What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-16 compared with 2025-03-12 · 418 added, 322 removed, 792 unchanged (48% of the section changed)

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We have audited the accompanying consolidated balance sheets of Flotek Industries, Inc.

and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, cash flow, and stockholders’ equity for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flow for each of the years in the two-year period ended December 31, 2025, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 16, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Recoverability of contract assets

As described in Note 2 to the Company’s consolidated financial statements, the Company’s contract assets represent consideration issued in the form of convertible notes and other incremental costs related to obtaining the ProFrac Agreement.

The contract assets are tested for recoverability on a recurring basis and the Company will recognize an impairment loss to the extent that the carrying amount of the contract assets exceeds the amount of consideration the Company expects to receive in the future for the transfer of goods under the ProFrac Agreement less the direct costs that relate to providing those goods in the future.

As described in Note 4, the Company had recorded contract assets, net of $69.0 million as of December 31, 2024.

We identified the evaluation of the recoverability of contract assets as a critical audit matter.

There was subjective auditor judgement in evaluating the key assumptions used in the Company’s contract asset recoverability assessment, specifically the forecasted product revenue and related forecasted costs to provide products over the term of the ProFrac Agreement.

Fair value of leased equipment used in lease classification

As discussed in Notes 2 and 3 to the consolidated financial statements, during the year ended December 31, 2025, the Company entered into a lease agreement with a related party.

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.

We identified the evaluation of the fair value of the leased equipment used in the Company’s lease classification assessment as a critical audit matter.

A high degree of subjective auditor judgment was required due to the subjectivity of significant

assumptions used in estimating the fair value of the leased equipment, including forecasted lease revenue over the leased equipment’s economic life and the discount rate.

These assumptions involved significant measurement uncertainty, were sensitive to changes in underlying inputs and required assessing management’s process for developing the estimate.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design of certain internal controls related to the Company’s contract assets recoverability assessment, including controls over the development of forecasted revenue and costs over the term of the ProFrac Agreement.

To assess the Company’s ability to forecast revenue and costs, we compared revenue and cost forecasts for the current year to actual results.

We performed sensitivity analyses over the Company’s contract asset recoverability assessment by evaluating the effect of changes in the forecasted revenue and costs over the term of the ProFrac Agreement.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process for estimating the fair value of the leased equipment, including controls over the determination of the significant assumptions noted above.

We evaluated the Company’s forecasted lease revenue by comparing it to the lease agreement and other relevant market indicators.

We compared the estimated economic life of the leased equipment to comparable assets and other evidence obtained during the audit.

We involved valuation professionals with specialized skills and knowledge, who assisted in developing an independently derived discount rate using publicly available market data for comparable entities and comparing the resulting range to the Company's discount rate.

Realizability of certain deferred tax assets

As discussed in Notes 2 and 12 to the consolidated financial statements, a valuation allowance is established by the Company when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company’s assessment considers positive and negative evidence, including forecasted taxable income.

As of December 31, 2025, the Company recorded a valuation allowance of $43.9 million and released $15.5 million of previously recognized valuation allowance during the year.

We identified the evaluation of the realizability of certain deferred tax assets as a critical audit matter.

The matter involved especially challenging auditor judgment due to the significant degree of management judgment involved in forecasting revenue when determining future taxable income and evaluating both positive and negative evidence.

The matter also involved significant measurement uncertainty because forecasted revenue depended in part on assumptions related to existing contractual arrangements, including the ProFrac Agreement and the Lease Agreement with ProFrac.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process for assessing the realizability of deferred tax assets, including controls over the development of forecasted revenue.

We assessed the positive and negative evidence considered by management by reading supporting analyses and comparing key elements to historical trends and externally available information.

We evaluated the Company’s revenue-related assumptions by comparing forecasted revenue to historical results and to the terms of the ProFrac Agreement and the Lease Agreement with ProFrac.

We involved tax professionals with specialized skills and knowledge, who assisted in evaluating the application of relevant tax laws to management’s assessment.

We have served as the Company’s auditor since 2021.

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19,043 17,386

Accounts receivable, related party, net of allowance for credit losses of $ 0 at December 31, 2024 and December 31, 2023, respectively

Accounts receivable, related party, net of allowance for credit losses of $ 0 at December 31, 2025 and December 31, 2024

64,204 52,370

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Property and equipment, net 20,344 6,178

Operating lease right-of-use assets 3,326 5,030

Right-of-use assets 3,083 3,326

Deferred tax assets, net 29,152 51

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Income taxes payable 258 48

Interest payable, related party 1,008 —

Current portion of operating lease liabilities 1,251 1,486

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Deferred revenue, long-term — 14

Note payable - related party, net of deferred financing costs 39,584 —

Long-term operating lease liabilities 5,608 6,514

Long-term debt — 60

Long-term finance lease liabilities 224 —

TOTAL LIABILITIES 106,991 56,896

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Selling, general, and administrative 28,046 24,709

Asset acquisition expenses 4,362 —

Depreciation 1,836 891

Research and development 1,822 1,714

Severance expense 530 —

Gain on sale of property and equipment ( 7 ) ( 124 )

Gain in fair value of Contract Consideration Convertible Notes Payable — ( 29,969 )

Total operating costs and expenses 36,589 27,190

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Other income (expense):

Paycheck protection plan loan forgiveness — 4,522

Interest expense ( 3,937 ) ( 1,095 )

Other income (expense), net 46 ( 26 )

Total other (expense) income ( 1,049 ) 1,639

Other income, net 348 46

Total other expense ( 3,589 ) ( 1,049 )

Income before income taxes 19,655 11,147

Income tax expense ( 649 ) ( 149 )

Income tax benefit (expense) 10,873 ( 649 )

Net income $ 30,528 $ 10,498

Income (loss) per common share:

Income per common share:

Basic $ 0.90 $ 0.36

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Weighted average common shares:

Weighted average common shares used in computing basic income (loss) per common share 29,534 24,830

Weighted average common shares used in computing diluted income (loss) per common share 30,889 28,377

Weighted average common shares used in computing basic income per common share 33,903 29,534

Weighted average common shares used in computing diluted income per common share 36,156 30,889

The accompanying Notes are an integral part of these Consolidated Financial Statements.

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Net income $ 30,528 $ 10,498

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Change in fair value of contingent consideration ( 127 ) 71

Change in fair value of Contract Consideration Convertible Notes Payable — ( 29,969 )

Amortization of convertible note issuance costs — 83

Paid-in-kind interest expense — 2,284

Amortization of contract assets 6,308 5,612

Depreciation 1,836 891

Amortization of asset-based loan origination costs 314 121

Amortization of deferred financing costs 345 314

Provision for credit losses, net of recoveries 603 181

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Stock compensation expense 2,300 1,366

Deferred income tax expense 249 104

Paycheck protection plan loan forgiveness — ( 4,522 )

Deferred income tax (benefit) expense ( 11,185 ) 249

Changes in current assets and liabilities:

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Income taxes payable 210 3

Interest payable — ( 8 )

Net cash provided by (used in) operating activities 3,361 ( 11,297 )

Interest payable, related party 1,008 —

Net cash provided by operating activities 7,204 3,361

Cash flows from investing activities:

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Cash flows from financing activities:

Payment for forfeited stock options — ( 617 )

Payments on long term debt ( 60 ) ( 179 )

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Payments on asset-based loan ( 188,407 ) ( 169,653 )

Payment of asset-based loan origination costs ( 164 ) ( 574 )

Payments of asset-based loan origination costs ( 169 ) ( 164 )

Payment of note payable issuance costs ( 480 ) —

Payment of stock warrant issuance costs ( 653 ) —

Payments to tax authorities for shares withheld from employees ( 1,559 ) ( 162 )

Proceeds from issuance of stock under Employee Stock Purchase Plan 155 114

Proceeds from stock option exercises 576 —

Payments for finance leases ( 96 ) ( 22 )

Net cash (used in) provided by financing activities ( 3,116 ) 5,928

Net cash used in financing activities ( 3,743 ) ( 3,116 )

Effect of changes in exchange rates on cash and cash equivalents ( 155 ) 124

Net change in cash and cash equivalents and restricted cash 1,329 ( 1,447 )

Cash and cash equivalents at the beginning of period 5,851 12,290

Restricted cash at the beginning of period 102 100

Cash and cash equivalents and restricted cash at beginning of period 5,953 12,390

Cash and cash equivalents at end of period 4,404 5,851

Restricted cash at the end of period 102 102

Cash and cash equivalents and restricted cash at end of period $ 4,506 $ 5,953

Cash and cash equivalents at the beginning of the period 4,404 5,851

Restricted cash at the beginning of the period 102 102

Cash and cash equivalents and restricted cash at the beginning of the period 4,506 5,953

Cash and cash equivalents at the end of the period 5,731 4,404

Restricted cash at the end of the period 104 102

Cash and cash equivalents and restricted cash at the end of the period $ 5,835 $ 4,506

The accompanying Notes are an integral part of these Consolidated Financial Statements.

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Foreign currency translation adjustment — — — — — ( 155 ) — ( 155 )

Stock option exercises 136 — — — 576 — — 576

Stock issued under employee stock purchase plan — — ( 16 ) — 155 — — 155

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Shares withheld to cover taxes — — 91 ( 1,559 ) — — — ( 1,559 )

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

Deferred tax asset on PWRtek assets, net (Note 12) — — — — 17,914 — — 17,914

Balance, December 31, 2025

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Value Shares Cost

(As adjusted, see Note 13)

Balance, December 31, 2023 30,773 $ 3 1,109 $ ( 34,504 ) $ 463,140 $ 127 $ ( 326,806 ) $ 101,960

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Restricted stock forfeited — — 11 — — — — —

Restricted stock units vested 82 — — — — — — —

Forfeited stock options purchased — — — — ( 617 ) — — ( 617 )

Restricted stock vested 71 — — — — — — —

Stock compensation expense — — — — 1,366 — — 1,366

Shares withheld to cover taxes — — 23 ( 162 ) — — — ( 162 )

Exercise of pre-funded warrants 4,228 — — — — — — —

Issuance of stock warrants, net of transaction fee — — — — 15,092 — — 15,092

Conversion of convertible notes payable to Pre-Funded Warrants — — — — 11,040 — — 11,040

Conversion of convertible notes payable to Common Stock 1,723 1 — — 8,996 — — 8,997

Conversion of Amended ProFrac Agreement Contract Consideration Convertible Notes Payable to Common Stock 10,583 1 — — 40,637 — — 40,638

Other 35 — — — — — — —

Balance, December 31, 2024

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Note 1 — Organization and Nature of Operations

Flotek creates unique solutions to reduce the environmental impact of energy on air, water, land and people.

A technology-driven, specialty chemistry and data company, Flotek helps customers across industrial and commercial markets improve their environmental performance.

The Company seeks to provide sustainable and optimized chemistry and data technology solutions for both domestic and international energy markets.

The Company’s Chemistry Technologies (“CT”) segment designs, develops, manufactures, packages and distributes specialty chemicals that 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 provides innovative analytical measurement solutions.

The DA segment seeks to deliver real-time information and insights to our customers to enable optimization of operations and reduction of emissions and their carbon intensity.

The Company’s operating segments, CT and DA, are supported by its Research & Innovation (“R&I”) advanced laboratory capabilities.

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.

The Company’s proprietary chemistries, specialty chemistries, logistics and technology services seek to enable our customers to pursue improved efficiencies and performance throughout the life cycle of their desired chemical applications program.

The Company designs, develops, manufactures, packages, distributes and markets optimized chemistry solutions that are designed to accelerate existing sustainability practices to reduce the environmental impact of energy on the air, water, land and people.

The Company’s Data Analytics (“DA”) segment delivers real-time measurement 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 5-15 seconds.

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 DA segment generates revenues through a combination of short and long-term equipment rentals (service revenue) and capital sales (product revenue) both of which are founded on the usage of the segment’s proprietary real-time measurement technologies.

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.

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 19, “Business Segment, Geographic and Major Customer Information.”

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The Company’s restricted cash as of December 31, 2025 and 2024 consisted of cash that the Company is contractually obligated to maintain in accordance with the terms of its credit card program with a financial institution.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable and Allowance for Credit Losses

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Additionally, certain customers are located in international areas that are inherently subject to risks of economic, political, and civil instability, which can impact the collectability of receivables.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in the allowance for credit losses are as follows (in thousands):

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As of December 31, 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 (see Note 19, “Related Party Transactions”).

The 2025 Contract Shortfall Fee offset (see Note 3, “Asset Acquisition”) in the amount of $ 7.2 million is presented net of the gross related party accounts receivable from ProFrac on the consolidated balance sheet as of December 31, 2025.

Contract Assets

The Company’s contract assets represent consideration issued in the form of convertible notes (Contract Consideration Convertible Notes Payable as discussed in Note 9, “Debt and Convertible Notes Payable”) and other incremental costs related to obtaining the ProFrac Agreement (see Note 17, “Related Party Transactions”) during the year ended December 31, 2022.

The Company’s contract assets represent consideration issued in the form of convertible notes and other incremental costs related to obtaining the ProFrac Agreement (see Note 18, “Related Party Transactions”) during the year ended December 31, 2022.

The contract assets are amortized over the term of the ProFrac Agreement (originally 10 years) based on forecasted revenues as goods are transferred to ProFrac Services, LLC and the amortization is presented as a reduction of the transaction price included in related party revenue in the consolidated statements of operations.

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Depreciation or amortization of property and equipment, including operating lease right-of-use assets (“ROU”), is calculated using the straight-line method over the shorter of the lease term or the asset’s estimated useful life as follows:

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Buildings and leasehold improvements 2 - 30 years

Machinery and equipment 7 - 10 years

Leased equipment 10 years

Furniture and fixtures 3 years

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The amount of impairment loss recognized is the excess of the asset or asset group’s carrying amount over its fair value.

Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

party independent appraisals, as considered necessary.

Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary.

There were no impairments of property and equipment, including ROU assets, during the years ended December 31, 2025 and 2024 .

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Since the former facility is not a component of the Company’s central operations, the income from the sublease and the expenses under the original lease are recorded in Other income, net on our Consolidated Statement of Operations.

Lessor Arrangements

On April 28, 2025, the Company entered into 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:

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, the Lease Agreement was classified as an operating lease.

For the years ended December 31, 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 Leased Equipment (as defined below) is recorded within Property and equipment, net in the balance sheet and depreciated over the Leased Equipment’s estimated useful life.

Depreciation expense associated with the Leased Equipment under the Lease Agreement is reflected in Depreciation in the statements of operations.

Fair Value Measurements

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In recognizing revenue for products and services, the Company determines the transaction price of contracts with customers, which may consist of fixed and variable consideration.

Determining the transaction price may require judgment by management, which includes identifying performance obligations, estimating variable consideration to include in the

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

transaction price, and determining whether promised goods or services can be distinguished in the context of the contract.

Determining the transaction price may require judgment by management, which includes identifying performance obligations, estimating variable consideration to include in the transaction price, and determining whether promised goods or services can be distinguished in the context of the contract.

The timing of revenue recognition, billings and cash collections results in billed and unbilled accounts receivable included in accounts receivable, net and accounts receivable, related party on our Consolidated Balance Sheet.

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Subscription-type arrangements were not a material revenue stream in the years ended December 31, 2025 and 2024.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Payment terms for both the CT and DA segments are customarily 30 - 60 days for domestic and 90 - 120 days f or international from invoice receipt.

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The Company’s comprehensive income includes consolidated net income and foreign currency translation adjustments.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Research and Development Costs

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Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets.

During the year ended December 31, 2025, the Company determined that a full valuation allowance was no longer required for certain deferred tax assets and a partial valuation allowance release was recognized (see Note 12, “Income Taxes”).

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained.

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The Company’s policy is to record interest and penalties related to uncertain tax positions as income tax expense.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

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Stock Warrants

The Company evaluated the Pre-Funded Warrants issued in June 2022 (the “Pre-Funded Warrants”) (see Note 13, “Stockholders’ Equity”) in accordance with ASC 815-40, “Contracts in Entity’s Own Equity” and determined that the warrants meet the criteria to be classified within stockholders’ equity and recorded the proceeds received for the Pre-Funded Warrants within additional paid in capital in the consolidated balance sheets.

The Company evaluated the Pre-Funded Warrants issued in June 2022 (the “Pre-Funded Warrants”) (see Note 14, “Stockholders’ Equity”) in accordance with ASC 815-40, “Contracts in Entity’s Own Equity” (“ASC 815-40”) and determined that the warrants meet the criteria to be classified within stockholders’ equity and recorded the proceeds received for the Pre-Funded Warrants within additional paid in capital in the consolidated balance sheets.

In connection with the asset acquisition, consideration included a warrant to purchase 6,000,000 shares of the Company’s common stock (the “April 2025 Warrant”).

The April 2025 Warrant was evaluated in accordance with ASC 815-40 and the Company determined that the April 2025 Warrant met the criteria to be classified within stockholders’ equity, net of issuance costs.

See Note 3, “Asset Acquisition” for additional information about the April 2025 Warrant.

On March 13, 2026, ProFrac GDM exercised the April 2025 Warrant and was issued 6,000,000 shares of the Company’s common stock.

Use of Estimates

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the useful lives of property and equipment;

fair-value of the Leased Equipment;

long lived asset impairment assessments;

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recoverability and timing of the realization of contract assets.

and the fair value of liability classified Contract Consideration Convertible Notes Payable until they were converted.

Recent Accounting Pronouncements

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New Accounting Standards Issued and Adopted as of December 31, 2025

The Company has adopted ASU 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures" ("ASU 2023-07"), effective retrospectively for the year ended December 31, 2024.

ASU 2023-07 enhances the disclosures required for operating segments in the Company's annual and interim consolidated financial statements.

As a result of this adoption, the Company's segment disclosure now includes significant expense categories.

See "Note 18, “Business Segment, Geographic and Major Customer Information" for the enhanced disclosures associated with the adoption of ASU 2023-07.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

New Accounting Standards Issued and Not Adopted as of December 31, 2024

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740):

Income Tax Disclosure Improvements

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 after December 15, 2024.

The Company continues to evaluate the impact of this standard on its disclosures.

ASU 2023-09 is effective for the Company for all annual periods beginning for the annual period ending December 31, 2025.

The Company adopted ASU 2023-09 retrospectively and the adoption resulted in expanded tax disclosures in the annual financial statements for the years ended December 31, 2025 and 2024.

New Accounting Standards Issued and Not Adopted as of December 31, 2025

Expense Disaggregation Disclosures

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.

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The Company is currently evaluating the impact of this standard on its disclosures.

Internal-Use Software Costs

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”).

ASU 2025-06 eliminates the previously required stage-based model for capitalization of internal-use software costs and now requires capitalization to begin when (i) management authorizes and commits to funding the project, and (ii) it is probable the project will be completed and used as intended.

The ASU also clarifies that all capitalized internal-use software, including implementation costs in hosting

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

arrangements, are subject to the disclosure requirements of ASC 360-10.

ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impact of adoption.

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 (the “Lease Agreement”), by and between PWRtek, LLC (“PWRtek”), a wholly-owned subsidiary of the Company, and ProFrac GDM (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 began recognizing lease revenue on the respective dates each of the eight units were placed in-service.

As of December 31, 2025, 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 18, “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 $ 40.0 million (the “PWRtek Note”), and (4) a $ 7.2 million offset against the 2025 Contract Shortfall Fee (the “OSP Offset”) amount due under the ProFrac Agreement (see Note 18, “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.

On March 13, 2026, ProFrac GDM exercised the April 2025 Warrant and was issued 6,000,000 shares of the Company’s common stock.

The PWRtek Note provided 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.

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.

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.

The Company recorded $ 4.4 million in asset acquisition expenses for the PWRtek Transactions.

These costs are recorded in the consolidated statement of operations and primarily comprised of professional services including legal, accounting, and other professional or consulting fees.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Due to ProFrac controlling more than 50% of the Company’s outstanding shares (see Note 18, “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 year ended December 31, 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.

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

PWRtek Note 40,000

2024 Contract Shortfall Fee offset 17,552

2025 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 or service revenue.

Product and service revenues include sales to related parties as described in Note 17, “Related Party Transactions.”

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 18, “Related Party Transactions.”

Total revenue disaggregated by revenue source is as follows (in thousands):

2 unchanged sentences

Services 7,636 6,555

Rental 16,139 —

$ 237,262 $ 187,025

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 which cannot be directly attributable to either tangible goods or services.

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):

5 unchanged sentences

$ 177,429 $ 147,639

Other cost of sales represent costs directly associated with the generation of revenue but which cannot be attributed directly to tangible goods sold or services.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 year ended December 31, 2025 includes $ 1.6 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, between external customers and related party, is as follows (in thousands):

Cost of sales, disaggregated between external customers and related party, is as follows (in thousands):

Years ended December 31,

3 unchanged sentences

$ 177,429 $ 147,639

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 — Contract Assets

6 unchanged sentences

Contract assets, long term $ 55,115 $ 63,105

In connection with entering into the Initial ProFrac Agreement and Amended ProFrac Agreement on February 2, 2022 and May 17, 2022, respectively, as discussed in Note 9, “Debt and Convertible Notes Payable” and 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 December 31, 2024 and December 31, 2023, $ 63.1 million and $ 68.8 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.

In connection with entering into the Initial ProFrac Agreement (defined below) and First Amendment to the ProFrac Agreement (defined below) on February 2, 2022 and May 17, 2022, respectively, as discussed in Note 18, “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 December 31, 2025 and 2024, $ 55.1 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 years ended December 31, 2024 and 2023, the Company recognized $ 5.6 million and $ 5.0 million, respectively, of contract assets amortization that is recorded as a reduction of the transaction price included in the 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.

During the years ended December 31, 2025 and 2024, the Company recognized $ 6.3 million and $ 5.6 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.

The table below reflects our estimated amortization per year (in thousands) based on the Company’s forecasted revenues from the ProFrac Agreement as of December 31, 2025.

Years ending December 31, Amortization

1 unchanged sentence

Total contract assets $ 62,736

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 — Inventories

6 unchanged sentences

Inventories, net $ 10,629 $ 13,303

During the years ended December 31, 2024 and 2023, additional reserves recorded were $ 0.6 million and $ 0.8 million, respectively, for the CT segment and $ 13 thousand and $ 0.2 million, respectively, for the DA segment.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the years ended December 31, 2025 and 2024, additional reserves recorded were $ 0.4 million and $ 0.6 million, respectively, for the CT segment and $ 82 thousand and $ 13 thousand, respectively, for the DA segment.

Note 7 — Property and Equipment

5 unchanged sentences

Machinery and equipment 8,804 8,524

Leased equipment 14,252 —

Furniture and fixtures 570 520

19 unchanged sentences

Financing cash flows from finance leases 27 1

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Maturities of lease liabilities as of December 31, 2025 are as follows (in thousands):

Years ending December 31, Operating Leases

Years ending December 31, Operating Leases Finance Leases

2026 $ 1,810 $ 180

2027 1,863 180

2028 1,729 57

Thereafter 1,407 —

2 unchanged sentences

Present value of lease liabilities $ 6,859 $ 377

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental balance sheet information related to leases is as follows (in thousands):

6 unchanged sentences

Finance Leases

Property and equipment $ — $ 147

Accumulated depreciation — ( 70 )

Property and equipment, net $ — $ 77

Finance lease right-of-use assets $ 365 $ —

Current portion of finance lease liabilities $ 153 $ —

Long-term finance lease liabilities 224 —

Total finance lease liabilities $ 377 $ —

5 unchanged sentences

Finance leases 9.5 % — %

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 $ 16.1 million during the year ended December 31, 2025.

At December 31, 2025, the minimum future lease income related to the Lease Agreement is as follows (in thousands):

Years ending December 31, Lease Agreement Income

Thereafter (1)

Total rental income (through April 2030)

(1) 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

2 unchanged sentences

Rental income from the sublease offsets the monthly rental expense from the Company’s lease of the facility.

Sublease rental income for future years are as follows (in thousands):

Years ending December 31, Rental Income

Sublease rental income for future years is as follows (in thousands):

Years ending December 31, Sublease Income

Thereafter 639

Total rental income $ 3,707

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 — Accrued Liabilities

4 unchanged sentences

Legal costs 85 99

Contingent liability for earn-out provision 127 56

Deferred revenue 716 808

2 unchanged sentences

Total current accrued liabilities $ 7,256 $ 5,912

Note 9 — Debt and Convertible Notes Payable

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 and August 2024 (as amended the “ABL”).

The August 2024 amendment to the ABL extended the maturity to August 2026, increased the credit availability and lowered the interest rate spread.

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 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.

4 unchanged sentences

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.

The interest rate under the ABL was 9.5 % and 11.0 % as of December 31, 2024 and 2023, respectively.

For the year ended December 31, 2024, the weighted-average interest rate was 10.8 %.

For the years ended December 31, 2025 and 2024, the weighted-average interest rate was 9.3 % and 10.8 %, respectively.

The ABL contains an annual commitment fee equal to 1.0 % of the ABL’s borrowing base.

2 unchanged sentences

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.

The ABL requires the Company to maintain a minimum Tangible Net Worth (as defined in the ABL) of not less than $ 11 million.

In addition, the ABL provides the lender a blanket security interest on all or substantially all of the Company’s assets.

The Company was in compliance with all of the covenants under the ABL as of December 31, 2024.

In connection with the Company’s entry into the Purchase Agreement (see Note 3, “Asset Acquisition”), the Company entered into the Letter Agreement in April 2025 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 December 31, 2025.

Related Party Note Payable

As of December 31, 2025, amounts outstanding under the PWRtek Note (see Note 3, “Asset Acquisition”) are as follows (in thousands):

December 31, 2025

PWRtek Note payable $ 40,000

unamortized debt issuance cost ( 416 )

Total PWRtek Note payable $ 39,584

As of December 31, 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

Thereafter 40,000

Total payments $ 40,000

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2025, interest expense related to the PWRtek Note was $ 2.7 million.

As of December 31, 2025, interest payable related to the PWRtek Note was $ 1.0 million and included in interest payable, related party in the consolidated balance sheets.

On November 7, 2025, the Company entered into a series of agreements with ProFrac GDM, in connection with the assignment of the PWRtek Note to PC Energy Credit I LLC, an affiliate of the founders and principal stockholders of ProFrac and entities owned by or affiliated with them and a related party to ProFrac (the “Note Assignment”).

In connection with the Note Assignment, (1) the Company and ProFrac GDM 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 entered into that certain Guaranty, dated as of November 7, 2025 (the “ProFrac Parent Guaranty”), and (3) the Company and ProFrac GDM entered into that certain Amendment No.

1 to Agreement for Equipment Rental, dated as of November 7, 2025 (the “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’s 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.

In addition, on October 28, 2025, the Company’s lender under the ABL provided the ABL Consent to the Assignment (see “Note 3 - Asset Acquisition”).

Paycheck Protection Program Loan

1 unchanged sentence

Small Business Administration (“SBA”).

In October 2021, the Flotek PPP loan maturity date was extended from April 15, 2022 to April 15, 2025.

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 is to be repaid in monthly installments of $ 15 thousand over the remaining term of the loan through April 15, 2025.

The forgiveness of the Flotek PPP loan was accounted for as an

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

extinguishment of the debt and the Company recorded a $ 4.5 million gain in the year ended December 31, 2023, comprising the principal amount forgiven of $ 4.4 million and accrued interest of $ 0.1 million.

Long-term debt, including current portion, is as follows (in thousands):

December 31, 2024 December 31, 2023

Flotek PPP loan

Less current maturities

( 60 ) ( 179 )

Total long-term debt, net of current portion

Convertible Notes Payable

On February 2, 2022, Flotek entered into a Private Investment in Public Equity transaction (the “PIPE transaction”) with a consortium of investors to secure growth capital for the Company.

Pursuant to the PIPE transaction, Flotek issued $ 21.2 million in aggregate initial principal amount of Convertible Notes Payable for net cash proceeds of approximately $ 20.1 million (the “Convertible Notes Payable”).

The investors were ProFrac Holdings, LLC, Burlington Ventures Ltd., entities associated with North Sound Management, certain funds associated with one of Flotek’s former directors including the D3 Family Fund and the D3 Bulldog Fund, and Firestorm Capital LLC.

The Convertible Notes Payable accrued paid-in-kind interest at a rate of 10 % per annum, had a maturity of one year , and were convertible into common stock of Flotek or Pre-Funded Warrants to purchase common stock of Flotek.

The issuance cost was amortized on a straight-line basis over the term of the Convertible Notes Payable and the amortization was included in interest expense in the consolidated statements of operations.

On March 21, 2022, a portion of the Convertible Notes Payable, plus accrued paid-in-kind interest thereon, were converted at the holder’s option into shares of common stock.

Upon maturity on February 2, 2023, the Convertible Notes Payable, excluding those held by ProFrac Holdings, LLC, with a carrying value of $ 9.0 million, including accrued paid-in-kind interest of $ 0.8 million, were converted into 1,722,640 shares of the Company’s common stock.

The Convertible Notes Payable held by ProFrac Holding, LLC, with a carrying value of $ 11.0 million, including accrued paid-in-kind interest of $ 1.0 million, were converted, upon maturity, into 2,113,880 February 2023 Warrants with an exercise price of $ 0.0001 per share and were recorded as additional paid in capital upon conversion.

On September 6, 2023, the February 2023 Warrants were exercised and the Company issued 2,113,880 shares of the Company’s common stock.

Initial ProFrac Agreement Contract Consideration Convertible Notes Payable

On February 2, 2022, the Company entered into a long-term supply agreement with ProFrac Services, LLC (the “Initial ProFrac Agreement”), a subsidiary of ProFrac Holdings LLC, in exchange for $ 10 million in aggregate principal amount of Contract Consideration Convertible Notes Payable (“Initial ProFrac Agreement Contract Consideration Convertible Notes Payable”), under the same terms as the Convertible Notes Payable issued in the PIPE transaction described above.

On February 2, 2023, the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable, remeasured to and carried at a fair value of $ 15.1 million (see Note 10, “Fair Value Measurements”), were converted, upon maturity, into 2,113,881 February 2023 Warrants with an exercise price of $ 0.0001 per share and were recorded as additional paid in capital upon conversion.

On September 6, 2023, the February 2023 Warrants were exercised and the Company issued 2,113,881 shares of the Company’s common stock.

Amended ProFrac Agreement Contract Consideration Convertible Notes Payable

On May 17, 2022, the Company entered into an amendment to the Initial ProFrac Agreement (the “Amended ProFrac Agreement” and collectively with the Initial ProFrac Agreement, the “ProFrac Agreement”) upon issuance of $ 50 million in aggregate principal amount of Contract Consideration Convertible Notes Payable (“Amended ProFrac Agreement Contract Consideration Convertible Notes Payable”) to ProFrac.

The Amended ProFrac Agreement Contract Consideration Convertible Notes Payable accrued paid-in-kind interest at a rate of 10 % per annum.

On May 17, 2023, the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable, remeasured to and carried at a fair value of $ 40.6 million (see Note 10, “Fair Value Measurements”), were converted, upon maturity, into 10,582,821 shares of common stock.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The remaining principal amount of $ 0.4 million and accrued interest was fully repaid as of April 15, 2025.

Note 11 — Fair Value Measurements

6 unchanged sentences

Fair Value of Other Financial Instruments

The carrying amounts of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accrued liabilities, accounts payable and ABL approximate fair value due to the short-term nature of these accounts.

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.

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):

December 31, December 31,

Level 1 Level 2 Level 3 2024 Level 1 Level 2 Level 3 2023

Level 1 Level 2 Level 3 2024

Contingent earnout consideration $ — $ — $ 127 $ 127

2 unchanged sentences

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 and December 31, 2023.

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.

December 31, 2024 December 31, 2023

Risk-free interest rate 4.30 % 4.58 %

Expected volatility 65.0 % 70.0 %

Term until liquidation (years) 0.38 1.38

Stock price $ 9.53 $ 3.92

Discount rate 8.00 % 11.86 %

Initial ProFrac Agreement Contract Consideration Notes Payable Key Inputs

The Initial ProFrac Agreement Contract Consideration Convertible Notes Payable were measured at fair value at issuance and on a recurring basis.

The Initial ProFrac Agreement Contract Consideration Convertible Notes Payable had an initial fair value of $ 10.0 million on February 2, 2022.

On February 2, 2023, the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable were remeasured, upon maturity, to a fair value of $ 15.1 million based on the closing price of the shares of common stock on the date of conversion.

The fair value adjustment was a $ 0.8 million increase for the year ended December 31, 2023.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amended ProFrac Agreement Contract Consideration Convertible Notes Payable Key Inputs

The Amended ProFrac Agreement Contract Consideration Convertible Notes Payable were measured at fair value at issuance and on a recurring basis.

The Amended ProFrac Agreement Contract Consideration Convertible Notes Payable had an initial fair value of $ 69.5 million on May 17,2022.

On May 17, 2023, the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable were remeasured, at maturity, to a fair value of $ 40.6 million based on the closing price of the shares of common stock on the date of conversion resulting in a gain in fair value of Amended ProFrac Agreement Contract Consideration Convertible Note Payable of $ 30.8 million for the year ended December 31, 2023.

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 the 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.

The earnout provision expired on May 18, 2025 and no payment was required to be made by the Company to the sellers.

Assets Measured at Fair Value on a Nonrecurring Basis

4 unchanged sentences

Balance - beginning of period $ 127 $ 56

Increase in principal of Initial ProFrac Agreement Contract Consideration Convertible Notes Payable for paid-in-kind interest — 85

Increase in principal of Amended ProFrac Agreement Contract Consideration Convertible Notes Payable for paid-in-kind interest — 2,043

Expiration of contingent earnout consideration ( 127 ) —

Change in fair value of contingent earnout consideration — 71

Change in fair value of Initial ProFrac Agreement Contract Consideration Convertible Notes Payable — 786

Change in fair value of Amended ProFrac Agreement Contract Consideration Convertible Notes Payable — ( 30,754 )

Conversion of Initial ProFrac Agreement Contract Consideration Convertible Notes Payable on maturity — ( 15,092 )

Conversion of Amended ProFrac Agreement Contract Consideration Convertible Notes Payable on maturity — ( 40,638 )

Balance - end of period $ — $ 127

3 unchanged sentences

Federal $ — $ —

State 209 400

Foreign 103 —

Total current expense 312 400

Federal ( 10,945 ) —

State ( 240 ) 249

Total deferred expense 249 104

Income tax expense $ 649 $ 149

Total deferred (benefit) expense ( 11,185 ) 249

Income tax (benefit) expense $ ( 10,873 ) $ 649

FLOTEK INDUSTRIES, INC.

6 unchanged sentences

Income before income taxes $ 19,655 $ 11,147

The income tax expense differed from the amounts computed by applying the U.S.

federal income tax rate of 21% respectively, to income before income tax for the reasons set forth below:

The income tax (benefit) expense differed from the amounts computed by applying the U.S.

federal income tax rate of 21% respectively, to income before income tax for the reasons set forth below (in thousands, except percentages):

Years ended December 31,

Income before income taxes $ 19,655 $ 11,147

federal statutory tax rate $ 4,128 21.0 % $ 2,341 21.0 %

State income taxes, net of federal benefit 4.6 0.5

income taxed at different rates ( 0.5 ) 0.3

Tax benefit related to stock-based awards ( 0.2 ) 0.7

Change in valuation allowance ( 21.4 ) ( 20.9 )

Permanent differences related to CARES Act — ( 3.6 )

Other 2.3 2.6

Effective income tax rate 5.8 % 0.6 %

State and Local income taxes, net of federal benefit (1)

( 25 ) ( 0.1 ) % 513 4.6 %

Foreign tax effects (2)

( 69 ) ( 0.4 ) % ( 51 ) ( 0.5 ) %

Effect of Changes in Tax Laws or Rates Enacted in the Current Period

Effect of Cross-Border Tax Laws 98 0.5 % 60 0.5 %

Changes in Valuation Allowances ( 14,826 ) ( 75.4 ) % ( 2,381 ) ( 21.4 ) %

Nontaxable or nondeductible items

Reduction in tax benefit related to stock-based awards ( 890 ) ( 4.5 ) % ( 26 ) ( 0.2 ) %

Executive compensation limit 562 2.9 % 15 0.1 %

Other (other perms, PY true-up, misc) 149 0.7 % 178 1.7 %

Income tax (benefit) expense and effective rate $ ( 10,873 ) ( 55.3 ) % $ 649 5.8 %

(1) State taxes in Texas and Louisiana made up the majority of the tax effect in this category.

(2) Foreign tax effects in the United Arab Emirates made up the majority of the tax effect in this category.

The Company paid the following amounts for income taxes, net of refunds received, as follows (in thousands):

Years ended December 31,

Federal $ — $ —

Oklahoma 17 —

Pennsylvania 10 —

United Arab Emirates 11 —

Total income taxes paid $ 135 $ 398

Deferred income taxes reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the value reported for income tax purposes, at the enacted tax rates expected to be in effect when the differences reverse.

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Equity compensation 281 148

Interest limitation — 137

Total gross deferred tax assets 80,136 63,335

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Additionally, the Company has an estimated $ 77.2 million in certain state NOL carryforwards and $ 3.8 million in tax credit carryforwards.

As a result of the ownership change experienced in 2023 (see Note 17, “Related Party Transaction”), 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 an uplift of $ 24.5 million.

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.

The Company’s use of new NOLs arising after the date of the ownership change would not be impacted by the Section 382 limitation.

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 $ 0.9 million of the state NOL carryforwards and $ 3.8 million of the tax credit carryforwards will expire unutilized.

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.

The Company’s cumulative losses (before permanent items) of $ 6.3 million in the three years ended December 31, 2024 are negative evidence that it will not likely generate sufficient future taxable income to utilize its deferred tax assets.

Therefore, the Company believes that it is not more likely than not that it will realize its deferred tax assets in all taxing jurisdictions with the exception of a portion related to the State of Texas.

Therefore, the Company recorded a valuation allowance as of December 31, 2024 and December 31, 2023 to reflect the estimated amount of deferred tax asset realizability.

The change in valuation allowance was ($ 2.7 ) million and ($ 5.2 ) million during the years ended December 31, 2024 and 2023, respectively.

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.

The Company does not have documented plans to reinvest the unremitted earnings of its non-U.S.

subsidiaries.

As of December 31, 2024 and 2023, the Company had approximately $ 6.4 million and $ 6.3 million, respectively, in unremitted earnings from its

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

foreign jurisdictions.

As of December 31, 2025 and 2024, the Company had approximately $ 6.6 million and $ 6.4 million, respectively, in unremitted earnings from its foreign jurisdictions.

As a result of the 2017 Tax Act these earnings have been previously taxed in the U.S.

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The tax returns for the years ended 2022 through 2024 remain subject to examination in the US, and the tax returns for the years ended December 31, 2021 through 2024 remain subject to examination in various state jurisdictions.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On July 4, 2025, the U.S.

1 “A bill to provide for reconciliation pursuant to Title II of H.

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 year ended December 31, 2025.

Valuation Allowance

The Company considered both positive and negative evidence and determined that 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 during the year, 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 on existing contracts including the ProFrac Agreement (discussed below in Note 18, “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 U.S.

federal and state deferred tax assets for the year ended December 31, 2025, was recorded totaling $ 15.5 million ($ 14.8 million federal and $ 0.7 million state).

As discussed in Note 3, “Asset Acquisition”, the PWRtek asset acquisition was treated as a purchase of assets under common control resulting in a $ 92.6 million reduction to additional paid in capital.

The $ 92.6 million of additional consideration results in an originating book tax difference.

Accordingly, a deferred tax asset of $ 20.9 million ($ 19.4 million federal and $ 1.5 million state) less an increase in the valuation allowance for the amount estimated to be unrealized of $ 3.0 million ($ 2.8 million federal and $ 0.2 million state) was recorded to additional paid in capital as a net $ 17.9 million increase.

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.

federal and state valuation allowances currently estimated to be necessary at December 31, 2025 are $ 43.9 million.

The timing and amount of future valuation allowance reductions are subject to future levels of profitability being achieved.

Note 13 — Commitments and Contingencies

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Note 14 — Stockholders’ Equity

Conversion of Convertible Notes Payable

On February 2, 2023, the Convertible Notes Payable pursuant to the PIPE transaction discussed in Note 9, “Debt and Convertible Notes Payable,” excluding those held by ProFrac Holdings, LLC, were converted, upon maturity, into 1,722,640 shares of common stock.

The Convertible Notes Payable converted into common stock had a carrying value of $ 9.0 million, including accrued paid-in-kind interest of $ 0.8 million and were recorded as additional paid-in-capital upon conversion.

The Convertible Notes Payable held by ProFrac Holding, LLC, with a carrying value of $ 11.0 million, including accrued interest of $ 1.0 million, were converted, upon maturity, into 2,113,880 February 2023 Warrants with an exercise price of $ 0.0001 per share and were recorded as additional paid-in-capital upon conversion.

On September 6, 2023, the February 2023 Warrants issued upon the conversion of the Convertible Notes Payable held by ProFrac Holding, LLC were exercised and the Company issued 2,113,880 shares of the Company’s common stock.

On February 2, 2023, the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable discussed in Note 9, “Debt and Convertible Notes Payable,” remeasured to a fair value of $ 15.1 million upon maturity, were converted into 2,113,881 February 2023 Warrants and were recorded as additional paid-in-capital upon conversion.

On September 6, 2023, the February 2023 Warrants issued upon the conversion of the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable were exercised and the Company issued 2,113,881 shares of the Company’s common stock.

On May 17, 2023, the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable discussed in Note 9, “Debt and Convertible Notes Payable”, were converted, upon maturity, into 10,582,821 shares of common stock.

The Contract Consideration Convertible Notes Payable, remeasured to a fair value of $ 40.6 million upon maturity, were recorded as additional paid-in-capital upon conversion.

Pre-Funded Warrants

On June 21, 2022, ProFrac Holdings II, LLC paid $ 19.5 million for Pre-Funded Warrants (the “June 2022 Warrants”) of the Company.

The June 2022 Warrants permit ProFrac Holdings II, LLC 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.

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.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ProFrac Holdings II, LLC 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, LLC has paid an additional $ 4.5 million to the Company;

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.

2 unchanged sentences

The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders’ equity.

During the years ended December 31, 2024 and 2023, the Company withheld 23 thousand shares and 42 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 and the exercise of stock options.

During the years ended December 31, 2025 and 2024, the Company withheld approximately 91 thousand shares and 23 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 years ended December 31, 2024 and 2023, forfeited stock awards returned to treasury stock were 11 thousand shares and 66 thousand shares, respectively.

During the years ended December 31, 2025 and 2024, forfeited stock awards returned to treasury stock were approximately 3 thousand shares and 11 thousand shares, respectively.

Note 15 — Stock-Based Compensation and Other Benefit Plans

Stock-Based Incentive Plans

In June 2024, Company stockholders approved an amendment to the Flotek Industries, Inc.

In May 2025, Company stockholders approved an amendment to the Flotek Industries, Inc.

2018 Long-Term Incentive Plan (the “2018 Plan”) to increase the number of shares of Company common stock eligible for issuance under the 2018 Plan.

5 unchanged sentences

All stock options are granted with an exercise price equal to the market value of the Company’s common stock on the date of grant.

During the year ended December 31, 2024, there were no grants of market-based or performance-based stock options compared to 0.1 million market-based stock options and 0.1 million performance-based stock options that were granted during the year ended December 31, 2023.

During the years ended December 31, 2025 and 2024, there were no grants of market-based or performance-based stock options .

The market-based and performance-based options are restricted until criteria defined in the stock option agreements are met.

3 unchanged sentences

Stock-based compensation expense is recorded for all equity awards expected to vest.

During the year ended December 31, 2024, 24 thousand stock options vested compared to none for the year ended December 31, 2023.

During the year ended December 31, 2025, 123 thousand stock options vested compared to 24 thousand for the year ended December 31, 2024 .

The total fair value of the stock options that vested was $ 0.3 million for the year ended December 31, 2025 .

22 unchanged sentences

Weighted-average remaining contractual term in years 7.52 7.93 7.54

The following table sets forth significant assumptions used in the Monte Carlo model for market-based options to determine the fair value of the 61,984 options awarded in June 2023 at the date of grant.

June 7, 2023 Awards

Risk-free interest rate 3.79 %

Expected volatility of common stock 110.00 %

Expected life of options in years 10.0

Dividend yield — %

The following table sets forth significant assumptions used in the Black-Scholes model for performance options to determine the fair value of the 128,744 options awarded in December 2023 at the date of grant.

December 5, 2023 Awards

Risk-free interest rate 4.13 %

Expected volatility of common stock 90.60 %

Expected life of options in years 6.5

Dividend yield — %

At December 31, 2025 and 2024, the unrecognized compensation cost related to stock options was $ 0.1 million and $ 0.4 million, respectively.

There were no options granted during the year ended December 31, 2024 .

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

There were no opti ons granted during the years ended December 31, 2025 and 2024 .

Restricted Stock

5 unchanged sentences

• Performance-based RSAs are issued with criteria defined over a designated period and vest only when, and if, the outlined criteria are met.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RSA activity for the years ended December 31, 2025 and 2024 , are as follows:

16 unchanged sentences

At December 31, 2025 and 2024, unrecognized compensation expense related to non-vested RSAs was $ 0.3 million and $ 0.4 million, respectively.

The unrecognized compensation expense is expected to be recognized over a weighted-average period of 1.5 years.

The unrecognized compensation expense is expected to be recognized over a weighted-average period of 1 year.

Restricted Stock Units

3 unchanged sentences

• Performance-based RSUs are issued with criteria defined over a designated period and vest only when, and if, the outlined criteria are met.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RSU activity for the years ended December 31, 2025 and 2024, was as follows:

15 unchanged sentences

The grant-date fair value is the market price of the shares on the date of grant.

The RSUs granted in 2024 included 147,050 performance-based RSUs, half of which will vest upon achievement of a market-based criteria and half of which will vest upon achievement of a non-market-based criteria.

The units with a market-based vesting criteria were valued using a Monte Carlo valuation model to determine the fair value of the awards as of the date of the grant.

The time-vesting RSUs granted in 2025 will vest in three equal annual installments starting on the first anniversary of the date of grant.

Of the 118,550 performance-based RSUs granted in 2025, 45,107 will vest upon achievement of a market-based criteria and 69,397 will vest upon achievement of a non-market-based criteria.

The following table sets forth significant assumptions used in the Monte Carlo model to determine the grant date fair value of the performance-based RSUs with a market-based vesting criteria awarded in 2025.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 19, 2025 Awards

Risk-free interest rate 3.58 %

Expected volatility of common stock 72.50 %

Expected life of RSU in years 2.11

Dividend yield — %

The RSUs granted in 2024 included 147,050 performance-based RSUs, half of which vested upon achievement of a market-based criteria and half of which will vest upon achievement of a non-market-based criteria.

Following the achievement of the market-based criteria and forfeiture activity, there are 67,525 performance-based RSUs remaining which will vest upon achievement of a non-market-based criteria.

The performance-based RSUs with a market-based vesting criteria were valued using a Monte Carlo valuation model to determine the fair value of the awards as of the date of the grant.

October 30, 2024 Awards

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Stock-based compensation expense related to stock options, restricted stock, restricted stock unit grants and stock purchased under the Company’s ESPP was $ 2.3 million and $ 1.4 million during the years ended December 31, 2025 and 2024 , respectively.

Stock based compensation expense for the year ended December 31, 2023 included an adjustment for actual forfeitures of $ 1.6 million that reduced the total stock-compensation expense.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 2023, the Company settled vested equity awards of a terminated officer through a cash payment.

The cash payment was made to the employee in lieu of the equity awards, which were previously granted and vested.

The settlement amount was determined based on the fair value of the equity awards at the time of termination.

The Company used the Black-Scholes Model to value the vested equity awards.

This transaction resulted in a reduction of the Company's equity awards liability and a corresponding outflow of cash for $ 0.6 million.

The key inputs to the Black-Scholes Model used to estimate the fair value of the vested equity awards, as of the date of the termination were as follows:

January 19, 2023

Risk-free interest rate 3.79 %

Expected volatility of common stock 90.00 %

Expected life of options in years 6.92

Stock price (1) $ 1.37

Strike Price $ 1.93

(1) Stock price is based on the price of common shares prior to the Company’s 1-for-6 reverse stock split in September 2023.

401(k) Retirement Plan

3 unchanged sentences

During the years ended December 31, 2025 and 2024, compensation expense included $ 0.4 million and $ 0.3 million, respectively, related to the Company’s 401(k) match.

Note 15 — Earnings (Loss) Per Share

Basic earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period (See Note 9, “Debt and Convertible Notes Payable” and Note 13, “Stockholders’ Equity”).

Diluted earnings (loss) per common share is calculated by dividing the adjusted net income (loss) by the weighted average number of common shares outstanding combined with dilutive common share equivalents outstanding, if the effect is dilutive.

Potentially dilutive common share equivalents consist of incremental shares of common stock issuable upon conversion of convertible notes payable, exercise of stock 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 (ESPP), employee stock options outstanding, and the Pre-Funded stock warrants are computed using the treasury stock method.

The dilutive effect of the Convertible Notes is computed using the if‑converted method.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The calculation of the basic and diluted earnings (loss) per share for the years ended December 31, 2024 and 2023 is as follows (in thousands):

Note 16 — 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 years ended December 31, 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 years ended December 31, 2025 and 2024 is as follows (in thousands):

Years ended December 31,

Net income for basic earnings per share $ 10,498 $ 24,713

Adjustments to net income available to shareholders

Paid-in-Kind interest expense on convertible notes payable and Contract Consideration Convertible Notes Payable — 2,284

Valuation gain on Contract Consideration Convertible Notes Payable carried at fair value — ( 29,969 )

Adjusted net income (loss) for diluted earnings per share $ 10,498 $ ( 2,972 )

Net income for basic and diluted earnings per share $ 30,528 $ 10,498

Basic weighted average shares outstanding (1)

Dilutive effect of convertible notes payable — 3,547

33,903 29,534

Dilutive effect of the June 2022 warrants 1,815 1,210

2 unchanged sentences

Basic earnings per share $ 0.90 $ 0.36

Diluted earnings (loss) per share $ 0.34 $ ( 0.10 )

Anti-dilutive incremental shares excluded from denominator for diluted earnings computation

Average number of diluted shares for June 2022 warrants (1)

Average number of diluted shares for options and restricted stock (1)

(1) These items were not included in the dilution calculation for the year ended December 31, 2023 due to their anti-dilutive effect as it would reduce the loss per share.

Diluted earnings per share $ 0.84 $ 0.34

(1) Basic weighted average shares outstanding for 2025 includes 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 17— Supplemental Cash Flow Information

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Years ended December 31,

Supplemental non-cash operating activities:

PWRtek Transactions (Note 3)

2024 Contract Shortfall Fee offset $ ( 17,552 ) $ —

2025 Contract Shortfall Fee (presented on a net basis in accounts receivable, 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 ) —

Deferred tax asset on PWRtek assets, net ( 17,914 ) —

Excess consideration over historical asset book value 92,608 —

April 2025 Warrant issued ( 42,660 ) —

Supplemental cash flow information:

Interest paid $ 3,620 $ 846

Income taxes 50 —

Supplemental non cash financing and investing activities:

Conversion of convertible notes payable to common stock — 8,997

Conversion of convertible notes payable to February 2023 Warrants — 11,040

Conversion of Initial Contract Consideration Convertible Notes Payable to February 2023 Warrants — 15,092

Conversion of Amended Contract Consideration Convertible Notes Payable to common stock — 40,638

FLOTEK INDUSTRIES, INC.

1 unchanged sentence

Note 18— Related Party Transactions

On February 2, 2022, the Company entered into 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 (see Note 9, “Debt and Convertible Notes Payable”).

Under the Initial ProFrac Agreement, ProFrac Services, LLC was obligated to order chemicals from the Company at least equal to the greater of (a) the chemicals required for 33 % of ProFrac Services, LLC’s hydraulic fracturing fleets and (b) a baseline measured by the first ten hydraulic fracturing fleets deployed by ProFrac Services, LLC during the term of the Initial ProFrac Agreement.

If the minimum volumes are not achieved in any given year, ProFrac Services LLC 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 the Amended ProFrac Agreement upon issuance of $ 50 million in aggregate principal amount of Contract Consideration Convertible Notes Payable (see Note 9, “Debt and Convertible Notes Payable”).

The Initial ProFrac Agreement was amended to (a) increase ProFrac Services LLC’s minimum purchase obligation for each year to the greater of 70 % of ProFrac Services LLC’s requirements and a baseline measured by ProFrac Services, LLC’s first 30 hydraulic fracturing fleets, and (b) increase the term to 10 years.

On February 2, 2023, the Company entered into another amendment to the ProFrac Agreement (the “Amended ProFrac Agreement No.

The Amended ProFrac Agreement No.

2 has an effective date of January 1, 2023.

The ProFrac Agreement was amended to (1) provide a ramp-up period from January 1, 2023 to May 31, 2023 for ProFrac Services, LLC 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 customers.

During the measurement period for Contract Shortfall Fees of January 1, 2024 through December 31, 2024, the minimum purchase requirements were not met and, as a result, related party revenues for the year ended December 31, 2024 reflect variable consideration for Contract Shortfall Fees of $ 32.4 million.

The measurement period for 2023 was June 1, 2023 through December 31, 2023.

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 purchase requirements were not met during the current measurement period, and as a result, related party revenues for the year ended December 31, 2025 reflect variable consideration for Contract Shortfall Fees of $ 27.4 million, which is presented on a net basis within accounts receivable, related party on the Company’s consolidated balance sheet as of December 31, 2025.

The measurement period for 2024 was January 1, 2024 through December 31, 2024.

Related party revenues for the year ended December 31, 2024 included $ 32.4 million of Contract Shortfall Fees.

During the years ended December 31, 2024 and 2023, the Company’s revenues from ProFrac Services, LLC were $ 115.8 million and $ 121.5 million, respectively.

On March 12, 2026, the Company and ProFrac entered into an agreement (as amended, the “OSP Agreement”) regarding the settlement of 2025 Contract Shortfall Fees payable to the Company under the ProFrac Agreement for the measurement period of January 1, 2025 to December 31, 2025.

The OSP Agreement provides for the payment of an aggregate of $ 19.7 million of consideration (which amount represents $ 27.4 million of 2025 Contract Shortfall Fees, net of the OSP Offset and other minor adjustments) to the Company as follows:

$ 7.2 million to be paid in cash and $ 12.5 million to be satisfied through an equipment construction and rental credit (the “Equipment Credit”).

Under the OSP Agreement, the Company has committed to purchase and/or rent $ 12.5 million of equipment from ProFrac to be used for opportunities within the Data Analytics segment, with the costs of such equipment to be offset by the Equipment Credit.

The Company expects to utilize the Equipment Credit during 2026, however any unused amounts at the end of 2026 would be available for use in 2027 until the full credit is utilized.

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 years ended December 31, 2025 and 2024, the Company’s related party revenues were $ 146.8 million and $ 115.8 million, respectively.

For the years ended December 31, 2025 and 2024, these revenues were net of amortization of contract assets of $ 6.3 million and $ 5.6 million, respectively.

Cost of sales attributable to these revenues were $ 101.7 million and $ 80.4 million, respectively, for the years ended December 31, 2025 and 2024.

As of December 31, 2024 and December 31, 2023 our accounts receivable from ProFrac Services, LLC was $ 52.4 million and $ 34.6 million, respectively, which is recorded in accounts receivable, related party on the consolidated balance sheets.

Also during 2023, we entered into the following related party transactions with ProFrac Holdings, LLC and ProFrac Holdings II, LLC:

• Conversion of Convertible Notes Payable (see Note 9, “Debt and Convertible Notes Payable”)

• Conversion of Contract Consideration Notes Payable (see Note 9, “Debt and Convertible Notes Payable”)

• Exercise of February 2023 Warrants (see Note 9, “Debt and Convertible Notes Payable” and Note 13, “Stockholders’ Equity”)

• Pre-Funded Warrants (see Note 13, “Stockholders’ Equity)

As a result of the above related party transactions, ProFrac Holdings, LLC or its affiliates owns approximately 51 % of the Company’s common stock as of December 31, 2024.

As of December 31, 2025 and December 31, 2024 our accounts receivable from ProFrac was $ 64.2 million and $ 52.4 million, respectively, which is recorded in accounts receivable, related party on the consolidated balance sheets.

Accounts receivable, related party as of December 31, 2025 includes the effect of the OSP Offset (see Note 3, “Asset Acquisition”).

As of December 31, 2025, our accounts payable with ProFrac was $ 0.3 million, which is recorded in accounts payable on the consolidated balance sheets.

There were no amounts due to ProFrac included in accounts payable as of December 31, 2024.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ProFrac Holdings or its affiliates beneficially owned approximately 61 % of the Company’s common stock, including the effects of the June 2022 Warrants and April 2025 Warrant, as of December 31, 2025.

On March 13, 2026, ProFrac GDM exercised the April 2025 Warrant and was issued 6,000,000 shares of the Company’s common stock.

Note 19 — Business Segment, Geographic and Major Customer Information

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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

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

4 unchanged sentences

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 ESG and operational goals.

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 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.

The Company’s Data Analytics (“DA”) segment provides analytical measurement and digital solutions, including measure-and-control services, that deliver near real-time insights for process control across the oil and gas value chain and emerging applications in power and digital valuation.

DA solutions help customers optimize performance, improve decision-making, and reduce emissions and carbon intensity, supported in part by recurring service and lease revenues.

FLOTEK INDUSTRIES, INC.

11 unchanged sentences

Services 123 397 — 520

Rental revenue — 16,139 — 16,139

Total revenue from related parties 130,221 16,605 — 146,826

2 unchanged sentences

Selling, general and administrative 9,155 4,483 14,408 28,046

Asset acquisition expenses — 4,362 — 4,362

Severance expense 11 29 490 530

Other segment items 1,933 1,593 125 3,651

18 unchanged sentences

Reconciliation of profit to income before income taxes:

Paycheck protection plan loan forgiveness $ 4,522 $ 4,522

Interest expense ( 1,095 ) ( 1,095 )

1 unchanged sentence

Income before income taxes $ 11,147

Other segment items for the year ending December 31, 2024 includes depreciation of $ 0.6 million and $ 0.2 million in the CT and DA segments, respectively;

R&D of $ 1.2 million and $ 0.5 million in the CT and DA segments, respectively;

and gain on sale of property and equipment in the CT and DA segments of $ 0.1 million and $ 15 thousand, respectively.

Other segment items for the year ended December 31, 2023 includes $ 30.0 million gain related to the change in fair value of Contract Consideration Convertible Notes Payable in the CT segment and depreciation of $ 0.6 million and $ 0.1 million in the CT and DA segments, respectively;

R&D of $ 1.9 million and $ 0.6 million in the CT and DA segments, respectively;

and gain on sale of property and equipment in the CT and DA segments of $ 21 thousand and $ 17 thousands, respectively.

Other segment items for the year ended December 31, 2025 include depreciation of $ 0.7 million and $ 1.1 million in the CT and DA segments, respectively;

R&D costs of $ 1.3 million and $ 0.5 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 year ended December 31, 2024 include depreciation of $ 0.6 million and $ 0.2 million in the CT and DA segments, respectively;

and R&D costs of $ 1.2 million and $ 0.5 million in the CT and DA segments, respectively;

and gain on the sale of property and equipment of $ 0.1 million and $ 15 thousand in the CT and DA segments, respectively.

FLOTEK INDUSTRIES, INC.

11 unchanged sentences

Additions to long-lived assets (1)

$ 1,131 $ 14,724 $ 381 $ 16,236

Additions to long-lived assets $ 360 $ 1,492 $ 88 $ 1,940

(1) Additions to long-lived assets for the year ended December 31, 2025 includes $ 14.3 million of assets as a result of the PWRtek Transactions (see Note 3, “Asset Acquisition”).

Geographic Information

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Long-lived assets held in countries other than the U.S.

are not considered material to the consolidated financial statements.

are not material to the consolidated financial statements.

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Major Customers

2 unchanged sentences

Year ended December 31, 2025

ProFrac Services, LLC

Customer A (related party)

$ 146,826 61.9 %

Year ended December 31, 2024

ProFrac Services, LLC

Customer A (related party)

$ 115,762 61.9 %

The concentration with ProFrac Services, LLC and in the oil and gas industry increases credit, commodity and business risk .

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The concentration with ProFrac and in the oil and gas industry increases credit, commodity and business risk.

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 December 31, 2025

$ 8,525 44.8 %

Customer B $ 3,001 15.8 %

Customer C $ 771 4.0 %

As of December 31, 2024

$ 3,324 18.6 %

Customer C $ 2,264 12.7 %

Customer B $ 1,288 7.2 %

Please see Note 18 - “Related Party Transactions” for additional information regarding accounts receivable with ProFrac.

Major Suppliers

4 unchanged sentences

Supplier C 16,935 12 %

Supplier A $ 24,064 19 %

Supplier B 21,410 17 %

Supplier C 20,333 16 %

Supplier D 28,222 19.9 %

Supplier E 16,447 11.6 %

Note 20 — Subsequent Event

The Company has evaluated the effects of events that have occurred subsequent to December 31, 2024 and there have been no material events that would require recognition in the 2024 consolidated financial statements or disclosure in the notes to the consolidated financial statements.

The Company has evaluated the effects of events that have occurred subsequent to December 31, 2025 through the date at which the Company’s annual financial statements are available to be issued and has determined that there have been no material events that would require recognition in the December 31, 2025 annual financial statements.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data