Replies to post #203416 on Liquidmetal Technologies Inc (LQMT)

[PayMEmf]

Yes what if those parts are bridge pins and zyris dental tool?

[The Paraclete]

You lost me Yama. Eon/Yihao splits have nothing to do with how much revenue LQMT gets from their customer. Yihao is the main contract manufacturer for LQMT. Nothing more. Take Yihao out of the equation and substitute Eutectix. Either way, LQMT has to pay their contract manufacturer for filling the order. That expense, along with the cost of the alloy, shipping costs, etc., is passed on to the customer PLUS the profit margin charged by LQMT. None of that profit goes to Yihao or to Eontec.

Like you, I know that royalties have nothing to do with the recurring volume order. I don't know how royalties even got into this conversation. It's a totally different subject.

[chipboarder]

I think that when you start splitting the spoils, you have to go to the “net income” line to do the split. Looks like you are splitting a very optimistic “operating profit” line that has many costs yet to be accounted for. Wish it were so.

[Watts Watt]

If the total revenue of parts shipped each month is say $1,000,000 and Yihao cost of goods and overhead is say 250k, that leaves $750,000 profit to split maybe evenly between Yihao and Lqmt(maybe 60%/40% Yihao). I'm wondering if Eontec would even get a cut since the value of their 60% owned Yihao would increase with this transaction.
Thoughts anyone on the % splits???

First of all, there will be no splits, as you suggest. The fact that Eontec owns 60 percent of Yihao doesn't imply any split at all.

Yihao manufactures for domestic customers
Yihao manufactures for international customers.

In either case the cost of goods sold and the margin Yihao deems necessary remain the same and an FOB plant price is offered to the customer. It will be up to Eontec to add on inland freight charges for its purchases going to its plants.

In the case of LQMT, it will be purchasing from Yihao either a CandF or CIF destination basis.

To simplify, this price includes costs of inland freight to port of export, cost of freight (via plane or ship) to US (or European) port of entry, and inland freight to customer's destination. Of course, freight forwarding and letters of credit fees will be built into that.

So there is no split of revenues as you suggest. Yihao will be uniform in its pricing structure to either domestic or foreign customer.