** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549**

 

**FORM 10-K/A**

**Amendment No. 2**

 
| ý                                                                                                                                                                                   | ** ** | **ANNUAL REPORT PURSUANT TO SECTION  13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**     |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|
|                                                                                                                                                                                     |       |                                                                                          |
| **For the fiscal year ended December 31,  2004**                                                                                                                                    |
|                                                                                                                                                                                     |       |                                                                                          |
| o                                                                                                                                                                                        | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                                     | ** ** | ** **                                                                                    |
| **For the transition period from               to             ** |

 

**Commission File No**.**000-31332**

 

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**LIQUIDMETALTECHNOLOGIES, INC.**(Exact name of Registrant as specified in itscharter)

 
| **Delaware**                                                     | ** ** | **33-0264467**                        |
|------------------------------------------------------------------|------------|---------------------------------------|
| (State or other jurisdiction  of incorporation or  organization) |       | (I.R.S. Employer  Identification No.) |

 

**25800 CommercentreDrive, Suite 100Lake Forest, California 92630**(address of principal executiveoffice, zip code)

 

Registrant’s telephone number, includingarea code: **(949) 206-8000**

 

Securitiesregistered pursuant to Section 12(b) of the Act:******None**

 

Securitiesregistered pursuant to Section 12(g) of the Act:

 

**Title of each Class**Common Stock, $.001 par value

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for at least the past 90 days.   Yes   ý   No   o

 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendmentto this Form 10-K   o

 

Indicateby check mark whether the registrant is an accelerated filer (as defined inExchange Act Rule 12b-2).    Yes   ý   No   o

 

Theaggregate market value of the registrant’s Common Stock held by non-affiliatesof the registrant as of June 30, 2004 was approximately $34,793,699. Forpurposes of this calculation only, (i) shares of Common Stock are deemed tohave a market value of $1.42 per share, the closing price of the Common Stockas reported on the Nasdaq National Market on June 30, 2004, and (ii) each ofthe executive officers, directors and persons holding more than 10% of theoutstanding Common Stock as of June 30, 2004 is deemed to be an affiliate.

 

 

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**LIQUIDMETALTECHNOLOGIES, INC.**

**AmendmentNo. 2 to the Annual Report on Form 10-K**

## **For the Fiscal Year ended December 31, 2004**

 

## **EXPLANATORY NOTE**

 

We are filing this Amendment No. 2 to our Annual Report on Form10-K for the fiscal year ended December 31, 2004, as filed with the U.S.Securities and Exchange Commission (SEC) on March 30, 2005 and as amended onMay 10, 2005, in response to a request by the SEC to (1) make certain changesto the disclosure in Item 9A thereof and (2) revise the certifications requiredby SEC Rule 13a-14(a) as contained therein.

 

Other than the changes referred to above, all other information includedin the above described Form 10-K, as amended, remains unchanged.  This amendment does not reflect eventsoccurring after the filing of such Form 10-K, as amended, and does notmodify or update the disclosures therein in any way other than as required toreflect the amendment as described above and set forth below.

 

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**LIQUIDMETALTECHNOLOGIES, INC.**

**PART II**

 

**Item 9A. Controls andProcedures**

 

Evaluation of disclosure controls and procedures. During the course of the audit of the financial statements ofLiquidmetal Technologies, Inc. (the “Company”) for the fiscal years endedDecember 31, 2001, 2002, and 2003, it was determined that revenues from certainequipment sales made by the Company to Growell Metal Co., Ltd. in thethird and fourth quarters of 2002 and the first quarter of 2003 shouldnot have been recognized in those periods****.  It was also**** determinedthat certain amounts relating to sales made to Samsung in December 2002, to JSTechnologies in September 2002, and AM Corporation in December 2002 should nothave been recognized.  It also ****was determined thatcompensation expense related to certain stock options granted in 2001 and 2002were not calculated in accordance with generally accepted accounting principlesunder APB Opinion No. 25, SFAS No. 123, and EITF 00-23.** **These determinations and the associated restatement of previouslyissued financial statements, as described more fully elsewhere in the Form 10-Kfor the year ended December 31, 2003, filed on November 10, 2004, suggest that,at the time of the subject transactions and the preparation of the Company’sfinancial statements for the relevant periods, the Company’s disclosurecontrols and procedures (as defined in Rule 13a-15 under the SecuritiesExchange Act of 1934) were not effective as of the end of the periodcovered by such Form 10-K.

 

Liquidmetal Technologies, Inc. (the “Company”)carried out an evaluation, under the supervision and with the participation ofthe Company’s management, including the Company’s Chief Executive Officer andVice President of Finance, of the effectiveness as of December 31, 2004 of thedesign and operation of the Company’s disclosure controls and procedurespursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended.  Based on that evaluation, the Chief Executive Officer andVice President of Finance have concluded that these disclosure controls andprocedures, as of December 31, 2004, were not effective.  This determination was based primarily on therestatement described above and the material weaknesses in internal controlsover financial reporting identified below.

 

****Management’sReport on Internal Control Over Financial Reporting********.The time and resources committed to the restatement of prior periods’ financialstatements (as aforementioned) delayed the Company’s internal timetable withrespect to its documentation, assessment and evaluation of internal controlover financial reporting, which are required to be undertaken to comply withSection 404 of the Sarbanes-Oxley Act of 2002 (“SOX 404”).  Due in part to the issues described in theforegoing paragraph, management’s assessment of the effectiveness of theCompany’s internal control over financial reporting has been substantiallydelayed and is not complete, which in turn has prevented the Company’sindependent registered public accounting firm, Stonefield Josephson, Inc. (“Stonefield”)from being able to satisfactorily complete an audit of the Company’s internalcontrol over financial reporting pursuant to SOX 404.  Based on the foregoing, Stonefield hasdisclaimed an opinion on the Company’s internal control over financialreporting.****

**** ****

****In attempting to complete itsassessment of internal control over financial reporting, management used thecriteria established in “Internal Control - Integrated Framework” issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO).  Although management has not yet completed itsreview and assessment of all of the Company’s internal controls over financialreporting, based on the review and assessment efforts that have actually beencompleted, management has identified several control deficiencies that existedduring and as of the year ended December 31, 2004, some of which have beendetermined to be material weaknesses in internal control over financialreporting.  As a result of the followingmaterial weaknesses, management has concluded that it did not maintaineffective internal control over financial reporting as of December 31, 2004,based on the criteria established in COSO (and the following paragraphs alsodescribe the specific steps that the Company has taken to remediate thesematerial weaknesses):****

 

1. ***Lack of adequate segregation of duties in accounts payableand accounts receivable involving cash receipts and deposits, bankreconciliations, cash disbursements, purchasing, and accounts receivablereconciliations***:

 

After the Company completely moved itsaccounting function from Tampa, Florida to Lake Forest, California in July 2004and reduced the size of its accounting staff, duties such as booking of cashreceipts, bank reconciliations and journal entries for corporate accountingwere primarily being done by two accountants. During the course of the Company’s audit for its 2004 fiscal year (whichaudit occurred during the first three months of 2005) and in the course of theCompany’s efforts to complete the assessment required by SOX 404 at the sametime, it was determined that this lack of segregation could contribute topreventing detection of potential fraud or misstatements of financialinformation.  Accordingly, beginning inthe second quarter of 2005, the Company started taking steps to evaluate itsoverall accounting duties and segregate these functions for better internalcontrol structure.  For example, theCompany began segregating the cash receipts booking and bank reconciliationamong the two accountants, as well as segregating invoice entry and check runfunction.  Additionally, as discussedbelow, beginning in the second quarter of 2005, the Company augmented itssupervisory review process to mitigate the potential for fraud andmisstatements.  The Company has notidentified any adjustments as a result of this lack of segregation of duties.

 

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2. ***Lack of adequate controls and monitoring of payrollprocessing, currently outsourced to a third party provider:***

 

This material weakness existed throughout 2004as the Company utilized the services of a third party payroll processor thatwas not certified under SAS 70 (Type II). During the course of the Company’saudit for its 2004 fiscal year, it was determined that the risk of using athird party payroll provider that is not SAS 70 certified may contribute tomisstatements of payroll and related financial information.  The Company intends to remediate thisweakness by retaining the services of ADP for payroll processing.  ADP is certified under SAS 70 (Type II).

 

3. ***Lack of documentation to evidence reviews of certainreconciliations***:

 

During the course of the Company’s audit forthe 2004 fiscal year, which audit occurred in January 2005, the Companydiscovered that certain reconciliations, including bank statements and generalledger accounts, were not fully documented because the supervisors performingthe review on such reconciliations occasionally omitted their signatureevidencing their review.  It wasdetermined at the time that this lack of documentation may result in certainaccounting documents not being properly reviewed or there being no evidence ofreview.  Beginning in the second quarterof 2005, the Company began taking steps to require that all reviews of reconciliationsby supervisors are evidenced by a supervisor signature and that that allaccounting documents are subject to proper review.  For example, the Company started utilizing a “Preparedby, Reviewed by, Checked by” stamp and required all reconciliations to haveevidence of the review prior to closing month end.

 

4. ***Lack of documentation of authorization of transactions***:

 

During the course of the Company’s audit forthe 2004 fiscal year, the Company discovered that, although accountingtransactions may have been authorized by the appropriate persons, theauthorizing person occasionally omitted his signature on the relevant documentsor approval forms to evidence his authorization.  This lack of documentation on invoices,purchase requisitions and expense reports may result in certain transactionsnot being properly approved, so in the second quarter of 2005, the Companybegan implementing additional procedures for ensuring that all accountingdocuments are subject to proper approval as well as indication of theapproval.  For example, the Company beganutilizing a “Prepared by, Reviewed by, Checked by” stamp and required that alldocuments have evidence of the approval prior to entry into the Company’saccounting system.

 

5. ***Manual performance of numerous procedures that could beautomated using current reporting systems***:

 

The Company uses the SAP system for financialreporting.  During the course of theaudit for the 2004 fiscal year, it was determined that the Company was manuallyperforming numerous procedures that could be automated by using the current SAPsystem.  For example, a sales ordermodule in SAP could be utilized to automate the entire order fulfillmentprocess.  While SAP contains many modulesand features which would allow the Company to automate certain operational andaccounting procedures and thereby minimize the potential for human error,utilization of such modules would require significant investment in upgradingand maintaining the SAP system. Considering the Company’s current size and limitedresources, management has determined that it is not prudent to make thisinvestment at the current time. Nevertheless, beginning in the second quarter of 2005 and continuingthereafter, the Company has been taking various steps to minimize the potentialfor human error caused by manual procedures. For example, the Company has established specific procedures for properreview and approval of transactions as outlined in paragraphs 3 and 4 above andexpanded utilization of other software tools such as programmed spreadsheets.

 

6. ***Material adjustments to the accounting records and financialstatements as of and for the year ended December 31, 2004 that were notinitially identified by the Company’s internal control over financialreporting:***

 

During the course of the Company’s SOX 404assessment efforts during the first several months of 2005, the Company and itsauditors identified a number of necessary material adjustments to the Company’saccounting records for 2004.  Forexample, certain adjustments were booked to properly value complex debtinstruments associated with the refinancing of the Company’s debt.  In addition, certain adjustments were bookedto impair the Company’s assets which are based on Management forecasts andoverall assessment of the Company’s business. The Company believes that these adjustments were a result of the Company’sfocus during 2004 on completing the Company’s three-year re-audit of its 2001,2002, and 2003 fiscal years.  As a resultof the Company’s SOX 404 assessment efforts, the Company has identified theseadjustments and has implemented additional controls to timely review and assessaccounting issues and prevent the need for such adjustments. While there can beno assurance that adjustments to financial statements will not occur in thefuture, with the completion of the three-year re-audit, the Company believesthat it will be able to devote its resources to completing its accountingassessments and entries timely and effectively.

 

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7. ***Management’s documentation of the evaluation of thesignificance of numerous control deficiencies and significant deficienciesidentified, which could rise to the level of a material weakness, has not beencompleted:***

 

The Company is continuing to diligently workto document and evaluate its internal controls under the requirements of SOX404 during 2005.

 

8. ***The company had inadequate controls related to timelyperformance of its assessment of internal control over financial reporting:***

 

The Company is diligently working to completeits assessment of its internal controls over financial reporting under therequirements of SOX 404 during 2005.

 

****9.*********Assurance Consulting 3, the independent third partyengaged to help document and assess the Company’s internal controls, hasidentified numerous and significant deficiencies, including those identifiedabove, which management has not completed evaluating whether they would rise tothe level of a material weakness in accordance to the PCAOB Audit Standard No.2.*****

 

****TheCompany will review these deficiencies during its assessment of internalcontrols under the requirements of SOX 404 during 2005.****

**** ****

****Management believes that it is taking appropriate steps toaddress these material deficiencies subsequent to December 31, 2004, includinghiring an independent consulting firm, Assurance Consulting 3, who has helpedto identify the material weaknesses disclosed above and to propose remedialactions to address and mitigate the deficiencies.  We cannot assure you that we will notdiscover additional material weaknesses in the future; however, management willcontinue to work with the independent consulting firm and to work towardscompliance with SOX 404 as of December 31, 2005.****

 

Changes in Internal Control over FinancialReporting.  During the quarter ended December 31, 2004,there were no changes in the Company’s internal control over financialreporting that have materially affected, or are reasonably likely to materiallyaffect, the Company’s internal control over financial reporting (althoughvarious changes made after December 31, 2004 are described above).

 

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**REPORT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM**

 

To the Board of Directors andShareholders of Liquidmetal Technologies, Inc.

 

We were engaged to audit management’sassessment included in the accompanying Management’s Report on Internal ControlOver Financial Reporting, that Liquidmetal Technologies, Inc. (the “Company”)maintained effective internal control over financial reporting as of December31, 2004, based on criteria established in**InternalControl–Integrated Framework**issuedby the Committee of Sponsoring Organizations of the Treadway Commission (COSO).** Liquidmetal Technologies, Inc.’s management isresponsible for maintaining effective internal control over financial reportingand for its assessment of the effectiveness of internal control over financialreporting.

 

A material weakness is asignificant deficiency, or combination of significant deficiencies, thatresults in more than a remote likelihood that a material misstatement of theannual or interim financial statements will not be prevented or detected.  Management has not completed its assessment ofinternal control over financial reporting, which has prevented us from beingable to satisfactorily complete an audit of the Company’s internal control overfinancial reporting.   However,management has identified the following material weaknesses during theirassessment:  lack of adequate segregationof duties in accounts payable and accounts receivable involving cash receiptsand deposits, bank reconciliations, cash disbursements, purchasing, andaccounts receivable reconciliations; lack of adequate controls and monitoringof payroll processing, currently outsourced to a third party provider; lack ofdocumentation to evidence reviews of certain reconciliations; lack ofdocumentation of authorization of transactions; manual performance of numerousprocedures that could be automated using current reporting systems; materialadjustments to the accounting records and financial statements as of and forthe year ended December 31, 2004 that were not initially identified by theCompany’s internal control over financial reporting; management’s documentationof the evaluation of the significance of numerous control deficiencies andsignificant deficiencies identified, which could rise to the level of amaterial weakness, has not been completed; and the Company had inadequatecontrols related to timely performance of its assessment of internal controlover financial reporting.   The existenceof one or more material weaknesses as of December 31, 2004 would preclude aconclusion that the Company’s internal control over financial reporting waseffective as of that date.  Thesematerial weaknesses were considered in determining the nature, timing andextent of audit tests applied in our audit of the 2004 consolidated financialstatements, and our disclaimer of opinion regarding the effectiveness of theCompany’s internal control over financial reporting does not affect our opinionon those consolidated financial statements.

 

A company’s internal control over financialreporting is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accountingprinciples. A company’s internal control over financial reporting includesthose policies and procedures that (1) pertain to the maintenance of recordsthat, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurancethat transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles, andthat receipts and expenditures of the company are being made only in accordancewith authorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have amaterial effect on the financial statements.

 

Because of its inherent limitations, internalcontrol over financial reporting may not prevent or detect misstatements. Also,projections of any evaluation of effectiveness to future periods are subject tothe risk that controls may become inadequate because of changes in conditions,or that the degree of compliance with the policies or procedures maydeteriorate.

 

Since management has not completed all thesteps necessary to enable us to satisfactorily complete an audit of theirinternal control over financial reporting, and we were unable to apply otherprocedures to satisfy ourselves as to the effectiveness of the company’sinternal control over financial reporting, the scope of our

 

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work was not sufficient to enable us toexpress, and we do not express, an opinion either on management’s assessment oron the effectiveness of the company’s internal control over financialreporting.

 

We have also audited, in accordance with thestandards of the Public Company Accounting Oversight Board (United States), theconsolidated financial statements of Liquidmetal Technologies, Inc. and ourreport dated March 3, 2005 expressed an unqualified opinion including anexplanatory paragraph on the Company’s ability to continue as a going concern.

 

We do not express an opinion or any other formof assurance on management’s statement referring to steps taken to addressmaterial weaknesses subsequent to December 31, 2004 or compliance with SOX 404as of December 31, 2005.

 

 
| /s/Stonefield Josephson, Inc. |   |
|-------------------------------|--------|
| Irvine, California            |
| May 9, 2005                   |

 

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**LIQUIDMETALTECHNOLOGIES, INC.**

 

**PARTIV**

 

**Item 15. Exhibits andFinancial Statement Schedules**

 

Alisting of exhibits filed:

 

**EXHIBIT INDEX**

 
| **Exhibit  Number** |   | **Description  of Document**                              |
|---------------------|--------|-----------------------------------------------------------|
| 23.1                |   | Consent of Registered Independent Public Accounting  Firm |
| 31.1                |   | Rule 13a –  14(a) Certifications - CEO               |
| 31.2                |   | Rule 13a –  14(a) Certifications - CFO               |
| 32.1                |   | Certification  Pursuant to 18 U.S.C. Section 1350         |

 

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**SIGNATURES**

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Actof 1934, the Registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized. 

 
|                 |   | Liquidmetal Technologies, Inc.         |
|----------------------|--------|----------------------------------------|
|                 |   |                                   |
|                 |   |                                   |
|                 | By:    | /s/ Ricardo  A. Salas                  |   |
|                 |   | Ricardo A.  Salas                      |
| Date: March 16, 2006 |   | President  and Chief Executive Officer |
|                 |   |                                   |
|                 |   |                                   |
|                 | By:    | /s/ Young J.  Ham                      |   |
|                 |   | Young J. Ham                           |
| Date: March 16, 2006 |   | Chief  Financial Officer               |
|                      |        |                                        |  |  |

 

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