Lugee Li - CEO Tony Chung - CFO Bruce Bromage - EVP Business Development & Operations

Good day and welcome to the Liquidmetal Technologies’ Fourth Quarter and Fiscal 2016 Conference call. My name is Chris, and I will be your conference operator this afternoon. Joining us on today's call are Liquidmetal's President and CEO, Professor Lugee Li; CFO, Tony Chung; and Executive Vice President of Business Development and Operations, Bruce Bromage. Before we proceed, I would like to provide the company's Safe Harbor statement with important questions regarding forward-looking statements made during this call, as follows. All statements made by the management during this call that are not based on historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, but are not limited, to those made by Mr. Professor Li, Mr. Chung and Mr. Bromage regarding the company's cash, revenue outlook and technology development. While management has based any forward-looking statements made during the call on its current expectations, the information on which such expectations were based may change. These forward-looking statements may rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties and other factors, many of which are outside the company's control that could cause actual results to materially differ from such statements. Such risks, uncertainties and other factors include, but are not necessarily limited to, those set forth under Risk Factors in the company's Annual Report on Form 10-K for the year ended December 31, 2016. Accordingly, you should not plan any reliance on forward-looking statements as a prediction of annual results -- actual results, excuse me. The company disclaims any intention and undertakes no obligation to update or revise any forward-looking statements. You are also urged to carefully review and consider the various disclosures in the company's Annual Report on Form 10-K for the year ended December 31, 2016, as well as other public filings with the SEC since such date. I would like to remind everyone that this call will be available for replay starting later this evening via the link available in the Investor Relations section of the company's Web site at www.liquidmetal.com. Now, I would like to turn the call over to the company’s President and CEO, Professsor Lugee Li. Please go ahead sir.

Thanks, Chris. Hello everyone. Since coming on Board as CEO of Liquidmetal I have seen great potential. It is not only the technology, it is the people. We've a very strong team, it is supreme. Everyone knows Liquidmetal. I know what Liquidmetal needs to thrive, so I give it. From my experience with Eon's business assess I know there are many opportunity for Liquidmetal. I'm focusing on those most promising and the fastest opportunity. And I'm now making some change. First, we can make progress very quickly by using the manufacturing capabilities that work so well in China. We are making parts for many customer using amorphous die cast machine and metal injection molding machine. I'm adding this system to Liquidmetal. Bruce will give an update. Second, I'm looking closely at Liquidmetal's cost structure, to become profitable as soon as possible. I'm changing the business, I also changed the spending. Tony will provide the details later. It will take a lot of hard work and a little bit more patience but in time Liquidmetal will thrive. Now, I will let Bruce and Tony give you their details and updates.

Thank you, Lugee. I'm pleased to update our operational progress. We remain focused on accelerating adoption of our technology and scaling the business. To accelerate adoption, we continue to work closely with strategic customers to prototype parts in automotive, medical and consumer markets. These parts demonstrate and refine our full production capabilities including molding, finishing and quality management. In addition, new products are underway power the use of lower cost alloys, lower cost molds, and China based production. These new capabilities provide broader and more competitive solutions to meet challenging customer requirements. To scale the business we are readying our building, a 41,000 square foot facility in nearby Lake Forest, California for volume production. We expect it to be operational in early third quarter. Our Lake Forest facility will support volume production of three distinct technologies. First, our flagship cold crucible injection molding systems are in active use. These systems provide exceptional control over oxygen and other impurities that affect the performance of amorphous metal parts. Parts are produced in high volumes with remarkable dimensional precision within microns, with high strength in corrosion resistance that is unique to bulk metallic glasses. We have extensively characterized the properties of our primary alloy LM105 which is produced to meet strict material chemistry specification. Our simplified production process and rigorous quality controls make our cold crucible system attractive for the most demanding customers including medical device manufacturers. During our last quarter, we completed additional biocompatibility studies that demonstrates the promise of Liquidmetal technology from [indiscernible] including designs that exploit the exceptional ware resistance of our materials. Second, we are about to receive our first two hot crucible die cast machine, leveraging technology developed by Eon. These systems produced high quality Liquimetal parts using low cost alloys. And the machines can make parts that are up to three times larger than our cold crucible systems. We are finding immediate interest in the many new applications that are enabled by this technology and have customer prototypes in China on identical machines. Today we offer customers [technical difficulty] volumes die cast production and we expect to offer U.S. based production within the third quarter of this year. Our injection molding and die cast systems are complementary addressing distinct market opportunities. Finally, we planned to add metal injection molding or MIM production to our manufacturing capabilities. MIM is a mature technology that is similar in some ways to Liquidmetal. Metal part or injection molding is a multi-step process, it is more difficult to control than that of metal but with significantly lower material cost. In general, a MIM part is not a candidate for Liquidmetal and vice versa. Customer seeking precision metal parts will be well served by our unique ability to guide them through the cost performance tradeoffs addressed by each of our three production technologies. Members of our staff have deep MIM experience and expertise and have already found customer interest. We expect our initial MIM cell to be operational by the third and fourth quarter and will begin quoting China based MIM production shortly. These efforts allow us to present customer with industry leading capabilities to address applications, from low cost to very high performance in China, United States and Europe. With that I'll hand the call over to Tony to provide our financial update.

Thanks Bruce and good morning everyone. First let me provide a brief overview of our 2016 financial results. For the fourth quarter we generated $124,000 of revenues to close out the year with $480,000 of revenues. Our operating loss for the fourth quarter was $2.7 million to close out the year with $9.9 million of operating loss. As Prof. Lee alluded to previously our primary goal as a company is to become profitable as soon as possible. Bruce has discussed our strategy to generating and increasing our revenue, but to become profitable we must also reduce our cost-of-sales and operating expenses. To reduce our cost-of-sales we are currently focusing our attention on collaborating with Eon Tech to lower alloy cost and increase efficiencies associated with the new die cast machine. To reduce our operating expense, we have focused on reducing our general and administrative expenses and as you are aware we've recently had changes in our execute management structure which in turn will reduce our G&A expense for the future. In addition, the company has significantly reduced its cash bonus structure for executives for 2017 and beyond. All in an effort to focus our spending on revenue generating activity. Professor Li’s dedication to reducing costs cannot be understated considering that he continues to receive no compensation for his role as CEO of the company. And we as Executive Management are following his lead by reducing our incentive pay to decrease operating expenses for the long run. Now focusing our attention on cash, we ended 2016 with close to $60 million of cash in the bank resulting from Professor Li’s investments in the fourth quarter of 2016. As you are aware, we have and we’ll spend on cash on investing in our infrastructure, as evidenced by the recent purchase of our new corporate headquarters and manufacturing facility, and on the purchase of die cast machine. Look for us to further invest in our capital infrastructure in 2017 to build out our new facility, to advance or manufacturing in the U.S. Lastly, I would like to point out an important company milestone as disclosed in our 10-K and that is a fact that our financial auditor SingerLewak has signed off on our financial statements without a go-in concern opinion. This is the first time in the history of our company since I've been here, we have not had to go-in concern opinion. This is largely due to the investments by Professor Li, but it’s sheds light on an important factor on the operation of this company. Fund raising in general can be incredibly time consuming expenses and distracting. It’s a significant moment for this company to be able to completely focus on manufacturing, operations and profitability without the need to raise short-term capital and I for one am glad that the company can operate making sound long-term decisions without this burden and distraction. For a more through discussion of our 2016 financial results, please refer to the management discussion in Analysis Section of our 2016 Form 10-K. Now related to some administrative matters, as part of our efforts to focused on operations and reduce operating expenses, we will not hold a first quarter earnings call. Look for our press releases and SEC filings for update on the company until our second quarter earnings call. In addition, after we settle into our new headquarters in Lake Forest, we will have an open house to showcase our new building sometimes this summer. Shareholders, customers, partners are all welcomed to join, so please look out for future announcements on our Web site. This concludes our 2016 year-end earnings call. Thank you very much and we will see you at our open house. Operator?

Yes, sir.

We are done here.

Very good. Thank you. This concludes today’s call. Thank you for your participation. You may now disconnect. End of Q&A: