LIQTECH INTERNATIONAL INC
For the period ended Dec 31, 2024. Filed Mar 28, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 28, 2025
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-K
Period ended 2023-12-31; filed 2024-03-22.
0001437749-24-009045
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-28.
0001437749-25-009832
Item 7. 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 88 previous paragraphs and 79 current paragraphs.
29 unchanged; 13 reworded; 37 added; 46 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 10 previous and 9 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 (37)
Current report
On January 10, 2024, Simon Stadil tendered his resignation as Chief Financial Officer of the Company, effective as of April 10, 2024.
Current report
On February 14, 2024, the Company entered into a distribution agreement with Razorback Direct for produced water treatment solutions in the U.S.
Current report
On March 19, 2024, the Board of Directors of the Company appointed Phillip Massie Price as Interim Chief Financial Officer of the Company, effective April 1, 2024.
Current report
On May 7, 2024, the Company entered into a distribution agreement with Dan Marine Group for marine water treatment solutions for the Chinese market.
Current report
On May 14, 2024, the Company entered into a distribution agreement with Franman for marine water treatment solutions for the Greek Market.
Current report
On July 25, 2024, the Company entered into a distribution agreement with Danbee Marine Co. for marine water treatment solutions for the South Korean market.
Current report
On September 27, 2024, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company agreed to issue and sell an aggregate of 3,630,129 shares of Common Stock, 1,369,871 pre-funded warrants to purchase shares of Common Stock, and warrants to purchase up to an aggregate of 5,000,000 shares of Common Stock for gross proceeds of approximately $10 million. The combined purchase price of one share of Common Stock and one accompanying warrant to purchase one share of Common Stock is $2.00. The combined purchase price of one pre-funded warrant and one accompanying warrant to purchase one share of Common Stock under the Purchase Agreement is $1.999.
Current report
The Company agreed to issue the Common Stock, warrants, and pre-funded warrants in two tranches: (i) a first tranche comprised of 29,227 shares of Common Stock, 555,302 pre-funded warrants, and warrants to purchase an aggregate of 584,529 shares of Common Stock, which closed on September 27, 2024; and (ii) a second tranche comprised of 3,600,902 shares of Common Stock, 814,569 pre-funded warrants, and warrants to purchase an aggregate of 4,415,471 shares of Common Stock, which closed on November 12, 2024.
Current report
On November 7, 2024, the Company announced the establishment of a joint venture in China for the marine water treatment market.
Current report
Revenue for the year ended December 31, 2024, was $14,604,618 compared to $18,001,652 for the same period in 2023, representing a decrease of $3,397,034, or 18.9%. The decline was mainly due to reduced deliveries of liquid filtration systems, plastics products, ceramic membranes, and aftermarket sales, partly offset by increased sales of DPFs.
Current report
The decrease in deliveries of liquid filtration systems was mainly driven by reduced deliveries of pool filtration systems and marine scrubber systems. The decline in aftermarket sales was primarily due to remediation work carried out in the same period of 2023, which did not recur in 2024. The reduction in sales of plastic products was largely due to a significant one-time sale recorded in 2023 that did not recur in the current period. The increase in sales of DPFs was primarily driven by the effective execution of strategies designed to capitalize on the increased demand for DPFs.
Current report
Gross profit for the year ended December 31, 2024, was $250,905 (or a gross profit margin of 1.7%), compared to $2,775,476 (or a gross profit margin of 15.4%) for the same period in 2023, representing a decrease of $2,524,571, or approximately 91.0%. This decline in gross profit can be attributed to the decrease in revenue, resulting in lower overall activity levels and underutilization of our manufacturing capacity, as well as an unfavorable sales mix, which resulted in a lower proportion of high-margin products such as liquid filtration systems and ceramic membranes. Specifically, the deliveries of containerized oil and gas pilot systems to the Middle East and the U.S. contributed to lower-than-usual margins, reflecting a strategic decision aimed at demonstrating and validating the value proposition associated with our technology and seeding the market for future growth. This approach has proven successful, securing an order for a full-scale system scheduled for delivery in 2025. Additionally, a thorough inventory review led to necessary adjustments for obsolescence and slow-moving items. 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 $1,830,553 and $2,598,095 for the years ended December 31, 2024, and 2023, respectively.
Current report
Operating Expenses
Current report
Selling expenses for the year ended December 31, 2024, were $2,725,239, compared to $4,298,905 for the same period in 2023, representing a decrease of $1,573,666, or 36.6%. This decline was primarily driven by a reduction in executive officers, along with reductions in bonus payouts, travel costs, marketing expenses, and expenditures related to external sales consultancy services. The decrease was partially offset by increased bad debt expenses.
Current report
General and administrative expenses for the year ended December 31, 2024, were $5,661,455 compared to $4,856,779 for the same period in 2023, representing an increase of $804,676, or 16.6%. The increase was primarily due to newly created positions in supply chain and project management, as well as higher legal expenses, insurance costs, and recruitment costs associated with the resignations of our CFO and VP of Sales. Additionally, one-time expenses were incurred for the relocation of our plastics production facility. The increase was also partially attributable to the release of bonus provisions in the comparable period of 2023. Included in general and administrative expenses was non-cash compensation of $664,434 and $627,904 for the years ended December 31, 2024, and 2023, respectively.
Current report
Research and development expense for the year ended December 31, 2024, was $1,352,060 compared to $1,418,842 for the same period in 2023, representing a decrease of $66,782, or 4.7%. The decrease was primarily due to a more focused R&D strategy with fewer ongoing projects and a reduced average number of employees engaged in external research and development activities, as the Company streamlined and centralized its R&D function. This was partially offset by one-time exit costs associated with a loss-making external development project.
Current report
Other income (expense)
Current report
Total Other expense for the year ended December 31, 2024, was $896,246 compared to $978,302 for the comparable period in 2023, representing decreased expense of $82,056, or 8.4%. The decrease was primarily attributable to a gain on currency transactions resulting from the EUR/DKK decline against the USD during the period and a loss on assets held for sale in the comparable period in 2023. This decrease in other expenses was partially offset by a non-cash loss related to the disposal of property and equipment, decreased interest income, and higher debt discount amortization costs due to the extension of the maturity date for the senior promissory notes, with additional warrants issued as consideration for the extension.
Current report
As a result of the cumulative effect of the factors described above, we had a net loss for the year ended December 31, 2024, of $10,345,258 compared to $8,571,145 for the comparable period in 2023, representing an increase in net loss of $1,774,113, or 20.7%.
Current report
Accounts Receivableand Allowance for Current Expected Credit Losses
Current report
Inventories
Current report
Inventories directly purchased are carried at the lower of cost or net realizable value, as determined on the first-in, first-out (“FIFO”) method. For inventories produced, standard costs that approximate actual cost on the FIFO method are used to value inventories. Standard costs are reviewed at least annually by management or more often if circumstances indicate a change in cost has occurred. Work in process and finished goods include material, labor, and production overhead costs.
Current report
The Company adjusts the value of its inventories to the extent management determines that the cost cannot be recovered due to obsolescence or other factors. Inventory valuation adjustments for excess and obsolete inventories are calculated based on current inventories levels, movement, expected useful lives, and estimated future demand for our products.
Current report
Goodwill and Intangible assets
Current report
The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business, with the residual purchase price recorded as goodwill. The determination of the value of the intangible assets acquired involves certain judgments and estimates. These judgments can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital.
Current report
Acquired intangible assets with determinable useful lives are amortized on a straight-line or accelerated basis over the estimated periods benefited, ranging from one to ten years. Customer relationships and other non-contractual intangible assets with determinable lives are amortized over periods of five years.
Current report
The Company evaluates the recoverability of long-lived assets by comparing the carrying amount of an asset to estimated future net undiscounted cash flows generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying value of the assets exceeds the fair value of the assets. The evaluation of recoverability involves estimates of future operating cash flows based upon certain forecasted assumptions, including, but not limited to, revenue growth rates, gross profit margins, and operating expenses over the expected remaining useful life of the related asset. A shortfall in these estimated operating cash flows could result in an impairment charge in the future.
Current report
Goodwill is not amortized but is evaluated annually for impairment at the reporting unit level or when indicators of a potential impairment are present. The Company estimates the fair value of the reporting unit using the discounted cash flow and market approaches. Forecasts of future cash flows are based on the Company’s best estimate of future net sales and operating expenses, using primarily expected category expansion, pricing, market segment fundamentals, and general economic conditions. During the years ended December 31, 2024, and 2023, no impairment charge for goodwill was recorded.
Current report
The Company records revenue in accordance with FASB ASC Topic 606, “Revenue from Contracts with Customers.” Revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the Company applies the following five-step approach: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as a performance obligation is satisfied.
Current report
Contracts Assets and Liabilities
Current report
Contract assets also include unbilled receivables, which usually comprise the last invoice remaining after the delivery of the water treatment unit, where revenue is recognized at the transfer of control based upon signed acceptance of the unit by the customer. Most commonly, this invoice is sent to the customer at commissioning of the product or no later than 12 months after delivery. Further included in Contract Assets are short-term receivables such as VAT and other receivables.
Current report
Income taxes are accounted for under the asset and liability method in accordance with ASC 740, “Income Taxes.” Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and establishes a valuation allowance if, based on the weight of available evidence, it believes it is more likely than not that all or a portion of the deferred tax assets will not be realized.
Current report
The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not the position will be sustainable upon examination by the taxing authority, including resolution of any related appeals or litigation processes. This evaluation is based on all available evidence and assumes that the tax authorities have full knowledge of all relevant information concerning the tax position. The tax benefit recognized is measured as the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in income tax expense.
Current report
Stock-Based Compensation
Current report
Stock-based awards granted to qualified employees, non-employee directors, and consultants are measured at fair value and recognized as an expense in accordance with ASC Topic 718, “Share-Based Payments.” For service-based awards, stock-based compensation is recognized on a straight-line basis over the requisite service period, which is generally the vesting period. The fair value of our stock options is estimated using a Black-Scholes option valuation model. Restricted stock awards are valued based on the closing stock price on the date of grant. The Company has elected to recognize forfeitures as they occur.
Current report
Warrant Liabilities
Current report
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants in accordance with ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815-40, “Contracts in Entity’s Own Equity.” This assessment, which requires the use of professional judgment, considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815-40, including whether the warrants are indexed to the Company’s own shares and whether the events where holders of the warrants could potentially require net cash settlement are within the Company’s control, among other conditions for equity classification. Warrant liabilities are recognized at fair value, with changes in fair value recognized in the consolidated statement of operations each period.
Removed paragraphs (46)
Previous report
On February 15, 2023, the Company entered into a distribution agreement with Liquinex regarding the supply of silicon carbide ceramic membranes.
Previous report
On April 25, 2023, the Company entered into a distribution agreement with Silicon Filter for Phosphoric Acid Purification Applications in China.
Previous report
On May 26, 2023, the Company completed a 1-for-8 reverse split of its issued and outstanding shares of Common Stock.
Previous report
On June 27, 2023, the Company announced that Chairman Mark Vernon would retire from the Board with immediate effect. 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.
Previous report
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”).
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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%. 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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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%.
Previous report
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%. 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.
Previous report
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.
Previous report
Expenses
Previous report
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.
Previous report
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%. 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.
Previous report
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.
Previous report
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 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.
Previous report
Restructuring costs for the year ended December 31, 2023, were $0 compared to $1,893,166 for the same period in 2022.
Previous report
Other income (expenses)
Previous report
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%. 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.
Previous report
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%.
Previous report
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.
Previous report
Liquidity and Capital Resources
Previous report
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. 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
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.
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
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. 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.
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 $940,000), which 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 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. 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. 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.
Previous report
Accounts Receivable / Long-Term Receivable / Allowance for Doubtful Accounts / Bad Debt
Previous report
Goodwill and Definite-life intangible assets
Previous report
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. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead are tested for impairment at least annually in accordance with the provisions of Topic 350. Impairment losses arising from this impairment test, if any, are included in operating expenses in the period of impairment. 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.
Previous report
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.
Previous report
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 new revenue standard was applied to all open revenue contracts using the modified retrospective method as of January 1, 2018.
Showing the first 40 of 46 passages. Open the source sections for the rest.
Reworded paragraphs (13)
Previous wording
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%.
Current wording
Total operating expenses for the year ended December 31, 2024, were $9,738,754, representing a decrease of $835,772, or 7.9%, compared to $10,574,526 for the same period in 2023.
Previous wording
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.
Current wording
The income tax benefit for the year ended December 31, 2024, was $38,837 compared to a benefit of $206,207 for the comparable period in 2023, representing a decrease of $167,370, or 81.2%, mainly driven by a decrease in tax credits associated with research and development activities in Denmark.
Previous wording
Cash used by operating activities is net income (losses) adjusted for certain non-cash items and changes in assets and liabilities. 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, 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. 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.
Current wording
Cash used by operating activities is net loss adjusted for certain non-cash items and changes in assets and liabilities. Cash used by operating activities for the year ended December 31, 2024, was $7,534,072 compared to cash used by operating activities of $4,183,918 for the year ended December 31, 2023, representing an increase of $3,350,154. The cash used by operating activities for the year ended December 31, 2024, consists mainly of the net loss for the year of $(10,345,258) adjusted by depreciation and other non-cash items of $4,432,671. Further, changes in assets and liabilities included a decrease in accounts payable of $1,050,406, a decrease in accrued expenses of $908,607, and an increase in inventories of $587,806, partly offset by a decrease in contract assets of $1,102,791 and a decrease in accounts receivable of $620,116.
Previous wording
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 investing activities include the purchase of property and equipment to satisfy earlier commitments made for the production facility in China, with select equipment re-directed to the manufacturing facility in Ballerup as part of the strategic negotiation with vendors.
Current wording
Net cash used in investing activities was $424,036 for the year ended December 31, 2024, as compared to $2,886,036 for the year ended December 31, 2023, representing a decrease of $2,462,000. The investing activities include general purchases of production equipment to continue optimizing production throughput and the internal production of rental assets, partly offset by proceeds from the disposition of production equipment in our Ballerup facility.
Previous wording
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. 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.
Current wording
Cash provided by financing activities was $8,493,300 for the year ended December 31, 2024, as compared to $580,645 for the year ended December 31, 2023, representing an increase of $7,912,655. The increase was mainly driven by the equity raise, generating net proceeds of $9,922,063 from the issuance of common stock and prefunded warrants, partly offset by the repayment of lease agreements in connection with the sales of production equipment in Ballerup as mentioned above.
Previous wording
Accounts receivable consist of trade receivables arising from credit sales to customers in the normal course of business. These receivables are recorded at the time of sale, net of an allowance for current expected credit losses. 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.
Current wording
Accounts receivable consist of trade receivables arising from credit sales to customers in the normal course of business. These receivables are recorded at the time of sale, net of an allowance for current expected credit losses. 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 customers, prevailing economic conditions, and reasonable and supportable forward-looking information. Accounts receivable balances are written off when they are determined to be uncollectible.
Previous wording
The roll-forward of the allowance for doubtful accounts for the year ended December 31, 2023 and December 31, 2022 was as follows:
Current wording
The roll-forward of the allowance for current expected credit losses for the year ended December 31, 2024, and December 31, 2023 were as follows:
Previous wording
We assess the impairment of long-lived assets when events or changes in circumstances indicate that the carrying value of the assets or the asset grouping may not be recoverable. Factors that we consider in deciding when to perform an impairment review include significant under-performance of a business or product line in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in our use of the assets. We measure the recoverability of assets that will continue to be used in our operations by comparing the carrying value of the asset grouping to our estimate of the related total future undiscounted net cash flows. If an asset grouping’s carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is considered to be impaired. The impairment is measured by comparing the difference between the asset grouping’s carrying value and its fair value.
Current wording
The Company assesses the impairment of long-lived assets when events or changes in circumstances indicate that the carrying value of the assets or the asset grouping may not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant under-performance of a business or product line in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in its use of the assets. The Company measures the recoverability of assets that will continue to be used in its operations by comparing the carrying value of the asset grouping to its estimate of the related total future undiscounted net cash flows. If an asset grouping’s carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is considered to be impaired. The impairment is measured by comparing the difference between the asset grouping’s carrying value and its fair value.
Previous wording
Impairments of long-lived assets are determined for groups of assets related to the lowest level of identifiable independent cash flows. Due to our asset usage model and the interchangeable nature of our ceramic filter manufacturing capacity, we must make subjective judgments in determining the independent cash flows that can be related to specific asset groupings. In addition, as we make manufacturing process changes and other factory planning decisions, we must make subjective judgments regarding the remaining useful lives of assets, primarily process-specific filter manufacturing tools and building improvements. If we determine that the useful lives of assets are shorter than we had originally estimated, we accelerate the rate of depreciation over the assets’ new, shorter useful lives.
Current wording
Impairments of long-lived assets are determined for groups of assets related to the lowest level of identifiable independent cash flows. Due to the Company’s asset usage model and the interchangeable nature of its ceramic filter manufacturing capacity, the Company must make subjective judgments in determining the independent cash flows that can be related to specific asset groupings. In addition, as the Company makes manufacturing process changes and other factory planning decisions, it must make subjective judgments regarding the remaining useful lives of assets, primarily process-specific filter manufacturing tools and building improvements. If the Company determines that the useful lives of assets are shorter than it had originally estimated, the Company accelerates the rate of depreciation over the assets’ new, shorter useful lives.
Previous wording
The Company sells products throughout the world; sales by geographical region are as follows:
Current wording
The Company sells products throughout the world. Sales by geographical region for the years ended December 31, 2024, and 2023 were as follows:
Previous wording
The Company’s sales by product and service are as follows for the years ended December 31, 2023 and 2022:
Current wording
The Company’s sales by product line for the years ended December 31, 2024, and 2023 were as follows:
Previous wording
Contract assets are the Company’s rights to consideration in exchange for goods or services and is recognized when a performance obligation has been satisfied but has not yet been billed. Contract assets are transferred to receivables when the right to consideration is unconditional and billed per the terms of the contractual agreement. Contract liabilities are payments received from customers prior to satisfaction of performance obligations, and these balances are typically related to prepayments for third-party expenses that are incurred shortly after billing. Contract liabilities also include deferred revenue related to the second performance obligation stated under Revenue Recognition, where the obligation is attributed to the commissioning of the water treatment system.
Current wording
Contract assets are the Company’s rights to consideration in exchange for goods or services and are recognized when a performance obligation has been satisfied but has not yet been billed. When the Company issues invoices to the customer, and the billing is higher than the capitalized Contract assets, the net amount is transferred to Contract liabilities. Contract assets/liabilities are transferred to revenue and cost of revenues when the right to consideration is unconditional and billed per the terms of the contractual agreement.
Previous wording
The roll-forward of Contract assets / liabilities for the periods ended December 31, 2023 and December 31, 2022 is as follows:
Current wording
The roll-forward of contract assets and contract liabilities for the years ended December 31, 2024, and 2023 were as follows: