Company Overview - LiqTech International, Inc. specializes in ceramic silicon carbide filters and membranes for gas and liquid purification, with a focus on industrial wastewater, acid purification, and oil & gas applications [15]. - The company has established a strong management team with extensive experience in clean technology and filtration, driving growth through customer relationship development and new product innovation [34]. Market Opportunities - The global ceramic membrane market is projected to grow at a CAGR of 11.4%, increasing from $5.4 billion in 2021 to $14.3 billion by 2030, highlighting significant market opportunities for LiqTech's products [34]. - The industrial water and wastewater treatment market is expected to reach $7.7 billion by 2030, growing at a CAGR of 11.2% from 2021, indicating strong demand for LiqTech's filtration solutions [35]. - The market for marine water filtration systems is projected to retrofit 8,000-10,000 ships with scrubber systems over the next five years, with nearly 4,000 ships already having installed or ordered scrubbers by the end of 2019 [37]. - The commercial pool market in Europe was valued at $1.5 billion in 2021 and is expected to grow at a CAGR of 6.2% from 2021 to 2028 [38]. - The global market for new Diesel Particulate Filter (DPF) filters is expected to increase approximately 13% per year from 2017 to 2026 [43]. Product Development and Technology - LiqTech's Aqua Solution® technology offers high-flow capabilities at low pressure, reducing water and energy consumption, and has been successfully deployed in over 250 marine scrubber systems [25][34]. - LiqTech's silicon carbide membranes exhibit superior durability and chemical resistance, making them more effective than traditional filtration products, which positions the company favorably against larger competitors [30]. - LiqTech's diesel particulate filters (DPFs) are designed to handle higher soot loads, making them ideal for both on-road and off-road applications, with a lifespan comparable to the machinery they serve [22][23]. - The proprietary DPF technology allows compliance with current and future regulatory thresholds for black carbon reduction in the marine industry [42]. - The company is focused on developing new applications and technologies to penetrate existing markets, particularly in automotive, clean water, and industrial wastewater sectors [34]. - LiqTech's R&D efforts are directed towards creating innovative products that align with regulatory and environmental sustainability trends, enhancing their competitive edge [28]. Financial Performance - Revenue for the year ended December 31, 2022 was $15,982,438, a decrease of $2,291,004 or 13% compared to $18,273,442 in 2021 [160]. - Gross profit for the year ended December 31, 2022 was $567,144, representing a decrease of $1,009,002 or approximately 64% from $1,576,146 in 2021 [165]. - Total operating expenses for the year ended December 31, 2022 were $13,100,898, an increase of $837,428 or approximately 7% compared to $12,263,470 in 2021 [166]. - Net income/loss for the year ended December 31, 2022, was $(14,169,107), an increased loss of $3,042,147 compared to $(11,126,960) in 2021 [174]. - Cash used by operating activities for the year ended December 31, 2022, was $12,039,020, an increase of $4,835,177 from $7,203,843 in 2021 [186]. - The company incurred an accumulated deficit of $67,351,035 as of December 31, 2022 [183]. Operational Challenges - The European energy crisis has led to increased gas and electricity prices, negatively impacting profitability and competitive position in Europe [72]. - The uncertain macroeconomic environment, exacerbated by the Ukraine war and energy crisis, may adversely affect product demand and delivery [74]. - Supply chain constraints could affect the availability and cost of raw materials, impacting product supply and profitability [84]. - Increased interest rates and market volatility pose risks to refinancing and maintaining access to financing [93]. - The company has undergone changes to improve financial flexibility, but achieving break-even is dependent on external macroeconomic conditions [82]. Customer and Market Risks - The company's four largest customers accounted for approximately 31% of net sales in 2022, down from 37% in 2021, indicating a need for customer base diversification [79]. - Significant credit risk exists due to a concentration of accounts receivable with major customers, which may not meet financial obligations [80]. - Competition in the market is significant, with rivals potentially offering superior or more cost-effective products [105]. Intellectual Property and Legal Risks - The company relies on a combination of patent protection, trade secrets, and confidentiality agreements to protect its intellectual property rights, but these measures may not be sufficient in all cases [95]. - The patent landscape is uncertain, with potential challenges to the validity and enforceability of patents, particularly in countries outside the United States [96]. - The company may face difficulties in obtaining patents for important technologies in a timely manner, which could limit its competitive advantage [97]. - The company faces potential litigation related to intellectual property rights, which could divert resources and have a material adverse impact on its business [102]. Internal Controls and Compliance - The company has reported material weaknesses in its internal controls over financial reporting, which could impact investor confidence and stock price [112]. - The company has not regained compliance with the Nasdaq minimum bid price requirement of $1.00 per share as of March 22, 2023 [132]. - The company received a deficiency notification from Nasdaq on June 24, 2022, indicating non-compliance with the minimum bid price rule for 30 consecutive business days [131]. Future Outlook - Future growth may require additional funding through equity or debt, which may not be available on favorable terms [83]. - The company plans to expand and optimize production capacity within existing facilities, supported by partnerships across Europe, the Middle East, and Asia [49]. - The company plans to expand operations and production capacity, but may face challenges in managing growth effectively [86].
LiqTech(LIQT) - 2022 Q4 - Annual Report