Investing in Nano Catalysts with QuantumSphere
We’ve covered plenty of over-the-counter (OTC) companies in the past and have pointed out many red flags for investors to consider. The fact is that a majority of OTC companies fail and this is not due to some “short conspiracy” but rather the constant stream of big promises, usually in the form of press releases, followed by little to no real execution. The reality is that shorting OTC stocks is very difficult and many OTC stocks are impossible to short. While speculators may make money on the long and short sides, long term investors in OTC companies will eventually lose all of their capital in almost all cases. We recently came across an OTC company which completed a reverse merger late last month and is now a publicly traded “leader in nanoscale catalyst technologies providing production efficiencies to multi-billion dollar industrial chemical processes”. That company is called QuantumSphere.
Founded in 2003, QuantumSphere has developed a process to manufacture metallic nanopowders with end-use applications in the chemicals and battery sectors. QuantumSphere began trading in the same way most OTC companies do. On April 22, 2014, a shell company called “Way Cool Imports Inc.” which was incorporated in Nevada in 2005 merged with QuantumSphere, Inc. and is expected to trade under the symbol QSIM. At the present time, there seems to be no price set for this security and consequently no volume. This could be due to an odd corporate event QuantumSphere initiated where they reverse split their stock 10,000 to 1 and then forward split right after for 10,000 to 1. While we would anticipate that this will be resolved shortly and the stock will begin trading, we get concerned when their 10-Q filing made a few weeks ago states “We estimate that, as of the date of this filing, our current cash will be depleted by the end of May 2015“. Hopefully, they’ve managed to raise the debt capital they were looking for.
QuantumSphere has issued two press releases in total so far, each with information worth noting. The first press release which was issued earlier this month validated the commercial viability of QuantumSphere’s nanocatalysts for ammonia production with a leading Chinese industrial chemicals partner:
Initial validation results from a 40,000 metric ton per year plant demonstrated a 10-15 percent increase in ammonia output, with no plant modifications. An increase of 5 percent in ammonia production can translate into millions of dollars of additional revenue annually in a typical-sized ammonia plant.
Based on this statement, the Chinese producer would have seen at least a $4 million increase in annual revenues as a result of using QuantumSphere’s nanocatalyst. The process used 360 kilos of these nanocatalysts which gives us some indication of the Company’s production capabilities.
The second press release made just a week ago was relating to a Joint Development Agreement (JDA) made with a private Swiss company called Casale. Founded in 1921, Casale is a global leader in production technologies for ammonia, urea, melamine and other chemicals having been the first licensee of the original ammonia process. Both companies will work together to validate and optimize QSI-Nano catalysts with Casale production reactor technologies and if this phase is successful, the second objective will be to then sell the catalysts to chemical plant owners and operators.
While QuantumSphere did have a trickle of revenue in Q1-2015 of $16,829, the Company is solely counting on their nanoparticle catalysts to bring them to profitability:
While we have achieved a commercial validation at a production-scale ammonia plant, and we are discussing pricing, volume and timing relating to the sale of our QSI-Nano® iron catalysts, we have not yet received a definitive purchase order. Until we achieve one or more purchase orders in meaningful amounts for our QSI-Nano® iron catalysts, we cannot attain our objective of becoming a profitable company.
QuantumSphere goes on to say that “our FeNIX nanocatalyst is just the first of many disruptive products we plan to bring to market”. Another one that we’ll cover in a coming article is their “met-air battery”. While this product isn’t elaborated on much in the 10-Q, and gets a whole two lines on QuantumSphere’s corporate site, there’s an entire website dedicated to this remarkable battery along with the bold statement:
QSI is an industry leader in the design, development, and manufacture of high performance, low cost metal-air battery components and systems targeted at the $30 billion portable battery market
(UPDATE 06/23/2018 – That website is now gone.) Let’s hope this isn’t another jack of all trades OTC company which claims to have technologies that can solve every problem mankind is facing yet can never seem to make just one application of their technology commercially viable and consequently goes bankrupt as a result.
Investors should expect revenues from this first product very shortly if, in fact, it can generate millions of dollars in additional revenues per year for ammonia producers. Only when meaningful revenues start to flow in can we be assured that this first product is commercially viable. Until then, QuantumSphere will be subject to being classified as “just another OTC company with lots of promises and investments but nothing to show for them”.