10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 001-15903

CARBO CERAMICS INC.

(Exact name of registrant as specified in its charter)

DELAWARE	72-1100013
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

575 North Dairy Ashford, Suite 300

Houston, TX 77079

(Address of principal executive offices)

(281) 921-6400

(Registrant's telephone number)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	CRR	New York Stock Exchange

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   ☐   No  ☒

As of July 19, 2019, 29,377,102 shares of the registrant's Common Stock, par value $0.01 per share, were outstanding.

CARBO CERAMICS INC.

Index to Quarterly Report on Form 10-Q

PART I.  FINANCIAL INFORMATION		PAGES
Item 1.	Financial Statements	3
	Consolidated Balance Sheets - March 31, 2019 (Unaudited) and December 31, 2018	3
	Consolidated Statements of Operations (Unaudited) - Three and six months ended June 30, 2019 and 2018	4
	Consolidated Statements of Shareholders' Equity (Unaudited) - Three and six months ended June 30, 2019 and 2018	5
	Consolidated Statements of Cash Flows (Unaudited) - Six months ended June 30, 2019 and 2018	6
	Notes to Consolidated Financial Statements (Unaudited)	7-14
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15-20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21
Item 4.	Controls and Procedures	21
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Mine Safety Disclosure	22
Item 5.	Other Information	22
Item 6.	Exhibits	23
Exhibit Index		24
Signatures		25

2

PART I.  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CARBO CERAMICS INC.

CONSOLIDATED BALANCE SHEETS

($ in thousands, except per share data)

	June 30,		December 31,
	2019		2018
	(Unaudited)		(Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	40,813	$	72,752
Restricted cash		1,200		1,725
Trade accounts and other receivables, net		23,834		35,693
Inventories:
Finished goods		39,747		41,422
Raw materials and supplies		18,680		22,592
Total inventories		58,427		64,014
Prepaid expenses and other current assets		4,910		4,754
Income tax receivable		2,328		2,319
Total current assets		131,512		181,257
Restricted cash		8,853		8,840
Property, plant and equipment:
Land and land improvements		39,584		39,584
Land-use and mineral rights		20,264		19,696
Buildings		75,978		75,815
Machinery and equipment		425,378		432,906
Construction in progress		28,762		29,129
Total property, plant and equipment		589,966		597,130
Less accumulated depreciation and amortization		333,243		323,511
Net property, plant and equipment		256,723		273,619
Goodwill		3,500		3,500
Operating lease right-of-use assets		52,266		—
Intangible and other assets, net		11,391		7,150
Total assets	$	464,245	$	474,366
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	13,910	$	12,174
Accrued payroll and benefits		4,048		6,950
Accrued freight		2,377		2,434
Accrued utilities		589		1,012
Other accrued expenses		7,810		14,020
Notes payable, related parties		—		27,040
Long-term debt, current portion		—		15,733
Operating lease liabilities		11,531		—
Other current liabilities		712		1,192
Total current liabilities		40,977		80,555
Deferred income taxes		1,114		1,114
Long-term debt, net		62,048		45,650
Noncurrent operating lease liabilities		49,866		—
Other long-term liabilities		4,209		10,764
Shareholders' equity:
Preferred stock, par value $0.01 per share, 5,000 shares authorized,    none outstanding		—		—
Common stock, par value $0.01 per share, 80,000,000 shares authorized; 29,377,538    and 27,710,861 shares issued and outstanding at June 30, 2019 and December 31,    2018, respectively		294		277
Additional paid-in capital		138,288		132,080
Retained earnings		167,449		203,926
Total shareholders' equity		306,031		336,283
Total liabilities and shareholders' equity	$	464,245	$	474,366

The accompanying notes are an integral part of these statements.

3

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands, except per share data)

(Unaudited)

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Revenues	$	43,099		$	57,989		$	90,557		$	107,356
Cost of sales (exclusive of depreciation and amortization shown below)		39,568			50,818		$	87,474		$	101,788
Depreciation and amortization		7,311			8,323			14,714			16,735
Gross loss		(3,780	)		(1,152	)		(11,631	)		(11,167	)
Selling, general and administrative expenses (exclusive of depreciation and amortization shown below)		9,784			10,685			19,816			20,292
Depreciation and amortization		398			620			796			1,234
Loss on sale of Russia proppant business		—			350			—			350
Other operating expenses (income)		89			(55	)		18			(59	)
Operating loss		(14,051	)		(12,752	)		(32,261	)		(32,984	)
Other expense:
Interest expense, net		(2,286	)		(2,084	)		(4,363	)		(4,101	)
Other income, net		132			31			425			8
		(2,154	)		(2,053	)		(3,938	)		(4,093	)
Loss before income taxes		(16,205	)		(14,805	)		(36,199	)		(37,077	)
Income tax expense		—			7			—			7
Net loss	$	(16,205	)	$	(14,812	)	$	(36,199	)	$	(37,084	)
Loss per share:
Basic	$	(0.57	)	$	(0.55	)	$	(1.29	)	$	(1.38	)
Diluted	$	(0.57	)	$	(0.55	)	$	(1.29	)	$	(1.38	)
Other information:
Dividends declared per common share	$	—		$	—		$	—		$	—

The accompanying notes are an integral part of these statements.

4

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

($ in thousands)

(Unaudited)

	Common Stock		Additional Paid-In Capital			Retained Earnings			Total
Balances at January 1, 2019	$	277	$	132,080		$	203,926		$	336,283
Net loss		—		—			(19,994	)		(19,994	)
Shares sold under ATM program		9		3,366			—			3,375
Stock granted under restricted stock plan, net		4		(4	)		—			—
Stock based compensation		—		710			—			710
Shares surrendered by employees to pay taxes		—		—			(278	)		(278	)
Balances at March 31, 2019	$	290	$	136,152		$	183,654		$	320,096
Net loss		—		—			(16,205	)		(16,205	)
Shares sold under ATM program		4		1,227			—			1,231
Modification of warrant		—		178			—			178
Stock granted under restricted stock plan, net		—		79			—			79
Stock based compensation		—		652			—			652
Balances at June 30, 2019	$	294	$	138,288		$	167,449		$	306,031
	Common Stock		Additional Paid-In Capital			Retained Earnings			Total
Balances at January 1, 2018	$	271	$	125,715		$	279,779		$	405,765
Net loss		—		—			(22,272	)		(22,272	)
Stock granted under restricted stock plan, net		3		(3	)		—			—
Stock based compensation		—		903			—			903
Shares surrendered by employees to pay taxes		—		—			(421	)		(421	)
Balances at March 31, 2018	$	274	$	126,615		$	257,086		$	383,975
Net loss		—		—			(14,812	)		(14,812	)
Shares sold under ATM program		3		2,846			—			2,849
Stock granted under restricted stock plan, net		—		320			—			320
Stock based compensation		—		820			—			820
Other		—		—			1			1
Balances at June 30, 2018	$	277	$	130,601		$	242,275		$	373,153

The accompanying notes are an integral part of these statements.

5

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)

(Unaudited)

	Six months ended
	June 30,
	2019			2018
Operating activities
Net loss	$	(36,199	)	$	(37,084	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		15,510			17,969
Amortization of debt issuance costs and original issue discount		1,061			340
Provision for doubtful accounts		183			81
Deferred income taxes		—			4
Loss (gain) on disposal or impairment of assets		18			(59	)
Loss on sale of Russian proppant business		—			350
Noncash lease expense		862			—
Stock compensation expense		1,586			2,254
PIK repayment on notes payable, related parties		(2,040	)		—
Change in fair value of derivative instruments		—			(1,348	)
Changes in operating assets and liabilities:
Trade accounts and other receivables		11,676			(3,777	)
Inventories		5,830			836
Prepaid expenses and other current assets		(194	)		(407	)
Accounts payable		1,293			(1,341	)
Accrued expenses		(7,938	)		(4,303	)
Income tax receivable, net		(9	)		97
Other, net		(169	)		2,126
Net cash used in operating activities		(8,530	)		(24,262	)
Investing activities
Capital expenditures		(1,085	)		(1,179	)
Investment in PicOnyx		(684	)		—
Issuance of Note from PicOnyx		(500	)		—
Net proceeds from asset sales		113			74
Net cash used in investing activities		(2,156	)		(1,105	)
Financing activities
Repayments on notes payable		(874	)		(500	)
Repayments on long-term debt		(14,533	)		—
Repayments on notes payable, related parties		(25,000	)		—
Proceeds from long-term debt		14,533			—
Proceeds from issuance of common stock under ATM program		4,606			2,849
Payment of debt issuance costs		(218	)		—
Purchase of common stock		(279	)		(421	)
Net cash (used in) provided by financing activities		(21,765	)		1,928
Net decrease in cash and cash equivalents and restricted cash		(32,451	)		(23,439	)
Cash and cash equivalents and restricted cash at beginning of period		83,317			78,385
Cash and cash equivalents and restricted cash at end of period	$	50,866		$	54,946
Supplemental cash flow information
Interest paid	$	4,469		$	3,850
Income taxes paid	$	—		$	—

The accompanying notes are an integral part of these statements.

6

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share data)

(Unaudited)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of CARBO Ceramics Inc. have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and notes required for complete financial statements.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included.  The results of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.  The consolidated balance sheet as of December 31, 2018 has been derived from the audited financial statements at that date.  These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2018 included in the annual report on Form 10-K of CARBO Ceramics Inc. for the year ended December 31, 2018.

The consolidated financial statements include the accounts of CARBO Ceramics Inc. and its operating subsidiaries (the “Company”).  All significant intercompany transactions have been eliminated.

The Company is currently producing ceramic technology proppants from its Eufaula, Alabama manufacturing facility, base ceramic proppants from its Toomsboro, Georgia manufacturing facility, and processing sand at its Marshfield, Wisconsin facility.  The Company also produces ceramic media at its McIntyre, Georgia and Eufaula, Alabama facilities.  The Company is also using its Toomsboro, Georgia facility for contract manufacturing.  In addition, the Company produces resin-coated ceramic proppants at its New Iberia, Louisiana facility.  The Company continues to assess liquidity needs and manage cash flows.  As a result of the steps the Company has taken to enhance its liquidity, the Company currently believes that cash on hand and cash flows from operations will enable the Company to meet its working capital, capital expenditure, debt service and other funding requirements for at least one year from the date this Form 10-Q is issued.  Our financial forecasts in recent periods have proven less reliable given customer demand, which is highly volatile in the current operating environment and no committed sales backlog exists with our customers.  As a result, there is no guarantee that our financial forecast, which projects sufficient cash will be available to meet planned operating expenses and other cash needs, will be accurate.  In the event that the Company experiences lower customer demand, lower prices for its products and services, or higher expenses than it forecasted, or if the Company underperforms relative to its forecast, the Company could experience negative cash flows from operations, as has been the case in prior years, which would reduce its cash balances and liquidity.    

The second phase of the retrofit of our Eufaula, Alabama plant with the new KRYPTOSPHERE^® technology has been suspended until such time that market conditions improve enough to warrant completion.  As of June 30, 2019, the value of the assets relating to this project totaled approximately 82% of the Company’s total construction in progress and the project is approximately 75% complete.  

On May 28, 2019, the Company entered into an agreement with PicOnyx, Inc. (“PicOnyx”) pursuant to which the Company agreed to provide certain services and contribute certain manufacturing assets to PicOnyx in exchange for 9.7 million shares of convertible preferred stock in PicOnyx.  At the Company’s election, the preferred stock can be converted into a pre-determined number of shares of common stock.  Additionally, the preferred stock has voting rights that give the Company approximately 22% of voting rights based on the number of outstanding shares of PicOnyx stock.  As part of its agreement with PicOnyx, the Company is also designated a seat on the PicOnyx Board of Directors.  The Company also holds a warrant to purchase additional shares from PicOnyx with a nominal exercise price in the event of certain qualified financings.   In addition, the Company entered into a Contract Manufacturing Services Agreement with PicOynx, pursuant to which the Company agreed to provide contract manufacturing services to PicOnyx for certain of its products.  Pursuant to the terms of the Subscription and Asset Contribution Agreement, the Company has agreed to lease certain property to PicOnyx.  The Company recorded its investment in PicOnyx at the fair value of the assets given up and liabilities assumed, which approximated the book value and which the Company believes represents the standalone selling price.  The fair value was estimated using equipment appraisals (Level 3 inputs as defined in ASC 820).  No gain or loss was recorded at inception.  Given that the Company’s investment in PicOnyx does not have a readily-determinable fair value, the Company measures the investment at cost, less any impairment, and will adjust the investment to fair value to the extent an observable price change for identical or similar investments of PicOnyx is identified.  No adjustments to the cost basis were recorded during the quarter ended June 30, 2019.  The net book value of the Company’s investment in PicOnyx is approximately $4,300 at June 30, 2019 and is recorded in Intangible and other assets, net on the consolidated balance sheet.  The transaction resulted in a non-cash change in Property, plant and equipment and Intangible and other assets, net of approximately $3,500 as well as a non-cash change in Accounts Payable and

7

Intangible and other assets, net of approximately $400.PicOnyx represents a variable interest entity for which the Company holds a variable interest.  The Company does not consolidate PicOnyx as the Company is not the primary beneficiary because the Company does not have the power to direct the activities that most significantly impact PicOnyx’s economic performance.  In addition, the Company provided PicOnyx $500 in exchange for a convertible promissory note.  The note will automatically be converted to equity shares if certain qualified financings occur.  The convertible promissory note bears interest at 7.5% per year.  The note matures on the earlier of August 1, 2021 or the termination of the Contract Manufacturing Services Agreement.The note is collateralized by all of the manufacturing assets the Company contributed to PicOnyx.

Deferred Taxes – Valuation Allowance

Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, provides the carrying value of deferred tax assets should be reduced by the amount not expected to be realized.  A company should reduce deferred tax assets by a valuation allowance if, based on the weight of all available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized.  ASC 740 requires all available evidence, both positive and negative, be considered to determine whether a valuation allowance for deferred tax assets is needed in the financial statements.  Additionally, there can be statutory limitations on the deferred tax assets should certain conditions arise.As a result of the significant decline in oil and gas activities and net losses incurred over the past several years, we believe it is more likely than not that a portion of our deferred tax assets will not be realized in the future.  Our valuation allowance against a portion of our deferred tax assets as of June 30, 2019 was $80,311.  Our assessment of the realizability of our deferred tax assets is based on the weight of all available evidence, both positive and negative, including future reversals of deferred tax liabilities.

Restricted Cash

A portion of the Company’s cash balance is restricted to its use in order to provide collateral primarily for letters of credit, corporate cards and funds held in escrow relating to the sale of its Millen plant.  As of June 30, 2019 and December 31, 2018, total restricted cash was $10,053 and $10,565, respectively.

Lower of Cost and Net Realizable Value Adjustments

As of June 30, 2019, the Company reviewed the carrying values of all inventories and concluded that no adjustments were warranted for finished goods and raw materials intended for use in the Company’s manufacturing process.

Manufacturing Production Levels Below Normal Capacity

As a result of the Company substantially reducing manufacturing production levels, including by idling certain facilities, certain production costs have been expensed instead of being capitalized into inventory.  The Company expenses fixed production overhead amounts in excess of amounts that would have been allocated to each unit of production at normal production levels.  For the three months ended June 30, 2019 and 2018, the Company expensed $5,861 and $6,834, respectively, in production costs.  For the six months ended June 30, 2019 and 2018, the Company expensed $14,345 and $16,557, respectively, in production costs.

Long-lived and Other Noncurrent Assets Impairment

The Company has temporarily idled production at various manufacturing facilities.  The Company does not assess temporarily idled assets for impairment unless events or circumstances indicate that the carrying amounts of those assets may not be recoverable.  Short-term stoppages of production for less than one year do not generally significantly impact the long-term expected cash flows of the idled facility.  As of June 30, 2019, the Company concluded that there were no events or circumstances that would indicate that carrying amounts of long-lived and other noncurrent assets might be impaired.  However, the Company continues to monitor market conditions closely.  Further deterioration of market conditions could result in impairment charges being taken on the Company’s long-lived and other noncurrent assets, including the Company’s manufacturing plants, goodwill and intangible assets.  The Company will evaluate long-lived and other noncurrent assets for impairment at such time that events or circumstances indicate that carrying amounts might be impaired.

Reclassification of Prior Period Amounts

Certain prior period financial information has been reclassified to conform to current period presentation.

8

2. Loss Per Share

The following table sets forth the computation of basic and diluted loss per share under the two-class method:

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Numerator for basic and diluted loss per share:
Net loss	$	(16,205	)	$	(14,812	)	$	(36,199	)	$	(37,084	)
Effect of reallocating undistributed earnings    of participating securities		—			—			—			—
Net loss available under the two-class method	$	(16,205	)	$	(14,812	)	$	(36,199	)	$	(37,084	)
Denominator:
Denominator for basic loss per share--weighted-average    shares		28,615,006			26,930,914			28,043,040			26,860,146
Effect of dilutive potential common shares		—			—			—			—
Denominator for diluted loss per share--adjusted    weighted-average shares		28,615,006			26,930,914			28,043,040			26,860,146
Basic loss per share	$	(0.57	)	$	(0.55	)	$	(1.29	)	$	(1.38	)
Diluted loss per share	$	(0.57	)	$	(0.55	)	$	(1.29	)	$	(1.38	)

3. Natural Gas Derivative Instruments

Natural gas is used to fire the kilns at the Company’s manufacturing plants.  In an effort to mitigate volatility in the cost of natural gas purchases and reduce exposure to short term spikes in the price of this commodity, we previously contracted in advance for portions of our future natural gas requirements.  Due to the severe decline in industry activity beginning in early 2015, the Company significantly reduced production levels and consequently did not take delivery of all of the contracted natural gas quantities.  As a result, the Company had accounted for the relevant contracts as derivative instruments.  However, as of December 31, 2018, the last derivative contract expired and no future natural gas obligations existed.

During the three months ended June 30, 2019 and 2018, the Company recognized a gain on derivative instruments of $0 and $412, respectively, in cost of sales.  During the six months ended June 30, 2019 and 2018, the Company recognized a gain on derivative instruments of $0 and $630, respectively, in cost of sales.

4. Leases

The Company leases certain property, plant and equipment under operating leases, primarily consisting of railroad equipment leases, certain distribution center assets and real estate.  Leases with an initial term of twelve months or less are not recorded on the balance sheet.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to ten years or more. The exercise of lease renewal options is typically at the Company’s sole discretion. Certain leases also include options to purchase the leased property.

As a result of the underutilization of some of the Company’s assets, we rent or sublease certain assets to third parties, primarily consisting of a portion of our railroad equipment and distribution center assets.

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, and noncurrent operating lease liabilities on our consolidated balance sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. As of June 30, 2019, it is not reasonably certain that we will exercise any of these options.  Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.  

We have lease agreements with lease and non-lease components, which are accounted for as a single lease component, primarily related to railroad equipment leases.

9

The components of lease cost were as follows:

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
Operating lease cost	$	3,811		$	7,969
Short-term lease cost		536			1,255
Sublease income (a)		(1,009	)		(2,109	)
Net lease cost	$	3,338		$	7,115

^(a) As a result of the adoption of ASC 842, sublease income is classified within revenues for the three and six months ended June 30, 2019.  Prior to the adoption, sublease income was recorded as a reduction to cost of sales.  Sublease income for the three and six months ended June 30, 2019 excludes rental income from owned assets of $393 and $799, respectively, which is recorded within revenues.

Future minimum lease payments under non-cancellable leases as of June 30, 2019 were as follows:

2019	$	8,708
2020		16,881
2021		16,471
2022		12,554
2023		9,209
Thereafter		16,455
Total lease payments	$	80,278
Less: imputed interest		(18,881	)
Present value of lease liabilities	$	61,397

The adoption of ASC 842 resulted in the Company recording a right of use asset of $56,591 and a total lease liability of $64,877 on January 1, 2019.  The Company also reduced its other long-term liabilities by approximately $6,500 and accrued expenses by approximately $1,800 as of January 1, 2019 given that deferred rent is now included within the total lease liability.  These adjustments represented non-cash changes during the period ended March 31, 2019.

Other information related to leases was as follows:

	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,379	$	6,358
Leased assets obtained in exchange for new operating lease liabilities		—		—

For the six months ended June 30, 2019, the weighted average remaining lease term was 5.9 years and the weighted average discount rate was 10.3%.

5. Stock Based Compensation

On May 21, 2019, the shareholders approved the 2019 CARBO Ceramics Inc. Omnibus Incentive Plan (the “2019 Omnibus Incentive Plan”).  The 2019 Omnibus Incentive Plan replaces the Amended and Restated 2014 CARBO Ceramics Inc. Omnibus Incentive Plan (“A&R 2014 Plan”). Under the 2019 Omnibus Incentive Plan, the Company may grant cash-based awards, stock options (both non-qualified and incentive) and other equity-based awards (including stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units or share-denominated performance units) to employees and non-employee directors.  The amount paid under the 2019 Omnibus Incentive Plan to any single participant in any calendar year with respect to any cash-based award shall not exceed $5,000.  Awards may be granted with respect to a number of shares of the Company’s Common Stock that in the aggregate does not exceed 2,500,000 shares prior to the fifth anniversary of the effective date of the 2019 Omnibus Incentive Plan, plus (i) the number of shares that are forfeited, cancelled or returned and (ii) the number of shares subject to awards that are withheld by the Company or tendered by the participant to the Company to satisfy exercise price or tax withholding obligations in connection with awards other than options or stock appreciation rights.  No more than 100,000 shares may be granted to any single participant in any calendar year.  Equity-based awards may be subject to performance-based and/or service-based conditions.  With respect to stock options and stock appreciation rights granted, the exercise price shall not be less than the market value of the underlying Common Stock on the date of grant.  The maximum term of an option is ten years.  Restricted stock awards granted generally vest (i.e., transfer and forfeiture restrictions on these shares are lifted) proportionately on each of the first three anniversaries of the grant date, but subject to certain limitations, awards may specify other vesting periods.  As of June 30,

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2019, 2,455,000 shares were available for issuance under the 2019 Omnibus Incentive Plan.  Although the Company’s A&R 2014 Plan has been cancelled, unvested shares granted under that plan remain outstanding in accordance with its terms.

A summary of restricted stock activity and related information for the six months ended June 30, 2019 is presented below:

	Shares			Weighted-Average Grant-Date Fair Value Per Share
Nonvested at January 1, 2019		541,560		$	12.14
Granted		468,984		$	4.55
Vested		(246,675	)	$	12.74
Forfeited		(29,170	)	$	9.96
Nonvested at June 30, 2019		734,699		$	7.18

As of June 30, 2019, there was $4,127 of total unrecognized compensation cost related to restricted shares granted under the now-cancelled A&R 2014 Plan.  That cost is expected to be recognized over a weighted-average period of 2.1 years.  The total fair value of shares vested during the six months ended June 30, 2019 was $1,011.  For restricted stock awards granted to certain executives of the Company, there is a holding period requirement of two years after the vesting date.  For the portion of such awards that are not expected to be withheld to satisfy tax withholdings, the grant date fair value for the January 2019 awards was discounted for the restriction of liquidity by 20.6%, which was calculated using the Finnerty model.

The Company made market-based cash awards to certain executives of the Company pursuant to the now-cancelled A&R 2014 Plan.  As of June 30, 2019, the total target award outstanding was $3,019.  The payout of awards can range from 0% to 200% based on the Company’s Relative Total Shareholder Return calculated over a three year period beginning January 1 of the year each grant was made.  During the six months ended June 30, 2019, a total of $708 was paid relating to the 2016 grant, which was approximately 61% of the total target award. During the six months ended June 30, 2018, a total of $526 was paid relating to the 2015 grant, which was approximately 76% of the total target award.

The Company also granted phantom stock and cash-settled restricted stock units (collectively discussed as “phantom stock”) to certain key employees pursuant to the now-cancelled A&R 2014 Plan.  The units subject to a phantom stock award vest and cease to be forfeitable in equal annual installments over a three-year period.  Participants awarded units of phantom stock are entitled to a lump sum cash payment equal to the fair market value of a share of Common Stock on the vesting date.  In no event will Common Stock of the Company be issued with regard to outstanding phantom stock awards.  As of June 30, 2019, there were 319,892 units of phantom stock granted, of which 115,020 have vested and 27,862 have been forfeited.  As of June 30, 2019, nonvested units of phantom stock had a total value of $239, a portion of which is accrued as a liability within Accrued Payroll and Benefits.  Compensation expense for these units of phantom stock will be recognized over the three-year vesting period.  The amount of compensation expense recognized each period will be based on the fair value of the Company’s common stock at the end of each period.

6. Long-Term Debt and Notes Payable

On March 2, 2017, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”), as last amended on June 20, 2019, with Wilks Brothers, LLC (the “Wilks”).  The Credit Agreement is a $65,000 facility maturing on December 31, 2022.  The Company’s obligations bear interest at 9.00% and are guaranteed by its two operating subsidiaries.  No principal repayments are required until maturity (except in certain circumstances), and there are no financial covenants. In May 2019, the Company repaid $14,533 to the Wilks as a result of the required prepayment relating to the net cash proceeds from the sale of its Millen, Georgia facility.  On June 20, 2019, the Company entered into the Second Amendment to Amended and Restated Credit Agreement and Joinder (the “Amended Credit Agreement”) with the Wilks and a promissory note (“Equify Note”) with Equify Financial LLC, an affiliate of the Wilks, (“Equify”). By amending the previous credit agreement, the Company was able to refinance the amount that was repaid in May 2019, such that the total outstanding principal remains at $65,000, but the Company’s repayment obligations are now split between the Wilks and Equify, at $33,000 and $32,000, respectively.  The interest rate of 9%, maturity on December 31, 2022, and the terms and conditions for both loans remain the same.

The loan cannot be prepaid before March 31, 2021 without making the lenders whole for interest that would have been payable over the entire remaining term of the loan.  The Company’s obligations under the Amended Credit Agreement are secured by: (i) a pledge of all accounts receivable and inventory, (ii) cash in certain accounts, (iii) domestic distribution assets residing on owned real property, (iv) the Company’s Marshfield, Wisconsin and Toomsboro, Georgia plant facilities and equipment, and (v) certain real property interests in mines and minerals.  

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As of June 30, 2019, the Company’s combined outstanding debt to Wilks and Equify under the Amended Credit Agreement and Equify Note was $65,000.   As of June 30, 2019, the fair value of the Company’s long-term debt approximated the carrying value.

As of June 30, 2019, the Company had $677 of unamortized debt issuance costs relating to the Credit Agreement and Amended Credit Agreement that are presented as a direct reduction from the carrying amount of the long-term debt obligation.  As a result of the May 2019 repayment, the Company wrote off approximately $137 of unamortized debt issuance costs relating to the Credit Agreement.  As a result of the June 2019 refinancing, the Company added approximately $218 to debt issuance costs resulting from an amendment fee paid directly to Wilks.  The Company had $7,475 and $2,625 in standby letters of credit issued through its banks as of June 30, 2019 and December 31, 2018, respectively, primarily as collateral relating to railcar leases and other obligations.

On March 2, 2017, in connection with entry into the Credit Agreement, the Company issued a Warrant (the “Warrant”) to Wilks.  Subject to the terms of the Warrant, the Warrant entitled the holder thereof to purchase up to 523,022 shares of the Common Stock, at an exercise price of $14.91 per share, payable in cash.  The Warrant was amended in connection with the Amended Credit Agreement and June 2019 refinancing to revise the exercise price to $4.00 and to extend the expiration date to December 31, 2024.   Based on a Form 13D filing with the SEC on July 9, 2019 as of June 20, 2019, the Wilks owned approximately 10.5% of the Company’s outstanding common stock as of June 30, 2019, and should the Wilks fully exercise the Warrant to purchase an additional 523,022 shares, the Wilks would hold approximately 12.1% of the Company’s outstanding common stock.  Upon issuance of the Warrant, the Company recorded an increase to additional paid-in capital of $3,871.  Upon modification of the Warrant, the Company recorded an increase to additional paid-in capital of $178.  As a result of the May 2019 repayment, the Company wrote off approximately $609 of unamortized original issue discount.  As of June 30, 2019, the unamortized original issue discount was $2,276.

In May 2016, the Company received proceeds of $25,000 from the issuance of separate unsecured Promissory Notes (the “Notes”) to two of the Company’s Directors.  Each Note matured on April 1, 2019 and bore interest at 7.00%.  On March 2, 2017, in connection with the Credit Agreement, the Notes were amended to provide for payment-in-kind, or PIK, interest payments at 8.00% until the lenders under the New Credit Agreement receive two consecutive semi-annual cash interest payments.  On April 1, 2017, the Company made a $997 interest payment as PIK, and capitalized the resulting amount to the outstanding principal balance.  On October 1, 2017, the Company made a $1,043 interest payment as PIK, and capitalized the resulting amount to the outstanding principal balance.  On April 1, 2019, the Company made a $27,040 payment repaying the outstanding principal balance of the Notes.

Interest cost for the six months ended June 30, 2019 and 2018 was $4,401 and $4,137, respectively.  Interest cost primarily includes interest expense relating to the Company’s debts as well as amortization and the write-off of debt issuance costs and amortization of the original issue discount associated with the Amended Credit Agreement and Warrant.

7. New Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which amends current lease guidance.  This guidance requires, among other things, that lessees recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.  Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.  In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which simplifies the implementation by allowing entities the option to instead apply the provisions of the new guidance at the effective date, without adjusting the comparative periods presented.  The Company adopted this guidance effective January 1, 2019 without adjusting the comparative periods.  In addition, the Company elected the package of practical expedients permitted under the guidance, which among other things, allowed the Company to carry forward the historical lease classification.  As of June 30, 2019, the Company’s operating lease ROU asset was $52,266 and its total lease liability was $61,397.  In addition, upon implementation, the Company’s deferred rent balances, recorded primarily within other long-term liabilities and accrued expenses as of December 31, 2018, of approximately $8,300 were removed and recorded to the lease liability.  The Company has implemented a lease accounting system for accounting for leases under the new standard.  There were no significant impacts to the consolidated statement of operations and consolidated statement of cash flows.  See Note 4 for additional information.

8. Equity Offering

On July 28, 2016, the Company filed a prospectus supplement and associated sales agreement related to an at-the-market (“ATM”) equity offering program pursuant to which the Company may sell, from time to time, common stock with an aggregate offering price of up to $75,000 through Cowen and Company LLC, as sales agent, for general corporate purposes.  The Company’s Form S-3 Registration Statement filed on May 20, 2016 has since expired, and as a result, we cannot sell additional common stock

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under the ATM program until a new Form S-3 Registration Statement is effective.  During the three months ended June 30, 2019, the Company sold a total of 356,350 shares of its common stock under the ATM program for $1,259, or an average of $3.53 per share, and received proceeds of $1,231, net of commissions of $28.  During the six months ended June 30, 2019, the Company sold a total of 1,250,000 shares of its common stock under the ATM program for $4,713, or an average of $3.77 per share, and received proceeds of $4,607, net of commissions of $106.  As of June 30, 2019, the Company had sold a total of 4,955,936 shares of its common stock under the ATM program for $54,240, or an average of $10.94 per share, and received proceeds of $53,019, net of commissions of $1,220.The most recent sales under the ATM program occurred on April 4, 2019.

9. Segment Information

The Company has two operating segments: 1) Oilfield and Industrial Technologies and Services and 2) Environmental Technologies and Services.  Discrete financial information is available for each operating segment.  Management of each operating segment reports to our Chief Executive Officer, the Company’s chief operating decision maker, who regularly evaluates income before income taxes as the measure to evaluate segment performance and to allocate resources.  The accounting policies of each segment are the same as those described in the summary of significant accounting policies in Note 1 of the consolidated financial statements included in the annual report on Form 10-K for the year ended December 31, 2018.

The Company’s Oilfield and Industrial Technologies and Services segment manufactures and sells ceramic technology products and services, base ceramic proppant and frac sand for both the oilfield and industrial sectors.  These products have different technology features and product characteristics, which vary based on the application for which they are intended to be used.  The various ceramic products’ manufacturing processes are similar.

Oilfield ceramic technology products, base ceramic proppant and frac sand proppant are manufactured and sold to pressure pumping companies and oil and gas operators for use in the hydraulic fracturing of natural gas and oil wells.   The Oilfield and Industrial Technologies and Services segment also promotes increased production and Estimated Ultimate Recovery (“EUR”) of oil and natural gas by providing industry-leading technology to Design, Build, and Optimize the Frac^®.  Through our wholly-owned subsidiary StrataGen, Inc., we sell one of the most widely used fracture stimulation software under the brand FracPro and provide fracture design and consulting services to oil and natural gas E&P companies under the brand StrataGen.

The Company’s industrial ceramic technology products are manufactured at the same facilities and using the same machinery and equipment as the oilfield products, however they are sold to industrial companies.  These products are designed for use in various industrial technology applications, including, but not limited to, casting and milling.  The Company’s chief operating decision maker reviews discreet financial information as a whole for all of the Company’s manufacturing, consulting and software businesses.  Manufacturing includes the manufacture of technology products, base ceramics, industrial ceramics, sand and contract manufacturing, regardless of the industry the products are ultimately sold to.  See Note 10 for disaggregated revenue information.

The Company’s Environmental Technologies and Services segment designs, manufactures and sells products and services intended to protect clients’ assets, minimize environmental risks, and lower lease operating expense (“LOE”).  Asset Guard Products Inc. (“AGPI”), a wholly-owned subsidiary of the Company, provides spill prevention, containment and countermeasure systems for the oil and gas and other industries.  AGPI uses proprietary technology designed to enable its clients to extend the life of their storage assets, reduce the potential for spills and provide containment of stored materials.

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Summarized financial information for the Company’s operating segments for the three and six months ended June 30, 2019 and 2018 is shown in the following tables.  Intersegment sales are not material.

	Oilfield and Industrial Technologies and Services			Environmental Technologies and Services		Total
	($ in thousands)
Three Months Ended June 30, 2019
Revenue from external customers	$	35,913		$	7,186	$	43,099
(Loss) income before income taxes		(16,502	)		297		(16,205	)
Depreciation and amortization		7,432			277		7,709
Three Months Ended June 30, 2018
Revenue from external customers	$	49,788		$	8,201	$	57,989
(Loss) income before income taxes		(15,545	)		740		(14,805	)
Depreciation and amortization		8,647			297		8,944
Six Months Ended June 30, 2019
Revenue from external customers	$	76,000		$	14,557	$	90,557
(Loss) income before income taxes		(36,768	)		569		(36,199	)
Depreciation and amortization		14,965			545		15,510
Six Months Ended June 30, 2018
Revenue from external customers	$	92,256		$	15,100	$	107,356
(Loss) income before income taxes		(38,312	)		1,235		(37,077	)
Depreciation and amortization		17,383			586		17,969

10. Disaggregated Revenue

The following table disaggregates revenue by product line:

	Three Months Ended				Six Months Ended
	June 30				June 30
	2019		2018		2019		2018
Oilfield and Industrial Technologies and Services segment
Technology products and services	$	8,426	$	12,786	$	15,615	$	22,656
Industrial products and services		3,141		3,269		7,868		6,562
Base ceramic and sand proppants		22,944		33,733		49,609		63,038
Sublease and rental income		1,402		—		2,908		—
		35,913		49,788		76,000		92,256
Environmental Technologies and Services segment		7,186		8,201		14,557		15,100
	$	43,099	$	57,989	$	90,557	$	107,356

Sales of oilfield technology products and services, consulting services, and FracPro software are included within Technology products and services.  Sales of industrial ceramic products, industrial technology products and contract manufacturing are included within Industrial products and services.  Sales of oilfield base ceramic and sand proppants, as well as railcar usage fees are included within Base ceramic and sand proppants.  Sublease and rental income primarily consist of the sublease of certain railroad equipment and rental income related to leases on some of our underutilized distribution center assets.  As a result of the adoption of ASC 842 as of January 1, 2019, these amounts were classified within revenues during the three and six months ended June 30, 2019.  These amounts were classified as a reduction of costs for the same periods in 2018.  See Note 4.  

11. Legal Proceedings

The Company is subject to legal proceedings, claims and litigation arising in the ordinary course of business.  While the outcome of these matters is currently not determinable, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

CARBO Ceramics Inc. (“we,” “us,” “our” or our “Company”) is a global technology company that provides products and services to the oil and gas, industrial, and environmental markets to enhance value for its clients.  The Company conducts its business within two operating segments: 1) Oilfield and Industrial Technologies and Services and 2) Environmental Technologies and Services.

Our Oilfield and Industrial Technologies and Services segment manufactures and sells ceramic technology products and services, base ceramic proppant and frac sand for both the oilfield and industrial sectors.  The products have different technology features and product characteristics, which vary based on the application for which they are intended to be used.  The various ceramic products’ manufacturing processes are similar.

Oilfield ceramic technology products, base ceramic proppant and frac sand proppant are manufactured and sold to pressure pumping companies and oil and gas operators for use in the hydraulic fracturing of natural gas and oil wells.  Hydraulic fracturing is the most widely used method of increasing production from oil and natural gas wells.  The hydraulic fracturing process consists of pumping fluids down a natural gas or oil well at pressures sufficient to create fractures in the hydrocarbon-bearing rock formation.  A granular material, called proppant, is suspended and transported in the fluid and fills the fracture, “propping” it open once high-pressure pumping stops.  The proppant filled fracture creates a conductive channel through which the hydrocarbons can flow more freely from the formation to the well and then to the surface.

There are three primary types of proppant that can be utilized in the hydraulic fracturing process: sand, resin coated sand and ceramic.  Sand is the least expensive proppant, resin-coated sand is more expensive and ceramic proppant is typically the most expensive.  We believe the higher initial cost of ceramic proppant is justified by the fact that its use in certain well conditions typically results in an increase in the production rate of oil and natural gas, an increase in the total oil or natural gas that can be recovered from the well and, consequently, an increase in cash flow for the operators of the well.  The increased production rates are primarily attributable to the higher strength and more uniform size and shape of ceramic proppant versus alternative materials.  We are one of the world’s largest suppliers of ceramic proppant.

Through our wholly-owned subsidiary StrataGen, Inc., we promote increased production and EUR of oil and natural gas by selling a widely used fracture stimulation software under the brand FracPro, and providing fracture design and consulting services to oil and natural gas E&P companies under the brand StrataGen.

FracPro provides a suite of stimulation software solutions used for designing fracture treatments and for on-site real-time analysis and data acquisition.  Use of FracPro enables our clients to optimize reservoir stimulation to enhance oil and gas production.  FracPro has been integrated with third-party reservoir simulation software, furthering its reach and utility.

The StrataGen consulting team works with operators around the world to help optimize well placement, fracture treatment design and production enhancement.  The broad range of expertise of the StrataGen consultants includes: fracture treatment design; completion support; on-site treatment supervision; quality control; post-treatment evaluation and optimization; reservoir and fracture studies; rock mechanics and software application and training.

Our industrial ceramic technology products are manufactured and sold to industrial companies.  These products are designed for use in various industrial technology applications, including but not limited to casting and milling.

We also produce industrial products at our manufacturing facilities for third parties under tolling arrangements.  These products so far have been primarily used in industrial or agricultural applications.  Contract manufacturing has led to increased revenue generation.  We continue to develop additional opportunities within the industrial, agricultural and oil and gas industries to grow revenue, and reduce our plants’ slowing and idling costs.

Our Environmental Technologies and Services segment is intended to protect operators’ assets, minimize environmental risks, and lower lease operating expense (“LOE”).  AGPI, the only subsidiary of ours to operate in this segment, provides spill prevention, containment and countermeasure systems for oil and gas, industrial, and retail applications.  AGPI uses proprietary technology to make products designed to enable its clients to extend the life of their storage assets, reduce the potential for hydrocarbon spills and provide containment of stored materials.  

Industry Conditions

During the three months ended June 30, 2019, the average price of West Texas Intermediate (“WTI”) crude oil decreased 12% to $59.78 per barrel compared to $68.03 per barrel during the same period in 2018.  The average North American rig count decreased 6%

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during the three months ended June 30, 2019 to 1,073 rigs compared to 1,143 rigs during the same period in 2018.  Commodity prices remain at significantly lower levels than prior to the severe industry downturn that began in late 2014, which has not encouraged a broad move away from low-cost completions.  E&P operators that are existing or target customers of ours continued to use more frac sand than ceramic or resin-coated proppants as a percentage of overall proppant consumption during the three months ended June 30, 2019.  In addition, customers’ shift to less expensive sand from the recent expansion of competitor regional sand supply has negatively impacted our frac sand revenue.  We expect this trend to continue as our customers are under increasing pressure to consider lower up-front cost alternatives in the current commodity price environment, notwithstanding the superior performance results of our ceramic products. 

Current demand for proppant is extremely dynamic.  Most of our oilfield products and services depend primarily on the supply of and demand for oil and natural gas, as well as on the number of natural gas and oil wells drilled, completed or re-completed worldwide.  More specifically, the demand for most of our products and services is dependent on the number of oil and natural gas wells that are hydraulically fractured to stimulate production.  The demand for our products and services is also dependent on the commodity price of oil and natural gas, and lower commodity prices result in fewer purchases of our premium products.  In addition, our results of operations are also significantly affected by a host of other factors, including but not limited to (a) rig counts, (b) well completions activity, which is not necessarily correlated with rig count, (c) customer preferences, (d) new product and technology adoption, (e) imports and competition, (f) changes in the product mix of what we sell, (g) costs of developing our products and services and running our business, and (h) changes in our strategy and execution.  

Critical Accounting Policies

The consolidated financial statements are prepared in accordance with U.S. GAAP, which require us to make estimates and assumptions (see Note 1 to the consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2018).  We believe that some of our accounting policies involve a higher degree of judgment and complexity than others.  As of December 31, 2018, our critical accounting policies included revenue recognition, estimating the recoverability of accounts receivable, inventory valuation, accounting for income taxes, accounting for long-lived assets, accounting for derivative instruments, and accounting for abnormally low production levels.  These critical accounting policies are discussed more fully in our annual report on Form 10-K for the year ended December 31, 2018.  

There have been no changes in our evaluation of our critical accounting policies since December 31, 2018, other than the addition of a new accounting policy for leases.

The Company accounts for its leases in accordance with the requirements of ASC 842, Leases.  We determine if an arrangement is a lease at inception.  Leases with an initial term of twelve months or less are not recorded on the balance sheet.  Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.  We have lease agreements with lease and non-lease components, which are accounted for as a single lease component, primarily related to railroad equipment leases.  Operating leases are included in operating lease ROU assets, operating lease liabilities, and noncurrent operating lease liabilities on our consolidated balance sheets. Sublease and rental income are recognized as revenue on the consolidated statement of operations.

Results of Operations

Three Months Ended June 30, 2019

Revenues.  Oilfield and Industrial Technologies and Services segment revenues of $35.9 million for the three months ended June 30, 2019 decreased 28% compared to $49.8 million for the same period in 2018.  The decrease was mainly attributable to decreases in base ceramic and frac sand and technology products sales.  These decreases were partially offset by sublease and rental income.  As a result of the adoption of ASC 842 as of January 1, 2019, sublease and rental income was classified within revenues during the three months ended June 30, 2019.  These amounts were classified as a reduction of costs for the same period in 2018.  Despite the overall decrease in base ceramic revenue, our international base ceramic revenue increased to 58% of total base ceramic revenue for the three months ended June 30, 2019 compared to 41% for the same period in 2018.

Environmental Technologies and Services segment revenues of $7.2 million for the three months ended June 30, 2019 decreased 12% compared to $8.2 million in the same period in 2018.  The decrease was mainly attributable to a decrease in oil and natural gas industry activity as well as increased competition. 

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Gross Loss.  Oilfield and Industrial Technologies and Services segment gross loss for the three months ended June 30, 2019 was $4.8 million, or 13% of revenues, compared to gross loss of $2.7 million, or 5% of revenues, for the same period in 2018.  Gross loss worsened primarily due to the decreases in base ceramic and frac sand sales.

Environmental Technologies and Services segment gross profit for the three months ended June 30, 2019 was $1.0 million compared to $1.5 million for the same period in 2018.  This decrease in gross profit was primarily the result of the decrease in sales for the period.  

Depreciation and amortization expense was $7.3 million for the three months ended June 30, 2019 compared to $8.3 million for the same period in 2018.  This decrease was primarily due to the sale of our Millen facility during the fourth quarter of 2018, asset sales, and assets becoming fully depreciated.

Selling, General and Administrative (SG&A) and Other Operating Expense (Income).  Oilfield and Industrial Technologies and Services segment SG&A (exclusive of depreciation and amortization) totaled $9.2 million for the three months ended June 30, 2019 compared to $10.0 million for the same period in 2018, primarily due to decreased sales and marketing and research and development costs.  Consolidated depreciation and amortization was down $0.2 million to $0.4 million for the three months ended June 30, 2019 compared to $0.6 million for the same period in 2018, primarily due to certain assets becoming fully depreciated or fully amortized.  The $0.35 million loss on the sale of our Russian proppant business for the three months ended June 30, 2018 was related to settling the receivable owed to us from the buyer of our Russian proppant business.  Consolidated other operating expense for the three months ended June 30, 2019 was $0.1 million compared to other operating income of $0.1 million for the same period in 2018, both primarily relating to losses and gains on asset sales.

Environmental Technologies and Services segment SG&A (exclusive of depreciation and amortization) was down $0.1 million to $0.6 million for the three months ended June 30, 2019 compared to $0.7 million for the same period in 2018.

Income Taxes.  Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, provides that the carrying value of deferred tax assets should be reduced by the amount not expected to be realized.  A company should reduce deferred tax assets by a valuation allowance if, based on the weight of all available evidence, it is not more likely than not that some portion or all of the deferred tax assets will be realized.  The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized.  ASC 740 requires all available evidence, both positive and negative, be considered to determine whether a valuation allowance for deferred tax assets is needed in the financial statements.  Additionally, there can be statutory limitations and losses also assessed on the deferred tax assets should certain conditions arise.  As a result of the significant decline in oil and gas activities and net losses incurred over the past several years, we believe it is more likely than not that a portion of our deferred tax assets will not be realized in the future.Our valuation allowance against a portion of our deferred taxes as of June 30, 2019 was $80.3 million.  Our assessment of the realizability of our deferred tax assets is based on the weight of all available evidence, both positive and negative, including future reversals of deferred tax liabilities.  As a result, income tax expense was $0 for the three months ended June 30, 2019 and 2018.

Six Months Ended June 30, 2019

Revenues.  Oilfield and Industrial Technologies and Services segment revenues of $76.0 million for the six months ended June 30, 2019 decreased 18% compared to $92.3 million for the same period in 2018.  The decrease was mainly attributable to decreases in base ceramic and frac sand and technology products sales.  These decreases were partially offset by increases in industrial products sales and sublease and rental income.  As a result of the adoption of ASC 842 as of January 1, 2019, sublease and rental income was classified within revenues during the six months ended June 30, 2019.  These amounts were classified as a reduction of costs for the same period in 2018.  Despite the overall decrease in base ceramic revenue, our international base ceramic revenue increased to 52% of total base ceramic revenue for the six months ended June 30, 2019 compared to 31% for the same period in 2018.

Environmental Technologies and Services segment revenues of $14.6 million for the six months ended June 30, 2019 decreased 4% compared to $15.1 million in the same period in 2018.  The decrease was mainly attributable to a decrease in oil and natural gas industry activity as well as increased competition.

Gross Loss.  Oilfield and Industrial Technologies and Services segment gross loss for the six months ended June 30, 2019 was $13.6 million, or 18% of revenues, compared to gross loss of $14.0 million, or 15% of revenues, for the same period in 2018.  Gross loss improved primarily due to lower slowing and idling production costs.  The improvement was partially offset with reductions due to the decrease in base ceramic and frac sand sales.

Environmental Technologies and Services segment gross profit for the six months ended June 30, 2019 was $2.0 million compared to $2.8 million for the same period in 2018.  This decrease in gross profit was primarily the result of the decrease in sales for the period.  

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Depreciation and amortization expense was $14.7 million for the six months ended June 30, 2019 compared to $16.7 million for the same period in 2018.  This decrease was primarily due to the sale of our Millen facility during the fourth quarter of 2018, asset sales, and assets becoming fully depreciated.

Selling, General and Administrative (SG&A) and Other Operating Expense.  Oilfield and Industrial Technologies and Services segment SG&A (exclusive of depreciation and amortization) totaled $18.5 million for the six months ended June 30, 2019 compared to $19.0 million for the same period in 2018, primarily due to decreased sales and marketing and research and development costs.  Consolidated depreciation and amortization was down $0.4 million to $0.8 million for the six months ended June 30, 2019 compared to $1.2 million for the same period in 2018, primarily due to certain assets becoming fully depreciated or fully amortized.  The $0.35 million loss on the sale of our Russian proppant business for the six months ended June 30, 2018 was related to settling the receivable owed to us from the buyer of our Russian proppant business.

Environmental Technologies and Services segment SG&A (exclusive of depreciation and amortization) was flat at $1.3 million for the six months ended June 30, 2019 and 2018.

Income Taxes.  Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, provides that the carrying value of deferred tax assets should be reduced by the amount not expected to be realized.  A company should reduce deferred tax assets by a valuation allowance if, based on the weight of all available evidence, it is not more likely than not that some portion or all of the deferred tax assets will be realized.  The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized.  ASC 740 requires all available evidence, both positive and negative, be considered to determine whether a valuation allowance for deferred tax assets is needed in the financial statements.  Additionally, there can be statutory limitations and losses also assessed on the deferred tax assets should certain conditions arise.  As a result of the significant decline in oil and gas activities and net losses incurred over the past several years, we believe it is more likely than not that a portion of our deferred tax assets will not be realized in the future.Our valuation allowance against a portion of our deferred taxes as of June 30, 2019 was $80.3 million.  Our assessment of the realizability of our deferred tax assets is based on the weight of all available evidence, both positive and negative, including future reversals of deferred tax liabilities.  As a result, income tax expense was $0 for the six months ended June 30, 2019 and 2018.

Outlook

The CARBO of the past will not be the CARBO of the future.  Our recently signed agreements to expand our product portfolio in the industrial market and enhance our oil and gas software offering is just the beginning.  Late stage discussions are underway to capitalize on additional opportunities, including potential contract manufacturing opportunities with other companies.  We believe these will set CARBO on a new path by continuing to reduce reliance on oil and gas activity and provide a platform for growth for many years to come.  

Although the first half of 2019 revenues were weaker-than-expected, we expect the revenue for the second half of 2019 to be stronger as delayed oil and gas projects from the first half of 2019 are completed.  As a result, we believe our results of operations should continue to improve as we work to produce consistent, positive cash flow.  The recently signed agreements previously noted, and possible additional opportunities, should accelerate our path to achieve this consistent positive cash flow and profitability.

We expect a stronger second half of 2019 given the delays experienced for our oil and gas technology ceramic products during the second quarter of 2019.  Both KRYPTOSPHERE HD and KRYPTOSPHERE LD sales should see continued growth and contribute meaningfully to revenue.  In addition, we anticipate technology sales of SCALEGUARD and CARBONRT to also have good results as we close out the year.

We experienced a temporary lull in industrial sales due to a client’s equipment process change during the quarter. As this client resumes normal activity and we are able to capitalize on the positive results from a number of our industrial product trials that started earlier this year, we anticipate industrial sales to grow in the second half of 2019 compared to the first half.  

We continue to put an immense amount of effort into closing contract manufacturing opportunities.  The process is long but when the projects are awarded they provide predictable and profitable work utilizing our idled assets.  These opportunities are key to overcoming the profitability challenges we face today.

Within our environmental business, additional industrial sales resources were added during the second quarter of 2019.  We expect these additions to lead to increased industrial sales for ASSETGUARD products over the remainder of the year.  In addition, our client count is growing through our eCommerce platform, CARBODIRECT, which, over time, will lower client acquisition costs and improve working capital.

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Maintaining healthy cash levels is a high priority as we continue our transformation process.  Excluding any potential M&A transactions, and assuming oil and gas activity stabilizes, we anticipate our cash levels to remain fairly flat for the remainder of the year.

Liquidity and Capital Resources

At June 30, 2019, we had cash and cash equivalents and restricted cash of $50.9 million compared to cash and cash equivalents and restricted cash of $83.3 million at December 31, 2018.  Uses of cash included $8.6 million used in operating activities, $2.2 million for investing activities, and $21.8 million used in financing activities.

We estimate our total capital expenditures for the remainder of 2019 will be less than $2.0 million.  In April 2019, we repaid the Notes with two of our directors totaling $27 million.  During the second quarter of 2019, we entered into an amended credit agreement with the Wilks Brothers, LLC and a promissory note entered into with Equify Financial LLC, an affiliate of the Wilks.  The outstanding principal balance remains at $65 million, but the Company’s repayment obligations are now split between the Wilks and Equify, at $33 million and $32 million, respectively.  The interest rate of 9%, maturity on December 31, 2022, and the terms and conditions for both loans remain the same.  By amending the previous credit agreement, we are able to retain the net cash proceeds from the sale of our Millen, Georgia facility that otherwise would have been required to pay down the credit facility principle if not reinvested within 270 days from the completion of the sale.  

We anticipate that cash on hand will be sufficient to meet planned operating expenses and other cash needs for at least one year from the date of this Form 10-Q.  The Company’s view regarding sufficiency of cash and liquidity is primarily based on our financial forecast for the next twelve months, which is impacted by various assumptions regarding demand and sales prices for our products.  Generally, we expect demand for our products and the sales prices to remain consistent over the next twelve months compared to the last twelve months.  We also expect to decrease our operating costs in the next twelve months compared to the last twelve months while improving our cash position through continued balance sheet management.  Our financial forecasts are based on estimates of customer demand, which is highly volatile in the current operating environment, and we have no committed sales backlog with our customers.  As a result, there is inherent uncertainty in our forecasts.  In the event that we experience lower customer demand, lower prices for our products and services, or higher expenses than we have forecasted or if we underperform relative to our forecast, we could experience negative cash flows from operations, as has been the case in prior years, which would reduce our cash balances and liquidity.

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements as of June 30, 2019.

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Forward-Looking Information

The statements in this Quarterly Report on Form 10-Q that are not historical statements, including statements regarding our future financial and operating performance and liquidity and capital resources, are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.  Forward-looking statements describe future expectations, plans, results or strategies and can often be identified by the use of terminology such as “may”, “will”, “estimate”, “intend”, “continue”, “believe”, “expect”, “anticipate”, “should”, “could”, “potential”, “opportunity”, or other similar terminology.  All forward-looking statements are based on management's current expectations and estimates, which involve risks and uncertainties that could cause actual results to differ materially from those expressed in forward-looking statements.  Among these factors are:

• changes in the cost of raw materials and natural gas used in manufacturing our products;

• risks related to our ability to access needed cash and capital;

• our ability to meet our current and future debt service obligations, including our ability to maintain compliance with our debt covenants;

• our ability to manage distribution costs effectively;

• our ability to successfully implement strategic changes in our business;

• changes in demand and prices charged for our products;

• changes in the demand for, or price of, oil and natural gas;

• changes in overall economic conditions;

• technological, manufacturing and product development risks;

• our dependence on and loss of key customers and end users;

• potential declines or increased volatility in oil and natural gas prices that adversely affect our customers, the energy industry or our production costs;

• potential reductions in spending on exploration and development drilling in the oil and natural gas industry that could reduce demand for our products and services;

• seasonal sales fluctuations;

• an increase in competition in the proppant market, including imports from foreign countries;

• logistical and distribution challenges relating to certain resource plays that do not have the type of infrastructure systems that are needed to efficiently support oilfield services activities;

• the development of alternative stimulation techniques that would not benefit from the use of our existing products and services, such as extraction of oil or gas without fracturing;

• changes in foreign and domestic governmental regulations, including environmental restrictions on operations and regulation of hydraulic fracturing;

• increased regulation of emissions from our manufacturing facilities;

• the development and utilization of alternative proppants for use in hydraulic fracturing;

• general global economic and business conditions;

• weather-related risks;

• changes in foreign and domestic political and legislative risks;

• risks of war and international and domestic terrorism;

• risks associated with foreign operations and foreign currency exchange rates and controls;

• the potential expropriation of assets by foreign governments; and

• other risks and uncertainties.

Additional factors that could affect our future results or events are described from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”).  Please see the discussion set forth under the caption “Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2018, under the caption “Risk Factors” in this report, and similar disclosures in subsequently filed reports with the SEC.  We assume no obligation to update forward-looking statements, except as required by law.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As of June 30, 2019, management had carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  There are inherent limitations to the effectiveness of any system of disclosure controls and procedures.  Accordingly, even effective disclosure controls and procedures can only provide reasonable assurances of achieving their control objectives.  Based upon and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2019 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II.  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are subject to legal proceedings, claims and litigation arising in the ordinary course of business.  While the outcome of these matters is currently not determinable, we do not expect that the ultimate costs to resolve these matters will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2018.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about our repurchases of Common Stock during the quarter ended June 30, 2019:

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan(1)		Maximum Number of Shares that May be Purchased Under the Plan(1)
04/01/19 to 04/30/19		—		—		—		2,000,000
05/01/19 to 05/31/19		—		—		—		2,000,000
06/01/19 to 06/30/19		—		—		—		2,000,000
		—				—

(1) On January 28, 2015, we announced the authorization by our Board of Directors for the repurchase of up to two million shares of our Common Stock.  The Plan is effective until all shares have been purchased under the Plan, or until such date that our Board of Directors cancels the Plan.  No shares have been purchased under the Plan.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURE

Our U.S. manufacturing facilities process mined minerals, and therefore are viewed as mine operations subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977.  Information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the recently proposed Item 106 of Regulation S-K (17 CFR 229.106) is included in Exhibit 95 to this quarterly report.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q:

10.1	2019 CARBO Ceramics Inc. Omnibus Incentive Plan
*10.2	Contract Manufacturing Services Agreement by and between CARBO Ceramics Inc. and PicOnyx, Inc.
31.1	Rule 13a-14(a)/15d-14(a) Certification by Gary A. Kolstad
31.2	Rule 13a-14(a)/15d-14(a) Certification by Ernesto Bautista III
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
95	Mine Safety Disclosure
101	The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in XBRL: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Shareholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to the Consolidated Financial Statements.

* Confidential portions of this exhibit have been omitted.

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EXHIBIT INDEX

EXHIBIT	DESCRIPTION
10.1	2019 CARBO Ceramics Inc. Omnibus Incentive Plan
*10.2	Contract Manufacturing Services Agreement by and between CARBO Ceramics Inc. and PicOnyx, Inc.
31.1	Rule 13a-14(a)/15d-14(a) Certification by Gary A. Kolstad.
31.2	Rule 13a-14(a)/15d-14(a) Certification by Ernesto Bautista III.
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
95	Mine Safety Disclosure.
101	The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in XBRL: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Shareholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to the Consolidated Financial Statements.

* Confidential portions of this exhibit have been omitted.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CARBO CERAMICS INC.
	/s/ Gary A. Kolstad
	Gary A. Kolstad
	President and Chief Executive Officer
	/s/ Ernesto Bautista III
	Ernesto Bautista III
	Chief Financial Officer
Date:  July 25, 2019

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EX-10.1

Exhibit 10.1

2019 CARBO CERAMICS INC. OMNIBUS INCENTIVE PLAN

1. Purpose of the Plan

This 2019 CARBO Ceramics Inc. Omnibus Incentive Plan is intended to promote the interests of the Company and its stockholders by providing the key employees of the Company, and eligible Directors of CARBO Ceramics, with incentives and rewards to encourage them to continue in the service of the Company.  The Plan is designed to serve this goal by providing such employees and eligible Directors with a proprietary interest in pursuing the long-term growth, profitability and financial success of the Company.

2. Definitions

As used in the Plan or in any instrument governing the terms of any Award, the following definitions apply to the terms indicated below:

(a)“Award” means an Option or Other Award granted pursuant to the terms of the plan.

(b)“Board” means the Board of Directors of CARBO Ceramics.

(c)“CARBO Ceramics” means CARBO Ceramics Inc., a Delaware corporation, and any successor thereto.

(d)“Code” means the Internal Revenue Code of 1986, as amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder.

(e)“Committee” means the Compensation Committee of CARBO Ceramics or such other committee appointed by the Board from time to time to administer the Plan (and to otherwise exercise and perform the authority and functions assigned to the Committee under the terms of the Plan) that meets the criteria set forth in Section 4 of the Plan.

(f)“Common Stock” means the common stock of CARBO Ceramics, par value $0.01 per share, or any other security into which such common stock shall be changed pursuant to the adjustment provisions of Section 10 of the Plan.

(g)“Company” means CARBO Ceramics, together with its Subsidiaries.

(h)“Director” means a member of the Board who is not at the time of reference an employee of the Company.

(i)“Disability” shall mean any physical or mental impairment which qualifies a Participant for (i) disability benefits under any long-term disability plan maintained by the Company, (ii) workers’ compensation total disability benefits or (iii) Social Security disability benefits, or as otherwise determined by the Board.  For purposes of this Plan, a Participant’s employment shall be deemed to have terminated as a result of Disability on the date as of which he or she is first entitled to receive disability benefits under such policy, law or regulation; provided that with respect to any Award that is subject to Section 409A of the Code, if such Award provides for any payment or distribution upon a Participant’s (i) Disability, then “Disability” shall have the meaning given to such term in Section 1.409A-3(i)(4) of the Treasury Regulations or (ii) termination of employment as a result of Disability, then such Participant’s employment shall be deemed to have terminated as a result of Disability on the date on which such Participant experiences a Separation from Service.

(j)“Effective Date” means the date on which the Plan is approved by the stockholders of CARBO Ceramics.

(k)“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder.

(l)“Fair Market Value” means, with respect to a share of Common Stock, as of the applicable date of determination, (i) the closing price of a share of Common Stock, as reported on the principal securities exchange on which shares of Common Stock are then listed or admitted to trading, on the date of determination (or, if not reported on such date, on the next preceding date on which such price was reported) or (ii) if the Common Stock is not listed or admitted to trading on any securities exchange, the fair market value of a share of Common Stock as reasonably determined by the Committee in its sole discretion using a reasonable valuation method.

(m)“Option” means a stock option to purchase shares of Common Stock granted to a Participant pursuant to Section 6.

(n)“Other Award” means an award granted to a Participant pursuant to Section 7.

(o)“Participant” means a Director or employee of the Company who is eligible to participate in the Plan and to whom one or more Awards have been granted pursuant to the Plan and, following the death of any such Person, his successors, heirs, executors and administrators, as the case may be.

(p)“Performance-Based Compensation” means compensation under Awards subject to the terms of Section 8 hereof.

(q)“Performance Measures” means such measures as are described in Section 8.

(r)“Performance Percentage” means the factor determined pursuant to a Performance Schedule that is to be applied to a Target Award and that reflects actual performance compared to the Performance Target.

(s)“Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.  Performance Periods may be overlapping.

(t)“Performance Schedule” means a schedule or other objective method for determining the applicable Performance Percentage to be applied to each Target Award.

(u)“Performance Target” means performance goals and objectives with respect to Performance Measures for a Performance Period.

(v)“Person” means a “person” as such term is used in Section 13(d) and 14(d) of the Exchange Act, including any “group” within the meaning of Section 13(d)(3) under the Exchange Act.

(w)“Plan” means this 2019 CARBO Ceramics Inc. Omnibus Incentive Plan, as it may be amended from time to time.

(x)“Securities Act” means the Securities Act of 1933, as amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder.

(y)“Separation from Service” shall have the meaning set forth in Section 1.409A- 1(h) of the Treasury Regulations.

(z)“Specified Employee” shall have meaning set forth in Section 1.409A-1(i) of the Treasury Regulations.

(aa)“Subsidiary” shall mean any entity that is directly or indirectly controlled by CARBO Ceramics or any entity, including an acquired entity, in which CARBO Ceramics has a significant equity interest, as determined by the Committee in its sole discretion, provided that with respect to any Award that is subject to Section 409A of the Code, “Subsidiary” shall mean a corporation or other entity in a chain of corporations or other entities in which each corporation or other entity, starting with CARBO Ceramics, has a controlling interest in another corporation or other entity in the chain, ending with such corporation or other entity.  For purposes of the preceding sentence, the term “controlling interest” has the same meaning as provided in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations, provided that the language “at least 50 percent” is used instead of “at least 80 percent” each place it appears in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations.  Notwithstanding the foregoing, for the purpose of determining whether a corporation or other entity is a Subsidiary for purposes of Section 5(a) hereof, if the Awards proposed to be granted to employees of such corporation or other entity would be granted based upon legitimate business criteria, the term “controlling interest” has the same meaning as provided in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations, provided that the language “at least 20 percent” is used instead of “at least 80 percent” each place it appears in Code Section 1.414(c)-2(b)(2)(i). For purposes of determining ownership of an interest in an organization, the rules of Sections 1.414(c)-3 and 1.414(c)-4 of the Treasury Regulations apply.

(bb)“Target Award” means a target Award determined by the Committee to be payable upon satisfaction of any applicable Performance Targets.

(cc)“Treasury Regulations” shall mean the regulations promulgated under the Code by the United States Internal Revenue Service, as amended.

(dd)“Voting Securities” means, at any time, CARBO Ceramics’ then outstanding voting securities.

3. Stock Subject to the Plan and Limitations on Awards

(a)Stock Subject to the Plan

The maximum number of shares of Common Stock that may be covered by Awards granted under the Plan shall not exceed 2,500,000 shares of Common Stock in the aggregate.  The maximum number of shares of Common Stock that may be issued through Options designated

as “incentive stock options” within the meaning of Section 422 of the Code under the Plan shall not exceed 2,500,000 shares of Common Stock in the aggregate.  The shares referred to in the preceding sentences of this paragraph shall in each case be subject to adjustment as provided in Section 10 and the following provisions of this Section 3.  Shares of Common Stock issued under the Plan may be either authorized and unissued shares or treasury shares, or both, at the sole discretion of the Committee.

For purposes of the preceding paragraph, shares of Common Stock covered by Awards shall no longer available for grant under the Plan to the extent such shares are (i) actually issued and delivered to a Participant (or such Participant’s permitted transferees as described in the Plan) pursuant to the Plan, (ii) withheld to pay the exercise price of an Award (iii) in the case of Options or stock appreciation rights, withheld to satisfy any tax withholding requirement in connection with such Award, (iv) to the extent an Award is exercisable for or convertible into shares of Common Stock or cash, settled in cash paid to the Participant or (v) subject to an exercised stock appreciation right settled in shares of Common Stock, regardless of the number of shares of Common Stock actually issued in connection with such stock appreciation right.  For purposes of clarification, (w) shares of Common Stock purchased by the Company on the open market with proceeds from the exercise price of Options shall not become available for issuance under the Plan, (x) to the extent an Award is not exercisable for or convertible into shares of Common Stock and is settled for cash without the delivery of Common Stock, such shares will remain available for grant under the Plan, (y) to the extent that an Award is granted or shares of Common Stock are issued to a Participant subject to conditions which may result in the forfeiture, cancellation or return of shares of Common Stock underlying such Award to the Company, any shares forfeited, cancelled or returned will again be available for grant under the Plan, and (z) to the extent shares of Common Stock are withheld to satisfy any tax withholding requirement in connection with an Award other than an Option or stock appreciation right, such shares will again be available for grant under the Plan. Shares of Common Stock covered by Awards granted pursuant to the Plan in connection with the assumption, replacement, conversion or adjustment of outstanding equity-based awards in the context of a corporate acquisition or merger (within the meaning of Section 303A.08 of the New York Stock Exchange Listed Company Manual) shall not count as issued under the Plan for purposes of this Section 3(a).

(b)Individual Award Limits

Subject to adjustment as provided in Section 10, the maximum number of shares of Common Stock that may be covered by Awards granted under the Plan to any single Participant in any calendar year shall not exceed 100,000 shares.  The amount paid under the Plan to any single Participant in any calendar year with respect to any cash-based Award shall not exceed $5,000,000.

4. Administration of the Plan

(a)The Plan shall be administered by a committee of the Board of Directors consisting of two or more persons, each of whom qualifies as a “non-employee director” (within the meaning of Rule 16b-3 promulgated under Section 16 of the Exchange Act) and as “independent” within the meaning of any applicable stock exchange or similar regulatory authority.  The Committee shall, consistent with the terms of the Plan, from time to time designate those employees and Directors of the Company who shall be granted Awards under the Plan and the amount, type and other terms and conditions of such Awards.  All of the powers and responsibilities of the Committee under the Plan may be delegated by the Committee, in writing, to any subcommittee thereof.  In addition, the Committee may from time to time authorize a subcommittee consisting of one or more members of the Board (including members who are employees of the Company) or officers of CARBO Ceramics to grant Awards to persons who are not “executive officers” of CARBO Ceramics (within the meaning of Rule 16a-1 under the Exchange Act), subject to such restrictions and limitation as the Committee may specify and in accordance with (and only to the extent permitted by) Section 157 of the Delaware General Corporation Law.

(b)The Committee shall have full discretionary authority to administer the Plan, including discretionary authority to interpret and construe any and all provisions of the Plan and the terms of any Award (and any agreement evidencing any Award) granted hereunder and to adopt and amend from time to time such rules and regulations for the administration of the Plan as the Committee may deem necessary or appropriate.  Without limiting the generality of the foregoing, the Committee shall determine whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment and whether employment for any Person other than the Company shall constitute employment for any purposes of the Plan.

(c)The employment of a Participant with the Company shall be deemed to have terminated for all purposes of the Plan if such person is employed by or provides services to a Person that is a Subsidiary of CARBO Ceramics and such entity ceases to be a Subsidiary of CARBO Ceramics, unless the Committee determines otherwise.  Decisions of the Committee shall be final, binding and conclusive on all parties.

(d)On or after the date of grant of an Award under the Plan, the Committee may, subject to applicable law and the limitations and requirements set forth herein, (i) accelerate the date on which any such Award becomes vested, exercisable or transferable, as the case may be, subject to the terms of Section 4(f) hereof, (ii)  extend the term of any such Award, including, without limitation, extending the period following a termination of a Participant’s employment during which any such Award may remain outstanding, (iii) waive any conditions to the vesting, exercisability or transferability, as the case may be, of any such Award or (iv) provide for the accrual of dividends or dividend equivalents with respect to any such Award; provided, that the Committee shall not have any such authority to the extent that the grant of such authority would cause any tax to become due under Section 409A of the Code; and provided, further, that no payment in respect of accrued dividends or dividend equivalents shall be made prior to the vesting of the relevant Award.

(e)No member of the Committee shall be liable for any action, omission, or determination relating to the Plan, and the Company shall indemnify and hold harmless each member of the Committee and each other director or employee of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been delegated against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any action, omission or determination relating to the Plan, unless, in either case, such action, omission or determination was taken or made by such member, director or employee in bad faith and without reasonable belief that it was in the best interests of the Company.

(f)Notwithstanding any provision of this Plan to the contrary, and except as provided in this Section 4(f) or in Section 19 hereof, equity-based Awards shall not vest more rapidly than ratably over a three-year period, and no equity-based Award shall vest prior to the first anniversary of the date on which such Award was granted; provided, however, that (i) to the extent permitted by Section 409A of the Code, the Committee may, in its sole discretion, provide for accelerated vesting of any such Award on account of a Participant’s death or Disability, (ii) to the extent permitted by Section 409A of the Code, the Committee may, in its sole discretion, provide for accelerated vesting of any such Award upon the achievement of performance criteria specified by the Committee, related to a period of performance of one year or more (provided, that, except as provided in item (i) of this sentence, no such Award shall vest prior to the first anniversary of the date on which such Award was granted), and (iii) up to five percent (5%) of the shares of Common Stock reserved for issuance under the Plan may be granted subject to equity-based Awards with such other vesting requirements (if any) as the Committee may establish in its sole discretion.

5. Eligibility

(a)The Persons who shall be eligible to receive Awards pursuant to the Plan shall be those employees and Directors of the Company whom the Committee shall select from time to time, including those key employees (including officers of CARBO Ceramics, whether or not they are members of the Board) who are largely responsible for the management, growth and protection of the business of the Company.  With respect to employees subject to U.S. income tax, Options and stock appreciation rights shall only be granted to such employees who provide direct services to CARBO Ceramics or a Subsidiary of CARBO Ceramics as of the date of grant of the Option or stock appreciation right.  Each Award granted under the Plan shall be evidenced by an instrument in writing in form and substance approved by the Committee.

(b)Employees of Subsidiaries may participate in the Plan upon approval of Awards to such employees by the Committee.  A Subsidiary’s participation in the Plan may be conditioned upon the Subsidiary’s agreement to reimburse the Company for costs and expenses of such participation, as determined by the Company.  The Committee may terminate the Subsidiary’s participation in the Plan at any time and for any reason.  If a Subsidiary’s participation in the Plan shall terminate, such termination shall not relieve it of any obligations theretofore incurred by it under the Plan, except with the approval of the Committee, and the Committee shall determine, in its sole discretion, the extent to which employees of the Subsidiary may continue to participate in the Plan with respect to previously granted Awards.  Unless the Committee determines otherwise, a Subsidiary’s participation in the Plan shall terminate upon the occurrence of any event that results in such entity no longer constituting a Subsidiary as defined herein; provided, however, that such termination shall not relieve such Subsidiary of any of its obligations to the Company theretofore incurred by it under the Plan, except with the approval of the Committee.  Notwithstanding the foregoing, unless otherwise specified by the Committee, upon any such Subsidiary ceasing to be a Subsidiary as defined herein, the Participants employed by such Subsidiary shall be deemed to have terminated employment for purposes of the Plan.  With respect to Awards subject to Section 409A of the Code, for purposes of determining whether a distribution is due to a Participant, such Participant’s employment shall be deemed terminated as described in the preceding sentence only if the Committee determines that a Separation from Service has occurred.

6. Options

The Committee may from time to time grant Options, subject to the following terms and conditions:

(a)Exercise Price

The exercise price per share of Common Stock covered by any Option shall be not less than 100% of the Fair Market Value of a share of Common Stock on the date on which such Option is granted.  The agreement evidencing the award of each Option shall clearly identify such Option as either an “incentive stock option” within the meaning of Section 422 of the Code or as a non-qualified stock option.

(b)Term and Exercise of Options

(1)Each Option shall become vested and exercisable on such date or dates, during such period and for such number of shares of Common Stock as shall be determined by the Committee and specified in the agreement evidencing such Option; provided, however that no Option shall be exercisable after the expiration of ten years from the date such Option is granted; and, provided, further, that each Option shall be subject to earlier termination, expiration or cancellation as provided in the Plan or in the agreement evidencing such Option.

(2)Each Option may be exercised in whole or in part.  The partial exercise of an Option shall not cause the expiration, termination or cancellation of the remaining portion thereof.

(3)An Option shall be exercised by such methods and procedures as the Committee determines from time to time, including without limitation through net physical settlement or other method of cashless exercise.

(4)Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent and distribution and may be exercised, during the lifetime of a Participant, only by the Participant; provided, however that the Committee may (but shall not be obligated to) permit Options that are not incentive stock options to be sold, pledged, assigned, hypothecated, transferred, or disposed of, on a general or specific basis, subject to such conditions and limitations as the Committee may determine.

(c)Effect of Termination of Employment or Other Relationship

The agreement evidencing the award of each Option shall specify the consequences with respect to such Option (if any) of the Participant’s termination of employment or service as a Director or other relationship between the Company and the Participant holding the Option, a leave of absence and the Participant’s death or Disability.

(d)Special Rules for Incentive Stock Options

(1)The aggregate Fair Market Value of shares of Common Stock with respect to which “incentive stock options” (within the meaning of Section 422 of the Code) are exercisable for the first time by a Participant during any calendar year under the Plan and any other stock option plan of CARBO Ceramics or any of its “subsidiaries” (within the meaning of Section 424 of the Code) shall not exceed $100,000.  Such Fair Market Value shall be determined as of the date on which each such incentive stock option is granted.  In the event that the aggregate Fair Market Value of shares of Common Stock with respect to such incentive stock options exceeds $100,000, then incentive stock options granted hereunder to such Participant shall, to the extent and in the order required by regulations promulgated under the Code (or any other authority having the force of regulations), automatically be deemed to be non-qualified stock options, but all other terms and provisions of such incentive stock options shall remain unchanged.  In the absence of such regulations (and authority), or in the event such regulations (or authority) require or permit a designation of which Options shall cease to constitute incentive stock options, incentive stock options granted hereunder shall, to the extent of such excess and in the order in which they were granted, automatically be deemed to be non-qualified stock options, but all other terms and provisions of such incentive stock options shall remain unchanged.

(2)No incentive stock option may be granted to an individual if at the time of the proposed grant, such individual owns stock possessing more than ten percent of the total combined voting power of all classes of stock of CARBO Ceramics or any of its “subsidiaries” (within the meaning of Section 424 of the Code), unless (i) the exercise price of such incentive stock option is at least one hundred and ten percent of the Fair Market Value of a share of Common Stock at the time such incentive stock option is granted and (ii) such incentive stock option is not exercisable after the expiration of five years from the date such incentive stock option is granted.

7. Other Awards

(a)The Committee may grant cash-based, equity-based or equity-related awards not otherwise described herein in such amounts and subject to such terms and conditions as the Committee shall determine.  Without limiting the generality of the preceding sentence, each such Other Award may (i) involve the transfer of actual shares of Common Stock to Participants, either at the time of grant or thereafter, or payment in cash or otherwise of amounts based on the value of shares of Common Stock, (ii) be subject to performance-based and/or service-based conditions, (iii) be in the form of cash, stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units or share-denominated performance units, (iv) be designed to comply with applicable laws of jurisdictions other than the United States and (v) be Performance-Based Compensation; provided, that each equity-based or equity-related Other Award shall be denominated in, or shall have a value determined by reference to, a number of shares of Common Stock that is specified (or will be determined using a formula that is specified) at the time of the grant of such Other Award.  The exercise price per share of Common Stock covered by any stock appreciation right shall be not less than 100% of the Fair Market Value of a share of Common Stock on the date on which such stock appreciation right is granted, and the compensation payable pursuant to any stock appreciation right shall not exceed the excess of the Fair Market Value of a share of Common Stock on the date on which such stock appreciation right is exercised over the exercise price.  No stock appreciation right shall be exercisable after the expiration of ten years from the date such stock appreciation right is granted; provided, however, that each stock appreciation right shall be subject to earlier termination, expiration or cancellation as provided in the Plan or in the agreement evidencing such stock appreciation right.

(b)The agreement evidencing each Other Award shall specify the consequences with respect to such Award (if any) of the Participant’s termination of employment or service as a Director or other relationship between the Company and the Participant holding such Award, a leave of absence, and the Participant’s death or Disability.

8. Performance-Based Compensation

(a)Discretionary Reduction

The Committee may, in its discretion, reduce or eliminate the amount payable to any Participant with respect to an Award that is designated as Performance-Based Compensation, based on such factors as the Committee may deem relevant, but the Committee may not increase any such amount above the amount established in accordance with the relevant Performance Schedule.  For purposes of clarity, the Committee may exercise the discretion provided for by the foregoing sentence in a non-uniform manner among Participants.

(b)Performance Measures

The Performance Targets upon which the payment or vesting of any Award (other than Options and stock appreciation rights) that is designated as Performance-Based Compensation depends shall relate to one or more of the following Performance Measures or any other measures chosen by the Committee: (i) net income or operating net income (before or after taxes, interest, depreciation, amortization, and/or nonrecurring/unusual items), (ii) return on assets, return on capital, return on equity, return on economic capital, return on other measures of capital, return on sales or other financial criteria, (iii) revenue or net sales, (iv) gross profit or operating gross profit, (v) cash flow, (vi) productivity or efficiency ratios, (vii) share price or total stockholder return, (viii) earnings per share, (ix) budget and expense management, (x) customer and product measures, including market share, high value client growth, and customer growth, (xi) working capital turnover and targets, (xii) margins, (xiii) economic value added or other value added measurements, (xiv) sales volume or other sales performance criteria, (xv) goals related to the research, development, implementation or marketing of new products or business initiatives, and (xvi) safety record and/or performance, as determined by statistical or numerical calculations for safety matters, such as number of lost-time accidents or total recordable incidence rate (TRIR), in any such case (A) considered absolutely or relative to historic performance or relative to one or more other businesses and (B) determined for the Company or any business unit or division thereof.

The measurement of any Performance Measure(s) may exclude the impact of charges for restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring items, and the cumulative effects of accounting changes, each as defined by generally accepted accounting principles and as identified in the Company’s audited financial statements, including the notes thereto.  Any Performance Measure(s) may be used to measure the performance of any Participant or group of Participants, or the Company or a Subsidiary as a whole or any business unit of the Company or any Subsidiary or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or a published or special index that the Committee, in its sole discretion, deems appropriate.

9. Payments and Deferrals

(a)Payment of vested Awards may be in the form of cash, Common Stock or combinations thereof as the Committee shall determine, subject to such terms, conditions, restrictions and limitations as it may impose.  The Committee may (i) postpone the exercise of Options or stock appreciation rights (but not beyond their expiration dates), (ii) require or permit Participants to elect to defer the receipt or issuance of shares of Common Stock pursuant to Awards or the settlement of Awards in cash under such rules and procedures as it may establish, in its discretion, from time to time, and (iii) provide for deferred settlements of Awards including the payment or crediting of earnings on deferred amounts, or the payment or crediting of dividend equivalents where the deferred amounts are denominated in common share equivalents.  Notwithstanding the foregoing, with respect to any Award subject to Section 409A of the Code, the Committee shall not take any action described in the preceding sentence unless it determines that such action will not result in any adverse tax consequences for any Participant under Section 409A of the Code.

(b)If, pursuant to any Award granted under the Plan, a Participant is entitled to receive a payment on a specified date, such payment shall be deemed made as of such specified date if it is made (i) not earlier than 30 days before such specified date and (ii) not later than December 31 of the year in which such specified date occurs or, if later, the fifteenth day of the third month following such specified date, in each case provided that the Participant shall not be permitted, directly or indirectly, to designate the taxable year in which such payment is made.

(c)Notwithstanding the foregoing, if a Participant is a Specified Employee at the time of his or her Separation from Service, any payment(s) with respect to any Award subject to Section 409A of the Code to which such Participant would otherwise be entitled by reason of such Separation from Service shall be made on the date that is six months after the Participant’s Separation from Service (or, if earlier, the date of the Participant’s death).

(d)If, pursuant to any Award granted under the Plan, a Participant is entitled to a series of installment payments, such Participant’s right to the series of installment payments shall be treated as a right to a series of separate payments and not as a right to a single payment.  For purposes of the preceding sentence, the term “series of installment payments” has the same meaning as provided in Section 1.409A-2(b)(2)(iii) of the Treasury Regulations.

10. Adjustment Upon Certain Changes

(a)In the event of any change in the Company’s capital structure on account of (i) any extraordinary dividend, stock dividend, stock split, reverse stock split, or any similar equity restructuring, or (ii) any combination or exchange of equity securities, merger, consolidation, recapitalization, reorganization, divesture or other distribution (other than ordinary cash dividends) of assets to stockholders, or any other similar event affecting the Company’s capital structure, to the extent necessary to prevent the enlargement or diminution of the rights of Participants, the Committee shall make such adjustments as it deems necessary or appropriate to (A) the maximum number of shares of Common Stock that may be issued through Awards under the Plan, (B) the maximum number of shares of Common Stock that may be issued through Options under the Plan, (C) the maximum number of shares that may be granted to any individual Participant under the Plan; (D) the number or kind of shares subject to an outstanding Award; (E) subject to the limitation contained in Section 10(d), the exercise price applicable to an outstanding Award; (F) any measure of performance that relates to an outstanding Award; and (G) any other terms or conditions of outstanding Awards as the Committee in its discretion deems appropriate, in each case in order to reflect such change in the Common Stock.

(b)Subject to any required action by the stockholders of the Company, in the event that the Company shall be the surviving corporation in any merger or consolidation (except a merger or consolidation as a result of which the holders of shares of Common Stock receive securities of another corporation), the Awards outstanding on the date of such merger or consolidation shall pertain to and apply to the securities that a holder of the number of shares of Common Stock subject to any such Awards would have received in such merger or consolidation (it being understood that if, in connection with such transaction, the stockholders of the Company retain their shares of Common Stock and are not entitled to any additional or other consideration, the Awards shall not be affected by such transaction).

(c)In the event of (i) a dissolution or liquidation of the Company, (ii) a sale of all or substantially all of the Company’s assets, (iii) a merger or consolidation involving the Company in which the Company is not the surviving corporation or (iv) a merger or consolidation in which the Company is the surviving corporation but the holders of shares of Common Stock receive securities of another corporation and/or other property, including cash, the Committee shall (x) provide for the exchange of each Option or Other Award outstanding immediately prior to such event (whether or not then exercisable or vested) for a right with respect to some or all of the property for which the stock underlying such Option or Other Award is exchanged and, incident thereto, make any adjustment in the exercise price of the Options or stock appreciation rights or the number or kind of securities or amount of property subject to any Award and/or (y) cancel, effective immediately prior to such event, any outstanding Award (whether or not exercisable or vested) and in full consideration of such cancellation pay to the Participant an amount in cash, with respect to each underlying share of Common Stock, equal to the excess of (A) the value, as determined by the Committee in its discretion of securities and/or property (including cash) received by such holders of shares of Common Stock as a result of such event over (B) the exercise price, if applicable, in each case, as the Committee may consider, in its sole discretion, necessary or appropriate to prevent dilution or enlargement of rights.  Notwithstanding the foregoing, in the event the transaction described in item (i), (ii), (iii) or (iv) of this Section 10(c) constitutes a Change in Control, the provisions of Section 19 hereof shall govern the vesting of such Option or Other Award (or the right or amount of cash such Option or Other Award is exchanged for pursuant to this Section 10(c)).

(d)Notwithstanding any provision of this Plan to the contrary, in no event shall (i) any repricing (within the meaning of U.S. generally accepted accounting principles or any applicable stock exchange rule) of Awards issued under the Plan be permitted at any time under any circumstances, (ii) any new Awards be issued in substitution for outstanding Awards previously granted to Participants if such action would be considered a repricing (within the meaning of U.S. generally accepted accounting principles or any applicable stock exchange rule) or (iii) any Option or stock appreciation right (x) have its exercise price be reduced or (y) be purchased (or otherwise “cashed out”) by the Company if, on the date of such purchase, the exercise price per share of Common Stock covered by such Option or stock appreciation right is less than 100% of the Fair Market Value of a share of Common Stock on such date.

(e)Notwithstanding anything to the contrary in this Section 10, any action taken under this Section 10: (i) with respect to incentive stock options, shall be taken only to the extent that it does not constitute a “modification” within the meaning of Section 424(h)(3) of the Code, (ii) shall be made in a manner that does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act, and (iii) with respect to Awards subject to Section 409A of the Code, shall conform to the requirements of Section 409A of the Code. The Company shall give each Participant notice of an adjustment, substitution, cancellation or other action hereunder and, upon notice, such adjustment, substitution, cancellation or other action shall be conclusive and binding for all purposes.  Notwithstanding the foregoing, the Committee may, in its discretion, decline to take action under this Section 10 with respect to any Award if the Committee determines that such action would violate (or cause the Award to violate) applicable law or result in adverse tax consequences to the Participant or to the Company.  No provision of this Section 10 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code.

(f)Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger or consolidation of CARBO Ceramics or any other corporation.  Except as expressly provided in the Plan, no issuance by CARBO Ceramics of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares or amount of other property subject to, or the terms related to, any Award.

11. Rights Under the Plan

Except as otherwise expressly provided in any Award grant agreement, no person shall have any rights as a stockholder with respect to any shares of Common Stock covered by or relating to any Award granted pursuant to the Plan until the date (if any) of the issuance of a stock certificate with respect to such shares or the date as of which the Company records the Participant or his or her nominee as the owner of such shares, free and clear of any restrictions or conditions pursuant to the Plan or any grant agreement hereunder, in its books and records.  Except as otherwise expressly provided in Section 10 hereof, no adjustment of any Award shall be made for dividends or other rights for which the record date occurs prior to the date such stock certificate is issued or such record is made.  Nothing in this Section 11 is intended, or should be construed, to limit the authority of the Committee to cause the Company to make payments based on the dividends that would be payable with respect to any share of Common Stock underlying an Award if such share were issued or outstanding on the record date of such dividends, or from granting rights hereunder related to such dividends.

The Company shall not have any obligation to establish any separate fund or trust or other segregation of assets to provide for payments under the Plan.  To the extent any person acquires any rights to receive payments hereunder from the Company, such rights shall be no greater than those of an unsecured creditor.

12. No Special Employment Rights; No Right to Award

(a)Nothing contained in the Plan or any Award shall confer upon any Participant any right with respect to the continuation of his or her employment by or service to the Company or interfere in any way with the right of the Company at any time to terminate such employment or service or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an Award.

(b)No person shall have any claim or right to receive an Award hereunder.  The Committee’s granting of an Award to a Participant at any time shall neither require the Committee to grant any subsequent Award to such Participant (or any Award to any other Participant or other person) at any time, nor preclude the Committee from making subsequent grants to such Participant or any other Participant or other person.

13. Securities Matters

(a)CARBO Ceramics shall be under no obligation to effect the registration pursuant to the Securities Act of any shares of Common Stock to be issued hereunder or to effect similar compliance under any state or non-U.S. laws.  Notwithstanding anything herein to the contrary, CARBO Ceramics shall not be obligated to cause to be issued or delivered any certificates evidencing shares or recordation by the Company of the Participant or his or her nominee as the owner of Common Stock pursuant to the Plan unless and until CARBO Ceramics is advised by its counsel that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Common Stock are traded.  The Committee may require, as a condition to the issuance and delivery of certificates evidencing shares or recordation by the Company of the Participant or his or her nominee as the owner of Common Stock pursuant to the terms hereof, that the recipient of such shares make such covenants, agreements and representations, and that such certificates bear such legends, as the Committee deems necessary or desirable.

(b)The exercise of any Option granted hereunder shall only be effective at such time as counsel to CARBO Ceramics shall have determined that the issuance and delivery of shares of Common Stock pursuant to such exercise is in compliance with all applicable laws and regulations and the requirements of any securities exchange on which shares of Common Stock are traded.  CARBO Ceramics may, in its sole discretion, defer the effectiveness of an exercise of an Option hereunder or the issuance or transfer of shares of Common Stock pursuant to any Award pending or to ensure compliance under federal, state or non-U.S. securities laws.  CARBO Ceramics shall inform the Participant in writing of its decision to defer the effectiveness of the exercise of an Option or the issuance or transfer of shares of Common Stock pursuant to any Award.  During the period that the effectiveness of the exercise of an Option has been deferred, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto.

14. Withholding Taxes

(a)Payment of Taxes

Participants shall be solely responsible for any applicable taxes (including without limitation income and excise taxes) and penalties, and any interest that accrues thereon, which they incur in connection with the receipt, vesting, settlement or exercise of any Award.  Notwithstanding any provision of this Plan to the contrary, in no event shall the Company or any Subsidiary be liable to a Participant on account of an Award’s failure to (i) qualify for favorable U.S. or non-U.S. tax treatment or (ii) avoid adverse tax treatment under U.S. or non-U.S. law, including, without limitation, Section 409A of the Code.

(b)Cash Remittance

Whenever shares of Common Stock are to be issued upon the exercise, grant or vesting of an Award, and whenever any cash amount shall become payable in respect of any Award, CARBO Ceramics shall have the right to require the Participant to remit to CARBO Ceramics in cash an amount sufficient to satisfy federal, state, local and/or non-U.S. withholding tax requirements, if any, attributable to such exercise, grant, vesting or payment prior to the delivery of any certificate or certificates for such shares or recordation by the Company of the Participant or his or her nominee as the owner of such shares or the effectiveness of the lapse of such restrictions or making of such payment.  In addition, upon the exercise or settlement of any Award in cash, or any payment with respect to any Award, CARBO Ceramics shall have the right to withhold from any payment required to be made pursuant thereto an amount sufficient to satisfy the federal, state, local and/or non-U.S. withholding tax requirements, if any, attributable to such exercise, settlement or payment.

(c)Stock Remittance

At the election of the Participant, subject to the approval of the Committee, when shares of Common Stock are to be issued upon the exercise, grant or vesting of an Award, the Participant may tender to CARBO Ceramics a number of shares of Common Stock that have been owned by the Participant for at least six months (or such other period as the Committee may determine) having a Fair Market Value at the tender date determined by the Committee to be sufficient to satisfy the minimum federal, state, local and/or non-U.S. withholding tax requirements, if any, attributable to such exercise, grant or vesting, but not greater than the minimum withholding obligations.  Such election shall satisfy the Participant’s obligations under Section 14(a) hereof, if any.

(d)Stock Withholding

At the election of the Participant, subject to the approval of the Committee, when shares of Common Stock are to be issued upon the exercise, grant or vesting of an Award, CARBO Ceramics shall withhold a number of such shares having a Fair Market Value at the exercise date determined by the Committee to be sufficient to satisfy the minimum federal, state, local and/or non-U.S. withholding tax requirements, if any, attributable to such exercise, grant or vesting, but not greater than the minimum withholding obligations.  Such election shall satisfy the Participant’s obligations under Section 14(a) hereof, if any.

15. Amendment or Termination of the Plan

(a)The Plan and any Award may be amended, suspended or terminated at any time by the Board, provided that no amendment shall be made without stockholder approval, if stockholder approval is required under then applicable law, including any applicable tax, stock exchange or accounting rules, and further provided that no amendment to the Plan or any Award shall violate the prohibition on repricing contained in Section 10(d).  Notwithstanding the foregoing, with respect to Awards subject to Section 409A of the Code, any amendment, suspension or termination of the Plan or any such Award shall conform to the requirements of Section 409A of the Code.  Except as otherwise provided in Section 15(b), no termination, suspension or amendment of the Plan or any Award shall adversely affect the right of any Participant with respect to any Award theretofore granted, as determined by the Committee, without such Participant’s written consent.

(b)The Committee may amend or modify the terms and conditions of an Award to the extent that the Committee determines, in its sole discretion, that the terms and conditions of the Award violate or may violate Section 409A of the Code; provided, however, that (i) no such amendment or modification shall be made without the Participant’s written consent if such amendment or modification would violate the terms and conditions of any other agreement between the Participant and the Company and (ii) unless the Committee determines otherwise, any such amendment or modification of an Award made pursuant to this Section 15(b) shall maintain, to the maximum extent practicable, the original intent of the applicable Award provision without contravening the provisions of Section 409A of the Code. The amendment or modification of any Award pursuant to this Section 15(b) shall be at the Committee’s sole discretion and the Committee shall not be obligated to amend or modify any Award or the Plan, nor shall the Company be liable for any adverse tax or other consequences to a Participant resulting from such amendments or modifications or the Committee’s failure to make any such amendments or modifications for purposes of complying with Section 409A of the Code or for any other purpose.  To the extent the Committee amends or modifies an Award pursuant to this Section 15(b), the Participant shall receive notification of any such changes to his or her Award and, unless the Committee determines otherwise, the changes described in such notification shall be deemed to amend the terms and conditions of the Award and the applicable agreement governing the terms of such Award.

16. No Obligation to Exercise

The grant to a Participant of an Award shall impose no obligation upon such Participant to exercise such Award.

17. Transfers Upon Death

Upon the death of a Participant, outstanding Awards granted to such Participant may be exercised only by the executors or administrators of the Participant’s estate or by any person or persons who shall have acquired such right to exercise by will or by the laws of descent and

distribution.  No transfer by will or the laws of descent and distribution of any Award, or the right to exercise any Award, shall be effective to bind CARBO Ceramics unless the Committee shall have been furnished with (a) written notice thereof and with a copy of the will and/or such evidence as the Committee may deem necessary to establish the validity of the transfer and (b)  an agreement by the transferee to comply with all the terms and conditions of the Award that are or would have been applicable to the Participant and to be bound by the acknowledgements made by the Participant in connection with the grant of the Award.

18. Expenses and Receipts

The expenses of the Plan shall be paid by CARBO Ceramics.  Any proceeds received by CARBO Ceramics in connection with any Award will be used for general corporate purposes.

19. Change in Control

(a)Upon a Change in Control, (i) each outstanding Award that is eligible to vest based solely on the passage of time and/or the Participant’s continued service to the Company shall become fully vested and exercisable or settled in cash or stock, as applicable, and all restrictions thereon shall lapse and (ii) each outstanding Award that is eligible to vest based on the achievement of performance criteria shall vest and become exercisable or settled in cash or stock, as applicable, and the restrictions thereon shall lapse, as to a pro-rata portion of the “target” of such Award (i.e., with respect to a number of shares of Common Stock underlying such Award or the amount of cash under such Award that is equal to (a) the total number of shares of Common Stock underlying such Award or cash amount under such Award (including a Participant’s Target Award, to the extent applicable) that would be eligible to vest based on meeting “target” performance during a performance period that includes the date of the Change in Control, multiplied by (b) a fraction, the numerator of which is the number of days during such performance period that have elapsed prior to (and including) the date of the Change in Control and the denominator of which is the total number of days in such performance period, in each case as determined by the Committee).  Any portion of a performance-based vesting award that does not vest pursuant to clause (ii) of the preceding sentence shall be forfeited as of the date of the Change in Control and the Participant shall have no further rights with respect thereto.  

(b)For purposes of the Plan and any agreement governing the terms of any Award hereunder, the term “Change in Control” means the occurrence of any of the following after the Effective Date: (i) the occurrence of a change in control of the Company of a nature that would be required to be reported or is reported in response to Item 5.01 of the current report on Form 8- K, as in effect on the Effective Date, pursuant to Sections 13 or 15(d) of the Exchange Act; or (ii) any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s outstanding securities (other than any Person who was a “beneficial owner” of securities of the Company representing 30% or more of the combined voting power of the Company’s outstanding securities prior to the Effective Date); or (iii) individuals who constitute the Board on the Effective Date (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board, provided that any person becoming a director subsequent to the Effective Date whose appointment to fill a vacancy or to fill a new Board position was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company’s stockholders was approved by the same nominating committee serving under an Incumbent Board, shall be, for purposes of this clause (iii), considered as though he were a member of the Incumbent Board; or (iv) the occurrence of any of the following of which the Incumbent Board does not approve (A) merger or consolidation in which the Company is not the surviving corporation or (B) sale of all or substantially all of the assets of the Company; or (v) consummation of a plan of reorganization, merger or consolidation of the Company with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan of reorganization are exchanged or converted into cash or property or securities not issued by the Company, which was approved by stockholders pursuant to a proxy statement soliciting proxies from stockholders of the Company, by someone other than the then current management of the Company.

Notwithstanding the foregoing and for the purposes of timing of payment, distribution or settlement only, a Change in Control shall not be deemed to occur under this Section 19 of this Plan with respect to any Award that constitutes “non-qualified deferred compensation” within the meaning of Section 409A of the Code, unless the events that have occurred would also constitute a “Change in the Ownership or Effective Control of a Corporation or in the Ownership of a Substantial Portion of the Assets of a Corporation” under Treasury Department Final Regulation 1.409A-3(i)(5), or any successor thereto.

20. Governing Law

The Plan and the rights of all persons under the Plan shall be construed and administered in accordance with the laws of the State of Delaware without regard to its conflict of law principles.

21. Effective Date and Term of Plan

The 2019 CARBO Ceramics Inc. Omnibus Incentive Plan was adopted by the Board on March 19, 2019, subject to the approval of the Plan by the stockholders of CARBO Ceramics.  No grants of Awards may be made under the Plan after the fifth anniversary of the Effective Date.

EX-10.2

Exhibit 10.2

Confidential portions of this exhibit have been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. The redacted terms have been marked at the appropriate place with “[XXX]”.

CONTRACT MANUFACTURING SERVICES AGREEMENT

This CONTRACT MANUFACTURING SERVICES AGREEMENT (the “Agreement”) is entered into and made effective as of May 28, 2019 (the “Effective Date”) by and between, CARBO Ceramics Inc., a Delaware corporation (“CARBO”), whose registered address is 575 N. Dairy Ashford, Suite 300, Houston, Texas and PicOnyx, Inc., a Delaware corporation, whose registered address is 6002 Rogerdale Road, Suite 175, Houston TX, (“PICONYX”). PICONYX and CARBO are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.

WHEREAS, CARBO owns the Manufacturing Facility and has personnel with experience in contract manufacturing;

WHEREAS, PICONYX desires to engage CARBO, and CARBO desires to be so engaged, to manufacture for PICONYX the Product at the PICONYX Property, under the terms and conditions contained herein; and

NOW THEREFORE, in consideration of the covenants and obligations expressed herein, and intending to be legally bound hereby, the Parties agree as follows

1. DEFINITIONS. As used in this Agreement, the following terms shall have the following respectivemeanings:

1.1. “Adequate Assurance” has the meaning set forth in Section 8.3.

1.2. “Affiliate” means any individual or entity directly or indirectly controlling, controlled by, or under common control with a Party. For purposes of this definition, “control” means the direct or indirect ownership of at least fifty percent (50%) of the outstanding voting securities, or the right to control the management or policy decisions, of the controlled entity, by contract or otherwise.

1.3. “Applicable Laws” means all laws, rules, pronouncements, regulations and guidance promulgated by any Regulatory Authority that are applicable to either Party’s performance of their respective obligations under this Agreement, including but not limited to the procurement, storage and handling of Raw Materials, the operation of either Party’s business and the manufacturing process for the Product.

1.4. “CARBO Technology” means all existing proprietary technology, including but not limited to, information, ideas, concepts, inventions, schematics, designs, systems, apparatuses, formulations, methods, process conditions, software (in source code) or database, owned or controlled by CARBO that are necessary for the manufacture of the Product in accordance with the requirements of this Agreement, including any and all prior amendments, improvements, updates, upgrades and derivative works thereto existing now, excluding any PICONYX Technology and excluding any Joint Technology.

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1.5. “Change of Control” means any transaction in which a Third Party, not already a shareholder, acquires more than 50% of the outstanding voting equity.

1.6. “Change of Control Notice” has the meaning set forth in Section 3 and Exhibit E.

1.7. “Change of Control Transaction” has the meaning set forth in Section 3 and Exhibit E.

1.8. “Claim” has the meaning set forth in Section11.1.  

1.9. “Commercial Completion” means the point in time in which the parties agree that a Commercial Product is able to be produced at the Manufacturing Facility, with the PICONYX Property including the large kiln, the pilot kiln and the milling equipment, and as set forth in Section 7.

1.10. “Commercial Product” means any Product listed on Exhibit A, that meets the Product Specifications set forth in Exhibit B.

1.11. “Confidential Information” means all trade secrets, know how, proprietary information, techniques, or technology, and data disclosed by one party to the other party pursuant to this Agreement or generated pursuant to this Agreement, except any portion thereof which (i) the recipient can demonstrate by its written records was known by the recipient prior to the disclosure thereof by the disclosing party; (ii) is disclosed to the recipient without restriction, after disclosure thereof by the disclosing party, by a Third Party who has the right to make such disclosure; (iii) is or becomes part of the public domain through no breach of this Agreement by the recipient; or (iv) is independently developed by employees of the recipient without use of any of the other party’s Confidential Information.

1.12. “Contract Manufacturing Price” has the meaning set forth in Section 8.1.

1.13. “Contract Manufacturing Services” means all operations (including but not limited to testing and release, receiving, regulatory and compliance, making, picking, packaging, quality control, testing, storage, documentation, and/or shipment) required to produce and distribute the Commercial Product.

1.14. “Development Product” means a new Product that is produced by CARBO for purposes of developing a new Commercial Product.

1.15. “Disclosing Party” means a Party to this Agreement which discloses Confidential Information.

1.16. “Exhibit” means the following Exhibits, which are attached hereto, and become a part of, this Agreement.

Exhibit A – Commercial Products

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Exhibit B – Products Specifications

Exhibit C – Contract Manufacturing Price Schedule

Exhibit D – Packaging Specifications and Materials

Exhibit E – Sale of PICONYX or PICONYX Property; Change of Control;

Exhibit F – Manufacturing Facility

Exhibit G – PICONYX Background IP

Exhibit H – CARBO Retained Equipment

Exhibit I – Third Party Manufacturing Payment Schedule

Exhibit J – CARBO Background IP

1.17. “Force Majeure Event” has the meaning set forth in Section 15.6.

1.18. “Indemnitee” has the meaning set forth in Section 11.3.

1.19. “Indemnitor” has the meaning set forth in Section 11.3.

1.20. “Initial Term” has the meaning set forth in Section 12.1.

1.21. “Intellectual Property Rights” means all intellectual or industrial property rights and protections pursuant to the laws of any jurisdiction throughout the world including without limitation any and all present and future patents, patent applications (including with respect to patents, any patent rights granted upon any reissue, division, continuation or continuation-in-part applications now or hereafter filed), utility models issued or pending, registered and unregistered design rights and databases, models, copyrights (including the copyright on software in any code), trade secrets, trademarks, tradenames, rights title and interest in any proprietary know-how, and license rights in such intellectual or industrial property.

1.22. “Joint Technology” means any conception, discovery, idea, design, or invention, including but not limited to, processes, equipment, products, materials, material properties, product features and formulations, that at least one employee or agent of CARBO and at least one employee or agent of PICONYX jointly develop, regardless of their relative contributions.  Joint Technology shall include, but is not limited to, improvements to CARBO Technology and improvements to PICONYX Technology.

1.23. “Maintenance Costs” means all costs, expenses, and fees incurred by CARBO to the extent those costs relate to, or otherwise support or are integral to, the use and operation of the PICONYX Property and the equipment therein, including without limitation, the repair and or replacement of equipment.

1.24. “Manufacturing Facility” means the real property located at 4810 Industrial Drive, New Iberia, Louisiana, which CARBO has agreed to lease to PICONYX pursuant to the Surface Lease Agreement, as set forth in Exhibit F.

1.25. “Minimum Quantity Commitment” has the meaning set forth in Section 6.3.

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1.26. “Offering Proceeds” means PICONYX securing of an additional $3,000,000 of financing by way of equity, debt, and grants.

1.27. “Order” and “Orders” have the meanings set forth in Section 6.2.

1.28. “Packaging Specifications and Materials” means all material required to effect the labelling and packaging of the Commercial Product, and the Specifications for the packaging and shipment of the Commercial Product, as set forth in Exhibit D.

1.29. “PICONYX Patents” means PICONYX’S right, title and interest in: (a) the patents and applications listed on Exhibit G; (b) all United States, international, and foreign patents and patent applications, which are based upon, issue from, or claim a right of priority to the patents and applications listed on Exhibit G; (c) all reissues, reexamination certifications, or renewals, of the patents and applications described in (a) or (b); and, (d) any rights to patents and application that PICONYX acquires from a Third Party.

1.30. “PICONYX Property” means the structure, as identified in Exhibit F, and all of its associated equipment, which CARBO transferred to PICONYX pursuant to the Subscription Agreement.  PICONYX Property does not include, and specifically excludes the equipment listed in Exhibit H, which is located on or at the Manufacturing Facility and owned by CARBO.

1.31. “PICONYX Technology” means all existing proprietary technology, including but not limited to, the PICONYX Patents, information, ideas, concepts, inventions, schematics, designs, systems, apparatuses, formulations, methods, process conditions, software (in source code) or database, owned or controlled by PICONYX that are necessary for the manufacture of the Product in accordance with the requirements of this Agreement, including any and all prior amendments, improvements, updates, upgrades and derivative works thereto existing now, excluding any CARBO Technology and excluding any Joint Technology.

1.32. “Product” means a material with potential or actual commercial value and includes the Commercial Products listed on Exhibit A and a Development Product, as the case may be.

1.33. “Product Specifications” means the specifications for, or concerning the manufacturing and packaging of, a Commercial Product, as listed in Exhibit A, and set forth in Exhibit B and Exhibit D, .

1.34. “Property” means collectively, the Manufacturing Facility and the PICONYX Property.

1.35. “Proposed Response” has the meaning set forth in Section 9.2.

1.36. “Quarterly Average Cost” is the average Contract Manufacturing Price for the three months of the Calendar Quarter in which PICONYX fails to meet its Minimum Quantity Commitment.

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1.37. “Raw Materials” means all materials to be incorporated or used in the manufacturing of theCommercial Product,including without limitation the materials listed in Exhibit C.

1.38. “Receiving Party” means a Party to this Agreement which is the recipient of Confidential Information.

1.39. “Regulatory Authority” means any national, supra-national, regional, state, or local regulatory agency, department, bureau, commission, council, or other governmental entity.    

1.40. “Renewal Term” has the meaning set forth in Section 12.1.  

1.41. “Rolling Forecast” has the meaning set forth in Section 6.1.

1.42. “Storage Lease Agreement” means the Storage Lease Agreement of even date herewith by and between the Parties.

1.43. “Subscription Agreement” means the Subscription and Asset Purchase Agreement of even date herewith by and between the Parties whereby CARBO has agreed to contribute certain assets and services in exchange for a certain number of shares of PICONYX Series Seed-1 Preferred stock.

1.44. “Surface Lease Agreement” means the Surface Lease Agreement of even date herewith by and between the Parties.

1.45. “Term” has the meaning set forth in Section 12.1.

1.46. “Territory” means North America

1.47. “Third Party” means any person or entity other than CARBO, PICONYX, and their respective Affiliates.

1.48. “Third Party Manufacturing” has the meaning set forth in Section 2.4.2.

1.49. “Unacceptable Product” has the meaning set forth in Section 5.1.

2. CONTRACT MANUFACTURING SERVICES:

2.1 Appointment; Exclusivity.  

2.1.1 PICONYX hereby appoints CARBO, and CARBO accepts its appointment, as PICONYX’s exclusive manufacturer of the Commercial Product in the Territory, subject to the terms and conditions of this Agreement.

2.1.1.1 During the Term, CARBO shall only manufacture and supply Commercial Product to PICONYX, pursuant to the provisions of this Agreement.

2.1.1.2 During the Term, PICONYX shall only contract with CARBO for the manufacturing of the Commercial Product, pursuant to the provisions of this Agreement.

2.1.2 PICONYX shall not engage any Third Party to manufacture

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Commercial Productin the Territory during the Term except as otherwise permitted in Section 6.4.1, Section 6.4.2 or Section 6.4.3(c).

2.1.3 PICONYX shall offer CARBO the right of first refusal to manufacture any SiOC based product extensions or additions to PICONYX’s product line, on identical terms to a bona fide Third Party offer to perform such manufacturing.

2.2 Raw Materials.

2.2.1 PICONYX shall provide all Raw Materials for use at the Property to make the Commercial Product.  PICONYX shall be the owner of the Raw Materials, all intermediate materials, and the Commercial Product made therefrom.

2.2.2 CARBO may, but is not required to, offer Raw Material and other purchasing support and services, which support and services if agreed to by the Parties shall be listed on Exhibit C.

2.3 Labeling and Packaging of Product.

2.3.1 CARBO shall package and label the Commercial Product in accordance with the Packaging Specifications and Materials.  PICONYX shall provide all packaging materials listed in Exhibit D for the packaging of Commercial Product.

2.4 Manufacture and Delivery of Product.

2.4.1 CARBO agrees to manufacture all Commercial Product specified in a PICONYX Order at the Property in accordance with the Product Specifications and pursuant to the provisions of this Agreement.

2.4.2 PICONYX acknowledges that CARBO has manufactured, and may, subject the terms of this Agreement, continue to manufacture, other products for the benefit of Third Parties at the Property (“Third Party Manufacturing”).

2.4.2.1 CARBO shall have the right to use equipment owned by CARBO, including but not limited to the equipment listed in Exhibit H, for Third Party Manufacturing.

2.4.2.2 CARBO, upon obtaining the written agreement of PICONYX, which agreement shall not be unreasonably withheld or delayed, may use PICONYX Property for Third Party Manufacturing.  It is acknowledged, that issues regarding scheduling, contamination, and damage of the PICONYX Property are not unreasonable, and can form a proper basis to withhold such agreement.

2.4.2.3 Notwithstanding any other provisions, including Section

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11.4 and Section11.5, of this Agreement, CARBO SHALL BE STRICTLY LIABLE FOR ANY AND ALL DAMAGES, WHATSOEVER, THAT OCCUR TO PICONYX AND THE PICONYX PROPERTY, AS A RESULT OF THIRD PARTY MANUFACTURING.

2.4.2.4 CARBO shall compensate PIXONYX for the use of PICONYX Property for Third Party Manufacturing as set forth in Exhibit I.

2.4.3 The Commercial Product, Product Specifications and Packaging Specifications and Materials shall be amended as: (a) requested by PICONYX; or, (b) necessary to conform such Product Specifications to Applicable Laws in the reasonable discretion of PICONYX.  Such amendments shall be in writing and become a part of this Agreement.

2.4.4 If any change in the Commercial Product, Product Specifications, Packaging Specifications and Material, or if any change in the Applicable Laws or sources of Raw Materials requires either: (a) a change in the Commercial Product manufacturing process; or, (b) CARBO to conduct development, testing, or other activities (e.g., process development stability testing, validation of new specifications) in addition to those activities CARBO conducted or is required to conduct in its manufacture of the Commercial Product prior to such change being requested or required, PICONYX shall reimburse CARBO for all costs incurred by CARBO in connection with such change; provided that, prior to CARBO incurring them, CARBO provides PICONYX with a good faith estimate of such costs and they are approved in writing by PICONYX. Upon either Party becoming aware of any proposed changes in the Applicable Laws that would affect the manufacture of the Commercial Product, it shall promptly notify the other Party and shall consult with the other Party regarding the proposed changes and activities, including any adjustment to the Manufacturing Price Schedule, as provided for in this Agreement.

2.5 At all times during the Term, PICONYX shall be obligated to maintain the PICONYX Property in good and serviceable condition consistent with all applicable laws and regulations.  Pursuant to this obligation to maintain the PICONYX Property, the Parties agree as follows:

2.5.1 Within sixty (60) days of the Effective Date, and annually thereafter, CARBO and PICONIX shall agree on an annual (12 month period) maintenance schedule including Maintenance Costs, having at least quarterly details (the “Annual Maintenance Schedule”).  The Annual Maintenance Schedule shall be based

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upon objectively reasonable bases, including historic costs, supplier estimates and historic practices.  Such agreement of the Parties shall not be unreasonably withheld or delayed.  PICONYX shall be responsible for all Maintenance Costs set forth in the Annual Maintenance Schedule, payable within 30 days of receipt of an invoice for the performance of any scheduled maintenance.

2.5.2 The Parties agree that written consent from the other party shall be required prior to CARBO incurring Maintenance Costs, not set forth in the Annual Maintenace Schdule in excess of one thousand dollars ($1,000) for any single item (or a group of related items).  Any such costs incurred without such consent where consent is required shall be the sole responsibility of CARBO. Any such costs incurred without such consent where consent is not required shall be the sole responsibility of PICONYX, payable within 30 days of receipt of an invoice for such maintenance.

2.5.3 In the case of emergency maintenance, CARBO shall contact, by the most expeditious means possible, David Bening, Allen Andress, Richard Landtiser, or such other person as PICONX identifies in writing, to obtain PICONYX’s written agreement, which written agreement can be via text message, to incure the Maintenance Costs for any emergency maintenance.     

2.6 In case of damage or loss materially affecting the PICONYX Property or the improvements thereon during the Term, PICONYX shall, at all times except a Force Majeure Event, promptly repair and restore the PICONYX Property to the extent necessary for use of the PICONYX Property hereunder consistent with prior practice and to substantially the same condition as existed prior to such damage or loss.  Provided, however, that in the event that such damage or loss exceeds available insurance coverage, PICONX may decommission the PICONYX Property in accordance with applicable laws and regulations.

2.7 CARBO shall have the right to access, or have its agents, contractors and/or representatives access, subject to the confidentiality obligations existing between the Parties, the Property at all times in order to perform CARBO’s duties and obligations hereunder.

2.8 Storage of Product.  All Product shall be stored in accordance with the Storage Lease Agreement.

3. CHANGE OF CONTROL; SALE OF PICONYX OR PICONYX PROPERTY.  In the event of a Change of Control, Sale of PICONYX or the PICONYX Property, the provisions set forth in the attached Exhibit E shall control.

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4. PRODUCT SPECIFICATIONS; MANUFACTURING RECORDS, QUALITY CONTROL

4.1 Conformity to Product Specifications.  Each batch of Commercial Product shall conform to the Product Specifications.  

4.2 Quality Control.  CARBO agrees to prepare and submit to PICONYX, quality control records and reports, that will include a reasonable testing schedule of the requirements set forth in the Product Specification, and shall retain samples of Commercial Products for one (1) year from the date of the production run for quality control purposes. PICONYX may request production samples from CARBO at any time during normal business hours, and CARBO shall send such samples to PICONYX at PICONYX's sole cost and expense.  

4.3 CARBO shall maintain manufacturing records in accordance with standards that are similar to or meet those of ISO 9000, including an accurate total of all PMN P-15-28 Product produced, as required by the US EPA 5(e) Consent Order.

4.4 Compliance with Applicable Laws.  Both Parties shall at all times comply with all Applicable Laws regarding the procurement of Raw Materials, and the manufacture, handling, and storage of Raw Materials, intermediate materials, and Product. Upon the reasonable written request of either Party, the other Party shall either certify in writing or provide evidence to such Party confirming its compliance with such Applicable Laws.  

5. INSPECTION OF PRODUCT.

5.1 Inspection; Rejection of Unacceptable Product. PICONYX may analyze representative samples of intermediates, and each lot of material and Product delivered hereunder for purposes of determining whether the same meets the Product Specifications. PICONYX may reject any Commercial Product by promptly notifying CARBO in writing of PICONYX’s determination that such Commercial Product constitutes an Unacceptable Product.  Any Commercial Product will be deemed an “Unacceptable Product” if the Commercial Product does not meet the Product Specifications.

5.2 Third Party Analysis. If CARBO, after good faith consultation with PICONYX, disputes any finding by PICONYX that Product is an Unacceptable Product, representative samples of such Product shall be forwarded to a Third Party jointly selected by CARBO and PICONYX for analysis. The findings of such Third Party regarding whether the Product was an Unacceptable Product shall be binding upon CARBO and PICONYX. The cost of such analysis by such Third Party shall be borne by the Party whose findings differed from those generated by such Third Party.

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5.3 Remedies for Delivery of Unacceptable Product.  Unless any nonconformity is caused by (i) a negligent or wrongful act or omission by PICONYX or its agents, or (ii) the inability of the PICONYX Property to manufacture a Commercial Product, PICONYX’s sole and exclusive remedy for any Unacceptable Product delivered by CARBO to PICONYX is for CARBO toreplacethe Unacceptable Product with Product that meets the Product Specifications, including the cost of all Raw Materials needed to replace the Unacceptable Product.

6. PRODUCT ORDERS.

6.1 Rolling Forecast.  On or before each June 1 and November 1 during the Term, PICONYX shall provide CARBO with a written forecast of PICONYX’s expected Commercial Product needs for a period of twelve (12) calendar months beginning on the date of such forecast (the “Rolling Forecast”).  Should PICONYX’s anticipated needs change, PICONYX is permitted to revise any Rolling Forecast by delivering such revised Rolling Forecast to CARBO in writing; provided that any revised Rolling Forecast shall not be effective to increase the quantity of any subsequent production run without CARBO’s consent unless such revised Rolling Forecast has been provided to CARBO at least twelve (12) weeks in advance of such production run.

6.2 Placement of Orders. Not later than the 15th of each January, April, July, and October during the Term (“Calendar Quarter(s)”), PICONYX shall submit completed Orders to CARBO in a format chosen by PICONYX specifying the quantity of Commercial Products for CARBO to manufacture and deliver to PICONYX during the following Calendar Quarter (each an “Order” and collectively, the “Orders”); provided that the initial Order may be delivered on such date as agreed to by the Parties. CARBO shall accept all Orders submitted by PICONYX in compliance with the terms and conditions of this Agreement as binding obligations of CARBO to provide the Commercial Products set forth therein. All Orders shall be sent by PICONYX (a) to the address for CARBO specified in the Notice provisions of Section 13.4, or such other addresses as CARBO may notify PICONYX of in writing from time to time or (b) by email or facsimile to the email address or facsimile number provided by CARBO without any obligation to provide further written notice thereof or satisfy any other requirements set forth in the Notice provisions of Section13.4.  Upon receipt of an Order via email, CARBO shall respond to such email to confirm the receipt of such Order. The Orders are expressly subject to the terms and conditions of this Agreement, and in the event of any conflict between the provisions of this Agreement and any Order, the provisions of this Agreement shall control.

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6.3 Minimum and Maximum Quantity Commitment. Once Commercial Completion is reached, the Parties will meet prior to PIXONYX providing each Rolling Forecast in order determine what the minimum quantity commitments(“Minimum Quantity Commitments”) and the maximum quantity commitments (“Maximum Quantity Commitments”) will be for the respective upcoming Calendar Quarters.

6.4 Failure to Meet Quantity Commitments.

6.4.1 In the event that CARBO cannot or does not satisfy all of PICONYX’S volume requirements up to the Maximum Quantity Commitment for a particular Calendar Quarter on a timely basis in accordance with this Agreement, and such failure is not attributable to a Force Majeure Event, then PIXONYX shall have the right, at its sole discursion, to operate the PICONYX Property using PICONYX employees and contractors; or to engage a Third Party to manufacture Commercial Product for PICONYX, until such time as CARBO is able to provide objectively reasonable assurance of its ability to resume supplying the Commercial Product in accordance with the terms of this Agreement.

6.4.2 In the event that CARBO cannot or does not satisfy all of PICONYX’S volume requirements up to the Maximum Quantity Commitment for any two (2) Calendar Quarters on a timely basis, regardless of the reason for such failure, the exclusivity provision of Section 2.1.1.2 shall automatically become non-exclusive.

6.4.3 Supplemental Quantities.

(a) If, in any Calendar Quarter, PICONYX wishes for CARBO to manufacture quantities of Commercial Product in excess of the Maximum Quantity Commitment, PICONYX may give written notice to CARBO specifying the additional quantity desired (the “Supplemental Quantity”) and the desired month of delivery, and CARBO shall have the exclusive option to manufacture the Supplemental Quantity of Commercial Product for PICONYX.  Such notice shall be delivered to CARBO at least thirty (30) days prior to the desired delivery month.

(b) CARBO’s exclusive option to manufacture the Supplemental Quantity shall be exercised by giving PICONYX written notice of CARBO’s willingness to manufacture the Supplemental Quantity (or portion thereof).  Such response shall be delivered at least fifteen (15) days prior to the desired month of delivery.

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(c) In the event that CARBO waives or is deemed to have waived its option to manufacture the Supplemental Quantity PICONYX shall have the right, at its sole discursion, to operate the PICONYX Property using PICONYX employees and contractors; or to engage a Third Party to manufacture the Supplemental Quantities of Commercial Product for PICONYX.

6.4.4 Provided however, when a failure to satisfy volume requirements, under Section 6.4.1, Section 6.4.2 or Section 6.4.3 (b), is limited to making an agreed upon increase in volume from a prior quarter, or in an agreed revised Rolling Forecast, PICONYX’s remedy shall be limited to: (a) having the shortage manufacture by PICONYX or a Third Party and (b) CARBO paying for any additional costs for such manufacturing.  In the event CARBO does not agree to manufacture any Supplemental Quantities, PICONYX’s remedy shall be limited to having such Supplemental Quantities manufactured by PICONYX or a Third Party, at PICONYX’s sole cost and expense.

6.5 In the event that PICONYX cannot or does not submit Orders of Commercial Product that meet or exceed the Minimum Quantity Commitment for a given Calendar Quarter, then PICONYX shall pay to CARBO an amount equal to the Quarterly Average Cost multiplied by the difference between (i) the actual amount of Commercial Product ordered and (ii) the Minimum Quantity Commitment for that Calendar Quarter.

7. COMMERCIAL PROCESS DEVELOPMENT.  From the Effective Date, up until such time as Commercial Completion, CARBO will assist PICONYX in the creation and development of processes to manufacture the Commercial Products using the PICONYX Property (“Commercial Process Development”).  PICONYX shall bear all costs for Raw Materials and reject material for the Commercial Process Development. Commercial Completion shall occur at such time as the Parties mutually agree in writing that the Commercial Product can be consistently produced in a manner which makes the process commercially viable.  

8. CONTRACT MANUFACTURING PRICE ANDPAYMENT.

8.1 Contract Manufacturing Price. PICONYX shall pay CARBO for Contract Manufacturing Services, and CARBO shall provide Contract Manufacturing Services in consideration for the payment.  CARBO shall manufacture Commercial Product at the price set forth in Exhibit C, (the “Contract Manufacturing Price”).

8.1.1 The Parties acknowledge that additional information and

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understanding of the costs for manufacturing the Commercial Product may be obtained prior to achieving Commercial Completion.  Accordingly the Parties agree that the “Contract Manufacturing Price” will be determined prior to, but no later than, Commercial Completion, and adjusted annually thereafter, for the purpose of addressing such additional information and understanding, upon the written agreement of the Parties, which agreement shall not be unreasonably withheld or delayed.

8.1.2 The Contract Manufacturing Price shall not exceed the Target Maximum Manufacturing Price.  

8.1.3 The Target Maximum Manufacturing Price shall be adjusted based upon actual changes to CARBO’S average costs accross all of CARBO’s facilites in New Iberia Lousiana (“New Iberia Average Costs”).  CARBO shall provide PICONX sixty (60) days written notice prior to a change in the Target Maximum Price.  Upon receipt of such notice, PICONX may request that the Parties meet and confirm regarding the change to the New Iberia Average Costs supporting the noticed change to the Target Maximum Manufacturing Price, and upon such request the Parties shall engage in good faith negotiations, based upon objective data, to reach an agreement to adjust the Target Maximum Manufacting Price, which agreement shall not be unreasonably withheld or delayed.

8.1.4 At all times the Parties agree to work towards and seek ways to reduce manufacturing costs.   

8.2 Payment. Payments to CARBO for, the Contract Manufacturing Price of Commercial Product, as well as any other payment due from PICONYX to CARBO pursuant to this Agreement, shall be made by PICONYX within thirty (30) days after the date of a valid invoice, except as to Unacceptable Product.  In the event that Commercial Product is rejected by PICONYX as Unacceptable Product, but such Product is subsequently determined to be acceptable pursuant to Section 3.2, the payment for such Product shall be due and payable within thirty (30) days after the determination with respect to such Product is made in accordance with Section 3.2. If there is a dispute relating to an invoice, the Parties shall cooperate, in good faith, to resolve such dispute in a reasonable period of time.

8.2.1 Provided, however, that the payment for the Contract Manufacturing Services shall be made by PICONYX within thirty (30) days after the earlier of: (i) six (6) months from the receipt of the permit for the Pilot Kiln, (ii) the Offering Proceeds, or (iii)  the termination of this Agreement.  

8.3 Credit Requirements and Adequate Assurance.  After the first anniversary

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date of this Agreement, if reasonable grounds for insecurity of payment or performance arise, CARBO may send a notice of demand to PICONYX requesting adequate assurance of performance. “Adequate Assurance” shall mean sufficient security in the form and for the term specified by and reasonably acceptable to CARBO, including, but not limited to, a standby, irrevocable letter of credit or a guarantee by a creditworthy entity.  Should PICONYX not provide Adequate Assurance as requested under this Section 8.3 within fifteen business (15) days from the receipt of a notice of demand, CARBO may suspend its obligations to perform Contract Manufacturing Services, until such time as PICONYX provides Adequate Assurance.

9. ACCESS TO MANUFACTURING FACILITY ANDRECORDS.

9.1 Inspection by Regulatory Authorities. Upon the request of any Regulatory Authority, such Regulatory Authority shall have access, to the extent required by law or regulation, to observe and inspect the PICONYX Property and the Manufacturing Facility, including the testing, labeling, packaging and/or warehousing of the Product and to audit such facilities for compliance with Applicable Laws.

9.2 Notification of Inquiries and Inspections. CARBO shall notify PICONYX within three (3) business days of any written or oral inquiries, notifications, or inspection activity by any Regulatory Authority in regard to any Product at the PICONYX Property. To the extent permissible by law, CARBO shall provide a complete description of any such governmental inquiries, notifications or inspections promptly after such visit or inquiry. CARBO shall furnish to PICONYX (a) within three (3) business days after receipt, any report or correspondence issued by any Regulatory Authority and (b) not later than five (5) business days prior to the time it provides to any Regulatory Authority, copies of proposed responses or explanations relating to items set forth above (each, a “Proposed Response”), in each case trade secrets or other confidential or proprietary information of both PARTIES, shall be protected to the full extent permitted by the law. CARBO shall discuss with PICONYX and consider in good faith any comments provided by PICONYX on the Proposed Response. After the filing of a response with any Regulatory Authority or other regulatory agency, CARBO shall notify PICONYX and provide PICONYX with copies of any further contacts with such agency relating to the subject matter of the response.

10. REPRESENTATIONS AND WARRANTIES; DISCLAIMERS; LIMITATION OFLIABILITY.

10.1 Representations and Warranties by CARBO. CARBO hereby represents, warrants and covenants that:

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10.1.1 it is a corporation or entity duly organized and validly existing under the laws of the state of its incorporation;

10.1.2 the execution, delivery, and performance of this Agreement by CARBO has been duly authorized by all requisite corporate action and does not require any shareholder action or approval;

10.1.3 it has the expertise, capability, power and authority to execute and deliver this Agreement and to perform its obligations hereunder;

10.1.4 the execution, delivery, and performance by CARBO of this Agreement, and the performance of its obligations hereunder, do not and will not (i) violate any order, writ, injunction, or decree of any court or Regulatory Authority entered against it or by which any of its property is bound, (ii) violate or conflict with, result in a breach of, or constitute a default (or an event which, with or without notice or lapse of time or both, would constitute a default) under, or create in any person or entity the right to terminate, modify or cancel, any loan or credit agreement, note, mortgage, lease, or other contract or agreement to which CARBO is a party or by which CARBO or any of it properties or assets are bound, (iii) require the consent, waiver, authorization, permit or approval of, or any notice, filing or registration to or with, any Third Party, or (iv) violate or conflict with any provision of its articles of incorporation or bylaws, or formation or corporate governance documents; and,

10.1.5 it shall at all times comply with all Applicable Laws applicable to its activities under this Agreement.

10.2 Representations and Warranties by PICONYX.  PICONYX hereby represents, warrants and covenants that:

10.2.1 it is a corporation duly organized and validly existing under the laws of the state of its incorporation;

10.2.2 the execution, delivery, and performance of this Agreement by PICONYX has been duly authorized by all requisite corporate action and does not require any shareholder action or approval;

10.2.3 it has the expertise, capability, power and authority to execute and deliver this Agreement and to perform its obligations hereunder;

10.2.4 the execution, delivery, and performance by PICONYX of this Agreement and its compliance with the provisions of this Agreement do not and shall not conflict with or result in a breach of any of the terms and provisions of or constitute a default under (i) any other agreement to which it is a party; (ii) the provisions of its charter or operative documents or bylaws; or (iii) any order, writ, injunction, or decree of any court or governmental authority entered against it or by which any of its property is bound; and

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10.2.5 it shall at all times comply with all Applicable Laws relating to its activities under this Agreement.

11. INDEMNIFICATION.

11.1 PICONYX Indemnity.  PICONYX agrees that it shall be solely responsible for all injuries to all persons and all loss or damage to property that may result from PICONYX’s negligent acts or omissions and/or willful misconduct.  PICONYX further agrees to indemnify, save and hold CARBO, its Affiliates, and its and their officers, directors, employees, and agents from and against any and all Third Party losses, claims, damages, liabilities, obligations, penalties, judgments, awards, costs, expenses, and disbursements, including, without limitation, the costs, expenses, and disbursements, as and when incurred, of investigating, preparing, or defending any action, suit, proceeding, or investigation asserted by such Third Party, including, without limitation, reasonable attorneys’ fees and expenses, (each a “Claim”) caused by, relating to, based upon, arising out of, or in connection with PICONYX’s employees’ negligent acts or omissions and/or willful misconduct, including but not limited to, any acts or omissions or willful misconduct while onsite at the Manufacturing Facility or PICONYX Property, except to the extent such Claim was caused by CARBO’s negligence or willful misconduct.  

PICONYX further agrees that it shall release CARBO, and shall defend, indemnify and hold harmless CARBO from and against any and all Claims brought by or on behalf of any person or entity arising out of or in connection with any allegation, in whole or in part, that CARBO’s use of the PICONYX Technology infringes, misappropriates, dilutes, or violates the copyright, trade secret, trademark, trade dress, service mark, patent or any other proprietary right of any person or entity.

In addition, PICONYX shall assume all responsibility for, including control, removal and remediation of, and shall protect, defend and indemnify CARBO from and against all Claims arising from pollution or contamination associated with the Raw Materials, intermediate materials, Products, their storage, or Contract Manufacturing Services at the PIXONYX Property, as the case may be, except to the extent such Claim was caused by CARBO’s negligence or willful misconduct.

11.2 CARBO Indemnity.  CARBO agrees that CARBO shall be solely responsible for all injuries to all persons and all loss or damage to property that may result solely and directly from CARBO’s negligent acts or omissions and/or willful misconduct.  CARBO further agrees to indemnify, save and hold PICONYX, its Affiliates, and its and their officers, directors, employees, and agents from and against any and all

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Claim caused by, relating to, based upon, arising out of, or in connection with (a) CARBO’s employees’negligent acts or omissions and/or willful misconduct, including but not limited to, any acts or omissions or willful misconduct while at the PICONYXProperty, except to the extent such Claim was caused by PICONYX’s negligence or willful misconduct.

11.3 Procedure for Indemnification.  Each Party seeking to be reimbursed, indemnified, defended, and/or held harmless under this Agreement (each, an “Indemnitee”) shall (a) provide the Party obligated to indemnify such Indemnitee (the “Indemnitor”) with prompt, written notice of any Claim for which such Indemnitee seeks to be reimbursed, indemnified, defended, and/or held harmless, which notice shall include a reasonable identification of the alleged facts giving rise to such Claim; (b) grant the Indemnitor reasonable authority and control over the defense and settlement of any such Claim; and (c) reasonably cooperate with the Indemnitor and its agents in defense of any such Claim, at the Indemnitor’s expense. Each Indemnitee shall have the right to participate in the defense of any Claim for which Indemnitee seeks to be reimbursed, indemnified, defended, or held harmless, by using attorneys of such Indemnitee’s choice, at such Indemnitee’s expense. Any settlement of a Claim for which any Indemnitee seeks to be reimbursed, indemnified, defended, and/or held harmless under this Agreement shall be subject to the prior written approval of such Indemnitee, which approval shall not be unreasonably withheld, conditioned, or delayed.

11.4 Equipment Damages. Notwithstanding any provision, except Section 2.4.2.3, in this Agreement to the contrary, in no event shall CARBO be responsible for any damage or loss to the PICONYX Property and/or its equipment resulting from or in connection with the Contract Manufacturing Services performed hereunder, including without limitation the processing of the Raw Products and any manufacture of the Products, except to the extent such damage or loss is determined by a court of competent jurisdiction to have been caused by the negligence or willful misconduct of CARBO.

11.5 No Consequential Damages.  NOTWITHSTANDING THE FOREGOING, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM OR ARISING OUT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS OR BUSINESS INTERRUPTIONS, HOWEVER THEY MAY BE CAUSED, REGARDLESS OF OWNERSHIP, REGARDLESS OF WHETHER OCCASIONED BY OR RESULTING FROM THE NEGLIGENCE, STRICT LIABILITY, BREACH OF WARRANTY OR OTHER FAULT OF COMPANY

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OR CONNECTOR, AS THE CASE MAY BE, IN WHOLE OR IN PART, WHETHER SOLE, JOINT, ACTIVE OR PASSIVE.  THIS SECTION 11.5 SHALL SURVIVE THE TERMINATION OF THE AGREEMENT.

12. TERM AND TERMINATION.

12.1 Term and Renewal. This Agreement shall begin on the Effective Date and shall continue for five (5) years from the Effective Date (the “Initial Term”) unless earlier terminated in accordance with the terms hereof. Thereafter, the Agreement will be automatically extended for up to fifteen (15) consecutive one (1) year terms (each a “Renewal Term”) unless PICONYX notifies CARBO in writing not less than one (1) year prior to the expiration of the Initial Term or any Renewal Term (both of which are referred to herein as the “Term”) that it will not extend the Agreement.  

12.2 Termination and Events of Default. If during the Term, (i) either Party (the “Defaulting Party”) is in breach of any of its obligations under this Agreement or in the event there is a commencement of proceedings by or against the Defaulting Party under applicable bankruptcy, insolvency or reorganization laws (an “Event of Default”), and such breach remains uncured for a period of forty five (45) days for breaches related to the payment of money and ninety (90) days for all other breaches, after the date that the Defaulting Party receives written notice of the breach from the other Party (the “Notifying Party”) then the Notifying Party shall have the right to: (a) terminate this Agreement; or (b) specific performance of the obligations or (ii) PICONYX decommissions the PICONYX Property in accordance with Section 2.6 herein, and such decommissioning lasts more than sixty (60) days, then CARBO shall have the right to terminate this Agreement.

12.2.1 In addition, if (i) the Parties are unable to make a Commercial Product within twelve (12) months of the Effective date, then either Party shall have the right, but not the obligation to terminate this Agreement, or (ii) PICONYX is unable to secure the Offering Proceeds, within six (6) months from the receipt of the permit for the Pilot Kiln, then CARBO shall have the right, but not the obligation to terminate this Agreement.

12.3 Actions upon Expiration or Termination.  

12.3.1 Upon expiration or termination of this Agreement, for any reason, CARBO shall deliver all Raw Materials, work-in-process and finished Products to PICONYX, at PICONYX’s sole cost and expense. The expiration or termination of this Agreement shall not release any Party of any liabilities or obligations that arose prior to the expiration or termination date. All terms and conditions of this Agreement that, by their nature, a reasonable person would expect

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to survive the termination of this Agreement shall so survive.

12.3.2 Upon the expiration or termination date of this Agreement, for any reason, PICONYX shall, at PICONYX’s sole discretion: (a), remove all PICONXY Property (except for the CARBO Retained Equipment as set forth in the attached Exhibit H in which the ownership thereof shall automatically transfer to CARBO), that is located in or on the Manufacturing Facility, at PICONYX’s sole cost and expense, within six (6) months of the expiration or termination date; or (b) sell the PICONYX Property (except for the CARBO Retained Equipment as set forth in the attached Exhibit H in which the ownership thereof shall automatically transfer to CARBO) that is located in or on the Manufacturing Facility to CARBO for the then “Net Book Value” of the PICONYX Property within sixty (60) days of the expiration or termination date.

13. INSURANCE. Each Party shall secure and maintain, at its sole cost and expense, the following insurance policies (with the minimum stated limits), each written as primary coverage and each waiving the insurer’s right of subrogation: (i) Workers’ Compensation: statutory limits, (ii) Employer’s Liability Insurance: $1 million per accident, (iii) Commercial General Liability: $1 million per occurrence, $2 million in the aggregate (iv) Automobile Liability: $1 million; and (v) Excess Liability: $1 million per occurrence in excess over the coverage outlined in (i) – (iv) above.  

14. OWNERSHIP.

14.1 PICONYX shall be the sole and exclusive owner of:  (a) PICONYX Technology; (b) all Intellectual Property Rights owned or controlled by PICONYX on the Effective Date; and, (c) all materials and information acquired by PICONYX after the Effective Date and provided to CARBO (or provided by a Third Party on PICONYX’s behalf) under this Agreement, including but not limited to, the Product Specifications, the Packaging Materials, and processes, know-how and technology developed or created by PICONYX, including all Intellectual Property Rights relating thereto.

14.2 CARBO shall be the sole and exclusive owner of (a) CARBO Technology; (b) all Intellectual Property Rights owned or controlled by CARBO on the Effective Date; and, (c) all materials and information acquired by CARBO after the Effective Date and provided to PIXONYX (or provided by a Third Party on CARBO’s behalf) under this Agreement, including but not limited to any processes, know-how and technology developed or created by CARBO, including all Intellectual Property Rights relating thereto.

14.3 At all times the Raw Materials, intermediate materials, and Commercial Products shall be deemed the sole and exclusive property of PICONYX.

14.4 Subject to the terms and conditions of this Agreement PICONYX hereby

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grants to CARBO a limited, non-exclusive, non-transferrable, non-assignable (except to subcontractors for the sole purpose of performing CARBO’s obligations hereunder), royalty free, fully paid up license to use the PICONYX Property for the internal manufacture, testing and packaging of the Product.

14.5 This Agreement does not grant, and nothing in this Agreement shall be construed as granting, any rights to CARBO, by license (express or implied) or otherwise, to any of the patents and applications listed on Exhibit G, to any United States, international, and foreign patents and patent applications, which are based upon, issue from, or claim a right of priority to the patents and applications listed on Exhibit G, or to any reissues, reexamination certifications, or renewals, of such patents and applications.

14.6 This Agreement does not grant, and nothing in this Agreement shall be construed as granting, any rights to PICONYX, by license (express or implied) or otherwise, to any of the patents and applications listed on Exhibit J, to any United States, international, and foreign patents and patent applications, which are based upon, issue from, or claim a right of priority to the patents and applications listed on Exhibit J, or to any reissues, reexamination certifications, or renewals, of such patents and applications.

14.7 Joint Technology shall be owned and licensed as follows:

14.8.1 Joint technology, whether or not patentable, relating to equipment shall be owned by CARBO, with PICONYX having a royalty free, sublicensable, fully paid up exclusive license, to have made, import, and use in the field of SiOC based material processing and manufacturing.

14.8.2 Joint technology, whether or not patentable, relating to processes and methods shall be owned by PICONYX, with CARBO having a royalty free, sublicensable, fully paid up exclusive license, to use and practice, in the field of non-SiOC based material processing and manufacturing.

14.8.3 Joint Technology, whether or not patentable, relating to SiOC based materials and formulations, shall be owned by PICONYX.

14.8.4 Joint Technology not covered by Sections 14.8.1, 14.8.2 and 14.8.3 and which is derived from, or a direct improvement of, a Party’s Background IP shall be owned by that Party, with the other Party receiving a non-exclusive, royalty free, perpetual fully paid up license to practice and in all respects commercially use such Joint Technology.

14.8.5 Any other Joint Technology, not covered by Sections 14.8.1, 14.8.2, 14.8.3 and 14.8.4 shall be jointly owned by the Parties, with each Party having an

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undivided interest in the whole.

14.8.6 The Parties shall consult with each other regarding the filing of any patent applications relating to Joint Technology.  No background confidential information of a Party shall be included in a patent filling, without first obtaining the written consent of that Party, which consent shall not be unreasonably withheld or delayed.

14.8.7 The owner of the Joint Technology shall be solely responsible for the prosecution of, maintenance of, enforcement of, and defense of, including without limitation the costs associated therewith, the patents and patent applications on Joint Technology.

14.8.8 The Parties shall cooperate and execute all documents reasonably necessary to effect the provisions of this Section 14.8.

15. MISCELLANEOUS

15.1 Confidential Information.  Each Party will, and will cause each of its Affiliates and its and their respective directors, officers, partners, employees, agents, representatives, contractors, borrowed servants and similarly situated persons to treat and hold as confidential and not use or disclose, either in whole or in part, whether written, oral or otherwise any and all Confidential Information provided by the Disclosing Party to the Receiving Party or otherwise observed by the Receiving Party.  The obligations of confidentiality and restrictions on use set forth herein shall not apply to any data or information which (i) shall become generally available to the public other than as a result of disclosure by or on behalf of the Receiving Party or its Affiliates; (ii) was available to the Receiving Party on a non-confidential basis prior to the date of this Agreement; (iii) comes into the Receiving Party’s possession after the date of this Agreement from a third party not under any known obligation of confidentiality with respect to such information; (iv) shall be required to be disclosed by or on behalf of the Receiving Party as a result of any applicable law, rule or regulation of any governmental authority having competent jurisdiction; provided, however, that the Receiving Party shall give the Disclosing Party prior written notice before making any such disclosure in accordance with the provisions of this section; (v) is disclosed to a Receiving Party’s Affiliates and each of their respective directors, officers, partners, employees, counsel, accountants or other agents or representatives (provided such Persons have agreed to keep such data or information confidential) on a need to know basis; or (vi) is disclosed to a Receiving Party’s advisors and to any potential purchaser of all or substantially all of such Party’s assets or business related to this Agreement; provided that any such disclosure(s) will be made under an express obligation of confidentiality no less stringent than the terms set

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forth herein.  The obligations of this Section 15.1 are in addition to, and do not alter, change or effect, the existing confidentially obligations between the Parties, which obligations and agreements remain in full force and effect.

15.2 Assignment. The rights of either Party under this Agreement shall not be assigned, nor shall the performance of either Party’s duties be delegated without the other Party’s prior written consent, such consent to not be unreasonably withheld or delayed.  Provided, however, that that either Party may assign, without obtaining such consent, this Agreement or its rights and obligations hereunder to an Affiliate, or a Third Party that succeeds by purchase, merger, consolidation or otherwise to all or substantially all of the assets or business of such Party relating to this Agreement, upon written notice to the other Party.

15.3 Entire Agreement; Amendment. This Agreement, together with its Exhibits, the Confidentiality/Ownership/Lease Agreements and the referenced schedules, embodies and shall constitute the entire agreement and understanding of the Parties relating to the subject matter of this Agreement and shall supersede all prior oral or written agreements, contracts, understandings, representations, or arrangements, whether oral or written, between them, relating to the subject matter of this Agreement.  No change or addition may be made to this Agreement or any schedule attached hereto except in writing, signed by a duly-authorized representative of each Party, and expressly stating that it is a modification of this Agreement.

15.4 Notices. All communications between the Parties with respect to any of the provisions of this Agreement shall be sent to the addresses set forth below by notice by nationally recognized courier or by prepaid certified mail, or by facsimile transmission or other electronic means of communications, with confirmation by letter given by the close of business on or before the next following business day (except that no such confirmation letter shall be required in the case of Orders and invoices delivered hereunder).  All notices provided hereunder shall be effective upon receipt.

If to PICONYX, to:

PicOnyx, Inc.

Attn: David Bening

6002 Rogerdale Road

Suite 175

Houston TX 77072

Tel: 614-704-0076

Fax: [none]

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Email:david.bening@piconyxinc.com

with a copy, which copy shall not constitute notice, to:

Attn: Damian Burke

Melior Innovations, Inc.

6002 Rogerdale Road

Suite 175

Houston TX 77072

Tel: 713-652-9108

Fax: [none]

Email:damian.burke@meliorinnovations.com

If to CARBO, to:

CARBO Ceramics Inc.

575 N. Dairy Ashford Road, Suite 300

Houston, Texas 77079-1121

Attn: Ernesto Bautista III

Tel: 281-921-6450

Fax:

Email: ernesto.bautista@carboceramics.com

with a copy, which copy shall not constitute notice, to:

Attn: _CARBO Ceramics Inc.

575 N. Dairy Ashford Road,

Suite 300

Houston, Texas 77079-1121

Attn: Robert J. Willette
Tel: 281-921-6490

Fax:

Email: robert.willette@carboceramics.com

15.5 Severability; Waiver; Headings. If any provision of this Agreement is held to be void or unenforceable by a court of competent jurisdiction, such finding(s) shall not be construed to render any other provision of this Agreement either void or unenforceable, and all other provisions shall remain in full force and effect.  Upon any such determination, the Parties shall make such amendments to this Agreement as necessary to remove the invalid or unenforceable part of any such provision, but otherwise achieve to the maximum extent permissible, the economic, legal, and commercial intent and objectives of the original provision. Failure or delay by either Party in exercising or enforcing any provision, right, or

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remedy under this Agreement, or waiver of any remedy hereunder, in whole or in part, shall not be deemed a waiver thereof, or prevent the subsequent exercise of that or any other rights or remedy.  The headings and captions used in this Agreement are solely for the convenience of reference and shall not affect its interpretation.

15.6 Force Majeure. Neither PICONYX nor CARBO shall be in breach of this Agreement if there is any failure of performance under this Agreement (other than a payment failure) occasioned by any act of God, fire, act of government or state, war, civil commotion, insurrection, or embargo or any other reason beyond the reasonable control of the Party affected thereby, including without limitation a Parties inability to obtain sufficient Raw Materials (a “Force Majeure Event”). Such excuse shall continue as long as the Force Majeure Event continues. Upon cessation of such Force Majeure Event, the affected Party shall promptly resume performance hereunder.  Each Party agrees to give the other Party prompt written notice of the occurrence of any Force Majeure Event, the nature thereof, and the extent to which the affected Party will be unable fully to perform its obligations hereunder. Each Party further agrees to use reasonable efforts to correct the Force Majeure Event as quickly as possible and to give the other Party prompt written notice when it is again fully able to perform such obligations.

15.7 Independent Contractors. The Parties acknowledge, agree and declare that the relationship hereby established between them is solely that of provider and recipient of manufacturing services and that each Party hereto is an independent contractor with respect to the other. Except as otherwise provided herein, no Party shall have any right, power, or authority to create any obligation, express or implied, on behalf of any other Party. Nothing in this agreement is intended to create or constitute a joint venture, partnership, agency, trust, or other association of any kind between the Parties.

15.8 Choice of Law: Jurisdiction. The provisions of this Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to conflict of laws principles. Any and all disputes between the Parties arising out of or related to this Agreement shall be heard in the state and federal courts located in the State of Texas, and the Parties hereby consent and submit to the jurisdiction of such courts.  

15.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute together the same document.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Parties hereto, by their authorized officers, have executed this Agreement as of the Effective Date.

PICONYX, INC.	CARBO CERAMICS INC.
By:  /s/ David J. Bening	By: /s/ Ernesto Bautista III
Name: David J. Bening	Name: Ernesto Bautista III
Title: CEO	Title: Vice President, Chief Financial Officer

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EXHIBIT A

Commercial Products

M-Tone 5100

M-Tone 5000 series (vary by particle sizes)

M-Tone 6000 series High temperature grades

M-Tone 7000 series Matte Finish grades (Blend of 5000 series grades)

As specified in Exhibit B.

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EXHIBIT B

Product Specifications

The Parties acknowledge that these Specifications are only guidelines as of the Effective Date.  The Parties anticipate that these Specifications will be refined and modified based upon information learned form the work to reach Commercial Completion.  The Parties agree that on or before Commercial Completion they will use Reasonable Objective Bases, which includes cost, regulatory, scienfitic, engineering and customer bases, to finalize these Specifications.  Once finalized, these Specifications can be modified, upon the written agreement of the Parties, for Reasonable Objective Bases, which agreement shall not be unreasonably withheld or delayed.

I.  For each finished Commercial Product

Particle Size  [XXX]

[XXX]

[XXX]

[XXX]

Density

[XXX]

[XXX]

[XXX]

[XXX]

Color

[XXX]

[XXX]

[XXX]

[XXX]

__________

_________ for M-Tone ____[A]________

_________ for M-Tone ____[B]________

_________ for M-Tone ____[etc.]________

___________

_________ for M-Tone ____[A]________

_________ for M-Tone ____[B]________

_________ for M-Tone ____[etc.]________

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Moisture Content

[XXX]

[XXX]

[XXX]

[XXX]

II.  For all Raw Materials

[XXX]

[XXX]

[XXX]

[XXX]

[XXX]

[XXX]

III.  [XXX]

[XXX]

[XXX]

IV.  [XXX]

[XXX]

[XXX]

V.  [XXX]

[XXX]

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EXHIBIT C

Contract Manufacturing Price Schedule

1. Manufacturing conversion costs will be based on Carbo’s cumulative cost of direct labor (material processing & handling, plant maintenance and supervision), energy consumption (electricity & natural gas),. The Carbo New Iberia, LA facility labor rates ([XXX]) and the energy rates as of the Execution Date of this Agreement are provided below for reference.

Hourly:

[XXX]

[XXX]

[XXX]

[XXX]

[XXX]

[XXX]

Supervisors:

[XXX]

[XXX]

Management:

[XXX]

[XXX]

Energy:

[XXX]

[XXX]

[XXX]

[XXX]

[XXX]

2. Contract Manufacturing Prices will be [XXX]. Carbo will supply PicOnyx  Carbo’s typical cost of Labor and Energy periodically during the Commercial Process Development in a separate document.

3. [XXX]:

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Manufacturing Phase(s)	Expected Volume (LB)-Based on PicOnyx Business Plan	“Target Maximum Manufacturing Price” ($/LB) Based on PicOnyx Business Plan with Carbo Margin*	Note
[XXX]	[XXX]	[XXX]	[XXX]
[XXX]	[XXX]	[XXX]	[XXX]
[XXX]	[XXX]	[XXX]	[XXX]
[XXX]	[XXX]	[XXX]	[XXX]
[XXX]	[XXX]	[XXX]	[XXX]

*Target Maximum Manufacturing Prices may be adjusted pursuant to Section 8.1.3 of this Agreement.

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EXHIBIT D

Packaging Specification and Materials

For ALL commercial products listed in Exhibit A:

[XXX]

Capacity (Gallon)	Capacity (LB)	Diameter	Height (in)	Weight (LB)
[XXX]	[XXX]	[XXX]	[XXX]	[XXX]
[XXX]	[XXX]	[XXX]	[XXX]	[XXX]
[XXX]	[XXX]	[XXX]	[XXX]	[XXX]

[XXX]

Page 31 of 39

EXHIBIT E

Sale of PICONYX or PICONYX Property; Change of Control

1. Sale of PICONYX or PICONYX Property; Change of Control

a. In the event PICONYX (a) receives a bona fide offer from a Third Party for the acquisition of the PIXONYX Property; (b) receives a bona fide offer from a Third Party for the acquisition of more than 50% of its outstanding voting equity; or (c) engages in a merger, consolidation, or any other transaction that results in a change in more than 50% of PICONYX’s voting equity (“Change of Control Transaction”), PICONYX shall. to the extent permissible, provide to CARBO prompt written notice thereof (“Change of Control Notice”).

Page 32 of 39

EXHIBIT F

Manufactuing Facility

Page 33 of 39

Page 34 of 39

EXHIBIT G

PICONYX Background IP

[XXX]

Page 35 of 39

EXHIBIT H

CARBO Retained Equipment

Asset Number	Asset Class	Asset Description
10014	Land	Land 14.53
10015	Land	Land 9.552 Acres
10060	Buildings	Building-KIII
10072	Buildings	Roof Access & Vent Impr P1
10280	Buildings	Concrete Area 1
10282	Buildings	Concrete Area 2
10284	Buildings	Concrete Area 3
10285	Buildings	Lights Area 3
10286	Buildings	Concrete Area 4
10287	Buildings	Area 04 Enclosure
10288	Buildings	Concrete Area 5
10289	Buildings	Lights Area 4
10290	Buildings	Lights Area 5
10291	Buildings	Lights Area 6
10292	Buildings	Lights Area 7
10293	Buildings	Lights Area 8
10294	Buildings	Lights Area 9
10296	Buildings	Control Room/Lab
10297	Buildings	Lights Area 15
10310	Buildings	Facility Renovations NI
10333	Buildings	Ventilation - All Areas
10363	Land Imprv	Transformer Yard Fence Grounding
10364	Land Imprv	Transformer Yard Limestone
10396	Buildings	Concrete Foundation (30% Building)
23196	M&E	Raw Material Nuisance Dust Collector
23197	M&E	Raw Material Nuisance Dust Collector Rotary
23198	M&E	Raw Material Nuisance Dust Collector Rotary
23199	M&E	Raw Material Nuisance Dust Collector Isolation
23200	M&E	Area P01 Vent Fan #1
23201	M&E	Area P01 Vent Fan #2
23212	M&E	Slurry Storage Tank
23213	M&E	Slurry Storage Tank Agitator
23214	M&E	Slurry Transfer Pump
23215	M&E	Slurry Cooler
23218	M&E	Area P02 Sump Agitator
23224	M&E	Piping Area 2
23225	M&E	Electrical Area 2
23334	M&E	Piping Area 12

Page 36 of 39

23335	M&E	Electrical Area 12
23336	M&E	480V MCC NO.1
23337	M&E	480V MCC NO.2
23338	M&E	480V MCC NO.3
23339	M&E	480V MCC NO.4
23340	M&E	Lab UPS
23343	M&E	Automatic Transfer Switch, Power To 480V LTG PNL
23344	M&E	PLC Cabinet No. 1
23345	M&E	PLC Cabinet No. 2
23346	M&E	Network Cabinet No. 1
23347	M&E	Network Cabinet No. 2
23353	M&E	Ethernet Switch
23440	M&E	Plant 1 Ventilation Fan #1
23441	M&E	Plant 1 Ventilation Fan #2
23442	M&E	Plant 1 Ventilation Fan #3
23443	M&E	Plant 1 Ventilation Fan #4
23580	M&E	Plant PLC
23601	M&E	Area 07 Electrical Tray Reroute
23602	M&E	Area 08 Electrical/VFDs
23603	M&E	Area 01/02 Equipment
23616	M&E	Area 01 Electrical
23617	M&E	Area 02 Electrical
23622	M&E	Area 07Electrical
23623	M&E	Area 08 Electrical
24037	M&E	Heat Exchangers
24046	M&E	Hoppers
24050	M&E	Bag Unloader Setup
2[XXX]3	Buildings	Building
3[XXX]3	Buildings	Building
Lab01	M&E	Resin Coating QC Microwave Muffle Furnace
Lab04	M&E	Spec Mill
Lab06	M&E	High Pressure Blower
Lab07	M&E	Spectro Ciros ICP
Lab12	M&E	Photo-Optical Particle Analyzer
Lab13	M&E	Zeiss Stereo Zoom Microscope with Image Analysis S
10281	Buildings	Lights Area 1
10283	Buildings	Lights Area 2
10309	Buildings	Plant I Kiln Roof Replacement
10332	Buildings	Kiln Isolation Wall
23311	M&E	Electrical Area 6
24045	M&E	Concrete Foundation (70% Machine Support)

Page 37 of 39

EXHIBIT I

Third Party Manufacturing Payment Schedule

The Parties shall agree on a commercially reasonable compensation, for CARBO to pay to PICONYX, for each use by CARBO of PICONYX Property for Third Party Manufacturing.  Factors to include in determining a commercially reasonable compensation shall include, but are not limited to, any risk to PICONYX Property and the Contract Manufacturing Price Schedule of Exhibit C.

Page 38 of 39

EXHIBIT J

CARBO Background IP

[XXX]

Page 39 of 39

EX-31.1

Exhibit 31.1

Quarterly Certification

As required by Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934

I, Gary A. Kolstad, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CARBO Ceramics Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  July 25, 2019    

    /s/ Gary A. Kolstad

Gary A. Kolstad

President & CEO

EX-31.2

Exhibit 31.2

Quarterly Certification

As required by Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934

I, Ernesto Bautista III, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CARBO Ceramics Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  July 25, 2019    

    /s/ Ernesto Bautista III

Ernesto Bautista III

Chief Financial Officer

EX-32

Exhibit 32

Certification Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of CARBO Ceramics Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 (the “Form 10-Q”) of the Company fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-Q.

Dated:  July 25, 2019    

/s/ Gary A. Kolstad
Name:	Gary A. Kolstad
Title:	Chief Executive Officer

Dated:  July 25, 2019    

/s/ Ernesto Bautista III
Name:	Ernesto Bautista III
Title:	Chief Financial Officer

EX-95

Exhibit 95

MINE SAFETY DISCLOSURE

For the three months ended June 30, 2019, the Company has the following mine safety information to report in accordance with Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, in connection with the Eufaula, Alabama processing facility, the McIntyre, Georgia processing facility, the Toomsboro, Georgia processing facility, and the Marshfield, Wisconsin processing facility.

Mine or Operating Name/MSHA Identification Number	Section 104 S&S Citations (#)	Section 104(b) Orders (#)	Section 104(d) Citations and Orders (#)	Section 110(b)(2) Violations (#)	Section 107(a) Orders (#)	Total Dollar Value of MSHA Assessments Proposed ($) (1)		Total Number of Mining Related Fatalities (#)	Received Notice of Pattern of Violations Under Section 104(e) (yes/no)	Received Notice of Potential to Have Pattern Under Section 104(e) (yes/no)	Legal Actions Pending as of Last Day of Period (#)	Aggregate Legal Actions Initiated During Period (#)	Aggregate Legal Actions Resolved During Period (#)
Eufaula Facility MSHA ID 0102687 Eufaula, Alabama	0	0	0	0	0	$	1,370	0	No	No	0	0	0
McIntyre Facility MSHA ID 0901108 McIntyre, Georgia	0	0	0	0	0	$	0	0	No	No	0	0	0
Toomsboro Facility MSHA ID 0901164 Toomsboro, Georgia	0	0	0	0	0	$	0	0	No	No	0	0	0
Marshfield Facility MSHA ID 4703636 Marshfield, Wisconsin	2	0	0	0	0	$	652	0	No	No	0	0	0
Totals	2	0	0	0	0	$	2,022	0			0	0	0

(1) Amounts represent the total dollar value of proposed assessments received and/or outstanding as of June 30, 2019.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Jul. 19, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Trading Symbol	CRR
Entity Registrant Name	CARBO CERAMICS INC
Entity Central Index Key	0001009672
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		29,377,102
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	001-15903
Entity Tax Identification Number	721100013
Entity Address, Address Line One	575 North Dairy Ashford
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77079
City Area Code	281
Local Phone Number	921-6400

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 40,813	$ 72,752
Restricted cash	1,200	1,725
Trade accounts and other receivables, net	23,834	35,693
Inventories:
Finished goods	39,747	41,422
Raw materials and supplies	18,680	22,592
Total inventories	58,427	64,014
Prepaid expenses and other current assets	4,910	4,754
Income tax receivable	2,328	2,319
Total current assets	131,512	181,257
Restricted cash	8,853	8,840
Property, plant and equipment:
Land and land improvements	39,584	39,584
Land-use and mineral rights	20,264	19,696
Buildings	75,978	75,815
Machinery and equipment	425,378	432,906
Construction in progress	28,762	29,129
Total property, plant and equipment	589,966	597,130
Less accumulated depreciation and amortization	333,243	323,511
Net property, plant and equipment	256,723	273,619
Goodwill	3,500	3,500
Operating lease right-of-use assets	52,266
Intangible and other assets, net	11,391	7,150
Total assets	464,245	474,366
Current liabilities:
Accounts payable	13,910	12,174
Accrued payroll and benefits	4,048	6,950
Accrued freight	2,377	2,434
Accrued utilities	589	1,012
Other accrued expenses	7,810	14,020
Notes payable, related parties		27,040
Long-term debt, current portion		15,733
Operating lease liabilities	11,531
Other current liabilities	712	1,192
Total current liabilities	40,977	80,555
Deferred income taxes	1,114	1,114
Long-term debt, net	62,048	45,650
Noncurrent operating lease liabilities	49,866
Other long-term liabilities	4,209	10,764
Shareholders' equity:
Preferred stock, par value $0.01 per share, 5,000 shares authorized, none outstanding
Common stock, par value $0.01 per share, 80,000,000 shares authorized; 29,377,538 and 27,710,861 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	294	277
Additional paid-in capital	138,288	132,080
Retained earnings	167,449	203,926
Total shareholders' equity	306,031	336,283
Total liabilities and shareholders' equity	$ 464,245	$ 474,366

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, share authorized	5,000	5,000
Preferred stock, share outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, share authorized	80,000,000	80,000,000
Common stock, share issued	29,377,538	27,710,861
Common stock, share outstanding	29,377,538	27,710,861

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues	$ 43,099	$ 57,989	$ 90,557	$ 107,356
Cost of sales (exclusive of depreciation and amortization shown below)	39,568	50,818	87,474	101,788
Depreciation and amortization	7,311	8,323	14,714	16,735
Gross loss	(3,780)	(1,152)	(11,631)	(11,167)
Selling, general and administrative expenses (exclusive of depreciation and amortization shown below)	9,784	10,685	19,816	20,292
Depreciation and amortization	398	620	796	1,234
Other operating expenses (income)	89	(55)	18	(59)
Operating loss	(14,051)	(12,752)	(32,261)	(32,984)
Other expense:
Interest expense, net	(2,286)	(2,084)	(4,363)	(4,101)
Other income, net	132	31	425	8
Nonoperating income (expense), total	(2,154)	(2,053)	(3,938)	(4,093)
Loss before income taxes	(16,205)	(14,805)	(36,199)	(37,077)
Income tax expense	0	7	0	7
Net loss	$ (16,205)	$ (14,812)	$ (36,199)	$ (37,084)
Loss per share:
Basic	$ (0.57)	$ (0.55)	$ (1.29)	$ (1.38)
Diluted	(0.57)	(0.55)	(1.29)	(1.38)
Other information:
Dividends declared per common share	$ 0	$ 0	$ 0	$ 0
Russia Proppant
Loss on sale of Russia proppant business	$ 0	$ 350	$ 0	$ 350

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings
Balances at Dec. 31, 2017	$ 405,765	$ 271	$ 125,715	$ 279,779
Net loss	(22,272)			(22,272)
Stock granted under restricted stock plan, net		3	(3)
Stock based compensation	903		903
Shares surrendered by employees to pay taxes	(421)			(421)
Balances at Mar. 31, 2018	383,975	274	126,615	257,086
Balances at Dec. 31, 2017	405,765	271	125,715	279,779
Net loss	(37,084)
Balances at Jun. 30, 2018	373,153	277	130,601	242,275
Balances at Mar. 31, 2018	383,975	274	126,615	257,086
Net loss	(14,812)			(14,812)
Shares sold under ATM program	2,849	3	2,846
Stock granted under restricted stock plan, net	320		320
Stock based compensation	820		820
Other	1			1
Balances at Jun. 30, 2018	373,153	277	130,601	242,275
Balances at Dec. 31, 2018	336,283	277	132,080	203,926
Net loss	(19,994)			(19,994)
Shares sold under ATM program	3,375	9	3,366
Stock granted under restricted stock plan, net		4	(4)
Stock based compensation	710		710
Shares surrendered by employees to pay taxes	(278)			(278)
Balances at Mar. 31, 2019	320,096	290	136,152	183,654
Balances at Dec. 31, 2018	336,283	277	132,080	203,926
Net loss	(36,199)
Balances at Jun. 30, 2019	306,031	294	138,288	167,449
Balances at Mar. 31, 2019	320,096	290	136,152	183,654
Net loss	(16,205)			(16,205)
Shares sold under ATM program	1,231	4	1,227
Modification of warrant	178		178
Stock granted under restricted stock plan, net	79		79
Stock based compensation	652		652
Balances at Jun. 30, 2019	$ 306,031	$ 294	$ 138,288	$ 167,449

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating activities
Net loss	$ (36,199)	$ (37,084)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	15,510	17,969
Amortization of debt issuance costs and original issue discount	1,061	340
Provision for doubtful accounts	183	81
Deferred income taxes		4
Loss (gain) on disposal or impairment of assets	18	(59)
Loss on sale of Russian proppant business		350
Noncash lease expense	862
Stock compensation expense	1,586	2,254
PIK repayment on notes payable, related parties	(2,040)
Change in fair value of derivative instruments		(1,348)
Changes in operating assets and liabilities:
Trade accounts and other receivables	11,676	(3,777)
Inventories	5,830	836
Prepaid expenses and other current assets	(194)	(407)
Accounts payable	1,293	(1,341)
Accrued expenses	(7,938)	(4,303)
Income tax receivable, net	(9)	97
Other, net	(169)	2,126
Net cash used in operating activities	(8,530)	(24,262)
Investing activities
Capital expenditures	(1,085)	(1,179)
Net proceeds from asset sales	113	74
Net cash used in investing activities	(2,156)	(1,105)
Financing activities
Repayments on notes payable	(874)	(500)
Repayments on long-term debt	(14,533)
Repayments on notes payable, related parties	(25,000)
Proceeds from long-term debt	14,533
Payment of debt issuance costs	(218)
Purchase of common stock	(279)	(421)
Net cash (used in) provided by financing activities	(21,765)	1,928
Net decrease in cash and cash equivalents and restricted cash	(32,451)	(23,439)
Cash and cash equivalents and restricted cash at beginning of period	83,317	78,385
Cash and cash equivalents and restricted cash at end of period	50,866	54,946
Supplemental cash flow information
Interest paid	4,469	3,850
ATM Program
Financing activities
Proceeds from issuance of common stock under ATM program	4,606	$ 2,849
Pic Onyx Inc
Investing activities
Investment in PicOnyx	(684)
Issuance of Note from PicOnyx	$ (500)

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of CARBO Ceramics Inc. have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and notes required for complete financial statements.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included.  The results of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.  The consolidated balance sheet as of December 31, 2018 has been derived from the audited financial statements at that date.  These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2018 included in the annual report on Form 10-K of CARBO Ceramics Inc. for the year ended December 31, 2018.

The consolidated financial statements include the accounts of CARBO Ceramics Inc. and its operating subsidiaries (the “Company”).  All significant intercompany transactions have been eliminated.

The Company is currently producing ceramic technology proppants from its Eufaula, Alabama manufacturing facility, base ceramic proppants from its Toomsboro, Georgia manufacturing facility, and processing sand at its Marshfield, Wisconsin facility.  The Company also produces ceramic media at its McIntyre, Georgia and Eufaula, Alabama facilities.  The Company is also using its Toomsboro, Georgia facility for contract manufacturing.  In addition, the Company produces resin-coated ceramic proppants at its New Iberia, Louisiana facility.  The Company continues to assess liquidity needs and manage cash flows.  As a result of the steps the Company has taken to enhance its liquidity, the Company currently believes that cash on hand and cash flows from operations will enable the Company to meet its working capital, capital expenditure, debt service and other funding requirements for at least one year from the date this Form 10-Q is issued.  Our financial forecasts in recent periods have proven less reliable given customer demand, which is highly volatile in the current operating environment and no committed sales backlog exists with our customers.  As a result, there is no guarantee that our financial forecast, which projects sufficient cash will be available to meet planned operating expenses and other cash needs, will be accurate.  In the event that the Company experiences lower customer demand, lower prices for its products and services, or higher expenses than it forecasted, or if the Company underperforms relative to its forecast, the Company could experience negative cash flows from operations, as has been the case in prior years, which would reduce its cash balances and liquidity.    

The second phase of the retrofit of our Eufaula, Alabama plant with the new KRYPTOSPHERE^® technology has been suspended until such time that market conditions improve enough to warrant completion.  As of June 30, 2019, the value of the assets relating to this project totaled approximately 82% of the Company’s total construction in progress and the project is approximately 75% complete.  

On May 28, 2019, the Company entered into an agreement with PicOnyx, Inc. (“PicOnyx”) pursuant to which the Company agreed to provide certain services and contribute certain manufacturing assets to PicOnyx in exchange for 9.7 million shares of convertible preferred stock in PicOnyx.  At the Company’s election, the preferred stock can be converted into a pre-determined number of shares of common stock.  Additionally, the preferred stock has voting rights that give the Company approximately 22% of voting rights based on the number of outstanding shares of PicOnyx stock.  As part of its agreement with PicOnyx, the Company is also designated a seat on the PicOnyx Board of Directors.  The Company also holds a warrant to purchase additional shares from PicOnyx with a nominal exercise price in the event of certain qualified financings.   In addition, the Company entered into a Contract Manufacturing Services Agreement with PicOynx, pursuant to which the Company agreed to provide contract manufacturing services to PicOnyx for certain of its products.  Pursuant to the terms of the Subscription and Asset Contribution Agreement, the Company has agreed to lease certain property to PicOnyx.  The Company recorded its investment in PicOnyx at the fair value of the assets given up and liabilities assumed, which approximated the book value and which the Company believes represents the standalone selling price.  The fair value was estimated using equipment appraisals (Level 3 inputs as defined in ASC 820).  No gain or loss was recorded at inception.  Given that the Company’s investment in PicOnyx does not have a readily-determinable fair value, the Company measures the investment at cost, less any impairment, and will adjust the investment to fair value to the extent an observable price change for identical or similar investments of PicOnyx is identified.  No adjustments to the cost basis were recorded during the quarter ended June 30, 2019.  The net book value of the Company’s investment in PicOnyx is approximately $4,300 at June 30, 2019 and is recorded in Intangible and other assets, net on the consolidated balance sheet.  The transaction resulted in a non-cash change in Property, plant and equipment and Intangible and other assets, net of approximately $3,500 as well as a non-cash change in Accounts Payable and Intangible and other assets, net of approximately $400. PicOnyx represents a variable interest entity for which the Company holds a variable interest.  The Company does not consolidate PicOnyx as the Company is not the primary beneficiary because the Company does not have the power to direct the activities that most significantly impact PicOnyx’s economic performance.  In addition, the Company provided PicOnyx $500 in exchange for a convertible promissory note.  The note will automatically be converted to equity shares if certain qualified financings occur.  The convertible promissory note bears interest at 7.5% per year.  The note matures on the earlier of August 1, 2021 or the termination of the Contract Manufacturing Services Agreement.  The note is collateralized by all of the manufacturing assets the Company contributed to PicOnyx.

Deferred Taxes – Valuation Allowance

Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, provides the carrying value of deferred tax assets should be reduced by the amount not expected to be realized.  A company should reduce deferred tax assets by a valuation allowance if, based on the weight of all available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized.  ASC 740 requires all available evidence, both positive and negative, be considered to determine whether a valuation allowance for deferred tax assets is needed in the financial statements.  Additionally, there can be statutory limitations on the deferred tax assets should certain conditions arise.As a result of the significant decline in oil and gas activities and net losses incurred over the past several years, we believe it is more likely than not that a portion of our deferred tax assets will not be realized in the future.  Our valuation allowance against a portion of our deferred tax assets as of June 30, 2019 was $80,311.  Our assessment of the realizability of our deferred tax assets is based on the weight of all available evidence, both positive and negative, including future reversals of deferred tax liabilities.

Restricted Cash

A portion of the Company’s cash balance is restricted to its use in order to provide collateral primarily for letters of credit, corporate cards and funds held in escrow relating to the sale of its Millen plant.  As of June 30, 2019 and December 31, 2018, total restricted cash was $10,053 and $10,565, respectively.

Lower of Cost and Net Realizable Value Adjustments

As of June 30, 2019, the Company reviewed the carrying values of all inventories and concluded that no adjustments were warranted for finished goods and raw materials intended for use in the Company’s manufacturing process.

Manufacturing Production Levels Below Normal Capacity

As a result of the Company substantially reducing manufacturing production levels, including by idling certain facilities, certain production costs have been expensed instead of being capitalized into inventory.  The Company expenses fixed production overhead amounts in excess of amounts that would have been allocated to each unit of production at normal production levels.  For the three months ended June 30, 2019 and 2018, the Company expensed $5,861 and $6,834, respectively, in production costs.  For the six months ended June 30, 2019 and 2018, the Company expensed $14,345 and $16,557, respectively, in production costs.

Long-lived and Other Noncurrent Assets Impairment

The Company has temporarily idled production at various manufacturing facilities.  The Company does not assess temporarily idled assets for impairment unless events or circumstances indicate that the carrying amounts of those assets may not be recoverable.  Short-term stoppages of production for less than one year do not generally significantly impact the long-term expected cash flows of the idled facility.  As of June 30, 2019, the Company concluded that there were no events or circumstances that would indicate that carrying amounts of long-lived and other noncurrent assets might be impaired.  However, the Company continues to monitor market conditions closely.  Further deterioration of market conditions could result in impairment charges being taken on the Company’s long-lived and other noncurrent assets, including the Company’s manufacturing plants, goodwill and intangible assets.  The Company will evaluate long-lived and other noncurrent assets for impairment at such time that events or circumstances indicate that carrying amounts might be impaired.

Reclassification of Prior Period Amounts

Certain prior period financial information has been reclassified to conform to current period presentation.

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Loss Per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Loss Per Share

2. Loss Per Share

The following table sets forth the computation of basic and diluted loss per share under the two-class method:

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Numerator for basic and diluted loss per share:
Net loss	$	(16,205	)	$	(14,812	)	$	(36,199	)	$	(37,084	)
Effect of reallocating undistributed earnings    of participating securities		—			—			—			—
Net loss available under the two-class method	$	(16,205	)	$	(14,812	)	$	(36,199	)	$	(37,084	)
Denominator:
Denominator for basic loss per share--weighted-average    shares		28,615,006			26,930,914			28,043,040			26,860,146
Effect of dilutive potential common shares		—			—			—			—
Denominator for diluted loss per share--adjusted    weighted-average shares		28,615,006			26,930,914			28,043,040			26,860,146
Basic loss per share	$	(0.57	)	$	(0.55	)	$	(1.29	)	$	(1.38	)
Diluted loss per share	$	(0.57	)	$	(0.55	)	$	(1.29	)	$	(1.38	)

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Natural Gas Derivative Instruments

6 Months Ended

Jun. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Natural Gas Derivative Instruments

3. Natural Gas Derivative Instruments

Natural gas is used to fire the kilns at the Company’s manufacturing plants.  In an effort to mitigate volatility in the cost of natural gas purchases and reduce exposure to short term spikes in the price of this commodity, we previously contracted in advance for portions of our future natural gas requirements.  Due to the severe decline in industry activity beginning in early 2015, the Company significantly reduced production levels and consequently did not take delivery of all of the contracted natural gas quantities.  As a result, the Company had accounted for the relevant contracts as derivative instruments.  However, as of December 31, 2018, the last derivative contract expired and no future natural gas obligations existed.

During the three months ended June 30, 2019 and 2018, the Company recognized a gain on derivative instruments of $0 and $412, respectively, in cost of sales.  During the six months ended June 30, 2019 and 2018, the Company recognized a gain on derivative instruments of $0 and $630, respectively, in cost of sales.

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Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

4. Leases

The Company leases certain property, plant and equipment under operating leases, primarily consisting of railroad equipment leases, certain distribution center assets and real estate.  Leases with an initial term of twelve months or less are not recorded on the balance sheet.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to ten years or more. The exercise of lease renewal options is typically at the Company’s sole discretion. Certain leases also include options to purchase the leased property.

As a result of the underutilization of some of the Company’s assets, we rent or sublease certain assets to third parties, primarily consisting of a portion of our railroad equipment and distribution center assets.

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, and noncurrent operating lease liabilities on our consolidated balance sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. As of June 30, 2019, it is not reasonably certain that we will exercise any of these options.  Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.  

We have lease agreements with lease and non-lease components, which are accounted for as a single lease component, primarily related to railroad equipment leases.

The components of lease cost were as follows:

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
Operating lease cost	$	3,811		$	7,969
Short-term lease cost		536			1,255
Sublease income (a)		(1,009	)		(2,109	)
Net lease cost	$	3,338		$	7,115

^(a) As a result of the adoption of ASC 842, sublease income is classified within revenues for the three and six months ended June 30, 2019.  Prior to the adoption, sublease income was recorded as a reduction to cost of sales.  Sublease income for the three and six months ended June 30, 2019 excludes rental income from owned assets of $393 and $799, respectively, which is recorded within revenues.

Future minimum lease payments under non-cancellable leases as of June 30, 2019 were as follows:

2019	$	8,708
2020		16,881
2021		16,471
2022		12,554
2023		9,209
Thereafter		16,455
Total lease payments	$	80,278
Less: imputed interest		(18,881	)
Present value of lease liabilities	$	61,397

The adoption of ASC 842 resulted in the Company recording a right of use asset of $56,591 and a total lease liability of $64,877 on January 1, 2019.  The Company also reduced its other long-term liabilities by approximately $6,500 and accrued expenses by approximately $1,800 as of January 1, 2019 given that deferred rent is now included within the total lease liability.  These adjustments represented non-cash changes during the period ended March 31, 2019.

Other information related to leases was as follows:

	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,379	$	6,358
Leased assets obtained in exchange for new operating lease liabilities		—		—

For the six months ended June 30, 2019, the weighted average remaining lease term was 5.9 years and the weighted average discount rate was 10.3%.

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Stock Based Compensation

6 Months Ended

Jun. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Based Compensation

5. Stock Based Compensation

On May 21, 2019, the shareholders approved the 2019 CARBO Ceramics Inc. Omnibus Incentive Plan (the “2019 Omnibus Incentive Plan”).  The 2019 Omnibus Incentive Plan replaces the Amended and Restated 2014 CARBO Ceramics Inc. Omnibus Incentive Plan (“A&R 2014 Plan”). Under the 2019 Omnibus Incentive Plan, the Company may grant cash-based awards, stock options (both non-qualified and incentive) and other equity-based awards (including stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units or share-denominated performance units) to employees and non-employee directors.  The amount paid under the 2019 Omnibus Incentive Plan to any single participant in any calendar year with respect to any cash-based award shall not exceed $5,000.  Awards may be granted with respect to a number of shares of the Company’s Common Stock that in the aggregate does not exceed 2,500,000 shares prior to the fifth anniversary of the effective date of the 2019 Omnibus Incentive Plan, plus (i) the number of shares that are forfeited, cancelled or returned and (ii) the number of shares subject to awards that are withheld by the Company or tendered by the participant to the Company to satisfy exercise price or tax withholding obligations in connection with awards other than options or stock appreciation rights.  No more than 100,000 shares may be granted to any single participant in any calendar year.  Equity-based awards may be subject to performance-based and/or service-based conditions.  With respect to stock options and stock appreciation rights granted, the exercise price shall not be less than the market value of the underlying Common Stock on the date of grant.  The maximum term of an option is ten years.  Restricted stock awards granted generally vest (i.e., transfer and forfeiture restrictions on these shares are lifted) proportionately on each of the first three anniversaries of the grant date, but subject to certain limitations, awards may specify other vesting periods.  As of June 30, 2019, 2,455,000 shares were available for issuance under the 2019 Omnibus Incentive Plan.  Although the Company’s A&R 2014 Plan has been cancelled, unvested shares granted under that plan remain outstanding in accordance with its terms.

A summary of restricted stock activity and related information for the six months ended June 30, 2019 is presented below:

	Shares			Weighted-Average Grant-Date Fair Value Per Share
Nonvested at January 1, 2019		541,560		$	12.14
Granted		468,984		$	4.55
Vested		(246,675	)	$	12.74
Forfeited		(29,170	)	$	9.96
Nonvested at June 30, 2019		734,699		$	7.18

As of June 30, 2019, there was $4,127 of total unrecognized compensation cost related to restricted shares granted under the now-cancelled A&R 2014 Plan.  That cost is expected to be recognized over a weighted-average period of 2.1 years.  The total fair value of shares vested during the six months ended June 30, 2019 was $1,011.  For restricted stock awards granted to certain executives of the Company, there is a holding period requirement of two years after the vesting date.  For the portion of such awards that are not expected to be withheld to satisfy tax withholdings, the grant date fair value for the January 2019 awards was discounted for the restriction of liquidity by 20.6%, which was calculated using the Finnerty model.

The Company made market-based cash awards to certain executives of the Company pursuant to the now-cancelled A&R 2014 Plan.  As of June 30, 2019, the total target award outstanding was $3,019.  The payout of awards can range from 0% to 200% based on the Company’s Relative Total Shareholder Return calculated over a three year period beginning January 1 of the year each grant was made.  During the six months ended June 30, 2019, a total of $708 was paid relating to the 2016 grant, which was approximately 61% of the total target award. During the six months ended June 30, 2018, a total of $526 was paid relating to the 2015 grant, which was approximately 76% of the total target award.

The Company also granted phantom stock and cash-settled restricted stock units (collectively discussed as “phantom stock”) to certain key employees pursuant to the now-cancelled A&R 2014 Plan.  The units subject to a phantom stock award vest and cease to be forfeitable in equal annual installments over a three-year period.  Participants awarded units of phantom stock are entitled to a lump sum cash payment equal to the fair market value of a share of Common Stock on the vesting date.  In no event will Common Stock of the Company be issued with regard to outstanding phantom stock awards.  As of June 30, 2019, there were 319,892 units of phantom stock granted, of which 115,020 have vested and 27,862 have been forfeited.  As of June 30, 2019, nonvested units of phantom stock had a total value of $239, a portion of which is accrued as a liability within Accrued Payroll and Benefits.  Compensation expense for these units of phantom stock will be recognized over the three-year vesting period.  The amount of compensation expense recognized each period will be based on the fair value of the Company’s common stock at the end of each period.

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Long-Term Debt and Notes Payable

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Long-Term Debt and Notes Payable

6. Long-Term Debt and Notes Payable

On March 2, 2017, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”), as last amended on June 20, 2019, with Wilks Brothers, LLC (the “Wilks”).  The Credit Agreement is a $65,000 facility maturing on December 31, 2022.  The Company’s obligations bear interest at 9.00% and are guaranteed by its two operating subsidiaries.  No principal repayments are required until maturity (except in certain circumstances), and there are no financial covenants.  In May 2019, the Company repaid $14,533 to the Wilks as a result of the required prepayment relating to the net cash proceeds from the sale of its Millen, Georgia facility.  On June 20, 2019, the Company entered into the Second Amendment to Amended and Restated Credit Agreement and Joinder (the “Amended Credit Agreement”) with the Wilks and a promissory note (“Equify Note”) with Equify Financial LLC, an affiliate of the Wilks, (“Equify”). By amending the previous credit agreement, the Company was able to refinance the amount that was repaid in May 2019, such that the total outstanding principal remains at $65,000, but the Company’s repayment obligations are now split between the Wilks and Equify, at $33,000 and $32,000, respectively.  The interest rate of 9%, maturity on December 31, 2022, and the terms and conditions for both loans remain the same.

The loan cannot be prepaid before March 31, 2021 without making the lenders whole for interest that would have been payable over the entire remaining term of the loan.  The Company’s obligations under the Amended Credit Agreement are secured by: (i) a pledge of all accounts receivable and inventory, (ii) cash in certain accounts, (iii) domestic distribution assets residing on owned real property, (iv) the Company’s Marshfield, Wisconsin and Toomsboro, Georgia plant facilities and equipment, and (v) certain real property interests in mines and minerals.  

As of June 30, 2019, the Company’s combined outstanding debt to Wilks and Equify under the Amended Credit Agreement and Equify Note was $65,000.   As of June 30, 2019, the fair value of the Company’s long-term debt approximated the carrying value.

As of June 30, 2019, the Company had $677 of unamortized debt issuance costs relating to the Credit Agreement and Amended Credit Agreement that are presented as a direct reduction from the carrying amount of the long-term debt obligation.  As a result of the May 2019 repayment, the Company wrote off approximately $137 of unamortized debt issuance costs relating to the Credit Agreement.  As a result of the June 2019 refinancing, the Company added approximately $218 to debt issuance costs resulting from an amendment fee paid directly to Wilks.  The Company had $7,475 and $2,625 in standby letters of credit issued through its banks as of June 30, 2019 and December 31, 2018, respectively, primarily as collateral relating to railcar leases and other obligations.

On March 2, 2017, in connection with entry into the Credit Agreement, the Company issued a Warrant (the “Warrant”) to Wilks.  Subject to the terms of the Warrant, the Warrant entitled the holder thereof to purchase up to 523,022 shares of the Common Stock, at an exercise price of $14.91 per share, payable in cash.  The Warrant was amended in connection with the Amended Credit Agreement and June 2019 refinancing to revise the exercise price to $4.00 and to extend the expiration date to December 31, 2024.   Based on a Form 13D filing with the SEC on July 9, 2019 as of June 20, 2019, the Wilks owned approximately 10.5% of the Company’s outstanding common stock as of June 30, 2019, and should the Wilks fully exercise the Warrant to purchase an additional 523,022 shares, the Wilks would hold approximately 12.1% of the Company’s outstanding common stock.  Upon issuance of the Warrant, the Company recorded an increase to additional paid-in capital of $3,871.  Upon modification of the Warrant, the Company recorded an increase to additional paid-in capital of $178.  As a result of the May 2019 repayment, the Company wrote off approximately $609 of unamortized original issue discount.  As of June 30, 2019, the unamortized original issue discount was $2,276.

In May 2016, the Company received proceeds of $25,000 from the issuance of separate unsecured Promissory Notes (the “Notes”) to two of the Company’s Directors.  Each Note matured on April 1, 2019 and bore interest at 7.00%.  On March 2, 2017, in connection with the Credit Agreement, the Notes were amended to provide for payment-in-kind, or PIK, interest payments at 8.00% until the lenders under the New Credit Agreement receive two consecutive semi-annual cash interest payments.  On April 1, 2017, the Company made a $997 interest payment as PIK, and capitalized the resulting amount to the outstanding principal balance.  On October 1, 2017, the Company made a $1,043 interest payment as PIK, and capitalized the resulting amount to the outstanding principal balance.  On April 1, 2019, the Company made a $27,040 payment repaying the outstanding principal balance of the Notes.

Interest cost for the six months ended June 30, 2019 and 2018 was $4,401 and $4,137, respectively.  Interest cost primarily includes interest expense relating to the Company’s debts as well as amortization and the write-off of debt issuance costs and amortization of the original issue discount associated with the Amended Credit Agreement and Warrant.

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New Accounting Pronouncements

6 Months Ended

Jun. 30, 2019

Accounting Changes And Error Corrections [Abstract]

New Accounting Pronouncements

7. New Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which amends current lease guidance.  This guidance requires, among other things, that lessees recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.  Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.  In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which simplifies the implementation by allowing entities the option to instead apply the provisions of the new guidance at the effective date, without adjusting the comparative periods presented.  The Company adopted this guidance effective January 1, 2019 without adjusting the comparative periods.  In addition, the Company elected the package of practical expedients permitted under the guidance, which among other things, allowed the Company to carry forward the historical lease classification.  As of June 30, 2019, the Company’s operating lease ROU asset was $52,266 and its total lease liability was $61,397.  In addition, upon implementation, the Company’s deferred rent balances, recorded primarily within other long-term liabilities and accrued expenses as of December 31, 2018, of approximately $8,300 were removed and recorded to the lease liability.  The Company has implemented a lease accounting system for accounting for leases under the new standard.  There were no significant impacts to the consolidated statement of operations and consolidated statement of cash flows.  See Note 4 for additional information.

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Equity Offering

6 Months Ended

Jun. 30, 2019

Stockholders Equity Note [Abstract]

Equity Offering

8. Equity Offering

On July 28, 2016, the Company filed a prospectus supplement and associated sales agreement related to an at-the-market (“ATM”) equity offering program pursuant to which the Company may sell, from time to time, common stock with an aggregate offering price of up to $75,000 through Cowen and Company LLC, as sales agent, for general corporate purposes.  The Company’s Form S-3 Registration Statement filed on May 20, 2016 has since expired, and as a result, we cannot sell additional common stock under the ATM program until a new Form S-3 Registration Statement is effective.  During the three months ended June 30, 2019, the Company sold a total of 356,350 shares of its common stock under the ATM program for $1,259, or an average of $3.53 per share, and received proceeds of $1,231, net of commissions of $28.  During the six months ended June 30, 2019, the Company sold a total of 1,250,000 shares of its common stock under the ATM program for $4,713, or an average of $3.77 per share, and received proceeds of $4,607, net of commissions of $106.  As of June 30, 2019, the Company had sold a total of 4,955,936 shares of its common stock under the ATM program for $54,240, or an average of $10.94 per share, and received proceeds of $53,019, net of commissions of $1,220.  The most recent sales under the ATM program occurred on April 4, 2019.

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Segment Information

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment Information

9. Segment Information

The Company has two operating segments: 1) Oilfield and Industrial Technologies and Services and 2) Environmental Technologies and Services.  Discrete financial information is available for each operating segment.  Management of each operating segment reports to our Chief Executive Officer, the Company’s chief operating decision maker, who regularly evaluates income before income taxes as the measure to evaluate segment performance and to allocate resources.  The accounting policies of each segment are the same as those described in the summary of significant accounting policies in Note 1 of the consolidated financial statements included in the annual report on Form 10-K for the year ended December 31, 2018.

The Company’s Oilfield and Industrial Technologies and Services segment manufactures and sells ceramic technology products and services, base ceramic proppant and frac sand for both the oilfield and industrial sectors.  These products have different technology features and product characteristics, which vary based on the application for which they are intended to be used.  The various ceramic products’ manufacturing processes are similar.

Oilfield ceramic technology products, base ceramic proppant and frac sand proppant are manufactured and sold to pressure pumping companies and oil and gas operators for use in the hydraulic fracturing of natural gas and oil wells.   The Oilfield and Industrial Technologies and Services segment also promotes increased production and Estimated Ultimate Recovery (“EUR”) of oil and natural gas by providing industry-leading technology to Design, Build, and Optimize the Frac^®.  Through our wholly-owned subsidiary StrataGen, Inc., we sell one of the most widely used fracture stimulation software under the brand FracPro and provide fracture design and consulting services to oil and natural gas E&P companies under the brand StrataGen.

The Company’s industrial ceramic technology products are manufactured at the same facilities and using the same machinery and equipment as the oilfield products, however they are sold to industrial companies.  These products are designed for use in various industrial technology applications, including, but not limited to, casting and milling.  The Company’s chief operating decision maker reviews discreet financial information as a whole for all of the Company’s manufacturing, consulting and software businesses.  Manufacturing includes the manufacture of technology products, base ceramics, industrial ceramics, sand and contract manufacturing, regardless of the industry the products are ultimately sold to.  See Note 10 for disaggregated revenue information.

The Company’s Environmental Technologies and Services segment designs, manufactures and sells products and services intended to protect clients’ assets, minimize environmental risks, and lower lease operating expense (“LOE”).  Asset Guard Products Inc. (“AGPI”), a wholly-owned subsidiary of the Company, provides spill prevention, containment and countermeasure systems for the oil and gas and other industries.  AGPI uses proprietary technology designed to enable its clients to extend the life of their storage assets, reduce the potential for spills and provide containment of stored materials.

Summarized financial information for the Company’s operating segments for the three and six months ended June 30, 2019 and 2018 is shown in the following tables.  Intersegment sales are not material.

	Oilfield and Industrial Technologies and Services			Environmental Technologies and Services		Total
	($ in thousands)
Three Months Ended June 30, 2019
Revenue from external customers	$	35,913		$	7,186	$	43,099
(Loss) income before income taxes		(16,502	)		297		(16,205	)
Depreciation and amortization		7,432			277		7,709
Three Months Ended June 30, 2018
Revenue from external customers	$	49,788		$	8,201	$	57,989
(Loss) income before income taxes		(15,545	)		740		(14,805	)
Depreciation and amortization		8,647			297		8,944
Six Months Ended June 30, 2019
Revenue from external customers	$	76,000		$	14,557	$	90,557
(Loss) income before income taxes		(36,768	)		569		(36,199	)
Depreciation and amortization		14,965			545		15,510
Six Months Ended June 30, 2018
Revenue from external customers	$	92,256		$	15,100	$	107,356
(Loss) income before income taxes		(38,312	)		1,235		(37,077	)
Depreciation and amortization		17,383			586		17,969

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Disaggregated Revenue

6 Months Ended

Jun. 30, 2019

Disaggregation Of Revenue [Abstract]

Disaggregated Revenue

10. Disaggregated Revenue

The following table disaggregates revenue by product line:

	Three Months Ended				Six Months Ended
	June 30				June 30
	2019		2018		2019		2018
Oilfield and Industrial Technologies and Services segment
Technology products and services	$	8,426	$	12,786	$	15,615	$	22,656
Industrial products and services		3,141		3,269		7,868		6,562
Base ceramic and sand proppants		22,944		33,733		49,609		63,038
Sublease and rental income		1,402		—		2,908		—
		35,913		49,788		76,000		92,256
Environmental Technologies and Services segment		7,186		8,201		14,557		15,100
	$	43,099	$	57,989	$	90,557	$	107,356

Sales of oilfield technology products and services, consulting services, and FracPro software are included within Technology products and services.  Sales of industrial ceramic products, industrial technology products and contract manufacturing are included within Industrial products and services.  Sales of oilfield base ceramic and sand proppants, as well as railcar usage fees are included within Base ceramic and sand proppants.  Sublease and rental income primarily consist of the sublease of certain railroad equipment and rental income related to leases on some of our underutilized distribution center assets.  As a result of the adoption of ASC 842 as of January 1, 2019, these amounts were classified within revenues during the three and six months ended June 30, 2019.  These amounts were classified as a reduction of costs for the same periods in 2018.  See Note 4.  

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Legal Proceedings

6 Months Ended

Jun. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Legal Proceedings

11. Legal Proceedings

The Company is subject to legal proceedings, claims and litigation arising in the ordinary course of business.  While the outcome of these matters is currently not determinable, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

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Subsequent Events

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Deferred Taxes - Valuation Allowance

Deferred Taxes – Valuation Allowance

Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, provides the carrying value of deferred tax assets should be reduced by the amount not expected to be realized.  A company should reduce deferred tax assets by a valuation allowance if, based on the weight of all available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized.  ASC 740 requires all available evidence, both positive and negative, be considered to determine whether a valuation allowance for deferred tax assets is needed in the financial statements.  Additionally, there can be statutory limitations on the deferred tax assets should certain conditions arise.As a result of the significant decline in oil and gas activities and net losses incurred over the past several years, we believe it is more likely than not that a portion of our deferred tax assets will not be realized in the future.  Our valuation allowance against a portion of our deferred tax assets as of June 30, 2019 was $80,311.  Our assessment of the realizability of our deferred tax assets is based on the weight of all available evidence, both positive and negative, including future reversals of deferred tax liabilities.

Restricted Cash

Restricted Cash

A portion of the Company’s cash balance is restricted to its use in order to provide collateral primarily for letters of credit, corporate cards and funds held in escrow relating to the sale of its Millen plant.  As of June 30, 2019 and December 31, 2018, total restricted cash was $10,053 and $10,565, respectively.

Lower of Cost or Market Adjustments

Lower of Cost and Net Realizable Value Adjustments

As of June 30, 2019, the Company reviewed the carrying values of all inventories and concluded that no adjustments were warranted for finished goods and raw materials intended for use in the Company’s manufacturing process.

Production Levels Below Normal Capacity Policy Text Block

Manufacturing Production Levels Below Normal Capacity

As a result of the Company substantially reducing manufacturing production levels, including by idling certain facilities, certain production costs have been expensed instead of being capitalized into inventory.  The Company expenses fixed production overhead amounts in excess of amounts that would have been allocated to each unit of production at normal production levels.  For the three months ended June 30, 2019 and 2018, the Company expensed $5,861 and $6,834, respectively, in production costs.  For the six months ended June 30, 2019 and 2018, the Company expensed $14,345 and $16,557, respectively, in production costs.

Long-lived and Other Noncurrent Assets Impairment

Long-lived and Other Noncurrent Assets Impairment

The Company has temporarily idled production at various manufacturing facilities.  The Company does not assess temporarily idled assets for impairment unless events or circumstances indicate that the carrying amounts of those assets may not be recoverable.  Short-term stoppages of production for less than one year do not generally significantly impact the long-term expected cash flows of the idled facility.  As of June 30, 2019, the Company concluded that there were no events or circumstances that would indicate that carrying amounts of long-lived and other noncurrent assets might be impaired.  However, the Company continues to monitor market conditions closely.  Further deterioration of market conditions could result in impairment charges being taken on the Company’s long-lived and other noncurrent assets, including the Company’s manufacturing plants, goodwill and intangible assets.  The Company will evaluate long-lived and other noncurrent assets for impairment at such time that events or circumstances indicate that carrying amounts might be impaired.

Reclassification of Prior Period Amounts

Reclassification of Prior Period Amounts

Certain prior period financial information has been reclassified to conform to current period presentation.

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Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Computation of Basic and Diluted Loss per Share under Two-Class Method

The following table sets forth the computation of basic and diluted loss per share under the two-class method:

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Numerator for basic and diluted loss per share:
Net loss	$	(16,205	)	$	(14,812	)	$	(36,199	)	$	(37,084	)
Effect of reallocating undistributed earnings    of participating securities		—			—			—			—
Net loss available under the two-class method	$	(16,205	)	$	(14,812	)	$	(36,199	)	$	(37,084	)
Denominator:
Denominator for basic loss per share--weighted-average    shares		28,615,006			26,930,914			28,043,040			26,860,146
Effect of dilutive potential common shares		—			—			—			—
Denominator for diluted loss per share--adjusted    weighted-average shares		28,615,006			26,930,914			28,043,040			26,860,146
Basic loss per share	$	(0.57	)	$	(0.55	)	$	(1.29	)	$	(1.38	)
Diluted loss per share	$	(0.57	)	$	(0.55	)	$	(1.29	)	$	(1.38	)

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Significant Components of Lease Cost

The components of lease cost were as follows:

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
Operating lease cost	$	3,811		$	7,969
Short-term lease cost		536			1,255
Sublease income (a)		(1,009	)		(2,109	)
Net lease cost	$	3,338		$	7,115

^(a) As a result of the adoption of ASC 842, sublease income is classified within revenues for the three and six months ended June 30, 2019.  Prior to the adoption, sublease income was recorded as a reduction to cost of sales.  Sublease income for the three and six months ended June 30, 2019 excludes rental income from owned assets of $393 and $799, respectively, which is recorded within revenues.

Future Minimum Lease Payments Under Non-cancellable Leases

Future minimum lease payments under non-cancellable leases as of June 30, 2019 were as follows:

2019	$	8,708
2020		16,881
2021		16,471
2022		12,554
2023		9,209
Thereafter		16,455
Total lease payments	$	80,278
Less: imputed interest		(18,881	)
Present value of lease liabilities	$	61,397

Other Information Related to leases

Other information related to leases was as follows:

	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,379	$	6,358
Leased assets obtained in exchange for new operating lease liabilities		—		—

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Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Restricted Stock Activity and Related Information

A summary of restricted stock activity and related information for the six months ended June 30, 2019 is presented below:

	Shares			Weighted-Average Grant-Date Fair Value Per Share
Nonvested at January 1, 2019		541,560		$	12.14
Granted		468,984		$	4.55
Vested		(246,675	)	$	12.74
Forfeited		(29,170	)	$	9.96
Nonvested at June 30, 2019		734,699		$	7.18

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Schedule of Financial Information for Operating Segments

Summarized financial information for the Company’s operating segments for the three and six months ended June 30, 2019 and 2018 is shown in the following tables.  Intersegment sales are not material.

	Oilfield and Industrial Technologies and Services			Environmental Technologies and Services		Total
	($ in thousands)
Three Months Ended June 30, 2019
Revenue from external customers	$	35,913		$	7,186	$	43,099
(Loss) income before income taxes		(16,502	)		297		(16,205	)
Depreciation and amortization		7,432			277		7,709
Three Months Ended June 30, 2018
Revenue from external customers	$	49,788		$	8,201	$	57,989
(Loss) income before income taxes		(15,545	)		740		(14,805	)
Depreciation and amortization		8,647			297		8,944
Six Months Ended June 30, 2019
Revenue from external customers	$	76,000		$	14,557	$	90,557
(Loss) income before income taxes		(36,768	)		569		(36,199	)
Depreciation and amortization		14,965			545		15,510
Six Months Ended June 30, 2018
Revenue from external customers	$	92,256		$	15,100	$	107,356
(Loss) income before income taxes		(38,312	)		1,235		(37,077	)
Depreciation and amortization		17,383			586		17,969

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Disaggregated Revenue (Tables)

6 Months Ended

Jun. 30, 2019

Disaggregation Of Revenue [Abstract]

Schedule of Disaggregates Revenue by Product Line

The following table disaggregates revenue by product line:

	Three Months Ended				Six Months Ended
	June 30				June 30
	2019		2018		2019		2018
Oilfield and Industrial Technologies and Services segment
Technology products and services	$	8,426	$	12,786	$	15,615	$	22,656
Industrial products and services		3,141		3,269		7,868		6,562
Base ceramic and sand proppants		22,944		33,733		49,609		63,038
Sublease and rental income		1,402		—		2,908		—
		35,913		49,788		76,000		92,256
Environmental Technologies and Services segment		7,186		8,201		14,557		15,100
	$	43,099	$	57,989	$	90,557	$	107,356

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Basis of Presentation - Additional Information (Detail) - USD ($)		3 Months Ended		6 Months Ended
	May 28, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Significant Accounting Policies [Line Items]
Preferred stock, share outstanding		0		0		0
Deferred tax assets, valuation allowance		$ 80,311,000		$ 80,311,000
Restricted cash		10,053,000		10,053,000		$ 10,565,000
Lower of cost or market inventory adjustment				0
Production cost		5,861,000	$ 6,834,000	14,345,000	$ 16,557,000
Pic Onyx Inc
Significant Accounting Policies [Line Items]
Minority interest		4,300,000		4,300,000
Gain (loss) recorded at inception	$ 0
Exchange for convertible promissory note	$ 500,000
Convertible promissory note interest	7.50%
Convertible promissory maturing date	Aug. 01, 2021
Preferred stock voting percentage	22.00%
Non-cash change in property, plant and equipment and Intangible and other assets, net		3,500,000		3,500,000
Non-cash change in accounts payable and intangible and other assets, net		$ 400,000		$ 400,000
Pic Onyx Inc | Convertible Preferred Stock
Significant Accounting Policies [Line Items]
Preferred stock, share outstanding	9,700,000
Eufaula and Alabama
Significant Accounting Policies [Line Items]
Percentage of value of assets of project on construction in progress				82.00%
Projects completed percentage				75.00%

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Computation of Basic and Diluted Loss per Share under Two-Class Method (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Numerator for basic and diluted loss per share:
Net loss	$ (16,205)	$ (19,994)	$ (14,812)	$ (22,272)	$ (36,199)	$ (37,084)
Effect of reallocating undistributed earnings of participating securities	0		0		0	0
Net loss available under the two-class method	$ (16,205)		$ (14,812)		$ (36,199)	$ (37,084)
Denominator:
Denominator for basic loss per share--weighted-average shares	28,615,006		26,930,914		28,043,040	26,860,146
Effect of dilutive potential common shares	0		0		0	0
Denominator for diluted loss per share--adjusted weighted-average shares	28,615,006		26,930,914		28,043,040	26,860,146
Basic loss per share	$ (0.57)		$ (0.55)		$ (1.29)	$ (1.38)
Diluted loss per share	$ (0.57)		$ (0.55)		$ (1.29)	$ (1.38)

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Natural Gas Derivative Instruments - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Cost of Sales
Derivative [Line Items]
Gain (loss) on derivative instruments	$ 0	$ 412,000	$ 0	$ 630,000
Natural gas derivative contract
Derivative [Line Items]
Last derivative contract expired			Dec. 31, 2018
Future natural gas obligations					$ 0

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Leases - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jan. 01, 2019
Operating Leased Assets [Line Items]
Existence of option to extend		true
Lease option to extend, description		one or more options to renew, with renewal terms that can extend the lease term from one to ten years or more
Lease renewal term start year		1 year
Sublease income	$ 393	$ 799
Right of use asset	52,266	52,266
Lease liability	$ 61,397	$ 61,397
Weighted average remaining lease term	5 years 10 months 24 days	5 years 10 months 24 days
Weighted average discount rate	10.30%	10.30%
ASC 842
Operating Leased Assets [Line Items]
Right of use asset	$ 52,266	$ 52,266	$ 56,591
Lease liability	$ 61,397	$ 61,397	64,877
Decrease in long term liabilities upon adoption of ASU			6,500
Decrease in accrued expenses upon adoption of ASU			$ 1,800
Maximum
Operating Leased Assets [Line Items]
Operating leases initial term	12 months	12 months
Minimum
Operating Leased Assets [Line Items]
Lease renewal term end year	10 years	10 years

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Leases - Significant Components of Lease Cost (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Lease Cost [Abstract]
Operating lease cost	$ 3,811	$ 7,969
Short-term lease cost	536	1,255
Sublease income	(1,009)	(2,109)
Net lease cost	$ 3,338	$ 7,115

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Future Minimum Lease Payments Under Non-cancellable Leases (Detail) $ in Thousands	Jun. 30, 2019 USD ($)
Leases [Abstract]
2019	$ 8,708
2020	16,881
2021	16,471
2022	12,554
2023	9,209
Thereafter	16,455
Total lease payments	80,278
Less: imputed interest	(18,881)
Present value of lease liabilities	$ 61,397

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Leases - Other Information Related to leases (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Leases [Abstract]
Operating cash flows from operating leases	$ 3,379	$ 6,358

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Stock Based Compensation - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Phantom Share Units (PSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
2019 Omnibus Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted to any single participant in any calendar year	100,000
Shares available for issuance under the plan	2,455,000
2019 Omnibus Incentive Plan | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Cash-based award paid to a single participant in any calendar year	$ 5,000,000
Aggregate number of common stock for issuance under the plan	2,500,000
Period of years for which the 2,500,000 shares can be granted over	5 years
2019 Omnibus Incentive Plan | Employee Stock Options | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term Period	10 years
2019 Omnibus Incentive Plan | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Now-cancelled A&R 2014 Plan | Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Cash awards	$ 3,019,000
Deferred compensation payment	$ 708,000	$ 526,000
Deferred compensation, percentage	61.00%	76.00%
Now-cancelled A&R 2014 Plan | Executive Officer | Beginning January 1, 2015 through December 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	200.00%
Now-cancelled A&R 2014 Plan | Minimum | Executive Officer | Beginning January 1, 2015 through December 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	0.00%
Now-cancelled A&R 2014 Plan | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense, net	$ 4,127,000
Unrecognized compensation expense, net, weighted average period	2 years 1 month 6 days
Total fair value of restricted stock vested	$ 1,011,000
Restricted stock awards granted, holding period	2 years
Share based payment awards discounted for restriction of liquidity percentage	20.60%
Now-cancelled A&R 2014 Plan | Phantom Share Units (PSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Units granted	319,892
Units vested	115,020
Units forfeited	27,862
Total fair value of units outstanding	$ 239,000

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Stock Based Compensation - Summary of Restricted Stock Activity and Related Information (Detail) - Restricted Stock Units (RSUs)	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Shares
Beginning Balance | shares	541,560
Granted | shares	468,984
Vested | shares	(246,675)
Forfeited | shares	(29,170)
Ending Balance | shares	734,699
Weighted-Average Grant-Date Fair Value Per Share
Beginning Balance | $ / shares	$ 12.14
Granted | $ / shares	4.55
Vested | $ / shares	12.74
Forfeited | $ / shares	9.96
Ending Balance | $ / shares	$ 7.18

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Long-Term Debt and Notes Payable - Additional Information (Detail)					1 Months Ended		3 Months Ended	6 Months Ended
	Apr. 01, 2019 USD ($)	Oct. 01, 2017 USD ($)	Apr. 01, 2017 USD ($)	Mar. 02, 2017 USD ($) Subsidiary $ / shares shares	May 31, 2019 USD ($)	May 31, 2016 USD ($) BoardofDirector	Jun. 30, 2019 USD ($) shares	Jun. 30, 2019 USD ($) shares	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Line of Credit Facility [Line Items]
Long-term debt							$ 62,048,000	$ 62,048,000		$ 45,650,000
Repayments of long-term debt								14,533,000
Write off of unamortized debt issuance costs								137,000
Debt issuance costs resulting from an amendment fee paid lender								218,000
Increase in additional paid-in capital due to issuance of warrant							178,000
Interest cost								$ 4,401,000	$ 4,137,000
Unsecured Promissory Notes
Line of Credit Facility [Line Items]
Debt instrument, maturity date						Apr. 01, 2019
Debt instrument, interest rate						7.00%
Proceeds from issuance of notes						$ 25,000,000
Debt instrument, payable number | BoardofDirector						2
PIK interest payment		$ 1,043,000	$ 997,000
Repayments of outstanding principal balance	$ 27,040,000
Credit Agreement | Unsecured Promissory Notes
Line of Credit Facility [Line Items]
Debt instrument, payment terms								Interest payments at 8.00% until the lenders under the New Credit Agreement receive two consecutive semi-annual cash interest payments.
Debt instrument, frequency of periodic payment								Semi-annual
Debt instrument, payment-in-kind interest rate				8.00%
Wilks
Line of Credit Facility [Line Items]
Repayments of long-term debt					$ 14,533,000
Wilks | Credit Agreement
Line of Credit Facility [Line Items]
Long-term debt				$ 65,000,000	65,000,000
Debt instrument, maturity date								Dec. 31, 2022
Debt instrument, interest rate				9.00%
Number of operating subsidiaries | Subsidiary				2
Unamortized debt issuance costs							$ 677,000	$ 677,000
Warrants exercise price per share | $ / shares				$ 14.91
Warrants expiration date				Dec. 31, 2024
Percentage of common stock outstanding owned							10.50%	10.50%
Percentage of common stock outstanding would hold upon exercise of warrant to purchase additional shares							12.10%	12.10%
Increase in additional paid-in capital due to issuance of warrant								$ 3,871,000
Wilks | Credit Agreement | Maximum
Line of Credit Facility [Line Items]
Warrant entitles to purchase shares of the common stock | shares				523,022			523,022	523,022
Wilks | Credit Agreement | Warrant
Line of Credit Facility [Line Items]
Unamortized original issue discount							$ 2,276,000	$ 2,276,000
Wilks | Amended Credit Agreement
Line of Credit Facility [Line Items]
Long-term debt					33,000,000
Unamortized debt issuance costs							677,000	677,000
Warrants exercise price per share | $ / shares				$ 4.00
Increase in additional paid-in capital due to issuance of warrant								178,000
Wilks | Amended Credit Agreement | Warrant
Line of Credit Facility [Line Items]
Unamortized original issue discount							609,000	609,000
Wilks and Equify | Amendment Credit Agreement and Equify Note
Line of Credit Facility [Line Items]
Long-term debt							65,000,000	65,000,000
Equify Note | Amended Credit Agreement
Line of Credit Facility [Line Items]
Long-term debt					$ 32,000,000
Equify Note | Wilks
Line of Credit Facility [Line Items]
Debt instrument, maturity date					Dec. 31, 2022
Debt instrument, interest rate					9.00%
Standby Letters of Credit | Wilks and Equify | Amended Credit Agreement
Line of Credit Facility [Line Items]
Letters of credit outstanding							$ 7,475,000	$ 7,475,000		$ 2,625,000

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New Accounting Pronouncements - Additional Information (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Jan. 01, 2019
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Company's ROU asset	$ 52,266
Total lease liability	61,397
Lease liability, current	11,531
Accounting Standards Update 2018-11
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Company's ROU asset	52,266	$ 56,591
Total lease liability	61,397	$ 64,877
Accounting Standards Update 2018-11 | Other Long Term Liabilities and Accrued Expenses
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Deferred rent	$ 8,300

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Equity Offering - Additional Information (Detail) - ATM Program - USD ($)	3 Months Ended	6 Months Ended		35 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jul. 28, 2016
Stockholders Equity Note [Line Items]
Proceeds from sale of common stock under ATM program		$ 4,606,000	$ 2,849,000
Cowen and Company LLC
Stockholders Equity Note [Line Items]
Aggregate offering price authorized					$ 75,000,000
Proceeds from sale of common stock under ATM program gross	$ 1,259,000	4,713,000		$ 54,240,000
Proceeds from sale of common stock under ATM program	1,231,000	4,607,000		53,019,000
Commissions paid	$ 28,000	$ 106,000		$ 1,220,000
Common Stock | Cowen and Company LLC
Stockholders Equity Note [Line Items]
Shares sold under ATM program	356,350	1,250,000		4,955,936
Average price per share	$ 3.53	$ 3.77		$ 10.94

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Segment Information - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2019 Segment
Segment Reporting [Abstract]
Number of operating segments	2

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Schedule of Financial Information for Operating Segments (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Revenue from external customers	$ 43,099	$ 57,989	$ 90,557	$ 107,356
(Loss) income before income taxes	(16,205)	(14,805)	(36,199)	(37,077)
Depreciation and amortization	7,709	8,944	15,510	17,969
Oilfield and Industrial Technologies and Services
Segment Reporting Information [Line Items]
Revenue from external customers	35,913	49,788	76,000	92,256
Operating Segment | Oilfield and Industrial Technologies and Services
Segment Reporting Information [Line Items]
Revenue from external customers	35,913	49,788	76,000	92,256
(Loss) income before income taxes	(16,502)	(15,545)	(36,768)	(38,312)
Depreciation and amortization	7,432	8,647	14,965	17,383
Operating Segment | Environmental Technologies and Services
Segment Reporting Information [Line Items]
Revenue from external customers	7,186	8,201	14,557	15,100
(Loss) income before income taxes	297	740	569	1,235
Depreciation and amortization	$ 277	$ 297	$ 545	$ 586

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Disaggregated Revenue - Schedule of Disaggregates Revenue by Product Line (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Disaggregation Of Revenue [Line Items]
Revenue by product line	$ 43,099	$ 57,989	$ 90,557	$ 107,356
Environmental Technologies and Services
Disaggregation Of Revenue [Line Items]
Revenue by product line	7,186	8,201	14,557	15,100
Oilfield and Industrial Technologies and Services
Disaggregation Of Revenue [Line Items]
Revenue by product line	35,913	49,788	76,000	92,256
Oilfield and Industrial Technologies and Services | Technology Products and Services
Disaggregation Of Revenue [Line Items]
Revenue by product line	8,426	12,786	15,615	22,656
Oilfield and Industrial Technologies and Services | Industrial Products and Services
Disaggregation Of Revenue [Line Items]
Revenue by product line	3,141	3,269	7,868	6,562
Oilfield and Industrial Technologies and Services | Base Ceramic and Sand Proppants
Disaggregation Of Revenue [Line Items]
Revenue by product line	22,944	$ 33,733	49,609	$ 63,038
Oilfield and Industrial Technologies and Services | Sublease and Rental Income
Disaggregation Of Revenue [Line Items]
Revenue by product line	$ 1,402		$ 2,908