Sigma Labs, Inc.
Q4 2019 Earnings Call Transcript

Published: 25 Mar 2020

[Operator:]

Good day, and welcome to the Sigma Labs' Fourth Quarter and Full Year 2019 Financial Results Conference Call and Webcast. Today's conference is being recorded.At this time, I would like to turn the conference over to Chris Tyson, Managing Director of MZ North America. Please go ahead, sir.

[Christopher Tyson:]

Thank you, and good afternoon. I'd like to thank you all for taking time to join us for Sigma Lab's fourth quarter and full year 2019 business update and results conference call. Your hosts today are Mark Ruport, Executive Chairman; John Rice, Chief Executive Officer; and Frank Orzechowski, the company's Chief Financial Officer. A press release detailing these results crossed the wires this afternoon at 4

[Mark Ruport:]

Thank you, Chris, and good afternoon everybody, and thanks for joining us today. It goes without saying that these are unprecedented times as the coronavirus is affecting every aspect of both our personal and professional lives. I hope that you and your families are safe and that we begin to see some positive signs this week, that the measures that the country is taking are beginning to slowdown the spread of the virus and the number of new incidents.As far as today's call is concerned, we will be concise, specific and relatively brief. John Rice, our Chief Executive Officer will provide a review of the 2019 highlights; Frank Orzechowski, our CFO will review the 2019 financials, and I will discuss our path forward. We will conclude the call with a question-and-answer session. John?

[Christopher Tyson:]

We were muted.

[John Rice:]

Thank you, Mark.

[Mark Ruport:]

Okay, you are welcome.

[John Rice:]

I want to echo your comments about the coronavirus and say to you our shareholders, our owners, that you are part of our Sigma family. We hope you are well and we hope you are safe and we hope that you will sense in and catch our optimism as we go forward with Sigma.In 2019 we accomplished several major objectives that laid the foundation for the company to complete a three-year transition [indiscernible] and following patiently from an R&D company into one that has fully commercialized product that is equipped to and we believe on the verge of generating significant revenue and increase in valuation for our shareholders as we go into 2020 and on into the future.In 2019 we designed and executed the RTE program. As many of you know, this was the "Drive Before You Buy" program and it placed our equipment in test evaluation of very large companies. The test in 2019 laid down a platform of a proven product performance off of which we are now launching our selling in 2020 and beyond. In 2019 we completed product in PrintRite3D when we released Version 5.0 last May.5.0 enhanced our software package with a sophisticated and very user friendly customer interface tool that it enables process engineers to go deep into the data analytics and to other build or a single part in real-time as the build has taken place or at any other time to mine and evaluate data to better understand the process.Now when we released this important upgrade made our product accessible and usable to both process engineers as well as machine operators on the floor who are learning now in the corona age that Version 5.0 is even more important, because we have process engineers we are talking with daily now who are working remotely and they have found out that they are able to fully use PrintRite3D to continue to monitor their operation in process and this they were besides the machines. And if they did not have PrintRite3D and they received an alert, they'd be getting a call from a machine operator miles away asking them to come down to the plant. So this is already a big deal.In 2019 we enhanced our competitive IP intellectual property mode with new patents. As you know, one of our principal strategies is to license our industry's major OEMs to sell PrintRite3D inside their product on the model of Intel story. And our growing patent portfolios are defense against companies seeking to just appropriate our technology. And as our issued patents continue to rollout including two more that we announced yesterday, we think that it is simply easier and wiser now for OEMs to seek license of our technology rather than risk attacking our patent wall [ph].We exited the fourth quarter, actually the whole year having built strategic relationships with end user customers like Airbus and Baker Hughes, OEMs like Materialise and additive industries, but note as we cannot mention due to MDAs. And currently we continue to collaborate with R&D institutes like Fraunhofer or such as Fraunhofer and the National Institute of Standards in the US. and with universities with additive manufacturing programs. This product drives to become the industry standard for defining and testing 3D metal quality at any and all brands of laser that have been AM equipment.So all of the above simply means that to us in the company 2019 was the year in which we completed our transformation into a commercial launching pad so that this year 2020 and beyond we could drive both revenues and cash flow.And with that, I'll turn it over to Frank Orzechowski, our Chief Financial Officer.

[Frank Orzechowski:]

Thank you, John. Our detailed financial results are contained in our Form 10-K filed with the SEC today and the press release we issued contains key highlights of our financial results. So for today, I will confine myself to a concise review of our financial results for the fourth quarter and the full year of 2019.Our revenue for the full year of 2019 totaled $402,000 of which $133,000 or 33% we earned in the fourth quarter of this year. This compares to revenues of $388,000 for the full year of 2018 of which $56,000 was earned in the fourth quarter of last year. Our gross profit for the full year of 2019 was negative $172,000 of which the fourth quarter contributed negative $105,000. The company's 2019 gross margin is primarily a function of variable additional travel and labor costs associated with the on-site and remote collaboration involved in the company's rapid test and evaluation programs.Our operating expenses for 2019 were $6.2 million of which $1.5 million were incurred in the fourth quarter. Total operating expenses for 2018 totaled $5.7 million. The increase in our total operating expenses was primarily driven by a few factors. Number one, increases in salaries and benefits of $525,000 and occupancy and related general office expenses of $57,000 related to six new hires, increased research and development expenses of $155,000 related to the continued development of our PrintRite3D product suite and increased travel expenses of $93,000 related to continued outreach to perspective OEMs, service bureaus and end user customers and our ongoing expansion into the European market. Partially offsetting this increase was a reduction in stock based compensation expense of $348,000.Our net loss for the full year of 2019 were $6.3 million or $5.37 per share compared to a net loss of $5.6 million or $8.10 per share in 2018 and I will note that all of these numbers are post [indiscernible] adjusted. Net loss for the fourth quarter of 2019 totaled $1.6 million or $1.17 per share compared to net loss of $1.7 million or $2.01 per share in the fourth quarter of 2018.Cash totaled $0.1 million at December 31, 2019, as compared to $1.1 million at September 30, 2019 and $1.3 million at December 31, 2018. Cash used in operating activities for the full year ended December 31, 2019 totaled $5.5 million, compared to $3.8 million in the full year ended December 31, 2018.Subsequent to the close of the fourth quarter, the Company completed two private placements consisting of shares of convertible preferred stock, warrants to purchase additional shares of convertible preferred stock, and warrants to purchase shares of our common stock, resulting in net cash proceeds to us of approximately $1.7 million. If all of the remaining warrants to purchase shares of preferred stock and common stock are exercised for cash by the holders, the total potential gross proceeds to us will be approximately $13.8 million.And with that, I will now turn the call back over to Mark for a look into 2020.

[Mark Ruport:]

Thanks Frank. Obviously it is impossible to know what will happen in the coming days, weeks for months. Our first obligation is to our employees. The State of New Mexico has ordered all nonessential businesses to close. However, we are a component manufacturer, so we can remain open as long as we follow the CDC recommendations and limit gatherings to under five people, which we're doing. Fortunately as a software company we're used to working through and supporting our customers remotely.Since we support customers in Asia, Europe, as well as United States, we say that Sigma never sleeps. As a company we're doing everything possible to keep things moving with our engineering teams and our customers. Our hope is that when we begin to return to some state of normalcy, we will be prepared to move forward without losing too much ground.As you know, we have a special shareholders' meeting scheduled for this Friday. There are two proposals on the ballot, the first is to approve the issuance of shares for private placement and the second is to increase the authorized common stock. The votes are in progress and we are pleased that IFS has recommended to their shareholders vote for both. If you haven’t voted, please do so.As a business, for those of you that are new to Sigma, I'd like to give you a brief refresher on what Sigma does, how we are different and why you should care. We develop quality assurance software for the additive manufacturing or 3D printing industry. 3D printing is seen by many to be the next revolution in manufacturing.A few advantages of 3D metal printing are designers can create parts that were impossible to make with other fabrication method. [Indiscernible] that would require multiple parts can be designed and manufactured as one. Parts can be created that are lighter, stronger and more durable and of course it is extremely important for industries like aerospace and the automotive. Customization of metal parts is easier with 3D printing than the traditional methods. And there is less material waste since the process is additive versus subtractive in the powder is recyclable.One of the major obstacles holding back the broader use of 3D metal printers is ensuring the quality of the part being manufactured. There are so many variables involved in the process from metal powder being used, the strength of the lasers, the number of lasers, the manufacturer, the printer, et cetera. The quality assurance is done after the process often by doing a CT scan of the finished product. This as you can imagine is costly and time consuming and a major limiting factor to the full industrialization of additive manufacturing.Currently, there are a few of any standards for ensuring quality across industries, supply chain or even manufacturing floor. Our product, PrintRite3D is the only product that we know of in the market today that works on the majority of 3D metal printers, monitors the manufacturing process layer by layer and is able to detect and identify defects and anomalies real-time limiting waste and saving time and money.Our goal as John had mentioned is to become the de facto standard for quality assurance for 3D printing and metal parts. And our opportunity is very large. We estimate that the addressable market to be approximately $2 billion between 2021 and 2027, which translates to approximately $100 million of revenue to Sigma for every 5% of the market that we can claim. We got off to a very fast start in January due to the success and feedback of the RTEs that John mentioned and the stability and features of PrintRite3D.We have transitioned from selling evaluations to selling commercially off-the-shelf software systems. If a customer wants to do an evaluation, we will jointly establish success criteria as part of the contract. We've recently entered into these more typical software agreements with several customers. This as you can imagine is a major milestone for the company in that it streamlines the sale. It actually takes less resource to sell than to do an evaluation, and it is repeatable and scalable.It also allows us to incorporate resellers into our sales model in certain parts of the world that we don't have direct sales, something that we could not do with the RTEs. We're doing this at the same time as we see a convergence of three factors that will drive the growth of the business. First, the industry continues to mature and is getting to the point where it is mature enough where end-users are making plans to move towards serial production with multiple 3D metal printers from different manufacturers.The second thing that we see happening is clearly that PrintRite3D 5.0 has been proven to work on multiple printers from different manufacturers, single, dual and quad laser configurations and consistently correlates to CT scans and accurately identifies and classifies defects. Finally, there is almost universal agreement that the industry needs a third-party in-process quality assurance solution. Sigma's technology is seen as the only viable product that works across machines types and supply chains.Our strategy is to attack all segments of the market and work with standards organizations to position PrintRite3D as a de facto standard. I do not see any major market barriers to us achieving our goal. Our relationship with Materialise opens up a retrofit market opportunity for us of over 2500 printers. 10% of that market would translate to millions of dollars of revenue for Sigma.We are actively making progress with several hardware OEMs to certify our technology with their 3D printers. Based on the manufacturers forecast, each opportunity represents a multimillion-dollar multiyear revenue stream for Sigma. And we continue to make significant progress with end-users as they move towards serial production. Each one of those interactions confirms our value and moves us closer to our goal.As you saw from the recent announcements with Mississippi State Northwestern University, we intend to help educate and influence tomorrow's manufacturing leaders by collaborating with such innovative organizations that focused on additive manufacturing. As you lay these revenue streams on top of each other, the effect is a slow but steady ramp to increase in revenue quarter over quarter. In addition, as our revenue mix changes from end-user and R&D organizations to software only OEM, our gross margin shifts dramatically.The question as you know, and several of you have asked me on the last conference call, have been one of timing and with today's additional challenges that becomes impossible to predict. However, based on our ability to continue to develop our software and support and collaborate our customers remotely, I believe that we will see the business recover quickly when the crisis subsides. When that happens, based on what we know today, we're positioned to increase our revenue quarter-over-quarter for the foreseeable future.I'd like to leave you with a couple additional thoughts about our market opportunity for the coming years. There are two very significant factors that are relevant in today's world and I believe will become increasingly improvement two or three years out. The first is the movement towards sustainable technologies and processes that are environmentally friendly and socially responsible.The second is the effect of the pandemic on the future of manufacturing. Regarding the former, 3D printing reduces waste, saves energy from reductions in warehouses and transportation, the powder as I mentioned earlier is recyclable and the process is cleaner than traditional processes. The trends toward sustainability is gaining momentum around the world and will become increasingly important to consumers, companies and investors.The pandemic that we are experiencing today will change many aspects of our lives going forward. I was watching Tom Friedman, The New York Times in an interview the other day. If you recall, he wrote the book, The World Is Flat, which happen to have an influence on my career and strategies when I was running other public and private companies. He was asked, "What would be different when we get through this?" And we will get through this.His first answer was e-learning will explode due to people being exposed as a substitute to going to traditional schools. His second answer to the question was 3D printing will explode. Supply chains are too long and complex. Traditional manufacturing processes are too rigid. 3D printing moves the manufacturing process closer toward the end product as needed greatly enhancing the agility and responsiveness of the supply chain.So when I sit back and take into account the maturity of the industry, the advances in technology, the functionality and stability of our product today, the increased focus on investing in companies and technologies that are socially responsible, and the potential changes in the manufacturing process, I see an industry that is truly ready to take off, and Sigma is positioned to do the same.PrintRite3D is the only technology that we know of that can provide in-process quality assurance in a heterogeneous serial manufacturing production facility. In Version 0.6 which we are actively working on with several of our customers, will enhance the use of our technology in serial production environments and move us closer to a true closed loop solution.The timing as I mentioned earlier is unpredictable, but the trajectory is unquestionable. As a company we will be ready to embrace and meet the challenge of the opportunities in front of us. Turning current difficulties aside, which I know is difficult, it is a very exciting time for Sigma and we're anxious to get back to work and see our vision become reality.Thanks for taking your time today. I know we are all consumed with personal issues and thank you for your support of Sigma Labs. At this time, we will open up the call for questions from listeners. Operator?

[Operator:]

Thank you. [Operator Instructions] Our first question will be coming from the line of George [indiscernible] who is a private investor. Please go ahead with your question.

[Unidentified Analyst:]

Hi guys, thank you for taking my call. Can you hear me okay?

[Mark Ruport:]

Yes, I can.

[Unidentified Analyst:]

Okay, hi Mark. As John Rice will tell you, I'm a very long-standing, long shareholder, so thank you for the call and thank you for taking my call. Obviously there are many questions. I'll try to be brief and if I have more questions, maybe I can come in later after other callers. A couple of strategic questions and a couple of tactical questions if I may Mark and John and everybody.You mentioned Materialise in your prepared remarks, which excited many of us. And you mentioned some numbers, some revenue numbers, can you refresh us again, I wasn't clear on that? What is the expected if any revenue projection in the immediate or near term from the Materialise deal?

[Mark Ruport:]

Yes, George, thanks for the question. Let me give you or let me frame the opportunity and what we're doing with Materialise right now. As you know, we're integrating PrintRite3D with their MCP, their control platform. They are targeting that platform to several markets. The first is the retrofit market from printers that are already out in use, and the second or new OEMs that are coming in on the hardware side.The opportunity that I talked about earlier is on the retrofit side. We estimate that there are 2500 printers in place today that provide an opportunity for Materialise and Sigma to come in with our joint solution. If we get 10% of that market, what I mentioned was that millions of dollars of revenue to Sigma. So that's what the opportunity is. We don't have a forecast on that yet, but the opportunity is clearly there.The second opportunity with new OEMs coming into the market, we've already jointly called on a couple of hardware OEMs that are looking at combinations of control platforms and monitoring software and that yet is another opportunity that we haven't quantified, but as you can imagine, if we become embedded in a new hardware OEM's platform, we get revenue for years to come as that hardware OEM ramps up their production.

[Unidentified Analyst:]

That's very encouraging and I appreciate that. Now you know, clearly the 3D AM world has been threatening to go into serial production for a while. We believe, let me rephrase, many believe that it's because of the uncertainty of the quality of the output that is not yet ubiquitous serial production and that an in-process QA solution is the tipping point that is required.Now, while I appreciate how technology is evolving and we're talking about Version 6.0, we are pretty good enough if it were true that we provide the solution, so yes we have this huge market opportunity which will go to the billions in terms of a 3D AM business the whole industry. We are the gate - Sigma is the gating factor by all accounts if we believe you.I believe you, but then I ask myself, the market cap of Sigma is $4 million. It is difficult to convince somebody that we are the Holy Grail if our market cap is $4 million, right? I can't, you know maybe it was the financing deal that's driven us down here, but even a $10 million or $20 million of value is way too low for the value for the true value proposition we bring to the table for the 3D AM industry. That is a conundrum I am struggling to deal with and communicate with some fellow investors. Can you comment on that?

[Mark Ruport:]

Yes, hi George. Sure George. When it comes to the stock market and our valuation, that's now within our control. I think that the thing within our control is generating revenue, getting the product to be commercially available as we have done so today, beginning to generate revenue in the first quarter and increasing that revenue quarter-over-quarter and in the end we have to prove our value. And we expect to do that this year. We expect to do it starting this quarter and we expect to see the valuation increase with our ability to deliver.So net-net is results count and this is the year of results for the company and when you combine that with the maturity of the industry and the things that are pushing the industry forward, I think you're going to see valuation increase pretty dramatically over time.

[Unidentified Analyst:]

Okay, I'll jump in the – or I should say in the line depending where everybody is from and I'll come back. I've got several more questions. Maybe I'll give some other people the opportunity to ask. Thank you for taking my questions.

[Mark Ruport:]

You are welcome George.

[Operator:]

Thank you. Our next question is coming from the line of Mark [indiscernible] with private investor. Please proceed with your question.

[Unidentified Analyst:]

Good afternoon, gentlemen. I recall what these calls used to sound like back in the early days of Sigma Labs and things sound considerably better nowadays, so I commend you guys on that. I know everybody is working hard. I just wanted to confirm, is it in fact the case that PrintRite3D is now capable of in-process quality assurance operations on a printer that is running multiple lasers?

[Mark Ruport:]

Yes, we are running on a single or dual and we're working with one OEM on our quad.

[Unidentified Analyst:]

Any indications that that is going to propel the acceptability of PrintRite3D in the industry is that I mean we have except for a few indirect response or indirect indications that that was the case, I've seen nothing that specifically touted that is that that you guys are putting out to everybody and does the metal AM world know that that is the case now?

[Mark Ruport:]

Yes, Mark again, a good question. I put that specifically in my remarks today that we're running on the single, dual and the quad and we're also running on multiple manufacturing printers dual and only one quad, but multiple manufacturing versions of dual and single and we will continue to highlight that. Part of the RTE too is for several companies was to run on different platforms, both single and dual laser, which we have completed. And we will make more hay of that as we go forward.

[Unidentified Analyst:]

Okay back to Materialise and the concept of closed loop, and I may now know from talking to a lot of people that closed loop is a dicey situation, but yes something with very much desired in the industry is Sigma Labs so closed loop efforts going to reside entirely with Materialise or is closed loop being pursued on your own in addition to the work that's being done with Materialise?

[Mark Ruport:]

It will be pursued between ourselves and the hardware manufacturer and the platform control system. So if we work with a hardware OEM and they don't have Materialise's control platform, we will be integrating PrintRite3D with theirs to the objective and the end result of getting closed loop.

[Unidentified Analyst:]

Okay, perfect. That's what I wanted to know. If an end user was not using Materialise platform, are you still going to be able to provide closed-loop abilities to them was a more precise way for me to ask my question and my what you're saying is indeed that is the case right?

[Mark Ruport:]

Yes, we are working with the manufacturer of that printer for the main developer of the control platform, the answer is yes.

[Unidentified Analyst:]

Okay. So once last question and again it is our attempt to get a better feel for how much of the industry is truly leaning toward incorporating Sigma Labs and PrintRite3D, we still only have you know the marquee names of Airbus and Baker Hughes touted out there. I understand NDAs are an issue, but can you tell us are there in fact more and possibly many more large corporations that are in fact looking at PrintRite3D right now or in fact using PrintRite3D right now?

[Mark Ruport:]

There are several more large corporations that have completed RTEs. There are several that we're negotiating with for follow-on contracts both for end-user systems and as OEMs and there are several other newer ones that are just recently come into play where as I mentioned earlier, we switch from doing the RTE to moving towards selling the commercial off-the-shelf software and we have several of those that we have already signed contracts with that are beginning to go through their 90-day evaluation or test days with our solution.

[Operator:]

Thank you. Your next question is coming from the line of [indiscernible]. Please proceed with your question.

[Unidentified Analyst:]

Good afternoon. A couple of questions. One, can you give an estimate of how much of the cost of a product is in the back end of it? It was no testing received the product is working?

[Mark Ruport:]

I'm not sure I understand the question. Could you state one more time?

[Unidentified Analyst:]

Sure, so the way I understand what you will do is that if something is not working you can stop the print and then wind up starting up a new piece. So how much can you save them by doing that?

[Mark Ruport:]

Yes, that's a good question and honestly we don’t have a specific answer to the question, because we don’t have enough data yet. But as users become more comfortable using our product and set tolerances that they are comfortable with for particular defects and particular parts and particular areas of that part they will begin to stop those processes earlier and every time they stop a process as opposed to finishing it and finding out they have a bad result, they save money and time. We don't have a good quantification of what that is yet. That is one of the things that we're working to validate. But what we're seeing is the more they use it, the more comfortable they get. So smaller the tolerance is they get and they are able to stop the build more quickly than ever before.

[Unidentified Analyst:]

Okay, and you spoke a lot about the patents, have you had third-party come in and evaluate the estimate the value of your patents?

[Mark Ruport:]

I am going to ask John that, because he has a better hold on the history than I. John, do you want to answer that question?

[John Rice:]

You bet. No we have not had a third-party evaluation of the patent conducted. Our extent of their strong value was based on two things. One, the firm leads have used this [indiscernible] patent but I think one of the top five patent firms in the world. And two, we are aware that we are protecting technology faster and sooner than our competitors seem to entered our realm. So we are very proud and secure with it.

[Unidentified Analyst:]

Well, have you considered bringing a party in to do it, I mean considering what your market value is now, I am going to assume that your patents are worth more than the market cap of the company now? Would it not be helpful for the world to see?

[John Rice:]

You are absolutely – we share your assumptions. As our point in development where it is understood that the value of the patents to a third-party would be more than the cost value that we report them at and in the event that there was a discussion of acquisition of some of the topic I'm sure that they would pay a third-party. Normally when a company does this for some benefit it is perceived as surfing your own mind. So it has not seemed to us to be a good investment for us to make.

[Unidentified Analyst:]

Okay and one – you are pretty flowing into the quarter, do you have any cover on what the first quarter revenues or second quarter revenues will be?

[Mark Ruport:]

No, as you might be aware, we are limited in our ability to disclose non-public information and provide specific guidance. So we don’t have any comment about the quarter. The only comment that I have made publicly that I repeated today is that you will see revenue generation in the first quarter and it will increase in subsequent quarters because of the pipeline that we're building.Getting back to the patents, I just wanted to add one more thing, because I've have several questions about what the patents mean for the company and what they protect. And the first patent is more broad and generally protects the future path base for advanced metrics design. The second patent is very specific to the way our product works today and that's very important for us in the protection of that product and also our quest to become the de facto standard.

[John Rice:]

Mark, if I may, the Mark just described those two patents that we published has been issued this week. We actually have 11 patents issued and those are two more big breaks in them all.

[Unidentified Analyst:]

Thanks John.

[Mark Ruport:]

Okay [indiscernible].

[Operator:]

Our next question comes from the line of Steven [indiscernible] who is a private investor. Please proceed with your question.

[Unidentified Analyst:]

Hey guys, can you hear me?

[Mark Ruport:]

Hi, yes I can.

[Unidentified Analyst:]

Excellent, thank you for taking my call. So, my question, I kind of want to add on to what George was saying and ask more about the financing and actually the voting, you know why the other vote is recommended and why I should feel good about it?

[Mark Ruport:]

I'm going to ask John to respond to that if you would John?

[John Rice:]

You bet. The board is important to the company because it has two specific needs. Once is two make us able to comply with the – or way domestic 20% growth and the other is to increase the number of shares available for issuance. If we were to lose that vote which at this point does not appear to be the case, but if we were to lose the vote that would in effect cripple the company from being able to forward with the financing that had commenced end of January and force the company to be seeking to create new relationships and new financing in the middle of a historically unpredictable negative marketplace as the coronavirus turns around us. So if you don't feel good about voting, moving ahead [ph] I can assure you, you'd feel pretty terrible if it lost.

[Unidentified Analyst:]

Okay, thank you for that. And then one of my other questions was around financing and other avenues because obviously I think like Aegis, [indiscernible], I don’t know how to describe nicely I guess, but I feel like they openly showed our stock and we are getting dangerously close to this $1.80 mark at this point, which to me as a wide holding shareholder I feel that is catastrophic. Right?So I guess my question is, are we going to have some other financing here in the future to kind of get these off our back and move things forward yet?

[Mark Ruport:]

Go ahead John.

[John Rice:]

I would put it this way. We have evolved into more difficult financing as we were a late-stage start up trying to get to the point where we are today. People were saying, you know we need more tangible results than the company has been delivering over the past three years. Now, because of where we are today, and we have paid to get here, my perception is that our options into the future grow and improve based on the fact that we going forward are based in all of our prospect of success on selling stuff and based in license agreements on deploying our product into the market. And when that is your problem, rather than getting a test going, the results are more visible to the world. So we expect that the company will begin to look more like the complete package that we've been building.We expect that with the prospect of the reality of revenue and the prospect of cash flow that our finance ability improves, that per George's observation, what the hell is the market cap doing down there. We think that all of the things change when as we fulfill our destiny in taking products into the market and proving the customers will buy. And with that come the opportunities for strategic investors who are awarding off ground and so on and so forth. We have to succeed our way from here.

[Unidentified Analyst:]

All right. Do you feel like we have enough cash at this point? Are we looking at further dilution? Are they going to try to exercise all these options to create the cash for us?

[Mark Ruport:]

You know that you can never have too much cash. We therefore never had enough. And I can't go speculating into where it does go with them. I will say that a lot of the agreements made with micro cap companies are structured so that the company really does well is somewhat uncomplicated for the investors to do well. If the company begins to run into difficulties, the investors have defense mechanisms that you referred to and the battles that we have fight to maintain the high visibility of what we think are good prospects to avoid the adjustments.

[Operator:]

Thank you. The next question is from the line of Anthony Charles with Symmetry. Please proceed with your question.

[Unidentified Analyst:]

Hey guys. For those of us who are a bit new to the opportunity, would you speak about PrintRite3D becoming the industry standard? Can you review the path you are taking get there and explain why it's so significant?

[Mark Ruport:]

Sure, so the way we see the market is that there were four segments and as the hardware manufacture we are going to be producing the printers, software manufacturers like Materialise are developers that are developing and manufacturing software, end-users such as Airbus that we've talked about before and research and development in Universities.And underlying those four segments there is a set of standards groups. Our strategy is go after all four of the segments. If we're able to do that, we're able to provide an end user that's using multiple printers from multiple manufacturers. A single view, a single look and evaluation of quality of the parts being developed, that's a very important thing for this serial manufacturer to have on their production floor.We're the only technology that we know of today that is capable of achieving that, that being in process, standards driven and they call it agnostic through the hardware manufacturer and the software manufacturer. Given that we're the only one who is capable of becoming a de facto standard today, if we are successful in going after each one of those markets, we believe that companies will then produce the printers and not look for another solution because none of the manufacturers are going to develop a solution for other manufacturers' printers.None of the software developers are going to develop a solution for the other monitoring software. So we become by definition the best and the only game in town and that's good for the hardware manufacturers because it allows them to certify standard level of quality that is good for the end-users where it simplifies their process of managing quality in their own operations and their cost to supply chain and it's good for the whole industry.

[Unidentified Analyst:]

Interesting. So you are really switched in some respects and you are not going to have any arrangements most likely with any particular OEMs and [indiscernible]?

[Mark Ruport:]

That's a 100% correct and switch only was a good analogy for us, because our goal is to accelerate the adoption of 3D metal printing regardless of manufacturer, regardless of industry, regardless of the software that they are running and to be able to be again the single point of quality assurance across all those variables.

[Unidentified Analyst:]

I understand. So as if in fact this is the case where you do become the industry standard, I mean really at that point negotiating from a position of strength with these licensing agreements I would assume correct?

[Mark Ruport:]

That’s the case. You know the first thing is to, it is a market share ground game and that's why we're attacking all four segments and working if the Standards of Organizations. If we can broaden our footprint and if we can magnify and leverage our footprint through our relationships with companies like Materialise or some of the hardware vendors we are working with, and we get a one for many type of influence into the market. So for one relationship we get hundreds of customers through those early on agreements.

[Unidentified Analyst:]

So I would think to achieve that goal of being the industry standard, you know, your patent portfolio and intellectual property as it stands right now is absolutely significant to your success and I don’t know, to me do you have any kind of subjective valuation if you had to take a stab at what you feel the monetary value of the portfolio would be?

[Mark Ruport:]

We do not. All we know is that we believe it is substantial. As John said that if we get into a situation where it has to be value we will do so and right know were focused on driving results, generating revenue and getting that footprint across all the segments that I mentioned.

[Unidentified Analyst:]

Terrific, I appreciate the question-and-answer. Thank you so much.

[Mark Ruport:]

Thank you.

[Operator:]

Out next question is from the line of Aaron [indiscernible] a private investor. Please proceed with your question.

[Unidentified Analyst:]

Hi good afternoon everybody, John and Mark. It's been a long time [indiscernible] 2013 and I understand [indiscernible] environment lately and I understand that [indiscernible] revenue quarter-over-quarter and I just want to first last year's August letter to the shareholders from John, it was optimistic of a clear line with price to break even operations for early 2020, and given our current environment if there are new plans for [indiscernible] operations in this space?

[Mark Ruport:]

Yes I'll answer that and I am not quite sure about what John said back then because I wasn’t around, but right know I can tell you we'll focus on three things as our goal and our plan. The first I'd mentioned several times increasing revenue every quarter and I believe that we can achieve that. The second is keeping expenses relatively flat for the time being as we introduce a product in the market, so we can minimize our cash burn. And that leads us to our plan where we crossover breakeven somewhere in 2021. So that's our current plan today. It's one that I believe is achievable and I'm not quite sure about the statement that might have been made in the past.

[Unidentified Analyst:]

Thank you.

[Operator:]

Our next question comes from Charles Smith a private investor. Please proceed with your question.

[Unidentified Analyst:]

I have two questions. One, can you share with us the number of RTEs that were entered into and how many of those graduated to Phase 2 and how many expired without any subsequent business?

[Mark Ruport:]

Yes, let me take a stab at that John and if I miss something, please jump in. So Airbus which we talked about is in process and moving towards Phase 2. Baker Hughes which we've talked about is in Phase 2. We have a Japanese hardware manufacturer that we are under NDA with is within Phase 1. We have a contract manufacturer that has completed Phase 1 and Phase 2 that were very successful and we have another hardware OEM that has completed both phases, that is right now in final certification of Phase 2. So those five have all moved forward and been successful. And John, am I missing one that we have mentioned on a call in the past?

[John Rice:]

Actually yes. The very first RTE [indiscernible] and they of course became a big, the relationship we announced couple of weeks ago.

[Mark Ruport:]

Right, so the direct answer to your question is, all of our RTEs have proven favorable. All of them have reinforced our belief in our products and that's why we were transitioning off the RTE to a commercially off the shelf product. And as I mentioned earlier, it is much easier to sell a commercial off the shelf product than it is to convince somebody to do a test and evaluation of software that they can validate through a reference work as documented.

[Unidentified Analyst:]

I understand. One other quick question on the relationship with Materialise, is PrintRite3D is that embedded in all of their software or is that an option?

[Mark Ruport:]

It is not embedded. Yes, I'm sorry, it's not embedded. It is not embedded. Right now we have signed a joint sales agreement where we will work, salesmen that will go into an account together and we will sell the joint solution. So it is not embedded. It is not an option that they offer. It is the joint sales where we go in and sell with them. We hope that the relationship will evolve from there in some shape or form, but right now it is truly a joint sales.

[Unidentified Analyst:]

Okay, thank you very much. I appreciate it, good.

[Operator:]

Our next question comes from George [indiscernible] a private investor. Please proceed with your question, sir.

[Unidentified Analyst:]

Hi, thank you for allowing me to come back in with a couple more questions. It was not that long ago that the company was very excited about an RTE with an international OEM manufacturer. You cited they were testing our product in two different geographies, Asia and America, for two different metal parts from two different metal powders. How is that going? Is there still excitement there? Is that still progressing?

[Mark Ruport:]

Yes, I had mentioned a hardware OEM that's completed the RTE and certifying the second RTE. And it has gone very well and we hope that we are able to put together a relationship with them in the near future, but it has gone well, but it is still under MDA.

[Unidentified Analyst:]

Okay, but it is still progressing very well. Okay, alright. Can I just ask about Siemens? Siemens on our website we made on and off references to Siemens over the years. Are they still and active partner or potential customer of ours?

[Mark Ruport:]

I will again ask John to answer that because it goes back a little bit for my time.

[John Rice:]

Yes Siemens has been sort of two round issues. They were one of our first 2017 technology integration program. So we really did a lot of testing with them on our - what was then more of an R&D tool and it was with their assistance that we helped to define what our product needed to be in the eyes of Siemens and the other big folks we are working with. So in the event, about the same time that we completed the development of TEP which is our ability to detect signatures and products and so forth.The group we were working with Siemens ran out of budget for that program and so we went into a hiatus with them and my hope is that they will come back and work something out to go back in for another test. The problem is we are no longer in testing evaluation mode. We've done enough of that successfully, that folks like Siemens to come back, they would have to enter a more highly priced program. And when you have helped someone develop a product, you are reluctant sometimes to do that. So we will see how that works out.

[Unidentified Analyst:]

Okay very good. Thank you for that. I know there is talk about validating the patents. I know it is very difficult, but suddenly there have been a few sources for the size of the 3D AM industry in the billions, $20 billion is one source, I think I even once saw somewhere $40 billion is a potential market as of 2030 I think. It is certainly huge. Specifically patents are dependent on driving that and we see it to be the critical missing would represent 1% of that as a minimum. So back to you valuation of patents in the hundreds of millions, definitely in the $150 million to $300 million mark, I'm just shocked that Materialise I must say, hey Mark, hey John, thank you very much it is $100 million and I will buy you beer over lunch.So that's one observation, but once specific question about the deal, can [indiscernible] is there a maximum they can own of the company after this deal is happening? For example, can they remove the same?

[Mark Ruport:]

Yes, George, I'm going to let John answer that question and I think we are going to cut it off and I have a couple closing remarks. So, John?

[John Rice:]

5%.

[Unidentified Analyst:]

So that's the maximum we can own.

[Frank Orzechowski:]

It's 4.99%.

[Unidentified Analyst:]

Very good, thank you, Frank.

[Mark Ruport:]

Thank you, John and George and George thanks for the questions. As I have mentioned earlier it is a difficult time to be excited given what's going on, but we are excited as a company to make the transition to take up product into a full sales and marketing initiatives around the world. And we have many dedicated and hard-working people throughout the company that have made that possible and so thanks to them from all of the management. Lastly, if you weren't able to ask a question or if you have a follow-on question, please feel free to contact us or MZ Group we would be happy to answer them. I know there was some confusion in the past on the last call and I want to personally make sure that we answer everyone's questions. So with that, we look forward to speaking with you again on our next conference call and I hope everybody remains safe and I will talk to you in about three months. Thank you very much.

[Operator:]

This concludes today's conference. Thank you for your participation.