Item 1 – Financial Statements
LIQUIDMETAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except par value and share data)
| | | March 31, | | | December 31, | |
| | | 2023 | | | 2022 | |
| | | (Unaudited) | | | (Audited) | |
| ASSETS | | | | | | | | |
| | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 6,850 | | | $ | 2,269 | |
| Restricted cash | | | 5 | | | | 5 | |
| Investments in debt securities- short term | | | 12,570 | | | | 16,435 | |
| Trade accounts receivable, net of allowance for doubtful accounts | | | 32 | | | | 24 | |
| Inventory | | | 25 | | | | 25 | |
| Prepaid expenses and other current assets | | | 410 | | | | 525 | |
| Total current assets | | $ | 19,892 | | | $ | 19,283 | |
| Investments in debt securities- long term | | | 4,700 | | | | 5,646 | |
| Property and equipment, net | | | 7,902 | | | | 7,980 | |
| Patents and trademarks, net | | | 67 | | | | 73 | |
| Other assets | | | 347 | | | | 353 | |
| Total assets | | $ | 32,908 | | | $ | 33,335 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | |
| | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 73 | | | $ | 88 | |
| Accrued liabilities | | | 230 | | | | 265 | |
| Deferred revenue | | | 53 | | | | 41 | |
| Total current liabilities | | $ | 356 | | | $ | 394 | |
| | | | | | | | | |
| Long-term liabilities | | | | | | | | |
| Other long-term liabilities | | | 902 | | | | 902 | |
| Total liabilities | | $ | 1,258 | | | $ | 1,296 | |
| | | | | | | | | |
| Shareholders' equity: | | | | | | | | |
| | | | | | | | | |
| Common stock, $0.001 par value; 1,100,000,000 shares authorized; 917,285,149 and 917,285,149 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | | | 917 | | | | 917 | |
| Warrants | | | 18,179 | | | | 18,179 | |
| Additional paid-in capital | | | 288,047 | | | | 288,013 | |
| Accumulated deficit | | | (275,283 | ) | | | (274,696 | ) |
| Accumulated other comprehensive loss | | | (132 | ) | | | (296 | ) |
| Non-controlling interest in subsidiary | | | (78 | ) | | | (78 | ) |
| Total shareholders' equity | | $ | 31,650 | | | $ | 32,039 | |
| | | | | | | | | |
| Total liabilities and shareholders' equity | | $ | 32,908 | | | $ | 33,335 | |
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 |
|
| |
|
Ended March 31, |
|
| |
|
2023 |
|
|
2022 |
|
| |
|
|
|
|
|
|
|
|
| Revenue |
|
|
|
|
|
|
|
|
| Products |
|
$ |
30 |
|
|
$ |
163 |
|
| Total revenue |
|
$ |
30 |
|
|
$ |
163 |
|
| |
|
|
|
|
|
|
|
|
| Cost of sales |
|
|
23 |
|
|
|
144 |
|
| Gross profit |
|
$ |
7 |
|
|
$ |
19 |
|
| |
|
|
|
|
|
|
|
|
| Operating expenses |
|
|
|
|
|
|
|
|
| Selling, marketing, general and administrative |
|
|
806 |
|
|
|
805 |
|
| Research and development |
|
|
6 |
|
|
|
9 |
|
| Total operating expenses |
|
$ |
812 |
|
|
$ |
814 |
|
| Operating loss |
|
|
(805 |
) |
|
|
(795 |
) |
| |
|
|
|
|
|
|
|
|
| Lease income |
|
|
118 |
|
|
|
133 |
|
| Interest and investment income (loss) |
|
|
100 |
|
|
|
(5 |
) |
| |
|
|
|
|
|
|
|
|
| Loss before income taxes |
|
$ |
(587 |
) |
|
$ |
(667 |
) |
| |
|
|
|
|
|
|
|
|
| Income taxes |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(587 |
) |
|
$ |
(667 |
) |
| |
|
|
|
|
|
|
|
|
| Net loss attributable to non-controlling interest |
|
|
- |
|
|
|
- |
|
| Net loss attributable to |
|
|
|
|
|
|
|
|
| Liquidmetal Technologies shareholders |
|
$ |
(587 |
) |
|
$ |
(667 |
) |
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Per common share basic and diluted: |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Net loss per common share attributable to Liquidmetal |
|
|
|
|
|
|
|
|
| Technologies shareholders, basic and diluted |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
| |
|
|
|
|
|
|
|
|
| Number of weighted average shares - basic and diluted |
|
|
917,285,149 |
|
|
|
916,340,085 |
|
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
Ended March 31, |
|
| |
|
2023 |
|
|
2022 |
|
| |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(587 |
) |
|
$ |
(667 |
) |
| Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
| Net unrealized gains (losses) on available-for-sale securities |
|
|
164 |
|
|
|
(210 |
) |
| Other comprehensive income (loss), net of tax |
|
|
164 |
|
|
|
(210 |
) |
| Comprehensive loss |
|
$ |
(423 |
) |
|
$ |
(877 |
) |
| Less: Comprehensive loss attributable to noncontrolling interests |
|
|
- |
|
|
|
- |
|
| Comprehensive loss attributable to Liquidmetal Technologies shareholders |
|
$ |
(423 |
) |
|
$ |
(877 |
) |
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, |
|
| |
|
2023 |
|
|
2022 |
|
| |
|
|
|
|
|
|
|
|
| Operating activities: |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(587 |
) |
|
$ |
(667 |
) |
| |
|
|
|
|
|
|
|
|
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
84 |
|
|
|
89 |
|
| Stock-based compensation |
|
|
34 |
|
|
|
43 |
|
| |
|
|
|
|
|
|
|
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Trade accounts receivable |
|
|
(8 |
) |
|
|
119 |
|
| Inventory |
|
|
- |
|
|
|
13 |
|
| Prepaid expenses and other current assets |
|
|
115 |
|
|
|
74 |
|
| Other assets and liabilities |
|
|
6 |
|
|
|
(15 |
) |
| Accounts payable and accrued liabilities |
|
|
(50 |
) |
|
|
(32 |
) |
| Deferred revenue |
|
|
12 |
|
|
|
(15 |
) |
| Net cash used in operating activities |
|
|
(394 |
) |
|
|
(391 |
) |
| |
|
|
|
|
|
|
|
|
| Investing Activities: |
|
|
|
|
|
|
|
|
| Purchases of debt securities |
|
|
(3,673 |
) |
|
|
(4,914 |
) |
| Proceeds from sales of debt securities |
|
|
8,648 |
|
|
|
5,939 |
|
| Net cash provided by investing activities |
|
|
4,975 |
|
|
|
1,025 |
|
| |
|
|
|
|
|
|
|
|
| Financing Activities: |
|
|
|
|
|
|
|
|
| Common stock issuance |
|
|
- |
|
|
|
212 |
|
| Net cash provided by financing activities |
|
|
- |
|
|
|
212 |
|
| |
|
|
|
|
|
|
|
|
| Net increase in cash, cash equivalents, and restricted cash |
|
|
4,581 |
|
|
|
846 |
|
| |
|
|
|
|
|
|
|
|
| Cash, cash equivalents, and restricted cash at beginning of period |
|
|
2,274 |
|
|
|
4,096 |
|
| Cash, cash equivalents, and restricted cash at end of period |
|
$ |
6,855 |
|
|
$ |
4,942 |
|
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, 2023 and 2022
(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, 2023 and March 31, 2022 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, 2023 are not necessarily indicative of the results that may be expected for any future periods or the year ending December 31, 2023. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company's 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 14, 2023.
8
Investments in Debt Securities
The Company will invest excess funds to maximize investment yield, while maintaining liquidity and minimizing credit risk. Debt securities are carried at fair value and consist primarily of investments in obligations of the United States Treasury, various U.S. and foreign corporations, and certificates of deposits. The Company classifies its investments in debt securities as available-for-sale with all unrealized gains or losses included as part of other comprehensive income. The Company evaluates its debt securities with unrealized losses on a quarterly basis for potential other-than-temporary impairments in value. As a result of this assessment, the Company did not recognize any other-than-temporary impairment losses considered to be credit related for the three months ended March 31, 2023 and 2022.
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, 2023, the following table represents the Company’s fair value hierarchy for items that are required to be measured at fair value on a recurring basis:
| | | Fair Value | | | Level 1 | | | Level 2 | | | Level 3 | |
| | | | | | | | | | | | | | | | | |
| Investments in debt securities (short-term) | | $ | 4,700 | | | $ | 876 | | | $ | 3,824 | | | $ | - | |
| Investments in debt securities (long-term) | | | 12,570 | | | | 10,458 | | | | 2,112 | | | | - | |
As of December 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) | | $ | 16,436 | | | $ | 13,661 | | | $ | 2,775 | | | $ | - | |
| Investments in debt securities (long-term) | | | 5,645 | | | | 1,555 | | | | 4,090 | | | | - | |
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 sixty-two 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.
9
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 five years, Yihao has agreed to serve as a non-exclusive contract manufacturer for amorphous alloy parts offered and sold by the Company at prices determined on a “cost-plus” basis. Yihao is an affiliate of Dongguan Eontec Co. Ltd. and Professor Lugee Li, 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 5 years and 2 months and is scheduled to expire on April 30, 2025. The base rent payable under the Facility Lease was $32,534 per month initially and is subject to periodic increases up to a maximum of approximately $39,000 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 and amendments thereof, 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 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 five years, subject to renewal provisions and the ability of either party to terminate earlier upon specified circumstances.
10
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 three 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.
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 | |
| | Longest | | March 31, | | | December 31, | | | March 31, | | | December 31, | |
| | Maturity Date | | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| | | | | | | | | | | | | | | | | | |
| U.S. government and agency securities | 2024 | | | 9,778 | | | | 11,964 | | | | 9,797 | | | | 11,922 | |
| Corporate bonds | 2025 | | | 7,659 | | | | 10,421 | | | | 7,474 | | | | 10,159 | |
| | | | | 17,437 | | | | 22,385 | | | | 17,271 | | | | 22,081 | |
Income from these investments totaled $100 and loss from these investments totaled $5 during the three months ended March 31, 2023 and 2022, respectively. Such amounts are included as a portion of interest and investment income on the Company’s consolidated statements of operations.
11
Based on the Company’s review of its debt securities that are individually in an unrealized loss position at March 31, 2023, 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, 2023, 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, 2023.
5. Trade Accounts Receivable
Trade accounts receivable were comprised of the following:
| | | March 31, | | | December 31, | |
| | | 2023 | | | 2022 | |
| Trade accounts receivable | | $ | 32 | | | $ | 24 | |
| Less: Allowance for doubtful accounts | | | - | | | | - | |
| Trade accounts receivable | | $ | 32 | | | $ | 24 | |
6. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets totaled $410 and $525 as of March 31, 2023 and December 31, 2022, respectively. Included within these totals are the following:
| | | March 31, | | | December 31, | |
| | | 2023 | | | 2022 | |
| | | | | | | | | |
| Prepaid service invoices | | | 115 | | | $ | 110 | |
| Prepaid insurance premiums | | | 166 | | | | 265 | |
| Prepaid lease costs and receivables- short term | | | 21 | | | | 23 | |
| Interest and other receivables | | | 108 | | | | 127 | |
| Total | | $ | 410 | | | $ | 525 | |
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.
7. Inventory
Inventory totaled $25 and $25 as of March 31, 2023 and December 31, 2022, respectively. Included within these totals are the following:
| | | March 31, | | | December 31, | |
| | | 2023 | | | 2022 | |
| | | | | | | | | |
| Work in progress | | $ | 25 | | | $ | 25 | |
| Finished goods | | | - | | | | - | |
| Total | | $ | 25 | | | $ | 25 | |
12
8. Property and Equipment, net
Property and equipment consist of the following:
| | | March 31, | | | December 31, | |
| | | 2023 | | | 2022 | |
| | | | | | | | | |
| Land, building, and improvements | | $ | 9,610 | | | $ | 9,610 | |
| Machinery and equipment | | | 1,304 | | | | 1,304 | |
| Computer equipment | | | 272 | | | | 272 | |
| Office equipment, furnishings, and improvements | | | 51 | | | | 51 | |
| Total | | | 11,237 | | | | 11,237 | |
| Accumulated depreciation | | | (3,335 | ) | | | (3,257 | ) |
| Total property and equipment, net | | $ | 7,902 | | | $ | 7,980 | |
Depreciation expense for three months ended March 31, 2023 and 2022 was $78 and $79, respectively. Such amounts were included in selling, marketing, general, and administrative expenses within Company’s consolidated statements of operations.
9. Patents and Trademarks, net
Net patents and trademarks totaled $79 and $73 as of March 31, 2023 and December 31, 2022, 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 $6 and $10 for the three months ended March 31, 2023 and 2022, respectively.
10. Other Assets
Other assets totaled $347 and $353 as of March 31, 2023 and December 31, 2022, respectively. Included within these totals are the following:
| | | March 31, | | | December 31, | |
| | | 2023 | | | 2022 | |
| | | | | | | | | |
| Utility deposits | | $ | 14 | | | $ | 14 | |
| Prepaid lease costs and receivables- long term | | | 333 | | | | 339 | |
| Total | | $ | 347 | | | $ | 353 | |
As of March 31, 2023, prepaid lease costs and receivables-long term are comprised of $25 in unamortized prepaid broker commissions that are not expected to be amortized within the next twelve months and $308 in straight-line rent accruals.
13
11. Accrued Liabilities
Accrued liabilities totaled $230 and $265 as of March 31, 2023 and December 31, 2022, respectively. Included within these totals are the following:
| | | March 31, | | | December 31, | |
| | | 2023 | | | 2022 | |
| | | | | | | | | |
| Accrued payroll, vacation, and bonuses | | $ | 108 | | | $ | 124 | |
| Accrued severance | | | 56 | | | | 56 | |
| Accrued audit fees | | | 66 | | | | 85 | |
| Total | | $ | 230 | | | $ | 265 | |
12. Other Long-Term Liabilities
Other long-term liabilities was $902 as of March 31, 2023 and December 31, 2022, and consisted of $859 of long-term, aged payables to vendors, individuals, and other third parties that have been outstanding for more than 5 years. Also included in the balance is $43 in tenant deposits under the Facility Lease.
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 5,654,000 and 5,674,000 shares of the Company’s common stock as of March 31, 2023 and December 31, 2022, 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 20,941,667 and 20,941,667 shares of the Company’s common stock as of March 31, 2023 and December 31, 2022, respectively.
Stock based compensation expense attributable to these plans was $34 and $43 for the three months ended March 31, 2023 and 2022, respectively.
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 | |
| | | | | |
| 2023 (remaining nine months) | | $ | 384 | |
| 2024 | | | 523 | |
| 2025 | | | 177 | |
| 2026 | | | - | |
| Thereafter | | | - | |
| | | $ | 1,084 | |
15. Consolidated Statements of Changes in Equity
The following table provides the Company’s changes in equity for the three months ended March 31, 2023:
| | | Preferred Shares | | | Common
Shares | | | Common
Stock | | | Warrants part of Additional Paid-in Capital | | | Additional
Paid-in
Capital | | | Accumulated
Deficit | | | Accumulated Other Comprehensive Income | | | Non- Controlling Interest | | | Total | |
| Balance, December 31, 2022 | | | - | | | | 917,285,149 | | | $ | 917 | | | $ | 18,179 | | | $ | 288,013 | | | $ | (274,696 | ) | | $ | (296 | ) | | $ | (78 | ) | | $ | 32,039 | |
| | | | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock-based compensation | | | | | | | | | | | | | | | | | | | 34 | | | | | | | | | | | | | | | | 34 | |
| Net loss | | | | | | | | | | | | | | | | | | | | | | | (587 | ) | | | | | | | | | | | (587 | ) |
| Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | 164 | | | | | | | | 164 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, March 31, 2023 | | | - | | | | 917,285,149 | | | $ | 917 | | | $ | 18,179 | | | $ | 288,047 | | | $ | (275,283 | ) | | $ | (132 | ) | | $ | (78 | ) | | $ | 31,650 | |
The following table provides the Company’s changes in equity for the three months ended March 31, 2022:
| | | Preferred Shares | | | Common
Shares | | | Common
Stock | | | Warrants part of Additional Paid-in Capital | | | Additional
Paid-in
Capital | | | Accumulated
Deficit | | | Accumulated Other Comprehensive Income | | | Non- Controlling Interest | | | Total | |
| Balance, December 31, 2021 | | | - | | | | 914,449,957 | | | $ | 914 | | | $ | 18,179 | | | $ | 287,641 | | | $ | (272,303 | ) | | $ | (62 | ) | | $ | (77 | ) | | $ | 34,292 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock issuance | | | | | | | 2,835,192 | | | | 3 | | | | | | | | 209 | | | | | | | | | | | | | | | | 212 | |
| Stock-based compensation | | | | | | | | | | | | | | | | | | | 43 | | | | | | | | | | | | | | | | 43 | |
| Net loss | | | | | | | | | | | | | | | | | | | | | | | (667 | ) | | | | | | | - | | | | (667 | ) |
| Other comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | | | | | (210 | ) | | | | | | | (210 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, March 31, 2022 | | | - | | | | 917,285,149 | | | $ | 917 | | | $ | 18,179 | | | $ | 287,893 | | | $ | (272,970 | ) | | $ | (272 | ) | | $ | (77 | ) | | $ | 33,670 | |
15
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, 2023:
| | | Unrealized gains (losses) on available- for-sale securities | | | Total | |
| Accumulated other comprehensive loss, net of tax, as of December 31, 2022 | | $ | (296 | ) | | $ | (296 | ) |
| | | | | | | | | |
| Other comprehensive income before reclassifications | | | 164 | | | | 164 | |
| Amounts reclassified from accumulated other comprehensive loss | | | - | | | | - | |
| Net increase in other comprehensive loss | | | 164 | | | | 164 | |
| Accumulated other comprehensive loss, net of tax, as of March 31, 2023 | | $ | (132 | ) | | $ | (132 | ) |
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 loss, net of tax, as of December 31, 2021 | | $ | (62 | ) | | $ | (62 | ) |
| | | | | | | | | |
| Other comprehensive loss before reclassifications | | | (210 | ) | | | (210 | ) |
| Amounts reclassified from accumulated other comprehensive loss | | | - | | | | - | |
| Net decrease in other comprehensive loss | | | (210 | ) | | | (210 | ) |
| Accumulated other comprehensive loss, net of tax, as of March 31, 2022 | | $ | (272 | ) | | $ | (272 | ) |
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 26,595,667 shares of common stock, at prices ranging from $0.07 to $0.38 per share, were outstanding at March 31, 2023, 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, 2023, 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 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.
16
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, 2023, Professor Li is a greater-than 5% beneficial owner of the Company and serves as the Company’s Chairman. Equipment and services procured from Eontec, and their affiliates, were $35 and $92 during the three months ended March 31, 2023 and 2022, respectively.
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.
17
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, 2022 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 and amendments thereof, we licensed to Eutectix specified equipment owned by us, 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. 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, 2022 (the “2022 Annual Report”) contains further discussions on our critical accounting policies and estimates.
Results of Operations
Comparison of the three months ended March 31, 2023 and 2022
| |
|
For the three months ended March 31, |
|
| |
|
2023 |
|
|
|
|
|
|
2022 |
|
|
|
|
|
| |
|
in 000's |
|
|
% of Revenue |
|
|
in 000's |
|
|
% of Revenue |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Products |
|
$ |
30 |
|
|
|
|
|
|
$ |
163 |
|
|
|
|
|
| Total revenue |
|
|
30 |
|
|
|
|
|
|
|
163 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of sales |
|
|
23 |
|
|
|
77 |
% |
|
|
144 |
|
|
|
88 |
% |
| Gross profit |
|
|
7 |
|
|
|
23 |
% |
|
|
19 |
|
|
|
12 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling, marketing, general and administrative |
|
|
806 |
|
|
|
2687 |
% |
|
|
805 |
|
|
|
494 |
% |
| Research and development |
|
|
6 |
|
|
|
20 |
% |
|
|
9 |
|
|
|
6 |
% |
| Total operating expense |
|
|
812 |
|
|
|
|
|
|
|
814 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating loss |
|
|
(805 |
) |
|
|
|
|
|
|
(795 |
) |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Lease income |
|
|
118 |
|
|
|
|
|
|
|
133 |
|
|
|
|
|
| Interest and investment income (loss) |
|
|
100 |
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
| Net loss |
|
$ |
(587 |
) |
|
|
|
|
|
$ |
(667 |
) |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
- |
|
|
|
|
|
|
$ |
- |
|
|
|
|
|
Revenue and operating expenses
Revenue. Total revenue decreased to $30 for the three months ended March 31, 2023 from $163 for the three months ended March 31, 2022. The decrease for the period was attributable to lower general production shipments of products made by our contract manufacturers and decreases in payments under development projects, following the Company’s transition to outsourced manufacturing in 2020.
Cost of sales. Cost of sales was $23, or 77% of total revenue, for the three months ended March 31, 2023, a decrease from $144, or 88% of total revenue, for the three months ended March 31, 2022. The decrease for the three months ended March 31, 2023 was attributable to lower products revenue and higher 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 decreased to $7 for the three months ended March 31, 2023 from $19 for the three months ended March 31, 2022. Our gross profit as a percentage of total revenue, increased to 23% for the three months ended March 31, 2023 from 12% for the three months ended March 31, 2022. 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 $806 for the three months ended March 31, 2023 compared to $805 for the three months ended March 31, 2022, respectively. The increase in expenses was primarily attributable to increased costs.
Research and development. Research and development expenses were $6 for the three months ended March 31, 2023, respectively, compared to $9 for the three months ended March 31, 2022, respectively. 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 $805 for the three months ended March 31, 2023. This compares to $795 for the three months ended March 31, 2022. Fluctuations in our operating loss are primarily attributable to variations in revenue, cost of sales, and 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 $118 for the three months ended March 31, 2023. This compares to $133 for the three months ended March 31, 2022.
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 income was $100 for the three months ended March 31, 2023. This compares to interest and investment loss of $5 during the three months ended March 31, 2022. The increase during 2023 is due continued volatility in corporate debt and bond markets, which is resulting in higher yields.
Liquidity and Capital Resources
Cash used in operating activities
Cash used in operating activities totaled $394 and $391for the three months ended March 31, 2023 and 2022, 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 $4,975 and $1,025 for the three months ended March 31, 2023 and 2022, 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 $0 for the three months ended March 31, 2023 and $212 for the three months ended March 31, 2022 related to the exercise of our stock options.
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, 2023, we had $6,855 in cash and restricted cash, as well as $17,270 in investments in debt securities. We view this total of $24,125 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.