Liquidmetal Technologies Inc (OTCMKTS:LQMT) is another microcap runner that we at Insider Financial have covered a great deal in the past. While 2018 was not a great year for its stock, LQMT has been one of our biggest winners prior to that. We first started covering LQMT back in 2016 at around $0.06 a share and then rode it all the way to $0.45 in 2017.
Is LQMT setting itself up for another run? It sure looks like it.
For those that are not familiar with Liquidmetal, here’s a little background. Liquidmetal Technologies is the leading producer of parts made with amorphous alloys, also known scientifically as Bulk Metallic Glasses or BMGs. The non-crystalline atomic structure of these materials imparts unique performance properties, including the ability to injection-mold with micron-level precision, lustrous finishes, high strength, hardness and corrosion resistance, and remarkable elasticity. Liquidmetal Technologies is the first company to produce amorphous alloy parts commercially, enabling significant improvements in products across a wide array of industries.
During the third quarter of 2018, the Company generated $253,000 in revenue through completion of the production tooling portion of commercial orders for both the AMM and MIM platforms. During the third quarter of 2018, LQMT finished validation procedures for the Company’s first eight-cavity mold.
Cost of goods sold was $884,000 in Q3 2018 and $87,000 in Q3 2017. This increase was primarily attributable to markdowns of raw materials inventory, which was slightly offset by improved production throughput.
Selling, marketing, general and administrative expense was $1.4 million in Q3 2018 and $1.7 million in Q3 2017. The decrease is primarily due to slightly lower costs associated with employee compensation, inclusive of non-cash stock-based compensation.
Research and development increased to $601,000 from $500,000 in Q3 2017. The increase is mainly due to increases in internal projects related alloy and molding machine development.
Cash and restricted cash totaled $36.4 million at September 30, 2018, as compared to $41.3 million at December 31, 2017.
Partnership with Omega
The new Omega Speedmaster Racing Chronometer utilized Liquidmetal Technologies. Omega, with support from its parent company, the Swatch Group, spared no effort in developmental work. The tachymeter scale along the bezel is fabricated from Liquidmetal, a patented material that’s poured into the milled indentations while still molten, allowed to harden, and then matte polished on its upper surface. Ceramic has a greater surface hardness, so polishing the Liquidmetal leaves no unwanted tool marks or other traces on the ceramic. This method allows Omega to give the bezel a completely smooth scale consisting of both polished ceramic and matte metal.
The partnership with Omega is just a start with the Swatch Group. The Swatch Group is one of the world’s largest watch companies owning brands like Breguet, Harry Winston, Blancpain, Omega, Longines, Rado, Tissot, Balmain, and many others. Swatch Group also prefers to keep all manufacturing in-house. Swatch Group now controls the entire gold processing chain internally. Its own foundry, which has just been granted a Responsible Jewellery Council (RJC) Code of Practices (COP) certificate, is now able to manage all of the gold requirements within the Group.
All of the Group’s gold will be processed in a totally closed cycle and under strict internal control. In other words, the entire transformation process – from the foundry to the semi-finished and finished products – is controlled within the Swatch Group.
Why this matters?
This could be the start of Swatch Group eyeing Liquidmetal Technologies as a takeover. While we and others speculated that Apple might make a play for the company and its over 70 patents, Swatch Group might be the ideal acquirer now that it is incorporating Liquidmetal Technologies into its watch-making process.
Currently trading with a market cap of $133 million, LQMT is an exciting story among small caps. With its $36 million in cash and over 70 U.S. patents, we believe it’s not a question of if LQMT will be bought, but when. As we’ve said before, CEO Lugee Li knows what he is doing and he didn’t invest $63 million into the company for nothing. He knows the value of Liquidmetal Technologies and is eyeing a huge payday. Patient shareholders will reap the rewards as well. This new bull run looks to be just getting started.
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Disclosure: We have no position in LQMT and have not been compensated for this article.
Image courtesy of Mark via Flickr