Qsam Biosciences Inc 's Suppliers Performance

Pursuant to our agreement, we are also subleasing approximately 2,500 square feet of facility space from PCNC consisting of approximately 1,000 square feet for engineers, 500 square feet for assembly of the Q2P Engines, and 1,000 square feet for testing and inventory. For this operating space, the Company is paying PCNC a monthly flat fee of $2,500 including utilities. The two principals of PCNC, including Nate Hawkins who is the Company’s VP of Manufacturing, both receive compensation from the Company for their services and expertise in the manufacturing process of our technology. The Company considers our working relationship with PCNC to be good, and believes that it provides us with great value in terms of cost and time reductions in both the R&D and production phases of our business. Loss of this relationship could have a material adverse effect on our results of operations if we were unable to find a partner with similar skills, resources and desire to assist the Company develop its technology.

Materials and Parts. Parts production and fulfillment comprise a major portion of our cost in manufacturing our Engines and CHP Systems. This is predominantly due to the fact that the Q2P Engine is just emerging from its prototype phase. Because we are constantly testing and improving part design, we have not yet invested in dies and molds required to achieve volume efficiencies of scale. There are approximately 20 major parts and components in each Q2P Engine (some require multiple pieces per engine) that require custom manufacturing.

We intend to use a portion of the proceeds in our future offerings to ramp-up our manufacturing capabilities, including investing in dies and molds starting with the units which will have the greatest impact on our cost structure. We expect that this investment will substantially reduce the costs of parts, and consequently, our total cost of manufacturing each power system. We estimate that we can reduce total costs by over 50% once part production has been automated, and approximately another 10 – 20% as volume increases.

Assembly. We currently assemble and test all Engines and CHP Systems in-house. We may hire additional technicians who are each capable of assembling 1 to 2 engines per day, and 1 system per week, although we are not yet at that level of production. With proper funding and demand, we estimate that we can scale up to 10 to 20 engines per month (3 to 5 systems) in our current facility at PCNC, and eventually scale-up to 90 to 100 engines (20 to 25 systems) per month over the following two to three years. Should we need additional manufacturing and assembly capacity, we can seek other contractors to perform such services for us in the future.

Pursuant to our agreement, we are also subleasing approximately 2,500 square feet of facility space from PCNC consisting of approximately 1,000 square feet for engineers, 500 square feet for assembly of the Q2P Engines, and 1,000 square feet for testing and inventory. For this operating space, the Company is paying PCNC a monthly flat fee of $2,500 including utilities. The two principals of PCNC, including Nate Hawkins who is the Company’s VP of Manufacturing, both receive compensation from the Company for their services and expertise in the manufacturing process of our technology. The Company considers our working relationship with PCNC to be good, and believes that it provides us with great value in terms of cost and time reductions in both the R&D and production phases of our business. Loss of this relationship could have a material adverse effect on our results of operations if we were unable to find a partner with similar skills, resources and desire to assist the Company develop its technology.

Materials and Parts. Parts production and fulfillment comprise a major portion of our cost in manufacturing our Engines and CHP Systems. This is predominantly due to the fact that the Q2P Engine is just emerging from its prototype phase. Because we are constantly testing and improving part design, we have not yet invested in dies and molds required to achieve volume efficiencies of scale. There are approximately 20 major parts and components in each Q2P Engine (some require multiple pieces per engine) that require custom manufacturing.

We intend to use a portion of the proceeds in our future offerings to ramp-up our manufacturing capabilities, including investing in dies and molds starting with the units which will have the greatest impact on our cost structure. We expect that this investment will substantially reduce the costs of parts, and consequently, our total cost of manufacturing each power system. We estimate that we can reduce total costs by over 50% once part production has been automated, and approximately another 10 – 20% as volume increases.

Assembly. We currently assemble and test all Engines and CHP Systems in-house. We may hire additional technicians who are each capable of assembling 1 to 2 engines per day, and 1 system per week, although we are not yet at that level of production. With proper funding and demand, we estimate that we can scale up to 10 to 20 engines per month (3 to 5 systems) in our current facility at PCNC, and eventually scale-up to 90 to 100 engines (20 to 25 systems) per month over the following two to three years. Should we need additional manufacturing and assembly capacity, we can seek other contractors to perform such services for us in the future.