LIQTECH INTERNATIONAL INC - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - LIQTECH INTERNATIONAL INC	ex_98471.htm
EX-32.1 - EXHIBIT 32.1 - LIQTECH INTERNATIONAL INC	ex_98470.htm
EX-31.2 - EXHIBIT 31.2 - LIQTECH INTERNATIONAL INC	ex_98469.htm
EX-31.1 - EXHIBIT 31.1 - LIQTECH INTERNATIONAL INC	ex_98468.htm
EX-10.2 - EXHIBIT 10.2 - LIQTECH INTERNATIONAL INC	ex_100501.htm
EX-10.1 - EXHIBIT 10.1 - LIQTECH INTERNATIONAL INC	ex_100500.htm
EX-4.1 - EXHIBIT 4.1 - LIQTECH INTERNATIONAL INC	ex_100499.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 nine months period ended September 30, 2017

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

For the transition period from _______________________ 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, DK2750 Ballerup, Denmark
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: +4544986000

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 (Do not check if a smaller reporting company)	☐	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 ☒

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, at November 14, 2017, was 44,229,264 shares.

Table of Contents

LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES

Quarterly Report on Form 10-Q

For the Period Ended September 30, 2017

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements	4

Consolidated Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016	4

Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2017 and September 30, 2016 (unaudited)	6

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and September 30, 2016 (unaudited)	8

Notes to Consolidated Financial Statements (unaudited)	10

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation	22

Item 3. Quantitative and Qualitative Disclosures About Market Risk	28

Item 4. Controls and Procedures	29

PART II. OTHER INFORMATION

Item 1A. Risk Factors	29

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3. Defaults Upon Senior Securities	29

Item 4. Mine Safety Disclosures	29

Item 5. Other Information	29

Item 6. Exhibits	30

SIGNATURES	31

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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. 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 report 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. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	As of		As of
	September, 30		December 31,
	2017		2016
	Unaudited
Current Assets:
Cash	$	528,566	$	1,208,650
Accounts receivable, net		1,613,668		1,111,759
Other receivables		342,556		306,177
Cost in excess of billing		753,615		642,700
Inventories		4,810,497		5,174,874
Prepaid expenses		16,383		62,161

Total Current Assets		8,065,285		8,506,321

Property and Equipment, net accumulated depreciation		2,123,429		2,633,558

Other Assets:
Investments at costs		5,909		5,282
Other intangible assets		3,963		5,614
Deposits		297,719		261,553

Total Other Assets		307,591		272,449

Total Assets	$	10,496,305	$	11,412,328

(Continued)

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

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LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	As of			As of
	September, 30			December 31,
	2017			2016
Current Liabilities:
Current portion of notes payable	$	16,061		$	15,034
Current portion of capital lease obligations		7,808			45,883
Accounts payable		2,290,345			2,262,688
Accrued expenses		2,197,993			2,385,586
Billing in excess of cost		15,224			106,375
Accrued income taxes payable		580			580
Customers deposits		720,561			192,597

Total Current Liabilities		5,248,572			5,008,743

Long-term notes payable, less current portion		32,521			39,895
Long-term capital lease obligations, less current portion		21,054			93,942

Total Long-Term Liabilities		53,575			133,837

Total Liabilities		5,302,147			5,142,580

Commitment and Contingencies See Note 11

Stockholders' Equity:
Common stock; par value $0,001, 100,000,000 shares authorized 44,229,264 and 36,835,514 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		44,230			36,836
Additional paid-in capital		37,961,723			36,084,117
Accumulated deficit		(27,516,432	)		(24,011,343	)
Deferred compensation		(58,548	)		(148,561	)
Other comprehensive income, net		(5,236,815	)		(5,691,301	)

Total Stockholders' Equity		5,194,158			6,269,748

Total Liabilities and Stockholders' Equity	$	10,496,305		$	11,412,328

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

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LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Net Sales	$	2,456,484		$	3,689,511		$	8,350,758		$	11,338,817

Cost of Goods Sold		2,772,451			3,303,042			8,202,634			9,078,036

Gross Profit		(315,967	)		386,469			148,124			2,260,781

Operating Expenses:
Selling expenses		521,627			558,105			1,506,369			1,661,352
General and administrative expenses		433,368			498,358			1,518,935			1,830,260
Non-cash compensation expenses		24,055			104,416			150,013			377,140
Research and development expenses		121,680			124,165			375,026			476,734

Total Operating Expense		1,100,730			1,285,044			3,550,343			4,345,486

Loss from Operations		(1,416,697	)		(898,575	)		(3,402,219	)		(2,084,705	)

Other Income (Expense)
Interest and other income		2,790			-			3,093			-
Interest expense		(3,781	)		(7,347	)		(23,308	)		(23,843	)
Loss on currency transactions		(26,913	)		(14,060	)		(54,600	)		(26,219	)
Loss on sale of fixed assets		(34,824	)		-			(28,056	)		-

Total Other Income (Expense)		(62,728	)		(21,407	)		(102,871	)		(50,062	)

Loss Before (Income) Taxes		(1,479,425	)		(919,982	)		(3,505,090	)		(2,134,767	)

Income Tax Expense (Income)		-			17,646			-			2,885,932

Net Loss		(1,479,425	)		(937,628	)		(3,505,090	)		(5,020,699	)


Basic Loss Per Share	$	(0.03	)	$	(0.02	)	$	(0.09	)	$	(0.13	)

Weighted Average Common Shares Outstanding		44,229,264			39,532,035			40,604,129			39,532,035

Diluted Loss Per Share	$	(0.03	)	$	(0.02	)	$	(0.09	)	$	(0.13	)

Weighted Average Common Shares Outstanding Assuming Dilution		44,229,264			39,532,035			40,604,129			39,532,035

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

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LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF OTHER

COMPREHENSIVE INCOME

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016

Net Loss		(1,479,425	)		(937,628	)		(3,505,090	)		(5,020,699	)

Currency Translation, Net of Taxes		142,599			66,547			454,487			401,194

Other Comprehensive Loss	$	(1,336,826	)	$	(871,081	)	$	(3,050,603	)	$	(4,619,505	)

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

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LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF CASH FLOWS

Increase (Decrease) in Cash and Cash Equivalents

	For the Period Ended
	September 30,
	2017			2016
Cash Flows from Operating Activities:
Net Loss	$	(3,505,090	)	$	(5,020,699	)
Adjustments to reconcile net (loss) to net cash provided (used) by operations:
Depreciation and amortization		732,963			995,687
Non-cash compensation		150,013			384,795
Bad debt expense (recovery)		(59,409	)		23,852
Reserve for obsolete inventory		-			132,983
Change in deferred tax asset / liability		-			3,193,214
Loss on sale of equipment		28,056			-
Changes in assets and liabilities:
(Increase) decrease in restricted cash		-			292,826
(Increase) decrease in accounts receivable		(478,879	)		(1,026,055	)
(Increase) decrease in inventory		238,986			(572,709	)
(Increase) decrease in prepaid expenses/deposits		26,817			(79,546	)
Increase (decrease) in accounts payable		27,657			(649,056	)
Increase (decrease) in accrued expenses		340,371			(49,752	)
Increase (decrease) long-term contracts		(202,066	)		1,271,781

Total Adjustments		804,509			3,918,020

Net Cash Used by Operating Activities		(2,700,581	)		(1,102,679	)

Cash Flows from Investing Activities:
Purchase of property and equipment		(94,950	)		(129,411	)
Proceeds from sale of property and equipment		12,827			-

Net Cash Used by Investing Activities		(82,123	)		(129,411	)

Cash Flows from Financing Activities:

Net payments on capital lease obligation		(110,963	)		(112,566	)
Payments on loans payable		(6,347	)		(21,210	)
Proceeds from issuance of common stock and warrants		1,825,000			-

Net Cash Provided by (Used in) Financing Activities		1,707,690			(133,776	)

Gain on Currency Translation		394,930			232,958

Net Increase (Decrease) in Cash and Cash Equivalents		(680,084	)		(1,132,908	)

Cash and Cash Equivalents at Beginning of Period		1,208,650			1,370,591

Cash and Cash Equivalents at End of Period	$	528,566		$	237,683

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

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LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES

(UNAUDITED) CONSOLIDATED STATEMENTS OF CASH FLOWS

Increase (Decrease) in Cash and Cash Equivalents

	For the Nine Months Ended September 30,
	2017		2016
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest Paid	$	23,308	$	23,843
Income Taxes	$	-	$	570

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Compensation upon vesting of stock options granted to employees	$	58,038	$	272,665
Compensation for vesting of restricted stock awards issued to the board of directors		78,750		58,250
Value of warrants issued for services		13,225		46,225
Total	$	150,013	$	377,140

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

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LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Basis of Presentation

The consolidated financial statements include the accounts of LiqTech International, Inc. (“Parent”) and its subsidiaries. The terms "Company", “us", "we" and "our" as used in this report refer to Parent and its subsidiaries, which are set forth below. The Company engages in the development, design, production, marketing and sale of automated filtering systems, liquid filters, diesel particulate air filters and kiln furniture in United States, Canada, Europe, Asia and South America. Set forth below is a description of Parent and each of its subsidiaries:

LiqTech International, Inc., a Nevada corporation (Parent) organized in July 2004, formerly known as Blue Moose Media, Inc.

LiqTech USA, a Delaware corporation and a wholly owned subsidiary of Parent formed in May 2011.

LiqTech International AS, a Danish corporation, incorporated on January 15, 2000 (“LiqTech Int. DK”), a 100% owned subsidiary of LiqTech USA, engages in development, design, application, marketing and sales of membranes on ceramic diesel particulate and liquid filters and catalytic converters in Europe, Asia and South America.

LiqTech NA, Inc. (“LiqTech NA”), incorporated in Delaware on July 1, 2005, a 100% owned subsidiary of LiqTech USA. LiqTech NA, Inc. engages in the production, marketing and sale of ceramic diesel particulate and liquid filters and kiln furniture in United States and Canada.

LiqTech Germany (“LiqTech Germany”) a 100% owned subsidiary of LiqTech Int. DK, incorporated in Germany on December 9, 2011, engages in marketing and sale of liquid filters in Germany. The Company has no operation and is in the process of closing down, which is expected to be completed during 2017.

LiqTech PTE Ltd. (“LiqTech Sing”) a 95% owned subsidiary of LiqTech Int. DK, incorporated in Singapore on January 19, 2012, engages in marketing and sale of liquid filters in Singapore and other countries in the area. The Company has no operation and is in the process of closing down, which is expected to be completed during 2017.

LiqTech Systems A/S ("LiqTech Systems"), a Danish corporation (formerly Provital Solutions A/S) was incorporated on September 1, 2009 and engages in the manufacture of fully automated filtering systems for application within the pool and spa markets, marine applications, and a number of industrial applications within Denmark and international markets. The financial statements include the accounts of LiqTech Systems from the date of acquisition on July 31, 2014.

Consolidation -- The consolidated financial statements include the accounts and operations of the Company. The non-controlling interests in the net assets of the subsidiaries are recorded in equity. The non-controlling interests of the results of operations of the subsidiaries are included in the results of operations and recorded as the non-controlling interest in subsidiaries. All material inter-company transactions and accounts have been eliminated in the consolidation.

Functional Currency / Foreign Currency Translation -- The functional currency of LiqTech International, Inc., LiqTech USA, Inc. and LiqTech NA is the U.S. Dollar. The Functional Currency of LiqTech Int. DK and LiqTech Systems is the Danish Krone (“DKK”), the functional currency of LiqTech Germany is the Euro and the functional currency of LiqTech Singapore is the Singapore Dollar. The Company’s reporting currency is U.S. Dollar for the purpose of these financial statements. The foreign subsidiaries balance sheet accounts are translated into U.S. Dollars at the period-end exchange rates and all revenue and expenses are translated into U.S. Dollars at the average exchange rates prevailing during the three and nine months ended September 30, 2017 and 2016. Translation gains and losses are deferred and accumulated as a component of other comprehensive income in stockholders’ equity. Transaction gains and losses that arose from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the statement of operations as incurred.

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash, Cash Equivalents and Restricted Cash -- The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The Company had no balances held in a financial institution in the United States in excess of federally insured amounts at September 30, 2017 and December 31, 2016.

Accounts Receivable -- Accounts receivables consist of trade receivables arising in the normal course of business. The Company establishes an allowance for doubtful accounts, which reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence.

The roll forward of the allowance for doubtful accounts for the nine months ended September 30, 2017 and the year ended December 31, 2016 is as follows:

	2017			2016
Allowance for doubtful accounts at the beginning of the period	$	2,128,452		$	1,087,871
Bad debt expense		(59,409	)		1,437,949
Amount of receivables written off		(31,609	)		(252,792	)
Effect of currency translation		252,482			(144,576	)
Allowance for doubtful accounts at the end of the period	$	2,289,916		$	2,128,452

Inventory -- Inventory is carried at the lower of cost or market, as determined on the first-in, first-out method.

Property and Equipment -- Property and equipment are stated at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized, upon being placed in service. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed for financial statement purposes on a straight-line basis over the estimated useful lives of the assets which range from three to ten years (See Note 4).

Long-Term Investments -- Investments in non-consolidated companies are included in long-term investments in the consolidated balance sheet and are accounted for under the cost method and equity method. For these non-quoted investments, we regularly review the assumptions underlying the operating performance and cash flow forecasts based on information requested from these privately held companies. Generally, this information may be more limited, may not be as timely as and may be less accurate than information available from publicly traded companies. Assessing each investment's carrying value requires significant judgment by management. If it is determined that there is another-than-temporary decline in the fair value of a non-public equity security, we write-down the investment to its fair value and record the related write-down as an investment loss in the consolidated statement of operations.

Intangible Assets -- Definite life intangible assets include patents. The Company accounts for definite life intangible assets in accordance with Financial Accounting Standards Board, (“FASB”) Accounting Standards Codification, (“ASC”) Topic 350, “Goodwill and Other Intangible Assets” and amortized the patents on a straight line basis over the estimated useful life of two to ten years.

Goodwill -- Goodwill is evaluated for impairment annually, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of goodwill or a significant decrease in expected cash flows.

Revenue Recognition and Sales Incentives -- The Company accounts for revenue recognition in accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (SAB 101), FASB ASC 605 Revenue Recognition. The Company recognizes revenue when rights and risk of ownership have passed to the customer, when there is persuasive evidence of an arrangement, product has been shipped or delivered to the customer, the price and terms are finalized, and collections of resulting receivable is reasonably assured. Products are primarily shipped FOB shipping point at which time title passes to the customer. In some instances, the Company uses common carriers for the delivery of products. In these arrangements, sales are recognized upon delivery to the customer. The Company's revenue arrangements with its customers often include early payment discounts and such sales incentives are recorded against sales.

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company has received long-term contracts for the installation of various water filtrations systems and grants from government entities for development and use of silicon carbide membranes in various water filtration and treatment applications. Revenues from long-term contracts and grants are recognized on the percentage-of-completion method, measured by the percentage of project costs incurred to date to estimated total project costs for each long-term contract or grant multiplied by the long-term contract or grant income on a project-by-project basis. This method is used because management considers costs incurred to be the best available measure of progress on contracts in process.

Project costs of the long-term contracts and grants include all direct material and labor costs and those indirect costs related to the project. Project costs are capitalized and accreted into cost of sales based on the percentage of the project completed. Should a loss be estimated on an incomplete project it would be recorded in the period in which such a loss is determined. Changes in estimated profitability of a project are recognized in the period in which the revisions are determined. The aggregate of costs incurred and income recognized on incomplete projects are recorded as costs in excess of billings and are shown as a current asset.

The aggregate of billings in excess of related costs incurred and income recognized on projects is shown as a current liability.

In Denmark, Value Added Tax (“VAT”) of 25% of the invoice amount is collected in respect of the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Company; instead, the amount is recorded as a liability on the balance sheet until such VAT is paid to the authorities.

Advertising Cost -- Cost incurred in connection with advertising of the Company’s products is expensed as incurred. Such costs amounted to $9,270 and $21,307 for the nine months ended September 30, 2017 and 2016, respectively.

Research and Development Cost -- The Company expenses research and development costs for the development of new products and systems as incurred. Included in operating expense for the nine months ended September 30, 2017 and 2016 were $375,026 and $476,734, respectively, of research and development costs.

Income Taxes -- The Company accounts for income taxes in accordance with FASB ASC Topic 740 Accounting for Income Taxes. This statement requires an asset and liability approach for accounting for income taxes.

Income (Loss) Per Share -- The Company calculates earnings (loss) per share in accordance with FASB ASC 260 Earnings Per Share. Basic earnings per common share (EPS) are based on the weighted average number of common shares outstanding during each period. Diluted earnings per common share are based on shares outstanding (computed as under basic EPS) and potentially dilutive common shares. Potential common shares included in the diluted earnings per share calculation include in-the-money stock options and warrants that have been granted but have not been exercised.

Stock Options and Awards -- The Company has granted stock options and awards to certain key employees and directors. See Note 14. The Company accounts for options in accordance with the provisions of FASB ASC Topic 718, Compensation – Stock Compensation. Non-cash compensation costs of $150,013 and $377,140 have been recognized for the vesting of options granted to employees and restricted stock awards issued to the board of directors with an associated recognized tax benefit of $26,775 and $18,445 for the nine months ended September 30, 2017 and 2016, respectively.

Fair Value of Financial Instruments --The Company accounts for fair value measurements for financial assets and financial liabilities in accordance with FASB ASC Topic 820. The authoritative guidance, which, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

●

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.

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, prepaid expenses, investments, accounts payable, accrued expenses, capital lease obligations and notes payable approximates their recorded values due to their short-term maturities.

Accounting Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets allowance for doubtful accounts receivable, cost in excess of billings, reserve for obsolete inventory, depreciation and impairment of property plant and equipment and impairment of goodwill and liabilities billings in excess of cost commitment and contingencies, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimated.

Recent Accounting Pronouncements -- In May 2014, the Financial Accounting Standards Board (FASB) issued a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. On July 9 2015, the FASB agreed to delay the effective date by one year; accordingly, the new standard is effective for us beginning in the first quarter of 2018 and we expect to adopt it at that time. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. We have not yet selected a transition method, nor have we determined the impact of the new standard on our consolidated financial statements.

In February 2016, the FASB issued changes to the accounting for leases that primarily affect presentation and disclosure requirements. The new standard will require the recognition of a right to use asset and underlying lease liability for operating leases with an initial life in excess of one year. This standard is effective for us beginning in the first quarter of 2019. We have not yet determined the impact of the new standard on our consolidated financial statements.

Other recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

NOTE 2 - GOING CONCERN

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has limited cash and incurred significant recent losses. These factors raise substantial doubt about the ability of the Company to continue as a going concern. There is no assurance that the Company will be successful in raising additional cash through the issuance of debt or equity instruments or return to achieving profitable operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

NOTE 3 - INVENTORY

Inventory consisted of the following at September 30, 2017 and December 31, 2016:

	2017			2016
Furnace parts and supplies	$	375,529		$	336,799
Raw materials		1,218,256			1,216,098
Work in process		2,592,894			2,499,242
Finished goods and filtration systems		1,934,569			2,544,080
Reserve for obsolescence		(1,310,751	)		(1,421,345	)
Net Inventory	$	4,810,497		$	5,174,874

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at September 30, 2017 and December 31, 2016:

	Useful Life				2017			2016
Production equipment		3	-	10	$	10,031,780		$	10,370,462
Lab equipment		3	-	10		85,766			76,658
Computer equipment		3	-	5		199,184			185,652
Vehicles		3	-	5		74,164			39,090
Furniture and fixture			5			104,431			146,453
Leasehold improvements			10			1,063,722			955,563
						11,559,047			11,773,878
Less Accumulated Depreciation						(9,435,618	)		(9,140,320	)
Net Property and Equipment					$	2,123,429		$	2,633,558

Depreciation expense amounted to $731,312 and $992,418 for the nine months ended September 30, 2017 and 2016, respectively. The property and equipment is held as collateral on lines of credit and guarantees with financial institutions. See Note 9.

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NOTE 5 - INVESTMENTS AT COSTS

The following tables summarize Level 1, 2 and 3 financial assets and financial (liabilities) by their classification in the Statement of Financial Position:

As of September 30, 2017	Level 1		Level 2		Level 3

Investments		-		-		5,909

Total		-		-		5,909

As of December 31, 2016	Level 1		Level 2		Level 3

Investments		-		-		5,282

Total		-		-		5,282

At September 30, 2017 and 2016, our total investments consisted of an investment of $5,909 and $5,282 in LEA Technology in France to strengthen our sales channels in the French market.

NOTE 6 - DEFINITE-LIFE INTANGIBLE ASSETS

At September 30, 2017 and December 31, 2016, definite-life intangible assets, net of accumulated amortization, consisted of patents on the Company’s products of $3,963 and $5,614, respectively. The patents are recorded at cost and amortized over two to ten years. Amortization expense for the nine months ended September 30, 2017 and 2016 was $1,651 and $3,269, respectively. Expected future amortization expense for the years ended are as follows:

Year ending December 31,	Amortization Expenses
2017		755
2018		2,540
2019		668
Thereafter		-

	$	3,963

NOTE 7 - GOODWILL

The Company recorded Goodwill in connection with the acquisition of LiqTech Systems. Goodwill is evaluated for impairment annually in the fourth quarter of the Company’s fiscal year, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of goodwill or a significant decrease in expected cash flows. Key variables included in evaluating goodwill for impairment include the pipeline of proposed potential customer sales, budgeted reoccurring sales, risk free interest rate and risk premium rate and future budgeted operating results. The Company recorded an impairment charge of $7,343,208 during the year ended December 31, 2016, as management's estimated fair value of the reporting unit did not exceed the carrying value during 2016 fourth quarter testing.

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NOTE 8 - NOTES PAYABLE

The Company had a 4.02% note payable used to purchase a vehicle with $48,582 and $54,929 balance outstanding as of September 30, 2017 and December 31, 2016. The note calls for monthly payments of $1,477, matures August 1, 2020 and is secured by the vehicle purchased.

The following represents the future maturities of long-term debt as of September 30, 2017:

Year ending December 31,	Payments
2017	$	3,947
2018		16,234
2019		16,897
2020		11,504
Thereafter		-
	$	48,582
Long-term notes payable, less current portion	$	32,521
Current portion of notes payable	$	16,061

NOTE 9 - LINES OF CREDIT

In connection with certain orders, we have to give the customer a working guarantee or a prepayment guarantee or security bond. For that purpose, we have a guarantee credit line of DKK 94,620 (approximately $15,000 at September 30, 2017) with a bank, subject to certain base limitations. As of September 30, 2017, we had DKK 94,620 (approximately $15,000) in working guarantee against the line. This line of credit is guaranteed by Vækstfonden (the Danish state's investments fund) and is secured by certain assets of LiqTech Systems such as receivables, inventory and equipment.

NOTE 10 - LEASES

Operating Leases -- The Company leases office and production facilities under operating lease agreements expiring in March 2021, August 2018, and May 2018. In some of these lease agreements, the Company has the right to extend.

The future minimum lease payments for non-cancelable operating leases having remaining terms in excess of one year as of September 30, 2017 are as follows:

Year ending December 31,	Lease Payments
2017		162,739
2018		467,758
2019		179,094
2020		182,676
2021		30,546
Thereafter		-
Total Minimum Lease Payments	$	1,022,813

Lease expense charged to operations was $481,001 and $559,755 for the nine months ended September 30, 2017 and 2016, respectively.

Capital Leases -- The Company leases equipment on various variable rate capital leases currently calling for monthly payments of approximately $661 and $595 expiring through July 2018. Included in property and equipment, at September 30, 2017 and December 31, 2016, the Company had recorded equipment on capital lease at $1,267,773 and $1,240,358, respectively, with related accumulated depreciation of $1,230,832 and $1,126,550, respectively.

During the nine months ended September 30, 2017 and 2016 depreciation expense for equipment on capital leases amounted to $39,445, and $103,219, respectively, and has been included in depreciation expense. During the nine months ended September 30, 2017 and 2016, interest expense on a capital lease obligation amounted to $6,216 and $13,770, respectively.

The following represents future minimum capital lease payments as of September 30, 2017:

Year ending December 31,	Lease Payments
2017		3,766
2018		26,538
Thereafter		-
Total minimum lease payments		30,304
Less amount representing interest		(1,442	)
Present value of minimum lease payments		28,862
Less Current Portion		(7,808	)
	$	21,054

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NOTE 11 - AGREEMENTS AND COMMITMENTS

401(K) Profit Sharing Plan -- LiqTech NA has a 401(k) profit sharing plan and trust covering certain eligible employees. The amount LiqTech NA contributes is discretionary. For the nine months ended September 30, 2017 and 2016, matching contributions were expensed and totaled $8,636 and $9,291, respectively.

Contingencies -- From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business.

On September 9, 2014, Mr. Raffaele Bruno Tronchetti Provera (“Plaintiff”), the 60% owner of LiqTech Italy s.r.l. (the “Venture”), sued LiqTech International A/S, the 40% owner of the Venture (“Defendant”), 750,000 Euros before the Court of Como, Italy alleging, among other things, that certain products provided by Defendant to the Venture were defective. As of August 14, 2017, the case is in the preliminary stages where the court has appointed an expert in order to verify the quality of the products in order to determine whether there is sufficient evidence to proceed. An evaluation of the outcome will only be possible after the results of the court appointment expert are known. This outcome of the court appointment expert is expected to be reported during 2017. Defendant believes that the claims are without merit and intends to vigorously defend any litigation.

In connection with certain orders, we have to give the customer a working guarantee or a prepayment guarantee or security bond. For that purpose, we have a guarantee line of DKK 94,620 (approximately $15,000 at September 30, 2017) with a bank, subject to certain base limitations. As of September 30, 2017, we had DKK 94,620 (approximately $15,000 at September 30, 2017) in working guarantee against the line.

NOTE 12 - INCOME TAXES

The Company accounts for income taxes in accordance with FASB ASC Topic 740, Accounting for Income Taxes, which requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carry forwards. The amount of and ultimate realization of the benefits from the deferred tax assets for income tax purposes is dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which cannot be determined. In accordance with prevailing accounting guidance, the Company is required to recognize and disclose any income tax uncertainties. The guidance provides a two-step approach to recognizing and measuring tax benefits and liabilities when realization of the tax position is uncertain. The first step is to determine whether the tax position meets the more-likely-than-not condition for recognition and the second step is to determine the amount to be recognized based on the cumulative probability that exceeds 50%. Actual results could differ from these estimates.

As of September 30, 2017, the Company had net operating loss carryovers of approximately $10,857,383 for U.S. federal tax purposes expiring through 2036; approximately $8,645,417 for Danish tax purposes, which do not expire; approximately $491,212 for German tax purposes, which do not expire and approximately $637,307 for Singapore tax purposes which do not expire.

As of September 30, 2017 and December 31, 2016, the Company established a valuation allowance of $3,491,779 and $3,542,000 for the tax components of LiqTech International Inc. and Liqtech NA, respectively, $2,116,505 and $1,095,000 for the tax components of LiqTech International AS and LiqTech Systems, respectively, $137,000 and $122,000 for the tax component of LiqTech Germany and $108,000 and $97,000 for the tax component of LiqTech Singapore as management could not determine that it was more than likely not that sufficient income could be generated by these components to realize the resulting net operating loss carry forwards and other deferred tax assets of these components.

The Company is not relying on the reversal of deferred tax liabilities to realize the deferred tax assets. The same variable used by the Company in evaluating goodwill for impairment was used in assessing the realization of deferred tax assets (See Note 7).

The temporary differences, tax credits and carry forwards gave rise to the following deferred tax asset (liabilities) at September 30, 2017 and December 31, 2016:

	2017			2016
Vacation accrual	$	5,450		$	5,450
Allowance for doubtful accounts		1,202			1,202
Reserve for obsolete inventory		213,745			200,118
Business tax credit carryover		30,935			30,935
Deferred Compensation		50,512			8,500
Net operating loss carryover		5,838,958			4,906,974
Excess of book over tax depreciation		(287,072	)		(296,227	)
Valuation allowance		(5,853,730	)		(4,856,952	)
Long term deferred tax asset	$	-		$	-

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A reconciliation of income tax expense at the federal statutory rate to income tax expense at the Company’s effective rate is as follows for the nine months ended September 30, 2017 and 2016:

	2017			2016
Computed tax at expected statutory rate	$	(1,191,730	)	$	(725,821	)
State and local income taxes, net of federal benefit		-			-
Non-US income taxed at different rates		186,512			15,135
Valuation allowance		1,005,218			3,553,605
Other		-			43,013
Income tax expense (benefit)	$	-		$	2,885,932

The components of income tax expense (benefit) from continuing operations for the nine months ended September 30, 2017 and 2016 consisted of the following:

	2017			2016
Current income tax expense:
Danish	$	-		$	(577,892	)
Federal		-			-
State		-			-
Current tax (benefit)	$	-		$	(577,892	)


Book in excess of tax depreciation	$	-		$	-
Deferred rent		-			-
Business tax credit carryover		-			-
Net operating loss carryover		440,787			(88,023	)
Valuation allowance		(440,787	)		3,551,847
Deferred compensation		-			-
Accrued vacation		-			-
Reserve for obsolete inventory		-			-
Deferred tax expense (benefit)	$	-		$	3,463,824
Total tax expense (benefit)	$	-		$	2,885,932

Deferred income tax expense / (benefit) results primarily from the reversal of temporary timing differences between tax and financial statement income.

The Company files Danish, U.S. federal and Minnesota state income tax returns. LiqTech International AS is generally no longer subject to tax examinations for years prior to 2012 for their Danish tax returns. LiqTech NA is generally no longer subject to tax examinations for years prior to 2013 for U.S. federal and U.S. states tax returns.

NOTE 13 - INCOME (LOSS) PER SHARE

The following data shows the amounts used in computing earnings per share and the effect on income and the weighted average number of shares of potential dilutive common stock for the nine months ended September 30, 2017 and 2016:

	For the Three Months Ended September 30						For the Nine Months Ended September 30
	2017			2016			2017			2016
Net Loss	$	(1,479,425	)	$	(937,628	)	$	(3,505,090	)	$	(5,020,699	)
Weighted average number of common shares used in basic earnings per share		44,229,264			39,532,035			40,604,129			39,532,035
Effect of dilutive securities, stock options and warrants		-			-			-			-
Weighted average number of common shares and potentially dilutive securities		44,229,264			39,532,035			40,604,129			39,532,035

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For the nine months ended September 30, 2017, Parent had 455,000 options outstanding to purchase shares of common stock of Parent at $0.74 to $1.01 per share and Parent had 700,000 warrants outstanding to purchase shares of common stock of Parent at $0.81 to $1.65 per share, which were not included in the loss per share computation because their effect would be anti-dilutive.

For the nine months ended September 30, 2016, Parent had 1,046,000 options outstanding to purchase shares of common stock of Parent at $0.74 to $1.90 per share and Parent had 7,325,575 warrants outstanding to purchase shares of common stock of Parent at $0.81 to $4.06 per share, which were not included in the loss per share computation because their effect would be anti-dilutive.

NOTE 14 - STOCKHOLDERS' EQUITY

Common Stock -- Parent has 100,000,000 authorized shares of common stock, $0.001 par value. As of September 30, 2017 and December 31, 2016, respectively, there were 44,229,264 and 36,835,514 common shares issued and outstanding.

Voting -- Holders of Parent common stock are entitled to one vote for each share held of record on each matter submitted to a vote of stockholders, including the election of directors, and do not have any right to cumulate votes in the election of directors.

Dividends -- Subject to the rights and preferences of the holders of any series of preferred stock which may at the time be outstanding, holders of Parent common stock are entitled to receive ratably such dividends as our Board of Directors from time to time may declare out of funds legally available.

Liquidation Rights -- In the event of any liquidation, dissolution or winding-up of affairs of Parent, after payment of all of our debts and liabilities and subject to the rights and preferences of the holders of any outstanding shares of any series of our preferred stock, the holders of Parent common stock will be entitled to share ratably in the distribution of any of our remaining assets.

Other Matters -- Holders of Parent common stock have no conversion, preemptive or other subscription rights, and there are no redemption rights or sinking fund provisions with respect to the common stock. All of the issued and outstanding shares of common stock on the date of this report are validly issued, fully paid and non-assessable.

Preferred Stock -- Our Board of Directors has the authority to issue Parent preferred stock in one or more classes or series and to fix the designations, powers, preferences and rights, the qualifications, limitations or restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any class or series, without further vote or action by the stockholders. The issuance of Parent preferred stock may have the effect of delaying, deferring or preventing a change in control of us without further action by the stockholders and may adversely affect the voting and other rights of the holders of common stock.

Common Stock Cancelation

On December 31, 2016, the Company canceled 2,696,521 common shares of the previously issued common shares held in escrow issued in connection with the acquisition of all of the issued and outstanding capital stock of LiqTech Systems (formerly Provital Solutions A/S), as LiqTech Systems failed to meet 2014, 2015 and 2016 catchup gross revenue and EBITDA thresholds.

Common Stock Issuance

On April 13, 2015, Parent issued an additional 100,000 shares of restricted stock valued at $75,000 for services provided and to be provided to a member of the Board of Directors. The Company will recognize the non-cash compensation of the award over the requisite service period, of which 33,333 shares vested on January 1, 2016, 33,333 shares will vest on January 1, 2017 and 33,334 shares will vest on January 1, 2018.

On January 2, 2016, Parent issued an additional 27,253 shares of restricted stock valued at $20,167 for services provided by the Board of Directors. The Company will recognize the non-cash compensation of the award over the requisite service period. The shares vested immediately.

On January 2, 2017, Parent issued an additional 93,750 shares of restricted stock valued at $60,000 for services provided by the Board of Directors. The Company will recognize the non-cash compensation of the award over the requisite service period. The shares vested immediately.

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On May 19, 2017, Parent completed a private placement of its common stock. The Company issued 7,300,000 new shares at a price of $0.25 per share. The private placement was made directly by LiqTech and the Company plans to use the net proceeds of $1,825,000 for acceleration of its business in the marine scrubber industry.

For the nine months ended September 30, 2017 and 2016, the Company has recorded non-cash compensation expense of $78,750 and $58,250, respectively, relating to the vesting of restricted stock awards issued to the board of directors.

Common Stock Purchase Warrants

A summary of the status of the warrants outstanding at September 30, 2017 is presented below:

		Warrants Outstanding						Warrants Exercisable
Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	0.81		100,000		0.25	$	0.81		100,000	$	0.81
$	1.00		200,000		0.25	$	1.00		200,000	$	1.00
$	1.65		400,000		1.83	$	1.65		400,000	$	1.65
Total			700,000		1.15	$	1.34		700,000	$	1.34

At September 30, 2017, the Company had zero non-vested warrants. We have recorded non-cash compensation expense of $13,225 for the nine months ended September 30, 2017 related to the warrants issued.

The exercise price of the warrants and the number of shares underlying the warrants are subject to adjustment for stock dividends, subdivisions of the outstanding shares of common stock and combinations of the outstanding shares of common stock. For so long as the warrants remain outstanding, we are required to keep reserved from our authorized and unissued shares of common stock a sufficient number of shares to provide for the issuance of the shares of common stock underlying the warrants.

On February 15, 2016, the Company issued to LCL Finance Limited warrants to purchase 100,000 shares of common stock at an exercise price of $0.81 per share. The warrants are exercisable immediately and will remain exercisable until December 31, 2017.

Stock Options

In August 2011, Parent’s Board of Directors adopted a Stock Option Plan (the “Plan”). Under the terms and conditions of the Plan, the Board of Directors is empowered to grant stock options to employees, officers, and directors of the Company. At September 30, 2017, 455,000 options were granted and outstanding under the Plan.

The Company recognizes compensation costs for stock option awards to employees, during 2016, based on their grant-date fair value. The value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average assumptions used to estimate the fair values of the stock options granted using the Black-Scholes option-pricing model are as follows:

	LiqTech International, Inc.
Expected term (in years)		10
Volatility		76.87	%
Risk free interest rate		2.24	%
Dividend yield		0	%

The Company recognized stock based compensation expense related to the options of $58,038 and $272,665 for the nine months ended September 30, 2017 and 2016, respectively. At September 30, 2017, the Company had approximately $28,206 of unrecognized compensation cost related to non-vested options expected to be recognized through December 31, 2025.

A summary of the status of the options outstanding under the Plan at September 30, 2017 is presented below:

		Options Outstanding						Options Exercisable
Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	0.74		325,000		2.87	$	0.74		108,333	$	0.74
$	1.01		130,000		8.22	$	1.01		130,000	$	1.01
Total			455,000		4.40	$	0.82		238,333	$	0.89

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A summary of the status of the options at September 30, 2017, and changes during the period are presented below:

	September 30, 2017
	Shares			Weighted Average Exercise Price		Average Remaining Life		Weighted Average Intrinsic Value

Outstanding at beginning of period		868,000		$	1.10		3.41	$	-
Granted		-			-		-		-
Exercised		-			-		-		-
Forfeited		(175,000	)		0.75		-		-
Expired		(238,000	)		1.90		-		-
Outstanding at end of period		455,000		$	0.82		4.40	$	-
Vested and expected to vest		455,000		$	0.82		4.40	$	-
Exercisable end of period		238,333		$	0.89		5.79	$	-

At September 30, 2017, Parent had 216,667 non-vested options to purchase shares of Parent common stock with a weighted average exercise price of $0.74 and with a weighted average grant date fair value of $0.46, resulting in unrecognized compensation expense of $18,804, which is expected to be expensed over a weighted-average period of 0.5 years.

The total intrinsic value of options at September 30, 2017 was $0. Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) or at September 30, 2017 (for outstanding options), less the applicable exercise price.

NOTE 15 - SIGNIFICANT CUSTOMERS / CONCENTRATION

For the nine months ended September 30, 2017, our four largest customers accounted for approximately 13%, 12%, 9% and 5%, respectively, of our net sales (approximately 39% in total).

For the nine months ended September 30, 2016, the Company had two customers who account for 30% and 19%, respectively, of our net sales (approximately 49% in total).

The Company sells products throughout the world. Sales by geographical region are as follows for the three and nine months ended September 30, 2017 and 2016:

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2017		2016		2017		2016
United States and Canada	$	271,434	$	204,134	$	835,602	$	554,678
Australia		215,713		43,883		502,895		266,625
South America		-		-		-		81,480
Asia		253,460		427,511		1,379,607		649,295
Europe		1,715,877		3,013,983		5,632,654		9,786,739
	$	2,456,484	$	3,689,511	$	8,350,758	$	11,338,817

The Company’s sales by product line are as follows for the three and nine months ended September 30, 2017 and 2016:

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2017		2016		2017		2016
Ceramic diesel particulate	$	1,519,920	$	1,749,925	$	5,677,005	$	4,318,202
Liquid filters and systems		933,182		1,759,285		2,550,144		6,745,397
Kiln furniture		3,382		180,301		123,609		275,218
	$	2,456,484	$	3,689,511	$	8,350,758	$	11,338,817

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NOTE 16 – SUBSEQUENT EVENTS

On November 14, 2017, the Parent effected a private placement of 1,617,503 shares of preferred stock (1 to 4 conversion rate) or 6,470,012 ordinary shares of its common stock at a per share price of $1.20 per preferred share for aggregate proceeds to Parent of $1,941,203.60. Immediately prior to the closing of the private placement, Parent had 44,229,264 of its common stock issued and outstanding, and after the issuance of the 1,617,503 shares of preferred stock in the private placement, or 14.63% equivalent shares of the total shares of common stock issued and outstanding immediately prior to effecting the private placement, Parent has 1,617,503 preferred shares and 44,229,264 common shares issued and outstanding as of the date of this Report. The private placement was completed pursuant to Rule 506 of Regulation D and/or Regulation S of the Securities Act. In connection with the private placement, each investor executed a subscription agreement, which contains customary representations and warranties of Parent and of each investor. The private placement was made directly by Parent and no underwriter or placement agent was engaged by Parent.

Except as set forth above, the Company's management reviewed material events through November 14, 2017 and there were no other subsequent events.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report. In addition, the following discussion should be read in conjunction with our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 30, 2017, and the financial statements and notes thereto. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Overview

We are a clean technology company that provides state-of-the-art technologies for gas and liquid purification by manufacturing ceramic silicon carbide filters. For more than a decade, we have developed and manufactured products of re-crystallized silicon carbide. We specialize in two business areas: ceramic membranes for liquid filtration and diesel particulate filters (DPFs) for the control of soot exhaust particles from diesel engines. We are phasing out the fabrication of kiln furniture for the refractory industry. Using nanotechnology, we develop proprietary products using patented silicon carbide technology. Our products are based on unique silicon carbide membranes which facilitate new applications and improve existing technologies. We market our products from our offices in the United States and Denmark, and through local representatives. The products are shipped directly to customers from our production facilities in the United States and Denmark.

The terms “LiqTech”, “we”, “our”, “us”, the “Company” or any derivative thereof, as used herein refer to LiqTech International, Inc., a Nevada corporation, together with its direct and indirect wholly owned subsidiaries, including LiqTech USA, Inc., a Delaware corporation (“LiqTech USA”), which owns all of the outstanding equity interest in LiqTech International A/S, a Danish limited company, organized under the Danish Act on Limited Companies of the Kingdom of Denmark (“LiqTech Int. DK”), together with its direct wholly owned subsidiary LiqTech Systems A/S, a Danish limited company, organized under the Danish Act on Limited Companies of the Kingdom of Denmark (“LiqTech Systems”) and LiqTech NA, Inc., a Delaware corporation (“LiqTech Delaware”). Collectively, LiqTech USA, LiqTech Int. DK, LiqTech Systems and LiqTech Delaware are referred to herein as our “Subsidiaries”.

We conduct operations in the Kingdom of Denmark and the United States. Our Danish operations are located in the Copenhagen area and in Hobro in Jutland, Denmark, and our U.S. operations are conducted by LiqTech Delaware located in White Bear Lake, Minnesota.

Going Concern

Our Strategy

Our strategy is to create stockholder value by leveraging our competitive and strengths and focusing on the opportunities in the end-markets we serve. Key features of our strategy include:

●

Enter New Geographic Markets and Expand Existing Markets. We plan to continue to manufacture and sell our products out of Denmark and the United States. We intend to continue to develop our organization in Denmark and the United States and we plan to expand our production facilities in the United States to include manufacturing of systems. We have opened sales offices in France and in Italy. In addition to utilizing local representatives, we intend to establish sales outlets with technical support in other European nations, while expanding our presence in Asia. We intend to work with agents and partners to access such markets.

●

Continue to Strengthen Position in DPF Market. We believe that we have a strong position in the retrofit market for diesel particulate filter (DPF) systems. We intend to continue our efforts to maintain our strength in this area. Furthermore, we intend to leverage our experience in the OEM market and expand our presence in the OEM market with new products relating to DPF systems.

●

Continue to Develop and Improve Technologies and Open New End Markets. We intend to continuously develop our ceramic membranes and improve the filtration efficiency for our filtration products. Through continuous development, we intend to find new uses for our products and plan to expand into any new markets that we believe would be appropriate for our Company. One of our key strategies is to develop our membrane applications together with our customers including, for example, the development of the next generation of DPFs with asymmetric design for the OEM market.

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●

Continue Our Focus on Selling and on Development New Standard Units. We will continue our focus on selling systems based on our unique SiC membranes. We will also combine the ceramic membranes with other technologies to be able to offer our customers a complete solution. We will continue our focus to develop smaller standard systems, like our ground water treatment unit and our residential swimming pool units. These units will be sold through a network of agents and partnerships.

Developments

Signed Contracts

On January 5, 2017, we announced that we and Grundfos Biobooster A/S (Grundfos) have signed a framework agreement for the delivery of silicon carbide ceramic discs. The agreement has a minimum value of $450,000 and an initial term of 2 years. The ceramic discs will be used in Grundfos´s Ultra Filtration systems for water re-use.

On January 17, 2017, we announced that we had received a $120,000 order for the Company´s water treatment systems for flue gas condensate. The order was received from Tjæreborg Industri A/S, a Danish company who specializes in the development and manufacturing of equipment for power plants. The system has been installed at Uldum Varmeværk, Denmark in 2017.

On March 1, 2017, we announced that due to regulatory issues it has not been feasible for Hunan Yonker Investment Group (Yonker) to complete the agreed investment in LiqTech before the deadline of February 28, 2017. The parties amended the Investment Agreement and the deadline for completion of the US$4,000,000 investment in LiqTech was extended to April 15, 2017, however Yonker subsequently informed the Company that the National Development and Reform Commission (NDRC) was still reviewing and verifying the submitted documents.

On April 17, 2017, we announced that we had received a $480,000 order for the Company´s standardized systems for treatment of waste water from marine scrubbers.

On April 17, 2017, we announced that we had been informed by Hunan Yonker Investment Group (Yonker) that they had completed the mandatory due diligence process related to earlier announced USD 4 million investment in LiqTech.

Yonker further confirmed that the final application has been submitted to the National Development and Reform Commission (NDRC) and now awaits the formal approval.

On May 15, 2017, we announced that we had received a $380,000 order for the Company´s system for treatment of waste water from marine scrubbers. The order is from a new customer and includes an option for further two systems.

On May 19, 2017, we announced that we had received subscription agreements for 7,300,000 new shares at a price of $0.25 per share. The private placement was made directly by LiqTech and the Company plans to use the net proceeds of $1,825,000 million for acceleration of its business in the marine scrubber industry.

On June 8, 2017, we announced that we had been informed by Hunan Yonker Investment Group (Yonker) that its application for a USD 4 million investment in LiqTech has been declined by the National Development and Reform Commission (NDRC).

On June 14, 2017, we announced that we had received a $290,000 order for the Company´s system for treatment of waste water from marine scrubbers.

On August 28, 2017, we announced that we had received two new orders for the Company's systems for treatment of waste water from marine scrubbers.

Results of Operations

The financial information below is derived from our unaudited condensed consolidated financial statements included elsewhere in this report.

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The following table sets forth our revenues, expenses and net income for the three months ended September 30, 2017 and 2016:

	Three Months Ended September 30,
													Period to Period Change
	2017			As a % of Sales			2016			As a % of Sales			US$			Percent %
Net Sales		2,456,484			100	%		3,689,511			100	%		(1,233,027	)		(33.4	)
Cost of Goods Sold		2,772,451			112.9			3,303,042			89.5			(530,591	)		(16.1	)
Gross Profit		(315,967	)		(12.9	)		386,469			10.5			(702,436	)		(181.8	)

Operating Expenses
Selling expenses		521,627			21.2			558,105			15.1			(36,478	)		(6.5	)
General and administrative expenses		433,368			17.6			498,358			13.5			(64,990	)		(13.0	)
Non-cash compensation expenses		24,055			1.0			104,416			2.8			(80,361	)		(77.0	)
Research and development expenses		121,680			5.0			124,165			3.4			(2,485	)		(2.0	)
Total Operating Expenses		1,100,730			44.8			1,285,044			34.8			(184,314	)		(14.3	)

Loss from Operating		(1,416,697	)		(57.7	)		(898,575	)		(24.4	)		(518,122	)		57.7

Other Income (Expense)
Interest and other income		2,790			0.1			-			-			2,790			-
Interest (expense)		(3,781	)		(0.2	)		(7,347	)		(0.2	)		3,566			(48.5	)
Loss on currency transactions		(26,913	)		(1.1	)		(14,060	)		(0.4	)		(12,853	)		91.4
Loss on sale of fixed assets		(34,824	)		(1.4	)		-			-			(34,824	)		-
Total Other Income (Expense)		(62,728	)		(2.6	)		(21,407	)		(0.6	)		(41,321	)		193.0

Loss Before Income Taxes		(1,479,425	)		(60.2	)		(919,982	)		(24.9	)		(559,443	)		60.8
Income Taxes Expense		-			-			17,646			0.5			(17,646	)		(100.0	)

Net Loss		(1,479,425	)		(60.2	)		(937,628	)		(25.4	)		(541,797	)		57.8

	Nine Months Ended September 30,
													Period to Period Change
	2017			As a % of Sales			2016			As a % of Sales			$			Percent %
Net Sales		8,350,758			100	%		11,338,817			100	%		(2,988,059	)		(26.4	)
Cost of Goods Sold		8,202,634			98.2			9,078,036			80.1			(875,402	)		(9.6	)
Gross Profit		148,124			1.8			2,260,781			19.9			(2,112,657	)		(93.4	)

Operating Expenses
Selling expenses		1,506,369			18.0			1,661,352			14.7			(154,983	)		(9.3	)
General and administrative expenses		1,518,935			18.2			1,830,260			16.1			(311,325	)		(17.0	)
Non-cash compensation expenses		150,013			1.8			377,140			3.3			(227,127	)		(60.2	)
Research and development expenses		375,026			4.5			476,734			4.2			(101,708	)		(21.3	)
Total Operating Expenses		3,550,343			42.5			4,345,486			38.3			(795,143	)		(18.3	)

Loss from Operating		(3,402,219	)		(40.7	)		(2,084,705	)		(18.4	)		(1,317,514	)		63.2

Other Income (Expense)
Interest and other income		3,093			0.0			0			0.0			3,093			-
Interest expense		(23,308	)		(0.3	)		(23,843	)		(0.2	)		535			(2.2	)
Loss on currency transactions		(54,600	)		(0.7	)		(26,219	)		-0.2			(28,381	)		108.2
Gain on sale of fixed assets		(28,056	)		(0.3	)		0			0.0			(28,056	)		-
Total Other Expense		(102,871	)		(1.2	)		(50,062	)		(0.4	)		(52,809	)		105.5

Loss Before Income Taxes		(3,505,090	)		(42.0	)		(2,134,767	)		(18.8	)		(1,370,323	)		64.2
Income Taxes Expense		-			-			2,885,932			25.5			(2,885,932	)		(100.0	)

Net Loss		(3,505,090	)		(42.0	)		(5,020,699	)		(44.3	)		1,515,609			(30.2	)

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Comparison of the Three Months Ended September 30, 2017 and September 30, 2016

Revenues

Net sales for the three months ended September 30, 2017 were $2,456,484 compared to $3,689,511 for the same period in 2016, representing a decrease of $1,233,027 or 33.4%. The decrease in sales consisted of a decrease in sales of liquid filters and systems of $826,103, a decrease in sales of DPFs of $230,005 and a decrease in sales of kiln furniture of $176,919. The decrease in demand for our liquid filters and systems is mainly due to a delay in certain business opportunities compared to the same period last year where various projects were realized. The decrease in demand for our DPFs is mainly due to a decrease in market activity in general compared to the same period last year. The decrease in demand for our kiln furniture is due to the decision that we will not focus on this product line anymore and expect very limited activity going forward.

Gross Profit

Gross loss for the three months ended September 30, 2017 was $315,967 compared to a gross profit of $386,469 for same period in 2016, representing a decrease of $702,436 or 181.8%. The decrease in gross profit was due to low sales activity compared to our fixed cost of goods sold. Included in gross profit is depreciation of $268,872 and $325,990 for the three months ended September 30, 2017 and 2016, respectively.

Expenses

Total operating expenses for the three months ended September 30, 2017 were $1,100,730 representing a decrease of $184,314 or 14.3%, compared to $1,285,044 for the same period in 2016. This decrease in operating expenses is attributable to an decrease in selling and marketing expenses of $36,478, or 6.5%, a decrease in general and administrative expenses of $64,990, or 13.0%, a decrease in non-cash compensation expenses of $80,361, or 77.0% and a decrease in research and development expenses of $2,485, or 2.0%, compared to the same period in 2016.

Selling expenses for the three months ended September 30, 2017 were $521,627 compared to $558,105 for the same period in 2016, representing a decrease of $36,478, or 6.5%. This decrease is attributable to a cost reduction in selling expenses in general and a centralization of the sales structure for the three months ending September 30, 2017 compared to the same period in 2016.

General and administrative expenses for the three months ended September 30, 2017 were $433,368 compared to $498,358 for the same period in 2016, representing a decrease of $64,990, or 13.0%. This decrease is attributable to a general cost reduction in general and administrative expenses for the three months ending September 30, 2017 compared to the same period in 2016.

Non-cash compensation expenses for the three months ended September 30, 2017 were $24,055 compared to $104,416 for the same period in 2016, representing a decrease of $80,361, or 77.0%. This decrease is attributable to decreased non-cash compensation expense for options, shares and warrants for services performed granted to directors, employees and management compared to the same period in 2016.

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

	For the Three Months Ended
	September 30,		September 30,
	2017		2016
Compensation upon vesting of stock options granted to employees	$	13,397	$	80,591
Compensation for vesting of restricted stock awards issued to the board of directors		6,250		19,417
Value of Warrants granted for services		4,408		4,408
Total Non-Cash Compensation	$	24,055	$	104,416

Research and development expenses for the three months ended September 30, 2017 were $121,680 compared to $124,165 for the same period in 2016, representing a decrease of $2,485, or 2.0%. This decrease is attributable to a cost reduction in research and development expenditures in general for the three months ending September 30, 2017 compared to the same period in 2016.

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Net Income

Net loss for the three months ended September 30, 2017 was a loss of $1,479,425 compared to a loss of $937,628 for the comparable period in 2016, representing an increase of $541,797, or 57.8%. This increase was primarily attributable to lower gross profit for the three months ending September 30, 2017 compared to the same period in 2016. This was partially offset by a decrease in total operating expenses for the three months ending September 30, 2017 compared to the same period in 2016.

Comparison of the Nine Months Ended September 30, 2017 and September 30, 2016

Revenues

Net sales for the nine months ended September 30, 2017 were $8,350,758 compared to $11,338,817 for the same period in 2016, representing a decrease of 2,988,059 or 26.4%. The decrease in sales consisted of a decrease in sales of liquid filters and systems of $4,195,253, a decrease in sales of kiln furniture of $151,609 offset by an increase in sales of DPFs of $1,358,803. The decrease in demand for our liquid filters and systems is mainly due to a delay in certain business opportunities compared to the same period last year where various projects were realized. The increase in demand for our DPFs is mainly due to an increase in market activities compared to the same period last year. The decrease in demand for our kiln furniture is due to the decision that we will not focus on this product line anymore and expect very limited activity going forward.

Gross Profit

Gross profit for the nine months ended September 30, 2017 was $148,124 compared to a gross profit of $2,260,781 for same period in 2016, representing a decrease of $2,112,657 or 93.4%. The decrease in gross profit was due to lower sales activity in general, lower gross margin and due to lower sales activity for our liquid filters and systems, which historically have a higher gross margin, compared to the same period in 2016. Included in gross profit is depreciation of $732,963 and $995,687 for the nine months ended September 30, 2017 and 2016, respectively.

Expenses

Total operating expenses for the nine months ended September 30, 2017 were $3,550,343 representing a decrease of $795,143 or 18.3%, compared to $4,345,486 for the same period in 2016. This decrease in operating expenses is attributable to a decrease in selling and marketing expenses of $154,983, or 9.3%, a decrease in general and administrative expenses of $311.325, or 17.0%, a decrease in non-cash compensation expenses of $227,127, or 60.2% and a decrease in research and development expenses of $101,708, or 21.3%, compared to the same period in 2016.

Selling expenses for the nine months ended September 30, 2017 were $1,506,369 compared to $1,661,352 for the same period in 2016, representing a decrease of $154,983, or 9.3%. This decrease is attributable to a cost reduction in selling expenses in general and a centralization of the sales structure for the nine months ending September 30, 2017 compared to the same period in 2016.

General and administrative expenses for the nine months ended September 30, 2017 were $1,518,935 compared to $1,830,260 for the same period in 2016, representing a decrease of $311,325, or 17.0%. This decrease is attributable to a general cost reduction in general and administrative expenses for the nine months ending September 30, 2017 compared to the same period in 2016.

Non-cash compensation expenses for the nine months ended September 30, 2017 were $150,013 compared to $377,140 for the same period in 2016, representing a decrease of $227,127, or 60.2%. This decrease is attributable to decreased non-cash compensation expense for options, shares and warrants for services performed granted to directors, employees and management compared to the same period in 2016.

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

	For the Nine Months Ended
	September 30,		September 30,
	2017		2016
Compensation upon vesting of stock options granted to employees	$	58,038	$	272,665
Compensation for vesting of restricted stock awards issued to the board of directors		78,750		58,250
Value of Warrants granted for services		13,225		46,225
Total Non-Cash Compensation	$	150,013	$	377,140

Research and development expenses for the nine months ended September 30, 2017 were $375,026 compared to $476,734 for the same period in 2016, representing a decrease of $101,708, or 21.3%. This decrease is attributable to a cost reduction in research and development expenditures in general for the nine months ending September 30, 2017 compared to the same period in 2016.

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Net Income

Net loss for the nine months ended September 30, 2017 was a loss of $3,505,090 compared to a loss of $5,020,699 for the comparable period in 2016, representing a decrease in net loss of $1,515,609, or 30.2%. This decrease in net loss was primarily attributable to a tax expense of $2,868,286 in 2016 and a decrease in total operating expenses offset by a decrease in gross profit compared to same period in 2016.

Liquidity and Capital Resources

We have historically satisfied our capital and liquidity requirements through offerings of equity instruments, internally generated cash from operations and our available lines of credit. At September 30, 2017, the Company did not have any available lines of credit with any lender. At September 30, 2017, we had cash of $528,566 and working capital of $2,816,713 and at December 31, 2016, we had cash of $1,208,650 and working capital of $3,497,578. At September 30, 2017, our working capital decreased by $680,865 compared to December 31, 2016. Total current assets were $8,065,285 and $8,506,321 at September 30, 2017 and at December 31, 2016, respectively, and total current liabilities were $5,248,572 and $5,008,743 at September 30, 2017 and at December 31, 2016, respectively.

On May 19, 2017, the Parent completed a private placement of 7,300,000 shares of its common stock at a per share price of $0.25 for aggregate proceeds to Parent of $1,825,000. Immediately prior to the closing of the private placement, Parent had 36,929,264 of its common stock issued and outstanding, and after the issuance of the 7,300,000 shares of common stock in the private placement, or 19.8% of the total shares of common stock issued and outstanding immediately prior to the closing of the private placement, Parent has 44,229,264 shares issued and outstanding as of the date of this Report. The private placement was completed pursuant to Section 4(a)(2) of the Securities Act and/or Regulation S promulgated under the Securities Act. In connection with the private placement, each investor executed a subscription agreement, which contains customary representations and warranties of Parent and of each investor. The private placement was made directly by Parent and no underwriter or placement agent was engaged by Parent.

We will need additional funds to sustain our business. We may raise such funds from time to time through public or private sales of equity or debt securities. Financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could materially adversely impact our financial condition and results of operations. Additional equity financing may be dilutive to holders of our common stock, and debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate our business. In the event that the Company is unable to raise funds, there is substantial doubt about the ability of the Company to continue as a going concern.

Cash Flows

Nine months ended September 30, 2017 Compared to nine months ended September 30, 2016

Cash provided (used) by operating activities is net income (losses) adjusted for certain non-cash items and changes in assets and liabilities. Cash used by operating activities for the nine months ended September 30, 2017 was $2,700,581, representing an increase of $1,597,902 compared to cash used by operating activities of $1,102,679 for the nine months ended September 30, 2016. The $1,597,902 increase in cash used by operating activities for the nine months ended September 30, 2017 was mainly due to a loss of $3,505,090 adjusted for no cash items, an increase of $478,879 in accounts receivable and a decrease of $202,066 in long-term contracts. This was partially offset by a decrease of $238,986 in inventory, an increase of $27,657 in accounts payable and an increase of $340,371 in accrued expenses.

The increase in in accounts receivable, the increase in accrued expenses, the increase in accounts payable, the decrease in inventory and the decrease in long-term, were all due to normal variations in the ordinary course of business.

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Cash used in investing activities was $82,123 for the nine months ended September 30, 2017, as compared to cash used in investing activities of $129,411 for the nine months ended September 30, 2016. Cash used in investing activities decreased by $47,288 for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016. This decrease was due to a period over period decrease of $34,461 in the purchase of property and proceeds from sale of property and equipment of $12,827.

Cash provided by financing activities was $1,707,690 for the nine months ended September 30, 2017, as compared to cash used by financing activities of $133,776 for the nine months ended September 30, 2016. This change of $1,841,466 in cash provided by financing activities for the nine months ended September 30, 2017, compared to 2016, was mainly due to cash received in connection with the private placement on May 19, 2017 where the Company raised $1,825,000 with no offering costs issuing 7,300,000 shares of common stock.

Off Balance Sheet Arrangements

As of September 30, 2017, we had no off-balance sheet arrangements other than normal operating leases. We are not aware of any material transactions, which are not disclosed in our consolidated financial statements.

Operating Leases -- The Company leases office and production facilities under operating lease agreements expiring in March 2021, August 2018, May 2018, and September 2017, In some of these lease agreements, the Company has the right to extend.

The future minimum lease payments for non-cancelable operating leases having remaining terms in excess of one year as of September 30, 2017 are as follows:

Year ending December 31,	Lease Payments
2017		162,739
2018		467,758
2019		179,094
2020		182,676
2021		30,546
Thereafter		-
Total Minimum Lease Payments	$	1,022,813

Significant Accounting Policies and Critical Accounting Estimates

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. 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:

	●	the assessment of collectability of accounts receivable, which impacts operating expenses when and if we record bad debt or adjust the allowance for doubtful accounts;
	●	the assessment of recoverability of long-lived assets, which impacts gross margin or operating expenses when and if we record asset impairments or accelerate their depreciation;
	●	the recognition and measurement of current and deferred income taxes (including the measurement of uncertain tax positions), which impact our provision for taxes;
	●	the valuation of inventory, which impacts gross margin; and
	●	the recognition and measurement of loss contingencies, which impact gross margin or operating expenses when we recognize a loss contingency, revise the estimate for a loss contingency, or record an asset impairment,

Recently Enacted Accounting Standards

For a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see “Note 1: Recently Enacted Accounting Standards” in the accompanying Financial Statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

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ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our management, under supervision and with the participation of both of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this report (the “Evaluation Date”). Based upon that evaluation, both of our Chief Executive Officer and Chief Financial Officer concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.　

(b) Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Not required for a “smaller reporting company.”

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

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ITEM 6.	EXHIBITS

4.1	Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock of LiqTech International, Inc.	Filed herewith

10.1	Form of Subscription Agreement (Regulation S)	Filed herewith

10.2	Form of Subscription Agreement (Section 4(a)(2)/Regulation D)	Filed herewith

31.1	Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

31.2	Certifications of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

32.1	Certification Pursuant To 18 U,S,C, Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002	Furnished herewith

32.2	Certification Pursuant To 18 U,S,C, Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002	Furnished herewith

101. INS	XBRL Instance Document	Filed herewith

101. CAL	XBRL Taxonomy Extension Calculation Link base Document	Filed herewith

101. DEF	XBRL Taxonomy Extension Definition Link base Document	Filed herewith

101. LAB	XBRL Taxonomy Label Link base Document	Filed herewith

101. PRE	XBRL Extension Presentation Link base Document	Filed herewith

101. SCH	XBRL Taxonomy Extension Scheme Document	Filed herewith

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		LiqTech International, Inc.

Dated: November 14, 2017		/s/ Sune Mathiesen
		Sune Mathiesen, Chief Executive Officer
		(Principal Executive Officer)


Dated: November 14, 2017		/s/ Soren Degn
		Soren Degn, Chief Financial Officer
		(Principal Financial and Accounting Officer)

LIQTECH INTERNATIONAL INC - FORM 10-Q - November 14, 2017

Attached files

LIQTECH INTERNATIONAL INC Reports