Rancho Santa Margarita-based Liquidmetal Technologies Inc. said it expects Chinese businessman Yeung Tak Lugee Li to invest up to $63.4 million to take a controlling interest in the producer of alloys used in medical devices and consumer electronics.
“Compared to prior fundraisers done through investment funds, Mr. Li’s investment is long term and is strategically focused,” said Tony Chung, chief financial officer for the pink-sheet listed company, on an analyst conference call. The company has 23 employees.
Liquidmetal produces glass-like metals that are billed as being two to three times stronger and tougher than stainless steel or titanium. Electronics components can be made by injecting Liquidmetal into molds instead of using a machine to whittle away a block of metal.
Liquidmetal executives said Li’s investment will allow them to shift their primary focus from raising capital to building the company’s sales team and global operations.
Li paid $8.4 million for about 105 million shares of Liquidmetal—roughly a 15% stake—on March 10. Plans call for him to complete the balance of the $63.4 million investment in the third quarter. Shareholders need to approve an increase of the company’s outstanding shares to 1.1 billion from 700 million prior to completing the investment by Li, who will hold a stake of about 40% if all goes as planned.
News of the deal nearly doubled the company’s share price to 13 cents and a market cap of $62 million.
Li will purchase the additional shares through a newly created China-based holding company called Liquidmetal Technology Ltd., according to the 10-K filed with the Securities and Exchange Commission. The investor will join Liquidmetal’s board as an additional director to bring the body to seven seats. He will have the right to name two additional directors after purchasing all the required shares.
Complementary Partnership
The agreement also creates a partnership with DongGuan Eontec Co. Ltd., a company Li owns in Shenzhen, China, a mainland city across the border from Hong Kong, which has status as a special autonomous region of the nation.
DongGuan Enotec makes low-cost alloys and parts for large machines. The company would make and sell Liquidmetal-based products in Asia.
Liquidmetal would be allowed to market DongGuan Eontec’s products in North America and Europe.
The deal prohibits DongGuan Eontec from using Liquidmetal technology to produce components for consumer electronics, watches and related components, or certain luxury goods. Cupertino-based Apple Inc. and Switzerland-based Swatch Group Ltd. obtained those rights from Liquidmetal in 2010 and 2011, respectively.
The partnership with DongGuan Eontec seems to be complementary, giving the China-based company a higher-end line to sell alongside its alloys and parts for machinery.
The deal with Li and Eontec comes as Liquidmetal seems to be gaining traction with manufacturers. Executive Vice President Paul Hauck said the company received nine orders for production and saw a 1,500% increase for quotes to 308 for the year ended Dec. 31. The company reported that it had four major customers in 2014.
New Markets
Liquidmetal said it has in recent years made moves into new markets. It struck a deal in 2013 with Austria-based Engel Austria GmbH to make and sell injection moldings, and with privately held LLPG Inc. for using its alloys in jewelry making. The company also has started creating golf clubs and putters through subsidiary Liquidmetal Golf.
Liquidmetal has grown slowly because clients must be taught how to design components using the company’s products, Hauck said.
The product also can take time to work its way through customers’ design and production processes.
Apple, for example, has filed 15 patents with the U.S. Patent Office based on Liquidmetal’s technology in the past six years but the company has released only one item—a SIM card ejector tool for its iPhones—to customers.
Apple’s other patents seem to indicate that the company is considering using Liquidmetal technology for computer screens, computer cases and watch faces. It’s unclear, however, when the computer maker will use the technology in its products on a regular basis.
Liquidmetal has reported four straight years of losses amounting to about $42 million, according to the latest 10-K. It had $125,000 in revenue and a loss of $7.3 million last year.
