FLOTEK INDUSTRIES INC/CN/ 10-K

Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors Flotek Industries, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Flotek Industries, Inc. 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 These consolidated financial statements are the responsibility of the Company’s management. 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 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. We conducted our audits in accordance with the standards of the PCAOB. 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. 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 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. 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 37 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 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. /s/ KPMG LLP We have served as the Company’s auditor since 2021. Houston, Texas March 16, 2026 38 FLOTEK INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, 2025 December 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 5,731 $ 4,404 Restricted cash 104 102 Accounts receivable, net of allowance for credit losses of $ 764 and $ 447 at December 31, 2025 and December 31, 2024, respectively 19,043 17,386 Accounts receivable, related party, net of allowance for credit losses of $ 0 at December 31, 2025 and December 31, 2024 64,204 52,370 Inventories, net 10,629 13,303 Other current assets 3,445 2,952 Current contract asset 7,621 5,939 Total current assets 110,777 96,456 Long-term contract asset 55,115 63,105 Property and equipment, net 20,344 6,178 Right-of-use assets 3,083 3,326 Deferred tax assets, net 29,152 51 Other long-term assets 1,578 1,680 TOTAL ASSETS $ 220,049 $ 170,796 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 48,317 $ 38,073 Accrued liabilities 7,256 5,912 Income taxes payable 258 48 Interest payable, related party 1,008 — Current portion of operating lease liabilities 1,251 1,486 Current portion of finance lease liabilities 153 — Asset-based loan 3,332 4,789 Current portion of long-term debt — 60 Total current liabilities 61,575 50,368 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 finance lease liabilities 224 — TOTAL LIABILITIES 106,991 56,896 Stockholders’ equity: Preferred stock, $ 0.0001 par value, 100,000 shares authorized; no shares issued and outstanding — — Common stock, $ 0.0001 par value, 240,000,000 shares authorized; 31,320,960 shares issued and 30,130,480 shares outstanding at December 31, 2025; 30,938,073 shares issued and 29,826,508 shares outstanding at December 31, 2024 3 3 Additional paid-in capital 434,964 464,620 Accumulated other comprehensive income 96 251 Accumulated deficit ( 285,780 ) ( 316,308 ) Treasury stock, at cost; 1,190,480 and 1,111,565 shares at December 31, 2025 and December 31, 2024, respectively ( 36,225 ) ( 34,666 ) Total stockholders’ equity 113,058 113,900 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 220,049 $ 170,796 The accompanying Notes are an integral part of these Consolidated Financial Statements. 39 FLOTEK INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Years Ended December 31, 2025 2024 Revenue: Revenue from external customers $ 90,436 $ 71,263 Revenue from related party 146,826 115,762 Total revenues 237,262 187,025 Cost of sales 177,429 147,639 Gross profit 59,833 39,386 Operating costs and expenses: 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 ) Total operating costs and expenses 36,589 27,190 Income from operations 23,244 12,196 Other income (expense): Interest expense ( 3,937 ) ( 1,095 ) Other income, net 348 46 Total other expense ( 3,589 ) ( 1,049 ) Income before income taxes 19,655 11,147 Income tax benefit (expense) 10,873 ( 649 ) Net income $ 30,528 $ 10,498 Income per common share: Basic $ 0.90 $ 0.36 Diluted $ 0.84 $ 0.34 Weighted average common shares: 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. 40 FLOTEK INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Years ended December 31, 2025 2024 Net income $ 30,528 $ 10,498 Other comprehensive income: Foreign currency translation adjustment ( 155 ) 124 Comprehensive income $ 30,373 $ 10,622 The accompanying Notes are an integral part of these Consolidated Financial Statements. 41 FLOTEK INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) Years ended December 31, 2025 2024 Cash flows from operating activities: Net income $ 30,528 $ 10,498 Adjustments to reconcile net income to net cash provided by operating activities: Change in fair value of contingent consideration ( 127 ) 71 Amortization of contract assets 6,308 5,612 Depreciation 1,836 891 Amortization of deferred financing costs 345 314 Provision for credit losses, net of recoveries 603 181 Provision for excess and obsolete inventory 442 645 Gain on sale of property and equipment ( 7 ) ( 124 ) Non-cash lease expense 1,025 2,094 Stock compensation expense 2,300 1,366 Deferred income tax (benefit) expense ( 11,185 ) 249 Changes in current assets and liabilities: Accounts receivable ( 2,260 ) ( 3,880 ) Accounts receivable, related party ( 36,634 ) ( 17,801 ) Inventories 3,066 ( 1,110 ) Income tax receivable ( 32 ) 8 Other assets ( 473 ) 561 Accounts payable 10,244 6,368 Accrued liabilities 1,457 ( 70 ) Operating lease liabilities ( 1,450 ) ( 2,515 ) Income taxes payable 210 3 Interest payable, related party 1,008 — Net cash provided by operating activities 7,204 3,361 Cash flows from investing activities: Capital expenditures ( 1,984 ) ( 1,940 ) Proceeds from sale of assets 7 124 Net cash used in investing activities ( 1,977 ) ( 1,816 ) Cash flows from financing activities: Payments on long term debt ( 60 ) ( 179 ) Proceeds from asset-based loan 186,950 166,950 Payments on asset-based loan ( 188,407 ) ( 169,653 ) 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 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 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. 42 FLOTEK INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Year Ended December 31, 2025 Common Stock Treasury Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Shares Issued Par Value Shares Cost Balance, December 31, 2024 30,938 $ 3 1,112 $ ( 34,666 ) $ 464,620 $ 251 $ ( 316,308 ) $ 113,900 Net income — — — — — — 30,528 30,528 Foreign currency translation adjustment — — — — — ( 155 ) — ( 155 ) Stock option exercises 136 — — — 576 — — 576 Stock issued under employee stock purchase plan — — ( 16 ) — 155 — — 155 Restricted stock granted 26 — — — — — — — Restricted stock forfeited — — 3 — — — — — Restricted stock units vested 221 — — — — — — — Stock compensation expense — — — — 2,300 — — 2,300 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 31,321 $ 3 1,190 $ ( 36,225 ) $ 434,964 $ 96 $ ( 285,780 ) $ 113,058 Year Ended December 31, 2024 Common Stock Treasury Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Shares Issued Par Value Shares Cost Balance, December 31, 2023 30,773 $ 3 1,109 $ ( 34,504 ) $ 463,140 $ 127 $ ( 326,806 ) $ 101,960 Net income — — — — — — 10,498 10,498 Foreign currency translation adjustment — — — — — 124 — 124 Stock issued under employee stock purchase plan — — ( 31 ) — 114 — — 114 Restricted stock granted 94 — — — — — — — Restricted stock forfeited — — 11 — — — — — Restricted stock vested 71 — — — — — — — Stock compensation expense — — — — 1,366 — — 1,366 Shares withheld to cover taxes — — 23 ( 162 ) — — — ( 162 ) Balance, December 31, 2024 30,938 $ 3 1,112 $ ( 34,666 ) $ 464,620 $ 251 $ ( 316,308 ) $ 113,900 The accompanying Notes are an integral part of these Consolidated Financial Statements. 43 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 — Organization and Nature of Operations General Flotek strives to be the collaborative partner of choice for solutions that reduce the environmental impact of energy on air, water, land and people. An advanced technology-driven, chemical and data analytics company, Flotek seeks to provide unique and innovative solutions to its customers in both the domestic and international energy markets. The Company is committed to delivering products and services that endeavor to maximize customer returns by leveraging chemistry as the common value creation platform. The Company’s Chemistry Technologies (“CT”) segment designs, develops, manufactures, packages, distributes and markets optimized chemistry solutions that we believe help customers improve their return on invested capital, lower operational costs and realize tangible environmental benefits. 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.” As used herein, “Flotek,” the “Company,” “we,” “our” and “us” refers to Flotek Industries, Inc. and/or the Company’s wholly-owned subsidiaries. The use of these terms is not intended to connote any particular corporate status or relationship. Note 2 — Summary of Significant Accounting Policies Basis of Presentation The Company’s consolidated financial statements have been prepared in accordance with U.S. GAAP. The accompanying consolidated financial statements include the accounts of Flotek Industries, Inc. and subsidiaries it controls. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company does not have investments in any unconsolidated subsidiaries. Cash Equivalents Cash equivalents consist of highly liquid investments with maturities of three months or less at the date of purchase. Restricted Cash The Company’s restricted cash was $ 0.1 million and $ 0.1 million as of December 31, 2025 and 2024, respectively. 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. 44 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accounts Receivable and Allowance for Credit Losses Accounts receivable and accounts receivable, related party, arise from product sales and services and are recorded at the invoiced amount, net of an allowance for credit losses. This value incorporates an allowance for credit losses to reflect any loss anticipated on accounts receivable balances. The Company applies the current expected credit loss (CECL) model, which requires immediate recognition of expected credit losses over the contractual life of receivables and records the appropriate allowance for credit losses as a charge to Operating Cost and Expenses. The allowance for credit losses is based on a combination of the individual customer circumstances, credit conditions, and historical write-offs and collections. The Company writes off specific accounts receivable when they are determined to be uncollectible. The recovery of accounts receivable previously written off is recorded as a reduction to the allowance for credit losses charged to operating expense. The majority of the Company’s customers are engaged in the energy industry. The cyclical nature of the energy industry may affect customers’ operating performance and cash flows, which directly impact the Company’s ability to collect on outstanding obligations. 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. Changes in the allowance for credit losses are as follows (in thousands): December 31, 2025 December 31, 2024 Balance, beginning of year $ 447 $ 745 Charges to provision for credit losses, net of recoveries 603 181 Write-offs ( 286 ) ( 479 ) Balance, end of year $ 764 $ 447 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 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. 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. Based on our tests of recoverability, we did not identify an impairment of the contract assets during the years ended December 31, 2025 and 2024 . Inventories Inventories consist of raw materials and finished goods and are stated at the lower of cost determined using the weighted-average cost method, or net realizable value. Finished goods inventories include raw materials, direct labor and production overhead. The Company periodically reviews inventories on hand and current market conditions to determine if the cost of raw materials and finished goods inventories exceeds current market prices and impairs the cost basis of the inventory accordingly. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its net realizable value if those amounts are determined to be less than cost. Write-downs or write-offs of inventory are charged to cost of sales. Property and equipment Property and equipment are stated at cost. Plant and equipment under finance leases are stated at the present value of the lease payments. The Company capitalizes costs associated with the acquisition of major software for internal use. The cost of ordinary maintenance and repair is charged to operating expense, while replacement of critical components and major improvements are capitalized. 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: 45 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 Land improvements 20 years Transportation equipment 2 - 5 years Computer equipment and software 3 - 7 years Property and equipment, including ROU assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. If events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable, the Company first compares the carrying amount of an asset or asset group to the sum of the undiscounted future cash flows expected to result from the use and eventual disposal of the asset. If the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the use and eventual disposal of the asset, the Company will determine the fair value of the asset or asset group. 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-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 . Assets to be disposed of are reported as assets held for sale at the lower of the carrying amount or the asset’s fair value less cost to s ell and depreciation is ceased. Upon sale or other disposition of an asset, the Company recognizes a gain or loss on disposal measured as the difference between the net carrying amount of the asset and the net proceeds received. Leases The Company leases certain facilities, land, vehicles, and equipment. The Company determines if an arrangement is classified as a lease at inception of the arrangement. The Company recognizes an ROU asset and a lease liability at the lease commencement date. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the related lease. Finance leases are under the current and non-current liabilities and the underlying assets are included in property and equipment on the consolidated balance sheet. For operating and finance leases, the lease liability is initially measured at the present value of the unpaid lease payments at the lease commencement date. The lease liability is subsequently measured at amortized cost using the effective-interest method. As most of the Company’s leases do not provide an implicit rate of return, on a quarterly basis, the Company’s incremental borrowing rate is used, together with the lease term information available at commencement date of the lease, in determining the present value of lease payments . Operating lease liabilities include the noncancellable period of the lease plus related options to extend or terminate lease terms that are reasonably certain of being exercised. Lease payments included in the measurement of the lease liability comprise fixed payments owed over the lease term. Leases with an initial term of 12 months or less (“short term leases”) are not recorded on the balance sheet; and the lease expense on short-term leases is recognized on a straight-line basis over the lease term. The Company entered into a sublease for its former headquarters, which is being accounted for under lessor accounting. The nature of the sublease did not relieve the Company of its obligations under the original lease. The lease for the prior headquarters was an operating lease and, as such, the Company continues to account for the original lease as it did prior to entering the sublease. 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: (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 46 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 The Company categorizes financial assets and liabilities using a three-tier fair value hierarchy, based on the nature of the inputs used to determine fair value. Inputs refer broadly to assumptions that market participants would use to value an asset or liability and may be observable or unobservable. When determining the fair value of assets and liabilities, the Company uses the most reliable measurement available. See Note 11, “Fair Value Measurements.” Revenue Recognition The Company recognizes revenue when it satisfies performance obligations under the terms of the contract with a customer, and control of the promised goods are transferred to the customer or services are performed, in an amount that reflects the consideration the Company expects to be entitled in exchange for those goods or services. The Company recognizes revenue based on a five-step model when all of the following criteria have been met: (i) a contract with a customer exists, (ii) performance obligations have been identified, (iii) the price to the customer has been determined, (iv) the price to the customer has been allocated to the performance obligations, and (v) performance obligations are satisfied. Products and services are sold with fixed or determinable prices. Variable consideration is estimated for the Contract Shortfall Fees from the ProFrac Agreement (see Note 18, “Related Party Transactions”) using the most likely amount and the Company includes an estimated amount of variable consideration in the transaction price only if it is probable that a subsequent change in the estimate of the amount of variable consideration would not result in a significant revenue reversal. A significant revenue reversal would occur if a subsequent change in the estimate of the variable consideration would result in a significant downward adjustment to the amount of cumulative revenue recognized from that contract when the change in estimate occurs. Certain sales include right of return provisions, which are considered when recognizing revenue and deferred accordingly, and discounts offered to customers for prompt payment. The Company does not act as an agent in any of its revenue arrangements. 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 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. The majority of the CT segment revenue is chemical products that are sold at a point in time based on when control transfers to the customer determined by agreed upon delivery terms. Contracts with customers for the sale of products generally state the terms of the sale, including the quantity and price of each product purchased. Additionally, the CT segment offers various services associated to products sold which includes field services, installation, maintenance, and other functions. These services are recognized upon completion of commissioning and installation due to the short-term nature of the performance obligation when the Company has a right to invoice the customer. The DA segment recognizes revenue for sales of equipment at the time of sale based on when control transfers to the customer based on agreed upon delivery terms. Additionally, the Company offers various services associated to products sold which includes field services, installation, maintenance, and other functions. Services are recognized upon completion of commissioning and installation due to the short-term nature of the performance obligation. There may be additional performance obligations related to providing ongoing or reoccurring maintenance. Revenue for these types of arrangements is recognized ratably over time throughout the contract period. Additionally, the Company provides subscription-type arrangements with customers in which monthly reoccurring revenue is recognized ratably over time in accordance with agreed upon terms and conditions. Customers may be invoiced for such maintenance and subscription-type arrangements and revenue not yet recognizable is reported under accrued liabilities and deferred revenue on the consolidated balance sheets. Subscription-type arrangements were not a material revenue stream in the years ended December 31, 2025 and 2024. 47 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. Under revenue contracts for both products and services, customers are invoiced once the performance obligations have been satisfied, at which point payment is unconditional. Contract assets and liabilities associated with incomplete performance obligations are not material. The Company applies several practical expedients including: • Sales commissions are expensed as selling, general and administrative expenses when incurred because the amortization period is generally one year or less. • The Company’s payment terms are short-term in nature with settlements of one year or less. As a result, the Company does not adjust the promised amount of consideration for the effects of a significant financing component. • In most service contracts, the Company has the right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s performance obligations completed to date and as such the Company recognizes revenue in the amount to which it has a right to invoice. • The Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer. Such taxes are included in accrued liabilities on our consolidated balance sheet until remitted to the governmental agency. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales in our consolidated statement of operations. Foreign Currency Translation The Company’s functional currency is primarily the U.S. dollar. The Company operates principally in the United States and substantially all assets and liabilities of the Company are denominated in U.S. dollars. Financial statements of foreign subsidiaries that are not U.S. dollar functional currency are prepared using the currency of the primary economic environment of the foreign subsidiaries as the functional currency. Assets and liabilities of those foreign subsidiaries are translated into U.S. dollars at exchange rates in effect as of the end of identified reporting periods. Revenue and expense transactions are translated using the average monthly exchange rate for the reporting period. Resultant translation adjustments are recognized as other comprehensive income within stockholders’ equity. Comprehensive Income Comprehensive income encompasses all changes in stockholders’ equity, except those arising from investments and distributions to stockholders. The Company’s comprehensive income includes consolidated net income and foreign currency translation adjustments. Research and Development Costs Expenditures for research activities relating to product development and improvement are charged to expense as incurred. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for temporary differences between financial statement carrying amounts and the tax bases of assets and liabilities and are measured using the tax rates expected to be in effect when the differences reverse. Deferred tax assets are also recognized for operating loss and tax credit carry forwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The establishment of a valuation allowance requires significant judgment and is impacted by various estimates. 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. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company’s policy is to record interest and penalties related to uncertain tax positions as income tax expense. 48 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Stock-Based Compensation Stock-based compensation expense, related to stock options, restricted stock awards and restricted stock units, is recognized based on their grant-date fair values. The Company recognizes compensation expense, net of estimated forfeitures, on a straight-line basis over the requisite service period of the award. Estimated forfeitures are based on historical experience. Stock Warrants 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 The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results could differ from these estimates. Significant items subject to estimates and assumptions include estimated variable consideration included in contract transaction price; the useful lives of property and equipment; fair-value of the Leased Equipment; long lived asset impairment assessments; stock-based compensation expense; valuation allowances for accounts receivable, inventories, and deferred tax assets; recoverability and timing of the realization of contract assets. Recent Accounting Pronouncements Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”). We evaluate the applicability and impact of all authoritative guidance issued by the FASB. Guidance not listed below was assessed and determined to be either not applicable, clarifications of items listed below, have no material effect on the Company’s financial statements or are already adopted by the Company. New Accounting Standards Issued and Adopted as of December 31, 2025 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 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. ASU 2024-03 is effective prospectively or retrospectively for fiscal years beginning after December 15, 2026 and for interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its disclosures. 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 49 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. 50 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 $ 42,660 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, 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): Years ended December 31, 2025 2024 Revenue: Products $ 213,487 $ 180,470 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 that cannot be directly attributed to either tangible goods or services. Total cost of sales disaggregated is as follows (in thousands): Years ended December 31, 2025 2024 Cost of sales: Tangible goods sold $ 155,966 $ 128,816 Services 1,115 547 Other 20,348 18,276 $ 177,429 $ 147,639 51 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, disaggregated between external customers and related party, is as follows (in thousands): Years ended December 31, 2025 2024 Cost of sales: Cost of sales for external customers $ 75,739 $ 67,205 Cost of sales for related party 101,690 80,434 $ 177,429 $ 147,639 Note 5 — Contract Assets Contract assets are as follows (in thousands): December 31, 2025 December 31, 2024 Contract assets $ 83,060 $ 83,060 Less accumulated amortization ( 20,324 ) ( 14,016 ) Contract assets, net 62,736 69,044 Less current contract assets ( 7,621 ) ( 5,939 ) Contract assets, long term $ 55,115 $ 63,105 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, 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 2026 $ 7,621 2027 9,611 2028 10,711 2029 10,711 Thereafter through May 2032 24,082 Total contract assets $ 62,736 52 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 6 — Inventories Inventories are as follows (in thousands): December 31, 2025 December 31, 2024 Raw materials $ 4,821 $ 4,945 Finished goods 9,711 13,581 Inventories 14,532 18,526 Less reserve for excess and obsolete inventory ( 3,903 ) ( 5,223 ) Inventories, net $ 10,629 $ 13,303 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 Property and equipment are as follows (in thousands): December 31, 2025 December 31, 2024 Land $ 886 $ 886 Land improvements 520 520 Buildings and leasehold improvements 6,594 5,722 Machinery and equipment 8,804 8,524 Leased equipment 14,252 — Furniture and fixtures 570 520 Transportation equipment 867 790 Computer equipment and software 1,934 1,531 Property and equipment 34,427 18,493 Less accumulated depreciation ( 14,083 ) ( 12,315 ) Property and equipment, net $ 20,344 $ 6,178 Depreciation expense totaled $ 1.8 million and $ 0.9 million for the years ended December 31, 2025 a nd 2024, respectively. Note 8 — Leases The components of lease expense and supplemental cash flow information are as follows (in thousands): Years ended December 31, 2025 2024 Operating lease expense $ 1,518 $ 2,703 Finance lease expense: Amortization of assets 108 15 Interest on lease liabilities 27 1 Total finance lease expense 135 16 Short-term lease expense 2,048 1,383 Total lease expense $ 3,701 $ 4,102 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,337 $ 5,399 Operating cash flows from finance leases 134 30 Financing cash flows from finance leases 27 1 53 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 Finance Leases 2026 $ 1,810 $ 180 2027 1,863 180 2028 1,729 57 2029 1,641 — Thereafter 1,407 — Total lease payments $ 8,450 $ 417 Less: Interest ( 1,591 ) ( 40 ) Present value of lease liabilities $ 6,859 $ 377 Supplemental balance sheet information related to leases is as follows (in thousands): December 31, 2025 December 31, 2024 Operating Leases Operating lease right-of-use assets $ 2,718 $ 3,326 Current portion of operating lease liabilities 1,251 1,486 Long-term operating lease liabilities 5,608 6,514 Total operating lease liabilities $ 6,859 $ 8,000 Finance Leases 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 $ — Weighted Average Remaining Lease Term Operating leases 4.6 years 5.4 years Finance leases 2.4 years — Weighted Average Discount Rate Operating leases 9.4 % 9.4 % Finance leases 9.5 % — % 54 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 2026 27,375 2027 27,375 2028 27,375 2029 27,375 Thereafter (1) 9,125 Total rental income (through April 2030) $ 118,625 (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 On April 1, 2023, the Company entered into an agreement to sublease its office and lab space in Houston, Texas beginning September 1, 2023 and continuing through October 30, 2030. The Company recorded rental income from the sublease of $ 0.7 million and $ 0.7 million for the years ended December 31, 2025 and 2024, respectively, which is included in the Company’s statement of operations in Other income (expense), net. Rental income from the sublease offsets the monthly rental expense from the Company’s lease of the facility. Sublease rental income for future years is as follows (in thousands): Years ending December 31, Sublease Income 2026 $ 767 2027 767 2028 767 2029 767 Thereafter 639 Total rental income $ 3,707 Note 9 — Accrued Liabilities Current accrued liabilities are as follows (in thousands): December 31, 2025 December 31, 2024 Severance costs $ 750 $ 380 Payroll and benefits 4,006 2,901 Legal costs 85 99 Deferred revenue 716 808 Financed insurance 1,431 1,074 Other 268 650 Total current accrued liabilities $ 7,256 $ 5,912 55 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 — Debt Asset Based Loan In August 2023, the Company entered into a 24-month revolving loan and security agreement in connection with an Asset Based Loan, which was amended in October 2023, August 2024 and April 2025 (as amended the “ABL”). The ABL provides up to $ 20.0 million of credit availability, which is limited by a borrowing base consisting of (i) 85 % of eligible accounts receivable, plus (ii) 60 % of the value of eligible inventory not to exceed 100 % of the eligible accounts receivable, plus (iii) 60 % of the value of certain real estate holdings. As of December 31, 2025 and 2024, the Company had $ 3.3 million and $ 4.8 million, respectively, outstanding under the ABL. As of December 31, 2025, the Company had approximately $ 8.0 million of available borrowings under the ABL. During the years ended December 31, 2025 and 2024, the Company incurred $ 1.0 million and $ 0.7 million, respectively, in interest and fees related to the ABL. As of December 31, 2025 and 2024, the Company recorded $ 0.2 million and $ 0.3 million, respectively, of unamortized deferred financing costs related to the ABL. Borrowings under the ABL bear interest at the Wall Street Journal Prime Rate (subject to a floor of 5.50 %) plus 2.0 % per annum. For the 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. Additionally, the Company will be assessed a non-usage fee of 0.25 % per quarter based on the difference between the average daily outstanding balance and the borrowing base limit of the ABL. If the ABL is terminated prior to the end of its term, the Company is required to pay an early termination fee of 2.5 % of the borrowing base limit of the ABL (if terminated with more than 12 months remaining until the maturity date) or 1.5 % of the borrowing base limit of the ABL (if terminated with less than 12 months remaining until the maturity date). The ABL contains customary representations, warranties, covenants and events of default, the occurrence of which would permit the lender to accelerate the payment of any amounts borrowed. In connection with the Company’s entry into the Purchase Agreement (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 Less: 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 2026 $ — 2027 — 2028 — 2029 — Thereafter 40,000 Total payments $ 40,000 56 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 In April 2020, the Company received a $ 4.8 million loan (the “Flotek PPP loan”) under the Paycheck Protection Program (“PPP”), which was created through the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). On January 5, 2023, the Company received notice from the SBA that $ 4.4 million of the $ 4.8 million principal amount and accrued interest to that date of $ 0.1 million were forgiven. The remaining principal amount of $ 0.4 million and accrued interest was fully repaid as of April 15, 2025. Note 11 — Fair Value Measurements Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company categorizes financial assets and liabilities into the three levels of the fair value hierarchy. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value and bases categorization within the hierarchy on the lowest level of input that is available and significant to the fair value measurement. • Level 1 — Quoted prices in active markets for identical assets or liabilities; • Level 2 — Observable inputs other than Level 1, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and • Level 3 — Significant unobservable inputs that are supported by little or no market activity or that are based on the reporting entity’s assumptions about the inputs. Fair Value of Other Financial Instruments The carrying amounts of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accrued liabilities, accrued liabilities - related party, accounts payable and ABL approximate fair value due to the short-term nature of these accounts. 57 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, Level 1 Level 2 Level 3 2024 Contingent earnout consideration $ — $ — $ 127 $ 127 Total $ — $ — $ 127 $ 127 Contingent Earnout Consideration Key Inputs In connection with the acquisition of one of the Company’s wholly owned subsidiaries, JP3 Measurement, LLC, the Company entered into a stock performance earn-out provision with the sellers. The estimated fair value of the remaining stock performance earn-out provision, with respect to this transaction, is included in accrued liabilities as of December 31, 2024. The estimated fair value of the earn-out provision at the end of 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 The Company’s non-financial assets, including property and equipment and operating lease ROU assets, are measured at fair value on a non-recurring basis and are subject to adjustment to their fair value in certain circumstances. Level 3 Rollforward for Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents the changes in balances of liabilities for the years ended December 31, 2025 and 2024 classified as Level 3 (in thousands): Years ended December 31, 2025 2024 Balance - beginning of period $ 127 $ 56 Expiration of contingent earnout consideration ( 127 ) — Change in fair value of contingent earnout consideration — 71 Balance - end of period $ — $ 127 Note 12 — Income Taxes Components of the income tax expense are as follows (in thousands): Years ended December 31, 2025 2024 Current: Federal $ — $ — State 209 400 Foreign 103 — Total current expense 312 400 Deferred: Federal ( 10,945 ) — State ( 240 ) 249 Foreign — — Total deferred (benefit) expense ( 11,185 ) 249 Income tax (benefit) expense $ ( 10,873 ) $ 649 58 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Current state income tax expense during the year ended December 31, 2024 related to the resolution of certain state tax audits for the years ended December 31, 2016 and 2017. The components of income before income taxes are as follows (in thousands): Years ended December 31, 2025 2024 United States $ 18,841 $ 11,000 Foreign 814 147 Income before income taxes $ 19,655 $ 11,147 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, 2025 2024 Income before income taxes $ 19,655 $ 11,147 U.S. federal statutory tax rate $ 4,128 21.0 % $ 2,341 21.0 % 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, 2025 2024 Federal $ — $ — State Texas 97 398 Oklahoma 17 — Pennsylvania 10 — Foreign 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. 59 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The component of deferred tax assets and liabilities are as follows (in thousands): December 31, 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 43,248 $ 43,818 Intangible assets 2,814 3,252 Tax credit carryforwards 3,827 3,861 Goodwill 3,767 4,008 Property and equipment 21,275 3,096 Lease liability 1,746 2,008 Inventory valuation reserves 803 1,102 Allowance for doubtful accounts 1,226 1,164 Accrued liabilities 336 279 Accrued compensation 813 599 Equity compensation 281 148 Total gross deferred tax assets 80,136 63,335 Valuation allowance ( 43,933 ) ( 56,333 ) Total deferred tax assets, net 36,203 7,002 Deferred tax liabilities: ROU asset ( 748 ) ( 818 ) Contract asset ( 5,767 ) ( 5,753 ) Prepaid insurance and other ( 536 ) ( 380 ) Total gross deferred tax liabilities ( 7,051 ) ( 6,951 ) Net deferred tax assets $ 29,152 $ 51 As of December 31, 2025, the Company had U.S. net operating loss carryforwards (“NOLs”) of $ 184.6 million, including $ 38.2 million expiring in various amounts from 2029 through 2037, which can offset 100 % of taxable income, and $ 146.4 million that has an indefinite carryforward period, which can offset 80 % of taxable income per year. Additionally, the Company has an estimated $ 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, the Company’s ability to use NOLs to reduce taxable income is generally limited by Section 382 of the Internal Revenue Code of 1986 to an annual amount of $ 3.5 million plus net unrealized built in gain of $ 24.5 million. The Company’s use of NOLs arising after the date of the ownership change are not impacted by the Section 382 limitation. NOLs that exceed the Section 382 limitation in any year continue to be allowed as carryforwards until they expire and can be used to offset taxable income for years within the carryover period subject to the limitation in each year. If the Company does not generate a sufficient level of taxable income prior to the expiration of the pre-2018 NOL carryforward periods, then the ability to apply those NOLs as offsets to future taxable income is lost. Based on an analysis of the Section 382 limitation, the Company estimates that all carryforwards with the exception of $ 0.9 million of the state NOL carryforwards and $ 3.8 million of the tax credit carryforwards will be available for utilization if there is sufficient taxable income in subsequent periods. Although the ownership change will significantly limit the ability of the Company to utilize the pre-change net operating losses and credits, the Company does not expect a significant impact to its financial statements. The Company does not have documented plans to reinvest the unremitted earnings of its non-U.S. subsidiaries. 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. although they have not been repatriated. However, certain withholding taxes may need to be paid upon repatriation depending on the US treaty with the applicable country. Because all of the Company’s foreign earnings have been previously taxed, the requirement to record a deferred tax liability on such unremitted earnings is not applicable. The Company has performed an analysis of its tax positions for the years ended December 31, 2025 and 2024, concluding all tax positions taken were highly certain. As of December 31, 2025, the Company is not under examination in any federal/national jurisdictions. 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. 60 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On July 4, 2025, the U.S. enacted H.R. 1 “A bill to provide for reconciliation pursuant to Title II of H. Con. Res. 14”, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing and the business interest expense limitation. ASC 740, “Income Taxes,” requires the effects of changes in tax rates and laws to be recognized in the period in which the legislation is enacted. Changes in tax laws may affect recorded deferred tax assets and deferred tax liabilities and our effective tax rate in the future, and the Company recognized those changes in tax laws in the 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. The U.S. 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 Litigation From time to time, the Company is subject to litigation and other claims that arise in the normal course of business. As of December 31, 2025, the Company was not party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company’s results of operations, financial condition or cash flows. However, the results of current or future matters cannot be predicted with certainty; an unfavorable resolution of one or more of such matters could have a material adverse effect on the Company’s results of operations, financial condition or cash flows. Other Commitments and Contingencies The Company is subject to concentrations of credit risk within trade accounts receivable and related party accounts receivable, as the Company does not generally require collateral as support for trade receivables. In addition, the majority of the Company’s cash is invested in three major U.S. financial institutions and balances often exceed insurable amounts. Note 14 — Stockholders’ Equity Pre-Funded Warrants On June 21, 2022, ProFrac Holdings II, LLC (“ProFrac Holdings II”) paid $ 19.5 million for Pre-Funded Warrants (the “June 2022 Warrants”) of the Company. The June 2022 Warrants permit ProFrac Holdings II to purchase 2,184,140 shares of the Company’s common stock at an exercise price equal to $ 0.0001 per share, subject to a $ 4.5 million exercise fee. 61 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ProFrac Holdings II and its affiliates may not receive any voting or consent rights in respect of the June 2022 Warrants or the underlying shares of common stock unless and until ProFrac Holdings II has paid an additional $ 4.5 million to the Company; provided, however, that ProFrac Holdings II may exercise the June 2022 Warrants immediately prior to the sale of the shares of common stock subject to such exercise to a non-affiliate of ProFrac Holdings II. The additional $ 4.5 million will be accounted for as an equity contribution if received. Treasury Stock The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders’ equity. During the 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, 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 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. The 2018 Plan permits the Company to grant equity awards to officers, key employees, non-employee directors and service providers in the form of stock options, restricted stock, restricted stock units, and certain other incentive awards. In addition, the Company has two other long-term incentive plans, which were created in 2020 and 2019 (the “2020 Plan” and “2019 Plan,” respectively). The maximum number of shares that may be issued under the 2020 Plan, the 2019 Plan and 2018 Plan are 0.5 million, 0.2 million, and 3.3 million, respectively. At December 31, 2025 and 2024, the Company had 1.2 million and 0.6 million shares remaining, respectively, to be granted under the 2020 Plan, 2019 Plan and 2018 Plan in the aggregate. Stock Options 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 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. Proceeds received from stock option exercises are credited to common stock and additional paid-in capital, as appropriate. The Company uses historical data to estimate pre-vesting option forfeitures. Estimates are adjusted when actual forfeitures differ from the estimate. Stock-based compensation expense is recorded for all equity awards expected to vest. 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 . 62 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Stock option activity for the years ended December 31, 2025 and 2024 , was as follows: Shares Weighted-Average Exercise Price Weighted-Average Fair Value Outstanding as of December 31, 2023 296,563 Granted — $ — $ — Exercised — $ — $ — Forfeited ( 29,367 ) $ 6.58 $ 4.49 Expired ( 47,918 ) $ 5.46 $ 5.47 Outstanding as of December 31, 2024 219,278 Granted — $ — $ — Exercised ( 135,787 ) $ 4.24 $ 2.94 Forfeited — $ — $ — Expired ( 10,000 ) $ 4.32 $ 0.60 Outstanding as of December 31, 2025 73,491 Vested or expected to vest at December 31, 2025 53,824 The below table shows the aggregate intrinsic value and weighted average remaining contractual term of share options outstanding, currently exercisable and vested or expected to vest. Share Options Outstanding Share Options Currently Exercisable Share Options Vested or Expected to Vest Number 73,491 11,507 53,824 Weighted-average exercise price $ 3.65 $ 3.28 $ 3.63 Aggregate intrinsic value ($000’s) $ 998 $ 161 $ 732 Weighted-average remaining contractual term in years 7.52 7.93 7.54 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 opti ons granted during the years ended December 31, 2025 and 2024 . Restricted Stock The Company grants employees and directors either time-vesting or performance-based restricted shares of common stock (“RSAs”) in accordance with terms specified in the applicable RSA Agreements. During the years ended December 31, 2025 and 2024, all of the RSAs granted were time-vested. Grantees of RSAs retain voting rights for the granted restricted shares. • Time-vesting RSAs vest after a stipulated period has elapsed after the date of grant, generally three years . Certain time-vested RSAs have also been issued with a portion of the shares granted vesting immediately. • Performance-based RSAs are issued with criteria defined over a designated period and vest only when, and if, the outlined criteria are met. 63 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS RSA activity for the years ended December 31, 2025 and 2024 , are as follows: Restricted Stock Shares Shares Weighted- Average Fair Value at Date of Grant Non-vested RSAs at December 31, 2023 249,013 $ 5.97 Granted 93,760 $ 4.43 Vested ( 182,319 ) $ 5.47 Forfeited ( 11,528 ) $ 7.77 Non-vested RSAs at December 31, 2024 148,926 $ 5.46 Granted 25,576 $ 15.64 Vested ( 124,851 ) $ 5.41 Forfeited ( 3,379 ) $ 2.96 Non-vested RSAs at December 31, 2025 46,272 $ 11.41 The total fair value of RSAs that vested during the years ended December 31, 2025 and 2024 was $ 1.6 million and $ 0.9 million, respectively. The grant-date fair value is the market price of the RSAs on the date of grant. 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 year. Restricted Stock Units The Company grants either time-vesting or performance-based restricted share units (“RSUs”) in accordance with terms specified in the applicable RSU Agreements. Grantees of RSUs do not have voting rights for the granted RSUs until such time as the applicable RSUs vests and shares of common stock are issued. • Time-vesting RSUs vest after a stipulated period has elapsed after the date of grant, generally three years . • Performance-based RSUs are issued with criteria defined over a designated period and vest only when, and if, the outlined criteria are met. RSU activity for the years ended December 31, 2025 and 2024, was as follows: Restricted Stock Units Units Weighted- Average Fair Value at Date of Grant Non-vested RSUs at December 31, 2023 212,567 $ 3.44 Granted 459,054 $ 4.81 Vested ( 71,476 ) $ 3.75 Forfeited ( 48,098 ) $ 3.28 Non-vested RSUs at December 31, 2024 552,047 $ 4.55 Granted 306,765 $ 14.70 Vested ( 221,074 ) $ 4.28 Forfeited ( 35,181 ) $ 5.88 Non-vested RSUs at December 31, 2025 602,557 $ 9.74 T he total fair value of RSUs that vested during the years ended December 31, 2025 and 2024 was $ 4.0 million and $ 0.5 million, respectively. The grant-date fair value is the market price of the shares on the date of 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. 64 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 Risk-free interest rate 4.20 % Expected volatility of common stock 53.10 % Expected life of RSU in years 1.2 Dividend yield — % At December 31, 2025 and 2024, unrecognized compensation expense related to RSUs was $ 5.1 million and $ 2.3 million, respectively. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 1.6 years. Non-vested RSUs at December 31, 2025 consist of both time-vesting and performance-based awards. Employee Stock Purchase Plan The Company’s Employee Stock Purchase Plan (“ESPP”) was approved by stockholders in 2012. The Company registered 500,000 shares of its common stock, currently held as treasury shares, for issuance under the ESPP. The purpose of the ESPP is to provide employees with an opportunity to purchase shares of the Company’s common stock through accumulated payroll deductions. The ESPP allows participants to purchase common stock at a purchase price equal to 85 % of the fair market value of the common stock on the last business day of a three-month offering period which coincides with calendar quarters. Payroll deductions may not exceed 10 % of an employee’s compensation. In addition, for each calendar year, an employee may not be granted purchase rights valued over $ 25,000 , as determined at the time such purchase right is granted. The fair v alue of the discount associated with shares purchased under the plan is recognized as stock-based compensation expense and wa s $ 27 thousand and $ 20 thousand for the years ended December 31, 2025 and 2024 , respectively. The total fair value of the shares purchased under the plan during the years ended December 31, 2025 and 2024 was $ 0.2 million and $ 0.1 million , respectively . The employee payment associated with participation in the plan occurs through payroll deductions. Stock-Based Compensation Expense 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. 401(k) Retirement Plan The Company maintains a 401(k) retirement plan for the benefit of eligible employees in the U.S. All U.S. based employees are eligible to participate in the plan upon employment. The Company currently matches contributions at 100 % of up to 2 % of an employee’s contributions . 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. 65 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 2025 2024 Numerator: Net income for basic and diluted earnings per share $ 30,528 $ 10,498 Denominator: Basic weighted average shares outstanding (1) 33,903 29,534 Dilutive effect of the June 2022 warrants 1,815 1,210 Dilutive effect of stock options and restricted shares 438 145 Diluted weighted average shares outstanding 36,156 30,889 Basic earnings per share $ 0.90 $ 0.36 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 Supplemental cash flow information is as follows (in thousands): Years ended December 31, 2025 2024 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 66 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 18— Related Party Transactions On February 2, 2022, the Company entered into a long-term supply agreement with ProFrac Services (the “Initial ProFrac Agreement”), upon issuance of $ 10 million in aggregate principal amount of the convertible notes (the “Contract Consideration Convertible Notes Payable”) to ProFrac Holdings LLC (“ProFrac Holdings”). Under the Initial ProFrac Agreement, ProFrac Services was obligated to order chemicals from the Company at least equal to the greater of (a) the chemicals required for 33 % of ProFrac Services’ hydraulic fracturing fleets and (b) a baseline measured by the first ten hydraulic fracturing fleets deployed by ProFrac Services during the term of the Initial ProFrac Agreement. If the minimum volumes are not achieved in any given year, ProFrac Services is required to pay to the Company, as liquidated damages an amount equal to twenty-five percent ( 25 %) of the difference between (i) the aggregate purchase price of the quantity of products comprising the minimum purchase obligation and (ii) the actual purchased volume during such calendar year (“Contract Shortfall Fees”). On May 17, 2022, the Company entered into an amendment to the Initial ProFrac Agreement (the “First Amendment to ProFrac Agreement”) upon issuance of $ 50 million in aggregate principal amount of Contract Consideration Convertible Notes Payable. The Initial ProFrac Agreement was amended to (a) increase ProFrac Services’ minimum purchase obligation for each year to the greater of 70 % of ProFrac Services’ requirements and a baseline measured by ProFrac Services’ first 30 hydraulic fracturing fleets, and (b) increase the term to 10 years. On February 2, 2023, the Company entered into a second amendment to the Initial ProFrac Agreement (the “Second Amendment to ProFrac Agreement” and together with the Initial ProFrac Agreement and the First Amendment to ProFrac Agreement, collectively the “ProFrac Agreement”) effective as of January 1, 2023. The Second Amendment to ProFrac Agreement amended the ProFrac Agreement to (1) provide a ramp-up period from January 1, 2023 to May 31, 2023 for ProFrac Services to increase the number of active hydraulic fracturing fleets to 30 fleets, (2) waive any Contract Shortfall Fee payment relating to any potential order shortfall prior to January 1, 2023, (3) add additional fees to certain products, and (4) provide margin increases based on margins with non-ProFrac Services customers. The current measurement period for Contract Shortfall Fees is January 1, 2025 through December 31, 2025. The 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. 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, 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. 67 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 Segment Information The Company’s segments are determined as those components whose results are reviewed regularly by the chief operating decision maker (“CODM”), who is the Company's Chief Executive Officer, in deciding how to allocate resources and assess performance. Each segment is organized and managed based upon the nature of the Company’s markets and customers and consists of similar products and services. Gross profit and income (loss) from operations for each segment are used by the CODM to assess the performance of each segment in a financial period. The CODM uses segment gross profit and income (loss) from operations as the measure to make resource (including financial or capital resources) allocation decisions for each segment. Accounting policies have been applied consistently by each segment for all reporting periods. Intercompany revenue and expense amounts, if any, have been eliminated within each segment to report on the basis that management uses internally for evaluating segment performance. Various functions, including certain sales and marketing activities and general and administrative activities, are provided centrally by the corporate office. Costs associated with corporate office functions, other corporate income and expense items, and income taxes are not allocated to the reportable segments. The operations of the Company are categorized into the following reportable segments: Chemistry Technologies. The CT segment includes specialty chemistries, logistics and technology services, which we believe enable our customers to pursue improved efficiencies and performance throughout the life cycle of their wells, and also help our customers improve their environmental, social and governance (“ESG”) and operational goals. Customers of the CT segment include major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, national and state-owned oil companies and international supply chain management companies . Data Analytics. The 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. 68 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Summarized financial information of the reportable segments is as follows (in thousands): As of and for the years ended December 31, Chemistry Technologies Data Analytics Corporate and Other Total 2025 Revenue from external customers Products $ 76,059 $ 7,261 $ — $ 83,320 Services 3,506 3,610 — 7,116 Total revenue from external customers 79,565 10,871 — 90,436 Revenue from related party Products 130,098 69 — 130,167 Services 123 397 — 520 Rental revenue — 16,139 — 16,139 Total revenue from related parties 130,221 16,605 — 146,826 Cost of sales 168,302 9,127 — 177,429 Gross profit 41,484 18,349 — 59,833 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 Income (loss) from operations $ 30,385 $ 7,882 $ ( 15,023 ) $ 23,244 Reconciliation of profit to income before income taxes: Interest expense $ ( 3,937 ) $ ( 3,937 ) Other income, net 348 348 Income before income taxes $ 19,655 2024 Revenue from external customers Products $ 60,847 $ 4,740 $ — $ 65,587 Services 2,367 3,309 — 5,676 Total revenue from external customers 63,214 8,049 — 71,263 Revenue from related party Products 114,879 5 — 114,884 Services 68 810 — 878 Total revenue from related parties 114,947 815 — 115,762 Cost of sales 141,948 5,691 — 147,639 Gross profit 36,213 3,173 — 39,386 Selling, general and administrative 7,861 3,489 13,359 24,709 Other segment items 1,750 623 108 2,481 Income (loss) from operations $ 26,602 $ ( 939 ) $ ( 13,467 ) $ 12,196 Reconciliation of profit to income before income taxes: Interest expense ( 1,095 ) ( 1,095 ) Other income, net 46 46 Income before income taxes $ 11,147 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. 69 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Assets of the Company by reportable segments and corporate and other are as follows (in thousands): December 31, 2025 December 31, 2024 Chemistry Technologies $ 161,332 $ 152,161 Data Analytics 19,179 8,632 Corporate and Other 39,538 10,003 Total assets $ 220,049 $ 170,796 Additions to long-lived assets by reportable segments and corporate and other are as follows (in thousands): As of and for the years ended December 31, Chemistry Technologies Data Analytics Corporate and Other Total 2025 Additions to long-lived assets (1) $ 1,131 $ 14,724 $ 381 $ 16,236 2024 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 Revenue by country is based on the location where services are provided and products are sold. For the years ended December 31, 2025 and 2024, no country other than the U.S. accounted for more than 10% of revenue. Revenue by geographic location is as follows (in thousands): Years ended December 31, 2025 2024 U.S. (1) $ 225,952 $ 177,825 UAE 9,951 7,392 Other countries 1,359 1,808 Total revenue $ 237,262 $ 187,025 (1) Includes revenue from related party Long-lived assets held in countries other than the U.S. are not material to the consolidated financial statements. 70 FLOTEK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Major Customers Revenue from major customers, as a percentage of consolidated revenue, is as follows (in thousands): Revenue % of Total Revenue Year ended December 31, 2025 Customer A (related party) $ 146,826 61.9 % Year ended December 31, 2024 Customer A (related party) $ 115,762 61.9 % 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 Customer A $ 8,525 44.8 % Customer B $ 3,001 15.8 % Customer C $ 771 4.0 % As of December 31, 2024 Customer A $ 3,324 18.6 % Customer C $ 2,264 12.7 % Customer B $ 1,288 7.2 % Please see Note 18 - “Related Party Transactions” for additional information regarding accounts receivable with ProFrac. Major Suppliers Expenditure with major suppliers, as a percentage of consolidated supplier expenditure, is as follows (in thousands): Years ended December 31, Expenditure % of Total Expenditure 2025 Supplier A $ 36,098 25 % Supplier B 17,840 12 % Supplier C 16,935 12 % 2024 Supplier A $ 24,064 19 % Supplier B 21,410 17 % Supplier C 20,333 16 % Note 20 — Subsequent Event 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. 71 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.