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.

Facebook Presence

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:
Sigma_Likes

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.

Conclusion

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.

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4 thoughts on “Sigma Labs Q2 2013 SEC Filing Observations

  1. I found your site to contain good information. I am wondering your thoughts on Sigma Labs, Inc. being one of the companies awarded grant money from the U.S. Department of Commerce’s National Institute of Standards and Technology.

    It appears to add some credibility to this small R&D company. Your thoughts are appreciated.

  2. Thank you for the comment JP and I’m glad you find the site to contain good information.

    The grant was for $5 million which if divided evenly among the 26 collaborators would be around $192 thousand. It is not particularly difficult to apply for and receive grants and the receipt of a grant is not neccesarily a good indicator of the likelihood of success or failure for a given company.

    A quick Google search shows that at least three of the companies in the below link received grants during their lifetimes:
    https://www.nanalyze.com/2013/08/the-dangers-of-over-the-counter-otc-stocks/

    All of these OTC companies were not successful and lost investors all of their money over time. These are just a few examples of OTC companies that failed which emphasizes the need to evaluate all OTC companies with a very high level of scrutiny.

  3. All of the points you mentioned are great points to consider. Any investor should pay strict attention to such things. The recent “hype” around Sigma Labs appears to be just that.

    Unless there are substantive developments from Sigma Labs, Inc. directly that enhance the company’s future and viability, I will be on the sidelines on this one.

    Keep up the great work on the site.

    Thanks.

    1. A development from Sigma Labs:
      Sigma Labs, Inc. (OTCBB: SGLB) today announced that it received from Los Alamos National Laboratory a second contract to provide Sigma Labs’ advanced manufacturing technology and continuing support efforts in nuclear weapons stockpile stewardship and disposition for the Advanced Recovery and Integrated Extraction System (ARIES). The ARIES program is the only program in the nation that disassembles and destroys surplus plutonium pits. The pits are transformed into plutonium oxide powder suitable for being made into fuel for civilian nuclear reactors. The ARIES Program is based on an agreement between the United States and the Russian Federation to eliminate 34 metric tons of weapons grade materials and turn them into nuclear fuel thereby reducing the threat of global weapons proliferation. Sigma Labs expects this contract with Los Alamos National Laboratory to generate up to $178,800 in revenues.

      Mark Cola, President and Chief Executive Officer of Sigma Labs, stated , “This latest contract is one in a series of awards that validates our expertise and our ability to deliver solid technical results to the most demanding applications in the world, namely U.S. National Security and reducing the threat of weapons proliferation.”

      http://rt.prnewswire.com/rt.gif?NewsItemId=LA04326&Transmission_Id=201310251030PR_NEWS_USPR_____LA04326&DateId=20131025

      Not a huge contract but it appears that there may be more coming. Also, there is more AM grant money ($9,000,000) becoming available, which Lars thinks is easy to get.

      http://www.areadevelopment.com/EconomicsGovernmentPolicy/Q4-2013/additive-manufacturingl-technology-end-use-products-27261451.shtml

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