Quantum Materials Corp (PINK:QTMM)’s First Appearance on the Promotional Scene

If you are subscribed to most of the promotional newsletters, you would probably know that they are often trying to create unnecessary excitement around small cap companies whose technology will (supposedly) change our lives or, at the very least will alter something that we’re all too familiar with. Quantum Materials Corp (PINK:QTMM)’s pump initiated by Stock Mister, Winning Penny Stock Picks as well as their affiliated newsletters is no exception.

We’ve covered our fair share of similar promotions and we have seen that, more often than not, they end in disaster with quite a lot of day traders getting burned and quite a lot of shareholders getting angry. It’s fair to say that we were a bit pessimistic about the whole thing from the very start and the fact that Stock Mister’s and Winning Penny Stock Picks’ emails are full of words that only a PhD in Physics can decipher didn’t really help.

Still, we persisted, read the emails a fair few times, scrolled through the company descriptions on the Internet and from what we could understand, QTMM‘s quantum dots are a sort of microscopic semi conductors that do all sorts of clever things. More importantly, the range of applications is absolutely vast – the dots can be used in anything from new, more efficient solar panels to medical diagnostics which, in turn, means that the potential demand for these things is huge.

So, how well are QTMM positioned? Well, right now, all we can say about them is that they are trying hard. They have signed several contracts with various universities around the world, but unfortunately from what we read in their latest financial report, they are struggling to stick to the terms. They need to pay some royalties, they have failed to establish a manufacturing facility and there are some negotiations for more acceptable fees, which means that virtually all the agreements are under threat of termination.

This is a direct result of their current financial situation, which can hardly be described as perfect. Here’s a recap of the most important figures as found in their 10-Q covering the fourth calendar quarter of 2012:

• current assets: $29 thousand in cash
• current liabilities: $3.7 million
• no revenue since inception
• quarterly net loss: $931 thousand

On the bright side, we heard some news from QTMM that could breathe some optimism into the picture. Yesterday, they announced that they are moving their HQ to Austin, Texas, and while they have yet to mention an exact address, we certainly hope that it will be better suited to a serious publicly traded company since, as the 10-Q reveals, their current office is located in their CEO’s house. In addition to the new headquarters, they will also open a R&D facility which is great news, although we’re not quite sure how they are going to pay for it.

In addition to this, they announced that they have sent some quantum dots to the big brains at the Department of Energy National Labs about a month ago. While it’s not stated in the press release, this could mean that QTMM might be able to obtain some financing in the near future in case the boffins like what they see.

At the same time, there are some things that we’re not too sure about. We can understand that at the moment, they don’t have the financial resources to pay the officers’ salaries, but the fact that they are issuing so many shares could cause some dilution which won’t be a pleasant experience for the long-term stockholders. We can also see that they recently increased the number of authorized shares, and anyone who’s followed stock promotions on small cap companies knows that this is a definite red flag.

Another thing to be worried about is the pump itself. According to our database, as of the time of writing this article, the total promotional budget is $75 thousand which means that someone is planning to make a profit out of all the fuss. If that happens, a drop in the price is inevitable and since QTMM have yet to establish a steady flow of money, the recovery will be problematic. That’s why you should weigh your risks carefully before jumping in on the excitement.