FLOTEK INDUSTRIES INC/CN/

Current report

Our CT segment requires access to various chemicals, many of which are produced in the U.S., but some of which contain international components or are sourced internationally. Our DA segment requires access to certain instruments and components, which are produced in whole or in part outside the U.S. Any imposition of or increase in tariffs on imports of these materials, as well as corresponding price increases for such materials available domestically, could increase our costs. To the extent that we are unable to pass all or any of such cost increases on to our customers, such cost increases could adversely affect our returns on investment. Higher materials costs could also diminish our ability to develop new products at acceptable returns, particularly during times of economic uncertainty, and limit our ability to pursue growth opportunities.

Current report

Approximately 7% of our CT segment revenue is derived from sales outside the U.S. and our DA segment also sells products outside the U.S. from time-to-time. Should any U.S. tariffs result in retaliatory tariffs in any of the counties outside the U.S. in which we sell products, the cost of our products in such countries could increase. These increased costs could negatively impact our sales in those countries, by rendering our products no longer cost-competitive.

Current report

In addition, tariffs or other trade restrictions may lead to continuing uncertainty and volatility in U.S. and global financial and economic conditions and commodity markets, declining consumer confidence, significant inflation and diminished expectations for the economy, and ultimately reduced demand for our and our customers’ products and services. Such conditions could have a material adverse impact on our business, results of operations and cash flows. Also, disruptions and volatility in the financial markets may lead to adverse changes in the availability, terms and cost of capital. Such adverse changes could increase our costs of capital and limit our access to external financing sources to fund acquisitions, capital projects, or refinancing of our existing debt on similar terms, which could in turn reduce our cash flows and limit our ability to pursue growth opportunities.

Current report

Changes in tariffs and trade restrictions can be announced with little or no advance notice. The adoption and expansion of tariffs or other trade restrictions, increasing trade tensions, or other changes in governmental policies related to taxes, tariffs, trade agreements or policies, are difficult to predict, which makes attendant risks difficult to anticipate and mitigate. If we are unable to navigate further changes in U.S. or international trade policy, it could have a material adverse impact on our business and results of operations.

Current report

We may fail to successfully integrate the Acquired Assets into our existing business in a timely manner, which could have a material adverse effect on our business, financial condition, results of operations, or cash flows, or we may fail to realize all of the expected benefits of the acquisition of the Acquired Assets and/or entry into the Lease Agreement, which could negatively impact our future results of operations.

Current report

Integration of the Acquired Assets into our existing business will be a complex, time-consuming and potentially costly process. A failure to successfully integrate the Acquired Assets with our existing business in a timely manner may have a material adverse effect on our business, financial condition, results of operations or cash flows. The difficulties of combining the Acquired Assets with our existing operations include, among other things:

Current report

•operating a larger combined organization and adding operations;

Current report

•difficulties in the assimilation of the Acquired Assets and operations;

Current report

•the diversion of management's attention from other business concerns;

Current report

•timely adding the personnel with the proper skill sets required to handle the additional operations;

Current report

•potential environmental or regulatory compliance matters or liabilities; and

Current report

•ensuring the continued flow of data from the Acquired Assets.

Current report

If any of these risks or unanticipated liabilities or costs were to materialize, then any desired benefits of the Acquired Assets and/or the Lease Agreement may not be fully realized, if at all, and our future results of operations could be negatively impacted. In addition, the costs to operate the Acquired Assets or to perform under the Lease Agreement may be higher than the forecasts we used to evaluate the Acquired Assets and Lease Agreement due to factors that are beyond our control. The useful life of the Acquired Assets may be shorter than we forecast. If the Acquired Assets cost more to operate than we had forecast or have shorter useful life than we used to evaluate the Acquired Assets or if the Lease Agreement costs more to perform under than we forecast, then our future results of operations could be negatively impacted.

Current report

Flaws in our due diligence in connection with the Acquired Assets could have a significant negative effect on our financial condition and results of operations.

Current report

We conducted customary due diligence in connection with the acquisition of the Acquired Assets prior to signing and closing the Purchase Agreement. However, diligence may not reveal all material issues that may affect the Acquired Assets. In addition, factors outside of our control may later arise. If, during the due diligence process, we failed to identify issues specific to the Acquired Assets, we may be forced to later write down or write off assets, restructure our operations, or incur impairment or other charges that could result in other reporting losses. We cannot assure you that we will not have to take write-downs or write-offs in connection with the Acquired Assets, which could have a negative effect on our financial condition and results of operations.

Current report

The Company’s reliance on the ProFrac Agreement and Lease Agreement, both with affiliates of ProFrac, could adversely impact our financial condition, results of operations and cash flows.

Current report

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. The Lease Agreement is also expected to be a major source of the Company’s liquidity. Revenues attributable to the ProFrac Agreement represented 62% and 65% of our total revenues during 2024 and 2023, respectively. If the Company became unable to either (1) execute the requirements of the ProFrac 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, or (2) properly perform its obligations under the Lease Agreement, the Company’s liquidity could be materially adversely impacted. Further, our relationship with ProFrac may impact their competitors’ willingness to purchase products from the Company or to seek price concessions from the Company.

Current report

We are also dependent on ProFrac Services, LLC’s compliance in meeting their committed activity levels under the ProFrac Agreement and paying for our products, including any Contract Shortfall Fees, on a timely basis, in accordance with the terms of the ProFrac Agreement. We are dependent upon ProFrac GDM’s compliance with their asset maintenance and payment obligations, among others, under the Lease Agreement. Our financial condition, results of operations and cash flows may be adversely impacted if ProFrac Services, LLC’s or ProFrac GDM’s financial condition or ProFrac Service LLC’s spending level under the ProFrac Agreement is negatively impacted and ProFrac Services, LLC or ProFrac GDM is unable to pay its outstanding obligations to the Company, including the Contract Shortfall Fees. As of March 31, 2025 and December 31, 2024 our accounts receivable from ProFrac Services, LLC, inclusive of any due and payable Contract Shortfall Fees, was $48.2 million and $52.4 million, respectively.

Current report

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. ProFrac Services, LLC also has the right to terminate the ProFrac Agreement for any other material breach of the ProFrac Agreement by the Company if the breach is capable of being cured, but is not cured within 30 days after written notice. 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. ProFrac GDM also has customary rights to audit the records of the Company with regard to third-party pricing to confirm compliance with the Lease Agreement’s pricing requirements. Any adverse findings during such an audit could have an adverse impact on the Company’s financial condition, results of operations and cash flows.

Current report

Trading Arrangements

Current report

During the quarter ended March 31, 2025, no director or officer (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934)adopted orterminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (in each case, as defined in Item 408(a) of Regulation S-K).

Previous report

None.