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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2021
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OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
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Commission File No. 001-31332
LIQUIDMETAL TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its
charter)
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Delaware
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33-0264467
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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20321 Valencia Circle
Lake Forest, CA 92630
(Address of principal executive offices, zip code)
Registrant’s telephone number, including area code: (949)
635-2100
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
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, a
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.
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 ☒
Securities registered pursuant to Section 12(b) of the Exchange
Act: None
The number of common shares outstanding as of November 15, 2021 was
914,449,957.
LIQUIDMETAL TECHNOLOGIES, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2021
FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q of Liquidmetal Technologies,
Inc. contains “forward-looking statements” that may state our
management’s plans, future events, objectives, current
expectations, estimates, forecasts, assumptions or projections
about the company and its business. Any statement in this report
that is not a statement of historical fact is a forward-looking
statement, and in some cases, words such as “believes,”
“estimates,” “projects,” “expects,” “intends,” “may,”
“anticipates,” “plans,” “seeks,” and similar words or expressions
identify forward-looking statements. Forward-looking statements
involve risks and uncertainties that could cause actual outcomes
and results to differ materially from the anticipated outcomes or
results. These statements are not guarantees of future performance,
and undue reliance should not be placed on these statements. It is
important to note that our actual results could differ materially
from what is expressed in our forward-looking statements due to the
risk factors described in the section of our Annual Report on Form
10-K for the year ended December 31, 2020 entitled “Risk Factors,”
as well as the following risks and uncertainties:
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●
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Our history of operating losses and the uncertainty surrounding our
ability to achieve or sustain profitability;
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●
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Our limited history of developing and selling products made from
our bulk amorphous alloys;
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Challenges associated with having products manufactured from our
alloys and the use of third parties for manufacturing;
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Our limited history of licensing our technology to third
parties;
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Lengthy customer adoption cycles and unpredictable customer
adoption practices;
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Our ability to identify, develop, and commercialize new product
applications for our technology;
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●
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Competition from current suppliers of incumbent materials or
producers of competing products;
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●
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Our ability to identify, consummate, and/or integrate strategic
partnerships;
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●
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The potential for manufacturing problems or delays;
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●
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Potential difficulties associated with protecting or expanding our
intellectual property position; and
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●
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Economic and business uncertainties relating to the COVID-19
pandemic.
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We undertake no obligation, other than as required by applicable
law, to update publicly any forward-looking statements, whether as
a result of new information, future events or otherwise.
PART I
FINANCIAL INFORMATION
Item 1 – Financial
Statements
LIQUIDMETAL TECHNOLOGIES, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except par value and share data)
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September 30,
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December 31,
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2021
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2020
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(Unaudited)
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(Audited)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ |
5,233 |
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$ |
1,514 |
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Restricted cash
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|
5 |
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5 |
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Investments in debt securities- short term
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11,631 |
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14,720 |
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Trade accounts receivable, net of allowance for doubtful
accounts
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353 |
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271 |
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Inventory
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22 |
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43 |
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Prepaid expenses and other current assets
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597 |
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465 |
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Total current assets
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$ |
17,841 |
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$ |
17,018 |
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Investments in debt securities- long term
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10,398 |
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12,768 |
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Property and equipment, net
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8,375 |
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8,614 |
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Patents and trademarks, net
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112 |
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158 |
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Other assets
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293 |
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|
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251 |
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Total assets
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$ |
37,019 |
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$ |
38,809 |
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LIABILITIES AND
SHAREHOLDERS' EQUITY
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Current liabilities:
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Accounts payable
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$ |
194 |
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$ |
205 |
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Accrued liabilities
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917 |
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315 |
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Deferred revenue
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41 |
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- |
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Total current liabilities
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$ |
1,152 |
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$ |
520 |
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Long-term liabilities
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Other long-term liabilities
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899 |
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899 |
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Total liabilities
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$ |
2,051 |
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$ |
1,419 |
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Shareholders' equity:
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Preferred Stock, $0.001
par value; 10,000,000 shares
authorized; 0 shares
issued and outstanding at September 30, 2021 and December 31, 2020,
respectively
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- |
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- |
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Common stock, $0.001 par value;
1,100,000,000 shares
authorized; 914,449,957 and
914,449,957 shares issued
and outstanding at September 30, 2021 and December 31, 2020,
respectively
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914 |
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914 |
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Warrants
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18,179 |
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18,179 |
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Additional paid-in capital
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|
287,585 |
|
|
|
287,183 |
|
|
Accumulated deficit
|
|
|
(271,644 |
)
|
|
|
(268,926 |
)
|
|
Accumulated other comprehensive income
|
|
|
11 |
|
|
|
116 |
|
|
Non-controlling interest in subsidiary
|
|
|
(77 |
)
|
|
|
(76 |
)
|
|
Total shareholders' equity
|
|
$ |
34,968 |
|
|
$ |
37,390 |
|
| |
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
$ |
37,019 |
|
|
$ |
38,809 |
|
The accompanying notes are an integral part of the consolidated
financial statements.
LIQUIDMETAL TECHNOLOGIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except share and per share data)
(unaudited)
|
|
|
For the Three Months
Ended September 30,
|
|
|
For the Nine Months
Ended September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$ |
406 |
|
|
$ |
288 |
|
|
$ |
700 |
|
|
$ |
367 |
|
|
Licensing and royalties
|
|
|
- |
|
|
|
39 |
|
|
|
21 |
|
|
|
64 |
|
|
Total revenue
|
|
$ |
406 |
|
|
$ |
327 |
|
|
$ |
721 |
|
|
$ |
431 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
319 |
|
|
|
171 |
|
|
|
528 |
|
|
|
242 |
|
|
Gross profit
|
|
$ |
87 |
|
|
$ |
156 |
|
|
$ |
193 |
|
|
$ |
189 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, marketing, general and administrative
|
|
|
1,643 |
|
|
|
1,096 |
|
|
|
3,372 |
|
|
|
2,953 |
|
|
Research and development
|
|
|
14 |
|
|
|
30 |
|
|
|
74 |
|
|
|
86 |
|
|
Gain on disposal of long-lived assets
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(35 |
)
|
|
Total operating expenses
|
|
$ |
1,657 |
|
|
$ |
1,126 |
|
|
$ |
3,446 |
|
|
$ |
3,004 |
|
|
Operating loss
|
|
|
(1,570 |
)
|
|
|
(970 |
)
|
|
|
(3,253 |
)
|
|
|
(2,815 |
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease income
|
|
|
132 |
|
|
|
132 |
|
|
|
396 |
|
|
|
352 |
|
|
Interest and investment income
|
|
|
35 |
|
|
|
61 |
|
|
|
138 |
|
|
|
297 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$ |
(1,403 |
)
|
|
$ |
(777 |
)
|
|
$ |
(2,719 |
)
|
|
$ |
(2,166 |
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(1,403 |
)
|
|
$ |
(777 |
)
|
|
$ |
(2,719 |
)
|
|
$ |
(2,166 |
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to non-controlling interest
|
|
|
- |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Liquidmetal Technologies
shareholders
|
|
$ |
(1,403 |
)
|
|
$ |
(776 |
)
|
|
$ |
(2,718 |
)
|
|
$ |
(2,165 |
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share attributable to Liquidmetal Technologies
shareholders, basic and diluted
|
|
$ |
(0.00 |
)
|
|
$ |
(0.00 |
)
|
|
$ |
(0.00 |
)
|
|
$ |
(0.00 |
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of weighted average shares - basic and diluted
|
|
|
914,449,957 |
|
|
|
914,449,957 |
|
|
|
914,449,957 |
|
|
|
914,449,957 |
|
The accompanying notes are an integral part of the consolidated
financial statements.
LIQUIDMETAL TECHNOLOGIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
($ in thousands, except share and per share data)
(unaudited)
|
|
|
For the Three Months
Ended September 30,
|
|
|
For the Nine Months
Ended September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(1,403 |
)
|
|
$ |
(777 |
)
|
|
$ |
(2,719 |
)
|
|
$ |
(2,166 |
)
|
|
Other comprehensive loss, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on available-for-sale securities
|
|
|
(15 |
)
|
|
|
(48 |
)
|
|
|
(105 |
)
|
|
|
40 |
|
|
Other comprehensive loss income (loss), net of tax
|
|
|
(15 |
)
|
|
|
(48 |
)
|
|
|
(105 |
)
|
|
|
40 |
|
|
Comprehensive loss
|
|
$ |
(1,418 |
)
|
|
$ |
(825 |
)
|
|
$ |
(2,824 |
)
|
|
$ |
(2,126 |
)
|
|
Less: Comprehensive loss attributable to noncontrolling
interests
|
|
|
- |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
Comprehenisve loss attributable to Liquidmetal Technologies
shareholders
|
|
$ |
(1,418 |
)
|
|
$ |
(824 |
)
|
|
$ |
(2,823 |
)
|
|
$ |
(2,125 |
)
|
The accompanying notes are an integral part of the consolidated
financial statements.
LIQUIDMETAL TECHNOLOGIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands, except per share data)
(unaudited)
|
|
|
For the Nine Months Ended September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
| |
|
|
|
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(2,719 |
)
|
|
$ |
(2,166 |
)
|
| |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
285 |
|
|
|
303 |
|
|
Realized investment gains
|
|
|
- |
|
|
|
(2 |
)
|
|
Bad debt expense
|
|
|
- |
|
|
|
226 |
|
|
Stock-based compensation
|
|
|
402 |
|
|
|
256 |
|
|
Gain on disposal of property and equipment
|
|
|
- |
|
|
|
(35 |
)
|
| |
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
(82 |
)
|
|
|
(105 |
)
|
|
Inventory
|
|
|
21 |
|
|
|
(35 |
)
|
|
Prepaid expenses and other current assets
|
|
|
(132 |
)
|
|
|
(188 |
)
|
|
Other assets and liabilities
|
|
|
(42 |
)
|
|
|
(178 |
)
|
|
Accounts payable and accrued liabilities
|
|
|
591 |
|
|
|
139 |
|
|
Deferred revenue
|
|
|
41 |
|
|
|
- |
|
|
Net cash used in operating activities
|
|
|
(1,635 |
)
|
|
|
(1,785 |
)
|
| |
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
- |
|
|
|
(116 |
)
|
|
Proceeds from disposal of property and equipment
|
|
|
- |
|
|
|
110 |
|
|
Purchases of debt securities
|
|
|
(17,788 |
)
|
|
|
(21,641 |
)
|
|
Proceeds from sales of debt securities
|
|
|
23,142 |
|
|
|
9,327 |
|
|
Net cash provided by (used in) investing activities
|
|
|
5,354 |
|
|
|
(12,320 |
)
|
| |
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
- |
|
|
|
- |
|
|
Net cash provided by financing activities
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Net decrease in cash, cash equivalents, and restricted
cash
|
|
|
3,719 |
|
|
|
(14,105 |
)
|
| |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, and restricted cash at beginning of
period
|
|
|
1,519 |
|
|
|
19,548 |
|
|
Cash, cash equivalents, and restricted cash at end of
period
|
|
$ |
5,238 |
|
|
$ |
5,443 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Supplemental Schedule of Non-Cash Investing Activities:
|
|
|
|
|
|
|
|
|
|
Settlement of contract liability from disposal of property and
equipment
|
|
|
- |
|
|
|
420 |
|
The accompanying notes are an integral part of the consolidated
financial statements.
LIQUIDMETAL TECHNOLOGIES, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2021 and 2020
(numbers in thousands, except percentages, share and per share
data)
(unaudited)
1. Description of
Business
Liquidmetal Technologies, Inc. (the “Company”) is a materials
technology company that develops and commercializes products made
from amorphous alloys. The Company’s family of alloys consists of a
variety of bulk alloys and composites that utilize the advantages
offered by amorphous alloys technology. The Company designs,
develops, and sells products and custom parts from bulk amorphous
alloys to customers in a wide range of industries. The Company also
partners with third-party
manufacturers and licensees to develop and commercialize
Liquidmetal alloy products.
Amorphous alloys are, in general, unique materials that are
distinguished by their ability to retain a random atomic structure
when they solidify, in contrast to the crystalline atomic structure
that forms in other metals and alloys when they solidify.
Liquidmetal alloys are proprietary amorphous alloys that possess a
combination of performance, processing, and potential cost
advantages that the Company believes will make them preferable to
other materials in a variety of applications. The amorphous atomic
structure of bulk alloys enables them to overcome certain
performance limitations caused by inherent weaknesses in
crystalline atomic structures, thus facilitating performance and
processing characteristics superior in many ways to those of their
crystalline counterparts. The Company believes that the alloys and
the molding technologies it employs may result in components, for many
applications, that exhibit: exceptional dimensional control and
repeatability that rivals precision machining, excellent corrosion
resistance, brilliant surface finish, high strength, high hardness,
high elastic limit, alloys that are non-magnetic, and the ability
to form complex shapes common to the injection molding of plastics.
Interestingly, all of these characteristics are achievable from the
molding process, so design engineers often do not have to select specific alloys to achieve
one or more of the characteristics
as is the case with crystalline materials. The Company believes
these advantages could result in Liquidmetal alloys supplanting
high-performance alloys, such as titanium and stainless steel, and
other incumbent materials in a wide variety of applications.
Moreover, the Company believes these advantages could enable the
introduction of entirely new products and applications that are
not possible or commercially viable
with other materials.
The Company’s revenues are derived from i) selling bulk Liquidmetal
alloy products to customers who produce medical devices, automotive
assemblies, sports and leisure goods, and non-consumer electronic
devices, ii) selling tooling and prototype parts such as
demonstration parts and test samples for customers with products in
development, iii) product licensing and royalty revenue, and iv)
research and development revenue. The Company expects that these
sources of revenue will continue to significantly change the
character of the Company’s revenue mix.
2. Basis of Presentation and
Recent Accounting Pronouncements
The accompanying unaudited interim consolidated financial
statements as of and for the three
and nine months ended September 30, 2021 and September 30, 2020 have been prepared in
accordance with accounting principles generally accepted in the
United States of America (“US GAAP”) for interim financial
information and in accordance with the instructions to Form
10-Q. Accordingly, they do
not include all of the information
and notes required by US GAAP for complete financial statements. In
the opinion of management, all adjustments (consisting only of
normal recurring accruals) considered necessary for a fair
presentation have been included. All intercompany balances and
transactions have been eliminated in consolidation. Operating
results for the three and
nine months ended September 30, 2021 are not necessarily indicative of the results
that may be expected for any future
periods or the year ending December 31,
2021. The accompanying unaudited consolidated financial
statements should be read in conjunction with the Company's
2020 Annual Report on Form
10-K filed with the Securities and
Exchange Commission (“SEC”) on March 9,
2021.
Investments in Debt
Securities
The Company will invest excess funds to maximize investment yield,
while maintaining liquidity and minimizing credit risk. Debt
securities are carried at fair value and consist primarily of
investments in obligations of the United States Treasury, various
U.S. and foreign corporations, and certificates of deposits. The
Company classifies its investments in debt securities as
available-for-sale with all unrealized gains or losses included as
part of other comprehensive income. The Company evaluates its debt
securities with unrealized losses on a quarterly basis for
potential other-than-temporary impairments in value. As a result of
this assessment, the Company did not
recognize any other-than-temporary impairment losses considered to
be credit related for the three and
nine months ended September 30, 2021 and 2020.
Fair Value
Measurements
The estimated fair values of financial instruments reported in the
consolidated financial statements have been determined using
available market information and valuation methodologies, as
applicable. The fair value of cash and restricted cash approximate
their carrying value due to their short maturities and are
classified as Level 1 instruments
within the fair value hierarchy.
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September
30, 2021 and 2020
(numbers in thousands, except percentages, share and per share
data)
(unaudited)
Fair value is defined as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in
an orderly transaction between market participants on the
measurement date. Entities are required to maximize the use of
observable inputs and minimize the use of unobservable inputs when
measuring fair value based upon the following fair value
hierarchy:
|
Level 1 —
|
Quoted prices in active markets for identical assets or
liabilities;
|
|
Level 2 —
|
Observable inputs other than Level 1 prices, such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities; and
|
|
Level 3 —
|
Unobservable inputs that are supported by little or no market activity and that are significant
to the fair value of the assets or liabilities.
|
As of September 30, 2021, the
following table represents the Company’s fair value hierarchy for
items that are required to be measured at fair value on a recurring
basis:
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in debt securities (short-term)
|
|
$ |
11,631 |
|
|
$ |
9,458 |
|
|
$ |
2,173 |
|
|
$ |
- |
|
|
Investments in debt securities (long-term)
|
|
|
10,398 |
|
|
|
200 |
|
|
|
10,198 |
|
|
|
- |
|
As of December 31, 2020, the
following table represents the Company’s fair value hierarchy for
items that are required to be measured at fair value on a recurring
basis:
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in debt securities (short-term)
|
|
$ |
14,720 |
|
|
$ |
8,939 |
|
|
$ |
5,781 |
|
|
$ |
- |
|
|
Investments in debt securities (long-term)
|
|
|
12,768 |
|
|
|
- |
|
|
|
12,768 |
|
|
|
- |
|
Leases
The Company leases its previous manufacturing facility under a
long-term contract, which is accounted for as an operating lease.
The lease provides for a fixed base rent and variable payments
comprised of reimbursements for property taxes, insurance,
utilities, and common area maintenance. The lease has a term of
sixty-two months,
exclusive of options to renew. In accordance with ASC 842, Leases, lease income, which includes
escalating rents over the term of the lease, is recorded on a
straight-line basis over the expected lease term. The difference
between lease income and payments received is recorded as a rent
receivable, which is included as a prepaid expense in the
consolidated balance sheets. Amounts paid for broker commissions
represent prepaid direct lease costs, and will be amortized as an
off-set to lease income over the lease term.
Other Recent
Pronouncements
Other recent accounting pronouncements issued by the FASB
(including its Emerging Issues Task Force) and the SEC did
not or are not believed by management to have a material
impact on the Company's present or future consolidated financial
statements.
3. Significant
Transactions
2019 Restructuring Plan
In July 2019, the Company adopted a
restructuring plan pursuant to which the Company elected to wind
down its prior manufacturing operations at the Company’s Lake
Forest, CA facility and proceeded to outsource the manufacture of
parts utilizing the Company’s technology through its domestic and
international manufacturing partners (the “2019 Restructuring Plan”). In connection
with the 2019 Restructuring Plan,
the Company shifted its business strategy from internal manufacture
of parts and products for customers toward the use and reliance of
outsourced manufacturers, which will initially be Dongguan Yihao
Metals Materials Technology Co., Ltd. (“Yihao”), a China-based
company in which our largest beneficial stockholder and Chairman,
Professor Lugee Li, has a material, indirect, equity interest.
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September
30, 2021 and 2020
(numbers in thousands, except percentages, share and per share
data)
(unaudited)
Manufacturing Facility
Purchase
On February 16, 2017, the Company
purchased a 41,000 square foot manufacturing facility (the
“Facility”) located in Lake Forest, CA, where operations commenced
during July 2017. The purchase
price for the Facility was $7,818. As a result of the 2019 Restructuring Plan, the Company has
discontinued manufacturing operations in the Facility.
Facility Lease
On January 23, 2020, 20321 Valencia, LLC, a Delaware limited
liability company and wholly owned subsidiary of the Company,
entered into a lease agreement (the “Facility Lease”) pursuant to
which the Company leased to MatterHackers, Inc., a Delaware
corporation (“Tenant”), an approximately 32,534 square foot portion
of the Facility. The lease term is for 5 years and 2 months and is scheduled to expire on
April 30, 2025. The base rent
payable under the Facility Lease is $33 per month initially and is
subject to periodic increases up to a maximum of approximately $54
per month. Tenant will pay approximately 79% of common operating
expresses. The Facility Lease has other customary provisions,
including provisions relating to default and usage restrictions.
The Facility Lease grants to Tenant a right to extend the lease for
one additional 60-month period at
market rental value.
2016 Purchase Agreement
On March 10, 2016, the Company
entered into a Securities Purchase Agreement with Liquidmetal
Technology Limited (the “2016
Purchase Agreement), a Hong Kong company (the “Investor”), which is
controlled by the Company’s Chairman, Professor Li. The 2016 Purchase Agreement provided for the
purchase by the Investor of a total of 405,000,000 shares of the
Company’s common stock for an aggregate purchase price of $63,400.
The transaction occurred in multiple closings, with the Investor
having purchased 105,000,000 shares at a purchase price of $8,400
(or $0.08 per share) at the initial closing on March 10, 2016 and the remaining 200,000,000
shares at $0.15 per share and 100,000,000 shares at $0.25 per share
for an aggregate purchase price of $55,000 on October 26, 2016.
In addition to the shares issuable under the 2016 Purchase Agreement, the Company issued
to the Investor a warrant to acquire 10,066,809 shares of common
stock (of which the right to exercise 2,609,913 of the warrant
shares vested on March 10, 2016 and
the right to exercise the remaining 7,456,896 warrant shares vested
on October 26, 2016 at an exercise
price of $0.07 per share). The warrant will expire on the
tenth anniversary of
its issuance date.
The 2016 Purchase Agreement also
provided that, with certain limited exceptions, if the Company
issues any shares of common stock at any time through the
fifth anniversary of the 2016 Purchase Agreement, the Investor will
have a preemptive right to subscribe for and to purchase at the
same price per share (or at market price, in the case of issuance
of shares pursuant to stock options) the number of shares necessary
to maintain its ownership percentage of Company-issued shares of
common stock.
Eontec License
Agreement
On March 10, 2016, in connection
with the 2016 Purchase Agreement,
the Company and Eontec, entered into the License Agreement pursuant
to which the Company and Eontec agreed to cross-license their
respective technologies. The Company’s Chairman, Professor Li, is
also a major shareholder and Chairman of Eontec.
The License Agreement provides for the cross-license of certain
patents, technical information, and trademarks between the Company
and Eontec. In particular, the Company granted to Eontec a paid-up,
royalty-free, perpetual license to the Company’s patents and
related technical information to make, have made, use, offer to
sell, sell, export, and import products in certain geographic areas
outside of North America and Europe. In turn, Eontec granted to the
Company a paid-up, royalty-free, perpetual license to Eontec’s
patents and related technical information to make, have made, use,
offer to sell, sell, export, and import products in certain
geographic areas outside of specified countries in Asia. The
license granted by the Company to Eontec is exclusive (including to
the exclusion of the Company) in the countries of Brunei, Cambodia,
China (P.R.C and R.O.C.), East Timor, Indonesia, Japan, Laos,
Malaysia, Myanmar, Philippines, Singapore, South Korea, Thailand,
and Vietnam. The license granted by Eontec to the Company is
exclusive (including to the exclusion of Eontec) in North America
and Europe. The cross-licenses are non-exclusive in geographic
areas outside of the foregoing exclusive territories.
Beyond the License Agreement, the Company collaborates with Eontec,
and its affiliates, to accelerate the commercialization of
amorphous alloy technology. This includes but is not limited to developing technologies to
reduce the cost of amorphous alloys, working on die cast machine
technology platforms to pursue broader markets, sharing knowledge
to broaden our intellectual property portfolio, and utilizing
Eontec’s volume production capabilities as a third party contract manufacturer.
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September
30, 2021 and 2020
(numbers in thousands, except percentages, share and per share
data)
(unaudited)
Eutectix Business
Development Agreement
On January 31, 2020, the Company
entered into a Business Development Agreement (the “Agreement”)
with Eutectix, which provides for collaboration, joint development
efforts, and the manufacturing of products based on the Company’s
proprietary amorphous metal alloys. Under the Agreement, the
Company licensed to Eutectix specified equipment owned by the
Company, including two injection
molding machines, two diecasting
machines, and other machines and equipment, all of which will be
used to make product for Company customers and Eutectix customers.
The licensed machines and equipment represented substantially all
of the machinery and equipment then held by the Company. The
Company has also licensed to Eutectix various patents and technical
information related to the Company’s proprietary technology. Under
the Agreement, Eutectix agreed to pay the Company a royalty of
six percent (6%) of the net sales
price of licensed products sold by Eutectix, and Eutectix will also
manufacture for the Company product ordered by the Company. The
Agreement has a term of five years, subject to renewal
provisions and the ability of either party to terminate earlier
upon specified circumstances.
Apple License
Transaction
On August 5, 2010, the Company
entered into a license transaction with Apple Inc. (“Apple”)
pursuant to which (i) the Company contributed substantially
all of its intellectual property assets to a newly organized
special-purpose, wholly-owned subsidiary, called Crucible
Intellectual Property, LLC (“CIP”), (ii) CIP granted to Apple
a perpetual, worldwide, fully-paid, exclusive license to
commercialize such intellectual property in the field of consumer
electronic products, as defined in the license agreement, in
exchange for a license fee, and (iii) CIP granted back to the
Company a perpetual, worldwide, fully-paid, exclusive license to
commercialize such intellectual property in all other fields of
use.
Under the agreements relating to the license transaction with
Apple, the Company was obligated to contribute, to CIP, all
intellectual property developed through February 2016. The Company is also obligated
to maintain certain limited liability company formalities with
respect to CIP at all times after the closing of the license
transaction.
Other License
Transactions
The Company’s majority-owned Liquidmetal Golf subsidiary has the
exclusive right and license to utilize the Company’s Liquidmetal
alloy technology for purposes of golf equipment applications. This
right and license is set forth in an intercompany license agreement
between Liquidmetal Technologies and Liquidmetal Golf. This license
agreement provides that Liquidmetal Golf has a perpetual and
exclusive license to use Liquidmetal alloy technology for the
purpose of manufacturing, marketing, and selling golf club parts
and other products used in the sport of golf. The Company owns 79%
of the outstanding common stock of Liquidmetal Golf.
In March 2009, the Company entered
into a license agreement with Swatch Group, Ltd. (“Swatch”) under
which Swatch was granted a non-exclusive license to the Company’s
technology to produce and market watches and certain other luxury
products. In March 2011, this
license agreement was amended to grant Swatch exclusive rights as
to watches, but non-exclusive as to Apple. The Company will receive
royalty payments over the life of the contract on all Liquidmetal
products produced and sold by Swatch. The license agreement with
Swatch will expire on the expiration date of the last licensed
patent.
4. Investments in Debt
Securities
The following table sets forth amortized cost fair value, and
unrealized gains (losses) of investments in debt securities
(short-term and long-term):
|
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
Unrealized gains (losses)
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
Longest
Maturity Date
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency securities
|
2022
|
|
|
7,147 |
|
|
|
- |
|
|
|
7,147 |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
Corporate bonds
|
2024
|
|
|
14,870 |
|
|
|
26,222 |
|
|
|
14,882 |
|
|
|
26,338 |
|
|
|
12 |
|
|
|
116 |
|
|
Certificates of deposit
|
One-year
|
|
|
- |
|
|
|
1,150 |
|
|
|
- |
|
|
|
1,150 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
22,017 |
|
|
|
27,372 |
|
|
|
22,029 |
|
|
|
27,488 |
|
|
$ |
12 |
|
|
$ |
116 |
|
Income from these investments totaled $35 and $138 during the
three and nine months ended September 30, 2021, respectively. Income from
these investments totaled $61 and $187 during the three and nine months ended September 30, 2020, respectively. Such
amounts are included as a portion of interest and investment income
on the Company’s consolidated statements of operations.
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September
30, 2021 and 2020
(numbers in thousands, except percentages, share and per share
data)
(unaudited)
Based on the Company’s review of its debt securities that are
individually in an unrealized loss position at September 30, 2021, it determined that the
losses were primarily the result current economic factors,
impacting all global debt and equity markets, that are the result
of the global COVID-19 pandemic.
The impact to the Company’s investment portfolio is considered to
be temporary, rather than a deterioration of overall credit
quality. As of September 30, 2021,
all investments are current on their schedule interest and dividend
payments. The Company does not
intend to sell and it is not more
likely than not that the Company
will be required to sell these securities prior to recovering their
amortized cost. As such, the Company does not consider these securities to
be other-than-temporarily impaired at September 30, 2021.
5. Trade Accounts
Receivable
Trade accounts receivable were comprised of the following:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Trade accounts receivable
|
|
$ |
353 |
|
|
$ |
505 |
|
|
Less: Allowance for doubtful accounts
|
|
|
- |
|
|
|
(234 |
)
|
|
Trade accounts receivable
|
|
$ |
353 |
|
|
$ |
271 |
|
During the nine months ended
September 30, 2021, the Company
formally wrote off $234 in outstanding receivables against
allowances for doubtful accounts taken in prior periods. The
write-off followed the Company’s normal process in evaluating
future collectability of accounts receivable and resulted in
no impact within the Company’s
consolidated statement of operations.
6. Prepaid Expenses and Other
Current Assets
Prepaid expenses and other current assets totaled $597 and $465 as
of September 30, 2021 and
December 31, 2020, respectively.
Included within these totals are the following:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
| |
|
|
|
|
|
|
|
|
|
Prepaid service invoices
|
|
$ |
65 |
|
|
$ |
76 |
|
|
Prepaid insurance premiums
|
|
|
364 |
|
|
|
233 |
|
|
Prepaid lease costs and receivables- short term
|
|
|
25 |
|
|
|
21 |
|
|
Interest and other receivables
|
|
|
143 |
|
|
|
135 |
|
|
Total
|
|
$ |
597 |
|
|
$ |
465 |
|
As of September 30, 2021, prepaid
lease costs and receivables- short term are comprised of $19 in
prepaid broker commissions that are expected to be amortized within
the next twelve months and $6 in
receivables for allocated utility costs.
7. Inventory
Inventory totaled $22 and $43 as of September 30, 2021 and December 31, 2020, respectively. Included
within these totals are the following:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
| |
|
|
|
|
|
|
|
|
|
Work in progress
|
|
$ |
18 |
|
|
$ |
- |
|
|
Finished goods
|
|
|
4 |
|
|
|
43 |
|
|
Total
|
|
$ |
22 |
|
|
$ |
43 |
|
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September
30, 2021 and 2020
(numbers in thousands, except percentages, share and per share
data)
(unaudited)
8. Property and Equipment,
net
Property and equipment consist of the following:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
| |
|
|
|
|
|
|
|
|
|
Land, building, and improvements
|
|
$ |
9,610 |
|
|
$ |
9,610 |
|
|
Machinery and equipment
|
|
|
1,304 |
|
|
|
1,304 |
|
|
Computer equipment
|
|
|
272 |
|
|
|
272 |
|
|
Office equipment, furnishings, and improvements
|
|
|
51 |
|
|
|
51 |
|
|
Total
|
|
|
11,237 |
|
|
|
11,237 |
|
|
Accumulated depreciation
|
|
|
(2,862 |
)
|
|
|
(2,623 |
)
|
|
Total property and equipment, net
|
|
$ |
8,375 |
|
|
$ |
8,614 |
|
Depreciation expense for three and
nine months ended September 30, 2021 was $79 and $239,
respectively. Depreciation expense for three and nine months ended September 30, 2020 was $79 and $240,
respectively. Such amounts were included in selling, marketing,
general, and administrative expenses within Company’s consolidated
statements of operations.
During the three and nine months ended September 30, 2020, the Company disposed of
certain manufacturing equipment for gross proceeds of $110. This
resulted in a gain on disposal of $0 and $35 during the
three and nine months ended September 30, 2020. No
such sales occurred during the three and nine months ended September 30, 2021.
9. Equipment Held for
Sale
The Company previously reclassified $585 in equipment, planned to
be disposed of under the 2019
Restructuring Plan, from property and equipment to equipment held
for sale on its consolidated balance sheet. The Company has
executed a purchase agreement for the equipment, with a negotiated
sales price of $600. The sale was finalized during the quarter
ended June 30, 2020, following
delivery and title transfer of the equipment to the buyer. During
October 2020, all amounts
pertaining to the purchase price were received, thus completing all
elements of the purchase agreement for the equipment originally
held for sale.
10. Patents and Trademarks,
net
Net patents and trademarks totaled $112 and $158 as of September 30, 2021 and December 31, 2020, respectively, and
primarily consisted of purchased patent rights and internally
developed patents.
Purchased patent rights represent the exclusive right to
commercialize the bulk amorphous alloy and other amorphous alloy
technology acquired from California Institute of Technology
(“Caltech”), through a license agreement with Caltech and other
institutions. All fees and other amounts payable by the Company for
these rights and licenses have been paid or accrued in full, and
no further royalties, license fees,
or other amounts will be payable in the future under the license
agreement.
In addition to the purchased and licensed patents, the Company has
internally developed patents. Internally developed patents include
legal and registration costs incurred to obtain the respective
patents. The Company currently holds various patents and numerous
pending patent applications in the United States, as well as
numerous foreign counterparts to these patents outside of the
United States.
The Company amortizes capitalized patents and trademarks over an
average of 10 to 17 year periods. Amortization expense for patents
and trademarks was $12 and $46 for the three and nine months ended September 30, 2021, respectively. This
compares to $21 and $63 for the three and nine months ended September 30, 2020, respectively.
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September
30, 2021 and 2020
(numbers in thousands, except percentages, share and per share
data)
(unaudited)
11. Other Assets
Other assets totaled $293 and $251 as of September 30, 2021 and December 31, 2020, respectively. Included
within these totals are the following:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
| |
|
|
|
|
|
|
|
|
|
Utility deposits
|
|
$ |
14 |
|
|
$ |
14 |
|
|
Prepaid lease costs and receivables- long term
|
|
|
279 |
|
|
|
237 |
|
|
Total
|
|
$ |
293 |
|
|
$ |
251 |
|
As of September 30, 2021, prepaid
lease costs and receivables- long term are comprised of $49 in
unamortized prepaid broker commissions that are not expected to be amortized within the next
twelve months and $230 in
straight-line rent accruals.
12. Accrued Liabilities
Accrued liabilities totaled $917 and $315 as of September 30, 2021 and December 31, 2020, respectively. Included
within these totals are the following:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
| |
|
|
|
|
|
|
|
|
|
Accrued payroll, vacation, and bonuses
|
|
$ |
217 |
|
|
$ |
147 |
|
|
Accrued severance
|
|
|
625 |
|
|
|
56 |
|
|
Accrued audit fees
|
|
|
75 |
|
|
|
112 |
|
|
Total
|
|
$ |
917 |
|
|
$ |
315 |
|
13. Other Long-Term
Liabilities
Other long-term liabilities were $899 as of September 30, 2021 and $899 as of December 31, 2020, and consisted of $856 of
long-term, aged payables to vendors, individuals, and other
third parties that have been
outstanding for more than 5 years. The Company is in the process of
researching and resolving the balances for settlement and/or
escheatment in accordance with applicable state law. Also included
in the balance for each period is $43 in tenant deposits.
14. Stock Compensation
Plans
On June 28, 2012, the Company
adopted the 2012 Equity Incentive
Plan (“2012 Plan”), with the
approval of the shareholders, which provides for the grant of stock
options to officers, employees, consultants, and directors of the
Company and its subsidiaries. The 2012 Plan provides for the granting to
employees of incentive stock options within the meaning of Section
422 of the Internal Revenue Code of
1986, as amended, and for the
granting to employees and consultants of non-statutory stock
options. In addition, the Plan permits the granting of stock
appreciation rights, or SARs, with or independently of options, as
well as stock bonuses and rights to purchase restricted stock. A
total of 30,000,000 shares of the Company’s common stock may be granted under the 2012 Plan, and all options granted under the
2012 Plan had exercise prices that
were equal to the fair market value on the date of grant. During
the three and nine months ended September 30, 2021, the Company granted Mr.
Chung an option grant under the Company’s 2015 Equity Incentive Plan, as approved by
the Board, to purchase up to 7,500,000 shares of Company stock.
Under this plan, the Company had outstanding grants of options to
purchase 5,609,192 and 5,609,192 shares of the Company’s common
stock as of September 30, 2021 and
December 31, 2020,
respectively.
On January 27, 2015, the Company
adopted its 2015 Equity Incentive
Plan (“2015 Plan”), which provided
for the grant of stock options to officers, employees, consultants,
and directors of the Company and its subsidiaries. A total of
40,000,000 shares of the Company’s common stock are available for
issuance under the 2015 Plan. All
options granted under the 2015 Plan
had exercise prices that were equal to the fair market value on the
dates of grant. During the three
and nine months ended September 30, 2021, the Company granted
7,500,000 and
7,500,000 options,
respectively, to purchase shares of common stock. Under this plan,
the Company had outstanding grants of options to purchase
19,841,667 and 12,341,667 shares of the Company’s common stock as
of September 30, 2021 and
December 31, 2020,
respectively.
Stock based compensation expense attributable to these plans was
$195 and $402 for the three and
nine months ended September 30, 2021, respectively. This
compares to $83 and $256 for the three and nine months ended September 30, 2020, respectively.
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September
30, 2021 and 2020
(numbers in thousands, except percentages, share and per share
data)
(unaudited)
In connection with the separation of former executives, the Company
has modified previously granted equity awards to allow for the
acceleration of vesting of equity awards, and the extension of the
timing to exercise vested awards, following the respective
separation dates. Of the $195 and $402 stock compensation expense
for the three and nine months ended September 30, 2021, respectively, the Company
incurred incremental stock-based compensation expense for the
modifications of the awards of $132 and $132 during the three and nine months ended September 30, 2021, respectively. There were
no similar expenses during the three and nine months ended September 30, 2020.
15. Facility Lease
Amounts collected under the facility lease are comprised of base
rents and reimbursements for direct facility expenses (property
taxes and insurance), common area maintenance, and utilities.
Amounts recorded to lease income are comprised of base rents and
direct facility expenses, recorded on a straight-line basis over
the lease term. Reimbursements for common area maintenance and
utility expense are recorded as reductions to like expenses within
sales, general, and administrative costs.
The future minimum rents due to the Company under the Facility
Lease are as follows:
|
Year
|
|
Base Rents
|
|
| |
|
|
|
|
|
2021
|
|
$ |
119 |
|
|
2022
|
|
|
486 |
|
|
2023
|
|
|
651 |
|
|
2024
|
|
|
699 |
|
|
2025
|
|
|
237 |
|
|
Thereafter
|
|
|
- |
|
|
|
|
$ |
2,192 |
|
16. Consolidated Statements of
Changes in Equity
The following table provides the Company’s changes in equity for
the three months ended
September 30, 2021:
|
|
|
Preferred Shares
|
|
|
Common
Shares
|
|
|
Common
Stock
|
|
|
Warrants part of Additional Paid-in Capital
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Accumulated Other Comprehensve
Income
|
|
|
Non- Controlling Interest
|
|
|
Total
|
|
|
Balance, June 30, 2021
|
|
|
- |
|
|
|
914,449,957 |
|
|
$ |
914 |
|
|
$ |
18,179 |
|
|
$ |
287,390 |
|
|
$ |
(270,241 |
)
|
|
$ |
26 |
|
|
$ |
(77 |
)
|
|
$ |
36,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195 |
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,403 |
)
|
|
|
|
|
|
|
|
|
|
|
(1,403 |
)
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15 |
)
|
|
|
|
|
|
|
(15 |
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2021
|
|
|
- |
|
|
|
914,449,957 |
|
|
$ |
914 |
|
|
$ |
18,179 |
|
|
$ |
287,585 |
|
|
$ |
(271,644 |
)
|
|
$ |
11 |
|
|
$ |
(77 |
)
|
|
$ |
34,968 |
|
The following table provides the Company’s changes in equity for
the nine months ended
September 30, 2021:
|
|
|
Preferred Shares
|
|
|
Common
Shares
|
|
|
Common
Stock
|
|
|
Warrants part of Additional Paid-in Capital
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Accumulated Other Comprehensve
Income
|
|
|
Non- Controlling Interest
|
|
|
Total
|
|
|
Balance, December 31, 2020
|
|
|
- |
|
|
|
914,449,957 |
|
|
$ |
914 |
|
|
$ |
18,179 |
|
|
$ |
287,183 |
|
|
$ |
(268,926 |
)
|
|
$ |
116 |
|
|
$ |
(76 |
)
|
|
$ |
37,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
402 |
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,718 |
)
|
|
|
|
|
|
|
(1 |
)
|
|
|
(2,719 |
)
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(105 |
)
|
|
|
|
|
|
|
(105 |
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2021
|
|
|
- |
|
|
|
914,449,957 |
|
|
$ |
914 |
|
|
$ |
18,179 |
|
|
$ |
287,585 |
|
|
$ |
(271,644 |
)
|
|
$ |
11 |
|
|
$ |
(77 |
)
|
|
$ |
34,968 |
|
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September
30, 2021 and 2020
(numbers in thousands, except percentages, share and per share
data)
(unaudited)
The following table provides the Company’s changes in equity for
the three months ended
September 30, 2020:
|
|
|
Preferred Shares
|
|
|
Common
Shares
|
|
|
Common
Stock
|
|
|
Warrants part of Additional Paid-in Capital
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Accumulated Other Comprehensve Income (Loss)
|
|
|
Non- Controlling Interest
|
|
|
Total
|
|
|
Balance, June 30, 2020
|
|
|
- |
|
|
|
914,449,957 |
|
|
$ |
914 |
|
|
$ |
18,179 |
|
|
$ |
287,005 |
|
|
$ |
(267,673 |
)
|
|
$ |
90 |
|
|
$ |
(75 |
)
|
|
$ |
38,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83 |
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(776 |
)
|
|
|
|
|
|
|
(1 |
)
|
|
|
(777 |
)
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48 |
)
|
|
|
|
|
|
|
(48 |
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020
|
|
|
- |
|
|
|
914,449,957 |
|
|
$ |
914 |
|
|
$ |
18,179 |
|
|
$ |
287,088 |
|
|
$ |
(268,449 |
)
|
|
$ |
42 |
|
|
$ |
(76 |
)
|
|
$ |
37,698 |
|
The following table provides the Company’s changes in equity for
the nine months ended
September 30, 2020:
|
|
|
Preferred Shares
|
|
|
Common
Shares
|
|
|
Common
Stock
|
|
|
Warrants part of Additional Paid-in Capital
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Accumulated Other Comprehensve
Income
|
|
|
Non- Controlling Interest
|
|
|
Total
|
|
|
Balance, December 31, 2019
|
|
|
- |
|
|
|
914,449,957 |
|
|
$ |
914 |
|
|
$ |
18,179 |
|
|
$ |
286,832 |
|
|
$ |
(266,284 |
)
|
|
$ |
2 |
|
|
$ |
(75 |
)
|
|
$ |
39,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
256 |
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,165 |
)
|
|
|
|
|
|
|
(1 |
)
|
|
|
(2,166 |
)
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020
|
|
|
- |
|
|
|
914,449,957 |
|
|
$ |
914 |
|
|
$ |
18,179 |
|
|
$ |
287,088 |
|
|
$ |
(268,449 |
)
|
|
$ |
42 |
|
|
$ |
(76 |
)
|
|
$ |
37,698 |
|
17. Accumulated Other
Comprehensive Income (Loss) (“AOCI”)
The following table presents a summary of the changes in each
component of AOCI for the three
months ended September 30,
2021:
|
|
|
Unrealized gains
(losses) on available-for-
sale securities
|
|
|
Total
|
|
|
Accumulated other comprehensive income (loss), net of tax, as of
June 30, 2021
|
|
$ |
26 |
|
|
$ |
26 |
|
| |
|
|
|
|
|
|
|
|
|
Other comprehensive loss before reclassifications
|
|
|
(15 |
)
|
|
|
(15 |
)
|
|
Amounts reclassified from accumulated other comprehensive income
(loss)
|
|
|
- |
|
|
|
- |
|
|
Net increase in other comprehensive income (loss)
|
|
|
(15 |
)
|
|
|
(15 |
)
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net of tax, as of
September 30, 2021
|
|
$ |
11 |
|
|
$ |
11 |
|
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September
30, 2021 and 2020
(numbers in thousands, except percentages, share and per share
data)
(unaudited)
The following table presents a summary of the changes in each
component of AOCI for the nine
months ended September 30,
2021:
|
|
|
Unrealized gains
(losses) on available-for-
sale securities
|
|
|
Total
|
|
|
Accumulated other comprehensive income (loss), net of tax, as of
December 31, 2020
|
|
$ |
116 |
|
|
$ |
116 |
|
| |
|
|
|
|
|
|
|
|
|
Other comprehensive loss before reclassifications
|
|
|
(105 |
)
|
|
|
(105 |
)
|
|
Amounts reclassified from accumulated other comprehensive income
(loss)
|
|
|
- |
|
|
|
- |
|
|
Net increase in other comprehensive income (loss)
|
|
|
(105 |
)
|
|
|
(105 |
)
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net of tax, as of
September 30, 2021
|
|
$ |
11 |
|
|
$ |
11 |
|
The following table presents a summary of the changes in each
component of AOCI for the three
months ended September 30,
2020:
|
|
|
Unrealized gains
(losses) on available-for-
sale securities
|
|
|
Total
|
|
|
Accumulated other comprehensive income (loss), net of tax, as of
June 30, 2020
|
|
$ |
90 |
|
|
$ |
90 |
|
| |
|
|
|
|
|
|
|
|
|
Other comprehensive loss before reclassifications
|
|
|
(48 |
)
|
|
|
(48 |
)
|
|
Amounts reclassified from accumulated other comprehensive income
(loss)
|
|
|
- |
|
|
|
- |
|
|
Net increase in other comprehensive income (loss)
|
|
|
(48 |
)
|
|
|
(48 |
)
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net of tax, as of
September 30, 2020
|
|
$ |
42 |
|
|
$ |
42 |
|
The following table presents a summary of the changes in each
component of AOCI for the nine
months ended September 30,
2020:
|
|
|
Unrealized gains
(losses) on available-for-
sale securities
|
|
|
Total
|
|
|
Accumulated other comprehensive income (loss), net of tax, as of
December 31, 2019
|
|
$ |
2 |
|
|
$ |
2 |
|
| |
|
|
|
|
|
|
|
|
|
Other comprehensive loss before reclassifications
|
|
|
42 |
|
|
|
42 |
|
|
Amounts reclassified from accumulated other comprehensive income
(loss)
|
|
|
(2 |
)
|
|
|
(2 |
)
|
|
Net increase in other comprehensive income (loss)
|
|
|
40 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net of tax, as of
September 30, 2020
|
|
$ |
42 |
|
|
$ |
42 |
|
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September
30, 2021 and 2020
(numbers in thousands, except percentages, share and per share
data)
(unaudited)
18. Loss Per Common
Share
Basic earnings per share (“EPS”) is computed by dividing earnings
(loss) attributable to common shareholders by the weighted average
number of common shares outstanding for the applicable period.
Diluted EPS reflects the potential dilution of securities that
could share in the earnings.
Options to purchase 25,450,859 shares of common stock, at prices
ranging from $0.07 to $0.38 per share, were outstanding at
September 30, 2021, but were
not included in the computation of
diluted EPS for the same period as the inclusion would have been
antidilutive, given the Company’s net loss. Warrants to purchase
10,066,809 shares of common stock, with a price of $0.07 per share,
outstanding at September 30, 2021,
were not included in the
computation of diluted EPS for the same period as the inclusion
would have been antidilutive, given the Company’s net loss.
Options to purchase 18,144,359 shares of common stock, at prices
ranging from $0.07 to $0.38 per share, were outstanding at
September 30, 2020, but were
not included in the computation of
diluted EPS for the same period as the inclusion would have been
antidilutive, given the Company’s net loss. Warrants to purchase
10,066,809 shares of common stock, with a price of $0.07 per share,
outstanding at September 30, 2020,
were not included in the
computation of diluted EPS for the same period as the inclusion
would have been antidilutive, given the Company’s net loss.
19. Related Party
Transactions
On March 10, 2016, the Company
entered into the 2016 Purchase
Agreement with Liquidmetal Technology Limited, providing for the
purchase of 405,000,000 shares of the Company’s common stock for an
aggregate purchase price of $63,400. Liquidmetal Technology Limited
was a newly formed company owned by Professor Li. In connection
with the 2016 Purchase Agreement
and also on March 10, 2016, the
Company and Eontec, entered into a license agreement pursuant to
which the Company and Eontec entered into a cross-license of their
respective technologies. Eontec is a publicly held Hong Kong
corporation of which Professor Li is the Chairman and major
shareholder. Eontec is also an affiliate of Yihao. Yihao is
currently the Company’s primary outsourced manufacturer. As of
September 30, 2021, Professor Li is
a greater-than 5% beneficial owner of the Company and serves as the
Company’s Chairman. Equipment and services procured from Eontec,
and their affiliates, were $136 and $409 during the three and nine months ended September 30, 2021, respectively. Equipment
and services procured from Eontec, and their affiliates, were $146
and $214 during the three and
nine months ended September 30, 2020, respectively.
On July 6, 2021, Professor Li
resigned as Chief Executive Officer and President of the Company.
Professor Li will maintain his role as Chairman of the Company’s
Board of Directors (the “Board”).
On July 6, 2021, the Board
appointed Tony Chung, a director of the Company, as the Company’s
interim Chief Executive Officer, and in that capacity, he will
serve as the Company’s principal executive officer. Mr. Chung is a
current member of the Board and will remain a director following
the foregoing appointment.
Mr. Chung will receive a base annual salary of $240,000 and a
$20,000 signing bonus, payable after ninety days of employment.
Additionally, Mr. Chung received an option grant under the
Company’s 2015 Equity Incentive
Plan, as approved by the Board, to purchase up to 7,500,000 shares
of Company common stock. The option has an exercise price of $0.07
per share and will expire 10 years from the date of grant unless it
terminates earlier upon a termination of service. The shares
covered by the option will vest in three tranches (“Tranche 1”, “Tranche 2”, and “Tranche 3”). Under Tranche 1, 2,500,000 shares covered by the option
will vest after ninety days of employment,
although thereafter any shares received from option exercises will
be subject to time-based lock-up provisions. Under Tranche
2, 2,500,000 shares covered by the
option will vest at the first
anniversary of employment. Under Tranche 3, 2,500,000 covered by the option will vest
at the second anniversary of
employment. Shares received from option exercises under Tranche
2 and Tranche 3 will be subject to a combination of
market-price based and time-based lock-up provisions. The terms of
the option are subject to the provisions of the 2015 Equity Incentive Plan. Mr. Chung will
serve on an “at-will” basis.
On August 30, 2021, the Company and
Bruce Bromage, the Company’s Chief Operating Officer, entered into
a Separation Agreement and General Release pursuant to which Dr.
Bromage agreed to resign as an officer and employee of the Company
and the Company and Dr. Bromage agreed to terminate Dr. Bromage’s
employment agreement with Dr. Bromage’s employment ending on
September 30, 2021 (the “Bromage
Separation Agreement”). The Bromage Separation Agreement provides
for the payment of severance compensation to Dr. Bromage in the
form of a lump sum equal to $316,285.00 (subject to tax
withholdings). In addition, it provides for the accelerated vesting
the remaining 2,430,000 unvested stock options held by Dr. Bromage
as of the termination date and the extension of the exercise period
of his options until the earlier of the second anniversary of the termination date
outlined in the Bromage Separation Agreement or the date on which
such options would otherwise expire and terminate in accordance
with its terms if Dr. Bromage had not resigned. This results in a total of
10,329,692 stock options being exercisable by Dr. Bromage as of the
termination date. In connection with the Bromage Separation
Agreement, Dr. Bromage granted the Company general releases subject
to customary exceptions.
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September
30, 2021 and 2020
(numbers in thousands, except percentages, share and per share
data)
(unaudited)
On August 30, 2021, the Company and
Bryce Van, the Company’s Vice President- Finance, entered into a
Separation Agreement and General Release pursuant to which Mr. Van
agreed to resign as an officer and employee of the Company and the
Company and Mr. Van agreed to terminate Mr. Van’s employment
agreement with Mr. Van’s employment to end on October 15, 2021 (the “Van Separation
Agreement”). The Van Separation Agreement provides for the payment
of severance compensation to Mr. Van in the form of a lump sum
equal to $252,889.69 (subject to tax withholdings). In addition, it
provides for the extension of the exercise period of his options
until the earlier of the second
anniversary of the termination date outlined in the Van Separation
Agreement or the date on which such options would otherwise expire
and terminate in accordance with its terms if Mr. Van had
not resigned. This results in a
total of 2,046,500 stock options being exercisable by Mr. Van as of
the termination date. Under the Van Separation Agreement, Mr. Van
agreed to be available to provide assistance to the Company by
telephone with no additional
consideration for sixty days following the
termination date. In connection with the Van Separation Agreement,
Mr. Van granted the Company general releases subject to customary
exceptions.
Item
2 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations
This management’s discussion and analysis should be read
in conjunction with the consolidated financial statements and notes
included elsewhere in this Quarterly Report on
Form 10-Q. All amounts described in this section are in
thousands, except percentages, periods of time, and share and per
share data.
This management’s discussion and analysis, as well as
other sections of this Quarterly Report on Form 10-Q,
may contain “forward-looking statements” that involve
risks and uncertainties, including statements regarding our plans,
future events, objectives, expectations, estimates, forecasts,
assumptions, or projections. Any statement that is not a statement
of historical fact is a forward-looking statement, and in some
cases, words such as “believe,” “estimate,”
“project,” “expect,” “intend,” “may,”
“anticipate,” “plan,” “seek,” and similar
words or expressions identify forward-looking statements. These
statements involve risks and uncertainties that could cause actual
outcomes and results to differ materially from the anticipated
outcomes or results, and undue reliance should not be placed on
these statements. These risks and uncertainties include, but are
not limited to, the matters discussed in Part II herein, under the
heading “Item 1A. Risk Factors” in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2020 and other
risks and uncertainties discussed in other filings made with the
Securities and Exchange Commission (including risks described in
subsequent reports on Form 10-Q and
Form 8-K and other filings). We disclaim any intention
or obligation, other than as required by applicable law, to update
or revise any forward-looking statements, whether as a result of
new information, future events, or otherwise.
Overview
We are a materials technology company that develops and
commercializes products made from amorphous alloys. Our
Liquidmetal® family of alloys consists of a variety of proprietary
bulk alloys and composites that utilize the advantages offered by
amorphous alloy technology. We design, develop, and sell custom
products and parts from bulk amorphous alloys to customers in
various industries. We also partner with third-party manufacturers
and licensees to develop and commercialize Liquidmetal alloy
products.
Amorphous alloys are, in general, unique materials that are
distinguished by their ability to retain a random atomic structure
when they solidify, in contrast to the crystalline atomic structure
that forms in other metals and alloys when they solidify.
Liquidmetal alloys are proprietary amorphous alloys that possess a
combination of performance, processing, and potential cost
advantages that we believe will make them preferable to other
materials in a variety of applications. The amorphous atomic
structure of bulk alloys enables them to overcome certain
performance limitations caused by inherent weaknesses in
crystalline atomic structures, thus facilitating performance and
processing characteristics superior in many ways to those of their
crystalline counterparts. We believe the alloys and the molding
technologies we employ can result in components for many
applications that exhibit exceptional dimensional control and
repeatability that rivals precision machining, excellent corrosion
resistance, brilliant surface finish, high strength, high hardness,
high elastic limit, alloys that are non-magnetic, and the ability
to form complex shapes common to the injection molding of plastics.
All of these characteristics are achievable from the molding
process, so design engineers often do not have to select specific
alloys to achieve one or more of the characteristics as is the case
with crystalline materials. We believe these advantages could
result in Liquidmetal alloys supplanting high-performance alloys,
such as titanium and stainless steel, and other incumbent materials
in a wide variety of applications. Moreover, we believe these
advantages could enable the introduction of entirely new products
and applications that are not possible or commercially viable with
other materials.
In July 2019, we adopted a restructuring plan pursuant to which we
elected to wind down our manufacturing operations at our Lake
Forest, CA facility and proceeded to outsource the manufacture of
parts utilizing our technology through domestic and international
manufacturing partners (the “2019 Restructuring Plan”). In
connection with the 2019 Restructuring Plan, we have shifted our
business strategy from internal manufacture of parts and products
for customers toward the use and reliance of outsourced
manufacturers, which will initially be Dongguan Yihao Metals
Materials Technology Co., Ltd. (“Yihao”), a China-based company in
which our largest beneficial stockholder and Chairman, Professor
Lugee Li, holds a material, indirect, equity interest. We will also
seek to develop other manufacturers, both global and domestic, to
aid in the further advancement of our technology and
operations.
Licensing Transactions
Eontec License
Agreement
On March 10, 2016, in connection with the Securities Purchase
Agreement (the “2016 Purchase Agreement”) with Liquidmetal
Technology Limited, a Hong Kong Company, we entered into a Parallel
License Agreement (the “License Agreement”) with DongGuan Eontec
Co., Ltd., a Hong Kong corporation (“Eontec”) pursuant to which we
each entered into a cross-license of our respective
technologies.
The License Agreement provides for the cross-license of certain
patents, technical information, and trademarks between us and
Eontec. In particular, we granted to Eontec a paid-up,
royalty-free, perpetual license to our patents and related
technical information to make, have made, use, offer to sell, sell,
export, and import products in certain geographic areas outside of
North America and Europe, and Eontec granted to us a paid-up,
royalty-free, perpetual license to Eontec’s patents and related
technical information to make, have made, use, offer to sell, sell,
export, and import products in certain geographic areas outside of
specified countries in Asia. The license granted by us to Eontec is
exclusive (including to the exclusion of us) in the countries of
Brunei, Cambodia, China (P.R.C and R.O.C.), East Timor, Indonesia,
Japan, Laos, Malaysia, Myanmar, Philippines, Singapore, South
Korea, Thailand, and Vietnam. The license granted by Eontec to us
is exclusive (including to the exclusion of Eontec) in North
America and Europe. The cross-licenses are non-exclusive in
geographic areas outside of the foregoing exclusive
territories.
Beyond the License Agreement, we collaborate with Eontec to
accelerate the commercialization of amorphous alloy technology.
This includes but is not limited to developing technologies to
reduce the cost of amorphous alloys, working on die cast machine
technology platforms to pursue broader markets, sharing knowledge
to broaden our intellectual property portfolio, and utilizing
Eontec’s volume production capabilities as a third party contract
manufacturer.
Eutectix Business
Development Agreement
On January 31, 2020, we entered into a Business Development
Agreement (the “Agreement”) with Eutectix, LLC, a Delaware limited
liability company (“Eutectix”), which provides for collaboration,
joint development efforts, and the manufacturing of products based
on our proprietary amorphous metal alloys. Under the Agreement, we
have agreed to license to Eutectix specified equipment owned by us,
including two injection molding machines, the Machines, and other
machines and equipment, all of which will be used to make products
for our customers and Eutectix customers. The licensed machines and
equipment represent substantially all of the machinery and
equipment currently held by us. We have also licensed to Eutectix
various patents and technical information related to our
proprietary technology. Under the Agreement, Eutectix will pay us a
royalty of six percent (6%) of the net sales price of licensed
products sold by Eutectix, and Eutectix will also manufacture
products for us. The Agreement has a term of five years, subject to
renewal provisions and the ability of either party to terminate
earlier upon specified circumstances.
Apple License
Transaction
On August 5, 2010, we entered into a license transaction with Apple
pursuant to which (i) we contributed substantially all of our
intellectual property assets to a newly organized special-purpose,
wholly-owned subsidiary, called Crucible Intellectual Property, LLC
(“CIP”), (ii) CIP granted to Apple a perpetual, worldwide,
fully-paid, exclusive license to commercialize such intellectual
property in the field of consumer electronic products, as defined
in the license agreement, in exchange for a license fee, and (iii)
CIP granted back to us a perpetual, worldwide, fully-paid,
exclusive license to commercialize such intellectual property in
all other fields of use.
Under the agreements relating to the license transaction with
Apple, we were obligated to contribute, to CIP, all intellectual
property developed by us through February 2016. We are also
obligated to maintain certain limited liability company formalities
with respect to CIP at all times after the closing of the license
transaction.
Other Material License
Transactions
Our Liquidmetal Golf subsidiary has the exclusive right and license
to utilize our Liquidmetal alloy technology for purposes of golf
equipment applications. This right and license is set forth in an
intercompany license agreement between Liquidmetal Technologies and
Liquidmetal Golf. This license agreement provides that Liquidmetal
Golf has a perpetual and exclusive license to use Liquidmetal alloy
technology for the purpose of manufacturing, marketing, and selling
golf club components and other products used in the sport of golf.
We own 79% of the outstanding common stock of Liquidmetal Golf.
In March 2009, we entered into a license agreement with Swatch
Group, Ltd. (“Swatch”) under which Swatch was granted a
non-exclusive license to our technology to produce and market
watches and certain other luxury products. In March 2011, this
license agreement was amended to grant Swatch exclusive rights as
to watches and all third parties (including us), but non-exclusive
as to Apple. We will receive royalty payments over the life of the
contract on all Liquidmetal products produced and sold by Swatch.
The license agreement with Swatch will expire on the expiration
date of the last licensed patent.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States
requires us to make estimates and assumptions that affect reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. These estimates and assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances. Actual results could differ
materially from these estimates under different assumptions or
conditions.
We believe that the following accounting policies are the most
critical to our consolidated financial statements since these
policies require significant judgment or involve complex estimates
that are important to the portrayal of our financial condition and
operating results:
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•
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Revenue recognition
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•
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Impairment of long-lived assets and definite-lived intangibles
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•
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Deferred tax assets
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•
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Share based compensation
|
Our Annual Report on Form 10-K for the year ended December 31, 2020
(the “2020 Annual Report”) contains further discussions on our
critical accounting policies and estimates.
Results of Operations
Comparison of the three
and nine months ended September, 2021 and 2020
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For the three months ended September 30,
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For the nine months ended September 30,
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2021
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2020
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2021
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2020
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in 000's
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% of Revenue
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in 000's
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% of Revenue
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in 000's
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% of Revenue
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in 000's
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% of Revenue
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Revenue:
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Products
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$ |
406 |
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$ |
288 |
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$ |
700 |
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$ |
367 |
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Licensing and royalties
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|
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- |
|
|
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39 |
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21 |
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64 |
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Total revenue
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406 |
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327 |
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721 |
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431 |
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Cost of sales
|
|
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319 |
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|
79 |
%
|
|
|
171 |
|
|
|
52 |
%
|
|
|
528 |
|
|
|
73 |
%
|
|
|
242 |
|
|
|
56 |
%
|
|
Gross profit
|
|
|
87 |
|
|
|
21 |
%
|
|
|
156 |
|
|
|
48 |
%
|
|
|
193 |
|
|
|
27 |
%
|
|
|
189 |
|
|
|
44 |
%
|
|
|
|
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|
|
|
|
|
|
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|
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Selling, marketing, general and administrative
|
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|
1,643 |
|
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|
405 |
%
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1,096 |
|
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|
335 |
%
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|
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3,372 |
|
|
|
468 |
%
|
|
|
2,953 |
|
|
|
685 |
%
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Research and development
|
|
|
14 |
|
|
|
3 |
%
|
|
|
30 |
|
|
|
9 |
%
|
|
|
74 |
|
|
|
10 |
%
|
|
|
86 |
|
|
|
20 |
%
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Gain on disposal of long-lived assets
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- |
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0 |
%
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|
- |
|
|
|
0 |
%
|
|
|
- |
|
|
|
0 |
%
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(35 |
)
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-8 |
%
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Total operating expense
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1,657 |
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1,126 |
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3,446 |
|
|
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|
3,004 |
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Operating loss
|
|
|
(1,570 |
)
|
|
|
|
|
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(970 |
)
|
|
|
|
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|
(3,253 |
)
|
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(2,815 |
)
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Lease income
|
|
|
132 |
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|
|
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|
|
132 |
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|
|
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|
396 |
|
|
|
|
|
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|
352 |
|
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|
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Interest and investment income
|
|
|
35 |
|
|
|
|
|
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|
61 |
|
|
|
|
|
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|
138 |
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|
297 |
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Net loss
|
|
$ |
(1,403 |
)
|
|
|
|
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|
$ |
(777 |
)
|
|
|
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|
$ |
(2,719 |
)
|
|
|
|
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|
$ |
(2,166 |
)
|
|
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|
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Revenue and operating
expenses
Revenue. Total revenue increased to $406 for the three
months ended September 30, 2021 from $288 for the three months
ended September 30, 2020. Total revenue increased to $700 for the
nine months ended September 30, 2021 from $367 for the nine months
ended September 30, 2020. The increase for both period was
attributable to higher general production shipments of products
made by our contract manufacturers and increases in payments under
development projects, following the Company’s transition to
outsourced manufacturing in 2020.
Cost of sales. Cost of sales was $319, or 79% of total
revenue, for the three months ended September 30, 2021, an increase
from $171, or 52% of total revenue, for the three months ended
September 30, 2020. Cost of sales was $528, or 73% of total
revenue, for the nine months ended September 30, 2021, an increase
from $242, or 56% of total revenue, for the nine months ended
September 30, 2020. The increase for both periods was attributable
to higher products revenue, decline in licensing and royalties
revenue, and lower gross profit percentages. If we begin increasing
our products revenues with shipments of routine, commercial
products and parts through third party contract manufacturers, we
expect our cost of sales percentages to decrease, stabilize and be
more predictable.
Gross profit. Our gross profit decreased to $87 for the
three month period ended September 30, 2021 from $156 for the three
month period ended September 30, 2020. Our gross profit as a
percentage of total revenue, decreased to 21% for the three month
period ended September 30, 2021 from 48% for the three month period
ended September 30, 2020. Our gross profit increased to $193 for
the nine month period ended September 30, 2021 from $189 for the
nine month period ended September 30, 2020. Our gross profit as a
percentage of total revenue, decreased to 27% for the nine month
period ended September 30, 2021 from 44% for the nine month period
ended September 30, 2020. Early prototype and pre-production orders
generally result in a higher cost mix, relative to revenue, than
would otherwise be incurred in an on-site production environment,
with higher volumes and more established operating processes, or
through contract manufacturers. As such, our gross profit
percentages have fluctuated and may continue to fluctuate based on
volume and quoted production prices per unit and may not be
representative of our future business. If we begin increasing our
products revenues with shipments of routine, commercial products
and parts through future orders to third party contract
manufacturers, we expect our gross profit percentages to stabilize,
increase, and be more predictable.
Selling, marketing, general and administrative. Selling,
marketing, general, and administrative expenses were $1,643 and
$3,372 for the three and nine months ended September 30, 2021,
respectively, compared to $1,096 and $2,953 for the three and nine
months ended September 30, 2020, respectively. The increase in
expenses was primarily attributable to stock base compensation and
severance expense according to the Bromage Separation Agreement and
the Van Separation Agreement.
Research and development. Research and development expenses
were $14 and $74 for the three and nine months ended September 30,
2021, respectively, compared to $30 and $86 for the three and nine
months ended September 30, 2020. We continue to perform research
and development of new Liquidmetal alloys and related processing
capabilities, albeit on a reduced basis in comparison with prior
periods.
Gain on disposal of fixed assets. During the three and nine
months ended September 30, 2020, the Company recorded gains on the
disposal of fixed assets of $0 and $35, respectively. Similar gains
were not recorded during the three and nine months ended September
30, 2021.
Operating loss. Operating loss was $1,403 and $2,719 for the
three and nine months ended September 30, 2021, respectively. This
compares to $777 and $2,166 for the three and nine months ended
September 30, 2020, respectively. Fluctuations in our operating
loss are primarily attributable to variations in operating
expenses, as discussed above.
We continue to invest in our technology infrastructure to expedite
the adoption of our technology, but we have experienced long sales
lead times for customer adoption of our technology. Until that time
when we can either (i) increase our revenues with shipments of
routine, commercial products and parts through third party contract
manufacturers or (ii) obtain significant licensing revenues, we
expect to continue to have operating losses for the foreseeable
future.
Other income and
expenses
Lease income. Lease income relates to straight-line rental
income received under the Facility Lease. Such amounts were $132
and $396 for the three and nine months ended September 30, 2021,
respectively. This compares to $132 and $352 for the three and nine
months ended September 30, 2020, respectively.
Interest and investment income. Interest and investment
income relates to interest earned from our cash deposits and
investments in debt securities for the respective periods. Interest
and investment income was $35 and $138 for the three and nine
months ended September 30, 2021, respectively. This compares to
interest and investment income of $61 and $297 during the three and
nine months ended September 30, 2020, respectively. The decrease
during 2021 is due continued volatility in corporate debt markets,
which is resulting in reduced yields.
Liquidity and Capital Resources
Cash used in operating
activities
Cash used in operating activities totaled $1,635 and $1,785 for the
nine months ended September 30, 2021 and 2020, respectively. The
cash was primarily used to fund operating expenses related to our
business and product development efforts.
Cash provided by (used
in) investing activities
Cash provided by investing activities totaled $5,354 and used in
investing activities totaled $12,320 for the nine months ended
September 30, 2021 and 2020, respectively. Investing inflows
primarily consist of proceeds from the sale of debt securities.
Investing outflows primarily consist of purchases of debt
securities and capital expenditures for additional building
improvements.
Cash provided by
financing activities
Cash provided by financing activities totaled $0 and $0 for the
nine months ended September 30, 2021 and 2020, respectively.
Financing arrangements
and outlook
During 2016, we raised a total of $62,700 through the issuance of
405,000,000 shares of our common stock in multiple closings under
the 2016 Purchase Agreement. The Company has a relatively limited
history of selling bulk amorphous alloy products and components on
a mass-production scale. Furthermore, the ability of future
contract manufacturers to produce the Company’s products in desired
quantities and at commercially reasonable prices is uncertain and
is dependent on a variety of factors that are outside of the
Company’s control, including the nature and design of the
component, the customer’s specifications, and required delivery
timelines. These factors have previously required that the Company
engage in equity sales under various stock purchase agreements to
support its operations and strategic initiatives. As a result of
the funding under the 2016 Purchase Agreement, the Company
anticipates that its current capital resources, when considering
expected losses from operations, will be sufficient to fund the
Company’s operations for the foreseeable future.
Item
3 – Quantitative and Qualitative Disclosures about Market
Risk
None.
Item 4 – Controls and
Procedures
Evaluation of Disclosure
Controls and Procedures.
Under the supervision and with the participation of our management,
including our Chief Executive Officer (our Principal Executive
Officer and Principal Financial Officer), we carried out an
evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) as of September 30, 2021. Based on
their evaluation, our Chief Executive Officer has concluded that
our disclosure controls and procedures were effective as of
September 30, 2021.
Changes in Internal
Control over Financial Reporting.
There were no changes in our internal control over financial
reporting (as that term is defined in Rules 13a-15(f) or
15d-15(f) under the Exchange Act) during the quarter ended
September 30, 2021 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
PART II
OTHER INFORMATION
Item
1 – Legal Proceedings
None.
Item
1A – Risk Factors
For a detailed discussion of the risk factors that should be
understood by any investor contemplating an investment in our
stock, please refer to Part I, Item 1A “Risk Factors” in the 2020
Annual Report. There have been no material changes from the risk
factors previously disclosed in Part I, Item 1A “Risk Factors” in
the 2020 Annual Report.
Item
2 – Unregistered Sales of Equity Securities and Use of
Proceeds
During the period covered by this Quarterly Report on Form 10-Q, we
did not issue or sell any unregistered equity securities.
Item 3 – Defaults Upon
Senior Securities
None.
Item
4 – Mine Safety Disclosures
None.
Item
5 – Other Information
None.
Item
6 – Exhibits
The following documents are filed as exhibits to this Report:
|
Exhibit
Number
|
|
Description of
Document
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|
| |
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|
10.1
|
|
Offer Letter Agreement, dated July 6,
2021, between the Company and Tony Chung (incorporated by reference
from Exhibit 10.1 to the Form 8-K filed on July 9, 2021))
|
| |
|
|
|
31.1
|
|
Certification of Principal Executive
Officer and Principal Financial Officer, Tony Chung, as required by
Section 302 of the Sarbanes-Oxley Act of 2002.
|
| |
|
|
|
32.1
|
|
Certification of Chief Executive Officer
and Principal Financial Officer, Tony Chung, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
| |
|
|
|
101.1
|
|
The following financial statements from Liquidmetal Technologies,
Inc.’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2021 (unaudited), formatted in Inline XBRL: (i)
Consolidated Balance Sheets as of September 30, 2021 and December
31, 2020, (ii) Consolidated Statements of Operations for the three
and nine months ended September 30, 2021 and 2020, (iii)
Consolidated Statements of Comprehensive Loss for the three and
nine months ended September 30, 2021 and 2020, (iv) Consolidated
Statements of Cash Flows for the nine months ended September 30,
2021 and 2020, and (v) Notes to Consolidated Financial
Statements.
|
| |
|
|
|
104
|
|
Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101).
|
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.
| |
LIQUIDMETAL TECHNOLOGIES, INC.
|
|
| |
(Registrant)
|
|
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|
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|
Date: November 15, 2021
|
/s/ Tony Chung
|
|
| |
Tony Chung
|
|
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Chief Executive Officer
|
|
| |
(Principal Executive Officer and Principal Financial Officer)
|
|
Liquidmetal Technologies (QB) (USOTC:LQMT)
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