liqt20230930

liqt20230930_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 quarterly period ended September 30, 2023

☐	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

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 November 9, 2023, there were 5,727,310 shares of Common Stock, $0.001 par value per share, outstanding.

Table of Contents

LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES

Quarterly Report on Form 10-Q

For the Period Ended September 30, 2023

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION	5

Item 1. Financial Statements	5

Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022	5

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and September 30, 2022 (unaudited)	7

Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and September 30, 2022 (unaudited)	8

Condensed Consolidated Statements of Stockholder’s Equity for the Three and Nine Months ended September 30, 2023 and September 30, 2022 (unaudited)	9

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and September 30, 2022 (unaudited)	11

Notes to Condensed Consolidated Financial Statements (unaudited)	13

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3. Quantitative and Qualitative Disclosures About Market Risk	37

Item 4. Controls and Procedures	37

PART II. OTHER INFORMATION	39

Item 1. Legal Proceedings	39

Item 1A. Risk Factors	39

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3. Defaults Upon Senior Securities	39

Item 4. Mine Safety Disclosures	39

Item 5. Other Information	39

Item 6. Exhibits	40

SIGNATURES	41

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FORWARD-LOOKING STATEMENTS

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” regarding the plans and objectives of management for future operations and market trends and expectations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the continued expansion of our business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. This is especially underlined by the impacts from the supply chain-related disruptions, inflationary pressure, prevailing macro-economic uncertainty, geopolitical instability in the Middle East and Ukraine, and the European energy crisis on the Company, including the related effects to our business operations, results of operations, cash flows, and financial position. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.

Forward-looking statements include, but are not limited to, statements concerning:

	●	Our exposure to increased macro-economic uncertainty;

	●	The risk of a prolonged period of inflationary pressure including energy shortages and volatile energy prices in Europe;

	●	The impact from prevailing conflicts across the Middle East and Ukraine including overall changes to the economic environment;

	●	The resurgence of COVID-19 or similar global pandemics;

	●	Our dependence on a few major customers and the ability to maintain future relationships with one or more of these major customers;

	●	Our ability to operate with financial stability and secure adequate access to external financing and liquidity;

	●	Our ability to secure and source supplies of raw materials and key components in due time and at competitive prices;

	●	Our reliance on subcontractors or delivery of new machinery and critical components for our machinery to develop sufficient manufacturing capacity to meet demand;

	●	Our ability to achieve revenue growth and execute the Company strategy;

	●	Our dependence on the expertise and experience of our management team and the retention of key employees;

	●	Our reliance and access to qualified personnel to expand our business;

	●	Our ability to adapt to potentially adverse changes in legislative, regulatory and political frameworks;

	●	Changes in emissions or environmental regulations and potential further tightening of emission standards;

	●	Our ability to compete under changing governmental standards by which our products are evaluated;

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Our exposure to potentially adverse tax consequences;

	●	The financial impact from the fluctuation and volatility of foreign currencies;

	●	The potential monetary costs of defending our intellectual property rights;

	●	Our ability to successfully protect our intellectual property rights and manufacturing know-how;

	●	The possibility of a dispute over intellectual property developed in conjunction with third parties with whom we have contractual relationships;

	●	The possibility that we could become subject to litigation that could be costly, limit, or cancel our intellectual property rights, or divert time and efforts away from our business operations;

	●	The potential negative impact to the sale of our products caused by technological advances of our competitors;

	●	The potential liability for environmental harm or damages resulting from technical faults or failures of our products;

	●	The possibility that an investor located within the United States may not be able to or find it difficult to enforce any judgments obtained in United States courts because a significant portion of our assets and some of our officers and directors may be located outside of the United States;

	●	The possibility that we may not be able to develop and maintain an effective system of internal controls over financial reporting, leading to inaccurate reports of our financial results;

	●	The possibility of breaches in the security of our information technology systems;

	●	The liability risk of our compliance to environmental laws and regulations;

	●	The potential negative impact of more stringent environmental laws and regulations as governmental agencies seek to improve minimum standards; and

	●	The possibility that enforcement actions to suspend or severely restrict our business operations could be brought against the Company for our failure to comply with laws or regulations and the potential costs of defending against such actions.

Any forward-looking statement made by us herein speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor can we assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	As of		As of
	September 30,		December 31,
	2023		2022
	(Unaudited)
Assets

Current Assets:
Cash and restricted cash	$	11,832,959	$	16,597,371
Accounts receivable, net of allowance for doubtful accounts of $48,909 and $59,559 at September 30, 2023 and December 31, 2022, respectively		3,883,813		2,310,344
Inventories, net of allowance for excess and obsolete inventory of $898,944 and $663,227 at September 30, 2023 and December 31, 2022, respectively		4,556,000		4,062,001
Contract assets		2,587,397		2,253,295
Prepaid expenses and other current assets		1,311,140		1,720,902
Assets held for sale		394,623		723,872

Total Current Assets		24,565,932		27,667,785

Long-Term Assets:
Property and equipment, net of accumulated depreciation of $10,713,077 and $9,046,499 at September 30, 2023 and December 31, 2022, respectively		8,640,532		8,296,807
Operating lease right-of-use assets		2,827,101		3,271,997
Deposits and other assets		446,149		450,038
Intangible assets, net of accumulated amortization of $509,641 and $438,250 at September 30, 2023 and December 31, 2022, respectively		135,363		212,933
Goodwill		223,951		226,095

Total Long-Term Assets		12,273,096		12,457,870

Total Assets	$	36,839,028	$	40,125,655

The accompanying notes are an integral part of these unaudited financial statements.

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LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

	As of			As of
	September 30,			December 31,
	2023			2022
	(Unaudited)
Liabilities and Stockholders’ Equity

Current Liabilities:
Accounts payable	$	2,233,853		$	1,389,355
Accrued expenses		3,847,849			3,087,206
Current portion of finance lease obligations		558,961			399,198
Current portion of operating lease liabilities		548,417			561,182
Contract liabilities		540,153			649,557

Total Current Liabilities		7,729,233			6,086,498


Deferred tax liability		111,077			154,645
Finance lease obligations, net of current portion		2,899,640			2,384,011
Operating lease liabilities, net of current portion		2,278,684			2,710,815
Senior promissory notes payable, net of debt discount of $1,455,127 and $519,686 at September 30, 2023 and December 31, 2022, respectively		4,544,873			5,480,314

Total Long-term Liabilities		9,834,274			10,729,785

Total Liabilities		17,563,507			16,816,283


Stockholders’ Equity:
Preferred stock; par value $0.001, 2,500,000 shares authorized, 0 shares issued and outstanding at September 30, 2023 and December 31, 2022		-			-
Common stock; par value $0.001, 12,500,000 shares authorized, 5,727,310 and 5,498,260 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		5,727			5,498
Additional paid-in capital		98,662,745			96,975,476
Accumulated deficit		(72,710,060	)		(67,351,035	)
Accumulated other comprehensive loss

SEC Form 10-Q filed by LiqTech International Inc.