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Tony held the following as of the most recent 10K:
Common Stock = 3,503,111
Vested Stock Options = 2,361,899
Unvested Stock Options = 2,735,801
Total = 8,600,811
In August, when he left from his CFO position, the company accelerated 247,650 shares from those not vested. The rest went away.
On 11/16, he sold 3,417,861 shares of common stock, leaving him with 85,250 shares of common stock, and 2,889,749 options that are vested. That makes his total today 2,974,999 vested options and shares.
Sounds to me like he wanted cash available to buy his remaining options before the expiration date of 8/16/2018, as well as a little walking around money. He might have made the big purchase in 2016 with the hope of getting a big enough appreciation in a year to buy out his remaining options while keeping his principle. It didn't work that way in the end, but it is a theory.
Hauck too has quite a few options remaining, though not yet vested. In the end, both will be worth north of $15 million if we hit $5.
If I haven't made a mistake, Tony has until 8/16 to exercise his remaining options and buy the shares. When he does, it will be interesting if he flips the options and sells, or if he holds onto the shares.
Yes, certainly a possiblity. Then Li sells DC105 to the rest of the world, without the name, while Apple works with LM105 and Engel. I don't think Apple wins in that scenario. Li wins less than he would if Apple plays along.
My guess is it would be named "Liquidmetal" and it would be the merging of all of Li's pieces and parts under one roof. Whether it is a Chinese company with a wholly owed US subsidiary similar to the way Foxconn is moving, or vice versa? I'd guess that they would keep the power center of the organization in China. My guess isn't worth much in that arena. The pros and cons of that decision are likely fairly complex and dependent upon the growth potential vs. taxation.
I don't know how a NASDAQ listing would affect that decision either.
Rights to CIP, not to Eontec's formula. If LQMT, after the ROFR, sells the right to DC105 to Samsung, can Samsung market their phone as containing Liquidmetal in every country but China (Apple has rights to the name there, I believe).
So can LQMT agree to let Eontec use the brand in exchange for a royalty in a CE product that is not made by Apple after the ROFR?
I'm interpreting it as a "yes", but I am not a lawyer.
I am reasoning through Josh's analysis. It is not mine, but I have tried to refute some of it with regard to Apple.
My understanding is this...
1. Would you give us a FDA approved medical part contract if all we had was our current manufacturing track record? I wouldn't. I suspect that "they" would require some significant assurances that we will be around in some form 5 -10 years from now. That didn't look like it was the case in mid-2015.
2. As many have said previously, if you are making a widget out of steel or aluminum now, you are making money on that part, what would compel you to switch materials? Why take that risk?
3. How would the manufacturing capacity be ramped up sufficiently to begin meeting large manufacturing needs for anyone who took the risk? The first movers need to also be big.
CE provides new applications that can only exist with technology that is as cheap as other metals with qualities those metals don't possess. It has to be CE on the scale worth building factories for. This is the reason CE needs to happen first.
Apple possesses the IP to produce a multitude of parts using LM105. Many of those parts are probably best produced with LM105 and an Engel machine. However, the Engel and its 100g capacity would struggle to meet Apple's production needs. It is also much more expensive than DC105 on an Eontec 1000g machine.
So China says to the world's cell phone manufacturers..."Give us your 5G prototype in 2018, or you do not sell your phones in China." RF transparency being important to 5G means that Liquidmetal's time has come. Apple has a choice in 2018... Stay with stainless and glass, while Huawei, LG, Samsung and the rest go with DC105 and call it Liquidmetal, lock into a new contract with LQMT that keeps the name exclusive to Apple, or use the expensive formula LM105.
That's a good question. Maybe someone else knows the answer. My premise is that the brand can be licensed if the two parties agree. It is just as if LQMT makes a sale that uses DC105, I would expect them to call it Liquidmetal. I would think they could extend that right to Eontec for a royalty.
Unfortunately, I don't work for LQMT, nor do I know joshuaeyu personally. I have read and re-read his breadcrumbs over the past 18 months. This site rarely rewards the consolidation of ideas, as you are subject to being picked apart.
The catalyst for my post was the document Josh posted a few hours/days back. It filled in a few blanks and helped me see what he has been saying. That does not mean my narrative is correct.
I've been invested since mid-2014. Like I said, the DD used in that summary is mostly Josh's. I just need to construct the narrative myself, for my own sanity, and alter it as more information is presented to us.
There is a big picture in Li's head. Maybe it is as some say; that he is simply raiding LQMT for our IP, or he is satisfied with 4 machines and a slow medical contract buildup. I don't believe that, because those pieces don't fit very nicely into a strategy.
Strategy and the execution of that strategy. It serves a purpose to think through where his strategy could go completely wrong. There is one major choke point in the strategy that I spelled out. He needs a major CE contract from someone. If I were Li, I would make sure that I cannot lose on that one crucial area, BEFORE I buy LQMT and BEFORE I build out my manufacturing base. Since he has done both, I have confidence that he knows he will get a CE contract from someone.
Now we wait.
I'm less interested in the share price today. I would love to see more discourse on the potential, specific sources of revenue over the next 5 years. I'll start with my thoughts and theories as formed by reading this board, especially joshuaeyu.
We focus on two sources primarily: 1. Lake Forest and the likelihood of medical and 2. Apple. What is Li's plan for us, and how does he hope it develops?
The document provided by Josh (again) is basically a defense to the Chinese government why Li should be allowed to acquire such a large interest in LQMT. Much of the first part of the document is a side-by-side comparison of the two entities, with an emphasis why LQMT will not steal market share from Eontec. This is a similar question as raised recently about Li's conflict of interest.
The answer given in the document (in 2016), was that LQMT is a R&D facility with no real manufacturing capability. LQMT's primary clients are medical. Also, the cross-licensing agreement keeps LQMT out of Eontec's primary market. They are stating here that LQMT has a different market, a different product, a separate R&D operation, separate suppliers and is of a completely different (smaller) scale than Eontec.
Why is that relevant? There was/is some speculation that Eontec might eventually take some of its existing customers in the LQMT territories and transfer those accounts to us. That could be the plan, but this document doesn't make that sound too feasible without an acquisition.
That leaves us with three possible sources of income...
1. Our own sales and production in Lake Forest. The only way for me to estimate this would be based upon the near-term production capacity of Lake Forest. Someone has estimated this in the past in the several hundred thousand dollar range annually per machine. It is better than what we have now, but the build up to NASDAQ proportions would take years.
2. Our own sales and Eontec production. The sky is the limit here, assuming we can sell. This seems contingent upon consumer electronic adoption to drive recognition and lower price, as well as a sales team that produces.
a. ROFR comes into play here, as February will determine whether
Apple wants to keep that brand exclusivity and first-mover bragging
rights, or if they are going to go it alone with LM105, risking all
of the other makers beating them to the punch with the much cheaper
DC105.
3. Royalties. Let Li's other companies use the brand name worldwide, regardless of who sells the contract or produces the goods. This also relies heavily on CE, as we need lots and lots of volume to make money here. However, we do not need production capacity.
What is Li's plan then?
1. Secure the Liquidmetal brand via controlling interest
2. Simultaneously build an unrivaled capacity and lowest cost for BMG in China, just as 5g, electric cars, aerospace, etc. begin to require something light, strong, and RF transparent.
3. Invest in Lake Forest as a prototyping facility for North America, (primarily for Apple initially), and for the medical contracts that were in motion prior to his arrival.
4. Attach the brand name LiquidMetal to everything and anything he is allowed to attach it to.
5. Combine companies under one company. Doing this first resolves the major conflict of interest problems Li will have if LQMT and Eontec begin sharing major automotive manufacturing duties
6. Expand production capacity in North America and Europe to capitalize on automotive applications.
Nothing happens without the scale of CE, and CE is controlled by Apple until February. DC105 is the only option in the near term for CE due to cost. The question is whether or not it will be labeled LiquidMetal.
Josh did the math a few days ago. $5 a share for 20% of the cell phone frame market. If not Apple, then everyone else. If Apple, then everyone else can't use the name, even if they use the formula.
I see the $5 - $20 a share possibility over the next 5 years. Lake Forest is a strategic piece to the puzzle because it is a US company, not because the medical contracts. I do not believe that the medical suppliers would have faith in our production capacity or staying power without the rest of this story. Medical will play a bigger part in the revenue eventually once it is adopted in more applications. That could take some time.
How likely is all of this to happen vs. slow slide into eventual bankruptcy? The only way to answer that is by looking at the investment being made by Li. Either he is a massive gambler, or he knows CE is inevitable in one form or another...
1. $64 million by Li into LQMT
2. Lake Forest > $10 million and growing
3. $1 million in raw materials in LF.
4. Almost 1 billion yuan in Eontec investment in manufacturing capacity
5. Joint ventures with Cloud Metal for magnesium (automotive), with LK to produce hundreds of machines per order
Why the silence then? No CE, means no medical, no economies of scale, no North America. To scale up in time to capitalize on CE, Li had to start building capacity 2 - 3 years ago. That is a huge risk if you are simply relying on Apple to be sympathetic to your dreams. The silence tells me that either Apple has agreed to a scenario where they use DC105 as "Liquidmetal" to meet the Chinese requirement for 5G prototypes by 2018, or the negotiations lasted until very recently before they failed. If we are hitching our wagon to Apple, the silence will likely continue past February, as they will have their usual supplier gag order in place. If not, this will become a race between the phone makers to publicize the brand first. We should see some indication of that after the ROFR expires.
Li knew he would be successful before investing in LQMT. We were the last major piece to the puzzle, not one of the first. The only choice Apple has in the near term is whether we enter into a new relationship with them, or we enter it with the rest of the cell phone makers. Near-term medical contracts are just the gravy that will pay for the US-based LiquidMetal showcase.
This is basically what I believe other posters, particularly Josh, have been saying for some time. Rather than believe it wholesale, I needed to piece that information into my own narrative.
It wouldn't. You are correct. My memory of the agreement was foggy...
It is not CE and the phrase "(except by non-exclusive license or exclusive license)" should apply to Tesla.
I was looking for a reason we haven't seen Tesla royalties in our earnings, when we probably have seen them. They are just tiny thus far.
(b)
Apple will have the right of first notice by LMT of any of the following activities that LMT may pursue with any third party (including any Affiliate of LMT), which right of first notice may be exercised in accordance with Section 9A(c) below:
“(i)
the sale, transfer or other assignment (except by non-exclusive license or exclusive license) of any Intellectual Property Rights by LMT that have not been licensed by LMT to Apple; or
“(ii)
the exclusive or non-exclusive license by LMT of any Intellectual Property Rights in any field of use relating to Consumer Electronic Products owned, acquired, invented, conceived of, or otherwise developed in whole or in part by LMT or any of its Affiliates after the Capture Period Extension.
According to Josh's posts in April, the google translate has overstated the Eontec amount of 416 million yuan when it should have been 4.16 million. This means that the 46 million royalty should read 460,000 yuan, or $70K. This probably was received.
To his point back in April, that was simply for the door locks. A lot more seems to be moving from Eontec to Tesla these days.
If the actual sale of Tesla parts had been a LQMT sale with Eontec manufacturing, I wouldn't think we would be receiving a royalty as payment. I would think we could book the entire sale, with a large manufacturing cost going to Eontec. A royalty says to me that they are either using our alloy, or our brand name. Our brand name use is subject to the ROFR.
Josh,
What do you make of the 2016 Product Comparison chart in this document that lists 290 million yuan in LQMT sales, including the 46.40 million in royalties from Tesla? Do you see these as potential sales (at the time) that never came to fruition, or delayed until ROFR expires and the brand name can be used without interference?
If the cross-licensing agreement gives us revenue based upon North American and European sales...
and if Eontec has a manufacturing facility that is operational...
and Eontec has established relationships with American and European companies...
and Eontec's formula is price competitive with other metals...
and we have shipping information showing large shipments to USA based companies from Eontec...
Why will it take at least 3 years to show revenue? Please explain. I don't have a manufacturing, metallurgy, patent, legal, or psychology background.
Thanks in advance for your explanation.
I'm not a long time poster here, but I am a long time reader. Here is my take:
Liquidmetal/Magnesium is a material being used in some otherwise complex products. Outside of medical, the Liquidmetal or magnesium that you might find in a brushless motor, battery enclosure, smartphone frame, or electric vehicle drivetrain, is one of many components. Those companies, for plenty of reasons, might not wish for LQMT to make very public announcements regarding their involvement with the end-product for competitive reasons.
Medical I believe, will be different. Magnesium or Liquidmetal is the story. It is the differentiating factor (vs. weight improvement or increased battery range, or a thinner profile) in these products. The material is the story for medical.
A contract announcement would be wonderful. Meanwhile, the 10Q may not name names, but it will show 3Q revenue. That is what I am looking forward to see.
I also believe that Li wants to be listed on the NASDAQ. From what I read, we need to maintain a $4 share price for at least 2 years for that to be possible. If I were Li, how would I make sure I get there the most quickly and stay there? I would build up my capacity, build up my contracts, build up the anticipation. Then I would unleash it all. I would want to rise comfortably past $4, and I would want to punish the shorts every time the share price threatened to slip. If he were to slowly leak contract information, months before it shows up on the 10Q, then show nothing new on the 10Q, he will be fighting the share price roller coaster for years.
This strategy doesn't bother me, because it seems rational. While waiting, we are up > 4x. I think that is a good compromise.
If we do not get a contract announcement, I will be looking for hints from the OH that mimic his "fruit company" comment... hinting without divulging. Once the 10Q comes, they will reveal the revenue, and they can give us forward guidance, even if he cannot reveal the contracts themselves. If LQMT is coy with their forward guidance in November, I will become suspicious. Until then, this is fine with me.
The picture posted by Inactive has a line item with “Zircon Alloy Materials”. The “alloy” part leads me to believe it is zirconium. Zircon is a mineral.
Inactive Member shows a number of e-ande shipments to companies in the US for use in automotive. In one case, TESLA is named in the shipping information. In addition to that, e-ande shipped zironium alloy to Liquidmetal just last week. Do you have a constructive comment about this DD?
Josh just showed that Eontec expects y-o-y growth this quarter to be huge? Any comment on what that might mean for LQMT considering they are likely to be the ones manufacturing most orders flowing through LQMT?
Do you have anything but superstition and negativity to offer? Are you a world-renowned investor who visits penny stock boards to mock other investors who will never be your equal?
Your opinion is April 2019. Great. We all know your opinion. You post your opinion 10 times a day. Your only DD is "It couldn't possibly happen to me, therefore it won't happen." 70 years old and you act and invest like a child.
Very nice. Thank you for the research.
TGIF
My mistake. I did misread “BMG-fiber” as BMG fiber. Thanks for the clarification.
If I am reading this correctly the fiber is BMG not carbon and can still be used with an epoxy
I agree on the umlaut. Maybe on the next one.
I don't believe our cross licensing agreement is limited to BMG.
I don't have any information other than what has been reported on this board. The question I would have is whether or not the parts being delivered by Eontec to SAPA for TESLA were ordered after the cross-licensing agreement between Liquidmetal and Eontec. If so, I have hope that it will be included.
That link points to the 2015 content of a Model S. I believe that BMG was used in a piece of the door assembly in the Model X. Furthermore, Eontec and Li won an award for their magnesium door panels.
https://www.lightmetalage.com/news/industry-news/magnesium/ima-announces-2017-awards-of-excellence/
Therefore, I believe the speculation is that Tesla may have ordered some magnesium door panels and potentially some battery box, hinges, etc. in BMG though LQMT, for the Model 3.
Eontec has shipped, over the last few months, 35 separate shipments to SAPA Extrusions, a supplier to TESLA.
https://panjiva.com/Sapa-Extrusions-Na/38073986
But you knew all of that. So why the diversion?
Not only that 7000 kg... The site linked says that this 9/5 shipment is the 35th shipment from Eontec to Sapa. So possibly 7000 kg x 35.
If the Tesla order was executed through LQMT with Eontec as the manufacturer, I assume we would see some sort of commission on each part.
iphone Liquidmetal Edition
It would require, I suspect, public knowledge of $75 million to $100 million in annual revenue for LQMT. As Josh would say..."TGiF".
My (very) optimistic prediction (hope)...
Li seems to be laying out his strategy patiently and methodically. He has a stated goal of listing on the NASDAQ requiring that the share price stay above $4 for two years.
Assuming he has some contracts in his back pocket, how should he stagger the announcements of these contracts to best support the share price?
If he took a leaf out of the "Ponzi Musk" playbook, he would release one, wait for the shorts to enter, then release the next.
1. Natural ramp up to the Apple Event on the 12th with no announcement. Share price between .35 and .47.
2. Apple announcement or hint of some sort without enough yet to clearly discern revenue on the 12th propels us to $1.20.
3. LQMT follow-up on Apple with more specifics before share price falls below $1 propels us to $1.75.
4. Tesla announcement just prior to or at the Open House gets us to $2.50.
5. Ramp up to Quarterly Earnings announcement on November 8 bumps us to $3.
6. Forward guidance at meeting brings us to $4 by Christmas.
7. More contract announcements keep support at or above $4 until February 7 earnings and forward guidance safely get us to $5 or above.