UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended | |
| OR | |
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to | |
Commission File No.
LIQUIDMETAL TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
| | | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices, zip code)
Registrant’s telephone number, including area code: (
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
Securities registered pursuant to Section 12(b) of the Exchange Act: None
The number of common shares outstanding as of May 13, 2022 was
LIQUIDMETAL TECHNOLOGIES, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2022
FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q of Liquidmetal Technologies, Inc. contains “forward-looking statements” that may state our management’s plans, future events, objectives, current expectations, estimates, forecasts, assumptions or projections about the company and its business. Any statement in this report that is not a statement of historical fact is a forward-looking statement, and in some cases, words such as “believes,” “estimates,” “projects,” “expects,” “intends,” “may,” “anticipates,” “plans,” “seeks,” and similar words or expressions identify forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual outcomes and results to differ materially from the anticipated outcomes or results. These statements are not guarantees of future performance, and undue reliance should not be placed on these statements. It is important to note that our actual results could differ materially from what is expressed in our forward-looking statements due to the risk factors described in the section of our Annual Report on Form 10-K for the year ended December 31, 2021 entitled “Risk Factors,” as well as the following risks and uncertainties:
| ● |
Our history of operating losses and the uncertainty surrounding our ability to achieve or sustain profitability; |
| ● |
Our limited history of developing and selling products made from our bulk amorphous alloys; |
| ● |
Challenges associated with having products manufactured from our alloys and the use of third parties for manufacturing; |
| ● |
Our limited history of licensing our technology to third parties; |
| ● |
Lengthy customer adoption cycles and unpredictable customer adoption practices; |
| ● |
Our ability to identify, develop, and commercialize new product applications for our technology; |
| ● |
Competition from current suppliers of incumbent materials or producers of competing products; |
| ● |
Our ability to identify, consummate, and/or integrate strategic partnerships; |
| ● |
The potential for manufacturing problems or delays; |
| ● |
Potential difficulties associated with protecting or expanding our intellectual property position; and |
| ● |
Economic and business uncertainties relating to the COVID-19 pandemic. |
We undertake no obligation, other than as required by applicable law, to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
FINANCIAL INFORMATION
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
($ in thousands, except par value and share data)
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Investments in debt securities- short term | ||||||||
| Trade accounts receivable, net of allowance for doubtful accounts | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | $ | $ | ||||||
| Investments in debt securities- long term | ||||||||
| Property and equipment, net | ||||||||
| Patents and trademarks, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | |||||||
| Accrued liabilities | ||||||||
| Deferred revenue | ||||||||
| Total current liabilities | $ | $ | ||||||
| Long-term liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| Shareholders' equity: | ||||||||
| Common stock, par value; shares authorized; and shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | ||||||||
| Warrants | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Non-controlling interest in subsidiary | ( | ) | ( | ) | ||||
| Total shareholders' equity | $ | $ | ||||||
| Total liabilities and shareholders' equity | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except share and per share data)
(unaudited)
| For the Three Months | ||||||||
| 2022 | 2021 | |||||||
| Revenue | ||||||||
| Products | $ | $ | ||||||
| Licensing and royalties | ||||||||
| Total revenue | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | $ | $ | ||||||
| Operating expenses | ||||||||
| Selling, marketing, general and administrative | ||||||||
| Research and development | ||||||||
| Total operating expenses | $ | $ | ||||||
| Operating loss | ( | ) | ( | ) | ||||
| Lease income | ||||||||
| Interest and investment income (loss) | ( | ) | ||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
| Income taxes | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss attributable to non-controlling interest | ||||||||
| Net loss attributable to | ||||||||
| Liquidmetal Technologies shareholders | $ | ( | ) | $ | ( | ) | ||
| Per common share basic and diluted: | ||||||||
| Net loss per common share attributable to Liquidmetal | ||||||||
| Technologies shareholders, basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Number of weighted average shares - basic and diluted | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
($ in thousands, except share and per share data)
(unaudited)
| For the Three Months | ||||||||
| 2022 | 2021 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive loss, net of tax | ||||||||
| Net unrealized gains (losses) on available-for-sale securities | ( | ) | ( | ) | ||||
| Other comprehensive loss income (loss), net of tax | ( | ) | ( | ) | ||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Less: Comprehensive loss attributable to noncontrolling interests | ||||||||
| Comprehensive loss attributable to Liquidmetal Technologies shareholders | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of the consolidated financial statements.
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands, except per share data)
(unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Trade accounts receivable | ||||||||
| Inventory | ( | ) | ||||||
| Prepaid expenses and other current assets | ||||||||
| Other assets and liabilities | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing Activities: | ||||||||
| Purchases of debt securities | ( | ) | ( | ) | ||||
| Proceeds from sales of debt securities | ||||||||
| Net cash provided by investing activities | ||||||||
| Financing Activities: | ||||||||
| Common stock issuance | ||||||||
| Net cash provided by financing activities | ||||||||
| Net decrease 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 | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2022 and 2021
(numbers in thousands, except percentages, share and per share data)
(unaudited)
1. Description of Business
Liquidmetal Technologies, Inc. (the “Company”) is a materials technology company that develops and commercializes products made from amorphous alloys. The Company’s family of alloys consists of a variety of bulk alloys and composites that utilize the advantages offered by amorphous alloys technology. The Company designs, develops, and sells products and custom parts from bulk amorphous alloys to customers in a wide range of industries. The Company also partners 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 the Company believes 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. The Company believes that the alloys and the molding technologies it employs may 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. Interestingly, 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. The Company believes 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, the Company believes these advantages could enable the introduction of entirely new products and applications that are not possible or commercially viable with other materials.
The Company’s revenues are derived from i) selling bulk Liquidmetal alloy products to customers who produce medical devices, automotive assemblies, sports and leisure goods, and non-consumer electronic devices, ii) selling tooling and prototype parts such as demonstration parts and test samples for customers with products in development, iii) product licensing and royalty revenue, and iv) research and development revenue. The Company expects that these sources of revenue will continue to significantly change the character of the Company’s revenue mix.
2. Basis of Presentation and Recent Accounting Pronouncements
The accompanying unaudited interim consolidated financial statements as of and for the three months ended March 31, 2022 and March 31, 2021 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. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. All intercompany balances and transactions have been eliminated in consolidation. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for any future periods or the year ending December 31, 2022. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company's 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 29, 2022.
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 recognize any other-than-temporary impairment losses considered to be credit related for the three ended March 31, 2022 and 2021.
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 1 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 1 — | Quoted prices in active markets for identical assets or liabilities; |
| Level 2 — | Observable inputs other than Level 1 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 3 — | 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 March 31, 2022, 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) | $ | $ | $ | $ | ||||||||||||
| Investments in debt securities (long-term) | ||||||||||||||||
As of December 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:
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Investments in debt securities (short-term) | $ | $ | $ | $ | ||||||||||||
| Investments in debt securities (long-term) | ||||||||||||||||
Leases
The Company leases its manufacturing facility under a long-term contract, which is accounted for as an operating lease. The lease provides for a fixed base rent and variable payments comprised of reimbursements for property taxes, insurance, utilities, and common area maintenance. The lease has a term of months, exclusive of options to renew. In accordance with ASC 842, Leases, lease income, which includes escalating rents over the term of the lease, is recorded on a straight-line basis over the expected lease term. The difference between lease income and payments received is recorded as a rent receivable, which is included as a prepaid expense in the consolidated balance sheets. Amounts paid for broker commissions represent prepaid direct lease costs, and will be amortized as an off-set to lease income over the lease term.
Other Recent Pronouncements
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) 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.
3. Significant Transactions
Yihao Manufacturing Agreement
On January 12, 2022, the Company entered into a manufacturing agreement (“Manufacturing Agreement”) with Dongguan Yihao Metal Materials Technology Co. Ltd. (“Yihao”) to become the primary contract manufacturer of the Company’s products. Under the Manufacturing Agreement, which has a term of 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, the Company’s Chairman and largest beneficial owner of the Company’s capital stock.
Manufacturing Facility Purchase and Lease
On February 16, 2017, the Company purchased a
On January 23, 2020, 20321 Valencia, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company, entered into a lease agreement (the “Facility Lease”) pursuant to which the Company leased to MatterHackers, Inc., a Delaware corporation (“Tenant”), an approximately
Eontec License Agreement
On March 10, 2016, 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 parties agreed to cross-license certain patents, technical information, and trademarks between the Company and Eontec. In particular, the Company granted to Eontec a paid-up, royalty-free, perpetual license to the Company’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 North America and Europe. In turn, Eontec granted to the Company 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 the Company to Eontec is exclusive (including to the exclusion of the Company) 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 the Company 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, 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.
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. 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 (
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, exclusive license to commercialize such intellectual property in the field of consumer electronic products, as defined in the license agreement, in exchange for a one-time, upfront 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. The Company is 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 Sublicense Agreement
Liquidmetal Golf Inc. (“Liquidmetal Golf” or “LMG”) is a majority-owned subsidiary which has the exclusive right and license to utilize the Company’s Liquidmetal alloy technology for purposes of golf equipment applications. This right and license is set forth in an intercompany license agreement dated January 1, 2002 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. The Company owns
On January 13, 2022, Liquidmetal Golf 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 has a term of years and provides for the payment of a running royalty to LMG of
Swatch Group License
In March 2009, the Company entered into a license agreement with Swatch Group, Ltd. (“Swatch”) under which Swatch was granted a non-exclusive license to the Company’s 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 as against all third parties (including the Company), but non-exclusive as to Apple. The Company 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.
4. 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):
| Amortized Cost | Fair Value | ||||||||||||||||
| March 31, | December 31, | March 31, | December 31, | ||||||||||||||
| Longest Maturity Date | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| U.S. government and agency securities | 2022 | ||||||||||||||||
| Corporate bonds | 2024 | ||||||||||||||||
| Certificates of deposit | One-year | ||||||||||||||||
Loss from these investments totaled $
Based on the Company’s review of its debt securities that are individually in an unrealized loss position at March 31, 2022, it determined that the losses were primarily the result current economic factors, impacting all global debt and equity markets, that are the result of global macro events. The impact to the Company’s investment portfolio is considered to be temporary, rather than a deterioration of overall credit quality. As of March 31, 2022, 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 March 31, 2022.
5. Trade Accounts Receivable
Trade accounts receivable were comprised of the following:
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Trade accounts receivable | $ | $ | ||||||
| Less: Allowance for doubtful accounts | ||||||||
| Trade accounts receivable | $ | $ | ||||||
6. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets totaled $
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Prepaid service invoices | $ | $ | ||||||
| Prepaid insurance premiums | ||||||||
| Prepaid lease costs and receivables- short term | ||||||||
| Interest and other receivables | ||||||||
| Total | $ | $ | ||||||
As of March 31, 2022, prepaid lease costs and receivables- short term are comprised of $
7. Inventory
Inventory totaled $
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Work in progress | $ | $ | ||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
8. Property and Equipment, net
Property and equipment consist of the following:
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Land, building, and improvements | $ | $ | ||||||
| Machinery and equipment | ||||||||
| Computer equipment | ||||||||
| Office equipment, furnishings, and improvements | ||||||||
| Total | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation expense for three ended March 31, 2022 and 2021 was $
9. Patents and Trademarks, net
Net patents and trademarks totaled $
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.
In addition to the purchased and licensed patents, the Company has internally developed patents. Internally developed patents include legal and registration costs incurred to obtain the respective patents. The Company currently holds various patents and numerous pending patent applications in the United States, as well as numerous foreign counterparts to these patents outside of the United States.
The Company amortizes capitalized patents and trademarks over an average of
10. Other Assets
Other assets totaled $
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Utility deposits | $ | $ | ||||||
| Prepaid lease costs and receivables- long term | ||||||||
| Total | $ | $ | ||||||
As of March 31, 2022, prepaid lease costs and receivables-long term are comprised of $
11. Accrued Liabilities
Accrued liabilities totaled $
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Accrued payroll, vacation, and bonuses | $ | $ | ||||||
| Accrued severance | ||||||||
| Accrued audit fees | ||||||||
| Total | $ | $ | ||||||
12. Other Long-Term Liabilities
Other long-term liabilities were $
13. 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. The 2012 Plan provides for the granting to employees of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and for the granting to employees and consultants of non-statutory stock options. In addition, the Plan permits the granting of stock appreciation rights, or SARs, with or independently of options, as well as stock bonuses and rights to purchase restricted stock. A total of
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. A total of
Stock based compensation expense attributable to these plans was $
14. Facility Lease
Amounts collected under the Facility Lease are comprised of base rents and reimbursements for direct facility expenses (property taxes and insurance), common area maintenance, and utilities. Amounts recorded to lease income are comprised of base rents and direct facility expenses, recorded on a straight-line basis over the lease term. Reimbursements for common area maintenance and utility expense are recorded as reductions to like expenses within sales, general, and administrative costs.
The future minimum rents due to the Company under the Facility Lease are as follows:
| Year | Base Rents | |||
| 2022 (remaining nine months) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| $ | ||||
15. Consolidated Statements of Changes in Equity
The following table provides the Company’s changes in equity for the three months ended March 31, 2022:
| Preferred Shares | Common | Common | Warrants part of Additional Paid-in Capital | Additional | Accumulated | Accumulated Other Comprehensive Income | Non- Controlling Interest | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Common stock issuance | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
The following table provides the Company’s changes in equity for the three months ended March 31, 2021:
| Preferred Shares | Common | Common | Warrants part of Additional Paid-in Capital | Additional | Accumulated | Accumulated Other Comprehensive Income | Non- Controlling Interest | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
16. 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 March 31, 2022:
| Unrealized gains (losses) on available-for- sale securities | Total | |||||||
| Accumulated other comprehensive income (loss), net of tax, as of December 31, 2021 | $ | ( | ) | $ | ( | ) | ||
| 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 March 31, 2022 | $ | ( | ) | $ | ( | ) | ||
The following table presents a summary of the changes in each component of AOCI for the three months ended March 31, 2021:
| Unrealized gains (losses) on available-for- sale securities | Total | |||||||
| Accumulated other comprehensive income (loss), net of tax, as of December 31, 2020 | $ | $ | ||||||
| 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 March 31, 2021 | $ | $ | ||||||
17. Loss Per Common Share
Basic earnings per share (“EPS”) is computed by dividing earnings (loss) attributable to common shareholders by the weighted average number of common shares outstanding for the applicable period. Diluted EPS reflects the potential dilution of securities that could share in the earnings.
Options to purchase
Options to purchase
18. Related Party Transactions
On March 10, 2016, the Company entered into a Securities Purchase Agreement (the “2016 Purchase Agreement”) with Liquidmetal Technology Limited, a Hong Kong company (the “Investor”), which is controlled by the Company’s Chairman, Professor Li. The 2016 Purchase Agreement provided for the purchase by the Investor of a total of
On March 20, 2016, in connection with the 2016 Purchase Agreement, the Company and Eontec, entered into a cross-license agreement to share their respective technologies. Eontec is a publicly held Hong Kong corporation of which Professor Li is the Chairman and major shareholder. Eontec is also an affiliate of Yihao. Yihao is currently the Company’s primary outsourced manufacturer. As of March 31, 2022, Professor Li is a greater-than
19. Subsequent Event
On May 10, 2022, Mr. Abdi Mahamedi resigned as a director of the Company. Mr. Mahamedi did not resign because of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. In connection with Mr. Mahamedi’s resignation, the Board of Directors of the Company approved an amendment to Mr. Mahamedi’s previously granted options to purchase an aggregate of
Upon Mr. Mahamedi’s resignation as a director, the Company entered into a Consulting Agreement, dated May 10, 2022, with Rosewood LLC pursuant to which Mr. Mahamedi as the owner of Rosewood LLC will assess and present business opportunities for the licensing and sublicensing of the Company’s technology. Mr. Mahamedi will also provide business development services and perform other special projects as requested by the Company. The Consulting Agreement has a term of 5 years, subject to the right of the Company or Mr. Mahamedi to terminate the agreement at any time after December 1, 2022 and subject to certain other early-termination rights. As sole consideration for the Consulting Agreement, the Company granted to Mr. Mahamedi an option to purchase up to
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, 2021 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.
Overview
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.
Licensing Transactions
Eontec License Agreement
On March 10, 2016, we entered into a Parallel License Agreement (the “License Agreement”) with DongGuan Eontec Co., Ltd., a Hong Kong corporation (“Eontec”) pursuant to which the parties agreed to cross-license 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. 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.
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
On January 13, 2022, our majority owned subsidiary, Liquidmetal Golf (“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 to ATJ a nonexclusive worldwide sublicense to our amorphous alloy technology and related trademarks to manufacture and sell golf clubs and golf related products. The LMG Sublicense Agreement has a term of three years and provides for the payment of a running royalty to LMG of 3% of the net sales price of licensed products.
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 |
|
| • |
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, 2021 (the “2021 Annual Report”) contains further discussions on our critical accounting policies and estimates.
Results of Operations
Comparison of the three months ended March 31, 2022 and 2021
| For the three months ended March 31, |
||||||||||||||||
| 2022 |
2021 |
|||||||||||||||
| in 000's |
% of Revenue |
in 000's |
% of Revenue |
|||||||||||||
| Revenue: |
||||||||||||||||
| Products |
$ | 163 | $ | 63 | ||||||||||||
| Licensing and royalties |
- | 9 | ||||||||||||||
| Total revenue |
163 | 72 | ||||||||||||||
| Cost of sales |
144 | 88% | 55 | 76% | ||||||||||||
| Gross profit |
19 | 12% | 17 | 24% | ||||||||||||
| Selling, marketing, general and administrative |
805 | 494% | 879 | 1221% | ||||||||||||
| Research and development |
9 | 6% | 22 | 31% | ||||||||||||
| Total operating expense |
814 | 901 | ||||||||||||||
| Operating loss |
(795 | ) | (884 | ) | ||||||||||||
| Lease income |
133 | 132 | ||||||||||||||
| Interest and investment income (loss) |
(5 | ) | 61 | |||||||||||||
| Net loss |
$ | (667 | ) | $ | (691 | ) | ||||||||||
Revenue and operating expenses
Revenue. Total revenue increased to $163 for the three months ended March 31, 2022 from $72 for the three months ended March 31, 2021. The increase for both period was attributable to higher general production shipments of products made by our contract manufacturers and increases in payments under development projects, following the Company’s transition to outsourced manufacturing in 2020.
Cost of sales. Cost of sales was $144, or 88% of total revenue, for the three months ended March 31, 2022, an increase from $55, or 76% of total revenue, for the three months ended March 31, 2021. The increase for both periods was attributable to higher products revenue, decline in licensing and royalties revenue, and lower gross profit percentages. 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 increased to $19 for the three month period ended March 31, 2022 from $17 for the three month period ended March 31, 2021. Our gross profit as a percentage of total revenue, decreased to 12% for the three month period ended March 31, 2022 from 24% for the three month period ended March 31, 2021. 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 $805 for the three months ended March 31, 2022 compared to $879 for the three months ended March 31, 2021, respectively. The decrease in expenses was primarily attributable to lower stock based compensation as well as continued cost reductions.
Research and development. Research and development expenses were $9 for the three months ended March 31, 2022 compared to $22 for the three months ended March 31, 2021. 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.
Operating loss. Operating loss was $795 for the three months ended March 31, 2022. This compares to $884 for the three months ended March 31, 2021. 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 $133 and $132 for the three months ended March 31, 2022 and 2021, 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 loss was $5 and interest and investment income $61 for the three months ended March 31, 2022 and 2021, respectively. The decrease during 2022 is due continued volatility in corporate debt and bond markets, which is resulting in reduced yields.
Liquidity and Capital Resources
Cash used in operating activities
Cash used in operating activities totaled $391 and $387 for the three months ended March 31, 2022 and 2021, respectively. The cash was primarily used to fund operating expenses related to our business and product development efforts.
Cash provided by investing activities
Cash provided by investing activities totaled $1,025 and investing activities totaled $102 for the three months ended March 31, 2022 and 2021, respectively. Investing inflows primarily consist of proceeds from the sale of debt securities. Investing outflows primarily consist of purchases of debt securities.
Cash provided by financing activities
Cash provided by financing activities totaled $212 for the three months ended March 31, 2022 related to the exercise of our stock options, and $0 for the three months ended March 31, 2021.
Financing arrangements and outlook
We have 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 our products in desired quantities and at commercially reasonable prices is uncertain and is dependent on a variety of factors that are outside of our control, including the nature and design of the component, the customer’s specifications, and required delivery timelines. These factors have previously required that we engage in equity sales under various stock purchase agreements to support its operations and strategic initiatives.
However, as of March 31, 2022, we had $4,942 in cash and restricted cash, as well as $20,884 in investments in debt securities. We view this total of $25,826 as readily available sources of liquidity in the event needed to advance our existing strategy, and/or pursue an alternative strategy. As such, we anticipate that our current capital resources, when considering expected losses from operations, will be sufficient to fund our operations for the foreseeable future.
Item 3 – Quantitative and Qualitative Disclosures about Market Risk
None.
Item 4 – Controls and Procedures
Evaluation of Disclosure Controls and Procedures.
Under the supervision and with the participation of our management, including our Chief Executive Officer (our Principal Executive Officer and Principal Financial Officer), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2022. Based on their evaluation, our Chief Executive Officer has concluded that our disclosure controls and procedures were effective as of March 31, 2022.
Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
OTHER INFORMATION
None.
For a detailed discussion of the risk factors that should be understood by any investor contemplating an investment in our stock, please refer to Part I, Item 1A “Risk Factors” in the 2021 Annual Report. There have been no material changes from the risk factors previously disclosed in Part I, Item 1A “Risk Factors” in the 2021 Annual Report.
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
During the period covered by this Quarterly Report on Form 10-Q, we did not issue or sell any unregistered equity securities.
Item 3 – Defaults Upon Senior Securities
None.
Item 4 – Mine Safety Disclosures
None.
Resignation of Director and Consulting Agreement
On May 10, 2022, Mr. Abdi Mahamedi resigned as our director. Mr. Mahamedi did not resign because of any disagreement with us on any matter relating to our operations, policies or practices. In connection with Mr. Mahamedi’s resignation, our Board of Directors approved an amendment to Mr. Mahamedi’s previously granted options to purchase an aggregate of 1,870,000 shares of our common stock to provide for the extension of the exercise period of the options through May 10, 2025.
Upon Mr. Mahamedi’s resignation as a director, we entered into a Consulting Agreement, dated May 10, 2022, with Rosewood LLC pursuant to which Mr. Mahamedi as the owner of Rosewood LLC will assess and present business opportunities for the licensing and sublicensing of our technology. Mr. Mahamedi will also provide business development services and perform other special projects as requested by us. The Consulting Agreement has a term of 5 years, subject to Mr. Mahamedi’s or our right to terminate the agreement at any time after December 1, 2022 and subject to certain other early-termination rights. As sole consideration for the Consulting Agreement, we granted to Mr. Mahamedi an option to purchase up to 2.0 million our common stock at an exercise price of the closing market price of our common stock on May 10, 2022 that will vest 33% on the first anniversary of the grant date and the remainder vesting monthly over the ensuing two years, provided that Mr. Mahamedi continues to be engaged as a consultant on each such vesting date. The options have a term of 5 years.
The following documents are filed as exhibits to this Report:
| Exhibit Number |
Description of Document |
|
| 10.1 |
||
| 31.1 |
||
| 32.1 |
||
| 101.1 |
The following financial statements from Liquidmetal Technologies, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (unaudited), formatted in Inline XBRL: (i) Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021, (ii) Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021, (iii) Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2022 and 2021, (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021, and (v) Notes to Consolidated Financial Statements. |
|
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LIQUIDMETAL TECHNOLOGIES, INC. |
||
| (Registrant) |
||
| Date: May 13, 2022 |
/s/ Tony Chung |
|
| Tony Chung |
||
| Chief Executive Officer |
||
| (Principal Executive Officer and Principal Financial Officer) |
Exhibit 10.1
CONSULTING AGREEMENT
This Consulting Agreement (the “Agreement”) is entered into as of May 10, 2022 (the “Effective Date”) between Liquidmetal Technologies, Inc., a Delaware corporation with offices at 20321 Valencia Circle, Lake Forest, CA 92630 (“Company”) and Rosewood LLC, a New York limited liability company with offices at 565 Taxter Road, Suite 301, Elmsford NY 10523 (“Consultant”). Company and Consultant may be separately referred to herein as “Party” and collectively as the “Parties”.
WHEREAS, Consultant is in the business of providing consulting services with regard to business strategy, investment, and networking;
WHEREAS, in order to have available Consultant’s knowledge, experience and advice, Company desires to retain the services of the Consultant on the terms and conditions provided in this Agreement; and
WHEREAS, Consultant, understanding and accepting the terms and conditions set forth herein, desires to render such services on such terms and conditions.
THEREFORE, in consideration of the above recitals and of the mutual promises and conditions in this Agreement, the parties agree as follows:
|
1. |
RESPONSIBILITIES, WARRANTIES AND COMPLIANCE WITH LAWS. |
1.1 Consultant agrees to provide to Company, in the required timeframe, as an independent contractor, the consulting services, projects and deliverables (the “Services”) set forth in one or more statements of works attached hereto (each a “Statement of Work”) and otherwise reasonably anticipated by the Parties as included within the applicable Statement of Work, whether or not specifically set forth therein and will be effective only when signed by both parties. Each Statement of Work shall be attached to and incorporated into this Agreement. If a conflict arises between the body of this Agreement and a Statement of Work, the Statement of Work shall control. The form of Statement of Work is attached hereto as Exhibit A.
1.2 Consultant represents that it has the qualifications and ability to perform the services in a professional manner, without the advice or control of Company.
1.3 Consultant warrants the following: (i) that she shall perform under this Agreement in a timely and professional manner its assignments; (ii) to the best of Consultant’s knowledge, the services delivered hereunder, and Company’s permitted use thereof, shall not infringe or violate any patent, copyright, trademark, trade secret, mask work or other proprietary or intellectual property right of any third party; and (iii) that she has full power and authority to make this Agreement including but not limited to providing all intellectual property rights associated with work performed hereunder. The warranties provided in this Section 1.3, or expressly provided elsewhere in this Agreement are exclusive and are in lieu of all other warranties, conditions and guarantees whether written, oral, implied or statutory. Consultant further represents that it is owned 100% by Mr. Abdi Mahamedi.
1.4 Consultant shall comply with the provisions of all applicable laws and any applicable regulations issued by any governmental agency having appropriate jurisdiction during the terms of this Agreement.
|
2. |
RELATIONSHIP OF THE PARTIES. |
2.1 Consultant enters into this Agreement as, and shall continue to be, an independent contractor of Company. Under no circumstances shall Consultant look to Company as its employer, or as a partner, agent, or principal. Consultant shall not be entitled to any benefits accorded to Company’s employees including worker’s compensation, disability insurance, vacation or sick pay. Consultant shall be responsible for providing, including for Consultant’s employees and agents, at Consultant’s expense, and in Consultant’s name, disability, worker’s compensation or other insurance as well as licenses and permits, if any, that are usual or necessary for performing the services.
2.2 Consultant shall pay, when and as due, any and all taxes incurred as a result of Consultant’s compensation.
2.3 Subject to the terms and conditions of this Agreement, Consultant may represent, perform services for, and contract with as many additional clients, persons, or companies as Consultant, in its sole discretion, sees fit.
|
3. |
COMPENSATION. In consideration for the services to be performed by Consultant, Company shall compensate Consultant as follows: |
3.1 Company will compensate Consultant as set forth in the applicable Statement of Work, which is incorporated herein by this reference.
3.2 Consultant will be responsible for all expenses incurred in performing Services under this Agreement.
3.4 Except as set forth on the applicable Statement of Work or a valid modification of this Agreement, there are no other fees or costs or compensation to be paid by Company under this Agreement.
3.5 The making of any payment or payments by Company, or the receipt thereof by Consultant, shall in no way affect the responsibilities and obligations of Consultant hereunder, and shall not imply acceptance by Company of any service or deliverable or the waiver of any warranties or requirements of this Agreement.
|
4. |
TERMINATION OF AGREEMENT; INDEMNIFICATION; LIMITATION OF LIABILITY |
4.1 This Agreement and any Statement of Work may be terminated by either party at any time on or after December 1, 2022 with advanced written notice to the other party. Notwithstanding the foregoing, this Agreement shall terminate automatically on the occurrence of (a) bankruptcy or insolvency of either party, (b) the death of Consultant, or (c) on the fifth anniversary of the Effective Date.
4.2 This Agreement and any Statement of Work may be terminated at any time without notice by the Company for Cause. As used in this Agreement, “Cause” shall mean the following: (1) the Consultant’s failure or inability to perform Consultant’s duties under this Agreement to the reasonable satisfaction of the Company after being given written notice of the Consultant’s deficiencies and having a period of at least ten (10) days to cure such deficiencies to the reasonable satisfaction of the Company; (2) dishonesty or other serious misconduct (3) the commission of an unlawful act material to Consultant’s service, (4) a material violation of the Company’s policies or practices which reasonably justifies immediate termination; (5) committing, pleading guilty, nolo contendre or no contest (or their equivalent) to, entering into a pretrial intervention or diversion program regarding, or conviction of, a felony or any crime or act involving moral turpitude, fraud, dishonesty, or misrepresentation; (6) the commission by the Consultant of any act which could reasonably affect or impact to a material degree the interests of the Company or in some manner injure the business, or business relationships of the Company; (7) any material breach by Consultant of this Agreement which, if unintentional and capable of being cured, is not cured within ten (10) days of written notice of such breach by the Company to Consultant. Termination by Company under this Section 4.2 shall not relieve Company of the obligation to pay Consultant for services rendered in conformance with the requirements herein and under any applicable Statement of Work prior to such notice of termination.
4.3 Consultant shall indemnify, defend and hold harmless Company its shareholders, officers, directors, employees, advisors and assigns, from and against any and all losses, claims, damages, and liabilities (including reasonable attorney’s fees and costs) brought by third parties resulting from or arising out of Consultant’s breach of any term, covenant or obligation of this Agreement or the services rendered hereunder, or the negligence, gross negligence or wrongful acts or omissions of Consultant or any employee or agent of Consultant.
4.4 Company shall indemnify, defend and hold harmless Consultant, from and against any and all losses, claims, damages, and liabilities (including reasonable attorney’s fees and costs) brought by third parties resulting from or arising out of performance of authorized Services by Consultant hereunder, with the exception of any claim or liability arising out of Consultant’s breach of any term, covenant or obligation of this Agreement or the services rendered hereunder or the negligence, gross negligence or wrongful acts or omissions of Consultant or any employee or agent of Consultant.
|
5. |
OWNERSHIP OF INTELLECTUAL PROPERTY |
5.1 All results of Consultant’s performance of Services for Company before, on or after the Effective Date, including but not limited to concepts, ideas, research, inventions, processes, techniques, product specifications, marketing plans, product designs, graphics, drawings, artwork, designs, copy writing, forms, documents, and all other materials and work product, and all of Consultant’s deliverables under this Agreement (collectively, the “Contract Work”), shall be the sole and exclusive property of Company, its successors and assigns, and shall be considered “work made for hire” under all relevant copyright laws. Consultant hereby irrevocably acknowledges and agrees to Company’s (and its successors and assigns) perpetual and complete ownership of all intellectual property and related rights in and to the Contract Work, and any and all derivative works thereof, and any and all elements of the foregoing, throughout the universe, in all languages and for all purposes. Consultant hereby waives the benefit of any law, doctrine or principle known as “droit moral,” or “moral rights of authors” or any similar law, doctrine or principle however denominated throughout the universe.
5.2 If, for any reason, the Contract Work, any and all derivative works thereof, and/or any and all elements of any of the foregoing, shall be deemed not to be a “work-made-for-hire” under the relevant copyright laws, Consultant shall assign without further consideration, and does hereby irrevocably and perpetually transfer, convey, assign and grant, to Company and its successors and assigns, upon creation, and Company hereby accepts from Consultant, any and all right, title and interest in and to the Contract Work, any and all derivative works thereof, and/or any and all elements of any of the foregoing, in all media and for all purposes.
5.3 Company shall have the right to have all or any of the Contract Work (including all or any derivative works thereof) copyrighted, trademarked or patented with the government of the United States or any applicable state or foreign government agency in the name of Company (or its customers or affiliates), at Company’s expense. Prior to disclosure of Company’s Confidential Information (as defined below) to any employees or contract personnel of Consultant, Consultant shall obtain written assurances from such employees and contract personnel that they acknowledge and agree that they are subject to and bound by terms materially similar to those contained in this Agreement, including but not limited to the provisions in Sections 5 and 6 regarding ownership and confidentiality.
5.4 Consultant agrees to deliver to Company all Contract Work when Consultant no longer provides services to Company or upon request by Company at any other time while providing services to Company or thereafter, without retaining any copies or excerpts thereof.
5.5 The foregoing assignment obligations in this Section 5 shall not apply to any invention that Consultant made, conceived, first reduced to practice or developed entirely on its own time without using any of Company’s equipment, supplies, facilities or trade secret information; unless such invention results from any work that Consultant performed for Company before, on or after the Effective Date. To the extent that any items that fall under this Section 5.5 are incorporated into the Contract Work, Consultant will disclose the same to Company and does hereby grant Company a perpetual, irrevocable, unconditional, worldwide, exclusive, freely transferable, and freely sublicensable right and license under and to any and all intellectual property rights in the same, including but not limited to the right to display, modify, create derivative works based thereon, and otherwise use in any manner and on any media as Company or its successors may in their sole discretion determine
5.6 The foregoing provisions of this Section 5 shall not apply to any intellectual property related to Contract Work produced in connection with a License Agreement (as defined within Exhibit A). All such rights and obligations shall be defined within the License Agreement.
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6. |
CONFIDENTIALITY |
6.1 Except to the extent necessary to perform the services requested pursuant to this Agreement and for the benefit of Company, Consultant will maintain in confidence and will not, directly or indirectly, disclose or use, either during or after the term of this Agreement, any proprietary information or confidential information or know-how belonging to Company or about the business or affairs of Company or its customers or affiliates, whether or not it is in written or permanent form (“Confidential Information”). Confidential Information shall include, but not be limited to: information and data related to Company’s products or product plans; technical, development, customer, marketing, sales, operating, performance, cost, business, financial and process information and materials; computer programming techniques; customer lists; computer programs; drawings, diagrams, designs, specifications and data; information regarding Company’s internal business operations; reports and studies; all record-bearing media containing or disclosing proprietary information and techniques, and all samples, models, prototypes or parts thereof; trade secrets; discoveries, ideas and concepts; and all other information which a reasonable person would perceive to be sensitive or confidential information of Company, whether provide to Consultant by Company or provided to Company by Consultant under this Agreement.
6.2 Confidential Information shall not include any information which: (i) is already known to Consultant by lawful means prior to its dealings with Company, is publicly available at the time of disclosure to Consultant or becomes publicly available after such disclosure other than through breach of this Agreement or other wrongful act(s); (ii) is disclosed to Consultant by a third party where such disclosure does not comprise, result from or entail an obligation of confidentiality (or breach thereof) to Company or its customers or affiliates; (iii) has been independently developed by Consultant without use of or reference to the Confidential Information, as evidenced by appropriate documentation; or (iv) has been approved by Company in writing for release by Consultant.
6.3 When Consultant’s work with Company is concluded, or at any time upon the request of Company, Consultant agrees to promptly deliver to Company: (i) all originals and copies of all documents, records, software programs, media and all other tangible objects and materials containing or representing any Confidential Information, and (ii) all equipment, files, software programs, documents, records, media and all other personal property belonging to Company.
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7. |
CONFLICT OF INTEREST. |
7.1 Consultant warrants that Consultant is free to enter into this Agreement and that the performance of this Agreement by Consultant will not conflict with or constitute a breach under any other agreement or legal obligation to which Consultant is bound.
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8. |
MISCELLANEOUS PROVISIONS. |
8.1 Assignment. This Agreement and all rights hereunder are personal to Consultant and not be transferred or assigned by Consultant without express approval of Company.
8.2 Integration. This Agreement contains the entire agreement between the parties and supersedes all prior oral and written agreements, understandings, commitments, and practices between them, including all prior agreements, whether or not fully performed by Consultant before the date of this Agreement.
8.3 Choice of Law. The formation, construction, and performance of this Agreement shall be construed in accordance with the laws of the State of Delaware without regard to its rules pertaining to conflict of laws. Any action arising out of or relating to this Agreement shall be brought in the appropriate state or federal court located in the State of Delaware and the parties expressly consent to exclusive venue and jurisdiction of the courts located in the State of Delaware, for any such action.
8.4 Attorney Fees and Costs. If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs incurred in the action or proceeding.
8.5 Background Check. Consultant acknowledges that, as a condition to a successful business relationship, Company may perform one or more background checks on Consultant and Consultant’s designees who perform services for Company. Consultant agrees to provide any necessary consent to Company (and cause such designees to provide their consents, as applicable) to enable Company to perform such checks.
8.6 Equitable Relief. CONSULTANT AGREES THAT IT WOULD BE IMPOSSIBLE OR INADEQUATE TO MEASURE AND CALCULATE COMPANY’S DAMAGES FROM ANY BREACH OF THE COVENANTS SET FORTH IN SECTIONS 5, 6 OR 7 OF THIS AGREEMENT. ACCORDINGLY, CONSULTANT AGREES THAT IF SHE BREACHES ANY SECTION OF THE AGREEMENT, COMPANY WILL HAVE AVAILABLE, IN ADDITION TO ANY OTHER RIGHT OR REMEDY AVAILABLE, THE RIGHT TO OBTAIN AN INJUNCTION OR OTHER EQUITABLE RELIEF FROM A COURT OF COMPETENT JURISDICTION RESTRAINING SUCH BREACH OR THREATENED BREACH AND TO SPECIFIC PERFORMANCE OF ANY SUCH PROVISION OF THIS AGREEMENT. CONTRACTOR FURTHER AGREES THAT NO BOND OR OTHER SECURITY SHALL BE REQUIRED IN OBTAINING SUCH EQUITABLE RELIEF AND CONTRACTOR CONSENTS TO THE ISSUANCE OF SUCH INJUNCTION AND TO THE ORDERING OF SPECIFIC PERFORMANCE.
8.7 Notices. Any notice required or permitted under this Agreement shall be given in writing, either by email, personal service or by registered or certified mail, postage prepaid, at the addresses set forth in the introductory paragraph to this Agreement.
8.8 Severability. If any provision of this Agreement is held invalid or unenforceable, the remainder of this Agreement shall nevertheless remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.
8.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be considered an original, and all of which taken together shall be considered one and the same instrument.
8.10 Waiver. The failure by Company at any time to require performance or compliance by Consultant of any of its obligations or agreements shall in no way affect the right to require such performance or compliance at any time thereafter. The waiver by Company of a breach of any provision hereof shall not be taken or held to be a waiver of any preceding or succeeding breach of such provision or as a waiver of the provision itself. No waiver of any kind shall be effective or binding, unless it is in writing and is signed by the party against whom such waiver is sought to be enforced.
8.11 Amendment. This Agreement and any Statement of Work may be altered, amended, modified, superseded canceled, renewed, or extended only by an agreement in writing executed by both Consultant and Company.
8.12 No License. Nothing in this Agreement is intended to grant any rights to Consultant under any patent, mask work right, copyright, trademark, trade secret or other intellectual property right of Company, and this Agreement shall not grant Consultant any rights in or to the Confidential Information.
8.14 Survival. Sections 2.1, 2.2, and all of Sections 4 through 8, inclusive, of this Agreement shall survive any termination or expiration of this Agreement.
IN WITNESS WHEREOF, Company and Consultant have executed this Agreement as of the Effective Date.
| COMPANY: | CONTRACTOR: | ||||
| Liquidmetal Technologies, Inc. | Rosewood LLC | ||||
| By: | /s/ Tony Chung | By: | /s/ Abdi Mahamedi | ||
| Name: Tony Chung | Name: Abdi Mahamedi | ||||
| Title: CEO | Title: Authorized Manager | ||||
Exhibit A – Form Statement of Work
This Statement of Work is entered into pursuant to the terms and conditions set forth in the Consulting Agreement (the “Agreement”) entered into as of May 10, 2022 (the “Effective Date”) between Liquidmetal Technologies, Inc. (“Company”) and Rosewood LLC (“Consultant”) and is incorporated into the Agreement by reference hereof.
The following represents the entire scope of work and pricing related to the Services that shall be provided by Consultant pursuant to this Statement of Work. This Statement of Work includes any attachments hereto. Any capitalized terms not defined in this Statement of Work shall have the meanings set forth in the Agreement. Changes to this Statement of Work must be approved in writing by the parties.
Pricing / Payment:
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1. |
The Company and Consultant shall enter into a separate agreement under which the Company shall grant to Consultant the right and option (the “Option”) to purchase from the Company on the terms and conditions set forth herein all or any part of an aggregate of two million (2,000,000) shares of the Company’s Common Stock. The Option Price per share of Common Stock subject to the Option shall be equal to the closing stock price on the date of grant in such separate agreement (the “Grant Date”). The shares covered by the Option shall vest 33% on the first anniversary of the Grant Date. Thereafter, the shares covered by the Option shall vest monthly over 2 years with the Option being 100% vested on the third anniversary of the Grant Date, provided that Consultant continues to be engaged as a consultant on each such vesting date. In the event that the Agreement is terminated for reason other than (a) bankruptcy or insolvency of either party, (b) death of Consultant, (c) Cause, or (d) voluntary termination by Consultant for any reason, any shares covered by the Option not yet vested on the day of such termination shall then immediately vest. Unless renewed by written agreement of the Parties, the options shall expire one day prior to the fifth anniversary of the Grant Date. The Option shall be Consultant’s sole consideration for the services provided under this Agreement. |
Scope of Services/Deliverables:
Consultant shall advise Company on its ongoing business strategy and licensing opportunities. Consultant shall, whenever appropriate, research, identify, and present licensing and sublicensing opportunities in North America, South America, Europe, the Middle East, and North Africa. Consultant shall perform research and market studies to assess the establishment of a sales and manufacturing site in Europe for the production of bulk metallic glass components and parts for applications within the aerospace and other related industries.
Upon the presentation by Consultant of an acceptable business case for such an opportunity to the Company for its consideration, Consultant and Company shall negotiate in good faith a royalty-based, worldwide, non-exclusive, field-restricted, time-restricted, and renewable license to the Company’s trademarks, patents, and other intellectual property rights (the “License Agreement”). The terms and scope of the License Agreement shall be subject to mutual agreement between the Company and Consultant, and the Company shall not be obliged to enter into the License Agreement pursuant to its good faith discretion. The presentation of such business case and the negotiation of such License Agreement shall be completed on or before November 30, 2022. In the event that no License Agreement can be successfully negotiated, Consultant shall still be entitled to the entirety of the Payment above, so long as the Consultant continues to provide the remainder of Consultant’s services hereunder in accordance with the terms of this Agreement.
Consultant shall perform business development activities and other special projects as requested by the Company.
Exhibit 31.1
CERTIFICATIONS
I, Tony Chung, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Liquidmetal Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: May 13, 2022 |
/s/ Tony Chung |
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Tony Chung |
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Chief Executive Officer |
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(Principal Executive Officer and Principal Financial Officer) |
Exhibit 32.1
WRITTEN STATEMENT
PURSUANT TO 18 U.S.C. 1350
Solely for the purposes of complying with 18 U.S.C. 1350, I, the undersigned Chief Executive Officer and Principal Financial Officer of Liquidmetal Technologies, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Tony Chung
Tony Chung, Chief Executive Officer and Principal Financial Officer
May 13, 2022
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
| Common stock, shares authorized (in shares) | 1,100,000,000 | 1,100,000,000 |
| Common stock, shares issued (in shares) | 917,285,149 | 914,449,957 |
| Common stock, shares outstanding (in shares) | 917,285,149 | 914,449,957 |
Consolidated Statements of Operations (Unaudited) - USD ($) $ / shares in Thousands, $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| Revenue | ||
| Revenues | $ 163 | $ 72 |
| Cost of sales | 144 | 55 |
| Gross profit | 19 | 17 |
| Operating expenses | ||
| Selling, marketing, general and administrative | 805 | 879 |
| Research and development | 9 | 22 |
| Total operating expenses | 814 | 901 |
| Operating loss | (795) | (884) |
| Lease income | 133 | 132 |
| Interest and investment income (loss) | (5) | 61 |
| Loss before income taxes | (667) | (691) |
| Income taxes | 0 | 0 |
| Net loss | (667) | (691) |
| Net loss attributable to non-controlling interest | 0 | 0 |
| Net loss attributable to Liquidmetal Technologies shareholders | $ (667) | $ (691) |
| Per common share basic and diluted: | ||
| Technologies shareholders, basic and diluted (in dollars per share) | $ (0) | $ (0) |
| Number of weighted average shares - basic and diluted (in shares) | 916,340,085 | 914,449,957 |
| Product [Member] | ||
| Revenue | ||
| Revenues | $ 163 | $ 63 |
| License [Member] | ||
| Revenue | ||
| Revenues | $ 0 | $ 9 |
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| Net loss | $ (667) | $ (691) |
| Other comprehensive loss, net of tax | ||
| Net unrealized gains (losses) on available-for-sale securities | (210) | (116) |
| Other comprehensive loss income (loss), net of tax | (210) | (116) |
| Comprehensive loss | (877) | (807) |
| Less: Comprehensive loss attributable to noncontrolling interests | 0 | 0 |
| Comprehensive loss attributable to Liquidmetal Technologies shareholders | $ (877) | $ (807) |
Note 1 - Description of Business |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Notes to Financial Statements | |
| Business Description and Basis of Presentation [Text Block] |
1. Description of Business
Liquidmetal Technologies, Inc. (the “Company”) is a materials technology company that develops and commercializes products made from amorphous alloys. The Company’s family of alloys consists of a variety of bulk alloys and composites that utilize the advantages offered by amorphous alloys technology. The Company designs, develops, and sells products and custom parts from bulk amorphous alloys to customers in a wide range of industries. The Company also partners 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 the Company believes 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. The Company believes that the alloys and the molding technologies it employs may 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. Interestingly, 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. The Company believes 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, the Company believes these advantages could enable the introduction of entirely new products and applications that are not possible or commercially viable with other materials.
The Company’s revenues are derived from i) selling bulk Liquidmetal alloy products to customers who produce medical devices, automotive assemblies, sports and leisure goods, and non-consumer electronic devices, ii) selling tooling and prototype parts such as demonstration parts and test samples for customers with products in development, iii) product licensing and royalty revenue, and iv) research and development revenue. The Company expects that these sources of revenue will continue to significantly change the character of the Company’s revenue mix.
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Note 2 - Basis of Presentation and Recent Accounting Pronouncements |
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| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation and Significant Accounting Policies [Text Block] |
2. Basis of Presentation and Recent Accounting Pronouncements
The accompanying unaudited interim consolidated financial statements as of and for the three months ended March 31, 2022 and March 31, 2021 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. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. All intercompany balances and transactions have been eliminated in consolidation. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for any future periods or the year ending December 31, 2022. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company's 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 29, 2022.
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 recognize any other-than-temporary impairment losses considered to be credit related for the three ended March 31, 2022 and 2021.
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 1 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:
As of March 31, 2022, 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 December 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:
Leases
The Company leases its manufacturing facility under a long-term contract, which is accounted for as an operating lease. The lease provides for a fixed base rent and variable payments comprised of reimbursements for property taxes, insurance, utilities, and common area maintenance. The lease has a term of months, exclusive of options to renew. In accordance with ASC 842, Leases, lease income, which includes escalating rents over the term of the lease, is recorded on a straight-line basis over the expected lease term. The difference between lease income and payments received is recorded as a rent receivable, which is included as a prepaid expense in the consolidated balance sheets. Amounts paid for broker commissions represent prepaid direct lease costs, and will be amortized as an off-set to lease income over the lease term.
Other Recent Pronouncements
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) 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.
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Note 3 - Significant Transactions |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Notes to Financial Statements | |
| Significant Transactions [Text Block] |
3. Significant Transactions
Yihao Manufacturing Agreement
On January 12, 2022, the Company entered into a manufacturing agreement (“Manufacturing Agreement”) with Dongguan Yihao Metal Materials Technology Co. Ltd. (“Yihao”) to become the primary contract manufacturer of the Company’s products. Under the Manufacturing Agreement, which has a term of 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, the Company’s Chairman and largest beneficial owner of the Company’s capital stock.
Manufacturing Facility Purchase and Lease
On February 16, 2017, the Company purchased a 41,000 square foot manufacturing 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 wholly owned subsidiary of the Company, entered into a lease agreement (the “Facility Lease”) pursuant to which the Company leased to MatterHackers, Inc., a Delaware corporation (“Tenant”), an approximately 32,534 square foot portion of the Facility. The lease term is for years and 2 months and is scheduled to expire on April 30, 2025. The base rent payable under the Facility Lease is $32,534 per month initially and is subject to periodic increases up to a maximum of approximately $54,000 per month. Tenant will pay approximately 79% of common operating expresses. The Facility Lease has other customary provisions, including provisions relating to default and usage restrictions. The Facility Lease grants to Tenant a right to extend the lease for one additional 60-month period at market rental value.
Eontec License Agreement
On March 10, 2016, 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 parties agreed to cross-license certain patents, technical information, and trademarks between the Company and Eontec. In particular, the Company granted to Eontec a paid-up, royalty-free, perpetual license to the Company’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 North America and Europe. In turn, Eontec granted to the Company 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 the Company to Eontec is exclusive (including to the exclusion of the Company) 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 the Company 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, 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.
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. 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 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, exclusive license to commercialize such intellectual property in the field of consumer electronic products, as defined in the license agreement, in exchange for a one-time, upfront 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. The Company is 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 Sublicense Agreement
Liquidmetal Golf Inc. (“Liquidmetal Golf” or “LMG”) is a majority-owned subsidiary which has the exclusive right and license to utilize the Company’s Liquidmetal alloy technology for purposes of golf equipment applications. This right and license is set forth in an intercompany license agreement dated January 1, 2002 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. The Company owns 79% of the outstanding common stock in Liquidmetal Golf.
On January 13, 2022, Liquidmetal Golf 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 has a term of years and provides 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, the Company entered into a license agreement with Swatch Group, Ltd. (“Swatch”) under which Swatch was granted a non-exclusive license to the Company’s 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 as against all third parties (including the Company), but non-exclusive as to Apple. The Company 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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Note 4 - Investments in Debt Securities |
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| Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block] |
4. 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):
Loss from these investments totaled $5 and income from these investments totaled $61 during the three months ended March 31, 2022 and 2021, respectively. Such amounts are included as a portion of interest and investment income on the Company’s consolidated statements of operations.
Based on the Company’s review of its debt securities that are individually in an unrealized loss position at March 31, 2022, it determined that the losses were primarily the result current economic factors, impacting all global debt and equity markets, that are the result of global macro events. The impact to the Company’s investment portfolio is considered to be temporary, rather than a deterioration of overall credit quality. As of March 31, 2022, 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 March 31, 2022.
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Note 5 - Trade Accounts Receivable |
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5. Trade Accounts Receivable
Trade accounts receivable were comprised of the following:
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Note 6 - Prepaid Expenses and Other Current Assets |
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| Prepaid Expenses and Other Current Assets [Text Block] |
6. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets totaled $431 and $505 as of March 31, 2022 and December 31, 2021, respectively. Included within these totals are the following:
As of March 31, 2022, prepaid lease costs and receivables- short term are comprised of $17 in prepaid broker commissions that are expected to be amortized within the next twelve months and $4 in receivables for allocated utility costs.
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Note 7 - Inventory |
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| Inventory Disclosure [Text Block] |
7. Inventory
Inventory totaled $22 and $35 as of March 31, 2022 and December 31, 2021, respectively. Included within these totals are the following:
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Note 8 - Property and Equipment |
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| Property, Plant and Equipment Disclosure [Text Block] |
8. Property and Equipment, net
Property and equipment consist of the following:
Depreciation expense for three ended March 31, 2022 and 2021 was $79 and $80, respectively. Such amounts were included in selling, marketing, general, and administrative expenses within Company’s consolidated statements of operations.
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Note 9 - Patents and Trademarks, Net |
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Mar. 31, 2022 | |
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| Intangible Assets Disclosure [Text Block] |
9. Patents and Trademarks, net
Net patents and trademarks totaled $92 and $102 as of March 31, 2022 and December 31, 2021, 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.
In addition to the purchased and licensed patents, the Company has internally developed patents. Internally developed patents include legal and registration costs incurred to obtain the respective patents. The Company currently holds various patents and numerous pending patent applications in the United States, as well as numerous foreign counterparts to these patents outside of the United States.
The Company amortizes capitalized patents and trademarks over an average of 10 to 17 year periods. Amortization expense for patents and trademarks was $10 and $19 for the three months ended March 31, 2022 and 2021, respectively.
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Note 10 - Other Assets |
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| Other Assets Disclosure [Text Block] |
10. Other Assets
Other assets totaled $321 and $306 as of March 31, 2022 and December 31, 2021, respectively. Included within these totals are the following:
As of March 31, 2022, prepaid lease costs and receivables-long term are comprised of $42 in unamortized prepaid broker commissions that are not expected to be amortized within the next twelve months and $265 in straight-line rent accruals.
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Note 11 - Accrued Liabilities |
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| Accounts Payable and Accrued Liabilities Disclosure [Text Block] |
11. Accrued Liabilities
Accrued liabilities totaled $252 and $246 as of March 31, 2022 and December 31, 2021, respectively. Included within these totals are the following:
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Note 12 - Other Long-term Liabilities |
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| Other Liabilities Disclosure [Text Block] |
12. Other Long-Term Liabilities
Other long-term liabilities were $899 as of March 31, 2022 and $899 as of December 31, 2021, 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 for each period is $43 in tenant deposits.
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Note 13 - Stock Compensation Plan |
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| Share-Based Payment Arrangement [Text Block] |
13. 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. The 2012 Plan provides for the granting to employees of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and for the granting to employees and consultants of non-statutory stock options. In addition, the Plan permits the granting of stock appreciation rights, or SARs, with or independently of options, as well as stock bonuses and rights to purchase restricted stock. 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. Under this plan, the Company had outstanding grants of options to purchase 5,674,000 and 7,009,192 shares of the Company’s common stock as of March 31, 2022 and December 31, 2021, 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. A total of 40,000,000 shares of the Company’s common stock are available for issuance under the 2015 Plan. All options granted under the 2015 Plan had exercise prices that were equal to the fair market value on the dates of grant. Under this plan, the Company had outstanding grants of options to purchase 18,941,667 and 20,441,667 shares of the Company’s common stock as of March 31, 2022 and December 31, 2021, respectively.
Stock based compensation expense attributable to these plans was $43 and $107 for the three months ended March 31, 2022 and 2021, respectively.
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Note 14 - Facility Lease |
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| Lessor, Operating Leases [Text Block] |
14. Facility Lease
Amounts collected under the Facility Lease are comprised of base rents and reimbursements for direct facility expenses (property taxes and insurance), common area maintenance, and utilities. Amounts recorded to lease income are comprised of base rents and direct facility expenses, recorded on a straight-line basis over the lease term. Reimbursements for common area maintenance and utility expense are recorded as reductions to like expenses within sales, general, and administrative costs.
The future minimum rents due to the Company under the Facility Lease are as follows:
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Note 15 - Consolidated Statements of Changes in Equity |
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| Stockholders' Equity Note Disclosure [Text Block] |
15. Consolidated Statements of Changes in Equity
The following table provides the Company’s changes in equity for the three months ended March 31, 2022:
The following table provides the Company’s changes in equity for the three months ended March 31, 2021:
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Note 16 - Accumulated Other Comprehensive Income ("AOCI") |
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| Comprehensive Income (Loss) Note [Text Block] |
16. 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 March 31, 2022:
The following table presents a summary of the changes in each component of AOCI for the three months ended March 31, 2021:
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Note 17 - Loss Per Common Share |
3 Months Ended |
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Mar. 31, 2022 | |
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| Earnings Per Share [Text Block] |
17. Loss Per Common Share
Basic earnings per share (“EPS”) is computed by dividing earnings (loss) attributable to common shareholders by the weighted average number of common shares outstanding for the applicable period. Diluted EPS reflects the potential dilution of securities that could share in the earnings.
Options to purchase 24,615,667 shares of common stock, at prices ranging from $0.07 to $0.38 per share, were outstanding at March 31, 2022, 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, 2022, 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.
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Note 18 - Related Party Transactions |
3 Months Ended |
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Mar. 31, 2022 | |
| Notes to Financial Statements | |
| Related Party Transactions Disclosure [Text Block] |
18. Related Party Transactions
On March 10, 2016, the Company entered into a Securities Purchase Agreement (the “2016 Purchase Agreement”) with Liquidmetal Technology Limited, a Hong Kong company (the “Investor”), which is controlled by the Company’s Chairman, Professor Li. The 2016 Purchase Agreement provided for the purchase by the Investor of a total of 405,000,000 shares of the Company’s common stock for an aggregate purchase price of $63,400. In relation to the foregoing investment, the Company issued to the Investor a warrant to acquire 10,066,809 shares of common stock at an exercise price of $0.07 per share. The warrant will expire on the tenth anniversary of its issuance date.
On March 20, 2016, in connection with the 2016 Purchase Agreement, the Company and Eontec, entered into a cross-license agreement to share their respective technologies. Eontec is a publicly held Hong Kong corporation of which Professor Li is the Chairman and major shareholder. Eontec is also an affiliate of Yihao. Yihao is currently the Company’s primary outsourced manufacturer. As of March 31, 2022, Professor Li is a greater-than 5% beneficial owner of the Company. Equipment and services procured from Eontec, and their affiliates, were $92 and $27 during the three months ended March 31, 2022 and 2021, respectively.
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Note 19 - Subsequent Events |
3 Months Ended |
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Mar. 31, 2022 | |
| Notes to Financial Statements | |
| Subsequent Events [Text Block] |
19. Subsequent Event
On May 10, 2022, Mr. Abdi Mahamedi resigned as a director of the Company. Mr. Mahamedi did not resign because of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. In connection with Mr. Mahamedi’s resignation, the Board of Directors of the Company approved an amendment to Mr. Mahamedi’s previously granted options to purchase an aggregate of 1,870,000 shares of Company common stock to provide for the extension of the exercise period of the options through May 10, 2025.
Upon Mr. Mahamedi’s resignation as a director, the Company entered into a Consulting Agreement, dated May 10, 2022, with Rosewood LLC pursuant to which Mr. Mahamedi as the owner of Rosewood LLC will assess and present business opportunities for the licensing and sublicensing of the Company’s technology. Mr. Mahamedi will also provide business development services and perform other special projects as requested by the Company. The Consulting Agreement has a term of 5 years, subject to the right of the Company or Mr. Mahamedi to terminate the agreement at any time after December 1, 2022 and subject to certain other early-termination rights. As sole consideration for the Consulting Agreement, the Company granted to Mr. Mahamedi an option to purchase up to 2.0 million shares of Company common stock at an exercise price of the closing market price of the Company’s common stock on May 10, 2022 that will vest 33% on the first anniversary of the grant date and the remainder vesting monthly over the ensuing two years, provided that Mr. Mahamedi continues to be engaged as a consultant on each such vesting date. The options have a term of 5 years.
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Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment, Policy [Policy Text Block] | 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 recognize any other-than-temporary impairment losses considered to be credit related for the three ended March 31, 2022 and 2021.
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| Fair Value Measurement, Policy [Policy Text Block] | 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 1 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:
As of March 31, 2022, 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 December 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:
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| Lessee, Leases [Policy Text Block] | Leases
The Company leases its manufacturing facility under a long-term contract, which is accounted for as an operating lease. The lease provides for a fixed base rent and variable payments comprised of reimbursements for property taxes, insurance, utilities, and common area maintenance. The lease has a term of months, exclusive of options to renew. In accordance with ASC 842, Leases, lease income, which includes escalating rents over the term of the lease, is recorded on a straight-line basis over the expected lease term. The difference between lease income and payments received is recorded as a rent receivable, which is included as a prepaid expense in the consolidated balance sheets. Amounts paid for broker commissions represent prepaid direct lease costs, and will be amortized as an off-set to lease income over the lease term.
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| New Accounting Pronouncements, Policy [Policy Text Block] | Other Recent Pronouncements
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) 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.
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Note 2 - Basis of Presentation and Recent Accounting Pronouncements (Tables) |
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| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] |
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Note 4 - Investments in Debt Securities (Tables) |
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| Debt Securities, Available-for-Sale [Table Text Block] |
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Note 5 - Trade Accounts Receivable (Tables) |
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| Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block] |
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Note 6 - Prepaid Expenses and Other Current Assets (Tables) |
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| Schedule of Prepaid Expenses and Other Current Assets [Table Text Block] |
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Note 7 - Inventory (Tables) |
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| Schedule of Inventory, Current [Table Text Block] |
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Note 8 - Property and Equipment (Tables) |
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| Property, Plant and Equipment [Table Text Block] |
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Note 10 - Other Assets (Tables) |
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| Schedule of Other Assets, Noncurrent [Table Text Block] |
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Note 11 - Accrued Liabilities (Tables) |
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| Schedule of Accrued Liabilities [Table Text Block] |
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Note 14 - Facility Lease (Tables) |
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| Lessor, Operating Lease, Payment to be Received, Fiscal Year Maturity [Table Text Block] |
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Note 15 - Consolidated Statements of Changes in Equity (Tables) |
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| Schedule of Stockholders Equity [Table Text Block] |
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Note 16 - Accumulated Other Comprehensive Income ("AOCI") (Tables) |
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| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] |
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Note 2 - Basis of Presentation and Recent Accounting Pronouncements (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
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| Impairment, Long-Lived Asset, Held-for-Use, Total | $ 0 | $ 0 |
| Lessor, Operating Lease, Term of Contract (Year) | 62 years | |
Note 2 - Basis of Presentation and Recent Accounting Pronouncements - Fair Value of Items Measured on a Recurring Basis (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Investments in debt securities (short-term) | $ 13,667 | $ 13,852 |
| Investments in debt securities (long-term) | 7,217 | 8,267 |
| Fair Value, Recurring [Member] | ||
| Investments in debt securities (short-term) | 13,668 | 13,852 |
| Investments in debt securities (long-term) | 7,216 | 8,267 |
| Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Investments in debt securities (short-term) | 9,592 | 10,138 |
| Investments in debt securities (long-term) | 194 | 199 |
| Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Investments in debt securities (short-term) | 4,076 | 3,714 |
| Investments in debt securities (long-term) | 7,022 | 8,068 |
| Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Investments in debt securities (short-term) | 0 | 0 |
| Investments in debt securities (long-term) | $ 0 | $ 0 |
Note 4 - Investments in Debt Securities (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
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| Interest and Investment Income [Member] | ||
| Debt Securities, Available-for-Sale, Realized Gain (Loss), Total | $ 5 | $ 61 |
Note 4 - Investments in Debt Securities - Amortized Cost and Fair Value of Investments in Debt Securities (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Investment in debt securities, amortized cost | $ 21,157 | $ 18,962 |
| Investment in debt securities, fair value | 20,884 | 18,899 |
| Certificates of Deposit [Member] | ||
| Investment in debt securities, amortized cost | 0 | 0 |
| Investment in debt securities, fair value | 0 | 0 |
| US Treasury and Government [Member] | ||
| Investment in debt securities, amortized cost | 6,905 | 7,327 |
| Investment in debt securities, fair value | 6,892 | 7,323 |
| Corporate Debt Securities [Member] | ||
| Investment in debt securities, amortized cost | 14,252 | 11,635 |
| Investment in debt securities, fair value | $ 13,992 | $ 11,576 |
Note 5 - Trade Accounts Receivable - Trade Accounts Receivable Table (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
|---|---|---|---|
| Trade accounts receivable | $ 28 | $ 147 | |
| Less: Allowance for doubtful accounts | 0 | 0 | |
| Trade accounts receivable | $ 28 | $ 147 | $ 147 |
Note 6 - Prepaid Expenses and Other Current Assets (Details Textual) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Prepaid Expense and Other Assets, Current | $ 431 | $ 505 |
| Prepaid Broker Commission | 17 | |
| Allocated Unity Cost [Member] | ||
| Receivables, Net, Current, Total | $ 4 |
Note 6 - Prepaid Expenses and Other Current Assets - Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Prepaid service invoices | $ 114 | $ 110 |
| Prepaid insurance premiums | 165 | 265 |
| Prepaid lease costs and receivables- short term | 21 | 22 |
| Interest and other receivables | 131 | 108 |
| Total | $ 431 | $ 505 |
Note 7 - Inventory (Details Textual) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Inventory, Net, Total | $ 22 | $ 35 |
Note 7 - Inventory - Schedule of Inventory (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Work in progress | $ 22 | $ 35 |
| Finished goods | 0 | 0 |
| Total | $ 22 | $ 35 |
Note 8 - Property and Equipment (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
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| Selling, General and Administrative Expenses [Member] | ||
| Depreciation, Total | $ 79 | $ 80 |
Note 8 - Property and Equipment - Property and Equipment (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Property and equipment, gross | $ 11,237 | $ 11,237 |
| Accumulated depreciation | (3,021) | (2,924) |
| Total property and equipment, net | 8,216 | 8,295 |
| Land, Buildings and Improvements [Member] | ||
| Property and equipment, gross | 9,610 | 9,610 |
| Machinery and Equipment [Member] | ||
| Property and equipment, gross | 1,304 | 1,304 |
| Computer Equipment [Member] | ||
| Property and equipment, gross | 272 | 272 |
| Office Equipment, Furnishings and Improvements [Member] | ||
| Property and equipment, gross | $ 51 | $ 51 |
Note 9 - Patents and Trademarks, Net (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
| Finite-Lived Intangible Assets, Net, Ending Balance | $ 92 | $ 102 | |
| Amortization of Intangible Assets | $ 10 | $ 19 | |
| Minimum [Member] | |||
| Finite-Lived Intangible Asset, Useful Life (Year) | 10 years | ||
| Maximum [Member] | |||
| Finite-Lived Intangible Asset, Useful Life (Year) | 17 years | ||
Note 10 - Other Assets (Details Textual) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Other Assets, Total | $ 321 | $ 306 |
| Unamortized Prepaid Broker Commissions | 42 | |
| Prepaid Rent Noncurrent | $ 265 |
Note 10 - Other Assets - Other Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Other Assets | $ 321 | $ 306 |
| Utility Deposits [Member] | ||
| Other Assets | 14 | 14 |
| Prepaid Lease Costs and Long-term Receivables [Member] | ||
| Other Assets | $ 307 | $ 292 |
Note 11 - Accrued Liabilities (Details Textual) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Accrued Liabilities, Current, Total | $ 252 | $ 246 |
Note 11 - Accrued Liabilities - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Accrued payroll, vacation, and bonuses | $ 145 | $ 111 |
| Accrued severance | 56 | 56 |
| Accrued audit fees | 51 | 79 |
| Total | $ 252 | $ 246 |
Note 12 - Other Long-term Liabilities (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|
| Other Liabilities, Noncurrent, Total | $ 899 | $ 899 |
| Loans Payable, Noncurrent, Total | $ 856 | |
| Period for Outstanding Liability (Year) | 5 years | |
| Tenant Deposits | $ 43 |
Note 13 - Stock Compensation Plan (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
Jan. 27, 2015 |
|
| Share-Based Payment Arrangement, Expense | $ 43 | $ 107 | ||
| Equity Incentive Plan 2012 [Member] | ||||
| Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares) | 30,000,000 | |||
| Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding, Number, Ending Balance (in shares) | 5,674,000 | 7,009,192 | ||
| Equity Incentive Plan 2015 [Member] | ||||
| Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares) | 40,000,000 | |||
| Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding, Number, Ending Balance (in shares) | 18,941,667 | 20,441,667 | ||
Note 14 - Facility Lease - Base Rents (Details) $ in Thousands |
Mar. 31, 2022
USD ($)
|
|---|---|
| 2022 (remaining nine months) | $ 366 |
| 2023 | 651 |
| 2024 | 699 |
| 2025 | 237 |
| 2026 | 0 |
| Thereafter | 0 |
| Lessor, Operating Lease, Payments to be Received, Total | $ 1,953 |
Note 16 - Accumulated Other Comprehensive Income ("AOCI") - Summary of Changes in AOCI (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| Balance | $ 34,292 | $ 37,390 |
| Other comprehensive income, net of tax | (210) | (116) |
| Balance | 33,670 | 36,690 |
| AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-Sale, Including Noncontrolling Interest [Member] | ||
| Balance | (62) | 116 |
| Other comprehensive income/ loss before reclassifications | (210) | (116) |
| Amounts reclassified from accumulated other comprehensive income (loss) | 0 | 0 |
| Other comprehensive income, net of tax | (210) | (116) |
| Balance | (272) | 0 |
| AOCI Attributable to Parent [Member] | ||
| Balance | (62) | 116 |
| Other comprehensive income/ loss before reclassifications | (210) | (116) |
| Amounts reclassified from accumulated other comprehensive income (loss) | 0 | 0 |
| Other comprehensive income, net of tax | (210) | (116) |
| Balance | $ (272) | $ 0 |
Note 18 - Related Party Transactions (Details Textual) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Mar. 10, 2016 |
|
| Chairman of Eontec [Member] | Minimum [Member] | |||
| Beneficial Ownership Percentage | 5.00% | ||
| Eontec [Member] | License Agreement [Member] | |||
| Related Party Transaction, Amounts of Transaction | $ 92 | $ 27 | |
| Investor Warrant [Member] | |||
| Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | 10,066,809 | ||
| Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ 0.07 | ||
| The 2016 Purchase Agreement [Member] | |||
| Common Stock Purchase Agreement, Number of Shares Authorized to Issue and Sell to Investors (in shares) | 405,000,000 | ||
| Common Stock Purchase Agreement, Value of Shares Authorized to Issue and Sell to Investors | $ 63,400 | ||
Note 19 - Subsequent Events (Details Textual) - Former Director [Member] - Subsequent Event [Member] |
May 10, 2022
shares
|
|---|---|
| Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding, Number, Ending Balance (in shares) | 1,870,000 |
| Share-Based Payment Arrangement, Tranche One [Member] | |
| Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Rights, Percentage | 33.00% |
| Maximum [Member] | |
| Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross (in shares) | 2,000,000.0 |