NOTE

- ACQUISITION

September 4, 2019

our wholly-owned subsidiary LiqTech International acquired

100%

of the outstanding equity of BS Plastic (“BS Plastic”), a specialized plastic manufacturer based in Denmark. The acquisition allows the Company to in-source certain components of its proprietary ceramic silicon carbide water filtration systems for closed-loop marine scrubber applications.

The purchase was accounted for in accordance with the acquisition method of accounting in accordance with ASC

805,

Business Combinations. The total purchase was

$2,220,150

which consisted of

$1,332,090

in cash and contingent consideration of

$888,060.

The contingent consideration is recorded at its acquisition day fair value and will be paid only if the acquired business achieves certain revenue and gross profit goals over the next

three

years. The maximum payable under the contingent consideration arrangement is

$888,060.

Transaction and other costs directly related to the acquisition of BS Plastic, consisting primarily of professional fees, have amounted to approximately

$29,500

were expensed as incurred and are included in general and administrative expenses.

The purchase price calculation is as follows:

Cash	$	1,332,090
Contingent Consideration		888,060
Total	$	2,220,150

The table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of purchase:

Cash and bank balances	$	177,188
Account receivables		600,440
Inventory		323,403
Other receivables / deferred expenses		59,235
Deposits		53,306
Property and Equipment		1,397,421
Right of Use Assets		456,080
Customer Relationships		488,433
Total Identifiable Assets Acquired		3,555,506

Accounts payables		(99,490	)
Other debt and accrued expenses		(660,989	)
Right of Use Liabilities		(456,080	)
Accrued income tax		(31,146	)
Deferred tax liability		(320,972	)
Total Liabilities Assumed		(1,568,677	)

Total Identifiable Net Assets		1,986,829
Goodwill		233,321
Total Consideration Transferred	$	2,220,150

In order to allocate the consideration transferred for BS Plastic, the fair values of all identifiable assets and liabilities were established. For accounting and financial reporting purposes, fair value is defined under FASB ASC Topic

820,

“Fair Value Measurements and Disclosures” as the price that would be received upon sale of an asset or the amount paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are assumed to be buyers and sellers in the principal (most advantageous) market for the asset or liability. Additionally, fair value measurements for an asset assume the highest and best use of that asset by market participants. We determined the fair value of the property and equipment using a market approach and we determined the fair value of customer relationships acquired primarily by using an income approach.

Customer relationships have an estimated useful life of

years.

Revenue and net income of B/S Plastic since the acquisition dated included in the consolidated income statement was

$895,203

and

$119,633,

respectively.

The Company began consolidating the results and cash flows of BS Plastic upon the acquisition date of

September 4, 2019.

The following unaudited supplemental pro-forma data presents consolidated information as if the acquisition had been completed on

January 1, 2017.

The pro-forma results were calculated by combining the results of the Company with the stand-alone results of BS Plastic for the pre-acquisition periods:

	For the Year Ended December 31
	2018			2017
Revenue	$	15,139,607		$	14,358,283
Net income attributable to common shareowners from continuing operations		(3,754,883	)		(4,370,052	)
Basic earnings per share of common stock from continuing operations		(0.24	)		(0.42	)