What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-07 compared with 2025-11-07 · 81 added, 146 removed, 136 unchanged (63% of the section changed)

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Recent Events

On November 7, 2025, the Company entered into a series of agreements with ProFrac GDM, LLC, a subsidiary of ProFrac, in connection with the assignment of the PWRtek Note by ProFrac GDM, LLC, a subsidiary of ProFrac (“ProFrac GDM”), to PC Energy Credit I LLC (the “Note Assignment”).

The PWRtek Note was originally issued as a component of the total consideration paid by the Company in connection with the PWRtek Transactions (see “Note 3 - Asset Acquisition” above).

In connection with the Note Assignment, (1) Company and ProFrac GDM have entered into that certain Consent, Acknowledgement and Amendment to Senior Secured Note Documents, dated as of November 7, 2025 (the “Assignment Consent”), (2) ProFrac and ProFrac GDM have entered into that certain Guaranty, dated as of November 7, 2025 (the “ProFrac Parent Guaranty”), and (3) the Company and ProFrac GDM have entered into that certain Amendment No.

1 to Agreement for Equipment Rental, dated as of November 7, 2025 (the “Dry Lease Amendment,” and together with the Assignment Consent and the ProFrac Parent Guaranty, the “Transaction Documents”).

Pursuant to the Transaction Documents, in consideration for the Company’s consent to the Note Assignment, the parties involved agreed to various amendments which include, among other things, (a) the provision of a guaranty by ProFrac of all of ProFrac GDM’s obligations under the Lease Agreement, (b) the elimination of all make-whole amounts and prepayment premiums applicable to the PWRtek Note, providing the Company with the unrestricted ability to prepay the PWRtek Note without premiums or penalties, (c) the removal of a “Material Adverse Effect” event of default under the PWRtek Note relating to the Company, and (d) the removal of restrictions included in the PWRtek Note on PWRtek, LLC’s, a subsidiary of the Company, ability to make distributions (as well as the corresponding removal of restrictions included in the Lease Agreement on ProFrac GDM’s ability to make distributions).

In addition, in order to facilitate the Note Assignment, the parties further agreed to the removal of the mutual rights to offset Contract Shortfall Fees that are payable under the ProFrac Agreement and the Company’s right to offset amounts due pursuant to the Lease Agreement against the principal of the PWRtek Note.

As a result, the full principal amount of the PWRtek Note will be payable in cash by the Company, rather than via offset against amounts payable pursuant to the Company’s other agreements with ProFrac and its affiliates.

Correspondingly, any amounts due to the Company from ProFrac and its affiliates pursuant to the Company’s other agreements with ProFrac and its affiliates, including order shortfall payments, must be paid in cash, rather than via offset.

In addition, on October 28, 2025, the Company’s lender under the ABL provided its consent (the “ABL Consent”) to the Assignment (see “Item 1.

Financial Statements - Note 10” above).

The foregoing description of the Assignment Consent, the ProFrac Parent Guaranty, the Dry Lease Amendment and the ABL Consent do not purport to be complete and are qualified in its entirety by reference to the complete text thereof, which are filed herewith as Exhibits 10.2, 10.3, 10.4, and 10.5 respectively, and incorporated herein by reference.

On March 3, 2026, the Company announced that it had been awarded its first contract to deliver power services for utilities infrastructure support.

Under the agreement, the Company expects to coordinate the installation of up to 50 megawatts (“MW”) of power generation equipment including the Company’s gas distribution and conditioning assets to support critical federal disaster recovery initiatives.

The initial term of the agreement is for six months, with customer option to extend to four years.

In late March, the Company began deploying the initial equipment to service this contract.

As a result, the Company expects DA revenue in the second quarter to increase as compared to the first quarter.

On March 12, 2026, the Company and ProFrac Holding Corp (“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 a $7.2 million offset against the 2025 Contract Shortfall Fee (the “OSP Offset”) amount due under the ProFrac Agreement 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 DA segment, with the costs of such equipment to be offset by the Equipment Credit.

Pursuant to the OSP Agreement, during the first quarter of 2026, the Company received $5 million in cash and utilized $0.7 million of the Equipment Credit.

The Company received the remaining $2.2 million in cash in April 2026 and expects to utilize the remaining 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.

Company Overview

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The measurement period for Contract Shortfall Fees during 2025 was January 1, 2025 through December 31, 2025.

Related party revenues for the nine months ended September 30, 2024 reflect Contract Shortfall Fees of $23.8 million.

Related party revenues for the three months ended March 31, 2025 reflect Contract Shortfall Fees of $7.5 million.

The current measurement period for Contract Shortfall Fees is January 1, 2026 through December 31, 2026.

The Company does not expect that the minimum purchase requirements will be met during the current measurement period, and as a result, related party revenues for the nine months ended September 30, 2025 reflect Contract Shortfall Fees of $23.9 million.

The PWRtek Transactions (see “Item 1.

Financial Statements - Note 3”) do not impact the ProFrac Agreement;

provided, however, the Company and ProFrac Services have agreed that any future Contract Shortfall Fees shall be offset by the approximately $7.2 million residual payable due under the Purchase Agreement described in “Item 1.

Financial Statements - Note 3” above and either the Company or ProFrac GDM, LLC (“ProFrac GDM”) may elect, upon written notice, to offset up to 50% of any due and payable Contract Shortfall Fees against principal and accrued and unpaid interest due under the PWRtek Note described in “Item 1.

Financial Statements - Note 3” above.

The Company does not expect that the minimum purchase requirements will be met during the current measurement period, and as a result, related party revenues for the three months ended March 31, 2026 reflect Contract Shortfall Fees of $2.7 million.

Data Analytics

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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 “Item 1.

Financial Statements - Note 3” above.

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 has expanded its presence in providing mobile power generation solutions which facilitates 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.

Research & Innovation

R&I supports both our business segments through chemistry formulation, specialty chemical formulations and EPA regulatory guidance, technical support, basin and reservoir studies, data analytics and new technology projects.

The purpose of R&I is to

supply the Company’s business segments with enhanced products and services that generate current and future revenues, while advising Company management on opportunities concerning technology, environmental and industry trends.

The purpose of R&I is to supply the Company’s business segments with enhanced products and services that generate current and future revenues, while advising Company management on opportunities concerning technology, environmental and industry trends.

The R&I facilities support advances in CT and DA segment performance, optimization and manufacturing.

For the three months ended September 30, 2025 and 2024, the Company incurred $0.5 million and $0.5 million, respectively, of research and development expense.

For the nine months ended September 30, 2025 and 2024, the Company incurred $1.4 million and $1.3 million, respectively, of research and development expense.

For each of the three months ended March 31, 2026 and 2025, the Company incurred $0.4 million of research and development expense.

The Company expects that its 2026 research and development investments will continue to support new product development, especially in support of enhanced environmental demands and customization initiatives for its clients.

Our business is subject to numerous variables that impact our outlook and expectations given the shifting conditions of the oil and gas industry.

We have based our outlook on the market conditions we perceive today.

Revenue during the first quarter of 2026 increased 27% as compared to the 2025 period.

We expect to grow revenues from the CT and DA segments through the remainder of 2026, as compared to 2025.

Our outlook is based upon market conditions we perceive today.

The oil and gas industry is highly cyclical.

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The demand for oil and gas and related services fluctuates due to numerous factors including weather and macroeconomic and geopolitical conditions.

Despite the near-term volatility in commodity pricing, partially attributable to the ongoing discussions with respect to tariffs and potential for additional conflicts in the Middle East, we believe the fundamentals for energy-related services remain stable.

Despite the near-term volatility in commodity pricing, partially attributable to the ongoing conflicts in the Middle East and numerous supply and demand factors, we believe the fundamentals for energy-related services remain stable.

Independent exploration and production companies operate the majority of U.S.

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In the current commodity price environment, we generally expect these companies, as well as major exploration and production companies, to maintain current activity levels over the next 12 months.

We are continuing to monitor developments with respect to the ongoing military conflicts in the region including the impact on global commodity prices, potential shipping and logistics disruptions as well as the impact to the cost of certain raw materials.

Chemistry Technologies

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We believe that we have optimized service delivery across key North American basins and are well-positioned to adapt to fluctuations in activity levels.

Based upon our strong results during the first quarter of 2025, and customer commitments, we anticipate stable demand for our chemistry during 2025.

Based upon our results during the first quarter of 2026, and customer commitments, we anticipate stable demand for our chemistry during 2026.

Our expectations are in part based upon our current outlook on oil and gas prices.

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Internationally, we are seeing an increase in unconventional activity in the Middle East and Argentina, where we expect demand for our chemistry to grow throughout 2026.

Our outlook for growth in the Middle East is subject to the resolution of the ongoing military conflicts.

We remain focused on driving innovation between the CT and DA segments, promoting opportunities in upstream applications designed to deliver enhanced efficiencies for E&P operators and service companies.

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As evidenced by and in connection with the transactions with ProFrac and ProFrac GDM described above under “Item 1.

Financial Statements - Note 3,” we are gaining traction leveraging the Verax™ in applications where operators and service companies are using lower cost field gas as a substitute for diesel in dual fuel engines as the market moves to Tier 4 equipment and electric powered drilling rigs and frack equipment.

Financial Statements - Note 16,” we are gaining traction leveraging the Verax™ in applications where operators, service companies and power providers are using lower cost field gas as a substitute for diesel in dual fuel engines as the market moves to Tier 4 equipment and electric powered drilling rigs and frack equipment.

Analyzing gas quality in real-time is designed to allow companies to maximize the field gas for diesel substitution rate providing significant cost savings while lowering emissions, reducing fuel consumption/costs and protecting equipment from damage.

In addition, we believe the Acquired Assets can be utilized in numerous vertical markets, including areas outside of the oil and gas industry, such as grid and emergency remote power support and power needs associated with data centers.

In addition, we believe the Acquired Assets (as described under “Item 1.

Financial Statements - Note 16”) can be utilized in numerous vertical markets, including areas outside of the oil and gas industry, such as grid and emergency remote power support and power needs associated with data centers.

The Lease Agreement described under “Item 1.

Financial Statements - Note 16” above has had and we expect it to continue to have a significant impact on the future financial results of our DA segment.

We expect full-year 2026 revenues from just the Lease Agreement to total approximately $27.0 million, as compared to $17.4 million in total DA revenues from all sources through the first nine months of 2025.

We expect full-year 2026 revenues from just the Lease Agreement to total approximately $27.0 million, as compared to $27.5 million in total DA revenues from all sources for the year ended December 31, 2025.

The DA segment continues to innovate and enhance its hardware, software and artificial intelligence platforms.

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Consolidated Results of Operations (in thousands)

Three months ended September 30, Nine months ended September 30,

2025 2024 2025 2024

Three months ended March 31,

Revenue from external customers $ 18,165 $ 24,423

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Selling general and administrative % 9.9 % 11.3 %

Asset acquisition expenses 167 — 4,362 —

Depreciation 631 252

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Income before income taxes 6,273 5,444

Income tax benefit (expense) 12,612 (37) 12,531 (293)

Income tax expense (1,609) (64)

Net income $ 4,664 $ 5,380

Net income % 6.7 % 9.7 %

Consolidated revenue for the three months ended September 30, 2025 increased $6.3 million, or 13%, versus the same period of 2024, driven by $6.1 million in PWRtek rental revenue, increased sales volumes from external customers and an increase in accrued Contract Shortfall Fees of $1.9 million, partially offset by reduced related party activity under the ProFrac Agreement.

Related party revenues in the CT segment are net of $1.3 million and $1.6 million of contract assets amortization for the three months ended September 30, 2025 and 2024, respectively.

Consolidated revenue for the nine months ended September 30, 2025 increased $33.5 million, or 25%, versus the same period of 2024, driven by increased sales volumes from external customers and $9.3 million in PWRtek rental revenue, partially offset by a decrease in accrued Contract Shortfall Fees of $0.1 million.

Related party revenues in the CT segment are net of $4.2 million and $4.3 million of contract assets amortization for the nine months ended September 30, 2025 and 2024, respectively.

Consolidated cost of sales for the three months ended September 30, 2025 decreased $2.4 million, or 6%, versus the same period of 2024, primarily due to decreased product sales.

Consolidated cost of sales percentage was 68% and 82% for the three months ended September 30, 2025 and 2024, respectively.

Consolidated cost of sales for the nine months ended September 30, 2025 increased $15.9 million, or 15%, versus the same period of 2024, primarily due to increased product sales, increased freight costs and increased costs related to PWRtek activity.

Consolidated cost of sales percentage was 74% and 80% for the nine months ended September 30, 2025 and 2024, respectively.

SG&A expenses for the three months ended September 30, 2025 increased $1.7 million, or 29%, versus the same period of 2024.

The increase relates primarily to increased salaries, increased stock compensation expense and increased professional fees.

SG&A expenses for the nine months ended September 30, 2025 increased $2.4 million, or 13%, versus the same period of 2024.

The increase relates primarily to increased salaries, increased stock compensation expense and increased professional fees.

Asset acquisition expenses were $0.2 million and $4.4 million for the three and nine months ended September 30, 2025, respectively, related to expenses associated with the April 28, 2025 PWRtek Transactions.

Income from operations increased $6.4 million for the three months ended September 30, 2025, versus the same period in 2024.

The increase was primarily driven by an $8.7 million increase in gross profit partially offset by $0.2 million in asset acquisition expenses and a $1.7 million increase in SG&A expenses during the three months ended September 30, 2025 as compared to the same period of 2024.

Income from operations increased $10.2 million for the nine months ended September 30, 2025, versus the same period in 2024.

The increase was primarily driven by an $17.5 million increase in gross profit partially offset by $4.4 million in asset acquisition expenses and a $2.4 million increase in SG&A expenses during the nine months ended September 30, 2025 as compared to the same period of 2024.

Interest and other expense for the three months ended September 30, 2025 increased $1.2 million driven by a $1.0 million increase in interest payments as a result of the new PWRtek Note compared to the same period of 2024.

Interest and other expense for the nine months ended September 30, 2025 increased $1.6 million driven by a $1.7 million increase in interest payments as a result of the new PWRtek Note compared to the same period of 2024.

The Company had an income tax benefit of $12.6 million for the three months ended September 30, 2025 and income tax expense of $37 thousand for the same period of 2024.

The Company had an income tax benefit of $12.5 million for the nine months ended September 30, 2025 and income tax expense of $0.3 million for the same period of 2024.

The changes for both 2025 periods are driven by the partial release of the Company’s valuation allowance on its deferred tax assets (see “Item 1.

Financial Statements - Note 12”).

Consolidated revenue for the three months ended March 31, 2026 increased $14.7 million, or 27%, versus the same period of 2025, driven by increased sales volumes under the ProFrac Agreement and $7.3 million in PWRtek rental revenue, partially offset by a decrease in accrued Contract Shortfall Fees of $4.8 million and decreased external customer product sales.

Related party revenues in the CT segment are net of $2.2 million and $1.5 million of contract assets amortization for the three months ended March 31, 2026 and 2025, respectively.

Consolidated cost of sales for the three months ended March 31, 2026 increased $11.6 million, or 27%, versus the same period of 2025, primarily due to increased product sales and increased costs related to PWRtek activity partially offset by decreased freight costs.

Consolidated cost of sales as a percentage of revenue was 78% and 78% for the three months ended March 31, 2026 and 2025, respectively.

SG&A expenses for the three months ended March 31, 2026 increased $0.6 million, or 10%, versus the same period of 2025.

The increase relates primarily to increased salaries, stock compensation expense and increased professional fees.

Income from operations increased $2.0 million for the three months ended March 31, 2026, versus the same period in 2025.

The increase was primarily driven by a $3.1 million increase in gross profit, partially offset by a $0.6 million increase in SG&A expenses and a $0.4 million increase in depreciation expenses during the three months ended March 31, 2026 as compared to the same period of 2025.

Interest and other expense for the three months ended March 31, 2026 increased $1.2 million driven by a $1.0 million increase in interest payments as a result of the PWRtek Note compared to the same period of 2025.

The Company had income tax expense of $1.6 million and $0.1 million for the three months ended March 31, 2026 and 2025, respectively.

Results by Segment (in thousands):

Chemistry Technologies Results of Operations:

Three months ended September 30, Nine months ended September 30,

2025 2024 2025 2024

Three months ended March 31,

Revenue from external customers $ 14,741 $ 22,009

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Income from operations 5,128 8,891

CT revenue from external customers for the three months ended September 30, 2025 increased $6.1 million, or 43%, compared to the same period of 2024 driven primarily by increased activity.

Revenue from related party for the three months ended September 30, 2025 decreased $6.0 million, or 18%, compared to the same period of 2024, primarily driven by decreased activity partially offset by increased accrued Contract Shortfall Fees.

CT revenue from external customers for the nine months ended September 30, 2025 increased $22.6 million, or 54%, compared to the same period of 2024 driven primarily by increased activity.

Revenue from related party for the nine months ended September 30, 2025 decreased $0.2 million compared to the same period of 2024, primarily driven by decreased activity partially offset by increased accrued Contract Shortfall Fees.

Income from operations for the CT segment for the three months ended September 30, 2025 increased $3.0 million compared to the same period of 2024.

The increase was driven by increased gross profit of $3.6 million for the three months ended September 30, 2025, which was related to increased product volumes partially and a decrease in cost of sales.

Income from operations for the CT segment for the nine months ended September 30, 2025 increased $7.7 million compared to the same period of 2024.

The increase was driven by increased gross profit of $8.7 million for the nine months ended September 30, 2025, which was related to increased product volumes partially offset by a corresponding increase in cost of sales.

CT revenue from external customers for the three months ended March 31, 2026 decreased $7.3 million, or 33%, compared to the same period of 2025 driven primarily by decreased product volumes.

Revenue from related party for the three months ended March 31, 2026 increased $14.2 million compared to the same period of 2025, primarily driven by increased product volumes, partially offset by decreased accrued Contract Shortfall Fees and increased contract amortization.

Income from operations for the CT segment for the three months ended March 31, 2026 decreased $3.8 million compared to the same period of 2025.

The decrease was driven by a $3.6 million decrease in gross profit for the three months ended March 31, 2026, which was related to decreased product volumes and an increase in cost of sales, partially offset by increased related party revenues.

Data Analytics Results of Operations:

Three months ended September 30, Nine months ended September 30,

2025 2024 2025 2024

Three months ended March 31,

Revenue from external customers $ 3,424 $ 2,414

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Income (loss) from operations 6,133 (124)

DA revenue from external customers for the three months ended September 30, 2025 increased $0.3 million, or 10.3%, compared to the same period of 2024 primarily due to increased unit sales.

Revenue from related party for the three months ended September 30, 2025 increased $5.9 million compared to the same period of 2024 primarily due to PWRtek rental income in 2025.

DA revenue from external customers for the nine months ended September 30, 2025 increased $2.0 million, or 34%, compared to the same period of 2024 primarily due to increased unit sales.

Revenue from related party for the nine months ended September 30, 2025 increased $9.0 million compared to the same period of 2024 primarily due to PWRtek rental income in 2025.

Income from operations for the DA segment for the three months ended September 30, 2025 increased $4.2 million compared to the same period of 2024 primarily driven by PWRtek rental income and increased activity, partially offset by increased materials costs.

Income from operations for the DA segment for the nine months ended September 30, 2025 increased $3.0 million compared to the same period for 2024 primarily driven by PWRtek rental income and increased activity, partially offset by increased materials costs and $4.4 million of asset acquisition expenses related to the PWRtek Transactions.

DA revenue from external customers for the three months ended March 31, 2026 increased $1.0 million, or 42%, compared to the same period of 2025 primarily due to increased service revenue and PWRtek rental income in 2026.

Revenue from related party for the three months ended March 31, 2026 increased $6.7 million compared to the same period of 2025 primarily due to the PWRtek lease agreement in 2026.

Income from operations for the DA segment for the three months ended March 31, 2026 increased $6.3 million compared to the same period for 2025 primarily driven by PWRtek rental income and increased activity, partially offset by increased materials costs and costs related to the Lease Agreement.

Corporate and Other Results of Operations:

Three months ended September 30, Nine months ended September 30,

2025 2024 2025 2024

Three months ended March 31,

Loss from operations $ (3,672) $ (3,200)

Loss from operations for the three months ended September 30, 2025 increased $0.8 million, or 28.0% compared to the same period of 2024.

Loss from operations for the nine months ended September 30, 2025 increased $0.4 million, or 4%, compared to the same period of 2024 attributable to increased professional fees.

Loss from operations for the three months ended March 31, 2026 increased $0.5 million, or 15%, compared to the same period of 2025 primarily attributable to increased administrative costs.

Capital Resources and Liquidity

The Company’s working capital requirements relate to the acquisition and maintenance of equipment and funding obligations as they become due.

During the nine months ended September 30, 2025, the Company funded working capital requirements with cash on hand, borrowings under the ABL (defined below) and cash flow from operations.

We believe our cash and cash equivalents, cash generated from operating activities, which includes the impact of the transactions described in “Item 1.

Financial Statements - Note 3” above, the collection or offset utilization of future Contract Shortfall Fees as described below, and availability under the ABL will be sufficient to fund our capital requirements and anticipated obligations as they become due over the next twelve months.

During the three months ended March 31, 2026, the Company funded working capital requirements with cash on hand, borrowings under the ABL (defined below) and cash flow from operations.

We believe our cash and cash equivalents, cash generated from operating activities, which includes the impact of the PWRtek Transactions, the collection of future Contract Shortfall Fees as described below, and availability under the ABL will be sufficient to fund our capital requirements and anticipated obligations as they become due over the next twelve months.

However, sustained weakness in the oil and gas markets, and the resulting potential impact on our customers’ ability to pay their obligations to us in a timely manner could have a negative impact on our liquidity.

In addition, the availability of capital is

dependent on the Company’s operating cash flow, which is currently expected to be principally derived from the ProFrac Agreement and the Lease Agreement.

The minimum purchase requirements under the ProFrac Agreement were not met during 2024.

As a result, the Company recorded revenue related to the 2024 Contract Shortfall Fees totaling $32.6 million.

The Company collected $15.0 million of 2024 Contract Shortfall Fees in cash during the first quarter of 2025.

The remainder of the 2024 Contract Shortfall Fees were offset as consideration for the Acquired Assets, see “Item 1.

Financial Statements - Note 3” above.

In addition, the availability of capital is dependent on the Company’s operating cash flow, which is currently expected to be principally derived from the ProFrac Agreement and the Lease Agreement.

The minimum purchase requirements under the ProFrac Agreement were not met during 2025 and, as a result, related party revenues for the year ended December 31, 2025 reflect 2025 Contract Shortfall Fees totaling $27.4 million.

As described in “Recent Events” above, on March 12, 2026, the Company and ProFrac entered into the OSP Agreement regarding the settlement of 2025 Contract Shortfall Fees.

The current measurement period for Contract Shortfall Fees is January 1, 2026 through December 31, 2026.

As noted above under “Company Overview – ProFrac Supply Agreement,” the Company and ProFrac Services have agreed that any future Contract Shortfall Fees will be offset by the approximately $7.2 million residual payable due under the Purchase Agreement.

Prior to November 7, 2025, the Company and ProFrac each had rights to offset future Contract Shortfall Fees against principal and accrued and unpaid interest due under the PWRtek Note without penalty, however those offset rights were eliminated in connection with entry into the Assignment Consent (see “Recent Events” above).

As of September 30, 2025, the Company had unrestricted cash and cash equivalents of $4.6 million compared to $4.4 million on December 31, 2024.

In addition, as of November 5 , 2025 , the Company had approximately $8.5 million in available borrowings under the ABL.

During the nine months ended September 30, 2025, the Company had $17.3 million of operating incom e, $1.0 million of cash provided by operating activities, $1.7 million of cash used in investing activities and $1.1 million of cash provided by financing activities.

As of both March 31, 2026 and December 31, 2025, the Company had unrestricted cash and cash equivalents of $5.7 million.

In addition, as of May 1, 2026, the Company had approximately $11.8 million in available borrowings under the ABL.

During the three months ended March 31, 2026, the Company had $7.6 million of operating income, $21 thousand of cash provided by operating activities, $1.0 million of cash used in investing activities and $0.9 million of cash provided by financing activities.

Asset Based Loan

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The ABL provides up to $20.0 million of credit availability, which is limited by a borrowing base consisting of (i) 85% of eligible accounts receivable, plus (ii) 60% of the value of eligible inventory not to exceed 100% of the eligible accounts receivable, plus (iii) 60% of the value of certain real estate holdings.

As of September 30, 2025, the Company had $6.7 million outstanding under the ABL.

During the nine months ended September 30, 2025, the Company incurred $0.7 million in interest and fees related to the ABL.

As of September 30, 2025, the Company recorded $0.2 million of unamortized deferred financing costs related to the ABL.

As of March 31, 2026, the Company had $4.7 million outstanding under the ABL.

During the three months ended March 31, 2026, the Company incurred $1.0 million in interest and fees related to the ABL.

As of March 31, 2026, the Company recorded $0.1 million 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.

The interest rate under the ABL was 9.25% as of September 30, 2025.

For the nine months ended September 30, 2025, the weighted-average interest rate was 9.4%.

For the three months ended March 31, 2026, the weighted-average interest rate was 8.75%.

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

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If the ABL is terminated prior to the end of its term, the Company is required to pay an early termination fee of 2.50% of the borrowing base limit of the ABL (if terminated with more than 12 months remaining until the maturity date) or 1.50% of the borrowing base limit of the ABL (if terminated with less than 12 months remaining until the maturity date).

In connection with the Company’s entry into the Purchase Agreement, the Company entered into the Letter Agreement with the lender whereby the lender will not test compliance with respect to the Tangible Net Worth (as defined in the ABL) covenant through and including December 31, 2025.

Pursuant to the Letter Agreement, the Company will be required to maintain positive trailing three-month consolidated net income on a monthly basis through and including December 31, 2025.

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

On October 28, 2025, the lender provided its consent to the assignment of the PWRtek Note and various amendments to the PWRtek Note and related documents (see “Recent Events” above).

The ABL contains customary representations, warranties, covenants and events of default, the occurrence of which would permit the lender to accelerate the payment of any amounts borrowed.

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

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

Consolidated cash flows by type of activity are noted below (in thousands):

Nine months ended September 30,

Three months ended March 31,

Net cash provided by operating activities $ 21 $ 7,313

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Operating Activities

Net cash provided by operating activities was $1.0 million during the nine months ended September 30, 2025 compared to net cash provided by operating activities of $5.9 million for the same period of 2024.

Consolidated net income for the nine months ended September 30, 2025 was $27.5 million compared to consolidated net income of $6.1 million for the nine months ended September 30, 2024.

During the nine months ended September 30, 2025, non-cash adjustments to net income totaled $3.8 million as compared to $8.7 million for the same period of 2024.

• For the nine months ended September 30, 2025, non-cash adjustments included a $12.8 million tax benefit primarily from the partial release of the valuation allowance and non-cash positive adjustments of $1.7 million of stock compensation expense, $4.2 million amortization of contract assets and $0.8 million of non-cash lease expense.

• For the nine months ended September 30, 2024, non-cash adjustments included non-cash positive adjustments of $0.9 million of stock compensation expense, $4.3 million amortization of contract assets and $1.7 million of non-cash lease expense.

During the nine months ended September 30, 2025, changes in working capital used $22.7 million of cash as compared to $8.9 million for the same period of 2024.

• For the nine months ended September 30, 2025, changes in working capital resulted primarily from an increase in related party accounts receivable of $10.0 million, increased third party accounts receivable of $9.9 million, decreased accrued liabilities and operating lease liabilities of $0.9 million and $1.2 million, respectively and decreases in accounts payable of $3.0 million, partially offset by a decrease in net inventories of $0.5 million and an increase in interest payable of $1.0 million.

• For the nine months ended September 30, 2024, changes in working capital resulted primarily from an increase in related party accounts receivable of $12.5 million, decreased third party accounts receivable of $1.3 million and net inventories of $0.5 million along with decreased accrued liabilities and operating lease liabilities of $1.7 million and $2.0 million, respectively, partially offset by increases in accounts payable of $5.7 million, and other assets of $0.8 million.

Net cash provided by operating activities was $21 thousand during the three months ended March 31, 2026 compared to net cash provided by operating activities of $7.3 million for the same period of 2025.

Consolidated net income for the three months ended March 31, 2026 was $4.7 million compared to consolidated net income of $5.4 million for the three months ended March 31, 2025.

During the three months ended March 31, 2026, non-cash adjustments to net income totaled $6.0 million as compared to $2.6 million for the same period of 2025.

• For the three months ended March 31, 2026, non-cash adjustments included a $1.6 million tax expense, $0.8 million of stock compensation expense, $2.2 million amortization of contract assets and $0.2 million of non-cash lease expense.

• For the three months ended March 31, 2025, non-cash adjustments included non-cash positive adjustments of $0.5 million of stock compensation expense, $1.5 million amortization of contract assets and $0.3 million of non-cash lease expense.

During the three months ended March 31, 2026, changes in working capital used $10.6 million of cash as compared to $0.7 million for the same period of 2025.

• For the three months ended March 31, 2026, changes in working capital resulted primarily from an increase in related party accounts receivable of $9.8 million, increased third party accounts receivable of $2.8 million, and increases in net inventories of $4.1 million and operating lease liabilities of $0.4 million, partially offset by increased accrued liabilities of $1.5 million and an increase in accounts payable of $4.2 million.

• For the three months ended March 31, 2025, changes in working capital resulted primarily from a decrease in related party accounts receivable of $4.1 million, increased third party accounts receivable of $2.5 million and net inventories of $0.4 million along with decreased accrued liabilities and operating lease liabilities of $1.8 million and $0.6 million, respectively, partially offset by increases in accounts payable of $0.9 million and other assets of $0.5 million.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2025 and 2024 was $1.7 million and $0.5 million, respectively, primarily driven by $1.7 million and $0.5 million in capital expenditures for the nine months ended September 30, 2025 and 2024, respectively.

Net cash used in investing activities for the three months ended March 31, 2026 and 2025 was $1.0 million and $0.6 million, respectively, primarily driven by $1.0 million and $0.6 million in capital expenditures for the three months ended March 31, 2026 and 2025, respectively.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2025 was $1.1 million and relates primarily to $1.9 million in net proceeds from the ABL, proceeds from the issuance of stock under the Company’s Employee Stock Purchase Plan and stock option exercises, partially offset by payments for loan origination costs on the PWRtek Note, the issuance cost of the April 2025 Warrant described in “Item 1.

Financial Statements - Note 3” above and payments to tax authorities for shares withheld from employees.

Net cash used in financing activities was $6.3 million for the nine months ended September 30, 2024, and relates primarily to $6.1 million in net payments on the ABL.

Net cash provided by financing activities for the three months ended March 31, 2026 was $0.9 million and relates primarily to $1.3 million in net proceeds from the ABL, and proceeds from the issuance of stock under the Company’s Employee Stock Purchase Plan and stock option exercises, and payments to tax authorities for shares withheld from employees.

Net cash used in financing activities was $4.8 million for the three months ended March 31, 2025, and relates primarily to net payments on the ABL.

Critical Accounting Policies and Estimates

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To the extent such rights of control are conveyed, we further make an assessment as to the applicable lease classification.

The determination of appropriate lease classification (sales-type lease or operating lease) may require the use of management judgment, including economic life of the leased equipment, the rate implicit in the lease used to determine the fair value of lease payments, and the fair value of leased equipment.

The determination of appropriate lease classification (sales-type lease or operating lease) may require the use of management judgment, including the economic life of the leased equipment, the rate implicit in the lease used to determine the fair value of lease payments, and the fair value of leased equipment.

Contract Assets

The Company’s contract assets represent consideration which was issued in the form of convertible notes (Contract Consideration Convertible Notes Payable as discussed in Note 10, “Debt and Convertible Notes Payable” in Part II, Item 8 of the 2024 Annual Report) and other incremental costs related to obtaining the ProFrac Agreement in 2022.

The Company’s contract assets represent consideration which was issued in the form of convertible notes (Contract Consideration Convertible Notes Payable as discussed in Note 18 - “Related Party Transactions” in Part II, Item 8 of the 2025 Annual Report) and other incremental costs related to obtaining the ProFrac Agreement in 2022.

The contract assets are amortized over the term of the ProFrac Agreement based on forecasted revenues.

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Due to the Contract Shortfall Fee, if actual purchases under the ProFrac Agreement are less than the annual minimum purchase obligation, there is negligible impact on the amount of gross profit generated by the ProFrac Agreement.

As result, the Company believes there is minimal sensitivity to amounts purchased under the ProFrac Agreement to the ProFrac Agreement’s expected profitability when considering the contract assets recoverability assessment.

Income Taxes:

Valuation Allowance

Accounting for income taxes involves estimates and judgments relating to the tax bases of assets and liabilities and the future recoverability of deferred tax assets.

In assessing the realization of deferred tax assets, we determine whether it is more likely than not that the deferred tax assets will be realized.

The ultimate realization of deferred tax assets is dependent upon generating sufficient taxable income in future years when deferred tax assets are recoverable or are expected to reverse.

Factors that may affect estimates of future taxable income include, but are not limited to, changes in revenue, costs or profit margins, market share, and execution of new long-term contracts with customers.

In practice, positive and negative evidence is reviewed with objective evidence receiving greater weight.

If, based on the weight of available evidence, it is more likely than not that all, or some portion, of the deferred tax assets will not be realized, we record a valuation allowance.

The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed for all, or some portion, of the deferred tax assets.

All available positive and negative evidence is analyzed quarterly to determine the amount of the valuation allowance.

A full valuation allowance against the federal and state net deferred assets, except for certain state jurisdictions, was recorded in the first quarter of 2019 because of significant losses and other negative evidence.

In the third quarter of 2025, the Company considered both positive and negative evidence and determined that, as of September 30, 2025, a full valuation allowance was no longer required for certain deferred tax assets.

Positive evidence included our results of operations reaching an adjusted three-year cumulative income position on a rolling twelve-quarter basis during the quarter ended September 30, 2025, that indicates a trend of profitability;

future reversals of existing taxable temporary differences;

and an evaluation of currently available information about future years forecasted taxable income, specifically, the forecasted future income based on existing contracts including the ProFrac Agreement and the Lease Agreement with ProFrac.

The Company’s adjusted three-year cumulative income position 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 both federal and state deferred tax assets was recorded during the three and nine months ended September 30, 2025 totaling $31.7 million and $33.0 million, respectively, of which $17.5 million associated with the deferred tax assets related to the PWRtek acquisition was recorded to additional paid in capital in accordance with the intraperiod allocation in interim period rules.

The Company will continue to evaluate both positive and negative evidence that would require changes to the remaining federal and state valuation allowances.

In assessing forecasted future income in the years after the expiration of the ProFrac Agreement and Lease Agreement when assessing if it is more likely than not that the deferred tax assets will be realized, the Company will consider the impact of sustained pre-tax income growth derived from non-related party customers;

renewals or extensions to current long-term customer contracts;

signing of new contracts with customers with positive margins;

and macroeconomic and industry specific conditions.

Refer to “Item 1A.-Risk Factors” in our 2024 Annual Report and “Item 1A.-Risk Factors” in our Q1 2025 Quarterly Report for more information.

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.

As a result, the Company believes there is minimal sensitivity to amounts purchased under the ProFrac Agreement to the ProFrac Agreement’s expected profitability when considering the contract assets recoverability assessment.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis