Form 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Company Overview

Chemistry Technologies (CT) provides sustainable, optimized chemistry solutions that aim to maximize customer value by improving return on invested capital, lowering operational costs, and providing environmental benefits. The company designs, develops, manufactures, and markets chemistry solutions to help customers in the energy, industrial, and advanced alternative energy sectors pursue improved efficiencies and performance.

CT’s major customers include energy companies like its related party ProFrac Services, as well as industrial companies. The company has a long-term chemistry supply agreement with ProFrac Services.

The company’s Data Analytics (DA) segment delivers real-time information and insights to customers to enable optimization of operations and reduction of emissions and carbon intensity. The DA segment generates revenue through equipment rentals and capital sales to customers across the oil and gas industry.

The company’s Research & Innovation (R&I) function supports both the CT and DA segments through chemistry formulation, technical support, and new technology development.

Financial Performance

For the three months ended June 30, 2026, the company reported total revenue of $99.4 million, a 70% increase compared to the same period in 2025. This was driven by increased external customer product sales, higher sales volumes under the ProFrac agreement, and revenue from new contracts like the Lease Agreement and Utility Support Contract.

Cost of sales increased 72% to $75.6 million, resulting in a gross profit margin of 23.9%. Selling, general, and administrative (SG&A) expenses increased 14% to $7.7 million.

Income from operations increased $12.3 million to $14.9 million, primarily due to the increase in gross profit and the absence of $4.2 million in asset acquisition expenses incurred in the prior year period.

For the six months ended June 30, 2026, total revenue increased 49% to $169.4 million, again driven by higher sales volumes, new contracts, and increased international chemistry sales. Cost of sales rose 50% to $130.1 million, with gross profit margin at 23.2%. SG&A expenses increased 12% to $14.7 million.

Income from operations for the six-month period grew $14.3 million to $22.5 million, reflecting the higher gross profit and lack of asset acquisition costs.

Segment Performance

The Chemistry Technologies (CT) segment saw revenue from external customers increase 38% in Q2 2026 and 3% in the first half of 2026, driven by higher product volumes including international sales. Related party revenue, primarily from the ProFrac agreement, grew 64% in Q2 and 55% in the first half, though this was partially offset by decreases in accrued contract shortfall fees.

CT segment income from operations increased $0.7 million in Q2 2026 but decreased $3.0 million in the first half, as the higher gross profit was offset by the decline in contract shortfall fees.

The Data Analytics (DA) segment had a very strong performance, with external customer revenue up 359% in Q2 2026 and 207% in the first half, primarily due to the new Utility Support Contract and increased product volumes. Related party revenue also grew significantly, up 115% in Q2 and 300% in the first half, driven by the Lease Agreement.

DA segment income from operations improved $12.1 million in Q2 2026 and $18.3 million in the first half, benefiting from the new contracts and higher activity levels.

Outlook

The company expects to grow revenues from both the CT and DA segments through the remainder of 2026 compared to 2025, based on current market conditions. However, the outlook could be impacted by volatility in oil and gas markets and the ongoing military conflicts in the Middle East.

In the CT segment, the company believes it is well-positioned to adapt to fluctuations in activity levels, and it anticipates stable demand for its chemistry products in 2026 based on customer commitments. Increased natural gas activity in the Haynesville shale basin and growing international unconventional activity could provide additional growth opportunities.

The DA segment continues to see strong demand for its real-time data and analytics technologies, which are helping customers optimize operations and reduce emissions. The company expects the Lease Agreement and Utility Support Contract to have a significant positive impact on DA segment revenues in 2026.

However, the company’s power services contracts, including the Utility Support Contract and a new 10-year agreement with the Puerto Rico Electric Power Authority, carry risks and uncertainties around third-party execution, permitting, and other factors that could prevent the realization of expected revenues.

Capital Resources and Liquidity

The company funded its working capital requirements during the first half of 2026 using cash on hand, borrowings under its asset-based loan (ABL) facility, and cash flow from operations. As of June 30, 2026, the company had $4.4 million in unrestricted cash and $15 million in available borrowing capacity under the ABL.

Cash used in operating activities was $6.6 million in the first half of 2026, compared to cash provided of $2.8 million in the prior-year period. This was primarily due to increases in working capital, including higher accounts receivable and inventory. Cash used in investing activities was $1.2 million, mostly for capital expenditures.

The company believes its current cash, cash flow from operations, and ABL availability will be sufficient to fund its capital requirements and obligations over the next 12 months. However, sustained weakness in oil and gas markets could negatively impact customer payments and the company’s liquidity.

The company’s ABL facility provides up to $20 million in credit, subject to a borrowing base. As of June 30, 2026, the company had $10.4 million outstanding under the ABL, which bears interest at the Wall Street Journal Prime Rate plus 2%.

Critical Accounting Policies

The company’s critical accounting policies include:

Leases - Lessor Accounting: The company leases equipment to customers under operating lease arrangements, requiring judgments around lease classification, equipment fair value, and lease term.

Contract Assets: The company has contract assets related to the ProFrac agreement, which are amortized over the contract term. The recoverability of these assets depends on forecasted revenues and the impact of contract shortfall fees.

Risks and Uncertainties

The company’s power services contracts, including the Utility Support Contract and a new agreement with the Puerto Rico Electric Power Authority, carry significant risks related to third-party execution, permitting, fuel supply, grid interconnection, and other factors outside the company’s control. Delays, cost overruns, or failure to complete these projects could materially impact the company’s ability to generate expected revenues.

As the company expands its power services business into new areas like grid power and data center support, it will face risks around scaling operations, managing capital commitments, and navigating new regulatory environments.

Overall, the company’s financial performance and outlook remain tied to the cyclical oil and gas industry, as well as broader macroeconomic and geopolitical conditions that could impact commodity prices, customer activity, and the company’s supply chain. The ongoing military conflicts in the Middle East introduce additional uncertainty.