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What changed in LIQTECH INTERNATIONAL INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of LIQTECH INTERNATIONAL INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+189 added−226 removedSource: 10-K (2024-03-22) vs 10-K (2023-03-22)

Top changes in LIQTECH INTERNATIONAL INC's 2023 10-K

189 paragraphs added · 226 removed · 166 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

66 edited+7 added−11 removed26 unchanged
Biggest changeThe growth within the global industrial water & wastewater treatment market is projected to reach $7.7 billion by 2030 at a CAGR of 11.2% from 2021, based on relevant industry research. Generally, we also see a growing global demand for higher-quality re-injection water from unconventional oil & gas productions.
Biggest changeWe are currently focused on evaluation future market potential in order to more accurately assess the commercial potential within each industrial end-market segment. Based on industry research, the growth within the global industrial water & wastewater treatment market is projected to reach $7.7 billion by 2030.
Based on more than 20 years of experience in the filtration industry, we have thoroughly developed a superior and cost-effective industrial pool filter system with a smaller footprint, lower chlorine consumption, and higher quality of water filtration. Conventional technologies use large amounts of chemicals for disinfection, whereas our superior commercial pool system reduces chemical consumption.
Based on more than 20 years of experience in the filtration industry, we have developed a superior and cost-effective industrial pool filter system with a smaller footprint, lower chlorine consumption, and higher quality of water filtration. Conventional technologies use large amounts of chemicals for disinfection, whereas our superior commercial pool system reduces chemical consumption.
Furthermore, our proprietary DPF technology has paved the way for new market opportunities such as black carbon reduction in the marine industry, where our solutions allow both ocean-going and inland marine vessels to comply with current and future regulatory thresholds as defined by both IMO and regional regulators.
Furthermore, our proprietary DPF technology has paved the way for new market opportunities such as black carbon emission reduction in the marine industry, where our solutions allow both ocean-going and inland marine vessels to comply with current and future regulatory thresholds as defined by both IMO and regional regulators.
The liquid filtration systems business has become a highly complementary offering to our existing SiC membrane and DPF business. We plan to actively market our existing products to new customers as we penetrate new markets and optimize our manufacturing capacity.
The liquid filtration systems business has become a highly complementary offering to our SiC membrane and DPF business. We plan to actively market our existing products to new customers as we penetrate new end markets and optimize our manufacturing capacity.
We possess in-house engineering capabilities for process design, 3D modeling, automation and control. Our professional staff of dedicated engineers and craftsmen assume responsibility for the entire specification, engineering, fabrication, and commissioning process.
We possess in-house engineering capabilities for process design, 3D modeling, automation, and control. Our professional staff of dedicated engineers and craftsmen assume responsibility for the specification, engineering, fabrication, and commissioning process.
In certain instances, our products are delivered to the end customer through system integrators. These system integrators use our filtration products and membranes in larger filtration systems, which eventually are installed in systems used by the end customer.
In certain instances, our products are delivered to the end customer through system integrators. These system integrators use our filtration products and membranes in larger filtration systems, which eventually are installed in systems used by the end customers.
The information contained in, or accessible from, our website is not a part of this Annual Report. Additionally, the SEC maintains a website that contains reports, proxy statements, information statements, and other information regarding issuers, including us, that file electronically with the SEC at www.sec.gov . 10 Table of Contents
The information contained in, or accessible from, our website is not a part of this Annual Report. Additionally, the SEC maintains a website that contains reports, proxy statements, information statements, and other information regarding issuers, including us, that file electronically with the SEC at www.sec.gov. 9 Table of Contents
We also believe that having distinctive names is an important factor in marketing our products and therefore use trademarks to brand some of our products. As of March 2023, we had three trademark registrations in China and four trademark registrations in Denmark (AQUA SOLUTION, CoMem, CDPX, and FUTURE FILTRATION).
We also believe that having distinctive names is an important factor in marketing our products and therefore use trademarks to brand some of our products. As of March 2024, we had three trademark registrations in China and four trademark registrations in Denmark (AQUA SOLUTION, CoMem, CDPX, and FUTURE FILTRATION).
We are also in the process of proactively renewing and developing new trademarks in select geographical areas. Government Regulation We do not believe that we are subject to any special governmental regulations affecting our products in the countries in which we operate, although we are subject to numerous health and safety laws and regulations.
We are also in the process of proactively renewing and developing new trademarks in select geographic areas. Government Regulation We do not believe that we are subject to any special governmental regulations affecting our products in the countries in which we operate, although we are subject to numerous health and safety laws and regulations.
In this context, our company seeks to deploy our unique filtration systems across industries to help unlock a more sustainable future with lower resource consumption and equally important more efficient and responsible operations, with the objective of creating both economic value and environmental benefits.
In this context, the Company seeks to deploy our unique filtration systems across industries to help unlock a more sustainable future with lower resource consumption and more efficient and responsible operations, with the objective of creating both economic value and environmental benefits.
We are expanding our range of products to better leverage existing customer relationships and develop new relationships within the oil & gas, marine, chemical, and other industries. ● Better penetrate existing end markets where our value proposition is strong.
We are expanding our range of products to better leverage existing customer relationships and develop new relationships within the oil & gas, marine, chemical, and other industries. ● Better penetration of existing end markets where our value proposition is strong.
We plan to expand and optimize our production capacity within the existing facilities with further support from existing partnerships across Europe, Middle East, Asia, and Europe. Raw Materials and Components The main raw materials we use in our manufacturing processes are silicon carbide, steel, pumps, electrical components, plastic, platinum, and palladium.
We plan to consolidate, optimize, and expand our production capacity within the existing facilities with further support from existing partnerships across Europe, Middle East, and Asia. Raw Materials and Components The main raw materials used in our manufacturing processes are silicon carbide, steel, pumps, electrical components, plastic, platinum, and palladium.
We purchase these commodities from various sources generally based upon availability and price. Sales, Marketing and Business Intelligence Our products and services are sold both directly and indirectly to end clients across multiple jurisdictions and end-markets through direct sales, systems integrators, distributors, agents, and partners.
We purchase these commodities from various sources generally based upon availability, lead time, quality, and price. Sales, Marketing and Business Intelligence Our products and services are sold both directly and indirectly to end clients across multiple jurisdictions and end-markets through direct sales, systems integrators, distributors, agents, and partners.
It utilizes a crossflow structure to handle high concentrations of suspended solids found in produced water from the oil and chemical industry, wastewater from industrial processes and manure filtration, and other applications. It offers consistent removal of oil and suspended solids at high throughput rates regardless of feed conditions.
It utilizes a crossflow structure to handle high concentrations of suspended solids found in produced water from the oil & gas and chemical industries, wastewater from industrial processes and manure filtration, and other applications. It offers consistent removal of oil and suspended solids at high throughput rates regardless of feed conditions.
We believe our offering is uniquely positioned to unlock future growth in the context of the global focus on ESG, considering that our commercial pool application delivers safe, clean, and clear water to our clients with lower energy consumption and reduced lifecycle costs.
We believe our offering is uniquely positioned to unlock future growth in the context of the global focus on ESG, since our commercial pool application delivers safe, clean, and clear water to our clients with lower energy consumption and reduced lifecycle costs.
With a pore size of 60 nanometers (nm), it is suitable for ultrafiltration applications. This state-of-the-art membrane technology facilitates new separation processes and new filtration applications; and ● Aqua Solution ®, which integrates a dead-end structural design with cutting-edge membrane technology in a solution specifically designed for applications including pre-treatment, wastewater treatment, and swimming pool and spa water filtration.
With a pore size of 60 nanometers (nm), it is suitable for ultrafiltration applications. This state-of-the-art membrane technology facilitates new separation processes and new filtration applications; and ● Aqua Solution ®, which integrates an enclosed structural design with cutting-edge membrane technology in a solution specifically designed for applications including pre-treatment, wastewater treatment, and swimming pool and spa water filtration.
Our Company initially focused on selling DPF filters to the automotive industry to reduce exhaust gas emissions in diesel engines. In 2014, we acquired Provital Solutions, a Danish filtration system manufacturing company, which enabled our Company to broaden our offering of products and systems for ceramics filters, SiC membranes and modular liquid filtration systems.
Our Company initially focused on selling DPF filters to the automotive industry to reduce exhaust gas emissions in diesel engines. In 2014, we acquired Provital Solutions, a Danish filtration system manufacturing company that enabled our Company to broaden our offering of products and systems for ceramic filters, SiC membranes, and modular liquid filtration systems.
Our Products We manufacture and sell a broad range of systems and products based on the application of our ceramic filters and membranes for the filtration of liquids and gases within a range of uses, such as industrial wastewater, acid purification, oil & gas, commercial pool, non-road machinery, marine, and other industrial applications.
Our Products We manufacture and sell a broad range of systems and products based on the application of our ceramic filters and membranes for the filtration of liquids and gases within a range of uses, such as industrial wastewater, oil & gas, commercial pool, non-road machinery, marine, chemicals/petrochemicals and other industrial applications.
Unlike filtration products made of aluminum oxide, silicon carbide membranes are chemically inert and temperature resistant. Furthermore, silicon carbide membranes exhibit a high degree of hydrophilicity (the tendency of a surface to become wet or absorb water), which results in unique high flux (and corresponding low energy consumption).
Unlike filtration products made of aluminum oxide, silicon carbide membranes are chemically inert and temperature-resistant. Furthermore, silicon carbide membranes exhibit a high degree of hydrophilicity (the tendency of a surface to become wet or absorb water), which results in uniquely high flux (and correspondingly low energy consumption).
As a result, we believe that such superior physical properties make our products desirable in both liquid filtration products and exhaust emission control products. ● Complete Inhouse Systems Fabrication: LiqTech provides full fabrication and integration of our membranes into complete filtration systems made from corrision-resistant materials and components.
As a result, we believe that such superior physical properties make our products desirable in both liquid filtration products and exhaust emission control products. ● Complete In-house Systems Fabrication: LiqTech provides full fabrication and integration of our membranes into complete filtration systems made from corrosion-resistant materials and components.
The Aqua Solution® also reduces the number of membrane elements, pressure vessels, and overall reduces both water and energy consumption including lower CO2 footprint, by offering high-flow capabilities at very low pressure with improved filtration characteristics; 2 Table of Contents Diesel Particulate Filters (DPFs) for Gas Purification We offer diesel particulate filters for exhaust emission control solutions to the verified retrofit and original equipment manufacturer (OEM) market through our direct sales force, and distributors specializing in sales to end-users.
The Aqua Solution® also reduces the number of membrane elements, pressure vessels, and both water and energy consumption as well as CO2 footprint by offering high-flow capabilities at very low pressure with improved filtration characteristics. 2 Table of Contents Diesel Particulate Filters (DPFs) for Gas Purification We offer diesel particulate filters for exhaust emission control solutions to the verified retrofit and original equipment manufacturer (OEM) markets through our direct sales force and distributors specializing in sales to end-users.
We believe that supplying our customers with a modular based system solution built upon our silicon carbide membranes is unique in the market, considering our vertical integration with inhouse manufacturing of silicon carbide products and engineered plastic components, coupled with the design, engineering and assembly of these integrated systems. ● Broad Application of LiqTech Membranes: Our membranes can be applied in a variety of applications, including the filtration of industrial wastewater, separation of metals from liquids in industrial processes, marine scrubber wastewater, chemicals and produced water within oil & gas, oil emulsion separation, bacteria removal, commercial swimming pool water treatment, food and beverages, acid purification, etc. 4 Table of Contents ● Marketing and Manufacturing in Key Markets and Expanding to Other Markets: While production is centered in Denmark, we have distribution, and sales capacity across multiple jurisdictions.
We believe that supplying our customers with a modular-based solution built upon our silicon carbide membranes is unique in the market, considering our vertical integration with in-house manufacturing of silicon carbide products and engineered plastic components, coupled with the design, engineering, and assembly of the integrated systems. ● Broad Application of LiqTech Membranes: Our membranes can be applied in a variety of applications, including the filtration of industrial wastewater, separation of metals from liquids in industrial processes, marine scrubber wastewater, chemicals and produced water within oil & gas, oil emulsion separation, bacteria removal, commercial swimming pool water treatment, food and beverages, chemicals/petrochemicals, and other applications. 4 Table of Contents ● Marketing and Manufacturing in Key Markets and Expanding to Other Markets: While production is centered in Denmark, we have distribution and sales activities across multiple jurisdictions.
Together with our clients, we have demonstrated the SiC membrane technology performance and verified significant performance improvements to the MEG regeneration process when compared to other membrane technologies. ● Marine Scrubber Wastewater: We supply water filtration systems for marine scrubber systems that may be deployed on ships to reduce sulfur emissions stemming from heavy fuel oil (HFO) operations, allowing vessels to comply with the IMO 2020 sulfur cap.
Together with our clients, we have demonstrated the performance of SiC membrane technology and validated significant performance improvements to the MEG regeneration process when compared to other membrane technologies. ● Marine Scrubber Wastewater: We supply water filtration systems for marine scrubber systems that may be deployed on ships to reduce sulfur emissions stemming from heavy fuel oil (HFO) operations, allowing vessels to comply with the International Maritime Organization (IMO) 2020 sulfur cap.
We have successfully sold products and installed systems into several end market segments--including automotive/transportation, clean water and pool filtration, marine, industrial wastewater, acid, and oil & gas applications.
We have successfully sold products and installed systems into several end market segments--including automotive/transportation, clean water and pool filtration, marine, industrial wastewater, chemicals/petrochemicals, and oil & gas applications.
We also provide engineered plastic parts and products for various internal and external industrial applications including the food & beverage and pharmaceutical industries. 1 Table of Contents Silicon Carbide Ceramic Membranes for Liquid Filtration For more than two decades, LiqTech has developed, manufactured, and sold innovative silicon carbide ceramic filtration technologies for liquid and gas purification.
We also provide engineered plastic parts and products for various internal and external industrial applications in the food & beverage and pharmaceutical industries. 1 Table of Contents Silicon Carbide Ceramic Membranes for Liquid Filtration For more than two decades, LiqTech has developed, manufactured, and sold innovative silicon carbide ceramic membranes for liquids purification.
Our chemically inert, plug-and-play membranes are extremely hard, chemically resistant, and consisting of durable ceramics with high flux (flow). SiC membranes are stronger, harder, longer-lasting, more temperature-resistant, and recover faster than conventional ceramic or polymeric membranes; ● Hybrid Technology Membranes (HTM) , a patented asymmetric membrane that combines the desired properties from silicon carbide (SiC) and zirconia (ZrO₂) ceramics.
Our chemically inert, plug-and-play membranes are extremely hard, chemically resistant, and consist of durable ceramics with high flux (flow). SiC membranes are stronger, harder, longer-lasting, more temperature-resistant, and perform more efficiently than conventional ceramic or polymeric membranes; ● Hybrid Technology Membranes (HTM) , a patented asymmetric membrane that combines the desired properties from silicon carbide (SiC) and zirconia (ZrO₂) ceramics.
Our current focus is to strengthen our position within certain industrial applications such as acid purification, metal cooling, and hydrocarbon production-derived contaminated water, which we refer to herein as “produced water”. Furthermore, we remain focused on our legacy segments within marine scrubber wastewater, pool, metal & mining, and other energy applications.
Our current focus is to strengthen our position within certain industrial applications such as difficult industrial water streams and hydrocarbon production-derived contaminated water, which we refer to herein as “produced water”. Furthermore, we remain focused on our legacy segments within marine scrubber wastewater, pool, metal & mining, and other energy applications.
We believe the aftermarket segment represents robust growth fundamentals as clients and technology providers are increasingly focused on unlocking value through close collaboration, for which service and maintenance will yield improved customer satisfaction and growth. 6 Table of Contents Silicon Carbide Ceramic Membrane & Diesel Particulate Filter (DPF) Market Our legacy business related to the provision of DPF filters is expected to continue growing across Asia, Europe, and the United States as regulators require diesel engines to comply with new and more stringent environmental rules and regulation.
We believe the aftermarket segment benefits from robust growth fundamentals as clients and technology providers are increasingly focused on unlocking value through close collaboration, for which service and maintenance will yield improved customer satisfaction and growth. 6 Table of Contents Silicon Carbide Ceramic Membrane & Diesel Particulate Filter (DPF) Market Our legacy business related to the provision of DPF filters is expected to continue growing across Asia, Europe, and North America as regulators require diesel engines to comply with new and more stringent environmental rules and regulations.
Our Aqua Solution® offers the same water flow as conventional sand filters, which typically require up to 400 times more space and have pore sizes at least three times larger than our SiC membranes.
Our Aqua Solution® offers the same water purification as conventional sand filters, which typically require up to 400 times more space and have pore sizes at least three times larger than our Aqua Solution® SiC membrane.
We offer onshore and offshore solutions and have experience within acid, chemicals and produced water streams. We believe our SiC filters are the best alternative to micro filtration and walnut shell filters due to the operational efficiencies of our SiC filters including operating cost savings, reduced installation cost, and product resilience.
We offer onshore and offshore solutions and have experience within petrochemicals, chemicals and produced water streams. We believe our SiC filters are the best alternative to microfiltration and walnut shell filters due to the operational efficiencies of our SiC filters including operating cost savings, reduced installation cost, and product resilience.
We currently provide water filtration systems for scrubber technology providers, shipowners, and ship operators as well as tailored filtration systems for oil & gas operators and services companies.
We currently provide water filtration systems for commercial pool owners, scrubber technology providers, shipowners, and ship operators as well as tailored filtration systems for oil & gas operators and services companies.
Furthermore, LiqTech Plastics delivers benefits through vertical integration by manufacturing some key components for the fabrication and assembly into the Liquids Filtration Systems for pool and marine scrubber applications. Our Competitive Strengths Our products and systems compete with other filtration technologies that are made of ceramic and polymeric materials.
Furthermore, LiqTech delivers benefits through vertical integration by manufacturing some key components for the fabrication and assembly of liquid filtration systems for pool and marine scrubber applications. Our Competitive Strengths Our products and systems compete with other filtration technologies that are made of ceramic, aluminum oxide and polymeric materials.
We intend to continue investing in R&D with the aim of developing new technologies and improving our existing products to strengthen our competitive advantages, retain our existing customers, and acquire new customers.
We intend to continue investing in R&D with the aim of developing new technologies and improving our existing products to strengthen our competitive advantages, retaining our existing customers, and acquiring new customers.
As of March 2023, we employed eleven (11) full-time sales, marketing and strategy people in addition to partnership and distribution agents. We promote our products through direct sales to potential customers and marketing activities such as participation in tradeshows and exhibitions, with a heavy focus on digital marketing.
As of December 2023, we employed eleven (11) full-time sales, marketing and strategy personnel in addition to partnership and distribution agents. We promote our products through direct sales to potential customers and marketing activities such as participation in tradeshows and exhibitions, with a new focus on digital marketing.
Certain employees in Denmark are represented by workers’ councils that have collective bargaining agreements. With the exception of such Danish employees, no other employees are members of a labor union or are represented by workers’ councils that have collective bargaining agreements.
Certain employees in Denmark are represented by workers’ councils that have collective bargaining agreements. With the exception of such Danish employees, no other employees are members of a labor union or are represented by workers’ councils that have collective bargaining agreements. We believe that we have good relations with our employees.
Our company will work to accelerate market penetration and further validate perspectives on market potential and value proposition through detailed market studies and associated estimates of total addressable markets. 7 Table of Contents Research and Development We have nine (9) full-time employees that are primarily engaged in R&D activities pertaining to the development of technology and intellectual property rights related to silicon carbide product forms, applications, and manufacturing processes.
We intend to work on accelerating market penetration and further validate perspectives on market potential and value proposition through detailed market studies and associated estimates of total addressable markets. 7 Table of Contents Research and Development We have eight (8) full-time employees that are primarily engaged in R&D activities pertaining to the development of technology and intellectual property rights related to silicon carbide product formulas, applications, and manufacturing processes.
Furthermore, our company has recently intensified its focus on aftermarket sales through service & maintenance agreements and general sale of spare parts to our clients and partners.
Furthermore, we have recently intensified focus on aftermarket sales through service & maintenance agreements and general sale of spare parts to our clients and partners.
We also sell our products through distributors and agents in many other countries such as China, Korea, Spain, UK, France, Middle East, Singapore, and US.
We also sell our products through distributors and agents in many other countries and regions such as China, Korea, Spain, UK, France, Middle East, Singapore, Australia and the U.S.
Item 1. Business Overview LiqTech International, Inc. is a clean technology company that provides state-of-the-art gas and liquid purification products by manufacturing ceramic silicon carbide filters, membranes and providing engineered systems. For more than two decades, we have developed and manufactured products of re-crystallized silicon carbide.
Item 1. Business Overview LiqTech International, Inc. is a clean technology company that provides state-of-the-art gas and liquid purification products by manufacturing ceramic silicon carbide filters and membranes as well as developing industry-leading and fully automated filtration solutions and systems. For more than two decades, we have developed and manufactured products of re-crystallized silicon carbide.
We intend to continue to devote resources to the development of new technologies and the improvement of our products to retain existing customers and acquire new customers. Employees At December 31, 2022 we had 105 employees, including 69 in production, 14 in administration, 9 in research and development, 11 in sales, marketing and strategy, and 2 in executive management.
We intend to continue to devote resources to the development of new technologies and the improvement of our products to retain existing customers and acquire new customers. Employees At December 31, 2023 we had 119 employees, including 83 in production; 15 in administration; 8 in research and development; 11 in sales, marketing and strategy; and 2 in executive management.
Manufacturing We currently manufacture our membrane and DPF products in Ballerup, Denmark (Copenhagen area). We assemble our water treatment systems in Hobro, Denmark, and we manufacture plastic products in our facility located in Aarhus, Denmark.
Manufacturing We currently manufacture our ceramic membrane and DPF products in Ballerup, Denmark (Copenhagen area). We assemble our liquid filtration systems in Hobro, Denmark, and we manufacture plastic products at our facility located in Aarhus, Denmark.
On July 7, 2014, we obtained a new Danish patent application related to our silicon carbide membrane technology. 8 Table of Contents We also rely on trade secret protection for our confidential and proprietary information. Trade secrets, however, can be difficult to protect.
On July 7, 2014, we obtained a new Danish patent application related to our silicon carbide membrane technology. In 2023, we have submitted 3 patent applications to further strengthen our intellectual property for SiC membranes. 8 Table of Contents We also rely on trade secret protection for our confidential and proprietary information. Trade secrets, however, can be difficult to protect.
LiqTech is differentiated by what we believe is our superior SiC membrane technology and our ability to provide a complete water treatment system for select industries and applications. 5 Table of Contents Our industrial applications within industrial wastewater e.g., metal cooling, diary and biomass, and more specific applications such as phosphoric acid purification, represent a core part of our strategic growth agenda.
LiqTech is differentiated by what we believe is our superior SiC membrane technology and our ability to provide a complete water treatment system for select industries and applications. 5 Table of Contents Our applications within industrial wastewater and more specific applications such as chemicals/petrochemicals purification represent a core part of our strategic plan.
Recently, however, our company has intensified its focus on the direct sale of SiC and HTM membranes products to clients and integrators across jurisdictions to directly access the global market for ceramics membrane solutions in the context of the growing need for clean water and responsible handling of industrial wastewater, while also placing value-enhancing applications across core industrial processes such as acid purification, enhances oil recovery, etc.
Recently, we have intensified focus on the direct sale of SiC and HTM membrane products to clients and integrators across jurisdictions to directly access the global market for ceramics membrane solutions in the context of the growing need for clean water and responsible handling of industrial wastewater, while also placing value-enhancing applications across core industrial processes such as chemicals/petrochemicals, enhanced oil recovery, and other applications.
The market for commercial pools in Europe alone was $1.5 billion in 2021 and expected to grow at a CAGR of 6.2% from 2021 to 2028 based on relevant industry research published in June 2022.
The market for commercial pools in Europe alone was $1.5 billion in 2021 and expected to grow at a CAGR of 6.2% from 2021 to 2028 based on relevant industry research published in June 2022. We remain committed to expand our geographical reach outside Europe through new partnerships and distribution agreements.
Historically, our business has predominantly sold our ceramic membranes through integrated filtration system offerings with SiC, HTM, and Aqua Solution membranes embedded in the filtration systems offered to our partners, distributors, and end clients.
We also believe the high pollution levels will increase the need to retrofit existing vehicles. Historically, our business has predominantly sold our ceramic membranes through integrated filtration system offerings with SiC, HTM, and Aqua Solution® membranes embedded in the filtration systems offered to our partners, distributors, and end clients.
We specialize in three business areas: ceramic membranes for liquid filtration systems, diesel particulate filters (DPFs) to control soot exhaust particles from diesel engines, and plastic components for usage in various industries. Using nanotechnology, we develop proprietary products using patented silicon carbide technology. Our products are based on unique silicon carbide membranes that facilitate new applications and improve existing technologies.
We specialize in three business areas: ceramic membranes for liquid filtration systems, ceramic diesel particulate filters (DPFs) to control soot exhaust particles and black carbon emission from diesel engines, and plastic components for usage across various industries. Using nanotechnology, we develop proprietary products using patented silicon carbide technology.
MEG is widely used by oil & gas producers in wellheads and pipelines to prevent hydrate formation in pipeline conditions. In deep water offshore gas production facilities, where the exposure to lower temperatures in subsea pipelines is common, MEG is used for hydrate inhibition.
In deep-water, offshore gas production facilities, where the exposure to lower temperatures in subsea pipelines is common, MEG is used for hydrate inhibition.
Highly Flexible & Innovative Plastic Manufacturing LiqTech provides highly flexible and innovative plastics manufacturing, focusing on machining, welding, bending, and solvent cementing. With an intense focus on customer demand, LiqTech serves market leaders in the clean technology, pharmaceuticals, foods, healthcare, and graphics industries.
Furthermore, our systems have been deployed successfully to reduce OPEX and enhance product quality in chemicals/petrochemicals applications. Highly Flexible & Innovative Plastic Manufacturing LiqTech provides highly flexible and innovative plastics manufacturing, focusing on machining, welding, bending, and solvent cementing. With an intense focus on customer demand, LiqTech serves market leaders in the clean technology, pharmaceuticals, foods, healthcare, and graphics industries.
We believe that we have good relations with our employees. 9 Table of Contents Corporate Information We filed our Articles of Incorporation on July 1, 2004, and are incorporated under the laws of the State of Nevada. Our principal executive office is located at Industriparken 22C, 2750 Ballerup, Denmark, and our telephone number is +45 3131 5941.
Corporate Information We filed our Articles of Incorporation on July 1, 2004, and are incorporated under the laws of the State of Nevada. Our principal executive office is located at Industriparken 22C, 2750 Ballerup, Denmark, and our telephone number is +45 3131 5941. We maintain an Internet website at www.liqtech.com .
We seek to leverage our innovative and patented SiC ceramic membrane technology by designing and deploying our filtration systems into complex and demanding industrial applications where our clients can benefit from both operational benefits and directly value creation.
We seek to leverage our innovative and patented SiC ceramic membrane technology by designing and deploying our filtration systems into complex and demanding industrial applications where our clients can benefit from both operational benefits and value creation. Recent deployments have showcased attractive returns on investment, as our solutions yield improved product characteristics, lower operational costs, and higher output.
Our Aqua Solution ceramic membranes provide unique advantages for the commercial pool filtration industry in terms of reduced energy consumption, lower CO2 emissions, smaller footprint, reduced water and chemical consumption, and consistent, high-quality water filtration. ● Food and Beverage Applications: Our high-quality filtration system can be deployed in the food and beverage industry to significantly reduce chemical and wastewater taxes.
Our Aqua Solution® ceramic membranes provide unique advantages for the commercial pool filtration industry in terms of reduced energy consumption, lower CO2 emissions, smaller footprint, reduced water and chemical consumption, and consistent, high-quality water filtration. ● Produced Water: Our systems can be used for the filtration of produced water, which is a byproduct of oil & gas production.
Furthermore, we present our water treatment and filtration solutions at marine conferences and trade shows, while also through digital marketing. In addition to our industrial, oil & gas, and marine applications, our company offers industry-leading commercial pool filtration systems globally through distributors and local partners.
In addition to our industrial, oil & gas, and marine applications, our Company offers industry-leading commercial pool filtration systems globally through distributors and local partners.
Examples include: ● Garbage trucks and port vehicles; ● Diesel pickup trucks not carrying a full load; ● Intra-city vehicles that do not reach highway speeds; ● Off-road construction vehicles that idle for long periods of time; ● Marine “black carbon” exhaust applications; and ● Back-up generators and general “gen-set” applications; Liquids Filtration Systems & Solutions LiqTech develops, manufactures, and sells liquid filtration systems using our patented silicon carbide technology (sometimes also referred to herein as our “Aqua Solution, SiC and HTM membranes”).
Examples include: ● Garbage trucks and port vehicles; ● Diesel pickup trucks not carrying a full load; ● Intra-city vehicles that do not reach highway speeds; ● Off-road construction vehicles that idle for long periods of time; ● Marine “black carbon” exhaust applications; and ● Back-up generators and general “gen-set” applications.
According to an industry publication (Diesel Particulate Filter – Global Market Outlook (2017-2026)), dated January 16 2019, the global market for new DPF filters manufactured by OEMs is expected to increase approximately 13% per year from 2017 to 2026. Diesel emissions consist of several toxic gases and particles: particulate matter (soot), carbon monoxide, and hydrocarbons.
According to industry research, the global market for new DPF filters manufactured by OEMs is expected to grow at approximately 13% per year. Diesel emissions consist of several toxic gases and particles, including particulate matter (soot), carbon monoxide, and hydrocarbons. Soot has been linked to a variety of human health problems.
We market our products from our office in Denmark and through local representatives and distributors. The products are shipped directly to customers from our production facilities in Denmark.
Our products are based on unique silicon carbide membranes that facilitate new applications and improve existing technologies. We market our products from our offices in Denmark and through local representatives and distributors. The products are shipped directly to customers from our production facilities in Denmark.
We have performed testing with major international oil & gas operators. Our solution is market-proven and applicable for onshore and offshore operations with a focus on enhanced oil recovery “EOR” for more sustainable operations. ● MEG: Our silicon carbide membrane technology can be deployed in filtration systems related to monoethylene glycol ("MEG") recovery within the oil & gas industry.
Our solution is market-proven and applicable for onshore and offshore operations. ● MEG: Our silicon carbide membrane technology can be deployed in filtration systems related to monoethylene glycol ("MEG") recovery within the oil & gas industry. MEG is widely used by oil & gas producers in wellheads and pipelines to prevent hydrate formation.
Our membranes are manufactured with a silicon carbide ceramic membrane based on our patented technology with the current portfolio consisting of: ● CoMem Silicon Carbide (SiC) ceramic membranes, a unique patented technology designed as a tubular membrane.
Based on our continuous R&D efforts, patented technologies, and advanced production methods, we produce state-of-the-art silicon carbide products for various applications with the current membrane portfolio consisting of: ● Silicon Carbide (SiC) ceramic membranes, a unique patented technology designed as a tubular membrane.
Soot has been linked to a variety of human health problems. Reducing diesel emissions will have both health and social benefits, along with reduced costs. In response to these health impacts, governments have been implementing legislation to regulate emissions from diesel engines.
Reducing diesel emissions will have both health and social benefits along with reduced costs. In response to these health impacts, governments have been implementing legislation to regulate emissions from diesel engines. California implemented the Diesel Risk Reduction Plan, and New York City implemented binding directives for the retrofitting of buses, garbage trucks, and construction machines.
Furthermore, we have recently worked closely with industry partners to help validate and accelerate new applications within the global oil & gas industry as evidenced by the recent application for monoethylene glycol (MEG) recovery in the Mediterranean.
In the past two years, we have worked closely with industry partners to validate and accelerate our ultrafiltration technology applications within the global oil & gas industry, in both onshore and offshore environments, evidenced by a commercial installation in the Middle East for produced water and in the Mediterranean Sea for monoethylene glycol (MEG) recovery.
Also, low emission zones have been implemented locally in various places in Europe, creating a patchwork of regulation. The Asian markets have shown an improved standard of living due to financial growth, which has led to increased sales of vehicles in the region. At the same time, pollution in major cities has reached high particulate matter levels.
The Asian markets have shown an improved standard of living due to economic growth, which has led to increased sales of vehicles in the region. At the same time, pollution in major cities has reached high particulate matter levels. As a result, for example, the Chinese government has introduced additional regulations, including new emissions standards, faster than previously anticipated.
Our filtration systems have been used in the following applications by our clients: ● Industrial Applications: We have delivered complete liquid filtration systems for aggressive fluid applications such as heavy metal removal for energy providers and water treatment systems for mining wastewater for European mining companies.
Recently, we are evaluating new opportunities for water treatment units in dual-fuel engine exhaust gas recovery. 3 Table of Contents ● Industrial Applications: We have delivered complete liquid filtration systems for aggressive fluid applications such as heavy metal removal for energy providers and water treatment systems for mining wastewater.
To date, more than 250 water treatment systems have been installed, with orders from European and Asian scrubber technology providers, shipyards, and ship owners. 3 Table of Contents ● Pool and Spa Water: We have supplied turnkey water filtration systems for medium to very large public swimming pool installations in Europe and Asia Pacific.
To date, more than 170 water treatment systems have been installed, with orders from European and Asian scrubber technology providers, shipyards, and ship owners.
In addition, we see tightening water discharge legislation, increasing water usage (more water produced per barrel of oil), and the introduction of Enhanced Oil Recovery (“EOR”) techniques as key growth drivers in this end market.
In the oil & gas market, we see growing global demand for high-quality re-injection water. In addition, we see tightening water discharge legislation, increasing public awareness of water scarcity, and growing adoption of reuse as key growth drivers in this end market.
California implemented the Diesel Risk Reduction Plan, and New York City implemented binding directives for the retrofitting of buses, garbage trucks, and construction machines. In the European Union, Directive EC 715/2007 of June 20, 2007, defines particle count limits for certain cars and light utility vehicles.
In the European Union, Directive EC 715/2007 of June 20, 2007, defines particle count limits for certain cars and light utility vehicles. Also, low emission zones have been implemented locally in various places in Europe, creating a patchwork of regulation.
In the event our products fail to meet these changing standards, some or all our products may become obsolete, which could have an adverse effect on our business, operating results, financial condition, and long-term prospects. Competition Our products compete with other filters that are made using polymer, silicon carbide ceramic, and aluminum oxide membranes.
It is our policy to comply with all applicable environmental requirements at each of our facilities. Competition Our products compete with other filters that are made using polymer, silicon carbide ceramic, and aluminum oxide membranes.
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Our product portfolio consists of silicon carbide ceramic membranes for liquid purification and diesel particulate filters for emission control. We also engineer, assemble and test engineered systems for water filtration applications. Based on our continuous R&D efforts, patented technologies, and evolved production methods, we are able to produce state-of-the-art silicon carbide filters.
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Liquids Filtration Systems & Solutions LiqTech develops, manufactures, and sells liquid filtration systems using our patented silicon carbide technology (sometimes also referred to herein as our “Aqua Solution®, SiC, and HTM membranes”).
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Furthermore, our systems have been deployed successfully to reduce OPEX and increase product quality in acid purification applications. ● Produced Water: Our systems can be used for the filtration of produced water, which is a byproduct of oil & gas production. The amount of produced water varies from 0.1 to 10 times the amount of oil produced.
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Our filtration systems have been used in the following applications by our clients: ● Pool and Spa Water: We have supplied turnkey water filtration systems for medium to very large public swimming pool installations in Europe and Asia Pacific.
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Recent deployments have showcased attractive returns on investment, as our solutions yield both improved end product characteristics, lower operational costs and higher output. We are currently focused on validating our value proposition and future market potential in order to more accurately assess the commercial potential within each industrial end-market segment.
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The amount of produced water varies from 0.1 to 10 times the amount of oil produced. We have an installation with a major international oil & gas company operating with stable performance.
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The tightening water discharge legislation and increased focus on EOR remain a problem for conventional treatment and filtration technologies; however, our SiC filters can mitigate these challenges, and we believe the increasing demand for technology-based solutions within the global oil & gas industry represents a favorable market trend for our business as operators continue to focus on extending well lifetime and reduce operating costs and energy consumption.
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Presently, we have initiated activity to penetrate the U.S. onshore oil & gas market. The market for marine water filtration systems is dependent on the development of new regulations for sulfur and ballast water emissions. In 2020, IMO issued Marpol VI with clear regulation of SOx emission for marine ships.
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The market for marine water filtration systems is dependent on the development of new regulations for sulfur and ballast water emissions. Industry experts estimate that 8,000-10,000 ships will be retrofitted with a scrubber water treatment system over the next five years.
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The regulation can be reached in one of two ways: 1) use of fuel with low SOx content for a cost that is 150-200 $/MT higher than normal bunker fuel; 2) installation of open-loop, hybrid or closed-loop scrubbers. Only hybrid and closed-loop systems can be use in ”ECA” zones (Emission Control Areas).
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At the end of 2019, the industry statistics note that nearly 4,000 ships have installed or ordered scrubbers (according to the DNV GL report of March 2020), although most installations were open-loop scrubbers, which discharge the wash water directly into the sea.
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For hybrid and closed-loop systems, there is a need to install a water treatment system. Up to now, approximately 6,000 vessels have installed a scrubber of which 1,200 include hybrid or closed-loop systems. Since 2018, LiqTech has sold and installed more than 170 water treatment units (WTU) for marine scrubbers, with an estimated market share of 14%.
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The addressable market for LiqTech is focused on closed-loop scrubbers, where the scrubber wash water is routed through our filtration system to remove sulfur and other particulates, and the clean water is then recycled as wash water.
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In the future, we will further develop and reposition our WTU to match the emerging new opportunity for exhaust gas recirculation in dual-fuel engines. This new market development supports the energy transition for the marine industry and will be a major trend in the coming years.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeUnder such circumstances, we could be required to curtail or cease operations, conduct site remediation or other corrective action, or pay substantial damage claims for which we may not have sufficient or any insurance coverage for claims. 17 Table of Contents A significant portion of our assets and some of our officers and directors may be located outside of the United States; therefore, it may be difficult for an investor to enforce within the United States any judgments obtained against us or such officers and directors.
Biggest changeSome of our officers and directors are located outside of the United States; therefore, it may be difficult for an investor to enforce within the United States any judgments obtained against us or such officers and directors.
No consistent policy regarding the breadth of patent claims has emerged to date in the United States, and the landscape could become more uncertain in view of future rule changes by the United States Patent and Trademark Office and the introduction of patent reform legislation and decisions in patent law cases by United States federal courts.
No consistent policy regarding the breadth of patent claims has emerged to date in the United States, and the landscape could become more uncertain in view of future rule changes by the United States Patent and Trademark Office, the introduction of patent reform legislation, and decisions in patent law cases by United States federal courts.
Any liability for environmental harm or damages resulting from technical faults or failures could be substantial and could materially adversely affect our business and results of operations. In addition, a well-publicized actual or perceived problem could adversely affect the market’s perception of our products, which would materially impact our financial condition and operating results.
Any liability for environmental harm or damages resulting from technical faults or failures could be substantial and could materially and adversely affect our business and results of operations. In addition, a well-publicized actual or perceived problem could adversely affect the market’s perception of our products, which would materially impact our financial condition and operating results.
Factors such as the following could cause the market price of our common stock to fluctuate substantially: ● the underlying price of the commodities that affect our key markets of industrial water filtration, marine, and oil & gas; ● announcements of capital budget changes by major customers; ● the introduction of new products by our competitors; ● announcements of technology advances by us or our competitors; ● current events affecting the political and economic environment in the United States, Europe, or Asia; ● conditions or industry trends, including demand for our products, services, and technological advances; ● changes to financial estimates by us or by any securities analysts who might cover our stock; ● additions or departures of our key personnel; ● government regulation of our industry; ● seasonal, economic, or financial conditions; ● our quarterly operating and financial results; ● litigation or public concern about the safety of our products; or ● the effect of macro-economic uncertainty, COVID-19, or other pandemics.
Factors such as the following could cause the market price of our common stock to fluctuate substantially: ● the underlying price of the commodities that affect our key markets of industrial water filtration, marine, and oil & gas; ● announcements of capital budget changes by major customers; ● the introduction of new products by our competitors; ● announcements of technology advances by us or our competitors; ● current events affecting the political and economic environment in the United States, Europe, or Asia; ● conditions or industry trends, including demand for our products, services, and technological advances; ● changes to financial estimates by us or by any securities analysts who might cover our stock; ● additions or departures of our key personnel; ● government regulation of our industry; ● seasonal, economic, or financial conditions; ● our quarterly operating and financial results; ● litigation or public concern about the safety of our products; or ● the effect of macroeconomic uncertainty, COVID-19, or other pandemics.
Consequently, this rising energy cost inflation has negatively impacted our profitability and reduced our competitive position compared to competitors operating outside Europe where the energy crisis has been less pronounced. The inflationary pressure on energy and gas prices may continue to negatively impact our business as prevailing core inflationary indicators remain above policy targets.
Consequently, this rising energy cost inflation has negatively impacted our profitability and reduced our competitive position compared to competitors operating outside of Europe where the energy crisis has been less pronounced. The inflationary pressure on energy and gas prices may continue to negatively impact our business as prevailing core inflationary indicators remain above policy targets.
RISKS RELATED TO OUR COMMON STOCK Future equity financings or convertible debt would dilute your ownership and could adversely affect your common stock ownership rights in comparison with those of other security holders. Our Board of Directors has the power to issue additional shares of common or preferred stock without stockholder approval.
RISKS RELATED TO OUR COMMON STOCK Future equity financings or convertible debt issuances would dilute your ownership and could adversely affect your common stock ownership rights in comparison with those of other security holders. Our Board of Directors has the power to issue additional shares of common or preferred stock without stockholder approval.
As a “smaller reporting company” (as defined in Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”), we are not required and may not include a Compensation Discussion and Analysis section in our proxy statements; we provide only three years of business information; provide fewer years of selected financial data; and have other “scaled” disclosure requirements that are less comprehensive than issuers that are not “smaller reporting companies,” which could make our stock less attractive to potential investors and could make it more difficult for shareholders to sell their shares.
As a “smaller reporting company” (as defined in Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”), we are not required and may not include a Compensation Discussion and Analysis section in our proxy statements, provide only three years of business information, provide fewer years of selected financial data; and have other “scaled” disclosure requirements that are less comprehensive than issuers that are not “smaller reporting companies,” which could make our stock less attractive to potential investors and could make it more difficult for stockholders to sell their shares.
Additionally, California recently enacted legislation, the California Consumer Privacy Act, which became effective January 1, 2020. We may also be subject to additional obligations relating to personal data by contract that industry standards apply to our practices.
Additionally, California recently enacted legislation, the California Consumer Privacy Act, which became effective on January 1, 2020. We may also be subject to additional obligations relating to personal data by contract that industry standards apply to our practices.
There is substantial doubt that our cash and cash equivalents will not be sufficient for the next twelve months. As a result of our financial condition and other factors described herein, there is substantial doubt about our ability to continue as a going concern.
There is substantial doubt that our cash and cash equivalents will be sufficient for the next twelve months. As a result of our financial condition and other factors described herein, there is substantial doubt about our ability to continue as a going concern.
The Company is also exposed to credit risk on its accounts receivable, and this risk is heightened during periods when economic conditions worsen. The Company’s outstanding receivables are not covered by collateral or potential credit insurance.
The Company is also exposed to credit risk on its accounts receivable, and this risk is heightened during periods when economic conditions worsen. The Company’s outstanding receivables are not covered by collateral or credit insurance.
We face constant changes in governmental standards by which our products are evaluated, and if we cannot meet any such changes, some of our products could become obsolete, which could have a material adverse effect on our business.
We face changes in governmental standards by which our products are evaluated, and if we cannot meet any such changes, some of our products could become obsolete, which could have a material adverse effect on our business.
The duration and severity of any future pandemics remains uncertain as exemplified by the rapid increase in the COVID-19 pandemic in late 2021, thus there can be no assurance that it will not have an adverse effect on our liquidity and capital resources, including our ability to access capital markets, in the future, on terms that are favorable to us, or at all.
The duration and severity of any future pandemics remain uncertain as exemplified by the rapid increase in the COVID-19 pandemic in late 2021, thus there can be no assurance that it will not have an adverse effect on our liquidity and capital resources, including our ability to access capital markets in the future on terms that are favorable to us or at all.
Such sales may also make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price that we deem appropriate. 20 Table of Contents The Company is considered a “ smaller reporting company ” and is exempt from certain disclosure requirements, which could make our common stock less attractive to potential investors.
Such sales may also make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price that we deem appropriate. 19 Table of Contents The Company is considered a “ smaller reporting company ” and is exempt from certain disclosure requirements, which could make our common stock less attractive to potential investors.
Furthermore, our competitors may independently develop similar technologies, duplicate technology developed by us, or otherwise possess intellectual property rights that could limit our ability to manufacture our products and operate our business. 15 Table of Contents We also rely on trade secret protection for our confidential and proprietary information. Trade secrets, however, can be difficult to protect.
Furthermore, our competitors may independently develop similar technologies, duplicate technology developed by us, or otherwise possess intellectual property rights that could limit our ability to manufacture our products and operate our business. 14 Table of Contents We also rely on trade secret protection for our confidential and proprietary information. Trade secrets, however, can be difficult to protect.
Each pre-funded warrant is exercisable for $0.001 per share of common stock underlying such pre-funded warrant, which may be paid by way of a cashless exercise, meaning that the holder may not pay a cash purchase price upon exercise, but instead would receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the pre-funded warrant.
Each pre-funded warrant is exercisable for $0.008 per share of common stock underlying such pre-funded warrant, which may be paid by way of a cashless exercise--meaning that the holder may not pay a cash purchase price upon exercise, but instead would receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the pre-funded warrant.
Third parties may be able to obtain patents with claims relating to our product forms, applications, and/or manufacturing processes which they could attempt to assert against us or our customers. 16 Table of Contents In any case, litigation may be necessary to enforce, protect or defend our intellectual property rights or to determine the validity and scope of the intellectual property rights of others.
Third parties may be able to obtain patents with claims relating to our product forms, applications, and/or manufacturing processes which they could attempt to assert against us or our customers. 15 Table of Contents In any case, litigation may be necessary to enforce, protect or defend our intellectual property rights or to determine the validity and scope of the intellectual property rights of others.
We will be subject to tax audits, and an audit could result in the assessment of additional income tax against us. This could have a material adverse effect on our operating results or cash flows in the period or periods for which that determination is made and could result in increases to our overall tax expense in subsequent periods.
We may be subject to tax audits, and an audit could result in the assessment of additional income tax against us. This could have a material adverse effect on our operating results or cash flows in the period or periods for which that determination is made and could result in increases to our overall tax expense in subsequent periods.
Any failure to have or maintain such internal controls could adversely impact our ability to report our financial results accurately and on a timely basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. 18 Table of Contents We may have risks associated with security of our information technology systems.
Any failure to have or maintain such internal controls could adversely impact our ability to report our financial results accurately and on a timely basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. 17 Table of Contents We may have risks associated with security of our information technology systems.
Such cybersecurity breaches, misuse, or other disruptions could lead to the disclosure of confidential information; improper usage and distribution of our intellectual property; theft, manipulation, and destruction of private and proprietary data; and production downtimes. Although we actively employ measures to prevent unauthorized access to our information systems, preventing unauthorized use or infringement of our rights is inherently difficult.
Such cybersecurity breaches, misuse, or other disruptions could lead to the disclosure of confidential information; improper usage and distribution of our intellectual property; theft, manipulation, and destruction of private and proprietary data; and production downtimes. Although we actively employ measures to prevent unauthorized access to our information systems, preventing unauthorized use is inherently difficult.
These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in their best interests. 19 Table of Contents There is limited trading volume of our common stock, which could make it difficult for you to liquidate an investment in our common stock in a timely manner.
These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in their best interests. 18 Table of Contents There is limited trading volume of our common stock, which could make it difficult for you to liquidate an investment in our common stock in a timely manner.
If our internal controls over financial reporting are determined to be ineffective, resulting in material weaknesses and/or significant deficiencies, investor perceptions regarding the reliability of our financial statements may be adversely affected, which could cause a decline in the market price of our stock and otherwise negatively affect our liquidity and financial condition.
If our internal controls over financial reporting is determined to be ineffective, resulting in material weaknesses and/or significant deficiencies, investor perceptions regarding the reliability of our financial statements may be adversely affected, which could cause a decline in the market price of our stock and otherwise negatively affect our liquidity and financial condition.
If existing regulations and emissions standards do not continue to become stricter, are loosened, or are not enforced by governmental authorities due to commercial and business pressure, economic conditions, or otherwise, it could have a material adverse effect on our business, operating results, financial condition, and long-term prospects.
If existing regulations and emissions standards do not continue to become stricter, are loosened, or are not enforced by governmental authorities due to commercial and business pressures, economic conditions, or otherwise, it could have a material adverse effect on our business, operating results, financial condition, and long-term prospects.
Further, our legal and regulatory obligations in foreign jurisdictions are subject to unexpected changes, including the potential for regulatory or other governmental entities to enact new or additional laws or regulations, to issues rulings that invalidate prior laws or regulations, or to increase penalties significantly.
Further, our legal and regulatory obligations in foreign jurisdictions are subject to unexpected changes, including the potential for regulatory or other governmental entities to enact new or additional laws or regulations, to issue rulings that invalidate prior laws or regulations, or to increase penalties significantly.
This, in turn, could adversely affect the demand for our marine scrubbers as ship owners delay or even cancel their orders for new closed-loop scrubber systems. Future growth of our business depends in part on the availability of funding for emissions control programs, which can be affected by economic as well as political reasons that are beyond our control.
This, in turn, could adversely affect the demand for our marine scrubbers as shipowners delay or even cancel their orders for new closed-loop scrubber systems. Future growth of our business depends in part on the availability of funding for emissions control programs, which can be affected by economic as well as political reasons that are beyond our control.
If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current development programs, cut operating costs, forego future development and other opportunities, or even terminate our operations.
If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current development programs, cut operating costs, forgo future development and other opportunities, or even terminate our operations.
Compliance with these laws and regulations can be costly and can delay or impede the development and offering of new products and services. For example, the General Data Protection Regulation, which became effective in May 2018, imposes more stringent data protection requirements, and provides for significantly greater penalties for noncompliance, than the European Union laws that previously applied.
Compliance with these laws and regulations can be costly and can delay or impede the development and offering of new products and services. 16 Table of Contents For example, the General Data Protection Regulation, which became effective in May 2018, imposes more stringent data protection requirements and provides for significantly greater penalties for noncompliance than the European Union laws that previously applied.
Changes in U.S. Generally Accepted Accounting Principles ( “ GAAP ” ) could adversely affect our financial results and may require significant changes to our internal accounting systems and processes. We prepare our consolidated financial statements in conformity with GAAP.
Generally Accepted Accounting Principles ( “ GAAP ” ) could adversely affect our financial results and may require significant changes to our internal accounting systems and processes. We prepare our consolidated financial statements in conformity with GAAP.
The war may result in sanctions and increased uncertainties, thus restricting our ability to service our clients and execute orders globally due to supply chain risk, import/export restrictions, and increased demand uncertainty.
The wars may result in sanctions and increased uncertainties, thus restricting our ability to service our clients and execute orders globally due to supply chain risk, import/export restrictions, and increased demand uncertainty.
If we issue additional securities to raise funds, these securities may have rights, preferences, or privileges senior to those of our common stock, and our current shareholders may experience dilution.
If we issue additional securities to raise funds, these securities may have rights, preferences, or privileges senior to those of our common stock, and our current stockholders may experience dilution.
Additionally, if customers are not successful in generating sufficient revenue or are precluded from securing financing the ongoing war, they may not be able to pay, or may delay payment of, owed amounts to the Company for the provision of products and services.
Additionally, if customers are not successful in generating sufficient revenue or are precluded from securing financing due to the ongoing wars, they may not be able to pay, or may delay payment of, owed amounts to the Company for the provision of products and services.
Customers, suppliers, and partners may experience business disruptions due to unplanned market volatility, supply chain restrictions, or lack of funding due to increased cost of capital.
Customers, suppliers, and partners may experience business disruptions due to unplanned market volatilities, supply chain restrictions, or lack of funding due to increased cost of capital.
Increased market and interest rate uncertainty may also elevate execution risk and ultimately restrict the ability for our company to refinance our debt obligations. 14 Table of Contents Foreign currency fluctuations could adversely impact financial performance. Our reporting currency is the United States Dollar ($).
Increased market and interest rate uncertainty may also elevate execution risk and ultimately restrict our ability to refinance our debt obligations. 13 Table of Contents Foreign currency fluctuations could adversely impact financial performance. Our reporting currency is the United States Dollar ($).
As of December 31, 2022, we have not entered into any derivate contracts to hedge our currency exposure. Our inability to protect our intellectual property rights could negatively affect our business and results of operations.
As of December 31, 2023, we have not entered into any derivative contracts to hedge our currency exposure. Our inability to protect our intellectual property rights could negatively affect our business and results of operations.
Increased macro-economic uncertainty and its effects on our business operations and financial condition. The uncertain macroeconomic environment caused by the ongoing war in Ukraine, European energy crisis, and general uncertainty related to the global economy may adversely affect our results and could have a negative impact on timing, delivery and demand for our products and services.
Increased macroeconomic uncertainty and its effects on our business operations and financial condition. The uncertain macroeconomic environment caused by the ongoing wars, European energy crisis, and general uncertainty related to the global economy may adversely affect our results and could have a negative impact on timing, delivery and demand for our products and services.
We will continue to incur significant costs from operating as a public company, and our management may be required to devote substantial time to compliance initiatives that ultimately could have a material adverse effect on our financial condition and results of operations. As a public company, we expect to continue to incur significant legal, accounting, and other expenses.
PUBLIC COMPANY RISK FACTORS We will continue to incur significant costs from operating as a public company, and our management may be required to devote substantial time to compliance initiatives that ultimately could have a material adverse effect on our financial condition and results of operations.
A significant portion of our assets are located outside of the United States. In addition, the majority of our officers and some of our directors are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside of the United States.
The majority of our officers and some of our directors are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets may be located outside of the United States.
As a result, our customers may modify, delay or cancel plans to purchase our products and services to help mitigate the impact from the prevailing macro-economic uncertainty. 11 Table of Contents Our business has been rightsized to help protect our profitability and cashflow, however we remain exposed to near term market fundamentals as we rely on short lead time products and orders that may be cancelled if customers are facing weakened end-market demand or increased uncertainty.
As a result, our customers may modify, delay or cancel plans to purchase our products and services to help mitigate the impact from the prevailing macroeconomic uncertainty. 10 Table of Contents Our business has been right-sized to help protect our profitability and cash flow; however, we remain exposed to near-term market fundamentals as we rely on short lead-time products and orders that may be cancelled if customers are facing weakened end-market demand or increased uncertainty.
The prevailing uncertainty and increased interest rates, represent a significant risk to our business as we are relying upon our ability to refinance our capital structure and maintain access to relevant financing. Furthermore, increased interest rates may entail increased uncertainty and cash flow constraints including the inability to company with existing debt service commitment.
The prevailing uncertainty and increased interest rates represent a significant risk to our business as we are relying upon our ability to refinance our capital structure and maintain access to relevant financing. Furthermore, elevated interest rates may cause increased uncertainty and cash flow constraints, including the inability of the company to meet existing debt service commitments.
Our consolidated financial statements as of December 31, 2022 have been prepared under the assumption that we will continue as a going concern for the next twelve months. As of December 31, 2022, we had cash and cash equivalents of $16.6 million and an accumulated deficit of $67.3 million.
Our consolidated financial statements as of December 31, 2023, have been prepared under the assumption that we will continue as a going concern for the next twelve months. As of December 31, 2023, we had cash and cash equivalents of $10.4 million and an accumulated deficit of $75.9 million.
As of December 31, 2022, we have issued pre-funded warrants to purchase a total of 31,440,000 shares of our common stock, of which none have been exercised.
As of December 31, 2023, we have issued pre-funded warrants to purchase a total of 3,930,008 shares of our common stock, of which none have been exercised.
We cannot be certain that raising additional capital, whether through selling additional debt or equity securities or obtaining a line of credit or other loan, will be available to us or, if available, will be on terms acceptable to us.
Our future success depends on our ability to restore profitability, raise capital, or a combination of both. We cannot be certain that raising additional capital, whether through selling additional debt or equity securities or obtaining a line of credit or other loan, will be available to us or, if available, will be on terms acceptable to us.
In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC, have imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls as well as mandating certain corporate governance practices.
As a public company, we expect to continue to incur significant legal, accounting, and other expenses. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC, have imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls as well as mandating certain corporate governance practices.
For the year ended December 31, 2022, our four largest customers accounted for approximately 13%, 9%, 6%, and 4% of our net sales (approximately 31% in total). For the year ended December 31, 2021, our four largest customers accounted for approximately 12%, 10%, 9%, and 6% of our net sales (approximately 37% in total).
For the year ended December 31, 2023, our four largest customers accounted for approximately 7%, 5%, 4%, and 4% of our net sales (approximately 20% in total). For the year ended December 31, 2022, our four largest customers accounted for approximately 13%, 9%, 6%, and 4% of our net sales (approximately 31% in total).
These assumptions, judgments, and estimates are drawn from historical experience and various other factors that we believe are reasonable under the circumstances as of the date of the consolidated financial statements.
These assumptions, judgments, and estimates are drawn from historical experience and various other factors that we believe are reasonable under the circumstances as of the date of the consolidated financial statements. Actual results could differ materially from our estimates, and such differences could significantly impact our financial results.
If we fail to staff our accounting and finance function adequately or maintain internal control systems adequate to meet the demands that are placed upon us as a public company, we may be unable to report our financial results accurately or in a timely manner and our business and stock price may suffer.
Our management and other personnel will continue to devote a substantial amount of time and financial resources to these compliance initiatives. 20 Table of Contents If we fail to staff our accounting and finance function adequately or maintain internal control systems sufficient to meet the demands that are placed upon us as a public company, we may be unable to report our financial results accurately or in a timely manner and our business and stock price may suffer.
Our ability to continue as a going concern will depend on our ability to obtain additional funding, as to which no assurances can be given. We continue to analyze various alternatives, including potentially obtaining debt or equity financings or other arrangements. Our future success depends on our ability to raise capital.
Our ability to continue as a going concern will depend on our ability to restore profitability and to obtain additional funding, as to which no assurances can be given. We continue to analyze various alternatives, including cost reduction initiatives, cash preservation actions, debt or equity financings, and other arrangements.
The costs of being a public company, as well as the diversion of management’s time and attention, may have a material adverse effect on our future business, financial condition, and results of operations. Our actual or perceived failure to adequately protect personal data could adversely affect our business, financial condition, and results of operations.
The costs of being a public company, as well as the diversion of management’s time and attention, may have a material adverse effect on our future business, financial condition, and results of operations. Changes in U.S.
Furthermore, fluctuation in demand for ceramics or global bottlenecks in shipping may result in supply chain constrains and longer lead time on key components which may result in delayed order shipments or risk of cancellation from clients demanding short lead times.
Additionally, fluctuation in demand for ceramics or global bottlenecks in shipping may result in supply chain constraints and longer lead times on key components which may result in delayed order shipments or risk of cancellation from clients demanding short lead times. If we are unable to manage our expected growth, our business may be materially and adversely affected.
While the Company has procedures to monitor and limit exposure to credit risk on its receivables, there can be no assurance such procedures will effectively limit our credit risk and avoid losses.
While the Company has procedures to monitor and limit exposure to credit risk on its receivables, there can be no assurance such procedures will effectively limit our credit risk and avoid losses. 11 Table of Contents The impact on our business operations and financial condition if we fail to restore financial stability through improved profitability and access to adequate liquidity.
The impact on our business operations and financial condition if we fail to restore financial stability through improved profitability and access to adequate liquidity. 12 Table of Contents Our business has undergone significant changes in 2022 to help restore financial flexibility to the Company through an enhanced capital structure, improved profitability, and reduced investments.
Our business has undergone significant changes in the past few years to help restore financial flexibility to the Company through an enhanced capital structure, improved profitability, reduced investments, and changes to the organization.
The adverse effect to our business operations from the Ukraine & Russia conflict or similar political, social, regulatory, or economic tension may challenge our operational flexibility and financial performance. The continuation of the war between Ukraine and Russia fuels uncertainty and risk to our business as we rely on the ability to manufacture, ship, service, and operate across multiple jurisdictions.
The adverse effect to our business operations from armed conflicts (such as Ukraine/Russia and Hamas/Israel) or similar political, social, regulatory, or economic tension may challenge our operational flexibility and financial performance.
Adverse conditions, regulatory challenges, or lack of funding for emission control programs may delay or negatively affect our future growth and market potential within the transportation and marine industries. Global health crises such as the COVID-19 or significant macro-economic uncertainty exacerbated by the current Ukraine and Russia war and high inflationary environment can significantly impact our company, customers, and suppliers.
Global health crises such as the COVID-19 pandemic or significant macroeconomic uncertainty exacerbated by current or future geopolitical conflicts and high inflationary pressure can significantly impact our Company, customers, and suppliers.
Removed
We may rely on subcontractors to meet current demand for our products, and we may need to obtain additional manufacturing capacity to increase production of our existing products or to produce our proposed new products, the failure of which could have a material adverse effect on our operations.
Added
The continuation of the war between Ukraine and Russia as well as the war/armed conflict related to Hamas/Israel and the situation in the Red Sea fuels uncertainty and risk to our business as we rely on the ability to manufacture, ship, service, and operate across multiple jurisdictions.
Removed
We may not have sufficient internal manufacturing capacity to meet the current demand for our products, and we may need to rely on subcontractors to enable us to meet this demand.
Added
Our business may also be adversely affected if we are unable to continue to attract and retain such personnel. 12 Table of Contents Adverse conditions, regulatory challenges, or lack of funding for emission control programs may delay or negatively affect our future growth and market potential within the transportation and marine industries.
Removed
Since we may rely on our subcontractors for part of our production capacity, the loss of the services from our subcontractors would have a material adverse effect on our business. Our plans for the growth of our business rely upon increasing sales of our existing products and systems and developing and marketing new products.
Added
Under such circumstances, we could be required to curtail or cease operations, conduct site remediation or other corrective action, or pay substantial damage claims for which we may not have sufficient or any insurance coverage for claims. Our actual or perceived failure to adequately protect personal data could adversely affect our business, financial condition, and results of operations.
Removed
We may not have adequate internal manufacturing facilities to substantially increase production of our products, and obtaining additional manufacturing capacity in-house could require substantial capital expenditures. We may not have the capital resources to obtain or expand manufacturing capacity and meet increasing demand for our products, which could have a material adverse effect on our operations.
Removed
Conversely, any significant decrease in demand for our products could create idle plant capacity and an inability to cover fixed costs, which could adversely impact our results of operations and financial condition. If we are unable to manage our expected growth, our business may be materially and adversely affected.
Removed
Our business may be adversely affected if we are unable to continue to attract and retain such personnel. 13 Table of Contents We will need to add qualified additional personnel as we expand our business, and we may not be able to employ such persons, which could affect our ability to expand and have a material adverse effect on our business.
Removed
To expand our product offerings and customer base, we will need to hire additional qualified personnel.
Removed
We may not be able to identify such persons, and even if we identify them in periods with low unemployment and increased wage inflation, we may not have the funds or ability to employ them, which could have a material adverse effect on our business expansion.
Removed
During the IMO meeting in November 2021, a number of proposals for further mid-term GHG reduction measures were discussed, including market-based measures, to address GHG emissions from shipping, as well as a proposal to establish an International Maritime Research and Development Board; however, no immediate regulation was imposed.
Removed
PUBLIC COMPANY RISK FACTORS We have not continued to satisfy the continued listing requirements of the Nasdaq Capital Market, and failure to regain compliance with the listing standards by could result in the suspension or delisting of our Common Stock, which could, among other things, limit demand for our Common Stock, substantially impair our ability to raise additional capital and have an adverse effect on the market price of, and the efficiency of the trading market for, our Common Stock.
Removed
Our Common Stock is listed on the Nasdaq Capital Market. To maintain our listing we are required to satisfy continued listing requirements, including the requirements commonly referred to as the minimum bid price rule. The minimum bid price rule requires that the closing bid price of our common stock be at least $1.00 per share.
Removed
We currently do not meet these criteria. There can be no assurance we will continue to satisfy applicable continued listing requirements.
Removed
The suspension or delisting of our common stock, or the commencement of delisting proceedings, for whatever reason could, among other things, substantially impair our ability to raise additional capital; result in the loss of interest from institutional investors, the loss of confidence in our company by investors and employees, and in fewer financing, strategic and business development opportunities; and result in potential breaches of agreements under which we made representations or covenants relating to our compliance with applicable listing requirements.
Removed
Claims related to any such breaches, with or without merit, could result in costly litigation, significant liabilities and diversion of our management’s time and attention and could have a material adverse effect on our financial condition, business, and results of operations.
Removed
On June 24, 2022, we received a deficiency notification letter from the Listing Qualifications Staff of Nasdaq indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) because the bid price for the Company’s common stock had closed below $1.00 per share for the previous 30 consecutive business days.
Removed
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company had 180 calendar days from the date of such notice, or until December 21, 2022, to regain compliance with the minimum bid price requirement. However, on December 22, 2022.
Removed
We received a notice from the Listing Qualifications Staff of Nasdaq that the Company had been granted an additional 180 days to regain compliance with the minimum bid price requirement, or until June 20, 2023.
Removed
To regain compliance, the bid price for the Company’s common stock must close at $1.00 per share or more for a minimum of 10 consecutive business days. As of March 22, 2023, we had not regained compliance with the $1.00 bid price requirement. There can be no assurance that we will regain compliance with this requirement.
Removed
Our management and other personnel will continue to devote a substantial amount of time and financial resources to these compliance initiatives. 21 Table of Contents As a “smaller reporting company,” we are still able to take advantage of certain exceptions available to both emerging growth companies and smaller reporting companies, including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and the exemption from providing a “Compensation Discussion and Analysis” section in our proxy statements; providing only three years of business information; and other “scaled” disclosure requirements that are less comprehensive than issuers that are not smaller reporting companies.
Removed
Actual results could differ materially from our estimates, and such differences could significantly impact our financial results. 22 Table of Contents Our business could be negatively impacted the by surge in geopolitical unrest and associated market turmoil negatively impacting financial markets.
Removed
Increased geopolitical tensions and prolonged inflationary pressure, combined with increased commodity prices and general volatility across financial markets, could negatively impact demand for our products and services due to reductions in investments across the global transportation, shipping, and energy industries.
Removed
The relevance and economic benefits of our systems may also be undermined by the delayed introduction of, or compliance with, both environmental and regulatory efforts. Furthermore, potential sanctions imposed on select countries could adversely affect our supply chain and overall demand, thus reducing our ability to timely source raw materials and deliver finished goods and services to our clients.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Please reference Note 10 - Agreements, Commitments and Contingencies for details on such litigation.
Biggest changeItem 3. Legal Proceedings From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Please reference Note 9 - Agreements, Commitments and Contingencies for details on such litigation.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed4 unchanged
Biggest changeSince the beginning of our fiscal year ended December 31, 2022, we have not repurchased any of our equity securities.
Biggest changeSince the beginning of our fiscal year ended December 31, 2023, we have not repurchased any of our equity securities. 22 Table of Contents
Since the beginning of our fiscal year ended December 31, 2022, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.
Since the beginning of our fiscal year ended December 31, 2023, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.
As of December 31, 2022, there were approximately 31 stockholders of record of our common stock as reported by our transfer agent, one of which is Cede & Co., a nominee for Depository Trust Company (“DTC”).
As of December 31, 2023, there were approximately 33 stockholders of record of our common stock as reported by our transfer agent, one of which is Cede & Co., a nominee for Depository Trust Company (“DTC”).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

44 edited+13 added−27 removed53 unchanged
Biggest changeFor the Year Ending December 31, Period to Period Change 2022 As a % of Sales 2021 As a % of Sales $ Percent % Revenue 15,982,438 100.0 % 18,273,442 100.0 % (2,291,004 ) (12.5 )% Cost of Goods Sold 15,415,294 96.5 16,697,296 91.4 (1,282,002 ) (7.7 ) Gross Profit 567,144 3.5 1,576,146 8.6 (1,009,002 ) (64.0 ) Operating Expenses Selling expenses 3,669,887 23.0 4,564,188 25.0 (894,301 ) (19.6 ) General and administrative expenses 5,701,955 35.7 5,836,629 31.9 (134,674 ) (2.3 ) Research and development expenses 1,835,890 11.5 1,862,653 10.2 (26,763 ) (1.4 ) Restructuring costs 1,893,166 11.8 - - 1,893,166 - Total Operating Expenses 13,100,898 82.0 12,263,470 67.1 837,428 6.8 Loss from Operations (12,533,754 ) (78.4 ) (10,687,324 ) (58.5 ) (1,846,430 ) 17.3 Other Income (Expense) Interest and other income 384,058 2.4 371,467 2.0 12,591 3.4 Interest expense (419,942 ) (2.6 ) (708,176 ) (3.9 ) 288,234 (40.7 ) Amortization discount on Convertible Note (2,389,128 ) (14.9 ) (835,331 ) (4.6 ) (1,553,797 ) 186.0 Gain (Loss) on currency transactions 404,162 2.5 668,225 3.7 (264,093 ) (39.5 ) Gain (Loss) on lease termination 147,452 0.9 - - 147,452 - Gain (Loss) on sale of fixed assets 635 0.0 1,113 0.0 (478 ) (42.9 ) Total Other Income (Expense) (1,872,763 ) (11.7 ) (502,672 ) (2.8 ) (1,370,091 ) 272.6 Loss Before Income Taxes (14,406,517 ) (90.1 ) (11,189,996 ) (61.2 ) (3,216,521 ) 28.7 Income Taxes Provision (Benefit) (237,410 ) (1.5 ) (63,036 ) (0.3 ) (174,375 ) 276.6 Net Loss (14,169,107 ) (88.7 ) (11,126,960 ) (60.9 ) (3,042,147 ) 27.3 Revenues Revenue for the year ended December 31, 2022 was $15,982,438 compared to $18,273,442 for the same period in 2021, representing a decrease of $2,291,004, or 13%.
Biggest changeFor the Year Ending December 31, Period to Period Change 2023 As a % of Sales 2022 As a % of Sales $ Percent % Revenue 18,001,652 100.0 % 15,982,438 100.0 % 2,019,214 12.6 % Cost of Goods Sold 15,226,176 84.6 15,415,294 96.5 (189,118 ) (1.2 ) Gross Profit 2,775,476 15.4 567,144 3.5 2,208,332 389.4 Operating Expenses Selling expenses 4,298,905 23.9 3,669,887 23.0 629,018 17.1 General and administrative expenses 4,856,779 27.0 5,701,955 35.7 (845,176 ) (14.8 ) Research and development expenses 1,418,842 7.9 1,835,890 11.5 (417,048 ) (22.7 ) Restructuring costs - - 1,893,166 11.8 (1,893,166 ) (100.0 ) Total Operating Expenses 10,574,526 58.7 13,100,898 82.0 (2,526,372 ) (19.3 ) Loss from Operations (7,799,050 ) (43.3 ) (12,533,754 ) (78.4 ) 4,734,704 (37.8 ) Other Income (Expense) Interest and other income 366,365 2.0 384,058 2.4 (17,693 ) (4.6 ) Interest expense (151,670 ) (0.8 ) (419,942 ) (2.6 ) 268,272 (63.9 ) Amortization discount on Convertible Note (400,903 ) (2.2 ) (2,389,128 ) (14.9 ) 1,988,225 (83.2 ) Gain (Loss) on currency transactions (359,960 ) (2.0 ) 404,162 2.5 (764,121 ) (189.1 ) Gain (Loss) on lease termination - - 147,452 0.9 (147,452 ) (100.0 ) Gain (Loss) on assets held for sale (439,388 ) (2.4 ) - - (439,388 ) - Gain (Loss) on sale of property and equipment 7,254 0.0 635 0.0 6,619 1,042.4 Total Other Income (Expense) (978,302 ) (5.4 ) (1,872,763 ) (11.7 ) 894,462 (47.8 ) Loss Before Income Taxes (8,777,352 ) (48.8 ) (14,406,517 ) (90.1 ) 5,629,166 (39.1 ) Income Taxes Provision (Benefit) (206,207 ) (1.1 ) (237,410 ) (1.5 ) 31,203 (13.1 ) Net Loss (8,571,145 ) (47.6 ) (14,169,107 ) (88.7 ) 5,597,963 (39.5 ) Revenues Revenue for the year ended December 31, 2023 was $18,001,652 compared to $15,982,438 for the same period in 2022, representing an increase of $2,019,214, or 13%.
To determine what costs can be included in the valuation of inventory, we must determine normal capacity at our manufacturing, assembly, and test facilities, based on historical production, compared to total available capacity.
To determine what costs can be included in the valuation of inventory, we must determine normal capacity at our manufacturing, assembly, and test facilities based on historical production and compared to total available capacity.
If we do not obtain required additional equity or debt funding, our cash resources will be depleted and we could be required to materially reduce or suspend operations, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained.
If we do not obtain required additional equity or debt funding, our cash resources could be depleted and we could be required to materially reduce or suspend operations, which would likely have a material adverse effect on our business, stock price, and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained.
Management has analyzed the impact of the current economic climate on its financial statements as of December 31, 2022 and has determined that the changes to its significant judgements and estimates did not have a material impact with respect to goodwill, intangible assets, or long-lived assets.
Management has analyzed the impact of the current economic climate on its financial statements as of December 31, 2023, and has determined that the changes to its significant judgements and estimates did not have a material impact with respect to goodwill, intangible assets, or long-lived assets.
Recovery of a portion of our deferred tax assets is impacted by management's plans and methods of allocating research and development costs to the underlying reporting units. 33 Table of Contents The calculation of our tax liabilities involves uncertainties in the application of complex tax regulations in Denmark and the United States.
Recovery of a portion of our deferred tax assets is impacted by management's plans and methods of allocating research and development costs to the underlying reporting units. 31 Table of Contents The calculation of our tax liabilities involves uncertainties in the application of complex tax regulations in Denmark and the United States.
Part of the invoicing to the customer is also attributed to the commissioning, and at transfer of the control of the system (i.e., the first performance obligation), this portion is recognized as Contract liabilities. 32 Table of Contents Aftermarket sales represent parts, extended warranties, and maintenance services.
Part of the invoicing to the customer is also attributed to the commissioning, and at transfer of the control of the system (i.e., the first performance obligation), this portion is recognized as Contract Liabilities. 30 Table of Contents Aftermarket sales represent parts, extended warranties, and maintenance services.
During the years ended December 31, 2022 and 2021, no impairment charge of long-lived assets has been recorded. 31 Table of Contents Revenue Recognition On January 1, 2018, the Company adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers,” which includes clarifying ASUs issued in 2015, 2016 and 2017 (“new revenue standard”).
During the years ended December 31, 2023 and 2022, no impairment charge of long-lived assets has been recorded. 29 Table of Contents Revenue Recognition On January 1, 2018, the Company adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers,” which includes clarifying ASUs issued in 2015, 2016 and 2017 (“new revenue standard”).
The Company did not record an impairment charge on goodwill during the years ended December 31, 2022 and 2021, as management's estimated fair value of the reporting unit exceeded its carrying value determined during impairment testing in the fourth quarters of 2022 and 2021.
The Company did not record an impairment charge on goodwill during the years ended December 31, 2023 and 2022, as management's estimated fair value of the reporting unit exceeded its carrying value determined during impairment testing in the fourth quarters of 2023 and 2022.
Product-specific facts and circumstances reviewed in the inventory valuation process include a review of the customer base, acceptance of the product by the customer and the various environmental authorities, competitors’ products, as well as an assessment of the selling price in relation to the product cost.
Product-specific facts and circumstances reviewed in the inventory valuation process include a review of the customer base, acceptance of the product by the customer and the various environmental authorities, competitors’ products, and an assessment of the selling price in relation to the product cost.
Topic 350 requires that definite intangible assets with estimable useful lives be amortized over their respective estimated useful lives and reviewed for impairment in accordance with Topic 360, Criteria for Recognition of an Impairment of Long-Lived Assets.
Topic 350 requires that definite-life intangible assets be amortized over their respective estimated useful lives and reviewed for impairment in accordance with Topic 360, Criteria for Recognition of an Impairment of Long-Lived Assets.
Going Concern and Management ’ s Plans The financial statements included elsewhere herein for the year ended December 31, 2022, were prepared under the assumption that we would continue our operations as a going concern, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business.
Going Concern and Management ’ s Plans The financial statements included herein for the period ended December 31, 2023, were prepared under the assumption that we would continue our operations as a going concern, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business.
The Company has initiated substantial cost reductions and profitability improvement measures in order to right size the business and develop a clear and sustainable path to profitability, further underpinned by an updated strategy and onboarding of key management resources. However, there can be no assurance that the Company will be able to obtain any sources of funding.
The Company has initiated substantial cost reductions and profitability improvement measures to help right-size the business and develop a clear and sustainable path to profitability, further underpinned by an updated strategy and onboarding of key executives. There can be no assurance, however, that the Company will be able to obtain any sources of funding.
We are not aware of any material transactions that are not disclosed in our consolidated financial statements. Critical Accounting Policies The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our consolidated financial statements.
We are not aware of any material transactions that are not disclosed in our consolidated financial statements. Critical Accounting Policies The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
For that purpose, we maintain a guaranteed credit line of EUR 1,350,000 (approximately $1,440,000), which is secured by a cash deposit.
For that purpose, we maintain a guaranteed credit line of EUR 850,000 (approximately $940,000), which is secured by a cash deposit.
Income taxes provision The income tax benefit for the year ended December 31, 2022 was $237,410 compared to a benefit of $63,036 for the comparable period in 2021, representing an increase of $174,374, or 277%, mainly driven by an increase in tax credits associated with research and development activities in Denmark.
Income taxes provision The income tax benefit for the year ended December 31, 2023, was $206,207 compared to a benefit of $237,410 for the comparable period in 2022, representing a decrease of $31,203, or 13%, mainly driven by a decrease in tax credits associated with research and development activities in Denmark.
The Company has historically satisfied its capital and liquidity requirements through offerings of equity instruments, cash from operations, and our available lines of credit. On December 31, 2022, the Company had net working capital of $21,581,287, including cash of $16,597,371, and on December 31, 2021, the Company had net working capital of $11,199,258, including cash of $17,489,380.
The Company has historically satisfied its capital and liquidity requirements through offerings of equity instruments, cash from operations, and our available lines of credit. On December 31, 2023, we had cash of $10,422,181 and net working capital of $14,590,430, and on December 31, 2022, we had cash of $16,597,371 and net working capital of $21,581,287.
The following is a summary of our non-cash compensation: 2022 2021 Compensation for vesting of restricted stock awards issued to the Board of Directors $ 167,750 $ 197,500 Compensation for vesting of restricted stock awards issued to management 766,673 283,604 Total Non-Cash Compensation $ 934,423 $ 481,105 Research and development expense for the year ended December 31, 2022 was $1,835,890 compared to $1,862,653 for the same period in 2021, representing a decrease of $26,763, or 1%.
The following is a summary of our non-cash compensation: 2023 2022 Compensation for vesting of restricted stock awards issued to the Board of Directors $ 203,708 $ 167,750 Compensation for vesting of restricted stock awards issued to management 424,196 766,673 Total Non-Cash Compensation $ 627,904 $ 934,423 Research and development expense for the year ended December 31, 2023, was $1,418,842 compared to $1,835,890 for the same period in 2022, representing a decrease of $417,048, or 23%.
The Company sells products throughout the world; sales by geographical region are as follows: % Distribution For the Year Ended December 31 2022 2021 2022 2021 Americas 7 % 17 % $ 1,073,433 $ 3,121,797 Asia-Pacific 21 % 25 % 3,406,420 4,658,070 Europe 59 % 58 % 9,379,337 10,493,575 Middle East & Africa 13 % 0 % 2,123,248 - 100 % 100 % $ 15,982,438 $ 18,273,442 The Company’s sales by product and service are as follows for the years ended December 31, 2022 and 2021: % Distribution For the Year Ended December 31 2022 2021 2022 2021 Water 33 % 39 % $ 5,297,286 $ 7,196,465 Ceramics 43 % 39 % 6,844,861 7,183,868 Plastics 22 % 20 % 3,528,606 3,615,681 Corporate 2 % 2 % 311,685 277,428 100 % 100 % $ 15,982,438 $ 18,273,442 For Water (systems and aftermarket), Ceramics (diesel particulate filters and membranes), and Plastics (components), revenue is recognized when performance obligations specified within the terms of a contract with the customer are satisfied, which occurs when control of the product transfers to the customer or when services are rendered by the Company.
The Company sells products throughout the world; sales by geographical region are as follows: % Distribution For the Year Ended December 31 2023 2022 2023 2022 Americas 12 % 7 % $ 2,125,460 $ 1,073,433 Asia-Pacific 14 % 21 % 2,506,215 3,406,420 Europe 65 % 59 % 11,820,674 9,379,337 Middle East & Africa 9 % 13 % 1,549,303 2,123,248 100 % 100 % $ 18,001,652 $ 15,982,438 The Company’s sales by product and service are as follows for the years ended December 31, 2023 and 2022: % Distribution For the Year Ended December 31 2023 2022 2023 2022 Water 42 % 33 % $ 7,705,080 $ 5,297,286 Ceramics 35 % 43 % 6,232,628 6,844,861 Plastics 21 % 22 % 3,736,529 3,528,606 Corporate 2 % 2 % 327,415 311,685 100 % 100 % $ 18,001,652 $ 15,982,438 For Water (systems and aftermarket), Ceramics (diesel particulate filters and membranes), and Plastics (components), revenue is recognized when performance obligations specified within the terms of a contract with the customer are satisfied, which occurs when control of the product transfers to the customer or when services are rendered by the Company.
As of December 31, 2022, we had total furnace parts and supplies of $66,495, raw materials of $2,474,227, work-in-process inventory of $982,973, total finished goods inventory of $1,201,533, and a reserve for excess and obsolescence of $663,227. The estimated future demand is included in the development of our short-term manufacturing plans to enable consistency between inventory valuation and production decisions.
As of December 31, 2023, we had total raw materials of $3,301,526, total finished goods inventory of $1,507,113, work-in-process inventory of $1,271,458, furnace parts and supplies of $55,177, and a reserve for excess and obsolescence of $867,458. The estimated future demand is included in the development of our short-term manufacturing plans to enable consistency between inventory valuation and production decisions.
General and administrative expenses for the year ended December 31, 2022, were $5,701,955 compared to $5,836,629 for the same period in 2021, representing a decrease of $134,674, or 2%.
General and administrative expenses for the year ended December 31, 2023, were $4,856,779 compared to $5,701,955 for the same period in 2022, representing a decrease of $845,176, or 15%.
Net cash used in investing activities was $1,689,986 for the year ended December 31, 2022 as compared to $1,450,139 for the year ended December 31, 2021, representing an increase of $239,847, or 17%.
Net cash used in investing activities was $2,886,036 for the year ended December 31, 2023, as compared to $1,689,986 for the year ended December 31, 2022, representing an increase of $1,196,050.
The roll-forward of Contract assets / liabilities for the periods ended December 31, 2022 and December 31, 2021 is as follows: December 31, 2022 December 31, 2021 Cost incurred $ 3,860,179 $ 3,381,994 Unbilled project deliveries 950,105 454,158 VAT 229,006 542,255 Other receivables 45,814 60,158 Prepayments (3,363,039 ) (2,947,736 ) Deferred Revenue (118,327 ) (499,146 ) $ 1,603,738 $ 991,682 Distributed as follows: Contract assets $ 2,253,295 $ 1,906,510 Contract liabilities (649,557 ) (914,828 ) $ 1,603,738 $ 991,682 Income Taxes We must make estimates and judgments in determining the provision for income taxes for financial statement purposes.
The roll-forward of Contract assets / liabilities for the periods ended December 31, 2023 and December 31, 2022 is as follows: December 31, 2023 December 31, 2022 Cost incurred $ 3,225,728 $ 3,860,179 Unbilled project deliveries 582,557 950,105 VAT 329,980 229,006 Other receivables 92,619 45,814 Prepayments (1,688,427 ) (3,363,039 ) Deferred Revenue (33,360 ) (118,327 ) $ 2,509,097 $ 1,603,738 Distributed as follows: Contract assets $ 2,891,744 $ 2,253,295 Contract liabilities (382,647 ) (649,557 ) $ 2,509,097 $ 1,603,738 Income Taxes We must make estimates and judgments in determining the provision for income taxes for financial statement purposes.
Cash provided by financing activities was $13,696,551 for the year ended December 31, 2022 as compared to $13,902,999 for the year ended December 31, 2021.
Cash provided by financing activities was $580,645 for the year ended December 31, 2023, as compared to $13,696,551 for the year ended December 31, 2022, representing a decrease of $13,115,906.
Cash used by operating activities for the year ended December 31, 2022 was $12,039,020 compared to cash used by operating activities of $7,203,843 for the year ended December 31, 2021, representing an increase of $4,835,177.
Cash used by operating activities for the year ended December 31, 2023, was $4,183,918 compared to cash used by operating activities of $12,039,020 for the year ended December 31, 2022, representing a decrease of $7,855,102.
The cash used by operating activities for the year ended December 31, 2022 consists mainly of the net loss for the year of $(14,169,107) adjusted by depreciation and other non-cash items of $5,705,351.
The cash used by operating activities for the year ended December 31, 2023, consists mainly of the net loss for the year of $(8,571,145) adjusted by depreciation and other non-cash items of $4,544,181.
Other income (expenses) Total Other income (expense) for the year ended December 31, 2022 was $(1,872,763) compared to $(502,672) for the comparable period in 2021, representing an increase of $(1,370,091), or 273%.
Other income (expenses) Total Other income (expense) for the year ended December 31, 2023, was $(978,302) compared to $(1,872,763) for the comparable period in 2022, representing a decrease of $894,462, or 48%.
The change was primarily attributable to non-recurring restructuring costs, early repayment of the Convertible Note issued in April 2021, the increase in non-cash compensation, the closure of the production facility in China, and the CEO transition.
The change was primarily attributable to the improved gross profit combined with the notable non-recurring items recorded in 2022, including restructuring costs, early repayment of the Convertible Note, closure of the production facility in China, and the CEO transition.
Based on current projections, which are subject to significant uncertainties, including the duration and severity of global macroeconomic issues, commodity volatility, and continued global supply chain disruptions, the Company believes the cash on hand, as well as ongoing cash generated from operations, will be sufficient to cover its capital requirements and committed investments for the next 12 months.
Based on current projections, which are subject to significant uncertainties--including the duration and severity of global macroeconomic issues, geopolitical instability, commodity price volatility, and continued global supply chain disruptions--the Company believes that the cash on hand, as well as ongoing cash generated from operations, will be sufficient to cover its capital requirements and committed investments for the next 12 months. 26 Table of Contents Continued market uncertainty and reduced order intake caused by weakening global macroeconomic conditions, recession, or a resurgence of the COVID-19 pandemic, however, could unfavorably impact the Company’s ability to generate positive cash flow and thereby significantly reduce its profitability and liquidity position.
Net Income/Loss Net income/loss for the year ended December 31, 2022 was $(14,169,107) compared to $(11,126,960) for the comparable period in 2021, representing an increased loss of $3,042,147.
Net Loss Net loss for the year ended December 31, 2023 was $(8,571,145) compared to $(14,169,107) for the comparable period in 2022, representing an improvement of $5,597,963, or approximately 40%.
If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that could result in our stockholders losing some or all of their investment in us.
If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that could result in our stockholders losing some or all of their investment. 27 Table of Contents Cash Flows Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Cash used by operating activities is net income (losses) adjusted for certain non-cash items and changes in assets and liabilities.
By incorporating LiqTech's SiC liquid membrane technology with its long-standing systems design experience and capabilities, the Company offers solutions to the most difficult water pollution problems. 2022 Developments On March 18, 2022 the Company announced that Sune Mathiesen, Chief Executive Officer, had taken a medical leave of absence. Alexander J.
By incorporating LiqTech's SiC liquid membrane technology with its long-standing systems design experience and capabilities, the Company offers solutions to the most difficult water pollution problems. 2023 Developments On February 15, 2023, the Company entered into a distribution agreement with Liquinex regarding the supply of silicon carbide ceramic membranes.
Gross Profit Gross profit for the year ended December 31, 2022 was $567,144 compared to $1,576,146 for the same period in 2021, representing a decrease of $1,009,002, or approximately 64%.
Gross Profit Gross profit for the year ended December 31, 2023, was $2,775,476, or 15.4%, compared to $567,144, or 3.5%, for the same period in 2022, representing an increase of $2,208,332, or approximately 389%.
We discuss these policies further below as well as the estimates and judgments involved. 30 Table of Contents Accounts Receivable / Long Term Receivable / Allowance for Doubtful Accounts / Bad Debt We assess the collectability of accounts receivable and long-term receivables on an ongoing basis and establish an allowance for doubtful accounts when collection is no longer reasonably assured.
We discuss these policies further below as well as the estimates and judgments involved. 28 Table of Contents Accounts Receivable / Long-Term Receivable / Allowance for Doubtful Accounts / Bad Debt Accounts receivable consist of trade receivables arising from credit sales to customers in the normal course of business.
The increase in net working capital of $10,382,029 compared to December 31, 2021 is mainly a result of the capital raise and repayment of the Convertible Note. In connection with certain orders, we provide the customer a working guarantee, a prepayment guarantee, or a security bond.
On December 31, 2023, our net working capital had decreased by $6,990,857 compared to December 31, 2022, mainly due to a reduction in cash and cash equivalents. In connection with certain orders, we provide the customer a working guarantee, a prepayment guarantee, or a security bond.
However, these savings were partly offset by non-recurring costs related to the CEO transition (increased non-cash compensation and recruitment expense) and consultancy costs associated with the now closed Chinese factory. 27 Table of Contents Included in general and administrative expenses is non-cash compensation expense of $934,423 and $481,105 for the years ended December 31, 2022 and December 31, 2021, respectively, representing an increase of $453,318, or 94%, attributable to stock grants to management in the context of the CEO transition.
The decrease is attributed to reduced legal expenses, the absence of costs associated with the now-closed production facility in China, the CEO transition, and other transition costs related to management changes executed in 2022. 25 Table of Contents Included in general and administrative expenses is non-cash compensation expense of $627,904 and $934,423 for the years ended December 31, 2023 and December 31, 2022, respectively, representing a decrease of $306,519, or 33%, mainly explained by the stock grants awarded to management amid the 2022 CEO transition.
As of December 31, 2022, we had cash and cash equivalents of $16,597,371, an accumulated deficit of $67,351,035, and total liabilities of $16,816,283. We have incurred losses from continuing operations, have used cash in our continuing operations, and are dependent on additional financing to fund operations.
As of December 31, 2023, we had cash and cash equivalents of $10,422,181, net working capital of $14,590,430, an accumulated deficit of $75,922,180, and total assets and liabilities of $35,971,847 and $18,695,831, respectively. We have incurred losses from continuing operations, used cash in our continuing operations, and remain dependent on external financing to fund operations.
Restructuring costs for the year ended December 31, 2022, were $1,893,166 compared to $0 for the same period in 2021 fully attributable to the restructuring program that was executed in the second quarter (See Note 3).
The decrease was attributable to the centralization of R&D efforts to streamline R&D spend and allow for better resource allocation and prioritization of projects. Restructuring costs for the year ended December 31, 2023, were $0 compared to $1,893,166 for the same period in 2022.
The roll-forward of the allowance for doubtful accounts for the year ended December 31, 2022 and December 31, 2021 was as follows: 2022 2021 Allowance for doubtful accounts at the beginning of the period $ 409,076 $ 498,044 Bad debt expense (24,534 ) (28,499 ) Receivables written off during the periods (295,778 ) (24,415 ) Effect of currency translation (29,205 ) (36,054 ) Allowance for doubtful accounts at the end of the period $ 59,559 $ 409,076 The receivables written off during the period 2022 mainly relates to legacy marine scrubber contracts and partnerships, renegotiated and terminated amid the COVID disruptions and general slowdown in the marine scrubber market.
The roll-forward of the allowance for doubtful accounts for the year ended December 31, 2023 and December 31, 2022 was as follows: 2023 2022 Allowance for doubtful accounts at the beginning of the period $ 59,559 $ 409,076 Bad debt expense 82,066 (24,534 ) Receivables written off during the periods (10,298 ) (295,778 ) Effect of currency translation 3,585 (29,205 ) Allowance for doubtful accounts at the end of the period $ 134,912 $ 59,559 Goodwill and Definite-life intangible assets The Company accounts for Goodwill and definite-life intangible assets in accordance with the provisions of the Statement of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles, Goodwill and Other.
Further, changes in assets and liabilities include an increase of Accounts receivables of $460,837, an increase in Contract assets/liabilities of $695,616, and a decrease in Accrued expenses of $1,632,896, offset by a decrease in Inventory of $984,130.
Further, changes in assets and liabilities included an increase of Inventory of $1,045,838, an increase of Accounts receivables of $765,956, and an increase in Contract assets/liabilities of $1,108,589, offset by a decrease in Deposits of $1,403,707 and an increase of Accounts payable of $990,538.
For the year ended December 31, 2021, the change was mainly attributable to the net cash proceeds of $14,283,333 related to the Convertible bond issuance in March 2021. 2022 2021 Net Cash Used in Operating Activities $ (12,039,020 ) $ (7,203,843 ) Net Cash Used in Investing Activities (1,689,986 ) (1,450,139 ) Net Cash Provided by Financing Activities 13,696,551 13,902,999 Net Change in Cash and Cash Equivalents (892,009 ) 4,224,931 Cash and Cash Equivalents at End of Period $ 16,597,371 $ 17,489,380 Off-Balance Sheet Arrangements As of December 31, 2022, we had no off-balance sheet arrangements.
The decrease was mainly driven by the equity raise recorded in May 2022, generating net proceeds of $24,418,612 from the issuance of Common Stock and prefunded warrants, coupled with proceeds of $6,000,000 from the issuance of the new Senior Promissory Notes, and partly offset by the full repayment of the Convertible Note issued in April 2021 of $16,800,000. 2023 2022 Net Cash Used in Operating Activities $ (4,183,918 ) $ (12,039,020 ) Net Cash Used in Investing Activities (2,886,036 ) (1,689,986 ) Net Cash Provided by Financing Activities 580,645 13,696,551 Net Change in Cash and Cash Equivalents (6,175,190 ) (892,009 ) Cash and Cash Equivalents at End of Period $ 10,422,181 $ 16,597,371 Off-Balance Sheet Arrangements As of December 31, 2023, we had no off-balance sheet arrangements.
On December 20, 2022, the Company entered into a cooperation agreement with Ecolotron Wasterwater Solutions on a combined solution for Phosporic acid purification 25 Table of Contents Results of Operations Results of Operations for the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 The following table sets forth our revenues, expenses, and net income for the years ended December 31, 2022 and 2021 in U.S. dollars, except for percentages.
On November 13, 2023, the Company filed an amendment to its Articles of Incorporation to increase the number of authorized shares of the Company’s common stock from 12,500,000 shares to 50,000,000 shares, which was approved by the Company’s stockholders at the Company’s on November 9, 2023. 23 Table of Contents Results of Operations Results of Operations for the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 The following table sets forth our revenues, expenses, and net income for the years ended December 31, 2023 and 2022 in U.S. dollars, except for percentages.
Selling expenses for the year ended December 31, 2022, were $3,669,887 compared to $4,564,188 for the same period in 2021, representing a decrease of $894,301 or approximately 20%.
Selling expenses for the year ended December 31, 2023, were $4,298,905 compared to $3,669,887 for the same period in 2022, representing an increase of $629,018, or approximately 17%. The increase is explained by the onboarding of new sales and commercial leadership in 2023, partly offset by the ongoing focus on cost reduction and reduced bad debt expenses.
Included in the gross profit for the year ended December 31, 2022 is depreciation of $1,822,402 compared to $1,957,357 for the same period in 2021. Expenses Total operating expenses for the year ended December 31, 2022 were $13,100,898, representing an increase of $837,428, or approximately 7%, compared to $12,263,470 for the same period in 2021.
Expenses Total operating expenses for the year ended December 31, 2023, were $10,574,526, representing a decrease of $2,526,372, or approximately 19%, compared to $13,100,898 for the same period in 2022. Adjusting for the reported restructuring costs of $1,893,166 incurred in 2022, total operating expenses decreased by $633,206, or 6%.
The decline in revenue was primarily due to lower system sales and currency headwinds due to weakening of the EUR and DKK compared to the USD, partly offset by growth in sales of DPFs and plastics products measured in local currency. ● For the years ended December 31, 2022 and 2021, sales of systems, spare parts and related services were $5,297,286 and $7,196,465, respectively, and accounted for 33% and 39% of our total sales. ● For the years ended December 31, 2022 and 2021, sales of DPFs and ceramic membranes were $6,844,861 and $7,183,868, respectively, and accounted for 43% and 39% of our total sales. ● For the years ended December 31, 2022 and 2021, plastics revenues were $3,528,606 and $3,615,681, respectively, and accounted for 22% and 20% of our total sales. 26 Table of Contents The decrease in sales of systems and related services of $1,899,179, reflecting a year on year decline of 26%, was a result of the negative impact of the uncertain macroeconomic environment and prolonged inflationary pressure, but also increased supply chain restrictions and general market volatility, which has resulted in significant restrictions and business limitations including a substantial decline in the demand and delivery of water treatment systems for the global marine scrubber industry.
The increase in revenue was underpinned by an uptick in system sales, general spare parts and related services, and plastic component sales, partly offset by a decline in sales of DPFs and ceramic membranes. ● For the years ended December 31, 2023 and 2022, sales of systems, spare parts and related services were $7,705,080 and $5,297,286, respectively, and accounted for 42% and 33% of our total sales. ● For the years ended December 31, 2023 and 2022, sales of DPFs and ceramic membranes were $6,232,628 and $6,844,861, respectively, and accounted for 35% and 43% of our total sales. ● For the years ended December 31, 2023 and 2022, plastics revenues were $3,736,529 and $3,528,606, respectively, and accounted for 21% and 22% of our total sales. 24 Table of Contents The increase in system sales and related services of $2,407,794, reflecting a year-on-year increase of 46%, is a result of the increased focus on aftermarket activities through the establishment of a new dedicated aftermarket organization that generated an uptick in spare parts and membrane housing orders, , coupled with continued traction within our system business related to pool and marine system deliveries as well as oil & gas and industrial system applications.
Removed
Buehler, a member of the Board of Directors, was appointed to serve as Interim Chief Executive Officer, effective immediately. In May 2022, the Company issued 22,535,850 shares of Common Stock and 30,425,000 prefunded warrants in a public offering to fund working capital, general corporate purposes, and partial repayment of its Senior Convertible Note.
Added
On April 25, 2023, the Company entered into a distribution agreement with Silicon Filter for Phosphoric Acid Purification Applications in China. On May 26, 2023, the Company completed a 1-for-8 reverse split of its issued and outstanding shares of Common Stock. On June 27, 2023, the Company announced that Chairman Mark Vernon would retire from the Board with immediate effect.
Removed
The total net proceeds from the offering and exercise of the over-allotment option was $24,453,528, which includes $1,996,472 in discounts, commissions and offering expenses paid by the Company.
Added
Alexander J. Buehler, a member of the Board of Directors, was appointed as the new Chairman of the Board. Further, the Company announced that Martin Kunz was appointed to the Company’s Board of Directors, also with immediate effect.
Removed
On June 23, 2022, the Company completed a private placement of Senior Notes in an aggregate principal amount of $6,000,000 and warrants to purchase 4,250,000 shares of common stock of the Company to affiliates of Bleichroeder L.P., 21 April Fund, L.P., and 21 April Fund, Ltd. (together, the "Purchasers"), pursuant to a note and warrant purchase agreement.
Added
On October 13, 2023, the Company and the Purchasers entered into an amendment to the Note and Warrant Purchase Agreement (the “ Amendment ”) and Allonge No. 1 to each of the Notes (collectively, the “ Allonges ”), each as more fully described in the current report on Form 8-K filed with the SEC on October 19, 2023, effective as of September 30, 2023, pursuant to which the Company and the Purchasers extended the maturity date of the Notes from June 20, 2024, to January 1, 2026 (the “ Extension ”).
Removed
Additionally, as part of the transaction, the Company issued 230,000 warrants to the placement agent. All warrants issued in this transaction have an exercise price of $0.65 per share, a term of five years, and are exercisable for cash at any time.
Added
On October 30, 2023, the Company entered into a distribution agreement with Barr + Wray for Aqua Solution® swimming pool water filtration systems covering the Middle East. On November 2, 2023, the Company entered into a distribution agreement with Waterco for Aqua Solution® swimming pool water filtration systems covering Australia, New Zealand, Papua New Guinea, and the Pacific Islands.
Removed
On July 29, 2022, the Company announced the appointment of Fei Chen as President & Chief Executive Officer, and a member of the Company’s Board of Directors. On November 17, 2022, the Company entered into a new distribution agreement with NESR for commercialization of produced water treatment solution for re-injection.
Added
The sales of DPFs and ceramic membranes experienced a year-on-year decline of 9% to $6,232,628, as the year ended December 31, 2022, benefitted from delivery of a large legacy DPF order. In addition, the Company has applied a deliberate focus to optimize the product mix in favor of higher-margin products, explaining the significant improvement in gross profit for the year.
Removed
The demand for our ceramic membranes and DPFs reflects continued interest in advanced environmental filtration solutions with a focus on the reduction of global CO2 emissions amid increased political and regulatory efforts, resulting in a year-on-year constant currency increase of 7%, offset by the negative impact of the currency headwinds from the weakening of the EUR compared to the USD, resulting a year-on-year decline of 5% to $6,844,861.
Added
The sale of plastic products benefitted from a year-on-year increase of 6% to $3,736,529, underpinned by increased customer diversification, stable order intake, and the successful execution of a large new order for the construction industry. For the years ended December 31, 2023 and 2022, revenue from R&D projects was $327,415 and $311,685, respectively, reflecting an increase of 5%.
Removed
The sale of plastic products benefitted from a year-on-year increase of 10% measured in local currency predominantly in the first half of the year underpinned by a diversified customer base, stable order intake, and delivery of large orders for the Asia Pacific marked, followed by increased uncertainty and reduced activity levels amid the European energy crisis in the second half of the year.
Added
The increase derives from a reduction in cost of goods sold due to an improved product mix and increased pricing discipline within the legacy ceramic DPF business, coupled with continued delivery of profitable system and aftermarket orders within the pool, oil & gas, and phosphoric acid businesses.
Removed
In addition, the adverse impact of the USD appreciation against the DKK-denominated revenue base resulted in the year-on-year decline of 2% to $3,528,606. For the years ended December 31, 2022 and 2021, revenue from R&D projects was $311,685 and $277,428, respectively, an increase of 12%.
Added
These efforts resulted in improved profitability, despite remediation costs related to legacy system deliveries and increased depreciation from recent investments in manufacturing equipment and facilities to improve kiln utilization and manufacturing throughput. Included in the gross profit for the year ended December 31, 2023 is depreciation of $2,575,824 compared to $1,822,402 for the same period in 2022.
Removed
The decrease in gross profit was largely the result of lower overall market activity and a lower relative mix of filtration system sales in our product mix, which typically command higher average gross margins.
Added
Total Other income (expense) in 2023 reflects a loss on assets held for sale along with a reduced gain on currency transactions, with the increased levels in the prior period explained by non-recurring transactions related to the now-closed production facility in China, the receipt of COVID-19 grants, and the early repayment of the Convertible Note.
Removed
Gross profit was further negatively impacted by the European energy crisis amid the Russia and Ukraine conflict and corresponding high electricity costs that also negatively impacted our competitive positioning as compared to companies operating outside of Europe, where the energy crisis has been less pronounced.
Added
Liquidity and Capital Resources In relation to the delivery and installation of new machinery and equipment to facilitate revenue growth, the Company has secured approximately $1.4 million of new finance leases from financial institutions to further strengthen its liquidity.
Removed
Proactive measures such as the reduction in capacity and the implementation of electricity price surcharges were implemented by the company to defend profitability to the extent possible. Furthermore, gross profit also included higher provisions for obsolescence and certain non-recurring costs associated with a strategic review of inventories.
Added
On September 30, 2023, the Company proactively addressed the maturity of the $6 million senior promissory notes, extending the original maturity from June 2024 to January 2026 with terms and conditions that are generally aligned with the original agreement dated on June 22, 2022.
Removed
Excluding restructuring charges of approximately $1.9 million, 2022 operating expenses were 9% lower than 2021. More importantly the fourth quarter operating expenses were approximately 34% lower compared to the same period in 2021.
Added
These receivables are recorded at the time of sale, net of an allowance for current expected credit losses.
Removed
The decrease is explained by the cost reduction and reorganization efforts initiated in 2022, including headcount reductions and organizational streamlining, partly offset by increased costs associated with increasing direct sales efforts, consulting service engagements, direct marketing activities, and bad debt provisions.
Added
In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 326, “Financial Instruments – Credit Losses,” the Company estimates expected credit losses based on historical bad debt experience, the aging of accounts receivable, the current creditworthiness of our customers, prevailing economic conditions, and reasonable and supportable forward-looking information.
Removed
The decrease for the year ended December 31, 2022, reflects the benefits of the cost reduction and restructuring efforts implemented in the first half of 2022 and fully implemented by the end of the year with favorable currency tailwinds from the weakening of the DKK compared to USD.
Removed
The change is attributable to increased spending on materials used for ongoing development projects and patent applications, offset by the benefit of the USD appreciation and a decrease in the average number of employees engaged in research and development activities, as the Company streamlined and centralized the R&D function.
Removed
The change is mainly related to the lower gain on currency transactions and the early repayment of the Convertible Note issued in April 2021, reflecting the full recognition of the repayment premium and amortization cost in the second quarter.
Removed
Other income for the year benefited from the decrease in interest expenses due the repayment of the Convertible Note, receipt of COVID-19 grants to the Danish entities, and a gain associated with lease terminations.
Removed
Furthermore, the change was also impacted by a decline in gross margin, caused largely by inflationary cost pressures on raw materials and electricity, lower overall sales activity levels and an unfavorable revenue mix with a lower share of higher margin systems sales.
Removed
Increased costs were partly offset by the benefits from the USD appreciation against the EUR/DKK-denominated cost base, general cost reductions and reorganization activities.
Removed
Liquidity and Capital Resources Based on the continued market volatility and geopolitical unrest pertaining to the Russia and Ukraine conflict, European energy crisis, and macro-economic uncertainty, the Company is unable to predict the full impact this will have on our long-term financial condition, results of operations, liquidity, and cash flows.
Removed
The Company has planned and executed on decisive measures in 2022 to help safeguard the business and its financial position by reducing cost, headcount, and overall capex commitments, which together with the successful completion of the $26.5 million public offering of common stock and pre-funded warrants, substantially improved the near-term liquidity position of the Company. 28 Table of Contents Furthermore, in June 2022, the Company completed the refinancing of its $15 million Convertible Note due in 2023, partly funded by the issuance of the new $6 million Senior Promissory Notes due in June 2024 along with the proceeds from the public offering.
Removed
The Senior Promissory Notes are interest-free, with full redemption after 24 months.
Removed
Continued market uncertainty and reduced order intake caused by weakening global macroeconomic conditions, recession, or a resurgence of the COVID-19 pandemic, however, could unfavorably impact the Company’s ability to generate positive cash flow and thereby significantly reduce its profitability and liquidity position.

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