On October 12, 2008, QPC Lasers (Sylmar, CA) had suspended most of its operations and terminated all but 20 of its 60 employees. On Monday, it stated it had resumed operating on a limited basis, “but other possibilities exist,” said a company spokesperson. If QPC doesn’t raise capital within the next few days, it is likely to file for Chapter 7 bankruptcy. This could be a body blow to the nascent laser display industry, as QPC was on many companies short list to supply RGB lasers in a range of power levels.

Chris Chinnock
Senior Analyst and Editor
for Insight Media

According to SEC (Securities and Exchange Commission) documents, the company was unable to raise the funds needed to continue operations. The company currently owes more than $25M in a series of convoluted financing deals and is obligated to pay about $6M in 2009 just to service this debt — a very hefty amount. And some of these financing deals already have a smell of desperation. Considering that back in February 2007, QPC agreed a $0.5M sale and leaseback deal on certain manufacturing equipment with a finance company in Boston, which charged an interest rate of 33.65%.

The current credit squeeze isn’t helping the company to come up with the funds in a hurry, but this situation was anticipated back in August when CEO Jeffrey Ungar said that Q2′08 produced $1.3M in revenue and a loss of $4.7M, a big jump up from the Q2′07 loss of $1.2M. The balance sheet was very weak too at only $463K in cash or cash equivalents — hence the need to raise some capital.

While Ungar noted they had a record $14M pipeline of orders and he saw a rosy growth scenario, he announced the company had retained two financial advisors to "explore various strategic opportunities."

The SEC documentation further states that management is continuing to explore certain options that might enable QPC Lasers to survive and continue operations. But, unless significant funding is secured in the next few days, QPC anticipates it will file for protection under Chapter 7 of the federal bankruptcy laws. Chapter 7 means that the assets and IP of the company will be liquidated at bargain basement prices. Chapter 11 bankruptcy rules allow the company to reorganize and continue operations, which apparently, is not deemed an option.

QPC Lasers’ common stock is quoted on the OTC Bulletin Board, under the symbol "QPCI." On October 21, 2008, the closing sale price of its common stock was $0.02, a sharp fall from a high of $0.88 reached last spring. The company was founded in 2000 and enjoyed revenues of $1M in 2005, growing to $3M in 2006.

Not only was QPC making visible wavelength lasers, but it also made high power infrared laser for other industries such as medical, defense and industrial. This includes fiber-coupled IR lasers with optical power of up to 425W. In 2006, about two-thirds of it’s income was from defense contracts.

QPC has a first class manufacturing facility that consists of 18,000 square feet of class 100 clean room space, and state-of-the-art Metalorganic Chemical Vapor Phase Deposition (MOCVD) fabrication equipment. This allows the company to control laser layer thickness with molecular-scale precision.

Highlights of some of its activities, as documented in our subscription newsletters, include:

• Nov. 2007 — QPC received a $12M contract to develop red, green and blue lasers for an RPTV customer. The red laser is a direct emission type while the green and blue are frequency doubled. The contract is exclusive for RPTVs, so QPC is free to offer lasers of other power levels to support pico, ultraportable or even cinema/large venue projectors.
• May 2008 — We visited the facility and received an update on its RGB development efforts. The companion pico projector module was furthest along with red targeting 600mW, green 400mW and blue 400mW. A second module set was targeting 6/3/3W for RGB while an integrated pico projector set was going to have 200/100/100mw for RGB. Later, at SID, the company showed an RPTV with its laser sources and beam shaping and despeckling technology, along with a companion pico projector demo.



• June 2008 — At Projection Summit, QPC’s Drew Osterman described its RGB laser technology revealing one of the secrets of its performance. He called it a regrowth process which allows the company to remove the laser wafer from their MOCVD chamber, etch some layers to create desired features and then place the wafer back into the MOCVD chamber for addition layers, allowing the creation of a region at the end of the laser with no gain. This allows for use of a separate output mirror, enabling much higher power lasers. Another advantage of the regrowth process is the ability to place an internal Bragg grating in the laser to reduce cost and eliminate alignment issues with an external component. Osterman said he has had discussions with 60 companies about lasers for display applications. Production of the 6/3/3W RGB set should begin shortly following customer approval.
• July 2008 — QPC announced a second RGB laser contract consisting of $2M in NRE and a $1.5M purchase order from a US company in the video gaming/entertainment industry that is aiming to produce a 3D laser projector. Meanwhile its Asian RPTV customer provided an $11M supply agreement to QPC.
• August 2008 — QPC finally revealed who its Asian RPTV customer was - Asia Optical. The two showed a 60" RPTV with LCoS imagers. Three additional customers had contracts for samples too, said the company. And, Asia Optical was rumored to be talking to Mitsubishi to supply the laser-based DLP engine for their next generation version.

As for the other parts of its business, QPC seemed to be doing well having successfully completed a Department of Defense (DoD) contract to develop and deliver high-power eye-safe surface-emitting diode pumps for directed-energy weapons applications last month.

Apparently, the founders are making a last ditch effort to secure some funding, presumably from a customer who will be hurt by QPC’s closure. But if that fails, what will happen to the company’s IP and assets when it has to file for Chapter 7? One of the early investors, Finisar, holds a preferred position in terms of the assets and IP. But Finisar is cash strapped too, so the outcome is unclear.

To be continued…