Item 1. Financial Statements
Item 1. Financial Statements
FLOTEK INDUSTRIES INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30, 2025 December 31, 2024
ASSETS
Current assets:
Cash and cash equivalents $ 4,603 $ 4,404
Restricted cash 103 102
Accounts receivable, net of allowance for credit losses of $ 716 and $ 447 at September 30, 2025 and December 31, 2024, respectively
26,767 17,386
Accounts receivable, related party, net of allowance for credit losses of $ 0 at September 30, 2025 and December 31, 2024
44,831 52,370
Inventories, net 13,232 13,303
Other current assets 2,305 2,952
Current contract asset 8,179 5,939
Total current assets 100,020 96,456
Long-term contract asset 56,655 63,105
Property and equipment, net 20,822 6,178
Right-of-use assets 3,266 3,326
Deferred tax assets, net 30,351 51
Other long-term assets 1,573 1,680
TOTAL ASSETS $ 212,687 $ 170,796
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 35,073 $ 38,073
Accrued liabilities 4,925 5,912
Accrued liabilities, related party 7,248 —
Income taxes payable 197 48
Interest payable, related party 1,008 —
Current portion of operating lease liabilities 1,216 1,486
Current portion of finance lease liabilities 149 —
Asset-based loan 6,662 4,789
Current portion of long-term debt — 60
Total current liabilities 56,478 50,368
Deferred revenue, long-term — 14
Note payable - related party, net of deferred financing costs 39,560 —
Long-term operating lease liabilities 5,887 6,514
Long-term finance lease liabilities 264 —
TOTAL LIABILITIES 102,189 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; 31,102,241 shares issued and 29,989,657 shares outstanding at September 30, 2025; 30,938,073 shares issued and 29,826,508 shares outstanding at December 31, 2024
3 3
Additional paid-in capital 433,939 464,620
Accumulated other comprehensive income 109 251
Accumulated deficit ( 288,805 ) ( 316,308 )
Treasury stock, at cost; 1,112,584 and 1,111,565 shares at September 30, 2025 and December 31, 2024, respectively
( 34,748 ) ( 34,666 )
Total stockholders’ equity 110,498 113,900
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 212,687 $ 170,796
The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
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FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Revenue:
Revenue from external customers $ 22,941 $ 16,565 $ 72,546 $ 47,935
Revenue from related party 33,090 33,177 97,197 88,332
Total revenues 56,031 49,742 169,743 136,267
Cost of sales 38,248 40,623 125,104 109,159
Gross profit 17,783 9,119 44,639 27,108
Operating costs and expenses:
Selling, general, and administrative 7,384 5,714 20,462 18,079
Asset acquisition expenses 167 — 4,362 —
Depreciation 581 220 1,207 662
Research and development 549 462 1,359 1,349
Gain on sale of property and equipment — — ( 7 ) ( 34 )
Total operating costs and expenses 8,681 6,396 27,383 20,056
Income from operations 9,102 2,723 17,256 7,052
Other income (expense):
Interest expense ( 1,351 ) ( 256 ) ( 2,563 ) ( 842 )
Other income (expense), net ( 8 ) 102 279 151
Total other expense ( 1,359 ) ( 154 ) ( 2,284 ) ( 691 )
Income before income taxes 7,743 2,569 14,972 6,361
Income tax benefit (expense) 12,612 ( 37 ) 12,531 ( 293 )
Net income $ 20,355 $ 2,532 $ 27,503 $ 6,068
Income per common share:
Basic $ 0.57 $ 0.09 $ 0.83 $ 0.21
Diluted $ 0.53 $ 0.08 $ 0.78 $ 0.20
Weighted average common shares:
Weighted average common shares used in computing basic income per common share 35,868 29,613 33,189 29,498
Weighted average common shares used in computing diluted income per common share 38,137 30,897 35,420 30,655
The accompanying Notes are an integral part of these Consolidated Financial Statements.
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FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Three months ended September 30, Nine months ended September 30,
2025 2024 2025 2024
Net income $ 20,355 $ 2,532 $ 27,503 $ 6,068
Other comprehensive income:
Foreign currency translation adjustment 13 ( 52 ) ( 142 ) 6
Comprehensive income $ 20,368 $ 2,480 $ 27,361 $ 6,074
The accompanying Notes are an integral part of these Consolidated Financial Statements.
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FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
Nine months ended September 30,
2025 2024
Cash flows from operating activities:
Net income $ 27,503 $ 6,068
Adjustments to reconcile net income to net cash provided by operating activities:
Change in fair value of contingent consideration ( 127 ) ( 46 )
Amortization of contract assets 4,210 4,341
Depreciation 1,207 662
Amortization of deferred financing costs 252 243
Provision for credit losses, net of recoveries 555 121
Provision for excess and obsolete inventory 307 626
Gain on sale of property and equipment ( 7 ) ( 34 )
Non-cash lease expense 840 1,661
Stock compensation expense 1,706 915
Deferred income tax (benefit) expense ( 12,773 ) 233
Changes in current assets and liabilities:
Accounts receivable ( 9,936 ) 1,346
Accounts receivable, related party ( 10,013 ) ( 12,495 )
Inventories 462 ( 532 )
Income tax receivable ( 32 ) —
Other assets 724 849
Accounts payable ( 3,000 ) 5,690
Accrued liabilities ( 874 ) ( 1,730 )
Operating lease liabilities ( 1,204 ) ( 2,002 )
Income taxes payable 149 9
Interest payable, related party 1,008 —
Net cash provided by operating activities 957 5,925
Cash flows from investing activities:
Capital expenditures ( 1,697 ) ( 491 )
Proceeds from sale of assets 7 34
Net cash used in investing activities ( 1,690 ) ( 457 )
Cash flows from financing activities:
Payments on long term debt ( 60 ) ( 135 )
Proceeds from asset-based loan 147,000 122,600
Payments on asset-based loan ( 145,127 ) ( 128,666 )
Payments of asset-based loan origination costs ( 150 ) ( 164 )
Payment of note payable issuance costs ( 480 ) —
Payment of stock warrant issuance costs ( 653 ) —
Payments to tax authorities for shares withheld from employees ( 82 ) ( 30 )
Proceeds from issuance of stock under Employee Stock Purchase Plan 113 88
Proceeds from stock option exercises 574 —
Payments for finance leases ( 60 ) ( 22 )
Net cash provided by (used in) financing activities 1,075 ( 6,329 )
Effect of changes in exchange rates on cash and cash equivalents ( 142 ) 6
Net change in cash and cash equivalents and restricted cash 200 ( 855 )
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 4,603 4,997
Restricted cash at the end of period 103 101
Cash and cash equivalents and restricted cash at end of period $ 4,706 $ 5,098
The accompanying Notes are an integral part of these Consolidated Financial Statements.
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FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Three Months Ended September 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, June 30, 2025 30,969 $ 3 1,114 $ ( 34,726 ) $ 415,637 $ 96 $ ( 309,160 ) $ 71,850
Net income — — — — — — 20,355 20,355
Foreign currency translation adjustment — — — — — 13 — 13
Stock option exercises 133 — — — 566 — — 566
Stock issued under employee stock purchase plan — — ( 4 ) — 45 — — 45
Stock compensation expense — — — — 569 — — 569
Shares withheld to cover taxes — — 3 ( 22 ) — — — ( 22 )
Excess consideration over historical asset book value (Note 3) — — — — ( 208 ) — — ( 208 )
Fees related to issuance of April 2025 Warrant (Note 3) — — — — ( 197 ) — — ( 197 )
Valuation allowance release on deferred tax asset — — — — 17,527 — — 17,527
Balance, September 30, 2025
31,102 $ 3 1,113 $ ( 34,748 ) $ 433,939 $ 109 $ ( 288,805 ) $ 110,498
Three Months Ended September 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, June 30, 2024 30,867 $ 3 1,107 $ ( 34,528 ) $ 463,844 $ 185 $ ( 323,270 ) $ 106,234
Net income — — — — — — 2,532 2,532
Foreign currency translation adjustment — — — — — ( 52 ) — ( 52 )
Stock issued under employee stock purchase plan — — ( 6 ) — 26 — — 26
Restricted stock vested 25 — — — — — — —
Stock compensation expense — — — — 273 — — 273
Shares withheld to cover taxes — — 1 ( 6 ) — — — ( 6 )
Balance, September 30, 2024
30,892 $ 3 1,102 $ ( 34,534 ) $ 464,143 $ 133 $ ( 320,738 ) $ 109,007
The accompanying Notes are an integral part of these Consolidated Financial Statements.
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FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Nine Months Ended September 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 — — — — — — 27,503 27,503
Foreign currency translation adjustment — — — — — ( 142 ) — ( 142 )
Stock option exercises 135 — — — 574 — — 574
Stock issued under employee stock purchase plan — — ( 13 ) — 113 — — 113
Restricted stock granted 26 — — — — — — —
Restricted stock forfeited — — 3 — — — — —
Restricted stock units vested 3 — — — — — — —
Stock compensation expense — — — — 1,706 — — 1,706
Shares withheld to cover taxes — — 11 ( 82 ) — — — ( 82 )
Excess consideration over historical asset book value (Note 3) — — — — ( 92,608 ) — — ( 92,608 )
Issuance of April 2025 Warrant, net (Note 3) — — — — 42,007 — — 42,007
Valuation allowance release on deferred tax asset — — — — 17,527 — — 17,527
Balance, September 30, 2025
31,102 $ 3 1,113 $ ( 34,748 ) $ 433,939 $ 109 $ ( 288,805 ) $ 110,498
Nine Months Ended September 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 — — — — — — 6,068 6,068
Foreign currency translation adjustment — — — — — 6 — 6
Stock issued under employee stock purchase plan — — ( 25 ) — 88 — — 88
Restricted stock granted 94 — — — — — — —
Restricted stock forfeited — — 11 — — — — —
Restricted stock vested 25 — — — — — — —
Stock compensation expense — — — — 915 — — 915
Shares withheld to cover taxes — — 7 ( 30 ) — — — ( 30 )
Balance, September 30, 2024
30,892 $ 3 1,102 $ ( 34,534 ) $ 464,143 $ 133 $ ( 320,738 ) $ 109,007
The accompanying Notes are an integral part of these Consolidated Financial Statements.
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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”) segment delivers real-time information and insights to its customers designed to enable optimization of operations and reduction of emissions and their carbon intensity. The Company’s technologies are founded upon an industry leading field-deployable, in-line optical near-infrared spectrometer that measures the quality, quantity and composition of hydrocarbon flows. The instrument’s response is processed with advanced chemometrics modeling, artificial intelligence and machine learning algorithms to deliver valuable insights to our customers every 15 seconds.
The DA segment generates revenues through a combination of short and long-term equipment rentals (service revenue) and capital sales (product revenue). Customers of the DA segment span across the oil and gas industry, including oil and gas supermajors, some of the largest midstream oil and gas companies, large gas processing plants, independent exploration and production companies and oil field service companies that provide hydraulic fracturing services. We believe customers using our technology may obtain significant benefits, including additional profits, by enhancing operations in crude/condensates stabilization, enhancing blending operations, reducing time impacting transmix operations and increasing efficiencies and optimization of gas plants. The DA segment has expanded its presence in providing mobile power generation solutions through the acquisition of the assets described in Note 3, “Asset Acquisition.” These assets facilitate the use of significantly lower-cost field gas, as a replacement to diesel, to generate power, lower emissions and protect equipment through the continuous measurement of gas quality.
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):
September 30, 2025 December 31, 2024
Balance, beginning of year $ 447 $ 745
Charges to provision for credit losses, net of recoveries 555 181
Write-offs ( 286 ) ( 479 )
Balance, end of period $ 716 $ 447
As of September 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”).
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FLOTEK INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 was 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 were 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 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. Based on the Company’s assessment, and in accordance with ASC 842, the Lease Agreement was classified as an operating lease.
For the three and nine months ended September 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 sheet 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 September 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. Early adoption is permitted. This is expected to result in expanded tax disclosures in the annual financial statements for the year ended 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
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FLOTEK INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 began recognizing lease revenue on the respective dates each of the eight units were placed in-service. As of September 30, 2025, all of the eight units under construction as of April 28, 2025 had been completed and placed in-service.
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 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 $ 0.7 million of issuance costs, as the April 2025 Warrant is classified as equity. As of September 30, 2025, the April 2025 Warrant had not been exercised.
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 September 30, 2025, there was $ 39.6 million outstanding, net of unamortized deferred financing costs of $ 0.4 million under the PWRtek Note. See Note 10 - “Debt” for additional information. For the three and nine months ended September 30, 2025, interest expense related to the PWRtek Note was $ 1.0 million and $ 1.7 million, respectively. As of September 30, 2025, interest payable related to the PWRtek Note was $ 1.0 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 were recorded at ProFrac’s historical book value of approximately $ 14.9 million. 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 $ 92.6 million was recorded as a reduction to additional paid in capital for the PWRtek Transactions within stockholders’ equity during the nine months ended September 30, 2025. 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.
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FLOTEK INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the consideration transferred and the historical book value of identified Acquired Assets at the date of the PWRtek Transactions (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 $ 14,252
Inventory 600
Total assets book value $ 14,852
Excess consideration over assets historical book value $ 92,608
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 September 30, Nine months ended September 30,
2025 2024 2025 2024
Revenue:
Products $ 47,686 $ 48,243 $ 154,717 $ 132,052
Services 2,278 1,499 5,731 4,215
Rental 6,067 — 9,295 —
$ 56,031 $ 49,742 $ 169,743 $ 136,267
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 September 30, Nine months ended September 30,
2025 2024 2025 2024
Cost of sales:
Tangible goods sold $ 32,538 $ 35,824 $ 109,703 $ 95,064
Services 521 91 847 273
Other 5,189 4,708 14,554 13,822
$ 38,248 $ 40,623 $ 125,104 $ 109,159
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 nine months ended September 30, 2025 includes $ 0.6 million and $ 0.8 million, respectively, related to the Lease Agreement. Examples of other costs of sales are certain personnel costs and equipment rental and insurance costs.
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FLOTEK INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cost of sales, disaggregated between external customers and related party, is as follows (in thousands):
Three months ended September 30, Nine months ended September 30,
2025 2024 2025 2024
Cost of sales:
Cost of sales for external customers $ 18,329 $ 14,996 $ 61,647 $ 45,436
Cost of sales for related party 19,919 25,627 63,457 63,723
$ 38,248 $ 40,623 $ 125,104 $ 109,159
Note 5 — Contract Assets
Contract assets are as follows (in thousands):
September 30, 2025 December 31, 2024
Contract assets $ 83,060 $ 83,060
Less accumulated amortization ( 18,226 ) ( 14,016 )
Contract assets, net 64,834 69,044
Less current contract assets ( 8,179 ) ( 5,939 )
Contract assets, long term $ 56,655 $ 63,105
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 September 30, 2025 and December 31, 2024, $ 56.7 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 September 30, 2025 and 2024, the Company recognized $ 1.3 million and $ 1.6 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 nine months ended September 30, 2025 and 2024, the Company recognized $ 4.2 million and $ 4.3 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 table below reflects our estimated amortization per year (in thousands) based on the Company’s forecasted revenues from the ProFrac Agreement as of September 30, 2025.
Years ending December 31, Amortization
2025 (excluding first nine months)
$ 1,745
2026 8,724
2027 9,976
2028 10,443
2029 10,443
Thereafter through May 2032 23,503
Total contract assets $ 64,834
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FLOTEK INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 — Inventories
Inventories are as follows (in thousands):
September 30, 2025 December 31, 2024
Raw materials $ 4,830 $ 4,945
Finished goods 12,858 13,581
Inventories 17,688 18,526
Less reserve for excess and obsolete inventory ( 4,456 ) ( 5,223 )
Inventories, net $ 13,232 $ 13,303
During the three months ended September 30, 2025 and 2024, additional reserves recorded were $ 28 thousand and $ 0.2 million, respectively, for the CT segment. For the three months ended September 30, 2025, additional reserves of $ 28 thousand were recorded for the DA segment with no additional reserves recorded for the three months ended September 30, 2024.
During the nine months ended September 30, 2025 and 2024, additional reserves recorded were $ 0.3 million and $ 0.6 million, respectively, for the CT segment and $ 45 thousand and $ 13 thousand, respectively, for the DA segment.
Note 7 — Property and Equipment
Property and equipment are as follows (in thousands):
September 30, 2025 December 31, 2024
Land $ 886 $ 886
Land improvements 520 520
Buildings and leasehold improvements 6,643 5,722
Machinery and equipment 8,975 8,524
Leased equipment 14,252 —
Furniture and fixtures 520 520
Transportation equipment 805 790
Computer equipment and software 1,698 1,531
Property and equipment 34,299 18,493
Less accumulated depreciation ( 13,477 ) ( 12,315 )
Property and equipment, net $ 20,822 $ 6,178
Leased equipment (See Note 3, “Asset Acquisition”) has an estimated useful life of ten years.
Depreciation expense totaled $ 0.6 million and $ 0.2 million for the three months ended September 30, 2025 a nd 2024, respectively. Depreciation expense totaled $ 1.2 million and $ 0.7 million for the nine months ended September 30, 2025 a nd 2024, respectively.
15
FLOTEK INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 — Leases
The components of lease expense and supplemental cash flow information are as follows (in thousands):
Three months ended September 30, Nine months ended September 30,
2025 2024 2025 2024
Operating lease expense $ 308 $ 640 $ 1,212 $ 2,176
Finance lease expense:
Amortization of assets 39 4 68 11
Interest on lease liabilities 10 — 18 1
Total finance lease expense 49 4 86 12
Short-term lease expense 506 392 1,382 963
Total lease expense $ 863 $ 1,036 $ 2,680 $ 3,151
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 793 $ 1,245 $ 2,967 $ 4,232
Operating cash flows from finance leases 35 7 75 30
Financing cash flows from finance leases 10 — 18 —
Maturities of lease liabilities as of September 30, 2025 are as follows (in thousands):
Years ending December 31, Operating Leases Finance Leases
2025 (excluding first nine months) $ 406 $ 45
2026 1,810 180
2027 1,863 180
2028 1,729 57
2029 1,641 —
Thereafter 1,407 —
Total lease payments $ 8,856 $ 462
Less: Interest ( 1,753 ) ( 49 )
Present value of lease liabilities $ 7,103 $ 413
16
FLOTEK INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Supplemental balance sheet information related to leases is as follows (in thousands):
September 30, 2025 December 31, 2024
Operating Leases
Operating lease right-of-use assets $ 2,862 $ 3,326
Current portion of operating lease liabilities 1,216 1,486
Long-term operating lease liabilities 5,887 6,514
Total operating lease liabilities $ 7,103 $ 8,000
Finance Leases
Finance lease right-of-use assets $ 404 $ —
Current portion of finance lease liabilities $ 149 $ —
Long-term finance lease liabilities 264 —
Total finance lease liabilities $ 413 $ —
Weighted Average Remaining Lease Term
Operating leases 4.9 years 5.4 years
Finance leases 2.6 years —
Weighted Average Discount Rate
Operating leases 9.4 % 9.4 %
Finance leases 9.5 % — %
Lease Agreement Income
The Company recorded income from the Lease Agreement (see Note 3, “Asset Acquisition”) of $ 6.1 million and $ 9.3 million for the three and nine months ended September 30, 2025, respectively. At September 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 nine months) (1)
$ 6,843
2026 27,375
2027 27,375
2028 27,375
2029 27,375
Thereafter (2)
9,125
Total rental income (through April 2030)
$ 125,468
(1) All assets have been placed in service as of September 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.
17
FLOTEK INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 $ 0.1 million and $ 0.2 million for the three months ended September 30, 2025 and 2024, respectively and $ 0.5 million and $ 0.4 million for the nine months ended September 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 nine months)
$ 192
2026 767
2027 767
2028 767
2029 767
Thereafter 639
Total rental income $ 3,899
Note 9 — Accrued Liabilities
Current accrued liabilities are as follows (in thousands):
September 30, 2025 December 31, 2024
Severance costs $ 406 $ 380
Payroll and benefits 3,023 2,901
Legal costs 88 99
Deferred revenue 735 808
Financed insurance 214 1,074
Other 459 650
Total current accrued liabilities $ 4,925 $ 5,912
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 September 30, 2025 and December 31, 2024, the Company had $ 6.7 million and $ 4.8 million, respectively, outstanding under the ABL. As of September 30, 2025, the Company had approximately $ 9.6 million of available borrowings under the ABL. During the three months ended September 30, 2025 and 2024, the Company incurred $ 0.4 million and $ 0.3 million, respectively, in interest and fees related to the ABL. During the nine months ended September 30, 2025 and 2024, the Company incurred $ 0.7 million and $ 0.7 million, respectively, in interest and fees related to the ABL. As of September 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 the three and nine months ended September 30, 2025, the weighted-average interest rate was 9.46 % and 9.40 %, respectively. 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
18
FLOTEK INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. 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 September 30, 2025.
Related Party Note Payable
As of September 30, 2025, amounts outstanding under the PWRtek Note (see Note 3, “Asset Acquisition”) are as follows (in thousands):
September 30, 2025
PWRtek Note payable $ 40,000
Less: unamortized debt issuance cost ( 440 )
Total PWRtek Note payable $ 39,560
As of September 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
$ —
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.
19
FLOTEK INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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):
September 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 nine months ended September 30, 2025 and 2024 classified as Level 3 (in thousands):
Three months ended September 30, Nine months ended September 30,
2025 2024 2025 2024
Balance - beginning of period $ — $ 30 $ 127 $ 56
Expiration of contingent earnout consideration — — ( 127 ) —
Change in fair value of contingent earnout consideration — ( 19 ) — ( 45 )
Balance - end of period $ — $ 11 $ — $ 11
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 September 30,
2025 2024
U.S. federal statutory tax rate $ 1,626 21.0 % $ 523 21.0 %
State income taxes, net of federal benefit ( 651 ) ( 8.4 ) % 37 1.5 %
Non-U.S. income taxed at different rates 34 0.4 % 144 5.8 %
Reduction in tax expense related to stock-based awards ( 271 ) ( 3.5 ) % ( 9 ) ( 0.3 ) %
Change in valuation allowance ( 13,243 ) ( 171.0 ) % ( 756 ) ( 30.4 ) %
Non-deductible expenses ( 107 ) ( 1.4 ) % 98 3.9 %
Income tax (benefit) expense and effective rate $ ( 12,612 ) ( 162.9 ) % $ 37 1.5 %
Nine months ended September 30,
2025 2024
U.S. federal statutory tax rate $ 3,144 21.0 % $ 1,320 21.0 %
State income taxes, net of federal benefit ( 571 ) ( 3.8 ) % 293 4.7 %
Non-U.S. income taxed at different rates ( 86 ) ( 0.6 ) % ( 10 ) ( 0.2 ) %
Increase (reduction) in tax expense related to stock-based awards ( 460 ) ( 3.1 ) % 30 0.5 %
Change in valuation allowance ( 14,885 ) ( 99.4 ) % ( 1,481 ) ( 23.6 ) %
Non-deductible expenses 327 2.2 % 141 2.3 %
Income tax (benefit) expense and effective rate $ ( 12,531 ) ( 83.7 ) % $ 293 4.7 %
As of September 30, 2025, the Company had U.S. net operating loss carryforwards (“NOLs”) of $ 190.1 million, including $ 40.6 million expiring in various amounts from 2029 through 2037, which can offset 100 % of taxable income, and $ 149.5 million that has an indefinite carryforward period, which can offset 80 % of taxable income per year. Additionally, the Company has an estimated $ 78.7 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.
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 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 recognized those changes in tax laws in the quarter ended September 30, 2025.
Valuation Allowance
The Company considered both positive and negative evidence and determined that as of September 30, 2025 a full valuation allowance was no longer required for certain deferred tax assets. Positive evidence included our results of operations reaching an adjusted three-year cumulative income position on a rolling twelve-quarter basis during the quarter ended September 30, 2025, that indicates a trend of profitability; future reversals of existing taxable temporary differences; and an evaluation of currently available information about future years forecasted taxable income, specifically, the forecasted future income based
21
FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
on existing contracts including the ProFrac Agreement (discussed below in Note 17, “Related Party Transactions”) and the Lease Agreement with ProFrac (see Note 3, “Asset Acquisition”). The Company’s assessment of profitability considered the impact of unusual and non-recurring items on historical book income or losses. However, because of the lack of objectively verifiable information in years after the expiration of the ProFrac Agreement and Lease Agreement, it was determined that forecasted future income may not be sufficient to realize all the deferred tax assets. Therefore, a partial release of valuation allowance for federal deferred tax assets was recorded during the three and nine months ended September 30, 2025 totaling $ 29.7 million and $ 31.1 million, respectively, of which $ 16.3 million during the three and nine months ended September 30, 2025 was recorded to equity as a change to intraperiod tax allocation in interim periods within the same year related to a deferred tax asset arising from a basis difference in connection with the Asset Acquisition. In addition, a partial release of valuation allowance for state deferred tax assets was recorded during both the three and nine months ended September 30, 2025 totaling $ 1.9 million, of which $ 1.2 million during the three and nine months ended September 30, 2025 was recorded to equity.
We intend to continue maintaining a valuation allowance on a substantial portion of our deferred tax assets until there is sufficient evidence to support a reversal of such allowances. The federal and state valuation allowances currently estimated to be necessary at December 31, 2025 are $ 41.3 million The timing and amount of future valuation allowance reductions are subject to future levels of profitability being achieved.
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 September 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 September 30, 2025 and 2024, the Company withheld approximately 3 thousand shares and 1 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 nine months ended September 30, 2025 and 2024, the Company withheld approximately 11 thousand shares and 7 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 nine months ended September 30, 2025 and 2024, forfeited stock awards returned to treasury stock were approximately 3 thousand shares and 11 thousand shares, respectively.
22
FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 nine months ended September 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.
The calculation of the basic and diluted earnings per share for the three and nine months ended September 30, 2025 and 2024 is as follows (in thousands):
Three months ended September 30, Nine months ended September 30,
2025 2024 2025 2024
Numerator:
Net income for basic and diluted earnings per share $ 20,355 $ 2,532 $ 27,503 $ 6,068
Denominator:
Basic weighted average shares outstanding (1)
35,868 29,613 33,189 29,498
Dilutive effect of the June 2022 warrants 1,827 1,190 1,773 1,029
Dilutive effect of stock options and restricted shares 442 94 458 128
Diluted weighted average shares outstanding 38,137 30,897 35,420 30,655
Basic earnings per share $ 0.57 $ 0.09 $ 0.83 $ 0.21
Diluted earnings per share $ 0.53 $ 0.08 $ 0.78 $ 0.20
(1) Basic weighted average shares outstanding for the three and nine 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):
Nine months ended September 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 14,252 —
PWRtek Note issued ( 40,000 ) —
Valuation allowance release on deferred tax asset on PWRtek assets ( 17,527 ) —
Excess consideration over historical asset book value 92,608 —
April 2025 Warrant issued ( 42,660 ) —
Supplemental cash flow information:
Interest paid $ 2,335 $ 654
Income taxes 124 50
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 three and nine months ended September 30, 2025 reflect variable consideration for Contract Shortfall Fees of $ 8.7 million and $ 23.9 million, respectively, which will be due in the first quarter of 2026 under the terms of the ProFrac Agreement, net of the Contract Shortfall Fee offset of $ 7.2 million as discussed in Note 3, “Asset Acquisition,” as recorded as Accrued liabilities, related party. The measurement period for 2024 was January 1, 2024 through December 31, 2024. Related party revenues for the three and nine months ended September 30, 2024 included $ 6.8 million and $ 23.8 million, respectively, of Contract Shortfall Fees.
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.
During the three months ended September 30, 2025 and 2024, the Company’s related party revenues were $ 33.1 million and $ 33.2 million, respectively. For the three months ended September 30, 2025 and 2024, these revenues were net of amortization of contract assets of $ 1.3 million and $ 1.6 million, respectively. Cost of sales attributable to these revenues were $ 19.9 million and $ 25.6 million, respectively, for the three months ended September 30, 2025 and 2024.
During the nine months ended September 30, 2025 and 2024, the Company’s related party revenues were $ 97.2 million and $ 88.3 million, respectively. For the nine months ended September 30, 2025 and 2024, these revenues were net of amortization of contract assets of $ 4.2 million and $ 4.3 million, respectively. Cost of sales attributable to these revenues were $ 63.5 million and $ 63.7 million, respectively, for the nine months ended September 30, 2025 and 2024.
As of September 30, 2025 and December 31, 2024 our accounts receivable from ProFrac Services was $ 44.8 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 September 30, 2025.
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 enable our customers to pursue improved efficiencies and performance throughout the life cycle of their wells, and also help 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 oil and gas industry, including oil and gas supermajors, some of the largest midstream oil and gas companies, large gas processing plants, independent exploration and production companies and oil field service companies that provide hydraulic fracturing services.
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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 September 30,
Chemistry Technologies Data Analytics
Corporate and Other Total
2025
Revenue from external customers
Products $ 19,083 $ 1,650 $ — $ 20,733
Services 1,138 1,070 — 2,208
Total revenue from external customers 20,221 2,720 — 22,941
Revenue from related party
Products 26,909 44 — 26,953
Services 47 23 — 70
Rental — 6,067 — 6,067
Total revenue from related parties 26,956 6,134 — 33,090
Cost of sales 35,654 2,594 — 38,248
Gross profit 11,523 6,260 — 17,783
Selling, general and administrative 2,435 1,183 3,766 7,384
Asset acquisition expenses (Note 3) — 167 — 167
Other segment items 557 542 31 1,130
Income (loss) from operations $ 8,531 $ 4,368 $ ( 3,797 ) $ 9,102
Reconciliation of profit to income before income taxes:
Interest expense $ ( 1,351 ) $ ( 1,351 )
Other expense, net ( 8 ) ( 8 )
Income before income taxes $ 7,743
2024
Revenue from external customers
Products $ 13,600 $ 1,681 $ — $ 15,281
Services 497 787 — 1,284
Total revenue from external customers 14,097 2,468 — 16,565
Revenue from related party
Products 32,962 — — 32,962
Services 15 200 — 215
Total revenue from related parties 32,977 200 — 33,177
Cost of sales 39,131 1,492 — 40,623
Gross profit 7,943 1,176 — 9,119
Selling, general and administrative 1,887 887 2,940 5,714
Other segment items 497 159 26 682
Income (loss) from operations $ 5,559 $ 130 $ ( 2,966 ) $ 2,723
Reconciliation of profit to income before income taxes:
Interest expense ( 256 ) ( 256 )
Other income, net 102 102
Income before income taxes $ 2,569
Other segment items for the three months ended September 30, 2025 includes depreciation of $ 0.2 million and $ 0.4 million in the CT and DA segments, respectively, and R&D costs of $ 0.4 million and $ 0.2 million in the CT and DA segments, respectively.
Other segment items for the three months ended September 30, 2024 includes depreciation of $ 0.2 million and $ 37 thousand in the CT and DA segments, respectively, and R&D costs of $ 0.3 million and $ 0.1 million in the CT and DA segments, respectively.
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FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of and for the nine months ended September 30,
Chemistry Technologies Data Analytics
Corporate and Other Total
2025
Revenue from external customers
Products $ 62,101 $ 5,132 $ — $ 67,233
Services 2,672 2,641 — 5,313
Total revenue from external customers 64,773 7,773 — 72,546
Revenue from related party
Products 87,439 44 — 87,483
Services 123 296 — 419
Rental revenue — 9,295 — 9,295
Total revenue from related parties 87,562 9,635 — 97,197
Cost of sales 118,702 6,402 — 125,104
Gross profit 33,633 11,006 — 44,639
Selling, general and administrative 6,757 3,258 10,447 20,462
Asset acquisition expenses (Note 3) — 4,362 — 4,362
Other segment items 1,406 1,061 92 2,559
Income (loss) from operations $ 25,470 $ 2,325 $ ( 10,539 ) $ 17,256
Reconciliation of profit to income before income taxes:
Interest expense $ ( 2,563 ) $ ( 2,563 )
Other income, net 279 279
Income before income taxes $ 14,972
2024
Revenue from external customers
Products $ 40,427 $ 3,920 $ — $ 44,347
Services 1,716 1,872 — 3,588
Total revenue from external customers 42,143 5,792 — 47,935
Revenue from related party
Products 87,705 — — 87,705
Services 27 600 — 627
Total revenue from related parties 87,732 600 — 88,332
Cost of sales 104,987 4,172 — 109,159
Gross profit 24,888 2,220 — 27,108
Selling, general and administrative 5,645 2,407 10,027 18,079
Other segment items 1,433 465 79 1,977
Income (loss) from operations $ 17,810 $ ( 652 ) $ ( 10,106 ) $ 7,052
Reconciliation of profit to income before income taxes:
Interest expense ( 842 ) ( 842 )
Other income, net 151 151
Income before income taxes $ 6,361
Other segment items for the nine months ended September 30, 2025 includes depreciation of $ 0.5 million and $ 0.6 million in the CT and DA segments, respectively; R&D costs of $ 0.9 million and $ 0.4 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 nine months ended September 30, 2024 includes depreciation of $ 0.5 million and $ 0.1 million in the CT and DA segments, respectively; and R&D costs of $ 1.0 million and $ 0.4 million in the CT and DA segments, respectively.
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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):
September 30, 2025 December 31, 2024
Chemistry Technologies $ 146,976 $ 152,161
Data Analytics 27,030 8,632
Corporate and Other 38,681 10,003
Total assets $ 212,687 $ 170,796
Additions to long-lived assets by reportable segments and corporate and other are as follows (in thousands):
As of and for the nine months ended September 30,
Chemistry Technologies Data Analytics
Corporate and Other Total
2025
Additions to long-lived assets (1)
$ 1,120 $ 14,662 $ 167 $ 15,949
2024
Additions to long-lived assets $ 333 $ 105 $ 53 $ 491
(1) Additions to long-lived assets for the nine months ended September 30, 2025 includes $ 14.3 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 nine months ended September 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 September 30, Nine months ended September 30,
2025 2024 2025 2024
U.S. (1)
$ 53,827 $ 48,498 $ 159,722 $ 131,763
UAE 2,067 592 8,925 3,136
Other countries 137 652 1,096 1,368
Total revenue $ 56,031 $ 49,742 $ 169,743 $ 136,267
(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 September 30, 2025
Customer A (related party)
$ 33,090 59.1 %
Three months ended September 30, 2024
Customer A (related party)
$ 33,177 66.7 %
Revenue % of Total Revenue
Nine months ended September 30, 2025
Customer A (related party)
$ 97,197 57.3 %
Nine months ended September 30, 2024
Customer A (related party)
$ 88,332 64.8 %
The concentration with ProFrac and in the oil and gas industry increases credit, commodity and business risk.
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FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Accounts receivable from major external customers, as a percentage of accounts receivable, is as follows (in thousands):
Accounts Receivable % of Total Non-Related Party Accounts Receivable
As of September 30, 2025
Customer A
$ 8,274 30.1 %
Customer B $ 3,170 11.5 %
Customer C $ 2,241 8.2 %
As of December 31, 2024
Customer A
$ 3,324 18.6 %
Customer C $ 2,264 12.7 %
Customer B $ 1,288 7.2 %
Please see Note 17 - “Related Party Transactions” for additional information regarding accounts receivable with ProFrac.
Major Suppliers
Expenditure with major suppliers, as a percentage of consolidated supplier expenditure, is as follows (in thousands):
Three months ended September 30, Expenditure % of Total Expenditure
2025
Supplier A $ 7,977 26 %
Supplier B 3,984 13 %
Supplier C 3,808 13 %
Supplier D 3,368 11 %
2024
Supplier D $ 8,885 25 %
Supplier A 5,187 14 %
Supplier C 4,348 12 %
Supplier E 3,782 10 %
Nine months ended September 30, Expenditure % of Total Expenditure
2025
Supplier A $ 26,787 26 %
Supplier D 14,301 14 %
2024
Supplier A $ 16,885 18 %
Supplier D 16,639 18 %
Supplier C 16,583 17 %
Note 19 — Subsequent Event
The Company has evaluated the effects of events that have occurred subsequent to September 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 discussed below, that would require recognition in the September 30, 2025 interim financial statements or disclosure in the notes to the interim financial statements.
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FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PWRtek Note Sale
On November 7, 2025, the Company entered into a series of agreements with ProFrac GDM, LLC, a subsidiary of ProFrac (“ProFrac GDM”), in connection with the assignment of the PWRtek Note by ProFrac GDM, LLC to PC Energy Credit I LLC (the “Note Assignment”). The PWRtek Note was originally issued as a component of the total consideration paid by the Company in connection with the PWRtek Transactions (see “Note 3 - Asset Acquisition” above).
In connection with the Note Assignment, (1) the Company and ProFrac GDM have entered into that certain Consent, Acknowledgement and Amendment to Senior Secured Note Documents, dated as of November 7, 2025 (the “Assignment Consent”), (2) ProFrac and ProFrac GDM have entered into that certain Guaranty, dated as of November 7, 2025 (the “ProFrac Parent Guaranty”), and (3) the Company and ProFrac GDM have entered into that certain Amendment No. 1 to Agreement for Equipment Rental, dated as of November 7, 2025 (the “Dry Lease Amendment,” and together with the Assignment Consent and the ProFrac Parent Guaranty, the “Transaction Documents”).
Pursuant to the Transaction Documents, in consideration for the Company’s consent to the Note Assignment, the parties involved agreed to various amendments which include, among other things, (a) the provision of a guaranty by ProFrac of all of ProFrac GDM’s obligations under the Lease Agreement, (b) the elimination of all make-whole amounts and prepayment premiums applicable to the PWRtek Note, providing the Company with the unrestricted ability to prepay the PWRtek Note without premiums or penalties, (c) the removal of a “Material Adverse Effect” event of default under the PWRtek Note relating to the Company, and (d) the removal of restrictions included in the PWRtek Note on PWRTEK, LLC’s, a subsidiary of the Company, ability to make distributions (as well as the corresponding removal of restrictions included in the Lease Agreement on ProFrac GDM’s ability to make distributions). In addition, in order to facilitate the Note Assignment, the parties further agreed to the removal of the mutual rights to offset Contract Shortfall Fees that are payable under the ProFrac Agreement and the Company’s right to offset amounts due pursuant to the Lease Agreement against the principal of the PWRtek Note. As a result, the full principal amount of the PWRtek Note will be payable in cash by the Company, rather than via offset against amounts payable pursuant to the Company’s other agreements with ProFrac and its affiliates. Correspondingly, any amounts due to the Company from ProFrac and its affiliates pursuant to the Company’s other agreements with ProFrac and its affiliates, including order shortfall payments, must be paid in cash, rather than via offset.
In addition, on October 28, 2025, the Company’s lender under the ABL provided its consent (the “ABL Consent”) to the Note Assignment(see “Note 10 - Debt”).
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