It’s not often I swing trade stocks on the OTCBB, sticking mostly to the national exchanges, but there are a few I’ve had success with over the last few years. Liquidmetal Technologies (OTCQB: LQMT) was one of them providing juicy swings due to their licensing deal with Apple (NASDAQ: AAPL).

How juicy? Well I’ve hit LQMT for +100% +$20,000 and +45% +$12,000 over the last few years after the AAPL deal. Not bad given the gains were captured in 1-4 day swings.

Unfortunately the company has not been able to execute their business plan and is running out of cash, AGAIN. Their recent common stock purchase agreement is TOXIC for investors and has sadly removed the once juicy swing trade idea from my consideration until something big changes.

Here’s how to understand LQMT’s most recent filing.

RANCHO SANTA MARGARITA, Calif. (BUSINESS WIRE) Nov. 8, 2013

Liquidmetal® Technologies, Inc. (OTCQB: LQMT) today announced that it has entered into a common stock purchase agreement (the “Purchase Agreement”) for a $20 million equity line with several existing institutional investors (the “Investors”). The agreement will enable Liquidmetal to access additional funds upon the terms set forth in the Purchase Agreement.

The Purchase Agreement allows, but does not obligate, Liquidmetal to issue and sell up to $20 million of shares of its common stock to the Investors from time to time over the 36-month period following the effectiveness of a registration statement that Liquidmetal has agreed to file with the Securities and Exchange Commission to register the resale of the stock by the Investors. Liquidmetal may, in accordance with the procedures outlined in the Purchase Agreement, notify the Investors of the dollar amount that Liquidmetal intends to sell to the Investors, subject to a maximum amount equal to the lesser of (i) a specified dollar amount set forth in the Purchase Agreement and (ii) a dollar amount equal to 300% of the average daily trading volume of the company’s common stock for the ten trading days immediately prior to the date of the request. Upon such a notice, the Investors will be contractually obligated to purchase the shares at a purchase price equal to 90% of the lowest daily volume weighted average price of the common stock over a five-day pricing period beginning on the date of the notice.

Liquidmetal intends to file, no later than December 23, 2013, a registration statement with the Securities and Exchange Commission to register the resale of up to 96,555,893 shares of Liquidmetal common stock by the Investors and an additional 5,468,750 shares underlying warrants previously issued in Liquidmetal’s July 2012 private placement. In addition, Liquidmetal has issued 2,666,667 shares of its common stock to the Investors as an initial commitment fee for entering into the Purchase Agreement. The effectiveness of this registration statement is a condition to Liquidmetal’s ability to sell common stock to the Investors under the Purchase Agreement.

Thomas Steipp, the President and Chief Executive Officer of Liquidmetal, stated, “The Purchase Agreement will provide Liquidmetal with a flexible source of additional capital to continue product development programs with customers and partners with the goal of broadly expanding the commercial availability of Liquidmetal solutions and maximizing shareholder value.”

Jason Bond Picks is about education through real money trading. Here’s a good teachable moment.

This is a TOXIC financing deal. The 3rd party gets to buy shares for 90% of the market value and sell them anytime. Then go do it again… again… and again until LQMT gets $20 million. As noted above, I usually take these off the list of things to watch when a company does this. There’s a lid on where it can go now. Here’s what it looks like as it plays out.

If the stock is trading @ an average of $1.00 for the past 5-days, then the finance company can buy a block of shares for $.90. It is TOXIC since the company can buy shares at 90% of the value NO MATTER WHAT the average 5-day price is. It could be $1.00 or it could be $.001… the company can still buy $100k+ blocks of stock from LQMT. Liquidmetal just has to issue more shares for the $ they get. The company has no incentive for higher prices, they just want liquidity so the stock ends up declining over time.  Sometimes quickly.