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Item 1. Business

2022-03-31 compared with 2021-03-31 · 148 added, 509 removed, 123 unchanged (84% of the section changed)

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.

is a clean technology company that provides state-of-the-art gas and liquid purification products by manufacturing ceramic silicon carbide filters.

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.

We specialize in two business areas:

ceramic membranes for liquid filtration and diesel particulate filters (DPFs) to control soot exhaust particles from diesel engines.

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.

We market our products from our offices in Denmark and local representatives and distributors across Europe, Middle East and Asia, with the products 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 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 Water Projects A/S ("LiqTech Water Projects”) and LiqTech Plastics A/S (“LiqTech Plastics”), all Danish limited companies organized under the Danish Act on Limited Companies of the Kingdom of Denmark, and LiqTech NA, Inc., a Delaware corporation (“LiqTech NA”).

Collectively, LiqTech USA, LiqTech Holding, LiqTech Ceramics, LiqTech Water, LiqTech Plastics and LiqTech NA are referred to herein as our “Subsidiaries”.  

We conduct operations in the Kingdom of Denmark.

Our Danish operations are located in the Copenhagen area, in Hobro and in Aarhus.

We manufacture and sell ceramic membranes and systems for the filtration of liquids and diesel particulate filters to control soot exhaust particles from diesel engines.

We also provide plastics components through LiqTech Plastics for a variety of internal and external industrial applications. 

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 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 Water Projects A/S (“LiqTech Water Projects”) and LiqTech Plastics A/S (“LiqTech Plastics”), all Danish limited companies organized under the Danish Act on Limited Companies of the Kingdom of Denmark, and LiqTech NA, Inc., a Delaware corporation (“LiqTech NA”).

Collectively, LiqTech USA, LiqTech Holding, LiqTech Ceramics, LiqTech Water, LiqTech Plastics, and LiqTech NA are referred to herein as our “Subsidiaries”.

We conduct and manage our operations from our office and manufacturing facilities in the Kingdom of Denmark, more specifically Hobro, Aarhus, and Ballerup in the Copenhagen area.

We are currently working to establish manufacturing operations in China.

We manufacture and sell a broad range of ceramic membranes and systems for the filtration of liquids and diesel particulate filters to control soot exhaust particles from diesel engines.

We also provide plastic parts through the recently acquired BS Plastic A/S for various internal and external industrial applications. 

Silicon Carbide Ceramic Membranes for Liquid Filtration

Under the “LiqTech”, “Cometas”

and “Provital”

brand names, we manufacture and sell ceramic membranes and systems for liquid filtration using our patented silicon carbide technology (sometimes also referred to herein as our “SiC Filters”).

Our current focus is on marine scrubber wash water, contaminated water from the production of hydrocarbons, which we refer to herein as “produced water”, removal of heavy metals in mining and energy applications, pre-filtration for reverse osmosis in drinking water and other industrial applications.

Our SiC Filters have been used in the following applications by our clients:

● 

Marine scrubber wash  

We supply water filtration systems for marine scrubber systems used on ships to reduce sulfur emissions emanating from heavy fuel oil (HFO) operations, allowing vessels to comply with the IMO 2020 sulfur cap.

To date, more than 250 water treatment systems have been installed as a result of orders from European and Asian scrubber technology providers, shipyards, and shipowners. 

● 

Produced water :

Our membrane systems can be used for the filtration of produced water, which is a byproduct of oil and gas production.

The amount of produced water varies from 0.1 to 10 times the amount of oil produced.

We have performed testing with major international private and public oil and gas companies.

Our solution is market-proven, approved by various international oil and gas companies for onshore and offshore applications.

● 

Pre-filtration of reverse osmosis drinking water :

To convert seawater or surface water into potable water, the seawater or surface water must be pre-filtered before entering the reverse osmosis membranes.

We have a market-proven solution that has been tested by various customers around the world.

● 

Industrial applications : We have delivered complete water treatment systems for specific targeted, aggressive fluid applications, such as the removal of heavy metals for energy providers and water treatment systems for mining wastewater. 

● 

Producing clean drinking water :

In addition to pre-filtration before reverse osmosis described above, the potential advantages of LiqTech SiC ceramic membranes in other drinking water applications are numerous.

Some examples include groundwater removal of precipitated salts such as iron and manganese along with surface water removal of organic suspended solids and humic acid.

● 

Pool and spa water:

We have supplied several turnkey water filtration systems for medium to very large public swimming pool installations in Europe.

We believe our SiC ceramic membranes provide unique advantages for the commercial pool filtration industry with the smallest footprint on the market, reduced water and chemical consumption, and consistent, high-quality water filtration.

Beyond those applications mentioned above utilizing silicon carbide ceramic membranes, LiqTech has developed many other industrial water treatment applications that do not use ceramic membranes.

These applications include:

Seawater Reverse Osmosis (SWRO) :

SWRO represents a new LiqTech solution to convert seawater into potable water using polymeric membranes.

With its high energy efficiency and consistent water quality, we believe SWRO provides one of the most efficient and sustainable solutions to convert seawater into drinkable freshwater.

The LiqTech SWRO units are suitable for small commercial vessels, fishing boats, sailing boats, small port applications, and for generally most applications with access to seawater and where desalinated, potable water is needed.

Filter Press :

The LiqTech Filter Press is a water sludge treatment system, enabling solid and liquid separation.

The filter press can convert sludge into a filter cake consisting of up to 80% dry matter, depending on the pressure and application.

One of the primary purposes of employing a filter press is to reduce handling costs associated with discharge.

UV Disinfection :

LiqTech is a distributor of UV-C LED Disinfection Systems.

This technology can be used to purify water, air, and surfaces to provide reliable and low-cost disinfection to protect human health.

Our SiC membranes are manufactured based on patented technology.

We are not aware of other companies that make both the substrate (honeycomb) and the membrane (the surface layer that accomplishes the filtering) solely from silicon carbide.

For more than two decades, LiqTech has developed, manufactured, and sold innovative silicon carbide ceramic filtration technologies for liquid and gas purification.

Our product portfolio consists of silicon carbide ceramic filters for liquid purification and diesel particulate filters for gas purification.

Based on our continuous R&D, patented technologies, and evolved production methods, we are able to produce state-of-the-art silicon carbide filters.

Our products are manufactured with a silicon carbide ceramic membrane based on patented technology.

We are not aware of other companies that make both the substrate (honeycomb) and the membrane (the part that accomplishes the filtering) solely from silicon carbide.

Our products are based on the following silicon carbide membrane technologies:

CoMem ceramic membranes  utilize a unique patented membrane technology designed as a tubular membrane.

The membranes utilize a crossflow structure to handle high concentrations of suspended solids found in produced water in the oil & gas and chemical industries, as well as wastewater from industrial processes and manure filtration.

CoMem ceramic membranes,  which are unique patented technology designed as a tubular membrane.

It utilizes a crossflow structure to handle high concentrations of suspended solids found in produced water from the oil and chemical industry, wastewater from industrial processes and manure filtration, and other applications.

It offers consistent removal of oil and suspended solids at high throughput rates regardless of feed conditions.

We offer onshore and offshore solutions and have extensive experience with produced water streams for fracking, gas condensate, and oil emulsions.

We believe our SiC filters are the better alternative to micro-flotation and walnut shell filters due to cost savings, reduced installation cost, robustness, and decreased downtime.

We believe our SiC filters are the best alternative to micro-flotation and walnut shell filters due to their cost savings, reduced installation cost, robustness, and reduced downtime.

Our chemically inert, plug-and-play membranes are extremely hard, chemically resistant, and durable ceramics with high flux (flow).

SiC membranes are stronger, harder, longer-lasting, more temperature-resistant, and recover faster than conventional ceramic or polymeric membranes; 

Flat sheet membranes ( “

FSMs ”

)  are designed for sub-merged outside-in filtration applications.

The FSM is suitable for wastewater reuse, groundwater, pre reverse osmosis treatment, and other applications.

SiC membranes are stronger, harder, longer-lasting, more temperature-resistant, and recover faster than conventional ceramic or polymeric membranes;

Flat sheet membranes (FSM) , which are designed for submerged outside-in filtration applications.

The FSM is highly applicable for wastewater reuse, groundwater, pre reverse osmosis treatment, and other applications.

LiqTech’s FSM towers can be customized with different rack sizes and tower heights.

The FSMs offer low energy consumption, maximum permeation, innovative rack design, and high flux;

These membranes are used in drinking water, pre-RO, and industrial wastewater reuse applications.

The FSM carrier and the selective layer are also made of silicon carbide, which gives the product unique advantages such as high flux, total chemical resistance (pH 0-14), long life and one of the lowest fouling tendency of any polymeric or ceramic membrane material;

Disc membranes 

are designed for the removal of high-suspended solids, oil droplets, and process water.

Disc membranes , which are designed for the removal of high-suspended solids, oil droplets, and process water.

The disc membranes use outside-in filtration and have internal permeation channels, facilitating the removal of the solids.

A crossflow effect is generated through the discs' rotation at high velocities, which enables flow cleaning of the filter membrane surface.

This principle offers 80% energy savings compared to conventional cross-flow systems;

Aqua Solution ®

integrates a dead-end structural design with cutting-edge membrane technology in a solution specifically designed for applications in the pre-treatment for reverse osmosis, wastewater treatment, and swimming pool and spa water filtration.

Our Aqua Solution® offers the same water flow as conventional sand filters, which typically require up to 400 times more space and have pore sizes at least three times bigger than our SiC membranes.

This principle offers 80% energy savings compared to conventional cross-flow;

Aqua Solution ®, which integrates a dead-end structural design with cutting-edge membrane technology in a solution specifically designed for applications in the pre-treatment for reverse osmosis, wastewater treatment, and swimming pool and spa water filtration.

Our Aqua Solution® offers the same water flow as conventional sand filters, which typically require up to 400 times more space and have pore sizes at least three times larger than our SiC membranes.

Moreover, our Aqua Solution® reduces the number of membrane elements, pressure vessels, the water consumption for backwash, and the energy costs by offering high flow capabilities at very low pressure.

Also, it eliminates the consumption or maintenance of filter cartridges;

Hybrid Technology Membranes (HTM)  is a new patented asymmetric membrane that combines the desired properties from silicon carbide (SiC) and zirconia (ZrO₂) ceramics.

Hybrid Technology Membranes (HTM) , which is a new patented asymmetric membrane that combines the desired properties from silicon carbide (SiC) and zirconia (ZrO₂) ceramics.

With a pore size of 60 nanometers (nm), it is suitable for ultrafiltration applications.

This state-of-the-art membrane technology facilitates new separation processes and new filtration applications.

The advantages of our SiC Filters compared to other pre-filtration systems for reverse osmosis are:

Equivalent water flow to commonly used sand filters that require up to 400 times more space and contain pore sizes that are at least three times larger than our SiC Filters.

Additionally, our SiC Filters reduce the number of membrane elements and pressure vessels;

High flow capacities that are achieved at very low pressures, which reduce energy costs;

Reduced water consumption for sand filter backwash;

Elimination of the consumption or maintenance of filter cartridges.

For the years ended December 31, 2020 and 2019, our sales of liquid filters, services and systems were $14,147,842 and $25,464,614, respectively, and accounted for 63% and 78% of our total sales, respectively. 

For the years ended December 31, 2020 and 2019, we received revenue from government grant projects of $599,102 and $624,981, respectively.

Diesel Particulate Filters (DPFs) for Gas Purification

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DPF sales are generally made to distributors specializing in sales to end-users.

We use a proprietary “nano washcoat”

to provide catalytic coating for anything from diesel particulate filters to catalytic converters.

Our DPF products are sold worldwide under the LiqTech brand.

We have developed a robust silicon carbide diesel particulate filter that is especially effective for vehicles that produce a high soot load, and if properly maintained, should last as long as the vehicle’s engine.

Our DPFs are ideal for off-road vehicles because of their strength, chemical non-reactive nature, temperature resilience and thermal conductivity. 

Our DPF filters can handle higher soot loads than filters that do not use a silicon carbide membrane, which makes them ideal for situations in which engines infrequently reach high enough temperatures to burn off soot.

Examples include:

We use a proprietary “nano wash coat”

to provide a catalytic coating for anything from diesel particulate filters to catalytic converters.

Our DPF products are sold worldwide under the LiqTech brand.

We have developed a robust silicon carbide diesel particulate filter that is especially effective for vehicles that produce a high soot load.

If properly maintained, a LiqTech DPF can last as long as the vehicle’s engine.

Our DPFs are ideal for off-road vehicles because of their strength, chemical non-reactive nature, temperature resilience, and thermal conductivity.

Our DPF filters can handle higher soot loads than filters that do not use a silicon carbide membrane, making them ideal for situations in which engines infrequently reach high enough temperatures to burn off the soot.

Examples include: 

Garbage trucks;

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Future tightening legislation in the marine industry has also created a new opportunity for our DPF product to reduce black carbon emissions from shipping.

For the years ended December 31, 2020 and 2019, our sales of DPFs were $5,131,891 and $5,652,685, respectively, and accounted for 23% and 17% of our total sales, respectively.

Plastics have been part of our offering since the acquisiton of BS Plastic A/S on September 4, 2019.

Turnkey Water Treatment Solutions

LiqTech develop, manufacture, and sell liquid filtration systems using our patented silicon carbide technology (sometimes also referred to herein as our “SiC Filters”).

Our current focus is on marine scrubber wastewater, hydrocarbon production-derived contaminated water, which we refer to herein as “produced water”, removal of heavy metals in mining and energy applications, pre-filtration for reverse osmosis in drinking water, and other industrial applications.

Our SiC ceramic membrane systems have been used in the following applications by our clients:

Marine Scrubber Wastewater:

 We supply water filtration systems for marine scrubber systems that may be employed on ships to reduce sulfur emissions stemming from heavy fuel oil (HFO) operations, allowing vessels to comply with the IMO 2020 sulfur cap.

To date, more than 250 water treatment systems have been installed because of orders from European and Asian scrubber technology providers, shipyards, and ship owners.

Produced Water:

 Our membrane systems can be used for the filtration of produced water, which is a byproduct of oil and gas production.

The amount of produced water varies from 0.1 to 10 times the amount of oil produced.

We have performed testing with major international private and public oil and gas companies.

Our solution is market-proven, approved by various international oil and gas companies, and applicable for onshore and offshore operations.

Pre-filtration of Reverse Osmosis Drinking Water :

To convert seawater or surface water into potable water, the seawater or surface water must be pre-filtered before entering the reverse osmosis membranes.

We have a market-proven solution for pre-filtration in reverse osmosis, tested by various customers all over the world.

Industrial Applications:

 We have delivered complete water treatment systems for specific targeted, aggressive fluid applications such as removing heavy metals for energy providers in Denmark and Finland and water treatment systems for mining wastewater for a European mining company.

In addition, our membrane systems have achieved meaningful results to reduce OPEX and increase product quality in acidic purification.

Producing Clean Drinking Water:

 The potential advantages of LiqTech SiC ceramic membranes in drinking water are numerous.

Some examples include groundwater removal of precipitated salts such as iron and manganese, surface water removal of organic suspended solids and humic acid, and seawater pre-filtration before reverse osmosis.

Food and Beverage Applications:

 High-quality filtration products for the food and beverage industry significantly reduce chemicals and wastewater taxes by installing a fully automated LiqTech membrane system.

Pool and Spa Water:

 We have supplied several turnkey water filtration systems for medium to very large public swimming pool installations in Europe.

Our SiC ceramic membranes provide unique advantages for the commercial pool filtration industry with the smallest footprint on the market, reduced water and chemical consumption, and consistent, high-quality water filtration.

Besides the applications mentioned above utilizing silicon carbide ceramic membranes, LiqTech has many other industrial water treatment applications that do not use ceramic membranes.

These applications include:

Seawater Reverse Osmosis (SWRO):

 SWRO represents a brand-new LiqTech solution to turn seawater into potable water using polymeric membranes.

Through its high energy efficiency and guaranteed, consistent water quality, SWRO provides one of the most efficient and sustainable solutions to convert seawater into drinkable freshwater.

The LiqTech SWRO units are suitable for small commercial vessels, fishing boats, sailing boats, small port applications, and generally all places with access to seawater and where desalinated, potable water is needed.

Filter Press:

 The LiqTech Filter Press is a water sludge treatment system, enabling solid and liquid separation.

The filter press can convert sludge into a filter cake consisting of 80% dry matter, depending on the pressure and application.

One of the primary purposes of employing a filter press is to reduce discharge handling costs.

UV Disinfection:

 LiqTech is a distributor of UV-C LED Disinfection Systems.

UV-C LED disinfection technology can be used to purify water, air, and surfaces.

The solution provides reliable and low-cost disinfection to protect human health.

Highly Flexible & Innovative Plastic Manufacturing

LiqTech provides highly flexible and innovative plastics manufacturing, focusing on machining, welding, bending, and solvent cementing.

With an intense focus on customer demands, LiqTech serves market leaders in the cleantech, pharma, food, healthcare, and graphics industries.

For the years ended December 31, 2020 and 2019 (4 months), our plastics revenues were $2,647,366 and $895,203, respectively and accounted for 12% and 3% of our total sales, respectively.

Our Competitive Strengths

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Most of our competitors are large industrial companies;

however, we believe our patented technology allows us to produce high-quality products that provide an advantage over many of our competitors, many of which have greater financial, technological, manufacturing, and personnel resources.

We intend to continue to devote resources to developing new technologies and improving our products to reinforce our competitive advantages, retain our existing customers and acquire new customers.

We believe the following strengths position us to increase our revenue and profitability:

however, we believe our patented technology allows us to produce high-quality products that provide an advantage over many of our direct and, in many cases, larger competitors.

We intend to continue investing in R&D with the aim of developing new technologies and improving our existing products to reinforce our competitive advantages, retain our existing customers, and acquire new customers.

We believe the following strengths underpin our ability to increase revenue and profitability:

Advantages of Silicon Carbide Membranes:

 Our liquid filtration and diesel exhaust products utilize silicon carbide membranes, which have unique qualities that we believe make our products more effective than those of our competitors.

Unlike other filtration products made of aluminum oxide, silicon carbide membranes are chemically inert and temperature resistant.

Furthermore, silicon carbide membranes exhibit a high degree of hydrophilicity (the tendency of a surface to become wet or absorb water), which results in unique high flux (and low energy consumption).

Unlike filtration products made of aluminum oxide, silicon carbide membranes are chemically inert and temperature resistant.

Furthermore, silicon carbide membranes exhibit a high degree of hydrophilicity (the tendency of a surface to become wet or absorb water), which results in unique flux (low energy consumption).

Silicon carbide is also very durable, and its hardness is only surpassed by diamonds, making it a highly desirable material for various abrasive fluids in industrial applications.

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 LiqTech provides full fabrication and integration of our membranes into complete filtration systems made from corrosive-resistant materials and components.

We possess in-house engineering capabilities for process design, 3D modeling, and control systems.

We possess in-house engineering capabilities for process design, 3D modeling, and control.

Our professional staff of highly dedicated engineers and craftsmen take responsibility for the entire specification, engineering, fabrication, and commissioning process.

We believe that supplying our customers with turnkey solutions built upon our silicon carbide membranes is unique in the market.

LiqTech is more than a membrane supplier — LiqTech is also a supplier of integrated water treatment systems. 

LiqTech is more than a membrane supplier — LiqTech is also a complete water treatment system supplier. 

Broad Application of LiqTech Membranes:

 Our membranes can be applied in a variety of applications, including filtration of marine scrubber wastewater, processing of industrial wastewater and produced water, pre-treatment of drinking water, pre-filtration for reverse osmosis, oil emulsion separation, bacteria removal for aquaculture, commercial swimming pool water treatment, ultrafiltration for the food and beverage industry, and the separation of metals from liquids in industrial processes. 

 Our membranes can be applied in a variety of applications, including filtration of marine scrubber wastewater, processing of industrial wastewater and produced water, pre-treatment of drinking water and pre-filtration for reverse osmosis, oil emulsion separation, bacteria removal for aquaculture, commercial swimming pool water treatment, food and beverages, and the separation of metals from liquids in industrial processes. 

Marketing and Manufacturing in Key Markets and Expanding to Other Markets:

 We have production and sales capacity in Europe.

We also sell our products through distributors and agents in many other countries such as China, Korea, Spain, the UK and France.

 We have production and sales capacity in Europe, and we are planning to develop capacity in China and the Middle East.

We also sell our products through distributors and agents in many other countries such as China, Korea, Spain, UK, and France.

Moreover, we have established customer relationships in more than 25 countries. 

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Our Strategy  

Our strategy is to create stockholder value by leveraging our competitive strengths in silicon carbide filters, membranes, and water treatment solutions through our focus on discrete applications in key end markets.

Our strategy is to create stockholder value by leveraging our competitive strengths in silicon carbide filters, membranes, and water treatment solutions through focus on discrete applications in key end markets.

Essential features of our strategy include:

Retain and acquire new customers in the marine industry .  We currently provide water filtration systems for scrubber technology providers, shipowners, and ship operators.

We are expanding our range of marine products to better leverage existing customer relationships and develop new relationships.

Retain and acquire new customers within the global marine and oil & gas industries .  We currently provide water filtration systems for scrubber technology providers, shipowners, and ship operators as well as tailored filtration systems for oil & gas operators and services companies.

We are expanding our range of products to better leverage existing customer relationships and develop new relationships within the oil & gas, marine, and global chemical industries.

Enter new geographic markets and expand existing markets .

We plan to continue to manufacture and sell our products from our manufacturing center in Denmark.

We plan to continue to manufacture and sell our products from our manufacturing centers in Denmark, and in the future, also from our manufacturing center in Taicang, China.

We work 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.

 We believe that we have a strong position in the retrofit market for diesel particulate filter (DPF) systems.

We intend to advance our efforts to maintain our market position in this area.

Furthermore, we intend to leverage our OEM experience by expanding our presence with new products and in new markets relating to diesel particulate filter systems like black carbon reduction in the marine industry.

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 for our products and plan to expand into new markets that offer the company significant opportunities.

 We intend to continue developing our ceramic membranes and enhance the efficiency of our filtration products.

We intend to find new uses for our products through continuous research and development and plan to expand into new 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 with other technologies to offer our customers complete filtration solutions.

Moreover, we will continue developing smaller standard systems, like those for groundwater treatment and residential swimming pools.

 We will continue our focus on selling systems based on our unique SiC membranes.

We will also combine the ceramic membranes with other technologies to offer our customers complete filtration solutions.

Moreover, we will continue developing smaller standard systems like groundwater treatment and residential swimming pools.

Our Industry  

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Liquid Filtration Market

The market for marine water filtration systems is rapidly evolving due to new regulations for sulfur and ballast water emissions.

Industry experts estimate that 4,000 to 6,000 ships will be retrofitted with a scrubber water treatment system over the next five years.

At the end of 2019, the industry statistics noted that nearly 4,000 ships have installed or ordered scrubbers (according to the DNV GL report published in March 2020), with most installations being open-loop scrubbers that discharge the wash water directly into the sea.

The market for marine water filtration systems is rapidly developing due to new regulations for sulfur and ballast water emissions.

Industry experts estimate that 8,000-10,000 ships will be retrofitted with a scrubber water treatment system over the next five years.

At the end of 2019, the industry statistics note that nearly 4,000 ships have installed or ordered scrubbers (according to the DNV GL report March 2020), with most installations being open-loop scrubbers.

Open-loop scrubbers discharge the wash water directly into the sea.

The addressable market for LiqTech is focused on closed-loop scrubbers, where the scrubber wash water is routed through the LiqTech filtration system to remove sulfur and other particulates, and the clean water is then recycled as wash water.

As noted above, the use of open-loop scrubbers to clean the exhaust from marine engines that use high-sulfur residual oil and diesel fuels may lead to the discharge of high concentrations of harmful compounds from vessels using such scrubbers.

Several trials have been conducted on board vessels by scrubber suppliers to define the constituent concentrations in wash water discharge.

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LiqTech’s water treatment systems can be used to remove the solids from the wet scrubber wash water.

The treatment process includes a pre-filtration step followed by filtration from a LiqTech SiC membrane.

The treatment process includes a pre-filtration step followed by a LiqTech SiC membrane filtration.

Treated water quality is monitored (NTU, PAH, and pH) before discharge.

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The Company is globally engaging with scrubber equipment suppliers, ship owners/operators, and shipyards.

Furthermore, we present our water treatment and filtration solutions at marine conferences and trade shows and through digital marketing.

Furthermore, we present our water treatment and filtration solutions at marine conferences and trade shows, while also through digital marketing.

In addition to our marine scrubbers, LiqTech offers packaged filtration systems consisting of ceramic SiC and conventional reverse-osmosis (RO) membranes for industrial and municipal customers.

We anticipate that global demand will increase for robust products that generate low operating expenses such as ours, especially those that are well-suited for mobile and modular systems.

We anticipate that global demand will increase for robust and low operating expense products such as ours that are well-suited for mobile and modular systems.

RO membranes are increasingly used to produce drinking water (desalination of seawater or brackish water), demineralized water for industrial processes (boiler feed water, microelectronics production), and food processing and pharmaceuticals.

Moreover, many laboratories rely on pure water, for which demineralization is an essential step.

LiqTech is differentiated by what we believe is our superior SiC membrane technology and the provision of complete, integrated water treatment systems.

According to market reports published by Markets and Markets in October 2020, the market size for membrane technologies in the water industry is expected to grow at a compound annual growth rate (CAGR) of 5.8%, from $18.5 billion in 2020 to $24.6 billion 2025.

Generally, we also expect a growing, global demand for higher-quality re-injection water from unconventional oil and gas productions.

In addition, we expect tightening water discharge legislation, increasing water usage (more water produced per barrel of oil), and the introduction of Enhanced Oil Recovery (“EOR”) techniques.

The tightening legislation for water discharge can be a problem for conventional treatment and filtration technologies;

LiqTech is differentiated by what we believe is our superior SiC membrane technology and by being able to provide a complete water treatment system.

According to Global Industry Analyst report, dated April 2021, the global membrane filtration market is expected to grow at a compound annual growth rate (CAGR) of 5.3%, from $14 billion in 2020 to $20 billion in 2027.

Generally, we also see a growing, global demand for higher-quality re-injection water from unconventional oil and gas productions.

In addition, we see tightening water discharge legislation, increasing water usage (more water produced per barrel of oil), and the introduction of Enhanced Oil Recovery (“EOR”) techniques.

The tightening water discharge legislation is a problem for conventional treatment and filtration technologies;

however, our SiC Filters can mitigate these challenges, and we believe the increasing demand represents a favorable market trend for our business.

Water is essential to life on earth, and clean water shortages are affecting billions of people.

Today, 2.2 billion people lack safely managed drinking water, and 3 billion people worldwide lack basic handwashing facilities at home (according to UN Water in June 2019).

In addition, more than 700 million people could be displaced due to water scarcity (according to the UN in March 2019).

Additionally, according to the World Health Organization, approximately 361,000 children die every year due to unsafe water and lack of basic sanitation.

Today, 2.2 billion people lack safely managed drinking water, and 3 billion people worldwide lack basic handwashing facilities at home.

In addition, more than 700 million people could be displaced due to water scarcity (according to the UN).

According to the World Health Organization, approximately 361,000 children die every year due to unsafe water and lack of basic sanitation.

Due to the growing need for pure water for drinking and industrial purposes, the market for water filtration is growing rapidly, with more and larger plants being commissioned all over the world.

Diesel Particulate Filter (DPF) Market

The increase in global regulation of diesel engine exhaust particles is expected to drive growth in the DPF market.

We expect jurisdictions in the United States to begin requiring DPF filters.

In Europe, for example, German cities are setting requirements for off-road machinery to include DPF filters.

According to an industry publication (Verified Market Research published in January 2021), the global market for new DPF filters manufactured by OEMs is expected to increase approximately 11% per year from 2020 to 2027 with a value of $11 billion in 2019 to an estimated value of $25 billion in 2027.

Our legacy business related to the provision of DPF filters is expected to continue growing across Asia, Europe, and the United States as regulators require diesel engines to comply with new and more stringent environmental rules and regulation.

In Europe, for example, German cities continue enforcing increased requirements for diesel engines to include DPF filters, with the same trend also taking place in select Asian countries.

Furthermore, our proprietary DPF technology has paved the way for new market opportunities such as black carbon marine, where our solutions allow both ocean-going and inland marine vessels to comply with current and future regulatory thresholds as defined by both IMO and regional regulators.

In Asia, we are currently intensifying our commercial efforts and expanding our regional manufacturing capabilities in China with the aim of capitalizing on its future market potential.

According to an industry publication (Diesel Particulate Filter –

Global Market Outlook (2017-2026)), dated January 16 2019, the global market for new DPF filters manufactured by OEMs is expected to increase approximately 13% per year from 2017 to 2026.

Diesel emissions consist of several toxic gases and particles:

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The Asian markets have shown an improved standard of living due to financial growth, which has led to increased sales of vehicles in the region.

At the same time, pollution in major cities has reached high (more than 2.5) levels of particulate matters.

At the same time, pollution in major cities has reached high particulate matter levels.

As a result, the Chinese government has introduced additional regulations, including new emissions standards, faster than previously anticipated.

We also believe that high pollution levels will increase the need for the retrofit of existing vehicles.

We also believe the high pollution levels will increase the need to retrofit existing vehicles.

Research and Development

We have fourteen (14) full-time employees that are primarily engaged in research and development activity.

For the years ended December 31, 2020 and 2019, we spent $1,278,331 and $749,249, respectively, on research and development.

We have eighteen (18) full-time employees that are primarily engaged in research and development activities pertaining to the developing of technology and intellectual property rights related to silicon carbide product forms, applications, and manufacturing processes.

Manufacturing

We currently manufacture our DPF and membrane products in facilities located in Ballerup, Denmark.

We assemble our water treatment systems in Hobro, Denmark.

In 2019, we acquired BS Plastic A/S (now called LiqTech Plastics) that manufactures its plastic products in facilities located in Aarhus, Denmark.

We are planning to expand our production capacity, primarily through investment in additional equipment for our liquid filtration products.

We currently manufacture our DPF and membrane products in Ballerup, Denmark.

We assemble our water treatment systems in Hobro, Denmark, and we manufacture plastic products in our facilities located in Aarhus, Denmark.

We plan to expand our production capacity in China and the Middle East, primarily through investment in additional facilities and manufacturing equipment for both membranes and filter products.

Raw Materials

The main raw materials that we use in our manufacturing processes are silicon carbide, steel, plastic, platinum, and palladium.

The main raw materials we use in our manufacturing processes are silicon carbide, steel, plastic, platinum, and palladium.

We purchase these commodities from various sources generally based upon availability and price.

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Our products are sold primarily to large industrial customers for gas and liquid filtration.

The Company sells through direct sales, systems integrators, distributors, agents, and partners. 

The Company initially focused on selling its DPF filters to the automotive industry.

In 2014, we acquired LiqTech Water (previously named LiqTech Systems and Provital Solutions), a Danish manufacturing company focused on filtration systems, which enabled us to shift our focus to providing complete, modular liquid filtration systems.

The Company’s liquid filtration systems business now serves the marine industry;

other industrial applications in mining, power generation, aquaculture and oil and gas;

and non-industrial applications such as swimming pools, water reclamation and municipal drinking water. 

For the year ended December 31, 2020, our four largest customers accounted for approximately 27%, 10%, 8% and 8% of our net sales (approximately 53% in total).

For the year ended December 31, 2019, our four largest customers accounted for approximately 29%, 18%, 15% and 7% of our net sales (approximately 68% in total).

If we are unable to diversify our customer base, our future results will be heavily dependent on these same customers. 

In 2014, we acquired Provital Solutions, a Danish filtration system manufacturing company, which enabled us to shift our focus to providing complete, modular liquid filtration systems.

The Company’s liquid filtration systems business is now rapidly expanding, focusing on the marine industry and other industrial applications in mining, power generation, aquaculture, oil and gas, and other applications within the pool industry, water reclamation, and drinking water.

We plan to actively market our existing products to new customers as we increase our production capacity.

As of March 2021, we employed eighteen (18) full-time salespeople in addition to distribution agents.

We promote our products through direct sales to potential customers and marketing activities such as participation in tradeshows and exhibitions.

In certain instances, our products are delivered to the end customer through systems integrators.

These systems integrators use our filtration products in larger filtration systems, which eventually are installed in products used by the end customer.

Due to legislative regulation, systems integrators are often required by end customers to receive approval for their systems, including the components used in such systems, which requires significant time and expense.

As a result, we believe that certain of the systems integrators that use our products will not replace our filters with competitive products unless there are compelling reasons.

As of March 2022, we employed eleven (11) full-time salespeople in addition to distribution agents.

We promote our products through direct sales to potential customers and marketing activities such as participation in tradeshows and exhibitions, with a heavy focus on digital marketing.

In certain instances, our products are delivered to the end customer through system integrators.

These system integrators use our filtration products in larger filtration systems, which eventually are installed in products used by the end customer.

Due to legislative regulation, system integrators are often required by end customers to receive approval for their systems, including the components used in such systems, which requires significant time and expenses.

As a result, we believe that certain system integrators that use our products will not replace our filters with competitive products unless there are compelling reasons to do so. 

Intellectual Property

We have one issued patent in the United States that we co-own with a third party, two issued patents in Denmark, five issued foreign patents (Germany, China and South Korea) that we co-own with a third party, and two pending European patent applications that we co-own with third parties.

patent that we co-own is generally effective for 20 years from the filing date (July 8, 2004) of the earliest U.S.

We have one issued patent in the United States that we co-own with a third party, two issued patents in Denmark, three issued foreign patents (Germany, China, and South Korea) that we co-own with a third party, and one pending European patent application that we co-own with a third party.

The United States patent that we co-own is generally effective for 20 years from the filing date (July 8, 2004) of the earliest U.S.

or international application to which it claims priority.

The scope and duration of each of our foreign patents varies in accordance with local law.

The scope and duration of each of our foreign patents vary in keeping with local laws.

On July 7, 2014, we obtained a new Danish patent application related to our silicon carbide membrane technology.

We also rely on trade secret protection for our confidential and proprietary information.

Trade secrets, however, can be difficult to protect.

We may not be able to maintain our technology or know-how as trade secrets, and competitors may develop or acquire equally valuable or more valuable technology or know-how related to the manufacture of comparable silicon carbide products.

We also seek to protect our confidential and proprietary information, in part, by requiring all employees, consultants, and business partners to execute confidentiality and/or nondisclosure agreements upon the commencement of any employment, consulting arrangement, or engagement with us.

These agreements generally require that all confidential and proprietary information developed by the employee, consultant, or business partner, or made known to the employee, consultant, or business partner by us, during the course of the relationship with us and thereafter, be kept confidential and not disclosed to third parties.

We also believe that having distinctive names is an important factor in marketing our products and therefore use trademarks to brand some of our products.

As of March 2022, we had one trademark registration in the United States (LiqTech NA) and four trademark registrations in the European Union (AQUA SOLUTION, CoMem, CDPX, and FUTURE FILTRATION).

Government Regulation

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To date, compliance with environmental matters has not had a material effect upon the Company’s capital expenditures, results of operations, or competitive position.

We believe that, due to the constant focus on the environment and clean air and clean water standards throughout the world, more stringent regulations in the U.S., Europe and elsewhere around the world are likely as governmental agencies seek to improve standards required for certification of products intended to promote clean air and water.

We believe that, due to the constant focus on the environment, clean air, and clean water standards throughout the world, more stringent regulations in the U.S., Europe and elsewhere around the world are likely as governmental agencies seek to improve standards required for certification of products intended to promote clean air and water.

In the event our products fail to meet these changing standards, some or all our products may become obsolete, which could have an adverse effect on our business, operating results, financial condition, and long-term prospects.

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We intend to continue to devote resources to the development of new technologies and the improvement of our products to retain existing customers and acquire new customers.

At December 31, 2020 we had 114 employees, 112 of whom were full-time employees. We have 109 employees in Denmark, including 64 in production, 13 in administration, 14 in research and development, 16 in sales and engineering and two in executive management.

At December 31, 2020 we also had 5 accounting and production employees remaining in the United States, where we recently ceased operations and the last employee left the Company at the end of January 2021.

At December 31, 2021 we had 120 employees, including 67 in production, 12 in administration, 18 in research and development, 21 in sales and engineering and 2 in executive management.

Certain employees in Denmark are represented by workers’

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Additionally, the SEC maintains a website that contains reports, proxy statements, information statements and other information regarding issuers, including us, that file electronically with the SEC at www.sec.gov .

RISKS RELATED TO OUR BUSINESS AND OPERATIONS  

The COVID-19 pandemic could have a material adverse effect on our business, results of operations and financial condition in the future.

Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including the outbreak of respiratory illness caused by thea novel coronavirus first identified in Wuhan, Hubei Province, China (COVID-19).

The COVID-19 pandemic has resulted in authorities worldwide implementing numerous measures to contain or mitigate the outbreak of the virus, such as travel bans and restrictions, border controls, limitations on business activity, social distancing requirements, quarantines, and shelter-in-place orders.

These measures have caused, and are continuing to cause, business slowdowns or shutdowns in affected areas, both regionally and worldwide.

The impact of the pandemic on our business and operations and our ability to execute our strategic plans remains uncertain and will depend on many unpredictable factors outside of our control, including, without limitation, the extent, trajectory and duration of the pandemic;

the development, availability and distribution of vaccines and other effective treatments to treat the COVID-19 virus and any new variants thereof;

the emergence of new variants that are more contagious, symptomatic or fatal and the time the medical community requires to respond to such variants;

the imposition of and compliance with protective public safety measures;

the impact of the pandemic on the global economy;

and the related impacts on our development pipeline and demand for our products.

At the end of the first quarter of 2020, we initiated several precautions in accordance with local regulations and guidelines to mitigate the spread of COVID-19 across our businesses.

These precautions have impacted the way we carry out our business, including additional sanitation and cleaning procedures in our production and other facilities, temperature and symptom confirmations, remote working when possible, and implementation of social distancing and staggered worktime requirements for our employees who must work on-site.

If we are required to continue such measures for an extended period of time, it could impact the ability of our employees to collaborate efficiently.

In addition, the loss or unavailability of our production staff or other key employees and executives, as a result of sickness of employees or their families or the responsibility of employees to manage family obligations while working from home, could negatively impact our business and operations and our ability to operate or execute our business strategy.

Continued employee telecommuting activity also increases the risk of a security breach of our information technology systems.

The changed environment under which we are operating could have an impact on our internal controls over financial reporting.

Moreover, the ongoing impacts of the COVID-19 pandemic could result in interruptions or delays in the operations of regulatory authorities, which may impact review or approval timelines;

delays in necessary interactions with other agencies and contractors due to limitations in employee resources or forced furlough of government employees;

termination of, or difficulties in procuring or maintaining, arrangements with third parties upon whom we depend such as manufacturers, including contract manufacturing organizations, suppliers and other strategic partners;

and disruptions or restrictions on our ability to pursue partnerships and other business transactions.

As a result of the COVID-19 pandemic, we have not experienced significant disruption or delays in our global supply chain.

If the COVID-19 pandemic worsens, however, we may experience supply disruptions due to temporary closures, production slowdowns, staffing shortages, logistics, delays and disruptions in the manufacture and/or shipment of our products.

Since the start of the COVID-19 pandemic in early 2020, there has been an overall decline in new orders, particularly in the shipping industry, due to reduced investment caused by demand disruption and the volatility of oil prices.

The effects of a prolonged pandemic could result in a continued negative impact on investment in the shipping industry and in other industries.

In addition, if COVID-19 impacts the financial position of our customers or any of our collaboration partners, we may have difficulty collecting receivables or milestone payments, and our business and results of operations could be exposed to risks associated with uncollectible accounts or defaults on contractual payment obligations by our collaboration partners.

If we are unable to generate sufficient cash from operations due to impacts of the COVID-19 pandemic or otherwise, we may need to raise additional funds.

The duration and severity of any further economic or market impact of the pandemic remains uncertain, and there can be no assurance that it will not have an adverse effect on our liquidity and capital resources, including our ability to access capital markets, in the future, on terms that are favorable to us, or at all.

Historically, we have been dependent on a few major customers for a significant portion of our Company's revenue.

Our revenue could decline if we are unable to maintain or develop relationships with additional customers and our results of operations could be adversely affected if any one of these customers is unable to meet their financial obligations to us.

For the year ended December 31, 2020, our four largest customers accounted for approximately 27%, 10%, 8% and 8% of our net sales (approximately 53% in total).

For the year ended December 31, 2019, our four largest customers accounted for approximately 29%, 18%, 15% and 7% of our net sales (approximately 68% in total).

If we are unable to diversify our customer base, our future results will be heavily dependent on these customers.

Our dependence on a limited number of customers means that the loss of a major customer or any reduction in orders by a major customer would materially reduce our net sales and adversely affect our results of operations.

We expect that sales to relatively few customers will continue to account for a significant percentage of our net sales for the foreseeable future;

however, these customers or our other customers, may not use our products at current levels in the future, if at all.

We have no firm, long-term volume commitments from any of our major customers, and we generally enter into individual purchase orders with our customers, in certain cases under master agreements that govern the terms and conditions of the relationship.

We have experienced delays or cancellations of orders and fluctuations in order levels from period to period and expect that we will continue to experience such delays, cancellations, and fluctuations in the future.

Customer purchase orders may be delayed or cancelled, and order volume levels can be changed with limited or no penalties.

We may not be able to replace cancelled, delayed, or reduced purchase orders with new orders.

If any one of these customers reduces its demand for our products, it will likely have a material adverse effect on our operations.

Furthermore, a significant portion of our accounts receivables is concentrated with a few major customers, who may not be able to meet their financial obligations to us.

The failure of any such customers to pay amounts owed to us in a timely fashion or at all could have an adverse effect on our results of operations. The Company is also exposed to credit risk on its accounts receivable, and this risk is heightened during periods when economic conditions worsen.

The Company's outstanding receivables are not covered by collateral or credit insurance.

The Company's exposure to credit and collectability risk on its receivables may also be higher in certain international markets, and its ability to mitigate such risks may be limited.

While the Company has procedures to monitor and limit exposure to credit risk on its receivables, there can be no assurance such procedures will effectively limit our credit risk and avoid losses.

We will need to raise additional funds to develop our business, which may adversely affect our future growth.

We expect to finance our anticipated future growth and possibly future strategic acquisitions through public or private equity offerings or debt financings.

Additional funds may not be available when we need them on terms that are acceptable to us, or at all.

If adequate funds are not available, we may be required to delay, reduce the scope of, our plans to grow our revenues or to consummate one or more strategic acquisitions or otherwise to scale back our business plans.

In addition, we could be forced to reduce or forego attractive business opportunities.

To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution.

In addition, debt financing, if available, may involve restrictive covenants.

We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.

Our access to the financial markets and the pricing and terms we receive in the financial markets could be adversely impacted by various factors, including changes in financial markets and interest rates.

Adverse conditions or events affecting the marine transportation industries may have a material adverse effect on our business.

Global health crises, such as the outbreak of COVID-19, can significantly impact us and our customers and suppliers.

For example, the global shipping industries have been negatively impacted by the coronavirus outbreak due to increased travel restrictions and may be further adversely affected by an extended shutdown of various businesses in the impacted regions.

In light of this operating environment, shipping companies that carry goods may begin to significantly reduce the number of seaborne vessels as measures to stop the spread of the coronavirus negatively impacts the demand for seaborne transport of goods.

This in turn can adversely affect the demand for our marine scrubbers to these shipping customers if many vessels sit idle or are taken out of service during the outbreak.

Furthermore, the volatility in oil prices caused by demand destruction from economic shutdowns and travel limitations, attenuated by reduced supply from major producers, has created similar volatility in the price of fuel oil used by our marine customers, including low-sulfur fuel oil.

A reduction in the price of low-sulfur fuel oil could negatively affect the demand for our marine scrubber systems, which could impact our sales of marine scrubbers and our operating results.

We may be adversely affected by global and regional economic conditions and legislative, regulatory and political developments.

We sell our products around the world, and we expect to continue to derive a substantial portion of sales from outside the U.S.

The uncertain macroeconomic environment caused by the outbreak of COVID-19 may adversely affect our results and could have a negative impact on demand for our products.

Customers or suppliers may experience cash flow problems and as a result, may modify, delay or cancel plans to purchase our products, and suppliers may significantly and quickly increase their prices or reduce their output.

Additionally, if customers are not successful in generating sufficient revenue or are precluded from securing financing, they may not be able to pay, or may delay payment of, amounts owed to us.

Any inability of current and/or potential customers to purchase our products and/or to pay us for our products may adversely affect our sales, earnings and cash flow.

Sales and earnings could also be affected by our ability to manage the risks and uncertainties associated with the application of local legal requirements or the enforceability of laws and contractual obligations, trade protection measures, changes in tax laws, regional political instability, war, terrorist activities, severe or prolonged adverse weather conditions and natural disasters as well as health epidemics or pandemics.

Our success will depend, to a large degree, on the expertise and experience of the members of our management team, the loss of whom could have a material adverse effect on our business.

Our success is, to a large degree, dependent upon the expertise and experience of the management team and its ability to attract and retain qualified personnel who are technically proficient.

The loss of the services of one or more of such personnel could have a material adverse effect on our business.

Our business may be adversely affected if we are unable to continue to attract and retain such personnel.

We will need to add qualified additional personnel as we expand our business, and we may not be able to employ such persons, which could affect our ability to expand and have a material adverse effect on our business.

In order to expand our product offerings and customer base, we will need to hire additional qualified personnel.

We may not be able to identify such persons, and even if we identify them, we may not have the funds or ability to employ them, which could have a material adverse effect on our business. 

Future growth of our business depends in part, on the availability of funding for emissions control programs as well as the enforcement of existing emissions-related environmental regulations and further tightening of emission standards worldwide, all of which are beyond our control and the lack of which could negatively affect our future growth.

Future growth of our business depends in part on the availability of funding for emissions control programs, which can be affected by economic as well as political reasons that are beyond our control.

For example, in light of a past budget crisis in California, funding was not available for a state-funded emissions control project and its start date was delayed. Funding for these types of emissions control projects drives the demand for our diesel particulate filters.

If such funding is not available, or delayed, it can negatively affect our future growth prospects.

In addition to funding, we also expect that our future business growth will be driven, in part, by the enforcement of existing emissions-related environmental regulations and tightening of emissions standards worldwide, where regulations and standards are frequently contested in litigation.

For example, the Alliance for California Business filed suit against the California Air Resources Board in an effort to cease the California Air Resources Board’s mandate that a DPF be retrofitted on certain older diesel trucks.

Likewise, our ability to expand our business in the marine industry is dependent on the effective implementation of IMO 2020, which requires the burning of low-sulfur oil for marine vessels or the inclusion of marine scrubber technology.

If existing regulations and emissions standards do not continue to become stricter, are loosened or are not enforced by governmental authorities due to commercial and business pressure, economic conditions or otherwise, it could have a material adverse effect on our business, operating results, financial condition and long-term prospects.

If we are unable to manage our expected growth, our business may be materially and adversely affected.

We expect to expand our operations, including by expanding our internal resources, making acquisitions and entering into new markets, and we intend to continue to focus on rapid growth, including organic growth and additional acquisitions.

The growth of our business could place significant strain on our management, operational and financial resources.

To manage our future growth, we could be required to improve existing or implement new operational or financial systems, procedures and controls or expand, train and manage a growing employee base.

Our failure to accomplish any of these tasks could materially and adversely affect our business.

Even if we are successful in integrating future acquisitions into our existing operations, we may not derive the benefits, such as operational or administrative synergies, that we expected from such acquisitions, which may result in the investment of our capital resources without realizing the expected returns on such investment.

We also may not recognize the anticipated benefits of completed dispositions or other divestitures we may pursue in the future.

We face constant changes in governmental standards by which our products are evaluated, and if we cannot meet any such changes, some of our products could become obsolete, which could have a material adverse effect on our business.

We believe that, due to the intencifying focus on the environment and clean air and water standards throughout the world, new requirements in the future to adhere to more stringent regulations are possible as governmental agencies seek to improve standards required for certification of products intended to promote clean air and water.

In the event our products fail to meet these evolving standards, some or all of our products may become obsolete, which could have an adverse effect on our business, operating results, financial condition and long-term prospects.

Our inability to protect our intellectual property rights could negatively affect our business and results of operations.

Our ability to compete effectively depends in part upon developing, maintaining and/or protecting intellectual property rights relevant to our re-crystallized silicon carbide product forms, applications and manufacturing processes.

We rely principally on a combination of patent protection, trade secret laws, confidentiality and non-disclosure agreements, and trusted business relationships to establish, maintain and protect the intellectual property rights relevant to our business.

These measures, however, may not be adequate in every given case to permit us to gain or retain any competitive advantage, particularly in those countries where the laws do not protect our proprietary rights as fully as in the United States.

In particular, because silicon carbide is a well-known material (developed over 100 years ago), and there has been extensive research, development and publication related to this material and its wide range of applications, obtaining intellectual property rights to key elements of silicon carbide technology can be challenging.

Accordingly, at least some of the technology employed in our manufacture of re-crystallized silicon carbide products is not protected by patents.

Where we consider it appropriate, we seek patent protection in the United States and other countries on technologies used in, or relating to, our re-crystallized silicon carbide product forms, applications and manufacturing processes.

The issuance of a patent is not conclusive as to its scope, validity and enforceability.

Thus, any patent or patent application which may issue into a patent held by us could be challenged, invalidated or held unenforceable in litigation or proceedings before the U.S.

Patent and Trademark Office and/or other patent tribunals or circumvented by others.

No consistent policy regarding the breadth of patent claims has emerged to date in the United States, and the landscape could become more uncertain in view of future rule changes by the United States Patent and Trademark Office, the introduction of patent reform legislation and decisions in patent law cases by United States federal courts.

The patent landscape outside the United States is even less predictable.

As a result, the validity and enforceability of patents cannot be predicted with certainty.

In addition, we may fail to apply for patents on important technologies or product candidates in a timely fashion, if at all, and our existing and future patents may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products or technologies, especially given the long history of silicon carbide development. 

Our patent strategy involves complex legal and factual questions.

Our ability to maintain and solidify our proprietary technology may depend in part upon our success in obtaining patent rights and enforcing those rights once granted or licensed.

We do not know whether any of our pending patent applications will result in the issuance of any patents.

Our issued patents and those that may be issued in the future may be challenged, invalidated, rendered unenforceable or circumvented, which could limit our ability to prevent competitors from marketing similar or related products, or shorten the term of patent protection that we may have for our products, processes and enabling technologies.

In addition, the rights granted under any issued patents may not provide us with competitive advantages against competitors with similar technology.

Furthermore, our competitors may independently develop similar technologies, duplicate technology developed by us or otherwise possess intellectual property rights that could limit our ability to manufacture our products and operate our business. 

We also rely on trade secret protection for our confidential and proprietary information.

Trade secrets, however, can be difficult to protect.

We also seek to protect our confidential and proprietary information, in part, by requiring all employees, consultants and business partners to execute confidentiality and/or nondisclosure agreements upon the commencement of any employment, consulting arrangement or engagement with us.

These agreements generally require that all confidential and proprietary information developed by the employee, consultant, or business partner, or made known to the employee, consultant or business partner by us, during the course of the relationship with us, be kept confidential and not disclosed to third parties.

These agreements may be breached and may not provide adequate remedies in the event of breach.

To the extent that our employees, consultants, or business partners use intellectual property owned by others in their work for and/or with us, disputes could arise as to the rights in related or resulting technologies, know-how or inventions.

Moreover, while we also require customers and vendors to execute agreements containing confidentiality and/or nondisclosure provisions, we may not have obtained such agreements from all of our customers and vendors.

In addition, our trade secrets may otherwise become known or be independently discovered by competitors, customers, or vendors.

Such customers or vendors may also be subject to laws and regulations that require them to disclose information that we would otherwise seek to keep confidential.

Moreover, others may independently develop and obtain patents covering technologies that are similar or superior to the product forms, applications, or manufacturing processes that we employ.

If that happens, we may need to obtain licenses for these technologies and may not be able to obtain licenses on reasonable terms, if at all, which could limit our ability to manufacture our future products and operate our business.

In addition, third parties could utilize our intellectual property rights in territories where we do not have intellectual property protection.

Such third parties may then try to import products made using our intellectual property rights into the United States or other countries, which could have a material adverse effect on our business.

Our contracts with third parties could negatively affect our intellectual property rights.

To further our product development efforts, we continue to work closely with customers, the Danish government and other third parties to research and develop advancements in silicon carbide product forms, applications, manufacturing processes and related products and technologies.

We have entered into agreements with private third parties and have been awarded a research and development contract with the Danish government to independently and jointly research, design and develop new devices and systems that incorporate our silicon carbide technologies.

We expect to enter into similar private agreements and be awarded similar government contracts in the future.

In some instances, the research and development activities that we conduct under these contracts may produce intellectual property to which we may not have ownership or exclusive rights and will be unable to protect or monetize.

Furthermore, there could be disputes between us and a private third party as to the ownership rights to any inventions that we develop in collaboration with such third party.

Any such dispute may cause us to incur substantial costs and could place a significant strain on our financial resources, divert the attention of management from our core business or harm our reputation. 

We could become subject to intellectual property litigation that could be costly, limit or cancel our intellectual property rights, divert time and efforts away from business operations, require us to pay damages and/or otherwise have an adverse material impact on our business.

The success of our business is highly dependent on protecting our intellectual property rights.

Unauthorized parties may attempt to copy or otherwise obtain and use our products and/or enabling technologies.

Policing the unauthorized use of our intellectual property rights is difficult and expensive, as is enforcing these rights against unauthorized use by others.

Identifying unauthorized use of our intellectual property rights is difficult because we may be unable to monitor the processes and/or materials being employed by other parties.

The steps we have taken may not prevent unauthorized use of our intellectual property rights, particularly in foreign countries where enforcement of intellectual property rights may be more difficult than in the United States.

Our continued commercial success will also depend in part upon not infringing the patents or violating the intellectual property rights of third parties.

We are aware of patents and patent applications generally relating to aspects of our technologies filed by, and issued to, third parties.

Nevertheless, we cannot determine with certainty whether such patents or patent applications of other parties may materially affect our ability to conduct our business.

There may be existing patents of which we are unaware that we may inadvertently infringe, resulting in claims against us or our customers.

In the event that the manufacture, use and/or sale of our products or processes is challenged, or if our product forms or processes conflict with the patent rights of others, third parties could bring legal actions against us or our customers in the United States, Europe or other countries, claiming damages and seeking to enjoin the manufacturing and/or marketing of our products.

Additionally, it is not possible to predict with certainty what patent claims may issue from any relevant third-party pending patent applications.

Third parties may be able to obtain patents with claims relating to our product forms, applications and/or manufacturing processes which they could attempt to assert against us or our customers.

In either case, litigation may be necessary to enforce, protect or defend our intellectual property rights or to determine the validity and scope of the intellectual property rights of others.

Any litigation could be unsuccessful, cause us to incur substantial costs, divert resources and the efforts of our personnel away from daily operations, harm our reputation and/or result in the impairment of our intellectual property rights.

In some cases, litigation may be threatened or brought by a patent holding company or other adverse patent owner who has no relevant product revenues and against which our patents may provide little or no deterrence.

If we are found to infringe any patents, we could be required to (1) pay substantial monetary damages, including lost profits, reasonable royalties and/or treble damages if an infringement is found to be willful and/or (2) totally discontinue or substantially modify any products or processes that are found to be in violation of another party’s intellectual property rights.

If our competitors are able to use our technology without payment to us, our ability to compete effectively could be harmed.

We face competition and technological advances by competitors, which could adversely affect the sales of our products.

The growth of our Company depends in part on maintaining and growing the sales of our current products in existing and new markets, but also in developing new products and technologies.

There is significant competition among companies that provide solutions for pollutant emissions from diesel engines and water purification solutions.

Several companies market products that compete directly with our products.

Other companies offer products that potential customers may consider to be acceptable or superior alternatives to our products and services, including products that are verified by the Environmental Protection Agency or other environmental authorities.

We face direct competition from companies with greater financial, technological, manufacturing and personnel resources.

Newly developed products could be more effective and cost-efficient than our current or future products.

Failure to obtain adequate supplies of raw materials or failure to obtain raw materials at affordable prices could negatively affect our ability to supply products to our customers and negatively affect our profit margins.

We use silicon carbide, steel, plastic, platinum and palladium in the manufacture of our products.

As other industries develop products utilizing silicon carbide, we may not be able to obtain adequate supplies of silicon carbide required for the manufacture of our existing and future products that would prevent us from supplying products to our customers and materially affect our business.

Furthermore, any increased demand for, the raising of tariff rates on, or an increase of non-tariff trade barriers that apply to silicon carbide, steel, plastic, platinum or palladium could increase the price we must pay to obtain it and could adversely affect our profitability, which would have an adverse effect on our financial results.

We may rely on sub-contractors to meet current demand for our products, and we may need to obtain additional manufacturing capacity in order to increase production of our existing products or to produce our proposed new products, the failure of which could have a material adverse effect on our operations.

We may not have sufficient internal manufacturing capacity to meet the current demand for our products, and we may need to rely on subcontractors to enable us to meet this demand.

Since we may rely on our subcontractors for a significant amount of our production capacity, the loss of the services of our subcontractors would have a material adverse effect on our business.

Our plans for the growth of our business rely upon increasing sales of our existing products and systems and developing and marketing new products.

We may not have adequate internal manufacturing facilities to substantially increase production of our products and obtaining additional manufacturing capacity in-house could require substantial capital expenditures.

We may not have the capital resources to obtain or construct new facilities to expand manufacturing capacity and meet increasing demand for our products, which could have a material adverse effect on our operations.

Conversely, any significant decrease in demand for our products could create idle plant capacity and an inability to cover fixed costs, which could adversely impact our results of operations and financial condition.

Foreign currency fluctuations could adversely impact financial performance.

Our reporting currency is the United States Dollar ($).

Because of our activities in Denmark, the European Continent and other countries, we are exposed to fluctuations in foreign currency rates.

Most income and expense related transactions are denominated in other currencies than the reporting currency and further all excess cash balances are either held in other currencies than the reporting currency or in bank accounts outside the United States causing risks of currency fluctuations when translating balances to the official currency rate at the end of the reporting period.

We may manage the risk to such exposure by entering foreign currency futures and option contracts;

however, we can make no assurance that such actions will be sufficient to offset a material adverse effect on our operations in the future. As at December 31, 2020 and 2019 we have not entered into any derivate contracts to hedge our currency exposure.

Any liability for environmental harm or damages resulting from technical faults or failures of our products could be substantial and could materially adversely affect our business and results of operations.

Customers rely upon our products to meet emissions control standards imposed upon them by the government.

Failure of our products to meet such standards could expose us to claims from customers.

Our products are also integrated into goods used by consumers, and therefore a malfunction or the inadequate design of our products could result in product liability claims.

Any liability for environmental harm or damages resulting from technical faults or failures could be substantial and could materially adversely affect our business and results of operations.

In addition, a well-publicized actual or perceived problem could adversely affect the market’s perception of our products, which would materially impact our financial condition and operating results.

We could become liable for damages resulting from our manufacturing activities, which could have a material adverse effect on our business or cause us to cease operations.

The nature of our manufacturing operations exposes us to potential claims and liability for environmental damage, personal injury, loss of life and damage to, or destruction of, property.

Our manufacturing operations are subject to numerous laws and regulations that govern environmental protection and human health and safety.

These laws and regulations have changed frequently in the past and it is reasonable to expect additional and more stringent changes in the future.

Our manufacturing operations may not comply with future laws and regulations, and we may be required to make significant unanticipated capital and operating expenditures to bring our operations within compliance with such evolving regulations.

If we fail to comply with applicable environmental laws and regulations, manufacturing guidelines, and workplace safety requirements, governmental authorities may seek to impose fines and penalties on us or to revoke or deny the issuance or renewal of operating permits, and private parties may seek damages from us.

Under such circumstances, we could be required to curtail or cease operations, conduct site remediation or other corrective action, or pay substantial damage claims for which may not have sufficient or any insurance coverage for claims.

A significant portion of our assets and the majority of our officers and some of our directors are located outside of the United States, and therefore it may be difficult for an investor to enforce within the United States any judgments obtained against us or such officers and directors.

A significant portion of our assets are located outside of the United States.

In addition, the majority of our officers and some of our directors are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’

assets are located outside the United States.

As a result, it may be difficult for an investor to affect service of process or enforce within the United States any judgments obtained against us or such officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.

In addition, there is uncertainty as to whether the courts of other jurisdictions would recognize or enforce judgments of United States courts obtained against us or our directors and officers predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in other jurisdictions against us, or such officers and directors predicated upon the securities laws of the United States or any state thereof. 

We have entered into a joint venture arrangement and may engage in additional collaborations, joint ventures, or strategic alliances in the future, and we may not realize the benefits of such arrangements.

Our subsidiary, LiqTech Water Projects, has entered into a joint venture agreement to supply and operate water treatment systems for oil and gas producers in the Middle East with 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 venture will be established in the form of a jointly owned limited liability company incorporated under the laws in the local country, and LiqTech Water Projects will hold 49% of the shares.

All profits of the company are to be allocated proportional to the ownership share and none of the parties are liable for the company’s liabilities towards third parties.

Additionally, from time to time, we may enter into other joint ventures with other entities.

Establishment of a joint venture involves significant risks and uncertainties, including (i) our ability to cooperate with our local partner, (ii) our local partner having economic, business, or legal interests or goals that are inconsistent with ours, and (iii) the potential that our local partner may be unable to meet its economic or other obligations, which may require us to fulfill those obligations alone.

In any joint venture we engage in, we will rely on our local partner for the implementation of much of any such joint venture operation, and the success of any such operation is thus not entirely within our control.

Any failure or perceived failure of a joint venture may have a material impact on our operations and financial condition.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, and current and potential stockholders may lose confidence in our financial reporting.

Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to assess the effectiveness of our internal control over financial reporting and to disclose in our filing if such controls were unable to provide assurance that a material error would be prevented or detected in a timely manner.

We have an ongoing program to review the design of our internal controls framework in keeping with changes in business needs, implement necessary changes to our controls design and test the system and process controls necessary to comply with these requirements.

If in the future, our internal controls over financial reporting are determined to be not effective resulting in a material weakness or significant deficiency, investor perceptions regarding the reliability of our financial statements may be adversely affected which could cause a decline in the market price of our stock and otherwise negatively affect our liquidity and financial condition.

In Item 9A, we disclose that, with respect to the standards of Sarbanes-Oxley Section 404 and the internal controls standard to which we are subjected, we reported material weaknesses in our internal controls over financial reporting.

For additional information on this item, please see Item 9A.

Controls and Procedures.

Although we believe our historical efforts have strengthened our internal control over financial reporting (and we concluded that our financial statements were reliable, notwithstanding the material weakness we reported), we cannot be certain that our revised internal control practices will ensure that we will have or maintain adequate internal control over financial reporting in future periods.

Any failure to have or maintain such internal controls could adversely impact our ability to report our financial results accurately and on a timely basis.

If our financial statements are not accurate, investors may not have a complete understanding of our operations.

We may have risks associated with security of our information technology systems.

We make significant efforts to maintain the security and integrity of our information technology systems and data.

Despite significant efforts to create security barriers to such systems, it is virtually impossible for us to entirely mitigate this risk.

There is a risk of industrial espionage, cyber-attacks, misuse or theft of information or assets, or damage to assets by people who may gain unauthorized access to our facilities, systems, or information.

Such cybersecurity breaches, misuse, or other disruptions could lead to the disclosure of confidential information;

improper usage and distribution of our intellectual property;

theft, manipulation, and destruction of private and proprietary data;

and production downtimes.

Although we actively employ measures to prevent unauthorized access to our information systems, preventing unauthorized use or infringement of our rights is inherently difficult.

These events could adversely affect our financial results and any legal action in connection with any such cybersecurity breach could be costly and time-consuming and may divert management’s attention and adversely affect the market’s perception of us and our products.

In addition, we must frequently expand our internal information system to meet increasing demand in storage, computing and communication, which may result in increased costs.

Our internal information system is expensive to expand and must be highly secure due to the sensitive nature of our customers’

information that we transmit.

Building and managing the support necessary for our growth places significant demands on our management and resources.

These demands may divert such resources from the continued growth of our business and implementation of our business strategy.

RISKS RELATED TO OUR COMMON STOCK

Future equity financings or convertible debt would dilute your ownership and could adversely affect your common stock ownership rights in comparison with those of other security holders.

Our board of directors has the power to issue additional shares of common or preferred stock without stockholder approval.

In general, stockholders do not have preemptive rights to any common stock issued by us in the future;

therefore, stockholders may experience additional dilution of their equity investment if we issue additional shares of common stock in the future, including shares issuable under equity incentive plans, or if we issue securities that are convertible into shares of our common stock. 

If additional funds are raised through the issuance of equity or convertible debt securities, the percentage of ownership of our existing stockholders will be reduced, and such newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.

If we issue additional common stock or securities convertible into common stock, such issuance will reduce the proportionate ownership and voting power of each other stockholder.

In addition, such stock issuances might result in a reduction of the market value of our common stock, which could make our stock unattractive to existing stockholders.

Provisions in our articles of incorporation and bylaws could discourage a change in control, or an acquisition of us by a third party, even if the acquisition would be favorable to you, thereby adversely affecting existing stockholders.

Our articles of incorporation and bylaws contain provisions that may have the effect of making more difficult or delaying attempts by others to obtain control of our Company, even when these attempts may be in the best interests of stockholders.

For example, our articles of incorporation authorize our Board of Directors, without stockholder approval, to issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of common stock.

These provisions and others that could be adopted in the future could deter unsolicited takeovers or delay or prevent changes in our control or management, including transactions in which stockholders might otherwise receive a premium for their shares over then-current market prices.

These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in their best interests.

There is limited trading volume of our common stock, which could make it difficult for you to liquidate an investment in our common stock in a timely manner.

Since April 16, 2019, our common stock has been traded on Nasdaq Capital Market under the ticker LIQT.

Because there is limited volume in our common stock, investors may not be able to liquidate their investments when they desire to do so.

In addition, if we fail to meet the criteria set forth in SEC and Nasdaq Capital Market rules and regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors.

Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect its liquidity.

If securities analysts do not publish research or reports about our business or if they downgrade us or our sector, the price of our common stock could decline.

The trading market for our common stock will depend in part on research and reports that industry or financial analysts publish about us or our business.

Furthermore, if one or more of the analysts who cover us downgrades us, the industry in which we operate, or the stock of any of our competitors, the price of our common stock may decline.

If one or more of these analysts ceases coverage altogether, we could lose visibility, which could also lead to a decline in the price of our common stock. 

The market price of our common stock has been and may continue to be volatile.

The market price of our common stock has been volatile and fluctuates widely in response to various factors that are beyond our control.

The price of our common stock is not necessarily indicative of our operating performance or long-term business prospects.

In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies.

These market fluctuations may also materially and adversely affect the market price of our common stock.

Factors such as the following could cause the market price of our common stock to fluctuate substantially:

the underlying price of the commodities that affect our key markets of industrial water filtration, marine, and oil and gas;

announcements of capital budget changes by major customers;

the introduction of new products by our competitors;

announcements of technology advances by us or our competitors;

current events affecting the political and economic environment in the United States, Europe or Asia;

conditions or industry trends, including demand for our products, services and technological advances;

changes to financial estimates by us or by any securities analysts who might cover our stock;

additions or departures of our key personnel;

government regulation of our industry;

seasonal, economic, or financial conditions;

our quarterly operating and financial results;

litigation or public concern about the safety of our products;

the effect of COVID-19.

The realization of any of these risks and other factors beyond our control could cause the market price of our common stock to decline significantly.

In particular, the market price of our common stock may be influenced by changes in governmental regulations regarding diesel particles emissions and marine wastewater because demand for our products and services is closely related to those regulations.

The stock market in general experiences, from time to time, extreme price and volume fluctuations.

Periodic and/or continuous market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock.

Price volatility may be worse if the trading volume of our common stock is low.

Future sales of our common stock, or the perception that future sales may occur, may cause the market price of our common stock to decline.

If any significant number of our outstanding shares are sold, such sales could have a depressive effect on the market price of our stock.

We are unable to predict the effect, if any, that the sale of shares, or the availability of shares for future sale, will have on the market price of the shares prevailing from time to time.

Sales of substantial amounts of shares in the public market, or the perception that such sales could occur, could depress prevailing market prices for the shares.

Such sales may also make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price that we deem appropriate.

The Company is considered a “

smaller reporting company ”

and is exempt from certain disclosure requirements, which could make our common stock less attractive to potential investors.

Rule 12b-2 of the Securities Exchange Act of 1934 ("Exchange Act") defines a “smaller reporting company”

as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent, that is not a smaller reporting company, and that:

Had a public float of less than $250 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity;

In the case of an initial registration statement under the Securities Act or Exchange Act for shares of its common equity, had a public float of less than $250 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares;

In the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero, had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available.

As a “smaller reporting company,”

we are not required and may not include a Compensation Discussion and Analysis section in our proxy statements;

we provide only three years of business information;

provide fewer years of selected financial data;

and have other “scaled”

disclosure requirements that are less comprehensive than issuers that are not “smaller reporting companies,”

which could make our stock less attractive to potential investors and could make it more difficult for shareholders to sell their shares.

We have no current plan to pay dividends on our common stock, and investors may lose the entire amount of their investment.

We have no current plans to pay dividends on our common stock;

therefore, investors will not receive any funds absent a sale of their shares.

We cannot assure investors of a positive return on their investment when they sell their shares, nor can we assure that investors will not lose the entire amount of their investment.

GENERAL RISK FACTORS

We will continue to incur significant costs as a result of operating as a public company, and our management may be required to devote substantial time to compliance initiatives that ultimately could have a material adverse effect on our financial condition and results of operations.

As a public company, we expect to continue to incur significant legal, accounting and other expenses.

In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC, have imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls as well as mandating certain corporate governance practices.

Our management and other personnel will continue to devote a substantial amount of time and financial resources to these compliance initiatives.

Effective January 1, 2018, we are no longer an “emerging growth company”

as defined in the Jumpstart our Business Startups Act of 2012, and as such we may no longer take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, such as exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

This increased burden will further increase our compliance burden.

As a “smaller reporting company”

we are still able to take advantage of certain exceptions available to both emerging growth companies and smaller reporting companies, including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and the exemption from providing a “Compensation Discussion and Analysis”

section in our proxy statements;

providing only three years of business information;

and other “scaled”

disclosure requirements that are less comprehensive than issuers that are not smaller reporting companies. 

If we fail to staff our accounting and finance function adequately or maintain internal control systems adequate to meet the demands that are placed upon us as a public company, we may be unable to report our financial results accurately or in a timely manner and our business and stock price may suffer.

The costs of being a public company, as well as diversion of management’s time and attention, may have a material adverse effect on our future business, financial condition and results of operations.

Our actual or perceived failure to adequately protect personal data could adversely affect our business, financial condition and results of operations.

A wide variety of provincial, state, national, foreign, and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data.

These privacy- and data protection-related laws and regulations are evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations.

Further, our legal and regulatory obligations in foreign jurisdictions are subject to unexpected changes, including the potential for regulatory or other governmental entities to enact new or additional laws or regulations, to issues rulings that invalidate prior laws or regulations, or to increase penalties significantly.

Compliance with these laws and regulations can be costly and can delay or impede the development and offering of new products and services. 

For example, the General Data Protection Regulation, which became effective in May 2018, imposes more stringent data protection requirements, and provides for significantly greater penalties for noncompliance, than the European Union laws that previously applied.

Additionally, California recently enacted legislation, the California Consumer Privacy Act, which became effective January 1, 2020.

We may also be subject to additional obligations relating to personal data by contract that industry standards apply to our practices.

Our actual or perceived failure to comply with applicable laws and regulations or other obligations to which we may be subject relating to personal data, or to protect personal data from unauthorized access, use, or other processing, could result in enforcement actions and regulatory investigations against us, claims for damages by customers and other affected individuals, fines, damage to our reputation, and loss of goodwill, any of which could have a material adverse effect on our operations, financial performance, and business.

Further, evolving and changing definitions of personal data and personal information, including the classification of IP addresses, machine identification information, location data, and other information, may limit or inhibit our ability to operate or expand our business, including limiting business relationships and partnerships that may involve the sharing or uses of data, and may require significant costs, resources, and efforts in order to comply.

Changes in U.S.

Generally Accepted Accounting Principles ( “

GAAP ”

) could adversely affect our financial results and may require significant changes to our internal accounting systems and processes.

We prepare our consolidated financial statements in conformity with GAAP.

These principles are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC and various bodies formed to interpret and create appropriate accounting principles and guidance.

The FASB periodically issues new accounting standards on a variety of topics.

For information regarding new accounting standards, please refer to Note 1, “Description of Business and Significant Accounting Policies – Recent Accounting Pronouncements,” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data,”

of this Annual Report on Form 10-K.

These and other such standards generally result in different accounting principles, which may significantly impact our reported results or could result in variability of our financial results.

In preparing our financial statements we make certain assumptions, judgments and estimates that affect amounts reported in our consolidated financial statements, which, if not accurate, may significantly impact our financial results.

We make assumptions, judgments and estimates for a number of items, including the fair value of financial instruments, goodwill, long-lived assets and other intangible assets;

the realizability of deferred tax assets;

the recognition of revenue and the fair value of stock awards;

We also make assumptions, judgments and estimates in determining the accruals for employee-related liabilities, including commissions and variable compensation, and in determining the allowance or provisions for uncertain tax positions, doubtful accounts, excess or obsolete inventory, and legal contingencies.

These assumptions, judgments and estimates are drawn from historical experience and various other factors that we believe are reasonable under the circumstances as of the date of the consolidated financial statements.

Actual results could differ materially from our estimates, and such differences could significantly impact our financial results.

Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our securities.

In recent years, shareholder activists have become involved in numerous public companies.

Shareholder activists frequently propose to involve themselves in the governance, strategic direction and operations of the Company.

Such proposals may disrupt our business and divert the attention of our Board of Directors, management and employees, and any perceived uncertainties as to our future direction resulting from such a situation could result in the loss of potential business opportunities, interfere with our ability to execute our strategic plan, be exploited by our competitors, cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel and business partners, all of which could adversely affect our business.

A proxy contest for the election of directors at our annual meeting could also require us to incur significant legal fees and proxy solicitation expenses.

In addition, actions of activist shareholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business