Koil Energy Solutions, Inc.

Previous wording

The 27% increase in revenues was primarily driven by an increase in fixed price contracts for the manufacture of subsea distribution equipment, such as flying leads and hydraulic distribution manifolds, partially offset by a decline in service contract activity when compared to revenues for the three months ended September 30, 2023.

Current wording

The 9% decrease in revenues was primarily driven by an overall decrease in fixed price contracts partially offset by an increase in service contract activity when compared to revenues for the three months ended March 31, 2024.

Previous wording

The Company records depreciation expense related to revenue-generating property, plant and equipment as cost of sales, which totaled $115 and $128 for the three months ended September 30, 2024 and 2023, respectively.

Current wording

The Company records depreciation expense related to revenue-generating property, plant and equipment as cost of sales, which totaled $117 and $116 for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

The Company records depreciation expense related to administrative property, plant and equipment and intellectual property as SG&A, which totaled $29 and $27 during the three months ended September 30, 2024 and 2023, respectively.

Current wording

The Company records depreciation expense related to administrative property, plant and equipment and intellectual property as SG&A, which totaled $29 and $28 for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

The $658 increase in Adjusted EBITDA was primarily driven by gross profit improvement associated with the increase in fixed price contracts during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Current wording

The $395 decrease in Adjusted EBITDA was primarily driven by a decrease in gross profit associated with the decrease in revenue from fixed price contracts during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. Restructuring costs during the three months ended March 31, 2025, consisted of expenses to strengthen and restructure administrative functions. Specifically, expenses included executive search fees for a Chief Financial Officer and a Director of Human Resources, as well as consulting costs related to organizational design and human capital strategy.

Previous wording

The Company believes it will have adequate liquidity to meet its future operating requirements. We are generally dependent on our cash flows from operations to fund our working capital requirements, and the uncertainties noted above create risks that we may not achieve our planned earnings or cash flow from operations. In 2023, the Company entered into a Purchase and Sale Agreement/Security Agreement with Zions Bancorporation, N.A., d/b/a Amegy Bank Business Credit (“Amegy”), which provides for Koil Energy from time to time to sell its accounts receivable and other rights to payment to Amegy, subject to Amegy’s right to approve or reject future accounts receivable and other rights proposed for sale, in its sole discretion. At September 30, 2024, the Company had no outstanding sales of accounts receivable to Amegy.

Current wording

The Company believes it will have adequate liquidity to meet its future operating requirements. We are generally dependent on our cash flows from operations to fund our working capital requirements, and the uncertainties noted above create risks that we may not achieve our planned earnings or cash flow from operations. On May 24, 2023, the Company entered into a Purchase and Sale Agreement/Security Agreement with Zions Bancorporation, N.A., d/b/a Amegy Bank Business Credit (“Amegy”), which provides for Koil Energy from time to time to sell its accounts receivable and other rights to payment to Amegy, subject to Amegy’s right to approve or reject future accounts receivable and other rights proposed for sale, in its sole discretion. At March 31, 2025 and December 31, 2024, the Company had no factored invoice outstanding with Amegy.

Previous wording

The principal liquidity needs of the Company are to fund ongoing operations, working capital, and capital expenditures. During the nine months ended September 30, 2024, the Company reported a $1,090 increase in cash. The Company generated $1,171 in net cash in operating activities, primarily driven by income of $2,083 and other adjustments of $578 to reconcile net income to net cash provided by operating activities, which includes items such as share-based compensation, depreciation and amortization, loss on sale of PP&E, and non-cash lease expense. This was partially offset by changes in operating assets and liabilities of $1,490. The Company used $127 of net cash for investing activities, primarily to fund capital expenditures. The Company also generated $46 of net cash from financing activities, primarily driven by proceeds received from the exercise of stock options.

Current wording

The principal liquidity needs of the Company are to fund ongoing operations, working capital, and capital expenditures. During the three months ended March 31, 2025, the Company reported a $1,229 decrease in cash. The Company used $766 of net cash in operating activities, primarily driven by net changes in operating assets and liabilities of $995. This was partially offset by other adjustments of $258 to reconcile net income to net cash used in operating activities, which includes items such as non-cash lease expense, share-based compensation, and depreciation and amortization. The Company used $463 of net cash for investing activities, primarily to fund capital expenditures.

Previous wording

During the nine months ended September 30, 2023, the Company reported a $1,221 decrease in cash. The Company used $733 of net cash in operating activities, primarily driven by changes in operating assets and liabilities of $383 and a net loss of $673. This was partially offset by other adjustments to reconcile net loss to net cash used in operating activities of $323, which includes items such as share-based compensation, depreciation and amortization, gain on sale of PP&E, bad debt expense, and non-cash lease benefit. The Company used $228 of net cash for investing activities, primarily to fund capital expenditures. The Company also used $260 of net cash in financing activities for principal payments made under its finance lease obligations.

Current wording

During the three months ended March 31, 2024, the Company reported a $52 decrease in cash. The Company used $307 of net cash in operating activities, primarily driven by net changes in operating assets and liabilities of $1,067. This was partially offset by net income of $576 and other adjustments of $184 to reconcile net income to net cash used in operating activities, which includes items such as non-cash lease expense, share-based compensation, and depreciation and amortization. The Company used $10 of net cash for investing activities, primarily to fund capital expenditures. The Company also generated $265 of net cash from financing activities, primarily driven by proceeds received from short-term borrowings.

Previous wording

The estimation of anticipated credit losses that may be incurred as we work through the invoice collection process with our customers requires us to make judgments and estimates regarding our customers’ ability to pay amounts due. We monitor our customers’ payment history and current credit worthiness, if needed, to determine that collectability is reasonably assured. We provide an allowance for credit losses based by reviewing each accounts receivable balance with respect to a debtor’s ability to make payments. We also evaluate historical loss rates as well as consider forward-looking factors specific to the debtors, the overall economic environment, and management expectations to determine expected losses. When certain accounts are determined to require an allowance, they are expensed by a provision for bad debts in that period. At September 30, 2024 and 2023, we estimated the allowance for credit losses requirement to be zero. There were no charges to bad debt expense for the three and nine months ended September 30, 2024. The Company recorded no charges and a $1 charge to bad debt expense during the three and nine months ended September 30, 2023, respectively. We believe that no allowance for credit losses is necessary under current conditions; however, uncertainties regarding changes in the financial condition of our customers could impact the amount and timing of any additional credit losses that may be required.

Current wording

The estimation of anticipated credit losses that may be incurred as we work through the invoice collection process with our customers requires us to make judgments and estimates regarding our customers’ ability to pay amounts due. We monitor our customers’ payment history and current credit worthiness, if needed, to determine that collectability is reasonably assured. We provide an allowance for credit losses based by reviewing each accounts receivable balance with respect to a debtor’s ability to make payments. We also evaluate historical loss rates as well as consider forward-looking factors specific to the debtors, the overall economic environment, and management expectations to determine expected losses. When certain accounts are determined to require an allowance, they are expensed by a provision for bad debts in that period. At March 31, 2025 and 2024, we estimated the allowance for credit losses requirement to be $0, and there were no charges to bad debt expense for the three months ended March 31, 2025 and 2024. We believe that our allowance for credit losses is adequate to cover the anticipated credit losses under current conditions; however, uncertainties regarding changes in the financial condition of our customers, either adverse or positive, could impact the amount and timing of any additional credit losses that may be required.