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Mail Stop 7010
January 5, 2006
Via U.S. mail and facsimile
Mr. John Kang
Chief Executive Officer
Liquidmetal Technologies, Inc.
25800 Commercentre Drive, Suite 100
Lake Forest, CA 92630
Re: Liquidmetal Technologies, Inc.
Registration Statement on Form S-1
Filed December 9, 2005
File No. 333-130251
Form 10-K/A for the fiscal year ended December 31, 2004
Filed May 10, 2005
File No. 001-31332
Form 10-Q for the fiscal quarter ended March 31, 2005
Filed May 16, 2005
File No. 001-31332
Form 10-Q for the fiscal quarter ended June 30, 2005
Filed August 15, 2005
File No. 001-31332
Form 10-Q for the fiscal quarter ended September 30, 2005
Filed December 1, 2005
File No. 001-31332
Dear Mr. Kang:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your filings in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Registration Statement on Form S-1
1. We note the disclosure in Note 2 to your financial statements
beginning on page F-9 regarding your ability to continue as a
going
concern. Please add disclosure under an appropriately titled
heading
that provides a detailed discussion of your plan to continue in
existence as a going concern.
2. It appears that each of the convertible notes and warrants
contains anti-dilution adjustments to the number of securities
issuable thereunder in the event of any equity issuances, subject
to
certain exceptions, by your company at an effective price less
than
the applicable conversion or exercise price. Please describe
these
provisions in reasonable detail and illustrate the impact of the
adjustments. In addition, please discuss the likelihood that
these
provisions will be triggered in light of the current market price
of
your common stock, which appears to be trading below $1.00 per
share,
and the fact that you have been issued a going concern opinion and
may have to issue additional equity securities to finance your
operations. Finally, please add risk factor disclosure regarding
the
risks to your stockholders arising from these anti-dilution
provisions.
3. Please note that Rule 416 may not be used to register for
resale
an indeterminate amount of shares resulting from the operation of
a
conversion formula. The anti-dilution provisions contemplated by
Rule 416 are those that are in the nature of stock splits,
dividends
and the like. You must make a good-faith estimate of the number
of
share you may issue upon conversion to determine the amount you
may
register for resale. If the actual number of shares issued is
greater than the amount registered, you must file a new
registration
statement to resell the additional shares. Please see Paragraph
3.S.
of the Securities Act section of the March 1999 Supplement to the
Manual of Publicly Available Telephone Interpretations, which is
available on our website at www.sec.gov. Please revise footnote
(5)
to the fee table and the first paragraph following the bullet
points
on the cover of the prospectus accordingly.
Cover Page of Prospectus
4. Please remove the references to the "1.2" multiple used to
calculate the number of registered shares and revise the section
entitled "The Offering" on page 3 to explain the "1.2" multiple.
In
this regard, please explain in reasonable detail how your
convertible
notes and warrants are convertible or exercisable into shares of
your
common stock, including specific examples illustrating this
conversion or exercise.
Prospectus Summary, page 1
5. Please clearly disclose that you have incurred losses since
inception and that you have been issued a going concern opinion.
Risk Factors, page 5
6. Please add risk factor disclosure regarding each of the
following:
* the risk disclosed in the last sentence on page 54;
* the fact that you have been issued a going concern opinion;
* the fact that your disclosure controls and procedures are not
effective;
* the restrictive covenants contained in your debt agreements; and
* the restatement of your 2002 and 2003 financial statements.
We may require additional funding..., page 5
7. Please quantify the risk described in this risk factor by
providing an estimate of the amount of funding that you will
require
over the next twelve months and, to the extent practicable, the
next
three years. Please also discuss in greater detail the potential
dilution to stockholders.
If we cannot establish and maintain relationships..., page 6
8. Item 503(c) of Regulation S-K states that issuers should not
"present risk factors that could apply to any issuer or any
offering." It appears that the risk described under this
subheading
could apply to nearly any issuer. Please revise to clearly
explain
how this risk specifically applies to you. Please also comply
with
this comment in risk factors 11, 14, 15 and 24.
We expect to derive a substantial portion of our revenue..., page
9
9. We note the risks set forth in the bullet points. Please
revise
to provide specific examples of how these risks have or could
impact
your company.
Our business is subject to potential adverse consequences of
exchange
rate..., page 9
10. Please quantify the risk described in this risk factor.
Our level of indebtedness reduces our financial flexibility...,
page
10
11. The risk described in the fourth bullet point regarding a
default
appears to be a significant risk that should be disclosed under
its
own explanatory subheading. Please revise accordingly.
We have not complied with Section 404 of the Sarbanes-Oxley
Act...,
page 11
12. Please revise this risk factor to disclose the actual risk to
an
investor, namely the risk that investors may not be able to rely
on
your financial statements.
13. Please remove language in this risk factor and elsewhere in
your
filing stating that the SEC has advised you as to the matters
discussed, as this may be understood by investors to suggest that
the
disclosure has been approved by the Commission.
Selling Stockholders, page 17
14. Please advise us as to whether any entity listed in your
selling
stockholder table is a broker-dealer or an affiliate of a broker-
dealer. If a selling stockholder is a broker-dealer, your
prospectus
should state that the selling stockholder is an underwriter. If a
selling stockholder is an affiliate of a broker-dealer, please
provide the following representations in your prospectus:
* the selling stockholder purchased the securities to be resold in
the ordinary course of business; and
* at the time of the purchase of the securities to be resold, the
selling stockholder had no agreements or understandings, directly
or
indirectly, with any person to distribute the securities.
If you are unable to make these representations, please state that
the selling stockholder is an underwriter.
15. If a selling stockholder is not a natural person, please
disclose
the natural person or persons with dispositive voting or
investment
control. Please refer to Item 4S of the Regulation S-K section of
the March 1999 Supplement to the Manual of Publicly Available
Telephone Interpretations, which is available on our website at
www.sec.gov.
16. The amount of securities reflected in your selling
stockholders
table is less than the total amount registered. Please reconcile.
Management`s Discussion and Analysis of Financial Condition...,
page
29
17. Please disclose the information required by Item 305 of
Regulation S-K.
18. It appears that the debt instruments contain restrictive
covenants. Please discuss the impact of these covenants on your
operations, including any impact on your financial condition or
results of operations. In addition, please disclose whether you
are
in compliance with these covenants.
Business, page 46
19. Please disclose the information required by Item 101(c)(xii)
of
Regulation S-K.
Competition, page 55
20. Please identify the principal methods of competition in your
industries. Please also discuss your competition`s advantages
over
you in each of your industries and how this affects your
competitive
position within each industry.
Principal Stockholders, page 73
21. We note that your calculation of beneficial ownership,
including
the calculation of the number of shares that may be acquired
within
60 days, is based on a date of October 1, 2005. You are required
to
calculate beneficial ownership as of the most recent practicable
date. In addition, the assumptions in the third paragraph are not
appropriate with respect to the calculation of beneficial
ownership
in this section. Please revise accordingly. See Item 403 of
Regulation S-K.
22. Please identify the relationship to your company of each
individual listed in the table. For example, are any individuals
non-management 5% stockholders?
Plan of Distribution, page 78
23. Please disclose whether your company or any selling
stockholder
intends to use any means of distributing or delivering the
prospectus
other than by hand or the mails, such as electronic delivery.
Please
also disclose whether your company or any selling stockholder
intends
to use any forms of prospectus other than the printed
prospectuses,
such as CD-ROMs, videos, etc. and provide us copies of all such
prospectuses. See SEC Releases No. 33-7233 and No. 33-7289.
24. Please advise us as whether your company or any selling
stockholder has any arrangements with a third party to host or
access
the preliminary prospectus on the Internet. If so, please tell us
who the party is and the address of the website. In addition,
please
describe the material terms of the agreement and provide us with a
copy of any written agreement. Finally, please provide us with
copies of all information concerning your company or this offering
that appears on the third-party website.
25. We note the disclosure in the third paragraph regarding short
sales. Please advise us as to whether any selling stockholder has
taken or plans to take any short position prior to the
effectiveness
of your registration statement. In addition, please confirm that
you
and each of the selling stockholders are aware of our position on
short sales against the box. See interpretation A.65 of the July
1997 Manual of Publicly Available Telephone Interpretations, which
is
available on our website at www.sec.gov.
26. We note your disclosure in the fourth paragraph. Please
confirm
that you are aware that you may only substitute a new selling
stockholder for an original selling stockholder by means of a
prospectus supplement if:
* the change is not material;
* the number of securities or dollar amount registered does not
change; and
* the new selling stockholder`s securities can be traced to those
covered by the original registration statement.
In addition, please be advised that you may not use a prospectus
supplement to add selling stockholders to your registration
statement
if their ownership cannot be traced to securities registered in
the
original registration statement. Otherwise, you must make the
changes by a post-effective amendment.
27. We note the disclosure in the fifth paragraph. If a selling
stockholder enters into an agreement, after the effectiveness of
the
registration statement, to sell its shares to a broker-dealer as
principal and the broker-dealer is acting as an underwriter, then
you
need to file a post-effective amendment to the registration
statement
identifying the broker-dealer, providing the required information
on
the plan of distribution, revising the appropriate disclosures in
the
registration statement, and filing the agreement as an exhibit to
the
registration statement. Please revise the disclosure in this
section
to indicate that you will file a post-effective amendment
addressing
the above information. Additionally, prior to any involvement of
any
broker-dealer in the offering, such broker-dealer must seek and
obtain clearance of the underwriting compensation and arrangements
from the NASD Corporate Finance Department.
Certain Relationships and Related Transactions, page 80
28. Please state whether you believe that the transactions
described
in this section are on terms at least as favorable to you as you
would expect to negotiate with unrelated third parties.
29. We note the disclosure in the first paragraph. Please
identify
the former director and disclose the amount of royalties that you
have received.
30. We note the disclosure in the sixth paragraph that you entered
into an agreement with Mr. Kang regarding Section 16 liability.
Please file this agreement as an exhibit to your registration
statement.
Changes of Accountants, page 81
31. Please delete the last sentence of the fourth paragraph on
page
82, as you are not permitted to incorporate by reference.
Report of Independent Registered Public Accounting Firm, page F-2
32. Amend your filing to include an audit report with a conformed
signature as required by Article 2-02(a) of Regulation S-X.
33. Tell us why the city of issuance indicated on the audit report
does not match the city of issuance on their consent.
Going Concern/ Sarbanes Oxley Act of 2002, page F-9
34. Please tell us the status of your assessment of internal
control
over financial reporting as of December 31, 2005, including
generally
what you have documented and tested and what controls have not
been
documented and tested and your plans to complete your assessment.
Summary of Significant Accounting Policies, page F-10
Revenue Recognition
35. We note your use of the percentage of completion method for
research and development contracts. Please tell us the percentage
of
total revenue accounted for using this method of accounting. Also
tell us your basis for using this method.
Notes Payable, page F-20
36. Please tell us what consideration you gave to paragraph 12 of
SFAS 133 and paragraph 4 of EITF 00-19 in your determination of
whether the debt conversion features constitute embedded
derivative
instruments and whether the debt instruments qualify as
"conventional
convertible" instruments.
Item 14. Indemnification of Directors and Officers, page II-1
37. We note the disclosure in the third paragraph of this section.
Please file these indemnity agreements as exhibits to your
registration statement.
38. Please delete the last paragraph of this section, as the
disclosure in this section should be materially complete.
Item 15. Recent Sales of Unregistered Securities, page II-2
39. We note the Securities Act exemption you cite with respect to
each transaction listed in this section. Please briefly describe
the
facts upon which you relied to make each exemption available. See
Item 701(d) of Regulation S-K.
40. Please provide the information required by paragraphs (a)
through
(d) of Item 701 of Regulation S-K for any options issued during
the
last three years.
41. We note the disclosure in the third sentence of paragraph (1)
regarding the total number of shares issuable upon exercise of the
warrants. Please reconcile with the disclosure in the last
paragraph
on page F-20.
Item 16. Exhibits and Financial Statements Schedules, page II-2
42. Please file as promptly as practicable each exhibit required
by
Item 601 of Regulation S-K, in particular Exhibit 5.1. These
exhibits and any related disclosure are subject to review and you
should allow a reasonable period of time for our review prior to
requesting acceleration.
43. Please file your factoring, loan and security agreement, dated
as
of April 21, 2005, as an exhibit to your registration statement.
Item 17. Undertakings, page II-2
44. Please provide the undertaking required by Item 512(h) of
Regulation S-K.
Form 10-K/A for the fiscal year ended December 31, 2004
General
45. Please consider the above comments, to the extent applicable,
in
the preparation of future Exchange Act reports, particularly your
annual report on Form 10-K.
46. Please comply with the following comments in each of your
Forms
10-Q for the fiscal quarters ended March 31, 2005, June 30, 2005
and
September 30, 2005.
Item 9A. Controls and Procedures, page 3
47. Amend the second paragraph to read that your evaluation of
Disclosure Controls and Procedures was performed as of the end of
the
period covered by the report as required by Item 307 of Regulation
S-
K.
48. We note the conclusions of your certifying officers in the
second
paragraph that your disclosure controls and procedures are not
effective. The description of your disclosure controls and
procedures appears to be based on the definition set forth in Rule
13a-15(e) under the Exchange Act. As described, however, the
description does not fully conform to that definition. Please
revise
accordingly. Alternatively, you may state that your certifying
officers concluded that your disclosure controls and procedures,
as
of the end of the period covered by the report, were not
effective.
49. We note the conclusions of your management regarding the
effectiveness of your internal control over financial reporting.
Please reconcile with the disclosure indicating that your
management
has not completed its assessment of your internal control over
financial reporting.
50. We note the disclosure in the fourth and fifth paragraphs and
have the following comments:
* Please disclose when the material weaknesses began.
* Please disclose in greater detail the material weaknesses and
their
impact on your financial statements.
* Please disclose the specific steps you have taken to remediate
the
material weaknesses.
* Please disclose the identity of the independent consulting firm
you
have retained and disclose the findings of this consultant.
51. Please disclose any changes in your internal control over
financial reporting that occurred during the last fiscal quarter
that
has materially affected or is reasonably likely to materially
affect
your internal control over financial reporting. See Item 308(c)
of
Regulation S-K.
Exhibits 31.3 and 31.4
52. Amend your December 31, 2004 certifications to include the
missing two sections relating to internal control over financial
reporting required for accelerated filers. Also please note that
the
certifying officers should not include their positions in the
first
line of the certification. Also amend your 2005 10-Q
certifications
to reflect the missing sections of the certifications relating to
internal control over financial reporting. See Item 601(b)(31) of
Regulation S-K.
Form 10-Q for the fiscal quarter ended September 30, 2005
Item 4. Controls and Procedures, page 34
53. We note that the conclusion of your certifying officers in the
third paragraph refers to the first quarter of 2005. Your
certifying
officers must assess the effectiveness of your disclosure controls
and procedures as of the end of the period covered by the report
in
which the conclusion is stated. Please revise accordingly. See
Item
307 of Regulation S-K.
54. We note the disclosure under the heading "Changes In Internal
Controls" on page 36. Please disclose in reasonable detail the
changes that were made to your internal control over financial
reporting.
* * * *
As appropriate, please amend your filings in response to
these
comments. You may wish to provide us with marked copies of the
amendments to expedite our review. Please furnish a cover letter
that is filed on EDGAR with your amendments that keys your
responses
to our comments and provides any requested information. Detailed
cover letters greatly facilitate our review. Please understand
that
we may have additional comments after reviewing your amendments
and
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in your filings to be certain that your
filings include all information required under the Securities Act
and
the Exchange Act and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of its registration statement,
it
should furnish a letter, at the time of such request,
acknowledging
that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert staff comments and the declaration of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filings or in response to our comments on your filings.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act and the Exchange Act as
they relate to the proposed public offering of the securities
specified in the above registration statement. We will act on the
request and, pursuant to delegated authority, grant acceleration
of
the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Bret Johnson, Staff Accountant, at (202)
551-
3753 or, in his absence, John Cash, Accounting Branch Chief, at
(202)
551-3768 if you have questions regarding comments on the financial
statements and related matters. Please contact Andrew Schoeffler,
Staff Attorney, at (202) 551-3748 or, in his absence, the
undersigned
at (202) 551-3760 with any other questions.
Sincerely,
Pamela A. Long
Assistant Director
cc: Mr. Curt P. Creely
Foley & Lardner LLP
100 North Tampa Street, Suite 2700
Tampa, FL 33602
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Mr. John Kang
Liquidmetal Technologies, Inc.
January 5, 2006
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE