Sigma Labs, Inc.
Q1 2016 Earnings Call Transcript

Published: 12 May 2016

[Operator:]

Good day and welcome to the Sigma Labs First Quarter 2016 Conference Call and Webcast. All participants will be in listen-only mode [Operator Instructions] After today's presentation, there will be an opportunity to ask questions [Operator Instructions] I would now like to turn the conference over to Mr. Chris Witty of Investor Relations. Please go ahead.

[Chris Witty:]

Good day ladies and gentlemen and welcome to the Sigma Labs’ first quarter conference call. Following management's prepared remarks, we'll hold a Q&A session. With me today is Mark Cola, the company's President and CEO.s I would now like to provide a brief Safe Harbor statement, which is also shown on Slide 2 of our first quarter presentation, which is being webcast. This conference call may include forward-looking statements that represent the Company's expectations and beliefs concerning future events that involve risks and uncertainties and may cause the Company's actual performance to be materially different from the performance indicated or implied by such statements. All statements other than statements of historical facts included in this conference call are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company's expectations are disclosed in this conference call and in the Company's Annual Report and Form 10-K for the fiscal year ended December 31, 2015. All subsequent written and oral forward-looking statements are attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements. Unless otherwise required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise after the date of this conference call. Please turn to Slide 3 of the presentation. And I would now like to turn the call over to the CEO, Mark Cola. Mark.

[Mark Cola:]

Thank you Chris, and good day ladies and gentlemen. Many thanks to all of you for joining us today, we're very pleased to have you with us. And I’m going to walk you through few slides here that sort of give you recent highlights for the past quarter and sort of outlook recommendations for going forward. And so if you're Slide 3, I would like to just point out a couple of things we're very pleased about this past quarter. And the first quarter was exciting for us in terms of revenue doubled compared to the year before 2015 and we continue to expand our reach out into the market space. And as you see listed there, we've signed two recent agreements with an existing partner of ours Spartacus3D. You will recall that last fall Spartacus3D joined our early adaptor program. Spartacus3D is a service bureau in France with customers in the aero-frame and aero-engine markets principally and they've agreed to be a showcase for us in the Europe arena and that's going well. The Creatz3D is an outfit manufacturer rep in Singapore that reached out to us and as the Singapore government in general is excited about the whole explosion in the 3D printing space, we've reached an agreement with Creatz3D to be a sales rep for us in the Southeast Asian markets. And we have some interesting leads and target opportunities that have been created with them and we're continuing to pursue that. We also maintained a presence in the global technology space for 3D printing, we had tradeshow presence at the Additive Manufacturers Users Group, meeting in St. Louis recently last month and we'll be attending and have a presence at the upcoming Rapid 2016 Tradeshow and conference next week in the Orlando Florida. And so we'll be also be attending future events later in the year, but we're finding these to be quite useful opportunities for us to reach a broad targeted market and market segments and quite a few leads and perspective customer opportunities have come from the evens that we've already participated in. So we're quite please with reception we're receiving at these tradeshows events. The other thing to mention here is that we've completely our reverse stock split on a one for 100 basis and that again is part of our path and one of the stepping stones as we proceed towards a national stock exchange uplift and so that seems to be moving in the direction where we're quite please with. And lastly of course, a week or so back we had our at our Annual Shareholder Meeting which we reached out to all of you and received approval for all of our ballot measures that we’re up for proxy vote. And so we greatly appreciate your support in that arena and look forward to pursuing those opportunities. If you would move on to Slide 4, I would like to talk a little bit more about the business outlook in general and there is three sort of topics that I would like to cover here on this slide. The first being of course our intellectual property and Sigma Labs is very bullish on their IP portfolio. We continue to expand our IP portfolio and such that we ensure our ability to have freedom to operate and also sufficient blocking strategies to keep competition out of our market space. And so competition while being good, nonetheless we want to ensure that we're able to provide our software licenses to our customers in an unencumbered fashion. And so with that, we continue to bring new patent filings to light and make those timely applications. The overall large market opportunity that exists for Sigma continues to expand, as any number of references you might want to reach out to one in particular that's particularly helpful in understanding the market space is the Wohlers Report and the most recent edition is the 2015 edition. And there is some interesting facts and figures there in terms of the size of the market space and the growth of the market space over the past several years. And then their forecast and projections into the future as indicated there, just a metal printing side of it alone is estimated to growth to $4 billion to $6 billion by 2020. So, we believe we continue to be in the right market space that is the 3D metal printing space with our PrintRite3D quality assurance products and our contract AM activities. And so a little bit more perhaps on the PrintRite3D Quality Assurance opportunities. We have had and you have heard in the past our relationships with GE Aviation and Honeywell Aerospace materialize to name of few. We continue to expand those relationships and we've recently added Aeroject Rocketdyne to our customer portfolio and we continue to execute on our federally funded programs as part of team effort with Honeywell Aerospace on our DARPA sponsored programs and GE Aviation with respect to our America Makes program. And so all of those are being executed successfully, they are finding favor with the customers and the sponsors and we're quite pleased with the interactions there. And so we've used those opportunities and to reach out to customers that we wouldn't above the rise been able to make direct connections with and in principal the early adaptor program has quite good favor with perspective customers. And we've added customers not just to our early adaptor program, but our OEM programs, the likes of which are summer listed there of course Spartacus and [indiscernible] additive industries is another one to make mention of. And we continue to move forward with them as they bring their products and services to markets and we remain in lockstep with them. A couple of other things to point out in terms of perspective customers and the market segments we're expanding into you see Michelin tire listed there that's an interesting niche market for us and we're keen to continue to explore that opportunity space as well as with Siemens Power Generation and GE Power and Water that to name a couple in the power generation and energy sections. So we are slowly and cautiously moving out into other market segments away from aerospace and couple of other names that are listed there are of importance and worth noting Woodward and Moog both are Tier-1 suppliers to aerospace and so they have approached us and we are working with them to finalize our contracts with them. The OEM program that I mentioned continues with additive industries as they bring their first products to market and continue to test and evaluate our PrintRite system for embedding in their product offering. So with that I think I would like to ask you to move to Slide 5, and give you a little bit more financial update and outlook. Just to summarize again, we ended the first quarter with approximately $1.1 million in cash in equivalence approximately $2.3 million in stockholder equity and we continue to maintain no debt. Our gross margins remain strong, we are quite pleased with that. A lot of the revenue generated in the first quarter as a result of their Early Adopted our OEM programs we put in place, so all those are associated with PrintRite system licenses and the software licenses. And in general I sort of mentioned on it but it’s worth mentioning again is that we continue to - and as we pointed out in our annual shareholder meeting and that slide deck is available as well. That we have any number of contract in various stages of negotiation with perspective customers and we believe that points to a strong growth path for us in 2016. The existing relationships we have continue to bare fruits not just nationally here in North America, but overseas as well and we expect those new relationships that I mentioned to help accelerate our growth going forward. So we are quite pleased in general with the first quarter and the start to the year and it looks quite exciting for us for the balance of the year. And so I think with that on Slide 6, I just want to say again thank you to all of you shareholders for your support. And at that point, I think I would like to open it up for questions that you might have.

[Operator:]

We will now begin the question-and-answer session [Operator Instructions] at this time we will pause momentarily to assemble our roster. And our first question comes from [Aaron Tilden] (Ph) a private investor. Please go ahead.

[Unidentified Analyst:]

Hey good morning Mark.

[Mark Cola:]

Good Morning Aaron.

[Unidentified Analyst:]

I guess my first question is ultimately to explain where PrintRite3D fits in the market space to some or total investors. And it’s my understanding that it fits where you provide cost savings in mass production of metallic parts which required third-party validation in areas such as aerospace, automotive and medical industries, again guidance and/or standards are issued from standard of bodies such as FAA, FDA, AFGM, and I was wondering if my assumption is correct to earmark?

[Mark Cola:]

So you are correct that the standards bodies are going drive at the end of the day the requirements for adoption of 3D printed articles into mainstream products both in all those market segments you mentioned. Principally led by the aerospace market not too far behind the healthcare, but the energy sectors are coming on very strong as they look to bring new products to market as well repair of existing products. So, no I think you've been right on point.

[Unidentified Analyst:]

Alright thank you. My next question is I know FDA they recently released this draft guidance for technical consideration for additive manufactured devices a couple of days ago. And on one of the pages, I noted and I quote that for validated processes the monitoring and control methods and data must documented and methods for ensuring quality. The consistence of quality should include or could include in process monitoring the parameters. So my question what is this guidance coming out, do you foresee in the business forthcoming with the draft guidance?

[Mark Cola:]

Well it is certainly a great potential on it, it's good to see them finally get behind this. They have been slow and cautious to issue such pronouncements and guidance. They have had considerable activities internally, guidance from their internal bodies, governing bodies. And so no I’m quite pleased with that and I certainly would expect that particularly that language to help and drive more business towards us. I mean because at the end of the day, it's exactly the sort of wording a little bit differently paraphrased that we hear from our customers and prospective customers that they are currently in either a prototyping activity and like to move into serial production mode or are in a serial production mode and would like to have greater insight into their process, such that they can provide that written documentation. And effectively, answer to the question is my process in control and how do I verify that. So that's exactly the toolset if you will and more importantly the methodology that we've assembled with our IP filings. It's not just about the tools, it's about how do you use the tools so that our customers can accept them by product using those tools. And so, no I’m quite please to hear that and see that that's been issued.

[Unidentified Analyst:]

Okay thanks Mark and I want to extent my thanks to you for allowing us investors to have some insight into PrintRIte3D pipeline at the shareholders meeting last months. So also I was just wondering is there any timelines anticipated for those PrintRite3D possible orders?

[Mark Cola:]

Of course, we would all love to have them yesterday and the timeline always seem to take a bit longer than we would like, but we're positive about the leads and the contracts that we're negotiating and so I think you will see some fruit quite soon.

[Unidentified Analyst:]

Okay and along those lines, I’m assuming that to do that uplift to a broader extent, you will be waiting for some of those orders to come through and then will you be able to give us possibly a timeframe for uplift into the broader extent?

[Mark Cola:]

Well again, there is no guarantees with any of this. We continue to make good progress on our strategy and tactical plan to achieve that uplift and we are working diligently to achieve that. And no I’m not sure that I could give a projection as to when that might occur at this point.

[Unidentified Analyst:]

Okay. Thank you very much for your time and Mark I appreciate it.

[Mark Cola:]

Thank you Aaron, we appreciate your support.

[Operator:]

[Operator Instructions] Our next question comes from [Paul Smarkin] (Ph) a private investor. Please go ahead. Mr. Smarkin, your line is un-mute?. And our next question comes from [Patrick Grady] (Ph) a private investor.

[Unidentified Analyst:]

Hey Mark, can you comment on the contract manufacturing with your 3D printer you have there?

[Mark Cola:]

I can. So the contract AM side as you have amply noted is one of our operating divisions we've stood up in the past few months. And with respect to that we broad on sales engineers to begin to actively target and pursue opportunities there and so progress is being made in that space. But I think more importantly what I want to sort of point out is that Sigma is not just trying to be a general purpose sort of service bureau. There is few out there that are and that's a long road a hoe, if you will. So what Sigma's plan is to do since we have the PrintRite3D technology, is to offer a more complete process engineering solution if you will for our customers. So everything that's required from design to process development to quality assurance development using our PrintRite. Ultimately allowing the customer to have a complete package at the end of contract with us, such that they can take that information either bring it back in-house if they have their own captive capabilities and utilize what we've developed for them or subcontract that out to other contract AM or back to us in a contract AM opportunity. So it achieves a couple of goals and objectives for us. One to expand and grow our contract AM opportunities, but it also opens up markets now for our PrintRite technology, because they will now have a complete solution package that includes the PrintRite3D specifications if you will and so that's kind of the approach we are taking right now.

[Unidentified Analyst:]

So has it been effective yet, or is it too early to tell?

[Mark Cola:]

It's bit early on, we have a couple of customers right now in the door that were exercising that approach with and we are finding favor. I think as the year wears on, we are going to continue to see increase favor. I mean at the end of the day, the real trouble spot for people is they are all excited about 3D printing and they want to jump in and they go and they buy a machine and it takes a considerable amount of time. There is a steep learning curve associated with getting up to speed, you just don't turn it on and start printing parts and so that's what we're trying to do is helped them flatten that learning curve. And so we're working with customers that has some experience perhaps limited others that have not experience. And then of course there's the customers that are in serial production, might have a service bureau and their customers are now starting to as Aaron pointed out, pay attention to their requirements and have also begun to reach out to us for PrintRite3D technology solutions.

[Unidentified Analyst:]

Thanks, Mark.

[Mark Cola:]

Sure. Thank you Patrick.

[Operator:]

[Operator Instructions] Our next question comes from [Mark Rupe] (Ph) a private investor. Please go ahead.

[Unidentified Analyst:]

Good morning, Mark. I have three questions. Honeywell has pretty much gathered together a suite of tools for providing support to metal AM printing and PrintRite3D is part of that. There is a number of other corporations that have input on that. Can you comment on what Honeywell is intending to do next? Are they going to claim that this is the solution for control with metal printing and put that out globally? Are they going to incorporate that in-house and apply these techniques to their own printers? I mean, can you give any input at all on what direction Honeywell is going with this?

[Mark Cola:]

Yes, so great question. I of course cannot comment on behalf of Honeywell and would not do so. But what I can tell you is that we continue to work with Honeywell and our systems continue to be tested and evaluated. Honeywell is at a point now where internally they have expanded their 3D printing capacity almost tripled the size of it, and as they are working to bring these new machines online and as they move towards production level activities. So we are encouraged by our continued work and support from Honeywell as they test and evaluate our system and their prototyping activities and we feel confident that we remain in lockstep with their intentions as they move toward production. Let me just add to that. So you asked an interesting question I didn’t want to miss it. The part of it about keeping it in-house or subbing it out. Of course I can't comments what Honeywell might do, because that ends up being a make buy decision for Honeywell at the end of the day. We just remain positioned to capitalize on either approach, because if they keep it in-house or they sub it out and they utilize our PrintRite technology and it finds its way into their specification then of course we will benefit from that, whether it stays in-house or goes outside. And with respect to staying in-house again, Honeywell and they have been very vocal about this, you can follow it on their blogs and everything, but Honeywell is has four locations around the globe. One of course there in Phoenix we we’re at and then Bangalore, India, Bruno, Check Republic and Shanghai, China and all of those have some level of activity in 3D printing. And so we are keen to pay attention to that as they move from their current level of activities to the next stage.

[Unidentified Analyst:]

Thank you. Do you foresee continued revenue growth at Sigma Labs each success quarter that comes now, I mean do you have enough vision that you guys are anticipating that?

[Mark Cola:]

So we certainly have insight to that in our current perspective target, our customer list would indicate that, yes we anticipate continued revenue growth. Some of these programs are slow to start, just because of the nature of the CapEx cycle. We would not always in lockstep with these CapEx budgets and cycles that these companies have our perspective customers, but we are trying to manage that risk as best we can.

[Unidentified Analyst:]

When you come across papers documentation, public documents where people are talking about metal AM manufacturing. They continue to essentially lead off discussions saying that they - one of the primary hurdles for successful AM printing remains the inability to have repeatable performance out of the process and that again process quality inspection is necessary and its all from the point of view that it’s not there yet. Is in fact the sweet of pills that Honeywell has or that you know of exists out there in the field including PrintRite3D. Is that not a solution, I mean when will we stop seeing paper works saying that we need this, well it seems like we have it, do we or do we not have it now?

[Mark Cola:]

So you asked a really insightful question Mark and let me try and offer a response, because I sense a bit of frustration in your question as well. So generally the early adopters like aerospace are very slow to adopt the new technology number one. So they are very cautious to make any changes, because what they don’t want to do is put something out there and end up with the black eye and then of course the technology gets that black eye and gets relegated to the bone yard for quite some time. And so they are slow to make sure that they are doing that. The other reason that its slow to adopt in these industries, traditional industries, because it’s a bit of a parodying shift for traditional manufacturers who are used to making an article or a part in one step and expecting it at another. And that’s what they do and they are comfortable with that, they understand the cost associated with that, they understand the costs associated with that. And so despite the fact that it might be more costly for them, they very belt and braces sort of approach to things. And so they are slow to mature the technology and they are cautious to implement the technology. So, it just takes time and then when you add something like now a paradigm shift where now you say which is what we're basically promoting is that you can use the manufacturing steps and incorporate your inspection into that step if you pay attention to these important variables during your process. And so to add a bit more insight into it, traditional manufacturing when they make it in one step and they inspect it another step, they are inspecting attributes of the parts, so they measure surface roughness and the size of the part dimensions, thing they can physically tough. And our approach is designed to measure attributes of the process which infer the quality of the part. And so now the tool becomes a methodology by which they can use to discriminate it become an arbiter if you will of quality and they can segregate and sort product. I mean at the end of day, the folks that are in the lead in terms of doing any sort of serial production right now. What they want, what they continue to ask us for is I want to know at the end of a build whether what I just did was successful and produced a high integrity quality part or did not. So that they can decide and make a decision on whether they segregate that out and relegate it out to further inspection or rework or scrap or I should send it on down the line and continue to add value to the product in terms of finishing it, whatever that might be. And so our tools are all and all of our IP protection are designed around that methodology. So it just takes a lot longer than you would hope and so with these traditional sort of manufacturers, and as they begin to learn the design freedom that's available with AM and the benefits that can be achieved or realized with incorporating a in-process approach like PrintRite3D. I believe you will see sort of an acceleration and sort of a hockey-stick sort of change in slope if you will to the curve. I hope that helps it, it was a bit longwinded. I sensed some frustration on your part.

[Unidentified Analyst:]

Yes definitely. The last question a little more frivolous. On your website you show a printed part, I'm assuming by your own contract manufacturing group that has what looks like inner and outer bearing with that geared wheels inside the part, movable geared wheels inside the part, are you familiar with one I’m talking about?

[Mark Cola:]

I am, I believe it's on the first slide of the presentation today as well.

[Unidentified Analyst:]

I'm on a mobile phone, I’m looking at that. So my question is, I want one, how do I get one?

[Mark Cola:]

Well, we might just have to figure out how to get you one. Thanks for asking.

[Unidentified Analyst:]

I mean even I have to place an order for it, I would call in and ask for it.

[Mark Cola:]

Okay, alright. Well yes, why don't you give us a ring separately and we will see what we can do for you.

[Unidentified Analyst:]

I'll do that. Thank you. Have a good day.

[Operator:]

[Operator Instructions] And we have a follow-up from [Aaron Tilden] (Ph). Please go ahead.

[Unidentified Analyst:]

Hi Aaron back again Mark.

[Mark Cola:]

Hi Aaron.

[Unidentified Analyst:]

Very quick question, how are things going with partnership with 3DSIM?

[Mark Cola:]

3DSIM, yes, so great question, we've had some initial interaction with 3DSIM. We've got some follow-up activities coming here later in the month. And we're progressing as we would have expected with 3DSIM. The opportunities base for us there, just to put a little clarity on that is to explore the opportunity to couple their technology with our technology. So if you think about it, right, at the end of the day, their approach is about numerical modeling of the process and providing an approach for iteratively evaluating process parameter development, because as new materials or even existing materials and designs come along, their approach is geared towards allowing you to simulate many iterations quickly upfront before actually having to go to machine to try them out. And so it makes sense to couple on numerical modeling solution with an in-process monitoring approach, such as ours, such that you can begin to model the sensor response in the case of our technology, as appose to just modeling the process. And so that might not be entirely clearly, but what I'm trying to articulate is that there is some good opportunity, we are quite excited about the interactions we are having and stay tuned, I think you will see some interesting things come up out.

[Unidentified Analyst:]

Okay, alright. Thanks, Mark. Just one more question, I guess with the recent proposals that were all approved by the shareholders. Are you looking to do anything with those authorized shares, are you looking to expand or do you have any particular plan in your mind that you could reveal for us today?

[Mark Cola:]

Nothing that I could talk in-depth about, we of course have those shares now available to us which we greatly appreciate, and it allows some freedom to explore some opportunities that might not have otherwise been available to us. And as well as just to continue to reward our dedicated employees and consultants for all the hard work they are putting in, they are not here for a paycheck that's not what they are all about and the long hours they are putting in, we greatly appreciate.

[Unidentified Analyst:]

Alright. Thanks a lot Mark and I appreciate all the hard work that you are doing.

[Mark Cola:]

Thank you Aaron. Appreciate your support.

[Unidentified Analyst:]

Thanks.

[Operator:]

And our next question comes from [Mark Louis] (Ph) a private investor. Please go ahead.

[Unidentified Analyst:]

Good morning Mark.

[Mark Cola:]

Good morning Mark.

[Unidentified Analyst:]

First of all, I would like to say, I want one of those planetary gear mechanisms as well. I would be satisfied with a reject, but I want to see the PrintRite3D graph or something indicating that and in fact it was so. I had a couple of questions about the metal fab one that additive industries makes and your inclusion or their inclusion of your software on it, do you know if the PrintRite3D - that's an option right, it's not a requirement on that machine.

[Mark Cola:]

It will be offered as an option. Correct.

[Unidentified Analyst:]

Okay, do you actually know if that option was on machine that went to airbus?

[Mark Cola:]

It was not. That was actually the second machine they built and it was too early to incorporate our technology into that. They are still in test and evaluation of our technology, there are still engineering activity as required in order to incorporate the physical hardware and sensors into their system. And so that's where we are at with them.

[Unidentified Analyst:]

Okay. I had a question about the same company, this is kind of the Intel inside model that’s only been discussed. How is Sigma Labs going to license this, is it going to be per machine, I mean or…

[Mark Cola:]

Yes, so it's a great question. The business model with respect to OEMs is going to be a licensing arrangement where they would license the technology and have a resale agreement with us where they can resell that through their product offering. While not completely flushed out, there would of course be the software fees associated with the upfront software license and then the recurring annual maintenance fees, also would be associated with that at least for the first year. so that would be their initial offering and then Sigma Labs would then have the opportunity to continue that relationship with their customer in terms of the recurring revenue associated with the software annual maintenance agreements and any upgrades that might occur to the software any significant upgrades that would occur would also require additional fees.

[Unidentified Analyst:]

I see. It sounds like a good plan. Thanks a lot. Keep up the good work.

[Mark Cola:]

Thank you Mark. Have a great day. We will see about that planetary gear.

[Unidentified Analyst:]

I appreciate a lot.

[Mark Cola:]

No worries.

[Operator:]

And our next question comes from [Tim House] (ph) from retail, please go ahead.

[Unidentified Analyst:]

Hey Mark, I just had a question on your number five slide about progress underpin path to profitability in 2016. Are you anticipating profitability this year or just your progress towards it or what's the thinking on?

[Mark Cola:]

We have our internal target that we certainly would like to achieve that this year and if we can close on the contracts we currently have in negotiations, we are going to make considerable progress towards that. So again, back to some of these earlier questions that were asked, why does things takes so long they just see takes a long. And we are working hard, we are opening up new fronts all the time trying to manage that risk and we will see how it all settles out.

[Unidentified Analyst:]

Maybe in that vein, the progress, is it impeded by the lack of the industry catching up to you, is that still part of what is going on?

[Mark Cola:]

So that’s a good question Tim. It's kind of along the lines that Mark a couple of questions back asked and why does it take so long. And the honest truth is it’s not just a paradigm shift for them and trying to figure out how to use the tools that are being provided and that’s why a lot of our patent portfolio is around the methodology. But at the end of the day, to be frank and honest with you is that when people jump into these new technologies, they are all excited about building things and making things and quality despite the factors numerous assertions in our face on TV and everything about qualities job one. I mean at the end of the day, that comes later, that’s doesn’t how it’s get built in right up front and it's not new or just the quality aspect, it's in other disciplines as well. You see this where people race to bring a product in market and then they realize oh I have got to build the quality in. And what we are promoting of course with this paradigm shift is as an opportunity to build that quality and right up front and gain that margin if you will instead of taking that loss to leader and building it on the back end. Because I used to be one of those manufacturing engineers on the floor and at the end of the day, they came down to my job and my margin and find a way to lean out the process to the point where they gained back some of that margin. So little bit of insight there that you might not had to think about, but that’s honestly what happens.

[Unidentified Analyst:]

Okay and one more question. Do you have an exchange in mind to up list two?

[Mark Cola:]

Well we are exploring possibilities of NASDAQ and NYSEMKT, but that we are keeping our options open.

[Unidentified Analyst:]

Okay. Is somebody advising you on this, you have folks?

[Mark Cola:]

Yes.

[Unidentified Analyst:]

Okay cool. Alright. Thank you and I appreciate the hard work.

[Mark Cola:]

Thank you Tim. Have a great day.

[Unidentified Analyst:]

You too.

[Operator:]

Our next question comes from [Jack Hirschfeld] (Ph) Please go ahead.

[Unidentified Analyst:]

Hi, good morning Mark. I have a couple of questions. The first question I have is on your in-house contract manufacturing, it appears that service bureaus that want to do contracts out of house are in serious trouble and that it takes so many machines to do a lot of things that they want to do. Are you going to take this approach or are you going to take the approach that I will make a nice prototype for you in a record time, record quality to show you that, it could be done if you use our PrintRite3D system and all our skills. So that is sort of a prototype manufacturing situation. Could you comment on that?

[Mark Cola:]

Yes, great question, Jack and it segways nicely from the question asked earlier and the answer I gave, which is we're not so interested in being just a general purpose contract AM house, where you are chasing one job after the other. But to your point, we are more interested in providing a process engineering services that include the complete engineering package if you will that allow them to move from engineering into manufacturing. And one of the enabling technologies of course, as you pointed out is our PrintRite3D technologies, because if at the end of the day we get approached by a customer right now that are interested in this to basically work with them to design the process for AM. Design the part, design the process and then provide the quality assurance package, which includes our PrintRite3D, ultimately leading towards either a print or a specification the calls out the requirement for PrintRite3D. And so, as I mentioned earlier that then opens up two or three doors for us either PrintRite sales opportunities to them if they are going to keep it captive in-house, or if they are going to sub it off to a service bureau. Well then that provider would have to come to us for PrintRite technology or the work comes back us and we could then do it. But we're not to your point, looking to be just a general purpose contract AM house, we're quite focused on some niche markets in that area.

[Unidentified Analyst:]

Fine I understand, okay that goes along with thoughts. Could you comment on the proposal you have out there with Moog and your affiliation with the navy. I see they won recently contracts for gun system supports, mission-critical actuators for submarines and I also see that you have a proposal like I said out with them, can you comment on that one or any of the proposals you have out?

[Mark Cola:]

So the work that we're proposing to do with Moog was, we were approached by them to team and put together a proposal to the navy to leverage government sponsorship in return for bringing the Moog products to market more quickly using an in-process monitoring approach. And so, what I can comment is that you are accurate that we have put together a proposal with them and as I enlisted as a name team member on their proposal. It's about all I can say with respect to the Moog proposal. It's in other than to say that their proposed approach is in lockstep with trying to bring a new technology like a PrintRite3D in-process monitoring approach into an existing traditional market space where again they are used the manufacturing in one step and inspecting in another. Because at the end of the day, when they all do their FMEA analysis, which is Failure Modes and Effects Analysis. If they have done it right, they are going to learn that there is opportunities to incorporate a PrintRite type technology to ensure that they don't have any under inspection scenarios or in other words escapes or parse that would make it into their final end applications. So now, they have been very sharp and have a keen eye to that. With respect to any other proposals right now, Sigma Labs continues to work with the GE Aviation on our America Makes, which is not a proposal that's an actual active program. And we continue to work on our active program with Honeywell in their DARPA sponsored program. As they finish up their period two activities and look forward to period three and so we remain active in both of those programs.

[Unidentified Analyst:]

Okay good. So it seem to me that with the contact that Moog has with the navy, the navy would need a system on almost every ship to keep their maintenance or critical parts available on board without having to wait a long time. So it seem a natural step and I know they have 3D machine on one of the ships or more, but this would seem like very, very good application and cut down on tremendous amount of time, and I think Moog is the one to do it, but thank you very much for taking the questions.

[Mark Cola:]

Thank you, Jack.

[Operator:]

And our next question from [Oscar Bernett] (Ph). Please go ahead.

[Unidentified Analyst:]

Good morning, Mark. Thank you for taking my call. My question concerns, I haven’t heard anything recently concerning materialize, they seem to be at a fairly high point of conversation a couple of quarters ago. haven’t heard anything about them and I began to do a research and I can't find where materialize even has access to or has PrintRite3D system to evaluate, as to whether it's compatible with what they are offering in the marketplace. Can you address that?

[Mark Cola:]

Sure, so there was and continues to be activity with materialize, the initial development agreement we put in place with them, was designed as all of our TDAs are designed to be project specific and have the modularity so that we can continue to add projects to them. So we've executed and finalized our first project with them to demonstrate the embedability of our software into their stream mix product offering. And now the next step with them will entail activities to for lack of a better term makes it more robust and commercialize it, bring it to market and establish the appropriate sales and marketing activities. And so that's where we are at and where we've been with materialize and where we expect to go.

[Unidentified Analyst:]

Okay, thank you.

[Mark Cola:]

Thank you Oscar.

[Operator:]

And our next question comes from [Robert Green] (Ph). Please go ahead.

[Unidentified Analyst:]

Hi, Mark. Thank you very much for taking my question. I want to switch gears for a moment and ask you this. I'm a automobile entrepreneur and I just started a company that makes wheels or rims for automobiles, it's called Rims World and I'm one of about 20 delivering companies that make rims or wheels for automobiles. This is a $2.9 billion a year business, most wheels are made in China, they are made out of high quality aluminum, they are cast, but the problem in the manufacturing process is that once you have made a mold and faces. When you start crunching these wheels, you start making these wheels, they have to go through a quality inspection and there is a tremendous amount of waste more than 5% to 10% of whatever is coming out of the mould. And so it has to be dumped, scraped, recast the whole thing. If you ever watch J. Leonard's Garage, it’s a TV program, it periodically showcases manufacturers of rims or wheels. So my question is, is this a field this $2.9 billion industry, is this a field perhaps the PrintRite could help us with?

[Mark Cola:]

So, interesting question Robert and thanks for asking and sharing a bit about what you are doing. So I would need to ask some questions of you first, of course there is always potential, but without digging a bit deeper and trying to understand exactly the processes being used and it's hard to completely understand the opportunities space. And so I would encourage you to ring me up separately and we can certainly have a chat about that offline.

[Unidentified Analyst:]

Okay. Thank you very much. It might be a great opportunity for Sigma.

[Mark Cola:]

Well we would certainly like to explore that. Thank you.

[Operator:]

And ladies and gentlemen this concludes our question-and-answer session. I would like to turn the conference back over to Mark Cola for any closing remarks.

[Mark Cola:]

Thank you very much ladies and gentlemen for all of your great questions today and continued support of Sigma Labs. We are very pleased with our progress year-to-date and we look forward to speaking with you at the next earnings call. And wish you all a good day. Thank you.

[Operator:]

And ladies and gentlemen the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.