NATURAL GAS SERVICES GROUP INC

3. Business Combination

Flatrock Acquisition

On June 12, 2026 (the “Acquisition Date”), we executed and closed a Securities Purchase Agreement (the “SPA”) with Flatrock Compression Holdings, LLC (“Flatrock”), the holders of all of the membership interests of Flatrock (the “Sellers”) and Mule Deer Sky LLC, acting as the Sellers’ Representative, to acquire all of the issued and outstanding membership interests of Flatrock from the Sellers, including a current rented fleet of 87,233 horsepower, in exchange for (i)241,803 shares of common stock, par value $0.01 per share of the Company (“Common Stock”), (ii) $108.9 million in cash, subject to customary post-closing adjustments, and (iii) the right to receive certain royalty payments pursuant to a royalty agreement (the “Flatrock Acquisition”). The Flatrock Acquisition represents the execution of our business strategy to pursue accretive mergers and acquisitions. Furthermore, the Flatrock Acquisition increases our operational density in the Permian Basin and the Eagle Ford Shale as well as adding meaningful customer diversification and attractive opportunities for growth with several new large customers, and complements our fleet with the addition of significant large horsepower and electric motor units. The cash portion of the purchase price was sourced from borrowings under our senior secured revolving credit agreement (as amended and restated from time to time, the “Credit Facility”), as amended by the Fifth Amendment to the Amended and Restated Credit Agreement (the “Fifth Amendment”).

On the Acquisition Date, a total of $2.3 million of the cash consideration was deposited into an escrow account pending an analysis of working capital that occurred after 90 days in advance of a final closing statement. The Sellers were provided a period of 30 days that was mutually extended in early October 2026 to allow additional time for review and resolution of certain administrative matters associated with the preliminary closing statement. Subsequently, the working capital adjustment was agreed upon and a final settlement is expected to occur in November 2026, at which time $1.9 million will be released from escrow to the Sellers with the remaining $0.4 million returned to the Company.

The Flatrock Acquisition has been accounted for by applying the acquisition method of accounting which contemplates the assets acquired and liabilities assumed to be recorded at their fair values on the Acquisition Date. The excess of the total consideration transferred over the fair values of the net assets acquired has been recorded as goodwill. The preliminary purchase price allocation provided below is based upon preliminary estimates and assumptions and is subject to certain adjustments upon management’s review of the final valuation. We are in the process of finalizing valuations attributable to property and equipment, identifiable intangible assets, deferred income taxes, contingent consideration, and goodwill. Any adjustments subsequent to the Acquisition Date could impact future depreciation and amortization as well as our income tax provision.

Transaction Consideration

The following table summarizes the estimated fair value of the consideration transferred:

(1) Includes $45.7 million to repay Flatrock’s outstanding line of credit obligation, including accrued interest and fees.

(2) Represents the issuance of 241,803 shares of Common Stock to the Sellers (the number of shares was determined from the 30-day volume weighted-average price as provided for in the SPA).

Preliminary Purchase Price Allocation

The following table summarizes the preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed as of the Acquisition Date:

Goodwill

The goodwill arising from the Flatrock Acquisition is primarily attributable to the workforce accompanying the operating assets acquired as well as the expansion of our services in the Permian Basin and the Eagle Ford Shale where we currently operate. The goodwill is considered to have an indefinite life and will be reviewed for impairment on an annual basis and when indicators of potential impairment, if any, are present. As the Flatrock Acquisition was structured as an asset purchase for income tax purposes, the goodwill is expected to be fully deductible for U.S. federal income tax purposes.

Intangible assets

The intangible assets acquired include $0.9 million for developed technology and $0.3 million for a tradename, both of which are being amortized over afive-year period. The intangible assets were valued using a “relief from royalties” methodology. We recorded a provision for amortization of the intangible assets for $0.1 million from the Acquisition Date through September 30, 2026.