Note 15 - Acquisition

12 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Business Combination Disclosure [Text Block]

NOTE 15 – ACQUISITION

Acquisition

- On the July 29, 2014, the Company, through its subsidiary, LiqTech Int. DK, completed the acquisition of all of the issued and outstanding capital stock (the “Provital Shares”) of Provital Solutions A/S, a Danish company (“Provital”) from Masu A/S, a Danish company (“MASU”). In consideration for the Provital Shares, MASU received cash consideration in the sum of DKK 12,600,000, that is, approximately USD$2,300,000, and 4,044,782 shares of the Company’s common stock (the “Payment Shares”). One-third (1/3) of the Payment Shares shall be subject to a lock-up period of six (6) months. The remaining two-thirds (2/3) of the Payment Shares shall be held in escrow and one-third of the Payment Shares will be released from escrow contingent upon Provital, for the year ending December 31, 2014, achieving (i) gross revenues of not less than DKK 65,000,000 and EBITDA of DKK 6,500,000, or (ii) EBITDA of not less than DKK 10,000,000 and gross revenues of not less than DKK 50,000,000. Another one-third (1/3) of the Payment Shares will be released from escrow contingent upon Provital, for the year ending December 31, 2015, achieving (i) gross revenues of not less than DKK 120,000,000 and EBITDA of DKK 12,000,000, or (ii) EBITDA of not less than DKK 16,000,000 and gross revenues of not less than DKK 80,000,000.   

The purchase agreement includes “catch up” provisions that provide that the Payment Shares placed in escrow will be released from escrow if Provital (1) for the years ending December 31, 2014 and December 31, 2015, achieves accumulated gross revenues (i) exceeding DKK 185,000,000 and EBITDA of DKK 18,500,000, or (ii) EBITDA of not less than DKK 26,000,000 and gross revenues of not less than DKK 130,000,000 or (2) for the year ending December 31, 2016, achieves gross revenues exceeding DKK 105,000,000 and EBITDA of not less than DKK 21,000,000.

Current fair value of the consideration transferred to acquire LiqTech Systems A/S:

Cash	$	2,300,000
4,044,782 common shares at $1.5 a share		6,067,173
Current consideration transferred for the acquisition	$	8,367,173

Total consideration transferred was allocated to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values at the acquisition date as set forth below. The Company believes that the acquisition of LiqTech Systems A/S facilitates the Company’s entry into the waters filtration systems industry market, diversifies its product revenue and enhances its strength in providing whole system offerings. These factors contributed to consideration transferred in excess of the fair value of LiqTech Systems net tangible and intangible assets acquired, resulting in the Company recording goodwill in connection with the transaction. Management estimated the fair values of tangible and intangible asset and liabilities in accordance with the applicable accounting guidance for business combinations.

The Company’s allocation of consideration transferred for LiqTech Systems AS is as follows:

	Estimated Fair Value
Cash	$	425,316
Accounts receivable, net		856,566
Other receivables		1,279
Cost in excess of billings		592,747
Inventory		1,572,529
Prepaid expenses		3,794
Current deferred tax asset		154,682
Property and Equipment, net of accumulated depreciation		56,005
Deposits		12,084
Deferred tax asset long term		277,126
Goodwill		9,383,593
Total assets acquired	$	13,335,721
Lines of credit payable		(1,794,301	)
Accounts payable		(1,637,815	)
Accrued expense		(1,082,482	)
Billings in excess of cost		(322,391	)
Notes payable		(131,559	)
Total net assets acquired	$	8,367,173

Goodwill

The $9,383,593 of goodwill represents the excess of consideration transferred over the fair value of assets acquired and liabilities assumed and is attributable to the benefits expected from combining the Company’s operations with LiqTech Systems AS.