================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB / A
Amendment No. 1
For Annual and Transition Reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 1-13270
FLOTEK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0709256
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation)
7030 Empire Central Drive 77040
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (713) 849-9911
Securities registered pursuant to Section 12(b)of the Exchange Act:
(none)
Securities registered pursuant to Section 12(g)of the Exchange Act:
Common Stock, $0.0001 par value
(Title of Class)
Check 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 X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
Revenues for the Company's 2001 fiscal year were $12,561,499.
The aggregate market value of the common stock held by non-affiliates of the
registrant was approximately $17,188,000 on April 26, 2002, based upon the
closing sale price of common stock on such date of $3.50 per share on the OTC
Bulletin Board. As of April 26, 2002, the Registrant had 4,910,812 shares of
common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
================================================================================
Transitional small business disclosure format: Yes ( ) No ( X )
================================================================================
TABLE OF CONTENTS
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16 (a) of the Exchange Act ..................3
Item 10. Executive Compensation...............................................5
Item 11. Security Ownership of Certain Beneficial Owners and Management.......6
Item 12. Certain Relationships and Related Transactions.......................7
SIGNATURE......................................................................8
2
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Executive Officers and Directors
The following table provides information about our Executive Officers and
Directors:
Name Age Position Tenure
---- --- -------- ------
Jerry D. Dumas, Sr.............. 66 Chairman and Chief Executive Officer 1998
Glenn S. Penny.................. 52 President, Chief Technical Officer and Director 2000
Richard L. Johnson II........... 54 Senior Vice President and Director 2000
Randall D. Keys................. 42 Chief Financial Officer 2001
Roger K. Padgham................ 58 Vice President and Director 2001
Robert S. Beall................. 43 Director 2001
John W. Chisholm................ 47 Director 1999
Gary M. Pittman................. 38 Director 1997
Barry E. Stewart................ 47 Director 2001
William R. Ziegler.............. 60 Director 1997
The following is a brief description of the background and principal occupation
of each Executive Officer and Director:
JERRY D. DUMAS, SR. - Mr. Dumas became Chairman of the Board of Directors and
Chief Executive Officer of the Company effective with the closing of the Merger
between Flotek Industries, Inc. and Chemical & Equipment Specialties, Inc.
("CESI") on October 31, 2001. He has served as President, Chairman and Chief
Executive Officer of Flotek Industries, Inc. since September 1998. Prior to that
he was Vice President of Corporate and Executive Services with Merrill Lynch.
Mr. Dumas also served as Group Division President with Hughes Tool Company, a
predecessor to Baker Hughes, Inc.
GLENN S. PENNY - Mr. Penny became President, Chief Technical Officer and a
Director of the Company effective with the closing of the Merger with CESI. Mr.
Penny founded CESI in April 2000 and served as its President and Chief Executive
Officer. Prior to founding CESI, Mr. Penny served as President of Stim-Lab,
Inc., a company specializing in independent testing of completion fluids and
methods, from its founding in 1985 to April 2000. Stim-Lab, Inc. was acquired by
Core Laboratories N.V., an NYSE-listed oilfield service company, in 1997.
RICHARD L. JOHNSON II - Mr. Johnson has served as Senior Vice President of
Marketing and Sales of the Company since the Merger with CESI and was named a
Director in February 2002. He had been in the same capacity with CESI since
2000. Prior to joining CESI, Mr. Johnson was Technical Manager for Borden
Chemical, Inc. from 1998 to 2000 and served as Vice President of Sales and
Marketing for Stim-Lab, Inc. from 1995 to 1998.
RANDALL D. KEYS - Mr. Keys was appointed Chief Financial Officer of the Company
in December 2001. He has been engaged as an independent consultant to the
Company since September 2001. Mr. Keys served as Chief Financial Officer of Core
Laboratories N.V. and one of its predecessors from 1998 to 2001. During 1998, he
served as Chief Financial Officer of Consolidated Graphics, Inc., an NYSE-listed
printing company, and from 1997 to 1998 was Chief Financial Officer of 3DX
Technologies, Inc. a NASDAQ-listed seismic technology company. Mr. Keys is a
CPA.
3
ROGER K. PADGHAM - Mr. Padgham was named Vice President of International Sales
and a Director upon the closing of the Merger with CESI. He founded Padko
International, Inc., a company acquired by CESI in January 2001, and has served
as its President for the past five years. Padko is engaged in international
sales and marketing of specialty chemicals and manufactured equipment to the oil
and gas industry.
ROBERT S. BEALL - Mr. Beall was appointed as a Director of the Company upon the
closing of the Merger with CESI. He founded Beall Concrete Enterprises, Ltd. in
1980 and continues as its President. In February 2000, his company merged with
publicly traded U.S. Concrete, Inc.
JOHN W. CHISHOLM - Mr. Chisholm has served as a Director of the Company since
1999. He is currently Co-Chief Executive Officer of Wellogix, Inc., a technology
company which provides internet-based software applications to improve
productivity and collaboration in the oil and gas industry. From 1985 through
1998, Mr. Chisholm was the co-founder and President of ProTechnics Company,
which was acquired by Core Laboratories N.V. in 1996. After leaving Core
Laboratories in 1998 as Senior Vice President of Global Sales and Marketing, Mr.
Chisholm started Chisholm Energy Partners LLC to invest in mid-size energy
service companies, including Wellogix, Inc. and the Company.
GARY M. PITTMAN - Mr. Pittman has served as a Director of the Company since
1997. He is President and Chief Executive Officer of Pittman & Company, a
company he founded in 1995 to provide investment and merchant banking services
to private and public companies. From 1987 to 1995, Mr. Pittman was Vice
President of The Energy Recovery Fund, a $180MM private equity fund focused on
the energy industry. Mr. Pittman serves as Chairman of the Company's
Compensation Committee.
BARRY E. STEWART - Mr. Stewart was appointed as a Director of the Company upon
the closing of the Merger with CESI. Since 2000, he has served as Chief
Financial Officer of Inphact, Inc., a provider of internet-based radiology
services to the health care industry. He was previously Vice President of
Finance for Community Health Systems, a leading NYSE-listed hospital chain. Mr.
Stewart is a CPA and serves as Chairman of the Company's Audit Committee.
WILLIAM R. ZIEGLER - Mr. Ziegler has been a director of the Company since 1997.
He has been of counsel to the law firm of Satterlee, Stephens, Burke & Burke LLP
since January 2001. Prior to that time he was a partner in that law firm and
predecessor firms for over five years. Mr. Ziegler is a director of Grey Wolf,
Inc., a provider of contract land drilling services to the oil and gas industry
and Geokinetics, Inc., a provider of seismic acquisition and geophysical
services to the oil and gas industry.
Compliance with Section 16(a) of the Securities Exchange Act
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the Rules
issued thereunder, the Company's directors and executive officers are required
to file with the Securities and Exchange Commission ("SEC") reports of ownership
and changes in ownership of Common Stock. Copies of such forms are required to
be filed with the Company. Based solely on its review of copies of such reports
furnished to the Company, the Company believes that the directors and executive
officers were in substantial compliance with the filing requirements of Section
16(a), except as follows. Mr. Beall, Mr. Penny, Mr. Johnson, Mr. Keys, Mr.
Padgham, Mr. Stewart and Mr. Tom D. Morton (a former director) were each late
filing Form 3, "Initial Statement of Beneficial Ownership" after appointment to
their respective positions as officers and directors of the Company following
the Merger with CESI. Additionally, Mr. Chisholm, Mr. Dumas and Mr. Ziegler were
each late filing Form 4, "Statement of Changes in Beneficial Ownership", to
reflect the conversion of securities and exercise of warrants in connection with
the Merger with CESI. Mr. Pittman was late filing Form 5, "Annual Statement of
Changes in Beneficial Ownership" to report stock options granted to him during
2001. None of these filings reported transactions involving the sale of the
Company's common stock, nor did they report market purchases of common stock.
4
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth cash and certain other compensation paid to or
earned by the Chief Executive Officer and other Executive Officers who earned at
least $100,000 in cash compensation for the years indicated. Amounts in the
table include all compensation paid and stock options granted by the Company and
its predecessor, CESI.
Summary Compensation Table
Securities
Underlying All Other
Name and Principal Position Year Salary Options Compensation
Jerry D. Dumas, Sr.................... 2001 $ 66,000 43,750 $ -
Chairman and Chief Executive Officer 2000 $ - 16,667 $ -
1999 $ - - $ -
Glenn S. Penny......................... 2001 $100,000 - $ -
President and Chief Technical Officer 2000 $ 50,000 - $ -
1999 $ - - $ -
Mr. Dumas did not receive a salary prior to May 2001. There were no bonuses paid
to any Executive Officers in any of the years presented.
Option Grants in 2001
The Company does not currently have a formal stock option plan. The following
options were granted by the Board of Directors at fair market value on the date
of grant.
Number of Shares Percent of Total Exercise
Underlying Options Granted to Price
Name Options Granted Employees in 2001 per Share Expiration Date
---- --------------- ----------------- --------- ---------------
Jerry D. Dumas, Sr.................. 43,750 35.4% $ 4.20 April 11, 2006
Of the options granted to Mr. Dumas, 27,083 shares were immediately vested on
the date of grant. The remaining 16,667 shares vest in three equal installments
on each of the first six-month anniversary dates.
Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Year-End (#) at Year-End ($)
----------------------- ---------------
Name Exercisable Unexercisable Exercisable Unexercisable
Jerry D. Dumas, Sr............... 65,972 11,111 $ 6,667 $ -
There were no stock options exercised by Executive Officers in 2001. The value
of unexercised in-the-money options was calculated as the positive difference
between the closing price for the Company's common stock on December 31, 2001
($4.00 per share) and the exercise price of each stock option grant.
Compensation of Directors
Directors who are not employees of the Company are paid $250 for each meeting
attended. In April 2001, each non-employee director was granted an option to
purchase 2,083 common shares at an exercise price of $4.20 per share, the fair
5
market value on the date of grant. These options were immediately vested and
expire in April 2006. In addition, Mr. Pittman was granted an option to purchase
8,333 shares of common stock for his efforts in connection with the Merger with
CESI.
Employment Contracts
Mr. Penny is covered by an employment contract which provides for minimum
compensation of $100,000 per year through January 21, 2004. The contract cannot
be terminated except for cause and requires continuing salary payments for the
remaining term in the event of involuntary termination, including termination in
connection with a change in control.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 26, 2002, information with respect
to the beneficial ownership of the Company's common stock by Executive Officers
and Directors and persons known by management of the Company to be the
beneficial owners of more than 5% of the outstanding shares of common stock.
Shares Right to Total Percent
Name of Beneficial Owner Owned (a) Acquire (b) Shares of Class
------------------------ --------- ----------- ------ --------
Executive Officers and Directors:
Jerry D. Dumas, Sr. (c)................. 57,551 71,527 129,078 2.6%
Glenn S. Penny.......................... 1,200,505 - 1,200,505 24.4%
Richard L. Johnson II (d)............... 326,412 - 326,412 6.6%
Roger K. Padgham........................ 65,291 - 65,291 1.3%
Robert S. Beall......................... 293,810 - 293,810 6.0%
John W. Chisholm (e).................... 225,099 29,012 254,111 5.1%
Gary M. Pittman......................... - 11,250 11,250 0.2%
William R. Ziegler (f).................. 76,232 2,916 79,148 1.6%
All directors and officers as a group... 2,244,900 114,705 2,359,605 47.0%
Other Beneficial Owners:
TOSI, L.P. (g).......................... 533,907 - 533,907 10.9%
1601 Elm Street, Suite 3900
Dallas, Texas 75201
John Todd Sanner (h).................... 195,873 65,291 261,164 5.2%
1004 S. Plainsman Road
Marlow, Oklahoma 73534
(a) Each person has sole voting and investment power with respect to the common
shares listed, except as noted below. The address for each of the Executive
Officers and Directors is 7030 Empire Central Drive, Houston, Texas 77040.
(b) Includes common shares which may be acquired within 60 days of April 26,
2002 through the exercise of employee stock options or warrants to acquire
common shares.
(c) Includes 35,648 common shares owned by Saxton River Corporation and 21,903
common shares owned by Hinckley Brook, Inc., both of which are controlled by Mr.
Dumas.
(d) Includes 199,603 common shares held in IRA account for the benefit of Mr.
Johnson and 26,116 common shares held by Mr. Johnson's wife for which Mr.
Johnson shares voting and dispositive powers.
(e) Includes 211,211 common shares and warrants to acquire 26,929 shares held by
Chisholm Energy Partners LLC, of which Mr. Chisholm is a manager and member.
Also includes 13,888 common shares held by ProTechnics II (Nevada), Inc. of
which Mr. Chisholm is President.
(f) Includes 1,666 shares held by Marlin Investors, LLC, of which Mr. Ziegler is
the sole managing member.
(g) The sole general partner of TOSI, L.P., Pitman Property Corp. and its
President and controlling person, J.W. Beavers, may also be deemed to be the
beneficial owners of those shares.
(h) Mr. Sanner is Vice President of Chemical Operations for the Company.
6
ITEM 12. CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT
The Company leases certain automobiles and equipment from corporations
controlled by Mr. Dumas. Payments under these leases totalled approximately
$52,000 during the year ended December 31, 2001 and the remaining balance owed
at that date was approximately $43,000. The Company also owes $120,839 to a
corporation controlled by Mr. Dumas pursuant to a loan made in 1999. This loan
bears interest at the rate of 10%.
During 2000, Mr. Ziegler made loans to the Company totalling $70,000. The loans,
together with interest at 10%, were repaid during 2001. The Company from time to
time utilizes the services of Satterlee, Stephens, Burke & Burke LLP. Mr.
Ziegler is of counsel with the firm. The Company paid the firm approximately
$27,000 for services during the year ended December 31, 2001 and owed
approximately $15,000 on that date.
Subsequent to December 31, 2001, the Company entered into a sale-leaseback
transaction with Oklahoma Facilities LLC ("Facilities"), in which Mr. Penny is
an officer and has a minority investment interest. Facilities assumed the
capital lease obligation on one of the Company's operating facilities in the
amount of $639,000 and paid the Company net cash proceeds of approximately
$761,000. The transaction is not expected to result in any significant gain or
loss. The Company simultaneously entered into a lease agreement with Facilities
under which it is obligated to pay average rent of $18,000 per month for a fixed
term of ten years. Additionally, pursuant to an arrangement which existed at the
time of the Merger between the Company and CESI, Mr. Penny is a personal
guarantor on substantially all of the bank debt of the Company. Mr. Penny does
not receive any compensation for this guarantee.
Effective October 15, 2001, the Company entered into an arrangement with Pittman
& Company under which the Company pays $5,000 per month for investment banking
services and consulting on mergers and acquisitions. Mr. Pittman is the Chief
Executive Officer and sole owner of Pittman & Company. The agreement is
cancelable by either party upon 30 days written notice.
Effective January 1, 2002, the Company entered into an arrangement with Chisholm
Management, Inc. under which the Company pays $5,000 per month for marketing and
sales consulting services. Mr. Chisholm is the President and sole owner of
Chisholm Management, Inc. The agreement is cancelable by either party upon 30
days written notice.
7
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ Jerry D. Dumas, Sr.
---------------------------
Jerry D. Dumas, Sr.
Chairman and Chief Executive Officer