3 more questions about Sigma Labs

Sigma_Labs

In an earlier article titled “A few questions about Sigma Labs” we looked at a few statements made in the company filings that merited further due diligence. There are a few more items that should be of interest as well to investors in 3D Printing company Sigma Labs.

Hudson Valley Capital Management

The below was taken from Sigma Labs 10Q filed May 2013 regarding private placements that took place in January and April of 2011:

Hudson Valley Capital Management Corp. (“Hudson”) acted as placement agent and received a total of $105,735 in commissions. The Company also issued to Hudson in connection with the offering five year warrants to purchase up to 7,931,250 shares of the Company’s common stock. Such warrants have an exercise price of $0.025 per share and are valued at $158,625.

Who is Hudson Valley Capital Management? Not a good firm to work with. On November 8 2012 the Financial Industry Regulatory Authority (FINRA)  expelled Hudson Valley Capital Management and barred the CEO for defrauding the clearing firm and customers. The press release from FINRA goes on to say:

Gillis purchased thousands of shares of securities in the open market in the firm’s account and allocated these shares to customers at markups between 177 percent and 280 percent. Gillis also converted a customer’s funds to pay for an unauthorized stock purchase and caused another customer to sustain a loss of approximately $400,000. When confronted about unauthorized trades that occurred in their accounts, Gillis lied to two customers about the transactions to hide his misconduct, and lied to FINRA staff during sworn testimony.

The 10Q does not say which firm Sigma Labs uses now presuming they no longer can use Hudson Valley Capital Management. Hopefully Sigma Labs shareholders were not impacted in any way by this fraudulent firm which is now in liquidation.

Recent Private Placement

On July 24th 2013 Sigma Labs announced a private placement  for proceeds of 1.2 million dollars. The press release does not mention the number of shares issued, but looking at the 8K shows the size of this transaction is significant at 120 million shares. As of March 31st 2013, the company had 431 million shares outstanding. This means that the recipient(s) of this private placement purchased almost 22% of the company for merely 1.2 million dollars. At the date of the issuance (July 18 2013) Sigma Labs traded close to a high of 11 cents per share as marked by the red dot in the below chart.

Sigma_Labs_Placement

Selling shares at 1 cent per share when the share price is at 11 cents per share is a massive discount to the purchaser. No details of the transaction are given but one would hope there are time limitations imposed so that the buyer of these shares cannot start dumping them on the open market to realize an immediate profit and consequently drive the share price down for existing shareholders.

Patagonia Global Trading Company

As mentioned in a previous article, Sigma Labs entered into a consulting agreement with Pategonia Global Trading to provide marketing services to build market awareness for their business. An addendum to the 10Q states the following about the agreement between the two parties:

Consultant specializes in online marketing of companies, specifically on Facebook, via established marketing channels to promote companies’ exposure to new potential followers on Facebook.

This agreement is signed by David Zirulnikoff, stated director of Patagonia Global Trading. Sigma Labs does now have a Facebook page which was created 5 days before the agreement was made. However in an 8K filed by company Eco-Trade on the 24th of April 2013, the below statement is made about David Zirulnikoff, a member of the board of directors at Eco-Trade:

David is the managing partner of Patagonia Global Trading, a commodities trading firm.

Conclusion

So what exactly is Patagonia Global Trading? A specialist in the online marketing of companies or a commodities trading firm?

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