Financial Performance - Revenue for Q2 2024 was 4,485,062,adecreaseof504,957 or 10.1% compared to 4,990,019inQ22023[62]−GrossprofitforQ22024was717,211, representing a gross profit margin of 16%, down from 1,162,528and23.3445,317 or 38.3%[66] - Net loss for Q2 2024 was 2,111,700,anincreaseof556,408 or 35.8% compared to a net loss of 1,555,292inQ22023[71]−RevenueforthesixmonthsendedJune30,2024was8,720,406, a decrease of 281,132,or3.19,001,538 in 2023[74] - Gross profit for the same period was 988,313,representingagrossprofitmarginof11.31,553,870 and 17.3% in 2023, a decrease of 565,557,or36.44,499,995, an increase of 555,200,or14.13,944,795 in 2023[80] Operating Expenses - Total operating expenses for Q2 2024 were 2,803,730,anincreaseof38,238 or 1% compared to 2,765,492inQ22023[67]−Sellingexpensesdecreasedby173,103 or 16.8% to 855,122inQ22024,attributedtoresignationsandreducedtravelandmarketingcosts[67]−Generalandadministrativeexpensesincreasedby163,833 or 11.9% to 1,541,316inQ22024,duetonewpositionsandincreasedlegalandrecruitmentcosts[68]−Researchanddevelopmentexpensesroseby47,508 or 13.2% to 407,292inQ22024,primarilyduetoone−timeexitcostsfromalossmakingproject[69]−Totaloperatingexpenseswere5,120,852, a decrease of 228,643,or4.35,349,495 in 2023[76] - Selling expenses decreased by 837,959,or37.91,372,701 compared to 2,210,660in2023[76]−Generalandadministrativeexpensesincreasedby649,615, or 26.7%, totaling 3,086,047comparedto2,436,432 in 2023[77] - Research and development expenses were 662,104,adecreaseof40,299, or 5.7% from 702,403in2023[78]−Otherexpensesincreasedby218,262, or 122.8%, totaling 396,045comparedto177,783 in 2023[79] Cash Flow and Working Capital - Cash on hand as of June 30, 2024 was 5,489,776,downfrom10,442,181 on December 31, 2023[82] - Net working capital decreased by 3,667,640to10,922,792 as of June 30, 2024 compared to 14,590,432onDecember31,2023[82]−CashflowsusedinoperatingactivitiesforthesixmonthsendedJune30,2024were3,779,679, representing an unfavorable change of 22,991comparedto3,756,688 for the same period in 2023[88] - Cash flows provided by investing activities improved to 333,171forthesixmonthsendedJune30,2024,comparedtocashflowsusedof290,468 for the same period in 2023, representing an improvement of 639,639[89]−Cashflowsusedinfinancingactivitiesincreasedto1,115,153 for the six months ended June 30, 2024, compared to 200,095forthesameperiodin2023,representinganincreaseof915,058[89] Internal Controls and Remediation - Management identified material weaknesses in internal controls over financial reporting, which were not effective as of June 30, 2024[95] - The company has initiated remediation efforts, including hiring additional finance staff and implementing a new ERP system to enhance internal controls[96] - The company is redesigning and documenting all processes related to financial reporting to ensure effective control operations[96] - Management believes that the steps taken will improve the internal control system, but material weaknesses cannot be considered fully remediated until controls operate effectively over time[97] Business Strategy - The decline in revenue was attributed to decreased deliveries of plastics products and ceramic membranes, partially offset by increased sales of DPFs[62] - The company aims to expand its product range and penetrate new markets, particularly in oil & gas, marine, and chemical industries[58] - The company is focusing on optimizing manufacturing processes to improve profitability within DPF and ceramic membrane production[66] Debt and Financial Instruments - The company recorded an initial debt discount of 1,193,206basedonthefairvalueofwarrantsissued,usingtheBlack−ScholesOptionPricingModelwithastockpriceof3.89 and an exercise price of $5.20[88] - As of June 30, 2024, the company had no off-balance sheet arrangements and was not aware of any material undisclosed transactions[90]
