What changed in this filing

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Item 1A. Risk Factors

2022-03-29 compared with 2021-03-09 · 85 added, 76 removed, 187 unchanged (46% of the section changed)

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In that case, the trading price of our common stock could fall and you could lose all or part of your investment .

Risks Related to Our Company and Business

Risk Related to Our Company and Business

We have incurred significant operating losses in the past and may not be able to achieve or sustain profitability in the future.

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We have a limited history of developing and selling products made from our bulk amorphous alloys.

We have a relatively limited history of producing bulk amorphous alloy components and products on a mass-production scale.

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

The restructuring plan that we adopted in July 2019 and the associated shift in business strategy may not result in the anticipated benefits.

In July 2019, the Company adopted the 2019 Restructuring Plan pursuant to which the Company elected to wind down its prior manufacturing operations at the Company’s Lake Forest, CA facility and seek to outsource the manufacture of parts utilizing the Company’s technology through its domestic and international manufacturing partners.

In connection with the 2019 Restructuring Plan, the Company has 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 Yihao, a China-based company in which our CEO and Chairman, Professor Lugee Li, maintains a material, indirect, equity interest.

The purpose of this shift was to preserve and maximize the value of the Company’s assets by reducing the infrastructure and cost associated with maintaining and building manufacturing operations and maximizing the prospects of successfully and more rapidly commercializing amorphous alloy products by leveraging the manufacturing capabilities of Yihao and potentially other manufacturers.

There is no assurance, however, that this strategy will enable the Company to more rapidly and successfully commercialize its products.

We have a relatively limited history of producing bulk amorphous alloy components and products on a mass-production scale. 

Furthermore, our suppliers’

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

We rely on assumptions about the markets for our products and components that, if incorrect, may adversely affect our profitability.

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As a result of our limited history of developing and marketing bulk amorphous alloy components and products, as well as our new manufacturing strategy of partnering with contract manufacturers and alloy producers, our historical results of operations may not be indicative of our future results.

We primarily rely on limited suppliers for mold making, manufacturing and alloying of our bulk amorphous alloy s and parts.

We currently have two suppliers who fulfill the mold making and manufacturing of our bulk amorphous alloy parts.

Our suppliers may allocate their limited capacity to fulfill the production requirements of their other customers.

In the event of a disruption of the operations of our suppliers, we may not have other manufacturing sources immediately available.

Such an event could cause significant delays in shipments and may adversely affect our revenue, cost of goods sold and results of operations.

We currently have two suppliers who fulfill our alloying/manufacturing of bulk amorphous alloys.

In the event of a disruption of the operations of our alloy suppliers, we may not have other alloying sources immediately available.

Such an event could cause significant delays in shipments and may adversely affect our revenue, cost of goods sold and results of operations.

We primarily rely on limited suppliers for mold making, manufacturing and alloying of our bulk amorphous alloys and parts.

We currently have one supplier located in China who fulfills the alloying, mold making and manufacturing of our bulk amorphous alloy parts.

Our supplier may allocate its limited capacity to fulfill the production requirements of its other customers.

In the event of a disruption of the operations of our supplier related to limited capacity, as well as other geo-political issues, we may not have other manufacturing sources immediately available.

Such events could cause significant delays in shipments and may adversely affect our revenue, cost of goods sold and results of operations.

The restructuring plan that we adopted in July 2019 and the associated shift in business strategy may not result in the anticipated benefits.

In connection with the 2019 Restructuring Plan, the Company reduced its management staff and shifted its business strategy from internal manufacture of parts and products for customers toward the use and reliance of outsourced manufacturers, including Yihao, a China-based company that is an affiliate of our largest beneficial stockholder, our Chairman, Professor Lugee Li.

There is no assurance, however, that this strategy will enable the Company to more rapidly and successfully commercialize its products.

The recent outbreak of COVID-19 and measures intended to prevent its spread may have a significant negative impact on our business, results of operations, and financial condition.

The global pandemic resulting from the outbreak of the novel coronavirus (“COVID-19”) has disrupted our operations beginning in March 2020.

Federal, state, and local mandates implementing quarantines, “shelter in place” orders, business limitations and/or shutdowns (subject to exceptions for certain essential operations and businesses) aimed at limiting the spread of COVID-19, have resulted in delays to our planned development pipeline.

While we are not currently experiencing any supply chain or labor force shortages, our ability to maintain our supply chain and labor force may become challenging as a result of the COVID-19 pandemic.

The global pandemic resulting from the outbreak of the novel coronavirus (“COVID-19”) has disrupted our operations beginning in March 2020.

Federal, state, and local mandates implementing quarantines, “shelter in place”

orders, business limitations and/or shutdowns (subject to exceptions for certain essential operations and businesses) aimed at limiting the spread of COVID-19, have resulted in delays to our planned development pipeline.

While we are not currently experiencing any supply chain or labor force shortages, our ability to maintain our supply chain and labor force may have become challenging as a result of the COVID-19 pandemic.

The COVID-19 pandemic and related circumstances may also adversely affect our ability to implement our growth plans, including delays in product development initiatives.

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However, we expect the COVID-19 pandemic to adversely impact our development pipeline and, depending on the severity and longevity of the COVID-19 pandemic, the efforts taken to reduce its spread and the possibility of a resurgence of the COVID-19 outbreak could impact our asset values, including investments in debt securities and long-lived assets, and have a material adverse effect on our financial results, future operations, and liquidity.

Even after the COVID-19 pandemic has subsided, we may continue to experience negative impacts to our financial results due to COVID-19’s global economic impact, including the availability of credit generally, decreases in our customers’ discretionary spending on development projects, and any economic slowdown or recession that has occurred or may occur in the future.

Risks Related to Customer Relationships

discretionary spending on development projects, and any economic slowdown or recession that has occurred or may occur in the future.

Risk Related to Customer Relationships

If we cannot establish and maintain relationships with customers that incorporate our components and products into their finished goods, we will not be able to increase our revenue and commercialize our products.

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Our future growth and success will depend in large part on our ability to enter into these relationships and the subsequent success of these relationships.

Even if our products are selected for use in a customer’s products, we still may not realize significant revenue from that customer if that customer’s products are not commercially successful.

It may take significant time and cost for us to develop new customer relationships, which may delay our ability to generate additional revenue or achieve profitability.

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Our history to date has demonstrated that the sales cycle could extend beyond one year.

The time it takes to transition a customer from limited production to full-scale production runs will depend upon the nature of the processes and products into which our Liquidmetal alloys are integrated.

Moreover, we have found that customers often proceed very cautiously and slowly before incorporating a fundamentally new and unique type of material into their products.

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Our experience has shown that our customers will perform numerous tests and extensively evaluate our components and products before incorporating them into their finished products.

The time required for testing, evaluating, and designing our components and products into a customer’s products, and in some cases, obtaining regulatory approval, can be significant, with an additional period of time before a customer commences volume production of products incorporating our components and products, if ever.

Moreover, because of this lengthy development cycle, we may experience a delay between the time we accrue expenses for research and development and sales and marketing efforts and the time when we generate revenue, if any.

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Our future revenue growth and ultimate profitability will depend in part on the ability of our customers and licensees to successfully market and sell their finished goods that incorporate our products.

We may have little control over our customers’ and licensees’ marketing and sales efforts.

We may have little control over our customers’

and licensees’

marketing and sales efforts.

These marketing and sales efforts may be unsuccessful for various reasons, any of which could hinder our ability to increase revenue or achieve profitability.

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Also, products incorporating competing technologies may be more successful for reasons unrelated to the performance of Liquidmetal products or the marketing efforts of our customers and licensees.

Risks Related to Technological and Intellectual Property

Risk Related to Technological and Intellectual Property

Our growth depends on our ability to identify, develop, and commercialize new applications for our technology.

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Our bulk amorphous alloy technology is still at an early stage of commercialization relative to many other materials.

Our bulk amorphous alloy technology is a relatively new technology as compared to many other material technologies, such as plastics and widely-used high-performance crystalline alloys.

Historically, the successful commercialization of a new material technology has required the persistent improvement and refining of the technology over a sometimes lengthy period of time.

Accordingly, we believe that our company’s future success will be dependent on our ability to continue expanding and improving our technology platform by, among other things, constantly refining and improving our processes, optimizing our existing amorphous alloy compositions for various applications, and developing and improving new bulk amorphous alloy compositions.

Our bulk amorphous alloy technology is a relatively new technology as compared to many other material technologies, such as plastics and widely-used high-performance crystalline alloys. 

Historically, the successful commercialization of a new material technology has required the persistent improvement and refining of the technology over a sometimes lengthy period of time. 

Our failure to further expand our technology base could limit our growth opportunities and hamper our commercialization efforts.

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The future development of any such new materials could render our alloys obsolete and unmarketable or may impair our ability to compete effectively.

Other companies or individuals may claim that we infringe their intellectual property rights, which could cause us to incur significant expenses or prevent us from selling our products.

Our success depends, in part, on our ability to operate without infringing on valid, enforceable patents or proprietary rights of third parties and without breaching any licenses that may relate to our technologies and products.

Future patents issued to third parties may contain claims that conflict with our patents and that compete with our products and technologies, and third parties could assert infringement claims against us.

Any litigation or interference proceedings, regardless of their outcome, may be costly and may require significant time and attention from our management and technical personnel.

Litigation or interference proceedings could also force us to:

stop or delay using our technology;

stop or delay our customers from selling, manufacturing or using products that incorporate the challenged intellectual property;

enter into licensing or royalty agreements that may be unavailable on acceptable terms.

We rely extensively on information technology in our operations, and any material failure, inadequacy, interruption, or security breach of that technology could have a material adverse impact on our business.

We rely extensively on information technology systems across our operations, including reporting results of operations, collection and storage of personal data of customers, employees and other stakeholders, and various other processes and transactions.

Some of these systems are managed by third-party service providers.

We use third-party technology and systems for a variety of reasons, including, without limitation, encryption and authentication technology, employee email, content delivery to customers, back-office support, and other functions.

Failure to follow applicable regulations related to those activities, or to prevent or mitigate data loss or other security breaches, including breaches of our business partners’ technology and systems could expose us and/or our customers and vendors to a risk of loss or misuse of such information, which could adversely affect our operating results, result in regulatory enforcement, other litigation and potential liability, and otherwise harm our business.

Our ability to effectively manage our business and coordinate the production, distribution, and sale of our products depends significantly on the reliability and capacity of these systems and third-party service providers.

Although we have developed systems and processes that are designed to protect customer information and prevent data loss and other security breaches, including systems and processes designed to reduce the impact of a security breach at a third-party service provider, such measures cannot provide absolute security.

We have exposure to similar security risks faced by other companies that have data stored on their information technology systems.

To our knowledge, we have not experienced any material breach of our cybersecurity systems.

If we or our third-party service providers systems fail to operate effectively or are damaged, destroyed, or shut down, or there are problems with transitioning to upgraded or replacement systems, or there are security breaches in these systems, we could experience delays or decreases in product sales, and reduced efficiency of our operations.

Any of the aforementioned could occur as a result of natural disasters, software or equipment failures, telecommunications failures, loss or theft of equipment, acts of terrorism, circumvention of security systems, or other cyber-attacks, including denial-of-service attacks.

Additionally, any of these events could lead to violations of privacy laws, loss of customers, or loss, misappropriation or corruption of confidential information, trade secrets or data, which could expose us to potential litigation, regulatory actions, sanctions or other statutory penalties, any or all of which could adversely affect its business, and cause it to incur significant losses and remediation costs.

Risks Related to Human Resources

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Our future growth and success will depend in part on our ability to retain key members of our management and engineering staff, who are familiar with this technology and the potential applications and markets for it.

We do not have “key man” or similar insurance on any of the key members of our management and engineering staff.

We do not have “key man”

or similar insurance on any of the key members of our management and engineering staff.

If we lose their services or the services of other key personnel, our financial results or business prospects may be harmed.

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Even if we do identify one or more potentially beneficial strategic partners, we may not be able to consummate transactions with these strategic partners on favorable terms or obtain the benefits we anticipate from such a transaction.

Risks Related to Our Global Business, Litigation, Laws, and Regulations

Risks Related to Our Global Business, Litigation, Laws and Regulation

We may derive some portion of our revenue from sales outside the United States, which may expose the Company to foreign commerce risks.

We may sell a portion of our products to customers outside of the United States, and our operations and revenue may be subject to risks associated with foreign commerce, including transportation delays and foreign tax and legal compliance.Moreover, customers may sell finished goods that incorporate our components and products outside of the United States, which indirectly expose us to additional foreign commerce risks.

Moreover, customers may sell finished goods that incorporate our components and products outside of the United States, which indirectly expose us to additional foreign commerce risks.

A substantial increase in the price or interruption in the supply of raw materials for our alloys could have an adverse effect on our profitability.

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For example, if the price of one of the elements included in our alloys substantially increases, we may not be able to pass the price increase on to our customers.

Our business could be subject to the potential ly adverse consequences of exchange rate fluctuations.

Our business could be subject to the potentially adverse consequences of exchange rate fluctuations.

We expect to conduct business in various foreign currencies and will be exposed to market risk from changes in foreign currency exchange rates and interest rates.

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Our inability to protect our licenses, patents, trademarks, and proprietary rights in the United States and foreign countries could harm our business.

We own several patents relating to amorphous alloy technology, and we have other rights to amorphous alloy patents through an exclusive license from Caltech.

Our success depends in part on our ability to obtain and maintain patent and other proprietary right protection for our technologies and products in the United States and other countries.

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The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems and costs in protecting our proprietary rights in these foreign countries.

In August 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 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, 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.

In August 2010, we entered into a license transaction with Apple pursuant to which (i) we contributed substantially all of our intellectual property assets to a special-purpose, wholly-owned subsidiary, Crucible Intellectual Property (“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, 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.

Patent law is still evolving relative to the scope and enforceability of claims in the fields in which we operate.

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Litigation or other proceedings to defend or enforce our intellectual property rights could require us to spend significant time and money and could otherwise adversely affect our business.

E volving regulation of corporate governance and public disclosure may result in additional expenses and continuing uncertainty.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the SEC XBRL mandate, new SEC regulations and International Financial Reporting Standards (“IFRS”), are creating uncertainty for public companies.

Other companies or individuals may claim that we infringe their intellectual property rights, which could cause us to incur significant expenses or prevent us from selling our products.

Any litigation or interference proceedings, regardless of their outcome, may be costly and may require significant time and attention from our management and technical personnel.

Litigation or interference proceedings could also force us to:

stop or delay using our technology;

stop or delay our customers from selling, manufacturing or using products that incorporate the challenged intellectual property;

enter into licensing or royalty agreements that may be unavailable on acceptable terms.

Evolving regulation of corporate governance and public disclosure may result in additional expenses and continuing uncertainty.

As a result of these new rules and the size and limited resources of our company, we will incur additional costs associated with our public company reporting requirements, and we may not be able to comply with some of these new rules.

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Failure to comply with import and export regulatory requirements can lead to substantial fines, civil and criminal penalties, and the loss of government contracting and export privileges.

Risks Related to Stock Ownership and Corporate Governance

The existence of minority share holders in our Liquidmetal Golf subsidiar y creates potential for conflicts of interest.

We directly own 79% of the outstanding capital stock of Liquidmetal Golf, our subsidiary that has the exclusive right to commercialize our technology in the golf market.

Risk Related to Stock Ownership and Corporate Governance

The existence of minority shareholders in our Liquidmetal Golf subsidiary creates potential for conflicts of interest.

We directly own 79% of the outstanding capital stock of Liquidmetal Golf, our subsidiary that has the exclusive right to commercialize our technology in the golf market. 

The remaining 21% of the Liquidmetal Golf stock is owned by approximately 95 shareholders of record.

As a result, conflicts of interest may develop between us and the minority shareholders of Liquidmetal Golf.

To the extent that our officers and directors are also officers or directors of Liquidmetal Golf, matters may arise that place the fiduciary duties of these individuals in conflicting positions.

Our executive officers, directors and insiders and entities affiliated with them hold a significant percentage of our common stock, and these shareholders may take actions that may be adverse to your interests.

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Our stock price has experienced volatility and may continue to experience volatility.

During 2020, the highest bid price for our common stock was $0.17 per share, while the lowest bid price during that period was $0.07 per share.

During 2021, the highest bid price for our common stock was $0.12 per share, while the lowest bid price during that period was $0.07 per share. 

The trading price of our common stock could continue to fluctuate widely due to:

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The trading prices of securities of many companies at our stage of growth have fluctuated broadly, often for reasons unrelated to the operating performance of the specific companies.

These general market and industry factors may adversely affect the trading price of our common stock, regardless of our actual operating performance.

If our stock price is volatile, we could face securities class action litigation, which could result in substantial costs and a diversion of management’s attention and resources and could cause our stock price to fall.

These general market and industry factors may adversely affect the trading price of our common stock, regardless of our actual operating performance. 

Future sales of our common stock could depress our stock price.

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In the event that we propose to register additional shares of common stock under the Securities Act of 1933 for our own account, certain shareholders are entitled to receive notice of that registration and to include their shares in the registration, subject to limitations described in the agreements granting these rights.

A limited public trading market exists for our common stock, which makes it more difficult for our share holders to sell their common stock in the public markets.

Our common stock is currently traded under the symbol “LQMT” and currently trades at a low volume, based on quotations on the “Over-the-Counter” exchanges, meaning that the number of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent.

A limited public trading market exists for our common stock, which makes it more difficult for our shareholders to sell their common stock in the public markets.

Our common stock is currently traded under the symbol “LQMT”

and currently trades at a low volume, based on quotations on the “Over-the-Counter”

exchanges, meaning that the number of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent.

This situation is attributable to a number of factors, including the fact that we are a small company which is still relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and might be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our stock until such time as we became more viable.

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As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future for our common shareholders.

FINRA sales practice requirements may also limit a shareholder’s ability to buy and sell our stock.

The Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require a broker-dealer to have reasonable grounds for believing that an investment is suitable for a customer prior to recommending the investment to such customer.

FINRA sales practice requirements may also limit a shareholder ’

s ability to buy and sell our stock.

Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information.

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These provisions:

authorize our board of directors, without shareholder approval, to issue up to 10,000,000 shares of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and prevent a takeover attempt;

limit shareholders’ ability to call a special meeting of our shareholders;

authorize our board of directors, without shareholder approval, to issue up to 10,000,000 shares of “blank check”

preferred stock that could be issued by our board of directors to increase the number of outstanding shares and prevent a takeover attempt;

limit shareholders’

ability to call a special meeting of our shareholders;

establish advance notice requirements to nominate directors for election to our board of directors or to propose matters that can be acted on by shareholders at shareholder meetings.

The provisions described above, as well as other provisions in our certificate of incorporation, our bylaws, and Delaware law could delay or make more difficult transactions involving a change in control of us or our management.

We will rely on the manufacturing operations of a third party in which our largest stockholder, CEO and Chairman, has a material indirect equity interest, which presents potential conflicts of interest.

We rely, at least initially, on Yihao to manufacture our products.

Professor Li maintains a material, indirect equity interest in Yihao.

Professor Li, through his Liquidmetal Technology Limited affiliate, is the largest beneficial owner of our common stock and owns approximately 45.1% of our common stock and is able to exercise significant influence over all matters affecting us, including the election of directors, formation and execution of business strategy and approval of mergers, acquisitions and other significant corporate transactions, which may have an adverse effect on our stock price and ability to execute our strategic initiatives.

As a result of this significant ownership and his interest in Yihao, as well as the future importance of Yihao as a manufacturer of the Company’s products, Professor Li may have conflicts of interest and interests that are not aligned with those of other stockholders of the Company

Unresolved Staff Comments

Some of these systems are managed by third-party service providers.

Failure to follow applicable regulations related to those activities, or to prevent or mitigate data loss or other security breaches, including breaches of our business partners’

technology and systems could expose us and/or our customers and vendors to a risk of loss or misuse of such information, which could adversely affect our operating results, result in regulatory enforcement, other litigation and potential liability, and otherwise harm our business.

We have exposure to similar security risks faced by other companies that have data stored on their information technology systems.

To our knowledge, we have not experienced any material breach of our cybersecurity systems.

We will rely on the manufacturing operations of a third party controlled by our largest stockholder and Chairman, which presents a potential conflicts of interest.

As a result of the 2019 Restructuring Plan, we will rely, on Yihao to manufacture our products.

Yihao is an affiliate of Professor Li and is indirectly controlled by Professor Li.

Professor Li, through his affiliates, is the largest beneficial owner of our common stock and owns approximately 45.1% of our common stock and is able to exercise significant influence over all matters affecting us, including the election of directors, formation and execution of business strategy and approval of mergers, acquisitions and other significant corporate transactions, which may have an adverse effect on our stock price and ability to execute our strategic initiatives.

As a result of this significant ownership and his affiliation with Yihao, as well as the future importance of Yihao as a manufacturer of the Company’s products, Professor Li may have conflicts of interest and interests that are not aligned with those of other stockholders of the Company.

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-K

Item 1A. Risk Factors