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Debt and Convertible Notes Payable
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
Debt and Convertible Notes Payable Debt and Convertible Notes Payable
Long Term Debt
Paycheck Protection Program Loans

In April 2020, the Company received a $4.8 million loan (the “Flotek PPP loan”) under the Paycheck Protection Program (“PPP”), which was created through the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). In October 2021, the Flotek PPP loan maturity date was extended from April 15, 2022 to April 15, 2025. On January 5, 2023 the Company received notice from the SBA that $4.4 million of the $4.8 million principal amount and accrued interest to this date of $0.1 million, was forgiven. The remaining principal amount of $0.4 million and accrued interest, will be repaid over the remaining term of the loan through April 15, 2025 beginning on March 15, 2023. The forgiveness of the Flotek PPP loan will be accounted for as an extinguishment of the debt and will result in the Company recording a $4.5 million gain in the first quarter of 2023 comprising the principal amount forgiven of $4.4 million and accrued interest of $0.1 million.

In connection with the acquisition of JP3 in May 2020, the Company assumed a PPP loan of $0.9 million obtained by JP3 (the “JP3 PPP loan”) in April 2020 prior to its acquisition by Flotek. In June 2021, the Company received notice from the SBA that the JP3 PPP loan and accrued interest were fully forgiven. Accordingly, during the year ended December 31, 2021, the Company recorded $0.9 million for the amount of principal and accrued interest forgiven associated with the JP3 PPP loan in other income on the consolidated statements of operations.

Long-term debt, including current portion, is as follows (in thousands):
December 31,
20222021
Flotek PPP loan$4,788 $4,788 
Less current maturities(2,052)(1,436)
Total long-term debt, net of current portion$2,736 $3,352 
Convertible Notes Payable

On February 2, 2022, Flotek entered into a Private Investment in Public Equity transaction (the “PIPE transaction”) with a consortium of investors to secure growth capital for the Company. Pursuant to the PIPE Transaction, Flotek issued $21.2 million in aggregate initial principal amount of Convertible Notes Payable for net cash proceeds of approximately $20.1 million. The investors are ProFrac Holdings, LLC, Burlington Ventures Ltd., entities associated with North Sound Management, certain funds associated with one of Flotek's directors including the D3 Family Fund and the D3 Bulldog Fund, and Firestorm Capital LLC. The Convertible Notes Payable accrue paid-in-kind interest at a rate of 10% per annum, have a maturity of one year, and are converted into common stock of Flotek or pre-funded warrants to purchase common stock of Flotek, (a) at the holder's option at any time prior to maturity, at a price of $1.088125 per share, (b) at Flotek's option, if the volume-weighted average trading price of Flotek's common stock equals or exceeds $2.50 for 20 trading days during a 30 consecutive trading day period, or (c) at maturity, at a price of $0.8705. The issuance cost of $1.1 million is amortized on a straight line basis over the term of the Convertible Notes Payable and the amortization is included in interest expense in the consolidated statements of operations.

On March 21, 2022, $3.0 million of the Convertible Notes Payable, plus accrued paid-in-kind interest thereon, were converted at the holder’s option into approximately 2.8 million shares of common stock resulting in a 3.0 million credit to additional paid-in-capital in stockholders’ equity.

As of December 31, 2022, the remaining Convertible Notes Payable are recorded at carrying value of $19.8 million, including accrued paid-in-kind interest of $1.8 million, and net of unamortized issuance costs of $0.1 million. The estimated fair value of the Convertible Notes Payable at December 31, 2022 was $25.8 million.

Interest expense for the year ended December 31, 2022 includes $1.8 million of accrued paid-in-kind interest and $1.0 million of issuance cost amortization related to these Convertible Notes Payable. Interest expense relating to the Convertible Notes Payable held by ProFrac Holdings, LLC (related party) is $1.0 million for the year ended December 31, 2022.

Initial ProFrac Agreement Contract Consideration Convertible Notes Payable

On February 2, 2022, the Company entered into a long-term supply agreement with ProFrac Services, LLC (the “Initial ProFrac Agreement”), a subsidiary of ProFrac Holdings LLC, in exchange for $10 million in aggregate principal amount of Contract Consideration Convertible Notes Payable (“Initial ProFrac Agreement Contract Consideration Convertible Notes Payable”), under the same terms as the Convertible Notes Payable issued in the PIPE Transaction described above, including the paid-in-kind interest at a rate of 10% per annum and conversion features.

The Initial ProFrac Agreement Contract Consideration Convertible Notes Payable are accounted for as liability classified convertible instruments and were initially recorded at fair value of $10.0 million on the issuance date with a corresponding contract asset. The Initial ProFrac Agreement Contract Consideration Convertible Notes Payable were remeasured to fair value of $14.2 million as of December 31, 2022 which includes paid-in-kind interest of $1.0 million. The fair value adjustment increased the carrying amount of the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable by $3.3 million during the year ended December 31, 2022 and is recognized in gain on fair value of contract consideration convertible notes payable, net on our consolidated statements of operations. See Note 11, “Fair Value Measurements”.

Amended ProFrac Agreement Contract Consideration Convertible Notes Payable

On May 17, 2022, the Company entered into an amendment to the Initial ProFrac Agreement (the “Amended ProFrac Agreement” and collectively the “ProFrac Agreement”) upon issuance of $50 million in aggregate principal amount of Contract Consideration Convertible Notes Payable (“Amended ProFrac Agreement Contract Consideration Convertible Notes Payable”) to ProFrac Holdings LLC. The Amended ProFrac Agreement Contract Consideration Convertible Notes Payable accrue paid-in-kind interest at a rate of 10% per annum and may be converted at any time prior to the maturity date, which is one year from the date of issuance under the same conversion terms as the Convertible Notes Payable issued in the PIPE Transaction described above.
The Amended ProFrac Agreement Contract Consideration Convertible Notes Payable are accounted for as liability classified convertible instruments and were initially recorded at fair value of $69.5 million on the issuance date with a corresponding contract asset. The Amended ProFrac Agreement Contract Consideration Convertible Notes Payable were remeasured to fair value of $69.4 million as of December 31, 2022 which includes paid-in-kind interest of $3.2 million The fair value adjustment resulted in a $3.3 million decrease during the year ended December 31, 2022 and is recognized in gain on fair value of contract consideration convertible notes payable, net on our consolidated statement of operations. See Note 11, “Fair Value Measurements”.