Some 10K takeaways...Fiscal Year End June 30, 2017
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Posted On: 04/30/2018 9:54:27 AM
Some 10K takeaways...Fiscal Year End June 30, 2017:
*As of April 24, 2018, the issuer had 422,817,665 shares of common stock outstanding. [up from 337,105,438 in December 2016]
*While we continue to pursue direct sales opportunities, we are also actively marketing a licensing model to top tier chemical companies. In January 2018 the Company engaged Canaccord Genuity to provide financial advisory and investment banking services as the Company may reasonably request. The Company believes such advisory services will be instrumental as we explore licensing, merger and JV opportunities.
*In fiscal year 2017, we applied for and received a Low Volume Exemption (“LVE”) under the Toxic Substances Control Act (“TSCA”) which allows us to manufacture QD quantities of 10,000 kilograms or less per year in the United States. We also recently gained Chemical Abstract Service (CAS) registration for QDX cadmium-free quantum dots through a division of the American Chemical Society and has also completed the requisite analysis in support of the QDX Safety Data Sheet (SDS). Both CAS and the SDS are required in order to ship high volumes of advanced materials abroad. Management believes that the patented (owned and licensed) processes and proprietary manufacturing equipment employed allow us to comply with current regulations.
*We have traditionally operated with limited resources and infrastructure. As of the date of this Form 10-K, we have 9 employees, including the management team.
Once we commence commercial manufacturing operations, we expect to add additional employees in operating management, sales/marketing, R&D, production, finance and accounting, and business administration from time to time, as necessary, as our business expands and the scale up of production accelerates. In the event a licensing agreement is determined to be the preferred route to first revenues, we will add the requisite personnel necessary to support our obligations under the licensing agreement,
* the Bayer Patents cover volume production technology for heavy metal-free QDs and nanoparticles; increasing quantum yields; heavy metal-free QDs; and hybrid organic quantum dot solar cell (“QDSC”) production as well as a surface modification process for increased efficiency of high performance solar cells and printed electronics.
*With resignations of Mr. Carlson and Mr. Martin as board members and with Mr. Squires assuming the role of Chairman, President and CEO in December 2016, our Board of Directors no longer had majority of independent directors and does not as of the date of this Form 10-K; however, we intend to return to a majority of independent directors as soon as practicable and are currently in the process of determining the best way to achieve this goal. Also, our board currently does not include a member who meets the requirements of the SEC’s “financial expert” definition which we will take into account when recruiting new board members.
*Patent licenses with Rice and University of Arizona include provisions for milestones and milestone payments. To date, such payments have been waived and/or extended by both Rice and University of Arizona, respectively, illustrating the support each university has given us as we have attempted to advance our business with measured resources.
In February 2018, the Company re-evaluated the Rice Technology and the business case and determined that it was highly unlikely that the Company would be using the cadmium-based Rice technology. The Company’s substantial advancement of cadmium free dots coupled with the high volume, low cost flow technology purchased from Bayer Advanced Materials and further developed by the Company has resulted in the obsolescence of the Rice Technology. The final decision not to continue with the Rice license was driven largely by concerns that the Rice royalties could unduly burden the cost of the Company’s quantum dot products.
Pg,30...as of the filing date of this Form 10-K. To date, we have not entered into any formal commercial supply agreements or licensing agreements.
*Liquidity and Capital Resources [+ more on Pgs.34 thru 40]
As of June 30, 2017, we had a working capital deficit of $3,437,864, with total current assets and liabilities of $1,307,534 and $4,745,398 respectively. Included in the liabilities are $361,375 owed to our officers, directors and employees for services rendered and accrued through June 30, 2017, $2,511,829 of convertible debentures, net of unamortized discount and $62,738 of notes payable that are due within one year. As a result, we have relied on financing through the issuance of common stock and convertible debentures.
As of June 30, 2017, we have cash and cash equivalent assets of $52,611. We continue to incur losses in operations. Over the past five years we have primarily relied on sales of common stock and debt instruments to support operations as well as employees and consultants agreeing to defer payment of wages and fees owed to them and/or converting such wages and fees into securities of the Company. Management believes it may be necessary for the Company to rely on external financing to supplement working capital in order to meet the Company’s liquidity needs in the fiscal years ended 2018 and 2019; the success of securing such financing on terms acceptable to the Company cannot be assured
*Item 2. Properties
In June 2013, we opened a Wet Lab facility and principal executive office in San Marcos, Texas for research and development and the production of QDs and other nanomaterials. The facility where the Company is located is owned by Texas State University. In June 2015, the Company moved into a larger lab space in the same facility. As of June 30, 2017, our monthly rent for the San Marcos facility and office was $9,075. We recently decreased our laboratory and office space at the San Marcos facility and as of the date of this Form 10-K, our monthly rent is $4,538.
*Item 3. Legal Proceedings
The Company was served in Hays County, Texas in a compliant for breach of contract in February 2017. In April 2017, the Company settled this complaint for $129,000 payable over a four-month period. As of the filing date of this Form 10-K, the balance in arrears is $95,000 plus interest and other charges and has accrued this amount on its financial statements at June 30, 2017.
CAUSE NUMBER 17-2033; Hays County, Texas
Two lenders, SBI Investments LLC, 2014-1, and L2 Capital, LLC, asked Quantum Materials’ transfer agent, Empire Stock Transfer, Inc., to set aside fifty-million (50,000,000) shares of stock as collateral for four loan agreements Quantum Materials had entered into in late March 2017. This joint request occurred despite the fact that or about September 30, 2017 Quantum had repaid $339,000 (plus accrued interest of $10,170) on two of the loans. Subsequently, in November, 2017, the Company also repaid $213,650 and $8,636 of accrued interest on two of the remaining loans on their due dates.
Quantum filed suit for an injunction to stop the release of the stock. The two lenders, SBI Investments LLC, 2014-1 (SBI), and L2 Capital, LLC (L2), hired the national law firm of K& L Gates to stop the injunction; problematically, this same firm had previously represented Quantum Materials. Quantum filed a motion to disqualify the law firm for that conflict, and they subsequently withdrew.
New counsel for SBI and L2, Cleveland Terrazas PLLC, brought suit against Quantum for $1.5 million on the four notes that had been repaid and were not in actual default, though SBI Investments LLC, 2014-1, and L2 Capital, LLC claimed technical defaults. The court in Hays County granted Quantum’s temporary injunction and set the full case for trial. The next day, SBI Investments LLC, 2014-1, and L2 Capital, LLC dismissed their suit against Quantum and refiled similar actions in Kansas and Florida on the notes claiming that one note was paid on a Monday when it was due on a Sunday, demanding late payment in stock (they refused cash), and another was paid on a Friday when it was due Saturday, claiming a pre-payment penalty. All three suits are related to the same transactions. The lenders claim 140% interest, attorney’s fees, 20 million shares of stock, and damages. Quantum maintains all loans have been paid timely. **Wow; ain't that some shit...talk about some slimy no-good predatory VC's, this about takes the cake
The Company denies all the abovementioned allegations and will vigorously defend all claims.
CAUSE NUMBER: 17CV06093; Johnson County, Kansas
The Kansas lawsuit is based on the same nucleus of facts. The putative default is the failure to properly and timely file a Form S-1 with the SEC. Three causes of action are alleged: the first is breach of contracts regarding the Registration Rights Agreement against Quantum; the second claim is for breach of contract of the first L2 promissory note against Quantum; the final claim is for breach of contract regarding the second L2 promissory note against both Quantum and Stephen Squires, individually.
The Company denies all the abovementioned allegations and will vigorously defend all claims.
CAUSE NUMBER: 2017-025283-CA-01; Miami-Dade County, Florida
The Florida lawsuit largely mirrors the suit in Kansas; defaults are alleged as follows:
On July 6, 2017, Quantum filed a revised Form 10-Q/A report (the Report) with the SEC, restating its financial statements. In comparison to the unrestated financial statement previously filed by Quantum, the Revised Report materially and adversely affects SBI’s rights with respect to the notes. This restatement of financial statements constituted a breach of each of the notes. Furthermore, because each note contains a cross-default clause, each of Quantum’s breaches of a specific note also constituted a breach of every other note.
On July 27, 2017, Quantum’s auditor resigned, and replaced its auditor without seeking or obtaining the consent of SBI. This replacement of Quantum’s auditor constituted an alleged breach of the SBI notes. Because each note contains a cross-default clause, each of Quantum’s breaches of a specific note also constituted a breach of every other note.
****It's still way too friggin early in the morning here for me to be digesting all this data, so this is all the further I got for now....anyone else is quite welcome to take it from here
Sidenote; Maybe, with a little luck, the subsequent missing (yet still forthcoming) 10Q's might reveal more substantial positive developments taking place since June 2017.
*As of April 24, 2018, the issuer had 422,817,665 shares of common stock outstanding. [up from 337,105,438 in December 2016]
*While we continue to pursue direct sales opportunities, we are also actively marketing a licensing model to top tier chemical companies. In January 2018 the Company engaged Canaccord Genuity to provide financial advisory and investment banking services as the Company may reasonably request. The Company believes such advisory services will be instrumental as we explore licensing, merger and JV opportunities.
*In fiscal year 2017, we applied for and received a Low Volume Exemption (“LVE”) under the Toxic Substances Control Act (“TSCA”) which allows us to manufacture QD quantities of 10,000 kilograms or less per year in the United States. We also recently gained Chemical Abstract Service (CAS) registration for QDX cadmium-free quantum dots through a division of the American Chemical Society and has also completed the requisite analysis in support of the QDX Safety Data Sheet (SDS). Both CAS and the SDS are required in order to ship high volumes of advanced materials abroad. Management believes that the patented (owned and licensed) processes and proprietary manufacturing equipment employed allow us to comply with current regulations.
*We have traditionally operated with limited resources and infrastructure. As of the date of this Form 10-K, we have 9 employees, including the management team.
Once we commence commercial manufacturing operations, we expect to add additional employees in operating management, sales/marketing, R&D, production, finance and accounting, and business administration from time to time, as necessary, as our business expands and the scale up of production accelerates. In the event a licensing agreement is determined to be the preferred route to first revenues, we will add the requisite personnel necessary to support our obligations under the licensing agreement,
* the Bayer Patents cover volume production technology for heavy metal-free QDs and nanoparticles; increasing quantum yields; heavy metal-free QDs; and hybrid organic quantum dot solar cell (“QDSC”) production as well as a surface modification process for increased efficiency of high performance solar cells and printed electronics.
*With resignations of Mr. Carlson and Mr. Martin as board members and with Mr. Squires assuming the role of Chairman, President and CEO in December 2016, our Board of Directors no longer had majority of independent directors and does not as of the date of this Form 10-K; however, we intend to return to a majority of independent directors as soon as practicable and are currently in the process of determining the best way to achieve this goal. Also, our board currently does not include a member who meets the requirements of the SEC’s “financial expert” definition which we will take into account when recruiting new board members.
*Patent licenses with Rice and University of Arizona include provisions for milestones and milestone payments. To date, such payments have been waived and/or extended by both Rice and University of Arizona, respectively, illustrating the support each university has given us as we have attempted to advance our business with measured resources.
In February 2018, the Company re-evaluated the Rice Technology and the business case and determined that it was highly unlikely that the Company would be using the cadmium-based Rice technology. The Company’s substantial advancement of cadmium free dots coupled with the high volume, low cost flow technology purchased from Bayer Advanced Materials and further developed by the Company has resulted in the obsolescence of the Rice Technology. The final decision not to continue with the Rice license was driven largely by concerns that the Rice royalties could unduly burden the cost of the Company’s quantum dot products.
Pg,30...as of the filing date of this Form 10-K. To date, we have not entered into any formal commercial supply agreements or licensing agreements.
*Liquidity and Capital Resources [+ more on Pgs.34 thru 40]
As of June 30, 2017, we had a working capital deficit of $3,437,864, with total current assets and liabilities of $1,307,534 and $4,745,398 respectively. Included in the liabilities are $361,375 owed to our officers, directors and employees for services rendered and accrued through June 30, 2017, $2,511,829 of convertible debentures, net of unamortized discount and $62,738 of notes payable that are due within one year. As a result, we have relied on financing through the issuance of common stock and convertible debentures.
As of June 30, 2017, we have cash and cash equivalent assets of $52,611. We continue to incur losses in operations. Over the past five years we have primarily relied on sales of common stock and debt instruments to support operations as well as employees and consultants agreeing to defer payment of wages and fees owed to them and/or converting such wages and fees into securities of the Company. Management believes it may be necessary for the Company to rely on external financing to supplement working capital in order to meet the Company’s liquidity needs in the fiscal years ended 2018 and 2019; the success of securing such financing on terms acceptable to the Company cannot be assured
*Item 2. Properties
In June 2013, we opened a Wet Lab facility and principal executive office in San Marcos, Texas for research and development and the production of QDs and other nanomaterials. The facility where the Company is located is owned by Texas State University. In June 2015, the Company moved into a larger lab space in the same facility. As of June 30, 2017, our monthly rent for the San Marcos facility and office was $9,075. We recently decreased our laboratory and office space at the San Marcos facility and as of the date of this Form 10-K, our monthly rent is $4,538.
*Item 3. Legal Proceedings
The Company was served in Hays County, Texas in a compliant for breach of contract in February 2017. In April 2017, the Company settled this complaint for $129,000 payable over a four-month period. As of the filing date of this Form 10-K, the balance in arrears is $95,000 plus interest and other charges and has accrued this amount on its financial statements at June 30, 2017.
CAUSE NUMBER 17-2033; Hays County, Texas
Two lenders, SBI Investments LLC, 2014-1, and L2 Capital, LLC, asked Quantum Materials’ transfer agent, Empire Stock Transfer, Inc., to set aside fifty-million (50,000,000) shares of stock as collateral for four loan agreements Quantum Materials had entered into in late March 2017. This joint request occurred despite the fact that or about September 30, 2017 Quantum had repaid $339,000 (plus accrued interest of $10,170) on two of the loans. Subsequently, in November, 2017, the Company also repaid $213,650 and $8,636 of accrued interest on two of the remaining loans on their due dates.
Quantum filed suit for an injunction to stop the release of the stock. The two lenders, SBI Investments LLC, 2014-1 (SBI), and L2 Capital, LLC (L2), hired the national law firm of K& L Gates to stop the injunction; problematically, this same firm had previously represented Quantum Materials. Quantum filed a motion to disqualify the law firm for that conflict, and they subsequently withdrew.
New counsel for SBI and L2, Cleveland Terrazas PLLC, brought suit against Quantum for $1.5 million on the four notes that had been repaid and were not in actual default, though SBI Investments LLC, 2014-1, and L2 Capital, LLC claimed technical defaults. The court in Hays County granted Quantum’s temporary injunction and set the full case for trial. The next day, SBI Investments LLC, 2014-1, and L2 Capital, LLC dismissed their suit against Quantum and refiled similar actions in Kansas and Florida on the notes claiming that one note was paid on a Monday when it was due on a Sunday, demanding late payment in stock (they refused cash), and another was paid on a Friday when it was due Saturday, claiming a pre-payment penalty. All three suits are related to the same transactions. The lenders claim 140% interest, attorney’s fees, 20 million shares of stock, and damages. Quantum maintains all loans have been paid timely. **Wow; ain't that some shit...talk about some slimy no-good predatory VC's, this about takes the cake
The Company denies all the abovementioned allegations and will vigorously defend all claims.
CAUSE NUMBER: 17CV06093; Johnson County, Kansas
The Kansas lawsuit is based on the same nucleus of facts. The putative default is the failure to properly and timely file a Form S-1 with the SEC. Three causes of action are alleged: the first is breach of contracts regarding the Registration Rights Agreement against Quantum; the second claim is for breach of contract of the first L2 promissory note against Quantum; the final claim is for breach of contract regarding the second L2 promissory note against both Quantum and Stephen Squires, individually.
The Company denies all the abovementioned allegations and will vigorously defend all claims.
CAUSE NUMBER: 2017-025283-CA-01; Miami-Dade County, Florida
The Florida lawsuit largely mirrors the suit in Kansas; defaults are alleged as follows:
On July 6, 2017, Quantum filed a revised Form 10-Q/A report (the Report) with the SEC, restating its financial statements. In comparison to the unrestated financial statement previously filed by Quantum, the Revised Report materially and adversely affects SBI’s rights with respect to the notes. This restatement of financial statements constituted a breach of each of the notes. Furthermore, because each note contains a cross-default clause, each of Quantum’s breaches of a specific note also constituted a breach of every other note.
On July 27, 2017, Quantum’s auditor resigned, and replaced its auditor without seeking or obtaining the consent of SBI. This replacement of Quantum’s auditor constituted an alleged breach of the SBI notes. Because each note contains a cross-default clause, each of Quantum’s breaches of a specific note also constituted a breach of every other note.
****It's still way too friggin early in the morning here for me to be digesting all this data, so this is all the further I got for now....anyone else is quite welcome to take it from here
Sidenote; Maybe, with a little luck, the subsequent missing (yet still forthcoming) 10Q's might reveal more substantial positive developments taking place since June 2017. 
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