Note 8 - Agreements and Commitments

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE 8 - AGREEMENTS AND COMMITMENTS

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

On February 27, 2019, LiqTech was contacted by a former supplier alleging that the Company owed DKK 543,905 ($81,177) for services rendered in 2017. The claimant has previously filed a lawsuit to claim payment for the services, which was denied by the Company due to severe errors in the services rendered. The claim was settled out of court and the Company agreed to pay DKK 400,000 ($59,700) for full and final settlement during the period ending March 31, 2022.

The Company entered arbitration on March 31, 2022 regarding a commercial dispute related to the delivery of a water treatment system installed on a commercial power plant. The parties disagree on whether the supplied equipment performs according to the agreed performance criteria. The dispute also relates to equipment downtime and the use of additives to operate the equipment. The claim against LiqTech amounts to DKK 1,671,768 ($249,510) with the addition of interest. LiqTech is disputing the claim while having filed a counterclaim regarding unpaid invoices. The claim was settled out of court and the Company agreed to pay DKK 600,000 ($83,799), including decommissioning of the installed system, for full and final settlement during the period ending June 30, 2022.

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

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

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

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

	June 30, 2022			December 31, 2021
Balance at January 1	$	962,313		$	1,056,613
Warranty costs charged to cost of goods sold		53,684			177,302
Utilization charges against reserve		-			(191,068	)
Release of accrual related to expired warranties		-			-
Foreign currency effect		(83,405	)		(80,534	)
Balance at the end of the period	$	932,592		$	962,313