LIQTECH INTERNATIONAL INC
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
LIQT$0.29-2.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-14.
0001437749-24-016604
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001437749-24-026779
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 54 previous paragraphs and 64 current paragraphs.
29 unchanged; 14 reworded; 16 added; 11 removed; 0 previous and 5 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
Comparison of the Three Months Ended June 30, 2024 and June 30, 2023
Current report
Revenues
Current report
Revenue for the three months ended June 30, 2024 was $4,485,062 compared to $4,990,019 for the same period in 2023, representing a decrease of $504,957 or 10.1%. The unfavorable change was attributable to a decrease in deliveries of plastics products, ceramic membranes, liquid filtration systems, and aftermarket sales, partly offset by increased sales of DPFs. The decline in sales of plastic products is primarily due to a large one-time sale recorded in 2023, which did not recur in the current period. The decrease in deliveries of liquid filtration systems and aftermarket sales was primarily attributed to a reduction in aftermarket sales due to elevated remediation work and associated deliveries in the same period in 2023. The increase in sales of DPFs was primarily due to the effective execution of strategies designed to capitalize on the increased demand for DPFs.
Current report
Total operating expenses for the three months ended June 30, 2024 were $2,803,730, representing an increase of $38,238, or 1%, compared to $2,765,492 for the same period in 2023.
Current report
General and administrative expenses for the three months ended June 30, 2024 were $1,541,316 compared to $1,377,483 for the same period in 2023, representing an increase of $163,833, or 11.9%. The increase was attributable to newly created positions in supply chain and project management, as well as increased legal expenses, insurance costs, and recruitment costs associated with the resignations of our CFO and VP of Sales. Included in general and administrative expenses were non-cash compensation of $166,617 and $193,924 for the three months ended June 30, 2024 and 2023, respectively.
Current report
As a result of the cumulative effect of the factors described above, we had a net loss for the three months ended June 30, 2024 of $2,111,700 compared to $1,555,292 for the comparable period in 2023, representing an increase in net loss of $556,408, or 35.8%.
Current report
Comparison of the Six Months Ended June 30, 2024 and June 30, 2023
Current report
Revenue for the six months ended June 30, 2024 was $8,720,406 compared to $9,001,538 for the same period in 2023, representing a decrease of $281,132, or 3.1%. The decline was mainly due to a reduction in deliveries of plastics products, liquid filtration systems, ceramic membranes and aftermarket sales, partly offset by increased sales of DPFs.
Current report
The decline in sales of plastic products is primarily due to a large one-time sale recorded in 2023, which did not recur in the current period. The decrease in deliveries of liquid filtration systems and aftermarket sales was primarily attributed to a reduction in aftermarket sales due to remediation work executed in the same period in 2023. The increase in sales of DPFs was primarily due to the effective execution of strategies designed to capitalize on the increased demand for DPFs.
Current report
Gross Profit
Current report
Expenses
Current report
Other Income (Expenses)
Current report
Net Loss
Current report
As a result of the cumulative effect of the factors described above, we had a net loss for the six months ended June 30, 2024 of $4,499,995 compared to $3,944,795 for the comparable period in 2023, representing an increase in net loss of $555,200, or 14.1%.
Current report
The Company has incurred significant recent losses, which raises substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. There is no assurance that the Company will be successful in executing the planned revenue growth, cost reductions, strategy, and profitability improvement measures, thus achieving profitable operations. We continue to analyze various alternatives, including potentially obtaining debt or equity financings or other arrangements. Our future success depends on our ability to accelerate growth, restore profitability, and raise capital as needed.
Current report
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. 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 are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current development programs, reduce operating costs, forego future development and other opportunities, or even terminate our operations.
Removed paragraphs (11)
Previous report
Revenue for the three months ended March 31, 2024 was $4,235,344 compared to $4,011,519 for the same period in 2023, representing an increase of $223,825 or 6%. The favorable change was attributable to an increase in sales of DPFs and ceramic membranes of $396,964 and an increase in deliveries of liquid filtrations systems and aftermarket sales of $113,747, partly offset by a decline in plastics products of $286,886. The uptick in DPFs and ceramic membranes sales was attributed to focused sales efforts beginning from late 2023 that generated elevated activity in the current year. The increase in liquid filtration system sales was mainly attributed to the delivery of an oil & gas pilot system to North America, albeit offset by reduced deliveries of marine orders. The decline in plastic products relates solely to a large one-off sale that was recorded in 2023, without recurrence in the current year.
Previous report
The following is a summary of non-cash compensation:
Previous report
Net loss for the three months ended March 31, 2024 was $(2,388,295) compared to $(2,389,503) for the comparable period in 2023, representing a reduction in net loss of $1,208.
Previous report
The change was primarily attributable to savings in operation expenses of $266,881, offset by a decrease in gross profit of $120,240, the non-cash loss on sale of fixed assets, and increased interest expenses and amortization costs.
Previous report
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.
Previous report
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.
Previous report
While the Company anticipates that its proactive measures will be sufficient to protect the business over the coming 12 months, the Company cannot predict the specific duration and severity of the unfavorable market dynamics that may adversely affect the business. In the future, the Company may experience reduced or changed demand for its products and services, especially if there is a global recession, structural shift in regulation, or the continuation of escalating interest rates that adversely impacts the investment decisions of our customers.
Previous report
In connection with certain orders, we provide the customer a working guarantee, a prepayment guarantee or a security bond. For that purpose, we maintain a guaranteed credit line of EUR 850,000 (approximately $905,000). The credit line is secured by a cash deposit.
Previous report
Going Concern and Management’s Plans
Previous report
The financial statements included herein for the period ended March 31, 2024, 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. As of March 31, 2024, we had cash and cash equivalents of $7,726,213, net working capital of $12,777,940, an accumulated deficit of $78,310,475, and total assets and liabilities of $31,366,068 and $16,828,606, respectively. We have incurred losses from continuing operations, used cash in our continuing operations, and remain dependent on external financing to fund operations. These conditions raise substantial doubt about our ability to continue as a going concern for one year after the date the financial statements are issued. The financial statements included elsewhere herein do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Previous report
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. Such additional funding may not be available or may not be available on reasonable terms, and in the case of equity financing transactions, could result in significant additional dilution to our stockholders. 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. 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.
Reworded paragraphs (14)
Previous wording
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report. In addition, the following discussion should be read in conjunction with our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 22, 2024 and the financial statements and notes thereto. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Current wording
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report. In addition, the following discussion should be read in conjunction with our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 22, 2024 and our Amendment No. 1 to our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on April 30, 2024, and the financial statements and notes thereto. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Previous wording
At present, we conduct our operations in the Kingdom of Denmark. Our Danish operations are located in the Copenhagen area, Hobro, and Aarhus.
Current wording
At present, we conduct our operations in the Kingdom of Denmark, with locations in the Copenhagen area, Hobro, and Aarhus. However, in July 2024, we consolidated our operations into the Copenhagen area and Hobro.
Previous wording
Gross profit for the three months ended March 31, 2024 was $271,102 (or 6.4% gross margin) compared to gross profit of $391,342 (or 9.8% gross margin) for the same period in 2023, representing a decrease of $120,240, or 31%, and a decrease in gross margin of 3.4 percentage points. This decline in gross profit can be attributed to the revenue mix. Specifically, the deployment of the containerized oil & gas pilot system contributed to lower-than-usual margins, reflecting a strategic decision aimed at demonstrating and documenting the efficiency of our technology. Furthermore, both efforts to strengthen the workforce to accommodate growth and the hedge against the cost of energy and critical raw materials contributed to the decline. The decline in gross profit was partly offset by decreased depreciation as well as continued initiatives aimed at optimizing manufacturing processes which have improved profitability within DPF and ceramic membrane production. Included in the gross profit was depreciation of $451,644 and $614,592 for the three months ended March 31, 2024, and 2023, respectively.
Current wording
Gross profit for the three months ended June 30, 2024 was $717,211 (or a gross profit margin of 16%) compared to gross profit of $1,162,528 (or a gross profit margin of 23.3%) for the same period in 2023, representing a decrease of $445,317, or 38.3%. This decline in gross profit can be attributed to the decrease in revenue and an unfavorable revenue mix, which resulted in a lower proportion of high-margin products being sold. Specifically, the delivery of a containerized oil & gas pilot system to the Middle East contributed to lower-than-usual gross profit margin, reflecting a strategic decision aimed at demonstrating and validating the efficiency of our technology. The decline in gross profit was partly offset by decreased depreciation as well as continued initiatives aimed at optimizing manufacturing processes, which have improved profitability within DPF and ceramic membrane production. Included in the gross profit was depreciation of $441,936 and $636,985 for the three months ended June 30, 2024, and 2023, respectively.
Previous wording
Total operating expenses for the three months ended March 31, 2024 were $2,317,122, representing a decrease of $266,881, or 10%, compared to $2,584,003 for the same period in 2023.
Current wording
Total operating expenses for the six months ended June 30, 2024 were $5,120,852, representing a decrease of $228,643, or 4.3%, compared to $5,349,495 for the same period in 2023.
Previous wording
Selling expenses for the three months ended March 31, 2024 were $517,579 compared to $1,182,435 for the same period in 2023, representing a decrease of $664,856, or 56%. The decrease in selling expenses is mainly explained by the release of bonus provisions for 2023, as well as reductions in travel costs, marketing expenses, and expenses related to external sales consultancy services. Furthermore, the comparable period in 2023 was affected by bonus payouts, which was partially offset by the release of bonus provisions classified as general and administrative expenses.
Current wording
Selling expenses for the six months ended June 30, 2024, were $1,372,701, compared to $2,210,660 for the same period in 2023, representing a decrease of $837,959, or 37.9%. The decrease in selling expenses is attributable to the resignations of our CFO and VP of Sales, as well as reductions in bonus payouts, travel costs, marketing expenses, and expenses related to external sales consultancy services.
Previous wording
General and administrative expenses for the three months ended March 31, 2024 were $1,544,731 compared to $1,058,949 for the same period in 2023, representing an increase of $485,782, or 46%. The comparable period in 2023 was affected by the release of bonus provisions, whereas the actual bonus payouts were classified as selling expenses. Furthermore, the change was attributable to increased legal expenses, insurance costs, and recruitment expenses associated with the CFO transition for the three months ended March 31, 2024. Included in general and administrative expenses were non-cash compensation of $193,321 and $157,173 for the three months ended March 31, 2024 and 2023, respectively.
Current wording
General and administrative expenses for the six months ended June 30, 2024, were $3,086,047, compared to $2,436,432 for the same period in 2023, representing an increase of $649,615, or 26.7%. The increase in general and administrative expenses was attributable to newly created positions in supply chain and project management, as well as increased legal expenses, insurance costs, and recruitment costs associated with the resignations of our CFO and VP of Sales. Furthermore, the increase is partly attributable to the release of bonus provisions in the comparable period of 2023. Included in general and administrative expenses was non-cash compensation amounting to $359,938 and $351,097 for the six months ended June 30, 2024, and 2023, respectively.
Previous wording
Research and development expenses for the three months ended March 31, 2024 were $254,812 compared to $342,619 for the same period in 2023, representing a decrease of $87,807, or 26%. The change is attributable to more focused R&D efforts with fewer ongoing projects combined with a decrease in the average number of employees engaged in research and development activities, as the Company streamlined and centralized the R&D function.
Current wording
Research and development expenses for the six months ended June 30, 2024 were $662,104 compared to $702,403 for the same period in 2023, representing a decrease of $40,299, or 5.7%. The change is attributable to more focused R&D efforts with fewer ongoing projects combined with a decrease in the average number of employees engaged in research and development activities, as the Company streamlined and centralized the R&D function, partly offset by one-time exit costs of a loss-making external development project.
Previous wording
Other Income (Expenses) for the three months ended March 31, 2024 was $(356,714) compared to $(211,134) for the comparable period in 2023, representing a decrease of $145,580, or 69%. The decrease was attributable to the non-cash loss associated with the sale of fixed assets and increased interest expenses incurred due to the acquisition of leased equipment throughout the remaining financial year of 2023. Additionally, we incurred increased amortization cost due to the extension of the maturity date for the senior promissory notes, with additional warrants issued as consideration for the extension. The decrease in Other Income (Expenses) was offset by a gain on currency transactions due to the EUR/DKK depreciation against the USD during the period.
Current wording
Other expenses for the six months ended June 30, 2024 was $396,045 compared to $177,783 for the comparable period in 2023, representing an increase of $218,262, or 122.8%. The increase was attributable to the non-cash loss associated with the disposal of property and equipment, decreased interest income and increased debt discount amortization cost due to the extension of the maturity date for the senior promissory notes, with additional warrants issued as consideration for the extension. The decrease in other expenses was offset by a gain on currency transactions due to the EUR/DKK decline against the USD during the period.
Previous wording
The Company has historically satisfied its capital and liquidity requirements through offerings of equity instruments, internally generated cash from operations and our available lines of credit. On March 31, 2024, we had cash of $7,726,213 and net working capital of $12,777,940, and on December 31, 2023, we had cash of $10,442,181 and net working capital of $14,590,432. On March 31, 2024, our net working capital had decreased by $1,812,492 compared to December 31, 2023, mainly as a result of a reduction in cash and cash equivalents.
Current wording
The Company has historically financed operations through offerings of equity or debt instruments, internally generated cash from operations and our available lines of credit. On June 30, 2024, we had cash of $5,489,776 and net working capital of $10,922,792, and on December 31, 2023, we had cash of $10,442,181 and net working capital of $14,590,432. On June 30, 2024, our net working capital had decreased by $3,667,640 compared to December 31, 2023, mainly as a result of a reduction in cash and cash equivalents.
Previous wording
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.
Current wording
Continued market uncertainty and reduced order intake caused by weakening global macroeconomic conditions or recession, could unfavorably impact the Company’s ability to generate positive cash flow and thereby significantly reduce its profitability and liquidity position.
Previous wording
Three months ended March 31, 2024 compared to three months ended March 31, 2023
Current wording
Six months ended June 30, 2024 compared to six months ended June 30, 2023
Previous wording
Cash flows from operating activities for the period ending March 31, 2024 derived from the net loss for the period, adjusted for non-cash items and changes in assets and liabilities. Cash flows from operating activities for the three months ended March 31, 2024 were $(1,956,701), representing an improvement of $328,600 compared to cash flows from operating activities of $(2,285,301) for the three months ended March 31, 2023. The cash flows from operating activities for the period consists mainly of the net loss of $(2,388,295) adjusted for depreciation and other non-cash-related items of $1,465,256 as well as a reduction in accrued expenses of $513,197 due to a reduction in accrued payroll, partly offset by a decrease in accounts receivable of $396,168 as a result of effective collection efforts.
Current wording
Cash flows from operating activities for the period ending June 30, 2024 derived from the net loss for the period, adjusted for non-cash items and changes in assets and liabilities. Cash flows used in operating activities for the six months ended June 30, 2024 were $3,779,679, representing an unfavorable change of $22,991 compared to cash flows used in operating activities of $3,756,688 for the six months ended June 30, 2023. The cash flows used in operating activities for the period consists mainly of the net loss of $4,499,995, adjusted for depreciation and other non-cash-related items of $2,420,451, as well as a decrease in accounts payable of $562,014 and an increase in inventory of $525,240, partly offset by a decrease in accounts receivable of $268,143.
Previous wording
Cash flows from investing activities were $551,787 for the three months ended March 31, 2024 as compared to $(87,470) for the three months ended March 31, 2023, representing an improvement of $639,257. The investing activities include proceeds from the sales of production equipment in Ballerup, offset by general purchases of production equipment to continue optimizing production throughput.
Current wording
Cash flows provided by investing activities were $333,171 for the six months ended June 30, 2024 as compared to cash flows used in investing activities of $290,468 for the six months ended June 30, 2023, representing an improvement of $639,639. The investing activities include proceeds from the disposition of production equipment in Ballerup, offset by general purchases of production equipment to continue optimizing production throughput.
Previous wording
Cash flows from financing activities were $(1,009,437) for the three months ended March 31, 2024 compared to $(98,945) for the three months ended March 31, 2023, representing a decrease of $910,492. The decrease was mainly driven by the repayment of lease agreements in connection with the sales of production equipment in Ballerup as mentioned above.
Current wording
Cash flows used in financing activities were $1,115,153 for the six months ended June 30, 2024 compared to $200,095 for the six months ended June 30, 2023, representing an increase of $915,058. The increase was mainly driven by the repayment of lease agreements in connection with the sales of production equipment in Ballerup as mentioned above.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Selling expenses for the three months ended June 30, 2024 were $855,122 compared to $1,028,225 for the same period in 2023, representing a decrease of $173,103, or 16.8%. The decrease in selling expenses is attributable to the resignations of our CFO and VP of Sales, as well as reductions in travel costs, marketing expenses, and expenses related to external sales consultancy services.
Current report — wording carried from elsewhere
Research and development expenses for the three months ended June 30, 2024 were $407,292 compared to $359,784 for the same period in 2023, representing an increase of $47,508, or 13.2%. The increase is solely attributable to one-time exit costs of a loss-making external development project, partly offset by more focused R&D efforts with fewer ongoing projects combined with a decrease in the average number of employees engaged in research and development activity as the Company streamlined and centralized the R&D function.
Current report — wording carried from elsewhere
Other expenses for the three months ended June 30, 2024 were $39,331 compared to other income of $33,351 for the comparable period in 2023, representing a decrease of $72,682, or 217.9%. The decrease was attributable to reduced interest income as well as increased debt discount amortization due to the extension of the maturity date for the senior promissory notes, with additional warrants issued as consideration for the extension. The decrease in other expenses was offset by reduced interest expenses and gain on currency transactions due to the EUR/DKK decline against the USD during the period.
Current report — wording carried from elsewhere
The following table sets forth our revenues, expenses and net loss for the six months ended June 30, 2024 and 2023:
Current report — wording carried from elsewhere
Gross profit for the six months ended June 30, 2024 was $988,313 (or gross profit margin of 11.3%) compared to gross profit of $1,553,870 (or a gross profit margin of 17.3%) for the same period in 2023, representing a decrease of $565,557, or 36.4%. This decline in gross profit can be attributed to the decrease in revenue and an unfavorable revenue mix, which resulted in a lower proportion of high-margin products being sold. Specifically, the delivery of a containerized oil and gas pilot system to the Middle East contributed to lower-than-usual margins, reflecting a strategic decision aimed at demonstrating and validating the efficiency of our technology. The decline in gross profit was partly offset by decreased depreciation as well as continued initiatives aimed at optimizing manufacturing processes, which have improved profitability within DPF and ceramic membrane production. Included in the gross profit was depreciation of $893,580 and $1,251,577 for the six months ended June 30, 2024 and 2023, respectively.