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Item 1A. Risk Factors

2025-03-17 compared with 2024-04-01 · 118 added, 104 removed, 197 unchanged (53% of the section changed)

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Although the risks described below are the risks that we believe are material, they are not the only risks relating to our industry, our business and our common stock.

Additional risks and uncertainties, including those that we have not yet identified or that we currently believe are immaterial, may also adversely affect our business, financial condition or results of operations.

Additional risks and uncertainties, including those that we have not yet identified or that we currently believe are immaterial, may also adversely affect our business, results of operations, financial condition and cash flows.

Risks Associated With Our Industry

Decreased oil and natural gas prices and oil and gas industry expenditure levels adversely affect our revenue.

Our revenue is derived primarily from expenditures in the oil and natural gas industry, which, in turn, are based on budgets to explore for, develop and produce oil and natural gas.

Decreased oil and gas prices and oil and gas industry expenditure levels adversely affect our revenue.

Our revenue is derived primarily from expenditures in the oil and gas industry, which, in turn, are based on budgets to explore for, develop and produce oil and gas.

When these expenditures decline, as they have at various times during the past several years, our revenue will suffer.

The industry’s willingness to explore for, develop and produce oil and natural gas depends largely upon the prevailing view of future oil and natural gas prices.

Prices for oil and natural gas historically have been, and are likely to continue to be, highly volatile.

Many factors affect the supply and demand for oil and natural gas and, therefore, influence oil and natural gas prices, including:

• the level of oil and natural gas production;

• the level of oil and natural gas inventories;

• domestic and worldwide demand for oil and natural gas;

The industry’s willingness to explore for, develop and produce oil and gas depends largely upon the prevailing view of future oil and gas prices.

Prices for oil and gas historically have been, and are likely to continue to be, highly volatile.

Many factors affect the supply and demand for oil and gas and, therefore, influence oil and gas prices, including:

• the level of oil and gas production;

• the level of oil and gas inventories;

• domestic and worldwide demand for oil and gas;

• the expected cost of developing new reserves;

• the cost of producing oil and natural gas;

• the cost of producing oil and gas;

• the level of drilling and completions activity;

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• domestic and worldwide economic activity;

• regulatory and other federal and state requirements in the United States;

• the ability of the Organization of Petroleum Exporting Countries, national oil companies and other large producers to set and maintain production levels and prices for oil;

• political conditions in or affecting oil and natural gas producing countries;

• terrorist activities affecting traditional supply routes and other possible terrorist activities in the United States and elsewhere;

• regulatory and other federal and state requirements in the U.S.;

• the ability of OPEC, national oil companies and other large producers to set and maintain production levels and prices for crude oil;

• political conditions in or affecting oil and gas producing countries;

• terrorist activities affecting traditional supply routes and other possible terrorist activities in the U.S.

and elsewhere;

• the cost of developing alternative energy sources;

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• tax policies.

The rental contracts of many of our operating compressor units have a short-term duration, and oil and natural gas companies tend to respond quickly to upward or downward changes in prices.

Any prolonged reduction in drilling and production activities historically has reduced our compressor sales and materially eroded both rental pricing and utilization rates for our equipment and services and adversely affected our financial results.

The rental contracts of many of our operating compressor units have a short-term duration, and oil and gas companies tend to respond quickly to upward or downward changes in prices.

Any prolonged reduction in drilling and production activities has historically eroded both rental pricing and utilization rates for our compression equipment and services and adversely affected our financial results.

As a result of any such prolonged reductions, we may suffer losses, be unable to make necessary capital expenditures or be unable to meet our financial obligations.

The intense competition in our industry could result in reduced profitability and loss of market share for us.

We compete with the oil and natural gas industry’s largest equipment and service providers who have greater name recognition than we do.

We compete with the oil and gas industry’s largest equipment and service providers who have greater name recognition than we do.

These companies also have substantially greater financial resources, larger operations and greater budgets for marketing, research and development than we do.

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As a result, we could lose customers and market share to those competitors.

These companies may also be better positioned than us to successfully endure downturns in the oil and natural gas industry.

These companies may also be better positioned than us to successfully endure downturns in the oil and gas industry.

Our operations may be adversely affected if our current competitors or new market entrants introduce new products or services with better prices, features, performance or other competitive characteristics than our products and services.

Competitive pressures or other factors also may result in significant price competition that could harm our revenue and our business.

In addition, our customers may purchase and operate their own compression fleets in lieu of renting compressors and using our compression services.

Additionally, we may face competition in our efforts to acquire other businesses.

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As a result of the COVID-19 outbreak and other economic conditions in the United States and abroad, our revenue and profitability were adversely affected in the ensuing years.

Although the effects of the outbreak have generally abated, pandemics or other public health crises could significantly impact public health, economic growth, supply chains and markets.

The extent to which our operations and financial results and condition may be affected by future pandemics or other public health crises will depend on various factors and consequences beyond our control, such as the duration and scope of such pandemic or public health crisis, the actions by governments and the private sector in response to the pandemic and the recovery speed and effectiveness of responses to combat any such pandemic or public health crisis.

Thus, any future pandemic or public health crisis may materially adversely affect our operating and financial results in a manner that is not currently known to us and may be material and pose significant risks to our operations.

The condition of domestic and global financial markets and the potential for disruption and illiquidity in the credit markets could have an adverse effect on our operating results and financial condition, and if sustained for an extended period, such adverse effects could also become significant.

Uncertainty and turmoil in the credit markets may negatively impact the ability of our customers to finance utilization of our products and services and could result in a decrease in, or cancellation of, orders or adversely affect the collectability of our receivables.

Uncertainty and turmoil in the credit markets may negatively impact the ability of our customers to finance utilization of our products and services and could result in a decrease in, or cancellation of, contracts or adversely affect the collectability of our receivables.

If the availability of credit to our customers is reduced, they may reduce their drilling and production expenditures, thereby decreasing demand for our products and services, which could have a negative impact on our financial condition.

A prolonged period of depressed prices for oil and natural gas would likely result in delays or cancellation of projects by our customers, reducing the demand for our products and services.

A prolonged period of depressed prices for oil and gas would likely result in delays or cancellation of projects by our customers, reducing the demand for our products and services.

Continued elevated levels of inflation could have an adverse impact on our operating results.

economy has experienced elevated levels of inflation since early 2022.

While such levels of inflation have moderated in recent months, uncertainty remains on expectations of inflation during 2024.

Should inflationary pressures return or increase, the result will be an increase in our cost structure, including labor costs, parts costs, lubricants and other items used in our operations.

While such levels of inflation have moderated somewhat, inflation pressure continues and uncertainty remains regarding expectations of inflation during 2025.

Should inflationary pressures continue or increase, the result will be an increase in our cost structure, including labor costs, parts costs, lubricants and other items used in our operations.

If such cost increases occur, we may be unable to pass along such increases to our customers in the form of higher rental rates for our compressor units.

Increases in inflation could also increase the costs of new compressor units, making them less attractive and decreasing the demand from our customers for such assets.

Should any of these items occur, they could negatively impact the results of our operations.

In addition, inflation may adversely affect customers’ financing costs, cash flows, and profitability, which could adversely impact their operations and our ability to collect receivables.

Should any of these items occur, they could negatively impact our results of operations, financial condition and cash flows.

A reduction in demand for oil could adversely affect our business.

Our results of operations depend upon the level of activity in the energy market, including oil development, production, and transportation.

Oil and natural gas prices and the level of drilling and exploration activity can be volatile.

Oil and gas prices and the level of drilling and exploration activity can be volatile.

As a result, the demand for our natural gas compression services can be adversely affected.

A reduction in demand has, and could in the future continue to, force us to reduce our pricing substantially.

Additionally, our customers’ production from oil-weighted reserves constitutes the majority percentage of our business.

These are considered unconventional sources and are generally less economically feasible to be developed in low oil price environments.

A decline in demand for oil and natural gas generally has an adverse effect on our business, financial condition and results of operations.

Additionally, our customers’ production from oil-weighted reserves constitutes a substantial portion of our business.

These are considered unconventional sources and are generally less economically feasible to be developed in low crude oil price environments.

A decline in demand for oil and gas generally has an adverse effect on our business, results of operations, financial condition and cash flows.

Our industry is highly cyclical, and our results of operations may be volatile.

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Periods of low demand intensify the competition in the industry and often result in rental equipment being idle for long periods of time.

We have been required to enter into lower rate rental contracts in response to market conditions and our rentals and sales revenue have decreased as a result of such conditions.

At times, we have been required to enter into lower rate rental contracts in response to market conditions and our revenues have decreased as a result of such conditions.

Due to the short-term nature of most of our rental contracts, changes in market conditions can quickly affect our business.

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Increased regulation or ban of current fracturing techniques could reduce demand for our compressors.

From time to time, for example, legislation has been proposed in Congress to amend the federal Safe Drinking Water Act (“SDWA”) to require federal permitting of hydraulic fracturing and the disclosure of chemicals used in the hydraulic fracturing process.

From time to time, for example, legislation has been proposed in Congress to amend the federal SDWA to require federal permitting of hydraulic fracturing and the disclosure of chemicals used in the hydraulic fracturing process.

Further, the EPA completed a study finding that hydraulic fracturing could potentially harm drinking water resources under adverse circumstances such as injection directly into groundwater or into production wells lacking mechanical integrity.

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Expanded regulations are likely to introduce a period of uncertainty as companies determine ways to proceed.

Any curtailment could result in a reduction in demand for our compressors, potentially affecting both sales and rentals of our units.

Any curtailment could result in a reduction in demand for our compressors, potentially affecting both rentals and sales of our units.

We are subject to extensive environmental laws and regulations that could require us to take costly compliance actions that could harm our financial condition.

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Increasing attention to climate change, increasing societal expectations on companies to address climate change, and potential consumer use of substitutes to energy commodities may result in increased costs, reduced demand for our customers’ hydrocarbon products which will likely translate to reduced demand for compression services, reduced profits, increased investigations and litigation, increased governmental regulations and negative impacts on our stock price and access to capital markets.

International, national and state governments and agencies continue to evaluate and promulgate legislation and regulations that are focused on restricting greenhouse gas (GHG) emissions.

International, national and state governments and agencies continue to evaluate and promulgate legislation and regulations that are focused on restricting GHG emissions.

Compliance with climate action regulations applicable to our customers ’ operations may have significant implications that could adversely affect our business and operating results in the fossil fuel sectors, and boosting demand for technologies contributing to the climate action agenda.

In the United States, the U.S.

Environmental Protection Agency (EPA) has taken steps to regulate GHG emissions as air pollutants under the U.S.

Clean Air Act of 1970, as amended.

The EPA's Greenhouse Gas Reporting Rule requires monitoring and reporting of GHG emissions from, among others, certain mobile and stationary GHG emission sources in the oil and natural gas industry.

In the United States, the EPA has taken steps to regulate GHG emissions as air pollutants under the CAA.

The EPA’s Greenhouse Gas Reporting Rule requires monitoring and reporting of GHG emissions from, among others, certain mobile and stationary GHG emission sources in the oil and gas industry.

In addition, the U.S.

government has proposed rules in the past setting GHG emissions standards for, or otherwise aimed at reducing GHG emissions from, the oil and natural gas industry.

government has proposed rules in the past setting GHG emissions standards for, or otherwise aimed at reducing GHG emissions from, the oil and gas industry.

Caps or fees on carbon emissions, including in the U.S., have been and may continue to be established and the cost of such caps or fees could disproportionately affect the fossil fuel sectors.

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Risks Associated With Our Company

A significant majority of our compressor unit rental agreements are either month-to-month or short-term in duration.

which, if terminated or not renewed, would adversely impact our revenue and our ability to recover our initial equipment costs.

Approximately one half of our compressor unit rental agreements, representing approximately one quarter of our rented horsepower, are month-to-month in duration, which, if terminated or not renewed, would adversely impact our revenue and our ability to recover our initial equipment costs.

The length of our compressor rental agreements with our customers varies based on customer needs, equipment configurations and geographic area.

In most cases, under currently prevailing rental rates, the initial rental periods are not long enough to enable us to fully recoup the average cost of acquiring or fabricating the equipment.

In certain cases, under currently prevailing rental rates, the initial rental periods are not long enough to enable us to fully recoup the average cost of acquiring or assembling the equipment.

On a unit basis, of the 1,208 compressors rented at December 31, 2024, 573 were rented on a month-to-month basis.

On a horsepower basis, of the 491,756 total rented horsepower, we had 115,071 of that total rented on a month-to-month basis, with the remainder on contracts expiring between 2025 and 2029.

Given the volatility of the oil and gas market, we cannot be sure that a substantial number of our customers will continue their rental agreements or that, if such agreements were terminated we will be able to re-rent the equipment to new customers or that any re-rentals would be at comparable rental rates.

We have limited ability to increase prices during our initial contract terms.

As a result, we are unable to pass unexpected increases in the prices of the equipment, materials and services we utilize to provide contract operations services, as a result of inflation of otherwise, onto our customers, which could result in a negative impact on our results of operations, financial condition and cash flows.

Given the volatility of the oil and gas market, we cannot be certain that a substantial number of our customers will continue their rental agreements or that, if such agreements were terminated we will be able to re-rent the equipment to new customers or that any re-rentals would be at comparable rental rates.

The inability to timely renegotiate or re-rent a substantial portion of our compressor rental fleet could have a material adverse effect upon our business, financial condition, results of operations and cash flows.

We could be subject to substantial liability claims that could harm our financial condition.

Our products are used in production applications where an accident or a failure of a product can cause personal injury, loss of life, damage to property, equipment or the environment, or suspension of operations.

While we maintain insurance coverage, we face the following risks under our insurance coverage:

We depend on particular suppliers and are vulnerable to product shortages and price increases.

In recent years, we have transitioned from in-house assembly of compressors, and we now purchase the majority of our compressors from third-party assemblers and suppliers.

If we are unable to purchase compression equipment or other integral equipment, materials and services from third party suppliers, we may be unable to retain existing customers or compete for new customers, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Our reliance on these suppliers involves several risks, including price increases (as a result of inflation or otherwise), quality issues and a potential inability to obtain an adequate supply of such equipment, materials and services in a timely manner.

Additionally, we may experience long lead times from our suppliers of compression equipment, which may negatively impact our ability to deliver compressors to our customers in a timely manner.

If we are unable to meet the demands of our customers, our existing customers may terminate their contractual relationships with us or curtail future orders, or we may not be able to compete for business from new customers, which, in either case, could have a material adverse effect on our business, results of operations and financial condition.

Further, supply chain issues could adversely affect our ability to obtain necessary materials, parts or lubricants used in our operations or increase the costs of such items.

A significant increase in the price of such equipment, materials and services as a result of inflation, or other factors, could have a negative impact on our business, results of operations, financial condition and cash flows.

Our operations entail inherent risks and we could be subject to substantial liability claims that could harm our financial condition.

Our insurance coverage may not insure against all potential losses and we could be materially harmed by unexpected losses and liabilities.

Our compressors are used in production applications where an accident or a failure of a product can cause personal injury, loss of life, damage to property, equipment or the environment, or suspension of operations.

While we maintain insurance coverage, we face the following risks:

• we may not be able to continue to obtain insurance on commercially reasonable terms;

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Our business is dependent not only on securing new customers but also on maintaining current customers.

We had one customer that accounted for an aggregate of approximately 50% of our revenue for the year ended December 31, 2023, and the same customer accounted for an aggregate of approximately 42% of our revenue for the year ended December 31, 2022.

At December 31, 2023, this same customer accounted for an aggregate of 64% of our accounts receivable.

We had one customer that accounted for an aggregate of approximately 54 percent of our revenue for the year ended December 31, 2024, and the same customer accounted for an aggregate of approximately 50 percent of our revenue for the year ended December 31, 2023.

As of December 31, 2024, this same customer accounted for an aggregate of 52 percent of our accounts receivable.

Unless we are able to retain our existing customers, or secure new customers if we lose one or more of our significant customers, our revenue and results of operations would be adversely affected.

In addition, the default on payments by our significant customer or other important customers would negatively impact our cash flow and current assets.

In addition, the default on payments by our significant customer or other important customers would negatively impact our cash flows and current assets.

Loss of key members of our management could adversely affect our business.

In keeping with our streamlined approach to our business, our executive management team consists of four officers:

our (i) Chief Executive Officer, (ii) Chief Financial Officer (iii) Chief Technical Officer and (iv) President and Chief Operating Officer.

On February 1, 2024, Justin Jacobs, a member of our board of directors, was named as Chief Executive Officer and assumed these duties beginning on February 12, 2024.

We have had two Interim Chief Financial Officers since the resignation of our prior Chief Financial Officer on February 28, 2023.

While there is an ongoing search for a permanent Chief Financial Officer, if this position is not adequately or timely replaced, our business operations could be materially adversely affected.

In addition, we rely on James Hazlett, our long-time Chief Technical Officer, in connection with the design and engineering of our compressor lines.

While we have recently hired Brian Tucker as our Chief Operating Officer, we expect that Mr.

Hazlett’s services will also continue to be available to us in the foreseeable future.

However, the complete loss of either Messrs.

Tucker’s or Hazlett’s services could have an adverse impact on our business.

We do not carry any key-man insurance on any of our officers or directors.

Our success depends on our ability to attract, retain and motivate a highly-skilled management team and workforce.

Failure to ensure that we have the depth and breadth of management and personnel with the necessary skill sets and experience could impede our ability to achieve growth objectives and execute our operational strategy.

As we continue to expand, we will need to promote or hire additional staff, and, as a result of increased compensation and benefit packages in our industry, as well as inflationary pressures, it may be difficult to attract or retain such individuals without incurring significant additional costs.

In keeping with our streamlined approach to our business, our executive management team consists of three officers:

our (i) Chief Executive Officer, (ii) President and Chief Operating Officer and (iii) Chief Financial Officer.

In addition, we employ a number of key employees in connection with our business, including in connection with the design and engineering of our compressors.

While we do have employment agreements with our three executive officers, the loss of any of our executive officers or other key employees could have an adverse impact on our business.

We do not carry any key-person insurance on any of our officers or directors.

The erosion of the financial condition of our customers could adversely affect our business.

Many of our customers finance their exploration and development activities through cash flow from operations, the incurrence of debt or the issuance of equity.

During times when the oil or natural gas markets are weak, our customers are more likely to experience a deterioration in their financial condition.

Many of our customers’ equity values and liquidity substantially decline during declines in oil and natural gas prices, and in some cases access to capital markets may be an unreliable source of financing for some customers.

Many of our customers finance their exploration and development activities through cash flows from operating activities, the incurrence of debt or the issuance of equity.

During times when the oil and gas markets are weak, our customers are more likely to experience a deterioration in their financial condition.

Many of our customers’ equity values and liquidity substantially decline during declines in oil and gas prices, and in some cases access to capital markets may be an unreliable source of financing for some customers.

The combination of a reduction in cash flow resulting from declines in commodity prices, an increase in the interest rates charged for debt financing, a reduction in borrowing bases under reserve-based credit facilities and the lack of availability of debt or equity financing may result in a reduction in our customers’ spending for our products and services.

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We might be unable to employ qualified technical personnel, which could hamper our present operations or increase our costs.

Many of the compressors that we sell or rent are mechanically complex and often must perform in harsh conditions.

Many of the compressors that we rent are mechanically complex and often must perform in harsh conditions.

We believe that our success depends upon our ability to employ and retain a sufficient number of technical personnel who have the ability to design, utilize, enhance and maintain these compressors.

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We may require a substantial amount of capital to expand our compressor rental fleet and grow our business.

In late 2022 and for 2023, we significantly expanded and borrowed under our bank credit facility in order to finance the growth of our large horsepower compressor fleet, increasing the outstanding balance on our facility from $25 million at December 31, 2022, to $164 million at December 31, 2023.

The current commitment on our credit facility is $225 million, subject to borrowing base limitations.

At December 31, 2023, our borrowing base under the credit facility was approximately $219.7 million, leaving approximately $55.7 million available for future borrowing.

We have a five-year senior secured revolving credit agreement, as amended (the “Credit Facility”), with a total commitment of $300.0 million.

We also have a right to request from the lender, an increase to the potential aggregate commitment of up to $50.0 million;

provided, however, the aggregate commitment amount is not permitted to exceed $350.0 million.

As of December 31, 2024, our borrowing base under the Credit Facility was approximately $300.0 million, with $170 million outstanding, leaving approximately $130.0 million available for future borrowing.

During 2025, the amount we will spend on capital expenditures related to compression equipment will be determined primarily by the activity of our customers, our financial resources and access to capital.

The amount and timing of any capital expenditures may vary depending on a variety of factors, including the level of activity in the oil and natural gas exploration and production industry and the presence of alternative uses for our capital, including any acquisitions that we may pursue.

In addition, although a significant portion of the value of a new compressor increases our borrowing base under our credit facility once it has been fully constructed and put into service, we generally have an approximate lag of 9 to 12 months between borrowing money under the credit facility to fund progress payments to build a compressor and the time it becomes eligible for inclusion in our borrowing base.

The amount and timing of any capital expenditures may vary depending on a variety of factors, including the level of activity in the oil and gas exploration and production industry and the presence of alternative uses for our capital, including any acquisitions that we may pursue.

In addition, although a significant portion of the value of a new compressor increases our borrowing base under our Credit Facility once it has been fully constructed and put into service, we generally have an approximate lag of 9 to 12 months between borrowing money under the Credit Facility to fund progress payments to build a compressor unit and the time it becomes eligible for inclusion in our borrowing base.

This lag can reduce the amount of future borrowings available for working capital purposes and new compressor unit acquisition until the unit is placed into service.

During the past year, we funded our capital expenditures through cash flows from operations and borrowings from our revolving credit facility.

Although we believe that cash on hand, cash flows from our operations and bank borrowing from our revolving credit facility will provide us with sufficient cash to fund our planned capital expenditures for 2024, we cannot provide assurance that these sources will be sufficient considering the factors and limitations noted above.

During the past year, we funded our capital expenditures through cash flows from operating activities and borrowings under the Credit Facility.

Although we believe that cash on hand, cash flows from operating activities and borrowing under our Credit Facility will provide us with sufficient cash to fund our planned capital expenditures for 2025, we cannot provide assurance that these sources will be sufficient considering the factors and limitations noted above.

In addition to expanding our existing business through organic growth opportunities, we may require additional capital to fund any significant unanticipated capital expenditures, such as a material acquisition.

To the extent we would require any necessary capital, due to the existing constraints noted above and any issues or limitations in the equity and debt capital markets, such capital, may not be available to us when we need it or on acceptable terms.

Our ability to raise additional capital will depend on the results of our operations and the status of various capital and industry markets at the time we seek such capital.

Failure to generate sufficient cash flow, together with the absence of alternative sources of capital, could stagnate our growth and have a material adverse effect on our business, financial condition, results of operations or cash flow.

Our ability to raise additional capital

will depend on the results of our operations and the status of various capital and industry markets at the time we seek such capital.

Failure to generate sufficient cash flows from operating activities, together with the absence of alternative sources of capital, could stagnate our growth and have a material adverse effect on our business, financial condition, results of operations or cash flows.

Our debt levels may negatively impact our current and future financial stability.

In November 2023, we increased the borrowing commitment of our revolving credit facility from $175 million to $225 million (subject to borrowing base limitation and customary covenants) and at December 31, 2023, we had $164 million outstanding on the revolving credit facility and anticipate additional borrowing on the facility through 2024.

During 2024, we increased the borrowing commitment of the Credit Facility from $225 million to $300 million and we have the right to request an increase in the potential commitment by $50 million (subject to borrowing base limitation and customary covenants).

As of December 31, 2024, we had $170 million of borrowings outstanding under the Credit Facility and anticipate additional borrowing under the Credit Facility through 2025.

Should we utilize our full debt capacity, growth beyond that point could be impacted.

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• our ability to obtain additional financing for working capital, acquisitions, capital expenditures and other purposes may be limited;

• a significant portion of our cash flow from operations may be dedicated to the payment of principal and interest (which is variable on our revolving credit facility) on our debt, thereby reducing funds available for other purposes;

• a significant portion of our cash flows from operating activities may be dedicated to the payment of principal and interest (which is variable under the Credit Facility) on our debt, thereby reducing funds available for other purposes;

• our leverage, if increased to an unacceptable level, could make us more vulnerable to economic downturns.

If we borrow under our credit line and are unable to service our debt, we will likely be forced to take remedial steps that are contrary to our business plan.

If we were to materially borrow further under our line of credit or other borrowing arrangements, it is possible that our business will not generate sufficient cash flow from operations to meet any debt service requirements and the payment of principal when due depending on the amount of borrowings at any given time.

If we borrow under the Credit Facility and are unable to service our debt, we will likely be forced to take remedial steps that are contrary to our business plan.

If we were to materially borrow further under the Credit Facility or other borrowing arrangements, it is possible that our business will not generate sufficient cash from operating activities to meet any debt service requirements and the payment of principal when due depending on the amount of borrowings at any given time.

If this were to occur, we may be forced to:

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• refinance all or a portion of our indebtedness on terms that may be less favorable to us.

Our current credit agreement contains covenants that limit our operating and financial flexibility and, if breached, could expose us to severe remedial provisions.

Under the terms of our current credit agreement, we must:

Our current Credit Facility agreement contains covenants that limit our operating and financial flexibility and, if breached, could expose us to severe remedial provisions.

Under the terms of our current Credit Facility agreement, we must:

• comply with various leverage, commitment coverage and other customary financial ratios;

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• other customary financial and operational limitations.

Our ability to meet the financial ratios and tests under our credit agreement can be affected by events beyond our control, and we may not be able to satisfy those ratios and tests.

Our ability to meet the financial ratios and tests under the Credit Facility can be affected by events beyond our control, and we may not be able to satisfy those ratios and tests.

A breach of any one of these covenants or requirements could permit the lending organization to accelerate outstanding amounts so that it is immediately due and payable.

If a breach occurs, no further borrowings would be available under our credit arrangement.

If we are unable to repay any outstanding amounts, the lending organization could proceed against and foreclose on the assets we pledged as collateral to secure payment of our indebtedness.

Our current credit agreement contains a variable interest rate and increases to such rate may increase our borrowing cost.

The interest expense charged on our outstanding borrowings under our current credit agreement is based upon a variable rate which fluctuates as interest rates change.

If a breach occurs, no further borrowings would be available under our Credit Facility.

If we are unable to repay any outstanding amounts, the lender could proceed against and foreclose on the assets we pledged as collateral to secure payment of our indebtedness.

Our current Credit Facility agreement contains a variable interest rate and increases to such rate may increase our borrowing cost.

The interest expense charged on our outstanding borrowings under the Credit Facility agreement is based upon a variable rate which fluctuates as interest rates change.

Changes in macroeconomic conditions outside of our control could result in a higher interest rate being charged on our outstanding borrowings and an increase in the overall interest costs charged.

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Our strategy envisions the continued expansion and growth of our business, subject to the demand for oil and gas and the impact of the other risks set forth in this risk factor section and elsewhere in this Report.

Continued rapid growth will likely challenge and place a strain on our management systems and

resources if we are unable to timely adapt and expand such systems and resources.

Continued rapid growth will likely challenge and place a strain on our management systems and resources if we are unable to timely adapt and expand such systems and resources.

Many of our ongoing reporting functions rely on data capture and recording using manual entry of transaction data.

In order to efficiently and effectively manage our planned growth, we will need to continue to analyze and upgrade our use of technology, including our ERP and other operating systems and this will likely require future capital investment.

In order to efficiently and effectively manage our planned growth, we will need to continue to analyze and upgrade our use of information technology (“IT”), including our enterprise resource planning and other operating systems and this will likely require future capital investment.

We must continue to refine and expand our business capabilities, our workforce, our systems and processes, and our access to financing sources.

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• upgrade and expand our office and field management infrastructure so that it is appropriate for our level of activity;

• continue to improve our systems effectively or efficiently and in a timely manner, including financial and management controls, reporting systems and procedures;

• continue to improve our IT systems effectively or efficiently and in a timely manner, including financial and management controls, reporting systems and procedures;

• attract, hire, train and retain additional highly skilled and motivated officers, sales staff, district managers and employees and allocate our human resources optimally.

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Liability to customers under warranties and indemnification provisions may materially and adversely affect our results of operations.

We provide warranties as to the proper operation and conformance to specifications of the equipment we manufacture.

We provide warranties as to the proper operation and conformance to specifications of the equipment we rent and sell.

Our equipment is complex and often deployed in harsh environments.

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We have in the past received warranty claims and we expect to continue to receive them in the future.

To the extent that we incur substantial warranty claims in any period, our reputation, our ability to obtain future business and our results of operations could be materially and adversely affected.

To the extent that we incur substantial warranty claims in any period, our reputation, our ability to obtain future business and our results of operations, financial condition and cash flows could be materially and adversely affected.

Our rental and sales contracts provide for varying forms of indemnification from our customers and in most cases may require us to indemnify our customers.

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Since our products are used in production applications in the energy industry, expenses and liabilities in connection with accidents involving our products and services could be extensive and may exceed our insurance coverage.

Our income taxes may change.

We are subject to income tax on a jurisdictional or legal entity basis and significant judgment is required in certain instances to allocate our taxable income to a jurisdiction and to determine the related income tax expense and benefits.

Losses in one jurisdiction generally may not be used to offset profits in other jurisdictions.

As a result, changes in the mix of our earnings (or losses) between jurisdictions, among other factors, could alter our overall effective income tax rate, possibly resulting in significant tax rate increases.

We are regularly audited by various tax authorities.

Income tax audit assessments or changes in tax laws, regulations, or other interpretations may result in increased tax provisions which could materially affect our operating results in the period or periods in which such determinations are made or changes occur.

Our ability to to use net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

Our ability to utilize net operating loss (“NOL”) carryforwards to reduce future taxable income is subject to limitations under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (“IRC”).

As disclosed in N o te 1 1 (“ Income Taxes ”) to our Consolidated Financial Statements, we have substantial NOL carryforwards.

The utilization of such carryforwards may be limited by the occurrence of certain ownership changes, including the purchase or sale of our common stock by significant shareholders and the offering of our common stock during any three-year period resulting in an aggregate change of more than 50 percent in our beneficial ownership.

In the event of an ownership change, Section 382 of the IRC imposes an annual limitation on the amount of our taxable income that can be offset by our NOL carryforwards.

Under such circumstances, it is possible that the limitations imposed on our ability to utilize pre-ownership change NOLs could cause a significant increase in our U.S.

federal income tax liabilities and could cause U.S.

federal income taxes to be paid earlier than they otherwise would be paid if such limitations were not in effect.

Failure to maintain effective internal controls could have a material adverse effect on our operations.

Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting.

If we fail to remediate our material weakness or maintain effective internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.

Moreover, effective internal controls are necessary for us to produce reliable financial reports and to help prevent financial fraud.

Effective internal controls are necessary for us to produce reliable financial reports and to help prevent financial fraud.

If, as a result of deficiencies in our internal controls, we cannot provide reliable financial reports or prevent fraud, our business decision process may be adversely affected, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the price of our stock could decrease as a result.

We rely on computer and telecommunications systems, and failures in our systems or cyber security attacks or breaches could result in information theft, data corruption, disruption in operations and/or financial loss.

In the conduct of our business, we rely heavily on information technology systems(“digital technology”), including internet-based systems, to process, transmit and store electronic information.

In the conduct of our business, we rely heavily on IT systems (“digital technology”), including internet-based systems, to process, transmit and store electronic information.

In particular, we depend upon our digital technology for supply chain management, inventory management, payment processing and data storage.

Like many companies, we have become increasingly dependent upon digital technology to conduct daily operations.

Our business partners, including vendors, service providers and financial institutions, are also dependent upon digital technology.

Our business partners, including customers, vendors, service providers and financial institutions, are also dependent upon digital technology.

We are continually exposed to various cybersecurity risks, including but not limited to, unauthorized access to our systems or data, malware and ransomware attacks, denial-of-service attacks, phishing, theft or loss of intellectual property, and data breaches.

These risks could result from malicious actors, employee error, malfeasance, or other operational vulnerabilities.

A cybersecurity attack could have a significant adverse impact on our business operations, financial condition and reputation.

A cybersecurity attack could have a significant adverse impact on our business operations, results of operations, financial condition, cash flows and reputation.

Potential consequences include loss of sensitive or proprietary information, disruption of business operations, financial losses from remedial actions, litigation and potential legal liabilities and damage to customer and investor confidence.

We have taken steps to protect against cyber-attacks to minimize the risk of our systems being penetrated and compromised by implementing a comprehensive cybersecurity program, such as regular risk assessments and penetration testing, deployment of firewalls and intrusion detection systems, deployment of encryption technologies, implementation of access controls and the development of incident response and recovery plans.

We have taken steps to protect against cyber-attacks to minimize the risk of our systems being penetrated and compromised by implementing a comprehensive cybersecurity program, such as risk assessments and penetration testing, deployment of firewalls and intrusion detection systems, deployment of encryption technologies, implementation of access controls and the development of incident response and recovery plans.

Additionally, we have employed data backup and storage measures that could allow for recovery of our data.

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The price of our common stock may fluctuate.

The trading price of our common stock and the price at which we may sell securities in the future are subject to substantial fluctuations in response to various factors, including our ability to successfully accomplish our business strategy, the trading volume of our stock, changes in governmental regulations, actual or anticipated variations in our quarterly or annual financial results, our involvement in litigation, general market conditions, the prices of oil and natural gas, announcements by us and our competitors, our liquidity, our ability to raise additional funds, and other events such as those discussed in the factors above.

The trading price of our common stock and the price at which we may sell securities in the future are subject to substantial fluctuations in response to various factors, including our ability to successfully accomplish our business strategy, the trading volume of our stock, changes in governmental regulations, actual or anticipated variations in our quarterly or annual financial results, our involvement in litigation, general market conditions, the prices of oil and gas, announcements by us and our competitors, our liquidity, our ability to raise additional funds, and other events such as those discussed in the factors above.

Future sales of our common stock could adversely affect our stock price.

Substantial sales of our common stock in the public market, or the perception by the market that those sales could occur, may lower our stock price or make it difficult for us to raise additional equity capital in the future.

According to filings made with the Securities and Exchange Commission as of March 28, 2024, an aggregate of approximately 37.1% of the outstanding shares of our common stock are owned by five institutional investors, each of which owns more than 5% of our outstanding shares as of the date of their respective filings.

According to filings made with the SEC through March 14, 2025, an aggregate of approximately 35 percent of the outstanding shares of our common stock are owned by five institutional investors, each of which owns more than 5 percent of our outstanding shares as of the date of their respective filings.

Potential sales of large amounts of these shares in a short period of time by one or more of these significant investors could have a negative impact on our stock price.

In addition, potential sales of our common stock by our directors and officers, who beneficially own approximately 7.3% of the outstanding shares of our common stock as of March 28, 2024, and because of the negative perception of sales by insiders, could also have a negative impact on our stock price.

In addition, potential sales of our common stock by our directors and officers, who beneficially own approximately 6 percent of the outstanding shares of our common stock as of March 14, 2025, and because of the negative perception of sales by insiders, could also have a negative impact on our stock price.

We have a comparatively low number of shares of common stock outstanding and, therefore, our common stock may suffer from limited liquidity and its price will likely be volatile and its value may be adversely affected.

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In addition, our common stock price is subject to fluctuations in response to variations in quarterly operating results, changes in management, future announcements concerning us, general trends in the industry and other events or factors such as those described above.

If we issue debt or equity securities, you may lose certain rights and be diluted.

If we issue debt or equity securities, you may lose certain rights and your ownership may be diluted.

If we raise funds in the future through the issuance of debt or equity securities, the securities issued may have rights and preferences and privileges senior to those of holders of our common stock, and the terms of the securities may impose restrictions on our operations or dilute your ownership in our Company.

We currently have on file with the SEC an effective "universal" shelf registration statement on Form S-3, which enables us to sell, from time to time, our common stock and other securities, including debt securities, covered by the registration statement in one or more public offerings.

We currently have on file with the SEC an effective “universal” shelf registration statement on Form S-3, which enables us to sell, from time to time, up to $200 million of our common stock and other securities, including debt securities, covered by the registration statement in one or more public offerings.

The shelf registration statement allows us to enter the public markets and consummate sales of the registered securities in rapid fashion and with little or no notice.

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

What changed 10-K

Item 1A. Risk Factors