##### 



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q



|x                                                 | QUARTERLY REPORT
 PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
|------------------------------------------------- | -------------------------------------------------------------------
|                                                  | EXCHANGE ACT OF 1934                                               
|                                                  |                                                                    
|For the quarterly period ended September 30, 2002

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.  000-31332



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LIQUIDMETAL TECHNOLOGIES


(Exact name of Registrant as specified in its charter)




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

100 North Tampa St., Suite 3150
Tampa, Florida 33602(address of principal executive office, zip code)

Registrants telephone number,
 including area code:(813) 314-0280



---

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

YesxNoo

As of November 12, 2002, there were 40,993,245 shares
 of the registrants common stock, no par value, outstanding.

1



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##### 



TABLE OF CONTENTS



|PART I                     
|---------------------------
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|PART II  Other Information
|                           
|                           
|SIGNATURES                 
|CERTIFICATIONS             
|EXHIBIT INDEX              

2



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##### 



PART I
FINANCIAL INFORMATION

Item 1  Financial Statements
 and Independent Accountants Report

LIQUIDMETAL TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)



|                                                                                                                                                                                   | September 30, 2002 |         | December 31, 2001
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------- | -----------------
|                                                                                                                                                                                   |                    |         |                  
|ASSETS                                                                                                                                                                            
|CURRENT ASSETS:                                                                                                                                                                    |                    |         |                  
|Cash and cash equivalents                                                                                                                                                          | $                  | 40,148  |                  
|Marketable securities held-for-sale                                                                                                                                                |                    | 2,182   |                  
|Trade receivables (net of allowance for
 doubtful accounts of $100 in 2002 and $30 in 2001)                                                                                        |                    | 3,911   |                  
|Inventories                                                                                                                                                                        |                    | 2,331   |                  
|Prepaid expenses and other current assets                                                                                                                                          |                    | 1,574   |                  
|                                                                                                                                                                                   |                    |         |                  
|Total current assets                                                                                                                                                               |                    | 50,146  |                  
|PROPERTY, PLANT AND EQUIPMENT, NET                                                                                                                                                 |                    | 13,075  |                  
|INTANGIBLE ASSETS, NET                                                                                                                                                             |                    | 933     |                  
|OTHER ASSETS                                                                                                                                                                       |                    | 310     |                  
|                                                                                                                                                                                   |                    |         |                  
|Total assets                                                                                                                                                                       | $                  | 64,464  |                  
|                                                                                                                                                                                   |                    |         |                  
|LIABILITIES AND
 SHAREHOLDERS EQUITY (DEFICIENCY)                                                                                                                                
|CURRENT LIABILITIES:                                                                                                                                                               |                    |         |                  
|Accounts payable and accrued expenses                                                                                                                                              | $                  | 6,452   |                  
|Net liabilities of discontinued operations                                                                                                                                         |                    | 2,273   |                  
|Deferred revenue                                                                                                                                                                   |                    | 953     |                  
|Other liabilities                                                                                                                                                                  |                    | 185     |                  
|Current portion of notes payable to shareholders                                                                                                                                   |                    |        |                  
|                                                                                                                                                                                   |                    |         |                  
|Total current liabilities                                                                                                                                                          |                    | 9,863   |                  
|OTHER LONG-TERM LIABILITIES                                                                                                                                                        |                    | 79      |                  
|                                                                                                                                                                                   |                    |         |                  
|Total liabilities                                                                                                                                                                  |                    | 9,942   |                  
|                                                                                                                                                                                   |                    |         |                  
|COMMITMENTS AND CONTINGENCIES MINORITY INTEREST                                                                                                                                    |                    | 226     |                  
|                                                                                                                                                                                   |                    |         |                  
|SHAREHOLDERS EQUITY (DEFICIENCY):                                                                                                                                                 |                    |         |                  
|Preferred stock, no par value; 10,000,000
 shares authorized and none outstanding at September 30, 2002 and 456,857 outstanding at
 December 31, 2001                              |                    |        |                  
|Common stock, no par value; 200,000,000
 shares authorized and 40,993,245 issued and outstanding at September 30, 2002 and
 35,023,515 issued and outstanding at December 31, 2001 |                    | 106,510 |                  
|Paid in capital                                                                                                                                                                    |                    | 19,445  |                  
|Unamortized stock-based compensation                                                                                                                                               |                    | (983    | )                
|Accumulated deficit                                                                                                                                                                |                    | (70,596 | )                
|Accumulated comprehensive (loss) income                                                                                                                                            |                    | (80     | )                
|                                                                                                                                                                                   |                    |         |                  
|Total shareholders equity (deficiency)                                                                                                                                            |                    | 54,296  |                  
|                                                                                                                                                                                   |                    |         |                  
|Total liabilities and
 shareholders equity (deficiency)                                                                                                                           | $                  | 64,464  |                  
|                                                                                                                                                                                   |                    |         |                  

See notes to condensed
 consolidated financial statements.

3



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##### 



LIQUIDMETAL TECHNOLOGIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
 COMPREHENSIVE LOSS(in thousands, except per share data)(unaudited)



|                                                                                       | For the Three Months |        | For the Nine Months
|-------------------------------------------------------------------------------------- | -------------------- | ------ | -------------------
|                                                                                       | Ended September 30,  |        | Ended September 30,
|                                                                                       |                      |        |                    
|                                                                                       |                      | 2002   |                    
|                                                                                       |                      |        |                    
|REVENUE                                                                                | $                    | 3,655  |                    
|COST OF SALES                                                                          |                      | 2,524  |                    
|                                                                                       |                      |        |                    
|Gross Profit                                                                           |                      | 1,131  |                    
|                                                                                       |                      |        |                    
|OPERATING EXPENSES:                                                                    |                      |        |                    
|Selling, general and administrative                                                    |                      | 3,912  |                    
|Research and development                                                               |                      | 2,652  |                    
|                                                                                       |                      |        |                    
|Total expenses                                                                         |                      | 6,564  |                    
|                                                                                       |                      |        |                    
|LOSS BEFORE INTEREST EXPENSE AND INCOME, MINORITY INTEREST AND DISCONTINUED OPERATIONS |                      | (5,433 | )                  
|Interest expense                                                                       |                      | (6     | )                  
|Interest income                                                                        |                      | 297    |                    
|                                                                                       |                      |        |                    
|LOSS BEFORE MINORITY INTEREST AND DISCONTINUED OPERATIONS                              |                      | (5,142 | )                  
|Minority interest in income of consolidated subsidiary                                 |                      | (76    | )                  
|                                                                                       |                      |        |                    
|LOSS FROM CONTINUING OPERATIONS                                                        |                      | (5,218 | )                  
|DISCONTINUED OPERATIONS:                                                               |                      |        |                    
|Loss from operations of discontinued retail golf segment, net                          |                      |       |                    
|Gain (loss) from disposal of discontinued retail golf segment, net                     |                      | 1,466  |                    
|                                                                                       |                      |        |                    
|NET LOSS                                                                               |                      | (3,752 | )                  
|Foreign exchange translation loss                                                      |                      | (371   | )                  
|Unrealized gain on marketable securities held-for-sale                                 |                      | 182    |                    
|                                                                                       |                      |        |                    
|COMPREHENSIVE LOSS                                                                     | $                    | (3,941 | )                  
|                                                                                       |                      |        |                    
|PER COMMON SHARE BASIC AND DILUTED:                                                    |                      |        |                    
|Loss from continuing operations                                                        | $                    | (0.13  | )                  
|                                                                                       |                      |        |                    
|Income (loss) from discontinued operations                                             | $                    | 0.04   |                    
|                                                                                       |                      |        |                    
|Net loss                                                                               | $                    | (0.09  | )                  
|                                                                                       |                      |        |                    

See notes to condensed consolidated financial statements.

4



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LIQUIDMETAL TECHNOLOGIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS
 EQUITY (DEFICIENCY)For the Nine Months Ended September 30, 2002(in thousands, except per share
 data)(unaudited)



|                                                                      | PreferredShares |   | PreferredStock | CommonShares | CommonStock |   | Paid inCapital |            | UnamortizedStock-optionBasedCompen- sation |   | Accumu-latedDeficit |   | AccumulatedCompre-hensiveIncome (Loss) |   | Total 
|--------------------------------------------------------------------- | --------------- | - | -------------- | ------------ | ----------- | - | -------------- | ---------- | ------------------------------------------ | - | ------------------- | - | -------------------------------------- | - | ------
|                                                                      |                 |   |                |              |             |   |                |            |                                            |   |                     |   |                                        |   |       
|Balance, December 31, 2001                                            | 456,857         |   |                | $            | 5,577       |   |                | 35,023,515 |                                            | $ | 29,752              |   |                                        | $ | 22,401
|Common stock issued                                                   |                |   |                |              |            |   |                | 5,229,000  |                                            |   | 78,435              |   |                                        |   |      
|Transaction expenses of initial public offering including commissions |                |   |                |              |            |   |                |           |                                            |   | (7,714              | ) |                                        |   |      
|Stock options exercised                                               |                |   |                |              |            |   |                | 283,873    |                                            |   | 460                 |   |                                        |   |      
|Conversion of preferred stock
 to common stock                        | (456,857        | ) |                |              | (5,577      | ) |                | 456,857    |                                            |   | 5,577               |   |                                        |   |      
|Stock-based compensation                                              |                |   |                |              |            |   |                |           |                                            |   |                    |   |                                        |   | (2,956
|Unamortized stock option based compensation                           |                |   |                |              |            |   |                |           |                                            |   |                    |   |                                        |   |      
|Foreign exchange translation gain (loss)                              |                |   |                |              |             |   |                |           |                                            |   |                    |   |                                        |   |      
|Unrealized gain on marketable Securities                              |                |   |                |              |            |   |                |           |                                            |   |                    |   |                                        |   |      
|Net loss                                                              |                |   |                |              |            |   |                |           |                                            |   |                    |   |                                        |   |      
|                                                                      |                 |   |                |              |             |   |                |            |                                            |   |                     |   |                                        |   |       
|Balance, September 30, 2002                                           |                |   |                | $            |            |   |                | 40,993,245 |                                            | $ | 106,510             |   |                                        | $ | 19,445
|                                                                      |                 |   |                |              |             |   |                |            |                                            |   |                     |   |                                        |   |       

See notes to condensed consolidated financial statements.

5



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LIQUIDMETAL
 TECHNOLOGIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share data)
(unaudited)



|                                                                                                    | For the Nine MonthsEnded September 30,
|--------------------------------------------------------------------------------------------------- | --------------------------------------
|                                                                                                    |                                       
|                                                                                                    |                                       
|                                                                                                    |                                       
|OPERATING ACTIVITIES:                                                                               |                                       
|Net loss                                                                                            | $                                     
|Loss from operations and
 (gain) loss on disposition of discontinued operations                     |                                       
|                                                                                                    |                                       
|Income (loss) from continuing operations                                                            |                                       
|Adjustments to
 reconcile loss from continuing operations to net cash used by operating activities: |                                       
|Gain on sale of property and equipment                                                              |                                       
|Minority interest in income of
 consolidated subsidiary                                             |                                       
|Depreciation and amortization                                                                       |                                       
|Amortization of debt discount                                                                       |                                       
|Stock-based compensation                                                                            |                                       
|Bad debt expense                                                                                    |                                       
|Changes in operating assets and liabilities:                                                        |                                       
|Accounts receivable                                                                                 |                                       
|Inventories                                                                                         |                                       
|Prepaid expenses and other current assets                                                           |                                       
|Other assets                                                                                        |                                       
|Accounts payable and accrued expenses                                                               |                                       
|Deferred revenue                                                                                    |                                       
|Other liabilities                                                                                   |                                       
|                                                                                                    |                                       
|Net cash used by continuing operations                                                              |                                       
|Net cash used by discontinued operations                                                            |                                       
|                                                                                                    |                                       
|Net cash used by operating activities                                                               |                                       
|                                                                                                    |                                       
|INVESTING ACTIVITIES:                                                                               |                                       
|Purchases of property and equipment                                                                 |                                       
|Proceeds from sale of property and equipment                                                        |                                       
|Purchase of marketable securities held-for-sale                                                     |                                       
|Purchase price of 51% investment in subsidiary, net of cash received of $407                        |                                       
|Investment in patents and trademarks                                                                |                                       
|                                                                                                    |                                       
|Net cash used by investing activities                                                               |                                       
|                                                                                                    |                                       
|FINANCING ACTIVITIES:                                                                               |                                       
|Proceeds from borrowings                                                                            |                                       
|Repayment of borrowings                                                                             |                                       
|Repayment of other liabilities                                                                      |                                       
|Proceeds from issuance of common stock (net of offering costs)                                      |                                       
|Proceeds from issuance of preferred stock (net of offering costs)                                   |                                       
|Stock options exercised                                                                             |                                       
|Repurchase of common stock by subsidiaries, net                                                     |                                       
|                                                                                                    |                                       
|Net cash provided by financing activities                                                           |                                       
|                                                                                                    |                                       
|EFFECT OF FOREIGN EXCHANGE TRANSLATION                                                              |                                       
|                                                                                                    |                                       
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                                           |                                       
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                    |                                       
|                                                                                                    |                                       
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                          | $                                     
|                                                                                                    |                                       
|SUPPLEMENTAL CASH FLOW INFORMATION                                                                  |                                       
|Interest paid                                                                                       | $                                     
|                                                                                                    |                                       

6



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LIQUIDMETAL TECHNOLOGIES AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF
 CASH FLOWS - continued


(in thousands, except per share data)


(unaudited)


In 2002, the Company entered
 into a lease agreement for $107 of office furniture that was recorded as a capital lease
 obligation. In 2001, the Company received such office furniture and recorded it as
 an accrued liability.

In 2001, $2,006 of notes
 payable and accrued interest was converted into the Companys common stock. In 2001, the
 Company recorded paid in capital of $1,692 comprised of discounts on notes payable. In
 2001, Liquidmetal Golf transferred and assigned to the Company two subordinated promissory
 notes in exchange for the Companys common stock in the amount of $2,000.

In 2002 and 2001,
 respectively, the Company recorded a net addition to shareholders equity of $1,149 and
 $577 comprised of stock-based compensation in the discontinued retail golf operations.
 Additionally, there was a $98 foreign exchange loss effect in the discontinued retail golf operations.



See notes
 to condensed consolidated financial statements.


7



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LIQUIDMETAL TECHNOLOGIES AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months and Nine Months Ended September 30, 2002 and 2001
(in thousands, except share data)(unaudited)

1.  Description of Business

Liquidmetal Technologies and its
 subsidiaries (collectively the Company) are in the business of developing, manufacturing,
 and marketing products made from amorphous alloys. Liquidmetal Technologies markets and sells
 Liquidmetal® alloy industrial coatings and also manufactures, markets and sells products and
 components from bulk Liquidmetal alloys that can be incorporated into the finished goods of
 its customers across a variety of industries.

The Company classifies
 operations into two reportable segments: Liquidmetal alloy industrial coatings and bulk Liquidmetal alloys. The Liquidmetal alloy industrial coatings are used primarily
 as a protective coating for industrial machinery and equipment, such as drill pipe
 used by the oil drilling industry and boiler tubes used by
coal-burning power plants. Bulk
 Liquidmetal alloys include potential market opportunities to manufacture and sell casing
 components for electronic devices, medical devices, sporting goods, tooling, prototype sampling,
 defense applications and furnace equipment. In the three months and nine months ended
 September 30, 2001, the Company derived a majority of its revenue from the operation of its
 retail golf segment, now accounted for as a discontinued operation. The retail golf segment
 marketed golf clubs made of the Companys bulk Liquidmetal alloys. The Company outsourced
 the manufacturing of the golf clubs.

2.  Basis of Presentation and Recent Accounting Pronouncements

The accompanying unaudited
 condensed consolidated financial statements have been prepared in accordance with accounting
 principles generally accepted in the United States of America (generally accepted
 accounting principles) for interim financial information and with the instructions to
 Form 10-Q. Accordingly, they do not include all of the information and notes required by
 generally accepted accounting principles for complete financial
statements. In the
 opinion of management, all adjustments (consisting only of normal recurring accruals) considered
 necessary for a fair presentation have been included. In addition, certain reclassifications
 have been made for consistent presentation. Operating results for the nine months ended September
 30, 2002 are not necessarily indicative of the results that may be expected for any future periods
 or the year ending December 31, 2002. The accompanying unaudited condensed consolidated financial
 statements should be read in conjunction with the Companys Registration Statement on
 Form S-1, as amended, filed with the Securities and Exchange Commission on November 20, 2001
 and declared effective May 21, 2002 (Registration No. 333-73716).

New Accounting Pronouncements. In
 July 2001, the Financial Accounting Standards Board (FASB) issued Statement
 of Financial Accounting Standards (SFAS) No. 141, Business Combinations and
 SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that all
 business combinations be accounted for under the purchase method only and that certain
 acquired intangible assets in a business combination be recognized as assets apart from
 goodwill. SFAS No. 142 requires that ratable amortization of goodwill be replaced with
 periodic tests of the goodwills impairment and that limited-life intangible assets
 other than goodwill should be amortized over their useful lives. Implementation of SFAS No.
 141 and SFAS No. 142 is required for fiscal year 2002. The adoption of SFAS No. 141 and 142
 did not have a material impact on the Companys financial statements.

In June 2001, the FASB
 issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143
 requires that the fair value of a liability for an asset retirement obligation
 be recognized in the period in which such liabilities are incurred if a reasonable
 estimate of fair value can be made. The associated asset retirement costs should
 be capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143
 is effective for financial statements issued for fiscal years beginning after
 June 15, 2002. Adoption of SFAS No. 143 is not expected to have a material
 impact on the Companys financial statements.

Issued in October 2001,
SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, replaces SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. The

8



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LIQUIDMETAL TECHNOLOGIES AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months and Nine Months Ended September 30, 2002 and 2001
(in thousands, except share data)(unaudited)

accounting model for long-lived assets to be disposed of by
 sale applies to all long-lived assets, including discontinued operations, and replaces the provisions
 of Accounting Principles Board (APB) Opinion No. 30,
Reporting Results of Operations  Reporting the
 Effects of Disposal of a Segment of a Business, for the disposal of segments of a business.
 SFAS No. 144 requires that those long-lived assets be measured at the lower of the carrying
 amount or fair value less cost to sell, whether reported in continuing operations or in
 discontinued operations. Therefore, discontinued operations will no longer be measured
 at net realizable value or include amounts for operating losses that have not yet occurred.
 SFAS No. 144 also broadens the reporting of discontinued operations to include all components
 of an entity with operations that can be distinguished from the rest of the entity and that will
 be eliminated from the ongoing operations of the entity in a disposal transaction. The provisions
 of SFAS No. 144 are effective for financial statements issued for fiscal years beginning after
 December 15, 2001 and, generally, are to be applied prospectively. In 2002, the Company adopted
 SFAS No. 144 which did not result in a material impact to the Companys financial statements.

In April 2002, the FASB issued
 SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
 Technical Corrections. SFAS No. 145 rescinds SFAS No. 4, Reporting Gains and Losses from
 Extinguishment of Debt, and an amendment of that Statement, SFAS
No. 64, Extinguishments
 of Debt Made to Satisfy Sinking-Fund Requirements. This Statement also rescinds SFAS No.
 44, Accounting for Intangible Assets of Motor Carriers. SFAS
No. 145 amends SFAS No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for
 sale-leaseback transactions and the required accounting for certain lease modifications that
 have economic effects that are similar to sale-leaseback transactions. This Statement also amends
 other existing authoritative pronouncements to make various technical corrections, clarify meanings,
 or describe their applicability under changed conditions. The provisions of this Statement
 related to the rescission of Statement 4 are required to be applied in fiscal years beginning
 after May 15, 2002. The provisions in paragraphs 8 and 9(c) of this Statement related to Statement
 13 are required to be applied to transactions occurring after May 15, 2002. Any gain or loss on
 extinguishment of debt that was classified as an extraordinary item in prior periods presented
 that does not meet the criteria in APB No. 30 for classification as an extraordinary item is required
 to be reclassified. All other provisions of this Statement are effective for financial statements issued
 on or after May 15, 2002. The Company elected to early adopt SFAS No. 145 during the second quarter
 of 2002. The effect of adopting SFAS No. 145 was to increase interest expense by $532, increase
 net loss from continuing operations by $532, and to increase basic and diluted loss from continuing
 operations per share by $0.01.

In June 2002, the FASB issued
 SFAS No. 146, Accounting for Costs Associated With Exit or
Disposal Activities. Statement
 146 addresses financial accounting and reporting for costs associated with exit or disposal
 activities and nullifies Emerging Issues Task Force (EITF) Issue No.
94-3, Liability Recognition
 for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including
 Certain Costs Incurred in a Restructuring). SFAS No. 146 requires costs associated with exit
 or disposal activities to be recognized when the costs are incurred, rather than at a date of
 commitment to an exit or disposal plan. SFAS No. 146 is effective for exit or disposal activities
 that are initiated after December 31, 2002. The adoption of SFAS No. 146 is not expected to have
 a material impact on the Companys financial statements.

In October 2002, the FASB issued
 SFAS No. 147, Acquisitions of Certain Financial Institutions  an amendment of FASB Statements No. 72
 and 144 and FASB Interpretation No. 9. SFAS No. 147 removes acquisitions of financial institutions
 from the scope of both Statement 72 and Interpretation 9 and requires that those transactions
 be accounted for in accordance with FASB Statements No. 141, Business Combinations, and No. 142,
 Goodwill and Other Intangible Assets. In addition, this Statement amends FASB Statement No. 144,
 Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope
 long-term customer-relationship intangible assets of financial institutions such as
 depositor- and borrower-relationship intangible assets and credit cardholder intangible assets.
 Consequently, those intangible assets are subject to the same undiscounted cash flow recoverability
 test and impairment loss recognition and measurement provisions that SFAS No. 144 requires for other
 long-lived assets that are held and used. Paragraph 5 of this SFAS No. 147, which relates to the
 application of the purchase method of accounting, is effective for acquisitions for which the date
 of acquisition is on or after October 1, 2002. The provisions in paragraph 6 of SFAS No. 147
 related to accounting for the impairment or disposal of certain long-term customer-relationship
 intangible assets are effective on October 1, 2002. Transition provisions for previously
 recognized unidentifiable intangible assets in paragraphs 8-14 of SFAS No. 147 are effective on October 1, 2002. The adoption of SFAS No. 147 is not expected to have a material impact on the Companys financial statements.

9



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##### 



LIQUIDMETAL TECHNOLOGIES AND
 SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED
 FINANCIAL STATEMENTSFor the Three Months and Nine Months Ended
 September 30, 2002 and 2001(in thousands, except share data)
(unaudited)

3.  Inventories

Inventories from continuing operations
 were comprised of the following:



|                  |   | September 30, |  |   | December 31,
|----------------- | - | ------------- |  | - | ------------
|                  |   | 2002          |  |   | 2001        
|                  |   |               |  |   |             
|Raw materials     | $ | 1,573         |  | $ | 186         
|Work in process   |   | 254           |  |   |            
|Finished goods    |   | 504           |  |   | 317         
|                  |   |               |  |   |             
|Total inventories | $ | 2,331         |  | $ | 503         
|                  |   |               |  |   |             

4.  Property, Plant and Equipment

Property, plant and equipment consisted of the following:



|                                                             |   | September 30, |   |  |   | December 31, |  
|------------------------------------------------------------ | - | ------------- | - |  | - | ------------ | -
|                                                             |   | 2002          |   |  |   | 2001         |  
|                                                             |   |               |   |  |   |              |  
|Machinery and equipment                                      | $ | 3,480         |   |  | $ | 234          |  
|Computer equipment                                           |   | 703           |   |  |   | 126          |  
|Office equipment, furnishings and improvements               |   | 607           |   |  |   | 253          |  
|Buildings                                                    |   | 706           |   |  |   |             |  
|Construction in process of machinery and equipment and plant |   | 8,274         |   |  |   | 808          |  
|                                                             |   |               |   |  |   |              |  
|Total                                                        |   | 13,770        |   |  |   | 1,421        |  
|Accumulated depreciation                                     |   | (695          | ) |  |   | (258         | )
|                                                             |   |               |   |  |   |              |  
|Total property, plant and equipment, net                     | $ | 13,075        |   |  | $ | 1,163        |  
|                                                             |   |               |   |  |   |              |  

Depreciation expense
 was approximately $226 and $31 for the three
 months ended September 30, 2002 and 2001; and
$676 and $48 for the nine months ended September 30, 2002 and 2001, respectively.

5.  Intangible Assets

Intangible assets
 consisted of the following:



|                                     |   | September 30, |   |  |   | December 31, |  
|------------------------------------ | - | ------------- | - |  | - | ------------ | -
|                                     |   | 2002          |   |  |   | 2001         |  
|                                     |   |               |   |  |   |              |  
|Purchased and licensed patent rights | $ | 457           |   |  | $ | 420          |  
|Internally developed patents         |   | 573           |   |  |   | 506          |  
|Trademarks                           |   | 54            |   |  |   | 66           |  
|Goodwill                             |   | 184           |   |  |   |             |  
|                                     |   |               |   |  |   |              |  
|Total                                |   | 1,268         |   |  |   | 992          |  
|Accumulated amortization             |   | (335          | ) |  |   | (269         | )
|                                     |   |               |   |  |   |              |  
|Total intangible assets, net         | $ | 933           |   |  | $ | 723          |  
|                                     |   |               |   |  |   |              |  

Amortization expense was
 approximately $18 and $6 for the three
 months ended September 30, 2002 and 2001; and $66
and $18 for the nine months ended September 30, 2002 and 2001, respectively.

10



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##### 



LIQUIDMETAL TECHNOLOGIES
 AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED
 FINANCIAL STATEMENTSFor the Three Months and Nine Months Ended September 30, 2002 and
 2001(in thousands, except share data)(unaudited)

On
 June 28, 2002, the Company acquired a 51% interest in Chusik Hoesa Dongyang Yudoro
 (Dongyang). The results of the Dongyangs operations have been included
 in the consolidated financial statements since that date. The aggregate purchase
 price was $333 in cash.

The
 following table summarizes the estimated fair values of the net assets held by
 Dongyang as of June 28, 2002:



|Cash                               |  | $ | 407  |  
|---------------------------------- |  | - | ---- | -
|Accounts receivable                |  |   | 71   |  
|Inventories                        |  |   | 200  |  
|Other current assets               |  |   | 126  |  
|Property, plant and equipment, net |  |   | 34   |  
|Other long-term assets             |  |   | 9    |  
|                                   |  |   |      |  
|Total assets                       |  |   | 847  |  
|Total liabilities                  |  |   | (554 | )
|                                   |  |   |      |  
|Net assets acquired                |  | $ | 293  |  
|                                   |  |   |      |  

The
 difference between the purchase price of $333 and the Companys investment in
 51% of the net assets of Dongyang was assigned to Goodwill in the amount of $184.
 The results of Dongyangs operations prior to June 28, 2002 were not
 significant.

6.  Notes
 Payable to Shareholders

The
 notes payable activity for the nine months ended September 30, 2002 is shown in the
 following table:



|                                                      |  | December 31, |        |            |  |            |       |      |  |   |        | September 30,
|----------------------------------------------------- |  | ------------ | ------ | ---------- |  | ---------- | ----- | ---- |  | - | ------ | -------------
|                                                      |  | 2001         |        | Borrowings |  | Repayments |       | 2002
|                                                      |  |              |        |            |  |            |       |     
|Kang/Salas 8.5%, principal $1,500                     |  | $            | 1,400  |            |  | $          |      |      |  | $ | (1,400 | )            
|Tjoa 8.5%, principal $1,500                           |  |              | 1,500  |            |  |            |      |      |  |   | (1,500 | )            
|Kang 8.0%, principal $2,000                           |  |              |       |            |  |            | 2,000 |      |  |   | (2,000 | )            
|Tjoa 8.0%, principal $1,000                           |  |              | 1,000  |            |  |            |      |      |  |   | (1,000 | )            
|Kang 8.0%, principal $750                             |  |              |       |            |  |            | 750   |      |  |   | (750   | )            
|Tjoa 8.0%, principal $750                             |  |              |       |            |  |            | 750   |      |  |   | (750   | )            
|                                                      |  |              |        |            |  |            |       |      |  |   |        |              
|                                                      |  |              | 3,900  |            |  | $          | 3,500 |      |  | $ | (7,400 | )            
|                                                      |  |              |        |            |  |            |       |      |  |   |        |              
|Less debt discount                                    |  |              | (912   | )          |  |            |       |      |  |   |        |              
|                                                      |  |              |        |            |  |            |       |      |  |   |        |              
|                                                      |  |              | 2,988  |            |  |            |       |      |  |   |        |              
|Less current portion                                  |  |              | (2,988 | )          |  |            |       |      |  |   |        |              
|                                                      |  |              |        |            |  |            |       |      |  |   |        |              
|Notes payable less current
 portion, net of discounts |  | $            |       |            |  |            |       |      |  |   |        |              
|                                                      |  |              |        |            |  |            |       |      |  |   |        |              

Kang
 8.0%, principal $2,000 - On March 12, 2002, the Company borrowed $2,000 on an
 unsecured basis from Mr. John Kang that was due on the earlier of May 1, 2003 or
 the closing of an initial public offering. The Company elected to repay the note
 upon the closing of the Companys initial public offering.

Kang
 8.0%, principal $750 - On April 3, 2002, the Company borrowed $750 on an
unsecured basis from Mr. John Kang that was due on the earlier of July 1, 2003 or
the closing of the initial public offering. The Company elected to repay the note
upon the closing of the Companys initial public offering.

11



---



##### 



LIQUIDMETAL TECHNOLOGIES
 AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
 STATEMENTS
For the Three Months and Nine Months Ended September 30, 2002 and 2001
(in thousands, except share data)
(unaudited)

Tjoa
 8.0% - On April 3, 2002, the Company borrowed $750 on an unsecured basis from
 Mr. Tjoa that was due on the earlier of July 1, 2003 or the closing of an initial
 public offering. The Company elected to repay the note upon the closing of the
 Companys initial public offering.

Total
 interest expense, including the debt discount amortization on the notes payable to
 shareholders, was $6 and $294 for the three months ended September 30, 2002 and
 2001, respectively; and $1,109 and $784 for the nine months ended September 30, 2002 and 2001, respectively.
 Included in the total interest expense is $532 of accelerated amortization of the
 remaining unamortized debt discount upon the early repayment of the Kang/Salas 8.5%
 and the Tjoa 8.5% promissory notes in May of 2002.

7.  Discontinued Operations

On April 30,
 2002, management terminated the operations of the retail golf segment by means of
 liquidating substantially all of the retail golf assets and liabilities. The disposition
 of the retail golf operations represents the disposal of a business segment. Accordingly,
 the accompanying condensed consolidated financial statements reflect the retail
 golf segment as a discontinued operation for all periods presented.

For the three
 months ended September 30, 2002, the Company had a net gain change in estimate of
 $1,466 on the disposal of the discontinued retail golf segment that was primarily
 due to a change in estimated value of stock-based compensation. The change in
 estimated value of the stock-based compensation was a result of a decrease in the
 fair market value of the common shares underlying the options granted to Paul Azinger
 of $1,403. The gain also included an increase of $63 in the estimated disposal value
 of work-in-process inventory which was sold at cost during the three months ended
 September 2002.

For the nine
 months ended September 30, 2002, the Company had a net gain change in estimate of
 $1,974 on the disposal of the discontinued retail golf segment that was primarily
 due to a change in estimated value of stock-based compensation. The change in
 estimated value of the stock-based compensation was a result of the cumulative decrease
 in the fair market value of the common shares underlying the options granted to
 Paul Azinger of $3,010. Additionally, there was a $98 gain due to the reversal
 of the accumulated foreign exchange gains after the liquidation of Liquidmetal Golf
 Europe Inc. These gains were partially offset by other changes in the estimated
 loss on disposal that included; $572 of additional operating expenses, $57 increase
 in the allowance for doubtful accounts and $505 primarily for the reduction of the
 estimated disposal value of work-in-process inventory and equipment.

Net liabilities
 of the discontinued retail golf segment have been segregated on the balance sheets
 presented, the components of which are as follows:



|                                           | September 30,2002 |        | December 31,2001
|------------------------------------------ | ----------------- | ------ | ----------------
|                                           |                   |        |                 
|Assets:                                    |                   |        |                 
|Cash                                       | $                 | 33     |                 
|Accounts receivable, net                   |                   |       |                 
|Inventories                                |                   |       |                 
|Property and equipment, net                |                   |       |                 
|                                           |                   |        |                 
|Total assets                               |                   | 33     |                 
|                                           |                   |        |                 
|Liabilities:                               |                   |        |                 
|Current liabilities                        |                   | 2,306  |                 
|                                           |                   |        |                 
|Total liabilities                          |                   | 2,306  |                 
|                                           |                   |        |                 
|Net liabilities of discontinued operations | $                 | (2,273 | )               
|                                           |                   |        |                 

12



---



##### 



LIQUIDMETAL TECHNOLOGIES AND
 SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED
 FINANCIAL STATEMENTSFor the Three Months and Nine Months Ended
 September 30, 2002 and 2001(in thousands, except share data)
(unaudited)

The results of
 operations for all periods presented have been
 restated for discontinued operations. The operating results of the discontinued
 operations are as follows:



|                                                    | For the Three Months |       | For the Nine Months
|--------------------------------------------------- | -------------------- | ----- | -------------------
|                                                    | Ended September 30,  |       | Ended September 30,
|                                                    |                      |       |                    
|                                                    |                      | 2002  |                    
|                                                    |                      |       |                    
|Net sales                                           | $                    |      |                    
|Cost of sales                                       |                      |      |                    
|                                                    |                      |       |                    
|Gross profit                                        |                      |      |                    
|Operating expenses                                  |                      |      |                    
|                                                    |                      |       |                    
|Loss from operations                                |                      |      |                    
|Gain (loss) on disposal                             |                      | 1,466 |                    
|                                                    |                      |       |                    
|Net income (loss)                                   |                      | 1,466 |                    
|Foreign exchange translation loss during the period |                      |      |                    
|                                                    |                      |       |                    
|Comprehensive income (loss)                         | $                    | 1,466 |                    
|                                                    |                      |       |                    

8.  Income Taxes

The provision for
 income tax benefit (expense) for the nine
 months ended September 30, 2002 and 2001, respectively, was calculated through the use of the estimated
 annual income tax rates based on projected annualized income (loss). The
Company estimated an effective tax rate of 0% during the nine months ended September 30, 2002
 and 2001, respectively, based
on the Companys reported losses.

9.  Income (Loss) Per Common Share

Basic EPS is computed
 by dividing earnings (loss)
 attributable to common shareholders by the weighted average
number of common shares outstanding for the periods. Diluted EPS reflects the potential dilution of securities that could share
in the earnings.



|                               | Three MonthsEnded September 30, |  | Nine MonthsEnded September 30,
|------------------------------ | ------------------------------- |  | ------------------------------
|                               |                                 |  |                               
|                               | 2002                            |  | 2001                          
|                               |                                 |  |                               
|Weighted average basic shares  | 40,993,245                      |  | 34,055,404                    
|Effect of dilutive securities: |                                 |  |                               
|Stock options                  |                                |  |                              
|Warrants                       |                                |  |                              
|                               |                                 |  |                               
|Diluted shares                 | 40,993,245                      |  | 34,055,404                    
|                               |                                 |  |                               

The conversion of preferred
 stock to common stock was not included
 in the computation of diluted EPS for the three months and nine months ended September 30, 2001
 as the inclusion would be antidilutive. The conversion of the preferred stock to common stock
 upon the closing of the initial public offering on May 28, 2002 was included in the basic EPS for the
three months and nine months ended September 30, 2002. The effect of outstanding options and warrants
 to purchase common stock was excluded in all periods presented because
 the inclusion would have been antidilutive.

10.  Initial Public Offering

Pursuant to the
 Companys Registration Statement on Form S-1, as
 amended, initially filed with the Securities and Exchange Commission on November 20, 2001
 and declared effective May 21, 2002, (Registration No. 333-73716), the Company closed an initial
 public offering of 5,000,000 registered shares of common stock on May 28, 2002, plus an
 additional 229,000 shares on June 10, 2002 pursuant to an overallotment option, at a
 price of $15.00 per share (which sale is referred to herein as the
Offering). The Offering
 generated net cash proceeds for the Company during the second

13



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##### 



LIQUIDMETAL TECHNOLOGIES AND SUBSIDIARIES NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the Three
Months and Nine Months Ended September 30, 2002 and 2001(in
thousands, except share data)(unaudited)

quarter 2002 of approximately $70,721, net
 of underwriting commissions of $5,490 and other transaction fees of approximately
 $2,224.

11.  Segment Reporting and Major
 Customers

SFAS No. 131,
 Disclosures about Segments of an Enterprise and Related Information, requires
 companies to provide certain information about their operating segments. In April
 2002, the Company began classifying operations into two reportable segments: Liquidmetal
 alloy industrial coatings and bulk Liquidmetal alloys. The Liquidmetal alloy industrial
 coatings are used primarily as a protective coating for industrial machinery and
 equipment, such as drill pipe used by the oil drilling industry and boiler tubes
 used by coal burning power plants. Bulk Liquidmetal alloys include potential market
 opportunities to manufacture and sell casing components for electronic devices,
 medical devices, sporting goods, tooling, prototype sampling, defense applications
 and furnace equipment. Primarily, the expenses incurred by the bulk
 Liquidmetal alloy segment are research and development costs and selling expenses
 associated with identifying and developing potential market opportunities. Bulk
 Liquidmetal alloy products can be distinguished from Liquidmetal alloy coatings
 in that the bulk Liquidmetal alloy can have significant thickness, up to approximately
 one inch which allows for their use in a wider variety of applications other than
 a thin protective coating applied to machinery and equipment. Revenue and expenses
 associated with research and development services are included in the bulk Liquidmetal
 alloy segment. The accounting policies of the reportable segments are the same
 as those described in Note 2 to the consolidated financial statements included in
 the Companys Prospectus filed with the Securities and Exchange Commission
 on May 22, 2002, pursuant to Rule 424(b)(1) of the Securities Act of 1933 (Registration
 No. 333-73716).

Summarized
 financial information concerning the Companys reportable segments is shown
 in the following tables:



|                                                                                      | Coatings |       | Bulk Alloy |   |        |   | SegmentTotals
|------------------------------------------------------------------------------------- | -------- | ----- | ---------- | - | ------ | - | -------------
|                                                                                      |          |       |            |   |        |   |              
|Three months ended September 30, 2002:                                                |          |       |            |   |        |   |              
|Revenue
 to external customers                                                        | $        | 1,234 |            | $ | 2,421  |   |              
|Gross
 profit (loss)                                                                  |          | 569   |            |   | 562    |   |              
|Income
 (loss) before minority interest, interest expense and discontinued operations |          | 358   |            |   | (3,024 | ) |              
|Total
 identifiable assets at end of period                                           |          | 1,717 |            |   | 19,042 |   |              
|Three
 months ended September 30, 2001:                                               |          |       |            |   |        |   |              
|Revenue
 to external customers                                                        | $        | 1,035 |            | $ | 77     |   |              
|Gross
 profit (loss)                                                                  |          | 500   |            |   | 63     |   |              
|Income
 (loss) before minority interest, interest expense and discontinued operations |          | 804   |            |   | (802   | ) |              
|Total
 identifiable assets at end of period                                           |          | 1,337 |            |   |       |   |              
|Nine
 months ended September 30, 2002:                                                |          |       |            |   |        |   |              
|Revenue
 to external customers                                                        | $        | 3,862 |            | $ | 3,400  |   |              
|Gross
 profit (loss)                                                                  |          | 1,824 |            |   | 1,045  |   |              
|Income
 (loss) before minority interest, interest expense and discontinued operations |          | 1,284 |            |   | (8,059 | ) |              
|Total
 identifiable assets at end of period                                           |          | 1,717 |            |   | 19,042 |   |              
|Nine
 months ended September 30, 2001:                                                |          |       |            |   |        |   |              
|Revenue
 to external customers                                                        | $        | 2,884 |            | $ | 124    |   |              
|Gross
 profit (loss)                                                                  |          | 1,400 |            |   | 86     |   |              
|Income
 (loss) before minority interest, interest expense and discontinued operations |          | 926   |            |   | (774   | ) |              
|Total
 identifiable assets at end of period                                           |          | 1,337 |            |   |       |   |              

14



---



##### 



LIQUIDMETAL TECHNOLOGIES AND SUBSIDIARIES NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the Three
Months and Nine Months Ended September 30, 2002 and 2001(in
thousands, except share data)(unaudited)

Reconciling
 information between reportable segments and the Companys consolidated totals
 is shown in the following table:



|                                                                                                   | For the Three MonthsEnded
 September 30, |        | For the Nine MonthsEnded
 September 30,
|-------------------------------------------------------------------------------------------------- | ---------------------------------------- | ------ | ---------------------------------------
|                                                                                                   |                                          |        |                                        
|                                                                                                   | 2002                                     |        | 2001                                   
|                                                                                                   |                                          |        |                                        
|Total segment income (loss) before minority interest, interest expense and discontinued operations | $                                        | (2,666 | )                                      
|General
 and administrative expenses                                                               |                                          | (2,767 | )                                      
|                                                                                                   |                                          |        |                                        
|Consolidated loss before interest expense, minority interest and discontinued operations           |                                          | (5,433 | )                                      
|Interest
 expense                                                                                  |                                          | (6     | )                                      
|Interest
 income                                                                                   |                                          | 297    |                                        
|Minority
 interest in income of consolidated subsidiary                                            |                                          | (76    | )                                      
|Loss
 from operations of the discontinued retail golf segment, net                                 |                                          |       |                                        
|Gain
 from disposal of discontinued retail golf segment, net                                       |                                          | 1,466  |                                        
|                                                                                                   |                                          |        |                                        
|CONSOLIDATED NET LOSS                                                                              | $                                        | (3,752 | )                                      
|                                                                                                   |                                          |        |                                        

Reconciling
 information between reportable segments and the Companys consolidated totals
 is shown in the following table:



|                                           | September 30,2002 |        | September 30,2001
|------------------------------------------ | ----------------- | ------ | -----------------
|                                           |                   |        |                  
|Total segment assets                       | $                 | 20,759 |                  
|Cash
 and cash equivalents                 |                   | 39,135 |                  
|Marketable securities held-for-sale        |                   | 2,182  |                  
|Prepaid
 expenses and other current assets |                   | 401    |                  
|Other
 property, plant & equipment         |                   | 1,158  |                  
|Other assets                               |                   | 78     |                  
|Intangibles, net                           |                   | 751    |                  
|                                           |                   |        |                  
|Total
 consolidated assets                 | $                 | 64,464 |                  
|                                           |                   |        |                  

12.  Related Party Transactions

Related party
 transactions include subordinated promissory notes issued to certain shareholders,
 the related interest incurred on the notes and the repayment of such notes (see
 Note 6). Additionally, two of the holders of the shareholder promissory notes (see
 Note 6) are directors and one such note holder is an officer of the Company.
 The Company has a consulting agreement with a former employee and officer that
 provides for the payment of annual consulting fees of $50 through the year ended
 December 31, 2005. For this same former employee and officer, the Company has an
 accrued severance balance of $38 at September 30, 2002 and $167 at December 31,
 2001. A company managed and partially owned by one of our directors provides technical
 support services and computer equipment to the Company. During the nine months
 ended September 30, 2002, the Company had incurred $102 of expenses and equipment
 purchases related to this arrangement. As of September 30, 2002, the Company had
 an outstanding payable related to these transactions of $65.

A company
 partially owned and managed by an employee of the Company purchased primarily work-in-process
 inventory and equipment in the discontinued retail golf segment in the amount of
 $250 in March, 2002. Of this amount, $50 remained receivable from the employee
 at March 31, 2002. The proceeds from the transaction were considered in determining
 the net realizable value of the inventory of the discontinued retail golf segment.
 During the second quarter of

15



---



##### 



LIQUIDMETAL
 TECHNOLOGIES AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months and Nine Months Ended September 30, 2002 and 2001
(in thousands, except share data)
(unaudited)

2002, both parties agreed to partially rescind
 the transaction. The effect of this rescission is included as an increase of $200
 to the loss on disposal of the discontinued retail golf segment as of September
 30, 2002.

On July 29,
 2002, the Company invested $2,000 in Growell Metal, Inc. (Growell),
 a metals processing company located in South Korea and publicly traded on South
 Koreas KOSDAQ stock market. The Company acquired 891,100 shares (or approximately
 5%) of Growells outstanding common stock in this transaction. The Company
 has accounted for this investment as an available for sale security in accordance
 with SFAS No. 115 Accounting for Certain Investments in Debt and Equity Securities and carries the investment at fair value with the unrealized gains and losses,
 net of income taxes, reported in other comprehensive income. During the three months
 and nine months ended September 30, 2002 the change in fair value of the investment
 in Growell resulted in an unrealized gain of $182, which is reported in comprehensive
 income in the accompanying condensed consolidated financial statements. Currently,
 Growell holds 92,167 shares (or approximately 0.002%) of the Companys outstanding
 common stock.

Under the
 terms of a technology transfer agreement, the Company has engaged Growell to produce
 Liquidmetal alloy ingots for the Company to purchase and use as a raw material in
 the production of products and components. The agreement is for a two year period
 beginning in February 2002. During the second quarter of 2002, the Company sold
 a machine to Growell for $269 to be used in the production of Liquidmetal alloy
 ingots to be purchased by the Company. Additionally, during the three months and
 nine months ended September 30, 2002, the Company sold $872 of furnace equipment
 to Growell to produce the Liquidmetal alloy ingots for the Company. The profit
 on these sales, $111, was deferred and will be amortized against cost of sales over
 the remaining term of the technology transfer agreement between Growell and the
 Company. During the three and nine months ended September 30, 2002, the Company
 purchased approximately $410 of Liquidmetal alloy ingots from Growell.

Furthermore,
 during the three months ended September 30, 2002, Growell Telecom, Inc. (Growell
 Telecom), a South Korean public company and an affiliate of Growell,
 purchased $724 of casing components for a combination MP3/CD player and tooling.
 During the second quarter of 2002, the Company provided to Growell Telecom technical
 support services for $37. As of September 30, 2002, the total receivable from Growell
 and entities related to Growell was approximately $1,596.

While the Company was privately held, the Companys chairman exercised
 a portion of his nonqualified stock options. The Company inadvertently did not
 collect the federal and state income taxes at the time of the exercise. The chairman
 has informed the Company that he has since paid all the necessary taxes. Management
 believes the exposure to the Company for penalties and interest, if any, is insignificant.

16



---



##### 



INDEPENDENT
 ACCOUNTANTS REPORT

To the Board of Directors and Shareholders
 of  Liquidmetal Technologies:

We have reviewed the accompanying condensed
 consolidated balance sheet of Liquidmetal Technologies and subsidiaries (the Company)
 as of September 30, 2002, the related condensed consolidated statements of
 operations and comprehensive loss for the three-month and nine-month periods ended
 September 30, 2002 and 2001, of shareholders equity (deficiency) for the nine
 months ended September 30, 2002, and of cash flows for the nine months ended September
 30, 2002 and 2001. These financial statements are the responsibility of the Companys
 management.

We conducted our review in accordance with
 standards established by the American Institute of Certified Public Accountants.
 A review of interim financial information consists principally of applying analytical
 procedures to financial data and of making inquiries of persons responsible for
 financial and accounting matters. It is substantially less in scope than an audit
 conducted in accordance with auditing standards generally accepted in the United
 States of America, the objective of which is the expression of an opinion regarding
 the financial statements taken as a whole. Accordingly, we do not express such
 an opinion.

Based on our review, we are not aware of
 any material modifications that should be made to such condensed consolidated financial
 statements for them to be in conformity with accounting principles generally accepted
 in the United States of America.

We have previously audited, in accordance
 with auditing standards generally accepted in the United States of America, the
 consolidated balance sheet of Liquidmetal Technologies and subsidiaries as of December
 31, 2001, and the related consolidated statements of operations and comprehensive
 loss, shareholders equity (deficiency), and cash flows for the year then ended
 (not presented herein) and in our report dated April 4, 2002, we expressed an unqualified
 opinion on those consolidated financial statements. In our opinion, the information
 set forth in the accompanying condensed consolidated balance sheet as of December
 31, 2001 is fairly stated, in all material respects, in relation to the consolidated
 balance sheet from which it has been derived.

DELOITTE & TOUCHE LLPCertified Public
 Accountants

Tampa, FloridaNovember 14, 2002

17



---



##### 



Item 2. Managements Discussion
 and Analysis of Financial Condition and Results of Operations

Liquidmetal Technologies and Subsidiaries,
Managements Discussion and Analysis of Financial ConditionAnd Results of Operations

This discussion should be read in the conjunction
 with the condensed consolidated financial statements and notes included elsewhere
 in this report and the Companys Registration Statement on Form S-1, as amended,
 initially filed with the Securities and Exchange Commission on November 20, 2001
 and declared effective May 21, 2002 (Registration No. 333-73716).

This managements discussion and analysis,
 as well as other sections of this report on Form 10-Q, may contain forward-looking
 statements that involve risks and uncertainties, including statements regarding
 our plans, future events, objectives, expectations, forecasts, or assumptions.
 Any statement that is not a statement of historical fact is a forward-looking statement,
 and in some cases, words such as believe, estimate, 
project, expect, intend,
 may, anticipate, plans, seeks,
 and similar expressions identify forward-looking statements.
 These statements involve risks and uncertainties that
 could cause actual outcomes and results to differ materially from the anticipated
 outcomes or results, and undue reliance should not be placed on these statements.
 These risks and uncertainties may include: our limited operating history in developing
 and manufacturing products from bulk amorphous alloys; the adoption of our alloys
 by customers; the commercial success of our customers products; our ability
 to identify, develop, and commercialize new applications for our alloys; competition
 with suppliers of incumbent materials; the development of new materials that render
 our alloys obsolete; the ability to manage our anticipated growth; our limited direct
 experience in manufacturing bulk alloy products; scaling-up our manufacturing facilities;
 protecting our intellectual property; problems associated with manufacturing and
 selling our alloys outside of the United States; a potentially long development
 and/or sales cycle associated with our products; the fact that future advances in
 materials science could render our alloys obsolete; additional funding may be required
 to grow our business but may not be available on acceptable terms; and other risks
 and uncertainties discussed in filings made with the Securities and Exchange Commission
 (including risks described in subsequent reports on Form 10-Q, Form 10-K, Form 8-K,
 and other filings). Liquidmetal Technologies disclaims any intention or obligation
 to update or revise any forward-looking statements, whether as a result of new information,
 future events, or otherwise.

OVERVIEW

We are in the business of developing, manufacturing, and marketing products made
 from amorphous alloys. We market and sell Liquidmetal alloy industrial coatings
 and make products from bulk Liquidmetal alloys that can be incorporated into the
 finished goods of our customers. Since our inception in 1987, we have marketed and
 sold industrial coatings made from our proprietary amorphous alloys. In 1993, we
 acquired an exclusive license to commercialize what we believe is the worlds
 first commercially viable bulk Liquidmetal alloy, and we began selling products
 made from this alloy in 1997.

The historical operating information for fiscal year 2001 contained in this section
 is based substantially on our coatings business, which is a diminishing percentage
 of our business. We recently began producing bulk Liquidmetal alloy components and
 products for incorporation into our customers finished goods. We have been
 focusing our initial commercialization efforts for bulk Liquidmetal alloys primarily
 on applications for products with high unit volumes that are sold in major industries.
 We expect that these new sources of revenues will continue to significantly change
 the size and character of our revenue mix.

The cost of sales for our Liquidmetal coatings consists primarily of the costs incurred
 in outsourcing our manufacturing to a third party. We expect that our cost of sales
 will increase significantly from historical results as we further develop our bulk
 Liquidmetal alloy business. Although we plan to continue outsourcing the manufacturing
 of our coatings, we intend to internally manufacture products derived from our bulk
 Liquidmetal alloys. By manufacturing our products in our own facilities with our
 own equipment, we expect to reduce processing costs, protect know-how, and

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achieve
 efficiencies in ways that could not be achieved from the third party manufacture
 of bulk Liquidmetal alloy products. However, we expect to incur substantial capital
 expenses as we establish our manufacturing capabilities.

Selling, general, and administrative expenses currently consist primarily of marketing
 and advertising, salaries and related benefits, stock-based compensation, professional
 fees, administrative expenses, and other expenses related to our operations. While
 many of these same expenses will continue, we expect that the amounts incurred for
 these expenses will increase significantly in support of the expanding operations,
 facilities, and applications offered. For example, we intend to hire
additional personnel for the sales and marketing of new applications.

Research and development expenses represent salaries, related benefits expense,
 stock-based compensation, expenses incurred for the design and testing of new processing
 methods, and other expenses related to the research and development of Liquidmetal
 alloys. Costs associated with research and development activities are expensed as
 incurred. We plan to enhance our competitive position by improving our existing
 technologies and developing advances in amorphous alloy technologies. We believe
 that our research and development efforts will focus on the discovery of new alloy
 compositions, the development of improved processing technology, and the identification
 of new applications for our alloys. We expect these research and development efforts
 to increase significantly, as will our expenses relating to these efforts.

Our historical operations included our coatings business and our retail golf operation
 conducted through our majority owned Liquidmetal Golf subsidiary. On September 29,
 2001, our board of directors and the board of directors of Liquidmetal Golf voted
 to discontinue the retail golf operations of Liquidmetal Golf in order to conform
 our operations to our business strategy. Pursuant to Accounting Principles Board
 Opinion No. 30, Reporting the Results of Operations  Reporting the Effects
 of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
 Occurring Events and Transactions, we reclassified our consolidated financial
 statements to reflect the discontinuation of Liquidmetal Golfs retail golf
 operations. The revenues, costs and expenses, assets and liabilities, and cash flows
 of the retail golf business were segregated in our Consolidated Balance Sheets,
 Consolidated Statements of Operations and Comprehensive Loss, and Consolidated Statements
 of Cash Flows. The net operating results, net assets, and net cash flows of the
 retail golf business were reported as discontinued operations in our annual consolidated
 financial statements and the condensed consolidated financial statements included
 in this Form 10-Q. On April 30, 2002, management terminated the operations of the
 retail golf segment by means of liquidating the retail golf assets and liabilities.

The following discussion and analysis of our financial condition and results of
 operations focuses on the historical results of our continuing operations.

RESULTS OF OPERATIONS

Comparison of the three months ended September 30, 2002 and 2001

Revenues. Revenues
 increased to $3.7 million in the three months ended September
 30, 2002 from $1.1 million in the three months ended September 30, 2001. This increase
 was due to increased revenue recognized from the delivery of our first production
 products manufactured from our bulk Liquidmetal alloy, furnace equipment sales,
 revenues from research and development contracts with the Department of Defense
 related to our bulk Liquidmetal alloys and revenues from the prototyping of bulk
 Liquidmetal alloy parts for customers. Revenue also increased from sales of our
 Liquidmetal alloy coatings to the hard-faced coatings industry resulting from increased
 marketing efforts. Revenues from the sale of products manufactured from our bulk
 Liquidmetal alloy increased $0.7 million, revenues from furnace equipment sales
 increased $1.0 million, revenues from research and development contracts with the
 Department of Defense increased $0.3 million, and revenue from prototyping of bulk
 Liquidmetal alloy parts increased $0.4 million in the three months ended September
 30, 2002 from $0.0, $0.0, $0.1, and $0.0 million, respectively, in the three months
 ended September 30, 2001. Revenue from the sale of Liquidmetal coatings products
 increased by $0.2 million over the same period last year.

Cost of
 Sales. Cost of sales increased to $2.5 million, or 69% of revenue, in the three
 months ended September 30, 2002 from $0.5 million, or 49% of revenue, in the three
 months ended September 30, 2001. This increase was primarily a result of costs to
 manufacture products made from our bulk Liquidmetal alloy and the costs of furnace
 equipment sold in the three months ended September 30, 2002. The increase in cost
 of sales as a percentage of revenue was the result of increased sales of products
 made from our bulk Liquidmetal alloys, which carry a higher materials cost than
 our historical coatings business and the costs to manufacture the furnace equipment
 sold in the three months ended September 30, 2002.

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Selling, General, and Administrative Expenses. Selling, general, and administrative
 expenses increased to $3.9 million, or 107% of revenue, in the three months ended
 September 30, 2002, from $1.1 million, or 97% of revenue, in the three months ended
 September 30, 2001. This increase was primarily a result of increased wages of $1.1
 million, increased professional fees, consultant fees, and contract services of
 $0.7 million, increased property rent of $0.3 million, increased insurance expenses
 of $0.2 million, and increased travel expenses of $0.2 million. These and other
 increases in selling, general and administrative expenses represent the continued
 additions to our corporate infrastructure required to prepare for and support the
 anticipated growth of our bulk Liquidmetal alloy business.

Research and Development Expenses. Research and development expenses increased
 to $2.7 million, or 73% of revenue, in the three months ended September 30, 2002
 from $0.4 million, or 33% of revenue, in the three months ended September 30, 2001.
 This increase was partially a result of expenses related to the continued research
 and development of new Liquidmetal alloys and related processing capabilities, including
 the hiring of additional research employees, developing new manufacturing techniques,
 and contracting with consultants to advance the development of Liquidmetal alloys.
 Specifically, salaries and wages increased $1.0 million, professional fees, consultant
 fees, and contract services increased $0.9 million, and travel-related expenses
 increased $0.1 million. These and other increases in research and development expenses
 represent the continued additions to our research and development efforts to create
 new alloy compositions and new processing techniques.

Interest (Expense) Income, Net. Interest income, net, increased to $0.3 million,
 or 8% of revenue, in the three months ended September 30, 2002 from an interest
 expense, net, of $0.3 million, or 26% of revenue, in the three months ended September
 30, 2001. This increase was primarily due to the discontinuance of amortization
 of the fair value of warrants granted in connection with subordinated promissory
 notes issued in February 2001. These subordinated promissory notes were paid in
 the second quarter of 2002, requiring the unamortized fair value of the warrants
 granted in connection with these subordinated promissory notes to be expensed at
 the time of payment. Also in the three months ended September 30, 2002, we earned
 $0.3 million in interest income from the investment of the net proceeds of our initial
 public offering.

Comparison of the nine months ended September 30, 2002 and 2001

Revenues. Revenues increased to $7.3 million in the nine months ended September
 30, 2002 from $3.0 million in the nine months ended September 30, 2001. This increase
 was primarily due to increased sales of our Liquidmetal alloy coatings to the hard-faced
 coatings industry resulting from increased marketing efforts. Additionally, revenues
 derived from furnace equipment sales, revenue from research and development contracts
 with the Department of Defense related to our bulk Liquidmetal alloys, and revenues
 recognized from the delivery of our first production products manufactured from
 our bulk Liquidmetal alloy. Revenues from the sales of Liquidmetal coatings products
 increased $1.0 million. Additionally, revenues of furnace equipment increased $1.0
 million, revenues from our research and development contracts with the Department
 of Defense increased $0.8 million, and revenues from the production of parts made
 of our bulk Liquidmetal alloy increased $0.7 million. The balance of the increase
 in revenue was attributable to $0.6 million from the prototyping of parts as well
 as other development contracts of $0.2 million related to the research and development
 of new products for our customers.

Cost of Sales. Cost of sales increased to $4.4 million, or 60% of revenue,
 in the nine months ended September 30, 2002 from $1.5 million, or 51% of revenue,
 in the nine months ended September 30, 2001. This increase was primarily a result
 of costs to manufacture products made from our bulk Liquidmetal alloy and the costs
 of furnace equipment sold in the nine months ended September 30, 2002. The increase
 in cost of sales as a percentage of revenue was the result of increased costs required
 to manufacture products made from our bulk Liquidmetal alloys and the costs to manufacture
 the furnace equipment sold in the nine months ended September 30, 2002.

Selling, General, and Administrative Expenses. Selling, general, and administrative
 expenses increased to $9.0 million, or 124% of revenue, in the nine months ended
 September 30, 2002 from $2.1 million, or 71% of revenue, in the nine months ended
 September 30, 2001. This increase was primarily a result of increased wages of $3.2
 million, increased professional fees, consultant fees, and contract services of
 $1.3 million, increased travel expenses of $0.6 million, increased property rent
 of $0.6 million, increased insurance expenses of $0.3 million, and $0.1 of stock
 compensation expense incurred in the nine months ended September 30, 2002. These
 and other increases in selling, general and

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administrative expenses represent the
 continued additions to our corporate infrastructure required to prepare for and
 support the anticipated growth of our bulk Liquidmetal alloy business.

Research
 and Development Expenses. Research and development expenses increased to $7.0
 million, or 97% of revenue, in the nine months ended September 30, 2002 from $0.9
 million, or 29% of revenue, in the nine months ended September 30, 2001. This increase
 was partially a result of expenses related to the continued research and development
 of new Liquidmetal alloys and related processing capabilities, including the hiring
 of additional research employees, developing new manufacturing techniques, and contracting
 with consultants to advance the development of Liquidmetal alloys. Salaries and
 wages increased $1.8 million, professional fees, consultant fees, and contract services
 increased $1.1 million, laboratory and prototyping expenses increased $0.7 million,
 and travel related expenses increased $0.4 million. The increase in research and
 development expenses in the nine months ended September 30, 2002 also included $0.2
 million in accelerated depreciation attributable to the acceleration of the estimated
 useful lives of certain capitalized research and development equipment and $1.4
 million of stock-based compensation expense primarily triggered by modifications
 made to accelerate the remaining vesting periods of stock options in connection
 with the hiring of certain consultants as employees in March 2002.

Interest (Expense) Income, Net. Interest expense, net was at $0.7 million,
 or 10% of revenue, in the nine months ended September 30, 2002 and was $0.7 million,
 or 26% of revenue, in the nine months ended September 30, 2001. The interest expense,
 net was primarily due to the amortization of the fair value of warrants granted
 in connection with subordinated promissory notes we issued in February 2001. In
 the nine months ended September 30, 2002, these subordinated promissory notes were
 paid, requiring the unamortized fair value of the warrants granted in connection
 with these subordinated promissory notes to be expensed fully in the nine months
 ended September 30, 2002 in an amount totaling $0.5 million. Also in the nine months
 ended September 30, 2002, we earned $0.4 million in interest income from the investment
 of the net proceeds of our initial public offering.

LIQUIDITY AND CAPITAL RESOURCES

Our operating activities, including our discontinued retail golf operations, used
 cash of $14.6 million for the nine months ended September 30, 2002 and used cash
 of $9.1 million for the nine months ended September 30, 2001. Cash used in operating
 activities for the nine months ended September 30, 2002 resulted primarily from
 net cash used by discontinued operations of $2.3 million and net cash used by continuing
 operations of $12.4 million. Cash used in operating activities for the nine months
 ended September 30, 2001 resulted primarily from net cash used by discontinued operations
 of $7.8 million and net cash used by continuing operations of $1.3 million. We have
 working capital of $40.3 million as of September 30, 2002. Cash used by continuing
 operations in the nine months ended September 30, 2002 resulted primarily from operating
 losses of continuing operations.

Our investing
 activities used cash of $14.5 million for the nine months ended September 30, 2002
 primarily for the acquisition of machinery and equipment and for the construction
 and development of our South Korean manufacturing facility totaling $12.6 million.
 Included in the investing activities for the nine months ended September 30, 2002
 was the investment of $2.0 million in the common stock of Growell
Metals, Inc., (Growell), a South Korean metals processing
company. We intend to
 source some of the production of our Liquidmetal alloy ingots
through Growell to increase the supply and availability of our Liquidmetal
alloy ingots for use in our manufacturing process in Korea. Also included in the investing activities for the nine months
 ended September 30, 2002 was the investment of $0.3 million, resulting in $0.1 million
 increase, net of cash received, in Chusik Hoesa Dongyang Yudoro (Dongyang),
 a South Korean company, whereby we acquired 51% of the outstanding stock
 of Dongyang. Dongyang manufactures furnace equipment critical to the manufacturing
 of our bulk Liquidmetal alloys. The acquisition of a controlling interest in Dongyang
 allows us to better control the manufacturing equipment supply chain relating to
 the manufacture of our bulk Liquidmetal alloys. We also invested $0.1 million
 in patents and trademarks related to our Liquidmetal alloys during the nine months
 ended September 30, 2002. Investing activities used cash of $0.5 million for the
 nine months ended September 30, 2001 primarily from the acquisition of furniture
 and equipment.

Our financing activities provided $67.3 million in cash for the nine months ended
 September 30, 2002 and primarily included $70.7 million, net of transaction costs
 paid, received from our initial public offering. Included in the financing activities
 is $3.5 million of cash borrowed through the issuance of debt prior to the initial
 public offering and $7.4 million used to repay all of the outstanding debt obligations
 of our Company. Also received in the nine months ended September

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30, 2002 was $0.5
 million from the exercise of stock options. Financing activities provided $11.2
 million in cash for the nine months ended September 30, 2001. This amount includes
 $3.5 million from the sale of shares of our common stock, $2.5 million from the
 sale of convertible preferred stock, $2.4 million from exercises of options to purchase
 shares of our common stock, and $3.0 million from the issuance of promissory notes.

We currently
 anticipate significant capital expenditures for at least the next 12 months, primarily
 for the completion of manufacturing facilities and purchase of manufacturing equipment.
 In addition to our first leased manufacturing facility in Incheon, South Korea,
 we have a plant in Pyoungtaek, South Korea, which is approximately 13,000 square
 feet in size. This plant is immediately adjacent to a larger 153,000 square foot
 plant that was recently constructed and is currently being equipped. We also currently
 intend to build-out our leased facility in Pinellas County, Florida to provide research,
 development, and testing capabilities, as well as possible prototype manufacturing
 capabilities. We anticipate that our capital expenditures will be approximately
 $10 to $15 million over the next three months, and approximately $10 to $15 million
 in 2003 for the completion and equipping of our manufacturing facilities and for
 the acquisition of furniture, fixtures, and other business equipment. This amount
 is subject to change, however, depending upon the nature and the amount of the orders
 that we actually receive from customers.

Our capital
 requirements during the next 12 months will depend on numerous factors, including
 the success of our existing products, the development of new applications for Liquidmetal
 alloys, and the resources we devote to develop and support our Liquidmetal alloy
 products. During the next 12 months, we expect to devote substantial capital to
 expand our sales and marketing capabilities, to expand our research and development
 activities, to develop or acquire additional manufacturing facilities, and for working
 capital and other general corporate purposes. These additional expenses and capital
 expenditures will consume a material amount of our cash resources, including a portion
 of the net proceeds of our initial public offering. Our liquidity is not dependent
 upon the use of off-balance sheet financing arrangements, such as securitization
 of receivables or obtaining access to assets through special purpose entities.

We intend
 to continue to develop our manufacturing resources and capabilities. Additionally,
 we anticipate significant growth in our working capital requirements from our expanding
 bulk Liquidmetal alloy business. However, the amount of these requirements will
 depend on the nature and amount of orders we receive for the purchase of our bulk
 Liquidmetal alloy products. We believe the net proceeds received from our initial
 public offering, together with anticipated cash flow from our operations, will be
 sufficient to fund our long-term liquidity requirements. We may, however, need to
 raise additional funds through private or public debt or equity financings, although
 there is no guarantee that additional capital will be available or, if available,
 will be on terms acceptable to us.

We are a party to a distribution agreement whereby we granted to a third party
 exclusive rights to market and sell golf products incorporating Liquidmetal technology
 to certain Japanese sporting equipment companies. The third party paid us a $1.0
 million distribution fee as part of this distribution agreement, of which a portion
 was refundable according to a formula based on the gross profit earned by the third
 party. None of the distribution fee has been refunded, and we do not believe the
 third party is entitled to a refund.

USE OF PROCEEDS

Pursuant to
 the Companys Registration Statement on Form S-1, as amended, initially filed
 with the Securities and Exchange Commission on November 20, 2001 and declared effective
 May 28, 2002 (Registration No. 333-73716), the Company closed an initial public
 offering of 5,000,000 shares of common stock on May 21, 2002, plus an additional
 229,000 shares on June 10, 2002 pursuant to an overallotment option, at a price
 of $15.00 per share (which sale is referred to herein as the Offering). The Offering
 generated aggregate cash proceeds for the Company during the second quarter 2002
 of $78.4 million. The net proceeds were $70.7 million after deducting underwriting
 commissions of $5.5 million and other transaction fees of $2.2 million. The managing
 underwriters for the Offering were Merrill Lynch & Co., UBS Warburg and Robert
 W. Baird & Co.

As of September
 30, 2002, the Company has used approximately $7.8 million of its net proceeds from
 the Offering to repay all of its outstanding promissory notes and accrued interest.
 Additionally, the Company used $5.9 million to partially fund the construction
 of our manufacturing facilities in South Korea and $5.0 million to purchase equipment
 used to manufacture Liquidmetal parts, and $0.3 million was used to purchase the
 51% interest in Dongyang. During the third quarter of 2002, the Company used $2.0
 million to invest in the common stock of Growell, who will supply a portion
 of the Liquidmetal alloy ingots used in our manufacturing process in Korea.

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As of September 30, 2002, the Company used
 approximately $9.2 million of the net proceeds for working
 capital, excluding $1.1 million paid to Paul Azinger for amounts due under the
 terms of his endorsement agreement. We have invested the remaining net proceeds
 of this offering in short-term, investment grade, interest-bearing securities. We
 intend to use the remaining net proceeds of the offering for the completion of our
 manufacturing facility in South Korea, the purchase of additional equipment used
 to manufacture Liquidmetal parts, and working capital purposes. Additionally, management
 may determine to fund all or a portion of the costs of any acquisitions of complementary
 businesses we determine to pursue in the future with proceeds from the Offering,
 although there are no assurances that we will be able to successfully identify or
 consummate any such acquisitions.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements in conformity with accounting
 principles generally accepted in the United States requires us to make estimates
 and assumptions that affect reported amounts of assets and liabilities and disclosure
 of contingent assets and liabilities at the date of the financial statements and
 the reported amounts of revenues and expenses during the reporting period. These
 estimates and assumptions are based on historical experience and various other factors
 that are believed to be reasonable under the circumstances. Actual results could
 differ materially from these estimates under different assumptions or conditions.

We
 believe that the following accounting policies are the most critical to our consolidated
 financial statements since these policies require significant judgment or involve
 complex estimates that are important to the portrayal of our financial condition
 and operating results:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | We have accounted
 for our retail golf business as a discontinued operation. In calculating the loss
 on disposal of our retail golf business, we made certain estimates with regard to
 the valuation of the assets and liabilities of the retail golf business. Estimates
 were made for the collectability of accounts receivables, the liquidation value
 of inventories, the liquidation of certain other operating assets, and the estimated
 future losses of the retail golf business through the disposal date of April 30,
 2002. Also included in the loss on disposal is our estimate of stock option compensation
 expense attributable to an endorsement contract. The estimated stock option expense
 is based in part on an estimated future common stock price. If the market price
 of our common stock fluctuates from our estimate over the remaining life of the
 endorsement contract, the estimated stock option expense may be subject to significant
 volatility. To the degree actual results vary from any of these estimates or management
 adjusts the estimates, the loss on disposal of discontinued operations
 may increase or decrease and cash received from the liquidation for these assets
 may not meet our estimates. During the nine months ended September 30, 2002, the
 Company recorded a $3.0 million reduction to the estimated loss on disposal of the
 discontinued retail golf segment due to a change in the estimated stock option value
 attributable to options granted pursuant to an endorsement agreement. The change
 in the estimated stock option value was due to a change in the market price of the
 underlying common stock.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | We have recorded
 stock-based compensation expense related to the issuance of stock options to non-employees.
 To the extent that these non-employees have not completed the services required
 to earn the options, we are required to value these option grants based on their
 fair market value, which is based in part on the underlying market price of our
 common stock at the time the financial statements are presented. If the market price
 of our common stock increases over the period in which the non-employees earn the
 stock option awards, the expense attributable to these stock options increases and
 is charged against income. Due to the number of options issued to non-employees,
 material amounts could be charged against earnings and could cause significant volatility
 in future earnings if the market price of our common stock increases.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Our earnings
 and cash flows are subject to fluctuations due to changes in non-U.S. currency exchange
 rates. We are exposed to non-U.S. exchange rate fluctuations as the financial results
 of non-U.S. subsidiaries are translated into U.S. dollars in consideration. As exchange
 rates vary, those results, when translated, may vary from expectations and adversely
 impact overall expected profitability. The cumulative translation effects for subsidiaries
 using functional currencies other than the U.S. dollar are included in accumulated
 foreign exchange translation in                                                                                                                                                                                                                                                                                      

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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | shareholders equity. Movements in non-U.S.
 currency exchange rates may affect our competitive position, as exchange rate changes
 may affect business practices and/or pricing strategies of non-U.S. based competitors.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | We record
 valuation allowances to reduce the deferred tax assets to the amounts estimated
 to be realized. While we consider taxable income in assessing the need for a valuation
 allowance, in the event we determine we would be able to realize our deferred tax
 assets in the future in excess of the net recorded amount, an adjustment would be
 made and income increased in the period of such determination. Likewise, in the
 event we determine we would not be able to realize all or part of our deferred tax
 assets in the future, an adjustment would be made and charged to income in the period
 of such determination.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001,
 the Financial Accounting Standards Board (FASB) issued SFAS No. 141,
 Business Combinations and SFAS No. 142, Goodwill and Other Intangible
 Assets. SFAS No. 141 requires that all business combinations be accounted for
 under the purchase method only and that certain acquired intangible assets in a
 business combination be recognized as assets apart from goodwill. SFAS No. 142 requires
 that ratable amortization of goodwill be replaced with periodic tests of the goodwills
 impairment and that limited-life intangible assets other than goodwill should
 be amortized over their useful lives. Implementation of SFAS No. 141 and SFAS No.
 142 is required for fiscal year 2002. The adoption of SFAS No. 141 and 142 did not
 have a material impact on the Companys financial statements.

In June 2001,
 the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations.
 SFAS No. 143 requires that the fair value of a liability for an asset retirement
 obligation be recognized in the period in which such liabilities are incurred if
 a reasonable estimate of fair value can be made. The associated asset retirement
 costs should be capitalized as part of the carrying amount of the long-lived asset.
 SFAS No. 143 is effective for financial statements issued for fiscal years beginning
 after June 15, 2002. Adoption of SFAS No. 143 is not expected to have a material
 impact on the Companys financial statements.

Issued in
 October 2001, SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
 Assets, replaces SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
 and for Long-Lived Assets to be Disposed Of. The accounting model for long-lived
 assets to be disposed of by sale applies to all long-lived assets, including discontinued
 operations, and replaces the provisions of APB Opinion No. 30, Reporting Results
 of OperationsReporting the Effects of Disposal of a Segment of a Business,
 for the disposal of segments of a business. SFAS No. 144 requires that those long-lived
 assets be measured at the lower of the carrying amount or fair value less cost to
 sell, whether reported in continuing operations or in discontinued operations. Therefore,
 discontinued operations will no longer be measured at net realizable value or include
 amounts for operating losses that have not yet occurred. SFAS No. 144 also broadens
 the reporting of discontinued operations to include all components of an entity
 with operations that can be distinguished from the rest of the entity and that will
 be eliminated from the ongoing operations of the entity in a disposal transaction.
 The provisions of SFAS No. 144 are effective for financial statements issued for
 fiscal years beginning after December 15, 2001 and, generally, are to be applied
 prospectively. In 2002, the Company adopted SFAS No. 144 which did not result in
 a material impact to the Companys financial statements.

In April 2002,
 the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment
 of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 rescinds SFAS
 No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment
 of that Statement, SFAS No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund
 Requirements. This Statement also rescinds SFAS No. 44, Accounting for Intangible
 Assets of Motor Carriers. SFAS No. 145 amends SFAS No. 13, Accounting for Leases,
 to eliminate an inconsistency between the required accounting for sale-leaseback
 transactions and the required accounting for certain lease modifications that have
 economic effects that are similar to sale-leaseback transactions. This Statement
 also amends other existing authoritative pronouncements to make various technical
 corrections, clarify meanings, or describe their applicability under changed conditions.
 The provisions of this Statement related to the rescission of Statement 4 are required
 to be applied in fiscal years beginning after May 15, 2002. The provisions in paragraphs
 8 and 9(c) of this Statement related to Statement 13 are

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required to be applied
 to transactions occurring after May 15, 2002. Any gain or loss on extinguishment
 of debt that was classified as an extraordinary item in prior periods presented
 that does not meet the criteria in APB No. 30 for classification as an extraordinary
 item is required to be reclassified. All other provisions of this Statement are
 effective for financial statements issued on or after May 15, 2002. The Company
 elected to early adopt SFAS No. 145 during the second quarter of 2002. The effect
 of adopting SFAS No. 145 was to increase interest expense by $0.5 million, increase
 net loss from continuing operations by $0.5 million, and to increase basic and diluted
 loss from continuing operations per share by $0.01.

In June 2002,
 the FASB issued SFAS No. 146, Accounting for Costs Associated With Exit or Disposal
 Activities. Statement 146 addresses financial accounting and reporting for
 costs associated with exit or disposal activities and nullifies Emerging Issues
 Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee
 Termination Benefits and Other Costs to Exit an Activity (including Certain Costs
 Incurred in a Restructuring). SFAS No. 146 requires costs associated with exit
 or disposal activities to be recognized when the costs are incurred, rather than
 at a date of commitment to an exit or disposal plan. SFAS No. 146 is effective for
 exit or disposal activities that are initiated after December 31, 2002. The adoption
 of SFAS No. 146 is not expected to have a material impact on the Companys
 financial statements.

In October
 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial Institutions-an
 amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9.
 SFAS No. 147 removes acquisitions of financial institutions from the scope of both
 Statement 72 and Interpretation 9 and requires that those transactions be accounted
 for in accordance with FASB Statements No. 141, Business Combinations, and
 No. 142, Goodwill and Other Intangible Assets. In addition, this Statement
 amends FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived
 Assets, to include in its scope long-term customer-relationship intangible assets
 of financial institutions such as depositor- and borrower-relationship intangible
 assets and credit cardholder intangible assets. Consequently, those intangible assets
 are subject to the same undiscounted cash flow recoverability test and impairment
 loss recognition and measurement provisions that SFAS No. 144 requires for other
 long-lived assets that are held and used. Paragraph 5 of this SFAS No. 147, which
 relates to the application of the purchase method of accounting, is effective for
 acquisitions for which the date of acquisition is on or after October 1, 2002. The
 provisions in paragraph 6 of SFAS No. 147 related to accounting for the impairment
 or disposal of certain long-term customer-relationship intangible assets are effective
 on October 1, 2002. Transition provisions for previously recognized unidentifiable
 intangible assets in paragraphs 8-14 of SFAS No. 147 are effective on October 1,
 2002. The adoption of SFAS No. 147 is not expected to have a material impact on
 the Companys financial statements.

RELATED PARTY TRANSACTIONS

In May 2002,
 we paid a total of $7.8 million to certain shareholders and directors of the Company
 in full payment of subordinated promissory notes held by them. The holders of these
 notes were John Kang, Ricardo Salas and Tjoa Thian Song, each of whom are directors
 and shareholders of the Company. John Kang is also our president and chief executive
 officer. We believe that the terms and conditions of these notes, including their
 interest rates, were more favorable to us than the terms and conditions that we
 could have obtained from clearly independent third parties.

A company
 partially owned and managed by an employee of the Company purchased primarily work-in-process
 inventory and equipment in the discontinued retail golf segment in the amount of
 $250,000 in March, 2002. Of this amount, $50,000 remained receivable from the employee
 at March 31, 2002. The proceeds from the transaction were considered in determining
 the net realizable value of the inventory of the discontinued retail golf segment.
 During the second quarter of 2002, both parties agreed to partially rescind the
 transaction. The effect of this rescission is included as an increase of $200,000
 to the loss on disposal of the discontinued retail golf segment as of September
 30, 2002.

We are currently
 a party to a consulting agreement with a company that is owned by a director and
 former executive officer of the Company. This agreement provides for the payment
 by the Company of consulting fees of $50,000 per year through December 31, 2005.
 Additionally, a company managed and partially owned by one of our directors provides
 technical support services and computer equipment to the Company. During the nine
 months ended September 30, 2002, the Company had incurred $102,000 of expenses and
 equipment purchases related to this arrangement. As of September 30, 2002, the
 Company had an outstanding payable related to these transactions of $65,000.

Consistent
 with our strategy of pursuing strategic transactions and relationships, on July
 29, 2002, we invested $2 million

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in Growell, a
 South Korean metals processing company. This investment took the form of a purchase
 of Growells common stock directly from Growell, which is a public company
 whose common stock is traded on South Koreas KOSDAQ stock market. We acquired
 approximately 5% of Growells outstanding common stock in this transaction.
 The specific purpose of this investment was to increase the supply
and availability of Liquidmetal alloy ingots for use in our
manufacturing process in Korea. Prior to our investment in Growell, we engaged Growell to produce and sell to us
 Liquidmetal alloy ingots that will be used to produce products and components in
 our South Korean manufacturing facilities. Growell will supply a portion of the
 ingots to be used in our manufacturing operations, and our investment in Growell
 will assist Growell in developing the capabilities to meet our expected demand.
 Growell holds 92,167 shares (or approximately 0.002%) of the outstanding
 common stock of our Company. None of our executive officers or directors holds
 any shares of Growell.

During the
 second quarter of 2002, the Company sold a machine to Growell for $269,000 to be
 used in the production of Liquidmetal alloy ingots to be purchased by the Company.
 Additionally, during the three months and nine months ended September 30, 2002,
 the Company sold $872,000 of furnace equipment to Growell to produce the Liquidmetal
 alloy ingots for the Company. The profit on these sales, $111,000, was deferred
 and will be amortized against cost of sales over the remaining term of the technology
 transfer agreement between Growell and the Company. During the three and nine months
 ended September 30, 2002, the Company purchased approximately $410,000 of Liquidmetal
 alloy ingots from Growell.

We also
 expect that affiliates of Growell could be valuable customers of Liquidmetal
 alloy finished goods. In particular, during the three months ended September 30,
 2002, Growell Telecom, Inc. (Growell Telecom) a South Korean public
 company and an affiliate of Growell Metal, purchased $724,000 of casing components
 for a combination MP3/CD player and tooling. During the second quarter of 2002,
 the Company provided to Growell Telecom technical support services for $37,000.
 As of September 30, 2002, the total receivable from Growell and entities related
 to Growell was approximately $1.6 million.

26



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##### 



Item 3  Quantitative
 and Qualitative Disclosures about Market Risk

We are exposed
 to various markets risks as a part of our operations, and we anticipate that this
 exposure will increase as a result of our planned growth. In an effort to mitigate
 losses associated with these risks, we may at times enter into derivative financial
 instruments, although we have not historically done so. These may take the form
 of forward sales contracts, option contracts, foreign currency exchange contracts,
 and interest rate swaps. We have not, and do not intend to, engage in the practice
 of trading derivative securities for profit.

Interest
 Rates. We are exposed to market risks relating to changes in interest rates.
 Some of the proceeds of our initial public offering are invested in short-term,
 interest-bearing, investment grade securities. The value of these securities will
 be subject to interest rate risk and could fall in value if interest rates rise.

Commodity
 Prices. We are exposed to price risk related to anticipated purchases of certain
 commodities used as raw materials by our businesses, including titanium and zirconium.
 Although we do not currently enter into commodity future, forward, and option contracts
 to manage the fluctuations in prices of anticipated purchases, we may enter into
 such contacts in the future as our business grows and as our purchases of these
 raw materials increase.

Foreign
 Exchange Rates. As a result of our operation of a manufacturing facility in
 South Korea, a substantial portion of our costs will be denominated in the South
 Korean won. Consequently, fluctuations in the exchange rates of the South Korean
 won to the U.S. dollar will affect our costs of goods sold and operating margins
 and could result in exchange losses. Although we do not currently enter into foreign
 exchange hedge transactions, we may do so in the future as our business grows.

Item 4  Controls and Procedures

Within the
 90 days prior to the date of this quarterly report, the Company carried out an evaluation,
 under the supervision and with the participation of the Companys management,
 including the Companys Chief Executive Officer and Chief Financial Officer,
 of the effectiveness of the design and operation of the Companys disclosure
 controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act
 of 1934, as amended. Based on that evaluation, the Chief Executive Officer and the
 Chief Financial Officer have concluded that these disclosure controls and procedures
 are effective in timely alerting them to material information relating to the Company,
 including its consolidated subsidiaries, required to be included in
this quarterly report on Form 10-Q. There were no significant changes in our internal controls
 or in other factors that could significantly affect these controls subsequent to
 the date of our evaluation.

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PART II
OTHER INFORMATION

Item 2  Change in Securities and
 Use of Proceeds.

Pursuant to
 the Companys Registration Statement on Form S-1, as amended, initially filed
 with the Securities and Exchange Commission on November 20, 2001 and declared effective
 May 21, 2002 (Registration No. 333-73716), the Company closed an initial public
 offering of 5,000,000 shares of common stock on May 28, 2002, plus an additional
 229,000 shares on June 10, 2002 pursuant to an overallotment option, at a price
 of $15.00 per share (which sale is referred to herein as the Offering). The Offering
 generated aggregate cash proceeds for the Company during the second quarter 2002
 of $78.4 million. The net proceeds were $70.7 million after deducting underwriting
 commissions of $5.5 million and other transaction fees of $2.2 million. The managing
 underwriters for the Offering were Merrill Lynch & Co., UBS Warburg and Robert
 W. Baird & Co.

As of September
 30, 2002, the Company has used approximately $7.8 million of its net proceeds from
 the Offering to repay all of its outstanding promissory notes and accrued interest.
 Additionally, the Company used $5.9 million to partially fund the construction
 of our manufacturing facilities in South Korea and $5.0 million to purchase equipment
 used to manufacture Liquidmetal parts, and $0.3 million was used to purchase the
 51% interest in Dongyang. During the third quarter of 2002, the Company used $2.0
 million to invest in the common stock of Growell, who will supply a
 portion of the Liquidmetal alloy ingots used in to our manufacturing
process in Korea. As of September
 30, 2002, the Company used approximately $9.2 million of the net proceeds for working
 capital, excluding $1.1 million paid to Paul Azinger for amounts due under the
 terms of his endorsement agreement. We have invested the remaining net proceeds
 of this offering in short-term, investment grade, interest-bearing securities. We
 intend to use the remaining net proceeds of the offering for the completion of our
 manufacturing facility in South Korea, the purchase of additional equipment used
 to manufacture Liquidmetal parts, and working capital purposes. Additionally, management
 may determine to fund all or a portion of the costs of any acquisitions of complementary
 businesses we determine to pursue in the future with proceeds from the Offering,
 although there are no assurances that we will be able to successfully identify or
 consummate any such acquisitions.

Item 6  Exhibits and Reports on
 Form 8-K.

(a)     Exhibits

The following documents are filed as an
 exhibit to this Report:



| |         |  |                                                                   
| | ------- |  | ------------------------------------------------------------------
| | Exhibit |  |                                                                   
| | Number  |  | Description
of Document                                           
| |         |  |                                                                   
| | 99.1    |  | Certificate of Chief Executive Officer
pursuant to 18 U.S.C. 1350.
| |         |  |                                                                   
| | 99.2    |  | Certificate
of Chief Financial Officer
pursuant to 18 U.S.C. 1350.

(b)     Reports on Form 8-K

The Company filed no reports on Form 8-K during the
 quarter ended September 30, 2002.

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SIGNATURES

Pursuant to the requirements of the Securities
 Exchange Act of 1934, the registrant has duly caused this report to be signed on
 its behalf by the undersigned thereunto duly authorized.



|Date:
November 14, 2002 | LIQUIDMETAL TECHNOLOGIES(Registrant)/s/ John Kang                                              
|----------------------- | -----------------------------------------------------------------------------------------------
|                        |                                                                                                
|                        | John KangPresident & Chief
 Executive Officer(Principal Executive Officer)                     
|                        |                                                                                                
|Date: November 14, 2002 | /s/ Brian McDougall                                                                            
|                        |                                                                                                
|                        | Brian McDougallExecutive
 Vice President & Chief Financial Officer(Principal Financial Officer)









29



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##### 



CERTIFICATION

I, John Kang, certify that:

1. I have reviewed this quarterly report
 on Form 10-Q of Liquidmetal Technologies;

2. Based on my knowledge, this quarterly
 report does not contain any untrue statement of a material fact or omit to state
 a material fact necessary to make the statements made, in light of the circumstances
 under which such statements were made, not misleading with respect to the period
 covered by this quarterly report;

3. Based on my knowledge, the financial
 statements, and other financial information included in this quarterly report, fairly
 present in all material respects the financial condition, results of operations
 and cash flows of the registrant as of, and for, the periods presented in this quarterly
 report;

4. The registrants other certifying
 officers and I are responsible for establishing and maintaining disclosure controls
 and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
 and we have:

a) designed such disclosure controls and
 procedures to ensure that material information relating to the registrant, including
 its consolidated subsidiaries, is made known to us by others within those entities,
 particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants
 disclosure controls and procedures as of a date within 90 days prior to the
 filing date of this quarterly report (the Evaluation Date); and

c) presented in this quarterly report our
 conclusions about the effectiveness of the disclosure controls and procedures based
 on our evaluation as of the Evaluation Date;

5. The registrants other certifying
 officers and I have disclosed, based on our most recent evaluation, to the registrants
 auditors and the audit committee of registrants board of directors
 (or persons performing the equivalent function):

a) all significant deficiencies in the design
 or operation of internal controls which could adversely affect the registrants
 ability to record, process, summarize and report financial data and have identified
 for the registrants auditors any material weaknesses in internal controls;
 and

b) any fraud, whether or not material, that
 involves management or other employees who have a significant role in the registrants
 internal controls; and

6. The registrants other certifying
 officers and I have indicated in this quarterly report whether or not there were
 significant changes in internal controls or in other factors that could significantly
 affect internal controls subsequent to the date of our most recent evaluation, including
 any corrective actions with regard to significant deficiencies and material weaknesses.



|Date:
November 14, 2002 | /s/ John Kang                                                             
|----------------------- | --------------------------------------------------------------------------
|                        |                                                                           
|                        | John KangPresident & Chief
 Executive Officer(Principal Executive Officer)

30



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##### 



CERTIFICATION

I, Brian McDougall, certify that:

1. I have reviewed this quarterly report
 on Form 10-Q of Liquidmetal Technologies;

2. Based on my knowledge, this quarterly
 report does not contain any untrue statement of a material fact or omit to state
 a material fact necessary to make the statements made, in light of the circumstances
 under which such statements were made, not misleading with respect to the period
 covered by this quarterly report;

3. Based on my knowledge, the financial
 statements, and other financial information included in this quarterly report, fairly
 present in all material respects the financial condition, results of operations
 and cash flows of the registrant as of, and for, the periods presented in this quarterly
 report;

4. The registrants other certifying
 officers and I are responsible for establishing and maintaining disclosure controls
 and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
 and we have:

a) designed such disclosure controls and
 procedures to ensure that material information relating to the registrant, including
 its consolidated subsidiaries, is made known to us by others within those entities,
 particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants
 disclosure controls and procedures as of a date within 90 days prior to the
 filing date of this quarterly report (the Evaluation Date); and

c) presented in this quarterly report our
 conclusions about the effectiveness of the disclosure controls and procedures based
 on our evaluation as of the Evaluation Date;

5. The registrants other certifying
 officers and I have disclosed, based on our most recent evaluation, to the registrants
 auditors and the audit committee of registrants board of directors
 (or persons performing the equivalent function):

a) all significant deficiencies in the design
 or operation of internal controls which could adversely affect the registrants
 ability to record, process, summarize and report financial data and have identified
 for the registrants auditors any material weaknesses in internal controls;
 and

b) any fraud, whether or not material, that
 involves management or other employees who have a significant role in the registrants
 internal controls; and

6. The registrants other certifying
 officers and I have indicated in this quarterly report whether or not there were
 significant changes in internal controls or in other factors that could significantly
 affect internal controls subsequent to the date of our most recent evaluation, including
 any corrective actions with regard to significant deficiencies and material weaknesses.



|Date: November 14, 2002 | /s/ Brian McDougall                                                                            
|----------------------- | -----------------------------------------------------------------------------------------------
|                        |                                                                                                
|                        | Brian McDougallExecutive
 Vice President & Chief Financial Officer(Principal Financial Officer)

31