting of restricted shares.
A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions. The Company has never declared or paid cash dividends on common stock. The Company has no current plans to declare dividends on its common stock.
A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions. The Company has never declared or paid cash dividends on its common stock. The Company has no current plans to declare dividends on its common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company’s common stock trades on the NYSE under the stock ticker symbol “FTK.” As of the close of business on March 6, 2024, there were approximately 7,649 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company’s common stock trades on the NYSE under the stock ticker symbol “FTK.” As of the close of business on March 7, 2025, there were approximately 36 holders of record of our common stock.
Unregistered Sales of Equity Securities During the year ended December 31, 2023, the Company did not have any sales of securities in transactions that were not registered under the Securities Act of 1933, as amended, that have not been reported on Form 8-K or Form 10-Q.
Unregistered Sales of Equity Securities During the year ended December 31, 2024 , the Company did not have any sales of securities in transactions that were not registered under the Securities Act of 1933, as amended.
Removed
As discussed in Note 13 - “Stockholders’ Equity” in Part II, Item 8 of this Annual Report, the Company completed a 1-to-6 Reverse Stock Split on September 25, 2023. Unless otherwise noted, references to the number of shares outstanding and issuances under compensation plans have been retroactively adjusted to give effect to the Reverse Stock Split.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

55 edited+8 added−19 removed12 unchanged
Biggest changeThe minimum purchase requirements were not met during the current measurement period, and as a result, related party revenues for the year ended December 31, 2023 reflect Contract Shortfall Fees of $20.1 million, of which $10.0 million was collected through March 11, 2024 with the remainder due on or before April 8, 2024. 23 Consolidated Results of Operations (in thousands) Years ended December 31, 2023 2022 Revenue Revenue from external customers $ 66,518 $ 54,344 Revenue from related party 121,540 81,748 Total revenues 188,058 136,092 Cost of sales 163,795 142,792 Cost of sales % 87.1 % 104.9 % Gross profit (loss) 24,263 (6,700) Gross profit (loss) % 12.9 % (4.9) % Selling, general and administrative 27,873 27,124 Selling, general and administrative % 14.8 % 19.9 % Depreciation 734 734 Research and development 2,486 4,438 Severance costs (46) — Gain on disposal of property and equipment (38) (2,916) Gain on lease termination — (584) Gain in fair value of contract consideration convertible notes payable (29,969) (75) Impairment of goodwill — — Income (loss) from operations 23,223 (35,421) Operating margin % 12.3 % (26.0) % Paycheck protection plan loan forgiveness 4,522 — Interest expense and other income, net (2,883) (6,906) Income (loss) before income taxes 24,862 (42,327) Income tax (expense) benefit (149) 22 Net income (loss) $ 24,713 $ (42,305) Net income (loss) % 13.1 % (31.1) % Consolidated revenue for the year ended December 31, 2023 increased $52.0 million, or 38%, versus the same period of 2022.
Biggest changeConsolidated Results of Operations (in thousands) Years ended December 31, 2024 2023 Revenue Revenue from external customers $ 71,263 $ 66,518 Revenue from related party 115,762 121,540 Total revenues 187,025 188,058 Cost of sales 147,639 163,795 Cost of sales % 78.9 % 87.1 % Gross profit 39,386 24,263 Gross profit % 21.1 % 12.9 % Selling, general and administrative 24,709 27,827 Selling, general and administrative % 13.2 % 14.8 % Depreciation 891 734 Research and development 1,714 2,486 Gain on disposal of property and equipment (124) (38) Gain in fair value of contract consideration convertible notes payable — (29,969) Income from operations 12,196 23,223 Operating margin % 6.5 % 12.3 % Other income (expense) Paycheck protection plan loan forgiveness — 4,522 Interest expense and other income, net (1,049) (2,883) Total other (expense) income (1,049) 1,639 Income before income taxes 11,147 24,862 Income tax expense (649) (149) Net income $ 10,498 $ 24,713 Net income % 5.6 % 13.1 % Consolidated revenue for the year ended December 31, 2024 decreased $1.0 million versus the same period of 2023.
For more information, see “Forward-Looking Statements.” These forward-looking statements are made as of the date of this report, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by applicable law. All dollar amounts stated herein are in U.S. dollars unless specified otherwise.
For more information, see “Forward-Looking Statements.” These forward-looking statements are made as of the date of this Annual Report, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by applicable law. All dollar amounts stated herein are in U.S. dollars unless specified otherwise.
Major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, national and state-owned oil companies, geothermal energy companies, solar energy companies and advanced alternative energy companies benefit from our best-in-class technology, field operations, and continuous improvement exercises that go beyond existing sustainability practices.
Major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, national and state-owned oil companies, geothermal energy companies, solar energy companies and advanced alternative energy companies may benefit from our best-in-class technology, field operations, and continuous improvement exercises that go beyond existing sustainability practices.
The Company’s proprietary green chemistries, specialty chemistries, logistics, and technology services enable its customers to pursue improved efficiencies and performance throughout the life cycle of its desired chemical applications program.
The Company’s proprietary green chemistries, specialty chemistries, logistics, and technology services enable its customers to pursue improved efficiencies and performance throughout the life cycle of their desired chemical applications program.
We have developed a line of Verax™ analyzers for deployment internationally which was certified for compliance in hazardous locations and harsh weather conditions. Research & Innovation R&I supports both segments through green chemistry formulation, specialty chemical formulations, EPA regulatory guidance, technical support, basin and reservoir studies, data analytics and new technology projects.
We have developed a line of Verax™ analyzers for deployment internationally, which was certified for compliance in hazardous locations and harsh weather conditions. Research & Innovation R&I supports both our business segments through green chemistry formulation, specialty chemical formulations and EPA regulatory guidance, technical support, basin and reservoir studies, data analytics and new technology projects.
If the minimum volumes are not achieved within the applicable measurement period, ProFrac Services, LLC is required to pay to the Company, as liquidated damages, an amount equal to twenty-five percent (25%) of the difference between (i) the aggregate purchase price of the quantity of products comprising the minimum purchase obligation and (ii) the actual purchased volume during the measurement period (“Contract Shortfall Fees”).
If the minimum volume purchases are not achieved within the applicable measurement period, ProFrac Services, LLC is required to pay to the Company, as liquidated damages, an amount equal to twenty-five percent (25%) of the difference between (i) the aggregate purchase price of the quantity of products comprising the minimum purchase obligation and (ii) the actual purchased volume during the measurement period (“Contract Shortfall Fees”).
As a result of many risks and uncertainties, including those factors set forth in Item 1A -Risk Factors of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
As a result of many risks and uncertainties, including those factors set forth in Item 1.A. Risk Factors of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
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).
If the ABL is terminated prior to the end of its 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 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.
The purpose of R&I is to supply the Company’s business 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 CT and DA performance, optimization and manufacturing.
More efficient operations have the benefit of reducing their carbon footprint e.g., less flaring and reduction in energy expenditure for compression and re-processing. Our customers in North America include the supermajors, some of the largest midstream companies and large gas processing plants.
More efficient operations have the benefit of reducing carbon footprint, e.g., less flaring and reduction in energy expenditure for compression and re-processing. Our customers in North America include oil and gas supermajors, some of the largest midstream oil and gas companies, large gas processing plants and independent exploration and production companies.
We believe customers using this technology have obtained significant benefits including additional profits by enhancing operations in crude/condensates stabilization, blending operations, reduction of transmix, increasing efficiencies and optimization of gas plants, allowing for the use of lower cost field gas instead of diesel to generate power and protect equipment, and ensuring product quality while reducing giveaways i.e., providing higher value products at the lower value products prices.
We believe customers using this technology have obtained significant benefits, including additional profits, by enhancing operations in crude/condensates stabilization, enhancing blending operations, reducing time impacting transmix operations, 23 increasing efficiencies and optimization of gas plants, allowing for the use of significantly lower cost field gas instead of diesel to generate power, lowering emissions and protecting equipment, and ensuring product quality while reducing giveaways, i.e., providing higher value products at the lower value products prices.
At December 31, 2023 and 2022, the reserve for excess and obsolete inventory was $6.1 million and $8.2 million, or 32.3% and 34.3% of inventory, respectively. Significant or unanticipated changes to our estimates and forecasts could impact the amount and timing of any additional provisions for excess and obsolete inventory.
At December 31, 2024 and 2023, the reserve for excess and obsolete inventory was $5.2 million and $6.1 million, or 28.2% and 32.3% of inventory, respectively. Significant or unanticipated changes to our estimates and forecasts could impact the amount and timing of any additional provisions for excess and obsolete inventory.
Real-time composition and physical properties are delivered simultaneously on their refined fuels, natural gas liquids (“NGLs”), natural gas, crude oil, and condensates using the industry’s only field-deployable, in-line optical near-infra-red spectrometer that generates no emissions. The instrument's response is processed with advanced chemometrics modeling, artificial intelligence, and machine learning algorithms to deliver these valuable insights every 15 seconds.
Real-time composition and physical property measurements are delivered simultaneously on refined fuels, natural gas liquids (“NGLs”), natural gas, crude oil, and condensates using the industry’s only field-deployable, in-line optical near-infrared spectrometer that generates no emissions. The instrument's response is processed with advanced chemometrics modeling, artificial intelligence, and machine learning algorithms to deliver valuable insights every fifteen seconds.
Net cash provided was partially offset by severance payments attributed to former CEO’s forfeited vested stock options, loan origination fees, and payments for shares withheld for taxes.
Net cash provided was partially offset by severance payments attributed to our former chief executive officer’s forfeited vested stock options, loan origination fees, and payments for shares withheld for taxes.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is subject to the safe harbor created by those sections.
GAAP, included elsewhere in this Annual Report. 22 Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act , and is subject to the safe harbor created by those sections.
ProFrac Supply Agreement On February 2, 2022, the Company entered into the Initial ProFrac Agreement, which was subsequently amended on May 17, 2022 and February 1, 2023 (collectively, the “ProFrac Agreement”). The ProFrac Agreement contains minimum requirements for chemistry purchases.
ProFrac Supply Agreement On February 2, 2022, the Company entered into a Chemical Products Supply Agreement with ProFrac Services, LLC, which was subsequently amended on May 17, 2022 and February 1, 2023 (collectively, the “ProFrac Agreement”). The ProFrac Agreement contains minimum requirements for chemistry purchases.
The interest rate under the ABL was 11% as of December 31, 2023. 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.
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.
Executive Summary 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 technology company, Flotek helps customers across industrial and commercial markets improve their environmental performance.
Executive Summary Flotek creates unique solutions to reduce the environmental impact of energy on air, water, land and people. A technology-driven, specialty chemistry and data technology company, Flotek helps customers across industrial and commercial markets improve their environmental performance. The Company seeks to provide sustainable and optimized chemistry and data technology solutions for both domestic and international energy markets.
Accounts payable and accrued liabilities decreased $1.7 million and $2.6 million, respectively. The decrease in accrued liabilities is primarily due to accrued severance, sales taxes and professional fees, partially offset by higher bonus accruals.
Accounts payable and accrued liabilities decreased $1.7 million and $2.6 million, respectively. The decrease in accrued liabilities is primarily due to accrued severance, sales taxes and professional fees, partially offset by higher bonus accruals. Operating lease liabilities decreased $3.4 million primarily due to payments on equipment leases.
The ABL provides up to $10 million of initial credit availability, which is limited by a borrowing base consisting of (i) 85% of eligible accounts receivable, plus (ii) 60% of the value of eligible inventory not to exceed 100% of the eligible accounts receivable.
The ABL provides up to $20.0 million of credit availability, which is limited by a borrowing base consisting of (i) 85% of eligible accounts receivable, plus (ii) 60% of the value of eligible inventory not to exceed 100% of the eligible accounts receivable, plus (iii) 60% of the value of certain real estate holdings.
The reduction in cost of sales as a percentage of revenue in 2023 was the result of revenue from Contract Shortfall Fees, which have no associated costs, and numerous initiatives to reduce the cost of freight and logistics and secure better pricing of materials. Selling general and administrative (“SG&A”) expenses are not directly attributable to products sold or services provided.
The reduction in cost of sales as a percentage of revenue in 2024 was the result of higher revenue from Contract Shortfall Fees, which have no associated costs. Selling general and administrative (“SG&A”) expenses are not directly attributable to products sold or services provided.
Interest expense and other income for the year ended December 31, 2023 increased $8.5 million, driven primarily by a $4.5 million gain for the forgiveness of the Flotek PPP loan and a $4.2 million decrease in interest expense related to the maturity of the Contract Consideration Convertible Notes Payable in the first half of 2023.
Total other (expense) income for the year ended December 31, 2024 decreased $2.7 million, driven primarily by a $4.5 million gain for the forgiveness of the Flotek PPP loan during 2023 with no corresponding activity in 2024, partially offset by a $1.8 million decrease in interest expense related to the maturity of the Contract Consideration Convertible Notes Payable in the first half of 2023.
Company Overview Chemistry Technologies We believe that the Company’s CT segment provides sustainable, optimized chemistry solutions that maximize our customers’ value by improving return on invested capital, lowering operational costs, and providing tangible environmental benefits.
The Company’s two operating segments, CT and DA, are supported by the Company’s continuing Research and Innovation (“R&I”) advanced laboratory capabilities. Company Overview Chemistry Technologies The Company’s CT segment provides sustainable, optimized chemistry solutions that we believe maximize our customers’ value by improving return on invested capital, lowering operational costs, and providing tangible environmental benefits.
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”).
Asset Based Loan In August 2023, the Company entered into a 24-month revolving loan and security agreement in connection with an Asset Based Loan, which was amended in October 2023 and again in August 2024 (as amended, the “ABL”).
During the year ended December 31, 2023, non-cash adjustments to net income totaled $22.8 million as compared to $12.8 million for the same period of December 31, 2022. • For the year ended December 31, 2023, non-cash adjustments included a $30.0 million gain on the fair value valuation of the Contingent Convertible Notes, a gain of $4.5 million for the Flotek PPP loan forgiveness, paid-in-kind interest on the Convertible Notes Payable and Contract Consideration Convertible Notes Payable of $2.3 million, amortization of contract assets and convertible note issuance costs of $5.0 million and $0.1 million, respectively, and stock compensation expense of $0.3 million.
Non-cash adjustments also include $0.9 million of depreciation expense, $0.3 million of amortization of loan origination costs and the provision for excess and obsolete inventory of $0.6 million. • For the year ended December 31, 2023, non-cash adjustments included a $30.0 million gain on the fair value valuation of the Contingent Convertible Notes, a gain of $4.5 million for the Flotek PPP loan forgiveness, paid-in-kind interest on the Convertible Notes Payable and Contract Consideration Convertible Notes Payable of $2.3 million, amortization of contract assets and convertible note issuance costs of $5.0 million and $0.1 million, respectively, and stock compensation of ($0.3) million.
Cash Flows Consolidated cash flows by type of activity are noted below (in thousands): Years ended December 31, 2023 2022 Net cash used in operating activities $ (11,297) $ (44,632) Net cash (used in) provided by investing activities (1,014) 5,331 Net cash provided by financing activities 5,928 38,267 Effect of changes in exchange rates on cash and cash equivalents (54) 100 Net change in cash, cash equivalents and restricted cash $ (6,437) $ (934) Operating Activities Net cash used in operating activities was $11.3 million and $44.6 million during the years ended December 31, 2023 and 2022, respectively.
The Company was in compliance with all of the covenants under the ABL as of December 31, 2024. 26 Cash Flows Consolidated cash flows by type of activity are noted below (in thousands): Years ended December 31, 2024 2023 Net cash provided by (used in) operating activities $ 3,361 $ (11,297) Net cash used in investing activities (1,816) (1,014) Net cash (used in) provided by financing activities (3,116) 5,928 Effect of changes in exchange rates on cash and cash equivalents 124 (54) Net change in cash, cash equivalents and restricted cash $ (1,447) $ (6,437) Operating Activities Net cash provided by (used in) operating activities was $3.4 million and ($11.3) million during the years ended December 31, 2024 and 2023, respectively.
Results by Segment (in thousands): Chemistry Technologies Results of Operations: Years ended December 31, 2023 2022 Revenue from external customers $ 59,016 $ 48,960 Revenue from related party 120,903 81,618 Income (loss) from operations 39,043 (14,729) CT revenue from external customers for the year ended December 31, 2023, increased $10.1 million, or 21%, compared to 2022 due to increased domestic sales with both new and existing customers.
Results by Segment (in thousands): Chemistry Technologies Results of Operations: Years ended December 31, 2024 2023 Revenue from external customers $ 63,214 $ 59,016 Revenue from related party 114,947 120,903 Income from operations 26,602 39,043 CT revenue from external customers for the year ended December 31, 2024, increased $4.2 million, or 7% compared to 2023 due to increased sales with both new and existing customers.
During the year ended December 31, 2023, changes in working capital used $13.2 million of cash as compared to using $15.2 million for the same period of 2022. • For the year ended December 31, 2023, changes in working capital resulted primarily from increases in accounts receivable, including related party of $6.5 million, and a decrease in inventories of $1.9 million due to reduced ProFrac sales in late 2023.
During the year ended December 31, 2024, changes in working capital used $18.5 million of cash as compared to $13.2 million used for the same period of 2023. • For the year ended December 31, 2024, changes in working capital resulted primarily from increases in accounts receivable, including related party, of $21.6 million, and an increase in inventories of $0.7 million.
SG&A expenses for the year ended December 31, 2023, increased $0.7 million, or 3%, versus the same period of 2022. Research and development (“R&D”) costs decreased $2.0 million, or 44%, for the year ended December 31, 2023, versus the same period of 2022 driven by lower personnel costs resulting from headcount optimization.
Research and development (“R&D”) costs decreased $0.8 million, or 31%, for the year ended December 31, 2024, versus the same period of 2023 driven by lower personnel costs resulting from headcount optimization. Operating income decreased by $11.0 million to $12.2 million for the year ended December 31, 2024 versus the same period in 2023.
Investing Activities Net cash used by investing activities for the year ended December 31, 2023 was $1.0 million primarily due to system enhancements and capital additions.
Investing Activities Net cash used in investing activities for the year ended December 31, 2024 was $1.8 million primarily due to capital additions, including new equipment and sensors expected to be utilized in flare monitoring. Net cash used in investing activities for the year ended December 31, 2023 was $1.0 million primarily due to system enhancements and capital additions.
During the year ended December 31, 2023, the Company had operating income of $23.2 million, $11.3 million of cash used in operating activities, $1.0 million of cash used in investing activities and $5.9 million of cash provided by financing activities.
During the year ended December 31, 2024 , the Compan y had $12.2 million of operating income, $3.4 million of cash provided by operating activities, $1.8 million of cash used in investing activities and $3.1 million of cash used in financing activities.
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 December 31, 2023.
In addition, the ABL provides the lender a blanket security interest on all or substantially all of the Company’s assets.
Data Analytics Results of Operations: Years ended December 31, 2023 2022 Revenue from external customers $ 7,502 $ 5,384 Revenue from related party 637 130 Loss from operations (53) (2,877) DA external customer revenue for the year ended December 31, 2023, increased $2.1 million, or 39%, compared to revenue for 2022. The increase was driven by increased product sales.
Data Analytics Results of Operations: Years ended December 31, 2024 2023 Revenue from external customers $ 8,049 $ 7,502 Revenue from related party 815 637 Loss from operations (939) (53) DA external customer revenue for the year ended December 31, 2024, increased $0.5 million, or 7%, compared to revenue for 2023.
The increase was driven by an increase in gross profit of $27.7 million attributable to increased activity and accrued Contract Shortfall Fees along with an increase in the gain in fair value of the Contract Consideration Convertible Notes Payable of $30.0 million for the year ended December 31, 2023 compared to $0.1 million for the same period in 2022.
The decrease was driven by the gain in fair value of the Contract Consideration Convertible Notes Payable of $30.0 million for the year ended December 31, 2023 without corresponding activity for the year ended December 31, 2024, partially offset by an increase in gross profit of $15.9 million attributable to higher Contract Shortfall Fees and lower freight costs.
The Company’s CT segment designs, develops, manufactures, packages, distributes and markets optimized chemistry solutions that accelerate existing sustainability practices to reduce the environmental impact of energy on the air, water, land and people. Customers of the CT segment include those of energy related markets, such as our related party ProFrac Services, LLC, as well as industrial applications.
The Company designs, develops, manufactures, packages, distributes and markets optimized chemistry solutions that are designed to accelerate existing sustainability practices to reduce the environmental impact of energy on the air, water, land and people.
I n addition , at March 11, 2024, the Company had approximately $0.5 million in borrowings outstanding under its ABL, as compared to $7.5 million at December 31, 2023.
As of December 31, 2024 , the Company had unrestricted cash and cash equivalents of $4.4 million compared to $5.9 million on December 31, 2023. In addition, at March 10, 2025, the Company had approximately $15 million i n available borrowings under the ABL.
Operating lease liabilities decreased $3.4 million primarily due to payments on equipment leases. • For the year ended December 31, 2022, changes in working capital resulted primarily from increases in accounts receivable and inventories of $28.7 million and $7.9 million, respectively, due to the significant increase in revenues.
Accrued liabilities increased $5.7 million and operating lease liabilities decreased $2.4 million primarily due to payments on equipment leases. • For the year ended December 31, 2023, changes in working capital resulted primarily from increases in accounts receivable, including related party, of $6.5 million, and a decrease in inventories of $1.9 million due to reduced sales with ProFrac Services, LLC in late 2023.
While we believe that our cash, liquid assets, and availability under the ABL will provide us with sufficient financial resources to fund operations to meet our capital requirements and anticipated obligations as they become due, uncertainty surrounding the long term stability and strength of the oil and gas markets could have a negative impact on our liquidity.
While we believe our cash and cash equivalents, cash generated from operating activities, which includes the collection of the Contract Shortfall Fees as described further below, and availability under the ABL will be sufficient to fund 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.
As of December 31, 2023, the Company had incurred origination costs of $0.5 million related to the ABL that was recorded as deferred financing costs to be amortized over the term of the ABL. Borrowings under the ABL bear interest at the Wall Street Journal Prime Rate (subject to a floor of 5.50%) plus 2.5% per annum.
Borrowings under the ABL bear interest at the Wall Street Journal Prime Rate (subject to a floor of 5.50%) plus 2.0% per annum. The interest rate under the ABL was 9.5% and 11.0% as of December 31, 2024 and 2023, respectively. For the year ended December 31, 2024, the weighted-average interest rate was 10.8%.
Revenue from related parties, including accrued Contract Shortfall Fees, increased $39.3 million, or 48%, driven by the ProFrac Agreement which commenced in the second quarter of 2022. Income from operations for the CT segment for the year ended December 31, 2023 increased $53.8 million, compared to 2022.
Revenue from related party for the year ended December 31, 2024, including accrued Contract Shortfall Fees, decreased $6.0 million, or 5%, primarily driven by decreased product sales under the ProFrac Agreement, partially offset by increased Contract Shortfall Fees. Income from operations for the CT segment for the year ended December 31, 2024 decreased $12.4 million, compared to 2023.
The minimum purchase requirements were not met during the current measurement period, and as a result, related party revenues and receivables for the year ended and as of December 31, 2023 include $20.1 million in Contract Shortfall Fees of which $10.0 million has been collected through March 11, 2024.
The minimum purchase requirements under the ProFrac Agreement were not met during the 2024 measurement period of January 1, 2024 through December 31, 2024, and as a result, the Company recorded revenue related to Contract Shortfall Fees of $32.4 million, of which $15.0 million was collected through March 12, 2025.
The non-cash adjustment for the provision for excess and obsolete inventory was $1.0 million and depreciation was $0.7 million.
The non-cash adjustment for the provision for excess and obsolete inventory was $1.0 million and depreciation was $0.7 million. Non-cash lease expense was $3.0 million primarily due to ROU Asset amortization for equipment leases which were added in 2022.
Net cash provided by investing activities for the year ended December 31, 2022 was $5.3 million primarily related to the sale of assets. 27 Financing Activities Net cash provided by financing activities was $5.9 million for the year ended December 31, 2023, primarily from net proceeds from the ABL.
Financing Activities Net cash used in financing activities was $3.1 million for the year ended December 31, 2024, primarily from $2.7 million in net payments on the ABL and $0.4 million in payments for loan origination fees and shares withheld for taxes. 27 Net cash provided by financing activities was $5.9 million for the year ended December 31, 2023, primarily from net proceeds from the ABL.
Capital Resources and Liquidity Overview The Company’s ongoing capital requirements relate to the acquisition and maintenance of equipment and funding of working capital.
Capital Resources and Liquidity Overview The Company’s capital requirements relate to the acquisition and maintenance of equipment and funding of working capital requirements. During the year ended December 31, 2024 , the Company funded working capital requirements with cash on hand and borrowings under the ABL (defined below).
During the year ended December 31, 2023, the Company incurred $0.5 million in interest and fees related to the ABL, which included the annual fee of $0.1 million.
As of December 31, 2024, the Company had $4.8 million outstanding under the ABL. During the year ended December 31, 2024, the Company incurred $0.7 million in interest and fees related to the ABL. As of December 31, 2024, the Company recorded $0.3 million of unamortized deferred financing costs related to the ABL.
Non-cash lease expense was $3.0 million primarily due to ROU Asset amortization for equipment leases which were added in 2022. • For the year ended December 31, 2022, non-cash adjustments included paid-in-kind interest on the Convertible Notes Payable and Contract Consideration Convertible Notes Payable of $6.0 million, amortization of contract assets and convertible note issuance costs of $3.4 million and $1.0 million, respectively, and stock compensation expense of $3.3 million.
During the year ended December 31, 2024, non-cash adjustments to net income totaled $11.2 million as compared to $22.8 million for the same period of 2023. • For the year ended December 31, 2024, non-cash adjustments included amortization of contract assets of $5.6 million, stock compensation expense of $1.4 million and non-cash lease expense of $2.1 million primarily due to ROU Asset amortization for equipment leases.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and related notes thereto, which have been prepared in accordance with U.S. GAAP, included elsewhere in this Annual Report.
Risk Factors, and our audited consolidated financial statements and related notes thereto, which have been prepared in accordance with U.S.
The significant increase in revenue during the year ended December 31, 2023 was driven primarily by a full year of activity under the ProFrac Agreement which commenced in the second quarter of 2022. In addition, revenues increased due to continued increased activity with new and existing domestic customers particularly in the CT segment, partially offset by reduced international activity.
The decrease in revenue during the year ended December 31, 2024 was driven primarily by a decrease in activity under the ProFrac Agreement, partially offset by increased Contract Shortfall Fees and higher revenue from external customers and higher DA revenues.
Consolidated cost of sales for the year ended December 31, 2023 increased $21.0 million, or 15%, versus the same period of 2022. The increase is primarily driven by the activity with ProFrac Services, LLC and higher freight and equipment rental costs due to the increased volume of business.
The decrease is primarily driven by decreased activity with ProFrac Services, LLC and lower freight and equipment 24 rental costs due to the decreased volume of business, partially offset by higher costs related to increased non-related party volumes and increased salaries and wages.
The Company expects to receive the remaining $10.1 million on or before April 8, 2024. For 2024, the measurement period will be January 1, 2024 through December 31, 2024. If the minimum purchase requirements are not met during the year ended December 31, 2024, there will be additional Contract Shortfall Fees due during the first quarter of 2025.
The minimum purchase requirements were not met during the 2024 measurement period of January 1, 2024 through December 31, 2024 and, as a result, the Company recorded revenue related to Contract Shortfall Fees of $32.4 million.
Corporate and Other Results of Operations: Years ended December 31, 2023 2022 Loss from operations $ (15,767) $ (17,815) Loss from operations for the year ended December 31, 2023 decreased by $2.0 million, or 11%, compared to the same period of 2022, due to decreased salaries and benefits from reduced headcount, including lower stock compensation costs.
The increase in losses was primarily due to increased cost of sales related to the change in contingent earnout valuations (see Note 10) and credits included in cost of sales for the year ended December 31, 2023 with no corresponding activity for the year ended December 31, 2024. 25 Corporate and Other Results of Operations: Years ended December 31, 2024 2023 Loss from operations $ (13,467) $ (15,767) Loss from operations for the year ended December 31, 2024 decreased by $2.3 million, or 15%, compared to the same period of 2023 due to decreased professional fees, partially offset by increased stock compensation expense.
Related party revenue increased by $0.6 million compared to 2022 relating to services provided to ProFrac Services, LLC outside of the ProFrac Agreement. Loss from operations for the DA segment for the year ended December 31, 2023 decreased $2.8 million, or 98%, compared to 2022. The improvement was primarily due to increased activity and decreased R&D expense and personnel costs.
The increase was driven by increased service sales primarily related to the Company’s near-infrared spectrometer measurement system, partially offset by decreased product sales. Related party revenue increased by $0.2 million, or 28%, compared to 2023 relating to services provided to ProFrac Services, LLC outside of the ProFrac Agreement.
Consolidated net income for the year ended December 31, 2023 was $24.7 million compared to a net loss of $42.3 million for the same period of 2022.
Consolidated net income for the years ended December 31, 2024 and 2023 was $10.5 million and $24.9 million, respectively.
The improvement was driven primarily by an increased gross profit of $31.0 million resulting from increased related party and external customer revenue, including accrued Contract Shortfall Fees, the gain in fair value of the Contract Consideration Convertible Notes Payable of $30.0 million compared to the same period of 2022, and a $2.0 million decrease in research and development costs.
The decrease in 2024 is primarily due to the $30.0 million gain in fair value of the Contract Consideration Convertible Notes Payable for the year ended December 31, 2023 with no corresponding activity for the year ended December 31, 2024, partially offset by a $15.1 million increase in gross profit resulting from higher Contract Shortfall Fees, a $3.1 million decrease in SG&A expenses and a $0.8 million decrease in R&D expenses.
The current measurement period for Contract Shortfall Fees is June 1, 2023 through December 31, 2023.
The ProFrac Agreement provides that payment of Contract Shortfall Fees is to be made within 30 days after the applicable measurement period. The measurement period for Contract Shortfall Fees during 2023 was June 1, 2023 through December 31, 2023. Related party revenues for the year ended December 31, 2023 reflected Contract Shortfall Fees of $20.1 million.
Removed
The Company serves specialty chemistry needs for both domestic and international energy markets. 22 During 2022 the Company entered into the ProFrac Agreement, (see Note 9, “Debt and Convertible Notes Payable” and Note 17, “Related Party Transactions”) which has resulted in a significant increase in revenue for the years ended December 31, 2023 and 2022.
Added
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with Part 1, including the matters set forth in Item 1.A.
Removed
Operating income increased by $58.6 million to $23 million for the year ended December 31, 2023, versus an operating loss of $35 million during the same period in 2022.
Added
Customers of the CT segment include those of energy related markets, such as our related party ProFrac Services, LLC, with whom we have a long-term supply agreement, as well as industrial companies.
Removed
The improvement was partially offset by an increase in 24 SG&A expenses of $0.7 million and a decrease in gains on the sale of assets and lease termination of $2.9 million and $0.6 million, respectively.
Added
For the years ended December 31, 2024 and 2023, the Company incurred $1.7 million and $2.5 million, respectively, of research and development expense. The Company expects that its 2025 research and development investment will continue to support new product development and customization initiatives for its clients.
Removed
During 2023, the Company funded working capital requirements with cash on hand and borrowings under the ABL (as defined below) entered into in August 2023. 25 As of December 31, 2023, the Company had unrestricted cash and cash equivalents of $5.9 million, as compared to $12.3 million at December 31, 2022.
Added
Consolidated cost of sales for the year ended December 31, 2024 decreased $16.2 million, or 10%, versus the same period of 2023.
Removed
On October 5, 2023, the ABL was amended to increase its maximum borrowing base from $10.0 million to a total of $13.8 million. As of December 31, 2023, the Company had $7.5 million outstanding under the ABL.
Added
SG&A expenses for the year ended December 31, 2024, decreased $3.1 million, or 11%, versus the same period of 2023 as a result of reduced legal fees in 2024, partially offset by higher stock compensation expense.
Removed
Sources and Uses of Liquidity The Company currently funds its operations with cash on hand, availability under the ABL (see Note 9, “Debt and Convertible Notes Payable” in Part II, Item 8 of this Annual Report) and other liquid assets.
Added
Loss from operations for the DA segment for the year ended December 31, 2024 increased $0.9 million compared to 2023.
Removed
Although the Company has a history of negative cash flows from operations and losses, the Company recognized $24.3 million and $24.7 million of gross profit and net income, respectively, during the year ended December 31, 2023.
Added
In addition, 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.
Removed
As discussed in Note 17, “Related Party Transactions” in Part II, Item 8 of this Annual Report, the ProFrac Agreement contains minimum requirements for chemistry purchases.
Added
The August 2024 amendment to the ABL extended the maturity to August 2026, increased the credit availability and lowered the interest rate spread.
Removed
If the minimum volumes are not achieved within the applicable measurement period, ProFrac Services LLC is required to pay to the Company, as liquidated damages (“Contract Shortfall Fees”), an amount equal to twenty-five percent (25%) of the difference between (i) the aggregate purchase price of the quantity of products comprising the minimum purchase obligation and (ii) the actual purchased volume during the measurement period.
Removed
The current measurement period for Contract Shortfall Fees is June 1, 2023 through December 31, 2023.
Removed
Based upon the improvement in our outlook for future cash flows from operations that includes the collection of the Contract Shortfall Fees related to 2023 of $20.1 million, combined with cash on hand and availability under the ABL, the Company believes it has sufficient financial resources to fund operations and meet its capital requirements and anticipated obligations as they become due in the next twelve months.
Removed
However, the Company cannot guarantee a sufficient level of cash flows in the future. The Company had previously disclosed in the consolidated financial statements as of and for the year ending December 31, 2022, that substantial doubt about the Company’s ability to continue as a going concern existed.
Removed
As described, the Company 26 has concluded that those conditions and events raising the substantial doubt no longer exist. The consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
Removed
Contract assets increased $3.6 million related to transaction fees paid associated with Contract Consideration Notes Payable. This was partially offset by an increase of accounts payable of $25.8 million, attributable to the increase in activity.
Removed
Net cash provided by financing activities was $38.3 million for the year ended December 31, 2022, primarily from the proceeds of the issuance of convertible notes of $21.2 million and prefunded warrants of $19.5 million, partially offset by issuance costs of $2.3 million.
Removed
Fair Value of Contract Consideration Convertible Notes Payable The Company accounted for the Contract Consideration Convertible Notes Payable, which was issued related to obtaining the ProFrac Agreement, as liability classified convertible instruments in accordance with FASB ASC 718, “Stock Compensation” (see Note 9, “Debt and Convertible Notes Payable” in Part II, Item 8 of this Annual Report).
Removed
Under ASC 718, liability classified convertible instruments are measured at fair value at the grant date and at each reporting date with the change in fair value included in the consolidated statements of operations.

… 2 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+4 added−0 removed2 unchanged
Biggest changeThe Company presently does not utilize commodity derivative instruments but may consider utilizing forms of hedging to mitigate the effects of rising commodity prices on its supplies, in the future. 29
Biggest changeCommodity and freight price increases are passed along to the Company’s customers, where applicable or possible. The Company presently does not utilize commodity derivative instruments but may consider utilizing forms of hedging to mitigate the effects of rising commodity prices on its supplies, in the future.
Market risk is measured as the potential negative impact on earnings, cash flows or fair values resulting from a hypothetical change in interest rates, commodity prices or foreign currency exchange rates over the next year. The Company manages exposure to market risks at the corporate level.
Market risk is measured as the potential negative impact on earnings, cash flows or fair values resulting from a hypothetical change in interest rates, commodity prices, freight or foreign currency exchange rates over the next year. The Company manages exposure to market risks at the corporate level.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 28 The Company is primarily exposed to market risk from changes in raw material prices, freight costs, and foreign currency exchange rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to a variety of market risks, which primarily includes market risk from changes in interest rates, raw material prices, freight costs and foreign currency exchange rates.
The Company has not historically used swaps or foreign currency hedges, however, the Company may utilize swaps or foreign currency hedges in the future. Commodity Risk The Company, and the CT segment in particular, primarily relies upon supply relationships to meet many of its raw material needs. Price increases are passed along to the Company’s customers, where applicable or possible.
The Company has not historically used swaps or foreign currency hedges, however, the Company may utilize swaps or foreign currency hedges in the future. Commodity and Freight Risk The Company, and the CT segment in particular, primarily relies upon supply relationships to meet many of its raw material needs.
During 2023, approximately 0.24% of revenue was denominated in non-U.S. dollar currencies and substantially all assets and liabilities of the Company are denominated in U.S. dollars. However, as the Company expands its international operations, non-U.S. denominated activity is likely to increase.
During 2024, approximately 4.9% of revenue was denominated in non-U.S. dollar currencies and substantially all assets and liabilities of the Company are denominated in U.S. dollars.
Added
However, as the Company expands its international operations, non-U.S. denominated activity is likely to increase. 28 A 10% devaluation in average foreign currency exchange rates for the U.S. dollar would have resulted in a $0.9 million decrease to our revenues for the year ended December 31, 2024.
Added
Interest Rate Risk The Company is subject to interest rate risk under its ABL, which bears interest at the Wall Street Journal Prime Rate (subject to a floor of 5.50%) plus 2.0% per annum. The interest rate under the ABL was 9.5% and 11.0% as of December 31, 2024 and 2023, respectively.
Added
For the year ended December 31, 2024, the weighted-average interest rate was 10.8%. During the year ended December 31, 2024, the Company incurred $0.7 million in interest and fees related to the ABL.
Added
Based upon ABL borrowings outstanding as of December 31, 2024 of $4.8 million, a 100 basis point change in interest rates would have resulted in an approximate $0.1 million change to our annual interest expense. 29

Other FTK 10-K year-over-year comparisons