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 ~~month~~months period ended September 30, ~~2021~~2022

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

For the transition period from ~~_______________________~~ to ~~_______________________~~ to

Commission File Number: 001-36210

LiqTech International, Inc.

(Exact name of registrant as specified in its charter)

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

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

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

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

Title of each class

Trading symbol(s)

Name of each exchange on which

registered

Common Stock, $0.001 par value

LIQT

The Nasdaq Stock Market LLC

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

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

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

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

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

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

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

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

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

As of November ~~15, 2021,~~10, 2022, there were ~~21,285,706~~43,896,871 shares of common stock, $0.001 par value per share, outstanding.

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 COVID-19 pandemic, related supply chain disruptions, inflationary pressure, macro-economic uncertainty, 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~~Considering 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:

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.

	As of		As of		As of		As of
	September 30,		December 31,		September 30,		December 31,
	2021		2020		2022		2021
	(Unaudited)				(Unaudited)
Assets

Current Assets:
Cash and restricted cash	$	20,692,339	$	13,264,449	$	17,605,377	$	17,489,380
Accounts receivable, net of allowance for doubtful accounts of $519,157 and $498,044 at September 30, 2021 and December 31, 2020, respectively		2,233,586		3,129,109
Inventories, net of allowance for excess and obsolete inventory of $622,215 and $723,949 at September 30, 2021 and December 31, 2020, respectively		5,117,362		5,522,038
Accounts receivable, net of allowance for doubtful accounts of $161,311 and $409,076 at September 30, 2022 and December 31, 2021, respectively						2,843,864		1,957,579
Inventories, net of allowance for excess and obsolete inventory of $578,076 and $268,470 at September 30, 2022 and December 31, 2021, respectively						4,657,188		5,421,027
Contract assets		1,939,107		2,708,136		2,078,472		1,906,510
Prepaid expenses and other current assets		686,112		1,031,194		2,653,978		1,292,285

Total Current Assets		30,668,506		25,654,926		29,838,879		28,066,781

Long-Term Assets:
Property and equipment, net of accumulated depreciation of $8,337,314 and $8,908,145 at September 30, 2021 and December 31, 2020, respectively		9,345,299		10,321,511
Property and equipment, net of accumulated depreciation of $7,848,569 and $7,554,803 at September 30, 2022 and December 31, 2021, respectively						6,877,185		8,858,993
Operating lease right-of-use assets		7,246,422		4,947,734		3,119,806		6,925,807
Deposits and other assets		517,847		545,673		390,634		628,109
Intangible assets, net of accumulated amortization of $336,961 and $269,441 at September 30, 2021 and December 31, 2020, respectively		370,012		480,060
Intangible assets, net of accumulated amortization of $376,954 and $357,231 at September 30, 2022 and December 31, 2021, respectively						218,190		334,743
Goodwill		245,467		260,233		206,639		240,259

Total Long-Term Assets		17,725,047		16,555,211		10,812,454		16,987,911

Total Assets	$	48,393,553	$	42,210,137	$	40,651,333	$	45,054,692

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

	As of			As of			As of			As of
	September 30,			December 31,			September 30,			December 31,
	2021			2020			2022			2021
	(Unaudited)						(Unaudited)
Liabilities and Stockholders’ Equity

Current Liabilities:
Accounts payable	$	2,023,985		$	2,332,151		$	1,617,452		$	1,646,662
Accrued expenses		4,363,370			4,908,961			3,447,107			4,685,665
Current portion of finance lease obligations		379,726			394,839			321,788			373,824
Current portion of operating lease liabilities		781,235			1,026,235			511,240			846,544
Current portion of convertible note payable		5,880,000			0
Current portion of Convertible Note payable								-			8,400,000
Contract liabilities		908,172			1,152,748			635,167			914,828

Total Current Liabilities		14,336,488			9,814,934			6,532,754			16,867,523

Convertible note payable, net of discount of $2,504,462 and $0 at September 30, 2021 and December 31, 2020, respectively		8,415,538			0

Deferred tax liability		245,262			305,167			154,478			224,779
Other liabilities, net of current portion		564,621			0			-			346,939
Finance lease obligations, net of current portion		2,650,139			3,112,496			1,911,361			2,499,591
Operating lease liabilities, net of current portion		6,485,282			4,159,225			2,608,566			6,154,064
Senior Promissory Notes, net								5,395,240			-
Convertible Note payable, less current portion								-			6,186,936

Total Long-term Liabilities		18,360,842			7,576,888			10,069,645			15,412,309

Total Liabilities		32,697,330			17,391,822			16,602,399			32,279,832


Stockholders' Equity:
Series A Convertible Preferred stock; par value $0.001, 2,500,000 shares authorized, 0 shares issued and outstanding at September 30, 2021 and December 31, 2020		-			-
Common stock; par value $0.001, 100,000,000 shares authorized, 21,285,706 and 21,655,461 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		21,285			21,655
Preferred stock; par value $0.001, 2,500,000 shares authorized, 0 shares issued and outstanding at September 30, 2022 and December 31, 2021								-			-
Common stock; par value $0.001, 100,000,000 shares authorized, 43,896,871 and 21,285,706 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively								43,896			21,285
Additional paid-in capital		70,784,780			69,897,698			96,785,016			70,910,902
Accumulated deficit		(50,516,461	)		(42,054,968	)		(65,188,075	)		(53,181,928	)
Accumulated other comprehensive loss		(4,593,381	)		(3,046,070	)		(7,591,903	)		(4,975,399	)

Total Stockholders' Equity		15,696,223			24,818,315			24,048,934			12,774,860

Total Liabilities and Stockholders' Equity	$	48,393,553		$	42,210,137		$	40,651,333		$	45,054,692

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

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2021			2020			2021			2020			2022			2021			2022			2021

Revenue	$	4,142,954		$	3,543,730		$	12,157,394		$	18,467,057		$	3,305,534		$	4,142,954		$	11,961,062		$	12,157,394
Cost of goods sold		3,946,732			3,852,210			11,525,847			15,641,998
Cost of Goods Sold														3,198,255			3,946,732			11,460,102			11,525,847

Gross Profit		196,222			(308,480	)		631,547			2,825,059			107,279			196,222			500,960			631,547

Operating Expenses:
Selling expenses		1,205,849			741,738			3,417,933			2,024,485			676,420			1,205,849			2,932,881			3,417,933
General and administrative expenses		1,102,772			1,526,327			3,824,574			4,585,857			1,429,315			1,102,772			4,611,375			3,824,574
Research and development expenses		497,823			256,239			1,370,059			883,752			283,524			497,823			1,377,097			1,370,059
Restructuring costs														(1,964	)		-			1,786,863			-

Total Operating Expense		2,806,444			2,524,304			8,612,566			7,494,094			2,387,295			2,806,444			10,708,216			8,612,566

Loss from Operations		(2,610,222	)		(2,832,784	)		(7,981,019	)		(4,669,035	)		(2,280,016	)		(2,610,222	)		(10,207,756	)		(7,981,019	)

Other Income (Expense)
Interest and other income		0			8,164			0			12,901			1,870			-			344,593			-
Gain on modification of earn-out liability		0			301,573			0			301,573
Interest expense		(235,318	)		(41,388	)		(491,335	)		(102,926	)		(28,514	)		(235,318	)		(394,532	)		(491,335	)
Amortization discount on convertible note		(292,129	)		0			(543,933	)		0
Fair value adjustment of warrants		0			(664,350	)		0			(901,250	)
Amortization discount on Notes														(84,098	)		(292,129	)		(2,304,054	)		(543,933	)
Gain (Loss) on currency transactions		218,030			(660,747	)		506,018			(821,681	)		628,137			218,030			361,928			506,018
Gain on lease termination														(3,317	)		-			150,258			-
Gain on sale of fixed assets		(8	)		0			1,126			0			(19	)		(8	)		642			1,126

Total Other Income (Expense)		(309,425	)		(1,056,748	)		(528,124	)		(1,511,383	)		514,059			(309,425	)		(1,841,165	)		(528,124	)

Loss Before Income Taxes		(2,919,647	)		(3,889,532	)		(8,509,143	)		(6,180,418	)		(1,765,957	)		(2,919,647	)		(12,048,421	)		(8,509,143	)

Income Tax Benefit		(15,691	)		(16,113	)		(47,650	)		(46,687	)		(13,293	)		(15,691	)		(42,274	)		(47,650	)

Net Loss	$	(2,903,956	)	$	(3,873,419	)	$	(8,461,493	)	$	(6,133,731	)	$	(1,752,664	)	$	(2,903,956	)	$	(12,006,147	)	$	(8,461,493	)


Basic and Diluted Loss Per Share	$	(0.13	)	$	(0.18	)	$	(0.39	)	$	(0.29	)	$	(0.04	)	$	(0.13	)	$	(0.37	)	$	(0.39	)

Basic and Diluted Weighted Average Common Shares Outstanding		21,540,688			21,653,514			21,661,945			21,059,251			43,891,799			21,769,461			32,529,152			21,661,945

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

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2021			2020			2021			2020			2022			2021			2022			2021

Net Loss		(2,903,956	)		(3,873,419	)		(8,461,493	)		(6,133,731	)		(1,752,664	)		(2,903,956	)		(12,006,147	)		(8,461,493	)

Other Comprehensive Income - Currency Translation, Net		(603,894	)		1,422,294			(1,547,311	)		1,666,112
Other Comprehensive Loss - Currency Translation, Net														(1,646,038	)		(603,894	)		(2,616,504	)		(1,547,311	)

Total Comprehensive Loss	$	(3,507,850	)	$	(2,451,125	)	$	(10,008,804	)	$	(4,467,619	)	$	(3,398,702	)	$	(3,507,850	)	$	(14,622,651	)	$	(10,008,804	)

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

For the period ended September 30, ~~2021~~2022 and September 30, ~~2020~~2021

							Additional						Accumulated Other																		Accumulated Other
	Common Stock						Paid-in			Accumulated			Comprehensive												*Additional*						*Compre-*
																			*Common Stock*						*Paid-in*			*Accumulated*			*hensive*
																			*Shares*			*Amount*			*Capital*			*Deficit*			*Income/(Loss)*			*TOTAL*

BALANCE, December 31, 2021																				21,285,706			21,285			70,910,092			(53,181,928	)		(4,975,399	)		12,774,860

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

Stock-based compensation																										178,778									178,778

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

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

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

Common shares issued for cash at $0.50 per share, net of offering cost of $1,996,469, in May 2022																				22,535,850			22,536			24,430,992									24,453,528

Warrants issued in connection with Senior Promissory Notes																										664,704									664,704

Stock-based compensation																										221,472									221,472

Currency translation, net																																(614,575	)		(614,575	)

Net Loss																													(6,507,059	)					(6,507,059	)

BALANCE, June 30, 2022																				43,888,538			43,888			96,406,781			(63,435,411	)		(5,945,865	)		27,069,393

Common stock issued in settlement of RSUs																				8,333			8			(8	)								-

Adjustment to warrants issued in connection with Senior Promissory Notes																										(3,868	)								(3,868	)

Stock-based compensation																										382,111									382,111

Currency translation, net																																(1,646,038	)		(1,646,038	)

Net Loss																													(1,752,664	)					(1,752,664	)

BALANCE, September 30, 2022																				43,896,871			43,896			96,785,016			(65,188,075	)		(7,591,903	)		24,048,934
	Shares			Amount			Capital			Deficit			Income/(Loss)			TOTAL
BALANCE, December 31, 2020		21,655,461			21,655			69,897,698			(42,054,968	)		(3,046,070	)		24,818,315			21,655,461			21,655			69,897,698			(42,054,968	)		(3,046,070	)		24,818,315

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

Stock-based compensation								102,388									102,388									102,388									102,388

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

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

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

Common stock issued as commitment fee for Convertible Note		80,000			80			531,649									531,729			80,000			80			531,649									531,729

Stock-based compensation								125,076									125,076									125,076									125,076

Currency translation, net														368,104			368,104															368,104			368,104

Net Loss											(3,098,108	)					(3,098,108	)											(3,098,108	)					(3,098,108	)

BALANCE, June 30, 2021		21,777,373			21,777			70,656,769			(47,612,505	)		(3,989,487	)		19,076,554			21,777,373			21,777			70,656,769			(47,612,505	)		(3,989,487	)		19,076,554

Common stock issued in settlement of RSUs		8,333			8			(8	)								-			8,333			8			(8	)								-

Exchange of common stock to prefunded warrants		(500,000	)		(500	)		500									-			(500,000	)		(500	)		500									-

Stock-based compensation								127,519									127,519									127,519									127,519

Currency translation, net														(603,894	)		(603,894	)														(603,894	)		(603,894	)

Net Loss											(2,903,956	)					(2,903,956	)											(2,903,956	)					(2,903,956	)

BALANCE, September 30, 2021		21,285,706			21,285			70,784,780			(50,516,461	)		(4,593,381	)		15,696,223			21,285,706			21,285			70,784,780			(50,516,461	)		(4,593,381	)		15,696,223


BALANCE, December 31, 2019		20,547,668			20,548			61,398,150			(32,246,608	)		(6,166,559	)		23,005,531

Common stock issued in settlement of RSUs		8,212			8			44,992									45,000

Stock-based compensation								96,222									96,222

Currency translation, net														(495,959	)		(495,959	)

Net Income											303,499						303,499

BALANCE, March 31, 2020		20,555,880			20,556			61,539,364			(31,943,109	)		(6,662,518	)		22,954,293

Common stock issued in settlement of RSUs		8,333			8			(8	)								-

Common shares issued for cash at $5.00 per share, net of offering cost of $680,952		1,085,000			1,085			4,742,963									4,744,048

Stock-based compensation								82,335									82,335

Currency translation, net														739,777			739,777

Net Loss											(2,563,811	)					(2,563,811	)

BALANCE, June 30, 2020		21,649,213			21,649			66,364,654			(34,506,920	)		(5,922,741	)		25,956,642

Prefunded warrants, 515,000, transferred to equity upon modification in August 2020								3,476,250									3,476,250

Additional offering cost of $81,923, related to the capital raise in May 2020								(81,923	)								(81,923	)

Exercise of stock options		6,248			6			18,494									18,500

Stock-based compensation								46,681									46,681

Currency translation, net														1,422,294			1,422,294

Net Loss											(3,873,419	)					(3,873,419	)

BALANCE, September 30, 2020		21,655,461			21,655			69,824,156			(38,380,339	)		(4,500,447	)		26,965,025

	For the Nine Months Ended
	September 30,						For the Nine Months Ended September 30,
	2021			2020			2022			2021
Cash Flows from Operating Activities:
Net Loss	$	(8,461,493	)	$	(6,133,731	)	$	(12,006,147	)	$	(8,461,493	)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
Depreciation and amortization		1,968,011			2,019,147			2,260,060			1,968,011
Amortization of discount on convertible notes payable		543,933			0
Amortization of discount on Notes payable								2,304,054			543,933
Stock-based compensation		354,983			270,238			782,361			354,983
Change in fair value of warrant liability		0			901,250
Gain on modification of earn-out liability		0			(301,573	)
Change in deferred tax asset / liability		(47,650	)		(46,687	)		(42,274	)		(47,650	)
Gain on lease termination								(150,258	)		-
Gain on sale of fixed assets		(1,126	)		0			(642	)		(1,126	)
Changes in assets and liabilities:
Changes in operating assets and liabilities:
Accounts receivable		741,514			2,635,995			(1,262,577	)		741,514
Inventory		94,319			(767,300	)		5,728			94,319
Contract assets		628,368			2,656,388			(485,469	)		628,368
Prepaid expenses and other current assets		299,949			(82,756	)		(1,497,612	)		299,949
Accounts payable		(188,035	)		(2,646,520	)		212,304			(188,035	)
Accrued expenses		599,086			1,451,421			(1,028,428	)		599,086
Operating lease liabilities		(755,503	)		(565,209	)		(409,008	)		(755,503	)
Contract liabilities		(184,447	)		(6,242	)		(165,028	)		(184,447	)

Total Adjustments		4,053,402			5,530,636			523,211			4,053,402

Net Cash used in Operating Activities		(4,408,091	)		(603,095	)		(11,482,936	)		(4,408,091	)

Cash Flows from Investing Activities:
Purchase of property and equipment		(932,293	)		(2,904,169	)		(792,523	)		(932,293	)
Purchase of other intangible assets		0			(23,932	)
Proceeds from sale of fixed assets		1,126			0			642			1,126
Net cash paid for earn-out agreement		(321,574	)		(301,573	)		-			(321,574	)

Net Cash used in Investing Activities		(1,252,741	)		(3,229,674	)		(791,881	)		(1,252,741	)

Cash Flows from Financing Activities:
Payments on finance lease obligation		(287,526	)		(26,120	)		(259,197	)		(287,526	)
Proceeds from convertible notes payable, net		14,283,333			0
Proceeds from exercise of stock options		0			18,500
Proceeds from issuance of prefunded warrants		0			2,575,000
Proceeds from issuance of common stock, net		0			4,662,125
Proceeds from issuance of common stock and prefunded warrants								24,418,612			-
Proceeds from issuance of Senior Promissory Notes								6,000,000			-
Payments on Convertible Note								(16,800,000	)		14,283,333

Net Cash provided by Financing Activities		13,995,807			7,229,505			13,359,415			13,995,807

Gain (Loss) on Currency Translation		(907,085	)		1,311,881			(968,601	)		(907,085	)

Net change in Cash and Restricted Cash		7,427,890			4,708,617			115,997			7,427,890

Cash and Restricted Cash at Beginning of Period		13,264,449			9,783,932			17,489,380			13,264,449

Cash and Restricted Cash at End of Period	$	20,692,339		$	14,492,549		$	17,605,377		$	20,692,339

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

	For the Nine Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2022		2021
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	483,321	$	83,014	$	364,846	$	483,321
Income Taxes		0		0		-		-

Non-cash financing activities
Original issue discount on convertible note		1,800,000		0
Original issue discount on Convertible Note						-		1,800,000
Convertible Note debt conversion feature		3,048,396		0		-		3,048,396
Debt issuance costs on convertible note		716,667		0
Common Stock issued in conjunction with convertible note financing		531,729		0
Debt issuance costs on Convertible Note						-		716,667
Common Stock issued for conversion of Convertible Note						-		531,729
Debt discount on Senior Promissory Notes						695,749		-

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

The consolidated financial statements include the accounts of LiqTech International, Inc., the “Company” and its subsidiaries. The terms "Company", “us", "we" and "our" as used in this report refer to the Company and its subsidiaries, which are set forth ~~below.~~below in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operation. The Company engages in the development, design, production, marketing and sale of automated filtering systems, ceramic silicon carbide liquid applications and diesel particulate air filters in the ~~United States, Canada,~~Americas, Asia-Pacific, Europe, ~~Asia~~ and ~~South America. Set forth below is a description of~~ the ~~Company and each of its subsidiaries:~~Middle East & Africa.

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

~~LiqTech USA, a Delaware corporation and a 100% owned subsidiary of the Company formed in~~ ~~May 2011.~~

~~LiqTech Holding A/S (formerly known as LiqTech International A/S), a Danish corporation, incorporated on~~ ~~January 15, 2000 (~~~~“LiqTech Holding”), a 100% owned subsidiary of LiqTech USA, handling all joint group activities such as management, marketing, finance, IT, etc.~~

~~LiqTech NA, Inc. (“LiqTech NA”), incorporated in Delaware on~~ ~~July 1, 2005,~~ a 100% owned subsidiary of LiqTech USA, engaged in the production, marketing and sale of ceramic diesel particulate and liquid filters in the United States and Canada. LiqTech NA has closed operations in ~~January 2021,~~ ~~and all activity in this company has ceased.~~

~~LiqTech Water A/S (formerly known as LiqTech Systems A/S), a Danish Corporation (“LiqTech Water”), incorporated on~~ ~~September 1, 2009,~~ engaged in the manufacture of fully automated filtering systems for use within marine applications, municipal pool and spa applications, and other industrial applications within Denmark and international markets.

~~LiqTech Plastics A/S (formerly known as BS Plastic A/S), a Danish Corporation (“LiqTech Plastics”), acquired on~~ ~~September 1, 2019,~~ ~~engaged in the manufacture of specialized machined and welded plastic parts within Denmark and international markets.~~

~~LiqTech Ceramics A/S, a Danish corporation (“LiqTech Ceramics”), incorporated on~~ ~~December 20, 2019,~~ ~~engaged in the development, design, application, marketing and sales of membranes, ceramic diesel particulate and liquid filters, and catalytic converters in Europe, Asia and South America.~~

~~LiqTech Water Projects A/S, a Danish corporation (“LiqTech Water Projects”), incorporated on~~ ~~July 28, 2020~~ ~~that is a dormant company without activity. This company was formed to include the investments for our joint venture in the Middle East.~~

~~LiqTech Emission Control A/S, a Danish corporation (“LiqTech Emission Control”), incorporated on~~ ~~March 1, 2021~~ ~~that is a dormant company without activity. This company was formed to include the investments for our joint venture in China.~~

~~LiqTech Environment Technologies (China) Co. Ltd. (“LiqTech China”), incorporated on~~ ~~September 23, 2021,~~ ~~to be engaged in the development, design, application, marketing and sales of ceramic diesel particulate, liquid filters, and catalytic converters in Asia.~~

~~LiqTech Germany (“LiqTech Germany”), a 100% owned subsidiary of LiqTech Holding, incorporated in Germany on~~ ~~December 9, 2011.~~ ~~This company is in the process of closing operations, and all activity in this company has ceased.~~

~~LiqTech PTE Ltd (“LiqTech Singapore”), a 95% owned subsidiary of LiqTech Holding, incorporated in Singapore on~~ ~~January 19, 2012.~~ ~~This company is in the process of closing operations, and all activity in this company has ceased.~~

Consolidation -- The consolidated financial statements include the accounts of the Company, ~~and~~ its ~~wholly owned~~wholly-owned subsidiaries and its majority owned subsidiary. All material intercompany transactions and accounts have been eliminated in the consolidation.

~~Reclassification~~ – Certain amounts presented in previously issued financial statements have been reclassified to be consistent with the current period presentation. In the statement of operations and comprehensive loss, the Company has reclassified the prior year comparative amounts of general and administrative expenses and other expenses to be consistent with the current classification.

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 Holding, LiqTech Water, LiqTech Plastics, LiqTech Ceramics, LiqTech Water Projects and LiqTech Emission Control is the Danish Krone (“DKK”); the functional currency of LiqTech China is the Renminbi (“RMB”); 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 the U.S. Dollar for the purpose of these consolidated financial statements. The balance sheet accounts of the foreign subsidiaries 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 nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. Translation gains and losses are deferred and accumulated as a component of other comprehensive income (loss) 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.

Cash and Restricted Cash -- The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company held ~~$1,500,000~~$1,314,637 and ~~$1,515,620,~~$2,125,695, respectively, of restricted cash. The restricted cash is held as security by a local financial institution for ensuring a leasing facility and for payment guarantees issued for the benefit of customers in connection with prepayments of sales orders and for warranties after the delivery of ~~sales orders.~~products.

Accounts held in each U.S. institution are insured by the Federal Deposit Insurance Company (“FDIC”) up to $250,000. At September 30, ~~2021~~2022 and December 31, ~~2020~~2021 the Company had ~~$14,750,644~~respectively $14,198,027 and $0$11,346,826 in excess of the FDIC insured ~~limit, respectively.~~limit.

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

The roll-forward of the allowance for doubtful accounts for the ~~period~~periods ended September 30, ~~2021~~2022 and December 31, ~~2020~~2021 is as follows:

	September 30, 2021			December 31, 2020			September 30, 2022			December 31, 2021
Allowance for doubtful accounts at the beginning of the period	$	498,044		$	612,434		$	409,076		$	498,044
Bad debt expense		75,680			320,270			91,519			(28,499	)
Receivables written off during the periods		(24,699	)		(484,265	)		(298,850	)		(24,415	)
Effect of currency translation		(29,868	)		49,605			(40,434	)		(36,054	)
Allowance for doubtful accounts at the end of the period	$	519,157		$	498,044		$	161,311		$	409,076

Inventory –-- Inventory directly purchased is carried at the lower of cost or net realizable value, as determined on the first-in, first-out method.

For inventory produced, standard costs that approximate actual ~~cost on~~costs, applying the FIFO method, are used to value inventory. Standard costs are reviewed at least annually by management or more often in the event that circumstances indicate a change in cost has occurred.

Work in process and finished goods include material, labor, and production overhead costs. The Company adjusts the value of its inventory to the extent ~~that~~ management determines that the cost cannot be recovered due to obsolescence or other factors.

Inventory valuation adjustments for excess and obsolete inventory are calculated based on current inventory levels, movement, expected useful lives, and estimated future demand of the products and spare parts.

Contracts Assets / Liabilities –-- Contract assets are the Company’s rights to consideration in exchange for goods or services and is recognized when a performance obligation has been satisfied but has not yet been billed. When the Company issues invoices to the customer and the billing is higher than the capitalized Contract assets, the net amount is transferred to Contract liabilities. Contract assets/liabilities are transferred to revenue and cost of goods sold when the right to consideration is unconditional and billed per the terms of the contractual agreement.

Contract assets also include unbilled receivables, which usually comprise the last invoice remaining after the delivery of the water treatment unit, ~~where~~from which revenue is recognized at the transfer of control based upon signed acceptance ~~of the water treatment unit~~ by the customer. Most ~~commonly~~often this invoice is sent to the customer at commissioning of the product or no later than 12 months after the delivery. Also included in Contract assets are short-term receivables such as VAT and other receivables.

Leases -- In ~~February 2016,~~ ~~the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)~~ ~~No.~~~~2016~~-~~02,~~ ~~Leases (“Topic~~ ~~842”~~), which requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Subsequent ASUs were issued to provide additional guidance.

On ~~January 1, 2019,~~ ~~the Company adopted Topic~~ ~~842~~ ~~using the optional transition method of adoption, under which the new standards were applied prospectively rather than restating the prior periods presented.~~ The Company has elected ~~the package of practical expedients permitted, which, among other things, allowed the Company to carry forward the historical lease classification. The Company made the accounting policy elections~~ to not recognize lease assets and liabilities with an initial term of 12 months or less and to not separate lease and non-lease components. The Company’s accounting for finance leases (formerly called capital lease obligations) remains substantially unchanged. Operating lease right-of-use (“ROU”) assets and liabilities ~~were~~are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, an incremental borrowing rate based on the information available at the commencement date ~~was~~is used in determining the present value. The Company will use the implicit rate when readily determinable. The operating lease ROU asset also included prepaid lease payments, ~~and was~~ reduced by accrued lease payments. The Company’s lease terms may include options to extend or terminate the lease, for which the Company will reflect the change when it is reasonably certain that those options will be exercised. Operating lease ~~cost~~costs for lease payments will be recognized on a straight-line basis over the lease term.

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 ~~fifteen~~ten years.

Goodwill and Intangible Assets -- The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business, with the residual purchase price recorded as goodwill. The determination of the value of the intangible assets acquired involves certain judgments and estimates. These judgments can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital.

Acquired intangible assets with determinable useful lives are amortized on a straight-line or accelerated basis over the estimated periods benefited, ranging from one to ten years. Customer relationships and other non-contractual intangible assets with determinable lives are amortized over periods of five years.

The Company evaluates the recoverability of long-lived assets by comparing the carrying amount of an asset to the estimated future net undiscounted cash flows generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying value of the assets exceeds the fair value of the assets. The evaluation of recoverability involves estimates of future operating cash flows based upon certain forecasted assumptions, including, but not limited to, revenue growth rates, gross profit margins, and operating expenses over the expected remaining useful life of the related asset. A shortfall in these estimated operating cash flows could result in an impairment charge in the future.

Goodwill is not amortized but is evaluated annually for impairment at the reporting unit level or when indicators of a potential impairment are present. The Company estimates the fair value of the reporting unit using the discounted cash flow and market approaches. Forecasts of future cash flows are based on the Company’s best estimate of future net sales and operating expenses, using primarily ~~using~~ expected category expansion, pricing, market segment fundamentals, and general economic conditions.

Revenue Recognition -- On January 1, 2018, the Company adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers,” which includes clarifying ASUs issued in 2015, 2016 and 2017 (“new revenue standard”). The new revenue standard was applied to all open revenue contracts using the modified retrospective method as of January 1, 2018.~~The new revenue standard did~~ ~~not~~ ~~have a material impact on revenue recognition.~~

The Company sells products throughout the ~~world;~~world, and sales by geographical region are as follows for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

The Company’s sales by product ~~line~~and service are as follows for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

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

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

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

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

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

Contract assets represent the Company’s rights to consideration in exchange for goods or services and is recognized when a performance obligation has been satisfied but has not yet been billed. Contract liabilities are payments received from customers prior to satisfaction of performance obligations, and these balances are typically related to prepayments for third-party expenses that are incurred shortly after billing. Contract assets/liabilities are transferred to revenue and cost of goods sold when the right to consideration is unconditional and billed per the terms of the contractual agreement. Contract liabilities also include deferred revenue related to the second performance obligation stated under Revenue Recognition, ~~where~~for which the obligation is attributed to the commissioning of the water treatment system.

The roll-forward of Contract assets / liabilities for the periods ended September 30, ~~2021~~2022, and December 31, ~~2020~~2021 isare as follows:

	September 30, 2021			December 31, 2020			September 30, 2022			December 31, 2021
Cost incurred	$	4,458,227		$	3,997,161		$	3,602,967		$	3,381,994
Unbilled project deliveries		419,112			1,015,977			667,670			454,158
VAT		412,733			446,608			383,701			542,255
Other receivables		90,908			75,010			9,240			60,158
Prepayments		(3,731,079	)		(3,112,118	)		(3,082,635	)		(2,947,736	)
Deferred Revenue		(618,966	)		(866,680	)		(137,638	)		(499,146	)
	$	1,030,935		$	1,555,958		$	1,443,305		$	991,682

Distributed as follows:
Contract assets	$	1,939,107		$	2,708,136		$	2,078,472		$	1,906,510
Contract liabilities		(908,172	)		(1,152,178	)		(635,167	)		(914,828	)
	$	1,030,935		$	1,555,958		$	1,443,305		$	991,682

Advertising Cost -- Costs incurred in connection with advertising of the Company’s products are expensed as incurred. Advertising costs are included in sales expenses, and total advertising costs for the three-month periods ended September 30, ~~2021~~2022 and ~~2020,~~2021 ~~respectively,~~ were $39,094 and $41,141, ~~and $20,522.~~respectively. Total advertising costs amounted to ~~$166,376~~$142,522 and ~~$82,545~~$166,376 for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. ~~Advertising cost has increased in~~ ~~2021~~ ~~due to the increased investment in sales and branding activities, especially those related to advertising activities on social media such as LinkedIn, Facebook and others.~~

Research and Development Cost -- The Company expenses research and development costs ~~for the development of new products~~ as incurred. Included in operating expense for the three-month periods ended September 30, ~~2021~~2022 and ~~2020~~2021 were ~~$497,823 and $256,239, respectively, of~~ research and development ~~costs.~~costs of $283,524 and $497,823, respectively. For the nine-month periods ended September 30, ~~2021~~2022 and ~~2020,~~2021, research and development costs were ~~$1,370,059~~$1,377,097 and ~~$883,752,~~$1,370,059, respectively.

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~~with respect to 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 of Common Stock 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 of Common Stock included in the diluted earnings per share calculation include in-the-money stock options, ~~RSU’s~~RSUs and warrants that have been granted but have not yet been exercised.

Stock ~~Options and~~ Awards -- During the years presented in the accompanying consolidated financial statements, the Company has granted stock ~~options and~~ awards. The Company accounts for ~~options~~stock awards in accordance with the provisions of FASB ASC Topic 718, Compensation – Stock Compensation.

~~Warrant Liability~~-- ~~The Company issued common stock warrants in~~ ~~May 2020~~ ~~in conjunction with an equity financing. In accordance with Accounting Standards Codification (“ASC”)~~ ~~480,~~ ~~Distinguishing Liabilities from Equity (“ASC~~ ~~480”~~), the fair value of these warrants was initially classified as a liability on the Company’s Consolidated Balance Sheet because, according to the original terms of the warrants, a fundamental transaction could have given rise to an obligation of the Company to pay cash to its warrant holders, which was outside of the control of the Company. On ~~August 12, 2020,~~ the terms of the prefunded warrant were amended and the potential obligation of the Company to pay cash to its warrant holders was removed. From the date of the execution of the amended warrant, it qualifies as an equity instrument and the liability measured at fair value on ~~August 12, 2020~~ of $3,476,250 has been reclassified to the Company´s Equity. Corresponding changes in the fair value measurement of the warrants are recognized in earnings on the Company’s Consolidated Statement of Operations in each subsequent period.

Fair Value of Financial Instruments -- The Company accounts for fair value measurements for financial assets and 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 non-recurring basis. Fair value is defined as the exit price, representing the amount that would either be received to sell an asset or 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:

Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, other receivables, prepaid expenses, accounts payable, accrued expenses, Senior Promissory Notes and ~~convertible notes~~Convertible Notes payable approximate 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 including accounts receivable; allowance for doubtful accounts; contract assets; reserve for excess and obsolete inventory; depreciation and impairment of property, plant and equipment; goodwill; liabilities including contract liabilities 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 November 2021, the FASB issued ASU 2021-10, Disclosures by Business Entities about Government Assistance. The FASB is issuing this Update to increase the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. The ASU will be effective for annual reporting periods after January 1, 2022. We are still assessing the impact of ASU 2021-10 on our consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06 ~~Debt—Debt with Conversion and Other Options (Subtopic~~ ~~470~~-20~~) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic~~ ~~815~~-40): Accounting for Convertible Instruments and Contracts in anAn Entity’s Own Equity. ~~This~~ ASU2020-06 simplifies the accounting for certain convertible instruments by removing the separation models for convertible debt with a cash conversion feature and for convertible instruments with a beneficial conversion feature. As a result, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, ASU 2020-06 amends the ~~guidance on~~diluted earnings per share calculation for convertible instruments ~~and~~by requiring the ~~derivatives scope exception for contracts in an entity’s own equity and improves and amends~~use of the ~~related EPS guidance for both Subtopics.~~if-converted method. The treasury stock method is no longer available. For SEC filers, excluding smaller reporting companies, ASU ~~will be~~2020-06 is effective for ~~annual reporting~~fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, ~~and~~including interim periods within those ~~annual periods, and early~~fiscal years. Early adoption is permitted, ~~in annual reporting periods ending~~but no earlier than fiscal years beginning after December 15, ~~2020.~~2020, ~~We are still assessing the impact of~~including interim periods within those fiscal years. The Company early adopted ASU 2020-06 on ~~our condensed consolidated financial statements.~~January 1, 2022, using a modified retrospective approach.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. This ASU is intended to help stakeholders during the global market-wide reference rate transition period and will be in effect for a limited time through December 31, 2022. Adoption is permitted at any time. The Company is currently evaluating the impact on its financial statements.

In ~~December 2019,~~ ~~the FASB issued ASU~~ ~~2019~~-~~12,~~ ~~Income Taxes (Topic~~ ~~740~~~~): Simplifying the Accounting for Income Taxes. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after~~ ~~December 15, 2020~~ ~~on a prospective basis, with early adoption permitted. We have adopted the new standard effective~~ ~~January 1, 2021,~~ ~~and the adoption of this guidance did~~ ~~not~~ ~~have a material impact 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.

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 incurred significant recent losses, which raises substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. There is no assurance that the Company will be successful in executing the proposed cost reductions and revenue growth, thus achieving profitable operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

During the second quarter, the Company completed a restructuring program to reduce costs, decrease operating losses and improve cash flow. Total restructuring and restructuring-related net charges pursuant to this program were $1,786,863, which were recorded separately in the income statement as “restructuring costs”, and allocated as follows:

CEO separation -- On May 10, 2022, the Board of Directors accepted the resignation of Sune Mathiesen as Chief Executive Officer and a director of the Company, effective May 12, 2022. As previously announced, Mr. Mathiesen had been on a medical leave of absence since March 17, 2022. In connection with Mr. Mathiesen’s resignation, Mr. Mathiesen and the Company entered into a Separation Agreement and Release (the “Separation Agreement”). Under the provisions of the Separation Agreement, Mr. Mathiesen received DKK1,605,000 (equivalent to $230,538), which is the equivalent of six months of salary, car allowance and pension contributions, in a lump-sum payment, less applicable deductions and withholdings.

Terminated employees – In the second quarter of 2022, the Company re-aligned its corporate management structure, which involved a reduction in headcount and labor costs of approximately 25%. The new organization reflects a focused effort to align key leaders with strategic imperatives, inspire greater accountability and performance management, eliminate silos and layers of middle management, and operate a leaner, more efficient business. Provisions for salary obligations to employees amounted to $159,841, reflecting the costs related to select employees released from duties with immediate effect. No provisions were made for the employees working during the notice period.

China close-down – In the second quarter of 2022, the Company reduced and suspended planned capital investments, including the Company’s program to build a manufacturing and service center in China. Pursuant to the suspended plans, the Company terminated and settled agreements with consultants, select project employees, and domestic property development providers, resulting in a net payment of termination and cancellation charges of $278,391.

Capex commitments -- As part of efforts to balance future investments with expected demands and cash flow, the Company commenced the renegotiation of all material Capex commitments during the quarter, with the ambition to reduce, cancel, or delay deliveries under the contracts, which initially amounted to approximately $9,000,000. Substantial progress was made during the second quarter, with expected closure of the renegotiation in the second half of 2022. As part of the renegotiation, a provision was made during the second quarter of $668,606 regarding expected cancellation charges and contractual termination costs. However, during this quarter the amount of paid cancellation charges has exceeded the provision by $28,607, which explains the total amount regarding capex commitments of $697,213.

Write-downs -- The re-routing of production equipment and machinery to Denmark (originally planned for China), resulted in a write-down of $243,075 on legacy installed equipment and machinery that was decommissioned as part of the arrival and implementation of new and more efficient equipment. Furthermore, review of obsolete inventory and existing product demand resulted in a write-down of $177,804.

The Company’s restructuring costs are as follows for the nine months ended September 30, 2022, of which $1,763,015 has been settled, resulting in $23,848 remaining unsettled as of September 30, 2022:

The following table displays a roll-forward of the restructuring accruals, presented within “accrued expenses”, for the nine months ended September 30, 2022 and 2021:

Inventory consisted of the following aton September 30, ~~2021~~2022, and December 31, ~~2020:~~2021:

	September 30, 2021			December 31, 2020			September 30, 2022			December 31, 2021
Furnace parts and supplies	$	380,381		$	471,622		$	609,550		$	213,224
Raw materials		2,454,919			1,955,713			2,157,268			2,144,067
Work in process		1,798,152			2,394,481			936,059			1,671,290
Finished goods and filtration systems		1,106,125			1,424,171			1,532,387			1,660,907
Reserve for obsolescence		(622,215	)		(723,949	)		(578,076	)		(268,470	)
Net Inventory	$	5,117,362		$	5,522,038		$	4,657,188		$	5,421,027

Inventory valuation adjustments for excess and obsolete inventory are calculated based on current inventory levels, movements, expected useful lives, and estimated future demand for the products.

During the third quarter the Company made further provisions for excess and obsolete inventory in a period with changing market fundamentals.

The Company leases certain vehicles, real property, production equipment and office equipment under lease agreements. The Company evaluates each lease to determine its appropriate classification as an operating lease or finance lease for financial reporting purposes. The majority of our operating leases are non-cancelable operating leases for production and office space in Hobro, Aarhus and Copenhagen, ~~Denmark as well as in Taicang, China and White Bear Lake, Minnesota. As~~Denmark. During the second quarter of ~~September 1, 2021~~ 2022,the Company ~~entered a new~~terminated the lease agreement for ~~a 8,524 square meter~~the office and production ~~facility~~space in Taicang, China. ~~The lease term is a minimum of 8 years, and the monthly lease payment is RMB 30 per square meter until~~ ~~August 31, 2025~~ ~~and RMB 33 per square meter from~~ ~~September 1, 2025~~ ~~until the end of the lease period. The parties have agreed on a 50% discount on the lease payments for the period~~ ~~September 1, 2021~~ to ~~June 30, 2022.~~ ~~The lease in White Bear Lake expired in~~ ~~February 2021,~~ ~~and due to the closure of the activity in North America, the lease has~~ ~~not~~ ~~been extended.~~

During the nine months ended September 30, ~~2021,~~2022, cash paid for ~~amounts included for the measurement of~~ finance lease liabilities was ~~$356,899,~~$316,246, and the Company recorded finance lease expenses ~~included~~ in other income (expenses) of ~~$195,174.~~$221,928.

During the nine months ended September 30, ~~2021,~~2022, cash paid for ~~amounts included for the measurement of~~ operating lease liabilities was ~~$766,896,~~$733,390, and the Company recorded operating lease expense of ~~$787,646.~~$812,032.

Supplemental balance sheet information related to leases as of September 30, ~~2021~~2022, and December 31, ~~2020~~2021 was as follows:

	September 30, 2021			December 31, 2020			September 30, 2022			December 31, 2021
Operating leases:
Operating lease right-of-use	$	7,246,422		$	4,947,734
Operating lease right-of-use assets							$	3,119,806		$	6,925,807

Operating lease liabilities – current	$	781,235		$	1,026,235		$	511,240		$	846,544
Operating lease liabilities – long-term		6,485,282			4,159,225			2,608,566			6,154,064
Total operating lease liabilities	$	7,266,517		$	5,185,460		$	3,119,806		$	7,000,608

Finance leases:
Property and equipment, at cost	$	4,545,747		$	4,819,201		$	2,852,356		$	3,334,830
Accumulated depreciation		(1,432,478	)		(1,389,488	)		(424,959	)		(336,337	)
Property and equipment, net	$	3,113,269		$	3,429,713		$	2,427,397		$	2,998,494

Finance lease liabilities – current	$	379,726		$	394,839		$	321,788		$	373,824
Finance lease liabilities – long-term		2,650,139			3,112,496			1,911,361			2,499,591
Total finance lease liabilities	$	3,029,865		$	3,507,335		$	2,233,149		$	2,873,415

Weighted average remaining lease term:
Operating leases		9.0			10.0			9.6			8.9
Finance leases		6.1			6.9			5.2			5.9

Weighted average discount rate:
Operating leases		6.5	%		6.2	%		6.2	%		6.5	%
Finance leases		2.8	%		2.8	%		2.8	%		2.8	%

Maturities of lease liabilities at September 30, ~~2021~~2022 were as follows:

	Operating lease			Finance lease			Operating Lease			Finance lease
2021 (remaining 3 months)	$	297,557		$	115,213
2022		1,264,956			459,223
2022 (remaining 3 months)							$	176,803		$	97,263
2023		1,284,566			454,417			681,709			389,052
2024		1,130,863			455,396			552,318			389,876
2025		835,749			451,685			287,898			386,752
2026								278,383			354,565
Thereafter		4,843,246			1,410,832			2,157,468			846,130
Total payment under lease agreements		9,656,937			3,346,766			4,134,579			2,463,638
Less imputed interest		(2,390,420	)		(316,901	)		(1,014,773	)		(230,489	)
Total lease liability	$	7,266,517		$	3,029,865		$	3,119,806		$	2,233,149

In connection with certain orders, ~~we provide~~ the ~~customer~~Company provides to customers a working guarantee, a prepayment guarantee or security bond. For that purpose, ~~we have~~the Company has a guaranteed credit line of ~~DKK10,000,000~~ ~~(approximately $1,550,000).~~EUR 1,350,000 (approx. $1,315,000) secured by a cash deposit. As of September 30, ~~2021~~2022, our bank has issued working guaranties of ~~$483,128 for our~~$306,327 to customers ~~based on~~against the credit line. ~~The credit line is secured by a cash deposit of $1,500,000.~~

On March 24, 2021, wethe Company entered into a Securities Purchase Agreement with an institutional investor pursuant to which the Company agreed to issue and sell a $15.0 million principal amount ~~Senior~~senior Convertible Note ~~(“the Note”~~(the “Note”) ~~due~~maturing on October 1, 2023 and 80,000 shares of our common stock, $0.001 par value (“Common ~~Stock~~Stock”) for an aggregate purchase price of $15.0 million upon the satisfaction of the closing conditions set forth in the Securities Purchase Agreement. The Closing occurred on April 8, 2021, and the Company issued to the Investor the securities in connection with the Closing.

The Note iswas a senior, unsecured obligation of the Company, payable at 112% of the principal amount at maturity on (October 1, ~~2023,~~2023), or earlier upon redemption or repurchase as set forth in the Note. The Note iswas convertible into shares of Common Stock pursuant to the terms of the Note, in part or in whole, from time to time, at the election of the Investor. The initial conversion rate iswas 100.6749 shares of Common Stock per $1,000 of principal amount of the Note. The conversion rate iswas subject to anti-dilution adjustments, including for stock dividends, splits and combinations; issuances of options, warrants or similar rights; spin-offs and distributions of property; cash dividends or distributions; and tender or exchange offers, in each case as further described in and pursuant to the terms of the Note.

~~The Company~~ ~~may~~ ~~provide written notice to the Holder electing to convert the entire Principal Amount of the Note if (~~1~~) the Daily VWAP per share of Common Stock exceeds~~ ~~one hundred~~ ~~and~~ ~~seventy-five~~ ~~percent (175%) of the Conversion Price on each of~~ ~~twelve~~ (12~~) consecutive VWAP Trading Days beginning after~~ ~~September 24, 2021;~~ ~~and (~~2~~) the Equity Conditions are satisfied on each of such~~ ~~twelve~~ (12~~) consecutive VWAP Trading Days.~~

Beginning on March 1, 2022, and on the first day of each calendar month thereafter, at the election of the Investor or Holder, if applicable, the Company ~~shall be~~was required to redeem $840,000 of the amounts due under the Note in cash or Common Stock at 90% of the lesser of (i) the volume-weighted average price (“~~VWAP~~”VWAP”) of the Common Stock on the trading day immediately preceding the payment date and (ii) the average of the lowest three (3) VWAPs over the 10 trading days immediately preceding the payment date, which shall in no case be less than the floor price of $1.75 per share. Beginning on March 1, 2022, the Company paid the first monthly installment of $840,000 in cash, totaling $3,360,000.

~~The~~As of June 22, 2022, the Note, ~~has~~including accrued interest ~~payable quarterly beginning~~ ~~June 1, 2021~~ atand all relevant obligations, was repaid in full, amounting to $13,446,875, allocated between a ~~rate~~principal repayment of ~~5% per annum. The number~~$11,640,000 and contractual repayment premium of ~~shares issuable if the Company elects to pay interest in shares of Common Stock shall be based on the Market Price.~~$1,806,875.

For the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company recognized interest expense of $0 and $481,712, respectively, and ~~$0,~~$0 and $292,129, respectively, ~~of which $292,129 and~~ ~~$0,~~ ~~respectively, was~~ related to the amortization of debt issuance costs.

For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company recognized interest expense of $308,958 and $904,350, respectively, and ~~$0,~~$2,213,065 and $360,417, respectively, ~~of which $360,417 and~~ ~~$0,~~ ~~respectively, was~~ related to the amortization of debt issuance costs.

~~Agreements~~ ~~-- LiqTech Water Projects has~~On June 22, 2022, the Company issued and sold Senior Promissory Notes in an aggregate principal amount of $6.0 million (the "Notes") and issued warrants to purchase 4,250,000 shares of common stock of the Company to affiliates of Bleichroeder L.P., 21April Fund, L.P., and 21April Fund, Ltd. (together, the "Purchasers"), pursuant to a note and warrant purchase agreement entered into with the Purchasers.

The Notes have a ~~joint venture agreement~~term of 24 months and do not bear interest during this period. However, if the notes are not repaid on or before the second anniversary of issuance, the Notes will thereafter bear interest of 10% per annum, which will increase by 1% each month the Notes remain unpaid, up to ~~supply~~a maximum of 16% per annum, payable monthly.

Additionally, as part of the transaction, the Company issued 230,000 warrants to the placement agent. All of the warrants issued in this transaction have an exercise price of $0.65 per share, a term of five years and ~~operate water treatment systems~~are exercisable for ~~oil~~cash at any time.

As a result, the Company recorded an initial debt discount of $664,704, based on the relative fair value of the warrants and ~~gas producers in~~notes issued. The Company determined the ~~Middle East.~~fair value of the warrants by using the Black-Scholes Option Pricing Model, with the following assumptions: expected term of 2.5 years, stock price of $0.43, exercise price of $0.65, volatility of 80.8%, risk-free rate of 3.13%, and no forfeiture rate. The partner in the joint venture is a local company. LiqTech Water Projects expects to deliver technological know-how, design of water treatment systems and components to support potential projects in the Middle East. The joint venturedebt discount will be ~~established in~~accreted according to the ~~form of a jointly owned limited liability company, incorporated under~~effective interest method over the ~~laws in the local country, and LiqTech Water Projects holds 49%~~contractual term of the ~~shares. All profits of the company are to be allocated proportionally to the ownership share,~~note. The warrants qualified for equity classification and ~~none~~ ~~of the parties are liable for the company’s liabilities towards~~ ~~third~~ ~~parties.~~were reported within Additional Paid-In Capital.

~~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.~~ components of notes payable are as follows:

For the three~~-month periods~~ months ended September 30, ~~2021~~2022, and ~~2020,~~2021, ~~matching contributions expensed totaled~~the Company recognized interest expense of $84,098 and $0, ~~and $3,860 respectively.~~ respectively, related to the amortization of the debt discount.

For the nine months ended September 30, ~~2021~~2022, and ~~2020,~~2021, ~~matching contributions expensed totaled $218~~the Company recognized interest expense of $90,989 and ~~$10,844, respectively.~~$0, respectively, related to the amortization of the debt discount.

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.

OnThe Company has during the ~~November 20, 2018,~~ third quarter been in dialogue with a former ~~supplier~~client regarding marine waste-water treatment systems delivered in 2019, regarding potential warranty claims due to ~~LiqTech Ceramics contacted the Company~~corrosion on select parts and component, with a ~~claim~~total estimated remediation cost of ~~DKK 448,500 ($68,800) alleging that an agreement from~~ ~~2016~~ ~~had~~ ~~not~~ ~~been respected.~~$ 1.5 million. The Company ~~contested~~is disputing the claim ~~but~~ in ~~December 2020~~ full however a commercial settlement is currently being discussed with expected completion during the ~~court ruled in favor of the supplier, and LiqTech was ordered to pay an amount totaling DKK 587,000 ($96,900), which included interest and court fees that were expensed in~~ ~~2020.~~fourth ~~The amount was paid in~~quarter or early ~~January 2021.~~2023.

On ~~February 27, 2019,~~ ~~LiqTech Water was contacted by a former supplier alleging that the Company owed DKK 543,905 ($89,800) for services rendered in~~ ~~2017.~~ The claimant has previously filed a lawsuit to claim payment for the services, which was denied by the Company due to severe errors in the services rendered, and the claim was rejected by a court of law in ~~2018.~~ ~~Due to the nature of the claim and the previous ruling from the court of law,~~ no ~~provision has been made as of~~ ~~September 30, 2021.~~

Product Warranties --- The Company provides a standard warranty for its systems, generally for a period of one to three years after customer acceptance. The Company estimates the costs that may be incurred under its standard warranty programs and records a liability for such costs at the time product revenue is recognized.

In addition, the Company sells an extended warranty for certain systems, which generally provides a warranty for up to four years from the date of commissioning. The specific terms and conditions of the warranties vary depending upon the product sold and the country in which the ~~Company does business.~~installation occurred. Revenue received for the sale of extended warranty contracts is deferred and recognized in the same manner as the costs incurred to perform under the warranty contracts.

The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Factors that affect the warranty liability include the number of units sold, historical and anticipated rates of warranty claims and the cost per claim.

Changes in the Company's ~~current and long-term~~ warranty obligations included in accrued expenses on the balance sheet, as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, were as follows:

	September 30, 2021			December 31, 2020			September 30, 2022			December 31, 2021
Balance at January 1	$	1,056,613		$	813,288		$	962,313		$	1,056,613
Warranty costs charged to cost of goods sold		79,972			348,241			52,990			177,302
Utilization charges against reserve		(132,360	)		(199,624	)		(77,720	)		(191,068	)
Release of accrual related to expired warranties		0			0			-			-
Foreign currency effect		(58,302	)		94,708			(132,653	)		(80,534	)
Balance at the end of the period	$	945,923		$	1,056,613		$	804,930		$	962,313

Basic and diluted net income (loss) per common share is determined by dividing net income (loss) by the weighted average ~~common~~number of shares of Common Stock outstanding during the period. For the periods where there is a net loss, stock options, warrants and Restricted Stock Units (“RSUs”) have been excluded from the calculation of diluted net loss per common share because their effect would be anti-dilutive. Consequently, the weighted average ~~common~~number of shares of Common Stock used to calculate both basic and diluted net loss per common share ~~would be~~is the ~~same.~~same for the reported periods.

For the period ended September 30, ~~2021,~~2022, the Company had ~~149,636 stock grants~~ outstanding ~~to issue Common Stock (“RSUs”). Further, the Company had 1,015,000~~balances of 2,504,340 RSUs, 31,440,000 prefunded warrants ~~outstanding to issue~~and 4,480,000 warrants, all exercisable for shares of Common Stock.

The following table shows the amounts used in computing earnings per share and the weighted average number of shares of ~~potential~~potentially dilutive ~~common stock~~Common Stock for thethree and nine months ended September 30, ~~2021~~2022, and ~~2020:~~2021:

							For the Three Months						For the Nine Months
	For the Nine Months Ended September 30,						Ended September 30,						Ended September 30,
	2021			2020			2022			2021			2022			2021
Net (Loss)	$	(8,461,493	)	$	(6,133,731	)		(1,752,664	)		(2,903,956	)		(12,006,147	)		(8,461,493	)
Weighted average number of common shares used in basic earnings per share		21,661,945			21,059,251			43,891,799			21,769,461			32,529,152			21,661,945
Effect of dilutive securities, stock options, RSUs, and warrants		0			0			-			-			-			-
Weighted average number of common shares and potential dilutive common shares outstanding used in dilutive earnings per share		21,661,945			21,059,251			43,891,799			21,769,461			32,529,152			21,661,945

For thethree and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021, respectively, the Company had no options ~~outstanding to purchase common stock.~~outstanding.

Common Stock –-- The Company has 100,000,000 authorized shares of common stock, $0.001 par value ("Common Stock"). As of September 30, ~~2021~~2022 and ~~2020,~~2021, there were 43,896,871 and 21,285,706 ~~and 21,655,461 common~~ shares of Common Stock issued and outstanding, respectively.

Voting -- Holders of 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, if any, which may at the time be outstanding, holders of ~~common stock~~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, 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 ~~common stock~~Common Stock will be entitled to share ratably in the distribution of any of our remaining assets.

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

Preferred Stock -- Our Board of Directors has the authority to issue preferred stock in one or more classes or series and to fix the designations, powers, preferences and rights, 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 preferred stock may have the effect of delaying, deferring, or preventing a change in control without further action by the stockholders and may adversely affect the voting and other rights of the holders of ~~common stock.~~Common Stock.

The Company has 2,500,000 authorized ~~Preferred~~shares of preferred stock, $0.001 par value. As of September 30, ~~2021,~~2022, there were 0no shares of preferred ~~shares~~stock issued and outstanding.

Since January 1, ~~2021,~~2022, the Company has made the following issuances of ~~common stock:~~Common Stock:

On January ~~6, 2021,~~3, 2022, the Company issued ~~11,218~~18,641 shares of Common Stock to settle ~~RSUs. The~~ RSUs ~~were valued at $70,000~~ for services provided by the Board of Directors in ~~2020.~~2021. ~~The Company recognized the stock-based compensation of the awards over the requisite service period.~~

On ~~February 26, 2021,~~January 3, 2022, the Company issued ~~30,694~~48,341 shares of Common Stock to settle ~~RSUs. The~~ RSUs ~~were valued at $166,667~~ for services provided by management in ~~2020.~~ ~~The Company recognized the stock-based compensation of the awards over the requisite service period.~~

On ~~April 9, 2021,~~ ~~the Company issued 80,000 restricted shares of Common Stock pursuant to the Convertible Note agreement executed on~~ ~~April 8,~~ 2021.

On ~~August~~May 17, ~~2021,~~2022, the Company ~~entered an Exchange Agreement with an existing shareholder to exchange an aggregate~~issued 15,635,850 shares of ~~500,000 shares~~Common Stock as part of the $23,000,000 public offering of common stock ~~for~~and 30,425,000 prefunded warrants to fund working capital, general corporate purposes, and partial repayment of ~~equivalent value. The prefunded warrants will be exercisable at any time on or after the closing date.~~its Senior Convertible Note.

On ~~September 3, 2021,~~May 19, 2022, the Company exercised in full the option to issue 6,900,000 shares of Common Stock as part of the overallotment of $3,450,000, resulting in the closing of its previously announced public offering of $26,450,000 to fund working capital, general corporate purposes, and partial repayment of its Senior Convertible Note. Total transaction costs related to the combined public offering of $26,450,000 amounted to $1,996,472.

On August 25, 2022, the Company issued 8,333 shares of Common Stock to settle ~~RSUs. The~~ RSUs ~~were valued at $57,500~~ for services provided by the Board of Directors. ~~The Company recognized the stock-based compensation of the awards over the requisite service period.~~

~~In connection with the Securities Purchase Agreement entered into in~~ ~~May 2020,~~ we issued a prefunded warrant (“the Warrant”) to purchase an aggregate of 515,000 shares of Common Stock at a purchase price of $5.00 per share. Subject to certain beneficial ownership limitations, the Warrant is immediately exercisable and ~~may~~ ~~be exercised for~~ no ~~additional consideration. The Warrant does~~ ~~not~~ ~~expire. A holder of the Warrant will~~ ~~not~~ ~~have the right to exercise any portion of the Warrant if the holder, together with Affiliates and Attribution Parties (as such terms are defined in the Warrant), would beneficially own in excess of~~ ~~9.99%~~ of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrant. Upon notice from the holder to the Company, however, the holder ~~may~~ ~~decrease or increase the beneficial ownership limitation (but~~ ~~not~~ ~~above~~ ~~9.99%~~ ~~of the number of shares of Common Stock outstanding).~~

On August 17, 2021, the Company entered an ~~Exchange Agreement~~exchange agreement with an existing shareholder to exchange an aggregate of 500,000 shares of Common Stock for equivalent shares of a prefunded ~~warrants.~~warrants (the “Exchange Agreement”). The prefunded warrants will be exercisable at an exercise price of $0.001 per share, subject to adjustments as provided under the terms of the prefunded warrants. The prefunded warrants will be exercisable at any time on or after the closing date. The Exchange Agreement ~~contain~~contained additional terms typical of exchange agreements including representations and warranties of the parties. In connection with ~~the Exchange Agreement,~~and as of the date of the Exchange Agreement, the Company issued the prefunded warrants to the ~~Shareholders. The exercise price of each prefunded warrant is equal to $0.001 per share,~~shareholder, and the prefunded warrants are exercisable on ~~or after~~ August 17, 2021, subject to the limitations on exercise and conditions set forth by the prefunded warrants. The prefunded warrants ~~are~~became subject to customary adjustments in the event of stock splits and dividends, fundamental transactions, and subsequent offerings of rights to purchase stock.

~~The following~~On May 17, 2022, the Company entered a warrant purchase agreement with existing shareholders to purchase 30,425,000 shares of common stock at an offering price of $0.499 per prefunded warrant, which represents the offering price of $0.50 per share of the Company’s common stock less the $0.001 per share exercise price for each pre-funded warrant, for total gross proceeds of approximately $15,182,075 as part of the Company’s public offering of common stock and pre-funded warrants totaling $23,000,000 before underwriting discounts, commissions and offering expenses payable by the Company.

On June 23, 2022, the Company completed a private placement of Senior Notes in an aggregate principal amount of $6,000,000 and warrants to purchase 4,250,000 shares of common stock of the Company to affiliates of Bleichroeder L.P., 21April Fund, L.P., and 21April Fund, Ltd. (together, the "Purchasers"), pursuant to a note and warrant purchase agreement. Additionally, as part of the transaction, the Company issued 230,000 warrants to the placement agent. All warrants issued in this transaction have an exercise price of $0.65 per share, a term of five years and are exercisable for cash at any time.

Below is a summary of the periodic changes in warrants outstanding for the nine months ended September 30, 2022 and 2021:

In 2013, the Company’s Board of Directors adopted a Share Incentive Plan (the “Incentive Plan”). Under the terms and conditions of the Incentive Plan, the Board of Directors is empowered to grant RSUs to officers and directors of the Company. At September 30, ~~2021,~~2022, ~~149,636~~2,504,340 RSUs were granted and outstanding under the Incentive Plan. Directors of the Company receive share compensation as follows: ~~(i)~~ an initial grant of 25,000 RSUs of Common Stock that vest over a three-year period upon appointment to the Board, followed by an annual grant of ~~$35,000~~$36,750 ($~~70,000~~73,500 for the Chairman of the Board) in RSUs per annum after full vesting of the initial grant. Further, the Company has granted shares of Common Stock in the third quarter to management as part of the Incentive Plan, totaling ~~114,328~~722,456 shares ~~that~~of which 97,456 shares vest in January 2023 (part of Interim CEO agreement amended on September 13, 2022) and the remaining shares vest over a three-year period.

The Company recognizes compensation costs for RSU grants to directors and management based on the stock price on the date of the grant.

The Company recognized stock-based compensation expense related to RSU grants of ~~$127,519~~$382,111 and ~~$46,681~~$127,519 for the three-month ~~period~~periods ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. For the nine~~-month period~~ months periods ended September 30, ~~2021~~2022, and ~~2020,~~2021, the stock-based compensation related to share grants was ~~$354,983~~$782,360 and ~~$270,238,~~$354,983, respectively. On September 30, ~~2021,~~2022, the Company had ~~$655,382~~$827,939 of unrecognized compensation cost related to non-vested stock grants.

A summary of the status of the RSUs as of September 30, ~~2021~~2022 and changes during the period are presented below:

	September 30, 2021								September 30, 2022
	Number of units			Weighted Average Grant-Date Fair value			Aggregated Intrinsic Value		Number of units			Weighted Average Grant-Date Fair value			Aggregated Intrinsic Value

Outstanding, December 31, 2020		128,299		$	5.79		$	283,541
Outstanding, December 31, 2021										149,636		$	6.59		$	-
Granted		71,582			7.51			-		2,574,871			0.77			-
Vested and settled with share issuance		(50,245	)		(5.85	)		-		(75,315	)		(6.59	)		-
Forfeited		0			0			-		(144,853	)		(6.22	)		-
Outstanding, September 30, 2021		149,636		$	6.59		$	0
Outstanding, September 30, 2022										2,504,340		$	0.63		$	-

NOTE 911��- – SIGNIFICANT CUSTOMERS / CONCENTRATION / DISAGGREGATED REVENUE

The following table presents customers accounting for 10% or more of the Company’s revenue:

	For the Three Months						For the Nine Months						For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,						Ended September 30,						Ended September 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Customer A		21	%		*			*			*			14	%		11	%		17	%		11	%
Customer B		11	%		*			11	%		*			12	%		*			*			*
Customer C		10	%		*			*			*			11	%		*			*			*
Customer D		*			23	%		*			27	%		*			*			12	%		*
Customer E		*			20	%		*			11	%		*			*			*			21	%
Customer F														*			*			*			10	%

The following table presents customers accounting for 10% or more of the Company’s Accounts receivable:

As of September 30, ~~2021,~~2022, approximately ~~63%~~62% of the Company’s assets were located in Denmark, ~~31%~~36% were located in the ~~United States~~U.S., and 6%2% were located in China. As of December 31, ~~2020,~~2021, approximately ~~100%~~61% of the Company’s assets were located in ~~Denmark.~~Denmark, 26% were located in the U.S., and 13% were located in China.

The Company operates in three segments: Water, Ceramics and Plastics. Effective as of January 1, 2020, the group structure was changed, aswith shared group activities ~~were~~ transferred to an individual reporting unit separated from the business units. Costs and assets for these activities were therefore separated during 2020.

	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Revenue
Water	$	1,493,549	$	1,925,879	$	3,730,889	$	12,127,421	$	785,046	$	1,493,549	$	3,522,049	$	3,730,889
Ceramics		1,703,057		989,601		5,444,863		4,367,591		1,854,981		1,703,057		5,548,951		5,444,863
Plastics		855,896		503,297		2,686,292		1,847,092		665,507		855,896		2,839,809		2,686,292
Other		90,452		124,953		295,350		124,953
Corporate										-		90,452		50,253		295,350
Total consolidated Revenue		4,142,954		3,543,730		12,157,394		18,467,057		3,305,534		4,142,954		11,961,062		12,157,394

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Income (Loss)
Water	$	(531,868	)	$	(175,725	)	$	(2,112,430	)	$	(64,967	)	$	(107,681	)	$	(531,868	)	$	(864,378	)	$	(2,112,430	)
Ceramics		(798,615	)		(622,504	)		(2,681,013	)		(1,598,205	)		(772,862	)		(798,615	)		(3,519,182	)		(2,681,013	)
Plastics		(358,880	)		(261,544	)		(887,184	)		(329,200	)		(152,492	)		(358,880	)		(392,092	)		(887,184	)
Other		(1,214,593	)		(2,813,646	)		(2,780,866	)		(4,141,359	)		(719,629	)		(1,214,593	)		(7,230,495	)		(2,780,866	)
Total consolidated Loss		(2,903,956	)		(3,873,419	)		(8,461,493	)		(6,133,731	)		(1,752,664	)		(2,903,956	)		(12,006,147	)		(8,461,493	)

	For the period ended				As of
Total assets	September 30, 2021		December 31, 2020
					September 30, 2022		December 31, 2021
Total Assets
Water	$	9,096,032	$	14,033,107	$	6,874,447	$	7,767,679
Ceramics		17,048,081		16,734,371		13,889,897		13,961,057
Plastics		1,940,034		2,022,381		1,207,357		1,645,879
Other		20,309,406		9,420,278		18,679,632		21,680,077
Total consolidated assets	$	48,393,553	$	42,210,137
Total consolidated Assets					$	40,651,333	$	45,054,692

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 31, ~~2021~~2022 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.

LiqTech International, Inc. is a clean technology company that provides state-of-the-art gas and liquid purification products by manufacturing ceramic silicon carbide filters and membranes. For more than two decades, we have developed and manufactured products of re-crystallized silicon carbide. We specialize in three business areas: ceramic membranes for liquid filtration systems, diesel particulate filters (DPFs) to control soot exhaust particles from diesel engines, and plastic components for usage in various industries. Using nanotechnology, we develop proprietary products using patented silicon carbide technology. Our products are based on unique silicon carbide membranes that facilitate new applications and improve existing technologies. We market our products from our office in Denmark and through local representatives and distributors. The products are shipped directly to customers from our production facilities in 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 NA, Inc., a Delaware corporation (“LiqTech NA”) and in LiqTech Holding A/S, a Danish limited company, organized under the Danish Act on Limited Companies of the Kingdom of Denmark (“LiqTech Holding”), together with its direct wholly owned subsidiaries LiqTech Ceramics A/S (“LiqTech Ceramics”), LiqTech Water A/S (“LiqTech Water”), LiqTech Plastics A/S (“LiqTech Plastics”), LiqTech Water Projects A/S ("LiqTech Water Projects”), LiqTech Emission Control A/S (“LiqTech Emission Control”), all Danish limited companies organized under the Danish Act on Limited Companies of the Kingdom of Denmark, and LiqTech Environment Technologies (China) Co., Ltd. (“LiqTech China”), a Chinese company organized under the Chinese Act on Limited Companies in the Peoples Republic of China. Collectively, LiqTech USA, LiqTech NA, LiqTech Holding, LiqTech Ceramics, LiqTech Water, LiqTech Plastics, LiqTech Water Projects, LiqTech Emission Control and LiqTech China are referred to herein as our “Subsidiaries”.

At present, we conduct our operations in the Kingdom of Denmark. Our Danish operations are located in the Copenhagen area, in Hobro, and in Aarhus.

Our strategy is to ~~create stockholder~~leverage our core competencies in material science, advanced filtration, and systems integration, creating differentiated products with compelling value ~~by leveraging our competitive strengths in silicon carbide filters, membranes,~~propositions to penetrate attractive end markets with regulatory and ~~water treatment solutions through our focus on discrete applications in key end markets.~~ESG tailwinds. Essential ~~features of~~imperatives associated with our strategy ~~include:~~include the following:

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

The following table sets forth our revenues, expenses and net loss for the three months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

	Three Months Ended September 30,																		Three Months Ended September 30,
													Period to Period Change																		Period to Period Change
	2021			As a % of Sales			2020			As a % of Sales			Variance			Percent %			2022			As a % of Sales			2021			As a % of Sales			Variance			Percent %
Revenue		4,142,954			100.0	%		3,543,730			100.0	%		599,224			16.9	%		3,305,534			100.0	%		4,142,954			100.0	%		(837,420	)		(20.2	)%
Cost of goods sold		3,946,732			95.3			3,852,210			108.7			94,522			2.5
Cost of Goods Sold																				3,198,255			96.8			3,946,732			95.3			(748,477	)		(19.0	)
Gross Profit		196,222			4.7			(308,480	)		(8.7	)		504,702			(163.6	)		107,279			3.2			196,222			4.7			(88,943	)		(45.3	)

Operating Expenses
Selling expenses		1,205,849			29.1			741,738			20.9			464,111			62.6			676,420			20.5			1,205,849			29.1			(529,429	)		(43.9	)
General and administrative expenses		1,102,772			26.6			1,526,327			43.1			(423,555	)		(27.7	)		1,429,315			43.2			1,102,772			26.6			326,543			29.6
Research and development expenses		497,823			12.0			256,239			7.2			241,584			94.3			283,524			8.6			497,823			12.0			(214,299	)		(43.0	)
Restructuring costs																				(1,964	)		(0.1	)		-			-			(1,964	)		-
Total Operating Expenses		2,806,444			67.7			2,524,304			71.2			282,140			11.2			2,387,295			72.2			2,806,444			67.7			(419,149	)		(14.9	)

Loss from Operation		(2,610,222	)		(63.0	)		(2,832,784	)		(79.9	)		222,562			(7.9	)		(2,280,016	)		(69.0	)		(2,610,222	)		(63.0	)		330,206			(12.7	)

Other Income (Expense)
Interest and other income		-			-			8,164			0.2			(8,164	)		(100.0	)		1,870			0.1			-			-			1,870			-
Gain on modification of earn-out liability		-			-			301,573			8.5			(301,573	)		(100.0	)
Interest (expense)		(235,318	)		(5.7	)		(41,388	)		(1.2	)		(193,930	)		468.6			(28,514	)		(0.9	)		(235,318	)		(5.7	)		206,804			(87.9	)
Amortization discount, convertible note		(292,129	)		(7.1	)		-			-			(292,129	)		-
Fair value adjustment of warrants		-			-			(664,350	)		(18.7	)		664,350			(100.0	)
Amortization discount, Notes																				(84,098	)		(2.5	)		(292,129	)		(7.1	)		208,031			(71.2	)
Gain (loss) on currency transactions		218,030			5.3			(660,747	)		(18.6	)		878,777			(133.0	)		628,137			19.0			218,030			5.3			410,107			188.1
Gain on lease termination																				(3,317	)		(0.1	)		-			-			(3,317	)		-
Gain (loss) on sale of fixed assets		(8	)		0.0			-			-			(8	)		-			(19	)		-			(8	)		0.0			(11	)		137.5
Total Other Income (Expense)		(309,425	)		(7.5	)		(1,056,748	)		(29.8	)		747,323			(70.7	)		514,059			15.6			(309,425	)		(7.5	)		823,484			(266.1	)

Loss Before Income Taxes		(2,919,647	)		(70.5	)		(3,889,532	)		(109.8	)		969,885			(24.9	)		(1,765,957	)		(53.4	)		(2,919,647	)		(70.5	)		1,153,690			(39.5	)
Income Tax Benefit		(15,691	)		(0.4	)		(16,113	)		(0.5	)		422			0.0			(13,293	)		(0.4	)		(15,691	)		(0.4	)		2,398			(0.2	)

Net Loss		(2,903,956	)		(70.1	)		(3,873,419	)		(109.3	)		969,463			(25.0	)		(1,752,664	)		(53.0	)		(2,903,956	)		(70.1	)		1,151,292			(39.6	)

Revenue for the three months ended September 30, ~~2021~~2022, was ~~$4,142,954~~$3,305,534 compared to ~~$3,543,730~~$4,142,954 for the same period in ~~2020,~~2021, representing ~~an increase~~a decrease of ~~$599,224,~~$837,420, or ~~17%~~20%. The ~~change~~decrease was particularly attributed to a reduction in ~~sales mainly consists~~deliveries of ~~a decrease in liquid filters and~~ water treatment systems of ~~$405,611,~~$708,503 and a decrease in Plastics revenue of $190,389 amid general market uncertainty exacerbated by the European energy crisis, partly offset by an increase in Ceramics revenue of $151,924 due to increased sales of ~~plastic components of $352,599~~membranes and DPFs and membranes of $693,512. The decrease in sales of liquid filters and water treatment systems is a result of the negative impact of the ongoing COVID-19 pandemic, which has resulted in significant restrictions and business limitations across the globe and has caused a substantial decline in the demand and delivery of water treatment systemslarge-scale DPF deliveries for the ~~marine scrubber industry. Revenue for DPFs and membranes increased by 69% based on the favorable customer interest in environmental solutions to reduce CO~~₂ ~~emissions. The increase in sales of plastic components is related to the onset of more programmatic sales efforts that started in 2020 and realized favorable effects in 2021.~~Asian market.

Gross profit for the three months ended September 30, ~~2021~~2022, was ~~$196,222~~$107,279 compared to gross profit of ~~$(308,480)~~$196,222 for the same period in ~~2020,~~2021, representing ~~an increase~~a decrease of ~~$504,702.~~$88,943. The ~~increase~~decrease was mainly caused by the continued negative impact from rising input cost inflation associated with the production of our silicon carbide products, including increases in electricity, raw material prices, labor, freight and logistic services. The gross profit ~~compared to last year is due largely to substantial costs that were incurred last year related to the planned closure of the production facility~~ in the ~~United States, including write-offs~~third quarter was further impacted by adjustments for excess and obsolete inventory in a period with changing market fundamentals, resulting in write-downs of ~~inventory components,~~select items and implementation of revised standard cost calculations. The negative impact was partly offset by deliveries of high-margin Ceramics membranes and increased ~~scrap costs for~~aftermarket sales during the ~~production machinery and other related costs. Additionally, the increase in net sales resulted in improved gross profit due to the higher utilization of the production facilities.~~quarter. Included in the gross profit iswas depreciation of ~~$473,327~~$436,257 and ~~$476,705~~$473,327 for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Total operating expenses for the three months ended September 30, ~~2021~~2022 were ~~$2,806,444,~~$2,387,295, representing ~~an increase~~a decrease of ~~$282,140,~~$419,149, or ~~11%~~15%, compared to ~~$2,524,304~~$2,806,444 for the same period in ~~2020.~~2021, mainly reflecting the cost reduction, restructuring, and reorganization efforts implemented in 2022.

Selling expenses for the three months ended September 30, ~~2021~~2022 were ~~$1,205,849~~$676,420 compared to ~~$741,738~~$1,205,849 for the same period in ~~2020,~~2021, representing ~~an increase~~a decrease of ~~$464,111,~~$529,429, or ~~63%~~44%. This ~~change resulted from~~decline was the ~~hiring~~result of, ~~additional sales personnel~~organizational streamlining that included a reduction in headcounts of seven compared to ~~implement our growth strategy, increasing from an average~~same period in 2021, partly offset by increased marketing and travel activities following the easing of ~~12 in 2020 to an average of 21 in 2021. Further, the Company invested in additional marketing activities to help increase future sales.~~COVID-19 restrictions.

General and administrative expenses for the three months ended September 30, ~~2021~~2022, were ~~$1,102,772~~$1,429,315 compared to ~~$1,526,327~~$1,102,772 for the same period in ~~2020,~~2021, representing ~~a decrease~~an increase of ~~$423,555,~~$326,543, or ~~28%~~30%. ~~This change resulted from various cost- savings initiatives, including a reduction in the number of administrative employees from an average of 20 in 2020 to an average of 13 in 2021.~~ Included in general and administrative expenses iswas increased non-cash compensation of ~~$127,519~~$254,592 related to onboarding of new CFO, CEO, and ~~$46,681 for the three months ended September 30, 2021~~interim CEO agreement, and ~~2020, respectively, representing an increase~~increased employee expenses related to onboarding of ~~$80,838, or 173%, attributable to stock grants to members of the Board and management.~~key staff, partly offset by a decrease in legal expenses.

	For the Three Months Ended				For the Three Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2022		2021
Compensation for vesting of restricted stock awards issued to the Board of Directors	$	49,375	$	5,014	$	51,125	$	49,375
Compensation for vesting of restricted stock awards issued to management		78,144		41,667		330,986		78,144
Total Non-Cash Compensation	$	127,519	$	46,681
Total Non-cash compensation					$	382,111	$	127,519

Research and development expenses for the three months ended September 30, ~~2021~~2022, were ~~$497,823~~$283,524 compared to ~~$256,239~~$497,823 for the same period in ~~2020,~~2021, representing ~~an increase~~a decrease of ~~$241,584,~~$214,299, or ~~94%~~43%. ~~This change resulted from an increase~~The decrease represents a reduction in the number of ~~employees engaged in research~~external development projects along with efficiencies and ~~development activities from an average~~saving achieved through the streamlining and centralization of ~~13 in 2020~~the R&D function.

Restructuring costs for the three months ended September 30, 2022, were $(1,964) compared to ~~an average of 18~~$0 for the same period in 2021, ~~as the Company increased development activities for existing and new products~~representing additional restructuring costs for the ~~marine industry~~completion of the restructuring program announced in the second quarter (see Note 3), offset by the continued appreciation of the USD against EUR and ~~other end markets.~~DKK.

Other Income ~~(Expenses)~~ for the three months ended September 30, ~~2021~~2022, was ~~$(309,425)~~$514,059 compared to ~~$(1,056,748)~~Other Expenses of $309,425 for the comparable period in ~~2020,~~2021, representing a ~~favorable difference~~positive variance of ~~$747,323.~~$823,484. The ~~improvement in Other Income (Expenses)~~change was mainly ~~caused~~related to a decrease in interest expenses and amortization discount of $414,835, explained by ~~a reduction~~the refinancing of the Convertible Note in the ~~loss~~second quarter of 2022 with the new $6 million Senior Promissory Note and gain on currency transactions ~~as a result~~ of a less volatility and a more favorable DKK/USD exchange rate during the period. Included in Other Income (Expenses) is an expense of $292,129 related to the amortization of discount and interest expenses of $189,583 related to the Convertible Note issued in April 2021.$410,107.

Net loss for the three months ended September 30, ~~2021~~2022, was ~~$(2,903,956)~~$1,752,664 compared to ~~$(3,873,419)~~$2,903,956 for the comparable period in ~~2020,~~2021, representing a ~~favorable difference~~decrease in net loss of ~~$969,463.~~

~~This change was primarily attributable to~~$1,151,292, supported by the ~~increase in revenue due to higher demand for diesel particulate filters and plastic components along with the favorable variance in other expenses due to a positive impact from~~intensified cost reduction efforts, gain on currency transactions, ~~during~~and the ~~period.~~benefits from the refinancing of the Convertible Note.

Comparison of the Nine MonthsEnded September 30, ~~2021~~2022 and September 30, ~~2020~~
2021

The following table sets forth our revenues, expenses and net ~~income~~loss for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

	Nine Months Ended September 30,																		Nine Months Ended September 30,
													Period to Period Change																		Period to Period Change
	2021			As a % of Sales			2020			As a % of Sales				$		Percent %			2022			As a % of Sales			2021			As a % of Sales			Variance			Percent %
Revenue		12,157,394			100.0	%		18,467,057			100.0	%		(6,309,663	)		(34.2	)%		11,961,062			100.0	%		12,157,394			100.0	%		(196,332	)		(1.6	)%
Cost of Goods Sold		11,525,847			94.8			15,641,998			84.7			(4,116,151	)		(26.3	)		11,460,102			95.8			11,525,847			94.8			(65,745	)		(0.6	)
Gross Profit		631,547			5.2			2,825,059			15.3			(2,193,512	)		(77.6	)		500,960			4.2			631,547			5.2			(130,587	)		(20.7	)

Operating Expenses
Selling expenses		3,417,933			28.1			2,024,485			11.0			1,393,448			68.8			2,932,881			24.5			3,417,933			28.1			(485,052	)		(14.2	)
General and administrative expenses		3,824,574			31.5			4,585,857			24.8			(761,283	)		(16.6	)		4,611,375			38.6			3,824,574			31.5			786,801			20.6
Research and development expenses		1,370,059			11.3			883,752			4.8			486,307			55.0			1,377,097			11.5			1,370,059			11.3			7,038			0.5
Restructuring costs																				1,786,863			14.9			-			-			1,786,863			-
Total Operating Expenses		8,612,566			70.8			7,494,094			40.6			1,118,472			14.9			10,708,216			89.5			8,612,566			70.8			2,095,650			24.3

Loss from Operations		(7,981,019	)		(65.6	)		(4,669,035	)		(25.3	)		(3,311,984	)		70.9
Loss from Operation																				(10,207,256	)		(85.3	)		(7,981,019	)		(65.6	)		(2,226,237	)		27.9

Other Income (Expense)
Interest and other income		-			-			12,901			0.1			(12,901	)		(100.0	)		344,593			2.9			-			-			344,593			-
Gain on modification of the earn-out agreement		-			-			301,573			1.6			(301,573	)		(100.0	)
Interest expense		(491,335	)		(4.0	)		(102,926	)		(0.6	)		(388,409	)		377.4
Amortization discount, Convertible Note		(543,933	)		(4.5	)		-			-			(543,933	)		-
Fair value adjustment of warrants		-			-			(901,250	)		(4.9	)		901,250			(100.0	)
Loss on currency transactions		506,018			4.2			(821,681	)		(4.4	)		1,327,699			(161.6	)
Interest (expense)																				(394,532	)		(3.3	)		(491,335	)		(4.0	)		96,804			(19.7	)
Amortization discount, Notes																				(2,304,054	)		(19.3	)		(543,933	)		(4.5	)		(1,760,121	)		323.6
Gain (loss) on currency transactions																				361,928			3.0			506,018			4.2			(144,090	)		(28.5	)
Gain on lease termination																				150,258			1.3			-			-			150,258			-
Gain (loss) on sale of fixed assets		1,126			0.0			-			-			1,126			-			642			-			1,126			0.0			(484	)		(43.0	)
Total Other Income (Expense)		(528,124	)		(4.3	)		(1,511,383	)		(8.2	)		983,259			(65.1	)		(1,841,165	)		(15.4	)		(528,124	)		(4.3	)		(1,313,040	)		248.6

Loss Before Income Taxes		(8,509,143	)		(70.0	)		(6,180,418	)		(33.5	)		(2,328,725	)		37.7			(12,048,421	)		(100.7	)		(8,509,143	)		(70.0	)		(3,539,277	)		41.6
Income Tax Benefit		(47,650	)		(0.4	)		(46,687	)		(0.3	)		(963	)		2.1			(42,274	)		(0.4	)		(47,650	)		0.4			5,376			(11.3	)

Net Loss		(8,461,493	)		(69.6	)		(6,133,731	)		(33.2	)		(2,327,762	)		38.0			(12,006,147	)		(100.4	)		(8,461,493	)		(69.6	)		(3,544,653	)		41.9

Revenue for the nine months ended September 30, ~~2021~~2022, was ~~$12,157,394~~$11,961,062 compared to ~~$18,467,057~~$12,157,394 for the same period in ~~2020,~~2021, representing a decrease of ~~$6,309,663,~~$196,332, or ~~34%~~1.6%. The ~~change in~~decrease was mainly driven by increased Plastics revenue ~~resulted from a decrease in sales~~ of ~~liquid filters~~$153,517 and ~~water treatment systems~~Ceramics revenue of ~~$8,700,268,~~$104,088, offset by ~~an increase~~the continued appreciation of ~~sales in DPFs and membranes of $1,714,562 and an increase in sales of plastic components of $839,200. The decrease in revenue for our liquid filters and water treatment systems was mainly~~the USD against the EUR due to ~~impacts~~revenue denominated in DKK or EUR, coupled with lower share of ~~the ongoing COVID-19 pandemic, which have resulted in significant restrictions~~completed development projects of $245,098 and ~~business limitations across the globe causing a significant decline in delivery~~reduced Water revenue of water treatment systems for the marine scrubber industry. The demand for DPFs and membranes increased by 46% based on favorable customer interest in environmental solutions to reduce CO2 emissions. The increase in sales of plastic components was related to the onset of more programmatic sales efforts that started in 2020 and realized favorable effects in 2021.$208,840.

Gross profit for the nine months ended September 30, ~~2021~~2022, was ~~$631,547~~$500,960 compared to gross profit of ~~$2,825,059~~$631,547 for the same period in ~~2020,~~2021, representing a decrease of ~~$2,193,512, or 78%.~~$130,587. The ~~decrease in gross profit was largely~~change reflects reduced profitability within the Plastics and Ceramics businesses due to unfavorable mix, further exacerbated by continued input cost inflation and the ~~decline in sales of liquid filters~~European energy crisis. Proactive measures such as price increases and water treatment systems, where sales command a higher gross margin. Additionally, gross profit in the water treatment business was negatively impacted by more competitive market pricing during the economic downturn precipitatedpower price surcharges have been launched by the ~~COVID-19 pandemic.~~company to defend profitability. Included in the gross profit was depreciation of ~~$1,440,382~~$1,406,003 and ~~$1,384,344~~$1,440,382, for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Total operating expenses for the nine months ended September 30, ~~2021~~2022, were ~~$8,612,566,~~$10,708,216, representing an increase of ~~$1,118,472,~~$2,095,650, or ~~15%~~24%, compared to ~~$7,494,094~~$8,612,566 for the same period in ~~2020.~~2021, mainly driven by restructuring costs of $1,786,863 recognized in the second quarter of 2022.

Selling expenses for the nine months ended September 30, ~~2021~~2022, were ~~$3,417,933~~$2,932,881 compared to ~~$2,024,485~~$3,417,933 for the same period in ~~2020,~~2021, representing ~~an increase~~a decrease of ~~$1,393,448,~~$485,052, or ~~69%~~14%. ~~This change resulted from~~The decrease is explained by the ~~addition of new~~cost reduction and reorganization efforts initiated in 2022, and more specifically headcounts reductions and organization streamlining, partly offset by increased costs associated with intensified direct sales ~~employees from an average of 12 in 2020 to an average of 20 in 2021. Further, the Company invested significantly in other sales and~~efforts, consulting service engagements, direct marketing activities, ~~including increased on-line advertising, new CRM software, additional sales agents in various countries~~ and ~~other measures.~~bad debt provisions.

General and administrative expenses for the nine months ended September 30, ~~2021~~2022, were ~~$3,824,574~~$4,611,375 compared to ~~$4,585,857~~$3,824,574 for the same period in ~~2020,~~2021, representing ~~a decrease~~an increase of ~~$761,283,~~$786,801, or ~~17%~~21%. ~~This change resulted from various cost-savings programs introduced as a result~~The increase was mainly caused by increased headcount and costs associated with the China capacity expansion, recruitment of ~~the COVID-19 impact on the business. The primary benefit resulted from the reduction in the number of administrative~~key employees, ~~that decreased from 23 in 2020 to 13 in 2021. Included~~and general legal and audit costs. Also included in general and administrative expenses ~~is Non-cash~~for the period was increased cost associated with the recent CEO transition that included increased non-cash compensation ~~expenses that were $354,983 and $270,238~~of $782,361 for the nine months ended September 30, ~~2021 and September 30, 2020, respectively, representing an increase of $84,745, or 31%, attributable~~2022, compared to ~~increased stock grants to members of management but offset by reduced stock grants to~~$354,983 in the ~~Board.~~same period in 2021.

	For the Nine Months Ended				For the Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2022		2021
Compensation for vesting of restricted stock awards issued to the Board of Directors	$	148,125	$	131,349	$	153,375	$	148,125
Compensation for vesting of restricted stock awards issued to management		206,858		138,889		628,985		206,858
Total Non-Cash Compensation	$	354,983	$	270,238	$	782,360	$	354,983

Research and development expenses for the nine months ended September 30, ~~2021~~2022, were ~~$1,370,059~~$1,377,097 compared to ~~$883,752~~$1,370,059 for the same period in ~~2020,~~2021, representing an increase of ~~$486,307,~~$7,038, or ~~55%~~0.5%. ~~This change resulted from an increase~~

Restructuring costs for the nine months ended September 30, 2022, were $1,786,863 compared to $0 for the same period in 2021. The restructuring program was executed in the ~~number of employees engaged in research and development activities from an average headcount of 14 in 2020~~second quarter (See Note 3).

Other Expense for the nine months ended September 30, 2022, was $1,841,165 compared to ~~an average headcount of 17~~$528,124 for the comparable period in 2021, asrepresenting a negative variance of $1,313,040.

The variance was mainly related to the ~~Company increased development activities for existing~~early repayment of the Convertible Note issued in April 2021, reflecting the full recognition of the repayment premium and ~~new products for~~amortization cost in the ~~marine industry~~second quarter of 2022. Further, the period was impacted by a lower gain on currency transactions of $144,090, partly offset by the receipt of COVID-19 grants in the Danish entities and ~~other end markets.~~gain on lease terminations.

Net loss for the nine months ended September 30, ~~2021~~2022, was ~~$(8,461,493)~~$12,006,147 compared to ~~$(6,133,731)~~$8,461,493 for the comparable period in ~~2020,~~2021, representing an unfavorable variance in net loss of ~~$2,327,762.~~$3,544,653.

This change was ~~resulted~~ primarily from the significant decrease in revenue and the related decrease in gross profit. Further, the increase in operating expenses caused primarily by the growth in headcount to support future sales and production exacerbated the increased loss for the nine months ended September 30, 2021 comparedattributable to the ~~same period~~restructuring charges, and refinancing cost related to the repayment of the Convertible Note in ~~2020.~~the second quarter.

Based on the ~~still ongoing negative effects of~~continued, and more recently increased market volatility and geopolitical unrest pertaining to the ~~global pandemic, we are~~Russia and Ukraine conflict, European energy crisis and highly inflationary environment, and macro-economic uncertainty, the Company is unable to predict the full impact ~~that COVID-19~~this will have on our long-term financial condition, results of operations, liquidity, and cash ~~flows due~~flows. The Company has planned and executed on decisive measures in 2022 to ~~uncertainties. Our compliance~~help safeguard the business and its financial position by reducing cost, headcount, and overall capex commitments, which together with the ~~measures implemented to avoid the spread~~successful completion of the ~~virus had a material adverse impact on our financial results since March 2020. To~~$26.45 million public offering of common stock and pre-funded warrants, substantially improve the ~~extent possible, we have taken precautionary measures to reduce and/or defer operating expenses and preserve liquidity.~~ near-term liquidity position of the Company.

Furthermore, in June the Company completed the refinancing of its $15 million Convertible Note due in 2023, partly funded by the issuance of the new $6 million Senior Promissory Notes due in June 2024 along with the proceeds from the public offering. The Senior Promissory Notes are interest-free, with full redemption after 24 months.

Based on current projections, which are subject to ~~numerous~~significant uncertainties, including the duration and severity of global macroeconomic issues, commodity volatility, and continued global supply chain disruptions, the ~~pandemic and containment measures along with~~Company believes the ~~effect of these on the industries in which we compete, we believe our~~ cash on hand, as well as ~~our~~ ongoing cash generated from operations, ~~might not~~will be sufficient to cover ~~our~~its capital requirements and committed investments for the next 12 ~~months from the issuance of this report as we consider further investments to generate revenue growth. In addition, as a result of the~~months.

Continued market uncertainty and reduced order intake and decreased manufacturing levels, our future gross profit will also likely be unfavorably impacted until such time that we are able to operate our manufacturing facilities at higher capacity levels as originally planned prior tocaused by weakening global macroeconomic conditions, recession, or a resurgence of the COVID-19 ~~pandemic. Notwithstanding~~pandemic, however, could unfavorably impact the ~~reduction in our manufacturing levels, based on our current rate of production, we believe that we will be able~~Company’s ability to ~~fulfill most, if not all, of our existing delivery obligations in 2021.~~generate positive cash flow and thereby significantly reduce the profitability and liquidity position.

While ~~we anticipate~~the Company anticipates that its proactive measures will be sufficient to protect and fund the ~~foregoing measures are temporary, we~~business over the coming 12 months, the Company cannot predict the specific duration ~~for which these precautionary measures will stay in effect~~ and ~~how our~~severity of the unfavorable market dynamics that may adversely affect the business ~~may be adversely affected~~ as a result of ~~the pandemic’s~~these global economic ~~impact~~issues and associated supply chain disruptions. In the future, the ~~pandemic~~Company may ~~cause~~experience reduced or changed demand for ~~our~~its products and services, especially if ~~it results in~~there is a global ~~recession. It could also lead to limitations~~recession or structural shift in ~~our ability to produce and ship~~regulation or demand for its products ~~caused by governmental actions and regulations to contain the spread of the virus along with disruptions in the global chain.~~across its core end markets.

~~We have~~The Company has historically satisfied ~~our~~its capital and liquidity requirements through offerings of equity instruments, internally generated cash from operations and our available lines of credit. ~~At the filing date,~~On September 30, 2022, the Company had an available line of credit amounting to DKK 20,000,000 ($3,000,000), which is used for a leasing arrangement and guarantees issued to customers for prepayments and for warranties after delivery. On September 30, 2021, we had cash of ~~$20,692,339~~$17,605,377 and net working capital of ~~$16,332,018,~~$23,306,125, and on December 31, ~~2020, we~~2021, the Company had cash of ~~$13,264,449~~$17,489,380 and net working capital of ~~$15,839,992. On September 30, 2021, our net~~$11,199,258. The increase in working capital ~~had increased by $492,026~~of $12,106,867 compared to December 31, ~~2020 as~~2021 is mainly a result of ~~an increase in Cash due to~~ the ~~proceeds from~~capital raise and repayment of the ~~issuance of a~~ Convertible ~~Note in April 2021. This was offset by a decrease in Accounts receivable and Contract assets/liabilities as well as a decrease in Accounts payable.~~Note.

In connection with certain orders, we provide the customer a working guarantee, a prepayment guarantee or a security bond. For that purpose, we maintain a guaranteed credit line of ~~DKK10,000,000~~EUR 1,350,000 (approximately ~~$1,500,000)~~$1,315,000). The credit line is secured by a cash ~~deposit~~deposit.

On March 24, 2021, the Company entered into a Securities Purchase Agreement with an institutional investor pursuant to which the Company agreed to issue and sell a $15.0 million principal amount senior Convertible Note (the “Note”) due on October 1, 2023, and 80,000 shares of common stock, $0.001 par value (“Common Stock”), for an aggregate purchase price of $15.0 million upon the satisfaction of the closing conditions set forth in the Securities Purchase Agreement. The Closing occurred on April 8, 2021, and the Company issued to the Investor the securities in connection with the Closing.

The Note was a senior, unsecured obligation of the Company, payable at 112% of the principal amount at maturity (October 1, 2023) or earlier upon redemption or repurchase as set forth in the Note. The Note was convertible into shares of Common Stock pursuant to the terms of the Note, in part or in whole, from time to time, at the election of the Investor. The initial conversion rate was 100.6749 shares of Common Stock per $1,000 of principal amount of the Note. The conversion rate was subject to anti-dilution adjustments including for stock dividends, splits and combinations; issuances of options, warrants or similar rights; spin-offs and distributions of property; cash dividends or distributions; and tender or exchange offers, in each case as further described in and pursuant to the terms of the Note.

Beginning on March 1, 2022, and on the first day of each calendar month thereafter, at the election of the Investor or Holder, if applicable, the Company was required to redeem $840,000 of the amounts due under the Note in cash or Common Stock at 90% of the lesser of (i) the volume-weighted average price (“VWAP”) of the Common Stock on the trading day immediately preceding the payment date and (ii) the average of the lowest three (3) VWAPs over the 10 trading days immediately preceding the payment date, which shall in no case be less than the floor price of $1.75 per share. Beginning on March 1, 2022, the Company paid the first monthly installments of $840,000 in cash, totaling $3,360,000.

As of June 22, 2022, the Note, including accrued interests and all relevant obligations, was repaid in full, amounting to $13,446,875, allocated to principal repayment of $11,640,000 and contractual repayment premium of $1,806,875.

On June 22, 2022, the Company issued and sold Senior Promissory Notes in an aggregate principal amount of $6.0 million (the "Notes") and issued warrants to purchase 4,250,000 shares of common stock of the Company to affiliates of Bleichroeder L.P., 21 April Fund, L.P., and 21 April Fund, Ltd. (together, the "Purchasers"), pursuant to a note and warrant purchase agreement entered into with the Purchasers.

The Notes have a term of 24 months and do not bear interest during this period. If the notes are not repaid on or before the second anniversary of issuance, however, the Notes will thereafter bear interest of 10% per annum, which will increase by 1% each month the Notes remain unpaid, up to a maximum of 16% per annum, payable monthly.

As a result, the Company recorded an initial debt discount of $664,704 based on the relative fair value of the warrants and notes issued. The Company determined the fair value of the warrants by using the Black-Scholes Option Pricing Model with the following assumptions: expected term of 2.5 years, stock price of $0.43, exercise price of $0.65, volatility of 80.8%, risk-free rate of 3.13%, and no forfeiture rate. The debt discount will be accreted according to the effective interest method over the contractual term of the note. The warrants qualified for equity classification and were reported within Additional Paid-In Capital.

Nine months ended September 30, ~~2021~~2022 compared to nine months ended September 30, ~~2020~~2021

~~Cash provided by (used in) operating activities is net loss adjusted for certain non-cash items and changes in assets and liabilities.~~ Cash used in operating activities for the nine months ended September 30, ~~2021 was $(4,408,092), representing~~2022 of $11,482,936 represents a decrease of ~~$(3,804,997)~~$7,074,845 compared to ~~cash used in operating activities of $603,095~~$4,408,091 for the nine months ended September 30, ~~2020. The cash used in operating activities for~~2021. For the nine months ended September 30, ~~2021 consists~~2022, the result is mainly ofexplained by the net loss for the period of ~~$(8,461,493)~~$12,006,147 adjusted for depreciation and other non-cash-related items of ~~$2,818,151. Further, changes~~$5,153,301. Changes in assets and liabilities include ~~decreased~~increased Accounts receivable of ~~$741,514, a decline in~~$1,262,577 and net Contract assets/liabilities of ~~$443,921,~~$650,497, with the latter caused by the delivery of a water treatment system in the second quarter of 2022 with an extended service, commissioning, and payment schedule running until August 2025. The increase in ~~Accrued expenses of $599,086 and a decrease in Prepaid~~prepaid expenses and other current assets of ~~$299,949, offset~~$1,497,612 is related to prepayments on production equipment. Furthermore, accounts payable increased by ~~a decrease in Accrued~~$212,304 and accrued expenses decreased by $1,028,428 due to repayment of ~~$755,503 and Accounts payable of $188,035.~~COVID-19 loans provided by the Danish government.

Net cash used in investing activities was $791,881 for the nine months ended September 30, 2022, compared to $1,252,741 for the nine months ended September 30, 2021, ~~as compared to net cash used in investing activities of $3,229,674 for the nine months ended September 30, 2020,~~ representing a decrease of $1,976,933. The investing activities include the purchase of equipment primarily related to the installation of new furnaces in Ballerup to increase production capacity and new machinery in Plastics to support customer needs for additional production capabilities. Further the Company have paid the last instalment of the earn-out agreement totaling $321,574.$460,860.

Cash provided from financing activities was $13,359,415 for the nine months ended September 30, 2022 compared to $13,995,807 for the nine months ended September 30, 2021, ~~as compared to cash provided from financing activities~~representing a decrease of ~~$7,229,505 for~~$636,392. For the ~~nine months ended September 30, 2020. Cash provided from financing activities for the~~nine-month period ended September 30, ~~2021 consisted primarily~~2022, the change is mainly explained by the equity capital raise in the second quarter, generating net proceeds of $24,418,612 from the issuance of common stock and prefunded warrants, combined with the $6,000,000 proceeds from the issuance of the ~~net funding from~~new Senior Promissory Notes, and offset by the full repayment of the Convertible Note issued in April ~~2021. The amount was $15,000,000 reduced by costs~~2021 of ~~$716,667 related to the agreement. Further, financing activities have been negatively impacted by the payment of $287,526 mainly related to the furnace lease agreement.~~

~~As of September 30, 2021, we had no off-balance sheet arrangements. We are not aware of any material transactions that are not disclosed in our consolidated financial statements.~~ $16,800,000.

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:

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.

We are not required to provide quantitative and qualitative disclosures about market risk because we are a smaller reporting company.

Management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the design and effectiveness of our internal controls over financial reporting and disclosure controls and procedures (pursuant to Rule 13a-15(b) and (c) under the Exchange Act) as of the end of the period covered by this Quarterly Report. A weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a misstatement of the registrant's financial statements will not be prevented or detected on a timely basis.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures as of September 30, ~~2021~~2022 were not effective as of the period covered by this Quarterly Report due to material weaknesses in internal controls over financial reporting. For more information on material weaknesses identified by management, please reference our Form 10-K filed on March 31, ~~2021~~2022 for the year ended December 31, ~~2020.~~2021.

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

In response to the identified material weaknesses, ~~our~~Company management, with oversight from the Company’s Audit Committee, has been and will continue to dedicate necessary resources to enhance the Company’s internal control over financial reporting and remediate the identified material weaknesses. As an example of such remediation, the Company has hired additional employees into the finance department, and we plan to continue to work on remediating the material weaknesses during ~~2021~~2022 by improving competencies and work processes. Further, an investment in a new ERP system has been made along with other supporting IT systems to ~~support~~reinforce the controls and processes of the ~~Company, and these~~Company. These investments are an important part of ~~the~~our remediation ~~plan for the material weaknesses.~~plan. Lastly, the Company has started the process of redesigning and ensuring documentation of all processes and procedures related to ~~the~~ financial reporting ~~process~~ to ensure the effective design and operation of process-level controls.

While management believes that the steps that we have been taken and plan to take will improve the overall system of internal control over financial reporting and will remediate the identified material weaknesses, ~~the~~these material weaknesses cannot be considered fully remediated until the applicable relevant controls operate for a sufficient period of time.

An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon 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. Over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

While management believes that the steps that we have taken and plan to take will improve the overall system of internal control over financial reporting and will remediate identified material weaknesses, the material weaknesses cannot be considered remediated until the applicable relevant controls operate for a sufficient ~~period of time.~~period.

~~None.~~For a description of contingencies, see “Note 8 – Agreements and Commitments”.

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.

	Page
PART I. FINANCIAL INFORMATION

~~Item 1. Financial Statements~~	5

~~Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020~~Item 1. Financial Statements	5

Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	5

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, ~~2021~~2022 and September 30, ~~2020~~2021 (unaudited)	7

Condensed Consolidated Statement of Stockholder’s Equity for the period ended September 30, ~~2021~~2022 and September 30, ~~2020~~2021 (unaudited)	9

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2021~~2022 and September 30, ~~2020~~2021 (unaudited)	10

Notes to Condensed Consolidated Financial Statements (unaudited)	12

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation	2628

Item 3. Quantitative and Qualitative Disclosures About Market Risk	3337

Item 4. Controls and Procedures	3337

PART II. OTHER INFORMATION	38

Item 1. Legal Proceedings	3438

Item 1A. Risk Factors	3438

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3438

Item 3. Defaults Upon Senior Securities	3438

Item 4. Mine Safety Disclosures	3438

Item 5. Other Information	3438

Item 6. Exhibits	3539

SIGNATURES	3640

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2021		2020		2021		2020
United States and Canada	$	211,575	$	120,163	$	573,365	$	577,064
Australia		75,003		118,089		334,855		222,050
Asia		561,619		358,430		2,890,836		2,684,474
Europe		3,294,757		2,947,048		8,358,338		14,983,469
	$	4,142,954	$	3,543,730	$	12,157,394	$	18,467,057

●	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.

	2022			2021
Restructuring accruals, January 1	$	-		$	-
Restructuring costs, net		1,786,863			-
Cash payments		(1,342,135	)		-
Asset impairments		(420,880	)		-
Restructuring accruals, September 30	$	23,848		$	-

	~~2021~~
~~Warrants outstanding at January 1~~		~~515,000~~
~~Common stock exchanged to prefunded warrant~~		~~500,000~~
~~Exercises and conversions~~		0
~~Warrants outstanding at September 30~~		~~1,015,000~~

	●	~~The impact on~~Our ability to successfully protect our ~~financial performance of foreign currency rate fluctuation;~~ intellectual property rights;

	●	The ~~risk~~possibility of ~~liability arising from claims of environmental damage, personal injury, and~~a dispute over intellectual property ~~damages~~developed in ~~connection~~conjunction with ~~our manufacturing operations;~~third parties with whom we have contractual relationships;

	September 30, 2022
CEO separation	$	230,538
Terminated employees		159,841
China close-down		278,391
Capex commitments		697,213
Write-downs		420,880
	$	1,786,863

	September 30, 2021			December 31, 2020
Convertible note	$	16,800,000			0
Less: unamortized debt issuance costs		(2,504,462	)		0
Convertible note payable	$	14,295,538		$	0

Current portion of convertible note payable		5,880,000			0
Convertible note payable, less current portion		8,415,538			0
Convertible note payable	$	14,295,538		$	0

	September 30, 2022			December 31, 2021
Senior Promissory Notes	$	6,000,000			-
Less: unamortized debt discount		(604,760	)		-
Senior Promissory Notes payable	$	5,395,240		$	-

Current portion of Senior Promissory Notes payable		-			-
Senior Promissory Notes payable, less current portion		5,395,240			-
Senior Promissory Notes payable	$	5,395,240		$	-

	2022		2021
Warrants outstanding at January 1		1,015,000		515,000
Warrants issued in connection with public offering and private placement		34,905,000		-
Common stock exchanged to prefunded warrant				500,000
Exercises and conversions		-		-
Warrants outstanding at September 30		35,920,000		1,015,000

	September 30, ~~2021~~2022			December 31, ~~2020~~2021
Customer DA		*			3914	%
~~Customer B~~		*
Customer C		11	%		*
Customer E		*			16	%
Customer CG		*			1211	%

	●	~~Retain~~Develop and ~~acquire~~reinforce new ~~customers in the marine industry~~products and applications to provide clean water and reduce pollution.. We currently provide water filtration systems for scrubber technology providers, shipowners, and ship ~~operators.~~operators as well as tailored filtration systems for oil & gas operators and services companies. We are expanding our range of ~~marine~~ products to better leverage existing customer relationships and develop new ~~relationships.~~relationships within the oil & gas, marine, and global chemical industries.

	●	~~Enter~~Better penetrate existing end markets where our value proposition is strong. We have successfully sold products and installed systems into several end markets--including automotive/transportation, clean water and pool filtration, marine, industrial wastewater, and oil & gas. We are focused on targeting and activating new ~~geographic~~customers in these end markets ~~and expand existing markets. We plan to continue to manufacture and sell our products from our manufacturing center in Denmark. We work~~while working with distributors, agents, and partners to access other important geographic markets.

	●	~~Strengthen our position in the DPF market.~~ We believe that we have a strong position in the retrofit market for diesel particulate filter (DPF) systems where we intend to advance our efforts to maintain our market position in this area. Furthermore, we intend to leverage our OEM market experience by expanding our presence with new products and markets relating to diesel particulate filter systems.

	●	Develop ~~and improve technologies and enter~~new end ~~markets.~~ ~~We intend to continue to develop our ceramic membranes and improve the efficiency of our filtration products. Through continuous research and development, we intend to find new uses~~markets for our core products and ~~plan~~applications. Our existing products and systems are relevant for and valuable to ~~expand into new~~other end markets, ~~that offer the Company significant opportunities.~~

	●	~~Focus on the development and sales of standardized water filtration and treatment systems.~~ ~~We will continue our focus on selling systems based on our unique SiC membranes,~~ and we ~~will also combine the ceramic membranes~~regularly evaluate opportunities to partner with ~~other technologies~~strategic customers to ~~offer our customers complete filtration solutions. Moreover, we will continue developing smaller standard systems, like those for groundwater treatment~~perfect new applications and ~~residential swimming pools.~~validate associated value propositions.

●	The assessment of revenue recognition, which impacts revenue and cost of sales;
●	the assessment of allowance for product warranties, which impacts gross profit;
●	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 profit 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, along with the reserve for excess and obsolescence, which impacts gross profit; and
●	the recognition and measurement of loss contingencies, which impact gross profit or operating expenses when we recognize a loss contingency, revise the estimate for a loss contingency, or record an asset impairment.

~~4.1~~10.1		~~Form of Pre-Funded Common Stock Purchase Warrant (Filed as~~Executive Services Agreement, dated July 26, 2022, by and between LiqTech Holding A/S and Fei Chen	Incorporated by reference to Exhibit ~~4.1~~10.1 to the Company’s current report on Form 8-K, filed with the ~~Commission~~SEC on August ~~20, 2021)~~	1, 2022.

~~10.1~~	~~Form of Exchange Agreement (Filed as Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on August 20, 2021)~~

~~10.2~~	~~Lease Agreement (Filed as Exhibit 10.1 to the Company’s Form 8-K filed with the Commission on September 28, 2021)~~

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		Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)	Provided herewith

101. CAL		Inline XBRL Taxonomy Extension Calculation Link base Document	Provided herewith

101. DEF		Inline XBRL Taxonomy Extension Definition Link base Document	Provided herewith

101. LAB		Inline XBRL Taxonomy Label Link base Document	Provided herewith

101. PRE		Inline XBRL Extension Presentation Link base Document	Provided herewith

101. SCH		Inline XBRL Taxonomy Extension Scheme Document	Provided herewith

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).	Provided herewith

	LiqTech International, Inc.

Dated: November ~~15, 2021~~10, 2022	/s/ ~~Sune Mathiesen~~Fei Chen
	~~Sune Mathiesen,~~Fei Chen, President and Chief Executive Officer
	(Principal Executive Officer)


Dated: November ~~15, 2021~~10, 2022	/s/ ~~Claus Toftegaard~~Simon S. Stadil
	~~Claus Toftegaard,~~Simon S. Stadil, Chief Financial Officer
	(Principal Financial and Accounting Officer)