10-Q 1 form10q.htm QUANTUM MATERIALS CORP. FORM 10-Q form10q.htm

  
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

[   ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

Commission file number: 0-52953

QUANTUM MATERIALS
 CORP.
(Exact name of small business issuer as specified in its charter)
 
Nevada
   20-8195578  
20-8195578
(State or other jurisdiction of incorporation)               
    (IRS Employer Identification No.)  
(IRS Employer Identification No.)
 
7700 S. River Parkway
Tempe, AZ 85284
(Address of principal executive offices)

           214-701-8779           
 (Registrant's telephone number)

Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [   ]

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the 12 preceding months (or such shorter period that the registrant was required to submit and post such file). Yes [   ]      No [    ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes [  ] No [X ].
Transitional Small Business Disclosure Format (Check one): Yes [  ]   No [X]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large Accelerated Filer [ ]  
Accelerated Filer         [ ]
 Accelerated Filer       [ ]      
Smaller Reporting Company [X]
 
As of August 5, 2011, the issuer had 111,901,446  shares of common stock, $0.001 par value per share outstanding ("Common Stock").

 
1

 

 
 
 
INDEX

 
PART 1 – FINANCIAL INFORMATION
  Page
   
Item 1.  Financial Statements
3
   
Consolidated balance sheets as of September 30, 2010 (unaudited) and June 30, 2010
3
   
Consolidated statements of operations, for the three months ended September 30, 2010 and 2009 and for the period from inception (May 19, 2008) through September 30, 2010 (unaudited)
4
   
 
Consolidated statements of cash flows for the three months ended September 30, 2010 and, 2009 and for the period from inception (May 19, 2008) through September 30, 2010 (unaudited)
5
  
 
Notes to consolidated financial statements (unaudited)
6
   
Item 2.  Management’s Plan of Operation.
12
   
Item 3. Quantitative and Qualitative Disclosures and Market Risk
18
   
Item 4.  Controls and Procedures
18
   
PART 2 – OTHER INFORMATION
19
   
Item 1.  Legal Proceedings
19
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
19
   
Item 3.  Defaults upon Senior Securities
21
   
Item 4.  Removed and Reserved
21
   
Item 5.  Other Information
21
   
Item 6.  Exhibits
21
   
Signatures
22



 
2

 
 
 
 
 
Quantum Materials Corp.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
 

 
 
             
   
September 30
   
June 30
 
   
2010
   
2010
 
   
(Unaudited)
       
ASSETS
           
Current
           
Cash
  $ -     $ 19  
                 
  Total current assets     -       19  
                 
Licenses
    55,000       55,000  
Furniture and equipment, net of amortization
    6,857       7,869  
Deferred financing cost, net
    114,917       141,167  
                 
  Total other assets     176,774       204,036  
                 
Total assets
  $ 176,774     $ 204,055  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current liabilities
               
Bank overdraft
  $ 4,214     $ -  
Accounts payable and accrued Liabilities
    862,887       844,398  
Accrued liabilities - related party
    825,310       696,100  
Advances - related party
    149,662       70,367  
Fair value of embedded conversion feature
    356,232       834,057  
Convertible debenture, net of discount
    421,610       322,083  
                 
Total current liabilities
    2,619,915       2,767,005  
                 
                 
  Total liabilities     2,619,915       2,767,005  
                 
Commitments and Contingencies
               
                 
Stockholders' deficit
               
Common stock, $0.001 par value,
               
Authorized, 200,000,000 shares
               
Issued and outstanding 86,085,227 and 83,868,430 as of
               
  September 30, 2010 and June 30, 2010, respectively     86,085       83,868  
Additional paid-in capital
    3,854,453       3,638,491  
Deficit accumulated during the development stage
    (6,383,679 )     (6,285,309 )
                 
Total stockholders' deficit
    (2,443,141 )     (2,562,950 )
                 
Total liabilities and stockholders' deficit
  $ 176,774     $ 204,055  
                 
   
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
3

 
 
 
 
 
Quantum Materials Corp.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ending September 30, 2010 and September 30, 2009
and period from May 19, 2008 (inception) through September 30, 2010
(Unaudited)
 

 
 
                   
   
Three months
   
Three months
   
Inception
 
   
ended
   
ended
   
through
 
   
September 30,
   
September 30,
   
September 30,
 
   
2010
   
2009
   
2010
 
                   
Operating expenses:
                 
General and administrative
  $ 390,239     $ 197,448     $ 4,661,138  
Research and development
    -       185,473       751,893  
                         
Total operating expenses
    390,239       382,921       5,413,031  
                         
Loss from operations
    (390,239 )     (382,921 )     (5,413,031 )
                         
Other (income) expenses:
                       
Amortization of convertible debenture discount
    99,527       39,363       395,312  
Amortization of deferred finance cost
    26,250       26,250       200,083  
Change in fair value of embeded conversion feature
    (477,825 )     79,489       (139,680 )
Interest expense
    20,302       30,000       295,143  
Warrant expense
    39,877       -       219,790  
                         
Total other (income) expenses
    291,869       (175,102 )     (970,648 )
                         
Net loss
  $ (98,370 )   $ (558,023 )   $ (6,383,679 )
                         
Basic and diluted loss per common share
  $ (0.00 )   $ (0.01 )        
                         
Weighted average number of common
                       
shares outstanding
    84,964,409       69,881,493          
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
4

 
 
 
 
Quantum Materials Corp.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ending September 30, 2010 and September 30, 2009
and period from May 19, 2008 (inception) through September 30, 2010
(Unaudited)
 

 
 
 
Three Months
Three Months
Inception
 
 
ended
 
ended
 
through
 
 
September 30,
September 30,
September 30,
 
 
2010
 
2009
 
2010
 
             
CASH FLOWS FROM OPERATING ACTIVITIES
   
             
Net loss
  $ (98,370 )   $ (558,023 )   $ (6,383,679 )
Adjustments to reconcile net loss to net cash
 
used in operating activities:
                       
Stock issued for services
    63,000       -       870,700  
Stock issued for debenture interest
    50,302       -       285,143  
Depreciation of furniture and office equipment
    1,012       1,303       8,682  
Amortization of convertible debenture discount
    99,527       39,363       395,312  
Amortization of deferred finance cost
    26,250       26,250       200,083  
Stock compensation
    30,000       -       1,261,817  
Warrant expense
    39,877       -       219,790  
Change in fair value of warrants and embedded
 
conversion feature
    (477,825 )     79,489       (139,680 )
Net change in:
                       
Bank overdraft
    4,214       (1,377 )     4,214  
Accounts payable and accrued liabilities
    18,489       232,156       860,686  
Accrued liabilities - related party
    129,210       176,991       825,310  
                         
Cash flows provided (used) by operating activities
    (114,314 )     (3,848 )     (1,591,622 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES
       
Purchase of license
    -       -       (55,000 )
Proceeds from disposal of furniture and equipment
    3,848       5,343  
Purchase of furniture & equipment
    -       -       (20,883 )
                         
Cash flows provided (used) in investing activities
    -       3,848       (70,540 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES
       
Proceeds from issuance of common stock
    35,000       -       327,500  
Proceeds from related party advances
    79,295       -       149,662  
Proceeds from convertible debenture issued
    -       -       1,500,000  
Payment of deferred finance cost
    -       -       (315,000 )
                         
Cash flows from financing activities
    114,295       -       1,662,162  
                         
NET INCREASE (DECREASE) IN CASH
    (19 )     -       -  
                         
Cash, beginning of the period
    19       -       -  
                         
Cash, end of the period
  $ -     $ -     $ -  
                         
Supplemental disclosure with respect to cash flows:
 
Cash paid for income taxes
  $ -     $ -     $ -  
Cash paid for interest
  $ -     $ -     $ -  
Non cash transaction
                       
Issuance of common stock in connection  
with recapitalization
  $ -     $ 2,202     $ 2,202  
                         
 
 
The accompanying notes are an integral part of these consolidated financial statements
 
 
5

 
 
 
QUANTUM MATERIAL CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
(Unaudited)
 
Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial statements. Accordingly, our interim statements do not include all of the information and disclosures required for our annual financial statements. In the opinion of our management, the consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of these interim results. These consolidated financial statements should be read in conjunction with our consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended June 30, 2010. The results for the three months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the full year ending June 30, 2011.

Since November 4, 2008, the Company has changed its business plans and is no longer intending to pursue the mining of mineral rights located in Nevada. The Company intends to pursue the business plans of its subsidiary, Solterra Renewable Technologies, Inc. (or “Solterra”).  The following is a brief business overview of Solterra.

Solterra is a start-up solar technology and quantum dot manufacturing firm which was founded by Stephen Squires. Mr. Squires perceives an opportunity to acquire a significant amount of both quantum dot and solar photovoltaic market share by commercializing a low cost quantum dot processing technology and a low cost quantum dot based third generation photovoltaic technology/solar cell, pursuant to an exclusive license agreement with William Marsh Rice University (“Rice University” or “Rice”).  Our objective is to become the first bulk manufacture of high quality tetrapod quantum dots and the first solar cell manufacturer to be able to offer a solar electricity solution that competes on a non-subsidized basis with the price of retail electricity in key markets in North America, Europe, the Middle East and Asia.

Certain amounts in the 2009 financial statements have been reclassified to conform to the 2010 financial statements presentation.

Note 2. Derivatives and Fair Value

The Company has evaluated the application of ASC 815 to the Convertible Note issued November 4, 2008.  Based on the guidance in ASC 815, the Company concluded these instruments were required to be accounted for as derivatives as of July 1, 2009 due to the down round protection feature on the conversion price and the exercise price.  The Company records the fair value of these derivatives on its balance sheet at fair value with changes in the values of these derivatives reflected in the statements of operations as “Gain (loss) on derivative liabilities.”  These derivative instruments are not designated as hedging instruments under ASC 815 and are disclosed on the balance sheet under Derivative Liabilities.

ASC 825-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 825-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 describes three levels of inputs that may be used to measure fair value:  Level 1  – Quoted prices in active markets for identical assets or liabilities;  Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and  Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. The Company’s Level 3 liabilities consist of the derivative liabilities associated with the November 4, 2008 note.  At September 30, 2010, all of the Company’s derivative liabilities were categorized as Level 3 fair value assets. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
 
 
 
6

 
 
 
Level 3 Valuation Techniques

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.  Level 3 financial liabilities consist of the derivative liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation.  We have valued the convertible note that contains down round provisions using a lattice model, with the assistance of a valuation consultant, for which management understands the methodologies. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of July 1, 2009 and September 30, 2010.   The fair value of the derivatives as of July 1, 2009 upon implementation of ASC 815-40-15 was estimated by management to be $495,912.  As part of implementing ASC 815-40-14 the Company decreased the accumulated deficit by $162,643 and decreased additional paid in capital by $212,184 and increased the discount on the convertible debenture by $446,371.  The adjustment to the accumulated deficit was a result of the interest expense recorded in connection with the original derivative liability and the reversal of prior amortization expense, and the change in fair value of the derivative liability as of July 1, 2009.
                                                  
   
As of September 30, 2010
 
   
Fair Value Measuring Using
 
   
Carrying
Value
    Level 1     Level 2     Level 3     Total  
Derivative Liabilities
  $ 356,232       -       -     $ 356,232     $ 356,232  
Total Derivative Liabilities
  $ 356,232       -       -     $ 356,232     $ 356,232  
 
The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the first three months of fiscal year 2011:
 
 
 
 
 
7

 
 
 
Fair Value
       
 
Measurements
       
 
Using Level 3
       
 
Inputs
       
 
Derivative
       
 
Liabilities
 
Totals
 
Beginning Balance as of July 1, 2010
  $ 834,057     $ 834,057  
Total Gains or Losses (realized/unrealized) Included in Net Loss
    (477,825 )     (477,825 )
Purchases, issuances and Settlements
    -       -  
Transfers in and/or out of Level 3
    -       -  
                 
Ending Balance at September 30, 2010
  $ 356,232     $ 356,232  

Note 3. Related party transactions
 
The Company expensed management fees to the CEO / major shareholder as well as other related party executives of $165,000 and $612,500 respectively in the three months ended September 30, 2010 and the year ended June 30, 2010.  The Company was not able to pay the majority of these fees, as a result the accrued liabilities related party was $825,310 and $696,100 respectively as of September 30, 2010 and June 30, 2010.

During the three months ended September 30, 2010 the Company recorded $2,880 of rent expense for the use of executive office space in the home of the CEO / major shareholder, $0 was paid and $2,880 was accrued at September 30, 2010.

The $149,662 of advances related party at September 30, 2010 consists of $142,632 of advances and unreimbursed expenses of the CEO as well as an additional $7,030 of unreimbursed expenses to other related party executives of the Company.

Note 4.  Common stock

In July 2010, according the terms of employment contracts approved by the board of directors, the Company issued 300,000 common shares valued at $30,000 to two new employees.

During the period ended September 30, 2010, the Company sold 625,000 shares of common stock for $50,000 at $0.08 per share. The Company collected $35,000 during the period ended September 30, 2010 and the remaining $15,000 was collected in October and December 2010.  This issue included 625,000 warrants exercisable at $0.08 cents; the life of the warrants is 5 years.

In September 2010 the Company issued 591,797 shares of common stock to pay accrued interest of $50,302 for the three month periods ending June 1, 2010 and October 1, 2010.

In September 2010 the Company issued 700,000 shares valued at $63,000 to American Marketing Complex, Inc. for a public relations services.

Note 5.  Commitments and Contingencies

Contingency
 
Certain default clauses related to the various agreements discussed in Item 2 (Management’s Plan of Operation) would result in a change of control of the board of directors.  Certain debt holders would have the option to appoint independent members to the board under such default.
 
 
 
 
8

 
 
License Agreement - Work-Study Arrangements
 
Solterra has a License agreement with William Marsh Rice University “Rice” whereby minimum royalty payments which are calculated based on sales volume must be made starting in August 2010.  This agreement can be terminated by Rice if certain financial and other conditions are not fulfilled by Solterra.  As of the filing date of this Form 10-Q, Solterra has an insolvency issue under said Agreement and is in arrears in the payment of certain monies due to Rice, which if not resolved to the satisfaction of Rice could lead to the immediate termination of the Agreement by Rice.  Solterra also has a work-study arrangement with Rice which began in January 2009 for a period of twelve months.  A recently executed agreement temporarily stays any exercise by Rice of Rice’s current termination rights through and including August 28, 2011.   Solterra is in arrears in the payment of its obligations owed to Rice by $101,893.

In July 2009 the Company completed a license agreement with The University of Arizona whereby minimum royalty payments are calculated based on sales volume must be made starting in January 2011.  The License Agreement relates to certain patent rights owned by the University pertaining to "Screen-Printing Techniques for the Fabrication for Organic Light-Emitting Diodes."
 
Development service agreements
 
In October 2008, the Company entered into a development service agreement with Arizona State University ("ASU") to optimize the printing process of solar cells.  The agreement is for the period October 1, 2008 to January 30, 2010 with an option for two additional years of services.  This Agreement has not been extended by the parties.  due to the departure of Dr Jabour from ASU.  The final balance due ASU is under negotiation.  The table below summarizes these financial commitments under this agreement.  These amounts are recorded as research and development expenses in the consolidated financial statements.

The Company is currently in arrears for payment of obligations due to ASU totaling $455,000.

In addition the Company had one other service agreements with a major university for a twelve month period starting in November 2009.  These services were not completed as the Professor responsible for exercising the agreement has moved out of the country.  The Company is negotiating final settlement for this agreement.

Employment agreements

The Company has two employment agreements in effect.  The CEO has a three year agreement which started in January 2010 and the Chief Technology Officer has a one year agreement which started in October 2009 and has been renewed for an additional year.  In addition the Company has employment agreements with two other individuals one for Asean business development which terminates April 15, 2012 and one for Middle East business development which terminates April 1, 2012.

Summary

                         
Fiscal
 
Services
   
Employment
   
License
       
Year
 
agreements
   
agreements
   
agreements
   
Total
 
2011
  $ 421,558     $ 327,000     $ 154,450     $ 903,008  
2012
    -       306,000       648,250       954,250  
2013
    -       70,000       1,946,000       2,016,000  
2014
    -       -       3,938,600       3,938,600  
2015
    -       -       3,938,600       3,938,600  
Thereafter
    -       -       3,938,600       3,938,600  
                                 
Total
  $ 421,558     $ 703,000     $ 14,564,500     $ 15,689,058  

 
 
 
9

 
 
Note 6.  Subsequent events
 
Stockholder Matters

In October 2010, the Company’s Common Stock ceased trading on the Electronic Bulletin board due to the lack of market makers on the bulletin board. The Common Stock is  trading in the over the counter market.  Immediately after our Common Stock ceased trading on the Electronic Bulletin Board, we became delinquent with filing reports under the Exchange Act.  After the filing of the quarterly reports that are past due in filing with the Securities and Exchange Commission, the Company believes that one or more broker/dealers will seek to file a 15c-211 application to have trading commence on the Bulletin Board at the earliest practicable date.

In January 2011 the Company issued 426,136 shares of common stock to pay accrued interest of $30,000 for the three month period ended December 1, 2010.
 
In January 2011 the Company issued 10,000,000 restricted shares to Stephen Squires the CEO in recognition of his support of the Company and in cancellation of all outstanding cash loans and advanced expenses totaling $269,895. Mr. Squires privately sold an aggregate of approximately 13,431,000 shares of the Company's Common Stock for an aggregate of $595,000. Mr. Squires advanced to the Company cash loans and made payment of Company expenses utilizing $269,895 of the net proceeds of these private sales.

In March 2011 the Company issued 298,805 shares of common stock to pay accrued interest of $30,000 for the three month period ended March 1, 2011.

In June 2011 the Company issued 312,501 shares of common stock to pay accrued interest of $30,000 for the three month period ended June 1, 2011.

Between March 2011 and August 5, 2011 the Company raised $382,500 of cash through the sale of 3,578,777 shares of the Company’s common stock.  The price received for these shares ranged between $0.08 and $0.14 per share.  These shares sold included 1,152,110 warrants to purchase the Company’s common stock.  The warrants have a two exercise life between $0.08 and $0.25 per share.   The total proceeds would be $159,902 if all warrants were exercised.

At a board meeting on May 18, 2011 the following agreements were approved by the board of directors.
 
  
A consulting agreement granting compensation of 1,325,000 shares of the Company’s common stock retroactive to December 15, 2010.  The agreement requires additional payments of 250,000 shares of common stock per fiscal quarter the first quarter being the quarter ended September 30, 2011.  This agreement can be terminated by either party without cause upon 30 days written notice. The consultant also paid for an additional 375,000 shares in cash ($15,000) and through payment of expenses (i.e.$15,000) on behalf of the Company. A total of 1,7000,000 shares previously issued to the consultant but not paid for as reported in our form 10-K for the fiscal year ended June 30, 2010 was now considered fully paid.

  
A consulting agreement granting compensation of 1,500,000 shares of the Company’s common stock.  The agreement requires additional payments of 250,000 shares of common stock per calendar quarter.  This agreement can be terminated by either party without cause upon 30 days written notice.

  
A consulting agreement granting compensation of 8,000,000 shares of the Company’s common stock.  The agreement requires additional payments of 50,000 shares of common stock per calendar quarter.  This agreement can be terminated by either party without cause upon 30 days written notice.

  
A fiscal advisory agreement in which the fees are performance based.

As of August 5, 2011, the Company's executive officers, directors and employees converted accrued salaries of $256,000 and bonuses of $64,000 totaling $320,000 into warrants to purchase 2,909,089 shares, exercisable at $.11 per share over a period of five years.

 
 
 
10

 
 

 
Warrants

The Company issued 1,000,000 common stock warrants on June 1, 2009 in connection with the standstill agreement.  These warrants were not exercised and expired in December 2010.  

As of November 4, 2010, the Company's executive officers, directors and employees converted accrued salaries of $630,500 and bonuses of $157,625 totaling $788,125 into warrants to purchase 10,508,331 shares, exercisable at $.075 per share over a period of five years.
 
 
 
 
11

 

 
Item 2.  Management’s Plan of Operation

This Form 10-Q contains "forward-looking statements" relating to us which represent our current expectations or beliefs, including statements concerning our operations, performance, financial condition and growth.  For this purpose, any statement contained in this report that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as "may", "anticipation", "intend", "could", "estimate", or "continue" or the negative or other comparable terminology are intended to identify forward-looking statements.

Statements contained herein that are not historical facts are forward-looking statements as that term is defined by the Private Securities Litigation Reform Act of 1995.  Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, the forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected. The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance and those actual results may differ materially from those in the forward-looking statements.  Such risks and uncertainties include, without limitation: well-established competitors who have substantially greater financial resources and longer operating histories, regulatory delays or denials, ability to compete as a start-up company in a highly competitive market, and access to sources of capital.

The following discussion should be read in conjunction with the Company's financial statements and notes thereto included elsewhere in this Form 10-Q and our Form 10-K filed February 14, 2011 for the fiscal year ended June 30, 2010.  Except for the historical information contained herein, the discussion in this Form 10-Q contains certain forward looking statements that involve risks and uncertainties, such as statements of the Company's plans, objectives, expectations and intentions.  The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear herein.  The Company's actual results could differ materially from those discussed here.
 
The financial information furnished herein has not been audited by an independent accountant; however, in the opinion of management, all adjustments (only consisting of normal recurring accruals) necessary for a fair presentation of the results of operations for the period ended September 30, 2010 have been included.

Business Overview
 
Quantum Material Corp. is a start-up solar technology and quantum dot manufacturing firm.  We perceive an opportunity to acquire a significant amount of both quantum dot and solar photovoltaic market share by commercializing a low cost quantum dot processing technology and a low cost quantum dot based third generation photovoltaic technology/solar cell, pursuant to an exclusive license agreement with William Marsh Rice University (“Rice University” or “Rice”).  Our objective is for Quantum to become the first bulk manufacture of high quality tetrapod quantum dots and for Solterra to be the first solar cell manufacturer to be able to offer a solar electricity solution that competes on a non-subsidized basis with the price of retail electricity in key markets in North America, Europe, the Middle East and Asia.

Competitors are pursuing different nanotechnological approaches to developing solar cells, but the general idea is the same for all. When light hits an atom in a semiconductor, those photons of light with lots of energy can push an electron out of its nice stable orbital around the atom. The electron is then free to move from atom to atom, like the electrons in a piece of metal when it conducts electricity.  Using nano-size bits of semiconductor embedded in a conductive plastic maximizes the chance that an electron can escape the nanoparticle and reach the conductive plastic before it is "trapped" by another atom that has also been stripped of an electron. Once in the plastic, the electron can travel through wires connecting the solar cell to an electronic device. It can then wander back to the nanocrystal to join an atom that has a positive charge, which scientifically is called electron hole recombination.

A quantum dot solar cell typically uses a thin layer of quantum dot semiconductor material, rather than silicon chips, to convert sunlight into electricity. Quantum Dots, also known as nanocrystals, measure near one billionth of an inch and are a non-traditional type of semiconductor. Management believes that they can be used as an enabling material across many industries and that quantum dots are unparalleled in versatility and flexible in form.
 
 
 
 
12

 

 
Quantum intends to design and manufacture solar cells using a proprietary thin film semiconductor technology that we believe will allow us to reduce our average solar cell manufacturing costs and be extremely competitive in this market. Quantum will be one of the first companies to integrate non-silicon quantum dot thin film technology into high volume low cost production using proprietary technologies.  Our objective is to become one of the first solar module manufacturers to offer a solar electricity solution that competes on a non-subsidized basis with the price of retail electricity in key markets in North America, Europe and Asia. Management believes that the manufacture of our thin film quantum dot solar cells can introduce a cost effective disruptive technology that can help accelerate the conversion from a fossil fuel dependent energy infrastructure to one based on renewable, carbon-neutral energy sources. We believe that our proposed products also can be a part of the solution to greenhouse gases and global warming.

Plan of Reorganization, Recent Financing and Change in Control

On November 4, 2008, the Company closed on an Agreement and Plan of Merger and Reorganization by and among the Company, Solterra Renewable Technologies, Inc. (“Solterra”), the shareholders of Solterra and Gregory Chapman as “Indemnitor” (the “Agreement”), which resulted in Solterra becoming a wholly-owned subsidiary of the Company. Pursuant to the Agreement, Mr. Chapman cancelled 40,000,000 shares of Common Stock of the Company owned by him and issued a general release in favor of the Company terminating its obligations to repay Mr. Chapman monies owed to him.

In accordance with the Agreement, the Company issued 41,250,000 shares of its Common Stock to the former stockholders of Solterra. Certain existing stockholders of the Company in consideration of Solterra and its shareholders completing the transaction, issued to the Company a Promissory Note in the amount of $3,500,000 due and payable on or before January 15, 2009, through the payment of cash or, with the consent of the Company, the cancellation of up to 12,000,000 issued and outstanding shares of the Company owned by them.  While this note is in default and the Company has made demand for payment and is considering all legal options, our Management does not believe that this Note is collectible.

On November 4, 2008, the Company entered into a Securities Purchase Agreement, Debenture, Security Agreement, Subsidiary Guarantee Agreement, Registration Rights Agreement, Escrow Agreement, Stock Pledge Agreement and other related transactional documents (the “Transaction Documents”) to obtain $1,500,000 in gross proceeds from three non-affiliated parties (collectively hereinafter referred to as the “Lenders”) in exchange for 3,525,000 restricted shares of Common Stock of the Company (the “Restricted Shares”) and Debentures in the principal amount aggregating $1,500,000. Each Debenture has a term of three years maturing on November 4, 2011 bearing interest at the rate of 8% per annum and is prepayable by the Company at anytime without penalty, subject to the Debenture holders’ conversion rights. Each Debenture is convertible at the option of each Lender into the Company’s Common Stock (the “Debenture Shares”, which together with the Restricted Shares shall collectively be referred to as the “Securities”), currently at a conversion price of $.12 per share (the “Conversion Price”).  The Registration Rights Agreement requires the Company to register the resale of the Securities within certain time limits and to be subject to certain penalties in the event the Company fails to timely file the Registration Statement, fails to obtain an effective Registration Statement or, once effective, to maintain an effective Registration Statement until the Securities are saleable pursuant to Rule 144 without volume restriction or other limitations on sale. The Debentures are secured by the assets of the Company and are guaranteed by Solterra as the Company’s subsidiary. In the event the Debentures are converted in their entirety, the Company would be required to issue an aggregate of 12,500,000 shares of the Company’s Common Stock, subject to anti-dilution protection for stock splits, stock dividends, combinations, reclassifications and sale of the Company’s Common Stock a price below the Conversion Price.  Certain changes of control or fundamental transactions such as a merger or consolidation with another company could cause an event of default under the Transaction.   We also entered into a Standstill Agreement with the Debenture Holders effective June 1, 2009 which was amended and expired on December 1, 2009.   At the time the Standstill Agreement expired, the Company did not have an effective registration statement, registering the resale of all Registrable Securities as required by the Registration Rights Agreement. Nevertheless, management believes that no such registration statement was then or is currently required to be filed with the Securities and Exchange Commission as management believes that all securities of the Company held by the Debenture Holders are saleable pursuant to Rule 144 without volume restriction or other limitations on sale, so long as the Debenture Holders are not affiliated parties of the Company.  As of the filing date of this Form 10-Q, the Debenture Holders have taken no action under the Registration Rights Agreement or other transaction documents to notify the Company that it is in default under any of such agreements even though an event of default may be deemed to exist for several reasons; including, without limitation, those enumerated above and the Company's failure to obtain director and officer liability insurance, failure to make a payment of interest on a timely basis and failure to be current from time-to-time with all obligations and responsibilities owed to Rice under our license agreement.
 
 
 
13

 

 
In December 2010 Rice agreed to an amendment to this agreement.  As of the time of this filing, Rice had agreed to a temporary stay agreement, delaying the exercise of Rice’s current termination rights through and including August 28, 2011.  The Company and Rice are renegotiating as of the filing date of this Form 10-Q, Rice has agreed that we are not in default under said Agreement and that Rice is working with us on a revised Agreement with new milestones for us to achieve under said agreement. See "Risk Factors."
 
Plan of Operation

Since November 4, 2008, the Company is executing its business plan as follows:  

Solterra plans to:
 
a)  
Scale up Quantum Dot Production by applying proprietary technology licensed from Rice University for our quantum dot synthesis process and accomplishing large scale production using proprietary Micro-Reactor technology jointly developed through an agreement with Access2Flow an advanced flow chemistry consortium based in the Netherlands. These proprietary technologies enable Solterra to produce the highly desirable tetrapod quantum dots at a cost savings of greater than 75% compared to competing suppliers, and will organically supply Solterra’s requirements for quantum dots for its solar cells and other quantum dot enabled products. Additionally, Solterra intends to market these Q-Dots through various existing supply channels into various markets, including but not limited to medical diagnostics and electronics. The initial pilot scale up will take place at the Access2Flow facilities in the Netherlands and once optimized will be relocated to a solar cell production facility, which is anticipated to be located in Saudi Arabia.

b)  
Fabricate solar cells and optimize the performance of solar cells based on a proprietary blend of  quantum dots (QDs).  The aim is to invest our best efforts to demonstrate and scale up production of low cost quantum dot solar cells having peak efficiency of greater than 6%. The efficiency of solar cells is the electrical power it puts out as percentage of the power in incident sunlight. Within the photovoltaic market, cell pricing and peak efficiency are key benchmarks for consumers in the decision for system selection and installation. The design and manufacture of Solterra's quantum dot based solar cells is projected to allow for the conversion of sunlight into usable electricity at a combination of efficiencies and cell cost at a very low "cents per kilowatt-hour" rate. This work to date has been accomplished on site at the Arizona State University labs but is being relocated better accommodate the logistic requirements of our Chief Science Officer, Professor Ghassan Jabbour, who is working at Kaust University in Saudi Arabia.
 
Objectives:

              The Current Objectives of Solterra upon receipt of additional financing are as follows:

  
Become the first bulk manufacture of high quality tetrapod quantum dots and the first solar cell manufacturer to be able to offer a solar electricity solution that competes on a non-subsidized basis with the price of retail electricity in key markets in North America, South America, Europe the Middle East and Asia.

  
Build a robust intellectual property portfolio in third generation photovoltaics, quantum dot process technologies and other quantum dot enabled technologies. Success criteria include completion of preparation and filing of various patent applications in the area of Quantum Dot Solar Cell technology, defining and initiating the strategy to secure a reliable source of key materials, and filing or acquiring additional process related patent applications in solar or printed electronics, which intellectual property would be owned or controlled by Solterra.
 
 
 
14

 
 
 

  
Initiate scaled manufacturing of tetrapod quantum dots, based in part on technology licensed from William H. Marsh Rice University, and building on continued research.  Planning includes the implementation of one or more pilot lines based on outcomes of collaboration with Access2Flow, an advanced flow chemistry consortium based in the Netherlands.  The design of the pilot line is intended such that the initial target output of the line, at approximately one kilogram per day, can be further scaled at least by an order of magnitude to 100 Kilograms per day in 2011.  The output of the tetrapod quantum dots manufacturing will be used for Solterra’s quantum dot solar cells as well as stand-alone sales into the biomedical research fields and to third party developers of quantum dot products such as displays, memory and computer and consumer electronics.

  
Continue to develop and characterize the Quantum Dot Solar Cell product; moving towards pilot proof line for solar cells and leading to high throughput print line ultimately capable of yearly solar cell output near gigawatt range. Target cell efficiencies are 6% within one year, 15% within 2 years and greater than 25% within five years.  Coupled within cell cost per watt decreasing below $.75/Watt, we intend to pursue initial product sales in late 2011 with significant increases in 2012.

Liquidity and Capital Resources

At September 30, 2010 the Company had a working capital deficit of $2,619,915 with total liabilities of $2,619,915. $825,310 of these liabilities are owed to our officers, directors and employees for services rendered and accrued through June 30, 2010.  $149,662 of these liabilities are owed to officers for advances made to the Company. The Company has been in the development stage since inception.  As a result, the Company has relied on financing through the issuance of common stock and a convertible debenture as well as advances from a director shareholder and employees wages being partially or fully accrued but not paid.
 
As of the filing date of this Form 10-Q, the Company lacks cash or cash equivalent assets and continues to incur losses in its development stage operations.  The Company has been relying on loans from its Chief Executive Officer resulting from private sale transactions in our common stock owned by him.  The Company has also relied on various universities performing work and providing U.S. licensing rights under business agreements in which the Company is in arrears in payments as well as employees and consultants agreeing to defer payment of wages and fees owed to them.  As of September 30, 2010 and currently, the Company is seeking additional financing; however, no definitive agreements for additional financing have been received and the Company cannot provide any assurance that additional funding will be available to finance our operations on terms acceptable to us, if at all, in order to support our plan of operations.  If we are unable to achieve the financing necessary to continue our plan of operations, then our stockholders may lose their entire investment in the Company.  See "Notes to Financial Statements."

Cash was used $114,314 in operating activities during the three months ended September 30, 2010. This is a result of a net loss of $98,370 partially offset by stock compensation of $30,000, stock issued for services of $63,000, stock issued for debenture interest $50,302, increases in accounts payables and accrued liabilities of $18,489, increase in accrued liabilities related parties $129,210, change in fair value of warrants and embedded conversion feature of $(477,825), amortization of convertible debenture discount of $99,527 and amortization of deferred finance cost of $26,250. Cash flows from financing activities during the three months ended September 30, 2010 were $114,295 which consisted of $35,000 from the proceeds of the sale of common stock and $79,295 from related party advances from Stephen Squires, our Chief Executive Officer, for certain loans to the Company. This resulted in a decrease in cash for the period of $19 and a cash on hand at the end of the period of nil. As of September 30, 2010, Mr. Squires has unreimbursed cash advances of $149,662 and accrued payroll totaling $180,000 owed to him and accrued payroll of $44,810 owed to his wife in her role as a bookkeeper for the Company. Cash flows from financing activities were nil.
 
 
 
15

 
 

 
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year.  Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying value and classification of assets and liabilities should the Company be unable to continue as a going concern.  At September 30, 2010, the Company had not yet achieved profitable operations, has accumulated deficit of $6,383,679 since its inception , has a working capital deficit of $2,619,915 and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern.  The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company requires immediate and substantial additional financing during fiscal 2011 to maintain its development stage operations. The Company is exploring all reasonable avenues of financing at this time, including, without limitation, the sale of equity, debt borrowing and/or the receipt of product licensing fees and royalties. We can provide no assurances that such financing will be obtained on terms satisfactory to the Company, if at all. Further, we can provide no assurances that one or more mutually acceptable licensing agreement(s) will be entered into on terms satisfactory to us, if at all.
 
Off-balance sheet arrangements

We have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.

Officers convert accrued salaries and bonus into warrants

In November 2010, Steven Squires ($125,000), Brian Lukian ($234,375), David Doderer ($62,500), Robert Glass ($37,500), Ghassan Jabbour ($243,750), Andrew Robinson ($50,000) and Toshinon Ando ($35,000) converted the amount of monies set forth beside their names into five-year warrants to purchase 1,666,666 shares, 3,125,000 shares, 833,333 shares, 500,000 shares, 3,250,000 shares, 666,666 shares and 466,666 shares, respectively, In summary, a total of $788,125 was converted into warrants to purchase 10,508,331 shares exercisable at $.075 per share through the expiration date of November 4, 2015.

Loans from Stephen Squires

In November 2008, Mr. Squires received 35,500,000 shares of the Company's Common Stock as part of a plan of reorganization, 20,000,000 of which he pledged to secure certain company indebtedness. Between December 2008 and December 2010, Mr. Squires privately sold an aggregate of approximately 13,431,000 shares of the Company's Common Stock for an aggregate of $595,000. Mr. Squires advanced to the Company cash loans and made payment of Company expenses utilizing $269,895 of the net proceeds of these private sales. On December 30, 2010, the Board of Directors authorized Mr. Squires to receive 10,000,000 restricted shares of Quantum Material Corp. in recognition of his support of the Company and in cancellation of all outstanding cash loans and advanced expenses totaling $269,895. Not reflected in the foregoing, were an additional $65,040 of cash loans that have been made by Mr. Squires to the Company and repaid to him.

In January 2010, the board of directors granted Mr. Squires the option to convert his cash loans to the Company into common stock of the Company's subsidiary. In this respect, Mr. Squires has a two-year option to convert up to $200,000 into a maximum of 5% of the outstanding common stock of Solterra.  As of the filing date of this Form 10-K, Mr. Squires has declined to exercise this option

Selected Financial Data

Not applicable.

Results of operations – September 30, 2010

General and administrative expenses

During the three months ended September 30, 2010 the Company incurred $390,239 of general and administrative expenses compared to the $197,448 recorded for the three months ended September 30, 2009.  There were four main variances that contributed to the increase in general and administrative expenses in the quarter ended September 30, 2010.  Staff remuneration increased by $109,000 due to an increase in number of staff combined with an award of stock valued at $30,000 given to attract qualified staff.  Also contributing to the increase was an increase in other professional fees of $88,020 comprising of $63,000 stock award for public relations as well as $25,020 having been paid for a financing initiative in Europe.  Travel increase of $20,726 as a result of efforts by the Company to sell a license to manufacture in other parts of the globe.  There was also a decrease in license maintenance of $25,489.
 
 
 
 
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Included in the expenses for the current three months ended September 30, 2010 were other professional fees of $88,020, remuneration of staff $244,000, license maintenance costs of $516, legal and audit of $15,725, corporate expense of $8,748, office expenses of $11,492, travel expense of $20,726 and amortization of furniture and equipment of $1,012.  General and administrative expenses for the three months ended September 30, 2009 included other professional fees of $0, remuneration of staff of $135,000 license maintenance costs of $25,489, legal and audit of $17,070, corporate of $2,005, office expense of $12,551, travel expense of $4,030 and amortization of furniture and equipment of $1,303.

Research and development expenses.

Research and development expenses of $nil were incurred in the three months ended September 30, 2010, compared to $185,473 in the three months ended September 30, 2009.  The decrease is the result of the Company not having sufficient cash to further develop the licenses acquired
 
Amortization of convertible debenture discount

The convertible debenture discount of $1,500,000 is being amortized over the 36 month term of the debenture using the effective interest method.  The debenture was issued on November 4, 2008.  Amortization recorded for the three month period ended September 30, 2010 was $99,527.  The amortized balance of the discount at September 30, 2010 is $1,078,390 resulting in the convertible debenture value on the balance sheet net of the discount $421,610.  At September 30, 2009 the amortization for the three months was $39,363.

Amortization of deferred finance cost
 
This amount relates to the $315,000 of expenses associated with the $1,500,000 convertible debenture financing raised in November 2008.  The deferred financing cost is being amortized using the effective interest method over the thirty-six month life of the debenture.  Amortization expense recorded in the three month period ended September 30, 2010 and 2009 was $26,250.
 
Interest expense on the convertible debenture

This amount relates to the 8% interest associated with the $1,500,000 convertible debenture issued in November 2008.  Interest expense recorded for the period ended September 30, 2010 was $20,302 compared to $30,000 in the three month period ended September 30, 2009.

According to the provisions of the Convertible Debenture agreement the Company has elected to issue shares of the Company’s Stock to pay accrued interest on the debentures.  In September 2010 the Company issued 591,797 shares of the Company’s restricted Common Stock to pay $60,000 of accrued interest payable.  As the provision to pay stock for interest discounts the market price of the stock the Company has attributed this discount to interest expense and additional paid in capital.  However the timing of the shares being issued resulted in the share value being less than the interest paid therefore a decrease in interest expense was recorded of $9,698 for the period.  The accrued interest for the period was $30,000 resulting in an interest expense for the quarter of $20,302.
 
Change in fair value of warrants and embedded conversion feature

This amount relates to the change in value of the derivative liabilities.  The change recorded in the three months ended September 30, 2010 was a decrease of $477,825 compared to an increase in the three months ended September 30, 2009 of $79,489.
 
 
 
 
17

 

 
Warrant expense

During the three months ended September 30, 2010 the Company issued 625,000 warrants with the 625,000 shares of common stock issued during the period.  The Company has attributed $39,877 to the warrant value using the Black Scholes price model.

Cash Flow

During the three months ended September 30, 2010, cash was used in operations of $114,314.  During this period the Company received proceeds from financing activities of $114,295.  These changes resulted in a decrease of $19 in the cash position for three months ended September 30, 2010.  The opening cash at June 30, 2010 was $19 and the closing balance at September 30, 2010 was nil.

Item 3.  Quantitative And Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our short term money market investments. The Company does not have any financial instruments held for trading or other speculative purposes and does not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure. The Company does not have any credit facilities with variable interest rates.

Item 4.  Controls and Procedures

The Company maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We performed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on their evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are not effective at September 30, 2010.  Management based its determination upon the untimely filing of our Form 10-K and Form 10-Q for the year ended June 30, 2010 and period ended September 30, 2010 respectively.
 
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
 
Changes in Internal Control Over Financial Reporting
 
In our Management’s Report on Internal Control Over Financial Reporting included in the Company’s Form 10-K for the year ended June 30, 2010, management concluded that our internal control over financial reporting was effective as of June 30, 2010.
 
Management did however identify a significant deficiency; a significant deficiency is a deficiency, or a combination of deficiencies, that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.  Currently we do not have sufficient in-house expertise in US GAAP reporting.  Instead, we rely very much on the expertise and knowledge of external financial advisors in US GAAP conversion.  External financial advisors have helped prepare and review the consolidated financial statements.  This deficiency of not having sufficient qualified staff has resulted in the Company being unable to file our 10-K for the year ending June 30, 2010 and this 10Q in a timely manner.  Although we have not identified any material errors with our financial reporting or any material weaknesses with our internal controls, no assurances can be given that there are no such material errors or weaknesses existing.  To remediate this situation, we are seeking to recruit experienced professionals to augment and upgrade our financial staff to address issues of timeliness and completeness in US GAAP financial reporting.  In addition, we do not believe we have sufficient documentation with our existing financial processes, risk assessment and internal controls.  We plan to work closely with external financial advisors to document the existing financial processes, risk assessment and internal controls systematically.
 
We believe that the remediation measures we are taking, if effectively implemented and maintained, will remediate the significant deficiency discussed above.
 
Except as described above, there have been no changes in our internal controls over financial reporting that occurred during our last fiscal quarter to which this Quarterly Report on Form 10-Q relates that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
 
 
 
 
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PART II – OTHER INFORMATION

Item 1.  Legal Proceedings.

None.

Item 1A. Risk Factors

As a Smaller Reporting Company as defined Rule 12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item 1A.
 
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

(a)  
From May 18, 2008 to January 31, 2011, we had the following sales of unregistered Common Stock.

 
Date of Sale
 
Title of Security
 
Number Sold
 
Consideration Received and Description of Underwriting or Other Discounts to Market Price or Convertible Security, Afforded to Purchasers
 
Exemption from Registration Claimed
 
If Option, Warrant or Convertible Security, terms of exercise or conversion
Nov. 4, 2008
 
Common Stock
 
41,250,000
Shares
 
 
Share exchange pursuant to Plan of Reorganization; no commissions paid.
 
Section 4(2) and/or
Rule 506.
 
Not applicable.
                     
Nov. 4, 2008
 
Common Stock and
Debentures
 
 
3,525,000
shares and
$1,500,000
Debentures
 
$1,500,000; $150,000 of finder’s fees
 
Section 4(2).
 
Notes are convertible at $.2667 per share.
                     
March, 2009
 
Common Stock
 
506,493
Shares
 
Shares issued in exchange for interest of $30,667; no commissions paid.
 
Section 4(2) and/or
Rule 506.
 
Not applicable.
                     
 
June, 2009
and November
2009
 
Common Stock
Warrants
 
 
3,000,000
Shares
 
Warrants issued as part
of a Standstill Agreement;
no commissions paid.
 
 
Section 4(2) and/or
Rule 506.
 
 
 
 
1,000,000 Warrants are exercisable at $0.25 per share over a period of 18 months and 2,000,000 Warrants are exercisable at $.10 per share through
October 31, 2014.
                     
November ,
2009 and December 2009, March 2010
 
Common Stock
    1,511,937  
Shares issued in exchange
For interest of $195,841;
no commissions paid.
 
Section 4(2) and/or
Rule 506.
 
Not applicable.
                       
 
November,
2009
 
Common Stock
    3,000,000  
 
Shares issued for services
rendered; no commissions paid
 
 
Section 4(2) and/or
Rule 506.
 
 
Not applicable.
 


 
19

 


                 
November,
2009
Common Stock
    7,000,000    
Shares issued for services
rendered; no commissions paid
Section 4(2) and/or
Rule 506
Not applicable.
 
                   
October,
2009
June
2010
Common Stock
Options
    8,950,000    
Services rendered; no
commissions paid
Section 4(2); and/or
Rule 506
Options are exercisable at prices
Between $.05 and $.2667 per share
                   
January-
March 2010
Common Stock
    2,200,000 (1)  
Services rendered; no
commissions paid
Section 4(2); and/or
Rule 506
Not applicable.
 
March -
May 2010
 
Common Stock
    3,125,000    
 
$250,000 received;
10% commission paid
 
Section 4(2); and/or
Rule 506
 
Not applicable.
                   
April 2010 -
June 2010
Common Stock
    300,000 (1)  
Services rendered
Section 4(2); and/or
Rule 506
Not applicable.
 
May 2010
 
Common Stock
    250,000 (1)  
 
Services rendered
 
Section 4(2); and/or
Rule 506
 
Not applicable.
                   
July, 2010 -
September,
2010
 
Common Stock
    625,000    
 
$50,000 received;
no commissions paid
 
Section 4(2); and/or
Rule 506
 
Not applicable.
                   
September,
2010
Common Stock
    591,797    
Shares issued in
exchange for $60,000
of interest
Section 4(2); and/or
Rule 506
Not applicable.
                   
September,
2010
Common Stock
    700,000 (1)  
Services rendered
Section 4(2); and/or
Rule 506
Not applicable.
                   
October
2010
Common Stock
    1,700,000    
(2)
Section 4(2); and/or
Rule 506
Not applicable.
                   
January
2011
Common Stock
    426,136    
Shares issued in
Exchange for $30,000
of interest
Section 4(2); and/or
Rule 506
Not applicable.
 
(b) 
Rule 463 of the Securities Act is not applicable to the Company.
(c)
In the three  months ended September 30, 2010, there were no repurchases by the Company of its Common Stock.

(1)
Shares issued in January 2011, although contractually they should have been issued at earlier date.
(2) 
1,700,000 shares were issued in October 2010 pending receipt of the completion of a financing on terms which were still being negotiated by the parties.  As of the filing date of this Form 10-K, we have not determined that any commissions will be paid.
 
 
 
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Item 3. Defaults Upon Senior Securities. None

Item 4.  Submission of Matters to a Vote of Security Holders.  

Reserved

Item 5. Other Information.
 
See "Note 3 to the Financial Statements" for description of Various Related Party and Other Transactions.
 
Item 6.                      Exhibits

The following exhibits are all previously filed in connection with our Form 8-K filed November 10, 2008, unless otherwise noted.
 
2.1
Agreement and Plan of Merger and Reorganization, dated as of October 15, 2008, by and among Hague Corp., Solterra Renewable Technologies, Inc., the shareholders of Solterra and Greg Chapman, as Indemnitor.
   
4.1
Form of Securities Purchase Agreement dated as of November 4, 2008.
   
4.2 
Form of Security Agreement dated November 4, 2008.
   
4.3
Form of Subsidiary Guarantee dated November 4, 2008.
   
4.4
Form of Stock Pledge Agreement dated November 4, 2008.
   
4.5
Form of Debenture-- MKM Opportunity Master Fund, Ltd.
   
4.6
Form of Debenture.-- MKM SP1, LLC.
   
4.7
Form of Debenture-- Steven Posner Irrevocable Trust u/t/a Dated 06/17/65.
   
4.8
Form of Escrow Agreement.
   
4.9
Form of Amended Waiver and Consent.
   
4.10
Form of Registration Rights Agreement.
   
4.11
Standstill Agreement dated June 1, 2009 (incorporated by reference to the Registrant’s Form 8-K filed on June 9, 2009).
   
4.12
Amended Standstill Agreement dated June 1, 2009 (incorporated by reference to the Registrant’s Form 10-K for its fiscal year ended June 30, 2009 filed November 12, 2009).
   
4.13
Extension of Standstill Agreement dated October 29, 2009(incorporated by reference to the Registrant’s Form 10-K for its fiscal year ended June 30, 2009 filed November 12, 2009).
   
10.1
License Agreement by and between William Marsh Rice University and Solterra Renewable Technologies, Inc. dated August 20, 2008 (incorporated by reference to the Registrant’s Form 10-Q for its Quarter year ended March 31, 2009 filed May 15, 2009).
   
10.2
Letter dated October 2, 2008 from Rice University amending the License Agreement contained in Exhibit 10.1.
   
10.3
Agreement with Arizona State University executed by ASU on October 8, 2008 and executed by Solterra on September 18, 2008 (incorporated by reference to the Registrant’s Form 10-K for its fiscal year ended June 30, 2009 filed November 12, 2009).
   
10.4
Letters dated November 5, 2009 and November 9, 2009 amending Rice University Agreement (incorporated by reference to the Registrant’s Form 10-K for its fiscal year ended June 30, 2009 filed  November 12, 2009).
   
10.5
Consulting Agreement between Steven Posner, Oceanus Capital and the issuer (incorporated by reference to the Registrant’s Form 10-K for its fiscal year ended June 30, 2009 filed November 12, 2009).
   
10.6
Consulting Agreement between Sound Capital Inc and the issuer dated November 12, 2009 (Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 2009).
   
10.7
License Agreement between The University of Arizona and the issuer dated July 2009.  (Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 2009)
   
21.1
Subsidiaries of Registrant listing state of incorporation (incorporated by reference to the Registrant’s Form 10-K for its fiscal year ended June 30, 2009 filed on November 12, 2009).
   
31(a)
 Rule 13a-14(a) Certification – Chief Executive Officer *
   
31(b)
 Rule 13a-14(a) Certification – Chief Financial Officer *
   
32(a)
 Section 1350 Certification – Chief Executive Officer *
   
32(b)
 Section 1350 Certification – Chief Financial Officer *
____________
*  Filed herewith.
 
 
 
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SIGNATURES
 
 
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  QUANTUM MATERIALS CORP.  
       
August 5, 2011 
By:
/s/ Stephen Squires  
    Stephen Squires  
    Chief Executive Officer  
       
     
       
August 5, 2011 
By:
/s/ Chris Benjamin  
    Chris Benjamin  
    Chief Financial Officer  
       



 
 
 
 
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