FTK 10-K & 10-Q changes, risk factors and insider trading
Flotek Industries Inc. · NYSE · Miscellaneous Chemical Products · CIK 928054 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Summary of Key Risk Factors”
New heading “Risks Related to the Company’s Business”
New heading “Risks Related to the Company’s Industry”
New heading “Risks Related to the Company’s Securities”
New heading “General Risk Factors”
New heading “Discussion of Key Risk Factors”
New heading “Our business is subject to complex and evolving laws and regulations regarding data privacy and cybersecurity.”
New heading “If we fail to maintain proper and effective internal controls over financial reporting, our ability to produce accurate and timely financial statements could be impaired.”
Removed heading “If the Company cannot meet the New York Stock Exchange (“NYSE”) continued listing requirements, the NYSE may delist the Company’s common stock.”
Largest changes
“While we have taken commercially reasonable steps to comply with applicable data privacy and cybersecurity laws and regulations, these laws and regulations are in some cases relatively new and the interpretation and application of these laws and regulations are uncertain. Thus, there can be no assurance that our efforts will be deemed effective by regulatory bodies. …”see in full comparison
“Pursuant to Section 404(a) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), our management is required to report upon the effectiveness of our internal control over financial reporting. We are an “accelerated filer” with respect to this Annual Report. As such, Section 404(b) of the Sarbanes-Oxley Act requires our independent auditors to express an opinion on our internal control over financial reporting. …”see in full comparison
“Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations, or cash flows. …”see in full comparison
“If the Company cannot meet the New York Stock Exchange (“NYSE”) continued listing requirements, the NYSE may delist the Company’s common stock.”see in full comparison
“The Company’s common stock is currently listed on the NYSE. In the future, if the Company is not able to meet the continued listing requirements of the NYSE, the Company’s common stock may be delisted. …”see in full comparison
“Our business is subject to complex and evolving laws and regulations regarding data privacy and cybersecurity.”see in full comparison
Full comparison: every changed paragraph (82)
The Company’s business, financial condition, results of operations, cash flows, liquidity and prospects are subject to various risks and uncertainties. Readers of this Annual Report should not consider any descriptions of these risk factors to be a complete set of all potential risks that could affect the Company. In addition, references to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. These factors should be carefully considered together with the other information contained in this Annual Report and the other reports and materials filed by the Company with the SEC. Further, many of these risks are interrelated and, as a result, the occurrence of certain risks could trigger and/or exacerbate other risks. Such a combination could materially increase the severity of the impact of these risks on the Company’s business, results of operations, financial condition, cash flows, liquidity or prospects.
Summary of Key Risk Factors
Risks Related to the Company’s Business
•The Company’s business is largely dependent upon its customers’ spending in the oil and gas industry. Spending could be adversely affected by industry conditions; new or increased governmental regulations; changes to existing governmental regulations; global economic conditions; the availability of credit; and oil and natural gas prices;
•The Company’s reliance on the ProFrac Agreement and Lease Agreement, both with affiliates of ProFrac, could adversely impact our financial condition, results of operations and cash flows;
•The Company’s inability to develop and/or introduce new products or differentiate existing products could have an adverse effect on its ability to be responsive to customers’ needs and could result in a loss of customers, as well as adversely affecting the Company’s future success and profitability;
•The Company’s business, financial condition, operating results and ability to grow and compete may be affected adversely if adequate capital is not available;
•Increased competition could exert downward pressure on prices charged for the Company’s products and services;
•If the Company is unable to adequately protect intellectual property rights or is found to infringe upon the intellectual property rights of others, or is unable to maintain the registrations and certifications of its products and facilities, the Company’s business is likely to be adversely affected;
•The loss of key customers could have an adverse impact on the Company’s results of operations and could result in a decline in the Company’s revenue;
•Loss of key suppliers, the inability to secure raw materials on a timely basis, or the Company’s inability to pass commodity price increases on to its customers could have a material adverse effect on the Company’s ability to service its customers’ needs and could result in a significant loss of customers;
•Changes in U.S. trade policy and the impact of tariffs may have a material adverse effect on our business and results of operations;
•Failure to collect for goods and services sold to key customers could have an adverse effect on the Company’s financial results, liquidity and cash flows;
•Cyberattacks may have a significant and adverse impact on the Company’s operations and related financial condition;
•Our business is subject to complex and evolving laws and regulations regarding data privacy and cybersecurity;
•Unforeseen contingencies such as litigation could adversely affect the Company’s financial condition;
•The Company’s current insurance policies may not adequately protect the Company’s business from all potential risks;
•If the Company does not manage the potential difficulties associated with expansion successfully, the Company’s operating results could be adversely affected;
•The Company may pursue strategic acquisitions, joint ventures and strategic divestitures, which could have an adverse impact on the Company’s business;
•The Company’s ability to use net operating losses and tax attribute carryforwards to offset future taxable income became limited due to an “ownership change” in 2023;
•The Company is subject to complex foreign, federal, state and local environmental, health, and safety laws and regulations, which expose the Company to liabilities that could adversely affect the Company’s business, financial condition, and results of operations;
•The Company and the Company’s customers are subject to risks associated with doing business outside of the U.S., including political risk, foreign exchange risk, and other uncertainties;
•If we fail to maintain proper and effective internal controls over financial reporting, our ability to produce accurate and timely financial statements could be impaired;
•Regulatory pressures, environmental activism, and legislation could result in reduced demand for the Company’s products and services, increase the Company’s costs, and adversely affect the Company’s business, financial condition and results of operations;
•Changes in laws and regulations relating to hydraulic fracturing may have a negative effect on the Company’s operations; and
•Climate change, environmental, social and governance and sustainability initiatives may result in regulatory or structural industry changes that could require significant operational changes and expenditures, reduce demand for the Company’s products and services and adversely affect the Company’s business, financial condition, results of operations, stock price or access to capital markets.
Risks Related to the Company’s Industry
•General economic declines or recessions, limits to credit availability, and industry specific factors could have an adverse effect on energy industry activity resulting in lower demand for the Company’s products and services.
•A continuous period of swings in oil and natural gas prices could result in further reductions in demand for the Company’s products and services and adversely affect the Company’s business, financial condition, and results of operations.
•The Company’s industry has a high rate of employee turnover. Difficulty attracting or retaining personnel or agents could adversely affect the Company’s business.
•Our DA segment may be negatively affected by government regulations.
•Severe weather could have an adverse impact on the Company’s business.
•A terrorist attack or armed conflict could harm the Company’s business.
Risks Related to the Company’s Securities
•The market price of the Company’s common stock has been and may continue to be volatile;
•The Company’s common stock is thinly traded; therefore, our stock price may fluctuate more than the stock market as a whole and it may be difficult to sell large numbers of our shares at prevailing trading prices;
•The Company’s relationship with ProFrac Services and ProFrac GDM and certain of their affiliates may create a conflict of interest;
•Future issuance of additional shares of common stock could cause dilution of ownership interests and adversely affect the Company’s common stock price;
•The Company may issue a substantial amount of securities in connection with future acquisitions, and the sale of those securities could adversely affect the trading price of our common stock or other securities;
•The Company may issue shares of preferred stock or debt securities with greater rights than the Company’s common stock;
•Certain anti-takeover provisions of the Company’s certificate of incorporation and applicable Delaware law could discourage or prevent others from acquiring the Company, which may adversely affect the market price of the Company’s common stock; and
•The Company has no current plans to pay dividends on the Company’s common stock, and, therefore, investors will have to look to stock appreciation for return on investments.
General Risk Factors
•If the Company loses the services of key members of management, the Company may not be able to manage operations and implement growth strategies; and
•The Company’s tax returns are subject to audit by tax authorities. Taxing authorities may make claims for back taxes, interest and penalties. Changes in U.S. tax legislation may adversely affect our business, results of operations, financial condition and cash flows.
Discussion of Key Risk Factors
•political and economic uncertainty, and sociopolitical unrest including the current military conflicts in Ukraine and the Middle East and ongoing sanctions imposed on Russia;
The Company’s reliance on the ProFrac Agreement and Lease Agreement, both with affiliates of ProFrac, could adversely impact our financial condition, results of operations and cash flows.
The ProFrac Agreement is a major source of the Company’s liquidity and we expect it to remain so over the term of the contract. The Lease Agreement is also expected to be a major source of the Company’s liquidity. Revenues attributable to the ProFrac Agreement and the Lease Agreement represented 62% and 65% of our total revenues during 2024both 2025 and 2023,2024. respectively.The Lease Agreement represented 6.8% of total revenues for 2025. If the Company became unable to either (1) execute the requirements of the agreementProFrac Agreement financially and operationally, from procuring inventory to meet the needs of ProFrac Services, LLCServices under the ProFrac Agreement to executing timely billing and collection, or (2) properly perform its obligations under the Lease Agreement, the Company’s liquidity could be materially adversely impacted. Further, our relationship with ProFrac Services, LLC may impact their competitors’ willingness to purchase products from the Company or to seek price concessions from the Company.
We are also dependent on ProFrac Services, LLC’sServices’ compliance in meeting their committed activity levels under the ProFrac Agreement and paying for our products, including any Contract Shortfall Fees, on a timely basis, in accordance with the terms of the ProFrac Agreement. We are dependent upon ProFrac GDM’s compliance with their asset maintenance and payment obligations, among others, under the Lease Agreement. Our financial condition, results of operations and cash flows may be adversely impacted if ProFrac Services,Services’ LLC’sor ProFrac GDM’s financial condition or itsProFrac Services’ spending level under the ProFrac Agreement is negatively impacted and itProFrac Services or ProFrac GDM is unable to pay its outstanding obligations to the Company, including those payments related tothe Contract Shortfall Fees. As of December 31, 2024,2025, amountsour dueaccounts to the Companyreceivable from ProFrac Services,Services LLCand ProFrac GDM totaled $52.4$64.2 million, including $32.4 millionamounts related to 20242025 Contract Shortfall Fees.
ProFrac Services, LLCServices has the right to terminate the ProFrac Agreement by providing written notice to the Company after the occurrence of any of the following events: (i) the Company’s bankruptcy; (ii) the Company’s failure to produce and deliver the products in accordance with the specifications, or failure to timely deliver products, and the Company has been unable to cure such failure within a commercially reasonable period determined by ProFrac Services, LLCServices; (iii) the Company fails to meet pricing requirements set forth in the ProFrac Agreement; or (iv) the Company is affected by a force majeure event, and such force majeure event has not been remedied within 30 days of the initial occurrence of such event. ProFrac Services, LLCServices also has the right to terminate the ProFrac Agreement for any other material breach of the ProFrac Agreement by the Company if the breach is capable of being cured, but is not cured within 30 days after written notice. Termination of the ProFrac Agreement would have a material adverse impact on the Company’s financial condition, results of operations and cash flows. In addition, ProFrac Services, LLCServices has customary rights to audit our compliance with the terms of the ProFrac Agreement. ProFrac GDM also has customary rights to audit the records of the Company with regard to third-party pricing to confirm compliance with the Lease Agreement’s pricing requirements. Any adverse findings during such an audit could have an adverse impact on the Company’s financial condition, results of operations and cash flows.
While we believe that our cash,cash liquidand assets,cash equivalents, cash generated from operating activities, the collection or offset utilization of future Contract Shortfall Fees and availability under the ABL will provide us with sufficient financial resources to fund operations to meet our capital requirements and anticipated obligations as they become due,due uncertainty surroundingover the long-termnext stabilitytwelve andmonths, strengthsustained ofweakness 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. TheIn 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 Company may need additional financing sources, including commercial borrowings and issuances of debt and/or equity securities. The Company’s ability to procure debt financing, is dependent on, among other things, the willingness of banks and other financial institutions to lend into the Company’s industry and on their evaluation of the Company’s credit risk.risk, which includes the concentration of revenues from ProFrac Services and ProFrac GDM. There is no guarantee that the Company will be able to procure additional debt financing or, in the event that it is able to procure additional debt financing, that the financing will be on favorable terms and conditions or at favorable rates of interest. The Company’s ability to access the capital markets, is dependent on, among other things, the willingness of investors to purchase new debt and/or equity issuances from the Company. There is no guarantee that the Company will be able to procure additional capital markets financing or, in the event that is it is able to do so, that the capital raises will be on favorable terms or conditions to the Company. If the Company cannot access capital on acceptable terms, the Company’s business, financial condition and operating results may be adversely affected. Further, the ability of the Company to grow and be competitive in the marketplace may be adversely impacted as the Company may not be able to finance strategic growth plans, take advantage of business opportunities or respond to competitive pressures.
Revenue derived from the Company’s three largest customers as a percentage of consolidated revenue for the years ended December 31, 20242025 and 2023,2024, totaled 75%76% and 73%,75%, respectively. The Company has seen customer concentration risk increase substantially due to its entry into the ProFrac Agreement and the Lease Agreement. Unlike the ProFrac Agreement and the Lease Agreement, our other large customer relationships are typically governed by purchase orders or other short-term contractual obligations as opposed to long-term contracts. Losses of customers also may occur due to product, service or pricing issues, as well as industry consolidation. The Company competes in a highly competitive environment and must work diligently to create and maintain productive customer relationships, and the failure to maintain those relationships could result in the loss of one or more key customers. The loss of one or more key customers could have an adverse effect on the Company’s results of operations and could result in a decline in the Company’s revenue.
Raw materials used in servicing and manufacturing operations, as well as those purchased for sale, are generally available on the open market from multiple sources. Acquisition costs and transportation of raw materials to the Company’s facilities have historically been impacted by extreme weather conditions. Additionally, prices paid for raw materials could be affected by energy products and other commodity prices; weather and disease associated with our crop dependent raw materials; tariffs and duties on imported materials; evolving geopolitical risks; foreign currency exchange rates; and phases of the general business cycle and global demand. The military conflicts in the Middle East could also impact the availability, pricing and transportation of raw materials to the Company’s facilities.
TheChanges newin TrumpU.S. Administrationtrade policy and the impact of tariffs may makehave substantiala changesmaterial toadverse fiscal,effect tax, and international trade policies that may adversely affecton our business, financial condition,business and results of operations.
Our business and results of operations may be adversely affected by uncertainty and changes in U.S. trade policies, including tariffs, trade agreements or other trade restrictions imposed by the U.S. or other governments. Several tariff announcements have been followed by announcements of limited exemptions and temporary pauses. These actions are unprecedented, have caused substantial uncertainty and volatility in financial markets and may result in retaliatory measures on U.S. goods.
Our CT segment requires access to various chemicals, many of which are produced in the U.S., but some of which contain international components or are sourced internationally. Our DA segment requires access to certain instruments and components, which are produced in whole or in part outside the U.S. Any imposition of or increase in tariffs on imports of these materials, as well as corresponding price increases for such materials available domestically, could increase our costs. To the extent that we are unable to pass all or any of such cost increases on to our customers, such cost increases could adversely affect our returns on investment. Higher materials costs could also diminish our ability to develop new products at acceptable returns, particularly during times of economic uncertainty, and limit our ability to pursue growth opportunities.
Approximately 4.8% of our revenues are derived from sales outside the U.S. Should any U.S. tariffs result in retaliatory tariffs in any of the countries outside the U.S. in which we sell products, the cost of our products in such countries could increase. These increased costs could negatively impact our sales in those countries, by rendering our products no longer cost-competitive.
In addition, tariffs or other trade restrictions may lead to continuing uncertainty and volatility in U.S. and global financial and economic conditions and commodity markets, declining consumer confidence, significant inflation and diminished expectations for the economy, and ultimately reduced demand for our and our customers’ products and services. Such conditions could have a material adverse impact on our business, results of operations and cash flows. Also, disruptions and volatility in the financial markets may lead to adverse changes in the availability, terms and cost of capital. Such adverse changes could increase our costs of capital and limit our access to external financing sources to fund acquisitions, capital projects, or refinancing of our existing debt on similar terms, which could in turn reduce our cash flows and limit our ability to pursue growth opportunities.
Changes in tariffs and trade restrictions can be announced with little or no advance notice. The adoption and expansion of tariffs or other trade restrictions, increasing trade tensions, or other changes in governmental policies related to taxes, tariffs, trade agreements or policies, are difficult to predict, which makes attendant risks difficult to anticipate and mitigate. If we are unable to navigate further changes in U.S. or international trade policy, it could have a material adverse impact on our business and results of operations.
Management's Discussion & Analysis (MD&A)
New heading “Power Services Contract”
New heading “Leases — Lessor Accounting”
New heading “Income Taxes: Valuation Allowance”
Largest changes
“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. The Company was in compliance with all of the covenants under the ABL as of December 31, 2024.”see in full comparison
“In connection with the Company’s entry into the Purchase Agreement, the Company entered into the Letter Agreement with the lender whereby the lender will not test compliance with respect to the Tangible Net Worth (as defined in the ABL) covenant through and including December 31, 2025. Pursuant to the Letter Agreement, the Company will be required to maintain positive trailing three-month consolidated net income on a monthly basis through and including December 31, 2025. …”see in full comparison
“The DA segment delivers real-time information and insights to our customers to enable optimization of operations and reduction of emissions and their carbon intensity. Real-time composition and physical property measurements are delivered simultaneously on refined fuels, natural gas liquids (“NGLs”), natural gas, crude oil, and condensates using the industry’s only field-deployable, in-line optical near-infrared spectrometer that generates no emissions. …”see in full comparison
“The Company’s working capital requirements relate to the acquisition and maintenance of materials and equipment and funding of obligations as they become due. During the year ended December 31, 2025, 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 transactions described in “Part II, Item 8. …”see in full comparison
Full comparison: every changed paragraph (52)
Flotek createsstrives uniqueto be the collaborative partner of choice for solutions tothat reduce the environmental impact of energy on air, water, land and people. AAn advanced technology-driven, specialty chemistrychemical and data technologyanalytics company, Flotek helps customers across industrial and commercial markets improve their environmental performance. The Company seeks to provide sustainableunique and optimized chemistry and data technologyinnovative solutions forto 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’sCompany has two operating segments, Chemistry Technologies (“CT”) and DA,Data Analytics (“DA”), which are both supported by the Company’s continuing Research and Innovation (“R&I”) advanced laboratory capabilities.
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,costs and providing tangible environmental benefits. The Company’s proprietary green chemistries, specialty chemistries, logistics,logistics and technology services seek to enable itsour 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 thoseenergy-related of energy related markets,companies, such as our related party ProFrac Services, LLC,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.
On February 2, 2022, the Company entered into a Chemical Products Supply Agreement with ProFrac Services, LLC, which was subsequently amended on May 17, 2022 and February 1, 2023 (collectively, 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, LLCServices 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 ProFrac Agreement provides that payment of Contract Shortfall Fees is to be made within 30 days after the applicable measurement period. The measurement period for Contract Shortfall Fees during 2023 was June 1, 2023 through December 31, 2023. Related party revenues for the year ended December 31, 2023 reflected Contract Shortfall Fees of $20.1 million. The minimum purchase requirements were not met during the 2024 measurement period of January 1, 2024 through December 31, 2024 and, as a result, related party revenues for the Companyyear recordedended revenueDecember related31, to2024 reflected Contract Shortfall Fees of $32.4 million. The minimum purchase requirements were not met during the 2025 measurement period of January 1, 2025 through December 31, 2025 and, as a result, related party revenues for the year ended December 31, 2025 reflected Contract Shortfall Fees of $27.4 million.
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 (which amount represents $27.4 million of 2025 Contract Shortfall Fees, net of a $7.2 million offset payable under the Purchase Agreement as described in “Part II, Item 8. Financial Statements and Supplementary Data - Note 3” (the “OSP Offset”) and other minor adjustments) of consideration 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 Data Analytics segment, with the costs of such equipment to be offset by the Equipment Credit. The Company expects to utilize the 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 Company’s Data Analytics (“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, supported in part by recurring service and lease revenues.
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 through the acquisition of the assets described in “Part II, Item 8. Financial Statements and Supplementary Data - Note 3.” These assets facilitate 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.
Power Services Contract
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 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. The Company expects to begin deploying equipment during the second quarter of 2026.
The DA segment delivers real-time information and insights to our customers to enable optimization of operations and reduction of emissions and their carbon intensity. Real-time composition and physical property measurements are delivered simultaneously on refined fuels, natural gas liquids (“NGLs”), natural gas, crude oil, and condensates using the industry’s only field-deployable, in-line optical near-infrared spectrometer that generates no emissions. The instrument's response is processed with advanced chemometrics modeling, artificial intelligence, and machine learning algorithms to deliver valuable insights every fifteen seconds.
We believe customers using this technology have obtained significant benefits, including additional profits, by enhancing operations in crude/condensates stabilization, enhancing blending operations, reducing time impacting transmix operations, increasing efficiencies and optimization of gas plants, allowing for the use of significantly lower cost field gas instead of diesel to generate power, lowering emissions and protecting equipment, and ensuring product quality while reducing giveaways, i.e., providing higher value products at the lower value products prices. More efficient operations have the benefit of reducing carbon footprint, e.g., less flaring and reduction in energy expenditure for compression and re-processing. Our customers in North America include oil and gas supermajors, some of the largest midstream oil and gas companies, large gas processing plants and independent exploration and production companies. We have developed a line of Verax™ analyzers for deployment internationally, which was certified for compliance in hazardous locations and harsh weather conditions.
R&I supports both our business segments through green 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 the years ended December 31, 20242025 and 2023,2024, the Company incurred $1.7$1.8 million and $2.5$1.7 million, respectively, of research and development expense. The Company expects that its 20252026 research and development investment will continue to support new product development and customization initiatives for its clients.
Consolidated revenue for the year ended December 31, 20242025 decreasedincreased $1.0$50.2 million versus the same period of 2023.2024. The decreaseincrease in revenue during the year ended December 31, 20242025 was driven primarily by a decreaseincreases in activityboth underexternal theand ProFracrelated Agreement,party product sales and $16.1 million in PWRtek rental revenue, partially offset by increaseddecreased Contract Shortfall Fees and higher revenue from external customers and higher DA revenues.Fees.
Consolidated cost of sales for the year ended December 31, 20242025 decreasedincreased $16.2$29.8 million, or 10%,20%, versus the same period of 2023.2024. The decreaseincrease is primarily driven by decreasedincreased activitymaterial withcosts, ProFracincreased Services,service LLCcosts and lowerincreased freight and equipment rental costs dueas toa theresult decreasedof increased volume of business, partially offset by higher costs related to increased non-related party volumes and increased salaries and wages. The reduction in cost of sales as a percentage of revenue in 2024 was the result of higher revenue from Contract Shortfall Fees, which have no associated costs.business.
SellingSelling, general and administrative (“SG&A”) expenses are not directly attributable to products sold or services provided. SG&A expenses for the year ended December 31, 2024,2025, decreasedincreased $3.1$3.3 million, or 11%,14%, versus the same period of 20232024 as a result of reducedincreased legalsalaries feesand inwages, 2024,increased stock compensation expense and higher contract labor and audit costs, partially offset by higherreduced stocklegal compensationand expense.consulting fees.
Asset acquisition expenses were $4.4 million for the year ended December 31, 2025 and were related to accounting, legal and other professional fees associated with the Asset Acquisition. There was no corresponding activity for the same period of 2024.
Research and development (“R&D”) costs decreasedincreased $0.8$0.1 million, or 31%,6%, for the year ended December 31, 2024,2025, versus the same period of 20232024 driven by lowerhigher personnel costs resulting from headcount optimization.
Operating income decreasedincreased by $11.0 million to $12.2$23.2 million for the year ended December 31, 20242025 versus the same period in 2023.2024. The decreaseincrease in 20242025 is primarily due to the $30.0 million gain in fair value of the Contract Consideration Convertible Notes Payable for the year ended December 31, 2023 with no corresponding activity for the year ended December 31, 2024, partially offset by a $15.1$20.4 million increase in gross profit resulting from higher Contractproduct Shortfallsales Fees,and rental revenues, partially offset by $4.4 million in Asset Acquisition expenses, a $3.1$3.3 million decreaseincrease in SG&A expenses and a $0.8$0.9 million decreaseincrease in R&Ddepreciation expenses.expense.
Total other expense for the year ended December 31, 2025 increased $2.5 million, driven primarily by a $2.8 million increase in interest expense primarily the result of interest from the PWRtek Note, partially offset by a $0.3 million decrease in other income. The changes for the 2025 period are driven by the partial release of the Company’s valuation allowance on its deferred tax assets (see “Part II, Item 8. Financial Statements and Supplementary Data - Note 12”).
Total income tax benefit was $10.9 million for the year ended December 31, 2025 compared to income tax expense of $0.6 million for the same period of 2024.
Total other (expense) income for the year ended December 31, 2024 decreased $2.7 million, driven primarily by a $4.5 million gain for the forgiveness of the Flotek PPP loan during 2023 with no corresponding activity in 2024, partially offset by a $1.8 million decrease in interest expense related to the maturity of the Contract Consideration Convertible Notes Payable in the first half of 2023.
CT revenue from external customers for the year ended December 31, 2024,2025, increased $4.2$16.4 million, or 7%26% compared to 20232024 due to increased sales with both new and existing customers. Revenue from related party for the year ended December 31, 2024,2025, includingincreased accrued Contract Shortfall Fees, decreased $6.0$15.3 million, or 5%,13%, primarily driven by decreasedincreased product sales under the ProFrac Agreement, partially offset by increaseddecreased Contract Shortfall Fees.
Income from operations for the CT segment for the year ended December 31, 20242025 decreasedincreased $12.4$3.8 million, compared to 2023.2024. The decreaseincrease was driven by the gain in fair value of the Contract Consideration Convertible Notes Payable of $30.0 million for the year ended December 31, 2023 without corresponding activity for the year ended December 31, 2024, partially offset by an increase in gross profit of $15.9$5.3 million attributable to higher Contractproduct Shortfallvolumes, Feespartially andoffset lowerby freightan costs.increase in cost of sales.
DA external customer revenue for the year ended December 31, 2024,2025, increased $0.5$2.8 million, or 7%,35%, compared to revenue for 2023.2024. The increase was driven primarily by increased service sales primarily related to the Company’s near-infrared spectrometer measurement system, partially offset by decreased productunit sales. Related party revenue increased by $0.2$15.8 million, or 28%,million compared to 20232024 primarily due to $16.1 million of rental income under the Lease Agreement partially offset by decreased revenue relating to services provided to ProFrac Services, LLCServices outside of the ProFrac Agreement.
LossIncome from operations for the DA segment for the year ended December 31, 20242025 increased $0.9$8.8 million compared to 2023.2024. The increase was driven by an increase in lossesgross wasprofit of $15.2 million primarily dueattributable to increasedrental costrevenues of sales related tounder the changeLease Agreement and increased product sales, partially offset by a $3.4 million increase in contingent earnout valuations (see Note 10) and credits included inthe cost of sales for the year ended December 31, 2023 with no corresponding activity for the year ended December 31, 2024.2025.
Loss from operations for the year ended December 31, 20242025 decreasedincreased by $2.3$1.6 million, or 15%,12%, compared to the same period of 20232024 due to decreasedincreased professionalseverance fees, partially offset byexpenses, increased stock compensation expense.expenses and increased contract labor and audit fees.
The Company’s working capital requirements relate to the acquisition and maintenance of materials and equipment and funding of obligations as they become due. During the year ended December 31, 2025, 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 transactions described in “Part II, Item 8. Financial Statements and Supplementary Data - Note 3”, the collection or offset utilization 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.
The Company’s capital requirements relate to the acquisition and maintenance of equipment and funding of working capital requirements. During the year ended December 31, 2024, the Company funded working capital requirements with cash on hand and borrowings under the ABL (defined below).
AsHowever, ofsustained December 31, 2024, the Company had unrestricted cash and cash equivalents of $4.4 million compared to $5.9 million on December 31, 2023. In addition, at March 10, 2025, the Company had approximately $15 millionweakness in available borrowings under the ABL. During the year ended December 31, 2024, the Company had $12.2 million of operating income, $3.4 million of cash provided by operating activities, $1.8 million of cash used in investing activities and $3.1 million of cash used in financing activities. While we believe our cash and cash equivalents, cash generated from operating activities, which includes the collection of the Contract Shortfall Fees as described further below, and availability under the ABL will be sufficient to fund our capital requirements and anticipated obligations as they become due, uncertainty surrounding the long-term stability and strength of 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 the 2024current measurement period of January 1, 20242025 through December 31, 2024,2025, and as a result, related party revenues for the Companyyear recordedended revenueDecember related31, to2025 reflect Contract Shortfall Fees of $32.4$27.4 million,million. ofAs whichdescribed $15.0in million“- wasCompany collectedOverview” throughabove, on March 12, 2025.2026, the Company and ProFrac entered into the OSP Agreement regarding the settlement of 2025 Contract Shortfall Fees.
As of December 31, 2025, the Company had unrestricted cash and cash equivalents of $5.7 million compared to $4.4 million on December 31, 2024. In addition, at March 4, 2026, the Company had approximately $11.1 million in available borrowings under the ABL. During the year ended December 31, 2025, the Company had $23.2 million of operating income, $7.2 million of cash provided by operating activities, $2.0 million of cash used in investing activities and $3.7 million of cash used in financing activities.
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 and again in2023, August 2024 and April 2025 (as amended, the “ABL”). The August 2024 amendment to the ABL extended the maturity date 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 December 31, 2025 and 2024, the Company had $3.3 million and $4.8 million outstanding under the ABL.ABL, respectively. During the yearyears ended December 31, 2025 and 2024, the Company incurred $1.0 million and $0.7 millionmillion, respectively, in interest and fees related to the ABL. As of December 31, 2025 and 2024, the Company recorded $0.3 million and $0.3 million, respectively, 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. The interest rate under the ABL was 9.5%8.75% and 11.0%9.5% as of December 31, 20242025 and 2023,2024, respectively. For the yearyears ended December 31, 2025 and 2024, the weighted-average interest rate was 10.8%.9.3% and 10.8%, respectively. 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).
In connection with the Company’s entry into the Purchase Agreement, the Company entered into the Letter Agreement with the lender whereby the lender will not test compliance with respect to the Tangible Net Worth (as defined in the ABL) covenant through and including December 31, 2025. Pursuant to the Letter Agreement, the Company will be required to maintain positive trailing three-month consolidated net income on a monthly basis through and including December 31, 2025. In addition, the ABL provides the lender a blanket security interest on all or substantially all of the Company’s assets, excluding the PWRtek Assets. On October 28, 2025, the lender provided its consent to the assignment of the PWRtek Note and various amendments to the PWRtek Note and related documents.
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. The Company was in compliance with all of the covenants under the ABL as of December 31, 2024.
Net cash provided by (used in) operating activities was $3.4$7.2 million and ($11.3)$3.4 million during the years ended December 31, 20242025 and 2023,2024, respectively. Consolidated net income for the years ended December 31, 20242025 and 20232024 was $10.5$30.5 million and $24.9$10.5 million, respectively.
•For the year ended December 31, 2025, non-cash adjustments included amortization of contract assets of $6.3 million, stock compensation expense of $2.3 million and non-cash lease expense of $1.0 million primarily due to ROU asset amortization for equipment leases. Non-cash adjustments also include a deferred tax benefit of $11.2 million, $1.8 million of depreciation expense, $0.3 million of amortization of loan origination costs, provision for doubtful accounts of $0.6 million and the provision for excess and obsolete inventory of $0.4 million.
•For the year ended December 31, 2023, non-cash adjustments included a $30.0 million gain on the fair value valuation of the Contingent Convertible Notes, a gain of $4.5 million for the Flotek PPP loan forgiveness, paid-in-kind interest on the Convertible Notes Payable and Contract Consideration Convertible Notes Payable of $2.3 million, amortization of contract assets and convertible note issuance costs of $5.0 million and $0.1 million, respectively, and stock compensation of ($0.3) million. The non-cash adjustment for the provision for excess and obsolete inventory was $1.0 million and depreciation was $0.7 million. Non-cash lease expense was $3.0 million primarily due to ROU Asset amortization for equipment leases which were added in 2022.
•For the year ended December 31, 2024,2025, changes in working capital resulted primarily from increases in accounts receivable, including related party, of $21.6$38.9 million, andpartially offset by an increase in inventories of $0.7$3.1 million. Accrued liabilities increased $5.7$11.8 million and operating lease liabilities decreased $2.4$1.5 million primarily due to payments on equipment leases.
•For the year ended December 31, 2023,2024, changes in working capital resulted primarily from increases in accounts receivable, including related party, of $6.5$21.6 million, and apartially decreaseoffset by an increase in inventories of $1.9$0.7 millionmillion. due to reduced sales with ProFrac Services, LLC in late 2023. Accounts payable and accruedAccrued liabilities decreasedincreased $1.7$5.7 million and $2.6 million, respectively. The decrease in accrued liabilities is primarily due to accrued severance, sales taxes and professional fees, partially offset by higher bonus accruals. Operatingoperating lease liabilities decreased $3.4$2.4 million primarily due to payments on equipment leases.
Net cash used in investing activities for the year ended December 31, 2025 was $2.0 million primarily due to capital expenditures related to capital additions. Net cash used in investing activities for the year ended December 31, 2024 was $1.8 million primarily due to capital additions, including new equipment and sensors expected to be utilized in flare monitoring. Net cash used in investing activities for the year ended December 31, 2023 was $1.0 million primarily due to system enhancements and capital additions.
Net cash used in financing activities was $3.7 million for the year ended December 31, 2025, primarily from $1.5 million in net payments on the ABL, $1.6 million in payments for shares withheld for taxes, $0.5 million in payments for note payable issuance costs and $0.7 million in stock warrant issuance costs, partially offset by $0.6 million in proceeds from stock option exercises and $0.2 million in proceeds from the issuance of stock related to the employee stock purchase plan.
Net cash provided by financing activities was $5.9 million for the year ended December 31, 2023, primarily from net proceeds from the ABL. Net cash provided was partially offset by severance payments attributed to our former chief executive officer’s forfeited vested stock options, loan origination fees, and payments for shares withheld for taxes.
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 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.
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 9,10, “Debt and Convertible Notes Payable” in Part II, Item 8) 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. SignificantThe oramount unanticipatedof changesconsideration the Company expects to ourreceive forecast could impactin 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.assets recoverability assessment.
Income Taxes: Valuation Allowance
Accounting for income taxes involves estimates and judgments relating to the tax bases of assets and liabilities and the future recoverability of deferred tax assets. In assessing the realization of deferred tax assets, we determine whether it is more likely than not that the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon generating sufficient taxable income in future years when deferred tax assets are recoverable or are expected to reverse. Factors that may affect estimates of future taxable income include, but are not limited to, changes in revenue, costs or profit margins, market share, and execution of new long-term contracts with customers. In practice, positive and negative evidence is reviewed with objective evidence receiving greater weight. If, based on the weight of available evidence, it is more likely than not that all, or some portion, of the deferred tax assets will not be realized, we record a valuation allowance. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed for all, or some portion, of the deferred tax assets.
The Company considered both positive and negative evidence and determined that a full valuation allowance was no longer required for certain deferred tax assets during the year ended December 31, 2025. Positive evidence included our results of operations reaching an adjusted three-year cumulative income position during the year that indicates a trend of profitability; future reversals of existing taxable temporary differences; and an evaluation of currently available information about future years forecasted taxable income, specifically, the forecasted future income based on existing contracts including the ProFrac Agreement and the Lease Agreement. The Company’s adjusted three-year cumulative income position considered the impact of unusual and non-recurring items on historical book income or losses. However, because of the lack of objectively verifiable information in years after the expiration of the ProFrac Agreement and Lease Agreement, it was determined that forecasted future income may not be sufficient to realize all the deferred tax assets. Therefore, a partial release of valuation allowance for both federal and state deferred tax assets was recorded during the year ended December 31, 2025 totaling $15.5 million.
The Company will continue to evaluate both positive and negative evidence that could require changes to the remaining federal and state valuation allowances. In assessing forecasted future income in the years after the expiration of the ProFrac Agreement and Lease Agreement when assessing if it is more likely than not that the deferred tax assets will be realized, the Company will consider the impact of sustained pre-tax income growth derived from non-related party customers; renewals or extensions to current long-term customer contracts; signing of new contracts with customers with positive margins; and macroeconomic and industry specific conditions. Refer to “Item 1A.-Risk Factors” in this Annual Report for more information. We intend to continue maintaining a valuation allowance on a substantial portion of our deferred tax assets until there is sufficient evidence to support a reversal of such allowances.
What changed in the latest 10-Q
Risk Factors
New heading “Our power services contracts are subject to significant risks and uncertainties that could prevent us from realizing expected revenues.”
Largest changes
“Our power services contracts are subject to significant risks and uncertainties that could prevent us from realizing expected revenues.”see in full comparison
“We have entered into contracts to provide power generation services and equipment in connection with infrastructure and utility projects, including (i) the Utility Support Contract announced in March 2026, under which we are coordinating the installation of up to 50 MW of power generation equipment to support federal disaster recovery initiatives, and (ii) the PREPA Contract announced in August 2026, a 10-year agreement to support a 400 MW natural gas-fired power generation project for the Puerto Rico Electric Power Authority (“PREPA”), under which we are providing our proprietary PWRtek …”see in full comparison
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors contained in “Item 1A.-Risk Factors” in our 2025 Annual Report, which could materially affect our business, financial condition and/or future results. As ofsee in full comparisonMarchJune31,30, 2026, there have been no material changes in our risk factors from those set forth in the 2025 AnnualReport.Report, other than the risk factor set below. The risks described in the 2025 Annual Report are not the only risks facing our company. Additional risks and uncertainties not currently known to us or those we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or future results.
Full comparison: every changed paragraph (3)
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors contained in “Item 1A.-Risk Factors” in our 2025 Annual Report, which could materially affect our business, financial condition and/or future results. As of MarchJune 31,30, 2026, there have been no material changes in our risk factors from those set forth in the 2025 Annual Report.Report, other than the risk factor set below. The risks described in the 2025 Annual Report are not the only risks facing our company. Additional risks and uncertainties not currently known to us or those we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or future results.
Our power services contracts are subject to significant risks and uncertainties that could prevent us from realizing expected revenues.
We have entered into contracts to provide power generation services and equipment in connection with infrastructure and utility projects, including (i) the Utility Support Contract announced in March 2026, under which we are coordinating the installation of up to 50 MW of power generation equipment to support federal disaster recovery initiatives, and (ii) the PREPA Contract announced in August 2026, a 10-year agreement to support a 400 MW natural gas-fired power generation project for the Puerto Rico Electric Power Authority (“PREPA”), under which we are providing our proprietary PWRtek platform, including up to 40 MW of primary power generation capacity. In each case, our ability to generate and sustain revenue under these contracts is dependent upon the successful execution and continued operation of projects involving third-party participants over whom we have limited or no control. With respect to the PREPA Contract, approximately 90% of the project’s power generation capacity and execution is being provided by third parties. Our ability to realize the expected revenues under that contract is dependent upon the successful completion and continued operation of the overall project by all participants. With respect to the Utility Support Contract, the initial term is six months and is subject to extension at the customer’s option; initial power generation under the contract has been paused due to infrastructure delays, and there can be no assurance that the contract will be extended beyond the initial term or that the delays will be resolved. These power services contracts are subject to numerous risks and contingencies outside of our control and contractual scope, including, but not limited to: securing adequate and uninterrupted fuel supply; obtaining and maintaining permits and governmental approvals; establishing and maintaining grid interconnection; satisfying bonding and financing requirements; timely delivery of third-party equipment; construction execution and scheduling by other project participants; power interruptions and grid instability; integration of systems provided by multiple contractors; changes in government policy, funding priorities, or utility governance; geopolitical instability or armed conflict; and hurricanes, tropical storms, landslides, flooding, and other severe weather events. Any one or more of these factors could result in significant delays, increased costs, contract termination, or failure to complete a project, which could materially impair or eliminate our ability to generate revenue under these contracts. There can be no assurance that these projects will be completed on the anticipated timeline or at all, or that, even if completed, they will generate the expected level of revenues over their respective contract terms. Our power services business is an emerging line of business for the Company, and we have limited operating history in providing infrastructure-scale power generation services. As we pursue additional power services opportunities, including potential expansion into grid power, data center support, and other infrastructure verticals, we could encounter similar third-party execution risks, as well as risks related to scaling operations, managing capital commitments for equipment, and entering new regulatory environments.
Management's Discussion & Analysis (MD&A)
New heading “For the three months ended June 30, 2026 and 2025”
New heading “For the six months ended June 30, 2026 and 2025”
Largest changes
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. Revenues from the CT segment during the first half of 2026 increased 33% as compared to the first half of 2025. Based upon our results during the firstsee in full comparisonquarterhalf of 2026, and customer commitments, we anticipate stable demand for our chemistry during the remainder of 2026. Our expectations are in part based upon our current outlook on oil and gasprices.prices, as well as an assumption that the scope of the ongoing conflicts in the Middle East does not materially expand.
“On July 31, 2026, the Company was notified by the Puerto Rico Electric Power Authority (“PREPA”), the electric utility for the Commonwealth of Puerto Rico, that the Company had been awarded a 10-year contract to support natural gas-fired grid enhancement initiatives for PREPA (the “PREPA Contract”). Under the PREPA Contract, the Company is providing its proprietary PWRtek platform, including up to 40 MW of primary power generation capacity and up to six pairs of smart conditioning and distribution skids. …”see in full comparison
Net cash provided by financing activities for thesee in full comparisonthreesix months endedMarchJune31,30, 2026 was$0.9$6.4 million and relates primarily to$1.3$7.1 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, partially offset by payments to tax authorities for shares withheld from employees and payments for finance leases. Net cash used in financing activities was $0.7 million for the six months ended June 30, 2025, and relates primarily to $0.3 million in net payments on the ABL, payments for loan origination costs on the PWRtek Note, the issuance cost of the April 2025 Warrant and payments to tax authorities for shares withheld fromemployees.employees,Netpartiallycashoffsetusedbyinproceedsfinancing activities was $4.8 million forfrom thethreeissuancemonthsofendedstockMarchunder31,the2025,Company’s Employee Stock Purchase Plan andrelatesstockprimarilyoptionto net payments on the ABL.exercises.
“Consolidated revenue for the six months ended June 30, 2026 increased $55.7 million, or 49%, versus the same period of 2025, driven by increased sales volumes under the ProFrac Agreement, including international chemistry, a $10.5 million increase in revenue attributable to the Lease Agreement for six months ended June 30, 2026 compared to the same period of 2025, and $6.6 million in revenue attributable to the Utility Support Contract. Increases in revenues for the period were partially offset by a decrease in accrued Contract Shortfall Fees of $3.5 million. …”see in full comparison
Full comparison: every changed paragraph (50)
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.initiatives (the “Utility Support Contract”). The initial term of the agreementUtility Support Contract is for six months, with customer option to extend to four years. InDuring latethe March,three and six months ended June 30, 2026, the Company beganrecorded deploying$5.9 million and $6.6 million, respectively, in revenue related to the Utility Support Contract. Initial power generation under the Utility Support Contract has been paused due to infrastructure delays. The Company and the customer are evaluating options to extend the Utility Support Contract beyond the initial equipmentterm, tobut servicethere thisis contract.no Asassurance a result,that the CompanyUtility expectsSupport DAContract revenuewill inbe extended or that the seconddelays quarterwill tobe increase as compared to the first quarter.resolved.
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 utilized $2.3 million of the Equipment Credit during the second quarter of 2026. The Company expects to utilize the remaining Equipment Credit during the second half of 2026, however any unused amounts at the end of 2026 would be available for use in 2027 until the full credit is utilized.
On July 31, 2026, the Company was notified by the Puerto Rico Electric Power Authority (“PREPA”), the electric utility for the Commonwealth of Puerto Rico, that the Company had been awarded a 10-year contract to support natural gas-fired grid enhancement initiatives for PREPA (the “PREPA Contract”). Under the PREPA Contract, the Company is providing its proprietary PWRtek platform, including up to 40 MW of primary power generation capacity and up to six pairs of smart conditioning and distribution skids. At full deployment, annual revenue is expected to total approximately $40 million, with a potential 10-year revenue backlog of approximately $400 million. Support equipment is expected to begin deployment in the fourth quarter of 2026, with the initial power generation equipment and conditioning and distribution skids expected by the end of the first quarter of 2027.
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 threesix months ended MarchJune 31,30, 2025 reflect Contract Shortfall Fees of $7.5$15.2 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 threesix months ended MarchJune 31,30, 2026 reflect Contract Shortfall Fees of $2.7$3.9 million.
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 MarchJune 31,30, 2026 and 2025, the Company incurred $0.4$0.5 million of research and development expense. For the six months ended June 30, 2026 and 2025, the Company incurred $0.9 million and $0.8 million, respectively, 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.
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 firstsix quartermonths ofended June 30, 2026 increased 27%49% 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.
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. Revenues from the CT segment during the first half of 2026 increased 33% as compared to the first half of 2025. Based upon our results during the first quarterhalf of 2026, and customer commitments, we anticipate stable demand for our chemistry during the remainder of 2026. Our expectations are in part based upon our current outlook on oil and gas prices.prices, as well as an assumption that the scope of the ongoing conflicts in the Middle East does not materially expand.
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-fourthirty-six 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. During the first half of 2026, revenue from international customers totaled $12.3 million as compared to $7.8 million during the first half of 2025. Our outlook for growth in the Middle East iscould subjectbe toimpacted the resolution ofby the ongoing military conflicts.
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 times 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,” as well as the Utility Support Contract, 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 or compressed natural gas 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”) and similar assets being constructed utilizing the Equipment Credit can be utilized insupport 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. During the first half of 2026, DA segment revenue increased 245% as compared to the first half of 2025. We expect our DA segment revenue during the second half of 2026 to continue to exceed prior year results.
For the three months ended June 30, 2026 and 2025
Consolidated revenue for the three months ended MarchJune 31,30, 2026 increased $14.7$41.0 million, or 27%,70%, versus the same period of 2025, driven by increased external customer product sales, including international chemistry, increased sales volumes under the ProFrac Agreement, a $3.6 million increase in revenue attributable to the Lease Agreement and $7.3$5.9 million in PWRtekrevenue rentalattributable revenue,to the Utility Support Contract, partially offset by a decrease in accrued Contract Shortfall Fees of $4.8$6.5 million and decreased external customer product sales.million. Related party revenues in the CT segment are net of $2.2$2.4 million and $1.5$1.4 million of contract assets amortization for the three months ended MarchJune 31,30, 2026 and 2025, respectively.
Consolidated cost of sales for the three months ended MarchJune 31,30, 2026 increased $11.6$31.6 million, or 27%,72%, versus the same period of 2025, primarily due to increased product sales and increased costs related to PWRtekthe activityLease partiallyAgreement offsetand byUtility decreasedSupport freight costs.Contract. Consolidated cost of sales as a percentage of revenue was 78%76% and 78%75% for the three months ended MarchJune 31,30, 2026 and 2025, respectively.
SG&A expenses for the three months ended MarchJune 31,30, 2026 increased $0.6$0.9 million, or 10%,14%, 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$12.3 million for the three months ended MarchJune 31,30, 2026, versus the same period in 2025. The increase was primarily driven by a $3.1$9.4 million increase in gross profit,profit and asset acquisition expenses of $4.2 million for the three months ended June 30, 2025 with no corresponding activity for 2026. The increase in income from operations was partially offset by a $0.6$0.9 million increase in SG&A expenses and a $0.4$0.3 million increase in depreciation expenses during the three months ended MarchJune 31,30, 2026 as compared to the same period of 2025.
Interest and other expense for the three months ended MarchJune 31,30, 2026 increased $1.2$0.5 million driven by a $1.0 million increaseincreases 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$3.6 million and $0.1$17 millionthousand for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The increase in tax expense includes the impact of the partial release of the valuation allowance during the third quarter of 2025 as described under “Item 1. Financial Statements - Note 11.”
For the six months ended June 30, 2026 and 2025
Consolidated revenue for the six months ended June 30, 2026 increased $55.7 million, or 49%, versus the same period of 2025, driven by increased sales volumes under the ProFrac Agreement, including international chemistry, a $10.5 million increase in revenue attributable to the Lease Agreement for six months ended June 30, 2026 compared to the same period of 2025, and $6.6 million in revenue attributable to the Utility Support Contract. Increases in revenues for the period were partially offset by a decrease in accrued Contract Shortfall Fees of $3.5 million. Related party revenues in the CT segment are net of $4.7 million and $2.9 million of contract assets amortization for the six months ended June 30, 2026 and 2025, respectively.
Consolidated cost of sales for the six months ended June 30, 2026 increased $43.2 million, or 50%, versus the same period of 2025, primarily due to increased product sales and increased costs related to the Lease Agreement and Utility Support Contract. Consolidated cost of sales as a percentage of revenue was 77% and 76% for the six months ended June 30, 2026 and 2025, respectively.
SG&A expenses for the six months ended June 30, 2026 increased $1.6 million, or 12%, versus the same period of 2025. The increase relates primarily to increased salaries, stock compensation expense and increased professional fees. As a percentage of revenue, SG&A declined to 8.7% during the six months ended June 30, 2026, as compared to 11.5% during the 2025 six-month period.
Income from operations increased $14.3 million for the six months ended June 30, 2026, versus the same period in 2025. The increase was primarily driven by a $12.5 million increase in gross profit and asset acquisition expenses of $4.2 million for the six months ended June 30, 2025 with no corresponding activity for 2026. The increase in income from operations was partially offset by a $1.6 million increase in SG&A expenses and a $0.7 million increase in depreciation expenses during the six months ended June 30, 2026 as compared to the same period of 2025.
Interest and other expense for the six months ended June 30, 2026 increased $1.7 million driven by an 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 $5.2 million and $81 thousand for the six months ended June 30, 2026 and 2025, respectively. The increase in tax expense includes the impact of the partial release of the valuation allowance during the third quarter of 2025 as described under “Item 1. Financial Statements - Note 11.”
CT revenue from external customers for the three months ended MarchJune 31,30, 2026 decreasedincreased $7.3$8.6 million, or 33%,38%, compared to the same period of 2025 driven primarily by decreasedincreased product volumes.volumes, including international sales. Revenue from related party for the three months ended MarchJune 31,30, 2026 increased $14.2$19.2 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.
CT revenue from external customers for the six months ended June 30, 2026 increased $1.3 million, or 3%, compared to the same period of 2025 driven primarily by increased product volumes. Revenue from related party for the six months ended June 30, 2026 increased $33.4 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 MarchJune 31,30, 2026 decreasedincreased $3.8$0.7 million compared to the same period of 2025. The decreaseincrease was driven by a $3.6$1.1 million decreaseincrease in gross profit for the three months ended MarchJune 31,30, 2026, which wasincluded relateda to$6.5 decreasedmillion product volumes and an increasedecrease in costContract ofShortfall sales, partially offset by increased related party revenues.Fees.
Income from operations for the CT segment for the six months ended June 30, 2026 decreased $3.0 million compared to the same period of 2025. The decrease was driven by a $2.5 million decrease in gross profit for the six months ended June 30, 2026, which included a $3.5 million decrease in Contract Shortfall Fees as compared to the 2025 six-month period.
DA revenue from external customers for the three months ended MarchJune 31,30, 2026 increased $1.0$9.5 million, or 42%,359%, compared to the same period of 2025 primarily due to increased$5.9 servicemillion in revenue andattributable PWRtekto rentalthe incomeUtility Support Contract in 2026.2026, with no corresponding contract for the same period of 2025, and increased product volumes. Revenue from related party for the three months ended MarchJune 31,30, 2026 increased $6.7$3.8 million compared to the same period of 2025 primarily due to the PWRtekLease lease agreementAgreement in 2026. The Lease Agreement closed in late-April 2025, limiting the impact during the second quarter of 2025.
DA revenue from external customers for the six months ended June 30, 2026 increased $10.5 million, or 207%, compared to the same period of 2025 primarily due to increased volumes, increased service revenue and $6.6 million in revenue attributable to the Utility Support Contract in 2026 with no corresponding contract for the same period of 2025. Revenue from related party for the six months ended June 30, 2026 increased $10.5 million compared to the same period of 2025 primarily due to the Lease Agreement in 2026. The Lease Agreement closed in late-April 2025, limiting the impact during the six-month 2025 period.
Income from operations for the DA segment for the three months ended MarchJune 31,30, 2026 increased $6.3$12.1 million compared to the same period for 2025 primarily driven by PWRtekthe rentalLease incomeAgreement, Utility Support Contract and increased activity, partially offset by increased materials costs and costs related to the Lease Agreement.costs.
Income from operations for the DA segment for the six months ended June 30, 2026 increased $18.3 million compared to the same period for 2025 primarily driven by the Lease Agreement, Utility Support Contract and increased activity, partially offset by increased materials costs.
Loss from operations for the three months ended MarchJune 31,30, 2026 increased $0.5 million, or 15%, compared to the same period of 2025 primarily attributable to increased administrative costs. Loss from operations for the six months ended June 30, 2026 increased $1.0 million, or 15%, compared to the same period of 2025 primarily attributable to increased administrative costs.
The Company’s working capital requirements relate to the acquisition and maintenance of equipment and funding obligations as they become due. During the threesix months ended MarchJune 31,30, 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.
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 threesix months ended MarchJune 31,30, 2026 reflect Contract Shortfall Fees of $2.7$3.9 million.
As of bothJune March 31,30, 2026 and December 31, 2025, the Company had unrestricted cash and cash equivalents of $4.4 million and $5.7 million.million, respectively. In addition, as of MayAugust 1,3, 2026, the Company had approximately $11.8$15 million in available borrowings under the ABL. During the threesix months ended MarchJune 31,30, 2026, the Company had $7.6$22.5 million of operating income, $21$6.6 thousandmillion of cash providedused byin operating activities, $1.0$1.2 million of cash used in investing activities and $0.9$6.4 million of cash provided by financing activities.
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 and2024, April 2025 and July 2026 (as amended, the “ABL”). The AugustJuly 20242026 amendment to the ABL extended the maturity to AugustOctober 2026,31, increased2026 and provides the creditCompany availability and loweredwith the interestoption, rateupon spread.at least thirty days’ written notice prior to the October 2026 maturity, to either (i) extend the term of the Loan Agreement for an additional twelve months from the October 2026 maturity or (ii) terminate the ABL at maturity. 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 MarchJune 31,30, 2026, the Company had $4.7$10.4 million outstanding under the ABL. During the threesix months ended MarchJune 31,30, 2026, the Company incurred $1.0 million in interest and fees related to the ABL. As of MarchJune 31,30, 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 threesix months ended MarchJune 31,30, 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 at the October 2026 maturity, the Company is required to pay an early termination fee of $50 thousand. If the ABL is extended for an additional twelve months from the October 2026 maturity and is terminated prior to the end of its extended term, the Company is required to pay an early termination fee of 2.50%1.5% 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).ABL.
Net cash providedused byin operating activities was $21$6.6 thousandmillion during the threesix months ended MarchJune 31,30, 2026 compared to net cash provided by operating activities of $7.3$2.8 million for the same period of 2025. Consolidated net income for the threesix months ended MarchJune 31,30, 2026 was $4.7$14.6 million compared to consolidated net income of $5.4$7.1 million for the threesix months ended MarchJune 31,30, 2025.
During the threesix months ended MarchJune 31,30, 2026, non-cash adjustments to net income totaled $6.0$14.6 million as compared to $2.6$5.9 million for the same period of 2025.
•For the threesix months ended MarchJune 31,30, 2026, non-cash adjustments included a $1.6$4.7 million tax expense, $0.8$2.0 million of stock compensation expense, $2.2$4.7 million amortization of contract assetsassets, a $1.1 million increase in the provision for excess and $0.2obsolete inventory and $0.4 million of non-cash lease expense.
•For the threesix months ended MarchJune 31,30, 2025, non-cash adjustments included non-cash positive adjustments of $0.5$1.1 million of stock compensation expense, $1.5$2.9 million amortization of contract assets and $0.3$0.6 million of non-cash lease expense.
During the threesix months ended MarchJune 31,30, 2026, changes in working capital used $10.6$35.8 million of cash as compared to $0.7$10.2 million for the same period of 2025.
•For the threesix months ended MarchJune 31,30, 2026, changes in working capital resulted primarily from increased third party accounts receivable of $24.6 million, an increase in related party accounts receivable of $9.8$19.5 million, increased third party accounts receivable of $2.8 million, and increases in net inventories of $4.1$16.6 million andmillion, operating lease liabilities of $0.4$0.7 million,million partiallyand offset by increaseddecreased accrued liabilities of $1.5$1.1 million andpartially offset by an increase in accounts payable of $4.2$26.2 million.
•For the threesix months ended MarchJune 31,30, 2025, changes in working capital resulted primarily from aan decreaseincrease in related party accounts receivable of $4.1$2.5 million, increased third party accounts receivable of $2.5$5.1 million and net inventories of $0.4 million along withmillion, decreased accrued liabilities and operating lease liabilities of $1.8$1.9 million and $0.6$0.9 million, respectively, partiallyand offset by increasesdecreases in accounts payable of $0.9$1.7 million, partially offset by a decrease in net inventories of $1.4 million andalong otherwith assetsan increase in interest payable of $0.5$0.7 million.
Net cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 and 2025 was $1.0$1.2 million and $0.6$1.3 million, respectively, primarily driven by $1.0$1.2 million and $0.6$1.3 million in capital expenditures for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Capital expenditures for the six months ended June 30, 2026 are net of the $3.0 million of Equipment Credit used for the period.
Net cash provided by financing activities for the threesix months ended MarchJune 31,30, 2026 was $0.9$6.4 million and relates primarily to $1.3$7.1 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, partially offset by payments to tax authorities for shares withheld from employees and payments for finance leases. Net cash used in financing activities was $0.7 million for the six months ended June 30, 2025, and relates primarily to $0.3 million in net payments on the ABL, payments for loan origination costs on the PWRtek Note, the issuance cost of the April 2025 Warrant and payments to tax authorities for shares withheld from employees.employees, Netpartially cashoffset usedby inproceeds financing activities was $4.8 million forfrom the threeissuance monthsof endedstock Marchunder 31,the 2025,Company’s Employee Stock Purchase Plan and relatesstock primarilyoption to net payments on the ABL.exercises.
FTK insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 1,319,493 shares, about $34.3M) and open-market sales in 2 filings (2 insiders, 2 trade dates, 2,319,360 shares, about $60.3M). Net open-market shares: -999,867 (purchases minus sales); net value about -$25.9M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-11 | Wilks Matthew |
Open-market purchase | 1,319,493 | $26.01 | $34.3M |
| 2026-09-11 | Profrac Gdm, Llc |
Open-market sale | 2,306,806 | $26.01 | $60.0M |
| 2026-05-18 | Clement James Bond |
Open-market sale | 12,554 | $20.08 | $252.1K |
| 2026-05-15 | Hill Kathryn Anne |
Grant/award | 5,099 | — | — |
| 2026-05-15 | Mcdonald Kevin M |
Grant/award | 5,099 | — | — |
| 2026-05-15 | Farber Evan R |
Grant/award | 5,099 | — | — |
| 2026-05-15 | Fucci Michael |
Grant/award | 5,099 | — | — |
| 2026-05-15 | Agadi Harshavardhan V |
Grant/award | 5,099 | — | — |
| 2026-05-15 | Clement James Bond |
Shares withheld for tax | 3,187 | $19.61 | $62.5K |
| 2026-05-15 | Clement James Bond |
Grant/award | 8,097 | — | — |
| 2026-05-15 | Ezell Ryan Gillis |
Shares withheld for tax | 4,780 | $19.61 | $93.7K |
| 2026-05-15 | Ezell Ryan Gillis |
Grant/award | 12,146 | — | — |
Well-known investors holding FTK (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| First Eagle Investment Management | 2026-06-30 | 293,242 | $6.9M | 0.01% | New position |
| Millennium Management (Israel Englander) | 2026-06-30 | 236,303 | $5.6M | 0.0% | Reduced 18% |
| Polen Capital Management | 2026-06-30 | 195,504 | $4.6M | 0.04% | Added 607% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 54,904 | $1.3M | 0.0% | Reduced 69% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 9,297 | $218.7K | 0.0% | New position |