Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

Overview

We are a Nevada corporation, formerly named Blue Moose Media, Inc. In October 2011, we changed our name to LiqTech International, Inc. For more than two decades, we have developed and provided state-of-the-art technologies for gas and liquid purification using silicon carbide ceramic filters, particularly highly specialized filters for the control of soot exhaust particles from diesel engines and for liquid filtration. Using nanotechnology, LiqTech develops products using proprietary silicon carbide technology. LiqTech's products are based on unique silicon carbide membranes that facilitate new applications and improve existing technologies. In particular, the Company has developed a new standard of water filtration technology to meet the ever-increasing demand for higher water quality. By incorporating LiqTech's SiC liquid membrane technology with its long-standing systems design experience and capabilities, the Company offers solutions to the most difficult water pollution problems.

2025 Developments

On January 31, 2025, LiqTech announced appointment of David Kowalczyk as Chief Financial and Operating Officer

On February 20, 2025, LiqTech received supplier approval water treatment system for the WinGD Dual-Fuel Engine

On March 11, 2025, LiqTech expanded distribution coverage in the Irish swimming pool water filtration system market

On May 13, 2025, LiqTech International Signed distribution and Partnership Agreement with NAF Aquatics for U.S. commercial swimming pool market

On June 25, 2025, LiqTech' s Advanced Oily Wastewater Filtration was selected by North Star BlueScope Steel

On September 15, 2025, LiqTech expanded its U.S. presence with Texas service center to support produced water and industrial filtration solutions

On November 20, 2025, Jitri LiqTech broke ground on marine-focused R&D Test Center and Localization Facility in China and completes regional spare parts warehouse

Results of Operations

Results of Operations for the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024

The following table sets forth our revenues, expenses, and net income for the years ended December 31, 2025, and 2024 in U.S. dollars, except for percentages.

Revenues

Revenue for the year ended December 31, 2025, was $16,507,558 compared to $14,604,618 for the same period in 2024, representing an increase of $1,902,940, or 13.0%. The increase was mainly due to increased deliveries of systems (Pool, Energy & Industry), and components (plastics), partly offset by decreased sales of filters.

The increase in deliveries of systems was mainly driven by increased deliveries of pool filtration systems and water treatment systems for industrial applications. The increase in components was mainly related to machine building for the food & beverage industry. The decrease in sales of filters was primarily driven by a refocusing of our strategy to capitalize on sub segments where we see increased future demand for DPFs outside of the automotives sector.

Gross Profit

Gross profit for the year ended December 31, 2025, was $1,250,523 (or a gross profit margin of 7.6%), compared to $250,905 (or a gross profit margin of 1.7%) for the same period in 2024, representing an increase of $999,618, or 398.4%. This increase in gross profit can be attributed to both an increase in revenue as well as a more favorable sales mix, which resulted in a higher proportion of high-margin products within our Systems segment. We did, however, continue to invest in deliveries of containerized oil and gas systems to the U.S., which 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. Despite the significant improvement in both gross profit and gross profit margin, we continue to see an underutilization of our manufacturing capacity that has a material, adverse effect on profitability. The continued refocusing of the company led to an inventory review and related adjustments for obsolescence and slow-moving inventory items, which also had an unfavorable impact on gross profit margin. The increase in gross profit was partly supported by decreased depreciation as well as continued initiatives aimed at optimizing manufacturing processes. Included in the gross profit was depreciation of $1,519,439 and $1,830,553 for the years ended December 31, 2025, and 2024, respectively.

Operating Expenses

Total operating expenses for the year ended December 31, 2025, were $9,559,223, representing a decrease of $179,531, or 1.8%, compared to $9,738,754 for the same period in 2024. In local currency, the cost decrease was higher driven by a DKK/USD appreciation of 3.9% for the full year.

Selling expenses for the year ended December 31, 2025, were $2,718,047, compared to $2,725,239 for the same period in 2024, representing a decrease of $7,192, or 0.3%. This decrease was partly driven by full year effect of savings made in 2024 and lower account receivable write-offs and provision needs. This were partly offset by costs associated with the newly formed joint venture in China, Nantong JiTRI LiqTech Green Energy Technology Co., Ltd.(the "JV"). The primary focus of the JV is to develop and commercialize systems for the marine water treatment market in China. Costs for outbound distribution, including tariffs, and expenditures related to external sales consultancy services also increased in 2025.

General and administrative expenses for the year ended December 31, 2025, were $5,677,525 compared to $5,661,455 for the same period in 2024, representing an increase of $16,070, or 0.3%. The increase was primarily due to higher legal expenses, the filling of open positions, including the CFO, as well as higher recruitment costs. Included in general and administrative expenses was non-cash compensation of $987,072 and $664,434 for the years ended December 31, 2025, and 2024, respectively. Non-cash compensation increased due to a 2025 conversion of 50% of the Board fee and 10% of Senior Leadership Team salary to stock awards and due to this being the second year of a new three-year, long-term incentive plan program for the Senior Leadership Team.

The following is a summary of our non-cash compensation:

Research and development expense for the year ended December 31, 2025, was $1,163,651 compared to $1,352,060 for the same period in 2024, representing a decrease of $188,409, or 13.9%. 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.

Other income (expense)

Total Other expense for the year ended December 31, 2025, was $294,694 compared to $896,246 for the comparable period in 2024, representing a decrease of $601,552, or 67.1%. The decrease was primarily attributable to reduced losses on the disposal of property and equipment, increased interest income, and lower debt discount amortization costs due to the extension of the maturity date for the senior promissory notes.

Income taxes provision

The income tax benefit for the year ended December 31, 2025, was $1,454compared to a benefit of $38,837for the comparable period in 2024, representing a decrease of $37,383, or 96.3%, mainly driven by a decrease in tax credits associated with research and development activities in Denmark.

Net Loss

As a result of the cumulative effect of the factors described above, we reported a net loss for the year ended December 31, 2025, of $8,601,940 compared to $10,345,258 for the comparable period in 2024, representing an improvement in net loss of $1,743,318, or 16.9%.

Going Concern and Management's Plans

The financial statements included herein for the period ended December 31, 2025, have been prepared under the assumption that the Company will continue as a going concern and contemplate the realization of assets and settlement of liabilities in the normal course of business. As of December 31, 2025, the Company had cash and cash equivalents of $5,070,385, net working capital of $11,237,788, an accumulated deficit of 94,795,121, and total assets and liabilities of $27,278,097 and $16,905,861, respectively. The Company has experienced operating losses and cash outflows from continuing operations and may require additional funding to support operations for the twelve months following the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management has implemented cost optimization and operational initiatives designed to improve liquidity and support a sustainable path toward profitability, supported by an updated strategic focus and strengthened leadership. The Company continues to evaluate financing alternatives and strategic opportunities to enhance its capital position. While there can be no assurance that additional funding will be obtained on favorable terms, management believes its ongoing initiatives position the Company to support operations and advance its strategic objectives.

Cash Flows

Year Ended December 31, 2025, Compared to Year Ended December 31, 2024

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, 2025, was $6,108,176 compared to cash used by operating activities of $7,534,072 for the year ended December 31, 2024, representing an improvement of $1,425,896. The cash used by operating activities for the year ended December 31, 2025, consists mainly of the net loss for the year which improved by $1,743,318, adjusted by depreciation and other non-cash items of which decreased $657,120. Further, changes in assets and liabilities decrease $339,698 primarily due to an increase in the development in account payables from 2024 to 2025 of $1,150,188 related to inventory build up of Pool systems and a decrease in contract assets relating to fewer ongoing research and development projects.

Net cash used in investing activities was $217,930 for the year ended December 31, 2025, as compared to $424,036 for the year ended December 31, 2024, representing a decrease of $206,106. 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. With our current strategic focus and the excess capacity already in place, we expect capital expenditures to be significantly lower than historical levels, allowing us to leverage our existing infrastructure.

Cash provided by financing activities was $719,287 for the year ended December 31, 2025, as compared to $8,493,300 for the year ended December 31, 2024, representing a decrease of $7,774,013 or 92%. The decrease was mainly driven by the equity raise, generating net proceeds of $9,922,063 from the issuance of common stock and prefunded warrants in 2024.

Off-Balance Sheet Arrangements

As of December 31, 2025, we had no off-balance sheet arrangements. We are not aware of any material transactions that are not disclosed in our consolidated financial statements.

Critical Accounting Policies

The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Our most critical accounting estimates include:

We discuss these policies further below as well as the estimates and judgments involved.

Accounts Receivable and Allowance for 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 customers, prevailing economic conditions, and reasonable and supportable forward-looking information. Accounts receivable balances are written off when they are determined to be uncollectible.

Inventories

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.

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.

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. 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.

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.

Management has analyzed the impact of the current economic climate on its financial statements as of December 31, 2025, 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.

For Systems and Aftermarket, Filters and Membranes, and Components, revenue is recognized when performance obligations specified within the terms of a contract with the customer are satisfied, which occurs when control of the product transfers to the customer or when services are rendered by the Company. The majority of the Company's sales contracts contain performance obligations satisfied at a point in time when title along with risks and rewards of ownership have been transferred to the customer. This generally occurs when the product is shipped or accepted by the customer. Revenue for service contracts is recognized as the services are provided. Revenue is measured as the amount of consideration expected to be received in exchange for transferring the goods or providing services. The satisfaction of performance obligations under the terms of a revenue contract generally gives rise to the right to receive payment from the customer. The Company's standard payment terms vary by the type and location of the customer and the products or services offered. Generally, the time between when revenue is recognized and when payment is due is not significant. Pre-payments received prior to satisfaction of performance obligations are recorded as a contract liability. Considering the relatively short time between revenue recognition and receipt of payment, financing components do not exist between the Company and its customers.

For contracts with customers that include multiple performance obligations, judgment is required to determine whether performance obligations specified in these contracts are distinct and should be accounted for as separate revenue transactions for recognition purposes. For such arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are generally determined based on the prices charged to customers or using expected cost-plus margin.

System sales are recognized when the Company transfers control to the customer based upon sales and delivery conditions specified in the sales contract, or for larger projects in line with completion. This typically occurs upon shipment of the system from the production facility but can also occur upon other agreed delivery terms. In connection with the completion of the system, it is normal procedure to issue a FAT (Factory Acceptance Test) asserting that the customer has accepted the performance of the system as it is being shipped from our production facility in Hobro. As part of the performance obligation, the customer is normally offered commissioning services (final assembly and configuration at a place designated by the customer), and this commissioning is therefore considered a second performance obligation and is valued at cost, with the addition of a standard gross profit. This second performance obligation is recognized as revenue at the time of the commissioning services being rendered together with the cost incurred. Part of the invoicing to the customer is also attributed to the commissioning, and at transfer of the control of the system (i.e., the first performance obligation), this portion is recognized as contract liabilities.

Aftermarket sales represent spare parts, extended warranties, and maintenance services. For the sale of aftermarket parts, the Company transfers control and recognizes revenue when parts are shipped to the customer. When customers are given the right to return eligible parts and accessories, the Company estimates the expected returns based on an analysis of historical experience. The Company adjusts estimated revenues at the earlier of when the most likely amount of consideration expected to be received changes or when the consideration becomes fixed. The Company recognizes revenue for extended warranty and maintenance agreements based on the standalone selling price over the life of the contract.

The Company has received long-term contracts for grants from government entities for the development and use of silicon carbide membranes in various water filtration and treatment applications and historically in the installation of various water filtrations systems. We measure transfer of control of the performance obligation on long-term contracts utilizing the cost-to-cost measure of progress, with cost of revenue including direct costs such as labor and materials. Under the cost-to-cost approach, the use of estimated costs to complete each performance obligation is a significant variable in the process of determining recognized revenue and a significant factor in the accounting for such performance obligations. The timing of when we bill our customers is generally dependent upon advance billings terms, milestone billings based on completion of certain phases of the work or when services are provided, or when products are shipped. Projects with performance obligations recognized over time that have costs and estimated earnings recognized to date in excess of cumulative billings are reported on our balance sheet as Contract assets. 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.