Re: SNMX
>>ant's experience probably points to the majority of snmx royalties being closer to 1% than 4%. It does sound like snmx has real deals and hard terms so I'm not concerned that this is bait and switch and the royalties will be far less.<<
You should be, IMHO. I have two explanations for the seemingly high 1-4% royalty rate:
1. SNMX’s royalty rates are tiered according to sales. The claimed 1-4% rate corresponds to the top tiers of the various contracts and applies to sales levels that may be hard to reach. At the sales levels actually attainable, the royalty rates are probably much lower for the reason Ant mentioned: profit margins on mainstream food items are tiny.
2. The contracts that SNMX has forged are for niche rather than mainstream products, where the food companies’ margins may be considerably higher. The bad side of this, of course, is that the sales base on which royalties are calculated will be small.
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Citing the top-tier rate of a royalty agreement and omitting mention of the lower tiers is an example of the kind of half-truth you often hear in corporate presentations to investors. Ditto for suggesting that a niche-product contract is for a mainstream product.
I admit that my initial DD on SNMX has been cursory, but I don’t like what I see. I think Ant’s comparison of SNMX to the genomics companies circa 1999-2000 may be on target. If further DD by any of us shows my initial assessment to be wrong, I’ll be happy to reconsider.
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