HOUSTON, June 15, 2012 /PRNewswire/ -- Flotek Industries, Inc. ("Flotek" or the "Company") (NYSE: FTK) announced today an agreement with all current warrant holders (the "Holders") to remove certain provisions that cause the Company to treat the warrants as derivative instruments ("Derivatives") under Generally Accepted Accounting Principles ("GAAP").
The conditions to be deleted include provisions related to the requirement of the Company to make cash payments to Holders upon certain fundamental transactions that result in a change of control. In addition, provisions related to the adjustment of the exercise price of the warrants in the case of certain actions by the Company have also been removed.
The removal of these provisions will allow Flotek to discontinue the treatment of these warrants as Derivatives for the purposes of GAAP accounting presentations. As a result, the Company will make a final fair value determination on the official date of the Amendment with any change in the fair value from the last valuation date recorded in income during the second quarter. The revalued warrant liability will be reclassified to additional-paid in capital and will no longer be adjusted to fair value. Going forward, there will be no additional fair value adjustments as the warrant will cease to be treated as Derivatives under GAAP accounting standards."The agreement by our warrant holders to amend their warrants to simplify our income statement presentation is another step in our quest to create clear and transparent financial statements to our stakeholders," said John Chisholm, Chairman, President and Chief Executive Officer of Flotek. "We believe the confusion associated with our warrant accounting has caused some potential investors to eschew Flotek due to the complexity of our earnings calculations. We appreciate the support of our warrant holders in making Flotek's accounting presentations more straightforward for all investors. This will further highlight the real earnings power of Flotek." In consideration for the Amendment, Flotek has paid $0.20 cash per outstanding warrant. Total consideration is approximately $335,000. The complete Amendment will be filed on a Current Report on Form 8-K with the U.S. Securities and Exchange Commission.