A few questions about Sigma Labs

In an earlier post we mentioned that Sigma Labs (OTCMKTS:SGLB) recently signed a Joint Technology Development Agreement with GE Aviation to advance and implement in-process inspection technologies that both companies mutually developed. As mentioned previously, any OTC company needs to be scrutinized heavily prior to making an investment.

Sigma Labs has a current market cap of $29 million and a share price of .068 cents. The company is a holding company containing two entities; B6 Sigma and Sumner Associates. The former entity is driving the commercialization of their inspection product and the later company provides consulting services. The company has 8 full time employees and 5 part time employees. The revenues from consulting in 2012 were just under 1 million dollars. The Company’s audited financial statements express substantial doubt about its ability to continue as a going concern. There are a few things that merit further explaining when examining the SEC filings.

Paid Consulting Services

The below statement was made in the Q1 2013 10Q:

Effective May 10, 2013, we entered into a consulting agreement with Pategonia Global Trading, LLC (the “consultant”), pursuant to which we engaged the consultant to provide us with marketing services to build market awareness for our business. As compensation for the consultant’s services, we issued the consultant 500,000 shares of our common stock, at a price per share of $0.0248, which was equal to the closing price of our common stock on the date of the agreement. The agreement has a term of 90 days, unless earlier terminated by the Company for any reason upon 10 days written notice to the consultant.

This represents about 34,000 dollars at today’s share price. Pategonia Global Trading LLC was registered as a Florida LLC in September 2011 and lists one active officer as Ezequiel D. Ziruinikoff. The company does not appear to have a website nor does a search in Google turn up any information about who this individual is. It would be good to know a bit more about what marketing services were actually purchased with shareholders equity.

Memorandum of Understanding

The below press release was posted on the Sigma Labs website:

SIGMA LABS, INC. & INTERACTIVE MACHINES, INC. EXECUTE MEMORANDUM OF UNDERSTANDING TO EXPLORE THE DESIGN AND BUILD OF NEXT GENERATION CONCEPTS FOR 3D METAL PRINTING MACHINERY Santa Fe, NM – March 14, 2013 – Sigma Labs, Inc. (OTCBB: SGLB) announced that it has signed a Memorandum of Understanding (MOU) with Interactive Machines, Inc. (IMI) of Southwick, Massachusetts.

It goes on to say:

The MOU sets forth the parties’ intent to explore the formation of a joint venture or other arrangement for the purpose of developing and commercializing next-generation 3D Printing devices designed to produce an increased output of up to 10X over currently available 3D metal printing machines. The parties intend to enter into definitive agreements before the end of the second quarter of 2013. Demonstration of the prototype is planned for introduction during the third quarter of 2014, subject to the parties obtaining adequate financing to implement a business plan.

This is a very ambitious undertaking and it would be good to know more about Interactive Machines. The company does have a website, though it’s very sparse and looks hastily put together. The domain was registered in 2011 yet the company has been in operations since 1986. The “About Us” page is dated March 21 2013. There are no management profiles and only one news item (this one). It would be good to know a bit more about this company’s management team and what the firm has accomplished in order to ascertain the likelihood of this significant event.

Conclusion

No doubt the collaboration Sigma Labs has with GE seems legitimate as evidenced by the GE Aviation press release. However when evaluating the merits of OTC stocks, attention to detail is important and anything that is unexplained should be questioned.

In a future article we will look at a few more items that should be of interest to Sigma Labs investors.

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