FLOTEK INDUSTRIES INC/CN/

Note 13 —Stockholders’ Equity

Pre-Funded Warrants

On June 21, 2022, ProFrac Holdings II, LLC (“ProFrac Holdings II”) paid $19.5 million for Pre-Funded Warrants (the “June 2022 Warrants”) of the Company. The June 2022 Warrants permit ProFrac Holdings II to purchase 2,184,140 shares of the Company’s common stock at an exercise price equal to $0.0001 per share, subject to a $4.5 million exercise fee.

ProFrac Holdings II and its affiliates may not receive any voting or consent rights in respect of the June 2022 Warrants or the underlying shares of common stock unless and until ProFrac Holdings II has paid an additional $4.5 million to the Company; provided, however, that ProFrac Holdings II may exercise the June 2022 Warrants immediately prior to the sale of the shares of common stock subject to such exercise to a non-affiliate of ProFrac Holdings II. The additional $4.5 million will be accounted for as an equity contribution if received.

April 2025 Warrant

A component of the consideration paid for the PWRtek Transactions (see Note 16, “Related Party Transactions”) consisted of a warrant (the “April 2025 Warrant”) to purchase 6,000,000 shares of the Company’s common stock. The April 2025 Warrant had aseven-year term and could be exercised on a cashless basis for nominal consideration. On March 13, 2026, ProFrac GDM exercised the April 2025 Warrant and was issued 6,000,000 shares of the Company’s common stock.

Treasury Stock

The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders’ equity. During the three months ended March 31, 2026 and 2025, the Company withheld approximately 28 thousand shares and 3 thousand shares, respectively, of the Company’s common stock at fair market value for payment of income tax withholding owed by employees upon the vesting of restricted shares. Shares issued as restricted stock awards to employees under the 2018 Long-Term Incentive Plan are accounted for as treasury stock when forfeited. During the three months ended March 31, 2025, approximately 3 thousand shares of forfeited stock awards were returned to treasury stock with no corresponding activity for the three months ended March 31, 2026.

Note 14 —Earnings Per Share

Basic earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing the adjusted net income by the weighted average number of common shares outstanding combined with dilutive common share equivalents outstanding, if the effect is dilutive. For the three months ended March 31, 2026 and 2025, there were no adjustments to net income. Potentially dilutive common share equivalents consist of incremental shares of common stock issuable upon exercise of the June 2022 Warrants and vesting and settlement of stock awards. The dilutive effect of non-vested stock issued under share‑based compensation plans, shares issuable under the Employee Stock Purchase Plan, employee stock options outstanding, and the June 2022 Warrants are computed using the treasury stock method.

The calculation of the basic and diluted earnings per share for the three months ended March 31, 2026 and 2025 is as follows (in thousands):

Note 15—Supplemental Cash Flow Information

Supplemental cash flow information is as follows (in thousands):

(1)Includes $0.7 million of equipment purchases recorded against the Equipment Credit (as defined in Note 16, “Related Party Transactions”).

Note 16—Related Party Transactions

On February 2, 2022, the Company entered into a long-term supply agreement with ProFrac Services (the “Initial ProFrac Agreement”), upon issuance of $10 million in aggregate principal amount of the convertible notes (the “Contract Consideration Convertible Notes Payable”) to ProFrac Holdings LLC (“ProFrac Holdings”). Under the Initial ProFrac Agreement, ProFrac Services was obligated to order chemicals from the Company at least equal to the greater of (a) the chemicals required for 33% of ProFrac Services’ hydraulic fracturing fleets and (b) a baseline measured by the first ten hydraulic fracturing fleets deployed by ProFrac Services during the term of the Initial ProFrac Agreement. If the minimum volumes are not achieved in any given year, ProFrac Services is required to pay to the Company, as liquidated damages an amount equal to twenty-five percent (25%) of the difference between (i) the aggregate purchase price of the quantity of products comprising the minimum purchase obligation and (ii) the actual purchased volume during such calendar year (“Contract Shortfall Fees”).

On May 17, 2022, the Company entered into an amendment to the Initial ProFrac Agreement (the “First Amendment to ProFrac Agreement”) upon issuance of $50 million in aggregate principal amount of Contract Consideration Convertible Notes Payable. The Initial ProFrac Agreement was amended to (a) increase ProFrac Services’ minimum purchase obligation for each year to the greater of 70% of ProFrac Services’ requirements and a baseline measured by ProFrac Services’ first 30 hydraulic fracturing fleets, and (b) increase the term to 10 years.

On February 2, 2023, the Company entered into a second amendment to the Initial ProFrac Agreement (the “Second Amendment to ProFrac Agreement” and together with the Initial ProFrac Agreement and the First Amendment to ProFrac Agreement, collectively the “ProFrac Agreement”) effective as of January 1, 2023. The Second Amendment to ProFrac Agreement amended the ProFrac Agreement to (1) provide a ramp-up period from January 1, 2023 to May 31, 2023 for ProFrac Services to increase the number of active hydraulic fracturing fleets to 30 fleets, (2) waive any Contract Shortfall Fee payment relating to any potential order shortfall prior to January 1, 2023, (3) add additional fees to certain products, and (4) provide margin increases based on margins with non-ProFrac Services customers.

On April 28, 2025, the Company entered into a series of transactions with ProFrac GDM and various subsidiaries of ProFrac (the “PWRtek Transactions”) pursuant to which, among other things, the Company acquired certain mobile power generation assets, certain inventory and related intellectual property (the “Acquired Assets”). Total consideration paid by the Company in connection with the PWRtek Transactions was $107.5 million. Pursuant to an Agreement for Equipment Rental, dated as of April 28, 2025 (the “Lease Agreement”), ProFrac GDM agreed to lease from PWRtek, for a period ofsix years, twenty-two operating mobile power generation assets, comprised of fourteen digitally enhanced mobile natural gas power generation filtration units and eight gas distribution units and eight additional units, comprised of seven gas distribution units and one mobile natural gas power generation filtration unit (collectively, the “Leased Equipment”). The Lease Agreement provides for fixed rental rates for the Leased Equipment during the first five years of the Lease Agreement and then prevailing market rates during the sixth year. The Lease Agreement does not include a purchase option for the purchase of the Leased Equipment at the end of the Lease Agreement term. See Note 7, “Leases – Lease Agreement Income” for additional information on the Lease Agreement.

The PWRtek Note was a component of the compensation for the PWRtek Transactions. On November 7, 2025, the Company entered into a series of agreements with ProFrac GDM, in connection with the Note Assignment. See Note 9, “Debt” for additional information on the PWRtek Note and Note Assignment.

On March 12, 2026, the Company and ProFrac entered into an agreement (as amended, the “OSP Agreement”) regarding the settlement of 2025 Contract Shortfall Fees payable to the Company under the ProFrac Agreement for the measurement period of January 1, 2025 to December 31, 2025. The OSP Agreement provides for the payment of an aggregate of $19.7 million of consideration (which amount represents $27.4 million of 2025 Contract Shortfall Fees, net of a $7.2 million offset against the 2025 Contract Shortfall Fee (the “OSP Offset”) 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”), which was reclassified from Accounts Receivable, related party to Equipment Credit, related party on our unaudited condensed consolidated balance sheets. Under the OSP Agreement, the Company has committed to purchase and/or rent $12.5 million of equipment from ProFrac to be used for opportunities within the Data Analytics segment, with the costs of such equipment to be offset by the Equipment Credit. Pursuant to the OSP Agreement, during the first quarter of 2026, the Company collected $5 million in cash and utilized $0.7 million of the Equipment Credit. The Company collected the remaining $2.2 million in cash during 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.

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 three months ended March 31, 2026 reflect Contract Shortfall Fees of $2.7 million, which is presented within accounts receivable, related party on the Company’s condensed consolidated balance sheet as of March 31, 2026. Related party revenues for the three months ended March 31, 2025 included $7.5 million of Contract Shortfall Fees.

During the three months ended March 31, 2026 and 2025, the Company’s related party revenues were $51.9 million and $30.9 million, respectively. For the three months ended March 31, 2026 and 2025, these revenues were net of amortization of contract assets of $2.2 million and $1.5 million, respectively. Cost of sales attributable to these revenues were $40.0 million and $21.3 million, respectively, for the three months ended March 31, 2026 and 2025.

As of March 31, 2026 and December 31, 2025 our accounts receivable from ProFrac was $61.0 million and $64.2 million, respectively, which is recorded in accounts receivable, related party on the condensed consolidated balance sheets.

As of March 31, 2026, our accounts payable with ProFrac was $0.2 million, which is recorded in accounts payable on the condensed consolidated balance sheets. There was $0.3 million due to ProFrac included in accounts payable as of December 31, 2025.

ProFrac Holdings or its affiliates beneficially owned approximately 61% of the Company’s common stock, including the effects of the June 2022 Warrants, as of March 31, 2026. On March 13, 2026, ProFrac GDM exercised the April 2025 Warrant and was issued 6,000,000 shares of the Company’s common stock.

Note 17 —Business Segment, Geographic and Major Customer Information

Segment Information

The Company’s segments are determined as those components whose results are reviewed regularly by the chief operating decision maker (“CODM”), who is the Company's Chief Executive Officer, in deciding how to allocate resources and assess performance. Each segment is organized and managed based upon the nature of the Company’s markets and customers and consists of similar products and services. Gross profit and income (loss) from operations for each segment are used by the CODM to assess the performance of each segment in a financial period. The CODM uses segment gross profit and income

(loss) from operations as the measure to make resource (including financial or capital resources) allocation decisions for each segment. Accounting policies have been applied consistently by each segment for all reporting periods. Intercompany revenue and expense amounts, if any, have been eliminated within each segment to report on the basis that management uses internally for evaluating segment performance. Various functions, including certain sales and marketing activities and general and administrative activities, are provided centrally by the corporate office. Costs associated with corporate office functions, other corporate income and expense items, and income taxes are not allocated to the reportable segments.

The operations of the Company are categorized into the following reportable segments:

Chemistry Technologies. The CT segment includes specialty chemistries, logistics and technology services, which we believe enable our customers to pursue improved efficiencies and performance throughout the life cycle of their wells, and also help our customers improve their environmental, social and governance (“ESG”) and operational goals. Customers of the CT segment include major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, national and state-owned oil companies and international supply chain management companies.

Data Analytics. The DA segment provides analytical measurement and digital solutions, including measure-and-control services, that deliver near real-time insights for process control across the oil and gas value chain and emerging applications in power and digital valuation. DA solutions help customers optimize performance, improve decision-making, and reduce emissions and carbon intensity.

Summarized financial information of the reportable segments is as follows (in thousands):

Other segment items for the three months ended March 31, 2026 include depreciation of $0.2 million and $0.4 million in the CT and DA segments, respectively; and R&D costs of $0.3 million and $0.1 million in the CT and DA segments, respectively.

Other segment items for the three months ended March 31, 2025 include depreciation of $0.2 million and $0.1 million in the CT and DA segments, respectively; R&D costs of $0.2 million and $0.1 million in the CT and DA segments, respectively; and gain on the sale of property and equipment of $7 thousand in the CT segment.

Assets by reportable segments and corporate and other are as follows (in thousands):

Additions to long-lived assets by reportable segments and corporate and other are as follows (in thousands):

Geographic Information

Revenue by country is based on the location where services are provided and products are sold. For the three months ended March 31, 2026 and 2025, no country other than the U.S. accounted for more than 10% of revenue. Revenue by geographic location is as follows (in thousands):

(1) Includes revenue from related party

Long-lived assets held in countries other than the U.S. are not material to the consolidated financial statements.

Major Customers

Revenue from major customers, as a percentage of consolidated revenue, is as follows (in thousands):

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

Accounts receivable from major external customers, as a percentage of non-related party accounts receivable, is as follows (in thousands):

Please see Note 16 - “Related Party Transactions” for additional information regarding accounts receivable with ProFrac.

Major Suppliers

Expenditures with major suppliers, as a percentage of consolidated supplier expenditure, is as follows (in thousands):

Note 18 —Subsequent Events

The Company has evaluated the effects of events that have occurred subsequent to March 31, 2026 through the date at which the Company’s interim financial statements are available to be issued and has determined that there have been no material events that would require disclosure in the March 31, 2026 interim financial statements.

The following discussion should be read in conjunction with the 2025 Annual Report and the unaudited condensed consolidated financial statements and accompanying notes included herein. Comparative segment revenues and related financial information are discussed herein and are presented in Note 17 to our unaudited condensed consolidated financial statements. See “Forward-Looking Statements” in this Quarterly Report and “Risk Factors” included in our filings with the SEC, including our Quarterly Reports on Form 10-Q and our 2025 Annual Report, for a description of important factors that could cause actual results to differ from expected results. Our historical financial information may not be indicative of our future performance.

Executive Summary

Flotek strives to be the collaborative partner of choice for solutions that reduce the environmental impact of energy on air, water, land and people. An advanced technology-driven, chemical and data analytics company, Flotek seeks to provide unique and innovative solutions to its customers in both the domestic and international energy markets. The Company is committed to delivering products and services that endeavor to maximize customer returns by leveraging chemistry as the common value creation platform.

The Company has two operating segments, Chemistry Technologies (“CT”) and Data Analytics (“DA”), which are both supported by the Company’s continuing Research and Innovation (“R&I”) advanced laboratory capabilities.

Recent Events

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

Chemistry Technologies

The Company’s CT segment provides sustainable, optimized chemistry solutions that we believe maximize our customers’ value by improving return on invested capital, lowering operational costs and providing tangible environmental benefits. The Company’s proprietary chemistries, specialty chemistries, logistics and technology services seek to enable our customers to pursue improved efficiencies and performance throughout the life cycle of their desired chemical applications program. The Company designs, develops, manufactures, packages, distributes and markets optimized chemistry solutions that are designed to accelerate existing sustainability practices to reduce the environmental impact of energy on the air, water, land and people.

Customers of the CT segment include energy-related companies, such as our related party ProFrac Services, LLC (“ProFrac Services”), with whom we have a long-term chemistry supply agreement, as well as industrial companies. Major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, national and state-owned oil companies, geothermal energy companies, solar energy companies and advanced alternative energy companies may benefit from our best-in-class technology, field operations, and continuous improvement exercises that go beyond existing sustainability practices.

ProFrac Supply Agreement

On February 2, 2022, the Company entered into a Chemical Products Supply Agreement with ProFrac Services, which was subsequently amended on May 17, 2022 and February 1, 2023 (as amended, the “ProFrac Agreement”).

The ProFrac Agreement contains minimum requirements for chemistry purchases. If the minimum volume purchases are not achieved within the applicable measurement period, ProFrac Services is required to pay to the Company, as liquidated damages, an amount equal to twenty-five percent (25%) of the difference between (i) the aggregate purchase price of the quantity of products comprising the minimum purchase obligation and (ii) the actual purchased volume during the measurement period (“Contract Shortfall Fees”). The measurement period for Contract Shortfall Fees during 2025 was January 1, 2025 through December 31, 2025. 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 three months ended March 31, 2026 reflect Contract Shortfall Fees of $2.7 million.

Data Analytics

The Company’s Data Analytics (“DA”) segment delivers real-time information and insights to its customers designed to enable optimization of operations and reduction of emissions and their carbon intensity. The Company’s technologies are founded upon an industry leading field-deployable, in-line optical near-infrared spectrometer that measures the quality, quantity and composition of hydrocarbon flows. The instrument’s response is processed with advanced chemometrics modeling, artificial intelligence and machine learning algorithms to deliver valuable insights to our customers every 5-15 seconds.

The DA segment generates revenues through a combination of short and long-term equipment rentals (service revenue) and capital sales (product revenue). Customers of the DA segment span across the oil and gas industry, including oil and gas supermajors, some of the largest midstream oil and gas companies, large gas processing plants, independent exploration and production companies and oil field service companies that provide hydraulic fracturing services. We believe customers using our technology may obtain significant benefits, including additional profits, by enhancing operations in crude/condensates stabilization, enhancing blending operations, reducing time impacting transmix operations and increasing efficiencies and optimization of gas plants. The DA segment has expanded its presence in providing mobile power generation solutions 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 R&I facilities support advances in CT and DA segment performance, optimization and manufacturing. 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.

Outlook

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

Energy Industry

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 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. land rigs and react quickly to changing commodity prices. 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

The CT segment is actively advancing integrated solutions to enhance capital efficiency for exploration and production (“E&P”) operators and service companies. Our approach combines technical leadership, exceptional service quality, reliable delivery and a strong safety record. 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 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.

As a result of the continued growth in the exportation of natural gas, as well as the increased utilization of natural gas to generate electricity, we expect the demand for natural gas to continue to increase over the next twelve to twenty-four months. Higher natural gas prices would likely increase activity in the Haynesville shale basin, an area where we expect our established presence, expertise and capabilities could provide growth.

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. We believe that these initiatives will lead to deeper integration between our CT and DA segments, creating a pathway for future growth.

Data Analytics

The use of data and digital analytics is a growing trend in industries where technology is leveraged to analyze large operational datasets to improve performance, as well as for predictive maintenance, advanced safety measures and reduction in the environmental impact of operations. We believe our suite of measurement technologies including the VERACAL®,Verax™, XSPCTTM and Raman analyzers have gained a foothold in North American markets for critical applications where compositional information is needed in real-time. These technologies deliver insight on valuable operational data, including vapor pressure, boiling point, flash point, octane level, API (American Petroleum Institute) gravity, viscosity, BTU (British Thermal Unit) and more, simultaneously.

To drive recurring revenue, we continue to build on the modular nature of our sensor and analysis packages with new data processing techniques designed to further enhance the value of our installations. Automated Interface Detection Algorithm (“AIDA”) provides real-time detection of interfaces in a pipeline without the need for additional sampling or chemometric modeling. Our application can identify products such as refined fuels, crude and NGLs with its advanced machine learning algorithms and detect interfaces real-time compared to traditional manual lab analysis. We believe this allows customers to cut batches quickly and accurately, reduce transmix and minimize off-spec product that requires downgrades.

As evidenced by and in connection with the transactions with ProFrac and ProFrac GDM described above under “Item 1. 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 (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 $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. These advancements are expected to enable complex lab-grade measurements in challenging environments, which is required for oil and gas valuation at custody transfer points. The Company’s recent deployment and GPA 2172 qualification of the XSPCT analyzers, along with its proven fleet of VERAX analyzers, will support the oil and gas industry’s digital shift while enhancing transparency in valuation, taxation and commodity forecasting. We believe that the lower-cost, rugged measurement points provided by our analyzers will help pave the way for digital measurement to become the standard for custody transfer.

Consolidated Results of Operations (in thousands)

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:

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:

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:

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

Overview

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

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

In August 2023, the Company entered into a 24-month revolving loan and security agreement in connection with an Asset Based Loan, which was amended in October 2023, August 2024 and April 2025 (as amended, the “ABL”). The August 2024 amendment to the ABL extended the maturity to August 2026, increased the credit availability and lowered the interest rate spread. The ABL provides up to $20.0 million of credit availability, which is limited by a borrowing base consisting of (i) 85% of eligible accounts receivable, plus (ii) 60% of the value of eligible inventory not to exceed 100% of the eligible accounts receivable, plus (iii) 60% of the value of certain real estate holdings.

As of 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. 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. Additionally, the Company will be assessed a non-usage fee of 0.25% per quarter based on the difference between the average daily outstanding balance and the borrowing base limit of the ABL. If the ABL is terminated prior to the end of its term, the Company is required to pay an early termination fee of 2.50% 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).

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.

Cash Flows

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

Operating Activities

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 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 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

The preparation of financial statements and related disclosures in conformity with U.S. GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions, and estimates that affect the amounts reported. Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the 2025 Annual Report describes the critical accounting policies and estimates used in the preparation of the Company’s consolidated financial statements. Note 2, “Summary of Significant Accounting Policies,” of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2025 Annual Report describe the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements.

Additionally, the Company believes the following are critical accounting policies and estimates used in preparation of the Company’s consolidated financial statements due to the significant subjective and complex judgments and estimates required when preparing the Company’s consolidated financial statements.

Leases — Lessor Accounting

We lease equipment to customers under operating lease arrangements. At contract inception we perform an evaluation to determine if a lease arrangement conveys the right to control the use of an identified asset. 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 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 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. As goods are transferred to ProFrac Services, LLC, the amortization is presented as a reduction of the transaction price included in related party revenue in the consolidated statements of operations. The contract assets are tested for recoverability on a recurring basis and the Company will recognize an impairment loss to the extent that the carrying amount of the contract assets exceeds the amount of consideration the Company expects to receive in the future for the transfer of goods under the contract less the direct costs that relate to providing those goods in the future. The amount of consideration the Company expects to receive in the future for the transfer of goods under the contract and the direct costs that relate to providing those goods used in the Company’s contract assets recoverability analysis consider both historical and anticipated purchases by ProFrac over the remaining life of the ProFrac Agreement, taking into account the effect of the Contract Shortfall Fee that is payable to the Company if the annual minimum purchase obligation is not met. The Contract Shortfall Fee mitigates the impact of a failure to meet the expected annual minimum purchase obligation by providing the Company consideration to offset the gross profit lost as a result of ProFrac’s purchases not meeting the annual minimum purchase obligation. 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 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.