Good afternoon. And welcome to the Sigma Labs Earnings Conference Call for the Year Ended December 31, 2017. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [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 for this call will be available approximately one hour after the end of the call through May 6, 2018. I would now like to turn the conference over to Scott Gordon, President of Core IR and the Company's Investor Relations Firm. Please go ahead sir.

Thank you, Brian, and thank you all for joining today's conference call to discuss Sigma Labs' corporate developments and financial results for the year ended December 31, 2017. With us today are John Rice, the Company's Interim CEO and Nannette Toups, the Company's CFO. At 9 AM Eastern Time today, Sigma Labs released financial results for quarter and year ended December 31, 2017. If you have not received Sigma Labs' earnings release, please visit the Investor's page at www.sigmalabsinc.com. During the course of this conference call, the Company will be making forward-looking statements. The Company cautions you that any statement that is not a statement of historical fact is a forward-looking statement. This includes any projections of earnings, revenues, cash or other statements relating to the Company's future financial results, any statements about plans, strategies or objectives of management for future operations, any statements concerning proposed new products, any statements regarding anticipated new relationships or agreements, any statements regarding expectations for the success of the Company's products in the U.S. and international markets, any statements regarding future economic conditions or performance, statements of belief and any statements of assumptions underlying any of the forgoing. These statements are based on expectations and assumptions as of the date of this conference call and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Some of these risks are described in the section of today's press release titled cautionary note on forward-looking statements and in the public periodic reports the Company files with the Securities and Exchange Commission. Investors or potential investors should read these risks. Sigma Labs assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. It is now my pleasure to turn the call over to John Rice, Interim CEO. John?

Good morning and welcome to our shareholders, and welcome to participants joining us for today's call. I'm the chairman of your company's Board of Directors and the Interim CEO, and the purpose of this call is to report to you on the Company's financial results and corporate developments for the 12 months ended December 31st. Today being April 6th, in Santa Fe, there is a lot of pollen in the air. So if you hear me or Nannette cough in or clearing our throats, forgive us please, its allergy season in the Mexico. So, as I have communicated to the shareholders in the past several months, the central theme of 2017 has been changed. We’ve had change in the market, change in our product, change in our culture -- our corporate culture, change in our management team and change in our operational strategies. During the fiscal year ended December 31, 2017, we generated an aggregate of 641,000 in revenues as compared to 966,000 in revenues for the prior fiscal year. This decrease in revenues was primarily due to the strategic reorganization of the Company's priorities and personnel over the second six months of 2017. Within four months of the successful public offering of February 2017, the Company's new Board of Directors determined that it was essential to transform Sigma from being an R&D company with an R&D culture into been a technology development and commercialization company with an aggressive marketing and sales culture. This imperative and the many changes that were required to implement it, derived from our analysis that the R&D culture could not meet, that demonstrated rapidly emerging business requirements of new and prospective customers for practical solutions to problems that they have now. More and more customers were not interested in 3D. In R&D, they were interested…

Thank you, John. I will now discuss our financial results for full year 2017. During the fiscal year ended December 31, 2017, we recognized revenue of $641,000 as compared to $942,000 in 2016. That is a $301,000 or 32% reduction. The reduction in revenue was primarily due to a shift in customer base in keeping with the Company’s strategic shift in priorities that John spoke about just now. As we move from an R&D to a commercialization focus, the primarily programmatic sales of 2016 were replaced by early adopter program and original equipment manufacturers sales. These have correspondent incentivized pricing, which reduced our revenues. Cost of sales related to those for 2017 were 272,000 as compared to 229,000 in 2016. That is an increase of $43,000 or 19%. The increase is associated with the equipment cost of those initial EAP and OEM installations that we made in the second half of the year. Sigma’s overall operating expenses for the 12 month, December 31, 2017 were 4,421,000 as compared to 3,211,000 for the 12 months of fiscal 2016, a 1,209,000 or 38% increase. Sigma’s operating expenses are principally made up of internal operating and sales expenses outside service fees, and research and development costs. These three categories of operating expenses are responsible for 1,133,000 of our total $1,209,000 increase that is a 94% increase. So, those are the three areas that we will address next. The big contributor to our internal operating expenses was personnel costs. Our payroll expenses for the 12 months ended December, 31, 2017 were 1,269,000 as compared to 1,027,000 for the same period in 2016, that’s a 24% increase. The increase was primarily due to the increased salaries associated with the strategic new hires and the reorganization of the management team made to achieve the goal of…

Thank you, Nannette, and well done. So, in conclusion there is a lot going on in Sigma, most of it good and all of the determined and focused. So, thank you for your attention and support of Sigma Labs, and operator, lets open the call for questions.

[Operator Instructions] And ladies and gentlemen our first question today comes from Kevin May. Please go ahead with your question.

Well, my first one is about our relationship with Morf3D. Their payment was due the 500,000 that we loaned to them or 10% of their company. What is our relationship like with them? And where is that -- where is that going exactly? Do you see them going to pay the cash? Or is it possible that they’d be willing to give us the 10%?

They were willing to give us the 10%, but they were more anxious to hold onto it themselves. So, Morf paid off the 500,000 would interest on March 28th. We continue to be close to Morf. Ivan Madera has become a good friend and I think that we will -- that our futures are probably going to be bound together. They’re doing an innovation center that’s of real interest to us going forward. So I hope that the Morf story continues to Morf and do wonderful things.

And during the last Investor Conference, you did, I believe it was in January. It was stated that there was some internal disagreement with the payment structure of our software. Has this been solved? And what does that structure look like now?

I'm not quite sure what you're referring to but I’ll speak to the issue. The current pricing of our software is called early adopter pricing and obviously it is crafted to try to get folks to commit early, and therefore not price the same, it’s based on what is the value of a research project that could cause us to buy somebody's products. And it’s not value pricing based on what is the -- what is the contribution of this product to an operating company that’s saving lots of money. So our pricing today is not what it will be tomorrow, is the simple answer. But there’s not a dispute about that. That’s an evolution that emerging technologies all have to go through.

And during this call, you explained how you set forth the transition from R&D into production companies admittedly even said that it caused a decrease in revenues the past two quarters. Where do you see this turning around in terms of a timeline and when does production structure begins to correlate into revenues?

So, you’ve just invited me to make forward-looking statements and you’re -- it’s fair game to do so. Essentially, the meaning of what we did last year was to reposition the Company, so that the customers in whom it is investing, almost all of its service and customer support are people who -- if these tests go, we'll have a substantial incentive in our opinion to buy our product. A year ago we were engaged with a bunch of terrific companies doing research, but not doing production. So, the success with them was we will call you, when we start making so. So the turning point for us is no guarantee that the terms but the turning point for us is the people working with now has the ability to push our sales by buying more.

In terms of our recent collaboration signed. Can you speak on anything with the NIST collaboration as well as the LVN and our -- some of our older collaborations with Materialise and 3DSim now Ansys.

Sure, Kevin, and to limit you that cuff you off at this questions, so other people can weigh in. But you've asked good question so thank you. First, the NIST opportunity is exciting into us because the whole industry is trying to move forward at the same time into a quality production setting and one of the major components of that is the materials. How do you characterize materials and how do you come up with uniform standards? Who can measure it and who can give you the information on this how they behave and so on and so forth? So our software, not sort of, is a unique tool for enabling that characterization, and NIST is a great honest broker through whom to be doing it. So that’s exciting. LVN is important to us because they have a foothold -- because they are based in Europe, and as one of the shareholders pointed out to me, their contractors to Airbus and the significance of Airbus in the market these days is that they have announced that they expect to be taking delivery. In this case from themselves of 30 tons of additive metal parts a month by December of this year. So, we're hopeful that LVN is the channel, which that ship with our shareholders suggested it might be. I cannot comment at this point on Materialise except to observe. They're really good company and we're really interested in them. Next question?

Our next question comes from Paul Tumarkin [ph]. Please go ahead with your question.

Good morning, John. My question goes to the shift from people with prototype who do research to people who looking at production. I'm wondering what kind of feedback they are getting with your increased contact with these companies where you're demonstrating PrintRite to them? What kind of feedback are you getting from them?

Paul, I did not coach you to ask that question, but thank you for asking that. There has just been really important to us. The part of our internal reshuffle has been to first for the Company, it's a small company. We got 13 people in it to work essentially as an integrated team with the customer. So the customer feedback we've been really pleased with and we have also -- it's been an important reciprocal mutual experience. The customers have asked us and Mark has created actually an education program for them. It's a two-day seminar that we are beginning to roll out because companies that we need -- you need to school us up. So we know what we're doing with you. That is terrific and that occurred because the customer asked for it. And the customer asked for it because they are fascinated by what they are seeing and have found a need to better understand what they are seeing. We have found that there are a number of companies in our space and particularly the OEM companies who have probes and machines and gathering data, and the production oriented people who want to know what the data means. And to the best of our knowledge, Sigma is the Company that is able to do that with them. So, we are getting very good feedback and we are gratified by that. And I have to tell you that our customers are making us a better company because of this cooperation.

[Indiscernible] within the feedback, is there any information that they're giving you as to why they're not going ahead, pulling the trigger and ordering more currently units? And what are they're waiting for?

As you are familiar I think the quality culture in America is a very powerful change of verse culture. In the case of 3D printing metal parts, it's a very complex culture because those who have done the most work in it are doing and awful lot of a very expensive post process inspection, which they backfill with very slowly overtime to slowly improve their quality. But as best we can tell, a good quality result yield in this domain for people who have high-technology parts looks to be in the 60s. So, we are dealing with people who have struggled to get to an unsatisfactory point. So, they are very interested in finding tools like ours that will help them do better than that. And they are also very resistant to rapid change because they don't want to screw up what they have worked so hard to get. So, our solution to that all has been to define with each one of these companies a path forward. What do you need to know in order for you to think you need our product? And what is the process we are going to do together to implement that? And so, that’s what we have done and it is typical of those companies to come back and say, this looks like a six months deal to us and it's typical of us to say let’s do that faster. And that is a bit of an arm wrestle. One of the problems that these companies have had is implementing the decision to start it. They -- at the buying level the folks who introduced us into the production setting are anxious to get going, and the production and research folks were doing other things and have other obligations. And so, we have found getting the initial start is not as fast as we would like, even as also, the amount of time we think it should take for them to learn is less than they think it will take. And so -- and so we go, but I think that 2018 is likely to shed an awful lot of light and to help us truncate this process, more than we were able to the earliest adherence.

In light of the stocks were versioned to PrintRite have been issued. How many of the installations they are out have taken advantage of these updates and [indiscernible]? How many have software that not them of current?

The connection is so bad. Did you understand what he said?

Not quite except I think, you are asking how many of the installations out there have are most current versions? And how many have older versions?

Yes, exactly.

Nannette was clearly better. Paul, if you're on a speaker phone go…

No, I am not.

You sound to be -- if you are not well, we'll send somebody to get you.

No, it's not that bad, not that bad yet.

Better, you're better now.

So, what that what we’re -- we are in the process of trying to roll people forward into the three -- the three series. Our tech team is moving fast and we are at a point where we are able to release upgrades and improvements in new versions faster than we can install and implement in the marketplace. So, there is a bit of a lag. But the 2.0 is with all functioning sites, 2.0 and higher are what is deployed. None of the early stuff is out there anymore.

Recently, John, had indicated that you'll all have obtained access for a multi-laser machine has start developing the software for PrintRite to work with multiple lasers. Then I've heard you comment on late stage that software examined, if there’s any anticipation of when that might become available?

Did you get that?

Yes, the new version that we’ll be able to work four lasers at a time where we're in that development?

We’re in that development.

Can you offer any more detail about that?

Usually when you hear an answer like that, it means that somebody likes what's going on, not that they don't like what’s going on. Yes, I mean what we’re doing across the board is adapting very rapidly to the evolution, the rapid evolution in the market with production. As you have no doubt read additive industries with whom we have a strategic relationship and an OEM relationship is a multiple laser - has multiple laser equipment, so you could reason that we're probably heavily up to our years on multi-laser technology.

Our next question comes from Mark Roop [ph]. Please go ahead with your question.

I've got three questions. One -- I've three questions so the first one kind of is a forward-looking statement, but the UN actually anticipate 2018 is the year that Sigma Labs will announce their first sales of PrintRite3D for actual production operations in the world.

It would certainly surprise me as it wasn't.

Okay, set met, next to kind of for I've been following the additive manufacturing industry for six or seven years now, and two things that have always been confounding to me. One, over the last handful of years there have been some fairly sensational public announcements of investments made by moneyed entities into companies pursuing the technology and additive manufacturing for power evaluations, printer machine design, part design, frontend engineering everything except In-Process Quality Assurance. What is the reason why the world has not been Sigma Labs and PrintRite3D to be valuable enough to actually invest into it to get this technology going out there? What are your thoughts on that?

Mark, some aggressive and forward-looking folks have invested in Sigma. So, the early adopters and the visionaries I think are with us. The development of metal parts manufacturing is led by large very high-technology companies, mostly in the aerospace sector they would go really begin pushing this along. And the barriers to entry for them have cause things to go slow. First of all to rollout something like the fuel nozzle for production as GE did, requires a substantial upfront capital investment of plus or minus million bucks a machine on this single laser technology in multiple ways of technology a million for or more. Second, the industry was slow, you heard me earlier in this call refer to the additive manufacturing metal parts problem. That problem has only begun to have a label that I have heard the past eight months. It was taken for granted that these are CMC machines and people I think look to the model of the classic machine shops of effective manufacturing. I think if you put in the machine and it will come out right. And I think that sophisticated folks in the industry as well as the investment community have been focused on in-process quality monitoring as a big deal. But it has been hidden behind the large-scale other issues of the expense of setting up for a whole new production line on a very capital-intense basis, for products that you then making very small lots. This is a big cultural and technical shift for a company to make, you have seen if happened.

So do you think that now that its front and center that’s may be some enquiries into how to invest in Sigma Labs in a much more meaningful ways? I mean you guys obviously are going to need money to roll this out in the way that you see it should be rolled out. Now is the time I mean, do you anticipate that coming? Or do you anticipate the potential for large investments into the Company?

That’s entirely possible and foreseeable. I think you need to talk with our investment bankers, Dawson James, and they can lead you along.

So, last question. I’m seeing many instances where there is reference or reporting on other evaluations or instances in-process quality technology being looked at or worked on for development or evaluated in some way, and these are all not Sigma Labs and PrintRite3D. For instance, we just recently heard that Honeywell has anointed Sintavia for AM production and yet, there is no mention of in process quality assurance technology. No mention of Sigma Labs. I guess this is a two-part question. Is Honeywell going the way of GE Aviation and a missed opportunity or that it just didn't pan out? The second part of the question is, how are the other efforts out there and metal AM manufacturing that are using or looking at in-process? How are they not involving PrintRite3D? How can that even be possible? I mean are your patents open enough that these other efforts feel like they have room among the patents to take a position? Or are they just not knowledgeable of Sigma Labs and the technology? How is always happening in Sigma Labs is not part of it all?

Well, Sigma Labs is more of part of it all than is apparent to many and at the moment that includes you. So, we actually worked very closely with Honeywell, have for some time and are committed going forward on a number of initiatives. The Honeywell is in the process of qualifying as is Boeing qualifying people like Sintavia, service bureaus to do their work. When they do that, they’re not -- what they're doing is confirming that these people that have the quality and capacity for conventional manufacturer and for 3D manufacturer that is state of the moment. It does not mean that they will not require them to use in-process quality monitoring when they give them an order as part of the specification or give them post process inspection procedures that they have to go through that will be so expensive that the service bureaus will of their own accord be migrating towards in process quality. So whether it is push or whether it is pull, we are confident, it’s coming. No deal that we’ve seen has -- like the Sintavia deal has been in anyway preemptive or excluding of Sigma.

Okay, thank you sir.

Your question of the patents is interesting. Certainly, this is a well established not new technology, but our niche of 3D manufacturing is in terms of intellectual property, patent protection is relatively new. So, Sigma has over a dozen patents applied for but almost all of them are in process. And so, our competitors don't know what we have because until the patents issue, they can’t read them. And so, on the IT front, this is a bit of a frontier still.

So, the fine is yet to come then?

Pardon me.

So, the fine is yet to come then, when it comes time to apply all sorts of patent?

Oh, absolutely, yes. Company looking at a -- a large company looking at a small company like Sigma in the future, if they were looking at acquisitions, would be as interested in the patent protection that comes with Sigma and prevents their large competitors from violating them, as they would be and been able to use Sigma’s technology, so the theory is that this is of enduring value.

Our next question comes from David Robertson [ph]. Please go ahead with your question.

John, there has been some discussion amongst Sigma investors particularly of late about competing products and I actually thought that was where the last caller was headed with his question. In particular, we’re hearing and reading about EOS technology or products that I believe that goes by the name EOS state note tool and there also has been some focus and discussion on massive in situ technology to delay folks such as myself and lots of others out there. When we read descriptions, I think of the technologies they appear to be described very similarly to PrintRite3D. What can you -- how can you help us to better understand and get our hands around a bit better than we might be able to our own? The difference is, you folks have, I think have said that to the best of your knowledge were at the head of the pack. How is our technology ahead of these other programs as far as you're aware?

And yes, thank you got me tiptoeing on this one. So as you know, if you visualize looking in the window of metal and manufacturing machine. There is actually not lot going on in there. You’re looking at the bright light of a laser a bed of powder and a melt pool. So the question is, how much can you learn in that simplistic setting. And as tended to be the case in the past couple of years that more and more of the equipment manufacturers have been putting probes in there to monitor the melt pool. And there various claims as to what their products do. And the bottom line from Sigma's point of view is none of these folks seem to know what to do with what's with the gathering data, you can see can gather data visually or thermally in any number of ways. But the question is what is actionable data, the question is do you know the meaning of what you are looking at. And so far as we can tell that is the barrier between where Sigma is and where they are. They can show you a picture of the melt pool, they can tell you it's melting, but they don’t seem to yet understand what information can be taken away and acted upon.

So then John would you -- then it'd be fair to say that that our advantage could be characterized as one of expert knowledge almost more for my consulting standpoint as opposed to our superior technology. And if you could consider, I asked the question within the context of the existing patent applications. Can you help us understand, if our advantages is in telling folks what to do with information, as opposed to the technology that collects the information? How can you -- how does that relate to patents that we've applied for and are hopeful?

Now, I’m up on point as opposed to merely tiptoeing. Alright, so what we've endeavored to do with our patents is to focus essentially on process or method patents. And differentiator so far between Sigma and the products with which we are aware of nor aware of in some detail of everything you named there, the difference is that the competing products are composed primarily of sensors and software, and the science here that’s critical its metallurgy. And Mark Cola, the guy, our co-founder and CTO, is a metallurgist, as was his co-founder also in that skill set areas. So knowing what you are seeing and what it means and what to do with it is the essence of In-Process Quality Assurance and that is our strength.

And is it conceptual matter, is knowing what to do with something? I guess it’s a bit of foreign idea than me and I’m not an IP guide, but is knowing what to do with something a patentable concept or patentable thing?

Yes, if somebody else hasn’t done it, patented it at first it's generally is.

So that is what’s known and I think you used the term just a moment ago of process patent that’s what we are talking about?

At often is, I really have to be careful on this area. You are going companies on this way. The IP is the heart of our value. It's not -- so, I want to help you understand it, but I don’t want to help you understand it too well.

So with that promise of course, you believe that our position in the likelihood of granting of some of these essential patents is high and is on the increase?

I can't answer that question in the terms you asked it, but I can answer this way. The company’s patent firm is Kilpatrick Townsend which is one of the top patent firms in the country, in the world. And they are good, very professional team with a terrific track record of success in this area.

And do those folks lead you to believe that they think we are in pretty good standing.

Well, yes. We are not going to file a patent. It based at we don’t think as you have got something here, we are not going to waste our money disagreements. So, everything we've done with them has been based on their belief that has a valid and appropriate thing to try to patent and has a reasonable chance of success. And reasonable chance of success in a domain is expensive is not in a 50-50 area.

John, from the financing standpoint with the need for additional funds, is there as much -- are you folks looking in a serious way about private sort of placement funding as an alternative to additional public share issuance?

Yes.

[Operator Instructions] And ladies and gentlemen, I am showing no additional questions. We’ll conclude today's question-and-answer session. I’d like to turn the conference call back over to John Rice for any closing remarks.

Well, I want to thank everyone who joined us on this call for doing that. We really appreciate the way people take an interest in our company. We appreciate how serious a group of people you are, and how curious, and it helps us that you support the Company. It helps us that you challenge us and ask questions. So, thank you for being here and thank you for asking and stick with us, and keep pushing us, and we’ll try to justify. Thank you and you all have a wonderful day.

Ladies and gentlemen, the conference has now concluded. We do thank you for attending today's presentation. You may not disconnect your lines.