About NanoSensors, Inc.
NanoSensors, Inc. (the “Company”) was incorporated in 2003 and is a publicly-traded (SYMBOL: NNSR) nanotechnology development Company based in Santa Clara, California. The Company’s principal business is the development and marketing of sensors and instruments to detect biological (B), explosive (X) and chemical (C) agents (“BCX”), along with the management of intellectual property derived there from that will enable NanoSensors to create nanoscale devices.
The Company’s current strategy is to build sensors that incorporate the technology covered by its license agreement with Michigan State University to detect e.coli and salmonella in food and water.
Over the past sixteen months the Company has accomplished a tremendous amount. In October 2005 the Company obtained a trading symbol (NNSR) from the National Associational of Security Dealers which allowed their shares to start trading on the over-the-counter bulletin board. Shortly thereafter, the Company was able to close a private placement with one valued investor, and from November 2005 through March 2006 the Company developed a new business model and growth strategy to develop and commercialize instruments to detect malicious agents.
Previously, the Company’s objective was to develop sensors and instruments to detect chemical, explosive and biological agents with an in-house research and development group and product development team. Today, the Company is still focused on developing sensors and instruments for Homeland Security applications that employ advanced nano-technologies such as porous silicon and carbon nanotubes to detect malicious agents. However, in an effort to accelerate growth, the Company is employing a strategy of acquiring technology licenses and assets that they believe will enable them to more rapidly and cost-effectively develop and commercialize products.
The components to this acquisition strategy consist of:
• Acquiring non-core intellectual property and tangible assets that will be income and balance sheet accretive.
• Acquiring intellectual property assets, patents, licenses, and source code for solutions that are in an advance stage of development.
• Identifying patented or patent-pending technologies at universities or government laboratories and funding additional development of those technologies in exchange for acquiring the exclusive rights to commercialize the resulting prototypes.
At the start of 2006, the Company’s major goals were to develop a new business model and growth strategy, raise additional equity capital to enable them to begin to execute their business plan, create a world-class technical advisory board, expand their senior management team and board of directors, and close two intellectual property acquisitions and/or commercialization transactions.
To date the Company has accomplished the following:
• Closed a private offering that raised total gross proceeds of $1,729,500
• Established a five member Technical Advisory Board
• Added a Chief Operating Officer and an independent Director to our Board of Directors
• Entered into technology license agreements with Michigan State University and Pohang University of Science and Technology
• Finalized the design of a biosensor to detect e.coli and manufactured limited quantities of the disposable unit and data acquisition unit through a third-party manufacturer. They expect to begin third-party field testing of their biosensor prototype to detect e-coli within the first two quarters of 2007.
• Executed a non-binding letter of intent to acquire privately-held DKL International, Inc., (www.dklabs.com) a provider of passive technology and related products to the homeland security, defense, military, law enforcement, security, safety, and rescue markets. DKL is currently selling its LifeGuard ™ product in Asia.
Products
Present detection sensors and instruments that are being used today by the government, military and private sector provide low sensitivity, take up too much space, have a high cost and require a high level of supervision.
Biosensor Devices
The nanoporous silicon-based biosensor technology covered by the Company’s license agreement with Michigan State University is to detect selected bacteria, salmonella and e-coli. This license also provides the Company with the first right of refusal for other bacteria which may be developed. The Company initiated the design and engineering of their first biosensor product for the bacteria e-coli promptly after the license agreement was executed.
The product consists of two core functional parts. First, the product design incorporates a disposable housing unit in which the actual sensor device would be mounted on a secured and sealed platform and a separate, external data acquisition unit. The sensor housing unit has been designed to incorporate the necessary electrical leads to transmit the signal from the sensor to the external data acquisition unit. The data acquisition unit has be designed to accept the output signal from the disposable housing unit, convert the signal to the appropriate format and to display the results. The prototype of the first biosensor product has been built and tested. The Company has finalized the design of the first prototype and limited quantities of the disposable unit and data acquisition unit have been produced by a third-party manufacturer. The Company expects to begin third-party field testing of our biosensor prototype to detect e-coli within the first two quarters of 2007.
The Company expects that their next nanoporous silicon-based biosensor product will be to detect the bacteria, salmonella. On average Salmonella sickens 40,000 and kills 600 people a year in the United States. The United States Department of Agriculture estimated the minimum annual cost of illness caused by salmonella bacteria in 2005 to be $2.3 billion, including $2.1 billion for premature death, $181 million for medical care, and $89 million in lost productivity. The Company does not anticipate major changes on the physical designs for the housing unit or the data acquisition unit used to detect e-coli in order to make it adaptable for salmonella. The changes will primarily reside in functionalizing the nanoporous silicon for salmonella rather than e-coli.
Nanoporous Silicon-based Sensors for Other Bacteria.
The Company’s research plan is directed toward developing biosensors for other bacteria. As previously mentioned, their license provides them with a first right of refusal for using the licensed technology for the detections of other bacteria. The research effort will be conducted by their licensor with funding support provided by the Company and will focus on determining the host molecule which will interact with the selected targeted bacteria and developing the method for attaching such host molecules to the nanoporous silicon.
Opportunity
According to the Center for Disease Control (CDC), e.coli is a general term that includes many strains of the bacteria. In fact, there are more than 170 strains of e.coli (called “serogroups”); although most strains are harmless, e.coli (particularly the strain called e. coli O157:H7) produces a powerful toxin that can cause severe illness, qualifying it as a pathogen. It is commonly found in the intestines of healthy cattle, deer, goats, and sheep.
The two major market segments for the Company’s biosensor product is the detection of food-borne e-coli and the water-borne e-coli. According to the Center for Disease Control (“CDC”), 85% of e-coli infections are food borne in origin. In addition, the CDC estimates that for every laboratory-confirmed infection, another 4-8 symptomatic cases are likely missed by current surveillance systems which means the true economic costs of e.coli infections alone could be as high as $3.24 billion. The United States Department of Agriculture estimated the minimum annual cost of e.coli illnesses in 2005 to be $430 million, including $392 million for premature death, $33 million for medical care, and $5 million in lost productivity.
The United States experienced two major e.coli outbreaks in 2006: one involving tainted produce served at Taco Bell restaurants, the other involving washed-and-bagged spinach from Natural Selection Foods which collectively caused deaths and hundreds of illnesses across 19 states.
Private corporations have significant financial, legal, and public relations interests in preventing e.coli outbreaks in their establishments. The top 60 restaurant chains have more than 130,000 locations. The “Big Five” – McDonalds, Subway, KFC, Burger King, and Pizza Hut account for 92,000 of these locations.
According to the CDC, 85% of e.coli infections are food borne in origin, and states with the highest incident rates of food-borne disease outbreaks were: Florida (224), California (208) Illinois (91), Maryland (63, Michagan (60), and Ohio (104). In addition, the CDC estimates that for every laboratory-confirmed infection, another 4-8 symptomatic cases are likely missed by current surveillance systems meaning the true economic costs of e.coli infections alone could be as high as $3.24 billion. The United States Department of Agriculture estimated the minimum annual cost of e.coli illnesses in 2005 to be $430 million, including $392 million for premature death, $33 million for medical care, and $5 million in lost productivity.
Acquisition Strategy
In an effort to move rapidly from a development stage organization, as well as to take advantage of opportunities that are present in the nanotechnology and homeland security industry; the Company is interested in acquiring and commercializing technology solutions in sectors that include: computing, materials and manufacturing, electronics and national security.
The Company has three strategic components to its acquisition strategy:
- IP Acquisition (Post-Revenue): Acquire non-core intellectual property and tangible assets from corporations that will be income and balance sheet accretive.
- IP Commercialization (Pre-Revenue): Acquire intellectual property assets, patents, licenses, and source code for solutions that are still in development, but less than twelve months away from generating revenue.
- University & Government R&D: Identify patented or patent-pending technologies at universities or government labs and fund additional development of those technologies in exchange for exclusive rights to commercialize the resulting prototypes.
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