FRANCIS M. GREGOREK (144785) BETSY C. MANIFOLD (182450) FRANCIS A. BOTTINI, JR. (175783) RACHELE R. RICKERT (190634) WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP Symphony Towers 750 B Street, Suite 2770 San Diego, CA 92101 Telephone: 619/239-4599 Facsimile: 619/234-4599 Attorneys for Plaintiff

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION

SIDNEY FIELDEN, individually and on behalf of all others similarly situated,

Plaintiff,

v. LIQUIDMETAL TECHNOLOGIES, INC., JOHN KANG, BRIAN McDOUGALL, JAMES KANG, WILLIAM JOHNSON, SHEKHAR CHITNIS, RICARDO SALAS, JACK CHITAYAT, TJOA THIAN SONG, JEFFREY OSTER, HENRI TCHEN, BETSY ATKINS, and DAVID BROWNE,

Defendants.

CIVIL ACTION NO. CLASS ACTION COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS JURY TRIAL DEMANDED

Plaintiff, individually and on behalf of all other persons similarly situated, by plaintiff’s

undersigned attorneys, for plaintiff’s Complaint, alleges upon the investigation made by and

through plaintiff’s counsel, which included, inter alia, a review of relevant public filings made

by Liquidmetal Technologies, Inc. ("Liquidmetal” or the "Company") with the Securities and

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Exchange Commission (the "SEC"), as well as tele-conferences, press releases, news articles,

analyst reports, and media reports concerning the Company. This complaint is based upon

plaintiff’s personal knowledge as to plaintiff’s own acts, and upon information and belief as to

all other matters, based upon the aforementioned investigation.

SUMMARY OF ACTION

1. This is a class action on behalf of all persons, other than defendants, who

purchased Liquidmetal securities during the period from May 21, 2002 to March 30, 2004,

inclusive (the "Class Period") to recover damages caused by defendants' violations of the federal

securities law.

JURISDICTION AND VENUE

2. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of

the Exchange Act [15 U.S.C. §§ 78j(b) and 78t(a)] and Rule 10b-5 promulgated thereunder by

the SEC [17 C.F.R. § 240.10b-5].

3. This Court has jurisdiction over the subject matter of this action pursuant to 28

U.S.C. §§ 1331 and 1337 and Section 27 of the Exchange Act [15 U.S.C. § 78aa].

4. Venue is proper in this District pursuant to Section 27 of the Exchange Act, and 28

U.S.C. § 1391(b). Many of the acts and practices complained of herein occurred in substantial

part in this District and Liquidmetal maintains its corporate headquarters in this District.

5. In connection with the acts alleged in this complaint, defendants, directly or

indirectly, used the means and instrumentalities of interstate commerce, including, but not

limited to, the mails, interstate telephone communications and the facilities of the national

securities markets.

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PARTIES

6. Plaintiff Sidney Fielden purchased shares of Liquidmetal common stock as set

forth more fully in the annexed certificate and suffered economic damages.

7. Liquidmetal is a California corporation with its principal place of business located

at 25800 Commercentre Dr. Suite 100, Lake Forest, CA 92630. Defendant Liquidmetal is in the

business of developing, manufacturing and marketing products made from amorphous alloys.

The Company 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.

8. The defendants listed below served, during the period specified, as senior officers

and/or directors of Liquidmetal:

(a) Defendant John Kang (“Kang”) is, and was at all relevant times,

Chairman of the Company's Board of Directors, President, and Chief Executive Officer;

(b) Defendant Brian McDougall (“McDougall”) is, and was at all relevant

times, Chief Financial Officer, Chief Operating Officer and Executive Vice President of

Liquidmetal;

(c) Defendant James Kang (“James Kang”) was Chairman of the Board of

Directors;

(d) Defendant William Johnson (“Johnson”) served as Vice Chairman of the

Board and Vice Chairman of Technology at all relevant times;

(e) Defendant Shekhar Chitnis (“Chitnis”) served as a director of

Liquidmetal during the Class Period;

(f) Defendant Ricardo Salas (“Salas”) served as a director of Liquidmetal

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during the Class Period;

(g) Defendant Jack Chitayat (“Chitayat”) served as a director of Liquidmetal

during the Class Period;

(h) Defendant Tjoa Thian-Song (“Tjoa”) served as a director of Liquidmetal

during the Class Period;

(i) Defendant Jeffrey Oster (“Oster”) served as a director of Liquidmetal

during the Class Period;

(j) Defendant Henri Tchen (“Tchen”) served as a director of Liquidmetal

during the Class Period;

(k) Defendant Betsy Atkins (“Atkins”) served as a director of Liquidmetal during

the Class Period; and

(l) Defendant David Browne (“Browne”) served as a director of Liquidmetal

during the Class Period.

9. Defendants John Kang, McDougall, James Kang, Johnson, Chitnis, Salas,

Chitayat, Oster, Tjoa, Tchen, Atkins and Browne are referred to herein as the "Individual

Defendants." The Individual Defendants, because of their positions with the Company,

possessed the power and authority to control the contents of Liquidmetal’s quarterly reports,

press releases and presentations to securities analysts, money and portfolio managers and

institutional investors, i.e., the market. Each defendant was provided with copies of the

Company's reports and press releases alleged herein to be misleading prior to or shortly after

their issuance and had the ability and opportunity to prevent their issuance or cause them to be

corrected. Because of their positions and access to material non-public information available to

them but not to the public, each of these defendants knew that the adverse facts specified herein

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had not been disclosed to and were being concealed from the public and that the positive

representations which were being made were then materially false and misleading.

10. It is appropriate to treat the Individual Defendants as a group for pleading

purposes and to presume that the false, misleading and incomplete information conveyed in the

Company’s public filings, press releases and other publications as alleged herein are the

collective actions of the narrowly defined group of defendants identified above. Each of the

above officers of Liquidmetal, by virtue of their high-level positions with the Company, directly

participated in the management of the Company, was directly involved in the day-to-day

operations of the Company at the highest levels and was privy to confidential proprietary

information concerning the Company and its business, operations, products, growth, financial

statements, and financial condition, as alleged herein. Said defendants were involved in drafting,

producing, reviewing and/or disseminating the false and misleading statements and information

alleged herein, were aware, or recklessly disregarded, that the false and misleading statements

were being issued regarding the Company, and approved or ratified these statements, in violation

of the federal securities laws.

11. As officers and controlling persons of a publicly-held company whose common

stock was, and is, registered with the SEC pursuant to the Exchange Act, and was traded on the

NASDAQ Stock Exchange (the “NASDAQ”), and governed by the provisions of the federal

securities laws, the defendants each had a duty to disseminate promptly, accurate and truthful

information with respect to the Company’s financial condition and performance, growth,

operations, financial statements, business, products, markets, management, earnings and present

and future business prospects, and to correct any previously-issued statements that had become

materially misleading or untrue, so that the market price of the Company's publicly-traded

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securities would be based upon truthful and accurate information. The Individual Defendants’

misrepresentations and omissions during the Class Period violated these specific requirements

and obligations.

12. The Individual Defendants participated in the drafting, preparation, and/or

approval of the various public and shareholder and investor reports and other communications

complained of herein and were aware of, or recklessly disregarded, the misstatements contained

therein and omissions therefrom, and were aware of their materially false and misleading nature.

Because of their Board membership and/or executive and managerial positions with Liquidmetal,

each of the defendants had access to the adverse undisclosed information about Liquidmetal’s

business prospects and financial condition and performance as particularized herein and knew (or

recklessly disregarded) that these adverse facts rendered the positive representations made by or

about Liquidmetal and its business issued or adopted by the Company materially false and

misleading.

13. The Individual Defendants, because of their positions of control and authority as

officers and/or directors of the Company, were able to and did control the content of the various

SEC filings, press releases and other public statements pertaining to the Company during the

Class Period. Each Individual Defendant was provided with copies of the documents alleged

herein to be misleading prior to or shortly after their issuance and/or had the ability and/or

opportunity to prevent their issuance or cause them to be corrected. Accordingly, each of the

Individual Defendants is responsible for the accuracy of the public reports and releases detailed

herein and is therefore primarily liable for the representations contained therein.

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PLAINTIFF'S CLASS ACTION ALLEGATIONS

14. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of all those who purchased or otherwise acquired the

securities of Liquidmetal during the Class Period and who suffered damages (the “Class”).

Excluded from the Class are defendants, the officers and directors of the Company, at all

relevant times, members of their immediate families and their legal representatives, heirs,

successors, or assigns and any entity in which defendants have or had a controlling interest.

15. The members of the Class are so numerous that joinder of all members is

impracticable. According to the Company’s report filed on Form 10-Q with the SEC on

November 14, 2003, a representative point during the Class Period, Liquidmetal had

approximately 41,599,652 shares of common stock outstanding. While the exact number of

Class members is unknown to plaintiff at this time and can only be ascertained through

appropriate discovery, plaintiff believes that there are hundreds or thousands of members in the

proposed Class. Record owners and other members of the Class may be identified from records

maintained by Liquidmetal or its transfer agent and may be notified of the pendency of this

action by mail, using the form of notice similar to that customarily used in securities class

actions.

16. Plaintiff's claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by defendants' wrongful conduct in violation of

federal law that is complained of herein.

17. Plaintiff will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation.

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18. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

(a) whether the federal securities laws were violated by defendants' acts as

alleged herein;

(b) whether statements made by defendants to the investing public during the

Class Period misrepresented material facts about the business, operations, financial

condition and management of Liquidmetal; and

(c) whether defendants acted knowingly or recklessly in making materially

false and misleading statements during the Class Period;

(d) whether the market prices of the Company's common stock was artificially

inflated or distorted during the Class Period because of defendants' conduct complained

of herein; and

(e) whether the members of the Class have sustained damages and the proper

measure of such damages.

19. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as

the damages suffered by individual Class members may be relatively small, the expense and

burden of individual litigation make it impossible for members of the Class to individually

redress the wrongs done to them. There will be no difficulty in the management of this action as

a class action.

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SUBSTANTIVE ALLEGATIONS

Fraudulent Scheme and Course of Business 20. Each of the defendants is liable as a participant in a fraudulent scheme and course of business

that operated as a fraud or deceit on purchasers of Liquidmetal securities by disseminating

materially false and misleading statements and/or concealing material adverse facts.

Specifically, the scheme involved the Company’s improper recognition of certain revenues and

will result in the Company restating its financial statements from the third quarter 2002 through

the first quarter 2003. Defendants' fraudulent scheme and course of business that operated as a

fraud or deceit on purchasers of Liquidmetal securities was a success, as it: (i) deceived the

investing public regarding Liquidmetal's business, operations, management and the intrinsic

value of Liquidmetal securities; (ii) enabled Liquidmetal insiders to sell their personally-held

Liquidmetal common stock at inflated prices to the unsuspecting public resulting in proceeds to

those insiders of more than $1.9 million; (iii) allowed defendants to consummate the $75 million

IPO; (iv) enabled the repayment of millions of dollars in loans made by defendants to

Liquidmetal; and (v) caused plaintiff and other members of the Class to purchase Liquidmetal

securities at artificially inflated prices

SUBSTANTIVE ALLEGATIONS

Background Facts

21. Liquidmetal describes itself as “in the business of developing, manufacturing and

marketing products made from amorphous alloys. The Company 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.”

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Materially False And Misleading Statements Issued During The Class Period

22. The Class Period begins on May 21, 2002. On that day the Company issued a

press release, “Liquidmetal Technologies Initial Public Offering Priced at $15.00 Per Share.”

The press release stated in pertinent part as follows:

“Liquidmetal Technologies announced today the initial public offering of 5,000,000 shares of its common stock at a price of $15.00 per share.

The shares will be quoted on the Nasdaq National Market under the symbol "LQMT." Liquidmetal Technologies has granted the underwriters an option to purchase up to 750,000 additional shares of its common stock to cover overallotments. Liquidmetal Technologies intends to use the net proceeds of the offering for the construction and equipping of manufacturing facilities, for the repayment of indebtedness, and for general corporate purposes.”

23. A Registration Statement related to the initial public offering was filed with the

SEC by the Individual Defendants, and included a Prospectus which discussed, among other

things, the Company’s strategy, customer relationships, compliance with accounting rules,

regulations and revenue recognition practices, and internal controls. The Registration Statement

provided the following with regard to the Company’s strategy and customers:

We produce casing components for electronic devices. We targeted this market because of its high product volume and potential branding opportunities. For example, the market for cellular phones is projected to reach nearly 672 million units in 2005, according to IDC. Liquidmetal alloys can be used for each of the structural components of a cellular phone, including the shield, face plate, hinge, back plate, side plates, and the clam shell, which is the plate that flips open on some cellular phone models. To date, we have produced cellular phone casing components for several cellular phone manufacturers. We are currently manufacturing prototype casing parts for Samsung, and we are working with LG Electronics to develop casing components for their cellular phones. We are also working with Motorola to develop cellular phone casing components, and we have received orders from Motorola for limited quantities of prototype casing components. Additionally, we are working with TCL Mobile Communication Company, Ltd., a leading Chinese

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cellular phone manufacturer, to develop casing components for their cellular phones. Bulk Liquidmetal alloys also have potential application as a casing material in a variety of other electronic devices. For example, we recently received a purchase order from Samsung for production quantities of casing components for personal digital assistants, or PDAs, to be used in military applications. We also have a purchase order from Samsung for production quantities of camera casings. In addition, we recently received a purchase order from Jascom Co., Ltd., a South Korean electronics manufacturer, for production quantities of casing components for a combination MP3/CD player. 24. In regards to the Company’s consolidated financial results, the Registration

Statement stated that the financial results had been prepared in accordance with Generally

Accepted Accounting Principles (“GAAP”) and that:

On December 3, 1999, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (“SAB 101”) that summarizes the staff’s views in applying accounting principles generally accepted in the United States of America to revenue recognition in financial statements. The Company’s revenue recognition policy complies with the requirements of SAB 101. Revenue is recognized at the time the Company ships its products, as this is when title passes to the customer. Revenue is deferred and included in liabilities when the Company receives cash in advance for services not yet performed or goods not yet delivered. Revenue from research and development contracts is recognized under the percentage of completion method.

25. The Registration Statement provided Liquidmetal’s Consolidated Statement of

Operations Data as follows:

Three Months Ended March 31, Year Ended December 31,

2002 2001 2001 2000 1999 1998 1997

(in thousands, except per share data) Consolidated Statements of Operations Data:

Revenue $ 1,463 $ 874 $ 3,882 $ 4,200 $ 2,012 $ 3,143 $ 3,216 Cost of sales 681 442 1,924 1,983 805 1,388 1,460

Gross profit 782 432 1,958 2,217 1,207 1,755 1,756 Operating expenses: Selling, general, and administrative 2,272 415 3,970 1,449 847 2,123 1,750 Research and development 2,694 252 2,057 455 333 278 1,057

Total operating expenses 4,966 667 6,027 1,904 1,180 2,401 2,807 Other (expense) income, net (312 ) (188 ) (1,095 ) (188) (190) 452 18

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Income (loss) from continuing operations (4,496 ) (423 ) (5,164 ) 125 (163) (194) (1,033 ) Loss from operations of discontinued retail golf segment, net — (1,887 ) (5,973 ) (8,938) (7,977) (7,052) (2,403 ) Loss from disposal of discontinued retail golf segment, net (530 ) — (11,949 ) — — — —

Net loss $ (5,026 ) $ (2,310 ) $ (23,086 ) $ (8,813) $ (8,140) $ (7,246) $ (3,436 )

26. On August 6, 2002, the Company issued a press release entitled “Liquidmetal

Technologies Second Quarter Revenue Grows 110% Versus Second Quarter of 2001; Company

Beats Consensus Estimates for Revenue and Earnings Per Share.” The press release stated, in

pertinent part:

Liquidmetal Technologies today announced results for its second quarter and six months ended June 30, 2002.

For the second quarter, revenue increased 110% to $2.1 million versus the second quarter of 2001, exceeding consensus revenue estimates of $1.9 million. On a sequential quarterly basis, revenue grew 47% versus $1.5 million in revenue for the first quarter of 2002. For the first six months of 2002, revenue improved 90% to $3.6 million versus $1.9 million for the same period a year ago.

Revenue gains for both the quarter and first half were driven primarily by growth in the company's bulk Liquidmetal(R) alloys business, and from strong demand for Liquidmetal coatings products. Growth in bulk alloys mainly reflected defense-related research and development revenues derived from the company's contracts with the U. S. Department of Defense. The growth is also attributable to revenue from prototyping parts for customers working with the company to develop new products in anticipation of mass production. Demand for Liquidmetal coatings remained strong from the oil drilling industry as well as other markets looking for high-performance coatings for wear and corrosion resistance.

For the second quarter, the company reported a loss from continuing operations of ($4.3) million, or ($0.11) per share, beating consensus estimates of a loss of ($0.14) per share, and comparing with a loss of ($0.7) million, or ($0.02) per share, for the same period in 2001. For the first six months of 2002, the loss from continuing operations was ($8.8) million, or ($0.24) per share, compared with a loss of ($1.1) million, or ($0.04) per share, for the same period in 2001. The loss from continuing operations was primarily due to expenditures made in SG&A and R&D to support growth of the company's bulk Liquidmetal alloy business.

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27. On October 31, 2002, the Company issued a press release entitled “Liquidmetal

Technologies Reports 2002 Third-Quarter Results; Revenues Increase 229% Over Prior Year,

EPS Achieve Consensus Estimates.” In pertinent part, it stated:

Liquidmetal Technologies (NASDAQ: LQMT) today announced results for its third quarter and nine months ended September 30, 2002.

Revenues for the third quarter increased 229% to $3.7 million from revenues of $1.1 million in the third quarter of 2001. On a sequential quarterly basis, third-quarter revenues were 70% higher than the $2.1 million reported for the second quarter of 2002. Revenues for the first nine months grew to $7.3 million compared to $3.0 million in the prior year nine-month period, a 141% increase.

The year-over-year revenue growth was attributable to the company's first production shipments of parts manufactured from bulk Liquidmetal(R) alloy, increased sales of Liquidmetal(R) alloy coatings, furnace equipment sales, research and development revenues largely derived from ongoing Department of Defense contracts, and revenues related to the prototyping of test products for current and prospective customers engaged in active product development programs with the company.

As expected, higher expenses stemming from the rapid build-up of the company's infrastructure in support of its growing operations resulted in losses for the third quarter and nine months. For the quarter, the company reported a loss from continuing operations of $5.2 million, or $.13 per share, compared to a loss of $1.2 million, or $.03 per share, in the third quarter of 2001. For the nine months, the loss from continuing operations was $14.0 million, or $.37 per share, compared with a loss of $2.3 million, or $.07 per share, from continuing operations for the prior year nine months. Including discontinued operations, the net loss for the quarter totaled $3.8 million, or $.09 per share, versus a net loss of $20.8 million, or $.61 per share, in the prior year quarter. For the nine months, the net loss including discontinued operations amounted to $12.0 million, or $.32 per share, compared with a net loss of $26.1 million, or $.80 per share, in the same period last year.

28. On February 20, 2003, the Company issued a press release entitled, “Liquidmetal

Technologies Announces 2002 Fourth Quarter and Full Year Results: Quarterly Revenues of

$5.9 Million Exceeded Prior Year by 572% and Grew 61% On a Sequential Quarterly Basis.” In

pertinent part, it stated,

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Liquidmetal Technologies today announced results for its 2002 fourth quarter and fiscal year ended December 31, 2002.

Revenues for the fourth quarter achieved a nearly seven-fold increase to $5.9 million from revenues of $874,000 in the fourth quarter of 2001. On a sequential basis, fourth-quarter revenues were 61% higher than the $3.7 million in revenues reported for the 2002 third quarter ended September 30. Revenues for the year grew to $13.1 million compared to $3.9 million in 2001, a 238% increase.

"These results mark an exciting milestone for the company: the start of full production at our new state-of-the-art manufacturing facility," said John Kang, Liquidmetal Technologies' President and Chief Executive Officer. "Perhaps more important, they signal our trajectory of growth as we enter 2003. With each passing week and month, we are gaining momentum and demonstrating the viability of our revolutionary material technology in a high-volume manufacturing environment."

The revenue gains largely resulted from a sharp rise in volume of products manufactured from the company's proprietary bulk Liquidmetal(R) alloys. Construction of the company's first full manufacturing plant was completed in September, accelerating the ramp-up of manufacturing capacity and providing a platform for the growth in sales of bulk alloy products and related revenues achieved in the fourth quarter.

29. On May 1, 2003, the Company issued a press release entitled “Liquidmetal

Technologies Reports 2003 First Quarter Results.” The press release stated, in pertinent part,

Liquidmetal Technologies today announced results for its 2003 first quarter ended March 31, 2003.

Revenues for the first quarter were $6.6 million, a 348% increase over revenues of $1.5 million for the first quarter of 2002 and a 12% sequential increase over revenues of $5.9 million in the fourth quarter of 2002.

The company's bulk alloy segment accounted for $5.8 million, or 88%, of total revenues, versus $171,000, or 12%, in the prior year first quarter. The prior year contribution from this segment was comprised solely of research and development revenues. The $5.6 million increase was attributable to the addition of manufacturing equipment sales and production of bulk Liquidmetal alloy parts and prototypes that were not a factor in prior year results. Higher R&D revenues stemming from ongoing development contracts with the Department of Defense and U.S. Army for defense-related products and with DePuy Orthopaedics for orthopedic implant products also positively impacted results for the quarter.

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"We are pleased to report solid growth in our bulk alloy segment versus the prior year and sequentially. These results reflect the positive impact of an expanded business strategy, increased revenues from product development, and the manufacturing of first components for LG Electronics and new parts for Samsung, demonstrating their continued commitment to incorporating Liquidmetal alloy across multiple products," said John Kang, President and Chief Executive Officer.

30. On July 31, 2003, the Company issued a press release entitled “Liquidmetal

Technologies Reports 2003 Second Quarter and Six-Month Results.” The press release stated in

part:

Liquidmetal(R) Technologies, Inc. today announced results for its 2003 second quarter and six months ended June 30, 2003.

Revenues for the second quarter increased 199% to $6.4 million from revenues of $2.1 million for the second quarter of 2002. On a sequential quarterly basis, revenues were slightly below the $6.6 million generated in the first quarter of 2003, while roughly in line with management's previously announced revenue outlook for the quarter. Revenues for the first six months of 2003 were 260% higher, at $13.0 million versus $3.6 million a year ago.

"As outlined during our last quarterly update, we have engaged in intensive efforts to restructure the company's operations and sharpen our product focus in support of our stated objective of achieving profitability in the fourth quarter of 2003," said John Kang, President and Chief Executive Officer. "This involved a rigorous assessment of both our progress and shortcomings as a still emerging company and resulted in a substantial realignment of our organizational size, facilities, marketing and manufacturing emphasis. With these efforts now largely behind us, we are realizing benefits that we believe will be reflected in our results going forward, beginning with our ongoing third quarter."

31. On October 30, 2003, the Company issued a press release entitled “Liquidmetal

Technologies Reports 2003 Third Quarter and Nine-Month Results: Third Quarter Revenues

Total $3.5 Million, $16.5 Million for Nine Months.” In pertinent part, in stated:

Liquidmetal® Technologies, Inc. (Nasdaq: LQMT) today announced results for its 2003 third quarter and nine months ended September 30, 2003.

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Revenues for the third quarter were $3.5 million compared with $3.7 million in the third quarter of 2002. Revenues for the first nine months of 2003 were $16.5 million compared with $7.3 million in the prior year period.

The company's bulk alloy segment contributed $2.6 million, or 75% of total revenues for the third quarter, versus $2.4 million, or 66% in the prior year quarter, principally on the strength of higher R&D revenues from ongoing defense-related and medical product development contracts, as well as a modest increase from the sale and prototyping of parts manufactured from bulk Liquidmetal® alloys. Revenues of the company's coatings segment, at $0.9 million, or 25% percent of the third quarter total, increased sequentially from the 2003 second quarter but compared unfavorably to revenues of $1.2 million, or 34% in the year-earlier period. Prior year results included a large coatings sale for a power industry project.

As announced on October 9, the company is currently pursuing a modified business strategy that sharply curtails its previous focus on mass-market, commodity cell phone components and limits internal manufacturing activities to premium products that command pricing based on the high-performance attributes of Liquidmetal alloys. In addition, the company reported that it intends to pursue strategic partnerships, principally in the form of technology licensing, joint development and product distribution relationships, to facilitate more rapid and effective commercialization of new products utilizing its amorphous alloy materials.

32. The above statements made by the defendants were each materially false and

misleading because they failed to disclose and misrepresented the following adverse facts:

(a) that Liquidmetal’s financial statements were materially false and misleading;

(b) that the Company was recording revenue on contingent contracts where

contingencies were unfulfilled and in violation of GAAP and SAB 101;

(c) that the Company was improperly booking revenue by infusing capital in

customers in return for the customers’ orders; and

(f) that, as a result of the foregoing, defendants lacked a reasonable basis for their

positive statements about the Company and their earnings projections.

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THE TRUTH EMERGES

33. On February 20, 2004, the Company issued a press release entitled “Liquidmetal

Technologies Expects to Restate Prior Period Revenues From Equipment Sales To Former

Supplier Growell Metal .” The press release stated, in pertinent part, as follows:

Liquidmetal(R) Technologies, Inc. today said that it expects to restate revenues for the third and fourth quarters of 2002 and the first quarter of 2003. The revenues relate to sales of alloy melting and casting equipment to a former supplier and licensee with whom the company recently settled a contract dispute, as announced in early January. The equipment was the subject of a previously reported dispute between a Liquidmetal Technologies subsidiary, Liquidmetal Korea ("LMK"), and Growell Metal ("Growell"), a former supplier of alloy ingots to the company's Pyongtaek, South Korea manufacturing plant and also a die casting licensee of the company. Under terms of a January 10 settlement of the dispute, LMK agreed to buy out Growell's investment in alloy inventories, proprietary alloying equipment purchased from LMK, as well as supporting equipment purchased from other suppliers. Also as part of the settlement, Growell satisfied in full a balance owed to LMK for the die casting machines Growell purchased from LMK in the first quarter of 2003 as part of a license agreement to manufacture Liquidmetal alloy parts for the South Korean automotive industry. The contract dispute arose late last year when Growell discontinued its Liquidmetal alloying operations following a decision by Liquidmetal Technologies to sharply curtail its internal manufacturing operations as part of a sweeping change in its business strategy.

The expected restatement of revenues from the equipment sales is a result of an analysis initiated by the company based upon the dispute settlement and a determination that the original revenue recognition decision did not include consideration of at least one agreement identified during a review of the originating transaction documents. The review and analysis indicated that the equipment sales should have been viewed as being contingent upon LMK's continued performance under its agreements with Growell, which would have precluded revenue recognition until the contingency ended.

The sales to Growell, which were previously disclosed in the company's public financial reports, were comprised of $1.7 million of revenue from alloying equipment sales in the third and fourth quarters of 2002 and $2.5 million of revenue from the sale of Liquidmetal die casting machines in the first quarter of 2003. However, an ongoing analysis and review by the company will determine the full extent of the expected restatement and corresponding impact on previously reported results of operations.

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The company said it will report on the full extent of the financial restatement upon completion of the analysis.

34. On March 30, 2004, the Company announced that it would not file its 2003

Annual Form 10-K by March 30 “as previously anticipated due to additional time required to

complete a previously announced review and analysis relating to the company's restatement of

results for certain prior periods.”

35. On April 29, 2004, Liquidmetal announced that it had received a Nasdaq Staff

Determination indicating that, because the company has not timely filed a Form 10-K with the

SEC for the period ended December 31, 2003 as required by Marketplace Rule 4310(c)(14), its

common stock is subject to delisting from the Nasdaq National Market.”

36. On May 13, 2004, Liquidmetal “filed a Current Report on Form 8-K reporting

that Deloitte & Touche LLP ("Deloitte") had resigned as the company's independent auditors,

effective May 6, 2004. The company said that its independent audit committee is moving swiftly

to engage a new auditor, with the immediate objective of completing the company's 2003 audit,

including finalization of a previously disclosed expected restatement of results for certain prior

reporting periods.”

MISLEADING FINANCIAL STATEMENTS AND PUBLIC DISCLOSURES

37. During the Class Period, the defendants caused the Company to violate generally

accepted accounting principles (“GAAP”) and SEC rules by improperly recording transactions

and improperly recognizing revenue included in its 2002 to 2003 results such that the results

were not a fair presentation of Liquidmetal’s financial condition and operating results.

38. These results were included in Form 10-Q’s and 10-K’s filed with the SEC as

well as published in press releases.

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39. The Company’s financial information was neither prepared in conformity with

GAAP nor was it a fair and accurate presentation of the Company’s operations and financial

position due to the Company’s improper accounting.

40. The Company’s published financial results violated GAAP and the following

principles:

a. The principle that interim financial reporting should be based upon the

same accounting principles and practices used to prepare annual financial statements.

(APB No. 28, 10);

b. The principle that financial reporting should provide information that is

useful to present to potential investors and creditors and other users in making rational

investment, credit, and similar decisions. (FASB Statement of Concepts No. 1, 34);

c. The principle that financial reporting should provide information about the

economic resources of an enterprise, the claims to those resources, and effects of

transactions, events, and circumstances that change resources and claims to those

resources. (FASB Statement of Concepts No. 1, 40);

d. The principle that financial reporting should provide information about an

enterprise’s financial performance during a period. (FASB Statement of Concepts No. 1,

42);

e. The principle that financial reporting should provide information about

how management of an enterprise has discharged its stewardship responsibility to owners

for the use of enterprise resources entrusted to it, and to the extent that management

offers securities of the enterprise to the public, it voluntarily accepts wider

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responsibilities for accountability to prospective investors and to the public. (FASB

Statement of Concepts No. 1, 50).

f. The principle that financial reporting should be reliable in that it

represents what it purports to represent (FASB Statement of Concepts NO. 2, 58-59);

g. The principle that completeness, meaning that nothing is left out of the

information that may be necessary to insure that it validly represents underlying events

and conditions. (FASB Statement of Concepts No. 2, 79); and

h. The principle that conservatism be used as a prudent reaction to

uncertainty to try to ensure that uncertainties and risks inherent in business situations are

adequately considered (FASB Statement of Concepts No. 2, 95).

41. The adverse information concealed by defendants during the Class Period and

detailed above was in violation of Item 303 of Regulation S-K under the federal securities law

(17 C.F.R. 229.303). This regulation sets forth the requirements of management’s discussion

and analysis of financial condition and results of operations including detailed and accurate

discussion pertaining to any material changes affecting the state of or trend of a company’s

liquidity and its capital resources. Moreover, this regulation requires that the Company describe

any known trends or uncertainties that have had or that the registrant reasonably expects will

have a material favorable or unfavorable impact on net sales or revenues or income from

continuing operations.

42. In addition, defendants’ concealment of the adverse information set forth in this

complaint during the Class Period caused the financial statements it made to be in violation of

SEC Regulation S-X, which states that “financial statements filed with the SEC which are not

prepared in compliance with GAAP are presumed to be misleading and inaccurate.” SEC

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Regulation S-X also requires that interim financial statements, i.e., Form 10-Q’s, must also

comply with GAAP. 17 C.F.R. §210.10-01(a).

SCIENTER ALLEGATIONS

43. As alleged herein, defendants acted with scienter in that defendants knew that the

public documents and statements issued or disseminated in the name of the Company were

materially false and misleading; knew that such statements or documents would be issued or

disseminated to the investing public; and knowingly and substantially participated or acquiesced

in the issuance or dissemination of such statements or documents as primary violations of the

federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their

receipt of information reflecting the true facts regarding Liquidmetal, their control over, and/or

receipt and/or modification of Liquidmetal’s allegedly materially misleading statements and/or

their associations with the Company which made them privy to confidential proprietary

information concerning Liquidmetal, participated in the fraudulent scheme alleged herein.

44. Defendants were motivated to inflate the financial performance of the Company

in order to complete its initial public offering which enabled the Company to repay loans made

to the Company by the Individual Defendants as well as create a liquid public market that

enabled for disposal of the Individual Defendants personally held shares in the Company.

45. Defendants were also motivated during the Class Period to inflate the Company’s

financial performance in order to enable the Individual Defendants to sell their personally held

Liquidmetal common stock to the unsuspecting market, as detailed in the following chart. The

significant amount of the sales, resulting in proceeds of more than $1.9 million, provide a strong

inference that the defendants were aware of the materially adverse facts concerning the Company

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and its business and intentionally failed to disclose such known facts to the public as detailed

herein.

Insider Date of Sale

Number of

Shares Price Per Share

Value of

Transaction

James Kang 4/16/03 127,600 $4.25-$4.90 $584,000

Shekhar Chitnis 2/18/03 4,000 $7.20 $28,804

Shekhar Chitnis 1/30/03 4,000 $8.46-$8.70 $34,000

Shekhar Chitnis 1/22/03 4,000 $9.90-$9.95 $40,000

Shekhar Chitnis 1/9/03 4,000 $9.65-$9.81 $39,000

Shekhar Chitnis 12/31/02 4,000 $9.90-$10.00 $40,000

Shekhar Chitnis 12/20/02 2,000 $8.60 $17,200

Shekhar Chitnis 12/16/02 2,000 $9.40 $18,800

Shekhar Chitnis 12/9/02 2,500 $9.30 $23,250

Shekhar Chitnis 12/4/02 50,000 $9.50-$9.69 $480,000

William Johnson 2/27/03 93,758 $6.97 $653,493

Total: 297,858 $1,958,547

APPLICABILITY OF PRESUMPTION OF RELIANCE: FRAUD-ON-THE-MARKET DOCTRINE

46. At all relevant times, the market for Liquidmetal securities was an efficient

market for the following reasons, among others:

(a) Liquidmetal’s stock met the requirements for listing, and was listed and

actively traded on the NASDAQ, a highly efficient and automated market;

(b) As a regulated issuer, Liquidmetal filed periodic public reports with the

SEC and the NASDAQ;

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(c) Liquidmetal regularly communicated with public investors via established

market communication mechanisms, including through regular

disseminations of press releases on the national circuits of major newswire

services and through other wide-ranging public disclosures, such as

communications with the financial press and other similar reporting

services; and

(d) Liquidmetal was followed by several securities analysts employed by

major brokerage firms who wrote reports which were distributed to the

sales force and certain customers of their respective brokerage firms. Each

of these reports was publicly available and entered the public marketplace.

47. As a result of the foregoing, the market for Liquidmetal’s securities promptly

digested current information regarding Liquidmetal from all publicly available sources and

reflected such information in Liquidmetal’s stock price. Under these circumstances, all

purchasers of Liquidmetal securities during the Class Period suffered similar injury through their

purchase of Liquidmetal securities at artificially inflated prices and a presumption of reliance

applies.

NO SAFE HARBOR

48. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this complaint.

Many of the specific statements pleaded herein were not identified as “forward-looking

statements” when made. To the extent there were any forward-looking statements, there were no

meaningful cautionary statements identifying important factors that could cause actual results to

differ materially from those in the purportedly forward-looking statements. Alternatively, to the

extent that the statutory safe harbor does apply to any forward-looking statements pleaded

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herein, defendants are liable for those false forward-looking statements because at the time each

of those forward-looking statements was made, the particular speaker knew that the particular

forward-looking statement was false, and/or the forward-looking statement was authorized

and/or approved by an executive officer of Liquidmetal who knew that those statements were

false when made.

FIRST CLAIM

Violation Of Section 10(b) Of The Exchange Act And Rule 10b-5 Promulgated Thereunder Against All Defendants

49. Plaintiff repeats and re-alleges each and every allegation contained above as if

fully set forth herein.

50. During the Class Period, defendants carried out a plan, scheme and course of

conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing

public, including plaintiff and other Class members, as alleged herein; and (ii) cause plaintiff

and other members of the Class to purchase Liquidmetal securities at artificially inflated prices.

In furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of

them, took the actions set forth herein.

51. Defendants: (a) employed devices, schemes, and artifices to defraud; (b) made

untrue statements of material fact and/or omitted to state material facts necessary to make the

statements not misleading; and (c) engaged in acts, practices, and a course of business which

operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to

maintain artificially high market prices for Liquidmetal securities in violation of Section 10(b) of

the Exchange Act and Rule 10b-5 promulgated thereunder. All defendants are sued either as

primary participants in the wrongful and illegal conduct charged herein or as controlling persons

as alleged below.

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52. Defendants, individually and in concert, directly and indirectly, by the use, means

or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a

continuous course of conduct to conceal adverse material information about the business,

operations and future prospects of Liquidmetal as specified herein.

53. These defendants employed devices, schemes and artifices to defraud, while in

possession of material adverse non-public information and engaged in acts, practices, and a

course of conduct as alleged herein in an effort to assure investors of Liquidmetal’s value and

performance and continued substantial growth, which included the making of, or the

participation in the making of, untrue statements of material facts and omitting to state material

facts necessary in order to make the statements made about Liquidmetal and its business

operations and future prospects in the light of the circumstances under which they were made,

not misleading, as set forth more particularly herein, and engaged in transactions, practices and a

course of business which operated as a fraud and deceit upon the purchasers of Liquidmetal

securities during the Class Period.

54. Each of the Individual Defendants’ primary liability, and controlling person

liability, arises from the following facts: (i) the Individual Defendants were high-level executives

and/or directors at the Company during the Class Period and members of the Company’s

management team or had control thereof; (ii) each of these defendants, by virtue of his/her

responsibilities and activities as a senior officer and/or director of the Company was privy to and

participated in the creation, development and reporting of the Company’s internal budgets, plans,

projections and/or reports; (iii) each of these defendants enjoyed significant personal contact and

familiarity with the other defendants and was comprised of and had access to other members of

the Company’s management team, internal reports and other data and information about the

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Company’s finances, operations, and sales at all relevant times; and (iv) each of these defendants

was aware of the Company’s dissemination of information to the investing public which they

knew or recklessly disregarded was materially false and misleading.

55. The defendants had actual knowledge of the misrepresentations and omissions of

material facts set forth herein, or acted with reckless disregard for the truth in that they failed to

ascertain and to disclose such facts, even though such facts were available to them. Such

defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and

for the purpose and effect of concealing Liquidmetal’s operating condition and future business

prospects from the investing public and supporting the artificially inflated price of its securities.

As demonstrated by defendants’ misstatements of the Company’s business, operations and

earnings throughout the Class Period, defendants, if they did not have actual knowledge of the

misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by

deliberately refraining from taking those steps necessary to discover whether those statements

were false or misleading.

56. As a result of the dissemination of the materially false and misleading information

and failure to disclose material facts, as set forth above, the market price of Liquidmetal

securities was artificially inflated during the Class Period. In ignorance of the fact that the

market prices of Liquidmetal’s publicly-traded securities were artificially inflated, and relying

directly or indirectly on the false and misleading statements made by defendants, or upon the

integrity of the market in which the securities trade, and/or on the absence of material adverse

information that was known to or recklessly disregarded by defendants but not disclosed in

public statements by defendants during the Class Period, plaintiff and the other members of the

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Class acquired Liquidmetal securities during the Class Period at artificially high prices and were

damaged thereby.

57. At the time of said misrepresentations and omissions, plaintiff and other members

of the Class were ignorant of their falsity, and believed them to be true. Had plaintiff and the

other members of the Class and the marketplace known the truth regarding the true financial

position, operating conditions and expenses that Liquidmetal was experiencing, which were not

disclosed by defendants, plaintiff and other members of the Class would not have purchased or

otherwise acquired their Liquidmetal securities, or, if they had acquired such securities during

the Class Period, they would not have done so at the artificially inflated prices which they paid.

58. By virtue of the foregoing, defendants have violated Section 10(b) of the

Exchange Act, and Rule 10b-5 promulgated thereunder.

59. As a direct and proximate result of defendants’ wrongful conduct, plaintiff and

the other members of the Class suffered damages in connection with their respective purchases

and sales of the Company’s securities during the Class Period.

SECOND CLAIM

Violation Of Section 20(a) Of The Exchange Act Against the Individual Defendants

60. Plaintiff repeats and re-alleges each and every allegation contained above as if

fully set forth herein.

61. The Individual Defendants acted as controlling persons of Liquidmetal within the

meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level

positions, and their ownership and contractual rights, participation in and/or awareness of the

Company’s operations and/or intimate knowledge of the false financial statements filed by the

Company with the SEC and disseminated to the investing public, the Individual Defendants had

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the power to influence and control and did influence and control, directly or indirectly, the

decision-making of the Company, including the content and dissemination of the various

statements which plaintiff contends are false and misleading. The Individual Defendants were

provided with or had unlimited access to copies of the Company’s reports, press releases, public

filings and other statements alleged by plaintiff to be misleading prior to and/or shortly after

these statements were issued and had the ability to prevent the issuance of the statements or

cause the statements to be corrected.

62. In particular, each of these defendants had direct and supervisory involvement in

the day-to-day operations of the Company and, therefore, is presumed to have had the power to

control or influence the particular transactions giving rise to the securities violations as alleged

herein, and exercised the same.

63. As set forth above, Liquidmetal and the Individual Defendants each violated

Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue

of their positions as controlling persons, the Individual Defendants are liable pursuant to Section

20(a) of the Exchange Act. As a direct and proximate result of defendants’ wrongful conduct,

plaintiff and other members of the Class suffered damages in connection with their purchases of

the Company’s securities during the Class Period.

WHEREFORE, plaintiff prays for relief and judgment, as follows:

(A) Determining that this action is a proper class action, designating plaintiff as Lead

Plaintiff and certifying plaintiff as a class representative under Rule 23 of the Federal Rules of

Civil Procedure and plaintiff’s counsel as Lead Counsel;

(B) Awarding compensatory damages in favor of plaintiff and the other Class

members against all defendants, jointly and severally, for all damages sustained as a result of

defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon;

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(C) Awarding plaintiff and the Class their reasonable costs and expenses incurred in

this action, including counsel fees and expert fees; and

(D) Such other and further relief as the Court may deem just and proper.

JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury.

Dated: May 17, 2004 WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP

FRANCIS M. GREGOREK BETSY C. MANIFOLD FRANCIS A. BOTTINI, JR. RACHELE R. RICKERT _____________________________________ FRANCIS M. GREGOREK 750 B Street, Suite 2770 San Diego, CA 92101 Telephone: 619/239-4599 Facsimile: 619/234-4599

Attorneys for Plaintiff

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