. Summary of Significant Accounting Policies

Principles of Consolidation.

The consolidated financial statements include the accounts of Liquidmetal Technologies, Inc., its special-purpose wholly-owned subsidiary, Crucible Intellectual Property LLC,

20321

Valencia LLC, and Liquidmetal Golf. All intercompany balances and transactions have been eliminated.

Non-

ontrolling

nterest.

The results of operations attributable to the non-controlling interest of Liquidmetal Golf are presented within equity and are shown separately from the Company’s equity.

Revenue Recognition

. Revenue is recognized pursuant to applicable accounting standards including FASB ASC Topic

606

(“ASC

605”

), 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.

The Company’s revenue recognition policy complies with the requirements of ASC

606.

As a majority of the Company’s sales revenue continues to be recognized when products are shipped, and there was

change in the recognition model historically applied to active license and royalty contracts under the new revenue standard, there was

adjustment to the opening balance of retained earnings. The impact to the Company’s results of operations is

not

material, on an on-going basis, because the analysis of the Company’s contracts under the new revenue standard supports a recognition model consistent with the Company’s previous revenue recognition model. Revenue on the majority of the Company’s contracts will continue to be recognized over time because of the continuous transfer of control to the customer.

Products

. Product revenues are primarily generated from the sale and prototyping of molds and bulk alloy products. Revenue is recognized when i) persuasive evidence of an arrangement exists, ii) delivery has occurred, iii) the sales price is fixed or determinable, iv) collection is probable and v) all obligations have been substantially performed pursuant to the terms of the arrangement. When the Company receives consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract, it records deferred revenue, which represents a contract liability. The Company will recognize deferred revenue as products revenue after it has transferred control of the goods or services to the customer and all revenue recognition criteria are met. Such amounts are

not

expected to be material on an ongoing basis.

Licensing and royalties

. License revenue arrangements in general provide for the grant of an exclusive or non-exclusive right to manufacture and/or sell products covered by patented technologies owned or controlled by the Company. The intellectual property rights granted

may

be perpetual in nature, extending until the expiration of the related patents, or can be granted for a defined period of time. Licensing revenues that are

one

-time fees upon the granting of the license are recognized when i) the license term begins in a manner consistent with the nature of the transaction and the earnings process is complete, ii) when collectability is reasonably assured or upon receipt of an upfront fee, and iii) when all other revenue recognition criteria have been met. Pursuant to the terms of these agreements, the Company has

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.

Practical Expedients and Exemptions

. The Company generally expenses sales commissions when incurred because the amortization period would have been

one

year or less. These costs are recorded within selling, marketing, general and administrative expenses. The Company does

not

disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of

one

year or less and (ii) contracts for which the Company recognizes revenue at the amount for which it has the right to invoice for services performed.

Cash

and cash equivalents

The Company considers all highly-liquid investments with maturity dates of

three

months or less when purchased to be cash equivalents. The Company limits the amount of credit exposure to each individual financial institution and places its temporary cash into investments of high credit quality with a financial institution that exceeds federally insured limits. The Company has

not

experienced any losses related to these balances and believes its credit risk to be minimal. As of

December 31, 2019

and

2018,

the Company held deposits of

$18,399

and

$15,187,

respectively, in such highly-liquid investments.

Investments in debt securities

. The Company will invest excess funds to maximize investment yield, while maintaining liquidity and minimizing credit risk. Debt securities are carried at fair value and consist primarily of investments in obligations of the United States Treasury, various U.S. and foreign corporations, and certificates of deposits. The Company classifies its investments in debt securities as available-for-sale with all unrealized gains or losses included as part of other comprehensive income. The Company evaluates its debt securities with unrealized losses on a quarterly basis for potential other-than-temporary impairments in value. As a result of this assessment, the Company did

not

recognize any other-than-temporary impairment losses considered to be credit related for the years ended

December 31, 2019

and

2018.

Trade Accounts Receivable.

The Company grants credit to its customers generally in the form of short-term trade accounts receivable. The creditworthiness of customers is evaluated prior to signing a contract with the customer. As of

December 31, 2019,

two

customers represented

90%,

$280,

of the total outstanding trade accounts receivable. As of

December 31, 2018,

three

customers represented

90%,

$108,

of the total outstanding trade accounts receivable. During

2019,

there were

five

major customers, who together accounted for

83%

of total revenue. During

2018,

there were

three

major customers, who together accounted for

66%

of total revenue. In the future, the Company expects that a significant portion of the revenue

may

continue to be concentrated in a limited number of customers, even if the bulk alloys business grows.

The allowance for doubtful accounts reflects management's best estimate of probable losses inherent in the trade accounts receivable. Management primarily determines the allowance based on the aging of accounts receivable balances, historical write-off experience, customer concentrations, customer creditworthiness and current industry and economic trends. The Company's provisions for uncollectible receivables are included in selling, marketing, general and administrative expense in the consolidated statements of operations and comprehensive loss. At

December 31, 2019

and

2018,

the Company had recorded an allowance for doubtful accounts of

and

$0,

respectively.

Inventory.

Inventory is stated at the lower of weighted-average cost or net realizable value. Inventory is recorded at actual cost when purchased and then expensed at weighted-average cost as used in production and/or shipped to satisfy customer orders. We perform an analysis of our inventory balances at least quarterly to determine if the carrying amount of inventories exceeds their net realizable value. The analysis of estimated net realizable value is based on customer orders, market trends and historical pricing. If the carrying amount exceeds the estimated net realizable value, the carrying amount is reduced to the estimated net realizable value.

Property and Equipment.

Property and equipment are stated at cost less accumulated depreciation and amortization. Additions and major renewals are capitalized. Repairs and maintenance are charged to expense as incurred. Upon disposal, the related cost and accumulated depreciation are removed from the accounts, with the resulting gain or loss included in operating income. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which range from

one

five

years.

Intangible Assets.

Intangible assets consist of the costs incurred to purchase patent rights and costs incurred to register and maintain patents and trademarks. Intangible assets are reported at cost, net of accumulated amortization. Patents and trademarks are amortized using the straight-line method over a period based on their contractual lives ranging from

ten

seventeen

years.

Impairment of Long-lived Assets

. The Company reviews long-lived assets to be held and used in operations for impairment whenever events or changes in circumstances indicate that the carrying value of an asset

may

be impaired. These evaluations

may

result from significant decreases in the overall market outlook for the Company’s technology or the market price of an asset, a significant adverse change in the extent or manner in which an asset is being used in its physical condition, a significant adverse change in legal factors or in the business climate that could affect the value of an asset, as well as economic or operational analyses. If the Company concludes that the carrying value of certain assets will

not

be recovered based on expected undiscounted future cash flows, an impairment write-down is recorded to reduce the assets to their estimated fair value. Fair value is determined via market, cost and income based valuation techniques, as appropriate. The fair value is measured on a nonrecurring basis using a combination of quoted prices for similar assets in active markets and other unobservable adjustments to historical cost (Level

) inputs. Based on the results of this analysis, the Company recorded non-cash impairment charges of

$1,676

for the year ended

December 31, 2019,

primarily related to the carrying value of the Company’s manufacturing assets that will

not

be utilized prospectively as a result of the

2019

Restructuring Plan.

such charges were recorded for the year ended

December 31, 2018.

Fair Value

Measurements.

The estimated fair values of financial instruments reported in the consolidated financial statements have been determined using available market information and valuation methodologies, as applicable. The fair value of cash and restricted cash approximate their carrying value due to their short maturities and are classified as Level

instruments within the fair value hierarchy.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Entities are required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value based upon the following fair value hierarchy:

Level

—

Quoted prices in active markets for identical assets or liabilities;

Level

—

Observable inputs other than Level

prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are

not

active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level

—

Unobservable inputs that are supported by little or

market activity and that are significant to the fair value of the assets or liabilities.

As of

December 31, 2019,

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

	Fair Value		Level 1		Level 2		Level 3

Investments in debt securities (short-term)	$	4,415	$	705	$	3,710	$	-
Investments in debt securities (long-term)		7,074		908		6,166		-

There were

items requiring measurement at fair value on a recurring basis as of

December 31, 2018.

Non-recurring fair value measurements.

Certain assets and liabilities are measured at fair value on a nonrecurring basis. In other words, the instruments are

not

measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). As a result of the Company’s periodic assessment of impairment of long-lived assets, the Company recorded an impairment loss of

$1,676

during the year ended

December 31, 2019.

Research and Development Expenses.

Research and development expenses represent salaries, related benefits expense, expenses incurred for the design and testing of new processing methods and other expenses related to the research and development of Liquidmetal alloys. Development costs incurred in research and development activities are expensed as incurred.

Advertising and Promotion Expenses.

Advertising and promotion expenses are expensed when incurred. Advertising and promotion expenses were

$68

and

$125,

for the years ended

December 31, 2019

and

2018,

respectively.

Legal Costs.

Legal costs are expensed as incurred.

Stock-Based Compensation

. The Company accounts for share-based compensation in accordance with the fair value recognition provisions of FASB ASC Topic

718,

Share-based Payment

, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the consolidated financial statements based on their fair values. The fair value of stock options is calculated by using the Black-Scholes option pricing formula that requires estimates for expected volatility, expected dividends, the risk-free interest rate and the term of the option. If any of the assumptions used in the Black-Scholes model change significantly, share-based compensation expense

may

differ materially in the future from that recorded in the current period.

Income Taxes.

Income taxes are provided under the asset and liability method as required by FASB ASC Topic

740,

Accounting for Income Taxes

. Under this method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The effect of a tax rate change on deferred taxes is recognized in operations in the period that the change in the rate is enacted. Valuation allowances are established when necessary to reduce net deferred tax assets to the amount expected to be realized. Under the provisions of FASB ASC Topic

740,

the Company had

material unrecognized tax positions and

adjustments to liabilities or operations were required. The Company, when applicable, will recognize interest and penalties related to uncertain tax positions in income tax expense. There was

expense related to interest and penalties for the years ended

December 31, 2019

and

2018,

respectively.

Earnings Per Share.

Basic earnings per share (“EPS”) is computed by dividing earnings (losses) attributable to common shareholders by the weighted average number of common shares outstanding for the periods. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

Use of Estimates.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates. These management estimates are primarily related to impairment of long-lived assets, allowance for bad debt, warrant valuations, and inventory valuation.

Subsequent Events.

The Company evaluated subsequent events through the filing of its Annual Report on Form

-K with the SEC.

Supplemental Cash Flow Information.

Cash payments for interest were

for each of the years ended

December 31, 2019

and

2018.

Recent Accounting Pronouncements.

Liability Classified Warrants

July 2017,

the FASB issued an accounting standards update which modifies the requirements for the classification of certain financial instruments with down round features as equity versus liabilities. The guidance will allow for financial instruments previously required to be presented as liabilities due to the presence of down round features to be presented as equity upon meeting other criteria. The Company adopted the requirements of this update effective as of

January 1, 2019,

utilizing the full retrospective transition option. Accordingly, the Company reclassified the warrant liability to additional paid in capital on its

December 31, 2018

consolidated balance sheets, which increased additional paid-in capital by

$6,970,

increased accumulated deficit by

$4,778,

and decreased warrant liability by

$2,192.

In addition, because of the retrospective adoption, the Company credited change in fair value of warrant liability on its consolidated statements of operations by

$1,267

for year ended

December 31, 2018.

The adoption of this guidance had

impact on the Company’s consolidated statement of cash flows in the current or previous annual reporting periods. The following table provides a reconciliation of warrant liability, additional paid-in capital, accumulated deficit, and change in fair value of warrant liability on the consolidated balance sheets for the year ended

December 31, 2018

and the consolidated statements of operations for the year ended

December 31, 2018:

	Balance Sheet
	Warrant Liability			APIC		Accum Def.

Balance as of 12/31/2018 (Prior to Adoption of ASU 2017-11)	$	925		$	279,306	$	(252,809	)
Reverse beginning balance as of January 1, 2018		(2,192	)		6,970		(4,778	)
Change in fair value of warrant liability		1,267			-		(1,267	)
Balance as of 12/31/2018 (After Adoption of ASU 2017-11)	$	-		$	286,276	$	(258,854	)

	Statement of Operations
	For the year ended December 31, 2018
	Change in Value of Warrant Liability			Net Loss and Comprehensive Loss

Balance as of 12/31/2018 (Prior to Adoption of ASU 2017-11)	$	1,267		$	(7,434	)
Reverse beginning balance as of January 1, 2018		-			-
Change in fair value of warrant liability		(1,267	)		(1,267	)
Balance as of 12/31/2018 (After Adoption of ASU 2017-11)	$	-		$	(8,701	)

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.