Product tracing company Dotz Nano (ASX:DTZ) has jumped out of a six-day trading halt with the announcement of a new $US13m (~$18m) contract this morning.

The new deal is with Breathe Medical Manufacturing, a Canada-based manufacturer of personal protective equipment (PPE).

The company said it would provide its ‘Secured by Dotz’ product authentication solution in connection with the production of face masks.

Shares in DTZ rose by more than 30 per cent to 26.5c in morning trade, up from 4.5c at the start of May.

Dotz Nano (ASX:DTZ) share price chart


Deal momentum

Dotz’ tracing solution utilises a two-factor authenticator, combining “ValiDotz security taggants with geo-specified and encrypted QR codes”, the company said.

The agreement with Breathe Medical marks the fourth such deal for Dotz in recent months, as the company finds momentum in a growth-sector linked directly to the fallout from COVID-19.

Other clients include UEG in Hong Kong, V2Tech in Australia, and TT Medical Group “across eight countries in Europe, Africa and the Middle East”, Dotz said.

As a measure of the broader demand for face masks in the wake of the pandemic, Breathe Medical was only established as a business in March this year.

“Our agreement will ensure that frontline and other essential workers in Canada and the USA will be able to authenticate the quality of their masks on-site and in real-time, as well as the general public,” Dotz CEO Uzi Breier said.

The company flagged some risks associated with such a newly created business, but said Breathe Medical’s letters of credit — along with previous sales to the Canadian government — reassured it that the new client “is able to comply with its minimum order and payment obligations under the agreement”.

The agreement sets out a minimum order amount of $US13m over the provisional three-year term of the deal.

A $US1m purchase order is scheduled for delivery in the September quarter, with the contract stipulating minimum quarterly purchase orders of $1.25m for the remainder of the three-year term.

But to maintain exclusivity, Breathe must make quarterly purchase orders of $US2.5m, which if fulfilled would bring the total contract value to $US24.6m.

If Breathe doesn’t meet an annual exclusivity quota then it must place a shortfall order. If not, Dotz can remove the exclusivity clause or terminate the agreemeent.

The Canadian manufacturer “has also agreed to provide Dotz with a letter of credit from an agreed bank to guarantee its minimum order each quarter”, Dotz said.

Breathe Medical CFO Robert Balazs said with the health risks posed by the pandemic, country-of-origin manufacturing was now “increasingly important” in the eyes of American consumers.

“This agreement coincides with our increased manufacturing capability to 90 million units a month, and introduction of new product lines for use in hospitals, dental offices and other manufacturing facilities,” Balazs said.