liqt20220331

liqt20220331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the three months period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to to

Commission File Number: 001-36210

LiqTech International, Inc.

(Exact name of registrant as specified in its charter)

Nevada		20-1431677
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Industriparken 22C, DK 2750 Ballerup, Denmark
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: +45 3131 5941

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which

registered

Common Stock, $0.001 par value

LIQT

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of May 12, 2022, there were 21,352,688 shares of common stock, $0.001 par value per share, outstanding.

	Page
PART I. FINANCIAL INFORMATION	5

Item 1. Financial Statements	5

Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	5

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2022 and March 31, 2021 (unaudited)	7

Condensed Consolidated Statement of Stockholder’s Equity for the period ended March 31, 2022 and March 31, 2021 (unaudited)	9

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and March 31, 2021 (unaudited)	10

Notes to Condensed Consolidated Financial Statements (unaudited)	12

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation	26

Item 3. Quantitative and Qualitative Disclosures About Market Risk	31

Item 4. Controls and Procedures	31

PART II. OTHER INFORMATION	32

Item 1. Legal Proceedings	32

Item 1A. Risk Factors	32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3. Defaults Upon Senior Securities	32

Item 4. Mine Safety Disclosures	32

Item 5. Other Information	32

Item 6. Exhibits	33

SIGNATURES	34

	As of		As of
	March 31,		December 31,
	2022		2021
	(Unaudited)
Assets

Current Assets:
Cash and restricted cash	$	11,227,061	$	17,489,380
Accounts receivable, net of allowance for doubtful accounts of $312,677 and $409,076 at March 31, 2022 and December 31, 2021, respectively		2,152,606		1,957,579
Inventories, net of allowance for excess and obsolete inventory of $262,901 and $268,470 at March 31, 2022 and December 31, 2021, respectively		5,809,602		5,421,027
Contract assets		2,437,924		1,906,510
Prepaid expenses and other current assets		2,651,618		1,292,285

Total Current Assets		24,278,811		28,066,781

Long-Term Assets:
Property and equipment, net of accumulated depreciation of $7,829,488 and $7,554,803 at March 31, 2022 and December 31, 2021, respectively		8,383,826		8,858,993
Operating lease right-of-use assets		6,613,073		6,925,807
Deposits and other assets		618,995		628,109
Intangible assets, net of accumulated amortization of $376,375 and $357,231 at March 31, 2022 and December 31, 2021, respectively		301,244		334,743
Goodwill		235,275		240,259

Total Long-Term Assets		16,152,413		16,987,911

Total Assets	$	40,431,224	$	45,054,692

	For the Three Months Ended
	March 31,
	2022			2021

Revenue	$	3,637,236		$	3,997,877
Cost of goods sold		3,391,695			3,883,262

Gross Profit		245,541			114,615

Operating Expenses:
Selling expenses		1,059,948			1,009,498
General and administrative expenses		1,916,517			1,474,670
Research and development expenses		602,737			437,607

Total Operating Expense		3,579,202			2,921,775

Loss from Operations		(3,333,661	)		(2,807,160	)

Other Income (Expense)
Interest and other income		99			-
Interest expense		(206,461	)		(40,419	)
Amortization discount on convertible note		(297,338	)		-
Gain (Loss) on currency transactions		75,993			371,684

Total Other Income (Expense)		(427,707	)		331,265

Loss Before Income Taxes		(3,761,368	)		(2,475,895	)

Income Tax Benefit		(14,994	)		(16,466	)

Net Loss	$	(3,746,424	)	$	(2,459,429	)


Basic and Diluted Loss Per Share	$	(0.18	)	$	(0.11	)

Basic and Diluted Weighted Average Common Shares Outstanding		21,350,455			21,677,186

	For the Three Months Ended
	March 31,
	2022			2021

Net Loss		(3,746,424	)		(2,459,429	)

Other Comprehensive Income - Currency Translation, Net		(355,891	)		(1,311,521	)

Total Comprehensive Loss	$	(4,102,315	)	$	(3,770,950	)

					Additional						Accumulated Other
	Common Stock				Paid-in			Accumulated			Comprehensive
	Shares		Amount		Capital			Deficit			Income/(Loss)			TOTAL
BALANCE, December 31, 2021		21,285,706		21,285		70,910,092			(53,181,928	)		(4,975,399	)		12,774,860

Common stock issued in settlement of RSUs		66,982		67		(67	)								-

Stock-based compensation						178,778									178,778

Currency translation, net												(355,891	)		(355,891	)

Net Loss									(3,746,424	)					(3,746,424	)

BALANCE, March 31, 2022		21,352,688		21,352		71,089,613			(56,928,352	)		(5,331,290	)		8,851,323



BALANCE, December 31, 2020		21,655,461		21,655		69,897,698			(42,054,968	)		(3,046,070	)		24,818,315

Common stock issued in settlement of RSUs		41,912		42		(42	)								-

Stock-based compensation						102,388									102,388

Currency translation, net												(1,311,521	)		(1,311,521	)

Net Income									(2,459,429	)					(2,459,429	)

BALANCE, March 31, 2021		21,697,373		21,697		70,000,044			(44,514,397	)		(4,357,591	)		21,149,753

	For the Three Months Ended March 31,
	2022		2021
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	203,289	$	37,236
Income Taxes		-		-

	March 31, 2022			December 31, 2021
Allowance for doubtful accounts at the beginning of the period	$	409,076		$	498,044
Bad debt expense		(88,776	)		(28,499	)
Receivables written off during the periods		-			(24,415	)
Effect of currency translation		(7,623	)		(36,054	)
Allowance for doubtful accounts at the end of the period	$	312,677		$	409,076

							For the Three months ended
	*% Distribution*						*March 31,*
	*2022*			*2021*			*2022*		*2021*
North America		4	%		4	%	$	139,307	$	165,588
Australia		1	%		1	%		35,399		32,141
Asia		22	%		28	%		799,965		1,157,155
Europe		73	%		67	%		2,662,564		2,642,993
		100	%		100	%	$	3,637,236	$	3,997,877

							For the Three Months
	*% Distribution*						*Ended March 31,*
	*2022*			*2021*			*2022*		*2021*
Liquid filters and systems		16	%		30	%	$	592,990	$	1,157,336
Diesel particulate filters		52	%		48	%		1,880,118		1,931,064
Plastic components		31	%		20	%		1,138,597		814,025
Development projects		1	%		2	%		25,530		95,452
		100	%		100	%	$	3,637,236	$	3,997,877

	March 31, 2022			December 31, 2021
Cost incurred	$	3,980,616		$	3,381,994
Unbilled project deliveries		282,135			454,158
VAT		413,204			542,255
Other receivables		324,714			60,158
Prepayments		(2,912,111	)		(2,947,736	)
Deferred Revenue		(343,273	)		(499,146	)
	$	1,745,284		$	991,682

Distributed as follows:
Contract assets	$	2,437,924		$	1,906,510
Contract liabilities		(692,640	)		(914,828	)
	$	1,745,284		$	991,682

	As of			As of
	March 31,			December 31,
	2022			2021
	(Unaudited)
Liabilities and Stockholders’ Equity

Current Liabilities:
Accounts payable	$	2,023,972		$	1,646,662
Accrued expenses		5,084,650			4,685,665
Current portion of finance lease obligations		367,171			373,824
Current portion of operating lease liabilities		871,682			846,544
Current portion of convertible note payable		10,080,000			8,400,000
Contract liabilities		692,640			914,828

Total Current Liabilities		19,120,115			16,867,523


Deferred tax liability		205,318			224,779
Other liabilities, net of current portion		61,547			346,939
Finance lease obligations, net of current portion		2,355,721			2,499,591
Operating lease liabilities, net of current portion		5,872,927			6,154,064
Convertible note payable, less current portion		3,964,273			6,186,936

Total Long-term Liabilities		12,459,786			15,412,309

Total Liabilities		31,579,901			32,279,832


Stockholders' Equity:
Preferred stock; par value $0.001, 2,500,000 shares authorized, 0 shares issued and outstanding at March 31, 2022 and December 31, 2021		-			-
Common stock; par value $0.001, 100,000,000 shares authorized, 21,352,688 and 21,285,706 shares issued and outstanding at March 31, 2021 and December 31, 2021, respectively		21,352			21,285
Additional paid-in capital		71,089,613			70,910,902
Accumulated deficit		(56,928,352	)		(53,181,928	)
Accumulated other comprehensive loss		(5,331,290	)		(4,975,399	)

Total Stockholders' Equity		8,851,323			12,774,860

Total Liabilities and Stockholders' Equity	$	40,431,224		$	45,054,692

●	Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;
●	Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
●	Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

	March 31, 2022			December 31, 2021
Furnace parts and supplies	$	405,384		$	213,224
Raw materials		2,186,304			2,144,067
Work in process		1,648,973			1,671,290
Finished goods and filtration systems		1,831,842			1,660,907
Reserve for obsolescence		(262,901	)		(268,470	)
Net Inventory	$	5,809,602		$	5,421,027

	March 31, 2022			December 31, 2021
Operating leases:
Operating lease right-of-use assets	$	6,613,073		$	6,925,807

Operating lease liabilities – current	$	871,682		$	846,544
Operating lease liabilities – long-term		5,872,927			6,154,064
Total operating lease liabilities	$	6,744,609		$	7,000,608

Finance leases:
Property and equipment, at cost	$	3,265,647		$	3,334,830
Accumulated depreciation		(381,095	)		(336,337	)
Property and equipment, net	$	2,884,553		$	2,998,494

Finance lease liabilities – current	$	367,171		$	373,824
Finance lease liabilities – long-term		2,355,721			2,499,591
Total finance lease liabilities	$	2,722,891		$	2,873,415

Weighted average remaining lease term:
Operating leases		8.7			8.9
Finance leases		5.6			5.9

Weighted average discount rate:
Operating leases		6.5	%		6,5	%
Finance leases		2.8	%		2.8	%

	Operating Lease			Finance lease
2022 (remaining 9 months)	$	922,725		$	329,688
2023		1,220,130			435,549
2024		1,072,809			436,488
2025		789,504			432,931
2026		814,186			396,284
Thereafter		3,782,380			955,968
Total payment under lease agreements		8,601,733			2,986,908
Less imputed interest		(1,857,124	)		(264,017	)
Total lease liability	$	6,744,609		$	2,722,891

	March 31, 2022			March 31, 2021
Convertible note	$	15,960,000			-
Less: unamortized debt issuance costs		(1,915,726	)		-
Convertible note payable	$	14,044,274		$	-

Current portion of convertible note payable		10,080,000			-
Convertible note payable, less current portion		3,964,273			-
Convertible note payable	$	14,044,274		$	-

	March 31, 2022			December 31, 2021
Balance at January 1	$	962,313		$	1,056,613
Warranty costs charged to cost of goods sold		-			177,302
Utilization charges against reserve		-			(191,068	)
Release of accrual related to expired warranties		-			-
Foreign currency effect		(19,964	)		(80,534	)
Balance at the end of the period	$	942,349		$	962,313

	For the Three Months Ended March 31,
	2022			2021
Net (Loss)	$	(3,746,424	)	$	(2,459,429	)
Weighted average number of common shares used in basic earnings per share		21,350,455			21,677,186
Effect of dilutive securities, stock options, RSUs, and warrants		-			-
Weighted average number of common shares and potential dilutive common shares outstanding used in dilutive earnings per share		21,350,455			21,677,186

SEC Form 10-Q filed by LiqTech International Inc.