Flowco Holdings Inc.

Note 1 – Orga nization

Flowco Holdings Inc. (“Flowco Holdings”) was incorporated as a Delaware corporation on July 25, 2024 (“Date of Incorporation”). The Corporation’s fiscal year end is December 31. The Corporation was formed for the purpose of completing an initial public offering (“IPO”) of its Class A common stock and related transactions in order to continue the business of Flowco MergeCo LLC (“Flowco LLC”) as a publicly traded entity. The Corporation is a holding company and, as of January 17, 2025, the sole managing member of Flowco LLC, and its principal asset will consist of equity interests in Flowco LLC.

As the sole managing member of Flowco LLC following the IPO, Flowco Holdings operates and controls all of the business and affairs of Flowco LLC. Subsequent to the IPO, Flowco Holdings will fully consolidate Flowco LLC’s financial results and report a noncontrolling interest related to the equity interests held by the pre-IPO common unitholders (“Continuing Equity Owners”) and certain affiliated entities to Flowco LLC’s principal stockholders (“Blocker Shareholders”) in the consolidated financial statements. For more discussion, see Note 4 – Subsequent Events.

Note 2 – Summary of Significant Accounting Policies

Basis of Accounting

The Balance Sheets have been prepared in accordance with accounting principles generally accepted in the United States of America. Separate statements of operations, comprehensive operations, changes in stockholders’ equity and cash flows have not been presented in the financial statements because there have been no activities in this entity and because the single transaction is fully disclosed below.

These financial statements have been prepared assuming Flowco Holdings will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business.

Note 3 - Stockholders’ Equity

Under the certificate of incorporation in effect as of the Date of Incorporation, Flowco Holdings is authorized to issue 1,000 shares of Class A common stock, par value $0.01 per share. As of July 29, 2024, all 1,000 shares of Class A common stock were issued for future consideration of $10, which was not received as of the Date of Incorporation. The purchase of the Class A common stock was not funded, and therefore there is a $10 contra-equity receivable on the Flowco Holdings’ balance sheet as of December 31, 2024 and November 30, 2024.

Note 4 – Subsequent Events

IPO and Reorganization

On January 15, 2025, Flowco Holdings consummated the IPO of 20,470,000 shares of Class A Common Stock (including shares issued pursuant to the exercise in full of the underwriters’ option to purchase additional shares) for net proceeds totaling approximately $461.8 million, and the IPO closing occurred on January 17, 2025.

In connection with the IPO, Flowco Holdings amended and restated the existing limited liability company agreement of Flowco LLC (“LLC Agreement”) to, among other things, (i) recapitalize all existing ownership interests in Flowco LLC held by the existing members of Flowco LLC into a new single class of common units (“LLC Interests”); and (ii) issue a non-economic member interest and appoint Flowco Holdings as the sole managing member of Flowco LLC upon its acquisition of the LLC interests.

Simultaneously with the IPO, Flowco Holdings amended and restated its certificate of incorporation to, among other things, provide: (i) for Class A common stock, with each share of its Class A common stock entitling its holder to one vote per share on all matters presented to our stockholders generally; and (ii) for Class B common stock, with each share of our Class B common stock entitling its holder to one vote per share on all matters presented to our stockholders generally, any shares of our Class B common stock may only be held by the Continuing Equity Owners and their respective permitted transferees. As a result, Flowco Holdings became a holding company and the sole manager of Flowco LLC, with no material assets other than 100% of the voting membership interest in Flowco LLC.

Simultaneously with the IPO, Flowco Holdings acquired the LLC Interests held by certain of the existing indirect owners of Flowco LLC in exchange for 5,251,620 shares of its Class A common stock. After giving effect to the use of proceeds in the IPO, Flowco Holdings issued 64,823,042 shares of Class B common stock to the Continuing Equity Owners, which is equal to the number of LLC Interests held by such Continuing Equity Owners, for nominal consideration. Following the IPO, it was determined that certain allocations of Class A common stock, and of a corresponding number of Class B common stock and LLC Interests, in connection with certain reorganization transactions were made in error. Flowco LLC and the applicable members of Flowco LLC entered into an Omnibus Agreement to correct such errors through (i) a rescission of 1,057,629 LLC Interests and corresponding number of shares of Class B common stock previously issued to a White Deer Affiliate and (ii) the issuance of 1,057,629 LLC Interests to Flowco Holdings, and the issuance of 1,057,629 shares of Class A common stock to White Deer Affiliates. Such corrections did not result in any change in the aggregate number of LLC Interests issued and outstanding, or the combined number of shares of Class A common stock and Class B common stock issued and outstanding. The foregoing outstanding shares and LLC Interests give effect to the corrections set forth in the Omnibus Agreement.

Subsequent to the IPO, Flowco Holdings used the net proceeds from the IPO to purchase 20,470,000 newly issued LLC Interests for approximately $461.8 million directly from Flowco LLC at a price per unit equal to the IPO price per share of Class A common stock less the underwriting discount.

In connection with the IPO, Flowco Holdings entered into a Tax Receivable Agreement (the “TRA”) with the Continuing Equity Owners and Blocker Shareholders (collectively, the “TRA Participants”) that provides for the payment Flowco Holdings to the TRA Participants of 85% of the amount of tax benefits, if any, that Flowco Holdings actually realizes (or in some circumstances, is deemed to realize) related to certain tax basis adjustments and payments made under the TRA.

Registration Rights Agreement

In connection with the IPO, Flowco Holdings entered into a Registration Rights Agreement (the “RRA”) with the Continuing Equity Owners and Blocker Shareholders (collectively, the “RRA Participants”). The RRA provides that Flowco Holdings agrees to use its reasonable best effort to file, at any time after 180 days following the IPO and the expiration of any related lock-up period, a registration statement registering the sale of its Class A common stock issuable to or held by the RRA Participants and to use its reasonable best efforts to ensure the registration statement is approved in a timely manner. The RRA also requires Flowco Holdings to maintain an effective registration statement or to ensure it takes the necessary procedures to reactivate the registration statement in the event of an expiration. Certain of the RRA Participants are entitled to initiate underwritten offerings, subject to certain customary limitations. The RRA also provides for customary “piggyback” registration rights for all parties to the agreement.

In January 2025, Flowco Holdings’ stockholder approved the 2025 Equity and Incentive Plan (the “Equity Plan”), which became effective in connection with the IPO. The Equity Plan is administered by the Compensation Committee. Flowco Holdings’ Board of Directors has the authority to amend and modify the Equity Plan, subject to any stockholder approval. Flowco Holdings granted 665,205 RSUs to certain of the Flowco Holdings' executives and employees and non-employees directors in conjunction with the Equity Plan with an aggregate grant date fair value of $19.8 million. The RSU awards to executives and employees cliff vest in full on the third anniversary of the grant date of the award, subject to employee’s continued employment. The RSU awards to non-employee directors vest in twelve equal installments on each of the first twelve quarterly anniversaries following the grant date of the award, subject to such non-employee director continuing in service through such date. The vesting of all RSU awards will accelerate and vest in full upon a change in control (as defined in the Equity Plan).