Penny Stock Liquidmetal Technologies (LQMT) Cuts the Fat

Shares of penny stock Liquidmetal Technologies (OTCBB: LQMT.OB) traded 3X the 3-month average volume on Friday in anticipation of the 2011 financial results. With the release of its financial results for the three-month period and year ended December 31, 2011 expected after the stock market close, LQMT ended the trading session down -4.55% at $0.21 with volume on the OTC listed stock of  4,247,261.

Shares in Liquidmetal Technologies is up 48.94% year-to-date. During 2011, the stock price fluctuated between $0.84 per share to, the lowest bid price during that period, $0.12 per share.

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Nearly in sync with the announcement of the new iPad 3, or iPad HD, LQMT issued a press release at 6:30pm March 6th which stated that the company had already  started shipping parts to their global customers. Shares in the penny stock jumped the next day 46.88% to $0.235 on volume of 25.94 million.

LQMT Financial Highlights FYE December 31,2011:

Revenue: Decreased by $19.6 million to $972 thousand from $20.6 million in 2010. The primary reason for the significant decrease was in the licensing and royalties revenue category due to the one-time licensing fee to Apple, Inc. (Nasdaq: APPL) of $20 million that occurred during 2010.

Cost of Sales:  $373 thousand, 65% of product revenue, compared to $262 thousand, 46% of product revenue, in 2010.

Selling, General, and Administrative Expenses: Decreased by $255 thousand to $4.2 million, 742% of product revenue, compared to $4.5 million, 793% of product revenue, in 2010. The reason for the decrease was the result of a one-time director consulting fee of $275 thousand.

Research and Development Expenses: Remained flat at $1.1 million.

Settlement Expense: $1.7 million compared to $2.8 million in 2010. Both amounts are related to a settlement with SAGA, SpA.

On August 6, 2010, SAGA, SpA in Padova, Italy, filed a complaint against Liquidmetal Technologies claiming damages of $3.2 million for payment on an alleged loan and for alleged breach of contract in connection with the formation of Liquidmetal Saga Italy, Srl, a joint venture between LQMT and SAGA.  
On April 6, 2011, the company entered into a Settlement and Equity Interest Purchase Agreement with SAGA pursuant to which
(i) the joint venture between us and SAGA was terminated,
(ii) LQMT and SAGA both agreed to cause certain pending legal action against each other to be dismissed with prejudice,
(iii) LQMT paid SAGA $2.8 million in the form of 4,496,429 restricted shares of LQMT common stock in exchange for SAGA’s equity interest in Liquidmetal Saga Italy, and
(iv) the Liquidmetal technology license to Liquidmetal Saga Italy, Srl was terminated.  A total of $0 and $3.1 million was accrued for the settlement and legal fees as of December 31, 2011 and 2010, respectively.
Change in Value of Warrants: A gain of $1.3 million which resulted from periodic valuation adjustments for warrants issued in connection with convertible and subordinated notes.

Other Income: $26 thousand, 5% of product revenue, compared to $70 thousand, 12% of product revenue, in 2010. Other income primarily are gains on settlements of accounts payable for less than face value.

Interest Expense: $90 thousand, 16% of revenue, compared to $4 million, 709% of revenue, in 2010. 2011 interest expense consisted of interest accrued on an outstanding promissory note. 2010 interest expense primarily consisted of debt amortization and interest accrued on convertible and subordinated notes and borrowings under a factoring, loan, and security agreement, all of which were retired during 2010.

Interest Income: $22 thousand compared to $6 thousand in 2010 derived from interest earned on cash deposits.

Gain on Disposal of Subsidiaries: $12.1 million due to the sale of the company’s China subsidiary Advanced Metals Materials, the sale of the company’s Korea subsidiary Liquidmetal Technologies, Korea, and the divestment of the company’s Coatings subsidiary Liquidmetal Coatings.

Loss from discontinued operations: $763 thousand compared to $2.7 million in 2010 from operations of LQMT’s discontinued subsidiaries.

Click here to view the entire 10-K

About LQMT:

Liquidmetal Technologies is a materials technology company that develops and commercializes products made from amorphous alloys. The company design, develop and sell products and components from bulk amorphous alloys to customers in various industries.

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. In lab testing, the company’s zirconium-titanium Liquidmetal alloys are approximately 250% stronger than commonly used titanium alloys, but with some of the beneficial processing characteristics more commonly associated with plastics.

Bottom Line: LQMT had an impressive 3 day run at the end of last year, but after that the price dropped. The penny stock has now established itself higher than that tiny run and has established a healthy volume pattern with a30 Day Average Volume of 2,341,312.

It would have been nice from a fundamental point of view to have seen the $20 million licensing fee booked in 2010 have an impact on assets rather than cash flow, but the company seems to be headed in the proper direction to right the ship of its $175.86 million accumulated deficit.

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