What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-04 compared with 2020-11-10 · 251 added, 173 removed, 290 unchanged (59% of the section changed)

4 unchanged sentences

($ in thousands, except par value and share data)

September 30,

Current assets:

8 unchanged sentences

Patents and trademarks, net

Equipment held for sale

LIABILITIES AND SHAREHOLDERS' EQUITY

2 unchanged sentences

Accrued liabilities

Deferred revenue

Total current liabilities

5 unchanged sentences

10,000,000 shares authorized;

0 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

0 shares issued and outstanding at March 31, 2021 and December 31, 2020, 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 September 30, 2020 and December 31, 2019, respectively

914,449,957 and 914,449,957 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Non-controlling interest in subsidiary

7 unchanged sentences

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

Ended March 31,

Licensing and royalties

4 unchanged sentences

Research and development

Impairment of long-lived assets

Gain on disposal of long-lived assets

14 unchanged sentences

For the Three Months

Ended September 30,

For the Nine Months

Ended September,

Net unrealized (losses) gains on available-for-sale securities

Other comprehensive income (loss), net of tax

Ended March 31,

Other comprehensive loss, net of tax

Net unrealized losses on available-for-sale securities

Other comprehensive loss, net of tax

Comprehensive loss

6 unchanged sentences

($ in thousands, except per share data)

For the Nine Months Ended

September 30,

For the Three Months Ended March 31,

Operating activities:

2 unchanged sentences

Realized investment gains

Bad debt expense

Stock-based compensation

Impairment of long-lived assets

Gain on disposal of long-lived assets

11 unchanged sentences

Proceeds from sales of debt securities

Net cash used in investing activities

Net cash provided by investing activities

Financing Activities:

1 unchanged sentence

Net cash provided by financing activities

Net decrease in cash, cash equivalents, and restricted cash

Net (decrease) increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents, and restricted cash at end of period

Supplemental Schedule of Non-Cash Investing Activities:

Settlement of contract liability from disposal of fixed assets

The accompanying notes are an integral part of the consolidated financial statements.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2020 and 2019

For the Three Months Ended March 31, 2021 and 2020

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

16 unchanged sentences

Basis of Presentation and Recent Accounting Pronouncements

The accompanying unaudited interim consolidated financial statements as of and for the three and nine months ended September 30, 2020 and September 30, 2019 have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q.

The accompanying unaudited interim consolidated financial statements as of and for the three months ended March 31, 2021 and March 31, 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q.

Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements.

1 unchanged sentence

All intercompany balances and transactions have been eliminated in consolidation.

Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for any future periods or the year ending December 31, 2020.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for any future periods or the year ending December 31, 2021.

The accompanying unaudited consolidated financial statements should be read in conjunction with the Company's 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 9, 2021.

5 unchanged sentences

The Company evaluates its debt securities with unrealized losses on a quarterly basis for potential other-than-temporary impairments in value.

As a result of this assessment, the Company did not recognize any other-than-temporary impairment losses considered to be credit related for the three and nine month periods ended September 30, 2020 and 2019.

F air Value Measurements

As a result of this assessment, the Company did not recognize any other-than-temporary impairment losses considered to be credit related for the three months ended March 31, 2021 and 2020.

Fair Value Measurements

The estimated fair values of financial instruments reported in the consolidated financial statements have been determined using available market information and valuation methodologies, as applicable.

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

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

LIQUIDMETAL TECHNOLOGIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2020 and 2019

For the Three Months Ended March 31, 2021 and 2020

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

6 unchanged sentences

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

As of September 30, 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:

As of March 31, 2021, the following table represents the Company’s fair value hierarchy for items that are required to be measured at fair value on a recurring basis:

Investments in debt securities (short-term)

15 unchanged sentences

In connection with the 2019 Restructuring Plan, the Company shifted its business strategy from internal manufacture of parts and products for customers toward the use and reliance of outsourced manufacturers, which will initially be Dongguan Yihao Metals Materials Technology Co., Ltd.

(“Yihao”), a China-based company that is an affiliate of our largest beneficial stockholder, CEO and Chairman, Professor Lugee Li (“Professor Li”).

(“Yihao”), a China-based company in which our largest beneficial stockholder, CEO and Chairman, Professor Lugee Li ("Professor Li"), has a material, indirect, equity interest.

LIQUIDMETAL TECHNOLOGIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2020 and 2019

For the Three Months Ended March 31, 2021 and 2020

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

7 unchanged sentences

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.

Tenant will pay approximately 79% of common operating expenses.

The Facility Lease has other customary provisions, including provisions relating to default and usage restrictions.

8 unchanged sentences

Eontec License Agreement

On March 10, 2016, in connection with the 2016 Purchase Agreement, the Company and DongGuan Eontec Co., Ltd., a Hong Kong corporation (“Eontec”), entered into a Parallel License Agreement (the “License Agreement”) pursuant to which the Company and Eontec agreed to cross-license their respective technologies.

On March 10, 2016, in connection with the 2016 Purchase Agreement, the Company and DongGuan Eontec Hong Kong corporation ("Eontec"), entered into a Parallel License Agreement (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.

5 unchanged sentences

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.

LIQUIDMETAL TECHNOLOGIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2020 and 2019

For the Three Months Ended March 31, 2021 and 2020

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

Beyond the License Agreement, the Company collaborates with Eontec to accelerate the commercialization of amorphous alloy technology.

Eutectix Business Development Agreement

On January 31, 2020, the Company entered into a Business Development Agreement (the “Agreement”) with Eutectix, LLC, a Delaware limited liability company (“Eutectix”), which provides for collaboration, joint development efforts, and the manufacturing of products based on 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.

On January 31, 2020, the Company entered into a Business Development Agreement (the “Business Development Agreement”) with Eutectix LLC, a Delaware limited liability company ("Eutectix"), which provides for collaboration, joint development efforts, and the manufacturing of products based on the Company’s proprietary amorphous metal alloys.

Under the Business Devlopment 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.

Under the Business Development 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 Business Development Agreement has a term of five years, subject to renewal provisions and the ability of either party to terminate earlier upon specified circumstances.

Apple License Transaction

On August 5, 2010, the Company entered into a license transaction with Apple Inc.

(“Apple”) pursuant to which (i) the Company contributed substantially all of its intellectual property assets to a newly organized special-purpose, wholly-owned subsidiary, called Crucible Intellectual Property, LLC (“CIP”), (ii) CIP granted to Apple a perpetual, worldwide, fully-paid, exclusive license to commercialize such intellectual property in the field of consumer electronic products, as defined in the license agreement, in exchange for a license fee, and (iii) CIP granted back to the Company a perpetual, worldwide, fully-paid, exclusive license to commercialize such intellectual property in all other fields of use.

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.

1 unchanged sentence

Other License Transactions

On January 31, 2012, the Company entered into a Supply and License Agreement for a five year term with Engel Austria Gmbh (“Engel”) whereby Engel was granted a non-exclusive license to manufacture and sell injection molding machines to the Company’s licensees.

On December 6, 2013, the Company and Engel entered into an Exclusivity Agreement for a ten year term whereby the Company agreed, with certain exceptions and limitations, that the Company and its licensees would purchase amorphous alloy injection molding machines exclusively from Engel.

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.

7 unchanged sentences

The license agreement with Swatch will expire on the expiration date of the last licensed patent.

LIQUIDMETAL TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2020 and 2019

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

Investments in debt securities

The following table sets forth amortized cost fair value, and unrealized gains (losses) of investments in debt securities (short-term and long-term):

The following table sets forth amortized cost fair value, and unrealized gains of investments in debt securities (short-term and long-term):

Amortized Cost

Unrealized gains (losses)

September 30,

Unrealized gains

Maturity Date

government and agency securities

Corporate bonds

Certificates of deposit

Income from these investments totaled $61 and $187 during the three and nine months ended September 30, 2020, respectively, and was included as a portion of interest and investment income on the Company’s consolidated statements of operations.

There was no income for the same periods in 2019.

Based on the Company’s review of its debt securities in an unrealized loss position at September 30, 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.

Income from these investments totaled $61 and $68 during the three months ended March 31, 2021 and 2020, respectively, and was included as a portion of interest and investment income on the Company’s consolidated statements of operations.

LIQUIDMETAL TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2021 and 2020

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

Based on the Company’s review of its debt securities in an unrealized loss position at March 31, 2021, it determined that the losses were primarily the result current economic factors, impacting all global debt and equity markets, that are the result of the global COVID-19 pandemic.

The impact to the Company’s investment portfolio is considered to be temporary, rather than a deterioration of overall credit quality.

As of September 30, 2020, all investments are current on their schedule interest and dividend payments.

As of March 31, 2021, all investments are current on their schedule interest and dividend payments.

The Company does not intend to sell, and it is not more likely than not that the Company will be required to sell, these securities prior to recovering their amortized cost.

As such, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2020.

As such, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2021.

Trade Accounts Receivable

Trade accounts receivable were comprised of the following:

September 30,

Trade accounts receivable

1 unchanged sentence

Trade accounts receivable

During the three and nine month periods ended September 30, 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.

P repaid Expenses and Other Current Assets

Prepaid expenses and other current assets totaled $600 and $322 as of September 30, 2020 and December 31, 2019, respectively.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets totaled $376 and $465 as of March 31, 2021 and December 31, 2020, respectively.

Included within these totals are the following:

September 30,

Prepaid service invoices

2 unchanged sentences

Interest and other receivables

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

As of September 30, 2020, interest and other receivables are comprised of $130 in interest receivable from investments in debt securities and $90 in receivables due under completed fixed asset sales (refer to Note 8 below).

As of March 31, 2021, prepaid lease costs and receivables- short term are comprised of $19 in prepaid broker commissions that are expected to be amortized within the next twelve months and $3 in receivables for allocated utility costs.

Inventory totaled $147 and $43 as of March 31, 2021 and December 31, 2020, respectively.

Included within these totals are the following:

Work in progress

Finished goods

LIQUIDMETAL TECHNOLOGIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2020 and 2019

For the Three Months Ended March 31, 2021 and 2020

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

Inventory totaled $47 and $12 as of September 30, 2020 and December 31, 2019, respectively.

Included within these totals are the following:

September 30,

Work in progress

Property and Equipment, net

Property and equipment consist of the following:

September 30,

Land, building, and improvements

4 unchanged sentences

Total property and equipment, net

Depreciation expense for three and nine months ended September 30, 2020 was $79 and $240, respectively.

Depreciation expense for three and nine months ended September 30, 2019 was $265 and $785, respectively.

For the three and nine months ended September 30, 2020, $0 and $0 of depreciation expense, respectively, was included in cost of sales and $79 and $240 was included in selling, marketing, general, and administrative expenses, respectively.

For the three and nine months ended September 30, 2019, $24 and $75 of depreciation expense, respectively, was included in cost of sales and $241 and $710 was included in selling, marketing, general and administrative expenses, respectively.

During the three and nine months ended September 30, 2020, the Company disposed of certain manufacturing equipment for gross proceeds of $110.

This resulted in a gain on disposal of $0 and $35 during the three and nine months ended September 30, 2020.

Similar sales resulted in losses of $7 and $2 during the three and nine months ended September 30, 2019, respectively.

Depreciation expense for three months ended March 31, 2021 and 2020 was $80 and $79, respectively, and was included in selling, marketing, general, and administrative expenses.

During the three months ended March 31, 2020, the Company disposed of certain manufacturing equipment for gross proceeds of $20.

This resulted in a gain on disposal of $20 during the three months ended March 31, 2020.

No such sales occurred during the three months ended March 31, 2021.

Equipment Held for Sale

2 unchanged sentences

The sale was finalized during the quarter ended June 30, 2020, following delivery and title transfer of the equipment to the buyer.

As of September 30, 2020, the Company had received $510 in proceeds from the sale of this equipment, with the remaining $90 of the purchase price being recorded as a receivable within prepaid expenses and other current assets.

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

LIQUIDMETAL TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2020 and 2019

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

Patents and T rademarks, net

Net patents and trademarks totaled $177 and $239 as of September 30, 2020, and December 31, 2019 respectively, and primarily consisted of purchased patent rights and internally developed patents.

During October 2020, all amounts pertaining to the purchase price were received, thus completing all elements of the purchase agreement for the equipment originally held for sale.

Patents and Trademarks, net

Net patents and trademarks totaled $139 and $158 as of March 31, 2021 and December 31, 2020, respectively, and primarily consisted of purchased patent rights and internally developed patents.

Purchased patent rights represent the exclusive right to commercialize the bulk amorphous alloy and other amorphous alloy technology acquired from California Institute of Technology (“Caltech”), through a license agreement with Caltech and other institutions.

All fees and other amounts payable by the Company for these rights and licenses have been paid or accrued in full, and no further royalties, license fees, or other amounts will be payable in the future under the license agreement.

other amounts payable by the Company for these rights and licenses have been paid or accrued in full, and no further royalties, license fees, or other amounts will be payable in the future under the license agreement.

In addition to the purchased and licensed patents, the Company has internally developed patents.

2 unchanged sentences

The Company amortizes capitalized patents and trademarks over an average of 10 to 17 year periods.

Amortization expense for patents and trademarks was $21 and $63 for the three and nine months ended September 30, 2020, respectively.

This compares to $21 and $63 for the three and nine months ended September 30, 2019, respectively.

Other assets totaled $235 and $14 as of June 30, 2020 and December 31, 2019, respectively.

Amortization expense for patents and trademarks was $19 and $21 for the three months ended March 31, 2021 and 2020, respectively.

LIQUIDMETAL TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2021 and 2020

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

Other assets totaled $266 and $251 as of March 31, 2021 and December 31, 2020, respectively.

Included within these totals are the following:

September 30,

Utility deposits

Prepaid lease costs and receivables- long term

As of September 30, 2020, prepaid lease costs and receivables- long term are comprised of $68 in unamortized prepaid broker commissions that are not expected to be amortized within the next twelve months and $153 in straight-line rent accruals.

As of March 31, 2021, prepaid lease costs and receivables- long term are comprised of $58 in unamortized prepaid broker commissions that are not expected to be amortized within the next twelve months and $194 in straight-line rent accruals.

Accrued Liabilities

Accrued liabilities totaled $310 and $775 as of September 30, 2020 and December 31, 2019, respectively.

Accrued liabilities totaled $299 and $315 as of March 31, 2021 and December 31, 2020, respectively.

Included within these totals are the following:

September 30,

Accrued payroll, vacation, and bonuses

1 unchanged sentence

Accrued audit fees

Contract liability

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 September 30, 2020, payments totaling $217 had been made, resulting in a remaining liability under the 2019 Restructuring Plan of $56 as of September 30, 2020.

Other Long- T erm L iabilities

Other long-term liabilities were $899 as of September 30, 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.

Other Long-Term Liabilities

Other long-term liabilities were $899 as of March 31, 2021 and $899 as of December 31, 2020, and consisted of $856 of long-term, aged payables to vendors, individuals, and other third parties that have been outstanding for more than 5 years.

The Company is in the process of researching and resolving the balances for settlement and/or escheatment in accordance with applicable state law.

Also included in the balance as of September 30, 2020 is $43 in tenant deposits.

LIQUIDMETAL TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2020 and 2019

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

Stock Compensation Plan s

On April 4, 2002, our shareholders and Board of Directors adopted the 2002 Equity Incentive Plan (“2002 Plan”).

The 2002 Plan provided 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 were available to be granted under the 2002 Plan.

The 2002 Plan expired by its terms in April 2012 and remained in effect only with respect to the equity awards that had been granted prior to its expiration.

During the three months ended September 30, 2020, all remaining awards under the 2002 Plan expired under their contractual terms.

As of September 30, 2020 and December 31, 2019, there were 0 and 69,000 options, respectively, outstanding under the 2002 Plan.

Also included in the balance for each period is $43 in tenant deposits.

Stock Compensation Plans

On June 28, 2012, the Company adopted the 2012 Equity Incentive Plan (“2012 Plan”), with the approval of the shareholders, which provides for the grant of stock options to officers, employees, consultants, and directors of the Company and its subsidiaries.

2 unchanged sentences

A total of 30,000,000 shares of the Company’s common stock may be granted under the 2012 Plan, and all options granted under the 2012 Plan had exercise prices that were equal to the fair market value on the date of grant.

During the nine months ended September 30, 2020, the Company granted no options to purchase shares of common stock.

Under this plan, the Company had outstanding grants of options to purchase 5,609,192 and 6,930,445 shares of the Company’s common stock as of September 30, 2020 and December 31, 2019, respectively.

During the three months ended March 31, 2020, the Company granted no options to purchase shares of common stock.

Under this plan, the Company had outstanding grants of options to purchase 5,609,192 and 5,609,192 shares of the Company’s common stock as of March 31, 2021 and December 31, 2020, respectively.

On January 27, 2015, the Company adopted its 2015 Equity Incentive Plan (“2015 Plan”), which provided for the grant of stock options to officers, employees, consultants, and directors of the Company and its subsidiaries.

1 unchanged sentence

All options granted under the 2015 Plan had exercise prices that were equal to the fair market value on the dates of grant.

During the nine months ended September 30, 2020, the Company granted no options to purchase shares of common stock.

Under this plan, the Company had outstanding grants of options to purchase 12,341,667 and 12,341,667 shares of the Company’s common stock as of September 30, 2020 and December 31, 2019, respectively.

Stock based compensation expense attributable to these plans was $83 and $256 for the three and nine months ended September 30, 2020, respectively.

This compares to $73 and $415 for the three and nine months ended September 30, 2019, respectively.

During the three months ended March 31, 2020, the Company granted no options to purchase shares of common stock.

Under this plan, the Company had outstanding grants of options to purchase 12,341,667 and 12,341,667 shares of the Company’s common stock as of March 31, 2021 and December 31, 2020, respectively.

Stock based compensation expense attributable to these plans was $107 and $92 for the three months ended March 31, 2021 and 2020, respectively.

LIQUIDMETAL TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2021 and 2020

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

Facility Lease

3 unchanged sentences

The future minimum rents due to the Company under the Facility Lease are as follows:

LIQUIDMETAL TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2020 and 2019

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

Consolidated Statements of Changes in Equity

The following table provides the Company’s changes in equity for the three months ended September 30, 2020:

Warrants part of Additional Paid-in

The following table provides the Company’s changes in equity for the three months ended March 31, 2021:

Preferred Shares

Warrants part of

Additional Paid-in

Accumulated Other

Income (Loss)

Balance, June 30, 2020

Non- Controlling

Balance, December 31, 2020

Stock-based compensation

Other comprehensive loss

Balance, September 30, 2020

The following table provides the Company’s changes in equity for the nine months ended September 30, 2020:

Warrants part of Additional Paid-in

Balance, March 31, 2021

The following table provides the Company’s changes in equity for the three months ended March 31, 2020:

Preferred Shares

Warrants part of

Additional Paid-in

Accumulated Other

Income (Loss)

Non- Controlling

Balance, December 31, 2019

Stock-based compensation

Other comprehensive income

Balance, September 30, 2020

The following table provides the Company’s changes in equity for the three months ended September 30, 2019:

Warrants part of Additional Paid-in

Balance, June 30, 2019

Stock option exercises

Stock-based compensation

Balance, September 30, 2019

Other comprehensive loss

Balance, March 31, 2020

LIQUIDMETAL TECHNOLOGIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2020 and 2019

For the Three Months Ended March 31, 2021 and 2020

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

The following table provides the Company’s changes in equity for the nine months ended September 30, 2019:

Warrants part of Additional Paid-in

Balance, December 31, 2018

Stock option exercises

Stock-based compensation

Balance, September 30, 2019

Accumulated Other Comprehensive Income (Loss) ( “ AOCI ” )

The following table presents a summary of the changes in each component of AOCI for the three months ended September 30, 2020:

The following table presents a summary of the changes in each component of AOCI for the three months ended March 31, 2021:

Unrealized gains

available-for-sale

Accumulated other comprehensive income (loss), net of tax, as of June 30, 2020

(losses) on available-for-

sale securities

Accumulated other comprehensive income (loss), net of tax, as of December 31, 2020

Other comprehensive loss before reclassifications

1 unchanged sentence

Net increase in other comprehensive income (loss)

Accumulated other comprehensive income (loss), net of tax, as of September 30, 2020

The following table presents a summary of the changes in each component of AOCI for the nine months ended September 30, 2020:

Accumulated other comprehensive income (loss), net of tax, as of March 31, 2021

The following table presents a summary of the changes in each component of AOCI for the three months ended March 31, 2020:

Unrealized gains

available-for-sale

(losses) on available-for-

sale securities

Accumulated other comprehensive income (loss), net of tax, as of December 31, 2019

Other comprehensive income before reclassifications

Other comprehensive loss before reclassifications

Amounts reclassified from accumulated other comprehensive income (loss)

Net increase in other comprehensive income (loss)

Accumulated other comprehensive income (loss), net of tax, as of September 30, 2020

There was no activity associated with these components of AOCI for the three and nine months ended September 30, 2019.

LIQUIDMETAL TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2020 and 2019

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

Accumulated other comprehensive income (loss), net of tax, as of March 31, 2020

Loss Per Common Share

1 unchanged sentence

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 September 30, 2020, but were not included in the computation of diluted EPS for the same period as the inclusion would have been antidilutive, given the Company’s net loss.

Warrants to purchase 10,066,809 shares of common stock, with a price of $0.07 per share, outstanding at September 30, 2020, were not included in the computation of diluted EPS for the same period as the inclusion would have been antidilutive, given the Company’s net loss.

Options to purchase 20,303,333 shares of common stock, at prices ranging from $0.07 to $0.38 per share, were outstanding at September 30, 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, with a price of $0.07 per share, outstanding at September 30, 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.

Options to purchase 17,950,859 shares of common stock, at prices ranging from $0.07 to $0.38 per share, were outstanding at March 31, 2021, but were not included in the computation of diluted EPS for the same period as the inclusion would have been antidilutive, given the Company’s net loss.

Warrants to purchase 10,066,809 shares of common stock, with a price of $0.07 per share, outstanding at March 31, 2021, were not included in the computation of diluted EPS for the same period as the inclusion would have been antidilutive, given the Company’s net loss.

Options to purchase 18,191,859 shares of common stock, at prices ranging from $0.07 to $0.38 per share, were outstanding at March 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.

Warrants to purchase 10,066,809 shares of common stock, with a price of $0.07 per share, outstanding at March 31, 2020, were not included in the computation of diluted EPS for the same period as the inclusion would have been antidilutive, given the Company’s net loss.

Related Party Transactions

3 unchanged sentences

Eontec is a publicly held Hong Kong corporation of which Professor Li is the Chairman and major shareholder.

Eontec is also an affiliate of Dongguan Yihao Metals Materials Technology Co., Ltd.

Eontec is also an affiliate of Yihao.

Yihao is currently the Company’s primary outsourced manufacturer.

As of September 30, 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 $146 and $214 during the three and nine months ended September 30, 2020, respectively.

Equipment and services procured from Eontec, and their affiliates, were $0 and $0 during the three and nine months ended September 30, 2019, respectively.

As of March 31, 2021, Professor Li is a greater-than 5% beneficial owner of the Company and serves as the Company’s Chairman, President, and Chief Executive Officer.

Services procured from Eontec, and their affiliates, were $121 and $23 during the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021 and 2020, the Company has outstanding payables to Eontec, and their affiliates, of $27 and $23, respectively.

Item 2 – Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

This management ’ s discussion and analysis should be read in conjunction with the consolidated financial statements and notes included elsewhere in this Quarterly Report on Form 10-Q.

All amounts described in this section are in thousands, except percentages, periods of time, and share and per share data.

This management ’ s discussion and analysis, as well as other sections of this Quarterly Report on Form 10-Q, may contain “ forward-looking statements ” that involve risks and uncertainties, including statements regarding our plans, future events, objectives, expectations, estimates, forecasts, assumptions, or projections.

Any statement that is not a statement of historical fact is a forward-looking statement, and in some cases, words such as “ believe, ” “ estimate, ” “ project, ” “ expect, ” “ intend, ” “ may, ” “ anticipate, ” “ plan, ” “ seek, ” and similar words or expressions identify forward-looking statements.

These statements involve risks and uncertainties that could cause actual outcomes and results to differ materially from the anticipated outcomes or results, and undue reliance should not be placed on these statements.

These risks and uncertainties include, but are not limited to, the matters discussed in Part II herein, under the heading “ Item 1A.

Risk Factors ” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and other risks and uncertainties discussed in other filings made with the Securities and Exchange Commission (including risks described in subsequent reports on Form 10-Q and Form 8-K and other filings).

We disclaim any intention or obligation, other than as required by applicable law, to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

We are a materials technology company that develops and commercializes products made from amorphous alloys.

Our Liquidmetal® family of alloys consists of a variety of proprietary bulk alloys and composites that utilize the advantages offered by amorphous alloy technology.

We design, develop, and sell custom products and parts from bulk amorphous alloys to customers in various industries.

We also partner with third-party manufacturers and licensees to develop and commercialize Liquidmetal alloy products.

Amorphous alloys are, in general, unique materials that are distinguished by their ability to retain a random atomic structure when they solidify, in contrast to the crystalline atomic structure that forms in other metals and alloys when they solidify.

Liquidmetal alloys are proprietary amorphous alloys that possess a combination of performance, processing, and potential cost advantages that we believe will make them preferable to other materials in a variety of applications.

The amorphous atomic structure of bulk alloys enables them to overcome certain performance limitations caused by inherent weaknesses in crystalline atomic structures, thus facilitating performance and processing characteristics superior in many ways to those of their crystalline counterparts.

We believe the alloys and the molding technologies we employ can result in components for many applications that exhibit exceptional dimensional control and repeatability that rivals precision machining, excellent corrosion resistance, brilliant surface finish, high strength, high hardness, high elastic limit, alloys that are non-magnetic, and the ability to form complex shapes common to the injection molding of plastics.

All of these characteristics are achievable from the molding process, so design engineers often do not have to select specific alloys to achieve one or more of the characteristics as is the case with crystalline materials.

We believe these advantages could result in Liquidmetal alloys supplanting high-performance alloys, such as titanium and stainless steel, and other incumbent materials in a wide variety of applications.

Moreover, we believe these advantages could enable the introduction of entirely new products and applications that are not possible or commercially viable with other materials.

In July 2019, we adopted a restructuring plan pursuant to which we elected to wind down our manufacturing operations at our Lake Forest, CA facility and proceeded to outsource the manufacture of parts utilizing our technology through domestic and international manufacturing partners (the “2019 Restructuring Plan”).

In connection with the 2019 Restructuring Plan, we have shifted our business strategy from internal manufacture of parts and products for customers toward the use and reliance of outsourced manufacturers, which will initially be Dongguan Yihao Metals Materials Technology Co., Ltd.

(“Yihao”), a China-based company in which our largest beneficial stockholder, CEO and Chairman, Professor Lugee Li, holds a material, indirect, equity interest.

We will also seek to develop other manufacturers, both global and domestic, to aid in the further advancement of our technology and operations.

Licensing Transactions

Eontec License Agreement

On March 10, 2016, in connection with the Securities Purchase Agreement (the “2016 Purchase Agreement”) with Liquidmetal Technology Limited, a Hong Kong Company, we entered into a Parallel License Agreement (the “License Agreement”) with DongGuan Eontec Co., Ltd., a Hong Kong corporation (“Eontec”) pursuant to which we each entered into a cross-license of our respective technologies.

The License Agreement provides for the cross-license of certain patents, technical information, and trademarks between us and Eontec.

In particular, we granted to Eontec a paid-up, royalty-free, perpetual license to our patents and related technical information to make, have made, use, offer to sell, sell, export, and import products in certain geographic areas outside of North America and Europe, and Eontec granted to us a paid-up, royalty-free, perpetual license to Eontec’s patents and related technical information to make, have made, use, offer to sell, sell, export, and import products in certain geographic areas outside of specified countries in Asia.

The license granted by us to Eontec is exclusive (including to the exclusion of us) in the countries of Brunei, Cambodia, China (P.R.C and R.O.C.), East Timor, Indonesia, Japan, Laos, Malaysia, Myanmar, Philippines, Singapore, South Korea, Thailand, and Vietnam.

The license granted by Eontec to us is exclusive (including to the exclusion of Eontec) in North America and Europe.

The cross-licenses are non-exclusive in geographic areas outside of the foregoing exclusive territories.

Beyond the License Agreement, we collaborate with Eontec to accelerate the commercialization of amorphous alloy technology.

Eutectix Business Development Agreement

On January 31, 2020, we entered into a Business Development Agreement (the “Agreement”) with Eutectix, LLC, a Delaware limited liability company (“Eutectix”), which provides for collaboration, joint development efforts, and the manufacturing of products based on our proprietary amorphous metal alloys.

Under the Agreement, we have agreed to license to Eutectix specified equipment owned by us, including two injection molding machines, the Machines, and other machines and equipment, all of which will be used to make products for our customers and Eutectix customers.

The licensed machines and equipment represent substantially all of the machinery and equipment currently held by us.

We have also licensed to Eutectix various patents and technical information related to our proprietary technology.

Under the Agreement, Eutectix will pay us a royalty of six percent (6%) of the net sales price of licensed products sold by Eutectix, and Eutectix will also manufacture products for us.

The Agreement has a term of five years, subject to renewal provisions and the ability of either party to terminate earlier upon specified circumstances.

Apple License Transaction

On August 5, 2010, we entered into a license transaction with Apple pursuant to which (i) we contributed substantially all of our intellectual property assets to a newly organized special-purpose, wholly-owned subsidiary, called Crucible Intellectual Property, LLC (“CIP”), (ii) CIP granted to Apple a perpetual, worldwide, fully-paid, exclusive license to commercialize such intellectual property in the field of consumer electronic products, as defined in the license agreement, in exchange for a license fee, and (iii) CIP granted back to us a perpetual, worldwide, fully-paid, exclusive license to commercialize such intellectual property in all other fields of use.

Under the agreements relating to the license transaction with Apple, we were obligated to contribute, to CIP, all intellectual property developed by us through February 2016.

We are also obligated to maintain certain limited liability company formalities with respect to CIP at all times after the closing of the license transaction.

Other Material License Transactions

Our Liquidmetal Golf subsidiary has the exclusive right and license to utilize our Liquidmetal alloy technology for purposes of golf equipment applications.

This right and license is set forth in an intercompany license agreement between Liquidmetal Technologies and Liquidmetal Golf.

This license agreement provides that Liquidmetal Golf has a perpetual and exclusive license to use Liquidmetal alloy technology for the purpose of manufacturing, marketing, and selling golf club components and other products used in the sport of golf.

We own 79% of the outstanding common stock of Liquidmetal Golf.

In March 2009, we entered into a license agreement with Swatch Group, Ltd.

(“Swatch”) under which Swatch was granted a non-exclusive license to our technology to produce and market watches and certain other luxury products.

In March 2011, this license agreement was amended to grant Swatch exclusive rights as to watches and all third parties (including us), but non-exclusive as to Apple.

We will receive royalty payments over the life of the contract on all Liquidmetal products produced and sold by Swatch.

The license agreement with Swatch will expire on the expiration date of the last licensed patent.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

These estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances.

Actual results could differ materially from these estimates under different assumptions or conditions.

We believe that the following accounting policies are the most critical to our consolidated financial statements since these policies require significant judgment or involve complex estimates that are important to the portrayal of our financial condition and operating results:

Revenue recognition

Investments in debt securities

Impairment of long-lived assets and definite-lived intangibles

Deferred tax assets

Share based compensation

Our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report”) contains further discussions on our critical accounting policies and estimates.

Results of Operations

Comparison of the three months ended March 31, 2021 and 2020

For the three months ended March 31,

Licensing and royalties

Total revenue

Cost of sales

Selling, marketing, general and administrative

Research and development

Gain on disposal of long-lived assets

Total operating expense

Operating loss

Interest and investment income

Revenue and operating expenses

Total revenue increased to $72 for the three months ended March 31, 2021 from $71 the three months ended March 31, 2020.

The change was attributable to similar sales volumes associated with new application development projects.

Cost of sales .

Cost of sales was $55, or 76% of total revenue, for the three months ended March 31, 2021, an increase from $36, or 51% of total revenue, for the three months ended March 31, 2020.

If we begin increasing our products revenues with shipments of routine, commercial products and parts through third party contract manufacturers, we expect our cost of sales percentages to decrease, stabilize and be more predictable.

Gross profit .

Our gross profit decreased to $17 for the three month period ended March 31, 2021 from $35 for the three month period ended March 31, 2020.

Our gross profit as a percentage of total revenue, decreased to 24% for the three month period ended March 31, 2021 from 49% for the three month period ended March 31, 2020.

Early prototype and pre-production orders generally result in a higher cost mix, relative to revenue, than would otherwise be incurred in an on-site production environment, with higher volumes and more established operating processes, or through contract manufacturers.

As such, our gross profit percentages have fluctuated and may continue to fluctuate based on volume and quoted production prices per unit and may not be representative of our future business.

If we begin increasing our products revenues with shipments of routine, commercial products and parts through future orders to third party contract manufacturers, we expect our gross profit percentages to stabilize, increase, and be more predictable.

Selling, marketing, general and administrative .

Selling, marketing, general, and administrative expenses were $879 for the three months ended March 31, 2021, compared to $987 for the three months ended March 31, 2020.

The decrease in expenses was attributable to overall lower costs for employee compensation due to headcount reductions associated with the 2019 Restructuring Plan.

Research and development .

Research and development expenses were $22 for the three months ended March 31, 2021, compared to $29 for the three months ended March 31, 2020.

We continue to perform research and development of new Liquidmetal alloys and related processing capabilities, albeit on a reduced basis in comparison with prior periods.

Gain on disposal of fixed assets.

During the three months ended March 31, 2020, the Company recorded gains on the disposal of fixed assets of $20.

Similar gains were not recorded during the three months ended March 31, 2021.

Operating loss .

Operating loss was $884 for the three months ended March 31, 2021.

This compares to $961 for the three months ended March 31, 2020.

Fluctuations in our operating loss are primarily attributable to variations in operating expenses, as discussed above.

We continue to invest in our technology infrastructure to expedite the adoption of our technology, but we have experienced long sales lead times for customer adoption of our technology.

Until that time when we can either (i) increase our revenues with shipments of routine, commercial products and parts through third party contract manufacturers or (ii) obtain significant licensing revenues, we expect to continue to have operating losses for the foreseeable future.

Other income and expenses

Lease income.

Lease income relates to straight-line rental income received under the Facility Lease.

Such amounts were $132 and $88 for the three months ended March 31, 2021 and 2020, respectively.

Interest and investment income.

Interest and investment income relates to interest earned from our cash deposits and investments in debt securities for the respective periods.

Interest and investment income was $61 and $127 for the three months ended March 31, 2021 and 2020, respectively.

The decrease during 2021 is due continued volatility in corporate debt markets, which is resulting in reduced yields.

Liquidity and Capital Resources

Cash used in operating activities

Cash used in operating activities totaled $387 and $697 for the three months ended March 31, 2021 and 2020, respectively.

The cash was primarily used to fund operating expenses related to our business and product development efforts.

Cash provided by (used in) investing activities

Cash provided by (used in) investing activities totaled $102 and $818 for the three months ended March 31, 2021 and 2020, respectively.

Investing inflows primarily consist of proceeds from the sale of debt securities.

Investing outflows primarily consist of purchases of debt securities and capital expenditures for additional building improvements.

Cash provided by financing activities

Cash provided by financing activities totaled $0 and $0 for the three months ended March 31, 2021 and 2020, respectively.

Financing arrangements and outlook

During 2016, we raised a total of $62,700 through the issuance of 405,000,000 shares of our common stock in multiple closings under the 2016 Purchase Agreement.

The Company has a relatively limited history of selling bulk amorphous alloy products and components on a mass-production scale.

Furthermore, the ability of future contract manufacturers to produce the Company’s products in desired quantities and at commercially reasonable prices is uncertain and is dependent on a variety of factors that are outside of the Company’s control, including the nature and design of the component, the customer’s specifications, and required delivery timelines.

These factors have previously required that the Company engage in equity sales under various stock purchase agreements to support its operations and strategic initiatives.

As a result of the funding under the 2016 Purchase Agreement, the Company anticipates that its current capital resources, when considering expected losses from operations, will be sufficient to fund the Company’s operations for the foreseeable future.

Off Balance Sheet Arrangements

As of March 31, 2021, we did not have any off-balance sheet arrangements.

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements