KOIL ENERGY SOLUTIONS, INC. 10-K

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 UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 Washington D.C., 20549

 FORM 10-K

 ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended December 31, 2024

 TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 Commission File No. 000-30351

 (Exact name of registrant as specified in its charter)

 Nevada

 75-2263732

 (State of other jurisdiction of incorporation)

 (I.R.S. Employer Identification No.)

 1310 Rankin Road,
 Houston, Texas

 77073

 (Address of Principal Executive Offices)

 (Zip Code)

 Registrant's telephone number, including area
code: ( 281) 517-5000

 Securities registered pursuant to Section 12(b) of
the Act: None

 Title of Each Class

 Trading Symbol(s)

 Name of Each Exchange on Which Registered

 N/A

 N/A

 N/A

 Securities registered pursuant to Section 12(g) of
the Act: Common Stock, $0.001 par value

 Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

 Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or 15(d) of the Act. Yes No

 Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes No

 Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit such files). Yes No

 Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See
definition of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging
growth company" in Rule 12b-2 of the Exchange Act.

 Large accelerated filer

 Accelerated filer

 Non-accelerated filer

 Smaller reporting company

 Emerging Growth Company

 If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.

 Indicate by check mark whether the registrant has
filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report.

 If securities are registered pursuant to Section 12(b)
of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of
an error to previously issued financial statements.

 Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant's
executive officers during the relevant recovery period pursuant to §240.10D-1(b).

 Indicate by checkmark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act) Yes No

 As of June 30, 2024, the aggregate market value of
the voting and non-voting common equity held by non-affiliates, computed by reference to the price at which the common equity was last
sold, was $ 15,557,851.92.

 At March 27, 2025, the registrant had 12,388,202 outstanding
shares of common stock, par value $0.001 per share.

 DOCUMENTS INCORPORATED BY REFERENCE

 None

 Item 1

 Business

 Item 1A

 Risk Factors

 Item 1B

 Unresolved Staff Comments

 Item IC

 Cybersecurity

 Item 2

 Properties

 Item 3

 Legal Proceedings

 Item 4

 Mine Safety Disclosures

 Item 5

 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item 6

 [ Reserved ]

 Item 7

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A

 Quantitative and Qualitative Disclosures About Market Risk

 Item 8

 Financial Statements and Supplementary Data

 Item 9

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A

 Controls and Procedures

 Item 9B

 Other Information

 Item 9C

 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Item 10

 Directors, Executive Officers and Corporate Governance

 Item 11

 Executive Compensation

 Item 12

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item 13

 Certain Relationships and Related Transactions, and Director Independence

 Item 14

 Principal Accountant Fees and Services

 Item 15

 Exhibits and Financial Statement Schedules

 Item 16

 Form 10-K Summary

 Signatures

 ii

 Forward-Looking Information

 Unless otherwise indicated, the terms "Koil
Energy Solutions, Inc.", "Koil Energy", the "Company", "we", "our" and "us"
are used in this report to refer to Koil Energy Solutions, Inc., a Nevada corporation, and its direct and indirect wholly owned subsidiaries.

 In this Annual Report on Form 10-K (the "Report"),
we may make certain forward-looking statements ("Statements"), including statements regarding our plans, strategies, objectives,
expectations, intentions, and resources that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. We do not undertake to update, revise, or correct any of the Statements. The Statements should also be read in conjunction
with our audited consolidated financial statements and the notes thereto.

 The Statements contained in this Report that are not
historical fact are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995), within
the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
The Statements contained herein are based on current expectations that involve a number of risks and uncertainties. These Statements can
be identified by the use of forward-looking terminology such as "believes", "expects", "may", "will",
"should", "intend", "plan", "could", "is likely", or "anticipates",
or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties.
We caution the readers that these Statements are only predictions. No assurances can be given that the future results indicated, whether
expressed or implied, will be achieved. While sometimes presented with numerical specificity, these projections and other Statements are
based upon a variety of assumptions relating to the business of the Company, which, although considered reasonable by us, may not be realized.
Because of the number and range of assumptions underlying our projections and Statements, many of which are subject to significant uncertainties
and contingencies that are beyond our reasonable control, some of the assumptions inevitably will not materialize, and unanticipated events
and circumstances may occur subsequent to the date of this Report. These Statements are based on current expectations, and we assume no
obligation to update this information. Therefore, our actual experience and the results achieved during the period covered by any projections
or Statements may differ substantially from those projected. Consequently, the inclusion of projections and other Statements should not
be regarded as a representation by us or any other person that these estimates and projections will be realized, and actual results may
vary materially. There can be no assurance that any of these expectations will be realized or that any of the Statements contained herein
will prove to be accurate.

 The risks and uncertainties mentioned previously relate
to, among other matters, the following:

 Economic uncertainty and financial market conditions may impact our customer base, suppliers, and backlog;

 The volatility of oil and natural gas prices;

 Our use of percentage-of-completion accounting could result in volatility in our results of operations;

 A portion of our contracts may contain terms with penalty provisions;

 Fluctuations in the price and supply of raw materials used to manufacture our products may reduce our profits and could materially impact our ability to meet commitments to our customers;

 Our operations could be adversely impacted by the continuing effects of government regulations;

 International and political events may adversely affect our operations;

 Our operating results may vary significantly from quarter to quarter;

 We may be unsuccessful at generating profitable internal growth;

 The departure of key personnel could disrupt our business;

 Our business requires skilled labor, and we may be unable to attract and retain qualified employees;

 Unfavorable legal outcomes could have a negative impact on our business; and

 Impact of global health crises, including epidemics and pandemics.

 iii

 ITEM 1.

 Business

 General

 Koil Energy Solutions, Inc., a Nevada corporation
(the "Company", "Koil Energy", "we", "our" and "us"), is an energy services
company that provides equipment and support services to the world's energy and offshore industries. Primary operations are conducted
under Koil Energy Solutions, Inc., a Delaware corporation ("Koil Energy Delaware"), which is a wholly owned subsidiary of
the Company.

 Koil Energy's website address is www.koilenergy.com.
The Company makes available, free of charge on its website, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as soon as reasonably practicable after the Company electronically files such material with,
or furnishes them to, the Securities and Exchange Commission (the "SEC"). Paper or electronic copies of these documents may
be obtained upon request by contacting the Company. The SEC maintains an internet website that contains reports, proxy and information
statements and other information regarding issuers that file electronically with the SEC, including the Company, at www.sec.gov.

 Business Overview

 Koil Energy is an energy services company that provides
equipment and support services to the world's energy and offshore industries. The Company provides innovative solutions to complex
customer challenges presented between the production facility and the energy source. Koil Energy's core services and technological
solutions include distribution system installation support and engineering services, umbilical terminations, loose-tube steel flying leads,
and related services. Additionally, Koil Energy's experienced professionals can support subsea engineering, manufacturing, installation,
commissioning, and maintenance projects located anywhere in the world. The Company's broad line of solutions are engineered and
manufactured primarily for major integrated, large independent, and foreign national energy companies in offshore areas throughout the
world. These products are often developed in direct response to customer requests for solutions to critical needs in the field. The Company
primarily serves the offshore oil and gas market; however, the Company's product offerings and service capabilities are based on
core competencies that are energy source agnostic and can be applied to additional markets, including offshore wind, offshore wave energy,
hydrogen, and liquefied natural gas.

 Koil Energy's goal is to provide superior services
and products to its customers in a safe, cost-effective, and timely manner. The Company believes there is significant demand for, and
brand name recognition of, its established services and products due to the technical capabilities, reliability, cost-effectiveness, timeliness
of delivery and execution, and operational efficiency features of these solutions.

 In 2022, we changed our name from Deep Down, Inc.,
to Koil Energy Solutions, Inc. In connection with the name change, our ticker symbol was changed to "KLNG".

 For the years ended December 31, 2024 and 2023, the
Company's operations were organized as one reportable and one operating segment.

 Services

 Koil Energy supports all aspects of subsea field development
with its engineering and project management services, including the design, installation, and retrieval of subsea equipment and systems,
connection and termination operations, well-commissioning services, and construction support. The Company works closely with all customers
to provide the fastest, safest, and most cost-effective solutions to a variety of complex issues. The Company also serves a range of customers,
including operators, installation contractors, and subsea equipment manufacturers.

 Project Management and Engineering. Koil Energy's
project managers and engineers have extensive experience and knowledge to support customers both on and offshore. Particularly, the Company
specializes in the design and engineering of steel tube flying leads, umbilicals, flexible and rigid risers, flowlines, and jumpers. Koil
Energy's comprehensive subsea engineering services oversee all project requirements from conception to final commissioning, including
offshore participation during installation to ensure proper execution and safe completion of projects.

 Spooling Services. Koil Energy's engineering
teams provide the planning, supervision, specialized equipment, and coordination with offshore installation personnel for a customer's
pull-in and spooling needs. The Company has the ability to manage every stage of the process from terminations, spooling operations, installation,
testing, monitoring, and pull-in for umbilicals and flying leads.

 Testing and Commissioning Services. The Company
can perform all aspects of testing related to connecting the umbilical termination assemblies, performing installations, and completing
the commissioning of the system thereafter. This includes initial factory acceptance testing, extended factory acceptance testing, and
system integration testing, and offshore installation and commissioning services. The Company also offers a variety of pumping systems
to meet industry needs and offers maximum flexibility to ensure a safe and efficient commissioning program.

 Storage Management. Koil Energy's facility
in Houston, Texas offers high quality warehousing and workshop capacity, external storage, and a strategic location near customers and
key suppliers. Among other capabilities, the Company provides long-term specialized contract warehousing, long and short-term storage,
material handling equipment, integrated inventory management, packing, and labeling.

 Equipment Refurbishment and Intervention Services.
 The Company provides refurbishment and repurposing of recovered subsea equipment and associated support services for offshore interventions.
As an emergency or intervention arises, the stored asset is engineered, reconfigured, and tested per customer specifications. Additionally,
Koil Energy has developed a suite of proprietary equipment and tools available to address the critical offshore needs of its customers
and minimize production disruptions due to unplanned events. A Koil Energy service technician is then deployed with the equipment to support
the offshore campaign.

 Products

 Koil Energy designs, manufactures, fabricates, inspects,
assembles, tests, and installs subsea distribution equipment used by major integrated, large independent, and foreign national energy
companies in offshore areas throughout the world. The Company's products are used during exploration, development, and production
operations on offshore drilling rigs, installation and intervention vessels, and as part of the permanently installed subsea production
infrastructure.

 Flying Leads. Koil Energy designs, manufactures,
and installs flying leads, particularly steel tube flying leads. Flying leads are umbilical jumpers with a termination plate at either
end that support the transmission of hydraulic fluid and/or chemicals between the subsea equipment. The Company's flagship product,
the Loose Steel Tube Flying Lead ("LSFL "), was developed to eliminate the residual memory left in traditional flying
leads due to the bundling process. The loose lay of the tubes is more compliant allowing the bundle to lay flat on the sea floor
and follow the prescribed lay path precisely. Koil Energy employs its Moray termination system on each end of the LSFL. The
Moray termination is a lightweight, high-strength, configurable, and field serviceable framework used to connect any commercially
available multi-quick connect plate to the LSFL bundle. The Moray termination assembly offers several cost and time saving
benefits over traditional competitive solutions that allow the Company to lower the total installed cost of customer projects.

 Umbilical Hardware. Koil Energy designs and
fabricates lightweight and compact umbilical hardware that covers the entire scope of a project's needs from the topside platform
to the subsea connection. The Company's compliant Umbilical Termination Assembly ("UTA") allows the installation team
to terminate an umbilical with a higher degree of quality, place the critical components of the base unit on the reel or on the carousel,
and handle it with additional ease and safety. The UTA can then be combined with the mud mat assembly easily and offers both first-end
stab and hinge-over features as well as yoke second end landing.

 Koil Energy's termination services offer the
ability to refurbish existing topside umbilical terminations from multiple manufacturers and provide a completely new connection, thus
extending the life of the umbilical and the subsea field. Bend Stiffener Latchers are designed to secure a dynamic umbilical to an
existing or standard flange offering significant cost savings without the need for modification to the rig interface or the use of divers.
The quick-release and locking mechanism allows a single remotely operated vehicle to engage or disengage the locking mechanism resulting
in significant savings to the customer.

 Riser Isolation Valves and Subsea Isolation Valve
Services. Koil Energy's Riser Isolation Valve and Subsea Isolation Valve control systems are unique solutions that provide platform
personnel hydraulic control and electrical indication for subsea production valves. These systems provide numerous advantages to the customer
including emergency shutdown capabilities, valve positioning monitoring systems, and auxiliary positions for spare and/or future field
development.

 In addition to the fabrication of these systems, Koil
Energy provides subsea installation engineering, consulting, and service personnel to support customers, installation contractors, valve
vendors, and more. The Koil Energy team provides commissioning and technical assistance to customers and platform personnel and seeks
to ensure that the systems are working properly.

 Installation Aids. The Company has developed
an extensive array of installation aids, including flying lead installation systems, tensioners, lay chutes, buoyancy modules, clump weights,
mud mats, pumping and testing skids, control booths, fluid drum carriers, under-rollers, 200 ton, 400 ton, 3,400 ton, and 3,500 ton carousels,
running and parking deployment frames, termination shelters, pipe straighteners, Subsea Deployment Basket system, Horizontal Drive
Units, and Rapid Deployment Cartridges.

 Manufacturing

 Koil Energy's facilities located in Houston,
Texas are integral to our operations, serving as the backbone of our manufacturing process. Strategically organized and equipped, these
spaces efficiently facilitate fabrication, manufacturing, assembly, and testing of our products. Within our well-structured environment,
our skilled teams harness their expertise alongside machinery and tools, ensuring precise execution at every stage. We also have a significant
footprint dedicated to our clean, stainless steel welding and tube bending environment, which is separated from all carbon steel fabrication.

 Our manufacturing facility is ISO 9001 certified.
We enhance our standards and product quality by having our quality assurance specialists work alongside our product manufacturing personnel
throughout the manufacturing process. We have the capacity to complete large turn-key projects and still have reserve space for unforeseen
emergency projects requiring immediate service and the attention to which our customers are accustomed.

 Customers

 Demand for our deepwater and ultra-deepwater services,
equipment and offshore rig equipment is dependent on the condition of the energy industry and its ability and need to make capital expenditures,
as well as continual maintenance and improvements on its offshore exploration, drilling, and production operations. The level of these
expenditures is generally dependent upon various factors such as expected commodity prices, exploration and production costs, and the
level of offshore drilling and production activity. The prevailing view of future commodity prices is influenced by numerous factors affecting
supply and demand. These factors include, but are not limited to, worldwide economic activity, interest rates, cost of capital, environmental
regulation, tax policies, and production levels and prices set and maintained by producing nations and the Organization of the Petroleum
Exporting Countries. Capital expenditures are also dependent on the cost of exploring for and producing oil and gas, the sale and expiration
dates of domestic and international offshore leases, the discovery rate of new oil and gas reserves in offshore areas and technological
advances. Oil and gas prices and the level of offshore drilling and production activity have historically been characterized by significant
volatility.

 Our principal customers are primarily major integrated,
large independent, and foreign national energy companies as well as subsea equipment manufacturers and subsea equipment installation contractors
involved in the offshore exploration, development, and production of natural and renewable resources. Offshore drilling contractors, engineering
and construction companies, and other companies involved in maritime operations represent a smaller customer base.

 Koil Energy is not dependent on any one customer or
group of customers. The amount and variety of our products and services required in a given period by a customer can depend upon the customer's
capital expenditure budget as well as the results of competitive bids. Consequently, a customer may account for a material portion of
revenues in one period and may represent an immaterial portion of revenues in a subsequent period. While we are not dependent on any one
customer or group of customers, the loss of one or more of our significant customers could, at least on a short-term basis, have an adverse
effect on the results of our operations and cash flows.

 Marketing and Sales

 We market our services and products worldwide through
our Houston-based sales force. We periodically advertise in trade and technical publications targeting our customer base. We also participate
in industry conferences and trade shows to enhance industry awareness of our products and services. Our customers generally order products
and services after consulting with us on their project. Orders are typically completed within two weeks to three months depending on the
type of product or service. Larger and more complex products may require significantly more time to complete. Our customers generally
select our products and services based on the quality, reliability and reputation of the product or service, price, timely delivery, and
advanced technology. For large production system orders, we engage our project management team to coordinate customer needs with our engineering,
manufacturing, and service departments, as well as with our trusted subcontractors and vendors. Our profitability on projects is dependent
on performing accurate and cost-effective bids as well as performing efficiently in accordance with bid specifications. Various factors
can affect our performance on individual projects that could potentially adversely affect the profitability of a project.

 Product Development and Engineering

 The technological demands of the energy industry continue
to increase as offshore exploration and drilling operations expand into deeper and more hostile environments. Conditions encountered in
these environments could soon include well pressures of up to 20,000 psi, mixed flows of oil and gas under high pressure that may also
be highly corrosive, and water depths exceeding 10,000 feet. We are continually engaged in product development activities to generate
new products and to improve existing products and services to meet our customers' needs. We also focus our activities on reducing
the overall cost to the customer, which includes not only the initial capital costs, but also ongoing operating costs associated with
our products.

 We have an established track record of introducing
new products and product enhancements. Our product development work is conducted at our facility in Houston, Texas, and in the field.
Our application engineering staff also provides engineering services to customers in connection with the design and sales of our products.
Our ability to develop new products and maintain technological advantages is important to our future growth and success.

 We believe that the success of our business depends
more on the technical competence, performance, creativity, and marketing abilities of our employees than on any individual patent, trademark,
or copyright. Nevertheless, as part of our ongoing product development and manufacturing activities, our policy is to seek patents when
appropriate on inventions concerning new products and product improvements. All patent rights for products developed by employees are
assigned to us.

 Competition

 The principal competitive factors in the offshore
drilling, development and production, and maritime equipment markets are quality, reliability, and reputation of the product, price, technology,
and timely delivery. We face significant competition from other manufacturers of exploration, production, and maritime equipment. Several
of our primary competitors are diversified multinational companies with substantially larger operating staffs and greater capital resources
and have a longer history in the manufacturing of these types of equipment.

 Employees

 At December 31, 2024, we had a total of 63 employees,
all of whom were full-time. We also work with a pool of independent contractors who enable us to scale our operations at short notice,
as business needs demand. Our employees are not covered by collective bargaining agreements, and we generally consider our employee relations
to be good. Our operations depend in part on our ability to attract a skilled labor force. While we believe that our wage rates are competitive
and that our relationship with our skilled labor force is good, a significant increase in the wages paid by competing employers could
result in a reduction of our skilled labor force or increases in the wage rates that we pay, or both.

 Governmental Regulations

 A significant portion of our business activities are
subject to federal, state, local and foreign laws and regulations and similar agencies of foreign governments. The technical requirements
of these laws and regulations are becoming increasingly expensive, complex, and stringent. These regulations are administered by
various federal, state, and local health and safety and environmental agencies and authorities, including the Occupational Safety and
Health Administration of the U.S. Department of Labor and the U.S. Environmental Protection Agency. From time to time, we are also subject
to a wide range of reporting requirements, certifications and compliance as prescribed by various federal and state governmental agencies.
Expenditures relating to such regulations are made in the normal course of our business and are neither material nor place us at any competitive
disadvantage. We do not currently expect that compliance with such laws will require us to make material additional expenditures.

 We are also affected by tax policies and other laws
and regulations generally relating to the oil and gas industry, including those specifically directed to offshore operations. Adoption
of laws and regulations that curtail exploration and development drilling for oil and gas could adversely affect our operations by limiting
demand for our services or products.

 Increased concerns about the environment have resulted
in offshore drilling in certain areas being opposed by environmental groups, and certain areas have been restricted. To the extent that
new or additional environmental protection laws that prohibit or restrict offshore drilling are enacted and result in increased costs
to the oil and gas industry in general, our business could be materially affected. In addition, these laws may provide for "strict
liability" for damages to natural resources or threats to public health and safety, rendering a party liable for the environmental
damage without regard to negligence or fault on the part of such party. Sanctions for noncompliance may include revocation of permits,
corrective action orders, administrative or civil penalties and criminal prosecution. Certain environmental laws provide for joint and
several liabilities for remediation of spills and releases of hazardous substances. In addition, companies may be subject to claims alleging
personal injury or property damage as a result of alleged exposure to hazardous substances, as well as damage to natural resources. Such
laws and regulations may also expose us to liability for the conduct of or conditions caused by others, or for our acts that complied
with all applicable laws at the time such acts were performed. Compliance with environmental laws and regulations may require us to obtain
permits or other authorizations for certain activities and to comply with various standards or procedural requirements.

 We cannot determine to what extent our future operations
and earnings may be affected by new legislation, new regulations, or changes in existing regulations. We believe that our facilities are
in substantial compliance with current regulatory standards. Based on our experience to date, we do not currently anticipate any material
adverse effect on our business or consolidated financial position as a result of future compliance with existing environmental laws and
regulations controlling the discharge of materials into the environment. However, future events, such as changes in existing laws and
regulations or their interpretation, more vigorous enforcement policies of regulatory agencies, or stricter or different interpretations
of existing laws and regulations, may require additional expenditures which may be material.

 Intellectual Property

 While we are the holder of various patents, trademarks
and licenses relating to our business, we do not consider any individual intellectual property to be material to our business operations.

 ITEM 1A.

 RISK FACTORS

 Not Applicable

 ITEM 1B.

 UNRESOLVED STAFF COMMENTS

 None

 ITEM 1C.

 CYBERSECURITY

 Cybersecurity Risk Management and Strategy

 Overall Risk Management

 We maintain a cybersecurity program that is reasonably
designed to protect our information, and that of our customers, against cybersecurity threats that may result in adverse effects on the
confidentiality, integrity, and availability of our information systems.

 The Company integrates cybersecurity risk management
into its broader risk management framework to promote a company-wide culture of cyber risk awareness. The head of our IT department continuously
evaluates and addresses cyber risks in alignment with business objectives, operational needs and industry-accepted standards, such as
the National Institute of Standards and Technology ("NIST").

 The Company has processes and procedures in place
to monitor the prevention, detection, mitigation and remediation of cybersecurity risks. These include but are not limited to:

 Maintaining a defined and practiced incident response plan;

 Maintaining cyber insurance coverage;

 Employing appropriate incident prevention and detection safeguards;

 Maintaining a defined disaster recovery policy and employing disaster recovery software, where appropriate;

 Educating, training and testing our user community on information security practices and identification of potential cybersecurity risks and threats; and

 Reviewing and evaluating new developments in the cyber threat landscape.

 Managing Third Party Risk

 Koil Energy recognizes the risks associated with the
use of vendors, service providers and other third parties that provide information system services to us, process information on our behalf,
or have access to our information systems, and the Company has processes in place to oversee and manage these risks. We conduct thorough
risk-weighted security assessments of various third-parties and maintain ongoing monitoring to ensure compliance with our cybersecurity
standards. This monitoring includes both annual assessments and assessments on an ongoing basis.

 Risks from Cybersecurity Incidents

 To our knowledge, Koil Energy has not been subject
to cybersecurity incidents that have materially affected, or are reasonably likely to materially affect the Company, its operations or
financial condition.

 Cybersecurity Governance

 Internal Cybersecurity Team

 Our internal cybersecurity team, led by our IT Manager,
is responsible for implementing, monitoring, and maintaining cybersecurity and data protection practices across the company. Our IT Manager
has over 14 years in cybersecurity work experience and managing all levels of the Company's on-premises and cloud infrastructure.

 Management

 Our management team periodically participates in the
review of our cybersecurity systems, processes, threats and incidents with our internal cybersecurity team, including the controls and
procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure
and reporting of such incidents can be made by management in a timely manner.

 Board of Directors

 The Audit Committee of the Company's Board of
Directors (the "Board") is responsible for overseeing the Company's cyber risk. Management has established a process
for the Audit Committee to receive regular updates that encompass a broad range of topics, including:

 Current cybersecurity threat landscape and emerging threats;

 Status of ongoing cybersecurity initiatives and strategies;

 Incident reports and learnings from unique cybersecurity events, including those of other companies;

 Compliance status and efforts with regulatory requirements and industry standards;

 Regulatory updates;

 Vulnerability developments; and

 Other cyber risk topics as requested by the Board.

 ITEM 2.

 PropertIES

 Our operating facility is located at 1310 Rankin Road,
Houston, Texas 77073 ("Rankin Rd.") and includes approximately 101,000 square feet of office, manufacturing, and storage space.
The term of the lease is for ten years, which commenced on August 1, 2022 at a base rate of $78,000 per month with a 2% increase each
subsequent year. Koil Energy uses the facility as its primary base of operations, which includes the fabrication of custom engineered
products as well as other subsea equipment for both oil and gas and renewable energy applications.

 We also lease, on a month-to-month basis, approximately
19,000 square feet of storage space in Mobile, AL to house our 3,400 metric ton and 3,500 metric ton carousel systems for $11,200 per
month.

 We believe that these facilities are suitable, adequate
and of sufficient capacity to support our current operations.

 ITEM 3.

 Legal Proceedings

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

 On September 23, 2024, WW Champion Developments, Inc.
("WW Champion") sued the Company alleging breach of contract and seeking money damages of $1,229,000 in the 281 st
District Court of Harris County in an action styled WW Champion Developments, Inc. vs. Koil Energy Solutions, Inc., Cause Number
2024-65006. WW Champion alleged that Koil Energy breached a lease agreement between the parties by abandoning the premises, failing to
maintain proper fire prevention measures, and failing to pay its remaining rental payments. The Company disputes WW Champion's allegations,
intends to vigorously defend itself against this lawsuit, and believes that the liability recorded for this matter has been adequately
accrued.

 ITEM 4.

 MINE SAFETY DISCLOSURE s

 None

 ITEM 5.

 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 Market for Common Stock

 Our common stock is quoted on the QB Tier of the OTC
Markets Group (the "OTCQB") under the symbol "KLNG." Quotations for our common stock on the OTCQB represent quotations
between dealers without adjustment for retail markup, mark down or commissions, and may not represent actual transactions.

 Stockholders of Record

 As of March 24, 2025, there were approximately 1,439
holders of record of our common stock. All common stock held in street names are recorded in the Company's stock register as being
held by one stockholder.

 Dividend Policy

 To date, we have not paid any cash dividends and our
present policy is to retain earnings for working capital for the growth of our operations.

 Securities Authorized for Issuance Under Equity
Compensation Plan

 STOCK OPTIONS ISSUED

 Plan category

 Number of securities to be issued upon exercise of outstanding options

 Weighted-average exercise price of outstanding options

 Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

 (a)

 (b)

 (c)

 Equity compensation plans not approved by security holders

 725,000

 $

 0.65

 –

 ITEM 6.

 [RESERVED]

 Item 7.

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 The following discussion of our financial condition
and results of operations should be read in conjunction with our consolidated financial statements and the notes to those consolidated
financial statements appearing elsewhere in this Report. This discussion contains forward-looking statements that involve significant
risks and uncertainties. As a result of many factors, our actual results may differ materially from those anticipated in our forward-looking
statements.

 All dollar and share amounts in this Management's
Discussion and Analysis of Financial Condition and Results of Operations are in thousands of dollars and shares, unless otherwise indicated.

 General

 Koil Energy is an energy services company that provides
equipment and support services to the world's energy and offshore industries. The Company provides innovative solutions to complex
customer challenges presented between the production facility and the energy source. Koil Energy's core services and technological
solutions include distribution system installation support and engineering services, umbilical terminations, loose-tube steel flying leads,
and related services. Additionally, Koil Energy's experienced professionals can support subsea engineering, manufacturing, installation,
commissioning, and maintenance projects located anywhere in the world. The Company's broad line of solutions are engineered and
manufactured primarily for major integrated, large independent, and foreign national energy companies in offshore areas throughout the
world. These products are often developed in direct response to customer requests for solutions to critical needs in the field. The Company
primarily serves the offshore oil and gas market; however, the Company's product offerings and service capabilities are based on
core competencies that are energy source agnostic and can be applied to additional markets, including offshore wind, offshore wave energy,
hydrogen, and liquefied natural gas.

 Industry and Executive Outlook

 The energy services industry relies heavily on the
capital and operating expenditure programs of energy companies. Operators' decisions to scale back or accelerate their exploration,
drilling, and production activities are significantly influenced by the overall state of the energy sector. Notably, the oil and gas industry
has historically experienced fluctuations in commodity prices, driven by various global market forces.

 The current consensus among our customers is that
the demand for energy is increasing. Our clients are indicating that the world's energy demand will require supply growth within
oil and natural gas as well as for renewables. Oil and natural gas supply from existing wells naturally declines over time, making sustained
investments more important over the coming years. The years of underinvestment in offshore production appear to have triggered a general
shift and returning focus on increasing production. As a result, several key subsea basins, particularly Gulf of America, the North Sea,
and off the coasts of Brazil, are being prepared to contribute significantly to this production output. Our strengthened positioning in
these markets is therefore essential to achieve a sustained level of growth. A leading indicator for our main products is the number of
subsea trees purchased by operators. Our product lines include vital support systems for subsea trees. According to Westwood Global Energy
Group, a market analyst firm, the global annual subsea tree awards included 284 and 279 awards in 2023 and 2024, respectively. This healthy
market presents good opportunities for KOIL Energy going forward, as our offering, such as subsea distribution equipment and services,
are typically awarded 1 to 1 years after the subsea tree awards. During the first quarter of this year, we have seen a significant
increase in bidding activity. We therefore anticipate experiencing the benefits of this positive momentum throughout this year and into
next year.

 As part of our growth strategy, we have also been
focusing on expanding our service and product offerings to better address the operating expenditures of our energy customers. We also
expect this expenditure to increase due to aging infrastructure. Re-termination of an umbilical cable on an existing installation is an
example of our success in the maintenance market.

 The 48% year-over-year increase in our revenues for
2024 is exceptional and beyond the industry benchmark. This outstanding growth in revenue in a fairly flat market was the result of an
assertive strategy and excellent work effort by our teams.

 We are one year into an ambitious 3-year strategy
where continued profitable revenue growth is the objective. The strategy has been concentrated on further developing the systems that
address the critical needs of our customers, while upselling more product and associated services. In April 2024 we announced the award
of a major contract for a Subsea Safety Control System from a major international energy company. In August last year we announced the
award of a significant contract for delivering Bend Stiffener Latchers (BSL) to an operator in a new region. In October we secured
a significant contract to provide umbilical re-termination (maintenance and repair) on an offshore production platform for an international
oil and gas company. In December we were awarded a significant contract to supply Electrical and Hydraulic Distribution Manifolds for
a project in West Africa. Although we secure numerous smaller contracts on a weekly basis, it is the major and significant awards that
drive our growth.

 We continue progressing towards achieving our goal
of becoming the premier provider of integrated subsea distribution systems.

 Results of Operations

 Revenues

 Year Ended December 31,

 Increase (Decrease)

 2024

 2023

 $

 %

 Revenues

 $
 22,734

 $
 15,343

 $
 7,391

 48%

 The 48 percent increase in revenues was primarily
driven by an increase in fixed price contracts for the manufacture of subsea distribution equipment, such as flying leads and hydraulic
distribution manifolds, partially offset by a decrease in service contract activity.

 Cost of sales and Gross profit

 Year Ended December 31,

 Increase (Decrease)

 2024

 2023

 $

 %

 Cost of sales

 $
 13,985

 $
 10,493

 $
 3,492

 33%

 Gross profit

 $
 8,749

 $
 4,850

 $
 3,899

 80%

 Gross profit %

 38%

 32%

 –

 6%

 The increase in gross profit was primarily driven
by increased revenues. Gross profit percentage increased 6% when compared to the previous year.

 The Company records depreciation expense related to
revenue-generating property, plant and equipment as cost of sales, which totaled $459 and $497 for the years ended December 31, 2024 and
2023, respectively.

 Selling, general and administrative expenses

 Year Ended December 31,

 Increase (Decrease)

 2024

 2023

 $

 %

 Selling, general & administrative

 $
 6,192

 $
 6,460

 $
 (268
)

 (4
)%

 Selling, general & administrative as a % of revenue

 27%

 42%

 –

 (15
)%

 The reduction in selling, general, and administrative
expenses ("SG&A") was driven by lower administrative payroll expense, advertising expense, research and development expense,
and rental expense related to the Company's short-term lease for furniture at the Company's operating facility.

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

 Interest expense (income), net

 Net interest income for the year ended December 31,
2024 was $47 compared to net interest income of $7 for the year ended December 31, 2023. The increase of $40 is mainly due to an increase
in interest received on the Company's interest bearing financial instruments during the year ended December 31, 2024.

 Other income, net

 The Company recorded net other income of $33 and $50
for the years ended December 31, 2024 and December 31, 2023, respectively, which primarily consists of insurance policyholder dividends.

 Gain/loss on sale of assets

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

 Modified EBITDA

 Management evaluates Company performance based on
a measure that is not in accordance with accounting principles generally accepted in the United States of America ("US GAAP"),
which consists of earnings (net income or loss) available to common stockholders before net interest income, income taxes, depreciation
and amortization, non-cash share-based compensation expense, non-cash impairments, non-cash gains or losses on the sale of property, plant
and equipment ("PP&E"), other non-cash items and one-time charges ("Modified EBITDA"). This measure may not
be comparable to similarly titled measures employed by other companies. The measure should not be considered in isolation or as a substitute
for operating income or loss, net income or loss, cash flows provided by operating, investing, or financing activities, or other cash
flow data prepared in accordance with US GAAP. The amounts included in the Modified EBITDA calculation, however, are derived from amounts
included in the accompanying consolidated statements of operations.

 We believe Modified EBITDA is a useful measure of
a company's operating performance, which can vary substantially from company to company depending upon accounting methods and book
value of assets, financing methods, capital structure and the method by which assets were acquired. It helps investors more meaningfully
evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest),
asset base (primarily depreciation and amortization), and actions that do not affect liquidity (share-based compensation expense) from
our operating results. Additionally, it helps investors identify items that are within our operational control. Depreciation and amortization
charges, while a component of operating income, are fixed at the time of the asset purchase or acquisition in accordance with the depreciable
lives of the related asset and as such are not a directly controllable period operating charge.

 The following is a reconciliation of net income (loss)
to Modified EBITDA for the years ended December 31, 2024 and 2023:

 2024

 2023

 $
 2,620

 $
 (1,554
)

 Deduct: Interest (income) expense, net

 (47
)

 (7
)

 Add: Income tax expense

 Add: Depreciation and amortization

 Add: Share-based compensation

 Add: Relocation costs

 –

 Deduct: Loss (gain) on sale of asset

 (4
)

 Modified EBITDA

 $
 3,537

 $
 (882
)

 The $4,419 increase in Modified EBITDA primarily resulted
from revenue and gross profit improvement associated with the increase in fixed price contracts and lower SG&A during the year ended
December 31, 2024 as compared to the year ended December 31, 2023.

 Liquidity and Capital Resources

 As an offshore energy services provider, our revenues,
profitability, cash flows, and future rate of growth are generally dependent on the condition of the global oil and gas industry and our
customers' ability to invest capital for offshore exploration, drilling and production, and maintenance of offshore drilling and
production facilities. Oil and gas prices and the level of offshore drilling and production activity have historically been characterized
by significant volatility. At times, we enter into large, fixed-price contracts which may require significant lead time and investment.
A decline in offshore drilling and production activity could result in lower contract volume or delays in significant contracts, which
could negatively impact our earnings and cash flows. Our earnings and cash flows could also be negatively affected by delays in payments
by significant customers or delays in the completion of our contracts for any reason.

 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, 2024 and 2023, respectively, the Company had no outstanding sales of accounts receivable to Amegy.

 The principal liquidity needs of the Company are
to fund ongoing operations, working capital, and capital expenditures. During the year ended December 31, 2024, the Company reported a
$1,392 increase in cash. The Company generated $1,726 of net cash provided by operating activities, primarily driven by cash used by changes
in operating assets and liabilities 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 partially offset by net income of $2,620. The Company used $373 of net cash
for investing activities, primarily to fund capital expenditures. The Company also provided by $39 of net cash in financing activities
for principal payments made under its finance lease obligations, proceeds from stock options exercised, and proceeds and principal payments
on short-term borrowings.

 During the year ended December 31, 2023, the Company
reported a $323 decrease in cash. The Company generated $203 of net cash from operating activities, primarily driven by changes in operating
assets and liabilities of $1,234 and other adjustments to reconcile net loss to net cash provided by operating activities of $523, which
includes items such as non-cash lease expense, gain on sale of property, plant and equipment, share-based compensation, bad debt expense
(recovery), and depreciation and amortization. This was partially offset by a net loss of $1,554. The Company used $226 of net cash for
investing activities, primarily to fund capital expenditures. The Company also used $300 of net cash in financing activities for principal
payments made under its finance lease obligations.

 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 PP&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.

 Summary of Critical Accounting Estimates

 Use of Estimates

 The preparation of financial statements in accordance
with US GAAP requires us to make estimates and judgments that may affect assets and liabilities. On an ongoing basis, we evaluate our
estimates, including those related to revenue recognition and related allowances, contract assets and liabilities, impairments of long-lived
assets, including intangibles, income taxes including the valuation allowance for deferred tax assets, contingencies and litigation, and
share-based payments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable,
the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ
from these estimates under different assumptions or conditions.

 Property, Plant and Equipment

 PP&E is stated at cost, net of accumulated depreciation,
amortization, and related impairments. Depreciation and amortization are computed using the straight-line method over the estimated useful
lives of the respective assets. Replacements and betterments are capitalized, while maintenance and repairs are expensed as incurred.
It is our policy to include amortization expense on assets acquired under finance leases with depreciation expense on owned assets. Additionally,
we record depreciation and amortization expense related to revenue-generating assets as a component of cost of sales in the accompanying
consolidated statements of operations.

 If circumstances associated with our PP&E have
changed or a significant event has occurred that may affect the recoverability of the carrying amount of our PP&E, an impairment indicator
exists, and we test the PP&E for impairment. Before testing for impairment, we group PP&E with other finite-lived long-lived assets
("long-lived assets") at the lowest level of identifiable cash flows that are largely independent of cash flows from other
assets or groups of assets. Testing long-lived assets for impairment is a two-step process:

 Step 1 - We test the long-lived asset group
for recoverability by comparing the carrying amount of the asset group with the sum of the undiscounted future cash flows from use and
the eventual disposal of the asset group. If the carrying amount of the long-lived asset group is determined to be greater than the sum
of the undiscounted future cash flows from use and disposal, we would need to perform step 2.

 Step 2 - If the long-lived group of assets
fails the recoverability test in step 1, we would record an impairment expense for the difference between the carrying amount and the
fair value of the long-lived asset group.

 During the years ended December 31, 2024 and December
31, 2023, the Company conducted assessments of whether impairment indicators were present that indicate the carrying amount of its long-lived
asset group might not be recoverable and determined that no such events or changes in circumstances were present.

 Revenue Recognition

 Revenues are recognized when control of the promised
goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange
for those goods or services. To determine the proper revenue recognition method for our customer contracts, we evaluate whether two or
more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted
for as more than one performance obligation. This evaluation requires significant judgment and the decision to combine a group of contracts
or separate the combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded
in a given period.

 For most of our fixed price contracts, the customer
contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or capability
even if that single project results in the delivery of multiple units. Hence, the entire contract is accounted for as one performance
obligation. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified,
payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

 Fixed Price Contracts

 For fixed price contracts, we generally recognize
revenue over time as we perform because of continuous transfer of control to the customer. This continuous transfer of control to the
customer is supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay us
for costs incurred plus a reasonable profit and take control of any work in process. In our fixed price contracts, the customer either
controls the work in process or we deliver products with no alternative use to the Company and have rights to payment for work performed
to date plus a reasonable profit as evidenced by contractual termination clauses.

 Because of control transferring over time, revenue
is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure
progress towards completion requires judgment and is based on the nature of the products or services to be provided. We generally use
the cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer which occurs as
we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based
on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated
fees or profits, are recorded proportionally as costs are incurred.

 Contracts are often modified to account for changes
in contract specifications and requirements. We consider a contract modification to exist when the modification either creates new, or
changes the existing, enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct
from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as
if they were part of that existing contract. The effect of a contract modification on the transaction price, and our measure of progress
for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction
of revenue) on a cumulative catch-up basis.

 We have a company-wide standard and disciplined quarterly
estimate at completion process in which management reviews the progress and execution of our performance obligations. As part of this
process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion
and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. Changes
in estimates of net sales, cost of sales and the related impact to operating income are recognized quarterly on a cumulative catch-up
basis, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a performance
obligation's percentage of completion. A significant change in one or more of these estimates could affect the profitability of
one or more of our performance obligations. When estimates of total costs to be incurred exceed total estimates of revenue to be earned
on a performance obligation related to fixed price contracts, a provision for the entire loss on the performance obligation is recognized
in the period the loss is estimated.

 Service Contracts

 We recognize revenue for service contracts measuring
progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer.
The control over services is transferred over time when the services are rendered to the customer 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 billed on a
monthly basis. Payment terms for services are usually 30 days from invoice receipt but can increase to 45, 60, or 90 days depending on
the customer.

 Contract Balances

 Costs and estimated earnings in excess of billings
on uncompleted contracts arise when revenues are recorded based on the extent of progress towards completion but cannot be invoiced under
the terms of the contract. Such amounts are invoiced upon completion of contractual milestones. Billings in excess of costs and estimated
earnings on uncompleted contracts arise when milestone billings are permissible under the contract, but the related costs have not yet
been incurred. All contract costs are recognized currently on jobs formally approved by the customer and contracts are not shown as complete
until virtually all anticipated costs have been incurred and the risk of loss has passed to the customer.

 Assets related to costs and estimated earnings in
excess of billings on uncompleted contracts, as well as liabilities related to billings in excess of costs and estimated earnings on uncompleted
contracts, have been classified as current. The contract cycle for certain long-term contracts may extend beyond one year, thus complete
collection of amounts related to these contracts may extend beyond one year, though such long-term contracts include contractual milestone
billings as discussed above. For the years ended December 31, 2024 and 2023, there were no contracts with terms that extended beyond one
year.

 Allowance for Credit Losses

 The estimation of anticipated credit losses that 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 bad debts in that period.
At December 31, 2024 and 2023, we estimated the allowance for credit losses requirement to be $0. Bad debt expense totaled $0 and $1 for
the years ended December 31, 2024 and 2023, 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.

 Income Taxes

 We follow the asset and liability method of accounting
for income taxes. This method considers the differences between financial statement treatment and tax treatment of certain transactions.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

 We record a valuation allowance to reduce the carrying
value of our deferred tax assets when it is more likely than not that some or all of the deferred tax assets will expire before realization
of the benefit or that future deductibility is not probable. The ultimate realization of the deferred tax assets depends upon our ability
to generate sufficient taxable income of the appropriate character in the future. This requires management to use estimates and make assumptions
regarding significant future events such as the taxability of entities operating in the various taxing jurisdictions. In evaluating our
ability to recover our deferred tax assets, we consider all reasonably available positive and negative evidence, including our past operating
results, the existence of cumulative losses in the most recent years and our forecast of future taxable income. In estimating future taxable
income, we develop assumptions, including the amount of future state, and federal pre-tax operating income, the reversal of temporary
differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment. When
the likelihood of the realization of existing deferred tax assets changes, adjustments to the valuation allowance are charged in the period
in which the determination is made, either to income or goodwill, depending upon when that portion of the valuation allowance was originally
created.

 We record an estimated tax liability or tax benefit
for income and other taxes based on what we determine will likely be paid in the various tax jurisdictions in which we operate. We use
our best judgment in the determination of these amounts. However, the liabilities ultimately realized and paid are dependent upon various
matters, including resolution of tax audits, and may differ from amounts recorded. An adjustment to the estimated liability would be recorded
as a provision or benefit to income tax expense in the period in which it becomes probable that the amount of the actual liability or
benefit differs from the recorded amount.

 Our future effective tax rates could be adversely
affected by changes in the valuation of our deferred tax assets or liabilities or changes in tax laws or interpretations thereof. If and
when our deferred tax assets are no longer fully reserved, we will begin to provide for taxes at the full statutory rate. In addition,
we are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess
the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

 Recent Accounting Pronouncements

 Recent Accounting Pronouncements are included in Note
1, "Description of Business and Summary of Significant Accounting Policies and Estimates", of the Notes to Consolidated Financial
Statements included in this Report.

 Item 7A.

 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 Not Applicable

 Item 8.

 Financial Statements AND SUPPLEMENTAry DATA

 The financial statements are included herewith commencing on page F-1.

 Report of Independent Registered Public Accounting Firm (PCAOB ID: 659)

 Consolidated Balance Sheets – December 31, 2024 and 2023

 Consolidated Statements of Operations – Years ended December 31, 2024 and 2023

 Consolidated Statements of Stockholders' Equity – Years ended December 31, 2024 and 2023

 Consolidated Statements of Cash Flows – Years ended December 31, 2024 and 2023

 Notes to Consolidated Financial Statements – Years ended December 31, 2024 and 2023

 Item 9.

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 None

 Item 9A.

 Controls and Procedures

 Disclosure Controls and Procedures

 Under the supervision of and with the participation
of our management, including our Chief Executive Officer, who is our principal executive officer, we conducted an evaluation of the effectiveness
of our disclosure controls and procedures as of the end of the period covered by this Annual Report. The term "disclosure controls
and procedures," as set forth in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a
company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to
be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's
management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required
disclosure.

 Based on the evaluation of our disclosure controls
and procedures as of the end of the period covered by this Annual Report, we concluded that, as of such date, our disclosure controls
and procedures were not effective due to the existence of the material weaknesses in the Company's internal control over financial
reporting described below under "Material Weakness."

 Notwithstanding the conclusion that our disclosure
controls and procedures as of the end of the period covered by this Annual Report were not effective, and notwithstanding the material
weakness in our internal control over financial reporting described below, management believes that the consolidated financial statements
and related financial information included in this Annual Report fairly present in all material respects our financial condition, results
of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with GAAP.

 Management's Report on Internal Control over Financial Reporting

 Our management is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance
of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

 Our management conducted an assessment of our
internal control over financial reporting as set forth in Item 308(a) of Regulation S-K promulgated under the Exchange Act and Section
404 of the Sarbanes-Oxley Act as of the end of the period covered by this Annual Report. Based on this assessment, our management concluded
that our internal control over financial reporting was ineffective due to the material weakness in our internal control over financial
reporting described below under "Material Weakness".

 Material Weaknesses

 A material weakness is a deficiency, or a combination of deficiencies,
in internal control, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim
financial statements will not be prevented or detected on a timely basis.

 The following material weaknesses were identified:

 The Company did not maintain certain components of the COSO framework, including
elements of the control environment, risk assessment and monitoring activities components, relating to: 1) sufficiency of competent personnel
with appropriate levels of knowledge, experience, and training in accounting for share-based payments; (ii) identifying and assessing
changes that could significantly impact internal control; and (iii) performing ongoing evaluations to ascertain whether the components
of internal controls are present and functioning. These entity level material weaknesses gave rise to the following control deficiency,
which was also determined to be a material weakness.

 The Company did not design and maintain effective management review controls
relating to its accounting for share-based payments.

 Remediation Plan

 In 2025, we intend to engage outside consultants
to assist with various accounting and financial reporting matters and we will continue assessing the need for hiring additional internal
accounting and third-party financial reporting resources, including additional training. We are in the process of replacing our recently
departed VP-Finance, retained additional accounting resources in the fourth quarter of 2024 and are implementing a more efficient ERP
system to streamline and automate certain processes. As we continue to obtain additional financial resources and as we continue to increase
our operating activity, management, under the oversight of the Audit Committee of the Board of Directors, will continue to implement measures
designed to improve our internal control over financial reporting to remediate the identified material weaknesses, namely, to identify
and engage, through internal hiring and the use of external third parties, a sufficient complement of accounting and financial reporting
resources and to periodically assess the design and operating effectiveness of our internal controls over financial reporting.

 While we believe that these efforts will improve
our internal control over financial reporting, the implementation of these measures is ongoing and will continue to require validation
and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles. We cannot
assure you that the measures we have taken to date, or that we may take in the future, will be sufficient to remediate the material weakness
we have identified or avoid potential future material weaknesses.

 Changes in Internal Control over Financial Reporting

 Other than as described above, there were no
changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2024 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.

 Item 9B.

 Other Information

 During the quarter ended December 31, 2024, none of
our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a "Rule 10b5-1 trading arrangement"
or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.

 ITEM 9C.

 DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 Not Applicable.

 Item 10.

 Directors, Executive Officers and Corporate Governance

 Current Directors and Executive Officers

 The following table sets forth the names, ages and positions of our directors
and executive officer as of December 31, 2024:

 Name

 Age

 Position Held with Koil Energy

 President, Chief Executive Officer, and Director

 Mark Carden

 Chairman of the Board of Directors

 David J. Douglas

 Director

 Neal I. Goldman

 Director

 Biographical information regarding each of these directors
and executive officer is as follows. The following paragraphs also include specific information about each director's experience,
qualifications, attributes, or skills that led the Board of Directors to the conclusion that the individual should serve on the Board
as of the time of this filing, in light of our business and structure:

 Erik Wiik, President, Chief Executive Officer,
and Director. Mr. Wiik has served as the Company's Chief Executive Officer since April 2024 and Board Member since March
2024. Mr. Wiik, served as President of ReAdapt Inc., an engineering consultancy firm providing subject matter expertise within subsea
technology, from July 2018 through March 2024. From March 2015 to June 2018, he was Group President of CIRCOR Energy, a manufacturer of
products for the oil and gas industry. Prior to that, he served in various capacities over 24 years with Aker Solutions, a provider of
integrated solutions, products and services to the global energy industry. His most recent position with Aker was as Regional President
of North America, and he also served as president of business units within subsea controls and umbilicals, marine contracting, well services,
engineering and floating production. Mr. Wiik also served on the Board of Directors of the United Stated National Ocean Industry Association,
Spindletop Charities and the Norwegian American Chamber of Commerce. Mr. Wiik was commissioned as an officer in the Norwegian Navy and
has an Engineering degree from Texas A&M University.

 Mr. Wiik is qualified to serve as a director based
on his in-depth knowledge of the Company's operations and his international business experience.

 Mark Carden, Chairman of the Board of Directors.
Mr. Carden has served as Chairman of the Board since September 30, 2017. Mr. Carden joined the Board as an independent director effective
May 1, 2014 and was appointed Chairman of the Audit Committee of the Board of Directors. Mr. Carden was a Partner at Coopers & Lybrand,
LLP, now PricewaterhouseCoopers, LLP and held multiple senior-level financial positions specializing in electric and gas utilities from
1981 to 1999; he most recently served as Chief Operating Officer, Global Energy Assurance Practice. Additionally, Mr. Carden was one of
three CPAs in the US selected to serve a two-year fellowship at the Financial Accounting Standards Board from 1991 to 1993. Mr. Carden
holds a BBA from Texas A&M University. He is currently the Executive Pastor and Elder at Clear Creek Community Church, in League City,
Texas. Mr. Carden is also a member of the Compensation Committee.

 Mr. Carden is qualified for service on the Board based
on his experience and expertise in management, notably his knowledge of the energy market and business strategy.

 David J. Douglas, Director. Mr. Douglas joined the Board
as an independent director effective April 16, 2019. Mr. Douglas is the Principal of Jamaka Capital Management, LLC, the Company's
largest institutional investor. Mr. Douglas has over 30 years of investment experience as a principal, including 25 years in the family
office industry. Mr. Douglas is a graduate of the University of Pennsylvania's Wharton School earning a BS in Economics, Magna
Cum Laude. Mr. Douglas is a member of the Audit Committee and Chairman of the Compensation Committee.

 Mr. Douglas is qualified to serve as a director based
on his significant finance and investment experience.

 Neal I. Goldman, Director. Mr. Goldman joined the Board
as an independent director effective April 16, 2019. Mr. Goldman is the President and Founder of Goldman Capital Management, Inc., a
family office since 2018, which was previously an investment advisory firm founded in 1985. Mr. Goldman is a Chartered Financial
Analyst (CFA). Mr. Goldman received his B.A. degree in Economics from The City University of New York (City College). Mr. Goldman is
a member of the Audit and Compensation Committees.

 Mr. Goldman is qualified to serve as a director based
on his significant finance and investment background.

 Corporate Governance

 Code of Ethics

 The Company has adopted Codes of Ethical Conduct that
apply to all its directors, officers (including its chief executive officer, chief operating officer, controller and any person performing
such functions) and employees. These Codes of Ethical Conduct are filed as Exhibits 14.1 and 14.2 to this Report. Copies of the Company's
Codes of Ethical Conduct may also be obtained at the Investors section of the Company's website, www.koilenergy.com, or by
written request addressed to the Corporate Secretary, Koil Energy Solutions, Inc., 1310 Rankin Rd., Houston, TX 77073. The Company intends
to satisfy the requirements under Item 5.05 of Form 8-K regarding disclosure of amendments to, or waivers from, provisions of its code
of ethics that apply to the Chief Executive Officer, Vice President of Finance or Controller by posting such information on the Company's
website. Information contained on the website is not part of this Report.

 Accounting and Audit Matters

 The Company's Board of Directors is responsible
for reviewing and making recommendations concerning the selection of outside auditors, reviewing the scope, results, and effectiveness
of the annual audit of the Company's financial statements and other services provided by the Company's independent public
accountants. The Board of Directors reviews the Company's internal accounting controls, practices, and policies. Our Board of Directors
has determined that Mr. Carden qualifies as an independent audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation
S-K.

 Insider Trading Policy

 We are committed to promoting high standards of ethical
business conduct and compliance with applicable laws, rules and regulations. As part of this commitment, we have adopted our Insider Trading
Policy governing the purchase, sale, and/or other dispositions of our securities by our directors, executive officers and designated employees,
that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations. A copy of our Insider Trading
Policy is filed as Exhibit 19.1 to this Report.

 Delinquent Section 16(a) Reports

 Section 16(a) of the Exchange Act requires our
officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of securities
ownership and changes in such ownership with the SEC. Officers, directors and greater than ten percent shareholders also are required
by rules promulgated by the SEC to furnish us with copies of all Section 16(a) forms they file.

 Based solely on the Company's review of the
copies of such forms received by it, the Company believes that all Section 16(a) filing requirements applicable to its officers and
directors and greater-than ten percent beneficial owners during the year ended December 31, 2024 were satisfied.

 Item 11.

 Executive Compensation

 The following table sets forth information concerning
total compensation earned in the years ended December 31, 2024 and 2023 by each person serving as our Principal Executive Officer (our
"Named Officers").

 Summary Compensation Table for the years ended December 31, 2024 and
2023

 Name and Principal Position

 Year

 Salary

 Stock Awards

 All Other Compensation

 (1) (2)

 Total

 Erik Wiik,

 2024

 $

 231,250

 $

 4 6,112

 $

 26,727

 $

 30 4,089

 President and Chief Executive Officer

 Charles K. Njuguna, former President,

 2024

 $

 229,128

 $

 –

 $

 26,553

 $

 255,681

 Chief Executive Officer, and Chief Financial
 Officer

 2023

 $

 325,000

 $

 –

 $

 46,056

 $

 371,056

 (1)

 Amounts in 2024 represent:

 Automobile allowances of $8,769 to Mr. Wiik; and

 Reimbursement of $17,958 to Mr. Wiik for healthcare premiums

 Automobile allowances of $6,000 to Mr. Njuguna;

 Reimbursement of $8,053 to Mr. Njuguna for healthcare premiums; and

 Payments for vacation not taken in 2024 of $12,500 for Mr. Njuguna.

 (2)

 Amounts in 2023 represent:

 Automobile allowances of $19,500 to Mr. Njuguna; and

 Reimbursement of $26,556 to Mr. Njuguna for healthcare premiums.

 Narrative Disclosure to Summary Compensation Table

 On
April 1, 2024, the Company entered into an employment agreement with Mr. Wiik (the "Employment Agreement". Under the terms
of the Employment Agreement, Mr. Wiik is entitled to receive an annual base salary (the amount of which is $325,000), subject to annual
adjustment by the Company's Board. Mr. Wiik is also entitled to receive an annual bonus based upon the achievement of financial
objectives by the Company, which objectives shall be set by the Board annually. In
connection with entering into the Employment Agreement, the Company granted 300,000 shares of restricted stock, and options for 300,000
shares, to Mr. Wiik. Each of the foregoing will vest in three equal installments on the anniversaries of the grant date.

 The Company was party to an employment agreement with
Mr. Njuguna, pursuant to which Mr. Njuguna received annual cash compensation of $325,000 and certain other compensation. Due to his resignation,
the employment agreement with Mr. Njuguna was terminated effective as of March 31, 2024.

 Outstanding Equity Awards

 The following table summarizes information with respect
to unexercised options and unearned stock awards for our Named Officer as of December 31, 2024.

 OPTION AWARDS

 STOCK AWARDS

 Number of securities underlying unexercised options

 Name

 (#) exercisable

 (#) unexercisable

 Option exercise price ($)

 Option expiration date

 Number of Shares or Units of Stock That Have Not Vested

 Market Value of Shares or Units of Stock that Have Not Vested

 Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)

 –

 300,000

 $
 0.65

 3/6/2029

 300,000

 $
 693,000

 $
 693,000

 Benefits payable upon change in control

 Mr. Wiik's Employment Agreement contains provisions
related to a change in control.

 In the event of a Change in Control (as defined in
the Employment Agreement), the awards and grants to Mr. Wiik that are comprised of or based upon equity securities under the Company's
plans, practices, policies and programs will immediately vest.

 The Employment Agreement provides that if any payment
or distribution to Mr. Wiik would be subject to any additional tax or excise tax, or any interest or penalties are incurred by Mr. Wiik
with respect to such excise tax, then Mr. Wiik will be entitled to receive from the Company an additional payment ("Gross-Up Payment")
in an amount such that after payment of all taxes Mr. Wiik will retain an amount of the Gross-Up Payment equal to the additional or excise
tax imposed upon such payment or distribution.

 In the event of termination of Mr. Wiik's employment
for any reason, Mr. Wiik will be entitled to receive all accrued, unpaid salary and vacation time through the date of termination and
all benefits to which Mr. Wiik is entitled or vested under the terms of all employee benefit and compensation plans, agreements and arrangements
in which Mr. Wiik is a participant as of the date of termination. In addition, subject to executing a general release in favor of the
Company, Mr. Wiik will be entitled to receive certain severance payments in the event his employment is terminated by the Company "other
than for cause" or by Mr. Wiik with "good reason." These severance payments include the following:

 i.
 a lump sum in cash equal to one time Mr. Wiik's annual base salary (at the rate in effect on the
date of termination);

 ii.
 a lump sum in cash equal to a pro rata portion of the annual bonus payable for the period in which the
date of termination occurs based on the actual performance under the Company's annual incentive bonus arrangement; provided, however,
that such pro rata portion shall be calculated based on Mr. Wiik's annual bonus for the previous fiscal year; provided further that
if no previous annual bonus has been paid to Mr. Wiik, then the lump sum cash payment shall be no less than fifty percent of Executive'
annual base salary; and

 iii.
 if Mr. Wiik's termination occurs prior to the date that is twelve months following a Change in Control,
then each and every share option, restricted share award and other equity-based award that is outstanding and held by Mr. Wiik shall immediately
vest and become exercisable.

 iv.
 Mr. Wiik has agreed, during the term of his employment and for a one-year period after his termination,
not to engage in Competition (as defined in the Employment Agreement) with the Company, solicit business from any customer or potential
customer of the Company, solicit the employment or services of any person employed by or a consultant to the Company on the date of termination
or with six months prior thereto, or otherwise knowingly interfere with the business or accounts of the Company or any of its subsidiaries.

 The Employment Agreement also provides that the Company,
to the extent permitted by applicable law and the by-laws of the Company, will defend, indemnify and hold harmless Mr. Wiik from any and
all claims, demands or causes of action, including reasonable attorneys' fees and expenses, suffered or incurred by Mr. Wiik as
a result of the assertion or filing of any claim, demand, litigation or other proceedings based upon statements, acts or omissions made
by or on behalf of Mr. Wiik pursuant to the Employment Agreement or in the course and scope of Mr. Wiik's employment with the Company.
The Company will also maintain and pay all applicable premiums for directors' and officers' liability insurance which shall
provide full coverage for the defense and indemnification of Mr. Wiik, to the fullest extent permitted by applicable law.

 In connection with entering into the Employment Agreement,
the Company granted 300,000 shares of restricted stock, and options for 300,000 shares, to Mr. Wiik. Each of the foregoing will vest in
three equal installments on the anniversaries of the grant date.

 The above description of the Employment Agreement
is qualified in its entirety by reference to the full text of the Employment Agreement, a copy of which is filed as Exhibit 10.1 to this
Annual Report on Form 10-K.

 No family relationship exists between Mr. Wiik and
any of the Company's directors or executive officers. There are no arrangements or understandings between Mr. Wiik and any other
person pursuant to which Mr. Wiik was selected as an officer of the Company, nor are there any transactions to which the Company is or
was a participant and in which Mr. Wiik had or will have a direct or indirect material interest subject to disclosure under Item 404(a)
of Regulation S-K.

 Compensation of Directors

 The Compensation Committee of the Board of Directors
makes all decisions regarding director compensation. Only directors who are not employees, independent contractors, or consultants of
the Company or any of its subsidiaries or affiliates ("Independent Directors"), are entitled to receive a fee, plus reimbursement
of reasonable out-of-pocket expenses incurred to attend Board meetings.

 The Company uses equity-based compensation, in the
form of restricted stock or stock options, to attract and retain qualified candidates to serve on the Board. We believe our compensation
arrangement for Independent Directors is comparable to the standards of peer companies within our industry and geographical location.

 The following table provides certain information with
respect to the 2024 compensation awarded or earned by our Independent Directors who served in such a capacity during the year.

 Name

 Option Awards
 ($) (1) (2)

 Total

 Mark Carden

 $

 $

 David J. Douglas

 $

 $

 Neal I. Goldman

 $

 $

 (1)

 On August 2, 2023, the Company's independent directors each received stock options to purchase 50,000 shares of our common stock with an exercise price of $0.55 per share. Fair value of these stock options was $0.32 per share at the date of grant. Twenty-five percent of the shares vested on each of August 31, 2023, November 30, 2023, February 28, 2024, and May 31, 2024.

 (2)

 On August 26, 2024, the Company's independent directors each received stock options to purchase 50,000 shares of our common stock with an exercise price of $1.28 per share. Fair value of these stock options was $0.99 per share at the date of grant. Twenty-five percent of the shares vested on each of August 31, 2024, November 30, 2024, February 28, 2025, and the remainder are scheduled to vest on May 31, 2025. In addition to the foregoing, all shares shall vest immediately prior to a change in control.

 Item 12.

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Set forth below is certain information with respect
to beneficial ownership of Common Stock as of March 27, 2025, except as otherwise noted below, by (i) each person known by us to beneficially
own more than 5 percent of the outstanding shares of our common stock; (ii) each Director as of such date; (iii) our "Named Officers"
(as determined under Item 402(m) of Regulation S-K); and (iv) all directors and executive officers of Koil Energy as a group. To our knowledge,
all persons listed in the table have sole voting and investment power with respect to their shares, except to the extent that authority
is shared with their respective spouse under applicable law.

 Name

 Number of

Shares of

Common Stock

Beneficially

Owned

 Number of

Shares That

May Be

Acquired By

Options

Exercisable

Within 60 Days

 Total

 Percent of

Outstanding

Common Stock (1)

 Ronald E. Smith

 2,449,383

 (2)

 –

 2,449,383

 19.5%

 Galloway Capital Partners, LLC

 985,651

 (3)

 –

 985,651

 7.8%

 Aegis Financial Corporation

 813,000

 (4)

 –

 813,000

 6.5%

 Intelligent Fanatics Capital Management LLC

 795,424

 (5)

 –

 795,424

 6.4%

 MAZ Capital Advisors, LLC

 618,767

 (6)

 –

 618,767

 5.0%

 Directors and Executive Officers:

 David J. Douglas

 1,484,091

 (7)

 237,500

 1,721,591

 13.7%

 Neal I. Goldman

 700,000

 (8)

 37,500

 737,500

 5.9%

 –

 300,000

 300,000

 2.4%

 Charles K. Njuguna

 267,350

 –

 267,350

 2.1%

 Mark Carden

 60,980

 (9)

 237,500

 298,480

 2.4%

 All directors and executive officers as a group (4 persons)

 2,512,421

 812,500

 3,324,921

 26.4%

 __________________

 (1)

 The percentages in the table are calculated using the total shares outstanding as of March 27, 2025 or a total of 12,388,202 shares, plus the number of shares that may be acquired by such person or group upon the exercise of options that are exercisable within 60 days of such date.

 (2)

 Based on a Schedule 13D filed with the SEC dated November 26, 2019, by Ronald E. Smith, 1447 FM 1010 Rd., Cleveland, TX 77327. This amount includes 710,562 shares held indirectly through an IRA, 930,651 shares held directly by Mr. Smith's spouse, and 23,071 shares held indirectly by Mr. Smith's spouse through an IRA.

 (3)

 Based on a Schedule 13D filed with the SEC dated March 6, 2024, by Galloway Capital Partners, LLC, 323 Sunny Isles Blvd, 7 th Floor, Sunny Isles Beach, FL 33160.

 (4)

 Based on a Schedule 13G/A filed with the SEC dated February 8, 2024, by Aegis Financial Corporation, 6862 Elm Street, Suite 830, McLean, VA 22101.

 (5)

 Based on a Schedule 13G filed with the SEC dated
April 2, 2025, by Intelligent Fanatics Capital Management LLC, 350 Rumford Road, Lititz, PA 17543.

 (6)

 Based on a Schedule 13D/A filed with the SEC dated
 July 16, 2024, by MAZ Partners LP, 8774 Lakes Boulevard, West Palm Beach, FL 33412.

 (7)

 Based on a Schedule 13D/A filed with the SEC dated
 September 2, 2022, by Jamaka Capital Management LLC, 3889 Maple Avenue, Dallas, TX 75219.

 (8)

 Based on a Form 3 filed with the SEC dated September 27, 2024, by Neal I. Goldman, Goldman Capital Management Inc., 767 Third Ave, New York, NY 10017.

 (9)

 Includes 980 shares held indirectly in retirement and trading accounts owned by Mr. Carden and his wife.

 ITEM 13.

 Certain Relationships and Related Transactions, and Director Independence

 Certain Relationships and Related Transactions

 Our Board of Directors and management recognize that
related person transactions present a heightened risk of conflicts of interest, and therefore we review all relationships and transactions
in which we and our directors, director nominees and executive officers or their immediate family members, as well as holders of more
than 5 percent of any class of our voting securities and their family members, have a direct or indirect material interest. As required
under SEC rules, transactions that are determined to be directly or indirectly material to us or a related person are disclosed in the
appropriate annual and/or quarterly statements filed with the SEC.

 Director Independence

 We believe that Messrs. Carden, Douglas, and Goldman
are "independent" under the requirements of Rule 303A.02 of the NYSE Listed Company Manual.

 ITEM 14.

 Principal Accountant Fees and Services

 The Company's independent registered public
accounting firm is Moss Adams LLP ("Moss Adams"); issuing office is Houston, TX; PCAOB ID: 659. The following table sets forth
the aggregate fees billed by Moss Adams for audit services rendered in connection with the Company's consolidated financial statements
and reports for the years ended December 31, 2024 and 2023 and for other services rendered during those years on behalf of Koil Energy
and its subsidiaries:

 Year Ended December 31,

 2024

 2023

 Audit Fees

 $
 225,000

 $
 225,000

 Audit Related Fees

 –

 –

 Tax Fees

 50,000

 50,000

 All Other Fees

 –

 –

 Audit Fees: Consists of fees and expenses billed
for professional services rendered for the audit of Koil Energy's consolidated financial statements, the review of interim condensed
consolidated financial statements included in quarterly reports, services that are normally provided in connection with statutory and
regulatory filings or engagements and attest services, except those not required by statute or regulation.

 Audit-Related Fees: Consists of fees billed
for assurance and related services that are reasonably related to the performance of the audit and review of Koil Energy's consolidated
financial statements and are not reported under "Audit Fees."

 Tax Fees: Consists of tax compliance, tax preparation
and other tax services. Tax compliance and tax preparation consists of fees and expenses billed for professional services related to assistance
with tax returns. Other tax services consist of fees billed for other miscellaneous tax consulting.

 All Other Fees: None.

 Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors

 The Board of Directors pre-approves all audit and
permissible non-audit services provided by Moss Adams. These services may include audit services, audit-related services, tax services
and other services. The Board of Directors may also pre-approve particular services on a case-by-case basis and may delegate pre-approval
authority to one or more directors. If delegated, the director must report any pre-approval decision to the Board of Directors at its
first meeting after the pre-approval was obtained.

 ITEM 15.

 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 Information required by this item is incorporated herein by reference from
the section entitled " Exhibit Index " of this Report.

 ITEM 16.

 FORM 10-K SUMMARY

 None

 SIGNATURES

 Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

 By: /s/ Erik Wiik

 President, Chief Executive Officer

 (Principal Executive and Financial Officer)

 Date: April 15, 2025

 By: /s/ Troy Aymond

 Troy Aymond

 Corporate Controller

 (Principal Accounting Officer)

 Date: April 15, 2025

 POWER OF ATTORNEY

 KNOW ALL PERSONS BY THESE PRESENTS
that each individual whose signature appears below constitutes and appoints Erik Wiik and Mark Carden and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to
sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents
or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 Pursuant to the requirements of
the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities
and on the date indicated:

 Signature

 Title

 Date

 /s/ Erik Wiik

 President, Chief Executive Officer, and Director

 (Principal Executive Officer)

 /s/ Mark Carden

 Chairman of the Board of Directors

 Mark Carden

 /s/ David J. Douglas

 Director

 David J. Douglas

 /s/ Neal I. Goldman

 Director

 Neal I. Goldman

 EXHIBIT INDEX

 Exhibit Number

 Description of Exhibit

 2.1

 Agreement and Plan of Reorganization among MediQuip Holdings, Inc., Deep Down, Inc., and the majority shareholders of Deep Down, Inc. (incorporated by reference from Exhibit 2.1 to our Form 10-KSB/A filed on May 1, 2008)

 3.1

 Articles of Incorporation of Deep Down, Inc., conformed to include the amendment of the Articles of Incorporation filed with the Secretary of State of the State of Nevada on September 29, 2008 (incorporated by reference from Exhibit A to our Schedule 14C filed on August 15, 2008).

 3.2

 Articles of Merger of Deep Down, Inc. and Koil Energy Solutions, Inc. and Agreement and Plan of Merger between Deep Down, Inc. and Koil Energy Solutions, Inc. filed with the Secretary of State of the State of Nevada on February 22, 2022 (incorporated by reference from Exhibit 3.2 to our Form 10-K filed on March 30, 2023)

 3.3

 Certificate of Change of Deep Down, Inc. (incorporated by reference from Exhibit 3.1 to our Form 8-K filed on July 19, 2012)

 4.1

 Description of Securities Registered Under Section 12 of the Exchange Act (incorporated by reference to Exhibit 4.3 to our Form 10-K filed on March 30, 2020)

 10.1

 Employment Agreement, effective as of April 1, 2024 between Koil Energy Solutions, Inc. and Erik Wiik (incorporated by reference from Exhibit 10.1 to our Form 8-K filed on March 11, 2024)

 10.4

 Commercial Lease Agreement between Wellbore Integrity Solutions, LLC, as Landlord, and Deep Down, Inc., as Tenant, dated effective May 5, 2022, and amended August 31,2022 (incorporated by reference from Exhibit 10.4 to our Form 10-K filed on March 29, 2022)

 14.1

 Directors Code of Business Conduct (incorporated by reference from Exhibit 14.1 to our Form 10-K filed on April 15, 2010)

 14.2

 Financial Officer's Code of Business Conduct (incorporated by reference from Exhibit 14.2 to our Form 10-K filed on April 15, 2010)

 19.1*

 Insider Trading Policy

 21.1*

 Subsidiary list

 24.1*

 Power of Attorney (included on signature page)

 31.1*

 Rule 13a-14(a)/15d-14(a) Certification of the President and Chief Executive Officer

 31.2*

 Rule 13a-14(a)/15d-14(a) Certification of the Corporate Controller

 32.1#

 Section 1350 Certification of the President and Chief Executive Officer

 32.2#

 Section 1350 Certification of the Corporate Controller

 101.INS*

 101.SCH*

 101.CAL*

 101.DEF*

 101.LAB*

 101.PRE*

 * Filed herewith.

 # Furnished herewith.

 Exhibit constitutes a management contract or compensatory plan
or arrangement.

 Report of Independent Registered Public Accounting Firm

 To the Shareholders and the Board of Directors of

 Koil Energy Solutions, Inc.

 Opinion on the Financial Statements

 We have audited the accompanying consolidated balance sheets of Koil
Energy Solutions, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the years then ended, and the related notes (collectively referred to as the
"consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and the consolidated results
of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the
United States of America.

 Basis for Opinion

 These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on
the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures to
assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.

 Critical Audit Matter

 The critical audit matter communicated below is
a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be
communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial
statements, and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.

 As described in Note 3 to the consolidated financial
statements, total revenue of approximately $15,842,000 for the year ended December 31, 2024, is generated from fixed price contracts.
For the Company's fixed price contracts, because of control transferring over time, revenue is recognized based on the extent of
progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires
judgment and is based on the nature of the products or services to be provided. The Company uses the cost-to-cost measure of progress
for its contracts because it best depicts the transfer of control to the customer which occurs as the Company incurs costs on the contracts.
Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred
to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated fees or profits, are recorded
proportionally as costs are incurred. Management's estimation of total cost at completion is subject to many variables and requires
significant judgment. There are many factors which impact management's estimate, including, but not limited to, the ability to properly
execute the engineering, design and fabrication phases consistent with customers' expectations, the availability and costs of labor
and materials resources, productivity, weather, and level of success in the installation phase.

 F- 1

 Each of these factors can affect the accuracy of cost
estimates, and ultimately, future profitability.

 The principal considerations in our
determination that revenue recognition, specifically determination of estimated costs to complete for fixed price contracts, is a
critical audit matter are the complexity of these estimates and exercise of significant judgment by management when developing these
estimates for fixed price contracts. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing
procedures and evaluating audit evidence related to the estimates of costs to complete.

 Addressing the matter involved performing
procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
Our audit procedures related to this critical audit matter included the following, among others:

 Evaluating management's process and methodology for developing estimated
costs to complete.

 Identifying, evaluating, and testing significant assumptions utilized by
management, including:

 o
 Obtaining executed purchase orders, agreements, and support for selected projects.

 o
 Discussing progress of contracts'
completion with management.

 o
 Performing corroborative inquiries of
appropriate project managers.

 o
 Confirming contract terms, billings, and
estimated completion dates with customers.

 o
 Performing a look-back analysis on completed
contracts during the year to assess variances between actual and prior year estimated costs to complete.

 Testing the completeness, accuracy and relevance of the underlying data used
in developing estimated costs to complete, including:

 o
 Testing the accuracy and occurrence of the actual
costs incurred to date.

 Houston, Texas

 We have served as the Company's auditor since 2017.

 F- 2

 CONSOLIDATED BALANCE SHEETS

 December 31,

 2024

 2023

 (In thousands, except share and per share amounts)

 ASSETS

 Current assets:

 Cash

 $
 3,422

 $
 2,030

 Accounts receivable

 2,767

 4,228

 Employee retention tax credit receivable

 Inventory

 Contract assets

 3,080

 Prepaid expenses and other current assets

 Total current assets

 10,206

 7,849

 Property, plant and equipment, net

 2,791

 2,968

 Intangibles, net

 Right-of-use operating lease assets

 5,383

 5,856

 Right-of-use finance lease assets

 Other assets

 Total assets

 $
 18,740

 $
 17,062

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:

 Accounts payable and accrued expenses

 $
 3,319

 $
 3,353

 Contract liabilities

 1,377

 Current operating lease liabilities

 Current finance lease liabilities

 Total current liabilities

 4,524

 5,284

 Operating lease liability, long-term

 5,600

 6,136

 Finance lease liability, long-term

 Total liabilities

 10,136

 11,444

 Commitments and contingencies (Note 9)

 –

 –

 Stockholders' equity:

 Common stock, 24,500,000 shares authorized at $ 0.001 par value, 16,106,100 and 15,906,010 shares issued at December 31, 2024 and December 31, 2023

 Additional paid-in capital

 74,206

 73,840

 Treasury stock, 3,717,808 and 4,017,808 shares at December 31, 2024 and December 31, 2023, at cost

)

)

 Accumulated deficit

 ( 62,483
)

 ( 65,103
)

 Total stockholders' equity

 8,604

 5,618

 Total liabilities and stockholders' equity

 $
 18,740

 $
 17,062

 The accompanying notes are an integral part of the
consolidated financial statements.

 F- 3

 CONSOLIDATED STATEMENTS OF OPERATIONS

 (In thousands, except per share amounts)

 2024

 2023

 Revenues

 $
 22,734

 $
 15,343

 Costs and expenses

 Cost of sales

 13,985

 10,493

 Selling, general and administrative

 6,192

 6,460

 Total costs and expenses

 20,177

 16,953

 Operating income (loss)

 2,557

 ( 1,610
)

 Interest income, net

 ( 47
)

 ( 7
)

 Other income, net

 ( 33
)

 ( 50
)

 Loss (gain) on sale of property, plant and equipment

 ( 4
)

 Income (loss) before income tax expense

 2,636

 ( 1,549
)

 Income tax expense

 $
 2,620

 $
)

 Net income (loss) per share:

 Basic

 $
 0.21

 $
 ( 0.13
)

 Fully diluted

 $
 0.21

 $
 ( 0.13
)

 Weighted-average shares outstanding:

 Basic

 12,187

 11,888

 Fully diluted

 12,344

 11,888

 The accompanying notes are an integral part of the
consolidated financial statements.

 F- 4

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 YEARS ENDED DECEMBER 31, 2024 AND 2023

 Additional

 Common
 Stock

 Paid-in

 Treasury

 Accumulated

 (In thousands)

 Shares
 (#)

 Amount
 ($)

 Capital

 Stock

 Deficit

 Total

 Balance at December 31, 2022

 15,906

 $

 $
 73,776

 $
)

 $
 ( 63,549
)

 $
 7,108

 Net loss

 –

 –

 –

 –

)

)

 Restricted stock awards forfeited

 –

 –

 –

 –

 –

 –

 Treasury shares purchased

 –

 –

 –

 –

 –

 –

 Share-based compensation

 –

 –

 –

 –

 Balance at December 31, 2023

 15,906

 $

 $
 73,840

 $
)

 $
 ( 65,103
)

 $
 5,618

 Net income

 –

 –

 –

 –

 2,620

 2,620

 Restricted Stock Comp Earned

 –

 –

 –

 –

 Stock option exercise

 –

 –

 –

 Share-based compensation

 –

 –

 –

 –

 Balance at December 31, 2024

 16,106

 $

 $
 74,206

 $
)

 $
 ( 62,483
)

 $
 8,604

 The accompanying notes are an integral part of the
consolidated financial statements.

 F- 5

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 2024

 2023

 (In thousands)

 Cash flows from operating activities:

 $
 2,620

 $
)

 Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 Share-based compensation

 Depreciation and amortization

 Loss (gain) on sale of property, plant and equipment

 ( 4
)

 Credit loss

 –

 Non-cash lease expense

 Changes in operating assets and liabilities:

 Accounts receivable

 1,461

 ( 982
)

 Contract assets

 ( 2,601
)

 ( 199
)

 Inventories

 ( 228
)

 Prepaid expenses and other current assets

 ( 155
)

 Other assets

 ( 103
)

 ( 83
)

 Accounts payable and accrued expenses

 ( 34
)

 Contract liabilities

 ( 721
)

 1,044

 Net cash provided by operating activities

 1,726

 Cash flows from investing activities:

 Proceeds from sale of property, plant and equipment

 Purchases of property, plant and equipment

 ( 375
)

 ( 230
)

 Net cash used in investing activities

 ( 373
)

 ( 226
)

 Cash flows from financing activities:

 Proceeds from short-term borrowings

 –

 Principal payments on short-term borrowings

 ( 995
)

 –

 Proceeds from stock options exercised

 –

 Principal payments under finance lease obligations

 ( 73
)

 ( 300
)

 Net cash provided by (used in) financing activities

 ( 300
)

 Change in cash

 1,392

 ( 323
)

 Cash, beginning of year

 2,030

 2,353

 Cash, end of year

 $
 3,422

 $
 2,030

 The accompanying notes are an integral part of the
consolidated financial statements.

 F- 6

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 All dollar and share amounts in the Notes to Consolidated
Financial Statements are in thousands of dollars and shares, unless otherwise indicated, except per share amounts.

 NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

 Description of Business

 Koil Energy Solutions, Inc., a Nevada corporation
("Koil Energy Nevada"), and its direct wholly owned subsidiary, Koil Energy Solutions, Inc., a Delaware corporation ("Koil
Energy Delaware", and together with Koil Energy Nevada, "Koil Energy", "we", "us" or the "Company"),
is an energy services company that provides equipment and support services to the world's energy and offshore industries. The Company
provides innovative solutions to complex customer challenges presented between the production facility and the energy source. Koil Energy's
core services and technological solutions include distribution system installation support and engineering services, umbilical terminations,
loose-tube steel flying leads, and related services. Additionally, Koil Energy's experienced professionals can support subsea engineering,
manufacturing, installation, commissioning, and maintenance projects located anywhere in the world. The Company's broad line of
solutions are engineered and manufactured primarily for major integrated, large independent, and foreign national energy companies in
offshore areas throughout the world. These products are often developed in direct response to customer requests for solutions to critical
needs in the field. The Company primarily serves the offshore oil and gas market; however, the Company's product offerings and service
capabilities are based on core competencies that are energy source agnostic and can be applied to additional markets, including offshore
wind, offshore wave energy, hydrogen, and liquefied natural gas.

 Liquidity

 Koil Energy's cash on hand was $ 3,422 and working
capital was $ 5,682 as of December 31, 2024. As of December 31, 2023, cash on hand and working capital were $ 2,030 and $ 2,565, respectively.
The Company generally depends on cash on hand, cash flows from operations, and the potential opportunistic sales of property, plant and
equipment ("PP&E") to satisfy its liquidity needs.

 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 PP&E. Given the inherent volatility in oil prices and global economic activity, the Company cannot predict this with certainty.
To mitigate this uncertainty, the Company exercises discipline when making capital investments and pursues opportunistic cost containment
initiatives, which can include workforce alignment, limiting overhead spending, and limiting research and development efforts to only
critical items. Additionally, 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. Any receivables sold shall bear an interest rate computed as Wall Street Journal Prime Rate
("Prime Rate") plus 2.00%. The Prime Rate has a floor and at no time shall it be less than 8.00% for the purposes of this
agreement. At December 31, 2024, the Company had no outstanding sales of accounts receivable to Amegy.

 F- 7

 Summary of Significant Accounting Policies and Estimates

 Principles of Consolidation

 The consolidated financial statements include the
accounts of Koil Energy for the years ended December 31, 2024 and 2023. All intercompany transactions and balances have been eliminated.

 Use of Estimates

 The preparation of these financial statements in accordance
with accounting principles generally accepted in the United States of America ("US GAAP") requires us to make estimates and
judgments that may affect assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition
and related allowances, contract assets and liabilities, impairments of long-lived assets, income taxes including the valuation allowance
for deferred tax assets, contingencies and litigation, and share-based payments. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying
values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

 Segments

 For the years ended December 31, 2024 and 2023, the
Company's operations were organized as one reportable segment and one operating segment.

 Cash

 Cash consist of cash on deposit with domestic banks
which, at times, may exceed federally insured limits.

 Fair Value of Financial Instruments

 Fair value is defined as the exchange price that would
be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants on the measurement date. We utilize a fair value hierarchy, which maximizes
the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The fair value hierarchy has three
levels of inputs that may be used to measure fair value:

 Level 1 – Unadjusted quoted prices
in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 Level 2 – Quoted prices in markets
that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset
or liability.

 Level 3 – Prices or valuation techniques
that require inputs that are both significant to the fair value measurement and unobservable.

 Our financial instruments consist primarily of cash,
accounts receivable and accounts payable. The carrying values of cash, accounts receivables, and payables approximated their fair values
at December 31, 2024 and 2023 due to their short-term maturities.

 F- 8

 Accounts Receivable and Allowance for Credit Losses

 Accounts receivable are uncollateralized customer
obligations due under normal trade terms. The estimation of anticipated credit losses that 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 credit worthiness, 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. Generally, we do not charge interest on past
due accounts. When certain accounts are determined to require an allowance, they are expensed by a provision for bad debts in that period.
At December 31, 2024 and 2023, we estimated the allowance for credit losses requirement to be $ 0. Bad debt expense totaled $ 0 and $ 1 for
the years ended December 31, 2024 and 2023, 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.

 Concentration of Revenues and Credit Risk

 Koil Energy's revenues are derived from the
sale of products and services to customers who participate in the offshore sector of the energy industry. Customers may be similarly affected
by economic and other changes in the energy industry. For the year ended December 31, 2024, our two largest customers accounted for 47
percent and 27 percent of total revenues, respectively. For the year ended December 31, 2023, our four largest customers accounted for
 29 percent, 19 percent, 14 percent, and 10 percent of total revenues, respectively. No other customers were in excess of 10 percent of
revenues. The loss of one or more of these customers could have a material impact on our results of operations and cash flows.

 As of December 31, 2024, three of our customers accounted
for 37 percent, 20 percent, and 14 percent of total accounts receivable. As of December 31, 2023, three of our customers accounted for
 47 percent, 13 percent, and 10 percent of total accounts receivable.

 Inventory

 Koil Energy maintains an inventory of components that
would otherwise have long lead times to purchase as needed. Inventory costs are determined principally by the use of the specific identification
method. Company manufactured inventory is valued using direct costs incurred. We periodically review the value of items in inventory and
record write-downs or write-offs of inventory based on our assessment of obsolescence or marketability. We did not record any write-downs
or write-offs of inventory in recent years; therefore, we do not consider a reserve against inventory to be necessary.

 Property, Plant and Equipment

 PP&E is stated at cost, net of accumulated depreciation,
amortization, and related impairments. Depreciation and amortization are computed using the straight-line method over the estimated useful
lives of the respective assets. Replacements and betterments are capitalized, while maintenance and repairs are expensed as incurred.
It is our policy to include amortization expense on assets acquired under finance leases with depreciation expense on owned assets. Additionally,
we record depreciation and amortization expense related to revenue-generating assets as a component of cost of sales in the accompanying
consolidated statements of operations.

 F- 9

 If circumstances associated with our PP&E have
changed or a significant event has occurred that may affect the recoverability of the carrying amount of our PP&E, an impairment indicator
exists, and we test the PP&E for impairment. Before testing for impairment, we group PP&E with other finite-lived long-lived assets
("long-lived assets") at the lowest level of identifiable cash flows that are largely independent of cash flows from other
assets or groups of assets. Testing long-lived assets for impairment is a two-step process:

 Step 1 – We test the long-lived asset
group for recoverability by comparing the carrying amount of the asset group with the sum of the undiscounted future cash flows from use
and the eventual disposal of the asset group. If the carrying amount of the long-lived asset group is determined to be greater than the
sum of the undiscounted future cash flows from use and disposal, we would need to perform step 2.

 Step 2 – If the long-lived group of
assets fails the recoverability test in step 1, we would record an impairment expense for the difference between the carrying amount and
the fair value of the long-lived asset group.

 During the years ended December 31, 2024 and December
31, 2023, the Company conducted assessments of whether impairment indicators were present that indicate the carrying amount of its long-lived
asset (group) might not be recoverable and determined that no such events or changes in circumstances were present.

 Lease Obligations

 In February 2016, the FASB issued ASU 2016-02, Leases
("ASC Topic 842"). Under this guidance, lessees are required to recognize on the balance sheet a lease liability and a right-of-use
("ROU") asset for all leases, except for short-term leases with terms of twelve months or less. The lease liability represents
the lessee's obligation to make lease payments arising from a lease and will initially be measured as the present value of the lease
payments. The ROU asset represents the lessee's right to use a specified asset for the lease term, and will be measured at the lease
liability amount, adjusted for lease prepayment, lease incentives received and the lessee's initial direct costs.

 ROU assets and lease liabilities are recognized at
the commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the
lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental
borrowing rate based on the information available at the lease commencement date. Lease agreements with lease and non-lease components
are generally accounted for as a single lease component. The Company's operating lease expense is recognized on a straight-line
basis over the lease term and a portion is recorded in cost of sales, and the remainder is recorded in selling, general and administrative
expenses. The accounting for some leases may require significant judgment, which includes determining whether a contract contains a lease,
determining the incremental borrowing rate to utilize in our net present value calculation of lease payments for lease agreements which
do not provide an implicit rate, and assessing the likelihood of renewal or termination options and impairment.

 At the inception of a lease, Koil Energy evaluates
the agreement to determine whether the lease will be accounted for as an operating or finance lease. The term of the lease used for such
an evaluation includes renewal option periods only in instances in which the exercise of the renewal option can be reasonably assured,
and if the contract contains a substantial penalty for failure to renew or extend the lease, it could lead the Company to conclude it
has a significant economic incentive to extend the lease beyond the base rental period.

 F- 10

 Income Taxes

 We follow the asset and liability method of accounting
for income taxes. This method considers the differences between financial statement treatment and tax treatment of certain transactions.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

 We record a valuation allowance to reduce the carrying
value of our deferred tax assets when it is more likely than not that some or all of the deferred tax assets will expire before realization
of the benefit or that future deductibility is not probable. The ultimate realization of the deferred tax assets depends upon our ability
to generate sufficient taxable income of the appropriate character in the future. This requires management to use estimates and make assumptions
regarding significant future events such as the taxability of entities operating in the various taxing jurisdictions. In evaluating our
ability to recover our deferred tax assets, we consider all reasonably available positive and negative evidence, including our past operating
results, the existence of cumulative losses in the most recent years and our forecast of future taxable income. In estimating future taxable
income, we develop assumptions, including the amount of future state and federal pre-tax operating income, the reversal of temporary differences
and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment. When the likelihood
of the realization of existing deferred tax assets changes, adjustments to the valuation allowance are charged in the period in which
the determination is made, either to income or goodwill, depending upon when that portion of the valuation allowance was originally created.

 We record an estimated tax liability or tax benefit
for income and other taxes based on what we determine will likely be paid in the various tax jurisdictions in which we operate. We use
our best judgment in the determination of these amounts. However, the liabilities ultimately realized and paid are dependent upon various
matters, including resolution of tax audits, and may differ from amounts recorded. An adjustment to the estimated liability would be recorded
as a provision or benefit to income tax expense in the period in which it becomes probable that the amount of the actual liability or
benefit differs from the recorded amount.

 Our future effective tax rates could be adversely
affected by changes in the valuation of our deferred tax assets or liabilities or changes in tax laws or interpretations thereof. If and
when our deferred tax assets are no longer fully reserved, we will begin to provide for taxes at the full statutory rate. In addition,
we are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess
the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

 Share-Based Compensation

 We record share-based awards exchanged for employee
service at fair value on the date of grant and expense the awards in the consolidated statements of operations over the requisite employee
service period. These awards are valued at the grant date fair market value using the closing price of our stock on the QB Tier of the
OTC Markets Group. Share-based compensation expense is generally recognized over the expected term of the award on a straight-line basis,
and forfeitures are recorded as they occur. At December 31, 2024 and December 31, 2023, the Company's share-based compensation was
in the form of stock options.

 Earnings or Loss per Common Share

 Basic earnings or loss per common share ("EPS")
is calculated by dividing net income or loss by the weighted-average number of common shares outstanding for the period. Diluted EPS is
calculated by dividing net income or loss by the weighted-average number of common shares and dilutive common stock equivalents (stock
options) outstanding during the period. Diluted EPS reflects the potential dilution that could occur if stock options and warrants to
purchase common stock were exercised for shares of common stock. In periods where losses are reported, the weighted-average number of
common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

 F- 11

 Recently Issued Accounting Standards

 In November 2023, the Financial Accounting Standards
Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280) - "Improvements
to Reportable Segment Disclosures." The new standard requires enhanced disclosures about a public entity's reportable segments including
more detailed information about a reportable segment's expenses. The amendments in this update apply to all public entities that are required
to report segment information, and include those entities that have a single reportable segment. The amendments in this update are effective
for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption
is permitted. We adopted Topic 280 on January 1, 2024. Retrospective application is required for all periods presented in the financial
statements. The adoption of Topic 280 did not have a material effect on our consolidated financial statements, other than with respect
to expanded disclosure. See Note 11 for disclosures related to the adoption of ASU No. 2023-07.

 In December 2023, the FASB issued ASU 2023-09, "Improvements
to Income Tax Disclosures," which requires significant additional disclosures about income taxes, primarily focused on the disclosure
of income taxes paid and the rate reconciliation table. The new guidance will be applied prospectively (with retrospective application
permitted) and is effective in the 2025 annual period and in 2026 for interim periods, with early adoption permitted. The adoption of
ASU No. 2019-10 will not have a material impact on our financial statements, other than with respect to expanded disclosure.

 In November 2024, the FASB issued ASU 2024-03, Income
Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,
which is to improve disclosures regarding the types of expenses included in commonly presented expense captions. This update is effective
beginning with the Company's 2027 fiscal year annual reporting period, with early adoption permitted. The Company is currently evaluating
the impact that the adoption of this standard will have on its consolidated financial statements.

 We consider the applicability and impact of all ASUs.
We assessed ASUs not listed above and determined that they either were not applicable or were not expected to have a material impact on
our financial statements.

 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
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.

 As of December 31, 2024 and 2023, the Company does
not have any subleases.

 F- 12

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

 Schedule of operating and finance leases

 Classification

 December 31, 2024

 December 31, 2023

 Assets

 Operating

 Right-of-use operating lease assets

 $
 5,383

 $
 5,856

 Finance

 Right-of-use finance lease assets

 Total lease assets

 $
 5,412

 $
 5,959

 Liabilities

 Current

 Operating

 Current operating lease liabilities

 $

 $

 Finance

 Current finance lease liabilities

 Non-current

 Operating

 Operating lease liability, long-term

 5,600

 6,136

 Finance

 Finance lease liability, long-term

 Total lease liabilities

 $
 6,161

 $
 6,714

 The components of our lease expense were as follows:

 Schedule of components of our lease expense

 Classification

 2024

 2023

 Finance lease costs

 Amortization of ROU assets

 Selling, general and administrative

 $

 $

 Interest on lease liabilities

 Interest (income) expense, net

 Operating lease expense

 Cost of sales

 Operating lease expense

 Selling, general and administrative

 Short term lease expense

 Cost of sales

 Total lease expense

 $
 1,434

 $
 1,573

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

 Schedule of lease term and discount rate

 December 31, 2024

 December 31, 2023

 Weighted-average remaining lease terms (years)

 Operating leases

 16.1

 8.7

 Finance leases

 2.4

 1.7

 Weighted-average discount rates

 Operating leases

 7.94 %

 7.97 %

 Finance leases

 0.02 %

 7.44 %

 F- 13

 Present value of lease liabilities:

 Schedule of present value of lease liabilities

 Years ending December 31,

 Operating Leases

 Finance Leases

 2025

 $
 1,006

 $

 2026

 1,021

 2027

 1,042

 –

 2028

 1,058

 –

 2029

 1,059

 –

 Thereafter

 3,115

 –

 Total lease payments

 $
 8,301

 $

 Less: Interest

 ( 2,164
)

 ( 1
)

 Present value of lease liabilities

 $
 6,137

 $

 The Company had no material non-cash financing or
operating leases entered into during the years ended December 31, 2024 and 2023.

 Supplemental cash flow information related to leases for the years ended
December 31, 2024 and 2023

 Schedule of lease obligations

 2024

 2023

 Right-of-use assets obtained in exchange for lease liabilities

 Operating leases

 $
 –

 $

 Finance leases

 –

 NOTE 3: REVENUE FROM CONTRACTS WITH CUSTOMERS

 Revenues are recognized when control of the promised
goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange
for those goods or services. To determine the proper revenue recognition method for our customer contracts, we evaluate whether two or
more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted
for as more than one performance obligation. This evaluation requires significant judgment and the decision to combine a group of contracts
or separate the combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded
in a given period.

 For most of our fixed price contracts, the customer
contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or capability
even if that single project results in the delivery of multiple units. Hence, the entire contract is accounted for as one performance
obligation. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified,
payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

 Disaggregation of Revenue

 The following table presents our revenues disaggregated by fixed price
and service contracts. Sales taxes are excluded from revenues.

 Schedule of disaggregation of revenues

 2024

 2023

 Fixed price contracts

 $
 15,842

 $
 6,951

 Service contracts

 6,892

 8,392

 Total

 $
 22,734

 $
 15,343

 F- 14

 Fixed price contracts

 For fixed price contracts, we generally recognize
revenue over time as we perform because of continuous transfer of control to the customer. This continuous transfer of control to the
customer is supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay us
for costs incurred plus a reasonable profit and take control of any work in process. In our fixed price contracts, the customer either
controls the work in process or we deliver products with no alternative use to the Company and have rights to payment for work performed
to date plus a reasonable profit as evidenced by contractual termination clauses.

 Because of control transferring over time, revenue
is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure
progress towards completion requires judgment and is based on the nature of the products or services to be provided. We generally use
the cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer which occurs as
we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based
on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated
fees or profits, are recorded proportionally as costs are incurred.

 Contracts are often modified to account for changes
in contract specifications and requirements. We consider a contract modification to exist when the modification either creates new, or
changes the existing, enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct
from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as
if they were part of that existing contract. The effect of a contract modification on the transaction price, and our measure of progress
for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction
of revenue) on a cumulative catch-up basis.

 We have a company-wide standard and disciplined quarterly
estimate at completion process in which management reviews the progress and execution of our performance obligations. As part of this
process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion
and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. Changes
in estimates of net sales, cost of sales and the related impact to operating income are recognized quarterly on a cumulative catch-up
basis, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a performance
obligation's percentage of completion. A significant change in one or more of these estimates could affect the profitability of
one or more of our performance obligations. When estimates of total costs to be incurred exceed total estimates of revenue to be earned
on a performance obligation related to fixed price contracts, a provision for the entire loss on the performance obligation is recognized
in the period the loss is estimated.

 Service Contracts

 We recognize revenue for service contracts measuring
progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer.
The control over services is transferred over time when the services are rendered to the customer 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 billed on a
monthly basis. Payment terms for services are usually 30 days from invoice receipt, but have increased to 45, 60, or 90 days, depending
on the customer.

 Contract balances

 Costs and estimated earnings in excess of billings
on uncompleted contracts arise when revenues are recorded based on the extent of progress towards completion but cannot be invoiced under
the terms of the contract. Such amounts are invoiced upon completion of contractual milestones. Billings in excess of costs and estimated
earnings on uncompleted contracts arise when milestone billings are permissible under the contract, but the related costs have not yet
been incurred. All contract costs are recognized currently on jobs formally approved by the customer and contracts are not shown as complete
until virtually all anticipated costs have been incurred and the risk of loss has passed to the customer.

 F- 15

 Assets related to costs and estimated earnings in
excess of billings on uncompleted contracts, as well as liabilities related to billings in excess of costs and estimated earnings on uncompleted
contracts, have been classified as current. The contract cycle for certain long-term contracts may extend beyond one year; thus, complete
collection of amounts related to these contracts may extend beyond one year though such long-term contracts include contractual milestone
billings as discussed above. For the years ending 2024 and 2023, there were no contracts with terms that extended beyond one year.

 The following table summarizes our contract assets,
which are "Costs and estimated earnings in excess of billings on uncompleted contracts" and our contract liabilities, which
are "Billings in excess of costs and estimated earnings on uncompleted contracts".

 Schedule of earnings in excess of billings on uncompleted contracts

 December 31, 2024

 December 31, 2023

 Costs incurred on uncompleted contracts

 $
 4,281

 $
 2,575

 Estimated earnings on uncompleted contracts

 4,925

 Estimated loss on uncompleted contracts

 ( 100
)

 ( 130
)

 Gross costs and estimated earnings

 9,106

 2,844

 Less: Billings to date on uncompleted contracts

 ( 6,682
)

 ( 3,741
)

 Costs incurred plus estimated earning less billings on uncompleted contracts, net

 $
 2,424

 $
 ( 897
)

 Accounts receivable, net, contract assets, and contract liabilities consisted
of the following:

 Schedule of accounts receivable, net, contract assets, and contract liabilities

 December 31, 2024

 December 31, 2023

 January 1, 2023

 Accounts receivable, net

 $
 2,767

 $
 4,228

 $
 2,920

 Contract assets

 3,080

 Contract liabilities

 1,377

 Total accounts receivable, net, contract assets, and contract liabilities

 $
 3,736

 $
 1,857

 $

 Contract assets
and liabilities fluctuate period to period based on various factors, including, among others, changes in the number and size of projects
in progress at period end; variability in billing and payment terms, such as up-front or advance billings, interim or milestone billings,
or deferred billings; and recognized unapproved change orders and contract claims. The contract asset and liability balances at
December 31, 2024 and 2023 consisted primarily of revenue related to fixed-price projects.

 Remaining Performance Obligations

 Remaining performance obligations represent the transaction
price of firm orders for which work has not been performed and excludes unexercised contract options, potential orders, and any remaining
performance obligations for any sales arrangements that had not fully satisfied the criteria to be considered a contract with a customer
pursuant to the requirements of ASC 606.

 Practical Expedients and Exemptions

 We generally expense sales commissions when incurred
because the amortization period would have been one year or less. These costs are recorded within selling, general and administrative
expenses.

 Many of our services contracts are short-term in nature
with a contract term of one year or less. For those contracts, we have utilized the practical expedient exempting the Company from disclosure
of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an
original expected duration of one year or less.

 F- 16

 Additionally, our payment terms are short-term in
nature with settlements of one year or less. We have, therefore, utilized the practical expedient exempting the Company from adjusting
the promised amount of consideration for the effects of a significant financing component given that the period between when the entity
transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

 Further, in many of our service contracts, we have
a right to consideration from a customer in an amount that corresponds directly with the value to the customer of our performance completed
to date (for example, a service contract in which we bill a fixed amount for each hour of service provided). For those contracts, we have
utilized the practical expedient allowing us to recognize revenue in the amount for which we have the right to invoice.

 Accordingly, we do not disclose the value of unsatisfied
performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize
revenue at the amount to which we have the right to invoice for services performed.

 NOTE 4: PROPERTY, PLANT AND EQUIPMENT

 Net property, plant and equipment consisted of the following:

 Schedule of property plant and equipment

 December 31,
 2024

 December 31,
 2023

 Range of
 Asset Lives

 Leasehold improvements

 $
 2,316

 $
 2,272

 lease term

 Equipment

 5,790

 5,861

 2 - 30 years

 Furniture, computers and office equipment

 2 - 8 years

 Construction in progress

 –

 -

 Total property, plant and equipment

 8,389

 8,313

 Less: Accumulated depreciation and amortization

 ( 5,598
)

 ( 5,345
)

 Property, plant and equipment, net

 $
 2,791

 $
 2,968

 Depreciation and amortization expense included in
cost of sales in the accompanying consolidated statements of operations was $ 459 and $ 497 for the years ended December 31, 2024 and 2023,
respectively. Depreciation and amortization expense excluded from cost of sales in the accompanying consolidated statements of operations
was $ 53 and $ 53 for the years ended December 31, 2024 and 2023, respectively.

 Construction in progress represents assets that are
not ready for service or are in the construction stage. Assets are depreciated once they are placed into service.

 NOTE 5: EARNINGS PER COMMON SHARE

 Basic EPS is calculated by dividing net income (loss)
by the weighted-average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net income (loss) by
the weighted-average number of common shares and the dilutive effect of common stock equivalents (warrants, nonvested stock awards and
stock options) using the treasury method.

 F- 17

 In each relevant period, the net income used in the
basic and diluted EPS calculations is the same. The following table reconciles the weighted-average basic number of common shares outstanding,
and the weighted-average diluted number of common shares deemed outstanding for the purpose of calculating basic and diluted EPS.

 Schedule of reconciliation of number of shares in earnings per share calculation

 2024

 2023

 Numerator:

 $
 2,620

 $
)

 Denominator:

 Weighted average number of common shares outstanding:

 Basic

 12,187

 11,888

 Diluted

 12,344

 11,888

 Income (loss) per common share outstanding:

 Basic

 $
 0.21

 $
 ( 0.13
)

 Diluted

 $
 0.21

 $
 ( 0.13
)

 At December 31, 2024 and 2023, there were outstanding
options that were vested and exercisable into 438 and 875 shares of common stock, respectively; however, they have been excluded from
the calculation of EPS because their exercise would be anti-dilutive.

 NOTE 6: SHARE-BASED COMPENSATION

 On August 26, 2024, the Company's independent
directors each received stock options to purchase 50,000
shares of our common stock with an exercise price of $ 1.28
per share. Fair value of these stock options was $ 0.99
per share at the date of grant. Twenty-five percent of the shares vested on each of August 31, 2024, November 30, 2024, February 28,
2025, and the remainder are scheduled to vest on May 31, 2025. In addition to the foregoing, all shares shall vest immediately prior
to a change in control.

 On August 2, 2023, the Company's independent
directors each received stock options to purchase 50,000
shares of our common stock with an exercise price of $ 0.55
per share. Fair value of these stock options was $ 0.32
per share at the date of grant. Twenty-five percent of the shares vested on each of August 31, 2023, November 30, 2023, February 28,
2024, and May 31, 2024.

 The following table summarizes the activity of our
nonvested stock options for the years ended December 31, 2024 and 2023:

 Schedule of option activity

 Shares
 Underlying
 Options

 Weighted-
 Average
 Exercise Price

 Weighted-
 Average
 Remaining Contractual Term
 (in years)

 Outstanding at December 31, 2022

 $
 0.63

 4.8

 Granted

 0.55

 Vested

 ( 150
)

 0.59

 Outstanding at December 31, 2023

 0.55

 4.6

 Granted

 0.90

 Vested

 ( 200
)

 1.14

 Exercised

 ( 200
)

 0.57

 Outstanding at December 31, 2024

 $
 0.86

 3.6

 Exercisable at December 31, 2024

 $
 0.94

 2.1

 F- 18

 For the years ended December 31, 2024 and 2023, we
recognized a total of $ 178 and $ 90, respectively, of share-based compensation expense related to stock options, which is included in selling,
general and administrative expenses in the accompanying consolidated statements of operations. The unamortized estimated fair value of
nonvested stock options was $ 157 and $ 24 at December 31, 2024 and 2023, respectively. These costs are expected to be recognized as expenses
over a weighted-average period of 1.82 years.

 NOTE 7: TREASURY STOCK

 Treasury shares are accounted for using the cost method.
During the year ended December 31, 2024, 200 shares of treasury stock were utilized for the exercise of non-qualified stock options. During
the year ended December 31, 2024, a total of 300 shares were used for the exercise of non-qualified stock options.

 During the year ended December 31, 2024, the Company
issued 200 shares for our CEO's restricted stock award. The Company had 3,718 and 4,018 shares of common stock held in treasury
as of December 31, 2024 and 2023.

 NOTE 8: INCOME TAXES

 Income tax expense is comprised of the following:

 Schedule of income tax expense

 2024

 2023

 Federal:

 Current

 $
 –

 $
 –

 Deferred

 –

 –

 Total

 –

 –

 State:

 Current

 Deferred

 –

 –

 Total

 Total income tax expense

 $

 $

 Income tax expense differs from the amount computed
by applying the U.S. statutory income tax rate to loss before income taxes for the reasons set forth below.

 Schedule of income tax expense (benefit)

 2024

 2023

 Income tax expense (benefit) at federal statutory rate

 21.00 %

 ( 21.00 %
)

 State tax expense (benefit), net of federal benefit

 0.51 %

 0.23 %

 Valuation allowance

 ( 21.58 %
)

 20.49 %

 Research and development credits

 0.45 %

 0.45 %

 Other permanent differences

 0.24 %

 0.17 %

 Total effective rate

 0.62 %

 0.34 %

 F- 19

 Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes, as well as operating loss and tax credit carryforwards. The tax effects of the temporary differences and carryforwards
are as follows:

 Schedule of deferred income taxes

 December 31,

 2024

 2023

 Deferred tax assets:

 Net operating loss carryforwards

 $
 5,432

 $
 6,090

 Research and development and other credit carryforwards

 Share-based compensation

 Intangible amortization

 ( 10
)

 ( 12
)

 Right-of-use operating lease liabilities

 1,289

 1,389

 Other

 ( 5
)

 Total deferred tax assets

 8,250

 8,908

 Less: valuation allowance

 ( 6,978
)

 ( 7,546
)

 Net deferred tax assets

 $
 1,272

 $
 1,362

 Deferred tax liabilities:

 Depreciation and amortization on property, plant and equipment

 $
 ( 141
)

 $
 ( 132
)

 Right-of-use operating lease assets

 ( 1,131
)

 ( 1,230
)

 Total deferred tax liabilities

 $
 ( 1,272
)

 $
 ( 1,362
)

 Net deferred tax position

 $
 –

 $
 –

 We have $ 25,387 of federal and $ 1,322 of state net
operating loss ("NOL") carryforwards and $ 618 in research and development and other credits available to offset future taxable
income. These federal and state NOLs will expire at various dates through 2034, except for federal NOLs generated in 2018 and subsequent
years, which have no expiration dates. Management analyzed its current operating results and future projections and determined that a
full valuation allowance was needed due to our cumulative losses in recent years. We have no uncertain tax positions at December 31, 2024.
Accordingly, we do not have any accruals for penalties or interest related to our tax returns. Should an examination or audit arise, we
would evaluate the need for an accrual and record one, if necessary. Our federal tax returns from the tax years ended December 31, 2020
through December 31, 2024 are open to examination by the Internal Revenue Service.

 NOTE 9: COMMITMENTS AND CONTINGENCIES

 Employment Agreement

 Our Chief Executive Officer ("CEO") is
employed under an employment agreement containing severance provisions. In the event of termination of the CEO's employment for
any reason, the CEO will be entitled to receive all accrued, unpaid salary and vacation time through the date of termination and all benefits
to which the CEO is entitled or vested under the terms of all employee benefit and compensation plans, agreements, and arrangements in
which the CEO participates as of the date of termination.

 In addition, subject to executing a general release
in favor of the Company, the CEO will be entitled to receive certain severance payments in the event his employment is terminated by the
Company "other than for cause" or by the CEO with "good reason." These severance payments include: (i) a lump
sum in cash equal to one time the CEO's annual base salary; (ii) a lump sum in cash equal to a pro rata portion of the annual bonus
payable for the period in which the date of termination occurs based on the actual performance under the Company's annual incentive
bonus arrangement; (iii) if the CEO's termination occurs prior to the date that is twelve months following a change of control,
then each and every share option, restricted share award and other equity-based award that is outstanding and held by the CEO shall immediately
vest and become exercisable.

 F- 20

 Litigation

 From time to time, the Company is party to various
legal proceedings arising in the ordinary course of business. The Company expenses or accrues legal costs as incurred and is not involved
in any material legal proceedings as of the date of these financial statements.

 WW Champion Developments Lawsuit

 On September 23, 2024, WW Champion Developments, Inc.
("WW Champion") sued the Company alleging breach of contract and seeking money damages of $1,229 in the 281 st District
Court of Harris County in an action styled WW Champion Developments, Inc. vs. Koil Energy Solutions, Inc., Cause Number 2024-65006.
WW Champion alleged that Koil Energy breached a lease agreement between the parties by abandoning the premises, failing to maintain proper
fire prevention measures, and failing to pay its remaining rental payments. The Company disputes WW Champion's allegations, intends
to vigorously defend itself against this lawsuit, and believes that the liability recorded for this matter has been adequately accrued.

 NOTE 10: EMPLOYEE RETENTION CREDIT

 Under the provisions of the Coronavirus Aid, Relief,
and Economic Security Act (the "CARES Act") signed into law on March 27, 2020 and the subsequent extension of the CARES Act,
the Company was eligible for a refundable employee retention credit subject to certain criteria. Since there is no U.S. GAAP for for-profit
business entities that receive government assistance that is not in the form of a loan, an income tax credit or revenue from a contract
with a customer, we determined the appropriate accounting treatment by analogy to other guidance. The Company accounted for the employee
retention credit by analogy to International Accounting Standards (IAS) 20, "Accounting for Government Grants and Disclosure of
Government Assistance," of International Financial Reporting Standards.

 Under an IAS 20 analogy, a business entity would recognize
the employee retention credit on a systematic basis over the periods in which the entity recognizes the payroll expenses for which the
grant (i.e., tax credit) is intended to compensate when there is reasonable assurance (i.e., it is probable) that the entity will comply
with any conditions attached to the grant and the grant (i.e., tax credit) will be received.

 The Company initially recognized a $ 650 employee retention
credit as other income on its condensed consolidated statement of operations for the year ended December 31, 2021. As of December 31,
2023, the Company has a $ 323 employee retention tax credit receivable balance recorded on its consolidated balance sheet. The Company
filed for refunds of the employee retention credits and as of the date of this Report, had received a $ 344 refund for the employee retention
credit filed for the first quarter of 2021.

 NOTE 11: SEGMENT INFORMATION

 The Company operates as a single operating segment,
as an energy services company that provides equipment and support services to the world's energy and offshore industries. The Company's
chief operating decision maker "(CODM)" is its chief executive officer, who reviews financial information presented on a consolidated
basis. The CODM uses consolidated net income to monitor budget versus actual results in assessing segment performance and the allocation
of resources. Significant segment expenses are presented in the Company's consolidated statements of operations.

 F- 21

 Total operating expenses are presented as follows:

 Schedule of operating expenses

 2024

 2023

 Revenues

 $
 22,734

 $
 15,343

 Share-based compensation and other personnel costs

 9,426

 8,221

 Materials

 4,064

 2,452

 Depreciation and amortization

 Other cost of sales and selling, general and administrative expenses

 6,116

 5,675

 Income tax expense

 Interest and other (income) expense

 ( 79
)

 ( 61
)

 $
 2,620

 $
)

 The CODM regularly reviews asset information by consolidated
assets since we only have one reportable segment.

 NOTE 12: SUBSEQUENT EVENTS

 The Company has evaluated subsequent events through the date these financial
statements were available to be issued.

 On January 8, 2025, Koil Energy received $365 for the remaining employee
retention credit filed for the second quarter of 2021. This payment of $365 included the $323 applied for that was recorded on the balance
sheet as a receivable well as $42 of interest earned.

 On January 15, 2025, KOIL Energy announced the resignation of Mr. Trevor
Ashurst from his position as Vice President of Finance and Administration, effective February 1, 2025. Troy Aymond, Corporate Controller
stepped in as the acting CFO. The Company has partnered with an Executive Search Firm to recruit a Chief Financial Officer and a Human
Resources Manager.

 On March 3, 2025, KOIL Energy announced its expansion
into Brazil, with a new center for manufacturing and service support in Maca. KOIL Energy has leased a 180,000 sq ft property
with offices and a workshop of 27,000 sq ft. The facility will mainly house service support activities. The leasing contract can be terminated
with a 3 months' notice. The subsidiary, KOIL Energy Solutions do Brasil LTDA, has also been established as the legal entity for
KOIL Energy's operations in Brazil.

 On March 4, 2025, KOIL Energy and SubseaDesign AS,
a Norway-based company, formed a strategic alliance to accelerate advancements in subsea technology. Both companies provide specialty
products and services for subsea projects. Driven by the rising demand for innovative solutions in the global subsea industry, the two
companies will collaborate within R&D and project execution.

 On March 17, 2025, KOIL Energy was awarded a significant
contract to deliver subsea distribution equipment for a US Project. This includes Multi-Quick Connector (MQC) Plates for a project in
the Gulf of America. This award encompasses equipment designed to control the high-pressure (20,000 PSI) systems of a subsea field operated
by a U.S. independent energy company. The scope of work for this project includes engineering, procurement, fabrication, assembly, and
testing. The project will be carried out at KOIL's manufacturing facility in Houston, Texas. Final delivery is scheduled for the last
quarter of this year.

 F- 22