Sigma Labs Q2 2013 SEC Filing Observations
In a previous article, we stressed how important the need for due diligence is when evaluating the merits of over-the-counter (OTC) companies. We also discussed many of the warning signs seen in the past with OTC companies that eventually left investors with next to nothing. OTC company Sigma Labs is a highly discussed company which is looking to capitalize on the opportunities presented by 3D printing. Below are a few observations about information disclosed in the Sigma Labs Q2 2013 SEC filing.
Partnership With Allotrope Sciences Corporation
The second quarter 10Q notes an agreement in April in which Sigma Labs exclusively licensed patents related to projectile and munitions related technologies to “Allotrope Sciences Corporation”. It’s difficult to gauge what sort of value Allotrope can bring to the table for Sigma Labs since the company does not have a website. In fact, no information at all exists about “Allotrope Sciences Corporation” other than an address in Key West Florida and a claim by an individual named Alan Yarborough to have started the company in 2013. Alan also lists on his LinkedIn profile that he is the President and CEO of ExNovo, a company whose last press release on May 2013 also announced a “teaming agreement” with Sigma Labs. Said Alan about this “teaming agreement”:
“Sigma Labs brings decades of experience in world-class technology solutions for National Security problems. By joining forces we expect to create and deliver best-in-class solutions that will help save US lives and complement United States interests around the globe.
Regarding this partnership with Allotrope, Sigma investors should ask how much value could an agreement with a “company” that has no information available, one apparent employee, and no website bring to shareholders in the future.
As mentioned in a previous article, in Q2 Sigma Labs provided 500,000 shares to Patagonia Global Trading Company for marketing services, a company with one listed officer and no website that “specializes in online marketing of companies, specifically on Facebook”. Just a little over 3 months later we see Sigma Labs now has a Facebook page with 11,319 followers. The most popular demographic according to Facebook is “18-24-year-olds from Ho Chi Minh City Vietnam”. The below chart shows the number of likes received by Sigma Labs’ Facebook page on a rolling week basis:
It seems highly unlikely that through the normal course of Facebook marketing one could go from 700+ likes a week to zero likes a week in just 8 days. An article published this month in the Guardian “How low-paid workers at ‘click farms’ create appearance of online popularity” talks about how workers in emerging markets are often times paid small amounts of money to create many likes in a short period of time. If this sudden surge in likes for Sigma Labs is through the use of such a click farm, investors should question whether or not the 500,000 shares given away for this endeavor were well spent.
Exclusive Marketing Agreement With Manhattan Scientific
In the Q2 SEC Filing, Sigma announced the granting of exclusive rights to Manhattan Scientific (MSI) to market the “Sigma Technology”.
MSI is an over-the-counter (OTC) company formed by merging two entities that were acquired in the past 5 years. The first is Metallicum which is an entity that provided 2 exclusive patent licenses and one non-exclusive patent license, one of these which produces all the Company’s revenue from one customer, .6 million for the first half of 2013. The second is Scientific Nanomedicine, a “company” that had no tangible assets or liabilities so was therefore acquired as an asset for 1.3 million dollars. The intellectual property acquired from these two entities makes up nearly half of Manhattan’s Scientific’s assets valued at 1.2 million dollars. As of December 31, 2012, the company had one full-time employee in general management.
The following statement was made by Sigma regarding the marketing agreement with Manhattan Scientific:
The MSI Technology and Sigma Technology can provide similar benefits in some applications, even though the method of action is different. MSI and Sigma desire to cooperate in marketing the technologies such that the technologies cooperate instead of competing.
Investors of Sigma Labs should be asking how a marketing agreement with a company that had one full-time employee at the end of last year, no assets, and revenue from a single customer relationship might be able to add value to Sigma shareholders in the future, much less capitalize on its own IP portfolio.
Pure-play disruptive tech stocks are not only hard to find, but investing in them is risky business. That's why we created “The Nanalyze Disruptive Tech Portfolio Report,” which lists 20 disruptive tech stocks we love so much we’ve invested in them ourselves. Find out which tech stocks we love, like, and avoid in this special report, now available for all Nanalyze Premium annual subscribers.