Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant ’ s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Our common stock is currently quoted on the “OTCQB Venture Marketplace” under the symbol “LQMT.” On December 31, 2025, the last reported sales price of our common stock was $0.10 per share. As of December 31, 2025, we had 174 active record holders of our common stock.
The following table sets forth, on a per share basis, the range of high and low bid information for the shares of our common stock for each full quarterly period within the two most recent fiscal years and any subsequent interim period for which financial statements are included, as reported by the “OTCQB Venture Marketplace.” These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
2025
High
Low
Fourth Quarter
$
0.15
$
0.08
Third Quarter
$
0.16
$
0.11
Second Quarter
$
0.14
$
0.11
First Quarter
$
0.13
$
0.04
2024
High
Low
Fourth Quarter
$
0.07
$
0.05
Third Quarter
$
0.07
$
0.05
Second Quarter
$
0.05
$
0.04
First Quarter
$
0.05
$
0.04
We have never paid a cash dividend on our common stock. We do not anticipate paying any cash dividends on our common stock in the foreseeable future, and we plan to retain our earnings to finance our operations and future growth.
Item 6. [Reserved]
Item 7. 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 report on Form 10-K. 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 report on Form 10-K, 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 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 under the caption “ Risk Factors ” in Item 1A of this report and other risks and uncertainties discussed in filings made with the Securities and Exchange Commission (including risks described in subsequent reports on Form 10-Q, Form 10-K, Form 8-K, and other filings). Liquidmetal Technologies, Inc. disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
OVERVIEW
We are a materials technology and manufacturing company focused on the development and commercialization of products made from proprietary amorphous alloys and/or utilizing proprietary amorphous alloy manufacturing technologies. In addition to developing our own manufacturing facility through our subsidiary in China, we work with third-party manufacturing and commercial partners to develop and commercial products made from our proprietary amorphous alloys.
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.
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Our revenues are derived from i) selling our bulk amorphous alloy custom products and parts for applications which include, but are not limited to, non-consumer electronic devices, medical products, automotive components, and sports and leisure goods; ii) selling tooling and prototype parts such as demonstration parts and test samples for customers with products in development; and iii) product licensing and royalty revenue.
Our cost of sales consists primarily of the costs of manufacturing, which include raw alloy and direct labor costs. Selling, general, and administrative expenses currently consist primarily of salaries and related benefits, travel, consulting and professional fees, depreciation and amortization, insurance, office and administrative expenses, and other expenses related to our operations.
Research and development expenses represent salaries, related benefits expenses, consulting and contract services, expenses incurred for the design and testing of new processing methods, expenses for the development of sample and prototype products, and other expenses related to the research and development of Liquidmetal bulk alloys. Costs associated with research and development activities are expensed as incurred. We plan to enhance our competitive position by improving our existing technologies and developing advances in amorphous alloy technologies. We believe that our research and development efforts will focus on the discovery of new alloy compositions, the development of improved processing technology, and the identification of new applications for our alloys.
SIGNIFICANT TRANSACTIONS
Hangzhou Feifeng Liquidmetal Co., Ltd. Joint Venture
On July 4, 2025, Liquidmetal Asia Holdings Limited (“Liquidmetal Asia”), a Hong Kong incorporated wholly owned subsidiary, entered into a shareholders agreement with Mr. Chong Liu, an individual investor to form a new joint venture company named Hangzhou Feifeng Liquidmetal Co. Ltd., a limited liability company formed under the Peoples Republic of China (the “Joint Venture Company”). The Joint Venture Company was formed for the principal purpose of developing a manufacturing facility in Hangzhou, China for the manufacture of amorphous metal products. The Joint Venture Company will be owned 70% by Liquidmetal Asia and 30% by Mr. Liu and will be capitalized with $6.0 million USD of initial capital, of which $4,200 has been contributed by Liquidmetal Asia, and $1,800 will be contributed by Mr. Liu on or before May 25, 2028. This Joint Venture Company will have full manufacturing capabilities in 2026.
Yihao Manufacturing Agreement
On January 12, 2022, Liquidmetal Technologies entered into a manufacturing agreement (“Manufacturing Agreement”) with Dongguan Yihao Metal Materials Technology Co. Ltd. (“Yihao”) to become an outsourced manufacturer of the Company’s products. Under the Manufacturing Agreement, which has a term of five years, Yihao has agreed to serve as a non-exclusive contract manufacturer for amorphous alloy parts offered and sold by the Company at prices determined on a “cost-plus” basis. Yihao is an affiliate of Dongguan Eontec Co. Ltd. and Professor Lugee Li, our Chairman and largest beneficial owner of the Company’s capital stock.
Liquidmetal Golf License
On January 13, 2022, our Liquidmetal Golf subsidiary entered into a sublicense agreement (“LMG Sublicense Agreement”) with Amorphous Technologies Japan, Inc. (“ATJ”), a newly formed Japanese entity that was established by Twins Corporation, a sporting goods company operating in Japan. Under the agreement, LMG granted to ATJ a nonexclusive worldwide sublicense to the Company’s amorphous alloy technology and related trademarks to manufacture and sell golf clubs and golf related products. The LMG Sublicense Agreement had an original term of three years and has been extended for an additional three year term that provides for the payment of a running royalty to LMG of 3% of the net sales price of licensed products.
Corporate Facility Purchase and Lease
On February 16, 2017, we purchased a 41,000 square foot facility (the “Facility”) located in Lake Forest, CA, where operations commenced during July 2017. The purchase price for the Facility was $7,818.
On January 23, 2020, 20321 Valencia, LLC, a Delaware limited liability company and our wholly owned subsidiary, entered into a lease agreement pursuant to which we leased to MatterHackers, Inc., a Delaware corporation (“Tenant”), an approximately 32,534 square foot portion of the Facility. The lease term was for 5 years and 2 months and expired on April 30, 2025. The base rent payable under the lease was $33 per month initially and was subject to periodic increases up to a maximum of approximately $54 per month. Tenant paid approximately 79% of common operating expenses.
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On March 26, 2025, we entered into a new lease agreement (the “Facility Lease”) for a 5 year term commencing on May 1, 2025 and expanded the leased square footage to 40,090 square feet. The base rent payable under the Facility Lease is $52 per month initially and is subject to periodic increases up to a maximum of approximately $58 per month. Tenant will pay approximately 98% of building operating expenses. The Facility Lease grants us or Tenant the right to terminate the Facility Lease after two and a half years into the lease term and has other customary provisions, including provisions relating to default and usage restrictions.
2016 Purchase Agreement
On March 10, 2016, we entered into a Securities Purchase Agreement (the “2016 Purchase Agreement”) with Liquidmetal Technology Limited, a Hong Kong company (the “Investor”), which is controlled by our Chairman, Professor Lugee Li (“Professor Li”). The 2016 Purchase Agreement provided for the purchase by the Investor of a total of 405,000,000 shares of our 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. On October 10, 2024, the Investor sold 179,787,888 to various buyers leaving 226,572,262 shares of our common stock owned by the Investor as of December 31, 2025.
In addition to the shares issuable under the 2016 Purchase Agreement, we issued to the Investor a warrant to acquire 10,066,809 shares of common stock. The warrant expired on March 10, 2026.
Eontec License Agreement
On March 10, 2016, in connection with the 2016 Purchase Agreement, 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. Our Chairman, Professor Li, is also the Chairman of Eontec.
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. In turn, 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.
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, 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 that we developed 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.
Liquidmetal Golf License
On January 13, 2022, our Liquidmetal Golf subsidiary (“Liquidmetal Golf” or “LMG”) entered into a sublicense agreement (“LMG Sublicense Agreement”) with Amorphous Technologies Japan, Inc. (“ATJ”), a newly formed Japanese entity that was established by Twins Corporation, a sporting goods company operating in Japan. Under the agreement, LMG granted ATJ a nonexclusive worldwide sublicense to our amorphous alloy technology and related trademarks to manufacture and sell golf clubs and golf related products. The original term of three years was extended to have automatic, annual renewals and provided for the payment of a running royalty to LMG of 3% of the net sales price of licensed products.
Swatch Group License
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, 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.
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RESULTS OF OPERATIONS
Years ended December 31,
2025
2024
Changes
Amount
% of
Revenue
Amount
% of
Revenue
Amount
% of
Change
Revenue:
Products
$
775
98.9
%
$
842
97.9
%
$
(67
)
-8.0
%
Licensing and royalties
9
1.1
%
18
2.1
%
(9
)
-50.0
%
Total revenue
784
100.0
%
860
100.0
%
(76
)
-8.8
%
Cost of sales
554
70.7
%
643
74.8
%
(89
)
-13.8
%
Gross profit
230
29.3
%
217
25.2
%
13
6.0
%
Operating expenses:
Selling, marketing, general and administrative
3,958
504.8
%
3,511
408.3
%
447
12.7
%
Research and development
14
1.8
%
19
2.2
%
(5
)
-26.3
%
3,972
506.6
%
3,530
410.5
%
442
12.5
%
Operating loss
(3,742
)
-477.3
%
(3,313
)
-385.2
%
(429
)
12.9
%
Other income (expense):
Lease income
641
81.8
%
355
41.3
%
286
80.6
%
Other income
8
1.0
%
311
36.2
%
(303
)
-97.4
%
Investment income
102
13.0
%
266
30.9
%
(164
)
-61.7
%
Interest income
649
82.8
%
870
101.2
%
(221
)
-25.4
%
1,400
178.6
%
1,802
209.5
%
(402
)
-22.3
%
Loss from operations
(2,342
)
-298.7
%
(1,511
)
-175.7
%
(831
)
55.0
%
Income taxes
-
0.0
%
-
0.0
%
-
0.0
%
Net loss
(2,342
)
-298.7
%
(1,511
)
-175.7
%
(831
)
55.0
%
Net loss attributable to non-controlling interest
1
0.1
%
1
0.1
%
-
0.0
%
Net loss attributable to Liquidmetal Technologies shareholders
$
(2,341
)
-298.6
%
$
(1,510
)
-175.6
%
$
(831
)
55.0
%
(a) Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
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Revenue and operating expenses
Revenue. Total revenue decreased by $76 to $784 for the year ended December 31, 2025 from $860 for the year ended December 31, 2024. The decrease was attributable to a decrease in product shipments primarily related to our health monitoring rings and medical devices.
Cost of sales . Cost of sales was $554, or 70.7% of total revenue, for the year ended December 31, 2025, as compared to $643, or 74.8% of total revenue, for the year ended December 31, 2024. Our cost of sales percentages have fluctuated and may continue to fluctuate based on production volumes and quoted production prices per unit and may not be representative of our future business. Once we are able to sustain and increase shipments of routine, commercial products and parts through our contract manufacturers, we expect our cost of sales percentages to decrease, stabilize, and be more predictable.
Gross profit. Our gross profit increased by $13 from $217 for the year ended December 31, 2024 to $230 for the year ended December 31, 2025. Our gross margin percentage increased from 25.2% for the year ended December 31, 2024 to 29.3% for the year ended December 31, 2025. Our gross profit percentages have fluctuated and may continue to fluctuate based on production volumes and quoted production prices per unit and may not be representative of our future business. Once we are able to sustain and increase 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 expenses . Selling, marketing, general, and administrative expenses increased by $447 to $3,958, or 504.8% of revenue, for the year ended December 31, 2025 from $3,511, or 408.3% of revenue, for the year ended December 31, 2024. The increase in expenses was primarily attributable to increase in travel, legal expenses, and joint venture startup costs in 2025 compared to 2024.
Research and development expenses . Research and development expenses decreased by $5 to $14, or 1.8% of revenue, for the year ended December 31, 2025, from $19, or 2.2% of revenue, for the year ended December 31, 2024. The decrease in expense was mainly due to reductions in employee compensation and associated development initiatives from headcount reductions. Going forward, we will continue to perform research and development of new Liquidmetal alloys and related processing capabilities, albeit on a reduced basis.
Operating loss. Operating loss increased by $429 from $3,313 for the year ended December 31, 2024 to $3,742 for the year ended December 31, 2025. 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.
Non-operational income and expenses
Investment income. Investment income relates to realized gains earned from our investments in debt securities for the respective periods. Investment income was $102 and $266 for the years ended December 31, 2025 and 2024, respectively. The decrease during 2025 is primarily due to lower overall trading on debt securities as a result of withdrawals from debt securities to fund our new joint venture.
Interest income. Interest income relates to interest earned from our cash deposits and investments in debt securities for the respective periods. Interest income was $649 and $870 for the years ended December 31, 2025 and 2024, respectively. The decrease during 2025 is primarily due to lower overall yields on debt securities as a result of withdrawals from debt securities to fund our new joint venture.
Lease income. Lease income relates to straight-line rental income received under the Facility Lease. Such amounts were $641 and $355 for the years ended December 31, 2025 and 2024, respectively.
Net loss. Our annual net losses of $2,342 for the year ended December 31, 2025 and $1,511 for the year ended December 31, 2024 are primarily reflective of operating expenses associated with our on-going business as well as non-operational income, discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities
Cash used in operating activities totaled $2,752 for the year ended December 31, 2025 and $1,157 for the year ended December 31, 2024. The cash was primarily used to fund operating and capital expenses related to our new joint venture manufacturing operations as well as business and product development efforts.
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Cash provided by (used in) investing activities
Cash provided by investing activities totaled $3,905 for the year ended December 31, 2025 and cash used in investing activities totaled $1,674 for the year ended December 31, 2024. Cash used in investing activities primarily consists of purchases and sales of debt securities in line with our investment strategy.
Financing arrangements and outlook
The Company has a relatively limited history of selling bulk amorphous alloy products and components on a mass-production scale. Furthermore, the ability of 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.
However, as of December 31, 2025, the Company had $7,164 in cash, as well as $12,523 in investments in debt securities. The Company views this total of $19,760 as readily available sources of liquidity in the event needed to advance the Company’s existing strategy, and/or pursue an alternative strategy. As such, 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
An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity, or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to our Company, or that engages in leasing, hedging, or research and development arrangements with our Company. As of December 31, 2025, the Company did not have any off-balance sheet arrangements.
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:
•
We recognize revenue 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.
Our revenue recognition policy complies with the requirements of ASC 606. As a majority of our sales revenue continues to be recognized when products are shipped, and there was no change in the recognition model historically applied to active license and royalty contracts under the new revenue standard, there was no adjustment to the opening balance of retained earnings. The impact to our results of operations is not material, on an on-going basis, because the analysis of our contracts under the new revenue standard supports a recognition model consistent with our previous revenue recognition model. Revenue on the majority of our contracts will continue to be recognized over time because of the continuous transfer of control to the customer.
●
Products Revenue : 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 we receive 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, we record deferred revenue, which represents a contract liability. We 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 us. 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, we have 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.
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●
Practical Expedients and Exemptions : We generally expense 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. We do 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 we recognize revenue at the amount for which it has the right to invoice for services performed.
•
We value our long-lived assets at the lower of cost or fair market value. We review 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 our 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 we 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. No cash impairment charges were recorded for the years ended December 31, 2025 and December 31, 2024.
•
We record valuation allowances to reduce our deferred tax assets to the amounts deemed more likely than not of being realized. While we consider taxable income in assessing the need for a valuation allowance, in the event we determine we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment would be made and income increased in the period of such determination. Likewise, in the event we determine we would not be able to realize all or part of our deferred tax assets in the future, an adjustment would be made and charged to income in the period of such determination.
•
We account 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.
•
Our inventory is stated at the lower of cost or estimated net realizable value. The cost of inventories is determined on the basis of weighted-average cost. 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.
•
We invest excess funds in debt securities 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. We classify our investments in debt securities as available-for-sale with all unrealized gains or losses included as part of other comprehensive income. We evaluate our debt securities with unrealized losses on a quarterly basis for potential other-than-temporary impairments in value. As a result of these assessments, we did not recognize any other-than-temporary impairment losses considered to be credit related for the years ended December 31, 2025 and 2024.
RECENT ACCOUNTING PRONOUNCEMENTS
Financial Instruments- Credit Losses
In June 2016, the FASB issued an accounting standards update which 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 its 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.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
None.
Item 8. Financial Statements
The financial statements required by this item can be found beginning on page 45 of this Annual Report on Form 10-K.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Not applicable.