Forward-Looking Statements
This Quarterly Report on Form 10-Q ("Quarterly Report"), and in particular, Part
I, Item 2 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations," contains "forward-looking statements" within the meaning
of the safe harbor provisions, 15 U.S.C. § 78u-5, of the Private Securities
Litigation Reform Act of 1995 ("Reform Act"). Forward-looking statements are not
historical facts, but instead represent Flotek Industries, Inc.'s ("Flotek" or
"Company") current assumptions and beliefs regarding future events, many of
which, by their nature, are inherently uncertain and outside the Company's
control. Such statements include estimates, projections, and statements related
to the Company's business plan, objectives, expected operating results, and
assumptions upon which those statements are based. The forward-looking
statements contained in this Quarterly Report are based on information available
as of the date of this Quarterly Report.
The forward-looking statements relate to future industry trends and economic
conditions, forecast performance or results of current and future initiatives
and the outcome of contingencies and other uncertainties that may have a
significant impact on the Company's business, future operating results and
liquidity. These forward-looking statements generally are identified by words
including, but not limited to, "anticipate," "believe," "estimate," "continue,"
"intend," "expect," "plan," "forecast," "project," and similar expressions, or
future-tense or conditional constructions such as "will," "may," "should,"
"could," etc. The Company cautions that these statements are merely predictions
and are not to be considered guarantees of future performance. Forward-looking
statements are based upon current expectations and assumptions that are subject
to risks and uncertainties that can cause actual results to differ materially
from those projected, anticipated, or implied.
A detailed discussion of potential risks and uncertainties that could cause
actual results and events to differ materially from forward-looking statements
is included in Part I, Item 1A - "Risk Factors" of the Annual Report on Form
10-K for the year ended December 31, 2019, as amended ("Annual Report") and
periodically in subsequent reports filed with the Securities and Exchange
Commission ("SEC"). The Company has no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information or future
events, except as required by law.
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") should be read in conjunction with the unaudited condensed
consolidated financial statements and the related notes thereto of this
Quarterly Report, as well as the Annual Report. Phrases such as "Company," "we,"
"our," and "us" refer to Flotek Industries, Inc. and its subsidiaries.
Executive Summary

Flotek is a technology-driven global chemistry and data company that develops
and supplies engineered chemistry solutions, equipment, data and analytical
services to industrial, commercial and consumer markets. The Company continued
its reinvention, which began in the first quarter of 2020 by reducing expenses,
scrutinizing capital spending to ensure alignment to near-term revenue,
acquiring JP3 to secure a footprint in the emerging data analytics market, and
aggressively launching a sustainable line of sanitizer and disinfectant products
built on its expertise in high-quality, specialized chemistry technologies.
Continuing Operations

With the acquisition of JP3 in May 2020, the Company now has two operating
segments: Chemistry Technologies and Data Analytics, which are both supported by
its continuing Research & Innovation advanced laboratory capabilities.
Chemistry Technologies
The Company's Chemistry Technologies segment includes specialty chemistries,
logistics and technology services. The Company designs, develops, manufactures,
packages, distributes, delivers, and markets reservoir-centric fluid systems,
including specialty and conventional chemistries, for use in oil and gas well
drilling, cementing, completion, remediation, and stimulation activities
designed to maximize recovery in both new and mature fields. Customers of this
product line of the Chemistry Technologies business segment include major
integrated oil and gas companies, oilfield services companies, independent oil
and gas companies, pressure-pumping service companies, national and state-owned
oil companies, and international supply chain management companies.
In the second quarter of 2020, the Company launched a line of sanitizers and
disinfectants for commercial and personal consumer use. These products build on
the Company's historical expertise in chemistry and leverage its infrastructure,
personnel, competencies, supply chain, research, and historic consumer market
experiences yielding a competitive product offering in this rapidly growing
segment. Given the increase in global demand for sanitizer products due to
COVID-19, the Company's concentration of customers is shifting and diversifying,
which helps to reduce credit and business risk.


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Data Analytics
The Company's Data Analytics segment, created in conjunction with the
acquisition of JP3, includes the design, development, production, sale and
support of equipment and services that create and provide valuable information
about the composition of its energy customers' hydrocarbon streams. JP3 is
continuing its transition to a Data-as-a-Service (DaaS) subscription model of
selling data generated by its line of Verax analyzers, deployed remotely "at the
edge" across the oil and gas sector, and software services via its cloud-based
Viper software platform.
JP3 creates and sells data systems and analytics services into the oil and gas
market. The Company sells equipment with a software license and (DaaS)
subscriptions. The data is provided in real time, every fifteen seconds, at the
point-of-use and via the cloud, to end use customers. This composition and
physical properties information increases efficiency and decreases operating
costs for producers, midstream operators, refiners and distribution companies.
The customers of JP3 span across the entire market, from production upstream to
midstream facilities to refineries and distribution networks. To date, JP3 has
focused sales solely on North American markets. The Data Analytics segment
provides real-time hydrocarbon composition data that helps its customers
generate additional profit by enhancing blending, increasing efficiencies of
towers, enabling automation and robotization of fluid handling, and reducing
losses due to give-away.
Research & Innovation
Flotek Research and Innovation supports both segments through formulations,
technical support, basin & reservoir studies, data analytics, and new technology
projects. The purpose of the organization is to supply the 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 Research and Innovation facilities
support advances in chemistry performance, detection, optimization, and
manufacturing.
Discontinued Operations

As previously disclosed, the Company sold Florida Chemical Company, LLC ("FCC")
effective as of February 28, 2019. As a result, the Company's CICT segment was
classified as discontinued operations. Financial results for the first three and
six months of 2019 include results from the Company's CICT segment during that
time period.
Outlook on Economic Conditions

On March 11, 2020, the World Health Organization declared the outbreak of the
novel coronavirus ("COVID-19") a global pandemic, which continues to spread
throughout the United States and around the world. This outbreak has severely
impacted global economic activity, and many countries and many states in the
United States have reacted to the outbreak by instituting quarantines, mandating
business and school closures and restricting travel.

During the first and second quarters of 2020, the oil and gas markets
experienced significant impacts from both the supply and the demand side. On the
demand side, the COVID-19 pandemic resulted in a drop in economic activity and a
corresponding destruction of global demand for oil, gas and associated products.
On the supply side, pricing and production wars between key oil-producing
countries led to global oversupply.
The demand destruction and oversupply together caused unprecedented disruption
to all sectors of the oil and gas markets. Prices for crude oil fell from over
$60/bbl. in January 2020 to nearly $20/bbl. by May 2020, with futures turning
negative for a brief period in April 2020. Oil and gas operators announced
budget cuts of more than 40%, or $42 billion year-over-year, according to RS
Energy Group, and announced shut-ins of more than 1.4 million barrels of
production. The North American rig count declined approximately 70% from January
2020 to the end of June 2020, based on the Baker Hughes rig count figures,
reflecting disproportionate impact to domestic markets.
Midstream and downstream markets were affected as well, as domestic gasoline
demand fell by approximately 45% in April 2020 (almost 5 million barrels per
day) and refinery utilization dropped below 70%. The Company expects negative
impacts to all facets of the oil and gas markets to continue for an extended
period before returning to pre-crash levels. Any further material COVID-19
disruption or significant setback in oil demand arising from a slower economic
recovery could present downside risks to this outlook.
Conversely, the COVID-19 pandemic has created increased demand for certain
specialty chemicals, and in particular disinfectants and sanitizers. The
increased usage globally of personal protection equipment has expanded beyond
masks, face shields, and gloves to include both disinfectants and sanitizers.
With the outbreak of COVID-19, sales of hand sanitizers and disinfectants has
swelled


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across every region in the world, which led to a global shortage. Consequently,
the market has experienced shortages of key raw materials used to make these
products, including USP-grade alcohol, woven cellulosics for wipes, and various
active ingredients. This rapid growth is accompanied by a need for sustained
higher volumes of sanitizing products as COVID-19 is expected to have a
long-term impact on social awareness, personal hygiene habits and consumer and
commercial cleaning protocols.

Company Outlook
In response to the deteriorating market conditions and anticipating ongoing
volatility, Flotek has reduced its cost structure to meet anticipated market
activity and reduce the Company's break-even levels. Among other cost-cutting
initiatives:
•      The Company's CEO, John W. Gibson, Jr., reduced his base salary by 20%,

and each of the other executive officers reduced his or her salary by 10%,

through December 31, 2020 in exchange for restricted stock, effective as

of April 1, 2020.

• The board of directors of Flotek approved a 20% reduction in the fees to


       be paid to the directors, effective as of April 1, 2020.


•      The Company consolidated office space by moving all employees at its

corporate headquarters into its GRIC facility and buying out the remaining


       term of the corporate headquarters lease for a significant discount, with
       the move completed by the end of June 2020.

• The Company reduced headcount by 35% on March 30, 2020.

• The Company decreased discretionary spending across all business operations.





These efforts were in addition to the previously-announced restructuring of the
Company's terpene supply agreement in February of 2020, which more closely
matched the Company's ongoing obligations for terpene with expected need, and
bringing more legal work in-house to reduce outside legal expenses.
While the full impact of the COVID-19 outbreak is not yet known, we are closely
monitoring the effects of the pandemic on commodity demands and on our
customers, as well as on our operations and employees. Any future development
and effects will be highly uncertain and cannot be predicted, including the
scope and duration of the pandemic; further adverse revenue and net income
effects; disruptions to our operations; third party providers' ability to
support our operations; customer shutdowns of oil and gas exploration and
production; the effectiveness of our work from home arrangements; employee
impacts from illness, school closures and other community response measures; any
actions taken by governmental authorities and other third parties in response to
the pandemic; and temporary closures of our facilities or the facilities of our
customers and suppliers. The uncertain future development of this crisis could
materially and adversely affect our business, operations, operating results,
financial condition, liquidity or capital levels.

Flotek has also focused on ongoing needs of customers and the market to
diversify its business and accelerate growth through deployment of capital, with
an emphasis on digital transformation in the oil and gas markets. On May 18,
2020, the Company closed the acquisition of all the ownership interests of JP3,
which gives Flotek access to the midstream and downstream markets and
diversifies exposure to volatility in the upstream sector. As Flotek's
newly-created Data Analytics segment, JP3 is positioned for growth both
domestically and internationally. In addition to increasing market share, the
Data Analytics segment is pursuing product enhancements that enable growth
opportunities with current and prospective customers.
The Company's Chemistry Technologies segment has focused on development of
competitively-priced product lines that are responsive to current market
including wellbore protection and damage mitigation products as the domestic
market has shifted to shutting in wells. In response to a forecasted reduction
in capital available to customers for drilling with a shift to optimizing
existing infrastructure, the Company initiated several efforts to use specialty
chemicals to improve enhanced oil recovery (EOR). The Company has also leveraged
its international footprint in the Middle East to include unconventional,
conventional, and enhanced oil recovery programs.
The Chemistry Technologies segment has also used its expertise in specialty
chemistry, existing chemistry infrastructure and facilities, and historical
consumer market experience to launch a product line of sanitizers and
disinfectants, as discussed above. The Company believes the new sanitizer and
disinfectant products slot into the premium market and will be competitive over
the long-term.
The Company has also made changes to its executive team to align with its growth
focus. TengBeng Koid, an experienced energy executive with significant upstream,
midstream, downstream and digital experience, joined Flotek as President of
Global Business in June 2020 and oversees all domestic and international sales
and business development efforts for both the Chemistry Technologies and the
Data Analytics segments. Additionally, Michael E. Borton joined the Company as
Chief Financial Officer in August 2020, bringing 35 years of experience serving
in financial and operational leadership roles for high-growth, Software as a
Service (SaaS)


                                       33

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technology companies in a wide range of industries. Finally, Ryan Ezell, Ph.D,
has been promoted to the role of President of Chemistry Technologies from Senior
Vice President of Operations at Flotek.
Consolidated Results of Operations (in thousands):
                                   Three months ended June 30,             Six months ended June 30,
                                    2020                 2019               2020                2019
Revenue                       $       8,880        $      34,692      $      28,296        $     77,949
Operating expenses (excluding
depreciation and
amortization)                        11,632               38,121             34,473              82,089
Operating expenses %                  131.0  %             109.9  %           121.8  %            105.3  %
Corporate general and
administrative                        5,395                6,054              9,888              13,335
Corporate general and
administrative %                       60.8  %              17.5  %            34.9  %             17.1  %
Depreciation and amortization           468                2,119              2,659               4,379
Research and development
costs                                 1,638                2,076              4,193               4,360
(Gain) loss on disposal of
long-lived assets                       (22 )                 (4 )              (55 )             1,093
Impairment of fixed assets
and long-lived assets                     -                    -             57,454                   -
Loss from operations                (10,231 )            (13,674 )          (80,316 )           (27,307 )
Operating margin %                   (115.2 )%             (39.4 )%          (283.8 )%            (35.0 )%
Gain on lease termination               576                    -                576                   -
Interest and other income
(expense), net                           62                  677                 11              (1,213 )
Loss before income taxes             (9,593 )            (12,997 )          (79,729 )           (28,520 )
Income tax benefit                       32                  192              6,201                 503
Loss from continuing
operations                           (9,561 )            (12,805 )          (73,528 )           (28,017 )
(Loss) income from
discontinued operations, net
of tax                                    -               (1,608 )                -              44,466
Net (loss) income             $      (9,561 )      $     (14,413 )    $     

(73,528 ) $ 16,449


  Net (loss) income %                (107.7 )%             (36.9 )%          (259.9 )%            (35.9 )%


Consolidated Results of Operations: Three and Six Months Ended June 30, 2020,
Compared to the Three and Six Months Ended June 30, 2019
Consolidated revenue for the three and six months ended June 30, 2020, decreased
$25.8 million, or 74.4%, and $49.7 million or 63.7%, respectively, and versus
the same periods of 2019. The decrease in revenue was largely a result of the
continued volatile macro-environment for U.S. onshore drilling and completion
activity, impacted by political and economic events in foreign markets. In
addition, concerns related to the COVID-19 virus impacted productivity and
customers demand for products.
Consolidated operating expenses (excluding depreciation and amortization) for
the three and six months ended June 30, 2020, decreased $26.5 million, or 69.5%,
and $48 million or 58.0%, respectively, versus the same periods of 2019, and, as
a percentage of revenue, increased by 21.1%, and 16.5%, respectively for the
three and six months ended June 30, 2020. The decrease in operating expenses is
primarily due to the lower cost of sales as a result of reduced revenues and
lower freight, personnel, and travel and entertainment expenses.
Corporate general and administrative ("CG&A") expenses are not directly
attributable to products sold or services provided. CG&A costs for the three and
six months ended June 30, 2020, decreased $0.7 million, or 10.9%, and $3.4
million or 25.8%, respectively, versus the same period of 2019. As a percentage
of revenue, CG&A increased 43.3% and 17.8% for the three and six months ended
June 30, 2020. The decrease in CG&A costs were primarily due to lower personnel
costs, lower software licensing fees, lower stock based compensation and lower
professional fees.
Depreciation and amortization expense decreased $1.7 million, or 77.9%, and $1.7
million, or 39.3%, for the three and six months ended June 30, 2020,
respectively, and versus the same periods of 2019 primarily due to impairment of
fixed and long-lived assets recorded in the first quarter 2020.


                                       34
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Research and development costs decreased $0.4 million, or 21.1%, and $0.2
million, or 3.8%, for the three and six months ended June 30, 2020,
respectively, and versus the same periods of 2019 due to lower personnel costs
as a result of reduction in force in the first quarter 2020.
Gain on disposal of long-lived assets had no change and increased $1.1 million,
or 105.0% for the three and six months ended June 30, 2020, respectively, and
versus the same periods of 2019.
Impairment of fixed asset and long-lived assets was $57.5 million due to a
write-down of fixed assets, operating right-of-use ("ROU") assets and intangible
assets to estimated fair market value and recorded in the first quarter of 2020.
Loss from operations decreased $3.4 million, or 25.2%, and increased $53.0
million, or 194.1% and for the three and six months ended June 30, 2020,
respectively, and versus the same period in 2019. The change in loss is
primarily the result of the impairment charges, lower margins, lower sales
volumes and lower plant utilization.
Interest and other income (expense), net increased $0.6 million, or 90.8%, and
decreased $1.2 million, or 100.9% for the three and six months ended June 30,
2020, respectively, and versus the same period of 2019, primarily due to the
termination of the Amended and Restated Revolving Credit, Term Loan and Security
Agreement (as amended, the "Credit Facility") with PNC Bank in the first quarter
2019.
The Company recorded an income tax benefit of $6.2 million, primarily as a
result of the extended net operating loss carryback provisions included in the
CARES Act, yielding an effective tax benefit rate of 0.3%, and 7.7%, for the
three and six months ended June 30, 2020, respectively, compared to an income
tax benefit of $0.5 million, yielding an effective tax benefit rate of 1.6% and
and 3.3% for the comparable periods in 2019.


                                       35
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Results by Segment (in thousands):



Chemistry Technologies

                           Three months ended June 30,         Six months ended June 30,
                             2020              2019              2020              2019
Revenue                      7,962        $     34,692      $    27,378        $  77,949
Gross margin                 1,301              18,180            2,539           54,609
Gross margin %                16.3  %             52.4  %           9.3  %          70.1  %
Income from operations      (3,596 )            (7,651 )        (66,257 )        (12,984 )
Income from operations %     (45.2 )%            (22.1 )%        (242.0 )%         (16.7 )%



Chemistry Technologies Results of Operations: Three and Six Months Ended
June 30, 2020, Compared to the Three and Six Months Ended June 30, 2019
Chemistry Technologies revenue for the three and six months ended June 30, 2020
decreased $26.7 million or 77.0%, and $50.6 million or 64.9%, respectively,
versus the same period of 2019. The decrease in revenue during the second
quarter of 2020 and the majority of the first half of 2020 was significantly
driven by impacts from both the supply and the demand side. The COVID-19
pandemic resulted in a sharp decline in economic activity and a corresponding
destruction of global demand for oil and gas, while pricing and production wars
between key oil-producing countries led to global oversupply. The demand
destruction and oversupply together caused unprecedented disruption to all
sectors of the oil and gas markets, with a significant reduction in North
American drilling and completion activity and its need for chemicals. While
experiencing pricing and overall market compression in the oil and gas sector of
the Chemistry Technologies segment, growth in the sanitizer and disinfectant
sector evolved as a natural fit with the Company's core technical and
manufacturing capabilities, with potential positive long-term opportunity for
diversification and sustainability of the portfolio, representing revenue for
the Company in the second quarter of 2020.
Chemistry Technologies gross margin (excluding depreciation and amortization)
for the three and six months ended June 30, 2020, decreased $16.9 million, or
92.8%, and $52.1 million or 95.4%, respectively versus the same period of 2019,
and as a percentage of revenue, decreased 36.1%, and 60.8% for the three and six
months ended June 30, 2020. Gross margins were influenced by shifts in
completion technologies to more cost efficient and simplified chemistry and
engineering packages, as well as continued pressure on market pricing to
maintain key accounts and available market share. Subsequently, the Company
executed on a number of activities to reduce cost of sales, freight, personnel,
and its operational cost structure to minimize the impacts of revenue declines
and modified product mix.
Chemistry Technologies income from operations (excluding depreciation and
amortization) for the three and six months ended June 30, 2020, improved $4.1
million, or 53.0%, and decreased $53.3 million or 410.3%, respectively versus
the same period of 2019, and as a percentage of revenue, decreased 23.1%, and
225.4% for the three and six months ended June 30, 2020. The increase in loss
during the six months ended June 20, 2020 is primarily the result of the
impairment charges of $57.5 million and lower margins due to sales volumes and
plant utilization recorded in the first quarter of 2020.

Data Analytics

                          May 18 - June 30
                                2020
Revenue                  $        918
Gross margin                      370
Gross margin %                   40.3  %
Income from operations         (1,151 )
Income from operations %       (125.4 )%





                                       36

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Data Analytics Results of Operations: May 18, 2020 to June 30, 2020



During the second quarter of 2020, the Company announced the purchase of JP3, an
equipment and data company that automates real-time data and analytics to the
energy industry to maximize the value of their hydrocarbons.

During the second quarter, revenue was hindered by sluggish-to-nonexistent
capital spending across the entire oil and gas market. The second quarter came
with site lockdowns and extreme caution to prevent the spread of COVID-19. The
segment finished the quarter with $0.9 million of revenue that came from
existing JP3 customers.

Off-Balance Sheet Arrangements
There have been no transactions that generate relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as
"structured finance" or "special purpose entities" ("SPEs"), established for the
purpose of facilitating off-balance sheet arrangements or other contractually
narrow or limited purposes. As of June 30, 2020, the Company was not involved in
any unconsolidated SPEs.
The Company has not made any guarantees to customers or vendors nor does the
Company have any off-balance sheet arrangements or commitments that have, or are
reasonably likely to have, a current or future effect on the Company's financial
condition, change in financial condition, revenue, expenses, results of
operations, liquidity, capital expenditures, or capital resources that would be
material to investors other than the long term terpene agreement discussed in
Note 3 in Part I, Item I - Financial Statements of this Quarterly Report.
Critical Accounting Policies and Estimates
The Company's Financial Statements have been prepared in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP"). Preparation of these statements requires management to make judgments,
estimates, and assumptions that affect the amounts reported in the financial
statements and accompanying footnotes. Part II, Item 8 - Financial Statements
and Supplementary Data, Note 2 of "Notes to Consolidated Financial Statements"
and Part II, Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations, "Critical Accounting Policies and
Estimates" of the Company's Annual Report, and the "Notes to Unaudited Condensed
Consolidated Financial Statements" of this Quarterly Report describe the
significant accounting policies and critical accounting estimates used to
prepare the consolidated financial statements. Critical accounting policies and
estimates are defined as those that are both most important to the portrayal of
the Company's financial condition and results of operations and require
management's most subjective judgments. The Company regularly reviews and
challenges judgments, assumptions, and estimates related to critical accounting
policies. The Company's estimates and assumptions are based on historical
experience and expected changes in the business environment; however, actual
results may materially differ from the estimates. There have been no significant
changes in the Company's critical accounting policies and estimates during the
six months ended June 30, 2020. However, during the six months ended June 30,
2020, the Company evaluated and recorded remeasurement and impairment charges on
right of use assets and fixed assets, respectively. Secondly, during the six
months ended June 30, 2020, the Company acquired JP3 and recorded the fair value
of net assets acquired as of the closing date of May 18, 2020.
Recent Accounting Pronouncements
Recent accounting pronouncements which may impact the Company are described in
Note 2 - "Recent Accounting Pronouncements" in Part I, Item 1 - "Financial
Statements" of this Quarterly Report.
Capital Resources and Liquidity
Overview
The Company's ongoing capital requirements relate to the Company's need to to
acquire and maintain equipment, fund working capital requirements, and when the
opportunities arise, to make strategic acquisitions and repurchase Company
stock. During the first six months of 2020, the Company funded capital
requirements primarily with cash from operations and cash on hand, including
proceeds from the sale of the CICT segment, received on March 1, 2019.
Historically, the Company's primary source of debt financing was its $75 million
Credit Facility with PNC Bank. Upon closing of the sale of the CICT segment, on
March 1, 2019, the Company repaid the outstanding balance, interest, and fees
related to the revolving credit facility, and subsequently terminated the Credit
Facility.


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As of June 30, 2020, the Company had available cash and cash equivalents of
$59.9 million. For the remainder of 2020, the Company expects capital spending
of approximately $2.0 million to $3.0 million for the Company's Chemistry
segment and $1.0 million to $2.0 million for the Company's Data Analytics
segment. The Company expects to fund operations and capital expenditures with
internal cash on hand, including the PPP loan funded in April 2020 for $4.8
million to Flotek and $0.9 million to JP3, the tax refund of $6.1 million, and
the release of $6.6 million from the indemnity escrow established pursuant to
the sale of FCC to ADM effective February 28, 2019.
Any excess cash generated may be used for outside growth opportunities or
retained for future use.
Cash Flows
Consolidated cash flows by type of activity are noted below (in thousands):
                                                             Six months 

ended June 30,


                                                              2020          

2019


Net cash used in operating activities                   $     (29,216 )     $      (6,344 )
Net cash (used in) provided by investing activities           (16,424 )     

151,363


Net cash provided by (used in) financing activities             5,023             (49,911 )
Net cash provided by discontinued operations                        -                  16

Effect of changes in exchange rates on cash and cash equivalents

                                                       (31 )                 2
Net (decrease) increase in cash and cash equivalents
and restricted cash                                     $     (40,648 )     $      95,126


Operating Activities
Net cash used in operating activities was $29.2 million and $6.3 million during
the six months ended June 30, 2020 and 2019, respectively. Consolidated net loss
for the six months ended June 30, 2020 and 2019, totaled $73.5 million and $28.0
million, respectively. The cash used in operating activities is primarily due to
two one-time payments, one to FCC to amend the Company's long-term terpene
supply agreement and one to ADM related to the final post-closing working
capital adjustment related to the sale of the CICT segment in 2019.
During the six months ended June 30, 2020, non-cash adjustments to net income
totaled $62.1 million. Contributory non-cash items consisted primarily of a
$57.5 million impairment charge consisting of $30.2 million impairment on fixed
assets, $15.2 million on impairment of intangibles, and$7.4 million impairment
on ROU assets. Additional non-cash charges included $2.7 million for
depreciation and amortization, $0.5 million for allowance for doubtful accounts,
$1.5 million for stock compensation expense, and $0.5 million for provision for
excess and obsolete inventory.
During the six months ended June 30, 2019, non-cash adjustments to net income
totaled $27.0 million. Contributory non-cash items consisted primarily of $17.9
million for changes to deferred income taxes driven by the valuation allowance
recorded against deferred tax assets, $4.4 million for depreciation and
amortization, $1.1 million on loss of disposal of assets,$0.5 million non-cash
lease expense, and $1.7 million for stock compensation expense.
During the six months ended June 30, 2020, changes in working capital used $17.8
million in cash, primarily resulting from a decrease in accrued liabilities and
accounts payable of $27.3 million, increase in accounts receivable, inventories
and other current assets of $25.2 million, offset by an increase in income tax
payable of $0.1 million and reducing income tax receivable by $6.3 million.
During the six months ended June 30, 2019, changes in working capital used $5.3
million in cash, primarily resulting from a decrease in accrued liabilities and
accounts payable of $14.4 million, increase in accounts receivable and
inventories of $7.2 million partially offset by an increase in income tax
payable of $1.2 million, and reducing income tax receivable , other current
assets and restricted cash by $17.2 million.
Investing Activities
Net cash used in investing activities was $16.4 million for the six months ended
June 30, 2020. The cash used in investing activities is primarily due to the
acquisition of JP3 during the second quarter 2020.
Net cash provided by investing activities was $151.4 million for the six months
ended June 30, 2019. Cash provided by investing activities primarily included
$152.2 million of proceeds from sale of business and $0.1 million of proceeds
received from the sale of assets, partially offset by $0.8 million for capital
expenditures and $0.2 million for the purchase of various patents.


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Financing Activities
Net cash generated through financing activities was $5.0 million for the six
months ended June 30, 2020. Cash generated through financing activities
primarily included $4.8 million proceeds from borrowings under the PPP, and $0.4
million proceeds from the sale of common stock partially offset by $0.1 million
cash used in the purchase of treasury stock.
Net cash used in financing activities was $49.9 million for the six months ended
June 30, 2019, primarily due to using $92.7 million for repayments of debt,
offset by borrowings on revolving credit facility of $42.9 million.
Contractual Obligations
Cash flows from operations are dependent on a variety of factors, including
fluctuations in operating results, accounts receivable collections, inventory
management, and the timing of payments for goods and services. Correspondingly,
the impact of contractual obligations on the Company's liquidity and capital
resources in future periods is analyzed in conjunction with such factors.
Material contractual obligations consist of payments of finance and operating
lease obligations. Contractual obligations at June 30, 2020, are as follows (in
thousands):
                                                                 Payments Due by Period
                                                    Less than 1                                         More than 5
                                        Total          year          1 - 3 years       3 - 5 years         years
Finance lease obligations            $     213     $        70     $         101     $          42     $         -
Operating lease obligations             13,969           1,371             2,593             2,684           7,321
Supply commitments for raw materials    17,724           1,974            15,750                 -               -
Total                                $  32,390     $     3,899     $      

18,444 $ 2,726 $ 7,321

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