QuantumSphere, Inc. (QSI) combines core skills in advanced nano catalysts and related process chemistries to develop, manufacture, and license solutions for a broad range of portable power and clean-tech applications. The Company's proprietary technologies can lower costs and enable breakthrough performance in multi-billion dollar growth markets such as batteries, fuel cells, hydrogen generation, emissions reduction, and seawater desalination.

Founded in 2002, QSI's mission is to reduce dependence on non-renewable energy sources and develop near-term, revolutionary, portable power, and clean technology products. QSI is achieving this goal through continuous innovation and refinement of its proprietary catalyst materials, high-performance electrode systems, key process chemistries, and other advanced technology platforms. QSI is headquartered in Santa Ana, CA.

In 2005, QSI won the Frost & Sullivan Innovation of The Year Award for its Patented Metallic Nano Powder Manufacturing Process. In late 2007, QSI was recognized by Small Times Magazine for the Best of Small Tech Nanomaterial of the Year Award for QSI-Nano® manganese. This proprietary catalyst material is a key ingredient demonstrating world-class performance in high-rate electrodes for metal air batteries. QSI's patent pending air electrode design has increased power output in metal air batteries by more than 320%, enabling new portable power applications. In early 2007, QSI partnered with a global battery manufacturer to further develop and commercialize this electrode design in a new flat form factor disposable battery.

In early 2008, QSI partnered with a leading chemicals, metals, and materials manufacturer to distribute QSI-Nano® materials through its website and catalog, providing increased exposure to new commercial applications.

In June 2008, QSI acquired Energetics, Inc., an R&D company focused on clean technologies. The founder, Subramanian (Subra) Iyer, has over 30 years of experience in metallurgy, hydrogen, fuel cells, batteries, and renewable-energy technologies, as well as corrosion sciences and seawater desalination. Subra now serves as principal technologist of QSI. This acquisition expands internal R&D resources in core skills of chemical and electrochemical processes. It increases QSI's intellectual property position substantially, particularly in end uses which enable potential revenue at the next step in the value chain. The R&D efforts will include next generation lithium ion batteries for portable electronics, seawater desalination, alkaline membrane technology (these polymeric membranes are used in batteries, fuel cells and electrolyzers), and hydrogen generation from compact reformers, capable of supplying high-purity hydrogen to fuel cell vehicles. The latter could potentially serve as a near-term solution to the limited hydrogen supply infrastructure in the U.S.

QSI completed a funding round of $11.15 million in mid-2007 consisting of common stock and warrants led by OM Group, Inc. (NYSE:OMG), San Diego hedge fund, Bricoleur Capital, and existing investors. The aggregate equity financing to date is approximately $18.0 million. The company has no debt or liabilities. In addition, QSI's financial statements are audited on an annual basis by the regional auditing firm, Squar, Milner, Miranda & Williamson LLP. QSI also successfully partnered with the National Institute of Occupational Safety and Health (NIOSH) and completed a thorough manufacturing facility review in mid-2007 to ensure best practices are being used in the manufacture and safe handling of these advanced materials.

QSI's foundation is built around sales of its highly engineered catalyst materials, electrode systems, and dispersions, as well as licensing of other proprietary technology platforms for end-use applications, particularly in the battery, fuel cell, and hydrogen generation markets. In addition, QSI has collaborative agreements with leading research universities and government institutions to leverage QSI-Nano® materials in multiple additional applications, generating licensing rights to resulting intellectual property. QSI is also partnering with large established global manufacturers and OEMs to achieve third party product validation, mass market sales penetration, and product distribution. Through the acquisition of Energetics, Inc., QSI is also exploring licensing to multi-national corporations its lithium battery, hydrogen reformer, seawater desalination, and bio-fuel process technologies.

QSI has developed a fully automated and scalable manufacturing process, yielding high-quality nano scale metals and oxides in commercial volumes. In October 2007, QSI was issued U.S. Patent No. 7,282,167 for its "Method and Apparatus for Forming Nanoparticles." Today, QSI has eight fully operational reactors producing a variety of nano metals and alloys including QSI-Nano® iron, silver, copper, nickel, cobalt, manganese, gold, and palladium. The ability to produce these advanced materials in commercial volumes is an essential component that will facilitate QSI's eventual participation in multiple mainstream markets. QSI has more than thirty high-value patent applications pending and issued in the areas of compositions, dispersions, coatings, chemical processes, and electrode designs.

QSI leverages its nano catalyst process by matching it with core electrochemistry expertise and technology applicable to power storage and clean-technologies. Through this combination, QSI has achieved the following performance enhancements (Patents Pending):

• Increased Consumer Zinc-Air Battery Cathode Power by 320%
• Designed a 2X Increased Capacity Lithium Ion Battery Anode
• Designed Forward Osmosis Seawater Desalination System at 1/3 Cost & 3X Output
• Increased Ammonia Production by 1600X at Reduced Temperature and Pressure
• Achieved a 3X Increase in Clean Hydrogen Output by Electrolysis at 85% Efficiency

QSI's core technologies are applicable in multiple mainstream markets, enabling a potentially rich and diverse revenue base for the company's capabilities. Markets and products addressed or addressable by QSI include those outlined below.

Batteries: QSI anticipates generating revenue in mid-2009 from the disposable military and consumer battery sector upon the commercialization of its QSI-Nano® enabled air electrode design. This breakthrough electrode will be used for multiple new flat form factor disposable batteries designed to address the need for compact, lightweight, high-power output for military applications and consumer portable electronic devices. A strong demand also exists for next-generation, high-capacity rechargeable lithium ion batteries (capacity is the key limiting factor for run time in portable electronics and extended range in electric or hybrid vehicles). QSI is currently developing advanced lithium ion battery anodes and cathodes for higher power density and increased capacity.

Seawater Desalination: QSI has also developed a revolutionary pathway for seawater desalination, using novel organic solutes in a low-cost forward osmosis process (with concepts analogous to battery processes). Initial proof-of-concept was established under a U.S. Navy grant, and final technology development and patent application was completed recently. Design and fabrication of a 5 gallons/day seawater desalination demonstration system is currently underway, to calculate costs and membrane flow rates. It is expected that the costs of seawater desalination, under this exciting new technology, will be one-third the present costs and three times the flow rates of current reverse osmosis membranes.

Ammonia Generation: QSI catalysts have successfully produced ammonia at a rate that is 1600 times that of commercial iron catalysts at only 20psi and 600oC. This represents a remarkable breakthrough for the 100 year old Haber-Bosch process - the predominant process used for ammonia synthesis. Annual global production of ammonia exceeds 100 million tons.

Emissions Reduction Catalysts: Stringent emission regulations established by the EPA and the Air Resource Board (ARB) have led to an extensive emissions control market. Recently, focus has shifted to emissions reduction in mobile and stationary diesel powered applications with special attention to PM (Particulate Matter - Soot) and NOx (oxides of nitrogen). Currently, ARB has the most stringent regulatory targets. Thus, there is a great need and potential for efficient emission reduction catalysts. QSI is diligently working with industry experts and has established an R&D lab in Michigan to test and validate its high surface area nano catalysts on various monolith substrates within emissions systems.

Fuel Cells: QSI was recently awarded a U.S. Army grant for developing a Unitized Reformed Methanol Fuel Cell, using proprietary technologies for micro-channel methanol reforming, high temperature protonic membranes, and hydrogen-permeable anode structures. The grant is expected to pave the pathway for development of complete portable power units from 50-500W systems for soldier power and mobile power, as well as emergency power supplies and UPS systems.

Hydrogen Generation: QSI recently developed and demonstrated a highly active nano coated nickel iron electrode (NIFE™) catalyst formulation designed to increase the reaction zone of commercial electrodes for hydrogen generation through water electrolysis. This proprietary NIFE coating has increased electrode surface area roughly 1000 times and boosted hydrogen output by approximately threefold in beta electrolysis tests. These low-cost electrodes provide a "drop-in" solution for existing hydrogen generation systems. QSI is also developing compact hydrogen reformers for supply of high-purity hydrogen to fuel cells, through the Energetics acquisition. This project is currently funded through a National Science Foundation grant.

Renewable Fuels: Generation of various renewable fuels (alcohols, biodiesel) is escalating and so is the need for efficient production techniques from a wide variety of feed-stocks (biomass, cellulose, etc.). QSI is exploring catalytic applications wherein its nano metals will improve the overall generating process efficiency for these fuels. QSI, through its acquisition of Energetics, Inc., is awaiting a California Energy Commission grant for biogasification of algae to hydrogen/methane/syngas (late 2008). Using its proprietary system design and high surface area nano catalysts, QSI aims to demonstrate an intermediate pathway to the entire spectrum of bio-fuel activities and technology development.

Electronics/Other: Under a joint development agreement, QSI is also collaborating with one of its key partners, OM Group (NYSE:OMG), to develop conductive inks, catalytic pastes, and other custom dispersions for the automotive, electronics, and semiconductor industries.

QSI's proprietary capabilities and expanded intellectual property portfolio provide a platform to uniquely serve multi-billion dollar near-term markets. To this end, QSI is committed to addressing these large opportunities by continuous innovation and refinement of its highly engineered catalytic materials, electrode systems, and advanced technology platforms.

Global battery manufacturer, large defense contractors, electronics OEMs.

Competition consists of large existing suppliers, and some smaller specialty suppliers such as A123 Systems, NanoGram, Nanostellar, and AltairNano.

Specialty metals company, OM Group, Inc. (NYSE:OMG), global battery and electronics manufacturers, defense contractors, and various university and industry experts where QSI has funded directed research projects.