Financial Performance - Revenue for Q2 2024 was $4,485,062, a decrease of $504,957 or 10.1% compared to $4,990,019 in Q2 2023[62] - Gross profit for Q2 2024 was $717,211, representing a gross profit margin of 16%, down from $1,162,528 and 23.3% in Q2 2023, a decrease of $445,317 or 38.3%[66] - Net loss for Q2 2024 was $2,111,700, an increase of $556,408 or 35.8% compared to a net loss of $1,555,292 in Q2 2023[71] - Revenue for the six months ended June 30, 2024 was $8,720,406, a decrease of $281,132, or 3.1% compared to $9,001,538 in 2023[74] - Gross profit for the same period was $988,313, representing a gross profit margin of 11.3%, down from $1,553,870 and 17.3% in 2023, a decrease of $565,557, or 36.4%[75] - Net loss for the six months ended June 30, 2024 was $4,499,995, an increase of $555,200, or 14.1% from $3,944,795 in 2023[80] Operating Expenses - Total operating expenses for Q2 2024 were $2,803,730, an increase of $38,238 or 1% compared to $2,765,492 in Q2 2023[67] - Selling expenses decreased by $173,103 or 16.8% to $855,122 in Q2 2024, attributed to resignations and reduced travel and marketing costs[67] - General and administrative expenses increased by $163,833 or 11.9% to $1,541,316 in Q2 2024, due to new positions and increased legal and recruitment costs[68] - Research and development expenses rose by $47,508 or 13.2% to $407,292 in Q2 2024, primarily due to one-time exit costs from a lossmaking project[69] - Total operating expenses were $5,120,852, a decrease of $228,643, or 4.3% from $5,349,495 in 2023[76] - Selling expenses decreased by $837,959, or 37.9%, totaling $1,372,701 compared to $2,210,660 in 2023[76] - General and administrative expenses increased by $649,615, or 26.7%, totaling $3,086,047 compared to $2,436,432 in 2023[77] - Research and development expenses were $662,104, a decrease of $40,299, or 5.7% from $702,403 in 2023[78] - Other expenses increased by $218,262, or 122.8%, totaling $396,045 compared to $177,783 in 2023[79] Cash Flow and Working Capital - Cash on hand as of June 30, 2024 was $5,489,776, down from $10,442,181 on December 31, 2023[82] - Net working capital decreased by $3,667,640 to $10,922,792 as of June 30, 2024 compared to $14,590,432 on December 31, 2023[82] - Cash flows used in operating activities for the six months ended June 30, 2024 were $3,779,679, representing an unfavorable change of $22,991 compared to $3,756,688 for the same period in 2023[88] - Cash flows provided by investing activities improved to $333,171 for the six months ended June 30, 2024, compared to cash flows used of $290,468 for the same period in 2023, representing an improvement of $639,639[89] - Cash flows used in financing activities increased to $1,115,153 for the six months ended June 30, 2024, compared to $200,095 for the same period in 2023, representing an increase of $915,058[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 $1,193,206 based on the fair value of warrants issued, using the Black-Scholes Option Pricing Model with a stock price of $3.89 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]
LiqTech(LIQT) - 2024 Q2 - Quarterly Report