LEASES

12 Months Ended

Dec. 31, 2025

NOTE 2: LEASES

We lease land, buildings, and certain equipment under non-cancellable operating leases. The Company leases office, indoor manufacturing, warehouse, and operating space in Houston, Texas and Macaé Brazil. Additionally, the company leases storage space in Mobile, Alabama to house its 3,400 metric ton and 3,500 metric ton carousel systems. We classify our leases related to certain office furniture and computer equipment as financing leases. The Company elects to apply the short-term lease exception; therefore, the Company will not record an ROU asset or corresponding lease liability for leases with an initial term of twelve months or less that are not reasonably certain of being renewed and instead will recognize a single lease cost allocated over the lease term, generally on a straight-line basis. The Company elects to apply the practical expedient to not separate lease components from non-lease components and instead account for both as a single lease component for all asset classes.

Most leases include one or more options to renew, with renewal terms that can extend the lease term on a monthly, annual, or longer basis. The exercise of lease renewal options is at the Company’s sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements is limited by the expected lease term unless there is a transfer of title or purchase option that is reasonably certain of being exercised.

The Company elects to not capitalize any lease in which the estimated value of the underlying asset at the commencement date is less than the Company’s capitalization threshold. A lease would need to qualify for the low value exception based on various criteria.

On November 19, 2025, Koil Energy Solutions do Brazil Ltda, began subleasing a portion of its administrative offices for $R30 per month (or approximately $5 at current exchange rates). This sub-lease is for 3 months and renewable.

The following tables present information about our operating and finance leases:


	Classification	December 31, 2025		December 31, 2024
Assets
Operating	Right-of-use operating lease assets	$	5,770	$	5,383
Finance	Right-of-use finance lease assets		53		29
Total lease assets		$	5,823	$	5,412

Liabilities
Current
Operating	Current operating lease liabilities	$	899	$	537
Finance	Current finance lease liabilities		20		12

Non-current
Operating	Operating lease liability, long-term		5,658		5,600
Finance	Finance lease liability, long-term		29		12
Total lease liabilities		$	6,606	$	6,161

The components of our lease expense were as follows:


		Years Ended December 31,
	Classification	2025		2024
Finance lease costs
Amortization of ROU assets	Selling, general and administrative	$	16	$	74
Interest on lease liabilities	Interest (income) expense, net		2		4
Operating lease expense	Cost of sales		1,049		756
Operating lease expense	Selling, general and administrative		219		220
Short term lease expense	Cost of sales		600		380
Total lease expense		$	1,886	$	1,434

The lease term and discount rate for our operating and financing leases were as follows:


	December 31, 2025		December 31, 2024
Weighted-average remaining lease terms (years)
Operating leases		6.67		7.72
Finance leases		3.47		2.40

Weighted-average discount rates
Operating leases		7.44%		7.94%
Finance leases		4.66%		0.02%

Present value of lease liabilities:


Years ending December 31,	Operating Leases			Finance Leases
2026	$	1,357		$	22
2027		1,378			9
2028		1,362			9
2029		1,100			9
2030		1,080			4
Thereafter		2,035			–
Total lease payments		8,312			53
Less: Interest		(1,755	)		(4	)
Present value of lease liabilities	$	6,557		$	49

The Company had no material non-cash financing or operating leases entered into during the years ended December 31, 2025, and 2024.