-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q1affIV7Dat98zC5dearxYbqpFDoxe6DdQPOjEqcTpEXc06Qh4QZn6DEjq20WGpZ yT1iZHfge+fAEZLyLxVpyw== 0000899243-01-500960.txt : 20010713 0000899243-01-500960.hdr.sgml : 20010713 ACCESSION NUMBER: 0000899243-01-500960 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010531 FILED AS OF DATE: 20010712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLOTEK INDUSTRIES INC/CN/ CENTRAL INDEX KEY: 0000928054 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-INDUSTRIAL MACHINERY & EQUIPMENT [5084] IRS NUMBER: 770709256 FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-13270 FILM NUMBER: 1680149 BUSINESS ADDRESS: STREET 1: 7030 EMPIRE CENTRAL DRIVE CITY: HOUSTON STATE: TX ZIP: 77040 BUSINESS PHONE: 7138499911 MAIL ADDRESS: STREET 1: 7030 EMPIRE CENTRAL DRIVE CITY: HOUSTON STATE: TX ZIP: 77040 10QSB 1 d10qsb.txt FORM 10-QSB FOR QUARTER ENDED 5/31/2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 - QSB (x) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended May 31, 2001 ( ) Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (no fee required) Commission file number 1-13270 FLOTEK INDUSTRIES INC. (Exact name of registrant as specified in its charter) ALBERTA 77-0709256 (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 7030 EMPIRE CENTRAL DRIVE, HOUSTON, TEXAS 77040 (Address of principal executive offices) (zip code) REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE (713) 849-9911 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 and 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 (x) As of May 31, 2000 the number of shares of common stock outstanding was 67,724,137. Transitional Small Business Disclosure Format (check one): Yes ( ) No (x) Part I - Financial Information FLOTEK INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
May 31, February 28, ASSETS 2001 2001 ------------ ------------ (unaudited) CURRENT ASSETS Cash and cash equivalents $ 124,693 $ 51,442 Accounts receivable, less allowance for doubtful accounts of $15,000 752,767 563,010 Inventory 1,035,628 1,079,665 ------------ ------------ Total current assets 1,913,088 1,694,117 PROPERTY AND EQUIPMENT, NET 232,141 233,881 OTHER ASSETS 528,154 535,642 ------------ ------------ $ 2,673,383 $ 2,463,640 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to Bank $ 151,867 $ 175,966 Other notes payable 180,000 31,000 Current portion of long-term debt 55,339 57,270 Accounts payable and accrued liabilities 535,555 632,157 Due to related party 190,839 190,839 ------------ ------------ Total current liabilities 1,113,600 1,087,232 Accrued Dividends 237,133 203,136 LONG-TERM DEBT 141,489 149,828 SHAREHOLDERS' EQUITY Common stock - no par value; 100,000,000 shares authorized; 67,724,137 and 53,555,655 issued and outstanding at May 31, 2001 and February 28, 2001, respectively 19,096,928 18,674,290 Convertible preferred stock - no par value; 2,114.496 Shares issued and outstanding at May 31, 2001 (2,365.77 shares at February 28, 2001); liquidation of $2,351,629 at May 15, 2001 2,114,496 2,365,770 Additional paid in capital 160,879 160,879 Accumulated deficit (19,900,439) (19,886,792) Accumulated other comprehensive loss (290,703) (290,703) ------------ ------------ 1,181,161 1,023,444 ------------ ------------ $ 2,673,383 $ 2,463,640 ============ ============
The accompanying notes are an integral part of these statements and should be read in conjunction herewith. 2 FLOTEK INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended May 31, 2001 2000 ---- ---- (unaudited) Sales $ 893,945 $ 656,434 Costs and expenses: Cost of goods sold 401,747 296,637 Selling 211,630 176,754 General and administrative 174,982 155,054 Depreciation and amortization 21,345 19,801 Research and development 24,324 7,740 ----------- ----------- 834,028 655,986 ----------- ----------- Income from operations 59,917 448 Other income (expense), net Interest (18,203) (58,652) Other - 49,304 ----------- ----------- (18,203) (9,258) ----------- ----------- Net income (loss) $ 41,714 $ (8,810) Basic and diluted net loss per common share (See Note 3) $ (0.0002) $ (0.0002) Weighted average number of shares outstanding 66,588,995 50,243,295
The accompanying notes are an integral part of these financial statements and should be read in conjunction herewith. 3 FLOTEK INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended May 31, 2001 2000 --------- --------- (unaudited) (unaudited) Cash flows from operating activities Net income (loss) $ 41,714 $ (8,810) Adjustments to reconcile net income (loss) to cash used in operating activities Depreciation and amortization 21,345 19,810 Change in operating assets and liabilities: Accounts receivable (189,757) (101,496) Inventory 44,037 15,281 Accounts payable and accrued liabilities (96,602) (396,125) --------- --------- Net cash used in operating activities (179,263) (471,349) Cash flows from investing activities Purchase of property and equipment (12,117) Cash flows from financing activities Exercise of common stock warrants 150,000 - Proceeds from long-term debt, notes payable and due to related parties 150,000 420,000 Repayment of long-term debt and notes payable (35,369) (44,008) --------- --------- Net cash provided by financing activities 264,631 375,992 Effect of exchange rates on cash - 14,973 --------- --------- Net increase (decrease) in cash 73,251 (80,384) Cash and cash equivalents - beginning of period 51,442 128,184 --------- --------- Cash and cash equivalents - end of period $ 124,693 $ 47,800 ========= ========= Supplementary information Interest paid $ 12,323 $ 8,228 Income taxes paid - - Non-cash investing and financing activities Patent acquired for common stock $ 175,000 Preferred stock and accrued interest converted to common stock $ 272,638 Accrued preferred dividends $ 55,361
The accompanying notes are an integral part of these financial statements and should be read in conjunction herewith. 4 FLOTEK INDUSTRIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - General The unaudited consolidated condensed financial statements included herein have been prepared by Flotek Industries Inc. (the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission. These financial statements reflect all adjustments which the Company considers necessary for the fair presentation of such financial statements for the interim periods presented. Although the Company believes that the disclosures in these financial statements are adequate to make the interim information presented not misleading, certain information relating to the Company's organization and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted in this Form 10-QSB pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended February 28, 2001. The results of operations for the three-month period ended May 31, 2001 are not necessarily indicative of the results expected for the full year. Note 2 - Comprehensive Income In September 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130"). SFAS No. 130 establishes standards for reporting and presentation of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Three Months Ended May 31, 2001 2000 ---- ---- Comprehensive income: Net income (loss) $ 41,714 $ (8,810) Cumulative translation adjustment - 14,973 --------- -------- Total comprehensive income $ 41,714 $ 6,163 ========= ======== 3. Net loss per common share Net loss per common share has been computed as follows: Three Months Ended May 31, --------------------- 2001 2000 ---- ---- Net income (loss) $ 41,714 $ (8,810) Accrued preferred stock dividends (55,361) - ------------ ----------- Loss for common shareholders $ (13,647) $ (8,810) Weighted average shares outstanding 66,588,995 50,243,295 Basic and diluted net loss per Common share $ (.0002) $ (.0002) The conversion of preferred stock or exercise of options or warrants to purchase common stock are antidilutive in regard to loss per common share. 4. Common stock options On April 11, 2000 the Board granted 1,000,000 fully vested options to Gary Pittman, a director and 250,000 fully vested options to each of the remaining four directors. In addition, options to purchase 5,000,000 shares of common stock were granted to Jerry D. Dumas (3,000,000 options to vest immediately and the balance to be vested in three equal parts over the following eighteen months). All options were issued at the market price on the grant date. The options have a five-year life. 5 ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Form 10-QSB includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The words "anticipate," "believe," "expect," "plan," "intend," "project," "forecasts," "could" and similar expressions are intended to identify forward-looking statements. All statements other than statements of historical facts included in this Form 10-QSB regarding the Company's financial position, business strategy, budgets and plans and objectives of management for future operations are forward-looking statements. Although the Company believes that the expectations reflected in such forward- looking statements are reasonable, no assurance can be given that actual results may not differ materially from those in the forward-looking statements herein for reasons including the effect of competition, the level of petroleum industry exploration and production expenditures, world economic conditions, prices of, and the demand for crude oil and natural gas, drilling activity, weather, the legislative environment in the United States and other countries, the condition of the capital and equity markets, and other risk factors identified herein. Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company's Consolidated Financial Statements and the related notes thereto. Business Flotek Industries Inc. (hereafter the "Company" or "Flotek") was originally incorporated under the laws of the Province of British Columbia on May 17, 1985. Effective September 7, 1995, the Company transferred its corporate status by continuing under the laws of the Province of Alberta. Flotek is headquartered in Houston, Texas and its common shares have been listed on the OTC Bulletin Board market. The Company's common stock is traded in the United States on the OTC Bulletin Board market under the symbol FOTDF. The Company's product lines are divided into two separate segments in the industry: drilling products and production equipment. The production equipment division develops, manufactures and markets the Petrovalve + Plus Pump Valves that include the PetroValve Gas Breaker, the Standing Valve for use with electric downhole pumps, the Petrovalve Injector Valve, which are valves for downhole sucker-rod pumps used in oil wells. The drilling products division manufactures and distributes casing centralizers, which are vaned cementing sleeves and integral joint stand off tools that improve mud and cementation displacement in drilled oil wells. Flotek is a provider of the patented Petrovalve line of production equipment and a complete portfolio of casing centralizer products. The Company operates primarily in the U.S. Gulf Coast market and in Latin America. . Flotek sells turbulator casing centralizers for all applications and provides technical advice to customers. Service personnel are available to install the product at the well site. . Flotek sells the complete line of Petrovalve products and provides engineering data and support to each customer as requested or required. On site installation is also provided as requested. 6 Production Equipment The Company has focused on the development of its proprietary and patented technologies: the Petrovalve + Plus Pump Valve and the Petrovalve Gas Breaker Valve. Both patented products are valves used in downhole sucker- rod pumps. The Petrovalve Gas Breaker Valve provides a solution to gas lock problems. Both valves offer producers operating advantages by performing more efficiently and lasting longer than the traditional ball and seat valves. Flotek's original technology was developed in concert with several university research departments, including the University of Alberta, and is the subject of various patents and patent applications. The Company's production equipment customers are the North American oil producers, and international energy companies. The Company's competition in the production equipment market is comprised of ball-and-seat manufacturers as well as rod-pump manufacturers. There is substantial competition in the oil field industry, which the Company assumes will remain at current levels for the foreseeable future; however, there is no other significant proprietary artificial lift technology in the down-hole sucker-rod pump market. The pump manufacturers manufacture an inferior ball & seat and can only set themselves apart by pricing. Presently, ball-and-seat manufacturers produce the majority of ball-and-seat valves for manufacturers of rod-pumps, yet, the rod-pump manufacturer is not considered to be in competition with the ball-and-seat manufacturer. The Petrovalve Plus valve product is manufactured by leading manufacturers to our controlled specifications. The Company's largest competitors with respect to its production equipment product line engage primarily in the manufacturing and direct sale of new equipment. These large manufacturers include Halliburton, and Weatherford International, Inc. within the United States. These companies tend to concentrate on the sale of new equipment, (down-hole sucker rod pumps and associated equipment), with sales to the customers through their regional and local pump repair facilities. The Company utilizes outside manufacturers under license arrangements to manufacture its patented products. The Company currently uses A-1 Carbide in California, Aves in Arlington, Texas, HRC Tool and Dye Manufacturing LTD. and Karnin Machine in Edmonton, Alberta, Canada among others. The Company's valve products are sold directly to the end user, the oil and gas producer, and distributed domestically through pump repair facilities and regional oilfield supply stores; and internationally through area agents and distributors, as well as direct Petrovalve Plus sales. Drilling Products Flotek's drilling products division manufactures, distributes and services several products that enhance oil and gas well cementing programs and the safety and effectiveness of the drilling process. Its primary products include the Cementing Turbulator, which the Company began distributing in March of 1994, when it acquired Turbeco Inc., an oilfield service company. The Turbulator is a steel sleeve, which is placed over pipe before the cementing process of pipe or casing. This pipe or casing is commonly cemented in the open hole section of a recently drilled oil well. The main purpose of this tool is to provide maximum standoff and improve displacement to obtain the best cement bond. The Company was one of the first companies to distribute spiral vaned cementing turbulators. The Turbulator has gained widespread acceptance through its proven ability to improve oil and gas well cementing programs and is effective in deep, directional and horizontal well applications. New products that have been successfully introduced are the Integral Pup Centralizer, the Eccentric Turbulator (jointly patented with Marathon Oil), and the Turbolock Centralizer. Recently we introduced our Pressure-Actuated Casing ("PAC") centralizer. This pressure-actuated tool is designed to accommodate "slim-hole" deviated well completion programs. The PAC centralizer is an integral part of the casing and does not activate until it is its final position in the drilled well, thus reducing drag during insertion of the casing in the well bore. Once in place, the vanes are activated providing a positive stand off of the casing to maximize the integrity of the cementing process. Patent applications are pending and marketing efforts are active. 7 The Company's Drilling Products customers are made up of the North American oil producers, including major oil companies that are involved in exploration and the drilling and cementing of oil wells. The Company's active customer base is well distributed between major oil companies and smaller independent operators. The Company's marketing area includes the Gulf of Mexico. Currently the Company's primary competitors with respect to its drilling products are: Weatherford International, Inc., Franks Industries, Ray Oil Tools and Milam Tool Company. Product Demand The demand for our drilling product services is related to the level, type, depth and complexity of oil and gas drilling. The most widely accepted measure of activity is the Baker Hughes Rig Count. During the fourth quarter of 1997, the rig count reached its highest level since 1990; however a decline began that continued through the second quarter of 1999, when it fell to the lowest level recorded in the previous 50 years. Since then the rig count in our principal market began to increase and has continued to increase into the early part of 2001. Technical advances such as 3-D seismic data and computer-enhanced interpretation of that data has reduced the risk of drilling deeper wells with a resultant increase in deep-water offshore exploration. Deeper and higher- pressure wells, particularly in environmentally sensitive areas, demand the highest level of cement bond integrity. Turbulator products are designed to meet that demand. The demand for integrity will also enhance the introduction of new designs such as the PAC centralizer. Our Production Equipment Division should benefit from demand to increase the natural gas supply in North America. The Petrovalve Gas Breaker traveling valve is being used on an extended trial basis to pump water from abandoned low pressure gas wells, thereby increasing production of gas or making possible production where the pressure is too low to flow naturally. Results have been favorable and we expect this type of application to increase so long as natural gas prices remain near current levels. Oil prices at current levels not only increase drilling activity but stimulates re-completion of older producing wells and increases opportunities to pump marginal reservoirs, including heavy oil. The Petrovalve products have advantages in these pumped well and the demand for hose products should continue to increase. Patents The Company has followed a policy of seeking patent protection both inside and outside the United States for products and methods that appear to have commercial significance. The Company believes its patents and trademarks to be adequate for the conduct of its business. International Operations The Company's operations are subject to the risks inherent in doing business in multiple countries with various legal and political policies. These risks include war, boycotts, political changes, and changes in currency exchange rates. Although it is impossible to predict the likelihood of such occurrences or their effect on the Company, management believes these risks to be acceptable. Even though the majority of the Company's operations are located in the United States, there can be no assurance that an occurrence of any one of these events in our international operations would not have a material adverse effect on its operations. Operating Risks and Insurance The Company's products are used for the exploration and production of oil and natural gas. Such operations are subject to hazards inherent in the oil and gas industry, such as fires, explosions, blowouts and oil spills, that can cause personal injury or loss of life, damage to or destruction of property, equipment, the environment and marine life, and suspension of operations. Litigation arising 8 from an occurrence at a location where the Company's products or services are used or provided may in the future result in the Company being named as a defendant in lawsuits asserting potentially large claims. The Company maintains insurance coverage that it believes to be customary in the industry against these hazards. RESULTS OF OPERATIONS Revenue by Operating Segment: Three Months Ended May 31, 2001 2000 ---- ---- Drilling Products $534,913 $417,076 Production Equipment 359,032 239,358 -------- -------- $893,945 $656,434 ======== ======== Consolidated revenues were up 36% for the three months ended May 31, 2001 as compared to the same period in fiscal 2001. Revenues from the drilling products segment increased by 28% compared to 2001, reflecting the increased North American rig counts caused by the fiscal 2001 increase in oil prices. Revenues from the production equipment segment increased by 50% for the quarter as compared to the same period in 2001, reflecting increased acceptance of our production valve products, including increased international sales. Costs and Expenses Consolidated gross margins at 55% were approximately the same for both periods. Selling expenses which consist primarily of the salaries, wages, and benefits of the Company's salesmen, rent, insurance and other direct selling costs were reduced from 27% of sales in fiscal 2001 to 24% of sales in 2002. This decrease was primarily attributable to more effective utilization of the work force and increased sales. The Company also increased in-house sales, which have lower selling costs. General and administrative expense increased by approximately $20,000, reflecting the increased sales volumes, but decreased as a percentage of sales from 24% to 20%. Research and development costs increased by $16,584 in fiscal 2002, compared to the same period in 2001, reflecting the continued development efforts for our Pressure-Actuated Casing centralizer. Interest expense for the first quarter of fiscal 2002 was $18,203 compared to $58,652 in 2001. The decrease in interest expense primarily reflects the exchange of $2,200,000 of interest bearing indebtedness into preferred stock in the second quarter of fiscal 2001. Other Income (expense) Included in other income for the three months ending May 31, 2000 were amounts totaling approximately $49,000 representing negotiated reductions for cash payments to settle accounts payable and accrued liabilities. 9 Capital Resources and Liquidity The Company has financed its operations to date from stock offerings, borrowings and internally generated funds. The principal use of its cash has been to fund the working capital needs of the Company. Operating Activities Substantially all of the Company's customers are engaged in the energy industry. This concentration of customers may impact the Company's overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic and industry conditions. The Company performs ongoing credit evaluations of its customers and does not generally require collateral in support of its trade receivables. The Company maintains reserves for potential credit losses, and actual losses have historically been within the Company's expectations. The Company's cash and cash equivalents increased to $124,693 at May 31, 2001 from $51,442 at February 28, 2001. Overall cash flows used in operating activities decreased from $471,349 for the three months ending May 31, 2000 to $179,263 for the three months ending May 31, 2001. Accounts receivable increased from $563,010 at February 28, 2001 to $752,767 at May 31, 2001, reflecting the higher level of sales in 2001. The Company expects to fund liquidity needs from a combination of available cash balances, internally generated funds and future financing activities. Financing Activities Repayments of long-term debt during the three months ending May 31, 2000 were $35,369. At May 31, 2001 the Company borrowed $150,000 from a private corporation. The Advance bears interest at 10% and is secured by two invoices totaling $343,802. The advance is to be repaid in the second quarter of fiscal 2002. At May 31, 2001 the Company had working capital of $799,488 and cash and cash equivalents of $124,643 compared to a working capital of $606,885 and cash and cash equivalents of $51,442 at February 28, 2001. The overall increase in working capital is attributable primarily to the improved operating results. Prior to 2001, the Company sustained substantial operating losses and has used substantial amounts of working capital in its operations. In view of these matters, realization of a major portion of the assets in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financing requirements, and the success of its future operations. Management believes that actions taken over the last two years to revise the Company's operating and financial requirements provide the opportunity for the Company to continue as a going concern. Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with adequate working capital. . During the second fiscal quarter of 2001, the Company issued (i) 2,365.77 shares of Series A Convertible Preferred Stock (no par) in exchange for the cancellation of principal indebtedness of $2,200,000 and accrued interest (as of April 30, 2000) of $165,770 which indebtedness was previously evidenced by certain secured promissory notes, and (ii) warrants to purchase 10 an aggregate of 78,859,012 shares of the Common Stock of the Company at $.03 per share in exchange for the cancellation of certain warrants and conversion rights previously issued by the Company. The preferred stock accrues dividends at 10% per annum compounding quarterly. No cash dividend payments have been declared. . Flotek has an agreement with a bank to factor domestic accounts receivable. The advancement of funds requires an assignment of first security interests in factored receivables. Advances of $151,867 were outstanding at May 31, 2000. . Management continues to add complementary product lines to help diversify the Company's product mix. Such new product lines will be sold through the Company's existing sales structure. . Management continues to actively seek potential acquisition or merger candidates to either decrease our costs of providing products, similar to the Trinity Tool Acquisition discussed below, or add new products and customer base to diversify the Company's market. Risk Factors The following risk factors, among others, may cause the Company's operating results and/or financial position to be adversely affected: . Competitive factors including, but not limited to, the Company's limitations with respect to financial resources and its ability to compete against companies with substantially greater resources. . The Company's ability to control the amount of operating expenses. . A decline in the rig count from its current level for a prolonged period of time would adversely affect the Company's drilling products division's results of operations as demand for oil related products and services would fall because of the uncertainty relating to the future. In addition, declines in the current worldwide rig count or drilling activity would reduce the demand for our drilling products and services and would have a material adverse effect on the Company's financial condition and results of operations. . In managing inventory requirements, the Company must forecast customer demand for our products. Should the Company underestimate the supplies needed to meet demand, it could be unable to meet customer demand. Should the Company overestimate the supplies needed to meet customer demand, its working capital could be adversely affected. If the Company is unable to manage purchases and utilization of its inventory to maintain low inventory levels immediately prior to major price declines, the Company could be unable to take immediate advantage of such declines to lower product costs, which could adversely affect its sales and gross margins. PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K 11 (a) Exhibits 3.1 Articles of Incorporation (incorporated by reference to the Company's Form 10-Q for the quarter ended November 30, 1997) 3.2 By-laws (incorporated by reference to the Company's Form 10-Q for the quarter ended November 30, 1997) 3.3 Amendment to Registrant's Bylaws (incorporated by reference to the Company's Form 10-KSB for the fiscal year ended February 28, 1998) (b) Reports on Form 8-K During the fiscal quarter ended May 31, 2001, the Company filed no reports on Form 8-K. SIGNATURES In accordance with 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. FLOTEK INDUSTRIES INC. (Registrant) By: /s/ JERRY DUMAS Date: July 12, 2001 ---------------- Jerry Dumas President and Chief Executive Officer (Principal Executive Officer) 12 -----END PRIVACY-ENHANCED MESSAGE-----