Quantum Materials Corp. Update (OTCQB: QTMM)
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Quantum Materials Corp.announced the completion of a major milestone yesterday wherein they reported shipping both evaluation and production sized quantities of cadmium-free, red and green quantum dots to select leading consumer electronics manufacturers. If you have been following the progression of this rapidly emerging market for quantum dots, then you likely realize that this is a very big deal for Quantum Materials Corp. and moves them several squares towards the Company's near term goal of establishing commercial sales contracts and/or or joint development agreements with one or more of the global flat panel display manufacturers.
Due to the Company's proprietary (patents and patents pending) continuous flow chemistry manufacturing method, rapid and low capital cost scale-up of manufacturing capacity has never been the metric holding this group back from establishing a customer base and eventual market share - but what has been somewhat unknown until yesterday's release was their ability to manufacture and supply (with this highly scalable flow chemistry method) a cadmium-free (or heavy metal free) variant of quantum dots with high performance characteristics defined in terms of overall quantum yield (measure of the materials brightness level) and FWHM levels (FWHM stands for full width half max - and is a standardized measure of the dot's color purity or narrow emission spectrum).
As of yesterday's release this issue looks to be no longer an unknown in the equation based on a quote from Quantum CEO Stephen Squires in the release stating (emphasis added):
"We were very encouraged with the results of our meetings at CES. I personally am even more pleased with the dedication, hard work and creativity of our team. Their discoveries have enabled us to meet the stringent demands and tight delivery deadlinesnecessary to rapidly integrate our materials into commercial products."
We see this most recent release as a watershed event and one of, if not the final piece of the puzzle falling into place which sets Quantum Materials squarely on a path towards meaningful revenue generation from quantum dot sales/collaborations - which we expect to be followed by enterprise value appreciation based on traditional valuation/economic metrics.
In the release the Company restated the near term delivery date (Q2-2015) of their next scale-up sized manufacturing reactor, rated to produce 2,000 Kg of quantum dots per year (2,000,000 grams), which will add 8X their current capacity of 250 Kg/year (with further expansion capacity planned for the balance of 2015). That might not sound like very much, but in the realm of quantum dots this is a very high capacity and could possibly be close to or possibly even exceed the topline capacity of most if not all of the Company's competitors at that time (their ability to scale up additional capacity beyond that level is just a matter of adding additional reactors). We have heard from several sources in the industry that the likely limiting factor restricting the adoption of quantum dots to drive higher quality color gamut in existing LCD panel manufacturing lines would simply be the availability of high quality quantum dots. That of course remains to be seen - but based on the reaction of the electronics industry at this year's CES conference and the apparent ramp up in interest level for information and sample requests at Quantum Materials Corp., we do see the market for this new type of "supercharged LCD" coming quickly and we will likely look back at 2015 as the year that QD LED panels made their big splash and started taking market share away from both standard LCD's as well as the industry's top quality rated panel format (and still higher priced) OLED technology.
Given the fact that you can now likely add "high performance level, cadmium-free red and green dots" to Quantum Materials existing tool box of differentiators that include: rapid, low capex scale up; high product uniformity and product stability (due to flow chemistry method and a proprietary zinc shelling technology) the Company certainly looks poised to take that next and very important step forward towards commercialization.
(for a quick primer on quantum dots and Quantum Materials flow production technology just click on the brief video segement below or go to: https://drive.google.com/file/d/0ByAeUTgpoB3PYWFwOTlENDZUN00/view
While the absolute timing for that event to occur is not known (our sense based on following this market buildup for the last six months is that they are very, very close), what we do know at this time is that the consumer electronics manufacturers now clearly see a strong value proposition in swapping out the underperforming phosphor based color generation design with quantum dot based technology. If that design improvement results in a commercial success in terms of product sell-through (we were at this years' CES and these QD sets are ridiculously better in quality than standard LCD displays - therefore we so no reason why they would not be in high demand from a consumer perspective) the consumer electronics groups will consume many tonnes of quantum dots per year to supply their panel fabs and drive the color spectrum of these next gen panels. Therefore, it stands to reason that if Quantum Materials is successful in building meaningful market share in what looks to be an explosive demand ramp for quantum dots, they would not only establish meaningful topline revenue vitrually overnight, but those numbers could expand rapidly over time as the sector builds in volume.
What would quantum dot sales look like in $/gram or $/kilogram at this time? That is one of the metrics we don't have a good handle on currently. Historically, quantum dots used primarily for medical assay and scientific research applications have sold for multiple thousand dollar per gram price levels. We understand that based on mass quantities and economies of scale those numbers are going to be cut down substantially but based on the expected demand levels and just how difficult it is to manufacture high performance, uniform quantum dots in large volumes - we do expect these numbers to be in a range that should allow Quantum Materials (based on their low capex and low opex manufacturing method) to realize eye popping revenues and maintain healthy margins. Let's face it, if they can just succeed in maxing out their first 2,000 Kg/year reactor the number that results from multiplying 2,000,000 grams times $X/gram gets big very, very fast!
Which brings us back to the title of this post and the "countdown"sequence. Since we've all watched plenty of live space launch missions on TV (hopefully soon to be on our very own 4K UHD quantum dot driven sets) we all know the famous words that follow this line: Yep, its . . . . "HOUSTON, WE HAVE LIFTOFF!" . . . . and that's exactly what we expect will happen to Quantum Materials when they break into the sales QD channeland the market realizes that this microcap company is now a highly disruptive force in the quantum dot sector with a low cost, high quality and scalable platform to build crystalline nanoparticle semiconductors (aka quantum dots) for making better performing LCD displays today and eventually changing the game for LED solid state lighting and solar energy generating photovoltaics in the future.
Here is a link to today's press release: http://finance.yahoo.com/news/quantum-materials-begins-shipping-cadmium-110000937.html
Here is a link to our recent CES Travel Digest: https://thcbin.files.wordpress.com/2015/01/qtmm-article-january-2015-final.pdf
To learn more about quantum dots see this short video: https://drive.google.com/file/d/0ByAeUTgpoB3PYWFwOTlENDZUN00/view
To learn more about Quantum Materials Corp. you can visit their website at: www.qmcdots.com
We will continue to keep you up to date on the future developments and milestone accomplishments atQuantum Materials Corp.
SD Torrey Hills Capital