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Note 7 - Agreements and Commitments
 6 Months Ended
Jun. 30, 2023
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]

NOTE 7 – 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.

 

In November 2022, the Company entered into a commercial settlement agreement regarding marine wastewater treatment systems delivered in 2019 and associated, potential warranty claims related to alleged corrosion on certain parts and components. The Company disputed the claim in full, subsequently reaching an amicable settlement agreement with expected remediation work to be conducted in 2023. The cost of any remediation work is shared between the two parties.

 

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

 

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

 

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

 

Changes in the Company’s current and long-term warranty obligations included in accrued expenses on the balance sheet, as of June 30, 2023 and December 31, 2022, were as follows:

 

  

June 30,

2023

  

December 31,

2022

 

Balance at January 1

 $898,072  $962,313 

Warranty costs charged to cost of goods sold

  53,274   86,256 

Utilization charges against reserve

  (277,651

)

  (93,653

)

Foreign currency effect

  14,254   (56,844

)

Balance at the end of the period

 $687,949  $898,072 

 

The utilization charges against the reserve for the six months ended June 30, 2023 relate to the commercial settlement agreement as described under “Contingencies”.