KLNG 10-K & 10-Q changes, risk factors and insider trading

The Company records depreciation and amortization expense related to administrative property, plant and equipmentequipment, capitalized software and intellectual property as SG&A, which totaled $86 and $112 andfor $108 for the years ended December 31, 20242025, and 2023,2024, respectively.

Net interest income for the year ended December 31, 31, 20242025, was $47$6 compared to net interest income of $7$47 for the year ended December 31, 2023.2024. The increasedecrease of $40$41 is mainly due to anincreased invoice increase infactoring expense to meet short-term liquidity requirements, which partially offset interest received on the Company’s interest bearing financial instruments during the year ended December 31, 2024.income.

The Company recorded net other incomeincome, net of $386 and $33 and $50 for the years ended December 31, 20242025, and December 31, 2023,2024, respectively, which increase primarily consistsconsisted of insurancea policyholder$333 dividends.gain recognized in 2025 related to the settlement of the WW Champion lawsuit.

The Company recorded loss of $1 and gain of $4$12 and a loss of $1 related to equipment sold by the Company during the years ended December 31, 20242025, and December 31, 2023,2024, respectively.

The Company believes it will have adequate liquidity to meet its future operating requirements. We are generally dependent on our cash flows from operations to fund our working capital requirements, and the uncertainties noted above create risks that we may not achieve our planned earnings or cash flow from operations. On May 24, 2023, the Company entered into a Purchase and Sale Agreement/Security Agreement with Zions Bancorporation, N.A., d/b/a Amegy Bank Business Credit (“Amegy”), which provides for Koil Energy from time to time to sell its accounts receivable and other rights to payment to Amegy, subject to Amegy’s right to approve or reject future accounts receivable and other rights proposed for sale, in its sole discretion. At December 31, 20242025, and 2023,2024, respectively, the Company had $541 and no outstanding sales of accounts receivable to Amegy.Amegy, respectively.

The principal liquidity needs of the Company are to fund ongoing operations, working capital, and capital expenditures. During the year ended December 31, 2024,2025, the Company reported a $1,392$1,887 increasedecrease in cash. The Company generatedconsumed $1,726$901 of net cash provided byin operating activities, primarily driven by cashincreased usedworking bycapital to changes insupport operatingcustomer assetscontracts and liabilitiesvendor obligations of $1,824 and other adjustments to reconcile net income to net cash provided by operating activities of $930, which includes items such as non-cash lease expense, loss on sale of property, plant and equipment, share-based compensation, bad debt expense, and depreciation and amortization. This was$2,436 partially offset by netnon-cash incomeitems including $375 of $2,620.share-based Thecompensation, $590 Companyfor depreciation and amortization, and $569 of credit loss expense. Net cash used $373in investing activities was $1,533, including $1,282 for new equipment and the overhaul of netexisting fixed assets and $263 for capitalized software development costs. Net cash for investing activities, primarily to fund capital expenditures. The Company also provided by $39 of net cash in financing activities for principalwas payments$562, madeprimarily related to short-term borrowings under itsthe financeAmegy leasefactoring obligations, proceeds from stock options exercised, and proceeds and principal payments on short-term borrowings.facility.

The Company maintains a positive outlook on customer inquiries and views this as an opportunity to capitalize on its product, service, and rental offerings to address the subsea distribution and cable management needs of its customers. The reasons for this expected increase are set forth in the “Industry and Executive Outlook” section above. As such, the Company believes it will have adequate liquidity to meet its future operating requirements through a combination of cash on hand, cash expected to be generated from operations, and potential sales of Property, Plant and Equipment (“PP&E.E”). Given the inherent volatility in oil prices and global economic activity, the Company cannot predict this with certainty. To mitigate this uncertainty and preserve liquidity, the Company will concentrate capital investments on key growth needs and pursue opportunistic cost containment initiatives, which can include workforce alignment, restricting overhead spending and limiting research and development efforts to only critical items.

We recognize revenue for service contracts measuringover progresstime towardwhen satisfyinglabor, theequipment performancerental, obligationand inother aassociated mannercosts thatare incurred, which we believe best depicts the transfer of goods or services to the customer. The controlControl overtransfers services is transferred over time when theas services are rendered to the customerperformed on a daily basis. Specifically, we recognize revenue as the services are provided as we have the right to invoice the customer for the services performed. Services are typically billed on a monthly basis.monthly. Payment terms for services are usually generally 30 days from invoice receipt but canmay increaseextend to 45, 60, or 90 days depending on the customer.

The estimation of anticipated credit losses that may may be incurred as we work through the invoice collection process with our customers requires us to make judgments and estimates regarding our customers’ ability to pay amounts due. We monitor our customers’ payment history and current creditworthiness, if needed, to determine that collectability is reasonably assured. We provide an allowance for credit losses based upon a review of each accounts receivable balance with respect to a customer’s ability to make payments. We also evaluate historical loss rates as well as consider forward-looking factors specific to the customers, the overall economic environment, and management expectations to determine expected losses. When certain accounts are determined to require an allowance, they are expensed by a provision for badcredit debtslosses in that period. At On December 31, 20242025, and 2023,2024, we estimated the allowance for credit losses requirement to be $0.$569 Bad debt expense totaledand $0 respectively. Credit loss expense totaled $569 and $1$0 for the yearsyear ended December 31, 20242025, and 2023,2024, respectively. We believe that our allowance for credit losses is adequate to cover the anticipated credit losses under current conditions; however, uncertainties regarding changes in the financial condition of our customers, either adverse or positive, could impact the amount and timing of any additional credit losses that may be required.

Global energy demand continues to rise. Meeting this demand requires incremental oil and natural gas production alongside growth in renewable energy sources. Years of underinvestment in offshore exploration and development are now fueling a resurgence in subsea activity. Deepwater fields naturally decline at an average rate of 7% per year, according to IHS Markit Ltd., underscoring the urgency for new development just to maintain current output. From our perspective, we are seeing global operators allocate more capital toward deepwater and ultra-deepwater developments, particularly in the US, Brazil, Norway, the US.Mediterranean, and West Africa.

(2) Subsea tie-back projects that connect new wells to existing infrastructure; and (3) Maintenance and life-extension activities, including upgrades and decommissioning of aging equipment and systems Koil Energy provides products and services across all three areas, with a particular focus on subsea tie-back projects. Subsea tie-back development continues to gain momentum as a preferred approach among offshore operators. These projects allow operators to access nearby reservoirs, utilize available topside capacity, and leverage existing subsea infrastructure. In mature basins, tie-back strategies have been employed for decades. In emerging regions, operators are increasingly adopting this approach to accelerate first hydrocarbon production and enhance project returns.

Three Months Ended MarchJune 31,30, 2026 Compared to to Three Months Ended MarchJune 31,30, 2025

The 56%78% increase in revenues was primarily driven by a $2,801$1,423 increase in lump-sumfixed-price projects, with an additional $123$2,623 contributionincrease from time-and-materialsservice work. The increase in fixed-price project revenues was attributable to a large, long-term integrated project, while the increase in service revenues was primarily driven by a large project involving two of the Company’s carousels. Revenues from new customers contributed $2,110gained toin the increase,prior 12 months contributed $2,981, or 32% of total revenue, while legacy customers accounted for the remaining $814,$6,248, asor compared68% toof revenuestotal revenue for the three months ended endedJune March30, 31, 2025.2026.

Cost of sales increased 55%81% from the firstsecond quarter of 2025 to the firstsecond quarter of 2026, generally consistent with higher revenue activity. The rate of increase was slightly belowabove revenue growth, resulting in ana improvement1% decrease in gross profit marginsmargin to 32% of sales, upcompared fromto 31%33% in the prior yearprior-year period. OperatingThe leverageprimary driver fromof higherthis throughputchange was partiallya offsetshift byin increasedrevenue Brazilmix officetoward expenseslarger, andlong-term higher consumables costs associated with fabrication projects.contracts.

The Company records depreciation expense related to revenue-generating property, plant and equipment as cost of sales, which totaled $146$147 and $117$127 for the three months ended MarchJune 31,30, 2026 and 2025, respectively.

Selling, general and administrative expenses (“SG&A”) increased by $611$339 in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. The increase was primarily driven by higher administrative headcount,headcount and employee bonus expense, resulting in a $405$173 increase in personnel costs, as well as a $156$57 increase in auditlegal feescost to support bidding activity, a $54 increase in IT expenses from added software licenses, and $50a of$55 publicincrease company expenses andacross other costs.cost categories.

The Company records depreciation expense related to administrative property, plant and equipment and intellectual property as SG&A, which totaled $32$34 and $29 for the three months ended MarchJune 31,30, 2026 and 2025, respectively.

The following is a reconciliation of net income (loss) to Adjusted EBITDA for the three months ended MarchJune 31,30, 2026 and 2025:

The $233 increase in Adjusted EBITDA increased by $955 for the three months ended MarchJune 31,30, 2026, was primarily drivendue byto higher project throughput, particularly onin lump-sum,time fixed-priceand contracts,materials asservice wellcontracts. A significant ascontributor was a modestmajor improvementproject to provide subsea umbilical handling, spooling, and storage services using the Company’s carousels. Share-based compensation increased, reflecting improved financial performance and commissions earned in grossconnection profit margin compared towith the samebooking periodof new in 2025.projects. This stronger operating performance contributed to a $270$591 improvement in net income, from a net loss of $29$61 in the prior-yearquarter quarterended June 30, 2025, to net income of $241$652 in the current quarter.year period.

The current-yearcurrent quarteryear period did not include any restructuring costs, while the three months ended MarchJune 31,30, 2025, included $158$122 of expenses related to efforts to streamline and strengthen administrative functions. Share-basedIn compensationaddition, increasedthe bysecond $61,quarter of 2025 included a $250 gain from $70the insuccessful resolution of the prior-yearWW quarterChampion to $131 in the current quarter, primarily due to equity awards granted to a new executive officer, the appointment of a new board member, and the settlement of a portion of employee bonuses in stock awards.lawsuit.

The Company believes it will have adequate liquidity to meet its future operating requirements. We are generally dependent on our cash flows from operations to fund our working capital requirements, and the uncertainties noted above create risks that we may not achieve our planned earnings or cash flow from operations. On May 24,19, 2023,2026, the Companywe entered into a PurchaseLoan and Sale Agreement/Security Agreement with ZionsnFusion Bancorporation,Capital N.A.,Finance, d/b/aLLC Amegy Bank Business Credit (“AmegynFusion”), pursuant to which providesnFusion forwill make Koilrevolving Energyloans to the Company from time to timetime, in amounts determined by nFusion in its good faith business judgment, up to sella itsmaximum credit accountslimit receivableof $5,000. The facility is asset-based, and otheradvances rights to payment to Amegy,are subject to Amegy’sthe rightweekly delivery of borrowing base certificates. The facility has an initial term of 12 months and is scheduled to approvemature orin rejectMay future2027. accountsThe receivableCompany expects the facility to be renewed at that time, although renewal remains subject to the terms of the agreement and other rights proposed for sale, in its sole discretion. As of March 31, 2026 and December 31, 2025, the Companyparties’ hadmutual $8 and $541, respectively, of factored invoices outstanding with Amegy.agreement.

The Company’s principal liquidity needs are to fund ongoing operations, working capital, and capital expenditures. During the threesix months ended MarchJune 31,30, 2026, cash decreased by by $350.$613. Net cash providedused byin operating activities totaled $414,$704, primarily driven byan netincrease incomein andaccounts non-cash add-backs for depreciation and amortization.receivable. Net cash used in investing activities was $216,$1,750, primarily related to capital expenditures, patent costs, and internal software development. Net cash usedprovided in by financing activities was $535,$1,856 substantiallyand allincluded net payments of which related$541 to repaymentsextinguish the Factoring Agreement and net borrowings of short-term$2,400 borrowingsunder under the AmegynFusion factoring line.facility.

Refer to Note 1 in Part II. Item 8. “Financial Statements and Supplemental Data,” in our Annual Report on Form 10-K for the year ended December 31, 20252025, for a discussion of recently issued accounting standards. There have been no significant changes to the status or expected impact of these standards during the three six months ended March 31,June 30, 2026.

On September 29, 2025, the Company filed a civil action against OMSi in the United States District Court for the Southern District of Texas seeking to recover the unpaid amounts. OMSi has not yet filed a response. For the quarter endingended September 30, 2025, the Company recorded a reserve of $569 in Allowance for Credit Losses. The Company received a judgment in US District Court against OMSi in January 2026 in the amount of approximately $575 and intends to pursue full recovery. The Company will adjust the reserve as new information becomes available.