MATCH POINT PARTNERS LLC

90 Park Avenue, Suite 1700

New York, NY 10016

QMT has spent approximately $30 million over the last 15 years developing technologies, R&D operating infrastructure, patent portfolios and business development networks.  These efforts have resulted in the following:

QMT’s primary focus had historically been on large accounts in order to meet the financial demands of the Company and to meet rapid growth targets.  This resulted in many lengthy projects and engagements that consumed time and resources, and in many cases did not yield a final commercial product (e.g., Hanes, Johnson & Johnson, Molnlycke).  The most successful relationships to date have been with smaller companies (e.g., Derma Sciences and Viridis) where QMT’s technologies provide a crucial part of the partner’s market strategy, as well as providing the means for the Company to grow.

In 2013, the Company reorganized its leadership, whereby senior management retired and new management centralized operations to Gainesville (where the core facility has always been).  The former CFO, who had been functioning mainly as an accountant, was replaced with an experienced and proactive CFO with strategic planning and investment banking experience.  Business development costs were drastically cut by these changes – cutting at least $500,000 of general and administrative expense from fiscal year 2012 to 2013.

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In order to continue operations QMT requires immediate financing of $500,000-$1,000,000 and will need to extend and restructure the Company’s existing debt

New management has been aggressively pursuing growth with companies that are not yet but have the potential to be market leaders, as well as with smaller, nimbler partners.  This has resulted in executed contracts with Polartec, a geographic expansion of the Viridis business, and several pending contracts with other corporate partners.  The Company is focused on partners that can directly access distribution channels for QMT’s products.  New management has also aggressively pursued federal funding to leverage research for product development using non-dilutive funding, and at the same time to generate scientific validation due to the peer-reviewed nature of the contracts and grants.

Financing received would be used to support operating expenses to continue and grow current and pending business.  The next priority is to expand business development to generate additional new business opportunities, primarily through the use of targeted experts within specific target markets (it is contemplated that part of the payment to experts would be in the form of revenue participation in order to limit cash needs).  Scientific support can be scaled with the needs of ongoing projects, and is expected to expand for FY15 based on income from federal and corporate funding for projects.

a)

Multistat® cosmeceutical line with BASF – sales have been lagging in recent years, as this product line was absorbed via acquisition.  BASF is expanding the formulations they are offering, and QMT is working together with BASF to target new customers.  FY13 sales were $330,000.

b)

NIMBUS® / Bioguard® wound dressings with Derma Sciences under their advanced wound care product line – Derma has been growing strongly in advanced wound care and the segment continues to expand.  The Company expects growth from product line expansion, increased sales force commitment (including a dedicated brand manager at Derma), and from international expansion.   Sales of BioGuard® gauze dressings were launched in Asia in October 2013.  Derma management has publicly stated a 30% expected annual growth rate for their advanced wound care product line.  FY13 royalties to QMT were $210,000. If Derma achieves their 30% growth rate, a milestone payment of $300,000 will be due in FY15, in addition to royalties.

c)

NIMBUS® wound dressings with Viridis: India and abroad – Viridis is producing NIMBUS® gauze for the Indian market, and NIMBUS® foam for India and export markets (expansion currently underway to CIS countries).  Projections are for this product line to generate meaningful royalties starting FY14 of $180,000 with double digit growth in subsequent years.

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a)

Stay Fresh® textile based products with Polartec – this contract was signed in 2013, and products are in active development, with initial sales expected early FY15.  The Stay Fresh® technology will appear in multiple product lines with Polartec – a second license payment is expected in FY15, with sales income also expected in FY15. Royalties in apparel are lower than medical so the expected royalty potential from this agreement is about half of what is expected from Viridis.

b)

Pending contract for Stay Fresh® wound dressings with a major distributor – this pending business will be under a compensated joint development agreement (JDA) (FY14) and license fee (FY14/15).  Potential income is significantly larger than from the Derma Sciences line.  This contract can include several lines of products, further expanding scope of business.

c)

Pending contract for Stay Fresh® specialty dressing (hydrocolloid) – this is with a manufacturer that has distribution access.  A small license fee in FY14, followed by sales in FY15 is expected, with major income (projected over $200,000) for FY16.

a)

Joint Development agreement for Wound Dressing.  Expect $50,000-$75,000 for FY14.

b)

Department of Defense contract on dressing to reduce scarring and contracture.

i)

Phase 1 almost completed.  Generated 37,000 income FY13 and $113,000 FY14, offset by approximately $40,000 in pass-through costs.

ii)

Phase 2 can be worth $700,000-$1,000,000 over two years.

c)

National Science Foundation grant on regenerable antimicrobial coating.

i)

Phase 1 nearing completion: $150,000 for FY14

ii)

Phase 1B is submitted, worth $30,000 from NSF.  QMT also has a matching commitment from a corporate partner for $60,000.

iii)

Phase 2 is pending submission – worth $700,000 to $1,000,000 over 2 years.

d)

Pending phase 1 submissions:

i)

Absorbent antimicrobial pads for produce and poultry

ii)

Improved antimicrobial Foley catheter (urinary catheter).

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FY2014

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Total revenue in FY13 was $0.9 million. Based on growth from Derma Sciences, Viridis and BASF, signed R&D contracts and new business FY14 revenue is projected at  $1.4 million.

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FY13 operating expenses before credits for forfeited option were $1.6 million. Before non-cash options expense, the same level is expected in FY14.

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Total decrease in cash in FY13 was $31,000. Adjusting for a one-time payment from Derma Sciences the decrease in cash would have been $1,169,000. We project this to decline to $600,000 in FY14. This is before interest expense which is not included in the projections given the uncertainty of the financing and debt restructuring negotiations.

 

Future Years

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Revenue growth from signed contracts and new business is projected to continue to increase in FY15 and FY16. To continue to grow the business, QMT will have to make investments in business development ($300,000), R&D ($300,000) and patents ($100,000). The following projections assume these investments start in FY 2015.

 

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