NOTE

- AGREEMENTS AND COMMITMENTS

401

(K) Profit Sharing Plan

-- LiqTech NA has a

401

(k)-profit sharing plan and trust covering certain eligible employees. The amount LiqTech NA contributes is discretionary. For the

three

months ended

March 31, 2019

and

2018,

matching contributions were expensed and totaled

$2,621

and

$2,693,

respectively.

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.

November 20, 2018

a former supplier to Liqtech International A/S contacted the Company with a claim of

DKK448,500

(

$68,800

) alleging that a former Agreement from

2016

had

not

been respected. The Company has contested the claim due to lack of evidence to support the claim.

provision has been made as per

March 31, 2019

as the Company does

not

expect the claim to materialize in any payments to the former supplier.

February 27, 2019,

LiqTech Systems A/S was contacted by a former supplier alleging that the Company owed

DKK543,905

(

$83,400

) 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 supplied, and the claim was rejected by the court of law in

2018.

Due to the nature of the new claim and the previous ruling from the court of law,

provision has been made as per

March 31, 2019.

In connection with certain orders, we have to give the customer a working guarantee or a prepayment guarantee or security bond. For that purpose, we have a guarantee line of DKK

94,620

(approximately

$14,240

March 31, 2019)

with a bank, subject to certain base limitations. As of

March 31, 2018,

we had DKK

94,620

(approximately

$15,743

) in working guarantee against the line.

Product Warranties

- The Company provides a standard warranty on its systems, generally for

one

five

years. The Company estimates the costs which

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 provide a warranty for up to

four

years from the date of commissioning. The specific terms and conditions of those warranties vary depending upon the product sold and the country in which the Company does business. 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 claim and the cost per claim.

Changes in the Company's current and long-term warranty obligations, including deferred revenue on extended warranty contracts, are as follows:

	2019
Balance at December 31, 2018	$	432,225
Current year warranty expense		313,894
Change in estimate related to pre-existing warranties		-
Payments made		-
Foreign currency effect		(11,588	)
Balance at March 31, 2019	$	734,531