Koil Energy Solutions, Inc.

From time to time, the Company is party to various legal proceedings arising in the ordinary course of business. The Company expenses or accrues legal costs as incurred. Except as described below, the Company is not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to our business.

WW Champion Developments Lawsuit

The Company was previously involved in a legal dispute with its former landlord, WW Champion Developments, Inc. ("WW Champion”). On September 23, 2024, WW Champion filed a lawsuit against the Company alleging breach of contract and seeking money damages of $1,229,000 in the 281 st District Court of Harris County in an action styledWW Champion Developments, Inc. vs. Koil Energy Solutions, Inc., Cause Number 2024-65006. WW Champion alleged that Koil Energy breached a lease agreement between the parties by abandoning the premises, failing to maintain proper fire prevention measures, and failing to pay its remaining rental payments.

The matter was settled in June 2025 for $590,000. The Company had previously recorded a liability of $923,000 and therefore recognized a gain of $333,000 upon resolution of the lawsuit. This gain is recorded in the consolidated statements of operations under Other (income), net. Payment terms for the settlement included the forfeiture of a $90,000 deposit, a $200,000 payment on July 1, 2025, and six monthly payments of $50,000 each commencing August 1, 2025. As of January 2026, all such amounts were fully paid.

OMSi Lawsuit

In December 2024, the Company completed work under purchase orders with OMS International Limited (OMSi), a UK-based subsea engineering firm. The Company successfully completed the project in March 2025 and issued invoices totaling $569,000. OMSi has not remitted payment on the outstanding invoices and has not responded to the Company’s repeated requests for payment.

On September 29, 2025, the Company filed a civil action against OMSi in the United States District Court for the Southern District of Texas seeking to recover the unpaid amounts. For the quarter ending September 30, 2025, the Company recorded a reserve of $569,000 in Allowance for Credit Losses. Koil received a judgment against OMSi in January 2026 in the amount of approximately $575,000 and intends to pursue full recovery and will adjust the reserve as new information becomes available.