Will Sigma Labs Finally Deliver on Their Promises?

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In past articles, we discussed an over-the-counter (OTC) 3D Printing company called Sigma Labs (OTCMKTS:SGLB), a company that while popular among 3D Printing speculators, has shown many red flags over time. In particular, the company announced marketing and partnership agreements with entities of which no information could be found, sold 22% of the company for just $1.2 million, and engaged in marketing services with unknown entities.

Since our last article on Sigma Labs (OTCMKTS:SGLB) which was over a year ago, not much seems to have happened in the way of commercializing their technology. According to last week’s 10Q, consulting revenues have fallen -51% for the first 6 months of 2014 compared to the same period in the year prior. The Company is also planning to purchase a $724,000 3D Printer from EOS which the company says will allow them to “now enter a new manufacturing phase”. Rather than pursue yet another business focus of becoming a 3D printing bureau, it’s likely that investors would much rather see progress made towards commercializing PrintRite 3D.

While over the past year quite a few press releases were issued concerning memorandums of understandingtechnology cooperation agreements, joint technology agreements, and another private placement to raise funding and further dilute shareholders, there still is no product that has reached commercialization. Investors should be used to dilution by now considering that the number of outstanding shares for Sigma Labs has risen from 432 million to 602 million, a 40% increase in shares outstanding just in the past year alone.

The most recent statement regarding progress made towards commercialization was made in last week’s 10-Q filing:

We expect that our continued development in fiscal 2014 of our IPQA® technology will enable us to begin commercializing this technology in the remainder of 2014 for the AM metal market.

Investors should hold Sigma Labs accountable for making this claim. Over the past two years, the Company has repeatedly made statements in SEC filings regarding progress made towards commercialization that were not met:

May 2012

We believe that our continued development in fiscal 2011 of our IPQA® and munitions technologies will enable us to commercialize these technologies in the remainder of 2012. We will continue to refine those and our other technologies, including our dental implant biomedical prosthetics technology, for commercialization during fiscal 2012.

August 2012

We believe that our continued development in fiscal 2012 of our manufacturing quality control technologies will enable us to reach commercialization of this technology in the remainder of 2012. We will continue to refine IPQA® for the emerging Additive Manufacturing market and our other technologies, including our dental implant biomedical prosthetics technology, for commercialization during fiscal 2012.

November 2012

We believe that our continued development in fiscal 2012 of our manufacturing quality control technologies will enable us to reach commercialization of this technology during the first half of 2013. We will continue to refine IPQA® for the emerging Additive Manufacturing market and our other technologies, including our dental implant biomedical prosthetics technology, for commercialization during fiscal 2013.

May 2013

We believe that our continued development in fiscal 2013 of our manufacturing quality control technologies will enable us to reach commercialization of this technology during the remainder of 2013. We will continue to refine IPQA® for the emerging Additive Manufacturing market and our other technologies, including our dental implant biomedical prosthetics technology, for commercialization during fiscal 2013.

August 2013
We expect that that our continued development of our “In Process Quality Assurance” or “IPQA technology will enable us to commercialize this technology during fiscal 2014. We will continue to refine that and our other technologies, including our dental implant biomedical prosthetics technology.

Have investors not questioned why these statements regarding commercialization have never been met? The CEO received a bonus during the first quarter of 2014 in the amount of $175,000. Maybe the next bonus should be made when commercialization targets are actually met. If no product revenues are realized in 2014, Sigma Labs (OTCMKTS:SGLB) investors should pose some hard questions to management as to why they consistently have not delivered on what they have promised.

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15 thoughts on “Will Sigma Labs Finally Deliver on Their Promises?

  1. The way I see it is that for the past year the share price has increased by more than 100 percent. If the shares outstaniding doubled then you would no value would have be created. In this case, while there was dilution shareholders still had plenty of upside since regardless of what happened in the background they made double their money. Short term, the stock has been a good play. If dilution continues true longs will be in trouble.

  2. Thank you for the comment SolomonK.

    For long term “investors” in Sigma Labs this article should be concerning. For speculators, it shouldn’t matter since the price seems to driven more by press releases than financial numbers.

    As long as a company has shares to issue that will provide the cash they need to survive, press releases can be issued and promises can be made ad infinitum. Too many OTC companies have a pattern of promising commercialization of their disruptive technology and then constantly moving the target a few quarters forward and usually the company management are never challenged. The reason for this is that most people buying or selling OTC stocks, especially high volume ones, are speculators, not investors. The few longs who think they are actually “investing” in Sigma Labs should be concerned.

  3. This company has been hanging its hat on the one GE press release they had a while back and since then no progress has been made. If you look at the chart you can see a base has formed. Because you have high volume you are now subject to a stock price behavior that will exhibit technical patterns. The stock price has been detached from fundamentals and now trades on technical indicators. At this point you should see a pop or a drop. If there are no product revenues reported in the next 10-K, this will go down down down.

    1. Thank you for the comment Fez. It’s important to draw a line in the sand and hold management accountable for their projections.

  4. There is a great deal of value for this technology to allow additive manufacturing to become viable on a large scale in industry. That is why I have hope that the IPQA technology will become a working reality. It is important to to note that even though GE is placing alot of emphasis on the need for this ability, it would be naive to think they are not developing the ability themselves. You do not commit as far as they have into this world and not have your highly paid engineering staff figuring out this technical ability themselves. The thought of a company of that size waiting on SGLB to prove their technology so they can move forward and place huge orders for the product is a nice idea that I hope becomes reality, but I fear may not.

    1. I would agree completely with you on that comment CDVL. A $263 billion company that is one of the top-10 companies in the world is probably not sitting on their hands waiting for a 6 employee OTC company with no product sales and just $4 million in cash to fund R&D to provide them with an instrumental technology for additive manufacturing.

      1. IPQA technology is patented (n. 20100288734; 20130126483) and, therefore, fully protected, even toward a goliath like GE. I would focus, rather than on the number of employees, on the capability of Printrite3D to give an answer to an unsolved problem in the AM sector, and, most of all, on the professional background of researchers like Mark Cola and Vivek Dave. LANL background and their expertise as metallurgists should be a guarantee. This product was not born yesterday (http://www.b6sigma.com/uploads/media/paper.LAScience-2003.pdf) and it has lot of complexity: we have an artificial neural network that needs to be set with IPQA parameters, coming from years of material metallurgical knowledge. This in order to allow the machine to learn and detect preventively which welds are acceptable, conditional, and unacceptable when elaborating gigabytes of optical, thermal and acoustic data. Certainty, this is an ambitious project for an ambitious result. It is possible that the time needed for developing all this in a viable product can disappoint frantic and short sighted investors. I, personally, am aware of the points stressed by this article, which are well exposed but still nothing new. The company is not flawless and I share some doubts and criticism toward management choices, especially in their communication strategy with investors. Having said this, I believe in their technology and stay confident with my long thesis.

        1. Thank you very much for the additional information Luca.

          When looking at the “pros and cons” of an OTC company, the “pros” are widely available and discussed the most on forums such as Yahoo message boards and Investorshub. It’s the “cons” that are often overlooked or when brought up, are not likely to be discussed much. In evaluating any stock, management will always put their best foot forward in press releases, interviews, and website content. Buried in the SEC filings however, a great deal of information can be found that helps expose potential problems with a company. It is for this reason that when evaluating OTC companies, we don’t perform interviews with management but instead will look for “cons” in the financial filings that may not be so obvious to investors. As we’ve said many times before, OTC companies are extremely risky and merit a great deal of scrutiny. Countless OTC companies have tried to bring new technologies to market and have failed leaving long term investors holding the proverbial bag.

          In regards to Sigma Labs, there would be some real validation for investors should the company begin realizing revenues this year with their IPQA technology. We like to invest in promising disruptive technologies like everyone else, but are very wary of OTC companies based on past experiences. With just over 4 months left in the year, we shouldn’t have to wait too long to see if the Company’s stated goals come to fruition.

          1. I appreciate your critic approach, and find it helpful in pushing investors for further due diligence. Although, I try not to be manichean in my opinions. One point I believe should require more focus and explanation from SGLB management, is the timing of their contract with Adurant Technologies to address big data handling problems. Considering their schedule, I am surprised that a relevant challenge like this comes under light only during the half of 2014, theorically close to commercialization.
            (one last thing: seeing you at Nanalyze focusing on Zecotek Photonics would be great).

          2. One thing we’ve noted about Sigma Labs is that it is difficult to find information about some third parties they conduct business with, either in press releases or in SEC filings. Who exactly is Adurant Technologies? A cursory Google search of the company name shows the company website, a LinkedIn profile, and mostly references to their “contract” with Sigma Labs. The company website lists a single managing director. Who is this firm and what is their track record in their industry? How many clients have they had in the past and what did they accomplish? What specifically is their value proposition for Sigma Labs? Is their really a need for big data solutions with no commercialized product? Is this just another press release to pacify the investor base? These are all questions that deserve some due diligence.

            OTC companies are never subject to the scrutiny of institutional investors so instead they are subject to the judgement of retail investors who banter about their press releases in various online forums such as we are doing now. In almost all cases, it’s not worth the time. We only write articles about Sigma Labs because nobody else seems to be taking an objective look at the company and challenging company management when things don’t seem to add up. Consequently, there is a great deal of interest in our observations. Time will tell.

            We haven’t looked into Zecotek Photonics much but we’ll look to write an article about the Company in the near future…

  5. I think your thesis …
    “The Company is also planning to purchase a $724,000 3D Printer from EOS which the company says will allow them to “now enter a new manufacturing phase”. Rather than pursue yet another business focus of becoming a 3D printing bureau, it’s likely that investors would much rather see progress made towards commercializing PrintRite 3D.”

    … overlooks the two key facts. First, they never said they were buying the printer, but that they were “acquiring it.” Second, there is more than one use for this printer. In other words, commercializing IPQA could happen much faster if Sigma has their own printer to perform R&D on and demonstrate PrinterRite3D to customers. Additionally, them have a direct relationship with EOS (the printer manufacturer) was excellent confirmation to me that they continue to build relationships with all the right players. EOS dominates the space where IPQA will make the most difference. Am I disappointed that Mark is not a great communicator and misjudges his time frames. NO! But why? Because first and foremost he is a scientist not a businessman. If he had not made significant additions to his Directors as well as build business relationships with partners that are better at commercialization that he is I would have sold my share earlier. Lastly, if you have ever been the smallest vendor on a huge project — i.e., Sigma on GE Aviation, having no control over their agenda you would realize that revenues are going to come when GE’s Auburn and Italian plants take off with production and not until then. Rather than chastise Sigma for not making consulting revenues I am elated that they are putting all of their energy (as Mark stated in his 2013 Report web conference) into getting PrintRite3D into production. The question to focus on with an OTC is not whether they are making each of their deadlines, but are they making progress, is their tech defensible, are their partners sticking with them, are they building a strong team. Why? Because you don’t get multi-bagger returns on demand. They happen when fundamental breakthroughs occur due to alignment of many factors which in Sigma’s case is very complex and often not of their own control.

    1. Thank you for the comment Ron. Regarding whether or not the printer is being bought or acquired, the below statement is made in the SEC filing:

      We are in the process of purchasing from EOS GmbH a Model 290 3D metal printer for a total cost of $724,000, to be paid in three equal installments. We expect to make the first payment in September 2014, and each of the two remaining installments is to be paid after notification to the Company by EOS GmbH that the 3D metal printer is ready for dispatch, and net 30 days after installation of the 3D metal printer, respectively.

      If the company is indeed purchasing the printer for R&D, what have they been using then for the past several years if their total “furniture and equipment” is a mere $8 thousand? The act of purchasing a product from a company hardly constitutes a direct relationship that can be touted to investors. Why do we have a scientist running this company and not a businessman? Companies that expect to be taken seriously by investors do not make promises and continually break them. Countless OTC companies have followed this exact same trajectory to have their shares expire worthless while speculators have been left holding the bag. Rest assured though that company management and “investor relations firms” will have been well compensated throughout the process.

  6. “SANTA FE, N.M., Dec. 26, 2013 /PRNewswire/ — Sigma Labs, Inc. (SGLB) [omissis..] delivered two of its PrintRite3D® quality assurance systems for 3D metal printing to a leading aerospace company. Sigma Labs expects to generate up to $975,000 in revenues during 2014 as the PrintRite3D® systems undergo test and evaluation”. Can someone explain what happened to this revenue stream and why there is no mention of this in the last 10-Q form?
    Not worth of mention even the NAMII award (PR Jan. 23, 2014): “Sigma Labs expects to generate up to $750,000 in revenues over the next 18 months from this project.”.
    I believe, in light of the serious and factual critics within the article and following comments, a clarification from the company would be appreciated. I previously said I am long and confident with SGLB, but I’m not married with any stock for sure and criticism should be kept at a high level, especially toward those companies in which we put our good and hardly gained money.
    (I was expecting Mr. Anderson to intervene here..too challenging??).

  7. Hi Luca,

    re: “I was expecting Mr. Anderson to intervene here..too challenging??”

    There is nothing where 3D printing stocks are concerned that I find “too challenging”.

    I’m a SGLB shareholder from .03/share, long before most ever heard of the company. Agree with the premise of the article here though, that SGLB needs to deliver. I believe they will, but it’s in their hands now.

    That’s the short answer.

    1. Hi Gary,
      I just tried to pull your leg, forgive me.
      However, your reply confirms some legitimate questions remain unsolved and time is passing.
      At least, we have now a webcast on the 11th of September, which many here will surely attend.
      Deform module, based on the webcast description, will be commercialized in 2014 too, that’s interesting. The whole description looks quite sound. I just hope there will be some not diplomatic but concrete answers (maybe one about where the $975,000 in revenues from the anonymous aerospace company went?).
      Long and steady here too, although not since .03, unluckily.
      P.S.: about Adurant Tech. My small LPG distribution company is in a contract with a software developer who’s a silver Microsoft Partner (Gruppo Euris). I was comparing the two websites and Adurant doesn’t come out very well..

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