Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Commission File No.  001-31332

LIQUIDMETAL TECHNOLOGIES, INC.

(Exact name of Registrant as specified in its charter)

20321 Valencia Circle

Lake Forest,, CA 92630

(Address of principal executive offices, zip code)

Registrant’s telephone number, including area code: (949) 635-2100635-2100 

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 NovemberAugust 6, 20202021 was 914,449,957.

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-partythird-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.

2.2.Basis of Presentation and Recent Accounting Pronouncements

The accompanying unaudited interim consolidated financial statements as of and for the three and ninesix months ended SeptemberJune 30, 2021 and June 30, 2020 and September 30, 2019 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.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 ninesix months ended SeptemberJune 30, 2020 2021 are not necessarily indicative of the results that may be expected for any future periods or the year ending December 31, 2020. 2021. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company's 20192020 Annual Report on Form 10-K10-K filed with the Securities and Exchange Commission (“SEC”) on March 10, 2020.9, 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 month periodssix months ended SeptemberJune 30, 2020 2021 and 2019.2020.

Fair

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 cash equivalents, and restricted cash approximate their carrying value due to their short maturities and are classified as Level 1 instruments within the fair value hierarchy.

3. 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“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 that is an affiliate ofin which our largest beneficial stockholder CEO and Chairman, Professor Lugee Li, (“Professor Li”).has a material, indirect, equity interest.

4. 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):

Income from these investments totaled $61$41 and $187$102 during the three and ninesix months ended SeptemberJune 30, 2021, respectively. Income from these investments totaled $58 and $126 during the three and six months ended June 30, 2020, respectively, and wasrespectively. Such amounts are included as a portion of interest and investment income on the Company’s consolidated statements of operations. There was no income for the same periods in 2019.

Based on the Company’s review of its debt securities that are individually in an unrealized loss position at SeptemberJune 30, 2020, 2021, it determined that the losses were primarily the result of current economic factors, impacting all global debt and equity markets, that are the result of the global COVID-19COVID-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 SeptemberJune 30, 2020, 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 SeptemberJune 30, 2020.2021.

5. Trade Accounts Receivable

Trade accounts receivable were comprised of the following:

During the three and nine month periods months ended SeptemberJune 30, 2020, 2021, the Company recorded an additional allowanceformally 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 $226accounts receivable and resulted in no impact to the Company's consolidated statements of operations for receivables related to products delivered to a customer at the end of 2019. The allowance is a result of financial uncertainties affecting the customer’s ability to make payments on outstanding invoices. The allowance was recorded as bad debt expense as a portion of selling, marketing, generalthree and administrative expenses.six months ended June 30, 2021.

6.Prepaid Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets totaled $600$232 and $322$465 as of SeptemberJune 30, 2020 2021 and December 31, 2019, 2020, respectively. Included within these totals are the following:

As of SeptemberJune 30, 2020, 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 $4 in receivables for allocated utility costs. As

7. Inventory

Inventory totaled $161 and $43 as of SeptemberJune 30, 2021 and December 31, 2020, interest and other receivablesrespectively. Included within these totals are comprised of $130 in interest receivable from investments in debt securities and $90 in receivables due under completed fixed asset sales (refer to Note 8 below).the following:

8. 8.Property and Equipment, net

Property and equipment consist of the following:

Depreciation expense for three and ninesix months ended SeptemberJune 30, 2020 2021 was $79$80 and $240,$160, respectively. Depreciation expense for three and ninesix months ended September 30, 2019 was $265 and $785, respectively. For the three and nine months ended SeptemberJune 30, 2020 $0was $81 and $0 of depreciation expense, respectively, was included in cost of sales and $79 and $240 was$161, respectively. Such amounts were included in selling, marketing, general, and administrative expenses respectively. For the three and nine months ended September 30, 2019, $24 and $75within Company’s consolidated statements of depreciation expense, respectively, was included in cost of sales and $241 and $710 was included in selling, marketing, general and administrative expenses, respectively.operations.

During the three and ninesix months ended SeptemberJune 30, 2020, the Company disposed of certain manufacturing equipment for gross proceeds of $110.$20. This resulted in a gain on disposal of $0$15 and $35 during the three and ninesix months ended SeptemberJune 30, 2020. SimilarNo such sales resulted in losses of $7 and $2occurred during the three and ninesix months ended SeptemberJune 30, 2019, respectively.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. As of September 30,During October 2020, the Company had received $510 in proceeds from the sale of this equipment, with the remaining $90 ofall amounts pertaining to the purchase price being recorded as a receivable within prepaid expenses and other current assets.

During October 2020, the remaining $90 of the purchase price waswere received, thus completing all elements of the purchase agreement for the equipment originally held for sale.

LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2020 and 2019

(numbers in thousands, except percentages, share and per share data)

(unaudited)

10. 10.Patents and Trademarks,Trademarks, net

Net patents and trademarks totaled $177$124 and $239$158 as of SeptemberJune 30, 2020, 2021 and December 31, 2019 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 $21$15 and $63$34 for the three and ninesix months ended SeptemberJune 30, 2020, 2021, respectively. This compares to $21 and $63$42 for the three and ninesix months ended SeptemberJune 30, 2019, 2020, respectively.