Donald Weinberger - Managing Member, Wolfe Axelrod Weinberger Associates Aldo Petersen - Chairman Sune Mathiesen - CEO.

Eric Stine - Craig-Hallum Joe Gomes - William Smith Jim Kennedy - Marathon Capital.

Greetings, and welcome to the LiqTech International Second Quarter 2016 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Donald Weinberger with Wolfe Axelrod. Thank you Mr. Weinberger, you may begin..

Thank you, Doug. Aldo Petersen, Chairman and Sune Mathiesen, CEO will begin their formal remarks shortly. Before I turn the call over to them, let me remind our listeners that following the conference call, there will be an open question-and-answer session.

You should note that a replay of the conference call will be available starting at 3 PM Eastern Time today ending on September 1. To access the replay, please dial (877) 660-6853 or (201) 612-7415 and enter the conference ID number 13642943.

If you do not have today's release, please contact my office at (212) 370-4500 and we will be pleased to forward the details to you. In order for all listeners to have an opportunity to ask questions, please limit your question participation initially to one question and one follow-up question.

After all individuals have had an opportunity to ask their questions, you're welcome to ask further questions. Now please bear with me for a minute as I read the forward-looking statement as required. The press release and conference call contain forward-looking statements.

Although the forward-looking statements reflect the good faith and judgment of management, forward-looking statements are inherently subject to known and unknown risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission, including the Risk Factors that attempt to advice interested parties of the risks that may affect our business, financial condition, results of operation and cash flows.

One or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected. Readers and listeners are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this release and call.

We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this release and call. Having dispensed with that, it is my pleasure to turn the floor over to Aldo Petersen. Aldo, please proceed..

Thank you, Don. And very warm welcome, good morning ladies and gentlemen in the U.S. and good afternoon to our participants from Europe to this second quarter conference call of LiqTech International. I would like to hand over the conference to our CEO, Mr. Sune Mathiesen. Sune, please..

Thank you, Aldo. We are very pleased to see that our revenue in the second quarter and first half year more than doubled from the same period last year. We're also pleased to note that our phase of water treatment systems continue to improve on a year-on-year comparative basis.

As earlier discussed, we still expect some lumpiness in our order inflows and revenue recognition. We are however pleased to see that the stability of our business continues to improve and we believe that this is the trend for the future.

Our EBITDA adjusted from non-cash expenses for the second quarter was $0.2 million and for the last 12 months, it was $124 million. We encouraged by this significant improvement of our business and it proves to us that our decision two years ago of focusing into water treatment systems well is the right one.

To transform a company from being a component supplier into being a systems manufacturer is not an easy task in itself. Our ceramic membrane technology is also still new and to many people still unknown.

We still have a big task ahead of us to increase the general awareness of our technology and to communicate the advantages we offer compared to more surface technologies.

Our technology has proven very successful in a number of applications within oil water separation, heavy metal removals from industrial waste water, treatment of pool water and treatment of drinking water from surface and groundwater and even recognition of backwash from sand filters that would otherwise be wasted.

Over the last three years, we have been able to secure a number of large scale multimillion dollar projects.

More importantly, we've been able to design and build these systems according to the timeframe and budget and deliver full satisfaction to our customers who now enjoy the benefits of reduced footprint that will take reduced chemical usage, low maintenance, and fully automatic systems.

We have helped these customers comply with tightening the legislation within all of the performance in the industries and we have secured some great references for our future growth. During the two years, we have learned that our customers are looking for suppliers of complete water treatment systems.

Often a complete water treatment system will consist of several technologies which in combination then will ensure the right resources. We have developed and delivered circulation systems, chemical pre-treatment systems, de-watering systems, and now we have developed reverse osmosis systems.

But a drinking water treatment plant in Serbia which we announced earlier this year we are in the process of delivering an RO system with a capacity of 4,500 gallons per minute. This is a very large RO system and we believe that it will be great reference for future projects.

But we now have the ability to define and build reverse osmosis systems is a great addition to our product offering and an important step in our ambitions of being a complete supplier of water treatment systems.

Our improved EBITDA and the successful completion of several large scale water treatment projects in different countries leads us to believe that we're now ready for the next stage of our business transformation.

We still have a new technology and we still have a lot of hard work ahead of us, but we are experiencing increased acceptance and awareness of our technology. As earlier discussed, two or three years ago, spend significant resources developing a promising market for our flat sheet membranes in Saudi Arabia.

Unfortunately we have to realize that that product was not competitive in itself. This and the fact that we have to rely on local companies to manufacture the systems led to lost orders.

After redesign of our flat sheet membranes and now that we have the capability of manufacturing systems ourselves, we have restarted our efforts in developing Saudi Arabian drinking water market. The Saudi Arabian Government has allocated more than $7 billion to just spend on water related projects.

We believe that we have now found the right partners and we have seen that we have now competitors with our products. We believe that our efforts in this interesting market will finally be rewarded. We recently announced a $2.2 million framework agreement on DPF products in China.

In Kailong High Technology Company we believe that we have found the right partner for our DPF products. We are encouraged by this development and we have even seen signs of improvement in the DPF markets in both North America and other International markets.

While exploring the opportunities for our DPF products in China, we have also explored the opportunities for our water treatment systems. Roughly 20% of the world's population lives in China and they only have access to approximately 5% of the world's water resources and 60% of groundwater is polluted and unsafe for drinking water purposes.

We have proven that we have the technology to clean polluted groundwater in an affordable and safe way they demonstrated with our project in Serbia. We have continued to explore these opportunities in China and we will continue our search for the right Chinese partner for our water treatment technology.

Having said that, I would now like to turn the conference back to Aldo, who will elaborate further on the Chinese markets and potential opportunities.

Aldo, please? Aldo?.

Thank you, Sune. I was at the phone which is really on mute, but everyone can hear me. Thank you. In China, we achieved our first major DPF order about a year ago for the Chinese market through a partner, a reseller of filters into the Chinese market.

Chinese market has been on many industrial companies front focused for a number of years because obviously whenever people visit China they are stunned by the significant amount of pollution that are in major city.

We have spent extensive time and I've been heading the effort to find the right partners in China and that has taken a number of visits to China. But, in April, we found a partner that is very committed into this market. Kailong High Technology is a company in Wuxi, which is about a 125 kilometers from Shanghai.

They are fairly large company in the DPF market where they have provided in 2014 approximately 6 million liters worth of filters, which in revenue would account for about $100 million in filters and systems.

We have visited them extensively in their headquarter in Wuxi and have been very impressed about their technology approach and very impressed about their facilities. In June, they visited us in Denmark, after they had committed to extensive test; allow our technology in the Chinese market after our visit in China.

And in June, they placed the first order with us with very high expectations on what is needed for the Chinese market in the future.

What have happened in China since late 2015 is that the Chinese government in its five-year plan have upgraded the quality control issues for the large trucks, large buses, and diesel cars, emissions of soot and particles. So they are currently executing what they describe as a China four standard for pollution.

But for 2020, they have upgraded to a 2016, a China six standard, which will significantly improve the reduction of soot and particles from engines in the Chinese market.

Our great advantage and what we have always believed is that our silicon carbide technology is very well-suited to this market and we have gotten proof of that by having Kailong omitting to our technology after they have done research in a number of different companies in Europe and in the U.S.

They want to build their future delivery of systems on our technology. The first order is $2.2 million. But we expect that that can grow into a significant larger amount of DPF into the Chinese market.

When we look at $2 million leader opportunity in the Chinese market, which is what Kailong believes will be the need for them to change their current $6 million leaders of offering into a number of silicon carbide base filters for their SCR system that is a very huge business opportunity for us.

And this is why after almost three years of a very depressing development in our DPF that we now see the government standard being in place in China. And we also have the right partner in place in China for our DPF business. The interest in China has Sune rightfully described is also still into our water treatment ability in the Chinese market.

And we believe that our partnership with the Kailong Technology will focus our effort and other Chinese companies focus on LiqTech Technology, so that we will have water treatment opportunities in the Chinese market.

We are visiting Wuxi in Kailong again from August 22 and there we will discuss the plan for how the business opportunities looks for 2017 and forward. But the impression that we have is that there is a huge opportunity and it's not any more just a potential opportunity, but it's a needed opportunity.

I think from our advices and we have had great help from a very well-respected consultant from Denmark who have lived 20 years in China and I think it's rightfully said, "That if you want to sell to Chinese something that is nice to have then it's going to take a long, long time." But here we are in a situation where we sell something that they need to have and this is the reason why we have managed in just four months to go from initial discussions to now having formed the partnership with Kailong Technology that we believe will significantly increase our DPF, and also open up for opportunities in the water treatment market for China.

So we are optimistic. It's a long and it's a big learning process. But we think that we have the right setup for executing in the Chinese market with the partnership of Kailong Technology. So with that, I would turn conference into the Q&A session. So please..

Thank you. Ladies and gentlemen, at this time we will be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Eric Stine from Craig-Hallum. Please proceed with your question..

Good morning. First question. Just wanted to touch on Serbia. I know that you're making good strides there, here and I think you secured two orders. But my understanding is that's -- I mean, it's still a very small percentage of the overall market. I think you've referenced 12 million households.

I mean, can you give any detail as to how many systems that would be for LiqTech as we see further progress going-forward?.

Yes. Good morning, Eric. I can give a little bit background to that. We have, as you say, secured two orders for Serbia until now. They are actually both for the same installation. The first order we secured was for a U.S. Ultra Filtration Plant based on ceramic membranes.

And the second order we secured was for the reverse osmosis systems that I mentioned earlier. Combined these two orders has a value of about $4 million and we have by the way, already delivered the first part of the order and we'll be delivering the second part shortly. This water treatment plant is to serve 65,000 people.

And there are about 12 million people in Serbia. So there are significant opportunities. And the problem in Serbia is that the groundwater is heavily polluted by arsenic, boron, and on top of that we have to remove ordinary things like manganese.

With the system we have developed now and if it's say to train us, if in water treatment technologies, we are able to clean that polluted water and provide people with safe and healthy drinking water, first of all. But we are also able to do so in an affordable way.

And actually the price of water will not go up for these people; they will still be paying the same amount of money. But now they would be able to open the path and clean water will come out. So hope that answers your question..

Yes. I mean, and we feel like you have the right partner there. I mean may be what does the pipeline look like with that current partner rather than -- maybe it's tough to size the overall market because it's so big.

But just may be give thoughts on pipeline with the partner you got there in Serbia?.

And so we are convinced that we have the right partner. We think that we've been able to make some good connections both with our partner, but also to make connections with financial partners in Serbia, to make connections with politicians, and all our decision makers.

We see that this is a very high focus from the Serbian government that access to clean and safe drinking water should be for all. We expect to see further projects coming out. We believe that being first movers in this market, it gives us an advantage.

So we're not saying that we will be able to secure all orders but we think that we have a good chance of securing some orders. Right now, we are in discussion for three further projects. So, yes, we believe that there is a great potential for future development as well..

Got it. Okay. May be you could turn to the cash balance. If you could update us on may be where the cash balance is today and then just the confidence you've got in that third quarter collection.

I know that's something you've been targeting for sometime related to the mining order?.

Yes you could say that we have been managing a very low cash position, and partly that is due to the Serbian order which we have already delivered and we expect to receive payment this month. We are very well aware that we have been managing this slow cash position.

On the other hand we had a great opportunity to break into a new market and we had a great opportunity to supply very large reverse osmosis system. So we expect to collect that payment and we expect to collect further payments from the mining order, as you say. So we think that we are managing this situation and we are satisfied with where we are..

Got it.

And just last one I mean sticking with that, I mean is the cash balance something that you feel like is having an impact in securing new orders or delivering on the backlog you have and I would expect that as you get these payments that would loosen a little bit?.

No, no we are not feeling that it puts a restrain on our business. We are still in general keeping a very strict policy to collect prepayments which will cover our expenses before we start off the project and we're not seeing any negative effects from the lower cash payments..

Our next question comes from the line of Joe Gomes with William Smith. Please proceed with your question..

I wonder may be you can help me sort of walk me through some of the revenues here may be you point out what I'm saying here, if I go back and look at my notes, you said in the second quarter call that you had 40% of the mining contract you're going to get in the second quarter which would have been like $2.4 million of revenue in the 10-Q.

You talked about getting the Serbia first part of the Serbia contract in the second quarter which would have been roughly $2 million. If I add in a million which is a runway for DPF, I mean I'm at $5.5 million revenue and you guys came in at $4 million.

I'm just trying to figure out what am I missing here that revenues are coming in, what I think is significantly lighter than what people were anticipating?.

Yes, just to correct, Joe, we spoke about the mining order. And what I said is that we realized at that stage revenues of approximately 60% and that is still direct. But we did not expect to recognize the remaining 40% in the second quarter. So it means that we still have a good deal of revenue outstanding for that order.

So I hope that explains why the number is a little bit lower..

Now is that contract -- probably that contract was all up and running and we still haven't recognized all the revenue on it yet?.

No the contract is structured in a way. So after commissioning the installation, we collect a certain payment and after having what we call taking all the test that means that we should be up and running for three months without any problems, we would recognize another portion of revenue.

So that may be the confusion because the system is up and running and what we currently say halfway through is just taking all the test which was [indiscernible] another percentage of the order..

Okay.

So would you expect that then to occur here in the third quarter or that is still over into the fourth quarter that revenue recognition?.

We would expect that to spill into the fourth quarter..

This is Aldo.

Joe and again it's very important to look at cash flow and the revenue and again what the reason for the low cash flow number that we have by the end of the second quarter is that to deliver into this Serbian market, where as Sune rightly said, we had a focus on bidding a financing agreement with a very large bank that is servicing the Serbian market and to have the ability to deliver an RO system.

We had the -- you could say that the delay against the expected payment of the system by the end of the second quarter. This is a payment that we're now expecting by the end of August and we're very comfortable that that by the end of August, we will improve our cash position.

But again talking to Bloudan there is a payment structure in effect that is being managed according to the contract and this is the reason why that the cash flow part of Bloudan is one thing and the recognition of the revenue is something else.

And I just want to correct one thing as well, when I talked about China; I was talking about the $2.2 million which is the framework for 2016. The current order is $400,000 approximately to be delivered here in August/September and we expect to receive the remaining order by the fourth quarter of 2016..

Okay. And on China to stick about for a second, so I know you talked a little bit about in the past of looking for a partner there.

Potentially having them run the manufacturing facility in China, is just Kailong is that dam, is that the guys you're looking at is, hey your partner and you will be doing the manufacturing under our technology in China or are you still looking for somebody else?.

Well the current agreement is again the comparison between our first order of approximately $1 million was for a reseller in the market. So this was a company that was trying to sell our filters into SCR system manufacturers to provide in the market.

After the first order where we expected to get a significant larger amount of business, we had to realize that the reseller system doesn't work well in the Chinese market because there is a very cost conscience view from Chinese companies.

So if and we don't know if that's the case but if Kailong was a potential customer to the reseller of filters that is essentially what is not going on, the big SCR or the big system providers are wanting to buy filters from a direct source.

So you could say our anticipation that last year was that a reseller would manage to sell a lot of filters to the SCR market in China that is not how the Chinese market works. The Chinese market works by having a number of SCR system providers for the automotive industry and they are ones that will become successful.

The reason for us to picking Kailong is because of their business foundation. They already have $100 million plus market for SCR systems in the Chinese market. They are one of the large system manufacturers and providers for the automotive industry in China. And they are the ones who is buying our system.

But to answer your question, production in China and not production, well they have accepted to buy from us at our European and American prices, so that just shows what a need in China, if download, we will come to an understanding that we can significantly increase our market by having a partnership in China that relates to production that is to be seen and that is an ongoing decision.

But as our investors are very well aware of, our capacity is focused on providing the water treatment market. That's where we have the highest margins that's where we feel that our team has done a very good job on getting a number of very specified applications into the market and these are the applications that we will focus on to grow our business.

We want to have more clean water treatment systems as we have now started providing in Serbia, we want to have more mining orders that we have provided in Sweden, we want to have more oil and gas orders, we now have provided into the South American market.

So our focus is really that as people who have been following our stock and our company for a longtime, the DPF has been a headache for us. This is for us who have the second or third opportunity in that market and that is providing a very, very large market with very high-end technology.

Now we have a Chinese company who needs to change the offer to their customers from another DPF technology into a technology that they have chosen to be LiqTech. And this is the great opportunity that now makes us more optimistic on DPF that we have been previously. And again because there is now close connection between us.

There are discussions on how we optimize the opportunity in China. But again we need to optimize the results for LiqTech and that with just a view of entering into a Chinese market.

We have good advisors on what to expect and what to be careful about in the Chinese market, but definitely we see now an opportunity that we didn't believe that we have just three months ago..

Okay. Thanks for that Aldo.

One last question and I will move out, I was wondering if you could kind of briefly touch on a number of topics here like the Grundfos partnership how the Danish pool market is shaping up, may be a little bit you haven't really talked about E.ON in a while, what's going on there, so if you could just kind of briefly give us a quick update on those I would appreciate it?.

Sure. Let us start off with E.ON in Germany which is something we initially came out and discussed I think two, three years ago. The opportunity was and is that Germany power plants have to clean their emission before that is done by wet scrubber system.

So what they essentially do is that this grey water or the smoke in the chimney and they collect heavy metals from that smoke and that water that needs to be cleaned up.

We have done a number of these installations in Germany and after we readdressed our business strategy and changed our focus into being a system supplier, we got into focusing on the Danish power plant business because first it's a home. So I would say our main focus has been on developing the Danish market for these systems.

Obviously that has taken some time. I'm happy to say that now we see that the first systems we just sold are up and running and performing very well. And I would say our sales pipeline for this industry is growing quite significantly. We have a dedicated salesman for that industry; he's doing to great job.

And I believe that then we'll see further development in that sector over the next years. With regards to the daily pool market, I would say we have been disappointed about that. The pool that needs to be refurbished, they still need to be refurbished. We have seen little movement in the market unfortunately.

Everybody is waiting for somebody else to be first movers. So for the pool business we have changed our focus a little bit to be more international.

We have setup new distribution in the Netherlands, in Spain, in France, in Poland, and in the UK, and each and single one of these new distributors has been able to secure first orders and for some of them second and third orders. And that has been highly successful.

We -- yesterday, we commissioned the first system in the UK that draws a success eventually and we have further aim to pipeline. So I'd say we are feeling that we are getting more traction for our pool products. Especially, now we also have the NSS approval in place in the U.S.

We've made I'd say our first move on the market and we have seen strong entry for our products into our pool and we'll generate some business in the near future from that as well. So we're very encouraged by the progress that we're making in the pool markets.

And we think that we are seeing the importance of having good distribution feet on ground, local companies that knows the specific market and knows the pool industry. And I'm sure that we'll see further development there. With Grundfos, they have basically spent 12-months shifting out our products.

Very successfully that the unit we developed for Grundfos was initially designed for groundwater treatment and they obviously tested out the product for that, which was a success. What they also did was that they tested it out for the treatment of surface water for drinking water purposes, which was also successful.

And treatment of backwash water from sand filters actually about 5% of the groundwater in the world is wasted to backwash sand filters. So what they wanted to test is that with our system we won't be able to recover those 5% and use them for drinking water instead of just wasting it. And that was also successful.

Our team, our marketing team, and their marketing team have spent a lot of time in discussions of finding a go-to-market plan.

We have a meeting next Wednesday and -- Wednesday next week to discuss the outcome of their assets and to finalize plan how to market this, where we should market it geographically and for which applications we will start out. So we have very high hopes for corporation with Grundfos.

We are of course very pleased to team with up a significant producer or manufacturer of pumps like that. And we really hope that we can see some success together with them..

That was great for me. Thanks. Appreciate it. I'll get back in line..

Thanks, Joe..

Our next question comes from the line of Jim Kennedy with Marathon Capital. Please proceed with your question..

Yes. Most of them have been ask and answered, but I did want to just drilldown on the Serbia opportunity a little bit more.

In terms of the funding for these projects, can you talk a little bit about is this coming thorough the government? Is it coming through local municipalities? What's really driving the funding here?.

For the drinking water projects, it's actually private public partnerings, which means that our partner in Serbia is actually he has gotten the right to deliver drinking water for period of years and he has to deliver that drinking water at a certain price.

As I explained before, with our system the price for the consumers is not going up, but now they will have clean drinking water. On top of that, our partner in Serbia will have very good business of running these systems and supplying the water to the consumers.

So everything is finalized by the local Serbian company or financed by the local Serbian company who has a bank financing to do this. Future projects are also expected to be public private partnerings. And I believe that with our combination of reasonable CapEx and very low OpEx, we will be very attractive solution for that..

And are you able to participate at all in that tail of revenue that comes off of the water sales?.

Yes. We actually have a small ownership of the company in Serbia. So yes, we will be participating in that revenue stream..

Okay.

I guess that's not a number you want to share in terms of -- so can we assume at this point that if the current private public partnership structure is used throughout the country that there is the potential for you to have a stream of income coming in over a period of years above and beyond whatever it cost you to put the initial system in?.

Yes, of course we can say our initial focus and interest is of course to deliver some water treatment systems into the Serbian market; that is our main interest.

We have been able to see the calculations from our partner in Serbia and it seems like a very attractive business to sell this water, which is why we decided to take a small part of that company.

Of course, in the future our focus will also be to sell the systems, but of course, if we have the same opportunities to partner up and share the revenue stream from the sales of water, we -- that will be interesting for us..

Got you. And I may have missed this on the Grundfos discussion. But can you talk a little bit about the opportunity there in terms of the applications that they may see as what's called a low hanging fruit at this point? In other words, what is attractive; is it strictly Europe for them? They are a large manufacturer.

And obviously, they have applications that they feel your technology would apply to.

Can you talk a little bit about their go-to-market and what your offering would be?.

Yes, you could say a critical success exerting my -- in my opinion is to find markets with the need. We have shown ability to remove particles from water, which could be essentially dangerous. We all heard about what went on the Michigan that lead in the water or something that we could easily remove.

So our focus will be to find areas in the world where you have challenging water. If we look into North America, for example, there are very large parts of North America with polluted groundwater. And I think this is where we will have the biggest opportunities.

So basically in my opinion and obviously that has to be discussed with our customer in my opinion we will have the biggest opportunities in North American and Eastern and Southern Europe..

And will those be opportunities that they pursue with their sales force or their connection, their distribution network?.

Yes, ideally that is what will be done. Obviously if they have that opportunities then we have I think it's more than I can't even remember the number of those, it's -- a lot of salesman on the road every day.

But I think also key is to find one market and focus into that, get a success, and then you can expand into further markets which means then that will have somebody who does 5% job in North America and a 5% job in Eastern Europe and a 5% job in Southern Europe is probably not the way, right way to go around it.

I think the best way would be to find a dedicated person in one country and get a success and then expand from that..

Certainly you and I have talked in the past about the article that came out in the January edition of Scientific American and it essentially described the arsenic issues globally. So Serbia does not appear to be an outlier in that regard.

Are there other parts of the world that you are either in discussions with or you are targeting for the type of solution that you introduced in Serbia?.

Yes we are still investing a lot of time and energy in Serbia, so that is a main focus for us now that it has a very large reference in place, we will try to generate further business from that.

But obviously we would try to take that excess and that reference and enter into all the markets and to one that we're targeting very much and I think the most attractive market that we could break into is the North American market.

I believe that it's about 40% of North America where you have water which is polluted with arsenic and that is a huge problem. And I'm convinced that with such a large reference that we're building right now in Serbia we will have chances to break into that market. So that would be our main focus outside of Serbia..

Good and last one from me coming back to the Danish aquatic club market, has anything changed, I think my understanding was that by the -- is it the end of July 2017 that these clubs must have at least signed a contract to put in the new filtering technology?.

No nothing has changed in. But sadly I believe that everybody is waiting for another one to be first mover and since nobody is moving, I think the general thinking is that maybe we will be able to get first movements. I think this is what the municipalities are hoping for at this stage. Hopefully we will see that the market will move soon.

I'm sure that when we see the first movers others will follow. But sadly I expect that they are waiting see what will happen, because obviously not all municipal tools will be shutdown that is very unlikely. So I think right now everybody is waiting for somebody else to be the first mover..

Okay. Pretty good. Thank you..

Jim this is Aldo, I just wanted to add to your excellent question about sort of how does the financing and the market development sort of happen. And this is the reason why we have accepted to enter into Serbia with such a large system because we at the same time have been working with the financing in place from a very large financing facility.

We have proof-of-concept of how well our system is working on the RO and we believe that the Serbian market but also other markets that we are focusing on needs to have a solution..

Our next question comes from the line of Anthony Markese [ph], a Private Investor. Please proceed with your question..

Hi good morning.

I'm fairly new to the LiqTech story but could you I didn't realize you guys had the NSF, I didn't see press release the NSF designation, could you just talk a little bit about that designation and what it entitles you to do or not to do and just generally the significance of that?.

Absolutely and welcome to the LiqTech story..

Thank you..

Anthony what we have been chasing was the NSF approval for the pool market that has taken us long time to obtain that approval. And I think we finally got it sometime during the same quarter. After having obtained that approval that really opens the market, the North American market for us for our pool products.

And we see the American pool product as being very interesting because there has been a lot of incidents with pool water treatment and unfortunately people getting sick. The initial feedback we have had from the first this is we have made after getting this approval also clearly proves to us that that there is significant problems to be solved.

We believe that we have good technology to do so. Our technology we take out parasites from the water it will take out bacteria, and this is something that a normal science which will not do.

And what is also very important is that our technology is disciplined barrier which means that everything about certain times will just not pass-through the filter. Where again the sand filter which will be the normal solution that could be 5 micron on a good day and it could be 200 microns on a bad day.

So we have a significant different offering and I think the important thing is that we're able to take out bacteria and parasites from the water that other people cannot do..

Okay.

And just a follow-up on the NSF designation, if I'm not internally familiar with it, it sounds like you have to -- you have to apply by application or is it in other words you mentioned you got it for the pool market, are there other markets that you would like to get it for that -- are you in the process of getting it for in the United States?.

Yes, first of all getting an NSF approval is not easy at all. You have to apply for it and they are very, very soil. They would test your product. So they will do tough tests and they will test your systems to make sure that everything is safe and but we're not adding any unsafe things to the water.

We currently have the NSF approval for the pool systems. We held the NSF approval for drinking water systems in the past and we are in the process of renewing that.

So those are the two markets that we feel it's necessary for us to have NSF approval and NSF approval is just key to getting any sales in North America, without that you can forget about it, nobody will be asking for your equipments. So we believe its key and luckily enough we have been able to pass those tests..

Okay. And final question, how are you approaching the North American market, are you going direct or you looking for a strategic partners, are you looking, are you approaching it just from the pool angle or from the drinking water angle.

You mentioned earlier the problem that we had in Flint and that you could have solved that problem but so how you're approaching each market or how are you approaching each markets?.

Yes, first of all it's important to understand that these industries are completely setup. So and we've learned the significance of having local companies with a long traditions in each individual markets.

So for pool products, we are currently teaming up with a number of distributors to make sure that we cover all of North America but also make sure that we are teaming up with companies with a longer experience in the pool market. So in fact the drinking water market is a little bit different.

Here we need to also team up with local companies but is also important to do certain amount of ground specification work. So here we need to talk to the channels, we need to talk to approving bodies, as well as finding our local C1 bank..

There are no further questions in the queue. I'd like to hand the call back over to management for closing comments..

I would like to thank everybody for dialing into this conference. I think that we have covered a lot of ground. Thank you for the interesting questions. We will continue our hard work to further develop the company. As I said before there is a lot of hard work ahead of us. We think that we have covered a lot of ground.

Two years ago we took the decision to become a systems manufacturer. We believe that an absolute key to success is the last day installations that we have been able to secure over those last two years and more importantly, to install and commission with very good results.

So we believe that we have come one step on the way and at least that we're ready to take the next steps now. So thank you very much for joining us today and have a great day..

Ladies and gentlemen this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day..