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Item 9A. Controls and Procedures

2023-03-22 compared with 2022-03-31 · 38 added, 351 removed, 170 unchanged (70% of the section changed)

7 unchanged sentences

Notwithstanding this finding, we concluded that the consolidated financial statements included in this Report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

During the year ended December 31, 2021, the Company was not subject to requirements of Section 404(b) of the Sarbanes-Oxley Act.

During the year ended December 31, 2022, the Company was not subject to the requirements of Section 404(b) of the Sarbanes-Oxley Act.

As such, our independent registered public accounting firm was not required to, and thus did not, audit our internal control structure.

8 unchanged sentences

Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures as of December 31, 2022 were not effective due to material weaknesses in internal controls over financial reporting.

The implementation of the new ERP system from the beginning of 2020 and through 2021, together with implementation of additional internal control procedures, have strengthened the Company´s internal control environment.

From the report received from the Company´s external auditor as a result of the audit of 2019, we have focused on improving controls to address each reported deficiency;

however, the prolonged impact of COVID-19 restrictions has slowed the pace of progress significantly.

Management's Remediation Initiatives

1 unchanged sentence

As an example of such remediation, the Company in 2022 hired additional employees into the finance department, and we plan to continue to work on remediating the material weaknesses during 2023 by improving competencies and processes.

Further, the implementation of the new ERP system has prioritized in addition to other supporting IT programs to help support the controls and processes of the Company, and these investments are an important part of the remediation of the material weaknesses.

Further, the Company implemented a new ERP system along with other IT programs to help reinforce its controls and processes, and these investments are an important step in the remediation of the material weaknesses.

During 2022, the Company introduced an updated Delegation of Authority, with the overall purpose to provide clarity for all employees on the extent to which they can commit the Company and at the same time provide the Company with assurance that decisions about agreements are made by the appropriate functions and employees.

Lastly, the Company has started the process of redesigning and ensuring documentation of all processes and procedures related to the financial reporting process to ensure the effective design and operation of process-level controls.

2 unchanged sentences

Based on these procedures, management believes that our consolidated financial statements included in this Form 10-K have been prepared in accordance with U.S.

Our CEO and CFO have certified that, based on their knowledge, the financial statements, and other financial information included in this Form 10-K, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Form 10-K. 

Our CEO and CFO have certified that, based on their knowledge, the financial statements, and other financial information included in this Form 10-K, fairly present in all material respects the financial condition, results of operations, and cash flows of the Company as of, and for, the periods presented in this Form 10-K.

Limitations on the Effectiveness of Internal Controls

11 unchanged sentences

Directors, Executive Officers and Corporate Governance

Set forth below is information concerning our directors and senior executive officers as of March 24, 2022.

Chairman of the Board

Sune Mathiesen

Chief Executive Officer, Director

Chief Financial Officer (Principal Financial and Accounting Officer)

Alexander Buehler

Director, Interim Chief Executive Officer (Principal Executive Officer)

Peyton Boswell

According to our bylaws, the number of directors at any one time may not be less than one or more than seven.

The maximum number of directors at any one time may be increased by a vote of a majority of the directors then serving.

Our charter provides for the annual election of directors.

At each annual meeting of stockholders, our directors will be elected for a one-year term and serve until their respective successors have been elected and qualified.

It is anticipated that the Board of Directors will meet at least quarterly.

Executive officers are appointed by and serve at the pleasure of the Board of Directors.

A brief biography of each director and executive officer follows:

Vernon has served as a Director of LiqTech International, Inc.

since February 26, 2013 and as Chairman of the Board of Directors since July 2, 2018.

Vernon also currently serves as a Director of Neles Oyj, a Finland-based industrial process valve company.

Vernon served nine years as a Director of Senior plc, a UK-based aerospace and industrial engineering business.

Vernon has had a long career in the industrial engineering industry and has wide international business experience.

Vernon previously served as Chief Executive Officer and Director of Spirax-Sarco Engineering plc (London Stock Exchange:

SPX), an industrial engineering business for industrial steam systems and peristaltic pumps.

He also served previously as Group Vice President of Flowserve’s Flow Control Business, Group Vice President of Durco International and President of Valtek International.

Vernon earned a BSc degree (magna cum laude) from Weber State University.

Sune Mathiesen .

Mathiesen has served as Chief Executive Officer and a Director of LiqTech International since July 29, 2014.

Mathiesen has served as Chief Executive Officer concurrent with LiqTech as a Director of Masu A/S, a Danish company, since February 2013.

He previously served as CEO and Director of Provital Solutions A/S.

Before that he served as Country Manager of Broen Lab Group and as Country Manager of GPA Flowsystem.

Mathiesen has a distinguished background in executive management, sales and turnarounds.

Mathiesen has been working hands-on with technical products within the valves and fittings industry for the past 20 years.

He has a degree in commercial science from Via College in Randers, Denmark.

Alexander Buehler .

Buehler has served as a Director since August 11, 2017 and currently serves as Interim Chief Executive Officer.

Buehler most recently served as the President & CEO of the Brock Group, a leading industrial services provider to multiple industries, including petrochemical, oil & gas refining, power, pharmaceutical, and LNG. 

Before Brock, Mr.

Buehler served as the Executive Vice President of Global Resources for Intertek, a publicly traded company headquartered in London providing quality assurances services across multiple industries.

Buehler previously served as the President and Chief Executive Officer of Energy Maintenance Services and prior to that as Chief Financial Officer of Energy Recovery, Inc.

Buehler also serves on the Board of Energy Recovery and also as Audit Committee Chairman, and he has previously served on the Board of Viscount Systems, also as Audit Committee Chairman.

Buehler previously served in executive leadership positions at Insituform Technologies, Inc., and he worked for five years in the U.S.

Army Corps of Engineers.

He received a B.S.

in Civil Engineering from the United States Military Academy at West Point and an MBA in Finance from the Wharton School at the University of Pennsylvania. 

Peyton Boswell .

Boswell has served as a Director since August 11, 2017.

Boswell has served as the Chief Executive Officer of EnterSolar, LLC, a provider of commercial solar photovoltaic solutions, since 2010.

Before joining EnterSolar, Mr.

Boswell led solar development activities for Fortistar and was the founder of RenewCo V.I., a renewable energy development firm based in the U.S.

Virgin Islands.

Prior to entering the solar industry, Mr.

Boswell was a finance and investment banking professional for 15 years with J.P.

Morgan and Bank of America.

Boswell is a Chartered Financial Analyst (CFA) and has earned a BA from Cornell University and holds an MBA from Columbia Business School.

Richard Meeusen.

Meeusen has served as a Director since August 26, 2020 and currently serves as the Audit and Compensation Committee Chairman. 

Meeusen most recently served as President, Chief Executive Officer and Chairman of Badger Meter, Inc., a publicly traded international manufacturer and seller of flow measurement equipment, primarily to the water industry.

Meeusen retired as Chief Executive Officer on December 31, 2018 after serving 17 years as the company’s Chief Executive Officer and, before that, 7 years as its Chief Financial Officer.

Prior to Badger Meter, Mr.

Meeusen was Chief Financial Officer of Zenith Sintered Products and before that worked for Arthur Andersen & Co as a Senior Manager.

In addition to his board service at Badger Meter, Mr.

Meeusen serves as a director of Menasha Corporation, a $2 billion privately-held packaging and display equipment company and previously served 8 years on the board of Serigraph Corporation.

Meeusen founded The Water Council in 2007, a 180-member company industry trade group where he still serves as a director. 

Meeusen earned an MBA degree from the Kellogg School of Management at Northwestern University.

Simon Stadil.

Stadil has served as Chief Financial Officer of LiqTech International, Inc.

since November 15, 2021.

From 2013 to 2021 Mr.

Stadil served as the Director of Treasury & Investor Relations of Welltec, Regional CFO Americas and Africa, and most recently as Vice President of Global Finance.

Additionally, Mr.

Stadil served as Assistant Funding Manager within the Danish renewable & utility company Ørsted, as well as Assistant Vice President within the Nordic Investment Banking Division at Barclays Capital in London.

Stadil holds a MSc.

in Business Economics and Finance (Cand.Merc.FIR) from Copenhagen Business School.

Director Expertise

The following is a brief description of the specific experience and qualifications, attributes or skills of each director that led to the conclusion that such person should serve as a director of the Company.

Vernon’s extensive global experience in the industrial engineering industry provides the Board with valuable insight in the markets the Company serves, as well as proven management and public company Board expertise.

Buehler’s experience in general management and strategic planning as well as new product development, corporate development, mergers & acquisitions, operations management, manufacturing process optimization, sales management, and back-office administration provides the Board with valuable perspective across all corporate functions and relevant industries. Mr.

Buehler has substantial experience in the global water, oil & gas, and manufacturing industries. Mr.

Buehler has been determined by our Board to be an Audit Committee Financial Expert. 

Boswell's experience in establishing and growing a successful renewable energy clean tech business and prior experience in investment banking provides the Board with a unique perspective on corporate finance and strategic growth matters.

Further, the Board has determined that he qualifies as an Audit Committee Financial Expert.

Meeusen’s prior experience in finance, operations, marketing and sales along with his leadership experience as a director of a publicly traded company and his long executive management responsibility in the water industry and in developing technology growth business distinguishes him as an integral part of the Company’s Board.

Mathiesen’s prior experience at leading businesses as the Chief Executive Officer and Chairman of companies in the technical products space distinguishes him as an integral part of the Company’s management team.

He is uniquely qualified to provide a perspective on matters involving the continued growth and development of the Company.

Family Relationships

None of our Directors or executive officers is related by blood, marriage or adoption.

Director Independence

Our Board of Directors has determined that Messrs.

Vernon, Buehler, Boswell and Meeusen are independent as that term is defined in the listing standards of the NASDAQ.

In making these determinations, our Board of Directors has concluded that none of our independent directors has an employment, business, family or other relationship, which, in the opinion of our Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

We expect that our independent directors will meet in executive session (without the participation of executive officers or other non-independent directors) at least two times each year.

Director Attendance at Board and Stockholder Meetings

The Board of Directors met formally sixteen times during 2021.

During 2021, each director attended at least 75% of the meetings of the Board and the committees upon which he serves.

We do not have a policy regarding director attendance at our annual meetings of stockholders.

Committees of our Board of Directors

Committee Composition

Our Board of Directors has an Audit Committee, a Compensation Committee, and a Governance and Nominating Committee.

The following table sets forth the current membership of each of these committees: 

Audit Committee

Compensation Committee

Governance & Nominating Committee

Richard Meeusen*

Richard Meeusen *

Mark Vernon *

Peyton Boswell

Richard Meeusen

Peyton Boswell

* Chairman of the committee

Audit Committee

Our Audit Committee consists of Richard Meeusen (Chair), Mark Vernon and Peyton Boswell, each of whom is an independent director as defined in the NASDAQ and SEC rules.

Based upon past employment experience in finance and other business experience requiring accounting knowledge and financial sophistication, our Board of Directors has determined that Mr.

Buehler is an “Audit Committee Financial Expert”

as defined in Item 407(d)(5) of Regulation S-K, and that each member of our Audit Committee is able to read and understand fundamental financial statements.

We have implemented a written charter for our Audit Committee that provides that our Audit Committee is responsible for:

appointing, compensating, retaining, overseeing and terminating our independent auditors and pre-approving all audit and non-audit services permitted to be performed by the independent auditors;

discussing with management and the independent auditors our annual audited financial statements, our internal control over financial reporting, and related matters;

reviewing and approving any related party transactions;

meeting separately, periodically, with management, the internal auditors and the independent auditors;

annually reviewing and reassessing the adequacy of our Audit Committee charter;

such other matters that are specifically delegated to our Audit Committee by our Board of Directors from time to time;

reporting regularly to the Board of Directors.

During the fiscal year ended December 31, 2021, the Audit Committee met four times.

Report of the Audit Committee of the Board of Directors

The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2021 with our management.

The Audit Committee has discussed with the Company’s independent registered public accounting firm the matters required to be discussed by Auditing Standard No.

1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (the “PCAOB”).

The Audit Committee has also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountants’

communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the accounting firm’s independence.

Based on the foregoing, the Audit Committee has recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Richard Meeusen

Peyton Boswell

Compensation Committee

Our Compensation Committee consists of Richard Meeusen (Chair), Mark Vernon and Peyton Boswell, each of whom is an independent director as defined in the NASDAQ rules, a “non-employee director”

under Rule 16b-3 promulgated under the Exchange Act, and an “outside director”

for purposes of Section 162(m) of the Code. We have implemented a written charter for our Compensation Committee that provides that our Compensation Committee is responsible for:

reviewing and making recommendations to our Board of Directors regarding our compensation policies and forms of compensation provided to our directors and officers;

reviewing and making recommendations to our Board of Directors regarding bonuses for our officers and other employees;

reviewing and making recommendations to our Board of Directors regarding stock-based compensation for our directors and officers;

administering our stock option plans in accordance with the terms thereof;

such other matters that are specifically delegated to the Compensation Committee by our Board of Directors after the business combination from time to time.

During the fiscal year ended December 31, 2021, the Compensation Committee met three times.  

Governance and Nominating Committee

Our Governance and Nominating Committee consists of Mark Vernon (Chair), Peyton Boswell and Richard Meeusen, each of whom is an independent director as defined in the NASDAQ rules.

We have implemented a written charter for our Governance and Nominating Committee that provides that our Governance and Nominating Committee is responsible for:

overseeing the process by which individuals may be nominated to our Board of Directors;

identifying potential directors and making recommendations as to the size, functions and composition of our Board of Directors and its committees;

considering nominees proposed by our stockholders;

establishing and periodically assessing the criteria for the selection of potential directors;

making recommendations to the Board of Directors on new candidates for Board membership;

overseeing corporate governance matters.

In making nominations, the Governance and Nominating Committee intends to submit candidates who have high personal and professional integrity, who have demonstrated exceptional ability and judgment and who are effective, in conjunction with the other nominees to the Board of Directors, in collectively serving the long-term interests of the stockholders.

In evaluating nominees, the Governance and Nominating Committee intends to take into consideration attributes such as leadership, independence, interpersonal skills, financial acumen, business experiences, industry knowledge, and diversity of viewpoints.

During the fiscal year ended December 31, 2021, the Governance and Nominating Committee met one time. 

Legal Proceedings Involving Officers and Directors

To the knowledge of the Company after reasonable inquiry, no current director or executive officer of the Company during the past ten years, has (i) been convicted in a criminal proceeding (excluding traffic violations or other minor offenses), (ii) been a party to any judicial or administrative proceeding (except for any matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, U.S.

federal or state securities laws, or a finding of any violation of U.S.

federal or state securities laws, (iii) filed a petition under federal bankruptcy laws or any state insolvency laws or has had a receiver appointed for the person’s property or (iv) been subject to any judgment, decree or final order enjoining, suspending or otherwise limiting for more than 60 days, the person from engaging in any type of business practice, acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity or engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws, (v) been found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated, (vi) been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated, (vii) been the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

(a) any Federal or State securities or commodities law or regulation, (b) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or (c) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity, or (viii) been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C.

78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.

1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Code of Ethics

We adopted a code of conduct and ethics on January 1, 2012.

The code of ethics has been posted on the Company’s website under the Investor Relations tab.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires a company’s officers and directors, and persons who own more than ten percent (10%) of a registered class of a company’s equity securities, to file reports of ownership and changes in ownership with the SEC.

Officers, directors, and greater than ten percent (10%) stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. 

To our knowledge, based solely on a review of the copies of such reports furnished to us, we believe that all reports under Section 16(a) required to be filed by its officers and directors were timely filed.

The information required by this Item 10 is incorporated herein by reference to our Definitive Proxy Statement relating to our 2023 Annual Meeting of Stockholders.

We intend to file such Definitive Proxy Statement with the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Executive Compensation

Summary Compensation Table

The following table sets forth certain information with respect to compensation for the years ended December 31, 2021 and 2020 earned by or paid to our Chief Executive Officer and our Chief Financial Officers.

Summary Compensation Table

Name and Principal

Incentive Plan

Sune Mathiesen, Chief Executive Officer (2)

Claus Toftegaard, Chief Financial Officer (3)

Simon Stadil, Chief Financial Officer (5)

Total salaries for Messrs.

Mathiesen and Toftegaard for 2020 are reported on an as-converted basis from Danish Krone (DKK) to U.S.

dollars ($) based on the currency exchange rate of $1.00 = DKK 6.5343, as of December 31, 2020.

Total salaries for Messrs.

Mathiesen, Toftegaard and Stadil for 2021 are reported on an as-converted basis from Danish Krone (DKK) to U.S.

dollars ($) based on the currency exchange rate of $1.00 = DKK 6.5612, as of December 31, 2021.

We do not make any representation that the Danish Krone amounts could have been, or could be, converted into U.S.

dollars at such rate on December 31, 2020 or December 31, 2021, or at any other rate.

Mathiesen became our Chief Executive Officer in August 2014.

Pursuant to his employment agreement, Mr.

Mathiesen is entitled to an annual base salary of approximately $365,787 based on the currency exchange rate of $1.00 = DKK 6.5612, as of December 31, 2021.

Toftegaard became our Chief Financial Officer in August 2018.

Pursuant to his employment agreement, Mr.

Toftegaard is entitled to an annual base salary of approximately $253,995 based on the currency exchange rate of $1.00 = DKK 6.5612, as of December 31, 2021.

Toftegaard changed role to Project Director, effective November 23, 2021

Pursuant to Mr.

Mathiesen’s employment agreement, Mr.

Mathiesen’s received $36,655 and $35,888 of contributions from the Company to his individual retirement account in 2021 and 2020.

Pursuant to Mr.

Toftegaard’s employment agreement, Mr.

Toftegaard received $25,453 and $24,916 of contributions from the Company to his retirement account in 2021 and 2020.

Stadil became our Chief Financial Officer in November 2021.

Pursuant to his employment agreement, Mr.

Stadil is entitled to an annual base salary of approximately $259,099 based on the currency exchange rate of $1.00 = DKK 6.5612, as of December 31, 2021.

Employment Arrangements  

During the year ended December 31, 2021, we had employment agreements with Messrs.

Mathiesen and Toftegaard.

A description of each agreement is set forth below.

Mathiesen Agreement

Effective July 30, 2014 the Company’s Board of Directors appointed Mr.

Sune Mathiesen to serve as Chief Executive Officer of the Company and as a Director of the Company pursuant to a Director Contract, dated July 15, 2014 (updated on October 15, 2018), by and between Mr.

Mathiesen and LiqTech Holding (the “

Director Agreement ”).

The Director Agreement provided as of December 31, 2021 for an annual base salary set at DKK 2,400,000 (or approximately $365,787 based on the currency exchange rate of $1 = DKK 6.5612 as of December 31, 2021) and an annual cash bonus of 100% - 150% of the Director’s annual salary if certain performance targets are met, as determined annually by the Company’s Compensation Committee.

Mathiesen is entitled to five weeks of vacation, home internet service, a company car or equivalent taxable allowance, a LiqTech Holding mobile phone, a LiqTech Holding laptop and reimbursement of LiqTech Holding-related travel expenses.

LiqTech Holding may terminate the Mathiesen Agreement upon not less than twelve months prior notice, and Mr.

Mathiesen may terminate the Mathiesen Agreement with twelve months prior notice. 

Toftegaard Agreement

On August 15, 2018 Mr.

Claus Toftegaard was appointed Chief Financial Officer of the Company.

Pursuant to the terms of a CFO Contract, in consideration for his services, Mr.

Toftegaard shall receive an annual base salary of DKK 1,666,512 (or approximately $253,995 based on the currency exchange rate of $1 = DKK 6.5612 as of December 31, 2021).

Toftegaard is entitled to six weeks of vacation, home internet service, a company car, a LiqTech Holding mobile phone, a LiqTech Holding laptop and reimbursement of LiqTech Holding-related travel expenses.

LiqTech Holding may terminate the Toftegaard Agreement upon not less than five months prior notice and Mr.

Toftegaard may terminate with five months prior notice. 

Stadil Agreement

On November 23, 2021, Mr.

Simon Stadil was appointed to serve as Chief Financial officer of the company.

Pursuant to the terms of his executive services contract, in consideration for his services, Mr.

Stadil will receive a base salary of DKK 1,700,000 (or approximately $260,000 based on the currency exchange rate of $1 = DKK 6.5612 as of December 31, 2021) and be eligible for a discretionary annual performance bonus of up to approximately $128,000.

Also in connection with his appointment, Mr.

Stadil will receive restricted stock unit awards with an aggregate grant date fair value of approximately $128,000. Mr.

Stadil is entitled to six weeks of vacation, home internet service, a company car, a mobile phone, laptop and reimbursement of travel expenses.

LiqTech may terminate the Stadil Agreement upon not less than five months prior notice and Mr.

Stadil may terminate the Stadil Agreement with three months prior notice. 

Outstanding Equity Awards at Last Fiscal Year End

The following table sets forth all outstanding equity awards held by named executive officers as of December 31, 2021.

Option Awards

Unexercisable

Sune Mathiesen, CEO

Claus Toftegaard, CFO

Simon Stadil, CFO

Compensation of Directors

For 2021 the Chairman of the Board was entitled to an annual fee of $60,000;

each non-executive director was entitled to $30,000 for services on the Board of Directors;

the Audit Committee Chairman was paid an additional annual fee of $10,000 per year, the Compensation Committee Chairman was paid an additional annual fee of $6,000 (however, when Mr.

Vernon has served as the Chairman of the Compensation Committee after being appointed Chairman of the Board, he was not paid this additional fee).

The Chairman of the Board also receives an automatic annual stock grant in the amount of $70,000 on January 2 each year.

Each qualifying non-executive director would receive an automatic annual stock grant on January 2 of each year in the amount of $35,000 commencing the first year after full vesting of their initial 25,000 share stock grant that vests over a three-year period.

The Company, has not entered any agreements with the Directors of any special compensation in relation to retirement, resignation, change of control or other kinds of events that might lead to the Director leaving the Board of LiqTech International, Inc.

The following table provides information regarding compensation that was earned or paid to the individuals who served as non-employee directors during the year ended December 31, 2021.

Non-qualified

Alexander Buehler

Peyton Boswell

Richard Meeusen

Our independent directors are entitled to cash compensation of $30,000 per year, the chairman of our Board is entitled to additional $30,000 per year, the chairman of our Audit Committee is entitled to additional $10,000 per year and the chairman of our Compensation Committee is entitled to additional $6,000 per year.

These amounts represent the aggregate grant date fair value for stock awards granted in 2021, computed in accordance with FASB ASC Topic 718.

As such, these amounts do not correspond to the compensation actually realized by each director for the period.

The Company issued in January 2021 11,218 shares of restricted stock valued at $70,000 for services provided and to be provided by Mr.

Vernon shall provide general work as member of the Board of Directors and other services, which are mutually agreeable by both parties on an ad hoc basis.

The Company issued in September 2021 8,333 shares of restricted stock valued at $57,500 for services provided and to be provided by Mr.

Meeusen shall provide general work as member of the Board of Directors and other services, which are mutually agreeable by both parties on an ad hoc basis

The information required by this Item 11 will be included in the Definitive Proxy Statement referenced above in Item 10 and is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth, as of March 24, 2022, certain information regarding the beneficial ownership of our common stock, the only class of capital stock we have currently outstanding, of (i) each director and “named executive officers”  (as defined in the section titled “Executive Compensation — Summary Compensation Table”) individually, (ii) our Chief Financial officer, (iii) all directors and executive officers as a group, and (iv) each person known to us who is known to be the beneficial owner of more than 5% of our common stock.

In accordance with the rules of the SEC, “beneficial ownership”

includes voting or investment power with respect to securities.

To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. 

Name of Beneficial Owner(1)

Percentage of

Directors and NEOs

Sune Mathiesen (4)

Alexander Buehler

Peyton Boswell

Richard Meeusen

All executive officers and directors as a group (7 persons)

5% Shareholders:

Bleichroeder LP

AWM Investment Company, Inc.

Clear Harbour Asset Management

* Less than one percent.

Unless otherwise indicated, the address for each person listed above is:

c/o LiqTech Holding A/S, Industriparken 22C, DK-2750 Ballerup, Denmark.

Under the rules and regulations of the SEC, beneficial ownership includes (i) shares actually owned, (ii) shares underlying preferred stock, options and warrants that are currently exercisable and (iii) shares underlying options and warrants that are exercisable within 60 days of March 24, 2022.

All shares beneficially owned by a particular person under clauses (ii) and (iii) of the previous sentence are deemed to be outstanding for the purpose of computing the percentage ownership of that person but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.

Based on 21,352,688 shares issued and outstanding as of March 24, 2022.

These shares are partly owned by Masu A/S, a Danish entity.

Mathiesen controls the voting and disposition of the shares owned by Masu A/S

We know of no arrangements, including pledges, by or among any of the forgoing persons, the operation of which could result in a change of control of us.

The following table provides information, as of December 31, 2021, regarding the number of shares of Company common stock that may be issued from outstanding stock options.

Plan Category

to be issued upon

Weighted average

exercise price of

for future issuance

Equity compensation plans approved by security holders:

Equity compensation plans not approved by security holders

(1) On August 21, 2013, the Company’s Board of Directors adopted the 2013 LiqTech International, Inc.

Share Incentive Plan (the “2013 Plan”).

The 2013 Plan authorized awards that equal to 10% of the total outstanding shares of Common Stock on an as-converted basis as of August 21, 2013, (612,788 shares of Common Stock), plus an increase of that number of shares of Common Stock to be added on each of the third, sixth and ninth anniversary of the 2013 Plan’s effectiveness.

Accordingly, on August 21, 2019, 2,054,767 shares of Common Stock became authorized under the 2013 Plan.

Pursuant to the terms of 2013 Plan, if any award thereunder terminates, expires, or lapses for any reason, any shares subject to such award shall again be available for the grant of an Award pursuant to the 2013 Plan.

The number of securities remaining available for future issuance accounts for 149,636 shares of Common Stock issued as “Restricted Share Units,”

which were not forfeited prior to vesting.

The information required by this Item 12 will be included in the Definitive Proxy Statement referenced above in Item 10 and is incorporated herein by reference.

Certain Relationships and Related Transactions, and Director Independence

Transactions with Related Persons

The following discussion relates to types of transactions involving the Company and any of our executive officers, directors, director nominees or five percent stockholders, each of whom we refer to as a "related party." For purposes of this discussion, a "related-party transaction" is a transaction, arrangement, or relationship:

in which we participate;

that involves an amount in excess of the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years;

in which a related party has a direct or indirect material interest.

From January 1, 2022 through the date of this Annual Report on Form 10-K, there have been no related-party transactions, except for the executive officer and director compensation arrangements described in the section "Executive Compensation" and as described below.

Policies and Procedures for Related Party Transactions

Any request for us to enter into a transaction with an executive officer, director, principal stockholder, or any of such persons’

immediate family members or affiliates, in which the amount involved exceeds $120,000, or 1% of the average of our total assets at year-end for the last two completed fiscal years, must first be presented to our audit committee for review, consideration and approval.

All of our directors, executive officers and employees will be required to report to our audit committee any such related party transaction.

In approving or rejecting the proposed agreement, our audit committee will consider the relevant facts and circumstances available and deemed relevant to the audit committee, including, but not limited to, the risks, costs and benefits to us, the terms of the transaction, the availability of other sources for comparable services or products, and, if applicable, the impact on a director’s independence.

Our audit committee will approve only those agreements that, in light of known circumstances, are in, or are not inconsistent with, our best interests, as our audit committee determines in the good faith exercise of its discretion.

The information required by this Item 13 will be included in the Definitive Proxy Statement referenced above in Item 10 and is incorporated herein by reference.

Principal Accountant Fees and Services

Audit and Audit-Related Fees

The aggregate fees billed or expected to be billed by our independent auditors for the audit of our annual consolidated financial statements for the year ended December 31, 2021 and 2020 and for the review of our quarterly financial statements were $164,000 and $152,500, respectively.

Our auditors did not provide any tax compliance, planning services, audit-related services, or other services for the Company other than those described above. 

Audit Committee Pre-approval

The policy of the Audit Committee is to pre-approve all audit and non-audit services provided by the independent accountants.

These services may include audit services, audit-related services, tax services and other services.

Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services.

The Audit Committee has delegated pre-approval authority to certain committee members when expedition of services is necessary.

The independent accountants and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent accountants in accordance with this pre-approval delegation, and the fees for the services performed to date.

The Audit Committee approved all of the services described above in this Item 14 in advance during the fiscal year ended December 31, 2021. 

The information required by this Item 14 will be included in the Definitive Proxy Statement referenced above in Item 10 and is incorporated herein by reference. 

Exhibits and Financial Statement Schedules

8 unchanged sentences

Bad debt expense

( 28,499 )  

320,270  

Reserve for obsolete inventory

5 unchanged sentences

$ 404,160  

$ ( 618,129 )

$ 663,227  

17 unchanged sentences

$ 134,152  

$ 586,291  

$ ( 678,598 )

4 unchanged sentences

Bad debt expense

320,270  

Receivables written off during the periods

Effect of currency translation

49,605  

Allowance for doubtful accounts at the end of the period

6 unchanged sentences

Articles of Incorporation, as amended as of May 21, 2021

Filed herewith

Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K as filed with the SEC on March 30, 2022

Amended and Restated Bylaws

10 unchanged sentences

Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K as filed with the SEC on August 20, 2021

Form of Pre-Funded Warrant

Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K as filed with the SEC on May 17, 2022

Form of Warrant

Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K as filed with the SEC on June 24.

Lease Agreement for Industriparken 22C, 2750 Ballerup, Denmark

Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K/A as filed with the SEC on November 15, 2011 (translated in English)

Director Contract, dated October 15, 2018, by and between LiqTech International A/S and Sune Mathiesen

Incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K as filed with the SEC on April 1, 2019

Form of Securities Purchase Agreement, by and among the Company and the purchasers named therein

3 unchanged sentences

Lease Contract for Benshoej Industrivej 24, 9500 Hobro

Incorporated by reference to the Company’s Form 8-K as filed with the SEC on December 5, 2019

Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K as filed with the SEC on December 5, 2019

Securities Purchase Agreement, by and among the Company and HT Investments MA, LC

Incorporated by reference to the Company’s Form 8-K as filed with the SEC on March 30, 2021

Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K as filed with the SEC on March 30, 2021

Form of Senior Convertible Note due 2023

Incorporated by reference to the Company’s Form 8-K as filed with the SEC on March 30, 2021

Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K as filed with the SEC on March 30, 2021

Form of Exchange Agreement

Incorporated by reference to the Company’s Form 8-K as filed with the SEC on August 20, 2021

Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K as filed with the SEC on August 20, 2021

Lease Agreement for the China Premises

Incorporated by reference to the Company’s Form 8-K as filed with the SEC on September 28, 2021

Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K as filed with the SEC on September 28, 2021

Executive Services Agreement by and between Liqtech Holding A/S and Simon Stadil  

Incorporated by reference to the Company’s Form 8-K as filed with the SEC on November 30, 2021

Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K as filed with the SEC on November 30, 2021

LiqTech International, Inc.

1 unchanged sentence

Incorporated by reference to the Company’s Form S-8 as filed with the SEC on January 27, 2014

Interim CEO Agreement by and between LiqTech International Inc.

and Alexander J.

Incorporated by reference to the Company’s Form 8-K/A as filed with the SEC on March 28, 2022

Note and Warrant Purchase Agreement, by and among the Company and the Purchasers

Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K as filed with the SEC on June 24, 2022

Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K as filed with the SEC on June 24, 2022

Registration Rights Agreement, by and among the Company and the Purchasers

Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K as filed with the SEC on June 24, 2022

Executive Services Agreement, dated July 26, 2022, by and between LiqTech Holdings A/S and Fei Chen

Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K as filed with the SEC on August 1, 2022

LiqTech International, Inc.

2022 Equity Incentive Plan

Incorporated by reference to Annex A to the Company’s Proxy Statement pursuant to Section 14(a) of the Exchange Act filed with the SEC on October 3, 2022

Exclusivity Agreement for Collaboration, Marketing and Deployment of Products and Associated Services, dated November 11, 2022, by and between the Company and NESR

Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K as filed with the SEC on November 17, 2022

List of Subsidiaries

26 unchanged sentences

Provided herewith

Indicates a management contract or compensatory plan or arrangement.

* Denotes management contract or compensatory plan, contract or arrangement.

Form 10-K Summary

3 unchanged sentences

March 22, 2023

Alexander Buehler

Interim Chief Executive Officer, Principal

Executive Officer and Director

Fei Chen 

Chief Executive Officer and Principal Executive Officer

In accordance with the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the dates indicated.

2 unchanged sentences

March 22, 2023

President, Chief Executive Officer, Principal Executive Officer and Director

March 22, 2023

/s/ Simon Stadil

2 unchanged sentences

/s/ Alexander Buehler

Interim Chief Executive Officer, Principal Executive Officer and Director

March 22, 2023

7 unchanged sentences

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 9A. Controls and Procedures