# Dear Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-equipment-services/NYSE_FTK_2019/NYSE_FTK_2019.mmd` · pages 2-8_

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Dear Shareholders:

The U.S. onshore oil and gas market faces unprecedented uncertainty in 2020 as a result of the global impacts of the Coronavirus, along with the disruption of global energy markets emerging from the March OPEC meetings. At the time of print, North American oil and gas operators have slashed tens of billions of dollars in capital spending and planned drilling and completion activity in the wake of the oversupply of and reduced demand for hydrocarbons, combined with the mounting crises of balance sheets.

Given the volatility and complexity of 2020 market conditions, Flotek Industries ("Flotek" or the "Company") is not taking a "business-as-usual" approach to our annual shareholder letter. Rather, the Company is focusing on key highlights from 2019 and outlook into 2020, which is limited at the time of publication.

2019

## A Year in Transition

Flotek executed on a number of strategic initiatives during 2019 to better position the Company given the disruptive environment. This included unlocking the value of Flotek's consumer and industrial business through the sale of Florida Chemical Company, LLC ("FCC") to Archer-Daniels-Midland Company ("ADM"). With the closing of the transaction in the first quarter of 2019, Flotek established itself as a pure play and leading provider of high-performance chemistry solutions designed for the reservoir that can reduce the total cost per barrel of oil equivalent ("BOE") for operators. In addition, the Company significantly increased its financial flexibility, while paying off all outstanding debt.
Flotek also took further steps in 2019 to significantly adjust its cost structure. In addition to reducing headcount and related personnel expenses, the Company implemented strategies to drive increased efficiencies through value stream mapping and continuous improvement in strategic sourcing, logistics, field operations and facilities management.

To more effectively position Flotek for long-term success, at the conclusion of 2019, Flotek announced John W. Gibson, Jr. would join the Company as Chairman, Chief Executive Officer and President in January 2020. Mr. Gibson is a recognized industry leader in energy technology, upstream, oilfield services and environmental services.

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# From John W. Gibson, Jr.
Chairman, CEO and President

## Letter to Shareholders

Dear Fellow Shareholders,

My first priority upon joining Flotek was to identify additional opportunities to improve the cost structure and accelerate our ability to regain profitability. A prime example was the recent amendment of our terpene supply agreement with Florida Chemical Company (FCC), which represents a significant improvement in Flotek's strategic relationship with FCC and our ability to manage inventory and ancillary costs. The original agreement required the purchase of approximately twice the volume of terpene required to support our current business, which resulted in excess inventory and storage costs. The original agreement also had an effective price that greatly exceeded the current market price. We worked with FCC to re-align the terms and provisions of the agreement, which required a one-time cash payment to FCC of $15.8 million.

In exchange for the one-time payment, we effectively reduced our volume commitment to less than 50% of the original agreement. The cash impact of the agreed price and volume reduction for the purchase of terpene in the amended contract for 2020 alone should substantially offset the one-time payment made to FCC. I would also note in years 2021, 2022 and 2023, the negotiated volume reduction of approximately 50% in each year should reduce our cash commitments proportionately. Importantly, we are now in a position to price more competitively in the market.

Additionally, we have identified and are executing on other opportunities to place the Company in a better position for improved financial performance in an uncertain market. This includes rationalization and aggressive review of all spending, including but not limited to executive compensation, office space, personnel and legal spending.

We are taking a very considered and deliberate approach to capital deployment in light of market conditions. Our current evaluations include seeking growth opportunities that reduce our dependence on rig count, focus on acceleration of international opportunities, provide new product lines that create a greater amount of backlog and/or annually recurring revenue, maintain differentiation of our offering from competitors, enhance our capability to provide digital transformation of chemistry, and strengthen our market share for our current product lines. We believe that our cash position, public equity, North American presence, lack of debt, continuous focus on cost reduction, commitment to ESG and absence of an IPO market make us attractive to numerous companies seeking liquidity.

![](images/3_0.jpg)

We are vetting opportunities to select those providing the greatest long-term shareholder value.

Importantly, I hope you will notice a marked shift in how we communicate with you. I am committed to greater transparency about our business and a "no-excuse" policy related to our business performance. What you can expect from me is just the facts about the Company without obfuscation related to adverse market conditions. Additionally, I will not be sharing hopes for business outcomes, but rather real results achieved. As a fellow shareholder, it is the standard to which I hold leadership teams for companies I invest in and the basis for building long-term trusted partnerships.

We appreciate the support of our shareholders, and look forward to keeping the investment community apprised of our progress as we move through the year.

Sincerely,

![](images/3_1.jpg)

John W. Gibson, Jr.
Chairman, Chief Executive Officer and President

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# FORM 10-K/A

Amendment No. 1

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-13270

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# FLOTEK INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State of other jurisdiction of incorporation or organization)

90-0023731
(I.R.S. Employer Identification No.)

10603 W. Sam Houston Parkway N. Suite 300 Houston, TX

(Address of principal executive offices)

77064

(Zip Code)

(713) 849-9911
(Registrant's telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Common Stock, $0.0001 par value

FTK

Name of each exchange on which registered

New York Stock Exchange

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

None

Indicate by check mark:

• if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

• if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

• whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☐

• whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T ( \( §232.405 \)  of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

• whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐

Smaller reporting company ☑ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

• whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The aggregate market value of voting stock held by non-affiliates of the registrant as of June 28, 2019 (based on the closing market price on the NYSE Composite Tape on June 28, 2019) was approximately \(150,815,000. At March 3, 2020, there were 63,275,372 outstanding shares of the registrant's common stock, \)0.0001 par value.

## DOCUMENTS INCORPORATED BY REFERENCE

The information required in Part III of the Annual Report on Form 10-K is incorporated by reference to the registrant's definitive proxy statement to be filed pursuant to Regulation 14A for the registrant's 2020 Annual Meeting of Stockholders.

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## EXPLANATORY NOTE

This Amendment No. 1 (this "Amendment") to the Annual Report on Form 10-K of Flotek Industries, Inc. (the "Company") for the year ended December 31, 2019 (the "2019 Form 10-K") is being filed for the purpose of correcting certain errors in the Exhibit Index under Part IV, Item 15 "Exhibits, Financial Statement Schedules" of the 2019 Form 10-K together with each of the exhibits filed as part of the 2019 Form 10-K, each of which has been amended and restated in its entirety. No revisions are being made to the Company's financial statements, and this Amendment does not reflect events occurring after the filing of the 2019 Form 10-K, or modify or update those disclosures that may be affected by subsequent events, and no other changes are being made to any other disclosure contained in the Form 10-K.