10-K: LiqTech Reports Revenue Growth Amidst Going Concern Doubts

LiqTech International, Inc. reported a 13% revenue increase and improved gross profit for fiscal year 2025, but faces substantial doubt about its ability to continue as a going concern.

Summary

• Revenue for the year ended December 31, 2025, increased by 13.0% to $16,507,558, up from $14,604,618 in 2024.
• Gross profit saw a significant increase of 398.4% to $1,250,523 in 2025, compared to $250,905 in 2024, with gross profit margin improving from 1.7% to 7.6%.
• Net loss improved by 16.9%, decreasing to $(8,601,940) in 2025 from $(10,345,258) in 2024.
• Loss per common share improved to $(0.89) in 2025 from $(1.64) in 2024.
• Cash and cash equivalents decreased significantly to $5,070,385 at December 31, 2025, from $10,868,728 at December 31, 2024.
• The company continues to experience operating losses and cash outflows from continuing operations, raising substantial doubt about its ability to continue as a going concern.
• Material weaknesses in internal control over financial reporting were identified, specifically in IT general controls, documentation of transaction-level controls, and process-level controls over revenue transactions.
• Strategic initiatives in 2025 included expanding U.S. presence with a Texas service center, securing supplier approval for a WinGD Dual-Fuel Engine water treatment system, and establishing a marine-focused R&D test center in China through a joint venture.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a concerning report. While operational improvements like revenue growth and gross profit margin expansion are positive, the explicit 'going concern' warning from auditors, significant cash burn, and identified material weaknesses in internal controls overshadow these gains, indicating fundamental financial instability.

Positives

• Revenue increased by 13.0% to $16,507,558 in 2025, driven by increased deliveries of systems (Pool, Energy & Industry) and components (plastics).
• Gross profit surged by 398.4% to $1,250,523 in 2025, with the gross profit margin improving from 1.7% to 7.6%, attributed to higher revenue and a more favorable sales mix.
• Net loss improved by 16.9%, reducing to $(8,601,940) in 2025 from $(10,345,258) in 2024.
• Cash used in operating activities improved by $1,425,896, decreasing to $(6,108,176) in 2025 from $(7,534,072) in 2024.
• Total operating expenses decreased by 1.8% to $9,559,223 in 2025, partly due to savings from 2024 and a more focused R&D strategy.
• Secured supplier approval for water treatment systems for the WinGD Dual-Fuel Engine, indicating market acceptance and potential for growth in the marine industry.
• Expanded distribution coverage in the Irish swimming pool water filtration system market and signed a partnership agreement with NAF Aquatics for the U.S. commercial swimming pool market.
• Advanced Oily Wastewater Filtration technology was selected by North Star BlueScope Steel, validating its effectiveness in industrial applications.
• Established a new U.S. service center in Texas to support produced water and industrial filtration solutions, enhancing market presence.
• Broke ground on a marine-focused R&D Test Center and Localization Facility in China through the Jitri LiqTech joint venture, aiming to accelerate entry into the dual-fuel engine market.

Negatives

• The company reported a net loss of $(8,601,940) for 2025 and has an accumulated deficit of $94,795,121, raising substantial doubt about its ability to continue as a going concern.
• Cash and cash equivalents decreased significantly by $5,798,343, from $10,868,728 in 2024 to $5,070,385 in 2025.
• Cash provided by financing activities decreased by $7,774,013, or 92%, in 2025 compared to 2024, primarily due to a large equity raise in 2024 not repeated in 2025.
• Gross profit margin of 7.6% in 2025 is still relatively low, partly due to strategic investments in containerized oil and gas systems to the U.S. at lower-than-usual margins.
• Underutilization of manufacturing capacity continues to have a material, adverse effect on profitability.
• Sales of filters decreased, driven by a refocusing strategy away from the automotive sector, indicating potential challenges in legacy markets.
• General and administrative expenses increased slightly due to higher legal expenses, filling open positions (including CFO), and recruitment costs.
• Income tax benefit decreased significantly by 96.3% due to a decrease in tax credits associated with R&D activities in Denmark.

Risks

• Substantial future capital investment is required, and inability to raise adequate capital could affect the company's ability to continue as a going concern.
• Failure to restore financial stability through improved profitability and access to adequate liquidity could impact business options and financial condition.
• Adverse effects on operations and financial performance from armed conflicts (e.g., Ukraine/Russia, Hamas/Israel) or similar political, social, regulatory, or economic tensions.
• Global trade restrictions, tariffs, and geopolitical tensions could adversely impact business and supply chain, increasing costs or reducing sales.
• Prolonged periods of energy market volatility and supply disruptions could negatively impact profitability due to exposure to gas and electricity prices.
• Health crises, pandemics, and other public health emergencies could adversely affect business, financial condition, and results of operations through supply chain disruptions, labor shortages, or delayed customer orders.
• Dependence on a few major customers (four largest customers accounted for approximately 30% of net sales in 2025) means loss or reduction in orders could materially reduce net sales.
• Potential interruption or failure to obtain raw materials and components (silicon carbide, steel, plastic, platinum, palladium) at affordable prices due to supply chain constraints.
• Inability to manage expected growth, including increasing production capacity and penetrating new markets, could materially and adversely affect the business.
• Dependence on the expertise and experience of the management team; loss of key personnel could have a material adverse effect.
• Adverse conditions, regulatory challenges, or lack of funding for emission control programs may delay or negatively affect future growth in transportation and marine industries.
• Changes in governmental standards by which products are evaluated could render some products obsolete.
• International operations are exposed to potential adverse tax consequences, including transfer pricing challenges and tax audits.
• Increased interest rates, tightening debt capital markets, and market volatility could adversely impact the company's ability to raise financing and meet debt service commitments.
• Foreign currency fluctuations could adversely impact financial performance, as most income and expense transactions are in non-USD currencies.
• Inability to protect intellectual property rights (patents, trade secrets) could negatively affect business and results of operations.
• Disputes over intellectual property developed in conjunction with third parties could arise, leading to substantial costs and diversion of management attention.
• Potential for intellectual property litigation that could be costly, limit or cancel rights, divert efforts, or require damage payments.
• Competition and technological advances by competitors, many of whom are larger industrial companies with greater resources, could adversely affect sales.
• Liability for environmental harm or damages resulting from technical faults or failures of products could be substantial.
• Liability for damages from manufacturing activities (environmental damage, personal injury, property damage) due to non-compliance with laws and regulations.
• Actual or perceived failure to adequately protect personal data could result in enforcement actions, claims, fines, and damage to reputation.
• Difficulty for U.S. investors to enforce judgments against officers and directors located outside the United States.
• Failure to realize the anticipated benefits of partnership, distribution, and joint venture agreements.
• Failure to maintain an effective system of internal control over financial reporting, leading to inaccurate financial results (material weaknesses identified).
• Risks associated with the security of information technology systems, including cyber-attacks and data breaches.
• Future equity financings or convertible debt issuances would dilute existing stockholders' ownership.
• Limited trading volume of common stock could make it difficult to liquidate investments in a timely manner.
• The market price of common stock has been and may continue to be volatile due to various factors beyond the company's control.
• If securities analysts do not publish research or downgrade the company, the stock price could decline.
• Future sales of common stock, or the perception of such sales, may cause the market price to decline.
• As a smaller reporting company, the company is exempt from certain disclosure requirements, which could make its common stock less attractive to potential investors.
• No current plan to pay dividends on common stock, meaning investors may not receive funds absent a sale of shares.
• Significant costs from operating as a public company and diversion of management time to compliance initiatives.
• Assumptions, judgments, and estimates made in preparing financial statements may not be accurate, potentially impacting financial results.

Future Outlook

Management plans to continue cost optimization and operational initiatives to improve liquidity and achieve sustainable profitability, supported by an updated strategic focus and strengthened leadership. The company is actively evaluating financing alternatives and strategic opportunities to enhance its capital position. Future growth is expected to be driven by the enforcement of existing emissions-related environmental regulations and tightening of emissions standards worldwide, particularly in the marine industry with dual-fuel engines and black carbon emission reduction. The company intends to continue investing in R&D to develop new technologies and improve existing products.

Management Comments

• 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.
• 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.
• Management believes that our consolidated financial statements included in this Form 10-K have been prepared in accordance with U.S. GAAP, despite identified material weaknesses in internal controls.

Industry Context

StockSavvy.ai notes that LiqTech International operates in critical clean technology sectors, including liquid filtration and diesel particulate filters, which are driven by increasing global demand for clean water and tightening environmental regulations. The company's focus on difficult industrial water streams, hydrocarbon production-derived contaminated water, and marine waste treatment aligns with significant market trends. The projected growth of the global industrial and municipal wastewater equipment market to $300 billion, and the produced water treatment market to $16 billion by 2032, indicates substantial addressable markets for LiqTech's specialized silicon carbide membrane technology. The repositioning towards dual-fuel marine engines also capitalizes on the shipping industry's energy transition. However, the competitive landscape, dominated by larger industrial companies, poses a challenge, requiring LiqTech to continuously leverage its patented technology and in-house fabrication capabilities.

Comparison to Industry Standards

• LiqTech's SiC filters are presented as a superior alternative to microfiltration and walnut shell filters due to operational efficiencies, cost savings, reduced installation, and product resilience.
• The Aqua Solution ceramic membranes offer the same water purification as conventional sand filters, but require up to 400 times less space and have pore sizes at least three times smaller, leading to reduced energy, water, and chemical consumption, and a lower CO2 footprint.
• LiqTech's DPF filters can handle higher soot loads than non-silicon carbide filters, making them ideal for applications with infrequent high-temperature operation, such as garbage trucks, port vehicles, and off-road construction vehicles.
• The company claims a 14% market share in marine scrubber water treatment systems, having sold and installed over 170 units since 2018, indicating a strong position in this niche.
• The European commercial pool market is projected to grow at a CAGR of 6.1% from 2024 to 2028, reaching $687 million, providing a growth benchmark for LiqTech's commercial pool systems.
• The global market for new DPF filters manufactured by OEMs is expected to grow at approximately 13% per year, offering a growth target for LiqTech's DPF segment.

Management Changes

Corporate Governance

Legal Proceedings

• The company may be involved in litigation relating to claims arising out of its operations in the normal course of business, as referenced in Note 8 Agreements, Commitments and Contingencies.

Related Party Transactions

• In February 2025, the Nantong JiTRI LiqTech Green Energy Technology Co., Ltd. (JV), in which the Company holds a 90% ownership stake, received R&D funding of RMB 8,000,000 (approximately $1.1 million) from the JV partner. This funding is classified as a long-term loan bearing a fixed annual interest rate of 12% and has no set maturity date. LiqTech has the sole discretion to convert it into equity or repay it.

Stakeholder Impact

• **Shareholders:** Face significant dilution risk from future equity financings, potential decline in stock price due to limited trading volume and market volatility, and no current plans for dividends. The 'going concern' doubt and material weaknesses in internal controls pose substantial risks to investment value.
• **Employees:** The company's ability to attract and retain qualified personnel is crucial for managing expected growth and R&D efforts. Changes in compensation structure (stock awards) aim to align interests.
• **Customers:** Benefit from new product developments, expanded distribution, and enhanced service capabilities (e.g., Texas service center, China R&D facility). However, supply chain disruptions and geopolitical tensions could impact product availability and delivery.
• **Suppliers:** Exposed to potential interruptions or failures in obtaining raw materials and components at affordable prices due to global supply chain constraints.
• **Creditors:** The extension of Senior Promissory Notes maturity to May 1, 2027, provides some relief, but the 'going concern' doubt and reliance on future financing pose credit risk. The related party loan to the JV also carries a 12% interest rate, reflecting some risk.

Next Steps

• Continue cost optimization and operational initiatives to improve liquidity and support a sustainable path toward profitability.
• Actively evaluate financing alternatives and strategic opportunities to enhance capital position.
• Invest in R&D to develop new technologies and improve existing products to strengthen competitive advantages.
• Expand range of products to better leverage existing customer relationships and develop new relationships within oil & gas, marine, chemical, and other industries.
• Target and develop new customers in existing end markets while working with distributors, agents, and partners to access other important geographic markets.
• Evaluate opportunities to develop strategic partners to perfect new applications and validate associated value propositions in new end markets.
• Expand geographical reach both within and outside of Europe through new partnerships and distribution agreements.
• Intensify focus on aftermarket sales through service & maintenance agreements and the sale of spare parts.
• Remediate identified material weaknesses in internal control over financial reporting by improving competencies and processes, evaluating ERP reimplementation, updating Delegation of Authority, and redesigning/documenting processes.
• File Definitive Proxy Statement for the 2025 Annual Meeting of Stockholders or an amendment to this Form 10-K within 120 days after December 31, 2025.

Key Dates

Recommendation

Despite some operational improvements like revenue growth and gross profit margin expansion, the filing presents critical red flags that warrant a 'strong sell' recommendation. The explicit 'going concern' warning from the independent auditors, coupled with a significant decrease in cash and cash equivalents (over 50% reduction year-over-year) and persistent operating losses, indicates severe financial instability. The identified material weaknesses in internal controls over financial reporting further undermine confidence in the company's financial integrity and operational reliability. While strategic initiatives are noted, the fundamental financial health and control environment are deeply concerning, suggesting a high probability of further value erosion for investors.

Keywords

Silicon Carbide Filters, Ceramic Membranes, Liquid Filtration Systems, Diesel Particulate Filters (DPF), Water Treatment, Clean Technology, Industrial Wastewater, Oil & Gas Filtration, Marine Water Treatment, Commercial Pool Filtration, Environmental Regulations, Corporate Governance, Financial Performance, SEC Filing, 10-K, LiqTech International