Tag Archives: optical thin film (OTF)

Nanotech Security Corp. stock declining but Cantor Fitzgerald Canada analyst Ralph Garcea gives the stock a buy rating

Linda Rogers has written a Feb. 29, 2016 article about a Vancouver-based company rather perturbingly titled ‘What’s Propelling Nanotech Security Corp to Decline So Much?‘ for Small Cap Wired,

The stock of Nanotech Security Corp (CVE:NTS) is a huge mover today! The stock is down 3.23% or $0.04 after the news [Nanotech Security announced its first quarter fiscal 2016 results in a Feb. 29, 2016 news release], hitting $1.2 per share. … The move comes after 7 months negative chart setup for the $68.48M company. It was reported on Feb, 29 [2016] by Barchart.com. We have $1.06 PT which if reached, will make CVE:NTS worth $8.22 million less.

The Feb. 29, 2016 Nanotech Security news release (summary version) highlights the good news first,

  • Revenue of $1.5 million consistent with the same period last year.  Security Features contributed revenues of $569,000 largely from development contracts and Surveillance delivered $940,000.
  • Gross margin improved to 50% up from 34% in the same period last year.  The improvement reflects the increased mix of higher margin Security Features revenue.
  • Renewed a $1.0 million banknote security feature development contract. The Company successfully renewed the third and final phase of a banknote development contract with a top ten issuing authority to develop a unique Optically Variable Device (“OVD”) security feature for incorporation into future banknotes.  The final phase is expected to generate revenues of approximately $1.0 million.
  • Signed new $3.0 million KolourOptik banknote development contract. The Company signed a new three phase development contract to use the KolourOptik™ nanotechnology to develop a unique OVD security features with another G8 country for incorporation into future banknotes.
  • Strategic meetings with large international banknote issuing authority.  The Company continues to work with a large international banknote issuing authority to deliver a significant volume of colour shifting Optical Thin Film (“OTF”), and partner with our KolourOptik™ technology.  Management continues to devote a significant amount of time and resources in advancing these opportunities.
  • Signed a Memorandum of Understanding (“MOU”) with Hueck Folien, a European manufacturer to supply OTF to the banknote market.  The MOU contemplates an operational agreement to collaborate in the volume production of a colour shifting OTF security feature.  The OTF product is anticipated to initially be used in banknotes as threads and then expand into other markets in the future.

Doug Blakeway, Nanotech’s Chairman and CEO commented, “These two development contracts are material achievements.  Issuing authorities are paying us – something not common in the industry – to design unique banknote security features with our OTF and KolourOptik™ technologies.”  He further added, “Nanotech’s team has scaled the Hueck Folien production facility to where we believe together we can provide the initial volumes demanded by a top-ten issuing authority.  Our relationship with Hueck Folien continues to funnel security feature opportunities to Nanotech.”

The company’s sadder news can be found in their seven-page Feb. 29, 2016 news release (PDF). Their net earnings for the final quarter of 2015 and 2014 were both losses but in 2014 their loss was (931,271) and in 2015 it was (1,746,335). Still, the company’s gross profit from revenue for the same time periods was 50% in 2015 as opposed to 34% in 2014 despite slightly less revenue in 2015.

Assuming I’ve read this information correctly, Nanotech Security does seem to be in a fragile situation but that can change. After all, IBM was in serious trouble for a number of years during the 1990s when there was even talk the company might go bankrupt. As far as I’m aware, IBM is no longer in imminent danger of disappearing from the scene. *ETA March 9, 2016: It seems I used the wrong example if Robert X. Cringley’s March 9, 2016 article ‘What’s happening at IBM? (It’s dying)‘ for Beta News is to be believed.)* Getting back to my point, companies do go through cycles and it can be difficult to determine exactly what’s happening at some of the earlier stages.

Certainly, Cantor Fitzgerald Canada analyst Ralph Garcea has an optimistic view of Nanotech Security’s prospects according to a March 1, 2016 article by Nick Waddell for cantech letter,

Nanotech Security (TSXV:NTS) offers a better and more secure solution in multiple market segments that together are worth billions of dollars per year, says Cantor Fitzgerald Canada analyst Ralph Garcea.

This morning [March 1, 2016], Garcea initiated coverage of Nanotech with a “Buy” rating and a one-year price target of $2.50, implying a return of 110 per cent at the time of publication.

Garcea notes that Nanotech has already created solutions for the consumer electronics, brand identification and currency segments. He points out that one of the company’s biggest differentiators is that its solution can be embedded onto almost any material. This is important, he says, because it means that security can be embedded into places it previously could not go, such as directly onto a pharmaceutical pill.

Shares of Nanotech Security closed today [March 1, 2016] up 2.5 per cent to $1.22.

I have written about Nanotech Security frequently and believe the most recent is a Dec. 29, 2015 posting. For those unfamiliar with the company’s technology, it’s based on the structures found on the blue morpho butterfly. The holes in the butterfly’s wings lend it certain optical properties which the company mimics for its anti-counterfeiting technology.

One final comment, I am not endorsing the company or any of the analysis of the company’s financial situation and prospects.

Vancouver (Canada) -based NanoTech Security and its tireless self-promotion

First featured here in a January 17, 2011 posting about proposed anti-counterfeiting measures based on the structures present on the Blue Morpho butterfly’s wings, NanoTech Security is the subject of a profile in the Vancouver (Canada) Sun’s Dec. 28, 2015 Technology article by Randy Shore.

They’ve managed to get themselves into the newspaper without having any kind of real news, research or business, to share. As is so often the case, timing is everything. This is a low news period (between Christmas and New Year) and the folks at NanoTech Security got lucky with a reporter who doesn’t know much about the company or the technology. When you add in low public awareness about the company and its products (you couldn’t do this with a company specializing in a well established technology, e.g., smartphones), there’s an opportunity.

Getting back to Shore’s Dec. 28, 2015 Technology article in the Vancouver Sun,

Landrock [Clint Landrock], the chief technology officer at Burnaby-based [Burnaby is a municipality in what’s known as Metro Vancouver] Nanotech Security Corp., has spun off his SFU [Simon Fraser University] research to found the firm, which is developing nano-optics for the global battle against counterfeiters.

Colour-shifting holographic images, used as counterfeit protection on many banknotes, use technology that has been around for more than 35 years and they are increasingly easy to reproduce. Talented hobbyists can duplicate simple holographic features and organized criminals with deeper pockets can reproduce more sophisticated features with the right equipment.

Nanotech Security hopes to take a quantum leap ahead of forgers.

The detail and colour reproduction possible in Nanotech’s KolourOptick are dramatically better than the holographic images used on banknotes.

“We can improve a lot on those, by making the image a lot brighter, have a lot more detail and make it easy to view,” said Landrock. “When you try to fake that, it’s much more difficult to do and when you see a fake it looks fake.”

“Right now, the fake holograms often look better than the real thing,” he said.

Tiny structuresWhat [sic] Landrock found on the wings of the Blue Morpho was a lattice of tiny treelike structures that interact with light, selecting certain wavelengths to create a bright blue hue without pigments.

This ‘origins’ story includes a business mastermind, Doug Blakeway, and the researcher (Bozena Kaminska) under whose supervision Landrock did his work. Blakeway provides a somewhat puzzling quote for Shore’s story,

“I love nanotechnology, but I really have not seen a commercialization of it that can make you money in the near term, [emphasis mine]” said Blakeway. “When this was initially presented to me by Bozena and Clint, I immediately saw their vision and they were only after one application — creating anti-counterfeiting features for banknotes.”

The three formed a private company and licensed the patents from SFU, which receives a three per cent royalty on sales of the technology created under its roof. …

I am perplexed by Blakeway’s ” … I really have not seen a commercialization of it that can make you money in the near term” comment. There are many nanotechnology-enabled products on the market ranging from coatings for superhydrophobic waterproofing products to carbon fibre-enhanced golf clubs to nanoscale chips for computers and components for phones to athletic materials impregnated with silver nanoparticles for their antibacterial properties (clothes you don’t have to wash as often) to cosmetics and beauty products, e.g., nano sunscreens, and there are more.

NanoTech Security’s recently released some information about their financial status. They must feel encouraged by their gains and other business developments (from a Dec. 17, 2015 NanoTech Security news release),

Nanotech Security Corp. (TSXV: NTS) (OTCQX: NTSFF), (“Nanotech” or the “Company”) today released its financial results for the fourth quarter and year ended September 30, 2015.

Strategic Highlights from 2015

Revenue increased to $5.2 million a 131% increase over 2014. Security Features contributed revenues of $3.1 million.
Gross margin improved to 43% up from 34% in the same period last year. The improvement reflects the increased mix of higher margin Security Features revenue.
Signed two banknote security feature development contracts. The contracts are with top ten issuing authorities to develop unique optically-variable security features for incorporation into future banknotes.
Strategic meetings with large international banknote issuing authority. The Company has been approached by a large international banknote issuing authority to deliver a large volume of Optical Thin Film (“OTF”), and partner with our KolourOptik™ technology. Management continues to devote a significant amount of time and resources in advancing these opportunities.
Private Placement. The Company completed a non-brokered private placement financing of $2.6 million in equity units at $1.00 each.
Signed an amending agreement related to the 2014 Fortress Optical purchase agreement. The amendment provides that 1.5 million of the 3.0 million shares held in escrow, pending certain sales milestones were released from escrow and the remaining 1.5 million shares were returned to the treasury. The overall effect of the amendment resulted in a gain of $1.5 million and cancellation of 1.5 million shares.
Demonstrated KolourOptik™ security feature on metal coins. The Company successfully applied nanotechnology images to metal coins in a production environment at an issuing mint.
Granted five new patents expanding the growing IP portfolio. Three patents relate to the Company’s next generation nanotechnology authentication features, and two provide increased protection for OTF.

I’m curious as to how much of their revenue is derived from sales as opposed to research funding and just how much money does a 43% increase in gross margins represent? (Or, perhaps I just need to get better at reading news about *companies* and their finances.) In any event, signing two contracts and gaining interest in applying the technology to metal coins must have been exciting.

This story goes to show that if you understand news cycles, have a little luck and/or know someone, and have a relatively unknown technology or product, it’s possible to get media coverage.

*’company’s’ corrected to ‘companies’.

Canadian company, Nanotech Security Corp. hopes to purchase Fortress Optical Features

Nanotech Security Corp. started life as a spin-off company from Simon Fraser University in Vancouver, Canada. A  Jan. 17, 2011 posting and a followup Sept. 29, 2011 posting will probably give you more information about the technology and the company’s beginnings than you every thought you’d want.

For those interested in the company’s current expectations, an Aug. 27, 2014 news item on Nanotechnology Now describes Nanotech Security Corp.’s plan to purchase another business (also Canadian with the parent company [which is not being purchased] headquartered in North Vancouver},

Nanotech Security Corp. (TSXV:NTS) (OTCQX:NTSFF) (“Nanotech” or “the Company”) today announces an agreement with Fortress Global Securities Sarl, a subsidiary of TSX listed Fortress Paper Ltd. (“Fortress Paper”), to purchase 100% of Fortress Optical Features Ltd. (“Fortress Optical Features”), a producer of optical thin film (“OTF”) used as security threads in banknotes in several countries. The definitive share and loan purchase agreement (the “Purchase Agreement”) provides for Nanotech to acquire 100% of the issued and outstanding securities of Fortress Optical Features for consideration of up to $17.5 million, of which 3 million Nanotech shares (up to $4.5 million) is contingent on the future operating performance of Fortress Optical Features. Nanotech has also entered into an agreement with Canaccord Genuity Corp. (“Canaccord Genuity”) to act as sole lead manager and book-runner, and including Craig-Hallum Capital Group, in respect of a private placement of subscription receipts of the Company convertible into Nanotech common shares (“Shares”) and Share purchase warrants (“Warrants”) in a targeted range of $9.0 million to $16.0 million as more fully described below. To date, subscription agreements in excess of $8.0 million have been received which is an amount sufficient to pay the cash portion of the acquisition under the Purchase Agreement. All monetary amounts are in Canadian dollars.

An Aug. 26, 2014 Nanotech Security Corp. news release, which originated the news item, provides additional details,

The acquisition of Fortress Optical Features will serve as a platform to accelerate commercialization of Nanotech’s KolourOptik technology by integrating it into Fortress Optical Features’ product line as an addition of KolourOptik images to the OTF threads.

Nanotech will acquire Fortress Optical Features’ state-of-the-art building and vacuum metal deposition equipment, located near Ottawa.

The transaction combines complementary businesses that can leverage established banknote customer relationships to accelerate market entry and leapfrog competitive technologies. To date, Fortress Optical Features’ technology has been utilized by 11 international currencies.

Fortress Optical Features’ CEO Igi LeRoux, and COO, Ron Ridley, will be integrated into the Company’s senior management.

Fortress has the right to appoint one director to the Nanotech board and Nanotech will appoint a director to a Fortress affiliate concerned with security paper production.
Cash portion of the purchase price to be funded by a subscription receipts offering at $1.50, each convertible into a Share and one-half Warrant as fully described below.
Concurrent financing and acquisition closings are scheduled for September 10, 2014.

“We believe this will be a transformational transaction for Nanotech”, stated Doug Blakeway, President and CEO of Nanotech. “By layering our KolourOptik nanotechnology onto Fortress Optical Features’ security threads which are currently used in numerous currencies, we will create a next-generation product for the banknote industry”.

Mr. Blakeway added, “Additionally, the transaction will expand Nanotech’s current IP portfolio for optical security features to include Fortress Optical Features’ 14 current patent applications which should enhance our ability to compete in other commercial spaces such as passports as well as product branding and authentication”.

Fortress Optical Features’ core business is optical thin film material used in security threads incorporated in banknotes in several countries. Originally developed by the Bank of Canada, and subsequently sold to Fortress Optical Features in 2011, this technology was deployed on Canadian banknotes from 1989 until 2011 as well as ten other international currencies. In the twelve month period ending December 31, 2013 Fortress Optical Features generated approximately $2.3 million in revenue and its existing plant could service production of about eight times the level of production which generated this revenue.

Fortress Optical Features recently invested $4.2 million to renovate its existing production facility and added $1.0 million in new equipment over the past few years. As part of the transaction, Nanotech will acquire Fortress Optical Features’ state-of-the-art production facility and high technology OTF production equipment. Fortress Optical Features is currently pursuing business in some of the world’s largest countries and sees potential new opportunities internationally. According to Secura Monde International, the top five banknote producing economies include China, India, the European Union, the United States and Indonesia.

TRANSACTION DETAILS AND CLOSING CONDITIONS

Under the terms of the Purchase Agreement, Nanotech will pay up to $17.5 million to be satisfied by a combination of $7 million cash, 5 million common shares of Nanotech and a secured vendor take-back note of $3 million with an interest rate of 4% per annum. Of this consideration 2 million shares will have a four month hold period from closing and 3 million shares will be escrowed and shall be released based on certain specific performance milestones based on sales of product to new customers over up to 5 years. Shares may be released early in the event of a sale of the business or change of control of Nanotech. Contingent shares not released after 5 years will be cancelled. Details of the share release formula will be found in the Purchase Agreement to be filed at www.sedar.com.

All Shares have a deemed value of $1.50 and the acquisition and financing transactions do not constitute a change of business nor a change of control for Nanotech but will be treated under TSX Venture Exchange policies as a fundamental acquisition.

Completion of the transaction will be subject to customary closing conditions, including receipt of all regulatory approvals of the TSXV as well as the listing of the common shares issuable in connection with the transaction, including those underlying the subscription receipts. If Nanotech elects to terminate the acquisition in reliance on an allowable condition, a $600,000 break fee payable in Shares is due to Fortress Paper. Nanotech and Fortress Optical Features anticipate the transaction and financing will close on or about September 10, 2014.

RELATED AGREEMENT DETAILS

As part of Nanotech’s acquisition of Fortress Optical Features, the parties and/or their affiliates have entered into certain ancillary agreements. These include a supply agreement under which Fortress Optical Features will continue to supply OTF security threads to Fortress Paper’s Swiss-based Landqart specialty paper division. Landqart will enjoy favoured customer status subject to certain minimum purchase obligations. Under a lease and related shared services agreement, a Fortress Paper affiliate will lease approximately 2/3 of the 100,000 sq ft building being acquired as part of Fortress Optical Features assets and the parties will share the costs of steam production, electrical power, security, and administration services. The $3 million note is fully secured against Fortress Optical Features shares and assets.

SUBSCRIPTION RECEIPT OFFERING

Nanotech has entered into an agreement with Canaccord Genuity, acting as sole lead manager and sole bookrunner, and including Craig-Hallum Capital Group, to sell on a best-efforts marketed private placement basis, up to approximately 10,667,000 subscription receipts of the Company (the “Subscription Receipts”) at a price of $1.50 per Subscription Receipt (the “Subscription Price”), for gross proceeds to Nanotech of up to $16.0 million.

The Subscription Receipts will automatically convert, without additional payment, into one common share and one-half of a common share purchase warrant of the Company for each Subscription Receipt upon completion of the transaction. Subject to certain conditions, each whole purchase warrant will entitle the holder to purchase one common share of Nanotech at a price of $1.90 for a period of one year from issuance. The warrants are subject to accelerated expiry in the event that the common shares of Nanotech trade on the TSX Venture Exchange at $2.25 or more for a ten consecutive day period after the four month resale restricted period applicable to the Shares in Canada expires. Completion of the Subscription Receipt offering is subject to certain conditions, including receipt of the approval of the TSXV and all other necessary regulatory approvals.

Net proceeds from the Subscription Receipt offering will be used by the Company to partially fund the purchase price payable for Fortress Optical Features and for general corporate purposes.

The Subscription Price represents a discount of approximately 6% to the closing price of $1.60 per common share of Nanotech on the TSXV on August 25, 2014 and a discount of approximately 7% over the 30-trading day volume-weighted average price of $ 1.61 per common share of Nanotech on the TSXV, up to and including August 25, 2014.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

####

About Nanotech Security Corp.

Nanotech has been a leading innovator in the design and commercialization of advanced security products using nano-optical devices. Nanotech’s KolourOptik™ and Plasmogram™ optically variable devices (“OVD”s) are nanotechnology based product platforms originally inspired by the unique optical properties of the iridescent wings of the Blue Morpho butterfly. Nanotech OVD images produce intense, high definition images that are ideal for brand authentication and for distinguishing currency, documents, personal identification, consumer electronics, etc. from fakes. Nanotech’s KolourOptik OVD platform creates unique, easy to authenticate images through interaction of light with nano-sized (billionth of a meter) arrays of surface indentation structures imbedded through algorithms and electron beams into various substrates. These nanostructures create vivid colour images, activated by a simple tilt or rotation, and achieve higher resolutions than the best LED-displays currently available, as well as having optical properties not achievable with holograms.

Additional information about Nanotech and its technologies can be found on its website www.nanosecurity.ca or the Canadian disclosure filings website www.sedar.com or the OTCMarkets disclosure filings website www.otcmarkets.com

ABOUT FORTRESS OPTICAL FEATURES

Fortress Optical Features produces optically variable thin film security material for the security threads contained in certain previous Canadian banknotes and various other international currency denominations. The film is a unique combination of layered or ‘stacked’ thin film materials to produce a predictable colour replay. Additional features of the film include differing optical features or colors which appear when the banknote is tilted. The material was developed by the Bank of Canada in coordination with the National Research Council of Canada in the early 1980s and was first used as a patch on Bank of Canada $20, $50, $100 and $1,000 denominations of Birds of Canada series issued from 1988-1993 and also used on all Canadian Journey denominations issued from 2004 –2011. Fortress Optical Features’ high security products are marketed to security paper manufacturers throughout the world.

Additional information about Fortress Optical Features and its technologies can be found on its website www.fortresspaper.com/company/optical-security-features

This News Release contains forward-looking statements about the proposed acquisition by Nanotech of all of the issued and outstanding securities of Fortress Optical Features and the related offering of Subscription Receipts. Forward-looking statements are frequently, but not always, identified by words such as “expects”, “anticipates”, “believes”, “intends”, “estimates”, “predicts”, “potential”, “targeted” “plans”, “possible” and similar expressions, or statements that events, conditions or results “will”, “may”, “could” or “should” occur or be achieved.

These forward-looking statements include, without limitation, statements about our market opportunities, strategies, competition, and the Company’s views that its nano-optical technology will continue to show promise for mass production and commercial application. The principal risks related to these forward-looking statements are that the Company’s intellectual property claims will not prove sufficiently broad or enforceable to provide the necessary commercial protection and to attract the necessary capital and/or that the Company’s products will not be able to displace entrenched hologram, metalized strip tagging, and other conventional anti-counterfeiting technologies sufficiently to allow for profitability.

There can be no assurance that the transaction will occur or that the anticipated strategic benefits and operational synergies will be realized. The transaction is subject to the successful closing of the Subscription Receipt offering and to various regulatory approvals, including approvals by the TSXV, and the fulfilment of certain conditions, and there can be no assurance that any such approvals will be obtained and/or any such conditions will be met. The transaction and the Subscription Receipt offering could be modified, restructured or terminated.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect Nanotech’s expectations only as of the date of this News Release. Nanotech disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This News Release is not an offer to sell or the solicitation of an offer to buy any securities in the United States or in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities described in this News Release have not been and will not be registered under the United States Securities Act of 1933, as amended, or any state securities laws and may not be offered or sold within the United States absent registration or an applicable exemption from the registration requirements of such laws.

This News Release is not an offer to sell or the solicitation of an offer to buy any securities in the United States or in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities described in this News Release have not been and will not be registered under the United States Securities Act of 1933, as amended, or any state securities laws and may not be offered or sold within the United States absent registration or an applicable exemption from the registration requirements of such laws.

So there you have it. No one is responsible for anything but they hope for the best.