Liquidmetal Technologies Inc

OTC:LQMT

Good afternoon. Welcome to the Liquidmetal Technologies Fiscal Year 2021 Conference Call. My name is Howard and I will be your conference operator this afternoon. Joining us on today's call are; Mr. Tony Chung, Liquidmetal’s Chief Executive Officer, and Mr. Isaac Bresnick, President. Before we proceed, I would like to provide the Company's Safe Harbor statement and important questions regarding forward looking statements made during this call as follows. All statements made by the management during this call that are not based on historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, but are not limited, to those made by Mr. Chung and Mr. Bresnick regarding the company's cash, revenue outlook and technology development. While management has based any forward-looking statements made during the call on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties and other factors, many of which are outside the company's control that could cause actual results to materially differ from such statements. Such risks, uncertainties and other factors include, but are not necessarily limited to, those set forth under Risk Factors in the company's Annual Report on Form 10-K for the year ended December 31, 2021. Accordingly, you should not plan any reliance on forward-looking statements as a prediction of annual results. The company disclaims any intention and undertakes no obligation to update or revise any forward-looking statements. You are also urged to carefully review and consider the various disclosures in the company's Annual Report on Form 10-K for the year ended December 31, 2021, as well as other public filings with the SEC since such date. I would also like to remind everyone that this call will be available for replay starting later this evening via the link available in the Investor Relations section of the company's website at www.liquidmetal.com. Now, I would like to turn the call over to the company’s Chief Executive Officer, Tony Chung.

Thank you, Howard, and thank you to our investors for participating in today's call. It has been quite some time since Liquidmetal's last live conference call and I'm happy to have this opportunity to update everyone on where we are as a company in-light of recent world events and provide some guidance into our future. Like many companies in the US, we operate under a modified work week schedule where employees work remotely and come in on set days during the week. This and the ability to work through video conferencing with our customers and partners have actually made our business operations more efficient and economical. We are glad to see the phasing out of mass mandates and the economic recovery, barring any future uptake in the spread of COVID, I believe that the negative impact on Liquidmetal from the pandemic is waning and becoming less relevant to our day to day out operations. In the aftermath of the pandemic, however, the US has experienced double digit inflationary pressures and supply chain delays and we to anticipate spending more dollars on our product costs and operating expenses, which may impact our future profitability. As I'll discuss later, during our financial recap, we closely monitor our costs and make adjustments to our margins to be competitive and will attempt to minimize the impact of inflation and supply chain constraints on our customers. And, of course, our minds and hearts are with Ukraine and we hope that democracy will prevail and put an end to the bloodshed. As we announced during the latter part of 2021, we signed up our first European sales rep firm MacB located in Cork, Ireland, and the conflict has had an impact on their ability to market our technology. We will continue to support our partners’ efforts, bearing in mind that there may be delays in our efforts to expand our reach into Europe for the short term. Now, let me focus on our sales and business development efforts. I've had a chance to personally engage with potential customers and discovered that there are so many technical engineers and designers who are unaware of amorphous alloys and its remarkable properties. The concept of molding complex parts with the strength and repeatability of liquid metal astounds many and while it's very exciting to see their reaction, it's evident that the challenge remains to educate and inform the engineering and design communities on our capabilities. As I alluded to earlier, we are expanding our network of sales reps to supplement our existing internal and external sales infrastructure. I am in discussions with other firms in Europe to form additional partnerships and I'm also reaching out to sign up more sales reps in Canada and in the US. These outside sales reps who already have long term relationships with existing customers allow immediate access to potential orders. And I'll personally continue to focus on these new opportunities. And, of course, we still have very close ties with our existing sales reps, who have been with us for many years, some of whom have had a stake in the game as investors in our company. We work closely with all of them to build customer relationships and seek out new opportunities for complex parts. In addition to focusing on expanding our sales network, we are especially focused on mass production of liquid metal parts through enterprise customer accounts. We already have agreements with licensees and continue to focus on applying our technology into their product lines. We have also prototyped applications for global medical device companies and we hope to bring about mass production in the medical device industry. These developing enterprise accounts will obviously help our brand awareness and encourage engineers and part designers to apply our technology into their supply chain. The ongoing challenge is to surpass internal hurdles of larger organizations to adopt new technologies, and we will continue our efforts to have them embrace liquid metal on a broader scale. On another front, we announced recently that we have partnered with Japan's Twins Corporation, a global supplier of sporting goods equipment, to promote liquid metal applications for golf clubs. If you know of our history, you'll recall that we discontinued our golf business prior to our 2002 IPO. And ever since then, there has not been much activity in this space. However, we have identified an opportunity to monetize this dormant business by partnering with experts who can devote time and energy into R&D and manufacturing to advance the technology in the golf field and bring about liquid metal golf 2.0. We are excited to see what comes into fruition and will keep our investor the prize of the developments as things progress. Lastly on the sales front, while our key focus is on increasing revenues for Liquidmetal applications, it is important to point out that our contract manufacturing partners Yihao and Eontec have global manufacturing capabilities outside of amorphous alloys, including magnesium and aluminum die casting, MIM and other technologies. At times, customers who show interest in our amorphous alloy technology may also require manufacturing services for parts utilizing these other capabilities that Yihao and Eontec can provide with Liquidmetal serving as the facilitator. With our growing network of sales reps and partners in North America and Europe, we will promote our primary offering in the amorphous salary space, but at the same time, pursue these ancillary opportunities, which will not only increase our revenue, but allow us to make further inroads into customer supply chains to increase our Liquidmetal brand awareness and make further steps toward having customers have access to our technology. Now I will let our President, Isaac Bresnick provides you with an overview on the operational aspects of our business.

Thanks, Tony. And thank you, Howard. Let me begin by providing some high level information on our current state of manufacturing capabilities through our partner companies. As we have recently announced, Liquidmetal has signed manufacturing supply agreement with Yihao. Although, Yihao has been our primary contract manufacturer for years, we solidified our relationship with a five year manufacturing supply contract. Yihao currently operates out of 200,000 square foot facility in Dongguan, China that houses more than 40 die cast machines to produce both metallic glass or BMG parts. Established in 2014, they have approximately 400 full time employees. They currently manufacture amorphous alloy parts for customers in Asia, including foldable hinges for a Chinese smartphone supplier, a vertically integrated model with capabilities including alloy production. in-house mold design and fabrication, MIM operations and multiple ISO certifications, Yihao is an ideal partner for our global manufacturing needs. In addition to Yihao, we have our parallel license agreement with Eontec, a publicly listed company on the Shenzhen Stock exchange with manufacturing capabilities in Dongguan, China on a larger scale. Established in 1993, Eontec has nine manufacturing plants spread throughout China with the majority of their business in aluminum and magnesium die casting for the automotive and consumer electronics industries. As Tony indicated, our manufacturing capabilities go beyond amorphous alloys and we will take advantage of the respective capabilities of Yihao and Eontec with Liquidmetal at the forefront of sales and engineering in the North American and European territories to expand our global reach. With regard to intellectual property under our parallel license agreements with Eontec, we have established a combined portfolio of over 150 patents. We continue to collaborate with our Chinese counterparts on new amorphous alloy technology and research and development efforts, solidifying our leading position in the amorphous alloy industry. In day-to-day operations, our employees work out of our corporate office located in Lake Forest, California, and correspond directly with the team of engineers and support staff at Yihao and Eontec, dedicated to identifying and qualifying Liquidmetals applications. While approximately, 80% of our corporate facility has been subleased, we have ample office space to accommodate any expansion of our sales, engineering and other staff, as the company prepares for scaling the business. With that, I'll turn the call back over to Tony.

Thank you, Isaac. Now let me highlight some of the financial information on our 10-K. Our revenues remained consistent with last year at a little above $800,000 with the majority being production revenue from the sale of dental instruments, the tarpins and watch components were the rest being in prototype in mode revenue. As mentioned earlier, our strategy to increase revenues through partnering with additional sales reps, pursuing enterprise accounts as well as ancillary revenues and die casting and MIM space will help to accelerate revenue growth. On the operating expense side, as we announced in 2019, we initiated our restructuring plan to become a sales and engineering organization and to outsource our manufacturing to Yihao and other third-party vendors. As part of the restructuring, we focused on reducing our overhead and operating expenses. And I would say that during 2021, we completed our restructuring with a reduction in our executive management staff. Our operating expense was $4.2 million and backing out non-cash expenses, our 2021 EBITDA was approximately $2.5 million. During 2021, we reduced the number of executives, switched audit firms and implemented other cost reduction measures, which included reducing our IR spending to minimize costs of being a public company. Rest assured that we will keep investors apprised of our business through press releases and update announcements on our website. So with the adjustments made in 2021, and our continued cost reduction efforts, we look for further reductions in our operating expense for 2022. Focusing on the balance sheet, we have an asset base with approximately $26 million of readily available cash and reserves at the end of 2021. In addition, we have approximately $8 million of property plant and equipment on our books, which primarily consists of the netbook value of our 41,000 square foot corporate facility. The ongoing appreciation of real estate has benefited the company, allowing us the option to seek asset-backed financing should the need ever arise. So with our current asset position measures to increase revenues and reduce operating expenses, we do not anticipate the need to raise funds for the foreseeable future and hope to get to breakeven cash flow and profitability with our existing resources. In conclusion, as with any new technology, it takes time and patience to position technology to succeed. I believe that our current balance sheet and operating expense are well-positioned allowing us to focus on long-term sales growth without the distraction of short-term cash needs. I also believe that the infrastructure we've built up through our global manufacturing partner, Yihao positions as well to succeed for the long-term. Our challenge still remain, we are heavily focused on bringing about mass production of Liquidmetal parts and seeking out new opportunities toward building shareholder value. And we will continue that effort in 2022 and beyond. Lastly, as an SEC reporting company, we are still considered a new technology. And I remind everyone to review our 10-K disclosures closely especially as it relates to the risk factors associated with new technology companies. That's it for today. I hope to share more news in the near future and we'll continue to implement strategies to increase our revenues, reduce our costs, and accelerate the adoption of our technology. Thank you for your attention, and I'll see you next time. Howard, that's it for today.

Thank you, Mr. Chung. At this time, this concludes today's call. You may now disconnect.