Property and Equipment, net

Property and equipment consist of the following:

	June 30, 2018			December 31, 2017


Land, building, and improvements	$	8,947		$	8,947
Machinery and equipment		5,648			5,577
Computer equipment		253			253
Office equipment, furnishings, and improvements		181			181
Total		15,029			14,958
Accumulated depreciation		(2,975	)		(2,493	)
Total property and equipment, net	$	12,054		$	12,465

Depreciation expense for

three

and

six

months ended

June 30, 2018

was

$252

and

$483,

respectively. Depreciation expense for the

three

and

six

months ended

June 30, 2017

was

$118

and

$204,

respectively. For the

three

and

six

months ended

June 30, 2018,

$14

and

$27

of depreciation expense, respectively, was included in cost of sales and

$238

and

$456

was included in selling, marketing, general and administrative expenses, respectively. For the

three

and

six

months ended

June 30, 2017,

and

$14

of depreciation expense, respectively, was included in cost of sales and

$110

and

$190

was included in selling, marketing, general and administrative expenses, respectively.

February 16, 2017,

the Company purchased a

41,000

square foot building located at

20321

Valencia Circle, Lake Forest, California

92630.

July 2017,

the Company commenced use of the facility, primarily for manufacturing and office space. The total purchase price for the property was

$7,818,

exclusive of closing costs. The Company funded the purchase through available cash on hand.

During

March 2017,

the Company signed contracts with Eontec to purchase

two

hot-crucible amorphous metal molding machines at a total purchase price of

$780.

The machines were delivered to the Company’s new manufacturing facility in

April 2017

and were operational beginning in the

fourth

quarter of

2017.

The Company’s current manufacturing efforts are focused on the identification, design, and successful prototyping of customer applications, including, but

not

limited to, medical and automotive components. Experience has shown that customers will perform numerous tests and extensively evaluate components and products before incorporating them into their finished products. The time required for testing, evaluating, and designing the Company’s 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 Liquidmetal components and products, if ever. 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 Liquidmetal alloys are integrated.

Investments in the Company’s manufacturing infrastructure are made with the goal of reaching volume manufacturing levels, scaling and generating sustainable revenues, and ultimately reaching profitability. In the event applications in the current development pipeline do

not

result in meaningful revenues and/or there is a fundamental shift in the Company’s market outlook for the technology, the Company’s overall business strategy

may

need to change. Such decisions, depending on their nature,

may

result in future impairments of the Company’s manufacturing assets, inclusive of patents and trademarks. Pending a change in operational direction, and significant assumptions impacting ultimate recovery of these assets, the Company plans to continue to pursue volume manufacturing from its facility.