Sigma Labs, Inc.
Q3 2017 Earnings Call Transcript

Published: 15 Nov 2017

[Operator:]

Good afternoon. And welcome to the Sigma Labs Earnings Conference Call for the Third Quarter ended September 30, 2017. [Operator Instructions] Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. A replay of the call will be available approximately one hour after the end of the call through December 14, 2017. I would now like to turn the conference over to Scott Gordon, President of Core IR the company's Investor Relations Firm. Please go ahead sir.

[Scott Gordon:]

Thank you, Michael and thank you everyone for joining today's conference call to discuss Sigma Labs' corporate developments and financial results for the third quarter ended June 30, 2017. With us today are John Rice, the company's Interim CEO and Nannette Toups, the company's CFO. Mark Cola, the company's President and CTO and Ron Fisher, the company's Vice President of Business Development are unable to participate in today's call because they are representing Sigma Labs at the industrial important Formnext show now taking place in Europe. At 4

[John Rice:]

Thank you. Well, good afternoon and welcome to our shareholders and other participants joining us for today's call. I'm John Rice, the Chairman of your company's Board of Directors and Interim CEO. The purpose of this call is to report on the company's financial results and corporate development for the third quarter in specific and for the first nine months of the year in general. The central theme of this three quarter period is change, change in the market, change in our product, change in our culture, change in our management team and of course change in our operational strategies. So I'm going to walk you through some of these. First, the change in the market's capacity to manufacture Metal AM parts in dedicated production settings are very important in the current year. So although the principal use that it manufacturing metal machines continues to be prototyping and research. We are seen an increasing number of companies in the news that are executing strategies to enable them to enter production. GE in the past year has spent over $1 billion buying Arcam and Concept Laser to enable themselves to have sufficient captive resources that are the manufacturing machines to meet their own forecasts. Meanwhile in Europe, Wohlers has forecasted that AirBus will be purchasing 30 tons of AM Metal parts a month by December 2018. Here in the United States we are seeing service providers such as Linear Moog been acquired by companies wishing to secure production capacity and we're also seeing large independent service bureau such as [indiscernible] adding substantial new capacity to build their own. Now concurrent with these developments in the course of the past year, we are also seeing additive manufacturing equipment manufacturers coming to market with machines that are clearly targeting production rather than prototyping. These are machines with features such as larger manufacturing chambers, multiple lasers, their design that contemplate dedicated production use in integrated banks of machines and machines that are dedicated to single materials. So we don't know when the tipping point into widespread AM manufacturing will occur. But based on what we're seeing this year, these are - these market changes are important and necessary precursors. And it is better that they have happened when you're trying to grow than you're waiting for them. Meanwhile, change in the market and change in the product. In the course of the past ten months, Sigma has announced the release of two PrintRite3D software packages Version 2.0 and this month Version 3.0. The product iterations introduced here include the TED algorithm, they deliver actionable information to operators in a user friendly fashion and they are accessible in the cloud. Version 3.0 is also built to scale with growing volumes of production by being able to oversee multiple machines with a single laser control and modules up to five machines at a time. And there's no known limit on how many modules of five can be combined and managed that way. These product developments are developed and they are introduced in response and in alignment with the new AM equipment offerings that I've just mentioned are coming to market. So Sigma and the manufacturers appear to be aligned. I want to talk about change in our culture. In business, just as in architecture, form follows function. And so Sigma entered 2017 as a research and development company converging with many other companies, R&D technologies into the additive manufacturing metal space. The changes in the market cited above have combined with product maturity that Sigma brought to market in 2017 in a way that means Sigma is compelled to grow past its research and development culture. Sigma is compelled to reconfigure itself into a company with a customer sales and service-based culture not an R&D culture. This means that we are aligning and professionalizing all functions in the company from product development, to sales and marketing, to installation, to customer technical support, to business process, to collecting money, all aligned. I want to talk about change in our management team. The changes in the company culture that I just cited are being implemented primarily by adapting our management structure and our management team members to these new challenges and need. This year we doubled down on our technology when Mark Cola, Co-Founder and the prior CEO moved over to full-time CTO in order to drive the growing depth and the breadth of our products and our intellectual property, Mark in turn brought in a new head of engineering to anchor that part of the team. I came in as our Interim CEO because Mike's deep experiences in operating companies and leading them to rapid change and growth. Nannette Toups joined our company as Chief Financial Officer due to a strong experience as a CPA and Chief Financial Officer, including in recent years in a technology company that grew from start-up through exit merger. And as announced in August, Frank Garofalo, a Director was retained as a dedicated M&A hunter to explore our strategy of broadening our technology revenue and EBITDA base by assembling a digital pathway from design to simulation, to in process quality control, to post process digital inspection. Now of course having this target is no assurance that we will hit it, but that's what we're aiming at. Finally I want to talk about change in our operational strategies. As a result of all of these other alterations and changes in the market and the company that I've just described, we have targeted our internal sales effort going forward on the emerging niche of customers that are already in production of some limited quantities of production parts and going forward with growing with that. We will be limiting our R&D only installations, the companies in which if we pass a specific test and evaluation criteria, those results would be leverageable into additional short-term sales with one of their affiliates or other relationships. So the pivot from single PrintRite3D R&D installations towards higher potential meaning more leverageable sales target is aimed at working into production our use of PrintRite3D with these niche customers and simply selling more units for per customer. The pivot is made possible by the recent growth of significant potential customers into this niche. You don't go fishing where the fish aren't running, and so it's good that folks are appearing in the niche. In the short term, such a pivot somewhat flattens revenues as some efforts are redirected. However, in the midterm we envision it will really start driving higher revenue. So simply put, our changing business culture along with the strategic expansion and specialization of the management team, our adaptations to the many real changes that are taking place in and around us. And it is all for the good as the metal production market matures. So I want to turn now quickly away from internal operations and make some comments on some of the developments during the last quarter that there are strongly on the remarks I've already made. So first, in furtherance of our goal of growing opportunities within active customer installations that are already manufacturing or buying AM products manufactured by others, I'm pleased to remind you of our announcements of delivery of our PrintRite INSPECT 2.0 software to the advanced additive manufacturing facility operated by Siemens Industrial Turbomachinery in Sweden and to Woodward, Inc. and aircraft turbine systems group in the Midwest. And yes, of course, we do anticipate upgrading these sites to 3.0 that we are introducing this month. So in furtherance of our goal of expanding our global reach with key distributor relationships we also entered into an agreement with Digital-CAN in Taiwan. Digital-CAN is at Taiwan's forefront in additive manufacturing. Similarly we have expanded our presence in the Pacific Northwest with executing of an agreement with Jeta Enterprises as a manufacturer's representative there. So my conclusion remark is simply that your board and your management team believe that we have now assembled the right team. We are confident that we truly have the right product. We are confident that we are working with the right strategies to meet the market needs as they have become and as they are now emerging. So right now we are small, but we mean to go big. And with that I will pass the call to Nannette Toups, our CFO who will discuss our financial results for the quarter and nine months and then we will open the call for questions. Nannette?

[Nannette Toups:]

Thank you, John. I'll now discuss the results and operations. During the three and nine months ended September 30, we recognized revenue of $78,046 dollars and $518,802 respectively that compares to $189,952 and $642,230 recognized during the same periods of 2016. The decrease in revenue for both periods was primarily due to reduced programatic cells. The revenues from those was partially replaced by sales associated with our new earlier adopter and original equipment manufacturer programs, but only partially due to the incentivized pricing associated with those two programs. Our general and administrative expenses for the three and nine months ended September 30, were $576,855 and $1,814,843 respectively this compares to $437,870 and $1,314,055 for the same period in 2016. Our G&A expenses principally includes internal operating in sales expenses and outside service fees. The largest component of those outside service fees are the services we incurred in connection with our obligations as an SEC reporting company. For this period, the increase in general and administrative expenses was principally the result of fees related to and as a consequence of our February 2017 public offering. That fee offering that resulted in net proceeds of approximately $5,225,000. We also have incurred fees in connection with investing in strategic partners. We've had an increase in interest and finance costs due to the $1 million note that originated in October of 2016. In addition to the continued development of our IPQA enabled PrintRite3D technologies and our latest efforts to expand our services. On the payroll front for the three and nine months ended September 30, our expenses were $298,890 and $973,172 respectively as compared to $259,011 and $727,494 for the same period in 2016. These increases in payroll expenses are principally the result of hiring additional software development staff to assist in acceleration of that IPQA enabled PrintRite3D technology and 2017 increases in administrative salaries. Next, we'll move to the stock-based compensation. For the three and nine months ended September 30, 2017, fees were $199,225 and $505,630 respectively. These compare to $105,641 and $236,554 respectively for the same period in 2016. These increases in stock-based compensation cost are due to the fact that the majority of stock options were granted after September 30, 2016. Thus more stock option vesting occurred in each quarter of 2017 than in the same periods of 2016. We want to know that utilizing stock and stock options to pay for services is one of the mechanisms Sigma has put into place to preserve cash. Our research and development expenses for the three and nine months ended September 30, 2017 were $57,947 and $225,562. These compare to $37,526 and $88,504 for the same periods in 2016. The increases are principally attributable to increased contract consulting combined with software and hardware upgrades required for the continued improvement and development of our software and technology. We expect our general and administrative expenses to continue to increase as we seek further commercialization of our IPQA enabled PrintRite3D technologies through increased marketing and sales efforts. Similarly, we anticipate that our payroll and non-cash compensation expenses will continue to increase as we engage more employees and other service providers to support our efforts to grow the business. Our net loss of the three and nine months ended September 30, 2017 increased over each of the prior year comparative periods and totaled $1,116,910 for the third quarter and $3,049,616 for the nine months. This compares to a loss of $719,320 and $1,931,833 for the same periods in 2016. This increase in net loss was attributable to the decreases in revenue and increases in operating expenses we just went over. In addition, Sigma's participation in two New Mexico employment incentive programs contributed a positive $154,568 to the bottom line in our first nine months of this year. As to cash position, as of September 30, 2017 we had $2,691,487 in cash and had a working capital surplus of $2,482,056 as compared to $398,391 in cash and a working capital surplus of $110,799 as of December 31, 2016. This improved working capital position of course results primarily from the February 2017 raise of capital. That raise continues to give us the financial security and ability to execute our business plan and it has given us a good strong balance sheet with approximately 4.6 million in assets and 1.3 million in liabilities. This puts on a solid path forward. With that return I'll turn the call back to John.

[John Rice:]

We're going to go to questions very shortly. I just want to wrap up from the management standpoint. We continue to be very confident of the outlook for Sigma. We are very confident of the capability and the dedication and the intensity of the management team that we have assembled. We believe that we continue to lead the market with our technology and our response to thinking that was to increase our commitment and speed of development to try to ensure that. So we are working into a market that is yet to reach its major tipping point. That is considered by many, many people to have enormous future potential and the question that they ask and the question that we ask is when does it take off? That said I'll take questions.

[Operator:]

[Operator Instructions] Your first question comes from Aaron Tyron [ph], a private investor.

[Unidentified Analyst:]

Just curious what other technology agreements that you have that are still ongoing. I know you have one which materialized but still in effect?

[John Rice:]

Yes it is.

[Unidentified Analyst:]

Also I have a question about the Honeywell DARPA Phase III which is anticipated to end in mid-2018, is it still anticipated to end around that time?

[John Rice:]

The government contract is expected by all parties to end at that time except that all of us will believe it when we see it.

[Unidentified Analyst:]

What are you trying to get out of that, what's going to be the benefit for Sigma Labs at the conclusion of that program? What do you see with that?

[John Rice:]

That actually is turning out to be very helpful. They have capabilities to look at many of the questions we're looking at internally. So we are able to use that as a test and confirmation facility for our own purposes even as we work with - to DARPA's needs too. It's been very helpful and the people in the program have really delighted us, they're darn good.

[Unidentified Analyst:]

Are you anticipating increase of sales to coincide at the end of that program?

[John Rice:]

You had a little break up there; I think you asked, are we expecting an increase in sales as a result of that program?

[Unidentified Analyst:]

Yes, sir.

[John Rice:]

I would say not directly, we don't know how to equate that program into a specific outcome. But it's one of so many things that we're working on that build market knowledge of our products with other companies, whether it's Honeywell or other high tech groups. So anytime we work a program like that the technology networking probably leads to significant sales opportunities, but I have no idea how to quantify that.

[Unidentified Analyst:]

Just one last question, earlier in the year, [indiscernible] could you clarify what they meant by that statement.

[John Rice:]

I will look into what I can say and I can't say. We have been working with EOS - with and on EOS for some years to try to develop appropriate teaming techniques and so on and so forth. And that cooperation has continued to grow and improve to this day. I am pleased with our relationship with them and it has promise.

[Operator:]

Your next question comes from David Robertson, a private investor.

[Unidentified Analyst:]

So, you talked quite a bit about in your introduction about movement and change in the market, and changes relative to Sigma's technology. The thing that's a little hard to get hands around and maybe you could provide a little better color. And I'm not asking for any specifics that we would understand you're not able to provide. The question is a general question. I think all of us saw in business node that there are communications that we have with our customers that we lead to not a guaranteed senses anything in terms of sales. And again I'm not asking, can you share specifics or give us even a broad sort of guarantee. But folks have enough involvement with a variety of partners; a lot of other companies that you're working with, you ought to have a sense in fairness. I think it's only fair to say that you ought to have a pretty good sense already. If real progress is being made, meaning, are you hearing from these folks, your potential customers that you truly are close and that you truly are gaining traction and can you say - can you tell us in fairness not promise us, but tell us that you believe that with this variety of different companies that Sigma is now closely associated with, many of which there have been a long standing associations with that you believe things are closer to coming to real revenue fruition and that is something that you're hearing from these other folks.

[John Rice:]

A perceptive approach of the question and I did not put you up to the question. Thank you. So a way to look at this question for Sigma is to look into the types of customers and the individual customers with whom we have been working over the past three or four years and what you see that segues into today's conference call is you see that we really began in the marketplace as a company, 16 other companies to do research in anticipation of the day that they would manufacture stuff with additive manufacturing. Some of them like GE were absolutely targeted on a specific part already. Many others were simply examining the space. Those relationships are important in terms of the notion that we may very well be able to reel in most of those companies over time don't know. What has changed in the past 12 to 15 months is the fact that there are major companies who are already making some parts with additive manufacturing and are discovering that they have a quality yield and cost problem. The good news is that they are manufacturing many good parts, but the bad news is they're not enough and it's not predictable. And we are working increasingly with companies like that and we have changed the way we do business to support companies like that. And what that means is when we contract now with a company to put PrintRite 3D in and they are already making metal parts on additive machines in their operation, we contract to a specific protocol and program that identifies a process by which we will assess their parts and they will assess our software and it begins with a process where we lay out, on a calendar, everything we're going to do in this test and it's a 35 to 40 day period, which is far faster than they want to go sometimes. But what it does is it allows them to, for the first time actually, to calibrate their own equipment. And then it allows them to see how our equipment works and assures the quality of their parts and those tests in my opinion are great for the customer and great for Sigma. And that process addresses the heart of your question. The relationship between Sigma and a company in that setting is very close. That's a co-operative development.

[Unidentified Analyst:]

And so what sort of feedback within that context from those various companies that you're referencing, what sort of specific feedback are you receiving.

[John Rice:]

We're really pleased. We are not discouraged by any of those relationships. It's exciting to them and to us to see what this enables them to do. Our product, remember, it's a new paradigm. So the normal beginning of this relationship is, you've got an engineer that's really excited about it and you've got a quality guy who doesn't want you messing with his system. But when a quality person sees Sigma finding a problem that they have no means to see, even if they have a CAT scan, suddenly, the game begins to change. So being able to apply our product to specific products to be made by these companies is a very, very different transaction from what we were doing a year ago at this time.

[Unidentified Analyst:]

So without any, let me we acknowledge yet again, without any, could you on the spot and asking you for an answer that as we know you cannot give, is it fully your expectation that some of these relationships will materialize.

[John Rice:]

Right. I would be amazed if we were not to succeed at this.

[Unidentified Analyst:]

That's a reassuring answer.

[John Rice:]

It's a pretty clear answer.

[Unidentified Analyst:]

Can I ask one more? Okay. So there is a lot of talk amongst investors that it has been certainly for a long time, but amongst Sigma investors that there's kind of a new wave of discussion about and concern about much of the GE's publicity of its GE's development. Let me call it, just generically speaking, quality assurance software and development programs. There's a lot of concern of course that that relates to Sigma's earlier relationship with GE. And I'm not asking for any sort of status question about what if anything exists in the way of relationship between the companies now, but the concern is that GE had a look see at, what it is that, it's Sigma's technology in a very intimate context and way and for very long time and that whatever they would have considered to be of value, they are busy building upon and working to better. We all know of course that GE's development pocket and budgets and staff is enormously much greater than ours, than Sigma's. Can you speak to that concern from an IP protection standpoint or in any context?

[John Rice:]

Sure. So first, let's go into the background. One of the things that's fascinating to me about this space is that so much has changed fast and in the case of the Sigma GE relationship was really kind of Sigma's first adventure into the marketplace with a major company. And the product at Sigma fielded to do that is - was the absolute beginning of what we have now developed into several more iterations. But it was an alpha product in the sense that was in lab view as an architecture and so on and so forth. And Sigma and GE did none of the things together that I described to you, we now do what the customer when we install. Sigma had about three people at the time they did the deal and so both Sigma and GE were somewhat loose in how they defined what they were going to do and how they were going to do it. And as best we can tell that resulted in a program in which GE felt rewarded by the fact that they did get into the thinking of how we look at stuff as well as other companies and that sent them on a path of their own development. The program that we were in with GE in effect ran its course. The report that they wrote was from our point of view left stuff out and was probably unintentionally loose and not - and therefore not entirely, not accurate as it should have been and Mark Cola has had discussions with them about whether or not to amend it or whether to just keep moving.

[Unidentified Analyst:]

So John, you all are of the thinking that even at this stage of Sigma's technology at the time, which we understand was to some extent at least behind the stage as we stand here today of the technology, you feel that GE's report was under appreciative of the technology, even if it stood at that and without suggesting that it was anything other than, whatever they reported what they reported, do you feel that they didn't give full credit to the technology as it existed on.

[John Rice:]

Yes. Our interpretation of the data that was gathered and what it meant was a stronger outcome than they chose to show. Then, so let's go - so where are we going with this is a major question from my point of view. That program ended and that team, now within the GE construct of additive manufacturing research and additive manufacturing production, is quite fragmented. And one of my goals as CEO is, we need to get back together with these folks and move forward on some other projects and that is the instruction that has gone to sales. So when the program that we were working on with them ended, the companies did not have - had failed to develop on both sides. The kind of interactive confidence that your first question probed for, have you developed relationships that lead to cooperations and lead to sales and because you know each other well and you've collaborated on the stuff and in our first effort, looking back, we didn't get that right and neither did they. And yet, they continued. We have friends in the company in a business sense and we will be driving to do more stuff with them and I'm confident that we will end up doing that. What we have is what they need.

[Operator:]

[Operator Instructions] Your next question comes from Kevin May [ph] from Sigma Labs.

[Unidentified Analyst:]

Well, I'm not from Sigma Labs. I'm an investor, but hi, John.

[John Rice:]

Kevin, we were searching our payroll records when I saw your name.

[Unidentified Analyst:]

If you want to throw me on there, go right ahead. But my question is to the distribution deals. We have had many that have been for about a year, maybe longer now and some that just have been this previous quarter. Can you give any color on to when we might beat revenue or where those are at each individually, including the OE and distribution?

[John Rice:]

I'm processing on how to do that. I can't give you what you want, but I'll give you what I can. There are two types of deals you're identifying. One is essentially sales agreements, particularly what we've done in the Orient and setting up those structures and the other are OEM agreements. The issue with the OEM companies is one of time and movement. What they tend to want to do is to establish, okay, what are our rights and what have you got. And then the problem that we have and that they have is, is this going to be an exercise in push or pull marketing. So we are talking for example with one very large customer who was interested in what would happen if I had a lot of Sigma equipment and if we were buying a lot of new equipment, can we order it with your stuff in it. And if a company like that goes the full nine yards and places a large order for equipment with our stuff, particularly with folks with whom we are having OEMs discussions, that would be the kind of tipping point that's decisive there. What the OEM companies are not yet interested in doing is putting it in as an option without it having been requested. And the OEM companies, as I mentioned in my opening remarks, are sort of divided between two markets, almost all of the equipment that they have in the marketplace today is used for prototypes. And I will venture to say that they wish that almost all of the equipment that they're going to sell over the next coming years is going to be in production because that hugely changes their industry. And so in the same way that we think the product is essential to enable people to go into production, so the OEM people are hedging their best by saying, we want to have the right person in there, kind of wait until someone asks us for it.

[Unidentified Analyst:]

Okay. With the latest 3DSIMS mentioning Flex and Sigma Labs technology directly correlating with their findings, from their software, how is that relationship going forward from a marketing standpoint with them, will they be offering our software with theirs or vice versa or how does that relationship play out.

[John Rice:]

Well, it's interesting, that's - the relationship isn't new, but the product is new, like this week. So the way that works is, this enables a user of 3DSIM to use data that we collect or can collect to model product and then it enables the customer to use PrintRite 3D to confirm it or to prove it out, which means that 3DSIM can sell their product with this module in it and that would not be a sale of PrintRite 3D Software, but if they wish to use the module, they couldn't confirm the results unless they had access to a service bureau or us or their own version of PrintRite 3D. So it's - I think it's an important development going forward, we're really happy about it.

[Unidentified Analyst:]

And one of the recent PRs regarding version 3.0, I mentioned right now capable of single laser and they were working on both the laser technology, is there any timeframe on when that might be achieved?

[John Rice:]

I'm sorry. I didn't put that question together properly. Ask it again please.

[Unidentified Analyst:]

In the latest PR regarding version 3.0, you said it was capable of single laser machine of measuring the quality of single laser machine, is there any timeframe would be available to multiple laser machine?

[John Rice:]

Oh, on multiples. There is no time frame that I can share with you, but obviously with the markets going and that's where we're going with.

[Operator:]

Your next question comes from Paul Parkin [ph], a private investor.

[Unidentified Analyst:]

Good afternoon. I'm most curious with the release of PrintRite 3L, have you already contacted GE about them getting the updated version, because there was quite a bit of focus with the America Makes reports how they were using an outdated version of PrintRite and I was just wondering if they were going to be getting the newest version despite the America Makes report.

[John Rice:]

Right. The America Makes report was the end of the program and so they do not have our original alpha/ beta version, doing anything and we won't be upgrading that until and unless we'd accomplish what I would love to accomplish, which is to re-partner with them on new goals going forward. But there's no existing relationship in which we would automatically upgrade.

[Unidentified Analyst:]

And you've talked about these relationships with companies evaluating PrintRite 3D. In the feedback you get from them, is there any consistent pattern as to why it is they are not purchasing more copies of PrintRite 3D at this point in time, because obviously manufacturer is going on and they need a way of quality assuring those parts. So I'm wondering if the people who have acquired PrintRite 3D have given you feedback about why they're hesitant to buy these multiple units and if so, is there some sort of commonality that these different users are touching on.

[John Rice:]

There is absolute consistency in this group in terms of their outlook and behaviors. And the good news is that it's not adverse to Sigma. The bad news is that their idea of time and process is far more elongated than what we really think they need and so the bottom line is nobody in this recent targeted group of folks who are manufacturing things has decided not to buy Sigma based on tests. The work we are doing with them proceeds from our point of view with good cooperation, good results and surprises like what you want to give a customer. Wow, I don't know how else I would know about that flaw. Gee, you can see much more than we can using these alternative means and so what the feedback we're getting at this early stage is there's no negativity to it per se. It's - our issue is guys, how many tests you really want to run and that kind of thing.

[Unidentified Analyst:]

With that in mind, are you looking to the future to play some sort of limitation on the test before they make a purchase kind of decision or are these EAP agreements kind of ongoing and open ended.

[John Rice:]

Heck yeah is the answer. In the past 60 days, we have changed how we do stuff on this question. And now it is very explicit and we're not imposing anything on the customer. What we're actually doing is selling and educating properly for a process that will work for them up front and when you do that, the resistance is dealt with upfront. So we don't - I don't expect going forward to have the six months programs that folks kind of want to have because if that's what they want, we really need to work with folks who have a greater appetite to get stuff done.

[Unidentified Analyst:]

Given the current losses that Sigma has been sustaining on a regular basis, and this maybe for the CFO, unless companies start to buy PrintRite in some near term, how long do you anticipate it's going to be before Sigma Labs has to have some other fund raising maneuver, given the trend that we have seen in terms of income versus expenses over the past couple of years?

[Nannette Toups:]

It's certainly the right question for an early stage company like that. You understand that there are limits on how optimistically I can answer that, but I'll do my best. Our current cash balances would carry the company up to - close up to next summer if we had no sales. And so the question is how much does your runway increase and the answer is with each dollar of sales. So things that we hope will happen could extend that runway indefinitely. That's answer with - that is the operational answer to your question. We are not discouraged on that front. Second, as you know, we haven't announced an active strategy to try to grow the breadth of our intellectual and operating assets, so because we really believe that we should be able to offer the market the full digital pathway from design through simulation through quality assurance to final post process digital design. In the event that we were to reel in companies like that, then of course we would have to go back to the market, both to acquire additional shares and additional capital to fuel them. So the two things that would cause us to be doing raising more funds would be either deals or a rapid ramp up due to a great customer success or failure to achieve enough orders fast enough to sustain ourselves indefinitely with cash. So those are the three variables that we're managing on.

[Unidentified Analyst:]

In the annual meeting held a couple of - six weeks ago whatever that was, it was indicated that there was no longer a focus on contract printing and I do not have the financial results in front of me on a computer right now, but as I read them about an hour ago, it seemed to me there was a statement in there to the effect of contract printing. So I'm confused, is Sigma still going to be involved in contract printing or is there machine going to be used strictly for R&D at this point.

[John Rice:]

I apologize for the confusion because I'm sure I'm the person who created that. Contract manufacturing is no longer to be deemed a major initiative of Sigma. That said, our intent for that equipment are the following things. First of all, to continue to do contract manufacturing, so that we are current with the marketplace. We have a couple of national laboratories in our neighborhood virtually. And doing projects for them is really useful because it causes us to look at different questions of materials and design and to stay engaged in the marketplace in that way. So that's an important, it's a profit making laboratory activity, one. Two, one of the things that we need to change and are changing as we go away from being an R&D company and become an operating company is we have actually not provided our salespeople with tools that we could have given them based on stuff that we can prove down the hall. And so we are going to be using our machine to do more demonstrations which will allow us to qualify materials, which allow us to give example proofs of how our software detects flaws and show them and so on and so forth. So we will be using that machine to benefit our own research effort. Those efforts can take place while we are making other people's parts also. So we don't have to reject revenue in favor of research. They can go forward concurrently and that's the plan.

[Operator:]

Thank you. We have reached our allotted time for questions. This concludes our question-and-answer session. I would now like to turn the conference back over to John Rice for closing remarks.

[John Rice:]

Well, I want to thank all of you for taking the time to join us, to listen in. I appreciate the interest you all have in Sigma. Sometimes, I hear frustration from our shareholders because they really want this company to be growing faster than its market will permit at the moment and I hear others saying, just hang in there because when this takes off, you'll be going with it. And so I hope you'll be patient. The team that we have in place is dedicated to the technology and dedicated to making this successful. So thank you and good night.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.