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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2026

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

For the transition period from to

Commission File Number: 001-36210

LiqTech International, Inc.

(Exact name of registrant as specified in its charter)

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

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

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

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

Title of each class

Trading symbol(s)

Name of each exchange on which

registered

Common Stock, $0.001 par value

LIQT

The Nasdaq Stock Market LLC

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

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

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

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

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

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

As of May 12, 2026, there were 9,947,841 shares of Common Stock, $0.001 par value per share, outstanding.

LIQTECH INTERNATIONAL, INC. AND SUBSIDIARIES

Quarterly Report on Form 10-Q

For the Period Ended March 31, 2026

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION	5

Item 1. Financial Statements	5

Condensed Consolidated Balance Sheets as of March 31, 2026 (unaudited) and December 31, 2025	5

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2026 and March 31, 2025 (unaudited)	7

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2026 and March 31, 2025 (unaudited)	8

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months ended March 31, 2026 and March 31, 2025 (unaudited)	9

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and March 31, 2025 (unaudited)	11

Notes to Condensed Consolidated Financial Statements (unaudited)	13

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3. Quantitative and Qualitative Disclosures About Market Risk	27

Item 4. Controls and Procedures	28

PART II. OTHER INFORMATION	29

Item 1. Legal Proceedings	29

Item 1A. Risk Factors	29

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3. Defaults Upon Senior Securities	29

Item 4. Mine Safety Disclosures	29

Item 5. Other Information	29

Item 6. Exhibits	30

SIGNATURES	32

FORWARD-LOOKING STATEMENTS

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” regarding the plans and objectives of management for future operations and market trends and expectations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the continued expansion of our business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future political, legislative, economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. This is especially underlined by the potential impacts from the prevailing macro-economic uncertainty on the Company, including the related effects to our business operations, results of operations, cash flows, and financial position. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Forward-looking statements include, but are not limited to, statements concerning:

	●	Our expectations regarding our liquidity, cash flows and uses of cash and ability to continue as a going concern;

	●	The potential adverse effects on our operations and financial performance from armed conflicts or geopolitical tensions;

	●	The potential adverse impact of global trade restrictions, tariffs and geopolitical tensions on our business and supply chain;

	●	The potential negative impact of prolonged energy market volatility and supply disruptions on our business;

	●	The potential adverse impact of health crises, pandemics, and public health emergencies on our business, financial condition, and operations;

	●	Our dependence on a few major customers and the ability to maintain future relationships with one or more of these major customers;

	●	Our ability to operate with financial stability and secure access to external financing and adequate liquidity;

	●	Our ability to secure and source supplies of raw materials and key components in due time and at competitive prices;

	●	Our ability to achieve revenue growth and penetrate new markets;

	●	Our dependence on the expertise and experience of our management team and the retention of key employees;

	●	Our reliance and access to qualified personnel to expand our business;

	●	Our ability to adapt to potentially adverse changes in legislative, regulatory and political frameworks;

	●	Changes in interest rates or tightening of debt capital markets;

	●	Changes in emissions and environmental regulations, and potential further tightening of emission standards;

	●	The exposure to potentially adverse tax consequences;

	●	Our ability to compete under changing governmental standards by which our products are evaluated;

	●	The financial impact from the fluctuation and volatility of foreign currencies;

	●	The potential monetary costs of defending our intellectual property rights;

	●	Our ability to successfully protect our intellectual property rights and manufacturing know-how;

	●	The possibility of a dispute over intellectual property developed in conjunction with third parties with whom we have contractual relationships;

	●	The possibility that we could become subject to litigation that could be costly, limit or cancel our intellectual property rights or divert time and efforts away from our business operations;

	●	The potential negative impact to the sale of our products caused by technological advances of our competitors;

	●	The potential liability for environmental harm or damages resulting from technical faults or failures of our products;

	●	The possibility that an investor located within the United States may not be able to, or find it difficult to, enforce any judgments obtained in United States courts because a significant portion of our assets and some of our officers and directors may be located outside of the United States;

	●	The possibility that we may not be able to develop and maintain an effective system of internal control over financial reporting, leading to inaccurate reports of our financial results;

	●	The possibility of breaches in the security of our information technology systems;

	●	The liability risk of our compliance to environmental laws and regulations; and

	●	The potential negative impact of more stringent environmental laws and regulations as governmental agencies seek to improve minimum standards.

Any forward-looking statement made by us herein speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor can we assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LIQTECH INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	*March 31,*		*December 31,*
	*2026*		*2025*

Assets

Current Assets:
Cash and restricted cash	$	2,732,739	$	5,070,385
Accounts receivable, net		3,664,250		3,429,992
Inventories, net		6,478,114		6,479,321
Contract assets		634,154		733,851
Prepaid expenses and other current assets		636,047		245,702

Total Current Assets		14,145,304		15,959,251

Non-Current Assets:
Property and equipment, net		5,624,902		5,845,323
Operating lease right-of-use assets		4,369,053		4,643,680
Deposits and other assets		534,502		545,573
Intangible assets, net		33,320		36,125
Goodwill		242,544		248,145

Total Non-Current Assets		10,804,321		11,318,846

Total Assets	$	24,949,625	$	27,278,097

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

LIQTECH INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

	*March 31,*			*December 31,*
	*2026*			*2025*

Liabilities and Stockholders’ Equity

Current Liabilities:
Accounts payable	$	2,036,019		$	1,552,890
Accrued expenses		2,227,908			1,795,382
Current portion of finance lease liabilities		504,799			517,759
Current portion of operating lease liabilities		711,295			714,446
Contract liabilities		181,553			140,986

Total Current Liabilities		5,661,574			4,721,463

Non-Current Liabilities:
Deferred tax liability		61,847			63,654
Finance lease liabilities, net of current portion		1,260,692			1,415,908
Operating lease liabilities, net of current portion		3,657,758			3,929,234
Loan from related party		1,159,369			1,265,057
Notes payable, net of debt discounts		5,598,049			5,510,545

Total Non-Current Liabilities		11,737,715			12,184,398

Total Liabilities		17,399,289			16,905,861


Stockholders' Equity:
Preferred stock; par value $0.001, 2,500,000 shares authorized, 0 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively		-			-
Common stock; par value $0.001, 50,000,000 shares authorized and 9,947,841 and 9,627,064 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively		9,948			9,627
Additional paid-in capital		110,463,498			110,427,993
Accumulated deficit		(97,505,233	)		(94,795,121	)
Accumulated other comprehensive loss		(5,341,800	)		(5,209,173	)

Total Stockholders' Equity		7,626,413			10,433,326

Noncontrolling Interest		(76,077	)		(61,090	)

Total Equity		7,550,336			10,372,236

Total Liabilities and Equity	$	24,949,625		$	27,278,097

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

LIQTECH INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	*For The Three Months Ended*
	*March 31,*
	*2026*			*2025*
Revenue	$	4,136,320		$	4,617,541
Cost of goods sold		3,742,576			4,492,485

Gross Profit		393,744			125,056

Operating Expenses:
Selling expenses		980,674			718,016
General and administrative expenses		1,414,145			1,362,246
Research and development expenses		276,134			230,123

Total Operating Expenses		2,670,953			2,310,385

Loss from Operations		(2,277,209	)		(2,185,329	)

Other Income (Expense):
Interest and other income		16,857			68,751
Interest and other expense		(209,064	)		(48,283	)
Amortization of debt discount		(87,504	)		(168,030	)
Gain (loss) on foreign currency transactions		(168,556	)		35,516
Gain (loss) on disposal of property and equipment		-			(61,306	)

Total Other Expense		(448,267	)		(173,352	)

Loss Before Income Taxes		(2,725,476	)		(2,358,681	)

Income tax benefit		(377	)		(339	)

Net Loss	$	(2,725,099	)	$	(2,358,342	)

Net Loss attributable to noncontrolling interest		(14,987	)		(6,950	)
Net Loss attributable to LiqTech International, Inc.		(2,710,112	)		(2,351,392	)

Loss Per Common Share – Basic and Diluted	$	(0.28	)	$	(0.25	)

Weighted-Average Common Shares Outstanding – Basic and Diluted		9,847,218			9,602,354

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

LIQTECH INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE LOSS (UNAUDITED)

	*For the Three Months Ended*
	*March 31,*
	*2026*			*2025*

Net Loss		(2,725,099	)		(2,358,342	)

Loss on foreign currency translation adjustments		(132,627	)		348,346

Total Other Comprehensive Loss	$	(2,857,726	)	$	(2,009,996	)

Net loss attributable to non-controlling interests		14,987			6,950

Total Other Comprehensive Loss Attributable to LiqTech International, Inc.	$	(2,842,739	)	$	(2,003,046	)

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

LIQTECH INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

													*Accumulated*						*Non-*
							*Additional*						*Other*			*Total*			*controlled*
	*Common Stock*						*Paid-in*			*Accumulated*			*Comprehensive*			*Stockholders’*			*Interest in*			*Total*
	*Shares*			*Amount*			*Capital*			*Deficit*			*Income (Loss)*			*Equity*			*Subsidiaries*			*Equity*
Balance at December 31, 2025		9,627,064			9,627			110,427,993			(94,795,121	)		(5,209,173	)		10,433,326			(61,090	)		10,372,236

Common stock issued in settlement of RSUs		394,226			394			(394	)		-			-			-			-			-

Tax withholdings paid related to stock-based compensation		(73,449	)		(73	)		(182,426	)		-			-			(182,499	)		-			(182,499	)

Stock-based compensation		-			-			218,325			-			-			218,325			-			218,325

Currency translation, net		-			-			-			-			(132,627	)		(132,627	)		-			(132,627	)

Net loss		-			-			-			(2,710,112	)		-			(2,710,112	)		-			(2,710,112	)

Net loss attributable to noncontrolling interest		-			-			-			-			-			-			(14,987	)		(14,987	)

Balance at March 31, 2026		9,947,841			9,948			110,463,498			(97,505,233	)		(5,341,800	)		7,626,413			(76,077	)		7,550,336

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

LIQTECH INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

													*Accumulated*						*Non-*
							*Additional*						*Other*			*Total*			*controlled*
	*Common Stock*						*Paid-in*			*Accumulated*			*Comprehensive*			*Stockholders’*			*Interest in*			*Total*
	*Shares*			*Amount*			*Capital*			*Deficit*			*Income (Loss)*			*Equity*			*Subsidiaries*			*Equity*
Balance at December 31, 2024		9,475,443			9,475			109,274,166			(86,267,438	)		(6,362,111	)		16,654,092			-			16,654,092

Common Stock issued in settlement of RSUs		158,975			159			(159	)		-			-			-			-			-

Tax withholdings paid related to stock-based compensation		(28,394	)		(28	)		(53,065	)		-			-			(53,093	)		-			(53,093	)

Warrants issued in connection with Senior Promissory Notes		-			-			220,000			-			-			220,000			-			220,000

Stock-based compensation		-			-			241,245			-			-			241,245			-			241,245

Currency translation, net		-			-			-			-			348,346			348,346			-			348,346

Net loss		-			-			-			(2,351,392	)		-			(2,351,392	)		-			(2,351,392	)

Capital contribution from noncontrolling interest		-			-			-			-			-						13,788			13,788

Net loss attributable to noncontrolling interest		-			-			-			-			-			-			(6,950	)		(6,950	)

Balance at March 31, 2025		9,606,024			9,606			109,682,187			(88,618,830	)		(6,013,765	)		15,059,198			6,838			15,066,036

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

LIQTECH INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	*For the Three Months Ended*
	*March 31,*
	*2026*			*2025*
Cash Flows from Operating Activities:
Net loss	$	(2,725,099	)	$	(2,358,342	)

Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization		356,894			442,002
Amortization of debt discount and accrued interest		87,504			168,030
Stock-based compensation		218,325			241,245
Amortization of right-of-use assets		172,864			134,824
Deferred taxes		(377	)		(339	)
Loss on disposal of property and equipment		-			61,306

Changes in assets and liabilities:
Accounts receivable		(317,277	)		(933,161	)
Inventories		(173,049	)		21,532
Contract assets		84,627			850,839
Prepaid expenses and other current assets		(399,522	)		(334,468	)
Accounts payable		526,117			405,038
Accrued expenses		355,850			114,203
Operating lease liabilities		(172,864	)		(134,824	)
Contract liabilities		44,536			24,929

Net Cash used in Operating Activities		(1,941,471	)		(1,297,186	)

Cash Flows from Investing Activities:
Purchase of property and equipment		(269,724	)		(163,465	)
Proceeds from the disposal of property and equipment		-			52,605

Net Cash used in Investing Activities		(269,724	)		(110,860	)

Cash Flows from Financing Activities:
Repayments of finance lease liabilities		(126,767	)		(113,637	)
Proceeds from related party loan		-			1,089,571
Acquisition of common stock for tax withholding obligations		(182,499	)		-
Capital contribution from noncontrolling interest		-			13,788

Net Cash provided by (used in) Financing Activities		(309,266	)		989,722

Effect of exchange rate changes on cash, cash equivalents and restricted cash		182,815			(2,973	)

Net Change in Cash, Cash Equivalents, and Restricted Cash		(2,337,646	)		(421,297	)

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period		5,070,385			10,868,729

Cash, Cash Equivalents, and Restricted Cash at End of Period	$	2,732,739		$	10,447,432

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

LIQTECH INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	*For the Three Months Ended*
	*March 31,*
	*2026*		*2025*
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	25,005	$	46,593

Non-Cash Investing and Financing Activities
Financed purchases of property and equipment	$	-	$	137,691

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

LIQTECH INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION AND OTHER INFORMATION

The accompanying unaudited condensed consolidated financial statements of LiqTech International, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all the information and footnotes required by GAAP for complete financial statements.

The December 31, 2025 consolidated balance sheet data were derived from audited financial statements but does not include all disclosures required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on February 27, 2026. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the

Company’s Annual Report on Form 10-K.

In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which enhances the transparency and decision usefulness of income tax disclosures by requiring; (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted. The Company has adopted this standard.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326). This guidance contains amendments that provide decision-useful information to investors and other financial statement users while reducing the time and effort necessary to analyze and estimate credit losses for current accounts receivable and current contract assets. The amendments will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company has adopted this standard.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization included in each relevant expense caption presented on the statement of operations. The standard also requires disclosure of qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, as well as the total amount of selling expenses and an entity’s definition of selling expenses. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.

The Company currently believes there are no other issued and not yet effective accounting standards that are materially relevant to its condensed consolidated financial statements.

NOTE 2 – LIQUIDITY AND GOING CONCERN ASSESSMENT

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has incurred recent operating losses and used cash in its operations, which raises substantial doubt about its ability to continue as a going concern for the twelve months following the issuance of these financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management continues to implement cost optimization and operational initiatives intended to improve liquidity and support a sustainable path toward profitability. The Company is actively evaluating financing alternatives, including potential debt or equity financing and other strategic arrangements, to strengthen its capital position. While there can be no assurance that such funding will be obtained on acceptable terms, Management’s plans are intended to improve liquidity and support the Company’s ability to continue operations; however, there can be no assurance these plans will be successful.

As of March 31, 2026, the Company had cash and cash equivalents of $2,732,739, net working capital of $8,483,730, an accumulated deficit of $97,505,233 and total assets and liabilities of $24,949,625 and $17,399,289, respectively.

NOTE 3– NONCONTROLLING INTEREST AND LOANS FROM RELATED PARTIES

In January 2025, the Company established a joint venture Nantong JiTRI LiqTech Green Energy Technology Co., Ltd (the “JV”) in which it holds a 90% ownership interest. The remaining 10% is owned by an unrelated third party. The primary focus of the JV is to develop and commercialize systems for the marine water treatment market in China. The JV is fully consolidated in the Company’s condensed financial statements, and the 10% noncontrolling interest is presented separately in the consolidated balance sheet within equity and in the consolidated statement of operations as a component of net income (loss).

As part of the JV agreement, the Company has agreed to make our technology utilization available to the JV and to transfer the utilization rights necessary for operations in the marine water treatment market in China. In February 2025, the JV received R&D funding of RMB 8,000,000 (approximately USD 1.2 million) from the JV partner to support capability development and system construction. The funding is classified as a long-term loan in the financial statements and may be increased to up to RMB 10,000,000 within 12 months if certain technical and commercial milestones are achieved.

The loan bears a fixed annual interest rate of 12% per annum and has no set maturity date. At the sole discretion of LiqTech, the loan may be either converted into equity of the JV in connection with future capital increases or equity injections, or it may be repaid in full with accrued interest. There is no separate default rate beyond the stated contractual interest, and no mandatory repayment terms exist unless elected by the Company.

As of March 31, 2026, the noncontrolling interest in the JV amounted to $(76,077) and reflects the third party’s share of the JV’s net assets and net loss for the period.

NOTE 4– DISAGGREGATION OF REVENUES AND SEGMENT REPORTING

The Company operates through three reportable segments: Systems and Aftermarket, Filters and Membranes, and Components. Each segment comprises multiple sub-segments that leverage a shared production infrastructure and centralized supporting functions. The Company’s Chief Operating Decision-Maker (“CODM”) is Executive Management, consisting of the Chief Executive Officer, and Chief Financial & Operating Officer. Revenue information at both the segment and sub-segment levels is reviewed regularly as part of daily operational management. Profitability and asset information is available and evaluated at the segment level on a monthly basis. Resource allocation decisions are made at the segment level and are assessed on a quarterly basis.

The Company sells products throughout the world, and sales by geographical region are as follows for the three months ended March 31, 2026 and 2025:

	*For the Three Months*
	*Ended March 31,*
Revenues		*2026*		*2025*
Americas	$	250,802	$	2,233,901
Asia-Pacific		625,553		134,455
Europe		3,259,965		2,249,185
Total revenue	$	4,136,320	$	4,617,541

The Company’s reportable segment information for the three months ended March 31, 2026 and 2025 were as follows:

	For the Three Months
	Ended March 31,
Revenues	2026		2025
Systems and Aftermarket	$	1,789,295	$	2,693,722
Filters and Membranes		1,306,999		953,846
Components		1,040,026		969,973
Total revenues	$	4,136,320	$	4,617,541

	*For the Three Months*
	*Ended March 31,*
Cost of goods sold	*2026*		*2025*
Systems and Aftermarket	$	1,289,213	$	2,159,127
Filters and Membranes		1,521,774		1,501,070
Components		931,589		830,385
Corporate		-		1,903
Total cost of goods sold		3,742,576		4,492,485

	*For the Three Months*
	*Ended March 31,*
Operating expenses	*2026*		*2025*
Systems and Aftermarket	$	783,635	$	611,487
Filters and Membranes		447,813		366,360
Components		373,107		254,157
Corporate		1,066,398		1,078,381
Total operating expenses		2,670,953		2,310,385

	*For the Three Months*
	*Ended March 31,*
Other Expenses	*2026*		*2025*
Systems and Aftermarket	$	22,774	$	65,951
Filters and Membranes		22,362		89,977
Components		2,312		3,250
Corporate		400,819		14,174
Total other expenses		448,267		173,352

	*For the Three Months*
	*Ended March 31,*
Net loss	*2026*			*2025*
Systems and Aftermarket	$	(306,327	)	$	(142,843	)
Filters and Membranes		(684,950	)		(1,003,561	)
Components		(266,982	)		(117,480	)
Corporate		(1,466,840	)		(1,094,458	)
Total net loss		(2,725,099	)		(2,358,342	)

	*As of*
	*March 31,*		*December 31,*
Total assets	*2026*		*2025*
Systems and Aftermarket	$	9,219,737	$	10,210,357
Filters and Membranes		9,670,372		10,139,656
Components		2,222,604		1,942,818
Corporate		3,836,912		4,985,266
Total assets	$	24,949,625	$	27,278,097

NOTE 5– ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following on March 31, 2026, and December 31, 2025:

	*March 31,*			*December 31,*
	*2026*			*2025*
Trade accounts receivable	$	3,764,447		$	3,567,961
Allowance for current expected credit losses		(100,197	)		(137,969	)
Total accounts receivable, net	$	3,664,250		$	3,429,992

The roll-forward of the allowance for doubtful accounts for the periods ended March 31, 2026 and December 31, 2025 is as follows:

	*March 31,*			*December 31,*
	*2026*			*2025*
Allowance for current expected credit losses at the beginning of the period	$	137,969		$	637,556
Bad debt expense		(34,658	)		29,439
Receivables written off during the period		-			(608,331	)
Effect of exchange rate changes		(3,114	)		79,305
Allowance for current expected credit losses at the end of the period	$	100,197		$	137,969

NOTE 6– INVENTORIES

Inventories consisted of the following on March 31, 2026, and December 31, 2025:

	*March 31,*			*December 31,*
	*2026*			*2025*
Raw materials	$	3,671,510		$	3,282,184
Work in process		2,267,951			2,402,158
Finished goods and filtration systems		1,438,643			1,755,674
Reserve for obsolescence		(899,990	)		(960,695	)
Total inventories, net	$	6,478,114		$	6,479,321

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

NOTE 7– CONTRACT ASSETS AND CONTRACT LIABILITIES

The roll-forward of Contract assets and Contract liabilities for the periods ended March 31, 2026 and December 31, 2025 is as follows:

	*March 31,*			*December 31,*
	*2026*			*2025*
Cost incurred	$	1,641,546		$	1,750,757
VAT		150,717			234,984
Other receivables		76,106			10,826
Prepayments		(1,415,768	)		(1,403,702	)
	$	452,601		$	592,865

Distributed as follows:
Contract assets	$	634,154		$	733,851
Contract liabilities		(181,553	)		(140,986	)
	$	452,601		$	592,865

NOTE 8– LEASES

The Company leases certain vehicles, real property, production equipment and office equipment under lease agreements. The Company evaluates each lease to determine its appropriate classification as an operating lease or finance lease for financial reporting purposes. The majority of our operating leases are non-cancelable leases for production and office space in Hobro and Copenhagen, Denmark.

During the three months ended March 31, 2026, cash paid for amounts included for the measurement of finance lease liabilities was $126,768 and the Company recorded finance lease expenses in other income (expenses) of $29,657.

During the three months ended March 31, 2026, cash paid for amounts included for the measurement of operating lease liabilities was $248,767 and the Company recorded operating lease expense of $249,384.

Supplemental balance sheet information related to leases as of March 31, 2026 and December 31, 2025 was as follows:

	*March 31,*			*December 31,*
	*2026*			*2025*
Operating leases:
Operating lease right-of-use assets	$	4,369,053		$	4,643,680

Operating lease liabilities – current	$	711,295		$	714,446
Operating lease liabilities – long-term	$	3,657,758			3,929,234
Total operating lease liabilities	$	4,369,053		$	4,643,680

Finance leases:
Property and equipment, at cost	$	4,487,105		$	4,590,723
Accumulated depreciation		(1,756,803	)		(1,703,252	)
Property and equipment, net	$	2,730,302		$	2,887,471

Finance lease liabilities – current	$	504,799		$	517,759
Finance lease liabilities – long-term		1,260,692			1,415,908
Total finance lease liabilities	$	1,765,491		$	1,933,667

Weighted average remaining lease term:
Operating leases		4.9			6.0
Finance leases		2.3			2.5

Weighted average discount rate:
Operating leases		6.6	%		6.7	%
Finance leases		5.3	%		5.3	%

Maturities of lease liabilities at March 31, 2026 were as follows:

	*Operating*			*Finance*
	*Leases*			*Leases*
2026	$	733,928		$	452,306
2027		980,729			1,147,506
2028		830,319			122,303
2029		526,183			172,711
2030		524,039			27,222
Thereafter		1,845,313			16,885
Total payment under lease agreements		5,440,511			1,938,933
Less imputed interest		(1,071,458	)		(173,442	)
Total lease liabilities	$	4,369,053		$	1,765,491

NOTE 9 – LONG-TERM DEBT

The components of notes payable are as follows:

	*March 31,*			*December 31,*
	*2026*			*2025*
Senior promissory notes	$	6,000,000		$	6,000,000
Less: unamortized debt discount		(401,951	)		(489,455	)
Total senior promissory notes payable, net	$	5,598,049		$	5,510,545

Senior promissory notes payable, less current portion		5,598,049			5,510,545
Total senior promissory notes payable, net	$	5,598,049		$	5,510,545

For the three months ended March 31, 2026, and 2025, the Company recognized amortization of debt discount of $87,504 and $168,030, respectively. During the three months ended March 31, 2026 accrued interests of $147,945 was recognized. This amount is March 31, 2026 included in Accrued Expenses.

NOTE 10 – 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.

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 March 31, 2026 and December 31, 2025, were as follows:

	*March 31,*			*December 31,*
	*2026*			*2025*
Balance at January 1	$	524,828		$	621,031
Warranty costs charged to cost of goods sold		(53,342	)		(87,466	)
Utilization charges against reserve		-			(78,958	)
Foreign currency effect		(10,905	)		70,221
Balance at the end of the period	$	460,581		$	524,828

NOTE 11 – STOCKHOLDERS’ EQUITY

Common Stock – The Company has 50,000,000 authorized shares of Common Stock, $0.001 par value. As of March 31, 2026 and December 31, 2025, there were 9,947,841 and 9,627,064 shares of Common Stock issued and outstanding, respectively.

Stock Issuances

During the three months ended March 31, 2026, the Company has made the following issuances of Common Stock:

On January 26, 2026, the Company issued 136,998 shares of Common Stock to settle RSUs. The RSUs were valued at $271,256 for services provided by the Company's board of directors (the "Board of Directors") in 2025. The Company recognized the stock-based compensation of the award over the requisite service period during the year ended December 31, 2025.

On January 27, 2026, the Company issued 63,149 shares of Common Stock to settle RSUs. The RSUs were valued at $137,549 for services provided by the Company's Senior Leadership Team (the "SLT") in 2025. The Company recognized the stock-based compensation of the award over the requisite service period during the year ended December 31, 2025.

On January 27, 2026, the Company issued 87,374 shares of Common Stock to settle RSUs. The RSUs were valued at $230,741 for services provided by management in 2025. The Company recognized the stock-based compensation of the award over the requisite service period during the year ended December 31, 2025. In connection with the issuance, 67,840 shares of Common Stock, with a total value of $172,198, were withheld from vesting to settle tax withholdings associated with stock-based compensation.

On February 12, 2026, the Company issued 7,389 shares of Common Stock to settle RSUs. The RSUs were valued at $14,630 for services provided by the Company's Senior Leadership Team (the "SLT") in 2025. The Company recognized the stock-based compensation of the award over the requisite service period during the year ended December 31, 2025.

On February 12, 2026, the Company issued 25,867 shares of Common Stock to settle RSUs. The RSUs were valued at $47,337 for services provided by management in 2025. The Company recognized the stock-based compensation of the award over the requisite service period during the year ended December 31, 2025. In connection with the issuance, 5,589 shares of Common Stock, with a total value of $10,228, were withheld from vesting to settle tax withholdings associated with stock-based compensation.

Warrants

On March 26, 2025, the Company entered into a Second Amendment to the Note and Warrant Purchase Agreement (the "Second Amendment") originally dated June 22, 2022, with the holders of the Company’s senior promissory notes. In connection with the Second Amendment, the parties executed Allonge No. 2 (the "Allonges") to each of the existing amended notes, resulting in an extension of the maturity date from January 1, 2026 to May 1, 2027.

Additionally, pursuant to the Allonges, beginning on January 1, 2026, the notes will bear interest at a rate of 10% per annum, payable semiannually. In the event of a default or if the notes are not repaid on or before the new maturity date, the interest rate increases to 13% per annum, with a monthly 1% step-up up to a cap of 16% per annum, payable monthly. Accrued interest (excluding default interest) may be paid in cash or in shares of common stock, at the Company’s election, subject to certain limitations.

As part of the transaction, the Company and the noteholders also agreed to amend and restate the related warrants, reducing the exercise price from $5.20 to $2.00 per share and extending the expiration date to December 31, 2029. The repricing resulted in an incremental change in warrant value of $220,000.

The following is a summary of the periodic changes in warrants outstanding for the three months ended March 31, 2026, and 2025:

	*2026*		*2025*
Outstanding, December 31		11,391,225		11,391,225
Warrants issued in connection with public offering and private placement		-		-
Outstanding, March 31		11,391,225		11,391,225

Stock-based Compensation

Directors of the Company receive share compensation consisting of annual grants of $36,750 ($73,500 for the Chairman of the Board) in RSUs per annum with one-year vesting.

In 2022, the Company’s Board of Directors adopted an Equity Incentive Plan (the “2022 Incentive Plan”). Under the terms and conditions of the 2022 Incentive Plan, the Board of Directors is empowered to grant stock awards, including RSUs, to officers and directors of the Company. At March 31, 2026, 309,527 RSUs were granted and outstanding under the 2022 Incentive Plan.

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

The Company recognized stock-based compensation expense related to RSU grants of $218,252 and $241,245 for the three-month periods ended March 31, 2026, and 2025, respectively. On March 31, 2026, the Company had $1,427,071 of unrecognized compensation cost related to non-vested stock grants.

A summary of the status of the RSUs as of March 31, 2026 and changes during the period are presented below:

	*March 31, 2026*
				*Weighted*
				*Average*		*Aggregated*
	*Number of*			*Grant-Date*		*Intrinsic*
	*units*			*Fair value*		*Value*

Outstanding, December 31, 2025		703,753		$	2.21	$	-
Vested and settled with share issuance		(320,777	)		2.19		-
Forfeited		(73,449	)		2.48		-
Outstanding, March 31, 2026		309,527		$	2.17	$	-

NOTE 12 – LOSS PER SHARE

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

As of March 31, 2026, the Company had 309,527 RSUs, 5,299,879 prefunded warrants, and 6,091,346 warrants, all exercisable for shares of Common Stock.

As of March 31, 2025, the Company had 554,571 RSUs, 5,299,879 prefunded warrants, and 6,091,346 warrants, all exercisable for shares of Common Stock.

NOTE 13 – SIGNIFICANT CUSTOMERS AND CONCENTRATIONS

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

	For the Three Months
	Ended March 31,
	2026			2025
Customer A		12	%		*	%
Customer B		11			*
Customer C		*	%		40	%

* Zero or less than 10%

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

	*March 31,*			*December 31,*
	*2026*			*2025*
Customer A		13	%		*	%
Customer B		11			10
Customer C		*			12
Customer D		*			20
Customer E		*	%		16	%

* Zero or less than 10%

As of March 31, 2026, approximately 95% of the Company’s assets were located in Denmark, 3% were located in China, and 2% were located in the U.S. As of December 31, 2025, approximately 97% of the Company’s assets were located in Denmark, 3% were located in China, and 0% were located in the U.S.

NOTE 14 – SUBSEQUENT EVENTS

None.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report. In addition, the following discussion should be read in conjunction with our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on February 27, 2026 and the financial statements and notes thereto. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Overview

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 as well as developing industry-leading and fully automated filtration solutions and systems. For more than two decades, we have developed and manufactured products of re-crystallized silicon carbide. We specialize in three business areas: ceramic membranes and membrane incorporated liquid filtration systems, ceramic diesel particulate filters (DPFs) to control soot exhaust particles and black carbon emission from diesel engines, and plastic components for usage across various industries. Using nanotechnology, we develop proprietary products using patented silicon carbide technology. Our products are based on innovative silicon carbide membranes that facilitate new applications and improve existing technologies. We market our products from our offices in Denmark and through local representatives and distributors. The products are shipped directly to customers from our production facilities in Denmark.

The terms “LiqTech”, “we”, “our”, “us”, the “Company” or any derivative thereof, as used herein, refer to LiqTech International, Inc., a Nevada corporation, together with its direct and indirect wholly-owned subsidiaries, which we collectively refer to herein as our “Subsidiaries”.

At present, we conduct our operations in the Kingdom of Denmark, the U.S. and China, with locations in the Copenhagen area, Hobro, Fort Worth and Nantong.

Our Strategy

Our strategy is to leverage our core competencies in material science, advanced filtration, systems integration, and application knowledge, creating differentiated products with compelling value propositions to penetrate attractive end markets with customer needs and regulatory tailwind. Essential imperatives associated with our strategy include the following:

	●	Develop and reinforce new products and applications to provide clean water and reduce pollution. We currently provide water filtration systems for commercial pool owners, dual fuel marine vessels, shipowners, and ship operators as well as tailored filtration systems for oil & gas operators, industrial 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, chemical, and other industries.

	●	Better penetration of existing end markets where our value proposition is strong. We have successfully sold products and installed systems into several end market segments--including automotive/transportation, clean water and pool filtration, marine, industrial wastewater, chemical/petrochemical, and oil & gas applications. We are focused on targeting and developing new customers in these end markets while working with distributors, agents, and partners to access other important geographic markets.

	●	Develop new end markets for our core products and applications. Our existing products and systems are relevant for and valuable to other end markets, and we regularly evaluate opportunities to develop strategic partners to perfect new applications and validate associated value propositions.

Results of Operations

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

Comparison of the Three Months Ended March 31, 2026, and March 31, 2025

The following table sets forth our revenues, expenses, and net loss for the three months ended March 31, 2026, and 2025:

	Three Months Ended March 31,
													Period to Period Change
				As a %						As a %						Percent
	2026			of Sales			2025			of Sales			Variance			%
Revenue	$	4,136,320			100.0	%	$	4,617,541			100.0	%	$	(481,221	)		(10.4	)%
Cost of goods sold		3,742,576			90.5			4,492,485			97.3			(749,909	)		(16.7	)
Gross Profit (Loss)		393,744			9.5			125,056			2.7			268,688			214.9

Operating Expenses
Selling expenses		980,674			23.7			718,016			15.5			262,658			36.6
General and administrative expenses		1,414,145			34.2			1,362,246			29.5			51,899			3.8
Research and development expenses		276,134			6.7			230,123			5.0			46,011			20.0
Total Operating Expenses		2,670,953			64.6			2,310,385			50.0			360,568			15.6

Loss from Operation		(2,277,209	)		(55.1	)		(2,185,329	)		(47.3	)		(91,880	)		4.2

Other Income (Expense)
Interest and other income		16,857			0.4			68,751			1.5			(51,894	)		(75.5	)
Interest expense		(209,064	)		(5.1	)		(48,283	)		(1.0	)		(160,781	)		333.0
Amortization of debt discount		(87,504	)		(2.1	)		(168,030	)		(3.6	)		80,526			(47.9	)
Gain (loss) on foreign currency transactions		(168,556	)		(4.1	)		35,516			0.8			(204,072	)		(574.6	)
Gain (loss) on disposal of property and equipment		-			-			(61,306	)		(1.3	)		61,306			(100.0	)
Total Other Income (Expense)		(448,267	)		(10.8	)		(173,352	)		(3.8	)		(274,915	)		158.6

Loss Before Income Taxes		(2,725,476	)		(65.9	)		(2,358,681	)		(51.1	)		(366,795	)		15.6
Income tax benefit		(377	)		(0.0	)		(339	)		(0.0	)		(38	)		11.2

Net Loss	$	(2,725,099	)		(65.9	)%	$	(2,358,342	)		(51.1	)%	$	(366,757	)		15.6	%
Net Loss attributable to Noncontrolling Interest		(14,987	)		(0.4	)		(6,950	)		(0.2	)		(8,037	)		115.6
Net Loss attributable to LiqTech International, Inc.		(2,710,112	)		(65.5	)		(2,351,392	)		(50.9	)		(358,720	)		15.3

Revenues

Revenue for the three months ended March 31, 2026 was $4,136,320 compared to $4,617,541 for the same period in 2025, representing a decrease of $481,221, or 10.4%. The decrease was solely attributable to a reduction in system sales, reflecting a significant Water for Energy delivery in 2025 that did not recur in 2026. Within the Systems segment, sales to both the Pool and Marine segments increased significantly. Furthermore, deliveries of Filters, Membranes, and Components increased during the period.

Gross Profit (Loss)

Gross profit for the three months ended March 31, 2026 was $393,744 (representing a gross profit margin of 9.5%) compared to a gross profit of $125,056 (representing a gross profit margin of 2.7%) for the same period in 2025, marking an increase of $268,688, or 214.9%. This increase was primarily driven by mix towards higher value system sales, better utilization of our manufacturing capacity, procurement effects on prices, and low depreciation expenses. Included in the gross profit was depreciation of $330,006 and $392,292 for the three months ended March 31, 2026, and 2025, respectively.

Expenses

Total operating expenses for the three months ended March 31, 2026 were $2,670,953, representing an increase of $360,568, or 15.6%, compared to $2,310,385 for the same period in 2025. Approximately 60% of the increase relates to foreign exchange rate developments, as the average USD/DKK exchange rate for the three months ended March 31st, was 6.385 in 2026 and 7.092 in 2025.

Selling expenses for the three months ended March 31, 2026 were $980,674 compared to $718,016 for the same period in 2025, representing an increase of $262,658, or 36.6%. Excluding the impact of foreign exchange rate developments, costs increased primarily due to the full-year effect of hires within the joint venture in China, Nantong JiTRI LiqTech Green Energy Technology Co., Ltd. (the “JV”), as well as continued investments in the sales organization across the U.S. and Europe, and annualization of the Service Center cost in the U.S.

General and administrative expenses for the three months ended March 31, 2026 were $1,414,145 compared to $1,362,246 for the same period in 2025, representing an increase of $51,899, or 3.8%. Adjusting for foreign exchange rate developments, expenses remained stable and below general inflation, as filing of open positions were covered by savings on other overhead expenses. Included in general and administrative expenses were non-cash compensation of $218,252 and $241,245 for the three months ended March 31, 2026, and 2025, respectively.

Research and development expenses for the three months ended March 31, 2026 were $276,134 compared to $230,123 for the same period in 2025, representing an increase of $46,011, or 20.0%. The increase was primarily attributed to membrane development costs and cost related to development of Marine systems.

Other Income (Expenses)

Other expenses for the three months ended March 31, 2026 were $448,267 compared to other expenses of $173,352 for the comparable period in 2025, representing an increase of $274,915, or 158.6%. The change was primarily attributable to losses on foreign currency transactions, lower interest income, and accrued interests on the senior promissory notes, partly balanced by lower amortization of debt discount, and a decrease of net interest expenses for the three months ended March 31, 2026

Net Loss

As a result of the cumulative effect of the factors described above, we reported a net loss for the three months ended March 31, 2026 of $2,725,099 compared to $2,358,342 for the comparable period in 2025, representing an increase in net loss of $366,757, or 15.6%.

Liquidity and Capital Resources

The Company has historically financed operations through offerings of equity or debt instruments, internally generated cash from operations, and our available lines of credit. On March 31, 2026, we had cash of $2,732,739 and net working capital of $8,483,730, and on December 31, 2025, we had cash of $5,070,385 and net working capital of $11,237,788. On March 31, 2026, our net working capital had decreased by $2,754,058 compared to December 31, 2025, mainly as a result of a reduction in cash and cash equivalents used to fund operating losses

The Company has experienced operating losses and cash outflows from continuing operations and will require additional funding to support operations for the twelve months following the issuance of these financial statements. These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management has implemented cost optimization operational initiatives and working capital control designed to improve liquidity and support a sustainable path toward profitability, supported by an updated strategic focus and strengthened leadership. The Company continues to evaluate financing alternatives and strategic opportunities to enhance its capital position. While there can be no assurance that additional funding will be obtained on favorable terms, management believes its ongoing initiatives position the Company to support operations and advance its strategic objectives.

Cash Flows

Three months ended March 31, 2026 compared to three months ended March 31, 2025

Cash flows used in operating activities for the three months ended March 31, 2026 were $1,941,544 representing an increase of $644,358 compared to cash flows used in operating activities of $1,297,186 for the three months ended March 31, 2025. The cash flows used in operating activities for the period consists mainly of the net loss of $2,725,099, adjusted for depreciation and other non-cash-related items of $835,210, an increase in accounts receivables of $317,277, prepaid expenses and other current assets of $399,522, and partially offset by an increase in accounts payable of $526,117.

Cash flows used in investing activities were $269,724 for the three months ended March 31, 2026 as compared to cash flows used in investing activities of $110,860 for the three months ended March 31, 2025, representing a change of $158,864. The investing activities include general purchases of production equipment to continue optimizing production throughput and the internal production of rental assets. For the three months ended March 31, 2026, the main additions were investments in assembly equipment in our JV in China and in the U.S. Service Center.

Cash flows provided from financing activities were $(311,911) for the three months ended March 31, 2026 compared to cash flows used by financing activities of $989,722 for the three months ended March 31, 2025, representing a change of $1,301,633. Financing activities primarily consisted of repayments of lease obligations and the acquisition of common stock to satisfy tax withholding obligations. Additionally, in the prior-year period, the Company received proceeds from a long-term loan as well as a capital contribution from the noncontrolling interest in the joint venture.

Off Balance Sheet Arrangements

As of March 31, 2026, we had no off-balance sheet arrangements. We are not aware of any material transactions that are not disclosed in our consolidated financial statements.

Significant Accounting Policies and Critical Accounting Estimates

The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our consolidated financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Our most critical accounting estimates include:

●	The assessment of revenue recognition, which impacts revenue and cost of sales;
●	the assessment of allowance for product warranties, which impacts gross profit;
●	the assessment of collectability of accounts receivable, which impacts operating expenses if and when we record bad debt or adjust the allowance for doubtful accounts;
●	the assessment of recoverability of long-lived assets, which impacts gross profit or operating expenses if and when we record asset impairments or accelerate their depreciation;
●	the recognition and measurement of current and deferred income taxes (including the measurement of uncertain tax positions), which impact our provision for taxes;
●	the valuation of inventory, which impacts gross profit; and
●	the recognition and measurement of loss contingencies, which impact gross profit or operating expenses when we recognize a loss contingency, revise the estimate for a loss contingency, or record an asset impairment.

Recently Enacted Accounting Standards

For a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see “Note 1: Basis of Presentation and Other Information” in the accompanying financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

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

Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures as of March 31, 2026 were not effective as of the period covered by this Quarterly Report due to material weaknesses in internal controls over financial reporting. For more information on material weaknesses identified by management, please refer to our Form 10-K filed on February 27, 2026 for the year ended December 31, 2025.

Changes in Internal Control over Financial Reporting

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

Management's Remediation Initiatives

In response to the identified material weaknesses, our management, with oversight from the Company’s Audit Committee, has been and will continue to dedicate necessary resources to enhance the Company’s internal control over financial reporting and remediate the identified material weaknesses. As an example of such remediation, the Company in 2025 hired additional employees into the finance department, and we plan to continue to work on remediating the material weaknesses during 2026 by improving competencies and processes. Further, the Company is evaluating an ERP reimplementation 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.

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

Limitations on the Effectiveness of Internal Controls

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

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. For a description of contingencies, see “Note 9 – Agreements And Commitments”.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors discussed in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on February 27, 2026.

We will require substantial capital investment in the future, and our inability to raise adequate capital could affect our ability to continue as a going concern.

We will require significant funding to continue our operations and advance our development of new products. Our ability to raise additional capital, on timely and favorable terms or at all, will depend on various factors, including macroeconomic conditions, future commodity prices, our exploration success, and market conditions. If these factors deteriorate, our ability to raise capital to fund ongoing operations and business activities could be significantly impacted. If we cannot obtain adequate additional financing, we may have to substantially curtail our exploration and development activities or sell assets, which could materially and adversely affect our business plan. Inadequate financial resources could also raise substantial doubt about our ability to continue as a going concern.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not sell any equity securities during the quarter ended March 31, 2026 in transactions that were not registered under the Securities Act other than as previously disclosed in our other filings with the SEC.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

During the quarter ended March 31, 2026, no director or Section 16 officer adopted, modified, or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408(a) of Regulation S-K).

ITEM 6. EXHIBITS

3.1	Articles of Incorporation, as amended as of November 13, 2023	Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K as filed with the SEC on March 22, 2024 (File No. 001-36210)

3.2	Amended and Restated Bylaws	Incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-Q as filed with the SEC on May 14, 2025 (File No. 001-36210)


31.1	Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

31.2	Certifications of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

32.1	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002	Furnished herewith

32.2	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002	Furnished herewith

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

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

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

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

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

101. SCH	Inline XBRL Taxonomy Extension Scheme Document	Provided herewith

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LiqTech International, Inc.

Dated: May 13, 2026	/s/ Fei Chen
	Fei Chen, Chief Executive Officer
	(Principal Executive Officer)


Dated: May 13, 2026	/s/ David Noerby Foss Kowalczyk
	David Noerby Foss Kowalczyk, Chief Financial and Operating Officer
	(Principal Financial, and Accounting)

LIQTECH INTERNATIONAL INC 10-Q