FLOTEK INDUSTRIES INC/CN/ 10-Q

Item 1. Financial Statements FLOTEK INDUSTRIES INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) June 30, 2025 December 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 5,028 $ 4,404 Restricted cash 103 102 Accounts receivable, net of allowance for credit losses of $ 430 and $ 447 at June 30, 2025 and December 31, 2024, respectively 22,221 17,386 Accounts receivable, related party, net of allowance for credit losses of $ 0 at June 30, 2025 and December 31, 2024 37,350 52,370 Inventories, net 12,302 13,303 Other current assets 3,084 2,952 Current contract asset 6,743 5,939 Total current assets 86,831 96,456 Long-term contract asset 59,386 63,105 Property and equipment, net 21,223 6,178 Right-of-use assets 3,174 3,326 Deferred tax assets, net 35 51 Other long-term assets 1,594 1,680 TOTAL ASSETS $ 172,243 $ 170,796 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 36,350 $ 38,073 Accrued liabilities 3,905 5,912 Accrued liabilities, related party 7,248 — Income taxes payable 85 48 Interest payable, related party 701 — Current portion of operating lease liabilities 1,186 1,486 Current portion of finance lease liabilities 146 — Asset-based loan 5,055 4,789 Current portion of long-term debt — 60 Total current liabilities 54,676 50,368 Deferred revenue, long-term — 14 Note payable - related party, net of deferred financing costs 39,536 — Long-term operating lease liabilities 5,879 6,514 Long-term finance lease liabilities 302 — TOTAL LIABILITIES 100,393 56,896 Stockholders’ equity: Preferred stock, $ 0.0001 par value, 100,000 shares authorized; no shares issued and outstanding — — Common stock, $ 0.0001 par value, 240,000,000 shares authorized; 30,968,827 shares issued and 29,854,440 shares outstanding at June 30, 2025; 30,938,073 shares issued and 29,826,508 shares outstanding at December 31, 2024 3 3 Additional paid-in capital 415,637 464,620 Accumulated other comprehensive income 96 251 Accumulated deficit ( 309,160 ) ( 316,308 ) Treasury stock, at cost; 1,114,387 and 1,111,565 shares at June 30, 2025 and December 31, 2024, respectively ( 34,726 ) ( 34,666 ) Total stockholders’ equity 71,850 113,900 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 172,243 $ 170,796 The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements. 4 FLOTEK INDUSTRIES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Revenue: Revenue from external customers $ 25,182 $ 18,191 $ 49,605 $ 31,371 Revenue from related party 33,168 27,961 64,107 55,155 Total revenues 58,350 46,152 113,712 86,526 Cost of sales 43,943 36,982 86,856 68,535 Gross profit 14,407 9,170 26,856 17,991 Operating costs and expenses: Selling, general, and administrative 6,796 6,279 13,078 12,365 Asset acquisition expenses 4,195 — 4,195 — Depreciation 374 222 626 442 Research and development 455 481 810 888 Gain on sale of property and equipment — ( 34 ) ( 7 ) ( 34 ) Total operating costs and expenses 11,820 6,948 18,702 13,661 Income from operations 2,587 2,222 8,154 4,330 Other income (expense): Interest expense ( 983 ) ( 308 ) ( 1,212 ) ( 586 ) Other income, net 181 75 287 49 Total other expense ( 802 ) ( 233 ) ( 925 ) ( 537 ) Income before income taxes 1,785 1,989 7,229 3,793 Income tax expense ( 17 ) ( 15 ) ( 81 ) ( 257 ) Net income $ 1,768 $ 1,974 $ 7,148 $ 3,536 Income per common share: Basic $ 0.05 $ 0.07 $ 0.22 $ 0.12 Diluted $ 0.05 $ 0.06 $ 0.21 $ 0.12 Weighted average common shares: Weighted average common shares used in computing basic income per common share 33,947 29,449 31,827 29,440 Weighted average common shares used in computing diluted income per common share 36,231 30,668 34,026 30,512 The accompanying Notes are an integral part of these Consolidated Financial Statements. 5 FLOTEK INDUSTRIES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Net income $ 1,768 $ 1,974 $ 7,148 $ 3,536 Other comprehensive income: Foreign currency translation adjustment ( 110 ) 16 ( 155 ) 58 Comprehensive income $ 1,658 $ 1,990 $ 6,993 $ 3,594 The accompanying Notes are an integral part of these Consolidated Financial Statements. 6 FLOTEK INDUSTRIES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) Six months ended June 30, 2025 2024 Cash flows from operating activities: Net income $ 7,148 $ 3,536 Adjustments to reconcile net income to net cash provided by operating activities: Change in fair value of contingent consideration ( 127 ) ( 27 ) Amortization of contract assets 2,916 2,749 Depreciation 626 442 Amortization of deferred financing costs 157 170 Provision for credit losses, net of recoveries 261 79 Provision for excess and obsolete inventory 250 433 Gain on sale of property and equipment ( 7 ) ( 34 ) Non-cash lease expense 624 1,236 Stock compensation expense 1,137 642 Deferred income tax expense 16 216 Changes in current assets and liabilities: Accounts receivable ( 5,096 ) 292 Accounts receivable, related party ( 2,532 ) ( 5,480 ) Inventories 1,448 192 Income tax receivable ( 32 ) — Other assets ( 155 ) 688 Accounts payable ( 1,722 ) 50 Accrued liabilities ( 1,893 ) ( 2,837 ) Operating lease liabilities ( 935 ) ( 1,510 ) Income taxes payable 37 ( 10 ) Interest payable, related party 701 — Net cash provided by operating activities 2,822 827 Cash flows from investing activities: Capital expenditures ( 1,309 ) ( 229 ) Proceeds from sale of assets 7 34 Net cash used in investing activities ( 1,302 ) ( 195 ) Cash flows from financing activities: Payments on long term debt ( 60 ) ( 90 ) Proceeds from asset-based loan 106,950 83,300 Payments on asset-based loan ( 106,685 ) ( 84,994 ) Payment of note payable issuance costs ( 480 ) — Payment of stock warrant issuance costs ( 456 ) — Payments to tax authorities for shares withheld from employees ( 60 ) ( 24 ) Proceeds from issuance of stock under Employee Stock Purchase Plan 68 62 Proceeds from issuance of stock from stock option exercises 8 — Payments for finance leases ( 25 ) ( 19 ) Net cash used in financing activities ( 740 ) ( 1,765 ) Effect of changes in exchange rates on cash and cash equivalents ( 155 ) 58 Net change in cash and cash equivalents and restricted cash 625 ( 1,075 ) Cash and cash equivalents at the beginning of period 4,404 5,851 Restricted cash at the beginning of period 102 102 Cash and cash equivalents and restricted cash at beginning of period 4,506 5,953 Cash and cash equivalents at end of period 5,028 4,777 Restricted cash at the end of period 103 101 Cash and cash equivalents and restricted cash at end of period $ 5,131 $ 4,878 The accompanying Notes are an integral part of these Consolidated Financial Statements. 7 FLOTEK INDUSTRIES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Three Months Ended June 30, 2025 Common Stock Treasury Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Shares Issued Par Value Shares Cost Balance, March 31, 2025 30,941 $ 3 1,114 $ ( 34,689 ) $ 465,112 $ 206 $ ( 310,928 ) $ 119,704 Net income — — — — — — 1,768 1,768 Foreign currency translation adjustment — — — — — ( 110 ) — ( 110 ) Stock issued under option exercises 2 — — — 8 — — 8 Stock issued under employee stock purchase plan — — ( 5 ) — 37 — — 37 Restricted stock granted 26 — — — — — — — Stock compensation expense — — — — 676 — — 676 Shares withheld to cover taxes — — 5 ( 37 ) — — — ( 37 ) Excess consideration over historical asset book value (Note 3) — — — — ( 92,400 ) — — ( 92,400 ) Issuance of April 2025 Warrant, net (Note 3) — — — — 42,204 — — 42,204 Balance, June 30, 2025 30,969 $ 3 1,114 $ ( 34,726 ) $ 415,637 $ 96 $ ( 309,160 ) $ 71,850 Three Months Ended June 30, 2024 Common Stock Treasury Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Shares Issued Par Value Shares Cost Balance, March 31, 2024 30,773 $ 3 1,112 $ ( 34,514 ) $ 463,484 $ 169 $ ( 325,244 ) $ 103,898 Net income — — — — — — 1,974 1,974 Foreign currency translation adjustment — — — — — 16 — 16 Stock issued under employee stock purchase plan — — ( 9 ) — 28 — — 28 Restricted stock granted 94 — — — — — — — Stock compensation expense — — — — 332 — — 332 Shares withheld to cover taxes — — 4 ( 14 ) — — — ( 14 ) Balance, June 30, 2024 30,867 $ 3 1,107 $ ( 34,528 ) $ 463,844 $ 185 $ ( 323,270 ) $ 106,234 The accompanying Notes are an integral part of these Consolidated Financial Statements. 8 FLOTEK INDUSTRIES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Six Months Ended June 30, 2025 Common Stock Treasury Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Shares Issued Par Value Shares Cost Balance, December 31, 2024 30,938 $ 3 1,112 $ ( 34,666 ) $ 464,620 $ 251 $ ( 316,308 ) $ 113,900 Net income — — — — — — 7,148 7,148 Foreign currency translation adjustment — — — — — ( 155 ) — ( 155 ) Stock issued under stock option exercises 2 — — — 8 — — 8 Stock issued under employee stock purchase plan — — ( 9 ) — 68 — — 68 Restricted stock granted 26 — — — — — — — Restricted stock forfeited — — 3 — — — — — Restricted stock units vested 3 — — — — — — — Stock compensation expense — — — — 1,137 — — 1,137 Shares withheld to cover taxes — — 8 ( 60 ) — — — ( 60 ) Excess consideration over historical asset book value (Note 3) — — — — ( 92,400 ) — — ( 92,400 ) Issuance of April 2025 Warrant, net (Note 3) — — — — 42,204 — — 42,204 Balance, June 30, 2025 30,969 $ 3 1,114 $ ( 34,726 ) $ 415,637 $ 96 $ ( 309,160 ) $ 71,850 Six Months Ended June 30, 2024 Common Stock Treasury Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Shares Issued Par Value Shares Cost Balance, December 31, 2023 30,773 $ 3 1,109 $ ( 34,504 ) $ 463,140 $ 127 $ ( 326,806 ) $ 101,960 Net income — — — — — — 3,536 3,536 Foreign currency translation adjustment — — — — — 58 — 58 Stock issued under employee stock purchase plan — — ( 19 ) — 62 — — 62 Restricted stock granted 94 — — — — — — — Restricted stock forfeited — — 11 — — — — — Stock compensation expense — — — — 642 — — 642 Shares withheld to cover taxes — — 6 ( 24 ) — — — ( 24 ) Balance, June 30, 2024 30,867 $ 3 1,107 $ ( 34,528 ) $ 463,844 $ 185 $ ( 323,270 ) $ 106,234 The accompanying Notes are an integral part of these Consolidated Financial Statements. 9 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 — Organization and Nature of Operations General Flotek strives to be the collaborative partner of choice for solutions that reduce the environmental impact of energy on air, water, land and people. An advanced technology-driven, chemical and data analytics company, Flotek seeks to provide unique and innovative solutions to its customers in both the domestic and international energy markets. The Company is committed to delivering products and services that endeavor to maximize customer returns by leveraging chemistry as the common value creation platform. The Company’s Chemistry Technologies (“CT”) segment designs, develops, manufactures, packages, distributes and markets optimized chemistry solutions that we believe help customers improve their return on invested capital, lower operational costs and realize tangible environmental benefits aimed at enhancing the profitability of hydrocarbon producers. The Company’s Data Analytics (“DA”) delivers real-time information and insights to its customers to enable optimization of operations and reduction of emissions and their carbon intensity. We believe customers using this technology have obtained significant benefits, including additional profits, by enhancing operations in crude/condensates stabilization, enhancing blending operations, reducing time impacting transmix operations, increasing efficiencies and optimization of gas plants, allowing for the use of significantly lower cost field gas instead of diesel to generate power, lowering emissions, protecting equipment and ensuring product quality while reducing giveaways, i.e., providing higher value products at lower value product prices. Our ability to facilitate the use of lower cost field gas to generate remote power solutions has been significantly enhanced through the acquisition of the assets described in Note 3, “Asset Acquisition.” The Company’s two operating segments, CT and DA, are supported by its Research & Innovation (“R&I”) advanced laboratory capabilities. For further discussion of our operations and segments, see Note 18, “Business Segment, Geographic and Major Customer Information.” As used herein, “Flotek,” the “Company,” “we,” “our” and “us” refers to Flotek Industries, Inc. and/or the Company’s wholly-owned subsidiaries. The use of these terms is not intended to connote any particular corporate status or relationship. Note 2 — Summary of Significant Accounting Policies Please refer to Note 2, “Summary of Significant Accounting Policies” to the consolidated financial statements from the 2024 Annual Report for the discussion of significant accounting policies. Accounts Receivable and Allowance for Credit Losses Changes in the allowance for credit losses are as follows (in thousands): June 30, 2025 December 31, 2024 Balance, beginning of year $ 447 $ 745 Charges to provision for credit losses, net of recoveries 261 181 Write-offs ( 278 ) ( 479 ) Balance, end of period $ 430 $ 447 As of June 30, 2025 and December 31, 2024, the Company had not recorded an allowance for credit losses for the related party accounts receivable from ProFrac Services, LLC (“ProFrac Services”) (see Note 17, “Related Party Transactions”). Lessor Arrangements The Company accounts for leasing arrangements in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 842, “Leases” (“ASC 842”). On April 28, 2025, the Company entered into an equipment lease, the Lease Agreement (as defined below), with a related party customer under an operating lease arrangement (see Note 3, “Asset Acquisition”). At contract inception, an evaluation is performed to determine if the lease arrangement conveys the right to control the use of an identified asset. To the extent such rights of control are conveyed, a further assessment is made as to the applicable lease classification. In determining whether a transaction should be classified as a sales-type or operating lease, the Company considers the following criteria at lease commencement: (1) whether title of the asset transfers automatically or for a nominal fee by the end of the lease term, (2) whether the present value of the minimum lease payments equals or exceeds substantially all of the fair value of the leased asset, (3) whether the lease term is for the 10 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS major part of the remaining economic life of the leased asset , (4) whether the lease grants the lessee an option to purchase the leased asset that the lessee is reasonably certain to exercise, and (5) whether the underlying asset is of such a specialized nature that it is expected to have no alternative use to the Company at the end of the lease term. If any of these criteria are met, the lease is classified as a sales-type lease. For the three and six month periods ended June 30, 2025 and 2024, the Company did not have any sales-type leases. For operating leases, rental income is recognized on a straight-line basis over the lease term as lease revenue. The cost of customer-leased equipment is recorded within Property and equipment, net in the balance sheets and depreciated over the equipment’s estimated useful life. Depreciation expense associated with the leased equipment under operating lease arrangements is reflected in Depreciation in the statements of operations. Recent Accounting Pronouncements Changes to U.S. GAAP are established by the FASB. We evaluate the applicability and impact of all authoritative guidance issued by the FASB. Guidance not listed below was assessed and determined to be either not applicable, clarifications of items listed below, have no material effect on the Company’s financial statements or already adopted by the Company. New Accounting Standards Issued and Not Adopted as of June 30, 2025 In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for the Company prospectively to all annual periods beginning for the annual period ending December 31, 2025. The FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures” (“ASU 2024-03”), which enhances the disclosures required for certain expense captions in the Company's annual and interim consolidated financial statements. ASU 2024-03 is effective prospectively or retrospectively for fiscal years beginning after December 15, 2026 and for interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its disclosures. Note 3 — Asset Acquisition The Company entered into a series of transactions in connection with an Asset Purchase Agreement, dated as of April 28, 2025 (the “Purchase Agreement”), with ProFrac GDM, LLC (“ProFrac GDM”), an indirect subsidiary of ProFrac Holding Corp. (“ProFrac”), and various subsidiaries of ProFrac, pursuant to which, among other things, the Company acquired certain mobile power generation assets, comprised of twenty-two operating units and eight units under construction, certain inventory and related intellectual property (the “Acquired Assets”). Concurrently, the Leased Equipment (as defined below) was leased back to ProFrac GDM pursuant to an Agreement for Equipment Rental, dated as of April 28, 2025, by and between PWRtek, LLC (“PWRtek”), a wholly-owned subsidiary of the Company, and ProFrac GDM (the “Lease Agreement”) (collectively, the “PWRtek Transactions”). In accordance with FASB ASC 805, “Business Combinations,” the acquisition of the Acquired Assets is classified as an asset acquisition between entities under common control. Pursuant to the terms of the Lease Agreement, ProFrac GDM agreed to lease from PWRtek, for a period of six years, twenty-two operating mobile power generation assets, comprised of fourteen digitally enhanced mobile natural gas power generation filtration units and eight gas distribution units and eight additional units, comprised of seven gas distribution units and one mobile natural gas power generation filtration unit, that were under construction (collectively, the “Leased Equipment”) as of April 28, 2025. The Lease Agreement provides for fixed rental rates for the Leased Equipment during the first five years of the Lease Agreement and then prevailing market rates during the sixth year. The Lease Agreement does not include a purchase option for the purchase of the Leased Equipment at the end of the Lease Agreement term. The Company began recognizing lease revenue associated with the twenty-two operating mobile power generation assets on April 28, 2025, the effective date of the Lease Agreement. With respect to the Leased Equipment under construction, the Company will recognize lease revenue at the earlier of the in-service date or January 1, 2026. In accordance with ASC 842, the Lease Agreement is accounted for as an operating lease. Total consideration paid by the Company in connection with the PWRtek Transactions was $ 107.5 million, which consisted of the following: (1) an offset of $ 17.6 million against the Company’s accrued 2024 Contract Shortfall Fee (see Note 17, “Related Party Transactions”), which was the consideration for the acquisition of the Acquired Assets, (2) a warrant (the “April 2025 Warrant”) to purchase 6,000,000 shares of the Company’s common stock, (3) a secured promissory note, issued by PWRtek in the initial principal amount of $ 40 million (the “PWRtek Note”), and (4) offsets against potential future period Contract 11 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Shortfall Fee amounts that may become due under the ProFrac Agreement (see Note 17, “Related Party Transactions”). The estimated fair value of the Leased Equipment was deemed to be in excess of the total consideration of $ 107.5 million. The April 2025 Warrant has a seven -year term and can be exercised on a cashless basis for nominal consideration at any time following the date on which the Company’s stockholders have approved the issuance of the shares of the Company’s common stock underlying the April 2025 Warrant. On July 9, 2025, the Company held a special stockholders meeting where the Company’s stockholders approved the issuance of the 6,000,000 shares of the Company’s common stock underlying the April 2025 Warrant. The fair value of the April 2025 Warrant was $ 42.7 million. The Company recorded the fair value of the April 2025 Warrant as additional paid in capital within stockholders’ equity, net of $ 0.5 million of issuance costs, as the April 2025 Warrant is classified as equity. The PWRtek Note provides for a five -year term and is subject to a 10 % annual interest rate, payable quarterly in cash or in-kind (i.e., added to the principal balance quarterly) at PWRtek’s option. The principal becomes due at the end of the five-year term on April 28, 2030. PWRtek’s obligations under the PWRtek Note are secured by a first priority lien on the Acquired Assets, including the Leased Equipment, as well as certain other after-acquired property of PWRtek. While the PWRtek Note includes certain prepayment restrictions, Flotek and ProFrac GDM can each elect to apply up to fifty percent cumulatively of any future Contract Shortfall Fee (see Note 17, “Related Party Transactions”) that becomes due and payable under the ProFrac Agreement to prepay principal and interest due under the PWRtek Note without penalty. The obligations under the PWRtek Note have been guaranteed by the Company. The Company recorded $ 0.5 million as deferred financing costs on April 28, 2025. As of June 30, 2025, there was $ 39.5 million outstanding, net of unamortized deferred financing costs of $ 0.5 million under the PWRtek Note. See Note 10 - “Debt” for additional information. For the three and six months ended June 30, 2025, interest expense related to the PWRtek Note was $ 0.7 million and as of June 30, 2025, interest payable related to the PWRtek Note was $ 0.7 million. Contract Shortfall Fees for the measurement period of January 1, 2024 through December 31, 2024 totaled approximately $ 32.6 million (the “2024 Contract Shortfall Fees”) and was included in accounts receivable, related party as of December 31, 2024. The Company collected $ 15.0 million of the 2024 Contract Shortfall Fees in cash in March 2025. The remaining 2024 Contract Shortfall Fees of $ 17.6 million were offset as consideration for the Acquired Assets as described above. Due to ProFrac controlling more than 50% of the Company’s outstanding shares (see Note 17, “Related Party Transaction”), the acquisition of the Acquired Assets qualified as a transfer of assets between entities under common control. As such, the Acquired Assets have been recorded at ProFrac’s historical book value of approximately $ 15.1 million as of April 28, 2025. The total consideration paid by the Company in connection with the PWRtek Transactions in excess of ProFrac’s historical book value of the Acquired Assets of $ 92.4 million was recorded as a reduction to additional paid in capital for the PWRtek Transactions within stockholders’ equity. Financial results from the Lease Agreement and operation of the Acquired Assets are reported within the Company’s DA segment. See Note 8 - “Leases” for additional information. The following table summarizes the consideration transferred and the historical book value of identified Acquired Assets at the date of the PWRtek Transactions: April 28, 2025 (in thousands) Components of consideration: April 2025 Warrant exercisable into 6,000,000 shares $ 42,660 PWRtek Note 40,000 2024 Contractual Shortfall Fee offset 17,552 Future Contract Shortfall Fee offset 7,248 Total consideration $ 107,460 Asset historical book value: Leased equipment $ 14,460 Inventory 600 Total assets book value $ 15,060 Excess consideration over assets historical book value $ 92,400 12 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 — Revenue from Contracts with Customers Disaggregation of Revenue The Company differentiates revenue based on whether the source of revenue is attributable to product sales, service revenue or rental income. Product, service and rental revenues include sales to related parties as described in Note 17, “Related Party Transactions.” Total revenue disaggregated by revenue source is as follows (in thousands): Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Revenue: Products $ 53,406 $ 44,694 $ 107,031 $ 83,809 Services 1,716 1,458 3,453 2,717 Rental 3,228 — 3,228 — $ 58,350 $ 46,152 $ 113,712 $ 86,526 Disaggregation of Cost of Sales The Company differentiates cost of sales based on whether the cost is attributable to tangible goods sold, cost of services sold or other costs that cannot be directly attributed to either tangible goods or services. Total cost of sales disaggregated is as follows (in thousands): Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Cost of sales: Tangible goods sold $ 38,933 $ 32,215 $ 77,165 $ 59,240 Services 147 88 326 182 Other 4,863 4,679 9,365 9,113 $ 43,943 $ 36,982 $ 86,856 $ 68,535 Other cost of sales represents costs directly associated with the generation of revenue that cannot be attributed directly to tangible goods sold or services. Other cost of sales for the three and six months ended June 30, 2025 includes $ 0.2 million related to the Lease Agreement. Examples of other costs of sales are certain personnel costs and equipment rental and insurance costs. Cost of sales, disaggregated between external customers and related party, is as follows (in thousands): Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Cost of sales: Cost of sales for external customers $ 21,658 $ 17,486 $ 43,318 $ 30,439 Cost of sales for related party 22,285 19,496 43,538 38,096 $ 43,943 $ 36,982 $ 86,856 $ 68,535 Note 5 — Contract Assets Contract assets are as follows (in thousands): June 30, 2025 December 31, 2024 Contract assets $ 83,060 $ 83,060 Less accumulated amortization ( 16,931 ) ( 14,016 ) Contract assets, net 66,129 69,044 Less current contract assets ( 6,743 ) ( 5,939 ) Contract assets, long term $ 59,386 $ 63,105 13 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In connection with entering into the Initial ProFrac Agreement (defined below) and Amended ProFrac Agreement (defined below) on February 2, 2022 and May 17, 2022, respectively, as discussed in Note 17, “Related Party Transactions,” the Company recognized contract assets of $ 10.0 million and $ 69.5 million, respectively, and associated fees of $ 3.6 million. As of June 30, 2025 and December 31, 2024, $ 59.4 million and $ 63.1 million, respectively, of the contract assets were classified as long term based upon our estimate of the forecasted revenues from the ProFrac Agreement that will not be realized within the next twelve months of the ProFrac Agreement. The Company’s estimate of the timing of the future contract revenues is evaluated on a quarterly basis. During the three months ended June 30, 2025 and 2024, the Company recognized $ 1.4 million and $ 1.5 million, respectively, of contract assets amortization that is recorded as a reduction of the transaction price included in related party revenue in the consolidated statement of operations. During the six months ended June 30, 2025 and 2024, the Company recognized $ 2.9 million and $ 2.7 million, respectively, of contract assets amortization that is recorded as a reduction of the transaction price included in related party revenue in the consolidated statement of operations. The below table reflects our estimated amortization per year (in thousands) based on the Company’s current forecasted revenues from the ProFrac Agreement. Years ending December 31, Amortization 2025 (excluding first six months) $ 2,798 2026 9,006 2027 10,347 2028 10,347 2029 10,347 Thereafter through May 2032 23,284 Total contract assets $ 66,129 Note 6 — Inventories Inventories are as follows (in thousands): June 30, 2025 December 31, 2024 Raw materials $ 5,049 $ 4,945 Finished goods 12,214 13,581 Inventories 17,263 18,526 Less reserve for excess and obsolete inventory ( 4,961 ) ( 5,223 ) Inventories, net $ 12,302 $ 13,303 During the three months ended June 30, 2025 and 2024, additional reserves recorded were $ 0.2 million and $ 0.1 million, respectively, for the CT segment. For the three months ended June 30, 2025, additional reserves of $ 5 thousand were recorded for the DA segment with no additional reserves recorded for the three months ended June 30, 2024. During the six months ended June 30, 2025 and 2024, additional reserves recorded were $ 0.2 million and $ 0.4 million, respectively, for the CT segment and $ 18 thousand and $ 13 thousand, respectively, for the DA segment. 14 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 7 — Property and Equipment Property and equipment are as follows (in thousands): June 30, 2025 December 31, 2024 Land $ 886 $ 886 Land improvements 520 520 Buildings and leasehold improvements 6,682 5,722 Machinery and equipment 8,661 8,524 Leased equipment 14,475 — Furniture and fixtures 520 520 Transportation equipment 805 790 Computer equipment and software 1,570 1,531 Property and equipment 34,119 18,493 Less accumulated depreciation ( 12,896 ) ( 12,315 ) Property and equipment, net $ 21,223 $ 6,178 Leased equipment (See Note 3, “Asset Acquisition”) has an estimated useful life of ten years. Depreciation expense totaled $ 0.4 million and $ 0.2 million for the three months ended June 30, 2025 a nd 2024, respectively.Depreciation expense totaled $ 0.6 million and $ 0.4 million for the six months ended June 30, 2025 a nd 2024, respectively. Note 8 — Leases The components of lease expense and supplemental cash flow information are as follows (in thousands): Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Operating lease expense $ 413 $ 753 $ 904 $ 1,536 Finance lease expense: Amortization of assets 29 4 29 7 Interest on lease liabilities 8 — 8 — Total finance lease expense 37 4 37 7 Short-term lease expense 392 312 877 571 Total lease expense $ 842 $ 1,069 $ 1,818 $ 2,114 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 1,094 $ 1,334 $ 2,175 $ 2,988 Operating cash flows from finance leases 40 10 40 23 Financing cash flows from finance leases 8 — 8 — 15 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Maturities of lease liabilities as of June 30, 2025 are as follows (in thousands): Years ending December 31, Operating Leases Finance Leases 2025 (excluding first six months) $ 841 $ 90 2026 1,693 180 2027 1,741 180 2028 1,602 58 2029 1,641 — Thereafter 1,407 — Total lease payments $ 8,925 $ 508 Less: Interest ( 1,860 ) ( 60 ) Present value of lease liabilities $ 7,065 $ 448 Supplemental balance sheet information related to leases is as follows (in thousands): June 30, 2025 December 31, 2024 Operating Leases Operating lease right-of-use assets $ 2,730 $ 3,326 Current portion of operating lease liabilities 1,186 1,486 Long-term operating lease liabilities 5,879 6,514 Total operating lease liabilities $ 7,065 $ 8,000 Finance Leases Finance lease right-of-use assets $ 444 $ — Current portion of finance lease liabilities $ 146 $ — Long-term finance lease liabilities 302 — Total finance lease liabilities $ 448 $ — Weighted Average Remaining Lease Term Operating leases 5.2 years 5.4 years Finance leases 2.9 years — Weighted Average Discount Rate Operating leases 9.4 % 9.4 % Finance leases 9.5 % — % 16 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Lease Agreement Income The Company recorded income from the Lease Agreement (see Note 3, “Asset Acquisition”) of $ 3.2 million for both the three and six months ended June 30, 2025. At June 30, 2025, the minimum future lease income related to the Lease Agreement is as follows (in thousands): Years ending December 31, Lease Agreement Income 2025 (excluding first six months) (1) $ 10,218 2026 27,375 2027 27,375 2028 27,375 2029 27,375 Thereafter (2) 9,125 Total rental income (through April 2030) $ 128,843 (1) Excludes income from assets not placed in service at June 30, 2025. (2) Excludes rental income for the sixth year of the Lease Agreement as rental rates in year six will be determined based on prevailing market rates. Sublease Income On April 1, 2023, the Company entered into an agreement to sublease its office and lab space in Houston, Texas beginning September 1, 2023 and continuing through October 30, 2030. The Company recorded rental income from the sublease of $ 0.2 million and $ 0.2 million for the three months ended June 30, 2025 and 2024, respectively and $ 0.4 million and $ 0.4 million for the six months ended June 30, 2025 and 2024, respectively, which is included in the Company’s statement of operations in Other income (expense), net. Rental income from the sublease offsets the monthly rental expense from the Company’s lease of the facility. Sublease rental income for future years is as follows (in thousands): Years ending December 31, Sublease Income 2025 (excluding first six months) $ 383 2026 767 2027 767 2028 767 2029 767 Thereafter 640 Total rental income $ 4,091 Note 9 — Accrued Liabilities Current accrued liabilities are as follows (in thousands): June 30, 2025 December 31, 2024 Severance costs $ 398 $ 380 Payroll and benefits 1,596 2,901 Legal costs 137 99 Deferred revenue 878 808 Financed insurance 505 1,074 Other 391 650 Total current accrued liabilities $ 3,905 $ 5,912 17 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 — Debt Asset Based Loan In August 2023, the Company entered into a 24-month revolving loan and security agreement in connection with an Asset Based Loan, which was amended in October 2023, August 2024 and April 2025 (as amended the “ABL”). The August 2024 amendment to the ABL extended the maturity date to August 2026, increased the credit availability and lowered the interest rate spread. The ABL provides up to $ 20.0 million of credit availability, which is limited by a borrowing base consisting of (i) 85 % of eligible accounts receivable, plus (ii) 60 % of the value of eligible inventory not to exceed 100 % of the eligible accounts receivable, plus (iii) 60 % of the value of certain real estate holdings. As of June 30, 2025 and December 31, 2024, the Company had $ 5.1 million and $ 4.8 million, respectively, outstanding under the ABL. As of June 30, 2025, the Company had approximately $ 9.2 million of available borrowings under the ABL. During the three months ended June 30, 2025 and 2024, the Company incurred $ 0.2 million and $ 0.2 million, respectively, in interest and fees related to the ABL. During the six months ended June 30, 2025 and 2024, the Company incurred $ 0.3 million and $ 0.4 million, respectively, in interest and fees related to the ABL. As of June 30, 2025 and December 31, 2024, the Company recorded $ 0.2 million and $ 0.3 million, respectively, of unamortized deferred financing costs related to the ABL. Borrowings under the ABL bear interest at the Wall Street Journal Prime Rate (subject to a floor of 5.50 %) plus 2.0 % per annum. For both the three and six months ended June 30, 2025, the weighted-average interest rate was 9.5 %. The ABL contains an annual commitment fee equal to 1.0 % of the ABL’s borrowing base. Additionally, the Company will be assessed a non-usage fee of 0.25 % per quarter based on the difference between the average daily outstanding balance and the borrowing base limit of the ABL. If the ABL is terminated prior to the end of its term, the Company is required to pay an early termination fee of 2.5 % of the borrowing base limit of the ABL (if terminated with more than 12 months remaining until the maturity date) or 1.5 % of the borrowing base limit of the ABL (if terminated with less than 12 months remaining until the maturity date). The ABL contains customary representations, warranties, covenants and events of default, the occurrence of which would permit the lender to accelerate the payment of any amounts borrowed. In connection with the Company’s entry into the Purchase Agreement, the Company entered into the Letter Agreement with the lender whereby the lender will not test compliance with respect to the Tangible Net Worth (as defined in the ABL) covenant through and including December 31, 2025. Pursuant to the Letter Agreement, the Company will be required to maintain positive trailing three-month consolidated net income on a monthly basis through and including December 31, 2025 and PWRtek is prohibited from making distributions, except as permitted pursuant to the PWRtek Note. In addition, the ABL provides the lender a blanket security interest on all or substantially all of the Company’s assets, excluding the PWRtek Assets. The Company was in compliance with all of the applicable covenants under the ABL as of June 30, 2025. 18 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Related Party Note Payable As of June 30, 2025, amounts outstanding under the PWRtek Note (see Note 3, “Asset Acquisition”) are as follows (in thousands): June 30, 2025 PWRtek Note payable $ 40,000 Less: unamortized debt issuance cost ( 464 ) Total PWRtek Note payable $ 39,536 As of June 30, 2025, the fair value of the PWRtek Note approximated the carrying amount. Principal payment for future years is as follows (in thousands): Years ending December 31, Principal Payments 2025 (excluding first six months) $ — 2026 — 2027 — 2028 — 2029 — Thereafter 40,000 Total payments $ 40,000 Paycheck Protection Program Loan 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”). 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 that date of $ 0.1 million were forgiven. The remaining principal amount of $ 0.4 million and accrued interest was fully repaid as of April 15, 2025. Note 11 — Fair Value Measurements Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company categorizes financial assets and liabilities into the three levels of the fair value hierarchy. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value and bases categorization within the hierarchy on the lowest level of input that is available and significant to the fair value measurement. • Level 1 — Quoted prices in active markets for identical assets or liabilities; • Level 2 — Observable inputs other than Level 1, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and • Level 3 — Significant unobservable inputs that are supported by little or no market activity or that are based on the reporting entity’s assumptions about the inputs. Fair Value of Other Financial Instruments The carrying amounts of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accrued liabilities, accrued liabilities - related party, accounts payable and ABL approximate fair value due to the short-term nature of these accounts. 19 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Liabilities Measured at Fair Value on a Recurring Basis The following table presents the Company’s liabilities that are measured at fair value on a recurring basis and the level within the fair value hierarchy (in thousands): June 30, December 31, Level 1 Level 2 Level 3 2025 Level 1 Level 2 Level 3 2024 Contingent earnout consideration $ — $ — $ — $ — $ — $ — $ 127 $ 127 Total $ — $ — $ — $ — $ — $ — $ 127 $ 127 Contingent Earnout Consideration Key Inputs In connection with the acquisition of one of the Company’s wholly owned subsidiaries, JP3 Measurement, LLC, the Company entered into a stock performance earn-out provision with the sellers. The estimated fair value of the remaining stock performance earn-out provision, with respect to this transaction, is included in accrued liabilities as of December 31, 2024. The estimated fair value of the earn-out provision at the end of each period was valued using a Monte Carlo model analyzing 20,000 simulations performed using Geometric Brownian Motion with inputs such as risk-neutral expected growth and volatility as set forth in the table below. The earnout provision expired on May 18, 2025 and no payment was required to be made by the Company to the sellers. December 31, 2024 Risk-free interest rate 4.30 % Expected volatility 65.0 % Term until liquidation (years) 0.38 Stock price $ 9.53 Discount rate 8.00 % Assets Measured at Fair Value on a Nonrecurring Basis The Company’s non-financial assets, including property and equipment and operating lease ROU assets, are measured at fair value on a non-recurring basis and are subject to adjustment to their fair value in certain circumstances. Level 3 Rollforward for Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents the changes in balances of liabilities for the three and six months ended June 30, 2025 and 2024 classified as Level 3 (in thousands): Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Balance - beginning of period $ 2 $ 30 $ 127 $ 56 Expiration of contingent earnout consideration ( 2 ) — ( 127 ) — Change in fair value of contingent earnout consideration — — — ( 26 ) Balance - end of period $ — $ 30 $ — $ 30 20 FLOTEK INDUSTRIES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 12 — Income Taxes The income tax provision differed from the amounts computed by applying the U.S. federal income tax rate of 21% to income before income tax for the reasons set forth below (dollars in thousands): Three months ended June 30, 2025 2024 U.S. federal statutory tax rate $ 375 21.0 % $ 420 21.0 % State income taxes, net of federal benefit 17 1.0 % 15 0.7 % Non-U.S. income taxed at different rates ( 45 ) ( 2.5 ) % ( 61 ) ( 3.1 ) % Increase (reduction) in tax expense related to stock-based awards ( 188 ) ( 10.5 ) % 16 0.8 % Change in valuation allowance ( 416 ) ( 23.3 ) % ( 387 ) ( 19.4 ) % Non-deductible expenses 274 15.3 % 12 0.6 % Income tax expense and effective rate $ 17 1.0 % $ 15 0.6 % Six months ended June 30, 2025 2024 U.S. federal statutory tax rate $ 1,518 21.0 % $ 796 21.0 % State income taxes, net of federal benefit 81 1.1 % 256 6.8 % Non-U.S. income taxed at different rates ( 120 ) ( 1.7 ) % ( 153 ) ( 4.1 ) % Increase (reduction) in tax expense related to stock-based awards ( 190 ) ( 2.6 ) % 39 1.0 % Change in valuation allowance ( 1,642 ) ( 22.7 ) % ( 724 ) ( 19.1 ) % Non-deductible expenses 434 6.0 % 43 1.1 % Income tax expense and effective rate $ 81 1.1 % $ 257 6.7 % As of June 30, 2025, the Company had U.S. net operating loss carryforwards (“NOLs”) of $ 186.2 million, including $ 39.8 million expiring in various amounts from 2029 through 2037, which can offset 100 % of taxable income, and $ 146.4 million that has an indefinite carryforward period, which can offset 80 % of taxable income per year. Additionally, the Company has an estimated $ 74.8 million in certain state NOL carryforwards and $ 3.8 million in tax credit carryforwards. As a result of the ownership change experienced in 2023, the Company’s ability to use NOLs to reduce taxable income is generally limited by Section 382 of the Internal Revenue Code of 1986 to an annual amount of $ 3.5 million plus net unrealized built in gain of $ 24.5 million. The Company’s use of NOLs arising after the date of the ownership change are not impacted by the Section 382 limitation. NOLs that exceed the Section 382 limitation in any year continue to be allowed as carryforwards until they expire and can be used to offset taxable income for years within the carryover period subject to the limitation in each year. If the Company does not generate a sufficient level of taxable income prior to the expiration of the pre-2018 NOL carryforward periods, then the ability to apply those NOLs as offsets to future taxable income is lost. Based on an analysis of the Section 382 limitation, the Company estimates that all carryforwards with the exception of $ 0.9 million of the state NOL carryforwards and $ 3.8 million of the tax credit carryforwards will be available for utilization if there is sufficient taxable income in subsequent periods. Although the ownership change will significantly limit the ability of the Company to utilize the pre-change net operating losses and credits, the Company does not expect a significant impact to its financial statements given the valuation allowance that is recorded to estimate the realizability of the deferred tax assets. Given the Company’s anticipated future earnings, we believe that there is a reasonable possibility that within the next 3 to 12 months, sufficient positive evidence may become available to allow us to reach the conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets and an income tax benefit for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change based on our ongoing analysis of all negative and positive evidence including the level of profitability that we are able to achieve. On July 4, 2025, the U.S. enacted H.R. 1 “A bill to provide for reconciliation pursuant to Title II of H. Con. Res. 14”, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing and the business interest expense limitation. ASC 740, “Income Taxes,” requires the effects of changes in tax rates and laws to be recognized in the period in 21 FLOTEK INDUSTRIES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS which the legislation is enacted. Changes in tax laws may affect recorded deferred tax assets and deferred tax liabilities and our effective tax rate in the future, and the Company continues to evaluate the impacts the new legislation will have on its financial statements. Note 13 — Commitments and Contingencies Litigation From time to time, the Company is subject to litigation and other claims that arise in the normal course of business. As of June 30, 2025, the Company was not party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company’s results of operations, financial condition or cash flows. However, the results of current or future matters cannot be predicted with certainty; an unfavorable resolution of one or more of such matters could have a material adverse effect on the Company’s results of operations, financial condition or cash flows. Other Commitments and Contingencies The Company is subject to concentrations of credit risk within trade accounts receivable and related party accounts receivable, as the Company does not generally require collateral as support for trade receivables. In addition, the majority of the Company’s cash is invested in three major U.S. financial institutions and balances often exceed insurable amounts. Note 14 — Stockholders’ Equity Pre-Funded Warrants On June 21, 2022, ProFrac Holdings II, LLC (“ProFrac Holdings II”) paid $ 19.5 million for Pre-Funded Warrants (the “June 2022 Warrants”) of the Company. The June 2022 Warrants permit ProFrac Holdings II to purchase 2,184,140 shares of the Company’s common stock at an exercise price equal to $ 0.0001 per share, subject to a $ 4.5 million exercise fee. ProFrac Holdings II and its affiliates may not receive any voting or consent rights in respect of the June 2022 Warrants or the underlying shares of common stock unless and until ProFrac Holdings II has paid an additional $ 4.5 million to the Company; provided, however, that ProFrac Holdings II may exercise the June 2022 Warrants immediately prior to the sale of the shares of common stock subject to such exercise to a non-affiliate of ProFrac Holdings II. The additional $ 4.5 million will be accounted for as an equity contribution if received. Treasury Stock The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders’ equity. During the three months ended June 30, 2025 and 2024, the Company withheld approximately 5 thousand shares and 4 thousand shares, respectively, of the Company’s common stock at fair market value for payment of income tax withholding owed by employees upon the vesting of restricted shares During the six months ended June 30, 2025 and 2024, the Company withheld approximately 8 thousand shares and 6 thousand shares, respectively, of the Company’s common stock at fair market value for payment of income tax withholding owed by employees upon the vesting of restricted shares. Shares issued as restricted stock awards to employees under the 2018 Long-Term Incentive Plan are accounted for as treasury stock when forfeited. During the six months ended June 30, 2025 and 2024, forfeited stock awards returned to treasury stock were approximately 3 thousand shares and 11 thousand shares, respectively. Note 15 — Earnings Per Share Basic earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing the adjusted net income by the weighted average number of common shares outstanding combined with dilutive common share equivalents outstanding, if the effect is dilutive. For the three and six months ended June 30, 2025 and 2024, there were no adjustments to net income. Potentially dilutive common share equivalents consist of incremental shares of common stock issuable upon exercise of the June 2022 Warrants and vesting and settlement of stock awards. The dilutive effect of non-vested stock issued under share‑based compensation plans, shares issuable under the Employee Stock Purchase Plan, employee stock options outstanding, and the June 2022 Warrants are computed using the treasury stock method. 22 FLOTEK INDUSTRIES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The calculation of the basic and diluted earnings per share for the three and six months ended June 30, 2025 and 2024 is as follows (in thousands): Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Numerator: Net income for basic and diluted earnings per share $ 1,768 $ 1,974 $ 7,148 $ 3,536 Denominator: Basic weighted average shares outstanding (1) 33,947 29,449 31,827 29,440 Dilutive effect of the June 2022 warrants 1,792 1,041 1,738 925 Dilutive effect of stock options and restricted shares 492 178 461 147 Diluted weighted average shares outstanding 36,231 30,668 34,026 30,512 Basic earnings per share $ 0.05 $ 0.07 $ 0.22 $ 0.12 Diluted earnings per share $ 0.05 $ 0.06 $ 0.21 $ 0.12 (1) Basic weighted average shares outstanding for the three and six month 2025 periods include the weighted average of 6,000,000 shares associated with the April 2025 Warrant assumed issued at the April 28, 2025 closing date of the PWRtek Transactions (see Note 3, “Asset Acquisition”). Note 16 — Supplemental Cash Flow Information Supplemental cash flow information is as follows (in thousands): Six months ended June 30, 2025 2024 Supplemental non-cash operating activities: PWRtek Transactions (Note 3) 2024 Contract Shortfall Fee offset $ ( 17,552 ) $ — Future Contract Shortfall Fee (accrued liabilities - related party) ( 7,248 ) — Historic book value of inventory acquired 600 — Supplemental non-cash investing and financing activities: PWRtek Transactions (Note 3) Historic book value of Acquired Assets 14,460 — PWRtek Note issued ( 40,000 ) — Excess consideration over historical asset book value 92,400 — April 2025 Warrant issued ( 42,660 ) — Supplemental cash flow information: Interest paid $ 1,072 $ 452 Income taxes 60 — 23 FLOTEK INDUSTRIES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 17— Related Party Transactions On February 2, 2022, the Company entered into a long-term supply agreement with ProFrac Services (the “Initial ProFrac Agreement”), upon issuance of $ 10 million in aggregate principal amount of the convertible notes (the “Contract Consideration Convertible Notes Payable”) to ProFrac Holdings LLC (“ProFrac Holdings”). Under the Initial ProFrac Agreement, ProFrac Services was obligated to order chemicals from the Company at least equal to the greater of (a) the chemicals required for 33 % of ProFrac Services’ hydraulic fracturing fleets and (b) a baseline measured by the first ten hydraulic fracturing fleets deployed by ProFrac Services during the term of the Initial ProFrac Agreement. If the minimum volumes are not achieved in any given year, ProFrac Services is required to pay to the Company, as liquidated damages an amount equal to twenty-five percent ( 25 %) of the difference between (i) the aggregate purchase price of the quantity of products comprising the minimum purchase obligation and (ii) the actual purchased volume during such calendar year (“Contract Shortfall Fees”). On May 17, 2022, the Company entered into an amendment to the Initial ProFrac Agreement (the “First Amendment to ProFrac Agreement”) upon issuance of $ 50 million in aggregate principal amount of Contract Consideration Convertible Notes Payable. The Initial ProFrac Agreement was amended to (a) increase ProFrac Services’ minimum purchase obligation for each year to the greater of 70 % of ProFrac Services’ requirements and a baseline measured by ProFrac Services’ first 30 hydraulic fracturing fleets, and (b) increase the term to 10 years. On February 2, 2023, the Company entered into a second amendment to the Initial ProFrac Agreement (the “Second Amendment to ProFrac Agreement” and together with the Initial ProFrac Agreement and the First Amendment to ProFrac Agreement, collectively the “ProFrac Agreement”) effective as of January 1, 2023. The Second Amendment to ProFrac Agreement amended the ProFrac Agreement to (1) provide a ramp-up period from January 1, 2023 to May 31, 2023 for ProFrac Services to increase the number of active hydraulic fracturing fleets to 30 fleets, (2) waive any Contract Shortfall Fee payment relating to any potential order shortfall prior to January 1, 2023, (3) add additional fees to certain products, and (4) provide margin increases based on margins with non-ProFrac Services customers. The current measurement period for Contract Shortfall Fees is January 1, 2025 through December 31, 2025. The Company does not expect that the minimum purchase requirements will be met during the current measurement period, and as a result, related party revenues for the six months ended June 30, 2025 reflect variable consideration for Contract Shortfall Fees of $ 15.2 million, which will be due in the first quarter of 2026 under the terms of the ProFrac Agreement. The measurement period for 2024 was January 1, 2024 through December 31, 2024. Related party revenues for the six months ended June 30, 2024 included $ 17.1 million of Contract Shortfall Fees. During the three months ended June 30, 2025 and 2024, the Company’s related party revenues were $ 33.2 million and $ 28.0 million, respectively. For the three months ended June 30, 2025 and 2024, these revenues were net of amortization of contract assets of $ 1.4 million and $ 1.5 million, respectively. Cost of sales attributable to these revenues were $ 22.3 million and $ 19.5 million, respectively, for the three months ended June 30, 2025 and 2024. During the six months ended June 30, 2025 and 2024, the Company’s related party revenues were $ 64.1 million and $ 55.2 million, respectively. For the six months ended June 30, 2025 and 2024, these revenues were net of amortization of contract assets of $ 2.9 million and $ 2.7 million, respectively. Cost of sales attributable to these revenues were $ 43.5 million and $ 38.1 million, respectively, for the six months ended June 30, 2025 and 2024. As of June 30, 2025 and December 31, 2024 our accounts receivable from ProFrac Services was $ 37.3 million and $ 52.4 million, respectively, which is recorded in accounts receivable, related party on the consolidated balance sheets. Also during 2023, the Company entered into various related party transactions with ProFrac Holdings and ProFrac Holdings II as described in Note 17, “Related Party Transactions” to the consolidated financial statements from the 2024 Annual Report. As a result of these related party transactions and other purchases by affiliates of ProFrac, ProFrac Holdings or its affiliates owned approximately 61 % of the Company’s common stock, including the effects of the June 2022 Warrants and April 2025 Warrant, as of June 30, 2025. PWRtek Transactions and Lease Agreement As described in Note 3, “Asset Acquisition”, on April 28, 2025, the Company entered into a series of transactions with various subsidiaries of ProFrac referred to as the PWRtek Transactions. Total consideration paid by the Company in connection with the PWRtek Transactions was $ 107.5 million. See Note 3, “Asset Acquisition,” Note 8, “Lease Agreements – Lease Agreement Income,” and Note 10, “Debt” for additional information on the Lease Agreement, April 2025 Warrant and PWRtek Note. 24 FLOTEK INDUSTRIES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 18 — Business Segment, Geographic and Major Customer Information Segment Information The Company’s segments are determined as those components whose results are reviewed regularly by the chief operating decision maker (“CODM”), who is the Company's Chief Executive Officer, in deciding how to allocate resources and assess performance. Each segment is organized and managed based upon the nature of the Company’s markets and customers and consists of similar products and services. Gross profit and income (loss) from operations for each segment are used by the CODM to assess the performance of each segment in a financial period. The CODM uses segment gross profit and income (loss) from operations as the measure to make resource (including financial or capital resources) allocation decisions for each segment. Accounting policies have been applied consistently by each segment for all reporting periods. Intercompany revenue and expense amounts, if any, have been eliminated within each segment to report on the basis that management uses internally for evaluating segment performance. Various functions, including certain sales and marketing activities and general and administrative activities, are provided centrally by the corporate office. Costs associated with corporate office functions, other corporate income and expense items, and income taxes are not allocated to the reportable segments. The operations of the Company are categorized into the following reportable segments: Chemistry Technologies. The CT segment includes specialty chemistries, logistics and technology services, which we believe enables our customers to pursue improved efficiencies and performance throughout the life cycle of their wells, and also helps our customers improve their environmental, social and governance (“ESG”) and operational goals. Customers of the CT segment include major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, national and state-owned oil companies, and international supply chain management companies . Data Analytics. The DA segment provides innovative analytical measurement solutions. The DA segment seeks to deliver real-time information and insights to our customers to enable optimization of operations, which has been enhanced through the addition of the Acquired Assets (see Note 3 - “Asset Acquisition”), and reduction of emissions and their carbon intensity. Customers of the DA segment span across the entire oil and gas market, from upstream production to midstream facilities to refineries and distribution networks. 25 FLOTEK INDUSTRIES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Summarized financial information of the reportable segments is as follows (in thousands): As of and for the three months ended June 30, Chemistry Technologies Data Analytics Corporate and Other Total 2025 Revenue from external customers Products $ 21,755 $ 1,820 $ — $ 23,575 Services 788 819 — 1,607 Total revenue from external customers 22,543 2,639 — 25,182 Revenue from related party Products 29,830 — — 29,830 Services 47 63 — 110 Rental — 3,228 — 3,228 Total revenue from related parties 29,877 3,291 — 33,168 Cost of sales 41,753 2,190 — 43,943 Gross profit 10,667 3,740 — 14,407 Selling, general and administrative 2,155 1,128 3,513 6,796 Asset acquisition expenses (Note 3) — 4,195 — 4,195 Other segment items 463 336 30 829 Income (loss) from operations $ 8,049 $ ( 1,919 ) $ ( 3,543 ) $ 2,587 Reconciliation of profit to income before income taxes: Interest expense $ ( 983 ) $ ( 983 ) Other income, net 181 181 Income before income taxes $ 1,785 2024 Revenue from external customers Products $ 15,647 $ 1,306 $ — $ 16,953 Services 714 524 — 1,238 Total revenue from external customers 16,361 1,830 — 18,191 Revenue from related party Products 27,741 — — 27,741 Services — 220 — 220 Total revenue from related parties 27,741 220 — 27,961 Cost of sales 35,556 1,426 — 36,982 Gross profit 8,546 624 — 9,170 Selling, general and administrative 1,903 837 3,539 6,279 Other segment items 498 145 26 669 Income (loss) from operations $ 6,145 $ ( 358 ) $ ( 3,565 ) $ 2,222 Reconciliation of profit to income before income taxes: Interest expense ( 308 ) ( 308 ) Other income, net 75 75 Income before income taxes $ 1,989 Other segment items for the three months ended June 30, 2025 includes depreciation of $ 0.2 million and $ 0.2 million in the CT and DA segments, respectively, and R&D costs of $ 0.3 million and $ 0.2 million in the CT and DA segments, respectively. Other segment items for the three months ended June 30, 2024 includes depreciation of $ 0.2 million and $ 35 thousand in the CT and DA segments, respectively, and R&D costs of $ 0.4 million and $ 0.1 million in the CT and DA segments, respectively. 26 FLOTEK INDUSTRIES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As of and for the six months ended June 30, Chemistry Technologies Data Analytics Corporate and Other Total 2025 Revenue from external customers Products $ 43,019 $ 3,482 $ — $ 46,501 Services 1,533 1,571 — 3,104 Total revenue from external customers 44,552 5,053 — 49,605 Revenue from related party Products 60,530 — — 60,530 Services 76 273 — 349 Rental revenue — 3,228 — 3,228 Total revenue from related parties 60,606 3,501 — 64,107 Cost of sales 83,048 3,808 — 86,856 Gross profit 22,110 4,746 — 26,856 Selling, general and administrative 4,322 2,075 6,681 13,078 Asset acquisition expenses (Note 3) — 4,195 — 4,195 Other segment items 848 520 61 1,429 Income (loss) from operations $ 16,940 $ ( 2,044 ) $ ( 6,742 ) $ 8,154 Reconciliation of profit to income before income taxes: Interest expense $ ( 1,212 ) $ ( 1,212 ) Other income, net 287 287 Income before income taxes $ 7,229 2024 Revenue from external customers Products $ 26,816 $ 2,238 $ — $ 29,054 Services 1,231 1,086 — 2,317 Total revenue from external customers 28,047 3,324 — 31,371 Revenue from related party Products 54,755 — — 54,755 Services — 400 — 400 Total revenue from related parties 54,755 400 — 55,155 Cost of sales 65,855 2,680 — 68,535 Gross profit 16,947 1,044 — 17,991 Selling, general and administrative 3,759 1,520 7,086 12,365 Other segment items 938 306 52 1,296 Income (loss) from operations $ 12,250 $ ( 782 ) $ ( 7,138 ) $ 4,330 Reconciliation of profit to income before income taxes: Interest expense ( 586 ) ( 586 ) Other income, net 49 49 Income before income taxes $ 3,793 Other segment items for the six months ended June 30, 2025 includes depreciation of $ 0.3 million and $ 0.2 million in the CT and DA segments, respectively; R&D costs of $ 0.5 million and $ 0.3 million in the CT and DA segments, respectively; and gain on sale of property and equipment in the CT segment of $ 7 thousand. Other segment items for the six months ended June 30, 2024 includes depreciation of $ 0.3 million and $ 70 thousand in the CT and DA segments, respectively; and R&D costs of $ 0.6 million and $ 0.2 million in the CT and DA segments, respectively. 27 FLOTEK INDUSTRIES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Assets of the Company by reportable segments and corporate and other are as follows (in thousands): June 30, 2025 December 31, 2024 Chemistry Technologies $ 136,478 $ 152,161 Data Analytics 25,995 8,632 Corporate and Other 9,770 10,003 Total assets $ 172,243 $ 170,796 Additions to long-lived assets by reportable segments and corporate and other are as follows (in thousands): As of and for the six months ended June 30, Chemistry Technologies Data Analytics Corporate and Other Total 2025 Additions to long-lived assets (1) $ 1,050 $ 14,681 $ 39 $ 15,770 2024 Additions to long-lived assets $ 175 $ 34 $ 20 $ 229 (1) Additions to long-lived assets for the six months ended June 30, 2025 includes $ 14.5 million of assets as a result of the non-cash PWRtek Transactions (see Note 3 and Note 17). Geographic Information Revenue by country is based on the location where services are provided and products are sold. For the three and six months ended June 30, 2025 and 2024 no country other than the U.S. accounted for more than 10% of revenue. Revenue by geographic location is as follows (in thousands): Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 U.S. (1) $ 54,426 $ 44,008 $ 105,895 $ 83,266 UAE 3,417 1,803 6,857 2,545 Other countries 507 341 960 715 Total revenue $ 58,350 $ 46,152 $ 113,712 $ 86,526 (1) Includes revenue from related party Long-lived assets held in countries other than the U.S. are not considered material to the consolidated financial statements. Major Customers Revenue from major customers, as a percentage of consolidated revenue, is as follows (in thousands): Revenue % of Total Revenue Three months ended June 30, 2025 Customer A (related party) $ 33,168 56.8 % Three months ended June 30, 2024 Customer A (related party) $ 27,961 60.6 % 28 FLOTEK INDUSTRIES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Revenue % of Total Revenue Six months ended June 30, 2025 Customer A (related party) $ 64,107 56.4 % Six months ended June 30, 2024 Customer A (related party) $ 55,155 63.7 % The concentration with ProFrac Services, ProFrac GDM and in the oil and gas industry increases credit, commodity and business risk. Major Suppliers Expenditure with major suppliers, as a percentage of consolidated supplier expenditure, is as follows (in thousands): Three months ended June 30, Expenditure % of Total Expenditure 2025 Supplier A $ 9,182 28 % Supplier B 6,171 19 % Supplier C 3,430 10 % 2024 Supplier A $ 5,975 23 % Supplier D 4,383 17 % Supplier B 4,103 16 % Six months ended June 30, Expenditure % of Total Expenditure 2025 Supplier A $ 17,068 24 % Supplier B 10,933 16 % 2024 Supplier D $ 12,120 23 % Supplier A 10,543 20 % Supplier B 4,103 8 % Note 19 — Subsequent Event The Company has evaluated the effects of events that have occurred subsequent to June 30, 2025 through the date at which the Company’s interim financial statements are available to be issued, and has determined that there have been no material events other than that discussed below that would require recognition in the June 30, 2025 interim financial statements or disclosure in the notes to the interim financial statements. 29