8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 4, 2007

FLOTEK INDUSTRIES, INC.

Delaware (State or Other Jurisdiction of Incorporation)

001-13270 (Commission File Number)

90-0023731 (IRS Employer Identification Number)

7030 Empire Central Drive, Houston, Texas (Address of Principal Executive Offices)

77040 (Zip Code)

Registrant’s Telephone Number, including Area Code: (713) 849-9911

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

ITEM 9.01	Financial Statements and Exhibits
	Signature
	Exhibit Index
	Financial Statements of Business Acquired
	Pro Forma Financial Information

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial statements of business acquired.

Teal Supply Co. d/b/a Triumph Drilling Tools, Inc.

Independent Auditors’ Report

Balance Sheets as of September 30, 2006 and December 31, 2005

Statements of Income for the nine-month period ended September 30, 2006 and the year ended December 31, 2005

Statements of Changes in Stockholders’ Equity for the nine-month period ended September 30, 2006 and the year ended December 31, 2005

Statements of Cash Flows for the nine-month period ended September 30, 2006 and the year ended December 31, 2005

Notes to Financial Statements

Supplemental Information

Supplemental Schedules of General and Administrative Expenses

(b) Pro forma financial information.

Unaudited Pro Forma Combined Balance Sheet as of December 31, 2006

Unaudited Pro Forma Combined Statement of Income for the year ended December 31, 2006

Notes to Unaudited Pro Forma Combined Financial Statements

(c) Exhibits.

99.1     Financial Statements of Business Acquired

99.2     Pro Forma Financial Information

SIGNATURES

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

Date: March 20, 2007

/s/ Lisa G. Meier

Lisa G. Meier

Chief Financial Officer & Vice President

EXHIBIT INDEX

Flotek Industries, Inc.

Exhibit No.
99.1	Financial Statements of Business Acquired – Teal Supply Co. d/b/a Triumph Drilling
	Tools, Inc.
	Independent Auditors’ Report
	Balance Sheets as of September 30, 2006 and December 31, 2005
	Statements of Income for the nine-month period ended September 30, 2006 and the year ended December 31, 2005
	Statements of Changes in Stockholders’ Equity for the nine-month period ended September 30, 2006 and the year ended December 31, 2005
	Statements of Cash Flows for the nine-month period ended September 30, 2006 and the year ended December 31, 2005
	Notes to Financial Statements
	Supplemental Information
	Supplemental Schedules of General and Administrative Expenses
99.2	Pro Forma Financial Information
	Unaudited Pro Forma Combined Balance Sheet as of December 31, 2006
	Unaudited Pro Forma Combined Statement of Income for the year ended December 31, 2006
	Notes to Unaudited Pro Forma Combined Financial Statements

EX-99.1

EXHIBIT 99.1

FINANCIAL STATEMENTS OF BUSINESS ACQUIRED

TEAL SUPPLY CO. d/b/a TRIUMPH DRILLING TOOLS, INC.

Independent Auditors’ Report

Balance Sheets

Statements of Income

Statements of Changes in Stockholders’ Equity

Statements of Cash Flows

Notes to Financial Statements

Supplemental Information

INDEPENDENT AUDITORS’ REPORT

Flotek Industries, Inc. &

Teal Supply Co. d/b/a

Triumph Drilling Tools, Inc.

We have audited the accompanying balance sheets of Teal Supply Co. d/b/a Triumph Drilling Tools, Inc. (the Company), an S Corporation, as of September 30, 2006 and December 31, 2005, and the related statements of income, changes in stockholder’s equity, and cash flows for the nine months ended September 30, 2006 and the year ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

As described in Note 12 to the financial statements, the Company has restated its December 31, 2005 financial statements to conform with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Teal Supply Co. d/b/a Triumph Drilling Tools, Inc. as of September 30, 2006 and December 31, 2005 and the results of its operations and its cash flows for the periods then ended in conformity with principles generally accepted in the United States of America.

As more fully discussed in Note 13 to the financial statements, subsequent to the issuance of the Company’s financial statements and our report thereon dated December 15, 2006, the Company changed its method of recognizing revenue for unbilled receivables in 2006 and 2005.

/s/ Elms, Faris & Company, LLP

Midland, Texas

December 15, 2006, except as to the sixth paragraph above and Note 13, which are as of March 9, 2007.

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

TABLE OF CONTENTS

	Page
Independent Auditors’ Report
Balance Sheets	1
Statements of Income	2
Statements of Changes in Stockholder’s Equity	3
Statements of Cash Flows	4
Notes to Financial Statements	5
Supplemental Information
Supplemental Schedules of General and Administrative Expenses	15

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

BALANCE SHEETS

SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

ASSETS

	RESTATED 2006			RESTATED 2005
CURRENT ASSETS
Cash and Cash Equivalents	$	47,509		$	143,209
Accounts Receivable -Trade, Net of Allowance of $47,542 and $0 in 2006 and 2005, Respectively		2,910,795			2,727,318
Employee Loans		23,180			22,429
Inventory		952,041			553,464
Equipment Deposits		166,800			60,000
Prepaid Expenses and Other Current Assets		372,625			148,248
TOTAL CURRENT ASSETS		4,472,950			3,654,668
PROPERTY AND EQUIPMENT, AT COST		10,705,261			8,557,786
Less: Accumulated Depreciation		(4,714,637	)		(3,978,923	)
NET PROPERTY AND EQUIPMENT		5,990,624			4,578,863
OTHER ASSETS
Employee Notes Receivable		23,820			—
TOTAL OTHER ASSETS		23,820			—
TOTAL ASSETS	$	10,487,394		$	8,233,531

LIABILITIES AND STOCKHOLDER‘S EQUITY

	RESTATED 2006		RESTATED 2005
CURRENT LIABILITIES
Accounts Payable - Trade	$	938,279	$	368,028
Accrued Liabilities		693,310		444,520
Current Maturities of Notes Payable		2,289,875		2,031,291
TOTAL CURRENT LIABILITIES		3,921,464		2,843,839
LONG-TERM LIABILITIES
Notes Payable		2,809,385		2,530,575
TOTAL LONG-TERM LIABILITIES		2,809,385		2,530,575
TOTAL LIABILITIES		6,730,849		5,374,414
STOCKHOLDER’S EQUITY
Common Stock, $1 Par Value; 1,000 Shares Authorized 1,000 Shares Issued and Outstanding		1,000		1,000
Additional Paid In Capital		327,825		327,825
Retained Earnings		3,427,720		2,530,292
TOTAL STOCKHOLDER’S EQUITY		3,756,545		2,859,117
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	10,487,394	$	8,233,531

The accompanying notes are an integral part

of these financial statements.

1

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

STATEMENTS OF INCOME

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2006

AND THE YEAR ENDED DECEMBER 31, 2005

	RESTATED 2006			RESTATED 2005
SALES	$	11,443,544		$	12,546,694
COST OF GOODS SOLD
Rentals, Sub-Rentals and Services		1,949,723			1,603,633
Labor		2,686,752			3,084,743
Tooling and Supplies		1,174,278			1,203,008
Overhead		512,142			632,476
Depreciation		1,038,398			1,134,375
TOTAL COST OF GOODS SOLD		7,361,293			7,658,235
GROSS PROFIT		4,082,251			4,888,459
GENERAL AND ADMINISTRATIVE EXPENSES		2,514,006			2,849,303
INCOME FROM OPERATIONS		1,568,245			2,039,156
OTHER INCOME (EXPENSE)
Interest Income		950			11
Gain on Sale of Assets		53,307			75,609
Miscellaneous Income (Expense), Net		20,624			21,213
Interest Expense		(236,524	)		(232,692	)
TOTAL OTHER INCOME (EXPENSE)		(161,643	)		(135,859	)
NET INCOME	$	1,406,602		$	1,903,297

The accompanying notes are an integral part

of these financial statements.

2

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2006

AND THE YEAR ENDED DECEMBER 31, 2005

	Common Stock			Additional Paid-in Capital		RESTATED Retained Earnings			RESTATED Total
Balance at January 1, 2005 as Previously Reported	1,000	$	1,000	$	327,825	$	2,001,192		$	2,330,017
Prior Period Adjustments	—		—		—		(603,558	)		(603,558	)
Balance at January 1, 2005 as Restated	1,000		1,000		327,825		1,397,634			1,726,459
Distributions, as Restated	—		—		—		(770,639	)		(770,639	)
Net Income, as Restated	—		—		—		1,903,297			1,903,297
Balance at December 31, 2005 as Restated	1,000		1,000		327,825		2,530,292			2,859,117
Distributions	—		—		—		(509,174	)		(509,174	)
Net Income, as Restated	—		—		—		1,406,602			1,406,602
Balance at September 30, 2006 as Restated	1,000	$	1,000	$	327,825	$	3,427,720		$	3,756,545

The accompanying notes are an integral part

of these financial statements.

3

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

STATEMENTS OF CASH FLOWS

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2006

AND THE YEAR ENDED DECEMBER 31, 2005

	RESTATED 2006			RESTATED 2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	1,406,602		$	1,903,297
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation		1,053,798			1,152,699
Gain on Sale of Assets		(53,307	)		(75,609	)
Changes in Assets and Liabilities:
(Increase) in Trade Receivables		(183,477	)		(847,539	)
(Increase) in Inventories		(398,577	)		(501,106	)
(Increase) in Prepaid Expenses and Employee Loans		(225,128	)		(148,248	)
(Increase) in Equipment Deposits		(106,800	)		(60,000	)
Increase (Decrease) in Accounts Payable		570,251			(1,317,119	)
Increase in Accrued Liabilities		248,790			205,780
NET CASH PROVIDED BY OPERATING ACTIVITIES		2,312,152			312,155
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sale of Property and Equipment		266,285			169,903
Capital Expenditures for Property and Equipment		(2,678,537	)		(2,142,437	)
NET CASH USED IN INVESTING ACTIVITIES		(2,412,252	)		(1,972,534	)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Employee Notes Receivable		(23,820	)		(19,298	)
Distributions to Shareholder		(509,174	)		(770,639	)
Proceeds from Issuance of Debt		5,509,479			9,859,582
Payments on Notes Payable		(4,972,085	)		(7,271,179	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		4,400			1,798,466
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(95,700	)		138,087
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		143,209			5,122
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	47,509		$	143,209
SUPPLEMENTAL CASH FLOW INFORMATION
Cash Paid for Interest	$	305,076		$	219,170

The accompanying notes are an integral part

of these financial statements.

4

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

NOTE 1: NATURE OF ORGANIZATION AND OPERATIONS

Teal Supply Co. d/b/a Triumph Drilling Tools, Inc. (the “Company”) was originated in 1997, is headquartered in Corpus Christi, Texas, and is a leading regional provider of down-hole rental equipment to the oil and gas industry. The Company maintains an extensive inventory of drilling tools for lease or sublease to customers in Texas, New Mexico, Louisiana, Arkansas, and Oklahoma. Its rental products include stabilizers, drill collars, drilling jars, roller reamer parts, and other specialized drilling tools. The Company also provides bottom hole assemble design, inspection services, and other related technical services for drilling contractors, directional drilling companies, and major and independent operators.

Concentration of a significant portion of the Company’s business activity in these oil and gas related industries and in those limited geographic areas increases the Company’s vulnerability to business fluctuation associated with economic and other conditions in those industries and in those geographic areas.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The Company maintains its books and prepares its financial statements on the accrual basis of accounting in accordance with generally accepted accounting principles.

Income Taxes

The Company, at inception and with the consent of its shareholder, elected under the Internal Revenue Code to be an S corporation. In lieu of corporation income taxes, the shareholders of an S corporation are taxed on their proportionate share of the Company’s taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable represent amounts due from customers, net of any related allowance for doubtful accounts.

(Continued)

5

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounts Receivable and Allowance for Doubtful Accounts (Continued)

Trade receivables are periodically evaluated for collection based on past credit history with customers, previous loss history, the customer’s ability to pay its obligation, and the general economy and the industry as a whole.

Inventory

Inventories consist of raw materials and certain tool components which are priced at the lower of cost (first-in, first-out) or market.

Manufacturing Overhead

An allocation of overhead expenses was made between general and administrative expenses and cost of goods sold based on management’s estimate of costs allocable to cost of goods sold. In addition, manufacturing overhead is allocated to inventory based on an estimated burden rate per hour.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets.

Maintenance, repairs and renewals, which neither materially add to the value of the property nor appreciably prolong its life, are charged to expense as incurred. Current year gains or losses on dispositions of property and equipment are included in income.

Revenue Recognition

Revenue for product sales is recognized when all of the following criteria have been met: (1) evidence of an agreement or delivery ticket exists, (2) products are shipped or services rendered to the customer and all significant risks and rewards of ownership have passed to the customer, (3) the price to the customer is fixed and determinable and (4) collectibility is reasonably assured. Accounts receivable are recorded at that time, net of any discounts. Earnings are charged with a provision for doubtful accounts based on a current review of collectibility of the accounts receivable. Accounts receivable deemed ultimately uncollectible are applied against the allowance for doubtful accounts.

Concentration of Credit Risk

The Company maintains its cash balances at various financial institutions. Accounts at those institutions are insured by the Federal Deposit Insurance Company up to $100,000. At various times during the year, the Company may have had balances in excess of the insured limit.

(Continued)

6

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Issued Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment.” SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values and is effective for the first interim or annual reporting period beginning after January 1, 2006. The Company adopted SFAS No. 123R effective January 1, 2006.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary assets – an amendment of APB Opinion No. 29.” SFAS 153 amends APB Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS No. 153 is effective for financial statements for fiscal years beginning after June 15, 2005. The Company adopted SFAS No. 153 effective January 1, 2006.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS 154 replaces APB Opinion 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, changes the requirements for the accounting for and reporting of a change in accounting principle, and is effective for accounting changes made in fiscal years beginning after December 15, 2005. The Company adopted SFAS No. 154 effective January 1, 2006.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs-An Amendment of ARB No. 43, Chapter 4” (SFAS No. 151). SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling cost, and wasted material (spoilage). Among other provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight, and re-handling costs be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal” as stated ARB No. 43. SFAS No. 151 is effective for fiscal years beginning after June 15, 2005. The Company adopted SFAS No. 151 effective January 1, 2006.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those years.

The Company does not believe the adoption of SFAS Nos. 123R, 153, 154, 151 and 157 will have a significant impact on the Company’s financial position or statements of operations.

7

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

NOTE 3: ACCOUNTS RECEIVABLE—TRADE

Bad debt expense for related accounts receivable – trade consisted of $50,038 and $12,790 for the nine months ended September 30, 2006 and the year ended December 31, 2005, respectively.

NOTE 4: INVENTORY

The components of inventory as of September 30, 2006 and December 31, 2005 were as follows:

	September 30, 2006		December 31, 2005
Raw Materials	$	708,822	$	267,911
Work-in Process		243,219		285,553
	$	952,041	$	553,464

NOTE 5: PROPERTY AND EQUIPMENT

A summary of property and equipment cost by major asset classification, and assigned asset depreciable lives are as follows:

	September 30, 2006		December 31, 2005		Asset Depreciable Lives
Rental Tools	$	8,103,131	$	6,287,878	7 years
Trucks, Trailers and Automotive Equipment		635,687		918,161	3 and 7 years
Machinery and Equipment		1,665,364		1,164,379	7 and 10 years
Furniture, Office and Communications Equipment		207,941		167,979	3, 5 and 10 years
Leasehold Improvements		39,711		19,389	7 and 10 years
Construction in Process		53,427		—
		10,705,261		8,557,786
Less Accumulated Depreciation		4,714,637		3,978,923
	$	5,990,624	$	4,578,863

8

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

NOTE 6: LEASE COMMITMENTS AND TOTAL RENTAL EXPENSE

The Company conducts its operations in leased facilities under operating leases. In January 2005 the Company began leasing vehicles under open-ended master leases. The Company, as lessee, is obligated to make a fixed monthly payment for each leased vehicle. In addition, the Company is responsible for license, titles, registration fees, insurance, vehicle damages, liability and all vehicle operating costs. Additional rent, fees, and charges are due in the event of premature termination and upon expiration of each vehicle’s lease term.

In addition, the Company conducts its operations in leased facilities under operating leases.

The minimum rental commitments under the current operating leases are as follows:

Period Ending	September 30
2007	$	493,971
2008		233,316
2009		103,099
2010		65,100
2011		58,500
Total	$	953,986

Rental expense for the operating leases of the facilities was $147,285 for the nine months ended September 30, 2006 and $138,972 for the year ended December 31, 2005.

Vehicle lease expense was $280,352 for the nine months ended September 30, 2006 and $185,240 for the year ended December 31, 2005.

9

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

NOTE 7: LONG – TERM DEBT

Long-term debt as of September 30, 2006 and December 31, 2005 consisted of the following:

Description	September 30, 2006		December 31, 2005
FMC equipment note dated March 28, 2003; three-year term, payable $1,180 monthly; 5.6 % interest rate; secured by automotive equipment	$	—	$	5,385
American Bank equipment note dated October 17, 2003; three-year term, payable $719 monthly; 5.5% interest rate; secured by automotive equipment		716		7,009
American Bank equipment note dated November 20, 2003; three-year term, payable $821 monthly; 6% interest rate; secured by automotive equipment		—		8,697
American Bank equipment note dated December 29, 2003; three-year term, payable $862 monthly; 6% interest rate; secured by automotive equipment		2,561		10,020
American Bank equipment note dated January 31, 2004; three-year term, payable $538 monthly, including 6% interest; secured by automotive equipment and commercial security agreement		—		6,750
American Bank equipment note dated March 31, 2004; three-year term, payable $3,978 monthly, including 6% interest; secured by automotive equipment and commercial security agreement		—		34,178
American Bank equipment note dated August 20, 2004; three-year term, payable $1,986 monthly, including 6.25% interest; secured by automotive equipment and commercial security agreement and right of set-off		21,055		37,511
GMAC note dated August 17, 2004; three-year term, payable $780 monthly, including 7.50% interest; secured by truck		9,009		15,322
GMAC note dated August 17, 2004; three-year term, payable $787 monthly, including 7.50% interest; secured by truck		9,096		15,469
GMAC note dated August 17, 2004; three-year term, payable $724 monthly, including 7.50% interest; secured by truck		8,363		14,223
Whitney National Bank revolving line of credit note dated May 4, 2005; due April 30, 2006; floating rate of interest payable monthly; secured by assets pledged under terms of Commercial Business Loan Agreement and Security Agreement, shareholder life insurance policy and right of set-off; continuing guaranty of debt by sole shareholder		575,000		1,280,000

(Continued)

10

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

NOTE 7: LONG – TERM DEBT (Continued)

Description	September 30, 2006		December 31, 2005
FMC equipment note dated March 28, 2003; three-year term, payable $1,180 monthly; 5.6 % interest rate; secured by automotive equipment	$	—	$	5,385
American Bank equipment note dated October 17, 2003; three-year term, payable $719 monthly; 5.5% interest rate; secured by automotive equipment		716		7,009
American Bank equipment note dated November 20, 2003; three-year term, payable $821 monthly; 6% interest rate; secured by automotive equipment		—		8,697
American Bank equipment note dated December 29, 2003; three-year term, payable $862 monthly; 6% interest rate; secured by automotive equipment		2,561		10,020
American Bank equipment note dated January 31, 2004; three-year term, payable $538 monthly, including 6% interest; secured by automotive equipment and commercial security agreement		—		6,750
American Bank equipment note dated March 31, 2004; three-year term, payable $3,978 monthly, including 6% interest; secured by automotive equipment and commercial security agreement		—		34,178
American Bank equipment note dated August 20, 2004; three-year term, payable $1,986 monthly, including 6.25% interest; secured by automotive equipment and commercial security agreement and right of set-off		21,055		37,511
GMAC note dated August 17, 2004; three-year term, payable $780 monthly, including 7.50% interest; secured by truck		9,009		15,322
GMAC note dated August 17, 2004; three-year term, payable $787 monthly, including 7.50% interest; secured by truck		9,096		15,469
GMAC note dated August 17, 2004; three-year term, payable $724 monthly, including 7.50% interest; secured by truck		8,363		14,223

(Continued)

11

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

NOTE 7: LONG – TERM DEBT (Continued)

Under the revolving line of credit, the Company must maintain certain financial covenants as of the last day of each quarter, including: (i) a ratio of total liabilities to tangible net worth of not more than a 2.5 to 1.0 ratio; (ii) a current ratio of not less than 1.0 to 1.0; (iii) a ratio of cash flow to scheduled principal payments plus all accrued interest payments on funded debt of not less than 1.5 to 1.0 as measured on a rolling twelve-month basis. The Company is in compliance with its respective debt covenants at September 30, 2006 and December 31, 2005.

Maturities of long-term debt are as follows:

Period Ending	September 30
2007	$	2,289,875
2008		836,953
2009		899,120
2010		852,092
2011		221,220
Total	$	5,099,260

NOTE 8: RELATED PARTY TRANSACTIONS

Lease

The Company leases from the stockholder’s family trust on a ten-year lease its main office, shop and yard facilities in Corpus Christi, Texas. Lease expenses made to this trust aggregated $28,500 for the nine months ended September 30, 2006 and $27,600 for the year ended December 31, 2005.

Scheduled payments remaining at September 30, 2006 and December 31, 2005 are as follows:

Period Ending	September 30
2007	$	42,000
2008		43,800
2009		44,400
2010		47,100
2011		48,000
Total	$	225,300

In addition to the above stated amounts, the Company as tenant is obligated to pay property taxes and insurance as well as all repairs and maintenance except those associated with the foundation, roof, and walls.

(Continued)

12

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

NOTE 8: RELATED PARTY TRANSACTIONS (Continued)

Revenue

The sole shareholder of the Company has a 17% ownership in a customer’s company. The Company’s sales to that customer were $129,818 for the nine months ended September 30, 2006 and $209,690 for the year ended December 31, 2005.

The accounts receivable due from that customer were $37,957 at September 30, 2006 and $36,070 at December 31, 2005 with 90% and 85%, respectively, of the balances due outstanding less than 30 days.

NOTE 9: DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash, accounts receivable, other current assets, accounts payable, and other current liabilities. The carrying amount approximates fair value due to the short maturity of these instruments.

The carrying amount of long-term debt approximates fair value, because the Company’s current borrowing rate does not materially differ from market rates for similar bank borrowings.

NOTE 10: MAJOR CUSTOMERS

For the periods ended September 30, 2006 and December 31, 2005, no one customer represented over 10% of the Company’s revenue.

NOTE 11: EMPLOYEE BENEFIT PLAN

The Company established the Triumph Drilling Tools 401(K) Profit Sharing Plan January 1, 2000. The plan covers substantially all employees who meet the eligibility requirements. Participants become fully vested in employer profit sharing contributions, employer matching contributions, and any earnings thereon after three or five years of service depending on the year end testing of the plan. There were no employer contributions for the nine months ended September 30, 2006 or for the year ended December 31, 2005.

NOTE 12: PRIOR PERIOD ADJUSTMENTS

The accompanying financial statements for 2005 have been restated to correct for errors made in 2005 and in prior years. The effect of the restatement was to decrease accumulated depreciation, rental tool assets, and prepaid expenses by $221,320, $413,740, and $91,284, respectively, and to increase accounts payable and accrued liabilities by $111,337. Retained earnings at the beginning of 2005 has been decreased by $343,800. The effect on net income in 2005 was an increase of $168,532.

(Continued)

13

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

NOTE 12: PRIOR PERIOD ADJUSTMENTS (Continued)

Included in the prior period adjustments are corrections of errors to: (1) correct understated rental tool assets prior to 2004 for elements of labor and overhead not being included in total manufactured rental tool cost, and (2) correct overstated rental tool assets and related accumulated depreciation prior to 2005 not being removed from the books for rental tools lost or destroyed. Other prior period adjustments made to be in accordance with accounting principles generally accepted in the United States of America were to: (3) correct rental tool inventory, accounts payable, accrued liabilities, expense for understated expense and rental tool inventory in 2005, and (4) reclassify to stockholder distributions and remove the associated prepaid expense and expense for certain promotional expenses.

The financial statements of Teal Supply Co. d/b/a Triumph Drilling Tools, Inc. as of December 31, 2005, before the restatement, were previously reviewed by other accountants whose report, dated May 11, 2006, stated that, except for the matters which are described above in items (1) and (2), they were not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America. We have audited the financial statements of December 31, 2005 including the adjustments described above that were applied to restate the 2005 financial statements and believe such adjustments are appropriate and have been properly applied.

NOTE 13: CHANGE IN METHOD OF ACCOUNTING FOR UNBILLED REVENUE

Subsequent to the issuance of the Company’s financial statements dated December 15, 2006, the Company elected to change its method of recording unbilled revenue to be in compliance with the accounting policy of its acquiring company as noted in Note 14. Previously, the Company’s accounting policy had been to accrue estimated unbilled revenues for rental tools that had been delivered to and were in use by a customer, but had not been returned by the end of the month in which they were received. The new method of accounting for these unbilled revenues is to not recognize the revenue on rental tools until they are invoiced. The new method was adopted, and the comparative financial statements of prior periods have been adjusted to apply the new method retrospectively. The effect of the retrospective application of the new method was to decrease accounts receivable by $544,329 and $431,059 in 2006 and 2005, respectively, and to decrease beginning retained earnings by $431,059 and $259,758 in 2006 and 2005, respectively. The effect on net income was to decrease it by $113,270 and $171,301, for the nine-month period ending September 30, 2006 and the year ended December 31, 2005, respectively.

NOTE 14: SALE OF COMPANY

Prior to December 15, 2006, the initial date of the independent auditors’ report, the Company entered into a definitive agreement to sell the assets of the Company. The consideration for the sale of the Company’s assets consisted of cash in the amount of $31 million. The sale was consummated in January 2007.

14

SUPPLEMENTAL INFORMATION

TEAL SUPPLY CO. d/b/a

TRIUMPH DRILLING TOOLS, INC.

SUPPLEMENTAL SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2006

AND THE YEAR ENDED DECEMBER 31, 2005

	2006			RESTATED 2005
GENERAL AND ADMINISTRATIVE EXPENSES
Wages and Benefits	$	1,320,833		$	1,403,077
Selling Expenses		428,008			539,189
Other Taxes		170,724			168,986
Vehicle Expenses		167,058			165,302
Utilities and Telephone		103,264			157,356
Insurance		131,816			155,415
Office Supplies and Expenses		139,131			154,100
Rents		147,285			138,972
Travel, Meals and Entertainment		173,109			132,071
Legal and Professional Fees		78,994			75,964
Advertising, Donations and Promotion		15,193			33,368
Depreciation		15,400			18,324
Bad Debt Expense		50,038			12,790
Dues and Subscriptions		16,763			11,374
Repairs and Maintenance		3,649			4,687
Manufacturing Overhead Applied		(447,259	)		(321,672	)
TOTAL	$	2,514,006		$	2,849,303

The accompanying notes are an integral part

of these financial statements.

15

EX-99.2

EXHIBIT 99.2

PRO FORMA FINANCIAL INFORMATION

TEAL SUPPLY CO. d/b/a TRIUMPH DRILLING TOOLS, INC.

Unaudited Pro Forma Combined Balance Sheet as of December 31, 2006

Unaudited Pro Forma Combined Statement of Income for the Year Ended December 31, 2006

Notes to Unaudited Pro Forma Combined Financial Statements

FLOTEK INDUSTRIES, INC.

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma combined financial statements give effect to the Teal Supply Co. d/b/a Triumph Drilling Tools, Inc. (“Triumph”) acquisition as described in Flotek’s Form 8-K filed on January 10, 2007. The unaudited pro forma combined balance sheet as of December 31, 2006 is presented as if the Triumph acquisition had occurred on that date. The unaudited pro forma combined statement of income for the year ended December 31, 2006 assumes that the Triumph acquisition occurred on January 1, 2006.

The unaudited pro forma combined financial statements should be read in conjunction with (i) the historical consolidated financial statements of Flotek included in its Annual Report on Form 10-K for the year ended December 31, 2006 and (ii) the historical combined financial statements of Triumph included in this Form 8-K. The unaudited pro forma combined financial statements are not necessarily indicative of the financial position that would have been obtained or the financial results that would have occurred if the Triumph acquisition had been consummated on the dates indicated, nor are they necessarily indicative of the financial position or financial results in the future. The pro forma adjustments, as described in the Notes to Pro Forma Combined Financial Statements, are based upon available information and certain assumptions that Flotek’s management believes are reasonable.

FLOTEK INDUSTRIES, INC.

PRO FORMA COMBINED BALANCE SHEET

DECEMBER 31, 2006

(Unaudited)

	Flotek		(a) Triumph		Pro Forma Adjustments			Pro Forma for the Transactions
	(In thousands of dollars)
ASSETS
Current assets:
Cash and cash equivalents	$	510	$	—	$	—		$	510
Accounts receivable, net		19,077		3,429		—			22,506
Inventories, net		17,899		1,299		(150	)(b)		19,048
Other current assets		578		—		—			578
Total current assets		38,064		4,728		(150	)		42,642
Property, plant and equipment, net		19,302		6,286		12,338	(b)		37,926
Goodwill		24,185		—		9,202	(c)		33,387
Intangible and other assets, net		1,339		243		250	(c)		1,832
	$	82,890	$	11,257	$	21,640		$	115,787
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	9,941	$	1,182		—		$	11,123
Accrued liabilities		7,457		715		—			8,172
Current portion of long-term debt		2,589		2,180		(2,180	)(d)		2,589
Current portion of deferred tax liability		675		—		—			675
Total current liabilities		20,662		4,077		(2,180	)		22,559
Long-term debt, less current portion		8,185		3,339		27,661	(d)		39,185
Deferred tax liability, less current portion		534		—		—			534
Total liabilities		29,381		7,416		25,481			62,278
Stockholders’ equity:
Common stock		1		1		(1	)(e)		1
Additional paid-in capital		46,661		328		(328	)(e)		46,661
Retained earnings		6,810		3,512		(3,512	)(e)		6,810
Accumulated other comprehensive income		37		—		—	(e)		37
Total stockholders’ equity		53,509		3,841		(3,841	)		53,509
	$	82,890	$	11,257	$	21,640		$	115,787

FLOTEK INDUSTRIES, INC.

PRO FORMA COMBINED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2006

(Unaudited)

	Flotek			(a) Triumph			Pro Forma Adjustments			Pro Forma for the Transactions
	(in thousands, except per share data)
Revenues		100,642		$	15,996		$	—		$	116,638
Expenses:
Operating and administrative expenses		78,383			12,180			—			90,563
Depreciation and amortization		2,750			1,420			1,285	(f)		5,455
Research and development		656			—			—			656
Total expenses		81,789			13,600			1,285			96,674
Income from operations		18,853			2,396			(1,285	)		19,964
Other income (expense):
Interest expense (original facilities)		(1,005	)		(341	)		341	(g)		(1,005	)
Interest expense (new facility)		—			—			(1,990	)(g)		(1,990	)
Other, net		85			56			—			141
Total other income (expense)		(920	)		(285	)		(1,649	)		(2,854	)
Income from before income taxes		17,933			2,111			(2,934	)		17,110
Provision for income taxes		(6,583	)		—			1,027	(h)		(5,556	)
Net income (loss)	$	11,350		$	2,111		$	(1,907	)	$	11,554
Basic earnings per common share	$	1.31								$	1.34
Diluted earnings per common share	$	1.22								$	1.24
Weighted average common shares used in computing basic earnings per common share		8,645									8,645
Incremental common shares from stock options and warrants		649									649
Weighted average common shares used in computing diluted earnings per common share		9,294									9,294

FLOTEK INDUSTRIES, INC.

NOTES TO PRO FORMA FINANCIAL STATEMENTS

(Unaudited)

(a)    Triumph financials audited as of September 30, 2006 and December 31, 2005. Amounts as of December 31, 2006 are unaudited.

(b)    Reflects write-down in inventory and step-up in basis of the fixed assets as a result of the acquisition to the lower of fair market value or actual cost.

(c)    Reflects the estimated allocation of the Triumph purchase price to goodwill and other intangibles assets.

(d)    Reflects the repayment of Triumph’s $5.2 million of borrowing under existing credit facilities and the addition of $31 million of term debt taken out by Flotek to fund the acquisition.

(e)    Reflects the elimination of Triumph’s stockholder’s equity.

(f)     Reflects the increase in depreciation expense as a result of the step-up in basis of fixed assets.

(g)    Reflects the elimination of interest expense due to historical debt not being assumed and the interest expense related to cash borrowed to effect the acquisition.

(h)    Reflects the application of 35% tax rate.