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Item 8. Financial Statements and Supplementary Data

2025-03-28 compared with 2024-03-22 · 287 added, 282 removed, 668 unchanged (46% of the section changed)

14 unchanged sentences

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph Regarding Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

52 unchanged sentences

Current Assets:

Cash, cash equivalents and restricted cash

Cash and restricted cash

$ 10,868,728 $ 10,422,181

Accounts receivable, net of allowance for doubtful accounts of $ 134,912 and $ 59,559 at December 31, 2023 and December 31, 2022, respectively

Accounts receivable, net

2,396,056 3,171,047

Inventories, net of allowance for excess and obsolete inventory of $ 867,458 and $ 663,227 at December 31, 2023 and December 31, 2022, respectively

Inventories, net

5,541,192 5,267,816

3 unchanged sentences

168,443 337,391

Assets held for sale

Total Current Assets

20,641,117 22,090,179

Long-Term Assets:

Property and equipment, net of accumulated depreciation of $ 11,828,200 and $ 9,046,499 at December 31, 2023 and December 31, 2022, respectively

Non-Current Assets:

Property and equipment, net

6,618,822 9,007,166

3 unchanged sentences

456,658 470,349

Intangible assets, net of accumulated amortization of $ 558,555 and $ 438,250 at December 31, 2023 and December 31, 2022, respectively

Intangible assets, net

39,367 114,593

220,693 233,723

Total Long-term Assets

Total Non-Current Assets

11,786,362 13,881,668

4 unchanged sentences

CONSOLIDATED BALANCE SHEETS

Liabilities and Stockholders’ Equity

Current Liabilities:

3 unchanged sentences

2,491,479 3,550,542

Current portion of finance lease obligations

Current portion of finance lease liabilities

458,347 590,550

5 unchanged sentences

4,904,308 7,499,747

Non-Current Liabilities:

Deferred tax liability

57,960 101,059

Finance lease obligation, net of current portion

Finance lease liabilities, net of current portion

1,600,931 2,879,932

Operating lease liability, net of current portion

Operating lease liabilities, net of current portion

3,906,625 3,527,082

Senior promissory notes payable

Notes payable, net

5,303,563 4,688,011

Total Long-term liabilities

Total Non-Current Liabilities

10,869,079 11,196,084

3 unchanged sentences

Preferred stock;

par value $ 0.001 , 2,500,000 shares authorized, 0 shares issued and outstanding at December 31, 2022 and December 31, 2021

par value $ 0.001 , 2,500,000 shares authorized, 0 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively

Common stock;

par value $ 0.001 , 50,000,000 shares authorized 5,727,310 and 5,498,260 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively

par value $ 0.001 , 50,000,000 shares authorized and 9,475,443 and 5,727,310 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively

Additional paid-in capital

12 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended

For the Year Ended

$ 14,604,618 $ 18,001,652

Cost of goods sold

14,353,713 15,226,176

250,905 2,775,476

Operating Expenses:

Selling expenses

2,725,239 4,298,905

General and administrative expenses

5,661,455 4,856,779

Research and development expenses

Restructuring costs

1,352,060 1,418,842

Total Operating Expenses

9,738,754 10,574,526

Loss from Operations

( 9,487,849 ) ( 7,799,050 )

Other Income (Expense):

Interest and other income

178,834 366,365

Interest expense

Amortization of discount on convertible note

Gain (loss) on currency transactions

Gain on lease termination

Gain (loss) on disposal of assets held for sale

Gain on sale of property and equipment

( 167,556 ) ( 151,670 )

Amortization of debt discount

( 615,552 ) ( 400,903 )

Gain (loss) on foreign currency transactions

164,310 ( 359,960 )

Gain (loss) on disposal of property and equipment

( 456,282 ) 7,254

Loss on assets held for sale

- ( 439,388 )

Total Other Expense

( 896,246 ) ( 978,302 )

Loss Before Income Taxes

( 10,384,095 ) ( 8,777,352 )

Income tax benefit

Basic and Diluted Loss Per Share

Basic and Diluted Weighted Average Common Shares Outstanding

( 38,837 ) ( 206,207 )

$ ( 10,345,258 ) $ ( 8,571,145 )

Loss Per Common Share – Basic and Diluted

$ ( 1.64 ) $ ( 1.51 )

Weighted-Average Common Shares Outstanding – Basic and Diluted

6,310,379 5,688,281

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

2 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the Years Ended

Other Comprehensive Income (Loss) - Currency Translation, net

Total Comprehensive Loss

For the Year Ended

$ ( 10,345,258 ) $ ( 8,571,145 )

Loss on foreign currency translation adjustments

( 758,223 ) 716,679

Other Comprehensive Loss

$ ( 11,103,481 ) $ ( 7,854,466 )

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

7 unchanged sentences

148,002 148 ( 148 ) - - -

Fractional shares from individual shareholder round-up following reverse split

Tax withholdings paid related to stock-based compensation

( 29,998 ) ( 30 ) ( 104,910 ) - - ( 104,940 )

Warrants issued in connection with Senior Promissory Notes

Issuance of common shares, warrants and prefunded warrants in connection with a private offering

3,630,129 3,630 9,918,433 - - 9,922,063

16 unchanged sentences

212,254 212 ( 212 ) - - -

Common shares issued for cash at $ 0.50 per share, net of offering cost of $ 1,996,469 , in May 2022

Fractional shares from individual shareholder round-up following reverse split

16,796 17 ( 17 ) - - -

3 unchanged sentences

- - 627,904 - - 627,904

Currency translation, net

Foreign currency translation adjustments

- - - - 716,679 716,679

7 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended

For the Year Ended

Cash Flows from Operating Activities:

$ ( 10,345,258 ) $ ( 8,571,145 )

Adjustments to reconcile net loss to net cash used in operations:

Depreciation and amortization

Amortization of discount on convertible notes payable

2,160,837 2,575,286

Amortization of debt discount

615,552 400,903

Stock-based compensation

Change in deferred tax liability

Gain on lease termination

664,434 627,904

Amortization of right-of-use assets

574,403 565,493

Deferred taxes

( 38,837 ) ( 57,539 )

Loss on disposal of assets held for sale

Gain on sale of equipment

(Gain) loss on disposal of property and equipment

456,282 ( 7,254 )

Changes in assets and liabilities:

Accounts receivable

620,116 ( 765,956 )

( 587,806 ) ( 1,045,838 )

Contract assets

1,102,791 ( 825,974 )

Prepaid expenses and other current assets

40,598 1,403,707

Accounts payable

( 1,050,406 ) 990,538

Accrued expenses

( 908,607 ) 639,309

Operating lease liabilities

( 576,948 ) ( 562,948 )

Contract liabilities

( 261,223 ) ( 282,614 )

Assets held for sale

Net Cash used in Operating Activities

( 7,534,072 ) ( 4,183,918 )

Cash Flows from Investing Activities:

Purchase of property and equipment

Proceeds from sale of property and equipment

( 1,367,729 ) ( 2,893,290 )

Proceeds from the disposal of property and equipment

943,693 7,254

Net Cash used in Investing Activities

( 424,036 ) ( 2,886,036 )

Cash Flows from Financing Activities:

Payments on finance lease obligation

Proceeds from Sale and Leaseback Agreements

Payments on Convertible Note

Repayments of finance lease liabilities

( 1,428,763 ) ( 435,343 )

Proceeds from sale and leaseback agreement

Proceeds from issuance of common stock and prefunded warrants

Proceeds from issuance of Senior Promissory Notes

Net Cash provided by Financing Activities

Effect of foreign currency exchange on cash

8,493,300 580,645

Effect of exchange rate changes on cash, cash equivalents and restricted cash

( 88,645 ) 314,119

Net Change in Cash, Cash Equivalents, and Restricted Cash

446,547 ( 6,175,190 )

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period

10,422,181 16,597,371

Cash, Cash Equivalents, and Restricted Cash at End of Period

$ 10,868,728 $ 10,422,181

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

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended

For the Year Ended

Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for:

Cash paid for interest

Cash paid for income taxes

Non-Cash Financing Activities

Debt discount on Senior Promissory Notes

Financed purchases of property and equipment

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

3 unchanged sentences

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Basis of Presentation

Business Organization

The consolidated financial statements include the accounts of LiqTech International, Inc.

5 unchanged sentences

LiqTech USA Inc., a Delaware corporation and a 100 % owned subsidiary of the Company formed in May 2011.

LiqTech Holding A/S (formerly known as LiqTech International A/S), a Danish corporation, incorporated on January 15, 2000 ( “LiqTech Holding”), a 100 % owned subsidiary of LiqTech USA Inc., handling all joint group activities such as management, marketing, finance, IT, etc.

LiqTech NA, Inc.

5 unchanged sentences

LiqTech Water Projects A/S, a Danish corporation (“LiqTech Water Projects”), incorporated on July 28, 2020, that is a dormant company without activity.

This company was formed to include the investments for our joint venture in the Middle East.

LiqTech Emission Control A/S, a Danish corporation (“LiqTech Emission Control”), incorporated on March 1, 2021, that is a dormant company without activity.

This company was formed to include the investments for our joint venture in China.

LiqTech Environment Technologies (China) Co.

(“LiqTech China”), incorporated on September 23, 2021, to be engaged in the development, design, application, marketing, and sales of ceramic diesel particulate, liquid filters, and catalytic converters in Asia.

Consolidation -- The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and its majority-owned subsidiary.

Nantong JiTRI LiqTech Green Energy Technology Co., Ltd., a Chinese corporation (“LiqTech JiTRI”), incorporated on December 6, 2024, as a joint venture in which the Company holds a 90 % ownership stake.

The company is focused on developing and commercializing systems for marine water treatment market in China.

Basis of Presentation

The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as codified in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and its majority-owned subsidiary.

All material intercompany transactions and accounts have been eliminated in the consolidation.

Reverse Stock Split -- On May 26, 2023, the Company effected a 1 -for- 8 reverse split of its outstanding common stock, $ 0.001 par value (“Common Stock”).

All outstanding Common Stock, warrants, and restricted stock units (“RSUs”) were adjusted to reflect the 1 -for- 8 reverse split, with respective exercise prices of the warrants proportionately increased.

All stock and per share data throughout these consolidated financial statements have been retroactively adjusted to reflect the reverse share split.

The total number of authorized Common Stock was adjusted to reflect the 1 -for- 8 reverse split.

As a result of the reverse Common Stock split, an amount equal to the decreased value of Common Stock was reclassified from “Common Stock” to “Additional Paid-in Capital.”

Functional Currency / Foreign currency translation -- The functional currency of LiqTech International, Inc.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Significant estimates and judgments include revenue recognition, allowance for estimated credit losses, reserves for excess and obsolete inventories, impairment evaluations of long-lived assets and goodwill, fair value measurements of warrants and stock-based compensation, and assessments of contingent liabilities.

Foreign Currency

The functional currency of LiqTech International, Inc.

and LiqTech USA, Inc.

The functional currency of LiqTech Holding, LiqTech Water, LiqTech Plastics, LiqTech Ceramics, LiqTech Water Projects, and LiqTech Emission Control is the Danish Krone (“DKK”);

and the functional currency of LiqTech China is the Renminbi (“RMB”).

and the functional currency of LiqTech JiTRI is the Renminbi (“RMB”).

The Company’s reporting currency is the U.S.

5 unchanged sentences

Transaction gains and losses that arose from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the statement of operations as incurred.

Cash, Cash Equivalents, and Restricted Cash -- The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

As of December 31, 2024 , and 2023 , the Company held $ 0 and $ 941,361 , respectively, of restricted cash.

3 unchanged sentences

At December 31, 2024, and December 31, 2023 , the Company had $ 4,414,510 and $ 0 in excess of the FDIC insured limit, respectively.

Accounts Receivable -- Accounts receivable consist of trade receivables arising from credit sales to customers in the normal course of business.

Accounts Receivable and Current Expected Credit Losses

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.

The roll-forward of the allowance for doubtful accounts as of December 31, 2023 and December 31, 2022 is as follows:

Allowance for doubtful accounts at the beginning of the period

In accordance with FASB 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.

The roll-forward of the allowance for current expected credit losses as of December 31, 2024, and 2023 were as follows:

Allowance for current expected credit losses at the beginning of the period

$ 134,912 $ 59,559

3 unchanged sentences

( 49,577 ) ( 10,298 )

Effect of currency translation

Effect of exchange rate changes

( 26,202 ) 3,585

Allowance for doubtful accounts at the end of the period

Allowance for current expected credit losses at the end of the period

$ 637,556 $ 134,912

Inventory -- Inventory directly purchased is carried at the lower of cost or net realizable value, as determined on the first -in, first -out method.

For inventory produced, standard costs that approximate actual cost on the FIFO method are used to value inventory.

Standard costs are reviewed at least annually by management or more often in the event that circumstances indicate a change in cost has occurred.

Inventories directly purchased is 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.

The Company adjusts the value of its inventory to the extent management determines that the cost cannot be recovered due to obsolescence or other factors.

Inventory valuation adjustments for excess and obsolete inventory are calculated based on current inventory levels, movement, expected useful lives, and estimated future demand for our products.

Contracts Assets / Liabilities -- 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 goods sold when the right to consideration is unconditional and billed per the terms of the contractual agreement.

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.

Assets Held for Sale -- Assets are classified as held for sale when all of the following criteria for a plan of sale have been met:

( 1 ) management, having the authority to approve the action, commits to a plan to sell the assets;

( 2 ) the assets are available for immediate sale, in their present condition, subject only to terms that are usual and customary for sales of such assets;

( 3 ) an active program to locate a buyer and other actions required to complete the plan to sell the assets have been initiated;

( 4 ) the sale of the assets is probable and is expected to be completed within one year;

( 5 ) the assets are being actively marketed for a price that is reasonable in relation to their current fair value;

and ( 6 ) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or the plan will be withdrawn.

When all of these criteria have been met, the assets are classified as held for sale on the balance sheet.

Assets classified as held for sale are reported at the lower of their carrying value or fair value less costs to sell.

Depreciation and amortization of assets cease upon designation as held for sale.

Leases -- The Company has elected to not recognize lease assets and liabilities with an initial term of 12 months or less and to not separate lease and non-lease components.

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.

The Company has elected to not recognize lease assets and liabilities with an initial term of 12 months or less and to not separate lease and non-lease components.

The Company’s accounting for finance leases remains substantially unchanged.

1 unchanged sentence

As most of the Company’s leases do not provide an implicit rate, an incremental borrowing rate based on the information available at the commencement date is used in determining the present value.

The Company will use the implicit rate when readily determinable.

The operating lease ROU asset also included prepaid lease payments and reduced by accrued lease payments.

The Company uses the implicit rate when determinable.

The operating lease ROU asset also included prepaid lease payments, reduced by accrued lease payments.

The Company’s lease terms may include options to extend or terminate the lease, recognized when it is reasonably certain that those options will be exercised.

Operating lease cost for lease payments will be recognized on a straight-line basis over the lease term.

Property and Equipment -- Property and equipment are stated at cost.

Property and Equipment

Property and equipment are stated at cost.

Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized upon being placed in service.

1 unchanged sentence

Depreciation is computed for financial statement purposes on a straight-line basis over the estimated useful lives of the assets, which range from three to ten years.

Long-lived Assets -- 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.

Long-Lived Assets

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.

7 unchanged sentences

Management has analyzed the impact of the current economic climate on its financial statements as of December 31, 2024 , 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.

During the years ended December 31, 2023 and 2022, no impairment charge of long-lived assets has been recorded.

Goodwill and Intangible Assets -- 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.

During the years ended December 31, 2024, and 2023 , no impairment charges for long-lived assets were recorded.

Goodwill and Intangible Assets

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.

6 unchanged sentences

A shortfall in these estimated operating cash flows could result in an impairment charge in the future.

Goodwill is not amortized but is evaluated annually for impairment at the reporting unit level or when indicators of a potential impairment are present.

Goodwill is not amortized but is evaluated annually for impairment at the reporting unit level as of December 31 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.

Revenue Recognition -- The Company records revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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.

During the years ended December 31, 2024, and 2023 , no impairment charge for goodwill was recorded.

Revenue Recognition

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:

5 unchanged sentences

The Company sells products throughout the world.

sales by geographical region are as follows for the year ended December 31, 2023 and 2022:

Sales by geographical region for the year ended December 31, 2024, and 2023 were as follows:

% Distribution

6 unchanged sentences

100 % 100 % $ 14,604,618 $ 18,001,652

The Company’s sales by product line are as follows for the years ended December 31, 2023 and 2022:

The Company’s sales by product line for the years ended December 31, 2024, and 2023 were as follows:

% Distribution

35 unchanged sentences

Projects with performance obligations recognized over time that have cumulative billings in excess of costs and estimated earnings recognized to date are reported on our balance sheet as contract liabilities.

The roll-forward of Contract Assets/Liabilities for the year ended December 31, 2023 and December 31, 2022 is:

Contracts Assets and Contract Liabilities

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 goods sold when the right to consideration is unconditional and billed per the terms of the contractual agreement.

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.

The roll-forward of contract assets and liabilities for the year ended December 31, 2024, and 2023 were as follows:

Cost incurred

8 unchanged sentences

$ 1,557,379 $ 2,509,097

$ 2,509,097 $ 1,603,738

Distributed as follows:

4 unchanged sentences

$ 1,557,379 $ 2,509,097

Cost of Sales -- The Company includes product costs (i.e., material, direct labor and overhead costs), shipping and handling expense, production-related depreciation expense and product license agreement expense in cost of sales.

Advertising Cost -- Costs incurred in connection with advertising of the Company’s products are expensed as incurred.

Advertising cost is included in sales expenses, and total advertising costs amounted to $ 70,580 and $ 144,043 for the years ended December 31, 2023 and 2022, respectively.

Research and Development Cost -- The Company expenses research and development costs for the development of new products as incurred.

Cost of Sales

The Company includes product costs (i.e., material, direct labor and overhead costs), shipping and handling expense, production-related depreciation expense, and product license agreement expense in cost of sales.

Advertising Costs

Costs incurred in connection with advertising of the Company’s products are expensed as incurred.

Advertising costs are included in selling expenses, and total advertising costs amounted to $ 56,037 and $ 70,580 for the years ended December 31, 2024, and 2023 , respectively.

Research and Development Cost

The Company expenses research and development costs for the development of new products as incurred.

Included in operating expense for the years ended December 31, 2024, and 2023 were $ 1,352,060 and $ 1,418,842 , respectively, of research and development costs.

Income Taxes -- The Company accounts for income taxes in accordance with FASB ASC Topic 740:

Accounting for Income Taxes.

This statement requires an asset and liability approach for accounting for income taxes.

Loss Contingencies – The Company is subject to various legal and administrative proceedings along with asserted and potential claims, accruals related to product warranties, and potential asset impairments (loss contingencies) that arise in the ordinary course of business.

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 establish 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.

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.

Loss Contingencies

The Company is subject to various legal and administrative proceedings along with asserted and potential claims, accruals related to product warranties, and potential asset impairments (loss contingencies) that arise in the ordinary course of business.

An estimated loss from such contingencies is recognized as a charge to income if it is probable that a liability has been incurred, and the amount of the loss can be reasonably estimated.

5 unchanged sentences

These revisions could have a material impact on the Company’s results of operations and financial position.

Income/(Loss) Per Share -- The Company calculates earnings (loss) per share in accordance with FASB ASC 260, Earnings Per Share.

Loss Per Share

The Company calculates loss per share in accordance with FASB ASC 260, " Earnings Per Share ".

Basic earnings per common share (EPS) are based on the weighted average number of common shares outstanding during each period.

1 unchanged sentence

Potential common shares included in the diluted earnings per share calculation include in-the-money stock options and warrants that have been granted but have not been exercised.

Stock Awards -- During the years presented in the accompanying consolidated financial statements, the Company has granted stock awards.

The Company accounts for stock awards in accordance with the provisions of FASB ASC Topic 718, Compensation – Stock Compensation.

Stock-based compensation costs of $ 627,904 and $ 934,423 have been recognized for the vesting of options and stock awards granted to directors, management, and certain key employees for the years ended December 31, 2023 and 2022, respectively.

Fair Value of Financial Instruments -- The Company accounts for fair value measurements for financial assets and liabilities in accordance with FASB ASC Topic 820.

Stock Based Compensation

Stock-based awards granted to qualified employees, non-employee directors, and consultants are measured at fair value at the grant date 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.

Warrant Liabilities

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.

Fair Value of Financial Instruments

The Company accounts for fair value measurements for financial assets and liabilities in accordance with FASB ASC Topic 820 “Fair Value Measurement ”.

The authoritative guidance, which, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis.

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Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, other receivables, prepaid expenses, accounts payable, and accrued expenses approximate their recorded values due to their short-term maturities.

Accounting Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, including accounts receivable;

allowance for doubtful accounts;

reserve for excess and obsolete inventory;

depreciation and impairment of property, plant and equipment;

goodwill and intangible assets;

liabilities including contingencies;

the disclosures of contingent assets and liabilities at the date of the financial statements;

warrant liability;

and the reported amount of revenues and expenses during the reporting period.

Actual results could differ from those estimated.

Recent Accounting Pronouncements -- In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ):

Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash and cash equivalents, restricted cash, accounts receivable, other receivables, prepaid expenses, accounts payable, and accrued expenses approximate their recorded values due to their short-term maturities.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures , which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable segment’s profit or loss and assets that are currently required annually.

ASU 2023 - 07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

These amendments are to be applied retrospectively.

The Company adopted ASU 2023 - 07 retrospectively on December 31, 2024.

See Note 12 for further details.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures , which enhances the transparency and decision usefulness of income tax disclosures by requiring;

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These amendments are to be applied prospectively, with retrospective application permitted.

We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.

In November 2023, the FASB issued ASU 2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable segment’s profit or loss and assets that are currently required annually.

ASU 2023 - 07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

These amendments are to be applied retrospectively.

We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.

The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024 - 03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220 - 40 ) , which requires additional disclosures around specific expense categories in the notes to the financial statements.

The additional annual disclosures are effective for our year ending December 31, 2027, and the additional interim disclosures are effective in 2028.

These disclosures will be applied prospectively.

The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

In August 2023, the FASB issued ASU 2023 - 05, Business Combinations — Joint Venture Formations (Subtopic 805 - 60 ):

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These amendments are to be applied prospectively, with retrospective application permitted for joint ventures formed before the effective date.

We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.

Other recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

NOTE 2 – GOING CONCERN

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America, which contemplate continuation of the Company as a going concern;

however, 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 proposed cost reductions, strategy, and profitability improvement measures, thus achieving profitable operations.

The financial statements do not include any adjustments that might result from the realization of these uncertainties.

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 and restore profitability.

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, cut operating costs, forego future development and other opportunities, or even terminate our operations.

As of December 31, 2023, the Company 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.

NOTE 3 – RESTRUCTURING COSTS

During the second quarter of 2022, the Company completed a restructuring program to reduce costs, decrease operating losses and improve cash flow.

Total restructuring and restructuring-related net charges pursuant to this program were $ 1,893,166 , which were recorded separately in the income statement as “restructuring costs”, and allocated as follows:

CEO separation -- On May 10, 2022, the Board of Directors accepted the resignation of Sune Mathiesen as Chief Executive Officer and a director of the Company, effective on May 12, 2022.

As previously announced, Mr.

Mathiesen had been on a medical leave of absence since March 17, 2022.

In connection with Mr.

Mathiesen’s resignation, Mr.

Mathiesen and the Company entered into a Separation Agreement and Release (the “Separation Agreement”).

Under the provisions of the Separation Agreement, Mr.

Mathiesen received DKK1,605,000 ($ 228,975 ), which is the equivalent of six months of salary, car allowance and pension contributions, paid in a lump-sum payment, less applicable deductions and withholdings.

Terminated employees – In the second quarter of 2022, the Company re-aligned its corporate management structure, which involved a reduction in headcount and labor costs of approximately 25 %.

The new organization reflects a focused effort to align key leaders with strategic imperatives, inspire greater accountability and performance management, eliminate silos and layers of middle management, and operate a leaner, more efficient business.

Provisions for salary obligations to employees amounted to $ 158,199 , reflecting the costs related to select employees released from duties with immediate effect.

No provisions were made for the employees working during the notice period.

China close-down – In the second quarter of 2022, the Company reduced and suspended planned capital investments, including the Company’s program to build a manufacturing and service center in China.

Pursuant to the suspended plans, the Company terminated and settled agreements with consultants, select project employees, and property development providers, resulting in a net payment of termination and cancellation charges of $ 275,445 .

Capex commitments -- As part of efforts to balance future investments with expected demands and cash flow, the Company commenced the renegotiation of all material Capex commitments during the quarter, with the ambition to reduce, cancel, or delay deliveries under the contracts, which initially amounted to approximately $ 10,300,000 .

As part of the renegotiation, a provision was made during the second quarter of $ 668,606 regarding expected cancellation charges and contractual termination costs.

During the third and fourth quarter the amount of paid cancellation charges exceeded the provision by $ 145,388 , which explains the total amount regarding capex commitments of $ 813,994 .

Write-downs -- The re-routing of production equipment and machinery to Denmark (originally planned for China), resulted in a write-down of $ 240,576 on legacy installed equipment and machinery that was decommissioned as part of the arrival and implementation of new and more efficient equipment.

Furthermore, review of obsolete inventory and existing product demand resulted in a write-down of $ 175,977 .

The Company’s restructuring costs are as follows for the years ended December 31, 2023 and 2022:

CEO separation

$ - $ 228,975

Terminated employees

China close-down

Capex commitments

$ - $ 1,893,166

NOTE 4 - INVENTORY

Inventory consisted of the following at December 31, 2023 and December 31, 2022:

The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

The Company currently believes there are no other issued and not yet effective accounting standards that are materially relevant to its financial statements.

NOTE 2 - INVENTORIES

Inventories consisted of the following on December 31, 2024, and 2023 :

Furnace parts and supplies

Raw materials

2,734,781 3,301,526

Work in process

2,435,280 1,271,458

Finished goods and filtration systems

Reserve for excess and obsolescence

Net Inventory

Inventory valuation adjustments for excess and obsolete inventory are calculated based on current inventory levels, movements, expected useful lives, and estimated future demand for the products.

1,580,255 1,507,113

Reserve for obsolescence

( 1,209,124 ) ( 867,458 )

Total inventories, net

$ 5,541,192 $ 5,267,816

Inventory valuation adjustments for excess and obsolete inventories are calculated based on current inventory levels, movements, expected useful lives, and estimated future demand for the products.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following on December 31, 2023 and December 31, 2022:

Property and equipment consisted of the following on December 31, 2024, and 2023 :

Useful life December 31, December 31,

Production equipment

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3 - 5 1,103,623 1,141,790

Computer equipment - finance lease

3 - 5 80,518 -

3 - 5 21,067 26,897

Furniture and fixture

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The Company evaluates each lease to determine its appropriate classification as an operating lease or finance lease for financial reporting purposes.

The majority of our operating leases are non-cancelable operating leases for production and office space in Hobro, Aarhus, and Copenhagen, Denmark.

The lease agreements expire on November 30, 2034, August 31, 2024, and August 31, 2028, respectively.

The majority of our operating leases are non-cancelable operating leases for production and office space in Hobro ( two facilities) and Copenhagen, Denmark.

The lease agreements expire on April 30, 2034, November 30, 2034, and August 31, 2028, respectively (for the two facilities in Hobro and the office space in Copenhagen, in that order)

During the year ended December 31, 2024 , cash paid for amounts included for the measurement of operating lease liabilities was $ 853,566 , and the Company recorded operating lease expenses of $ 851,110 in operating expenses.

During the year ended December 31, 2023, cash paid for amounts included for the measurement of finance lease liabilities was $ 441,696 , and the Company recorded finance lease expenses of $ 159,766 in other income (expenses).

Supplemental balance sheet information related to leases as of December 31, 2023 and 2022 was as follows:

During the year ended December 31, 2024 , cash paid for amounts included for the measurement of finance lease liabilities was $ 1,378,297 , and the Company recorded finance lease expenses of $ 154,598 in other expenses.

Supplemental balance sheet information related to leases as of December 31, 2024, and 2023 were as follows:

Operating leases:

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( 1,306,904 ) ( 301,363 )

Total lease liability

Total lease liabilities

$ 4,450,822 $ 2,059,278

NOTE 5 - INTANGIBLE ASSETS

At December 31, 2023 and December 31, 2022, other intangible assets, net of accumulated amortization, consisted of customer relationships acquired in connection with the purchase of BS Plastic A/S and the cost of patent applications for the Company’s products.

Intangible assets consisted of the following at December 31, 2023 and December 31, 2022:

On December 31, 2024, and 2023 , other intangible assets, net of accumulated amortization, consisted of customer relationships acquired in connection with the purchase of BS Plastic A/S and the cost of patent applications for the Company’s products.

Intangible assets consisted of the following at December 31, 2024, and 2023 :

Customer relationships

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Amortization expense amounted to $ 71,359 and $ 105,522 for the years ended December 31, 2024, and 2023 , respectively.

Expected future amortization expense for the years ended are as follows:

Expected future amortization expense for the next five years consists of the following as of December 31, 2024 :

Year ending December 31,

NOTE 8 - LINES OF CREDIT

In connection with certain orders, the Company provides to customers a working guarantee, prepayment guarantee, or security bond.

For that purpose, the Company has a guaranteed credit line of EUR 850,000 (approx.

$ 940,000 ) secured by a cash deposit.

As of December 31, 2023, the Company no longer has any outstanding working guarantees issued to customers against this credit line.

NOTE 9 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consisted of the following at December 31, 2023 and December 31, 2022:

NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following at December 31, 2024, and 2023 :

Accounts payable

$ 1,300,966 $ 2,444,653

Accrued payroll liabilities

746,938 1,223,712

Product warranty accrual

621,031 629,100

Other accrued expenses

1,123,510 1,697,730

Total accounts payable and accrued expenses

$ 3,792,445 $ 5,995,195

NOTE 7 - LONG-TERM DEBT

Convertible Note

On March 24, 2021, the Company entered into a Securities Purchase Agreement with an institutional investor (“Investor”) pursuant to which the Company agreed to issue and sell a $ 15.0 million principal amount senior convertible note (the “Convertible Note”) maturing on October 1, 2023 and 10,000 shares of our Common Stock, $ 0.001 par value (“Common Stock”), for an aggregate purchase price of $ 15.0 million upon the satisfaction of the closing conditions set forth in the Securities Purchase Agreement.

The Closing occurred on April 8, 2021, and the Company issued to the Investor the securities in connection with the closing.

The Convertible Note was a senior, unsecured obligation of the Company, payable at 112 % of the principal amount at maturity ( October 1, 2023), or earlier upon redemption or repurchase as set forth in the Convertible Note.

The Convertible Note was convertible into shares of Common Stock pursuant to the terms of the Convertible Note, in part or in whole, from time to time, at the election of the Investor.

The initial conversion rate was 805.3992 shares of Common Stock per $1,000 of principal amount of the Convertible Note.

The conversion rate was subject to anti-dilution adjustments, including for stock dividends, splits, and combinations;

issuances of options, warrants, or similar rights;

spin-offs and distributions of property;

cash dividends or distributions;

and tender or exchange offers, in each case as further described in and pursuant to the terms of the Convertible Note.

Beginning on March 1, 2022, and on the first day of each calendar month thereafter, at the election of the Investor or Holder, if applicable, the Company was required to redeem $ 840,000 of the amounts due under the Convertible Note in cash or Common Stock at 90% of the lesser of (i) the volume-weighted average price (“VWAP”) of the Common Stock on the trading day immediately preceding the payment date and (ii) the average of the lowest three ( 3 ) VWAPs over the 10 trading days immediately preceding the payment date, which shall in no case be less than the floor price of $ 14.00 per share.

As of June 22, 2022, the Convertible Note, including accrued interest and all relevant obligations, was repaid in full, amounting to $ 13,446,875 , allocated between a principal repayment of $ 11,640,000 and contractual repayment premium of $ 1,806,875 .

For the year ended December 31, 2023 and 2022, the Company recognized interest expense of $ 0 and $ 308,958 , respectively, and $ 0 and $ 2,213,065 , respectively, related to the amortization of debt issuance costs.

Senior Promissory Notes

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The warrants issued in this transaction have an exercise price of $ 5.20 per share, a term of five years and are exercisable for cash at any time.

The Notes originally had a term of 24 months and do not bear interest during this period.

If the Notes are not repaid on or before the second anniversary of issuance, however, the Notes will thereafter bear interest of 10 % per annum, which will increase by 1 % each month the Notes remain unpaid, up to a maximum of 16 % per annum, payable monthly.

The Notes originally had a term of 24 months and did not bear interest during this period.

If the Notes are not repaid on or before the second anniversary of issuance, however, the Notes will thereafter bear interest of 10 % per annum, which would increase by 1 % each month the Notes remain unpaid, up to a maximum of 16 % per annum, payable monthly.

Additionally, as part of the transaction, the Company issued 28,846 warrants to the placement agent.

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( 696,437 ) ( 1,311,989 )

Senior Promissory Notes payable

Total senior promissory notes payable, net

$ 5,303,563 $ 4,688,011

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5,303,563 4,688,011

Senior Promissory Notes payable

Total senior promissory notes payable, net

$ 5,303,563 $ 4,688,011

For the year ended December 31, 2023, and 2022, the Company recognized interest expense of $ 0 and $ 0 , respectively, and $ 400,903 and $ 176,063 , respectively, related to the amortization of the debt discount.

For the years ended December 31, 2024 , and 2023 , the Company recognized amortization of debt discount of $ 615,552 and $ 400,903 , respectively.

NOTE 8 - AGREEMENTS, COMMITMENTS AND CONTINGENCIES

Contingencies - From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business.

In November 2022, the Company entered into a commercial settlement agreement regarding marine wastewater treatment systems delivered in 2019 and associated, potential warranty claims related to alleged corrosion on certain parts and components.

The Company disputed the claim in full, subsequently reaching an amicable settlement agreement with the customer to conduct remediation work in 2023.

The cost of any remediation work is shared between the two parties.

Product Warranties - The Company provides a standard warranty on its systems, generally for a period of one to three years after customer acceptance.

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( 36,059 ) 23,861

Balance at December 31,

Balance at the end of the period

$ 621,031 $ 629,100

The utilization charges against the reserve for the ended December 31, 2023 relate to the commercial settlement agreement as described over under “Contingencies”.

NOTE 9 - INCOME TAXES

The Company accounts for income taxes in accordance with FASB ASC Topic 740, Accounting for Income Taxes, which requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carryforwards.

The amount of and ultimate realization of the benefits from the deferred tax assets for income tax purposes is dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which cannot be determined.

In accordance with prevailing accounting guidance, the Company is required to recognize and disclose any income tax uncertainties.

The guidance provides a two -step approach to recognizing and measuring tax benefits and liabilities when realization of the tax position is uncertain.

The first step is to determine whether the tax position meets the more-likely-than- not condition for recognition, and the second step is to determine the amount to be recognized based on the cumulative probability that exceeds 50%.

Actual results could differ from these estimates.

As of December 31, 2024 , the Company had net operating loss carry-forwards of approximately $ 30,953,048 for U.S.

federal tax purposes, expiring through 2041; approximately $ 21,482,164 for Danish tax purposes, which do not expire;

and approximately $ 1,914,858 for Chinese tax purposes, which expires in 2027.

federal tax purposes, expiring through 2041, and approximately $ 28,209,222 for Danish tax purposes, which do not expire.

As of December 31, 2024, and December 31, 2023 , the Company established a valuation allowance of $ 7,611,000 and $ 7,100,000 for the tax components of LiqTech International Inc.

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$ 7,795,000 and $ 6,303,000 for the tax components of LiqTech Holding, LiqTech Ceramics, LiqTech Water, LiqTech Plastics, LiqTech Emission Control, and LiqTech Water Projects, respectively;

and $ 479,000 and $ 488,000 for LiqTech China, respectively, as management could not determine that it was more than likely not that sufficient income could be generated by these components to realize the resulting net operating loss carry-forwards and other deferred tax assets of these components.

The change in the valuation allowance for the year ended December 31, 2023 was $ 590,000 , $ 1,077,000 , and $ 9,000 for the US, Danish, and Chinese components, respectively.

The change in the valuation allowance for the year ended December 31, 2022 was $ 1,146,000 , $ 1,720,000 , and $ 295,000 for the US, Danish, and Chinese components, respectively.

The temporary differences, tax credits and carry-forwards gave rise to the following deferred tax assets and liabilities at December 31, 2023 and December 31, 2022:

and $ 0 and $ 479,000 for LiqTech China, respectively, as management could not determine that it was more likely than not that sufficient income could be generated by these components to realize the resulting net operating loss carry-forwards and other deferred tax assets of these components.

The change in the valuation allowance for the year ended December 31, 2024 , was an increase of $ 511,000 for the US component, an increase of $ 1,492,000 for the Danish component, and a decrease of $ 479,000 for the Chinese component.

The change in the valuation allowance for the year ended December 31, 2023 , was an increase of $ 590,000 , $ 1,077,000 , and $ 9,000 for the US, Danish, and Chinese components, respectively.

The temporary differences, tax credits, and carry-forwards gave rise to the following deferred tax assets and liabilities at December 31, 2024, and 2023 :

Excess of tax over financial accounting

$ 1,588,748 $ 1,454,389

Reserve for excess and obsolete inventory

Reserve for excess and obsolete inventories

266,007 190,841

Accrued interest

Discount amortization

853,619 724,353

Deferred compensation

Net operating loss carryover

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Excess of book over tax work in progress

190,196 ( 253,930 )

Valuation allowance

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State and local income taxes, net of federal benefit

( 1,177 ) ( 1,532 )

Non-US income taxed at different rates

( 80,280 ) ( 44,279 )

Deferred compensation

Non-deductible expenses

Non-taxable income

Change in valuation allowance

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220,848 ( 77,919 )

Income tax expense (benefit)

Income tax benefit

$ ( 38,837 ) $ ( 206,207 )

The components of income tax expense (benefit) from continuing operations for the years ended December 31, 2023 and 2022 consisted of the following:

The components of income tax benefit from continuing operations for the years ended December 31, 2024, and 2023 consisted of the following:

Current income taxes:

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2,477,718 1,128,197

Deferred compensation

Accrued interest

Discount amortization

129,266 84,190

Accrued vacation

Reserve for obsolete inventory

Reserve for obsolete inventories

( 102,432 ) ( 37,841 )

Deferred tax expense (benefit)

Deferred tax benefit

$ ( 38,837 ) $ ( 57,539 )

Total tax expense (benefit)

Total tax benefit

$ ( 38,837 ) $ ( 206,207 )

Deferred income tax expense / (benefit) results primarily from the reversal of temporary timing differences between tax and financial statement income.

Deferred income tax benefit results primarily from the reversal of temporary timing differences between tax and financial statement income.

The Company files Danish, Chinese, U.S.

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federal and state tax returns.

NOTE 13 - EARNINGS PER SHARE

Basic and diluted net income (loss) per common share is determined by dividing net income (loss) by the weighted average common shares outstanding during the period.

For the periods where there is a net loss, stock options, warrants, and Restricted Stock Units have been excluded from the calculation of diluted net loss per common share because their effect would be anti-dilutive.

NOTE 10 - LOSS PER SHARE

Basic and diluted net loss per common share is determined by dividing net loss by the weighted average common shares outstanding during the year.

For the years where there is a net loss, stock options, warrants, and restricted stock units (“RSUs”) have been excluded from the calculation of diluted net loss per common share because their effect would be anti-dilutive.

Consequently, the weighted-average common shares used to calculate both basic and diluted net loss per common share would be the same.

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Common Stock - The Company has 50,000,000 authorized shares of common stock, $ 0.001 par value.

As of December 31, 2023 and 2022, respectively, there were 5,727,310 and 5,498,260 common shares issued and outstanding.

As of December 31, 2024, and 2023 , there were 9,475,443 and 5,727,310 common shares issued and outstanding, respectively.

Voting - Holders of common stock are entitled to one vote for each share held of record on each matter submitted to a vote of stockholders, including the election of directors, and do not have any right to cumulate votes in the election of directors.

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As of December 31, 2024, and 2023 , there were no preferred shares issued and outstanding.

Reversed Stock Split - On May 26, 2023, the Company effected a 1 -for- 8 reverse split of its outstanding Common Stock, $ 0.001 par value (“Common Stock”).

All outstanding Common Stock, warrants, and RSUs were adjusted to reflect the 1 -for- 8 reverse split, with respective exercise prices of the warrants proportionately increased.

All stock and per share data throughout these condensed consolidated financial statements have been retroactively adjusted to reflect the reverse share split.

The total number of authorized Common Stock was adjusted to reflect the 1 -for- 8 reverse split.

As a result of the reverse Common Stock split, an amount equal to the decreased value of Common Stock was reclassified from “Common Stock” to “Additional Paid-in Capital.”

Stock Issuances

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The Company recognized the stock-based compensation of the award over the requisite service period during the year ended December 31, 2023 .

On May, 2023, the Company issued 16,796 shares of Common Stock for individual shareholder round-ups in connection with the 1 -for- 8 reverse split of its outstanding Common Stock.

In connection with the issuance, 29,998 shares of Common Stock, with a total value of $ 104,940 , were retired to settle tax withholdings associated with stock-based compensation.

On June 24, 2024 , the Company issued 11,932 shares of Common Stock to settle RSUs.

The RSUs were valued at $ 73,500 for services provided by the Board of Directors in 2023.

The Company recognized the stock-based compensation of the award over the requisite service period during the period ended June 30, 2023.

On August 25, 2023, the Company issued 1,042 shares of Common Stock to settle RSUs.

The RSUs were valued at $ 57,500 for services provided by the Board of Directors in 2023.

The Company recognized the stock-based compensation of the award over the requisite service period during the period ended September 30, 2023.

The RSUs were valued at $ 36,750 for services provided by the Board of Directors from 2023 to 2024 .

The Company recognized the stock-based compensation of the award over the requisite service period from 2023 to 2024 .

On September 12, 2024 , the Company issued 26,042 shares of Common Stock to settle RSUs.

1 unchanged sentence

The Company recognized the stock-based compensation of the award over the requisite service period during the period ended September 30, 2024 .

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 up to $ 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 .

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 (collectively, the “First Tranche Securities”);

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 (collectively, the “Second Tranche Securities”).

On September 27, 2024 , in connection with the closing of the first tranche, the Company sold and issued the First Tranche Securities for gross proceeds of approximately $ 1.2 million.

On November 12, 2024 , in connection with the closing of the second tranche, the Company sold and issued the Second Tranche Securities for gross proceeds of approximately $ 8.8 million.

On May 17, 2022, the Company entered a warrant purchase agreement with existing stockholders to purchase 3,803,133 shares of Common Stock at an offering price of $ 3.992 per prefunded warrant, which represents the offering price of $ 4.00 per share of the Company’s Common Stock less the $ 0.008 per share exercise price for each pre-funded warrant.

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The warrants are exercisable at any time prior to the five -year anniversary of the initial exercise date of September 30, 2023.

On September 27, 2024 ( as described under Stock Issuances), the Company closed on a securities purchase agreement with certain purchasers, pursuant to which the Company agreed to issue and sell to such purchasers warrants for the purchase of 584,529 shares of Common Stock at an exercise price of $ 2.00 per common share and prefunded warrants for the purchase of 555,302 shares of Common Stock at an exercise price of $ 0.001 per common share.

On November 12, 2024 ( as described under Stock Issuances), the Company closed on a securities purchase agreement with certain purchasers, pursuant to which the Company agreed to issue and sell to such purchasers warrants for the purchase of 4,415,471 shares of Common Stock at an exercise price of $ 2.00 per common share and prefunded warrants for the purchase of 814,569 shares of Common Stock at an exercise price of $ 0.001 per common share.

The following is a summary of the periodic changes in warrants outstanding for the years ended December 31, 2024, and 2023 :

Warrants outstanding at January 1

Outstanding, December 31

5,021,354 4,490,104

1 unchanged sentence

6,369,871 531,250

Common stock exchanged to prefunded warrant

Warrants outstanding at December 31

Exercises and conversions

Outstanding, December 31

11,391,225 5,021,354

17 unchanged sentences

( 148,002 ) ( 3.49 ) -

( 119,710 ) ( 3.38 ) -

Outstanding, December 31, 2024

3 unchanged sentences

Water, Ceramics, and Plastics.

Effective as of January 1, 2020, the group structure was changed so that shared group activities were transferred to an individual reporting unit separated from the business units.

Costs and assets for these activities were therefore separated during 2020.

Segment information for the business areas is as follows:

For the Year Ended December 31,

The Company’s reportable segment information for the years ended December 31, 2024, and 2023 were as follows:

For the Year Ended

$ 5,538,741 $ 7,705,080

2 unchanged sentences

49,496 327,415

Total consolidated revenue

Total revenues

$ 14,604,618 $ 18,001,652

For the Year Ended December 31,

For the Year Ended

$ ( 2,149,224 ) $ ( 736,148 )

2 unchanged sentences

( 3,568,939 ) ( 4,533,206 )

Total consolidated Loss

Total net loss

( 10,345,258 ) ( 8,571,145 )

For the Year Ended December 31,

$ 8,235,726 $ 9,432,991

2 unchanged sentences

11,842,084 11,228,239

Total consolidated assets

$ 32,427,479 $ 35,971,847

NOTE 13 - SIGNIFICANT CUSTOMERS / CONCENTRATION

The following table presents customers accounting for 10% or more of the Company’s net sales:

For the Year Ended December 31,

* Zero or less than 10%

The Company did not have any customers accounting for 10% or more of net sales in the reported periods.

As a result, there is no significant customer concentration that would materially impact the Company's financial position or results of operations.

The following table presents customers accounting for 10% or more of the Company’s accounts receivable:

* Zero or less than 10%

As of December 31, 2024 , approximately 86 % of the Company’s assets were located in Denmark, 14 % were located in the U.S., and 0 % were located in China.

2 unchanged sentences

On January 1, 2025 , the Company issued 30,704 common shares to settle RSUs.

The RSUs were valued at $ 81,886 for services provided by the senior leadership team and key employees in 2024 .

The Company is recognizing the stock-based compensation of the award over the requisite service period.

On January 3, 2025 , the Company issued 52,350 common shares to settle RSUs.

The RSUs were valued at $ 183,750 for services provided by the Board of Directors in 2024 .

3 unchanged sentences

The Company is recognizing the stock-based compensation of the award over the requisite service period.

On January 10, 2024, Simon Stadil tendered his resignation as Chief Financial Officer of the Company, effective as of April 10, 2024.

On January 31, 2025 , the Company announced the appointment of David Kowalczyk as its new Chief Financial Officer and Chief Operating Officer ("CFOO"), effective March 1, 2025.

In connection with this appointment, Phillip Massie Price, the Company’s Interim Chief Financial Officer, and the Company mutually agreed that Mr.

Price will step down as Interim CFO effective March 1, 2025.

Price will continue to serve as the Company’s principal financial officer until April 30, 2025, after which he will depart from the Company.

Kowalczyk is an experienced finance executive with over 20 years of professional experience across multiple industries and ownership structures.

He holds a Bachelor of Science in Economics and Business Administration, a Master of Science in Accounting and Auditing, and a Master of Science in Finance and Investments from Copenhagen Business School.

He also has extensive experience in technology and R&D-driven companies.

On March 26, 2025, the Company entered into a Second Amendment to the Note and Warrant Purchase Agreement originally dated June 22, 2022, with the holders of the Company’s senior promissory notes.

In connection with the Second Amendment, the parties executed Allonge No.

2 to each of the existing amended notes, resulting in an extension of the maturity date from January 1, 2026 to May 1, 2027.

Additionally, beginning on January 1, 2026, the notes will bear interest at a rate of 10 % per annum, payable semi-annually.

In the event of a default or if the notes are not repaid on or before the new maturity date, the interest rate increases to 13 % per annum, with a monthly 1 % step-up up to a cap of 16 % per annum, payable monthly.

Accrued interest (excluding default interest) may be paid in cash or in shares of common stock, at the Company’s election, subject to certain limitations.

As part of the transaction, the Company and the noteholders also agreed to amend and restate the related warrants, reducing the exercise price from $ 5.20 to $ 2.00 per share and extending the expiration date to December 31, 2029.

The Company evaluated the Second Amendment under ASC 855 and concluded that it represents a non-recognized subsequent event.

While it does not impact the financial statements as of December 31, 2024, it is disclosed herein due to its significance.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data