Investing in a materials-oriented company that has survived off of license agreements such as LQMT reminds me of a (now defunct) company called Energy Conversion Devices. The principle inventions (by the prolific Stanford Ovshinsky) included amorphous compounds for solar cells, non-volatile chip memory, erasable write-many CD/DVDs, and nickel-metal hydride for batteries, ranging from AA cells to electric cars. All high-volume markets, but with just 1-2% licensing fees, never amounted to much. The patents started expiring, NiMH batteries became supplanted by lithium batts, etc.
There were promises that their materials weren't just incrementally better than existing ones, but could define entire new markets. For solar panels, they were 10-30% less efficient than crystalline silicon, but could not be manufactured for that percentage less cost in volume. For more efficient materials, ditto.
Ironically, many years after the basic patents expired, Intel supposedly will be manufacturing a major replacement for flash memory.
So, how to quantify LQMT's material? For iPhone is it say 30% tougher than series 700 aluminum but 10x the cost? No go, then. Does it make home buttons / hinges last 10X longer? At what price? Unibody laptop cases, watch cases? From the demos, pinball or Pachinko machines make sense at some cost increment, ha! Golf ball centers, tennis rackets, where is the beef?
Other IP licensing companies include biotech outfits that, until they are big enough to take home most of the profits from an FDA-approved drug, make similar arrangements with sugar-daddy big pharma, sometimes pulling in "mid-digit" royalties but seemingly never enough to keep payroll going.
I'm actually a long-term holder here with a tiny position, but it would be nice to see an cost analysis for some high-volume product. Is there a cost-no-object application such as a satellite space shield? If so, does LQMT take a percentage of the list price? Medium-volume products such as artificial hips seem promising, but I can't imagine a lot of profit in a dental-implant bolt, even at high-volume. So, I'm waiting for such a report, even if blue-sky. Saying stuff like $27 million (sounds overly exact) in near-term business doesn't do the trick, without talking top-line vs. bottom-line with gross margin info.
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