LIQUIDMETAL TECHNOLOGIES INC 10-K

Item 8. Financial Statements The financial statements required by this item can be found beginning on page 48 of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None. I tem 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and Vice President of Finance (Principal Financial Officer), we conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer (Principal Executive Officer) and Vice President of Finance (Principal Financial Officer) concluded that our disclosure controls and procedures were effective as of December 31, 2020 (the end of the period covered by this report). Changes in Internal Controls. 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 December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management’s Report on Internal Control over Financial Reporting. The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. As required by Section 404 of the Sarbanes-Oxley Act of 2002 and the related rule of the SEC, management assessed the effectiveness of the Company’s internal control over financial reporting using the Internal Control-Integrated Framework (2013) developed by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2020. Management has not identified any material weaknesses in the Company’s internal control over financial reporting as of December 31, 2020. I tem 9B. Other Information None. 26 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance Set forth below is a table identifying our directors and executive officers as of March 5, 2021: Name Age Position Lugee Li 60 Chairman of the Board, President and Chief Executive Officer Bruce Bromage 67 Chief Operating Officer Bryce Van 37 Vice President- Finance Isaac Bresnick 36 Executive Administrator and Director Abdi Mahamedi 57 Vice Chairman of the Board Vincent Carrubba 60 Director Tony Chung 51 Director Professor Lugee Li (“ Professor Li ”) was elected by our board of directors to serve as our Chief Executive Officer in December 2016. Pursuant to the terms of the 2016 Purchase Agreement, Professor Li was appointed as a member of our board of directors in March 2016 and became Chairman of our board of directors in October 2016. Professor Li is the founder, Chairman, and majority shareholder of DongGuan Eontec Co. Ltd. (referred to above as “Eontec”), a Hong Kong company listed on the Shenzen Stock Exchange engaged in the production of precision die-cast products and the research and development of new materials. Professor Li founded Eontec in 1993 and has served as its Chairman since that date. At Eontec, Professor Li is responsible for strategic development and research and development. Professor Li is also the founder and sole shareholder of Leader Biomedical Limited, a Hong Kong company engaged in the supply of biomaterials and surgical implants. Professor Li serves as an analyst for the Institute of Metal Research at the Chinese Academy of Sciences and serves part-time as a professor at several universities in China. Professor Li owns Liquidmetal Technology Limited, a Hong Kong company and the investor in our 2016 Purchase Agreement. Bruce Bromage was elected by our board of directors to serve as Chief Operating Officer in October 2017 after serving as Executive Vice President of Business Development and Operations with our Company since November 2012. From April 2002 to August 2010, Dr. Bromage served as Executive Vice President and General Manager of Symmetricom, a publicly traded provider of products for communications infrastructure and systems and was an officer of the company. Responsibilities during his eight years with Symmetricom included Corporate Strategy, M&A Integration, Information Technology, and General Management of the Timing, Test and Measurement Division and the Technology Realization Center. Prior to Symmetricom, Dr. Bromage held senior executive positions with two high-technology startups and managed Strategic Business Development with Hewlett Packard. Dr. Bromage received his Ph.D. in Cognitive Psychology from the University of California, Santa Barbara in 1981 and has completed executive programs with the Stanford Graduate School of Business. Bryce Van was appointed by our board of directors to serve as our Vice President of Finance and Principal Financial and Accounting Officer in August 2017. Previously, Mr. Van served as our Corporate Controller since joining the Company in August 2013. Mr. Van is a Certified Public Accountant and served seven years at PwC as an Audit Manager for a mix of large and small-cap SEC registrants. He received his B.A. degree in Business Economics from University of California Santa Barbara in 2006. Isaac Bresnick began serving on our board of directors in October 2016 and was appointed to the role of Executive Administrator within the Company in November 2016. From October 2014 to November 2016, Mr. Bresnick served as Legal and Regulatory Affairs Director for the Leader Biomedical Group, a private company based in Hong Kong and operating from Amsterdam, the Netherlands. At Leader Biomedical, Mr. Bresnick was responsible for the direction and management of legal affairs, regulatory affairs, quality control and quality assurance, as well as for advising executive management of affiliated companies. From July 2013 to October 2017, Mr. Bresnick served as Director of aap Joints GmbH, a private company in Berlin, Germany. From January 2013 through June 2013, Mr. Bresnick provided full-time consulting services to AAP Orthopedics Ltd., a BVI company. Mr. Bresnick received his J.D. from the University of Connecticut School of Law in 2013, and his B.S. in Industrial Design from the University of Bridgeport in 2008. After completion of his undergraduate studies and continuing through his enrollment at the University of Connecticut, Mr. Bresnick worked as Senior Arrangements Designer for Electric Boat Corporation, a subsidiary of General Dynamics, from June 2008 to December 2012. 27 Table of Contents Abdi Mahamedi has served as a director since May 2009 and served as Chairman of the board of directors from March 2010 through October 2016. Since 1987, Mr. Mahamedi has served as the President and Chief Executive Officer of Carlyle Development Group of Companies (“CDG”), which develops and manages residential and commercial properties in the United States on behalf of investors worldwide. In his role as President and Chief Executive Officer, Mr. Mahamedi evaluates and supervises all of the investment activities and management personnel of CDG. Prior to joining CDG, Mr. Mahamedi founded Emanuel Land Company, a subsidiary of Emanuel & Company, a Wall Street investment banking firm, and served as a managing director for Emanuel Land Company from 1986 to 1987. In 1983, Mr. Mahamedi received his B.S.E. degree in Civil and Structural Engineering from the University of Pennsylvania, and in 1984 he received his M.S.E. degree in Civil and Structural Engineering from the University of Pennsylvania. Vincent Carru b ba began serving on our board of directors in October 2016. From September 2014 through the present, Mr. Carrubba has served as the CEO of Admiral Composite Technologies Inc. (“Admiral”). During his time at Admiral, Mr. Carrubba has helped to develop new technologies for environmentally responsible and innovative building materials which represent Admiral’s product lines. Mr. Carrubba has also served as Admiral’s Chairman since its inception in 2009. From September 2014 through the present, Mr. Carrubba has served as the CEO of Asia Sourcing & Communications USA Inc. and he has served as its Chairman since its inception in 2013. From 2002 through August 2014, Mr. Carrubba served as the Director of research and development for Interdynamics Inc. and IDQ Holdings, where he was responsible for all research and development and quality control matters, including the management of engineering, legal, patenting, regulatory, insurance and consumer relations matters. From 1989 through 1992, Mr. Carrubba designed and installed the New York Stock Exchange telecommunications and information technology systems. Mr. Carrubba has held engineering and executive positions with Xerox, General Electric, Bristol-Meyers Squibb and AT&T and he is the inventor of several patents related to telecommunications, professional tools and consumer products. Mr. Carrubba received a Bachelor of Arts degree in Engineering Science and a Bachelor of Science Degree in Mechanical Engineering from Columbia University’s School of Engineering and Applied Science (SEAS) in 1982. Tony Chung was appointed to our board of directors in August 2017. Mr. Chung had previously served as the Company’s Chief Financial Officer from December 2008 to August 2017. Prior to joining the Company, he was the Chief Financial Officer of Solarcity, currently a division of Tesla Inc., that provides advanced solar technology solutions. Mr. Chung currently serves as the Managing Director of Baypoint Ventures, a technology investment fund. Mr. Chung is an Attorney at Law and received a B.S. degree in business from UC Berkeley and a J.D. Degree from PCU Law School. Audit Committee We have a separately-designated standing Audit Committee of our board of directors (the “Audit Committee”) established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Mr. Carrubba serves as the chairman, and Mr. Mahamedi and Mr. Chung serve as the other members of, the Audit Committee. Our board of directors has determined that Mr. Carrubba, Mr. Mahamedi, and Mr. Chung are “independent directors” as defined by the rules of The NASDAQ Stock Market, Inc. applicable to members of an audit committee and Rule 10A-3(b)(i) under the Exchange Act. Our board of directors has deemed Mr. Chung to be qualified as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K and also demonstrates “financial sophistication” as defined by the rules of The NASDAQ Stock Market, The Audit Committee is appointed by our board of directors to assist our board of directors in monitoring the integrity of our financial statements, our compliance with legal and regulatory requirements, and the independence and performance of our internal and external auditors. The Audit Committee carries out these responsibilities through regular meetings with (1) our management team, (2) our internal auditors, with formal approval of fees and scope of services, and (3) our external auditors, with formal approval of the scope of services, fees, and quarterly independence assessments. The Audit Committee maintains open, direct, lines of communication with both the internal and external audit functions to further support them in their corporate governance efforts. The results of services performed by both our internal and external audit functions are reported directly to the Audit Committee. Section 16(a) B eneficial O wnership R eporting C ompliance Section 16(a) of Exchange Act requires the Company’s directors and officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file initial reports of ownership and reports of changes in ownership with the SEC. Such persons also are required to furnish the Company with copies of all Section 16(a) reports they file. Based solely on its review of the copies of such reports received by it with respect to fiscal year 2020 or written representations from certain reporting persons, the Company believes that all filing requirements applicable to its directors and officers and persons who own more than 10% of a registered class of the Company’s equity securities have been complied with, on a timely basis, for fiscal year 2020. 28 Table of Contents Code of Ethics Our board of directors has adopted a written Code of Ethics for Chief Executive Officer and Senior Financial and Accounting Officers that applies to our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or Controller, or persons performing similar functions. A current copy of the code is filed as an exhibit to this report on Form 10-K and is also available on our website, www.liquidmetal.com , in the “Investors” section. In addition, we intend to post on our website, www.liquidmetal.com , all disclosures that are required by law concerning any amendments to, or waivers from, any provision of the Code of Ethics for Chief Executive Officer and Senior Financial and Accounting Officers. Item 11. Executive Compensation Executive Benefits and Perquisites Set forth below is information regarding compensation earned by or paid or awarded to the following executive officers of the Company during the year ended December 31, 2020: (i) Professor Li, our Chairman, President and Chief Executive Officer; (ii) Bruce Bromage, our Chief Operating Officer; (iii) Bryce Van, our Vice President of Finance, and (iv) Isaac Bresnick, our Executive Administrator. These persons are hereafter referred to as our “named executive officers.” The identification of such named executive officers is determined based on the individual’s total compensation for the year ended December 31, 2020, as reported below in the Summary Compensation Table. Summary Compensation Table The following table sets forth for each of the named executive officers: (i) the dollar value of base salary and bonus earned during the years ended December 31, 2020 and 2019 (ii) the aggregate grant date fair value of stock and option awards granted during 2020 and 2019, computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 (R); (iii) the dollar value of earnings for services pursuant to awards granted during 2020 and 2019 under non-equity incentive plans; (iv) non-qualified deferred compensation earnings during 2020 and 2019; (v) all other compensation for 2020 and 2019; and, finally, (vi) the dollar value of total compensation for 2020 and 2019. Name and Principal Position Year Salary Bonus Stock Awards Option Awards Total Lugee Li, 2020 $ - $ - $ - $ - $ - Chairman , President and Chief Executive Officer 2019 $ - $ - $ - $ - $ - Bruce Bromage, 2020 $ 291,000 $ - $ - $ - $ 291,000 Chief Operating Officer 2019 $ 291,000 $ 98,000 $ - $ - $ 389,000 Bryce Van, 2020 $ 245,000 $ - $ - $ - $ 245,000 Vice President- Finance 2019 $ 245,000 $ 78,000 $ - $ - $ 323,000 Isaac Bresnick, 2020 $ 154,000 $ - $ - $ - $ 154,000 Executive Administrator 2019 $ 154,000 $ 64,000 $ - $ - $ 218,000 29 Table of Contents Outstanding Equity Awards at 20 20 Fiscal Year-End The following table sets forth information on outstanding option and stock awards held by the named executive officers at December 31, 2020, including the number of shares underlying both exercisable and un-exercisable portions of each stock option as well as the exercise price and expiration date of each outstanding option. Option Awards Name Number of Securities Underlying Unexercised Options Exercisable Number of Securities Underlying Unexercised Options Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options Option Exercise Price Option Expiration Date Lugee Li 641,667 58,333 (1) - $ 0.13 5/4/2026 Bruce Bromage 1,335,192 - (2) - $ 0.08 2/5/2023 1,704,500 - (3) - $ 0.29 2/5/2024 1,500,000 - (4) - $ 0.14 1/28/2025 1,450,000 50,000 (5) - $ 0.07 2/17/2026 240,000 - (6) - $ 0.23 2/7/2027 1,620,000 2,430,000 (10) - $ 0.14 11/15/2028 Bryce Van 90,000 - (7) - $ 0.15 10/23/2023 300,000 - (3) - $ 0.29 2/5/2024 165,000 - (4) - $ 0.14 1/28/2025 231,000 10,500 (5) - $ 0.07 2/17/2026 120,000 - (6) - $ 0.23 2/7/2027 973,056 156,944 (9) - $ 0.24 5/10/2028 Isaac Bresnick 560,000 140,000 (8) - $ 0.25 12/13/2026 240,000 - (6) - $ 0.23 2/7/2027 (1) The shares underlying these grants vest 20% following the first anniversary of the grant date of May 4, 2016, and on a monthly basis following such date for the remaining four years thereof. (2) The shares underlying these grants vest 20% following the first anniversary of the grant date of February 6, 2013, and on a monthly basis following such date for the remaining four years thereof. (3) The shares underlying these grants vest 20% following the first anniversary of the grant date of February 5, 2014, and on a monthly basis following such date for the remaining four years thereof. (4) The shares underlying these grants vest 20% following the first anniversary of the grant date of January 27, 2015, and on a monthly basis following such date for the remaining four years thereof. (5) The shares underlying these grants vest 20% following the first anniversary of the grant date of February 17, 2016, and on a monthly basis following such date for the remaining four years thereof. (6) The shares underlying these grants vest 33.33% following the first anniversary of the grant date of February 7, 2017, and on a monthly basis following such date for the remaining two years thereof. (7) The shares underlying these grants vest 20% following the first anniversary of the grant date of October 23, 2013, and on a monthly basis following such date for the remaining four years thereof. (8) The shares underlying these grants vest 20% following the first anniversary of the grant date of December 13, 2016, and on a monthly basis following such date for the remaining four years thereof. (9) The shares underlying these grants vest 33.33% following the first anniversary of the grant date of May 10, 2018, and on a monthly basis following such date for the remaining two years thereof. (10) The shares underlying these grants vest 20% following the first anniversary of the grant date of November 15, 2018, 20% on the second anniversary of the grant date, and 60% on the third anniversary of the grant date. 30 Table of Contents Employment Agreements and Change of Control Agreement On March 10, 2016, the Company amended its Change of Control Agreements with named executive officers. As so amended, the Change of Control Agreements provide that if the executive officer’s employment with the Company is terminated without cause during the one-year period after a change of control of the Company, then the terminated officer will receive a lump sum severance compensation in an amount equal to twelve months of his then-current base salary. The named executive officers will each also be entitled to the above-described severance compensation in the event he terminates his own employment within one year after a change of control because of a salary decrease, assignment to a lower-level position or a required move of more than 25 miles. In addition to the above-described severance compensation, upon any termination described in this paragraph, all unvested stock options related to these officers will automatically and immediately vest and shall thereafter be exercisable in accordance with the terms and provisions of the applicable award agreements. “Change of control” is defined in the Change of Control Agreements, with certain exceptions, as a merger of the Company with a third-party, the sale of all or substantially all of the Company’s assets, the acquisition by a single person or group of more than 50% of the combined voting power of the Company’s outstanding securities. “Cause” is defined in the Change of Control Agreements to include fraud, embezzlement, dishonesty, material harm to the Company, or an uncured failure to adequately perform job duties, among other things. On November 15, 2018, the Company entered into an Employment Agreement with Bruce Bromage, the Company’s Chief Operating Officer (the “Bromage Employment Agreement”). The Bromage Employment Agreement has a term of three years and will continue thereafter on an “at-will” basis until terminated by either the Company or Mr. Bromage upon 30 days’ prior written notice. The Bromage Employment Agreement provides for an annual base salary of $291,000 plus bonuses at the discretion of the Company’s board of directors. The agreement provides that the Company can terminate Mr. Bromage’s employment at any time and for any reason, provided that if his employment is terminated without “Cause” (as specifically defined in the agreement), then he will continue to be entitled to his base salary and health and welfare benefits for a period of twelve months after termination, and his unvested equity awards (to the extent they would have vested during the twelve-month period after termination)will immediately vest and become exercisable until the earlier of two years after vesting or the scheduled expiration date of the award. In the event that Mr. Bromage terminates his own employment within two years after a change in control of the Company for various “Good Reason Events” (as specifically defined in the agreement), including a material change in compensation or duties, the Company will also be obligated to pay him the same severance compensation that would be applicable to a termination without “Cause”. The Bromage Employment Agreement provides that Mr. Bromage will not be entitled to any severance compensation if he voluntarily leaves the employment of the Company or is terminated for “Cause”, and severance payments will cease if he violates certain restrictive covenants in the agreement. On November 15, 2018, the Company entered into an Employment Agreement with Bryce Van, the Company’s Vice President of Finance (the “Van Employment Agreement”). The Van Employment Agreement has a term of three years, subject to automatic extension on a month-to-month after the expiration of the initial three-year term. The Van Employment Agreement provides for an annual base salary of $245,000 plus bonuses at the discretion of the Company’s Board of Directors. The agreement provides that the Company can terminate Mr. Van’s employment at any time and for any reason, provided that if his employment is terminated without “Cause” (as specifically defined in the agreement), then he will continue to be entitled to his base salary and health and welfare benefits for a period of twelve months after termination, and his unvested equity awards (to the extent they would have vested during the twelve-month period after termination) will immediately vest and become exercisable until the earlier of two years after vesting or the scheduled expiration date of the award. In the event that Mr. Van terminates his own employment within two years after a change in control of the Company for various “Good Reason Events” (as specifically defined in the agreement), including a material change in compensation or duties, the Company will also be obligated to pay him the same severance compensation that would be applicable to a termination without “Cause”. The Van Employment Agreement provides that Mr. Van will not be entitled to any severance compensation if he voluntarily leaves the employment of the Company or is terminated for “Cause”, and severance payments will cease if he violates certain restrictive covenants in the agreement. Professor Li does not have an employment agreement or change of control agreement with the Company. 31 Table of Contents Potential Payments Upon Termination or Change in Control The following table and summary set forth estimated potential payments the Company would be required to make to our named executive officers upon termination of employment or change in control of the Company, pursuant to each executive’s employment agreement or change of control agreement in effect at year end. Except as otherwise indicated, the table assumes that the triggering event occurred on December 31, 2020. Name Benefit Termination without Cause ($) Death ($) Termination Following Change of Control ($) Lugee Li (1) Salary - - - Bonus - - - Equity Acceleration - - - Benefits Continuation - - - Total Value - - - Bruce Bromage Salary 291,000 - 291,000 Bonus 98,000 - 98,000 Equity Acceleration 186,554 - 186,554 Benefits Continuation 18,738 - 18,738 Total Value 594,292 - 594,292 Bryce Van Salary 245,000 - 245,000 Bonus 78,000 - 78,000 Equity Acceleration 24,382 - 24,382 Benefits Continuation 8,978 - 8,978 Total Value 356,360 - 356,360 Isaac Bresnick (2) Salary - - 154,000 Bonus - - 64,000 Equity Acceleration - - 27,330 Benefits Continuation - - 27,091 Total Value - - 272,421 (1) Professor Li does not have an employment agreement, nor is he currently receiving any form of compensation from the Company. (2) Severance amounts also apply if Mr. Bresnick terminates own employment within one year after a change of control because of a salary decrease, assignment to a lower-level position or a required move of more than 25 miles. 401(k) Savings Plan We have adopted a tax-qualified employee savings and retirement plan, or 401(k) plan that covers all of our employees. Pursuant to our 401(k) plan, participants may elect to reduce their current compensation, on a pre-tax basis, by an amount up to the statutorily prescribed annual limit and have the amount of the reduction contributed to the 401(k) plan. The 401(k) plan permits us, in our sole discretion, to make additional employer contributions to the 401(k) plan. However, we do not currently make employer contributions to the 401(k) plan and may not do so in the future. As such, contributions by employees or by us to the 401(k) plan, and the income earned on plan contributions, are not taxable to employees until withdrawn from the 401(k) plan, and we can deduct our contributions, if any, at the time they are made. 32 Table of Contents Director Compensation The following table sets forth information regarding the compensation received by each of our non-employee directors serving during the year ended December 31, 2020: Name Fees Earned or Paid in Cash ($) Stock Awards($) Option Awards ($) Non-Equity Incentive Plan Compensation ($) Nonqualified Deferred Compensation Earnings ($) All Other Compensation ($) Total ($) Abdi Mahamedi $ 15,000 - $ - - - - $ 15,000 Vincent Carrubba $ 40,000 - $ - - - - $ 40,000 Tony Chung $ 15,000 - $ - - - - $ 15,000 Our non-employee directors receive certain compensation for their services and are reimbursed for expenses incurred in attending board and committee meetings, as determined by the board of directors. Mr. Currubba received a base fee of $40,000 during 2020. Mr. Mahamedi and Mr. Chung each received an annual base fee of $15,000 during 2020. All fees are paid quarterly in arrears. We have a 2012 Equity Incentive Plan and a 2015 Equity Incentive Plan pursuant to which our non-employee directors are entitled to receive stock options. Each non-employee directors may be entitled to receive options on a case by case basis, in an amount determined by our board of directors or its compensation committee in its respective discretion, to purchase shares of common stock upon initial election to the board of directors. In determining the number of options granted to a director upon initial election, the compensation committee uses its judgment and, consistent with our compensation objectives, maintains the flexibility necessary to recruit qualified and experienced directors. All options granted under the plans have an exercise price equal to the fair market value of our common stock on the date of the grant. These stock options have a 10-year term and are exercisable pursuant to an equal 3-year vesting schedule, and remain exercisable for certain periods of time after a person is no longer a director. No director who is an employee will receive separate compensation for services rendered as a director. However, our employee directors are eligible to participate in our 2012 and 2015 Equity Incentive Plans. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Share holder Matters The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 5, 2021 by: ● each person known by us to be a beneficial owner of more than 5.0% of our outstanding common stock; ● each of our directors; ● each of our named executive officers; and ● all of our directors and executive officers as a group. The number and percentage of shares beneficially owned is determined under the rules of the SEC and is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership for each individual includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire beneficial ownership of within 60 days of March 5, 2021 through the exercise of any stock option or other right. Unless otherwise indicated in the footnotes, each person has sole voting and investment power with respect to the shares shown as beneficially owned. A total of 914,449,957 shares of our common stock were issued and outstanding as of March 5, 2021. Unless otherwise indicated, the address of all directors and named executive officers is 20321 Valencia Circle, Lake Forest, California 92630. 33 Table of Contents Common Stock Name of Beneficial Owner Number of Shares(1) Percent of Class(1) Directors and Named Executive Officers Lugee Li 417,091,959 (2) 45.1 % Abdi Mahamedi 16,228,336 (3) 1.8 % Vincent Carrubba 1,030,000 (4) * Tony Chung 340,250 (5) * Bruce Bromage 7,913,722 (6) * Bryce Van 1,952,333 (7) * Isaac Bresnick 823,333 (8) * All directors and executive officers as a group (7 persons) 445,379,933 47.4 % 5% Shareholders Liquidmetal Technology Limited 415,066,809 (9) 44.9 % Room 906, Tai Tung Building, 8 Fleming Rd Wanchai, Hong Kong *Less than one percent (1) Shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assumes the exercise or conversion of all options, warrants and other securities convertible into common stock, beneficially owned by such person or entity currently exercisable or exercisable within 60 days of March 5, 2021. Shares issuable pursuant to the exercise of stock options and warrants exercisable within 60 days of March 6, 2020, or securities convertible into common stock within 60 days of March 5, 2021, are deemed outstanding and held by the holder of such shares of common stock, options, warrants, or other convertible securities, for purposes of computing the percentage of outstanding common stock beneficially owned by such person, but are not deemed outstanding for computing the percentage of outstanding common stock beneficially owned by any other person. The percentage of common stock beneficially owned is based on 914,449,957 shares of common stock outstanding as of March 5, 2021. (2) Includes: (a) 405,000,000 shares of common stock held of record by Liquidmetal Technology Limited. Professor Li is the majority owner, officer, and director of Liquidmetal Technology Limited and has the power to direct the voting and disposition of such shares; (b) 10,066,809 shares issuable pursuant to a Warrant held by Liquidmetal Technology Limited which is exercisable currently or within 60 days of March 5, 2021. Professor Li is the majority owner, officer, and director of Liquidmetal Technology Limited and has the power to direct the voting and disposition of such shares; (c) 1,360,150 shares of common stock held of record by Professor Li; and (d) 665,000 shares issuable pursuant to outstanding stock options which are exercisable currently or within 60 days of March 5, 2021. Does not include 35,000 shares that are issuable pursuant to outstanding stock options, held by Professor Li, that are not exercisable currently or within 60 days of March 5, 2021. (3) Includes: (a) 13,858,908 shares of common stock held of record by Carlyle Holdings, LLC. Mr. Mahamedi has the power to direct the voting and disposition of such shares as the president and sole shareholder of Carlyle Development Group, Inc., which is a managing member of Carlyle Holdings, LLC; 34 Table of Contents (b) 759,428 shares of common stock held of record by Mr. Mahamedi; and (c) 1,610,000 shares issuable pursuant to outstanding stock options which are exercisable currently or within 60 days of March 5, 2021. Does not include 60,000 shares that are issuable pursuant to outstanding stock options that are not exercisable currently or within 60 days of March 5, 2021. (4) Includes 1,030,000 shares issuable pursuant to outstanding stock options, held of record by Mr. Carrubba, which are exercisable currently or within 60 days of March 5, 2021. Does not include 176,667 shares that are issuable pursuant to outstanding stock options that are not exercisable currently or within 60 days of March 5, 2021. (5) Includes: (a) 85,250 shares of common stock held of record by Mr. Chung; and (b) 255,000 shares issuable pursuant to outstanding stock options which are exercisable currently or within 60 days of March 5, 2021. Does not include 60,000 shares that are issuable pursuant to outstanding stock options that are not exercisable currently or within 60 days of March 5, 2021. (6) Includes: (a) 14,030 shares of common stock held of record by Mr. Bromage; and (b) 7,899,692 shares issuable pursuant to outstanding stock options which are exercisable currently or within 60 days of March 5, 2021. Does not include 2,430,000 shares that are issuable pursuant to outstanding stock options that are not exercisable currently or within 60 days of March 5, 2021. (7) Includes 1,952,333 shares issuable pursuant to outstanding stock options, held of record by Mr. Van, which are exercisable currently or within 60 days of March 5, 2021. Does not include 94,167 shares that are issuable pursuant to outstanding stock options that are not exercisable currently or within 60 days of March 5, 2021. (8) Includes 823,333 shares issuable pursuant to outstanding stock options, held of record by Mr. Bresnick, which are exercisable currently or within 60 days of March 5, 2021. Does not include 176,667 shares that are issuable pursuant to outstanding stock options that are not exercisable currently or within 60 days of March 5, 2021. (9) Includes: (a) 405,000,000 shares of common stock held of record by Liquidmetal Technology Limited; and (b) 10,066,809 shares issuable pursuant to a Warrant held by Liquidmetal Technology Limited which is exercisable currently or within 60 days of March 5, 2021. 35 Table of Contents Equity Compensation Plan Information Our executive officers, directors, and all of our employees are allowed to participate in our equity incentive plans. We believe that providing them with the ability to participate in such plans provides them with a further incentive towards ensuring our success and accomplishing our corporate goals. The following table provides information regarding the securities authorized for issuance under our equity compensation plans as of December 31, 2020: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants, and rights [a] Weighted-average exercise price of outstanding options, warrants, and rights [b] Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column [a]) [c] Equity compensation plans approved by stockholders 5,609,192 $ 0.20 14,498,555 Equity compensation plans not approved by stockholders 12,341,667 0.16 17,336,202 Total 17,950,859 $ 0.17 31,834,757 The number of securities, and types of plans available for future issuances of stock options, as of December 31, 2020 was as follows: Plan Name Options and Warrants for Common Shares Authorized Exercised Outstanding Available 2012 Equity Incentive Plan 30,000,000 9,892,253 5,609,192 14,498,555 2015 Equity Incentive Plan 40,000,000 10,322,131 12,341,667 17,336,202 Total Stock Options 70,000,000 20,214,384 17,950,859 31,834,757 2012 Equity Incentive Plan On June 28, 2012, the Company adopted the 2012 Equity Incentive Plan (“2012 Plan”), with the approval of the shareholders, which provided for the grant of stock options to officers, employees, consultants and directors of the Company and its subsidiaries. The purpose of the 2012 Plan is to advance the interests of our shareholders by enhancing our ability to attract, retain, and motivate persons who make or are expected to make important contributions to the Company and its subsidiaries by providing such persons with equity ownership opportunities and performance-based incentives, thereby better aligning their interests with those of our shareholders. 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, it 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 our common stock may be granted under the 2012 Plan, and all options granted under this plan had exercise prices that were equal to the fair market value on the date of grant. There were 5,609,192 outstanding options or stock awards at a weighted average price of $0.20 under the 2012 Plan as of December 31, 2020. There were 5,534,859 options exercisable and 9,892,253 shares had been issued upon exercise of options under the 2012 Plan as of December 31, 2020. 2015 Equity Incentive Plan On January 27, 2015, the Company adopted the 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. The purpose of the 2015 Plan is to advance the interests of our shareholders by enhancing our ability to attract, retain, and motivate persons who make or are expected to make important contributions to the Company and its subsidiaries by providing such persons with equity ownership opportunities and performance-based incentives, thereby better aligning their interests with those of our shareholders. The 2015 Plan provides for the granting to employees and consultants of non-statutory stock options. In addition, it 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 40,000,000 shares of our common stock may be granted under the 2015 Plan, and all options granted under this plan had exercise prices that were equal to the fair market value on the date of grant. 36 Table of Contents There were 12,341,667 outstanding options or stock awards at a weighted average price of $0.16 under the 2015 Plan as of December 31, 2020. There were 9,133,058 options exercisable and 10,322,131 shares had been issued upon exercise of options under the 2015 Plan as of December 31, 2020. Item 13. Certain Relationships and Related Transactions, and Director Independence Transactions with Related Persons 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 December 31, 2020, Professor Li is a greater-than 5% beneficial owner of the Company and serves as the Company’s Chairman, President, and Chief Executive Officer. Equipment and services procured from Eontec, and their affiliates, were $478 and $31 during the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020 and 2019, the Company had outstanding payables to Eontec, and their affiliates, of $118 and $0, respectively. Review, Approval or Ratification of Transactions with Related Persons Our policy is to require that any transaction with a related party required to be reported under applicable SEC rules, other than compensation-related matters, be reviewed and approved or ratified by the Audit Committee. The Audit Committee has not adopted specific procedures for review of, or standards for approval of, these transactions, but instead reviews such transactions on a case by case basis. Our policy is to require that all compensation-related matters be recommended for board of directors approval by the Compensation Committee. During the last fiscal year no transactions with a related party occurred that required a waiver of this policy and no transactions with a related party occurred in which we did not follow this policy. D irector Independence Our board of directors currently has five members – Lugee Li, Isaac Bresnick, Abdi Mahamedi, Vincent Carrubba, and Tony Chung. Our board of directors has determined that Mr. Mahamedi, Mr. Carrubba, and Mr. Chung are “independent directors” as such term is defined by the rules of the NASDAQ Stock Market, Inc. In addition, all of the members of our Compensation Committee, Corporate Governance and Nominating Committee, and Audit Committee are “independent directors” under the rules of the NASDAQ Stock Market, Inc. and the SEC applicable to members of such committees. Item 14. Principal Accountant Fees and Services Audit Fees for 20 20 and 201 9 The following table summarizes the aggregate fees billed to us by SingerLewak LLP, our principal accountants, for professional services during the years ended December 31, 2020 and December 31, 2019: Fees 2020 2019 Audit Fees (1) $ 142,409 $ 194,039 All Other Fees - - Total Fees $ 142,409 $ 194,039 (1) Audit Fees. Fees for audit services billed in 2020 consisted of: • Progress billings for the audits of the Company’s financial statements for 2019 and 2020; and • Review of the Company’s quarterly financial statements for 2020. 37 Table of Contents Fees for audit services billed in 2019 consisted of: • Progress billings for the audits of the Company’s financial statements for 2018 and 2019; and • Review of the Company’s quarterly financial statements for 2019. Audit Committee Pre-Approval Policies Our Audit Committee pre-approves all audit and permissible non-audit services provided by our independent public accountants on a case-by-case basis. Our Audit Committee approved 100% of the services performed by SingerLewak LLP in 2020 and 2019 and no non-audit related services were provided by SingerLewak LLP in either of 2020 or 2019. 38 Table of Contents PART IV Item 15. Exhibits , Financial Statement Schedules (a) The following documents are filed as a part of this report: 1. Financial Statements . See the Index to Consolidated Financial Statements on page 43. 2. Exhibits . See Item 15(b) below. (b) Exhibits . The exhibits listed on the Exhibit Index, which appears at the end of this Item 15, are filed as part of, or are incorporated by reference into, this report. 39 Table of Contents EXHIBIT INDEX Exhibit Number Document Description 3.1 Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on May 20, 2016 ). 3.2 Amended and Restated ByLaws of Liquidmetal Technologies, Inc. ( incorporated by reference to Exhibit 3.1 to the Form 8-K filed on October 5 , 201 5 ). 4.1 Reference is made to Exhibits 3.1 and 3.2 . 4.2 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.2 to the Form 10-Q filed on August 14, 2003). 4.3 Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as amended. 10.1 Amended and Restated License Agreement, dated September 1, 2001, between Liquidmetal Technologies, Inc. and California Institute of Technology (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1 filed on November 20, 2001 (Registration No. 333-73716)). 10.2** Master Transaction Agreement, dated August 5, 2010, among Apple Inc., Liquidmetal Technologies, Inc., Liquidmetal Coatings, LLC and Crucible Intellectual Property, LLC (incorporated by reference from Exhibit 10.3 to the Form 10-Q filed on November 4, 2010). 10.3* Liquidmetal Technologies, Inc. 2012 Equity Incentive Plan ( incorporated by reference from Exhibit 10.1 to the Form 8-K filed on July 2, 2012). 10.4 Amendment Number One to Master Transaction Agreement and Other Transaction Documents, dated June 15, 2012, among Apple Inc., Liquidmetal Technologies, Inc., Liquidmetal Coatings, LLC and Crucible Intellectual Property, LLC. ( incorporate d by reference from Exhibit 10.41 to the Registration Statement on Form S-1 (Amend m ent No. 1) filed on August 3, 2012 ). 10.5 Amendment Number Two to Master Transaction Agreement and Other Transaction Documents, dated May 19, 2014, among Apple Inc., Liquidmetal Technologies, Inc., Liquidmetal Coatings, LLC and Crucible Intellectual Property, LLC. ( incorporated by reference from Exhibit 10.1 on the Form 10-Q filed on August 1 2 , 201 4 ). 10.6 Amended and Restated VPC Sublicense Agreement, dated May 20, 2014, between Liquidmetal Technologies, Inc. and Visser Precision Cast, LLC. ( incorporated by reference from Exhibit 10.2 to the Form 8-K filed on May 20, 2014). 10.7 Amended and Restated Registration Rights Agreement, dated May 20, 2014, between Liquidmetal Technologies, Inc. and Visser Precision Cast, LLC. ( incorporated by reference from Exhibit 10.3 to the Form 8-K filed on May 20, 2014). 10.8 Amended and Restated Mutual Nondisclosure Agreement, dated May 20, 2014, between Liquidmetal Technologies, Inc. and Visser Precision Cast, LLC. ( incorporated by reference from Exhibit 10.4 to the Form 8-K filed on May 20, 2014). 10.9 Liquidmetal Technologies, Inc. 2015 Equity Incentive Plan ( incorporated by reference from Exhibit 10.1 to the Form 8-K filed on February 9, 2015 ). 40 Table of Contents 10.10 Amendment Number Three to Master Transaction Agreement and Other Transaction Documents, dated June 17, 2015, among Apple Inc., Liquidmetal Technologies, Inc., Liquidmetal Coatings, LLC and Crucible Intellectual Property, LLC ( incorporated by reference from Exhibit 10.1 on the Form 10-Q filed on August 6 , 201 5 ) . 10.11 Form of Director and Officer Indemnification Agreement (incorporated by reference from Exhibit 10. 1 to the Form 8-K filed on October 5, 2015 ). 10.12 Form of Amended and Restated Director and Officer Indemnification Agreement (incorporated by reference from Exhibit 10. 2 to the Form 8-K filed on October 5, 2015 ). 10.13 Form of Amendment to Change of Control Agreement ( incorporated by reference from Exhibit 10. 3 to the Form 8-K filed on February 9, 2016 ). 10.14 Stock Purchase Warrant, dated March 10, 2016, issued to Liquidmetal Technology Limited by Liquidmetal Technologies, Inc. ( incorporated by reference from Exhibit 4 .1 to the Form 8-K filed on March 14, 2016 ). 10.15 Securities Purchase Agreement, dated March 10, 2016, between Liquidmetal Technologies, Inc. and Liquidmetal Technology Limited ( incorporated by reference from Exhibit 10 .1 to the Form 8-K filed on March 14, 2016 ). 10.16 Parallel License Agreement, dated March 10, 2016, between Liquidmetal Technologies, Inc. and DongGuan Eontec Co., Ltd. ( incorporated by reference from Exhibit 10.2 to the Form 8-K filed on March 14, 2016 ). 10.17 Form of Amendment of Change of Control Agreement ( incorporated by reference from Exhibit 10.4 to the Form 8-K filed on March 14, 2016 ). 10.18 Amendment to Securities Purchase Agreement, dated August 17, 2016, between Liquidmetal Technologies, Inc. and Liquidmetal Technology Limited ( incorporated by reference from Exhibit 10 .1 to the Form 8-K filed on August 17, 2016 ). 10.19* Employment agreement, dated November 15, 2018, between Liquidmetal Technologies, Inc. and Bruce Bromage ( incorporated by reference from Exhibit 10.1 to the Form 8-K filed on November 21, 2018 ). 10.20* Employment agreement, dated November 15, 2018, between Liquidmetal Technologies, Inc. and Bryce Van ( incorporated by reference from Exhibit 10.2 to the Form 8-K filed on November 21, 2018 ). 10.21 Standard Industrial/Commercial Multi-Tenant Lease – Net, dated January 23, 2020, between 20321 Valencia, LLC and MatterHackers, Inc. ( incorporated by reference from Exhibit 10.1 to the Form 8-K filed on January 29, 2020 ). 10.22 Business Development Agreement, dated January 31, 2020, between Liquidmetal Technologies, Inc. and Eutectix, LLC. ( incorporated by reference from Exhibit 10.1 to the Form 8-K filed on February 5, 2020 ). 21.1 Subsidiaries of the Registrant ( incorporated by reference from Exhibit 21.1 to the Registration Statement on S-1 filed July 18, 2012 ). 24.1 Power of Attorney relating to subsequent amendments (included on the signature page(s) of this report). 31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended. 31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended. 32.1 Certification pursuant to 18 U.S.C. Section 1350. 101 The following financial statements from Liquidmetal Technologies, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Shareholder’s Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements. * Denotes a management contract or compensatory plan or arrangement. ** Portions of this exhibit have been omitted pursuant to a confidential treatment request. Omitted information has been filed separately with the Securities and Exchange Commission. Item 1 6 . Form 10-K Summary None. 41 Table of Contents S IGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. By: /s/ Lugee Li Lugee Li President and Chief Executive Officer (Principal Executive Officer) Date: March 9, 2021 KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Lugee Li and Bryce Van and each of them, jointly and severally, his attorneys-in-fact, each with full power of substitution, for him in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Signature Title Date /s/ Lugee Li Lugee Li President, Chief Executive Officer and Director March 9, 2021 (Principal Executive Officer) /s/ Bryce Van Bryce Van Vice President of Finance March 9, 2021 (Principal Financial Officer and Principal Accounting Officer) /s/ Abdi Mahamedi Abdi Mahamedi Director March 9, 2021 /s/ Isaac Bresnick Isaac Bresnick Director March 9, 2021 /s/ Vincent Carrubba Vincent Carrubba Director March 9, 2021 /s/ Tony Chung Tony Chung Director March 9, 2021 Certifications provided as Exhibits. 42 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm 44 Consolidated Financial Statements: Consolidated Balance Sheets 45 Consolidated Statements of Operations 46 Consolidated Statements of Comprehensive Loss 47 Consolidated Statements of Shareholders’ Equity 48 Consolidated Statements of Cash Flows 49 Notes to Consolidated Financial Statements 50 43 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Liquidmetal Technologies, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Liquidmetal Technologies, Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Allowance for Doubtful Accounts As described in Notes 2 and 5 to the consolidated financial statements, the Company’s allowance for doubtful accounts reflects the Company’s judgment of the incurred loss exposure on its accounts receivable that are both probable and reasonable to estimate. The allowance for doubtful accounts was $234,000 as of December 31, 2020. Management determines the allowance for doubtful accounts based on aging of accounts receivable, historical write-offs, customer concentrations, customer creditworthiness and current industry and economic trends. The evaluation of these factors requires that management make significant judgments regarding these factors, which may significantly impact the estimated reserve. We identified the allowance for doubtful accounts as a critical audit matter as auditing management’s determination of qualitative factors, including probability and range of loss, involved a high degree of auditor judgment given the highly subjective nature of management’s judgement. Our audit procedures related to the Company’s qualitative factors applied to the allowance for accounts receivable included the following, among others: ● We obtained an understanding of management’s process and methodology used to develop the estimate of allowance for doubtful accounts. ● We evaluated the reasonableness of qualitative factor judgments assessed by management and their correlation to potential losses. ● We inspected communication with customers and available third-party data to help develop an independent expectation. /s/ SingerLewak LLP We have served as the Company's auditor since 2011. Los Angeles, California March 9, 2021 44 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, December 31, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 1,514 $ 19,543 Restricted cash 5 5 Investments in debt securities- short term 14,720 4,415 Trade accounts receivable, net of allowance for doubtful accounts 271 303 Inventory 43 12 Prepaid expenses and other current assets 465 322 Total current assets $ 17,018 $ 24,600 Investments in debt securities- long term 12,768 7,074 Property and equipment, net 8,614 8,819 Patents and trademarks, net 158 239 Equipment held for sale - 585 Other assets 251 14 Total assets $ 38,809 $ 41,331 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 205 $ 132 Accrued liabilities 315 775 Total current liabilities $ 520 $ 907 Long-term liabilities Other long-term liabilities 899 856 Total liabilities $ 1,419 $ 1,763 Shareholders' equity: Preferred Stock, $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively - - Common stock, $0.001 par value; 1,100,000,000 shares authorized; 914,449,957 and 914,449,957 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively 914 914 Warrants 18,179 18,179 Additional paid-in capital 287,183 286,832 Accumulated deficit (268,926 ) (266,284 ) Accumulated other comprehensive income 116 2 Non-controlling interest in subsidiary (76 ) (75 ) Total shareholders' equity $ 37,390 $ 39,568 Total liabilities and shareholders' equity $ 38,809 $ 41,331 The accompanying notes are an integral part of the consolidated financial statements. 45 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Years Ended December 31, 2020 2019 Revenue Products $ 925 $ 1,325 Licensing and royalties 64 48 Total revenue 989 1,373 Cost of sales 621 832 Gross profit 368 541 Operating expenses Selling, marketing, general and administrative 3,798 5,424 Research and development 110 1,342 Impairment of long-lived assets - 1,676 Gain on disposal of long-lived assets (35 ) (11 ) Total operating expenses 3,873 8,431 Operating loss (3,505 ) (7,890 ) Interest and investment income 378 459 Lease income 484 - Loss before income taxes (2,643 ) (7,431 ) Income taxes - - Net loss (2,643 ) (7,431 ) Net loss attributable to non-controlling interest 1 1 Net loss attributable to Liquidmetal Technologies shareholders (2,642 ) (7,430 ) Per common share basic and diluted: Net loss per common share attributable to Liquidmetal Technologies shareholders, basic $ (0.00 ) $ (0.01 ) Net loss per common share attributable to Liquidmetal Technologies shareholders, diluted $ (0.00 ) $ (0.01 ) Number of weighted average shares - basic 914,449,957 914,352,127 Number of weighted average shares - diluted 914,449,957 914,352,127 The accompanying notes are an integral part of the consolidated financial statements. 46 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands, except share and per share data) Years Ended December 31, 2020 2019 Net loss $ (2,643 ) $ (7,431 ) Other comprehensive income, net of tax Net unrealized gains on available-for-sale securities 114 2 Other comprehensive income, net of tax 114 2 Comprehensive loss $ (2,529 ) $ (7,429 ) Less: Comprehensive loss attributable to noncontrolling interests 1 1 Comprehenisve loss attributable to Liquidmetal Technologies shareholders $ (2,528 ) $ (7,428 ) The accompanying notes are an integral part of the consolidated financial statements. 47 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands, except share and per share data) Preferred Shares Common Shares Common Stock Warrants part of Additional Paid-in Capital Additional Paid-in Capital Accumulated Deficit Accumulated other comprehensive income Non- controlling Interest Total Balance, December 31, 2018 - 914,206,832 $ 914 $ 18,179 $ 286,276 $ (258,854 ) $ - $ (74 ) $ 46,441 Stock option exercises - 243,125 - - 21 - - - 21 Stock-based compensation - - - - 535 - - - 535 Net loss - - - - - (7,430 ) - (1 ) (7,431 ) Other comprehensive income - - - - - - 2 - 2 Balance, December 31, 2019 - 914,449,957 914 18,179 286,832 (266,284 ) 2 (75 ) 39,568 Stock-based compensation - - - - 351 - - - 351 Net loss - - - - - (2,642 ) - (1 ) (2,643 ) Other comprehensive income - - - - - - 114 - 114 Balance, December 31, 2020 - 914,449,957 $ 914 $ 18,179 $ 287,183 $ (268,926 ) $ 116 $ (76 ) $ 37,390 The accompanying notes are an integral part of the consolidated financial statements. 48 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except share and per share data) Years Ended December 31, 2020 2019 Operating activities: Net loss $ (2,643 ) $ (7,431 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 402 1,129 Realized investment gains (2 ) - Stock-based compensation 351 535 Bad debt expense 226 - Impairment of long-lived assets - 1,676 Gain on disposal of long-lived assets (35 ) (11 ) Changes in operating assets and liabilities: Trade accounts receivable (194 ) (183 ) Inventory (31 ) 19 Prepaid expenses and other current assets (143 ) 41 Other assets and liabilities (194 ) - Accounts payable and accrued liabilities 33 384 Deferred revenue - (31 ) Net cash used in operating activities (2,230 ) (3,872 ) Investing Activities: Purchases of property and equipment (116 ) (630 ) Proceeds from disposal of fixed assets 200 282 Purchases of debt securities (26,719 ) (11,692 ) Proceeds from sales of debt securities 10,836 205 Net cash used in investing activities (15,799 ) (11,835 ) Financing Activities: Proceeds from exercise of stock options - 21 Net cash provided by financing activities - 21 Net decrease in cash, cash equivalents, and restricted cash (18,029 ) (15,686 ) Cash, cash equivalents, and restricted cash at beginning of period 19,548 35,234 Cash, cash equivalents, and restricted cash at end of period $ 1,519 $ 19,548 Supplemental Schedule of Non-Cash Investing Activities: Settlement of contract liability from disposal of fixed assets 420 - The accompanying notes are an integral part of the consolidated financial statements. 49 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 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 . Summary of Significant Accounting Policies Principles of Consolidation. The consolidated financial statements include the accounts of Liquidmetal Technologies, Inc., its special-purpose wholly-owned subsidiary, Crucible Intellectual Property LLC, 20321 Valencia LLC, and Liquidmetal Golf. All intercompany balances and transactions have been eliminated. Non- C ontrolling I nterest. The results of operations attributable to the non-controlling interest of Liquidmetal Golf are presented within equity and are shown separately from the Company’s equity. Revenue Recognition . Revenue is recognized pursuant to applicable accounting standards including FASB ASC Topic 606 (“ASC 606”), Revenue from Contracts with Customers. ASC 606 summarizes certain points in applying generally accepted accounting principles to revenue recognition in financial statements and provides guidance on revenue recognition issues in the absence of authoritative literature addressing a specific arrangement or a specific industry. Products . Product revenues are primarily generated from the sale and prototyping of molds and bulk alloy products. Revenue is recognized when i) persuasive evidence of an arrangement exists, ii) delivery has occurred, iii) the sales price is fixed or determinable, iv) collection is probable and v) all obligations have been substantially performed pursuant to the terms of the arrangement. When the Company receives consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract, it records deferred revenue, which represents a contract liability. The Company will recognize deferred revenue as products revenue after it has transferred control of the goods or services to the customer and all revenue recognition criteria are met. Such amounts are not expected to be material on an ongoing basis. Licensing and royalties . License revenue arrangements in general provide for the grant of an exclusive or non-exclusive right to manufacture and/or sell products covered by patented technologies owned or controlled by the Company. The intellectual property rights granted may be perpetual in nature, extending until the expiration of the related patents, or can be granted for a defined period of time. Licensing revenues that are one-time fees upon the granting of the license are recognized when i) the license term begins in a manner consistent with the nature of the transaction and the earnings process is complete, ii) when collectability is reasonably assured or upon receipt of an upfront fee, and iii) when all other revenue recognition criteria have been met. Pursuant to the terms of these agreements, the Company has no further obligation with respect to the grant of the license. Licensing revenues that are related to royalties are recognized as the royalties are earned over the related period. 50 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) Practical Expedients and Exemptions . The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling, marketing, general and administrative expenses. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount for which it has the right to invoice for services performed. Cash and cash equivalents . The Company considers all highly-liquid investments with maturity dates of three months or less when purchased to be cash equivalents. The Company limits the amount of credit exposure to each individual financial institution and places its temporary cash into investments of high credit quality with a financial institution that exceeds federally insured limits. The Company has not experienced any losses related to these balances and believes its credit risk to be minimal. As of December 31, 2020 and 2019, the Company held deposits of $1,328 and $18,399, respectively, in such highly-liquid investments. 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 years ended December 31, 2020 and 2019. Trade Accounts Receivable. The Company grants credit to its customers generally in the form of short-term trade accounts receivable. The creditworthiness of customers is evaluated prior to signing a contract with the customer. As of December 31, 2020, one customer represented 99%, or $270, of the total outstanding trade accounts receivable. As of December 31, 2019, two customers represented 90%, or $280, of the total outstanding trade accounts receivable. During 2020, there were four major customers, who together accounted for 93% of total revenue. During 2019, there were five major customers, who together accounted for 83% of total revenue. In the future, the Company expects that a significant portion of the revenue may continue to be concentrated in a limited number of customers, even if the bulk alloys business grows. The allowance for doubtful accounts reflects management's best estimate of probable losses inherent in the trade accounts receivable. Management primarily determines the allowance based on the aging of accounts receivable balances, historical write-off experience, customer concentrations, customer creditworthiness and current industry and economic trends. The Company's provisions for uncollectible receivables are included in selling, marketing, general and administrative expense in the consolidated statements of operations. At December 31, 2020 and 2019, the Company had recorded an allowance for doubtful accounts of $234 and $8, respectively. Inventory. Inventory is stated at the lower of weighted-average cost or net realizable value. Inventory is recorded at actual cost when purchased and then expensed at weighted-average cost as used in production and/or shipped to satisfy customer orders. We perform an analysis of our inventory balances at least quarterly to determine if the carrying amount of inventories exceeds their net realizable value. The analysis of estimated net realizable value is based on customer orders, market trends and historical pricing. If the carrying amount exceeds the estimated net realizable value, the carrying amount is reduced to the estimated net realizable value. Property and Equipment. Property and equipment are stated at cost less accumulated depreciation and amortization. Additions and major renewals are capitalized. Repairs and maintenance are charged to expense as incurred. Upon disposal, the related cost and accumulated depreciation are removed from the accounts, with the resulting gain or loss included in operating income. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which range from one to five years. Intangible Assets. Intangible assets consist of the costs incurred to purchase patent rights and costs incurred to register and maintain patents and trademarks. Intangible assets are reported at cost, net of accumulated amortization. Patents and trademarks are amortized using the straight-line method over a period based on their contractual lives ranging from ten to seventeen years. Impairment of Long-lived Assets . The Company reviews long-lived assets to be held and used in operations for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may be impaired. These evaluations may result from significant decreases in the overall market outlook for the Company’s technology or the market price of an asset, a significant adverse change in the extent or manner in which an asset is being used in its physical condition, a significant adverse change in legal factors or in the business climate that could affect the value of an asset, as well as economic or operational analyses. If the Company concludes that the carrying value of certain assets will not be recovered based on expected undiscounted future cash flows, an impairment write-down is recorded to reduce the assets to their estimated fair value. Fair value is determined via market, cost and income based valuation techniques, as appropriate. The fair value is measured on a nonrecurring basis using a combination of quoted prices for similar assets in active markets and other unobservable adjustments to historical cost (Level 3) inputs. Based on the results of this analysis, the Company recorded non-cash impairment charges of $1,676 for the year ended December 31, 2019, primarily related to the carrying value of the Company’s manufacturing assets that would not be utilized prospectively as a result of the 2019 Restructuring Plan. No such charges were recorded for the year ended December 31, 2020. 51 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 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. 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 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 - As of December 31, 2019, 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) 4,415 705 3,710 - Investments in debt securities (long-term) 7,074 908 6,166 - Non-recurring fair value measurements. Certain assets and liabilities are measured at fair value on a nonrecurring basis. In other words, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). As a result of the Company’s periodic assessment of impairment of long-lived assets, the Company recorded an impairment loss of $1,676 during the year ended December 31, 2019. No such losses were recorded during the year ended December 31, 2020. Concentration Risk. The Company currently sources substantially all of its product manufacturing from one manufacturer, namely Yihao. The Company's manufacturing and operating results could be adversely affected if the supply of products from Yihao were delayed or curtailed. While the Company expects this manufacturing relationship to continue, it is attempting to mitigate this risk by developing other suppliers of its products. For the year ended December 31, 2020, Yihao accounted for 77% or $478 of total cost of goods sold. Research and Development Expenses. Research and development expenses represent salaries, related benefits expense, expenses incurred for the design and testing of new processing methods and other expenses related to the research and development of Liquidmetal alloys. Development costs incurred in research and development activities are expensed as incurred. Advertising and Promotion Expenses. Advertising and promotion expenses are expensed when incurred. Advertising and promotion expenses were $61 and $68, for the years ended December 31, 2020 and 2019, respectively. Legal Costs. Legal costs are expensed as incurred. Stock-Based Compensation . The Company accounts for share-based compensation in accordance with the fair value recognition provisions of FASB ASC Topic 718, Share-based Payment , which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the consolidated financial statements based on their fair values. The fair value of stock options is calculated by using the Black-Scholes option pricing formula that requires estimates for expected volatility, expected dividends, the risk-free interest rate and the term of the option. If any of the assumptions used in the Black-Scholes model change significantly, share-based compensation expense may differ materially in the future from that recorded in the current period. 52 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 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 part of other assets within 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. Income Taxes. Income taxes are provided under the asset and liability method as required by FASB ASC Topic 740, Accounting for Income Taxes . Under this method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The effect of a tax rate change on deferred taxes is recognized in operations in the period that the change in the rate is enacted. Valuation allowances are established when necessary to reduce net deferred tax assets to the amount expected to be realized. Under the provisions of FASB ASC Topic 740, the Company had no material unrecognized tax positions and no adjustments to liabilities or operations were required. The Company, when applicable, will recognize interest and penalties related to uncertain tax positions in income tax expense. There was no expense related to interest and penalties for the years ended December 31, 2020 and 2019, respectively. Earnings Per Share. Basic earnings per share (“EPS”) is computed by dividing earnings (losses) attributable to common shareholders by the weighted average number of common shares outstanding for the periods. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates. These management estimates are primarily related to impairment of long-lived assets, allowance for bad debt, warrant valuations, and inventory valuation. Subsequent Events. The Company evaluated subsequent events through the filing of its Annual Report on Form 10-K with the SEC. Supplemental Cash Flow Information. Cash payments for interest and income taxes were $0 for each of the years ended December 31, 2020 and 2019, respectively. Recent Accounting Pronouncements. Financial Instruments- Credit Losses In June 2016, the FASB issued an accounting standards update that changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. This update replaces the existing incurred loss impairment model with an expected loss model (referred to as the Current Expected Credit Loss model, or "CECL"). The standard update, and its related amendments, will become effective for the fiscal year beginning on January 1, 2023. The Company is in the process of assessing the impact of this standard update, and its related amendments, on the Company’s consolidated financial statements, but is not expecting it will have a material impact on the Company’s consolidated financial statements. Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA 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, CEO and Chairman, Professor Lugee Li, has a material, indirect, equity interest. 53 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 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 the 2016 Purchase Agreement with Liquidmetal Technology Limited, a Hong Kong company (the “Investor”), which is controlled by the Company’s Chairman and CEO, 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 and CEO, 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 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. 54 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 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 pursuant to which (i) the Company contributed substantially all of its intellectual property assets to a newly organized special-purpose, wholly-owned subsidiary, called 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 Material 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 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 as against all third parties (including the Company), 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 D ebt S ecurities The following table sets forth amortized cost and fair value of investments in debt securities (short-term and long-term): Amortized Cost Fair Value December 31, Longest Maturity Date 2020 2019 2020 2019 U.S. government and agency securities 2022 - 1,612 - 1,612 Corporate bonds 2025 26,222 7,475 26,338 7,477 Certificates of deposit One-year 1,150 2,400 1,150 2,400 27,372 11,487 27,488 11,489 Income from these investments totaled $268 and $24 during the years ended December 31, 2020 and 2019, respectively, and was included as a portion of interest and investment income on the Company’s consolidated statements of operations. Based on the Company’s review of its debt securities in an unrealized loss position at December 31, 2020, 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-19 pandemic. The impact to the Company’s investment portfolio is considered to be temporary, rather than a deterioration of overall credit quality. 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 December 31, 2020. 55 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 5. Trade A ccounts R eceivable Trade accounts receivable were comprised of the following: December 31, 2020 2019 Trade accounts receivable $ 505 $ 311 Less: Allowance for doubtful accounts (234 ) (8 ) Trade accounts receivable $ 271 $ 303 During the year ended December 31, 2020, the Company recorded an additional allowance for doubtful accounts of $226 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, general and administrative expenses. 6 . Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets totaled $465 and $322 as of December 31, 2020 and December 31, 2019, respectively. Included within these totals are the following: December 31, 2020 2019 Prepaid service invoices $ 76 $ 42 Prepaid insurance premiums 233 198 Prepaid lease costs and receivables- short term 21 - Interest and other receivables 135 82 Total 465 322 As of December 31, 2020, 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 $2 in receivables for allocated utility costs. As of December 31, 2020 and December 31, 2019, interest and other receivables are comprised entirely of interest receivable from investments in debt securities. 7 . Inventory Inventory totaled $43 and $12 as of December 31, 2020 and December 31, 2019, respectively. Included within these totals are the following: December 31, 2020 2019 Work in progress $ - $ 12 Finished goods 43 - Total 43 12 56 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 8 . Property and Equipment Property and equipment consist of the following: December 31, 2020 2019 Land, building, and improvements $ 9,610 $ 9,495 Machinery and equipment 1,304 1,482 Computer equipment 272 272 Office equipment, furnishings, and improvements 51 63 Total 11,237 11,312 Accumulated depreciation (2,623 ) (2,493 ) Total property and equipment, net $ 8,614 $ 8,819 Depreciation expense for the years ended December 31, 2020 and 2019 was $321 and $1,046, respectively. For the year ended December 31, 2020, $0 of depreciation expense was included in cost of sales and $321 was included in selling, marketing, general and administrative expenses. For the year ended December 31, 2019, $82 of depreciation expense was included in cost of sales and $964 was included in selling, marketing, general and administrative expenses. During the year ended December 31, 2020, the Company disposed of certain equipment that it was not expecting to utilize prospectively, as originally contemplated in the 2019 Restructuring Plan, for gross proceeds of $200. This resulted in a gain on disposal of $35 during the year ended December 31, 2020. During the year ended December 31, 2019, the Company disposed of certain equipment that it was not expecting to utilize prospectively, as part of the 2019 Restructuring Plan, for gross proceeds of $282. This resulted in a gain on disposal of $11 during the year ended December 31, 2019. 9 . Patents and T rademarks, net Patents and trademarks consist of the following: December 31, 2020 2019 Purchased and licensed patent rights $ 566 $ 566 Internally developed patents 1,686 1,686 Trademarks 148 148 Total 2,400 2,400 Accumulated amortization $ (2,242 ) $ (2,161 ) Total intangible assets, net $ 158 $ 239 Amortization expense was $81 and $83 for the years ended December 31, 2020 and 2019, respectively, and is included in research and development expense in the consolidated statements of operations and comprehensive loss. The estimated aggregate amortization expense for each of the five succeeding years is as follows: December 31, Aggregate Amortization Expense 2021 $ 56 2022 29 2023 20 2024 17 2025 14 Thereafter 22 $ 158 57 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) Accumulated amortization for the years ended December 31, 2020 and 2019 is as follows: December 31, 2020 2019 Purchased and licensed patent rights $ (562 ) $ (555 ) Internally developed patents (1,540 ) (1,471 ) Trademarks (140 ) (135 ) Total $ (2,242 ) $ (2,161 ) The weighted average amortization periods for the years ended December 31, 2020 and 2019 are as follows: December 31, 2020 2019 Purchased and licensed patent rights 17 17 Internally developed patents 17 17 Trademarks 10 10 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 agreements. In addition to the purchased and licensed patents, the Company has capitalized legal and registration costs incurred to obtain and maintain 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. 10. 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 had executed a purchase agreement for the equipment, with a negotiated sales price of $600. The sale was finalized during the year ended December 31, 2020, following title transfer of the equipment to the buyer and receipt of all amounts due under the purchase agreement for the equipment. 11. Other Assets Other assets totaled $251 and $14 as of December 31, 2020 and December 31, 2019, respectively. Included within these totals are the following: December 31, 2020 2019 Utility deposits $ 14 $ 14 Prepaid lease costs and receivables- long term 237 - Total $ 251 $ 14 As of December 31, 2020, prepaid lease costs and receivables- long term are comprised of $63 in unamortized prepaid broker commissions that are not expected to be amortized within the next twelve months and $174 in straight-line rent accruals. 58 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 1 2 . Accrued Liabilities Accrued liabilities totaled $315 and $775 as of December 31, 2020 and December 31, 2019, respectively. Included within these totals are the following: December 31, 2020 2019 Accrued payroll, vacation, and bonuses $ 147 $ 169 Accrued severance 56 67 Accrued audit fees 112 119 Contract liability - 420 Total $ 315 $ 775 In connection with the 2019 Restructuring Plan, the Company recorded severance expenses related to employees whose positions would be eliminated. The elements and impact of the 2019 Restructuring Plan, including details regarding the severance elements that the Company had adopted, were communicated to all impacted employees in July 2019. As a result, total expense of $273 was recorded as a component of sales, general, and administrative expenses within the consolidated statement of operations for the year ended December 31, 2019. As of December 31, 2020, payments totaling $217 had been made, resulting in a remaining liability under the 2019 Restructuring Plan of $56 as of December 31, 2020. 1 3 . Other Long-Term Liabilities Other long-term liabilities were $899 as of December 31, 2020 and $856 as of December 31, 2019, 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 as of December 31, 2020 is $43 in tenant deposits under the Facility Lease. 1 4 . Stock Compensation Plan On April 4, 2002, our shareholders and Board of Directors adopted the 2002 Equity Incentive Plan (“2002 Plan”). The 2002 Plan provides for the grant of stock options to officers, employees, consultants and directors of the Company and its subsidiaries. A total of 10,000,000 shares of our common stock may be granted under the 2002 Plan. The 2002 Plan expired by its terms in April 2012, but remained in effect only with respect to the equity awards that had been granted prior to its expiration. During the year ended December 31, 2019, all outstanding awards existing under the 2002 Plan expired by their original terms. As such, no awards remain outstanding under the 2002 plan. On June 28, 2012, the Company adopted the 2012 Equity Incentive Plan (“2012 Plan”), with the approval of the shareholders, which provided 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 Equity Incentive Plan, and all options granted under this plan had exercise prices that were equal to the fair market value on the date of grant. During 2020, the Company did not grant any option awards under the 2012 Plan, with total options outstanding of 5,609,192 as of December 31, 2020. 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 2020, the Company did not grant any option awards under the 2015 Plan, with total options outstanding of 12,341,667 as of December 31, 2020. FASB ASC 718, Compensation – Stock Compensation, requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Under ASC 718, the Company is required to measure the cost of employee services received in exchange for stock options and similar awards based on the grant-date fair value of the award and recognize this cost in the income statement over the period during which an employee is required to provide service in exchange for the award. The Company recorded $351 and $535 for the years ended December 31, 2020 and 2019, respectively, of non-cash charges for stock compensation related to amortization of the fair value of restricted stock and unvested stock options. The total compensation costs related to non-vested awards not yet recognized were $303 and $559 for the years ended December 31, 2020 and 2019, respectively. The Company did not grant any option awards under either of its active plans during the 2020 or 2019. For prior grants, expected volatilities are based on historical volatility expected over the expected life of the options. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. Expected forfeiture rates are determined based on historical forfeitures over a five year period. The risk free rate used for the period within the expected life of the options is based on U.S. Treasury rates in effect at the time of grant. 59 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) The following table summarizes the Company’s stock option transactions for the years ended December 31, 2020 and 2019: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) Options outstanding at December 31, 2018 28,831,170 $ 0.17 Granted - - Exercised (243,125 ) 0.09 Forfeited (8,796,775 ) 0.18 Expired (450,158 ) 0.20 Options outstanding at December 31, 2019 19,341,112 $ 0.17 Granted - - Exercised - - Forfeited (1,275,586 ) 0.21 Expired (114,667 ) 0.20 Options outstanding at December 31, 2020 17,950,859 $ 0.17 5.5 $ 35 Options exercisable at December 31, 2020 14,667,917 $ 0.17 5.1 $ 34 Options unvested at December 31, 2020 3,282,942 $ 0.15 7.5 $ 1 Options vested or expected to vest at December 31, 2020 17,398,252 $ 0.17 5.4 $ 35 The following table provides supplemental data on stock options for the years ended December 31, 2020 and 2019: December 31, 2020 2019 Weighted average grant date fair value per option granted $ - $ - Fair value of options vested 340 644 Cash from participants to exercise stock options - 21 Intrinsic value of options exercised - 13 The following table summarizes the Company’s stock options outstanding and exercisable by ranges of option prices as of December 31, 2020: Options Outstanding Options Exercisable Range of Exercise Prices Numbers of Options Outstanding Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number of Options Exercisable Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price $0.00 - 0.10 3,844,192 3.85 $0.07 3,766,526 3.82 $0.07 0.11 - 0.38 14,106,667 5.96 0.19 10,901,391 5.48 0.21 Total 17,950,859 14,667,917 The Company’s non-vested options at the beginning and ending of fiscal year 2020 had weighted-average grant-date fair values of $0.13 and $0.12 per option, respectively. 60 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 1 5 . 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 $ 474 2022 486 2023 651 2024 699 2025 237 Thereafter - $ 2,547 1 6 . Income Taxes Significant components of deferred tax assets are as follows: Years Ended December 31, 2020 2019 Loss carry forwards $ 36,813 $ 36,093 Allowance for bad debts 65 2 NQSO 2,148 2,060 Tax credits and other (16) 114 Total deferred tax asset $ 39,010 $ 38,269 Valuation allowance (39,010) (38,269 ) Total deferred tax asset, net $ - $ - The valuation allowance increased $741 and $1,875 in 2020 and 2019, respectively. Changes in the valuation allowance are impacted by the expiration of net operating loss (“NOL”) carryforwards, current year net operating losses, and changes to future tax deductions resulting from the terms of stock compensation plans and accrued liabilities. The following table accounts for the differences between the expected federal tax benefit (based on the statutory 2020 U.S. federal income tax rate of 21%) and the actual tax provision: Years Ended December 31, 2020 2019 Expected federal tax benefit -21.0 % -21.0 % Permanent items 0.3 % 0.6 % Net operating loss utilized or expired 0.0 % 0.0 % Increase in valuation allowance and others 20.7 % 20.4 % Effective tax rate 0 % 0 % As of December 31, 2020, the Company had approximately $142.1 million of NOL carryforwards for U.S. federal income tax purposes expiring in 2021 through 2040. As of December 31, 2020, the Company had approximately $99.9 million of NOL carryforwards for California income tax purposes expiring in 2021 through 2040, respectively. The Company and Liquidmetal Golf, Inc. file on a separate company basis for federal income tax purposes. Accordingly, the federal NOL carryforwards of one legal entity are not available to offset federal taxable income of the other. Liquidmetal Golf, Inc. had approximately $23.7 million in federal NOL carryforwards, expiring in 2021 through 2040. 61 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) We recognize excess tax benefits associated with the exercise of stock options directly to shareholders’ equity only when realized. Accordingly, deferred tax assets are not recognized for NOL carryforwards resulting from excess tax benefits. As of December 31, 2020, deferred tax assets do not include approximately $437 of these tax effected excess tax benefits from employee stock option exercise that are a component of our NOL carryforwards. Accordingly, additional paid-in capital will increase up to an additional $437 if and when such excess tax benefits are realized. As of December 31, 2020, the Company had approximately $87 of Research & Development (“R&D”) credit carryforwards for U.S. federal income tax purposes expiring in 2021 through 2030. In addition, the Company has California R&D credit carryforwards of approximately $243, which do not expire under current California law. Section 382 of the Internal Revenue Code (“IRC”) imposes limitations on the use of NOL’s and credits following changes in ownership as defined in the IRC. The limitation could reduce the amount of benefits that would be available to offset future taxable income each year, starting with the year of an ownership change. As a result of the completion of the complex analysis required by the IRC to determine if an ownership change has occurred, the Company has determined that its annual NOL carryforward limitation under Section 382 of the IRC is $764 per year. The ability to realize the tax benefits associated with deferred tax assets, which includes benefits related to NOL’s, is principally dependent upon the Company’s ability to generate future taxable income from operations. The Company has provided a full valuation allowance for its net deferred tax assets due to the Company’s net operating losses. The Company adopted the provisions of FASB ASC Topic 470 – Income Taxes. At the adoption date and as of December 31, 2020, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense which were $0 for the years ended December 31, 2020 and 2019. As of December 31, 2020, the tax years 2014 through 2019, and 2013 through 2019 are subject to examination by the federal and California taxing authorities, respectively. 1 7 . Accumulated Other Comprehensive Income (“AOCI”): The following table presents a summary of the changes in each component of AOCI for the years ended December 31, 2020 and 2019: Unrealized gains on available-for-sale securities Total Accumulated other comprehensive income, net of tax, as of December 31, 2018 $ - $ - Other comprehensive income before reclassifications 2 2 Amounts reclassified from accumulated other comprehensive income - - Net increase in other comprehensive income 2 2 Accumulated other comprehensive income, net of tax, as of December 31, 2019 $ 2 $ 2 Other comprehensive income before reclassifications 116 116 Amounts reclassified from accumulated other comprehensive income (2 ) (2 ) Net increase in other comprehensive income 114 114 Accumulated other comprehensive income, net of tax, as of December 31, 2020 $ 116 $ 116 62 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 1 8 . 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 periods. Diluted EPS reflects the potential dilution of securities that could share in the earnings. Options to purchase 17,950,859 shares of common stock at prices ranging from $0.07 to $0.38 per share were outstanding at December 31, 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. Options to purchase 19,341,112 shares of common stock at prices ranging from $0.07 to $0.38 per share were outstanding at December 31, 2019, 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, priced at $0.07 per share, outstanding at each of December 31, 2020 and 2019 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. 1 9 . Segment Information The primary business of the Company is to develop and manufacture products and applications from amorphous alloys. As a result, the Company’s financial results are reported in a single segment. 20 . 401(k) Savings Plan The Company has a tax-qualified employee savings and retirement plan, or 401(k) plan. Under the 401 (k) plan, participants may elect to reduce their current compensation, on a pre-tax basis, by up to 15% of their taxable compensation or of the statutorily prescribed annual limit, whichever is lower, and have the amount of the reduction contributed to the 401(k) plan. The 401(k) plan permits the Company, in its sole discretion, to make additional employer contributions to the 401(k) plan. However, the Company did not make employer contributions to the 401(k) plan during any of the periods presented in the accompanying consolidated financial statements. 2 1 . 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 December 31, 2020, Professor Li is a greater-than 5% beneficial owner of the Company and serves as the Company’s Chairman, President, and Chief Executive Officer. Equipment and services procured from Eontec, and their affiliates, were $478 and $31 during the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020 and 2019, the Company has outstanding payables to Eontec, and their affiliates, of $118 and $0, respectively. 63 Table of Contents LIQUIDMETAL TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 2 2 . Quarterly Financial Information (Unaudited) Quarter Ended March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 Total Revenue $ 71 $ 33 $ 327 $ 558 $ 989 Gross profit 35 (2 ) 156 179 368 Operating loss (961 ) (884 ) (970 ) (690 ) (3,505 ) Net loss (746 ) (643 ) (777 ) (477 ) (2,643 ) Basic and diluted net loss per common share $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.00 ) Quarter Ended March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019 Total Revenue $ 223 $ 132 $ 421 $ 597 $ 1,373 Gross profit (loss) 44 29 137 331 541 Operating loss (1,878 ) (3,333 ) (1,520 ) (1,159 ) (7,890 ) Net loss and comprehensive loss (1,768 ) (3,224 ) (1,395 ) (1,044 ) (7,431 ) Basic and diluted net loss per common share $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.01 ) 64