QuantumSphere, Inc.

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Description of company business:

QSI has reached a key inflection point in its lifecycle. The Company has completed its initial product R&D phase, established a proven business model, and is accelerating growth through the commercialization of its award-winning products. Founded in 2002, QSI has established strategic relationships with several large, key participants in its target markets who are now relying on QSI’s breakthrough capabilities for their new products. QSI’s products have received several industry awards from research firms such as Frost & Sullivan. The Company seeks up to $10 million of equity funding to expand sales and marketing efforts for its current products, further expand production capacity, and accelerate critical future product initiatives. Investors have an opportunity to come in on the front-end of the inflection point.

QuantumSphere Investment Highlights:

• QSI was founded in 2002 and has secured ~$20M in funding to date (including U.S. Dept. of Energy, NSF, CEC, and U.S. Army government grants).

• Our technical team has developed and patented a unique manufacturing process which enables the production of high performance catalysts used to increase efficiency in multiple specialty chemicals and energy storage applications.

• These award winning high-performance catalysts materials and QSI components are now enabling breakthrough results for key customers / industry partners and QSI anticipates commencing high volume production within the next 18 months.

• QSI catalysts have the potential to benefit multiple multi-billion dollar process applications in the refining, petrochemical, chemical, and pharmaceutical industries. Currently, QSI’s lead application and commercialization focus is ammonia synthesis, a highly critical and energy-intensive process. The $100B+ of ammonia produced annually consumes more than 2% of the world’s energy supply. QSI is engaged with a firm that controls >50% of the plant engineering / design / refurbishment market.

• The Company anticipates it can generate nearly $100+ million dollars in annual revenue within the ammonia and specialty chemicals industry in the next 5 years.

• QSI began with early validation and revenue traction from energy storage applications (battery and fuel cell catalysts and components), we see these as emerging categories and solid growth segments for QSI (also supported by existing non-dilutive U.S Dept of Energy grants). The high performance metal air battery electrodes have been validated by global industry leaders.

• The Company’s technology is backed by 50 patents issued and applications pending.

• Installed production capacity is automated, easily scalable, and requires modest capital expenditure. In addition, QSI has achieved ISO 9001:2008 Certification, ensuring quality, consistency, and customer satisfaction.

• QSI is reaching an inflection point as energy storage and specialty chemicals customers and partners are anticipated to ramp in 2012.

• QSI anticipates moving from annual revenues of several hundred thousand dollars to several million dollars with cash flow breakeven projected to occur in Q3 2013.

• QSI projects significant revenue and margin growth: projected sales to reach $200M+ by 2015 with anticipated gross margins near 70%; EBITDA margins anticipated to reach almost 50%.

• QSI is seeking up to $10M in equity at this time. This equity financing is anticipated to take QSI past the cash flow break even milestone.

Also, please view our brief corporate video (turn up the volume) for additional background: www.qsinano.com/intro.

About QuantumSphere, Inc.

QuantumSphere, Inc. (QSI or the Company) develops and manufactures proprietary high-performance nanoscale catalysts which are used to increase the rate of chemical reactions. Demonstrated results by QSI reduce costs and increase efficiency in the generation, storage, and use of energy. QSI also actively develops high-value commercial applications for its products across a range of carefully selected specialty chemicals and energy storage markets, typically in conjunction with the sector's end-market leaders.

Industry leading companies are engaged and depending on QSI's award winning products to provide competitive advantage for their new offerings in multi-billion dollar and high-growth market opportunities. With validation and lead customers in place, key segments addressed by QSI include metal-air batteries for electric vehicles and large-scale grid storage; direct methanol fuel cells for military applications; and more efficient chemical production for ammonia and other high-value industrial chemicals. QSI is backed by more than 50 patents issued and applications pending, has recently achieved ISO 9001:2008 certification, and is at a major growth inflection point as it is poised for expansion and profitability with multiple customer products in development or launching. Click here to view QSI's corporate introductory video: www.qsinano.com/intro

A multi-billion dollar global industry, catalysts are essential to the world's industrial production. As much as 90% of all chemical processes utilize catalysts (petroleum refining, pollution abatement, and production of fuels and chemicals) and 60% of all industrial products (fertilizers, plastics, and pharmaceuticals) are made using catalysts. Catalysts are now seen as a preferred way to improve process efficiency, lower costs, increase output, use less energy, and meet both performance and environmental standards. This is placing a strong emphasis on the development of new catalysts with higher activity, increased longevity, and reduced environmental and/or health impact.

The extent of the catalyst market may not be apparent to the casual observer because catalysts are mostly used in intermediate processing steps, but catalysts are a multi-billion dollar industry. Current global catalyst markets are in excess of $12 billion annually. Nanocatalysts sales are projected to reach $6.0 billion by 2015 and will play a critical role in reducing costs and increasing efficiency in the generation, storage, and usage of energy. Sources: Freedonia Group, Global Industry Analysts, Inc.

For more information please visit, www.qsinano.com. or call 714-545-6266.

Website: QuantumSphere

No. of Employees: 15 Employees

Stage of Company: Growth

Core Product/ Service:

Advanced materials used to increase performance and efficiency when generating, storing, or using energy.
QSI has developed and patented a fully automated, scalable, safe, environmentally friendly, and ISO 9001:2008 Certified manufacturing process. QSI's high surface area, nano-scale metal catalysts have a very narrow particle size distribution, spherical morphology, unique metal core with controllable oxide shell which enhances product performance, efficiency, and durabilty.

Technology

QuantumSphere's manufacturing process is an adaptation of the gas phase condensation (GPC) method covered by proprietary trade secrets and other key intellectual property. Metal is vaporized using resistance heat at a temperature beyond the boiling point of the material, until a sufficient rate of vaporization is achieved. Through automated computer control of the metal flux, chamber pressure, temperature and gas flow, metal and metal alloy nanoparticles are manufactured with the desired size and particle distribution. The resistance heated vapor condensation method provides the best quality metal and metal alloy nanoparticles with the lowest level of agglomeration and fewest impurities in the marketplace. This method is the clear choice for low-cost commercial production of uniform, reproducible, advanced metals and catalysts at the nano scale (see QSI product profiles for additional technical info).

Intellectual Property

The patent for QuantumSphere's platform GPC process was awarded October 16, 2007 and includes seventy-three broad claims on the manufacturing system that produces advanced metals and catalysts at the nano scale. Additional patent applications have been filed covering composition of nano alloys, unique dispersions/formulations, process chemistries, several commercial devices (for batteries, fuel cells, solar and hydrogen generation), as well as other clean-tech applications enabled by the use of QSI's advanced catalyst materials.

Competing Technologies

Synthetic or man-made nano scale materials were first created in the 1970's using the gas phase condensation method. Today, there are dozens of processes for producing nano scale materials worldwide. These processes include chemical vapor deposition, physical vapor deposition, reactive sputtering, laser pyrolysis, plasma gun spray conversion, mechanical alloying, grinding and sol gel. Most of these processes are relatively expensive and require sophisticated and complex equipment and labor intensive maintenance. In addition, these methods may result in products with inconsistent particle size, distribution, shape and impurities with little ability to scale up to commercial quantities at reasonable prices.

Our Process

QuantumSphere's patented process is safe, environmentally friendly, fully automated and requires low supervision and little down time for reactor maintenance. Unlike competitive processes, we have literally removed the potential for human error and expensive labor from the manufacturing equation. Our increased production rates combined with lower labor and conversion costs have enabled commercial application of these advanced materials by industry leading companies commercializing multiple consumer and industrial products. With the ability to deliver high quality nano scale catalysts in commercial quantities at reasonable prices, QuantumSphere and its partners are opening the door to allow for mass market penetration and accelerated commercialization of these new advanced materials. Learn More

Analysis

At QuantumSphere, our primary focus is to produce ultra-fine advanced materials and catalysts that enhance the performance of our customers' end-use products. We manufacture our metal and metal alloy nanoparticles according to our customer's specifications and maintain a very narrow particle size range. In order to ensure the quality of our product, we analyze each batch before it is shipped using analytical techniques such as: BET surface area measurement, TGA thermal analysis for oxide shell thickness, x-ray diffraction, elemental analysis, and electron microscopy. Batch sizes can be adjusted to the requirements of our customers.

Environmentally Friendly

Our manufacturing facility and production process personnel follow strict NIOSH best practice guidelines for handling nanomaterials (see QSI EH&S section for more details). To our knowledge, QuantumSphere manufactures the highest quality nano scale metal catalysts in the industry without compromising our commitment to employee safety and the environment. As a result, we do not use hazardous chemicals or toxic gases in our manufacturing process. There is no solid, liquid or hazardous waste stream generated. We simply utilize electricity and helium gas and the result is a greater than 85% yield of high quality nano scale catalysts from feedstock; unprocessed raw metals are completely recyclable.

Business Model:

BUSINESS MODEL

QSI's integrated catalytic solutions generate multiple revenue streams through a combination of material, component sales, and intellectual property licensing. With this flexibility, QSI is able to work closely with its key partners to maximize the potential of each opportunity while mitigating risk and delivering shareholder value. Click here to learn more and view the Company's introductory video (turn up your speakers): www.qsinano.com/intro

MARKETS AND APPLICATIONS

QSI follows a disciplined marketing strategy by engaging only in specific sectors and only when securing access to industry-leading application development experts and market-leading customers. QSI products provide both high value to customers and high margins to QSI. This focus has resulted in multiple products not only validated but also accepted by lead customers currently or positioned to drive further QSI growth.

Current Annual Revenue: ~$4M in 2012 - $205M in 2015 - Projected

Current Sources of Revenue:

Catalysts Material Sales
Battery / Fuel Cell Component Sales
Custom washcoat formulations / catalytic dispersions
IP Licensing

Technology Offerings: