Quantum Materials Corp. (fka QTMM)

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The Final Countdown!

Quantum Materials Corp. Update – Releases Data on QDX™ Quantum Dots – Cadmium Free Nano-crystals with Game Changing Heat, Oxidation and Moisture Resistance

Quantum Materials Corp. (OTCQB: QTMM) just turned the quantum dot industry on its ear this morning with a ground shaking press release wherein they are introducing an extremely robust line of heavy metal free quantum dots that have high heat, moisture and oxidation resistivity possessing performance characteristics heretofore unavailable in the industry. This is a “Rubicon” moment not only for Quantum Materials Corp, but also for the industry in general as this type of performance in a heavy metal free (or cadmium free) quantum dot has been the missing piece of the puzzle for designing products in the LCD flat panel display market that will have long lasting, high quality performance and can operate for prolonged periods of time exposed to a high heat environment - as well as not break down due to prolonged exposure to oxygen and moisture.

In the release, Stephen Squires, CEO for Quantum Materials states: "Our QDX Quantum Dots represent a game-changing development in advancing next generation display and lighting applications. Their stability under high heat allows for more effective high temperature dispersion onto LCD display thin-film. In Solid-State Lighting, QDX Quantum Dots used in QD-LEDs will give better performance and effective life in high-heat and moisture-laden environments without degradation. We are excited to see QDX Quantum Dots unleash the engineering and design teams of our customers to facilitate advances in display and lighting applications never before possible."

Due to their ability to create a very high color gamut in flat panel displays that mimic and can even exceed (according to some in the industry) performance characteristics of OLED technology panels, the consumer electronics industry has embraced quantum dots and has been introducing a number of “next generation” displays with color palettes driven by quantum dot materials. In addition to their ability to dramatically expand the color gamut of panels to more closely match the full spectrum of colors the human eye can see, another key value driver for quantum dots is their ability to drive screen brightness while consuming less power than standard phosphor based LCD and OLED panels. This is due to the fact that quantum dots are “light emitters” and not color “filters”. One of the key design restraints that we feel has held the industry back from incorporating this technology more rapidly to date has been the fact that it is our understanding that present quantum dots availiable in the market have not had the durability needed to perform for long duration time frames without also adding high cost barrier films to protect them from the heat emanating from LED backlights and/or have needed to be encapsulated in polymer substrates that protect them from exposure to oxygen and humidity conditions.

Quantum Materials’ QDX™ dots change the game and now will allow designers to incorporate these atomic sized nano-crystals that emit a very narrow bandwidth of pure color into simpler - and most importantly - less costly designs while continuing to offer the high performance capabilities afforded by quantum dots into a myriad of new product designs such as flat panel displays, solid state lighting and eventually photo-voltaic solar cells (silicon based solar cells max out at around 33% conversion efficiency ceiling - whereas based on the fact that two electrons are released for each photon striking the cell- quantum dot based solar cells have the potential to reach double that efficiency rate).

In fact, we believe that this break through in quantum dot design and introduction of QDX™ dots is nothing short of extraordinary and could move Quantum Materials Corp right to the front of the ongoing quantum dot arms race that has been in full swing over the past 12 to 24 months as the flat panel industry has been moving forward to incorporate this technology into their product designs.

What could this mean to Quantum Materials Corp in terms of enterprise growth? Well, based on what we have been observing in the industry this press release changes everything. Quantum Materials Corp was already well on their way to winning the foot race to low-cost capex scalability with their proprietary continuous flow reactor technology. The Company recently announced arrival at their San Marcos, TX labs of their next generation reactor capable of 2 tonnes of annual quantum dot capacity. It is our understanding that this reactor is just a fraction of the price of building large scale capacity in the “seeded growth or batch process” technology - processing technologies which we believe are being utilized by several of the major groups that claim to be entering the commercial scale supply of quantum dots for display and solid state lighting markets.

One of those groups, Nanoco Group PLC’s (LSE:NANO) quantum dot manufacturing partner Dow has still not had a ribbon cutting ceremony at their Cheonan, South Korea facility after several news stories over the last year or so have touted that it would be open by now. Also, we still do not know the capacity of this facility or the final build-out price tag, but we have heard numbers that are well south of QMC’s current capacity and capex cost figures many multiples of the cost of the 2 tonnes per year reactor at QMC (one tonne is equal to 1,000 kg). Prior to the two tonne reactor arriving in Texas, QMC had the capacity to produce 250 kg per year from their pilot scale reactor. This information is note worthy as Nanoco has proclaimed for some time that they were “the only company capable of producing heavy metal free quantum dots in commercial scale quantities”. Looking at their public filings and website information, we were only able to find stated capacity for their England facilities of 50 kg/year. They had shown designs for ramping another of their facilities in England to 400 kg/year - but we have not been able to verify if this was ever completed. Quantum Materials Corp. announced several months ago (Feb 5, 2015) their ability to produce increased uniformity and enhanced stability heavy metal free quantum dots in their automated 250 kg/year reactor (which has the same basic design of their 2 tonnes year reactor), therefore we are happy to see that it appears that Nanoco has finally decided to walk back some of these “exclusive heavy metal free production capability claims” from their website and corporate materials, especially when QMC’s present commercial scale production capability looks to be materially higher than theirs. How difficult is it to scale up production at QMC? Simple, they just order additional reactors and they can scale up in 2 tonne increments very quickly.

The market has given Nanoco a market value of roughly US$390 million. QMC’s present market cap is just over 10% of that value at US$42 million. Based on today’s release we expect that gap could narrow considerably over time in the event that QMC is able to position QDX™ dots into the marketplace, a marketplace that has been on a desperate search for high performance, robust quantum dot crystals that hold up in extreme environments. If this goes to plan, the next comp we might be mentioning in this post down the road could be Universal Display (OLED), with a present market cap of US$2.5 billion on annual revenues of $191 million and net income of $42 million (12/2014). Why OLED? Well we were told when we first got involved with QMC and quantum dots that these were game changing, atomic sized particles that could disrupt the design of many technologies and likely the first industry they would disrupt would be the flat panel display industry. This is due to the fact that they are an ideal replacement to phosphors for driving the color gamut of flat panel displays and would allow LCD panels to emulate the color of OLED technology displays at a greatly reduced cost to the consumer. How many kg of quantum dots would QMC need to sell to get to these numbers? Well, that is information that is not available at this time, but with a capacity of 2.25 tonnes (2,250 kilograms), and the ability to scale up quickly and at low capex, we think that if QDX™ gets popular with LCD panel manufacturers wanting to put a lower cost product on the shelf to compete with OLED, they could get there faster than you think.

Are we there yet? Well, not quite - but the company looks to be on the very brink of busting this industry wide open and today’s release just shifted QMC into a much bigger gear. We see the word disruptive thrown around a lot these days, but in this case we believe it really fits well as this new development in quantum dot technology could change or “disrupt” things in a big way. For example, it should allow panel manufacturers to deliver OLED like color displays at a price point just a few percentage points over present LCD prices. It should allow solid-state lighting manufacturers to produce “incandescent type” lighting with LED lighting efficiency, and down the road it could even allow solar to compete with hydrocarbon and coal based electricity. If you’re starting to get the sense that today’s release is a really big deal for QMC, then you’ve been paying attention and you get it!

As stated in today’s release QMC’s management team will be at the SID “Display Week 2015” Conference all this week in San Jose, CA where they will be launching QDX™ and meeting with some of the globe’s largest and most influential consumer electronics groups/VAR suppliers to this multi billion dollar industry.

If you happen to be at an age where you were listening to rock music during the mid 80’s, then you are likely familiar with the song title that started this post – The Final Countdown by the band Europe – and we feel that song is a very fitting way to end this post (the song lyrics even prophetically pose the question “will things ever be the same again?") It takes a minute or two to get going - but stick with it, it’s well worth the wait - just like Quantum Materials Corp!! Here’s the link, enjoy! https://www.youtube.com/watch?v=9jK-NcRmVcw

Team QTMM, take a bow – you’ve earned it!

Here is a link to today’s press release: http://finance.yahoo.com/news/quantum-materials-announces-qdx-tm-131500770.html

Here is a link to Quantum Materials Corp’s website: www.qmcdots.com

We will continue to keep you up to speed on all things Quantum Materials Corp.

Regards.


Clay Chase
SD Torrey Hills Capital
858 456-7300
[e-mail]



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