10-Q: Liquidmetal Technologies Reports Wider Q3 Loss Amid Revenue Decline

Liquidmetal Technologies reported a significant increase in net loss and a sharp decline in revenue for the third quarter and first nine months of 2025, despite an increase in gross margin percentage and a new joint venture.

Summary

• Total revenue for the three months ended September 30, 2025, decreased by 88.3% to $37,000 from $316,000 in the prior year period, primarily due to a decrease in product shipments.
• Net loss for the three months ended September 30, 2025, widened by 25.2% to $552,000 compared to $441,000 in the same period last year.
• For the nine months ended September 30, 2025, total revenue decreased by 16.8% to $608,000 from $731,000 in the prior year period.
• Net loss for the nine months ended September 30, 2025, increased by 62.1% to $1,645,000 from $1,015,000 in the prior year period.
• Gross profit for the three months ended September 30, 2025, decreased by 74.0% to $20,000, but the gross margin percentage increased to 54.1% from 24.4% due to lower cost of sales relative to revenue.
• Selling, marketing, general, and administrative expenses increased by 6.3% to $961,000 for the three months ended September 30, 2025, driven by higher payroll, legal fees, travel, and stock compensation.
• A new joint venture, Hangzhou Feifeng Liquidmetal Co. Ltd., was formed on July 4, 2025, in China, with Liquidmetal Asia Holdings Limited owning 70% and Mr. Chong Liu owning 30%, to develop a manufacturing facility.
• The joint venture is capitalized with $6.0 million USD, with Liquidmetal Asia contributing $4.2 million and Mr. Liu to contribute $1.8 million by May 25, 2028.
• A new 5-year lease agreement for the Lake Forest, CA facility commenced on May 1, 2025, expanding the leased square footage to 40,090 square feet and increasing base rent.
• As of September 30, 2025, cash and cash equivalents totaled $8,490,000, and investments in debt securities totaled $12,616,000, providing $21,106,000 in readily available liquidity.

Sentiment

Score: 2

Explanation: The company reported significantly wider net losses and a sharp decline in revenue, indicating deteriorating financial performance in its core business. While there are strategic initiatives like a new joint venture and increased lease income, these are overshadowed by the operational losses and increased cash burn. The outlook acknowledges continued losses, leading to a negative sentiment.

Positives

• Gross margin percentage increased to 54.1% for the three months ended September 30, 2025, from 24.4% in the prior year period, and to 28.8% for the nine months ended September 30, 2025, from 23.4%.
• Established a new joint venture, Hangzhou Feifeng Liquidmetal Co. Ltd., in China to develop a manufacturing facility for amorphous metal products, with Liquidmetal Asia holding a 70% stake.
• Lease income significantly increased by 122.7% to $196,000 for the three months ended September 30, 2025, and by 66.7% to $445,000 for the nine months ended September 30, 2025, due to a new lease agreement with higher base rents.
• Cash, cash equivalents, and restricted cash at the end of the period increased to $8,490,000 as of September 30, 2025, from $4,895,000 in the prior year period.
• The Liquidmetal Golf sublicense agreement with Amorphous Technologies Japan, Inc. was extended to have automatic, annual renewals, providing for a running royalty of 3% of net sales.

Negatives

• Total revenue for the three months ended September 30, 2025, decreased by 88.3% to $37,000, primarily due to a significant decline in product shipments.
• Net loss for the three months ended September 30, 2025, widened by 25.2% to $552,000.
• Total revenue for the nine months ended September 30, 2025, decreased by 16.8% to $608,000.
• Net loss for the nine months ended September 30, 2025, increased by 62.1% to $1,645,000.
• Operating loss increased by 13.4% to $945,000 for the three months and by 14.0% to $2,699,000 for the nine months ended September 30, 2025.
• Cash used in operating activities significantly increased to $1,325,000 for the nine months ended September 30, 2025, from $135,000 in the prior year period.
• Selling, marketing, general, and administrative expenses increased by 6.3% for the three months and 13.4% for the nine months ended September 30, 2025, contributing to higher operating losses.
• Investment income and interest income both decreased for the three and nine months ended September 30, 2025, primarily due to withdrawals from debt securities to fund the new joint venture.

Risks

• A history of operating losses and uncertainty surrounding the ability to achieve or sustain profitability.
• Limited history of developing and selling products made from bulk amorphous alloys.
• Challenges associated with having products manufactured from alloys and the reliance on third parties for manufacturing.
• Limited history of licensing technology to third parties.
• Lengthy customer adoption cycles and unpredictable customer adoption practices.
• Ability to identify, develop, and commercialize new product applications for the technology.
• Competition from current suppliers of incumbent materials or producers of competing products.
• Ability to identify, consummate, and/or integrate strategic partnerships.
• Potential for manufacturing problems or delays.
• Potential difficulties associated with protecting or expanding intellectual property position.

Future Outlook

Management anticipates that current capital resources, including cash and investments in debt securities totaling $21.1 million, will be sufficient to fund operations for the foreseeable future, despite expecting continued operating losses. The company aims to enhance its competitive position by improving existing technologies, developing advances in amorphous alloy technologies, and focusing on discovering new alloy compositions, improved processing technology, and identifying new applications. Management expects cost of sales percentages to decrease, stabilize, and become more predictable once routine, commercial product shipments increase through contract manufacturers or significant licensing revenues are obtained.

Management Comments

• We expect to continue to have operating losses for the foreseeable future until we can either increase our revenues with shipments of routine, commercial products and parts through third-party contract manufacturers or obtain significant licensing revenues.
• 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.
• Our current capital resources, when considering expected losses from operations, will be sufficient to fund our operations for the foreseeable future.

Industry Context

Liquidmetal Technologies operates in the specialized materials technology sector, focusing on amorphous alloys. The industry is characterized by high R&D costs, long customer adoption cycles, and competition from traditional high-performance materials like titanium and stainless steel. The company's strategy of developing manufacturing facilities through joint ventures and licensing its technology reflects a common approach in advanced materials to scale production and market reach, particularly in regions like China, which is a significant manufacturing hub.

Comparison to Industry Standards

• NA

Related Party Transactions

• Liquidmetal Technology Limited, controlled by Chairman Professor Li, was the investor in the 2016 Purchase Agreement for 405,000,000 shares of common stock and a warrant for 10,066,809 shares.
• Dongguan Yihao Metal Materials Technology Co. Ltd. (Yihao), the primary contract manufacturer, is an affiliate of Dongguan Eontec Co. Ltd. and Professor Lugee Li.
• The Company and Eontec (an affiliate of Yihao) entered into a perpetual cross-license agreement for their respective technologies.
• Equipment and services procured from Yihao totaled $299,000 for the nine months ended September 30, 2025, and $479,000 for the nine months ended September 30, 2024.
• Outstanding payables to Yihao were $14,000 as of September 30, 2025, and $70,000 as of December 31, 2024.
• A Consulting Agreement was entered into with former director Mr. Abdi Mahamedi on May 10, 2022, for 5 years, including an option to purchase up to 2.0 million shares of common stock.

Stakeholder Impact

• Shareholders face increased net losses and declining revenue, which could negatively impact share price and long-term value, despite the company's stated liquidity.
• Employees may experience continued uncertainty given the ongoing operating losses, though payroll expenses have increased.
• Customers in medical devices, automotive, sports, and non-consumer electronics may see new product development and manufacturing capabilities through the China joint venture.
• Suppliers, particularly Yihao, continue to be a key manufacturing partner, with ongoing transactions.
• Creditors are not explicitly mentioned, but the company's liquidity position appears stable for the foreseeable future.

Next Steps

• Increase shipments of routine, commercial products and parts through third-party contract manufacturers.
• Obtain significant licensing revenues to offset operating losses.
• Continue research and development efforts on new Liquidmetal alloys and related processing capabilities.
• Invest in technology infrastructure to expedite the adoption of amorphous alloy technology.
• Develop the manufacturing facility in Hangzhou, China, through the new joint venture.

Key Dates

Recommendation

The company's core business performance shows significant deterioration, with a sharp decline in revenue and widening net losses for both the quarter and year-to-date periods. While the company maintains a healthy cash and investment balance, the substantial increase in cash used in operating activities indicates a high burn rate that is not sustainable without a significant turnaround in revenue generation. Strategic initiatives like the China joint venture are long-term, and the immediate financial results are concerning, suggesting a 'sell' recommendation for investors.

Keywords

Amorphous Alloys, Liquidmetal, Materials Technology, SEC Filing, 10-Q, Financial Results, Joint Venture, Manufacturing, Licensing, Intellectual Property, Corporate Governance, Risk Factors