**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-Q/A**

**Amendment No. 1**

 
| **ý**                                                                                                                                                                                 | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                 | ** ** | ** **                                                                                              |
| **For the  quarterly period ended March 31, 2005**                                                                                                                                    |
| ** **                                                                                                                                                                                 |
| **OR**                                                                                                                                                                                     |
| ** **                                                                                                                                                                                 | ** ** | ** **                                                                                              |
| **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. ****001-31332**                                                                                                                                                |

 

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**LIQUIDMETALTECHNOLOGIES, INC.**

(Exact name ofRegistrant as specified in its charter)

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

 

**25800 Commercentre Drive, Suite 100**

**LakeForest, California 92630**

(address ofprincipal executive office, zip code)

 

Registrant’s telephone number, including areacode: **(949) 206-8000**

 

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Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for atleast the past 90 days.

 

Yes  ý    No  o

 

Indicateby check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act).

 

Yes  ý    No  o

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

 

Yes  o    No  ý

 

#### **As of May 10, 2005, therewere 41,609,652 shares of the registrant’s common stock, $.001 par value,outstanding.**

 

 

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**LIQUIDMETALTECHNOLOGIES, INC.AMENDMENT NO. 1 TO FORM 10-QFOR THE QUARTER ENDED MARCH 31, 2005**

 

**EXPLANATORY NOTE**

 

Weare filing this Amendment No. 1 to our Quarterly Report on Form 10-Qfor the quarter ended March 31, 2005, as filed with the U.S. Securitiesand Exchange Commission (SEC) on May 16, 2005, in response to a request bythe SEC to (1) make certain changes to the disclosure in Item 4 thereofand (2) revise the certifications required by SEC Rule 13a-14(a) ascontained therein.

 

Otherthan the changes referred to above, all other information included in the abovedescribed Form 10-Q remains unchanged. This amendment does not reflect events occurring after the filing ofsuch Form 10-Q and does not modify or update the disclosures thereinin any way other than as required to reflect the amendment as described aboveand set forth below.

 

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**Item 4 – Controls and Procedures**

 

Evaluation of disclosure controls and procedures.  During the course of the audit of thefinancial statements of Liquidmetal Technologies, Inc. (the “Company”) forthe fiscal years ended December 31, 2001, 2002, and 2003, it wasdetermined that revenues from certain equipment sales made by the Companyto Growell Metal Co., Ltd. in the third and fourth quarters of 2002 and thefirst quarter of 2003 should not have been recognized in those periods****.  It was also**** determinedthat certain amounts relating to sales made to Samsung in December 2002,to JS Technologies in September 2002, and AM Corporation in December 2002should not have 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 ofthe Company’s financial 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.

 

LiquidmetalTechnologies, Inc. (the “Company”) carried out an evaluation, under thesupervision and with the participation of the Company’s management, includingthe Company’s Chief Executive Officer and Vice President of Finance, of theeffectiveness as of March 31, 2005 of the design and operation of theCompany’s disclosure controls and procedures pursuant to Rule 13a-15 underthe Securities Exchange Act of 1934, as amended.  Basedon that evaluation, the Chief Executive Officer and Vice President of Financehave concluded that these disclosure controls and procedures, as of March 31,2005, were not effective.  Thisdetermination was based primarily on the material weaknesses in internalcontrols over financial reporting identified below.  

**** ****

****Update on Management’s Assessment of InternalControl 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 with Section 404of the Sarbanes-Oxley Act of 2002 (“SOX 404”). Due in part to the issues described in the foregoing paragraph,management’s assessment of the effectiveness of the Company’s internal controlover financial reporting has been substantially delayed and is not complete,which in turn has prevented the Company’s independent registered publicaccounting firm, Stonefield Josephson, Inc. (“Stonefield”) from being ableto satisfactorily complete an audit of the Company’s internal control overfinancial reporting pursuant to SOX 404. Based on the foregoing, Stonefield has disclaimed an opinion on theCompany’s internal control over financial reporting.****

**** ****

****In attempting to complete its assessment of internalcontrol over financial reporting, management used the criteria established in “InternalControl - Integrated Framework” issued by the Committee of SponsoringOrganizations 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 materialweaknesses identified below, 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.****

**** ****

****We have identified the following material weaknesses inconnection with our ongoing assessment of internal controls as follows:****

 

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1. ***Lack of adequate segregation of duties inaccounts payable and accounts receivable involving cash receipts and deposits,bank reconciliations, cash disbursements, purchasing, and accounts receivablereconciliations:***

 

Afterthe Company completely moved its accounting function from Tampa, Florida toLake Forest, California in July 2004 and reduced the size of itsaccounting staff, duties such as booking of cash receipts, bank reconciliationsand journal entries for corporate accounting were primarily being done by twoaccountants.  During the course of theCompany’s audit for its 2004 fiscal year (which audit occurred during the firstthree months of 2005) and in the course of the Company’s efforts to completethe assessment required by SOX 404 at the same time, it was determined thatthis lack of segregation could contribute to preventing detection of potentialfraud or misstatements of financial information.  Accordingly, beginning in the second quarterof 2005, the Company started taking steps to evaluate its overall accountingduties and segregate these functions for better internal controlstructure.  For example, the Companybegan segregating the cash receipts booking and bank reconciliation among thetwo accountants, as well as segregating invoice entry and  check run function.  Additionally, as discussed below, beginningin the second quarter of 2005, the Company augmented its supervisory reviewprocess to mitigate the potential for fraud and misstatements.  The Company has not identified any adjustmentsas a result of this lack of segregation of duties.

 

2.***Lackof adequate controls and monitoring of payroll processing, currently outsourcedto a third party provider:***

 

Thismaterial weakness existed throughout 2004 as the Company utilized the servicesof a third party payroll processor that was not certified under SAS 70 (TypeII). During the course of the Company’s audit for its 2004 fiscal year, it wasdetermined that the risk of using a third party payroll provider that is notSAS 70 certified may contribute to misstatements of payroll and relatedfinancial information.  The Companyintends to remediate this weakness by retaining the services of ADP for payrollprocessing.  ADP is certified under SAS70 (Type II).

 

3.***Lack of documentation toevidence reviews of certain reconciliations***:

 

Duringthe course of the Company’s audit for the 2004 fiscal year, which auditoccurred in January 2005, the Company discovered that certainreconciliations, including bank statements and general ledger accounts, werenot fully documented because the supervisors performing the review on suchreconciliations occasionally omitted their signature evidencing theirreview.  It was determined at the timethat this lack of documentation may result in certain accounting documents notbeing properly reviewed or there being no evidence of review.  Beginning in the second quarter of 2005, theCompany began taking steps to require that all reviews of reconciliations bysupervisors 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 ofauthorization of transactions***:

 

Duringthe course of the Company’s audit for the 2004 fiscal year, the Companydiscovered that, although accounting transactions  may have been authorized by the appropriatepersons, the authorizing person occasionally omitted his signature on therelevant documents or 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 ofnumerous procedures that could be automated using current reporting systems***:

 

TheCompany uses the SAP system for financial reporting.  During the course of the audit for the 2004fiscal year, it was determined that the Company was manually performingnumerous 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 

 

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automate certain operational and accounting procedures and therebyminimize the potential for human error, utilization of such modules wouldrequire significant investment in upgrading and maintaining the SAP system.Considering the Company’s current size and limited resources, management hasdetermined that it is not prudent to make this investment at the currenttime.  Nevertheless, beginning in thesecond quarter of 2005 and continuing thereafter, the Company has been takingvarious steps to minimize the potential for human error caused by manualprocedures.  For example, the Company hasestablished specific procedures for proper review and approval of transactionsas outlined in paragraphs 3 and 4 above and expanded utilization of other software tools such as programmedspreadsheets.

 

6.***Material adjustments tothe accounting records and financial statements as of and for the year ended December 31,2004 that were not initially identified by the Company’s internal control overfinancial reporting:***

 

Duringthe course of the Company’s SOX 404 assessment efforts during the first severalmonths of 2005, the Company and its auditors identified a number of necessarymaterial adjustments to the Company’s accounting records for 2004.  For example, certain adjustments were bookedto properly value complex debt instruments associated with the refinancing ofthe Company’s debt.  In addition, certainadjustments were booked to impair the Company’s assets which are based onManagement forecasts and overall assessment of the Company’s business.  The Company believes that these adjustmentswere a result of the Company’s focus during 2004 on completing the Company’sthree-year re-audit of its 2001, 2002, and 2003 fiscal years.  As a result of the Company’s SOX 404assessment efforts, the Company has identified these adjustments and hasimplemented additional controls to timely review and assess accounting issuesand prevent the need for such adjustments. While there can be no assurance thatadjustments to financial statements will not occur in the future, with thecompletion of the three-year re-audit, the Company believes that it will beable to devote its resources to completing its accounting assessments andentries timely and effectively.

 

7.***Management’sdocumentation of the evaluation of the significance of numerous controldeficiencies and significant deficiencies identified, which could rise to thelevel of a material weakness, has not been completed:***

 

TheCompany is continuing to diligently work to document and evaluate its internalcontrols under the requirements of SOX 404 during 2005.

 

8.***The company hadinadequate controls related to timely performance of its assessment of internalcontrol over financial reporting:***

 

TheCompany is diligently working to complete its assessment of its internalcontrols over financial reporting under the requirements of SOX 404 during2005.

 

****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.*****

 

****The Company will review thesedeficiencies during its assessment of internal controls under the requirementsof SOX 404 during 2005.****

 

****Management believes that it has takenappropriate steps to address these material deficiencies subsequent to March 31,2005, including hiring an independent consulting firm (Assurance Consulting 3)to identify and propose remedial actions to address and mitigate thedeficiencies.****

 

Changes in internal controls. There were no changes in the Company’s internal controls that occurredduring the quarter ended March 31, 2005 (although various changes tointernal controls occurring after March 31, 2005 are describedabove).  The Company is in the process ofre-evaluating its internal controls pursuant to SOX 404, as indicated above.

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned hereuntoduly authorized.

 
|                 |   | LIQUIDMETAL TECHNOLOGIES,  INC.              |
|----------------------|--------|----------------------------------------------|
|                 |   | (Registrant)                                 |
|                 |   |                                         |
| Date: March 16, 2006 |   | /s/ Ricardo A. Salas                         |   |
|                 |   | Ricardo A. Salas                             |
|                 |   | President and Chief Executive Officer        |
|                 |   | (Principal Executive Officer)                |
|                 |   |                                         |
|                 |   |                                         |
| Date: March 16, 2006 |   | /s/ Young Ham                                |   |
|                 |   | Young Ham                                    |
|                 |   | Chief Financial Officer                      |
|                 |   | (Principal Financial and Accounting Officer) |
|                      |        |                                              |  |  |

 

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