NextTrip, Inc. (NTRP) Q2 2018 Earnings Report, Transcript and Summary

Good afternoon and welcome to the Sigma Labs Earnings Conference Call for the Second Quarter Ended June 30, 2018. All participants will be in listen-only mode. [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 of the call will be available approximately 1 hour after the end of the call through September 14, 2018. I would now like to turn the conference over to John Marco, Managing Director of Core IR, the company’s Investor Relations Firm. Please go ahead sir.

Thank you, Michele. Thank you for joining today’s conference call to discuss Sigma Labs’ corporate developments and financial results for the second quarter ended June 30, 2018. With us today are John Rice, the company’s Chairman and CEO and Nannette Toups, the company’s CFO. At 4:05 p.m. Eastern Time today, Sigma Labs released financial results for the second quarter of 2018. If you have not received Sigma Labs’ earnings release, please visit the Investors 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. I will now turn the call over to John Rice, Chairman and CEO of Sigma Labs. John?

Thank you, John. Good afternoon, folks and welcome to shareholders, welcome other parties who are interested in our company. The purpose of this call is to report on the second quarter and more broadly to give you an update on the company and its activities. In this case, I am going to do a broader update, because on August 1 last year, that marked my first day as being honored to be your CEO. So I am accountable to you and I am going to give you an update on what we have been doing really for the last year on and through the second quarter. So as many of you know from my communications to you in the past for the principal challenge that Sigma faced on August 1, 2017 was to transform itself from an R&D company which had a very high potential R&D product into a commercialization company with a high potential of reliable performance market-ready product to sell and that’s what we have been doing for a year. Driving this information over the course of one year is challenging as we recruited several additional experts to balance our skill sets, we implemented new business processes in product development and customer service and step-by-step, we set out to elevate our lab-ready hardware and software products into really robust commercial equipment ready to deploy into high-quality production settings. So, the good news is that we have managed to put together an extraordinary team of people to execute these challenges. The bad news is that no matter how good the team, the process for which we have been engaged can be arduous and it’s indeed, we are very vulnerable to Murphy's Law that if something can go wrong, it will usually more than once. Some extraordinarily capable and patient customers have permitted us to work with them as really as partially integrated technology teams and this has increased the sophistication of our customer responsiveness. Sometimes it is because with these major customers to be victim to helping us implying both detection and suite rapidly accelerated products sophistication in this transition year. But these customers have made our product better. Indeed, they have made our company better and we hope and have obviously no assurance, but we really think this may result in Sigma receiving material orders for serial production applications at the tail end of this year and going into 2019. The very good news is that our team was more determined and effective than Murphy. And as we wind up this transition year, the core product, PrintRite3D, is proven to deliver valuable advanced quality solutions for additive metal production and not merely for research. We do a couple of extraordinary things that are not available from any of our competitors. So, I am going to tell you what they are. So, first, PrintRite3D identifies inherent inconsistencies in additive manufacturing equipment and product performance and it enables our customers to offset those inconsistencies by resetting the machines to account for them and thereby it elevates the machine’s quality yield right away. It also means that our product compares build-to-build, which enables us to alert the operator if the equipment needs maintenance when the laser’s performance strays outside the process envelope. That’s always a problem that at the moment the industry has no other solution to do. The second thing is that PrintRite enables the customer to very rapidly determine the optimum multiple characteristics required by their specific metals and specific parts to meet the quality and performance criteria that’s set by the customer. With the information that PrintRite3D provides to the customer, they are able to set the design file instructions sent to the laser, which will render each portion of each part to the ultimate characteristic required to sustain the quality of the part and that is done by varying the performance of the laser in order to make the melt pool and the part quality a constant. This capability is terribly important. It means that PrintRite3D is a tool that increases quality by preventing quality lapses. The third major element here is that PrintRite3D monitors 100% of 100% of the parts being made layer by layer. And as you long heard this, we are able to detect when and if a laser behavior was starting to stray from the process and to alert the operator given the opportunity to make changes to try to preserve that. Finally, in May, we announced that we have demonstrated the Closed Loop Control to Grail. This means that we have opened the door to being able to detect and reverse and/or offset certain discrepancies at the point at which they actually begin to emerge as developing quality problems and manufacture them. We expect to be able to market this in its first modules sometime next year. So, as these changes were maturing and hardening within the company, it’s important to know that the general additive metal market also continued to grow. SmarTech reported just last week that AM metal revenues grew another 20% in 2017. So as we exit this transition year, we do so with a product that is easier to demonstrate and easier to deploy and that is solidifying as a production tool really due to the customer relationships which we have forged them in working over the past year. Going forward from today, we are launching the rollout of PrintRite3D version 3.2 into this growing market and we are making it available through a rapid proof-of-concept demonstration, which we think will substantially reduce our sales cycle and it also creates a much simpler buy decision for the customer in the marketplace. Our previously announced market strategy of seeking to license our system to large OEM is advancing in the form of business to business interchanges on multiple fronts and of course I am not permitted to tell you about that and there is no assurance of success, but I can say that we are encouraged by the fact that we are demonstrating an ability to deliver results, to deliver capabilities in these interchanges that our target OEM companies’ products simply cannot do. So for the moment, this concludes my introductory remarks. I am going to pass this call back to Nannette Toups, our CFO who will discuss financial results for the second quarter and then we will have some closing remarks and we will take questions. Nannette, take it way?

Thank you, John and welcome everyone. To begin the discussion on the financial results for the second quarter of 2018, first of all, we have recognized revenue of $98,663 compared to $290,553 during the same period of 2017, that’s a reduction of $192,000. Sigma’s shift to focus away from government programmatic work and R&D customers caused $247,000 drop in revenue, but we are able to slightly offset that with revenue from contract additive manufacturing services we are providing in-house, which also gives us an opportunity to use our product and test its capabilities. Correspondingly, our cost of revenue for the second quarter of 2018 was down $43,000, $68,568 as compared to $114,412 in 2017. The decrease is directly related to the absent of hardware cost associated with system sales we made to RFD customers in 2017. Our total operating expenses for the second quarter of 2018 were $1,422,511 compared to $1,108,234 for the same period of 2017. That’s a $314,000 increase. The major components of this increase are payroll and stock compensation costs. Payroll cost in the second quarter of 2018 were $426,049 compared to $246,994 for the same period in 2017, a $79,000 increase resulted primarily from the addition of three employees in the third quarter of 2017 as part of our realignment and refocusing and three in the second quarter of 2018 as we continued the concentrated acceleration of technology development and to expand into the European 3D manufacturing market. The other component of personnel cost stock-based compensation for the second quarter of 2018 was $423,067 compared to $166,773 for the same period in 2017. The $256,000 increase resulted primarily from the issuance of $143,000 in stock options to our Chief Executive Officer in the second quarter of 2018, $62,000 of additional stock options vesting expense related to options that were issued to our President and Chief Technology Officer under his amended and restated employment agreement of 2017 and the amortization of an additional $72,000 in Board of Directors stock compensation cost in the same 2018 second quarter period. Relatively, office expenses were up by $46,019 in the second quarter of 2018 over 2017. This was due primarily to the additional computer software and office based costs required to accommodate the 6 new hires coupled with additional travel expense related to both more aggressive outreach to active AUM production companies and our expansion into the European market. These increases were offset slightly by a $37,000 decrease in R&D cost expenses and $29,000 decrease in public company costs between the second quarters of the two years. In total, our net loss for the second quarter of 2018 was $1,388,804 as compared to $988,741 loss in the second quarter of 2017. That’s a $400,063 increase. In total, operating income contributed $463,000 to that loss and increased other income offset by $63,000. That’s the second quarter comparative. Now, I will turn to the 6 months. During the 6 months ended June 30, 2018, we recognized revenue of $202,078, which compares to $405,076 of revenues during the same period of 2017. Again, it has to do with our refocus. $203,000 of that reductions were revenue decreases related to the fees of the wind down of the DARPA and Aerojet government programs. These were partially offset by increases in net other revenues primarily against $59,000 this time from contract AUM service sales from in-house builds. Our cost of revenue for 6 months ended June 30, 2018 was $142,363 compared to $185,946 during the same period in 2017, that’s the same $42,000 decrease we have talked about in system cost associated with the second quarter 2017 sales to RFD customers. Sigma’s total operating expenses for the 6 months ended June 30, 2018 were $2,599,641 compared to $2,144,717 of the same period in 2017. That’s a $485,000 increase in operating cost. Again, payroll and stock compensation costs were the biggest components. Payroll cost for the 6 months ended June 30, 2018 were $824,706 compared to $785,204 for the same period in 2017. The $39,000 increase results primarily from the earlier mentioned addition of 6 employees since the end of the second quarter of 2017, which was partially offset by a $50,000 bonus payment made in 2017. Stock-based compensation for the 6 months ended June 30 was $584,589 in 2018 compared to $306,405 in 2017. This $278,000 increase resulted primarily from the previously detailed option vesting and shared amortization increases that occurred in the second quarter of 2018, again relatively, office expenses were up by $57,000. These are primarily accommodating costs for new employees and increased travel in our new target of expanding our markets. Also, there were marginal increases in public company costs by $40,000 and R&D costs by $30,000. Our total net loss for the 6 months ended June 30, 2018 was $2,559,680 as compared to $1,815,373 for the same period of 2017. That’s a $744,307 increase. Operating income contributed $644,338 of the increase and other income and expense contributed $99,000. Turning to our balance sheet, as of June 30, 2018, we had $3,519,637 in cash and a working capital surplus of $3,320,502 as compared with $1,515,674 in cash and a working capital surplus of $2,273,801 as of December 31, 2017. With that, I will turn the call back to John.

Thank you. And Nannette, so as we come into the second half of this year, the platform we are standing on that we built over the past year essentially rest on the notion that in exiting the R&D business, we traded a reduction in current revenues to pay for a major overhaul of the company of reworking the culture, rapidly advancing the technology from the bench to the high potential of commercially deployable products. So, today is where we sit. We have made a great product and now we really have to go out and start selling them. In the past 6 months, we have added substantially to the value of the company from a management perspective, we have raised over $3 million with the assistance of Dawson James directed at enabling us to finance our way through to positive cash flow. We have announced Closed Loop Control and we have succeeded in developing the product to a very high level. So I hope and believe that you will be glad we made the choice as we did and I hope that you will be happy with the rewards we are now setting out to earn from them. In the meantime, I will thank you for your patience, because I know this is tough to watch, but your company is getting strong. Questions, operator, bring it on.

Thank you. [Operator Instructions] Our first question will come from Tower Smith, Private Investor. Please go ahead with your questions.

Hi, John. This is not a question, but I noted on your shareholder letter, which was issued this afternoon that says you are in transit on Munich, Germany, are you there now or are you back here?

I am back here. I was writing it in Munich. So, I will let you know where I was.

Alright, that was a little bit misleading. On the May 15 conference call, you were asked about the relationship with Morf3D and as I recall you respond it by saying the relationship continues to be good that Ivan Madera was a good friend that they are going to create an innovation center and hope to be part of that. And yet shortly after that July 24, Ivan Madera has quoted in writing as saying Sigma Labs is no longer part of our long-term outlook. Can you elaborate or explain what happened?

Actually, nothing happened, which is probably why nothing – so we had intended to be sitting down with Ivan in the first week of July and then we had a series of schedule conflicts, which made it impossible to do that. I am still hoping to do it. What Ivan is doing out there I think it’s important and I hope that we can end up in the innovation center. There is no ill-well that announcement was brought about by a shareholder going to Ivan and sort of saying what are you doing and at the moment neither he nor we are doing anything together, we just need to schedule a dinner.

It really sounded like he threw you under the bus, but anyway.

Fallen under bigger buses, I didn’t feel too bad.

Alright. As it stands, do we – when the Sigma have any relationship with Precision Therapeutics?

No, we don’t.

I was just curious about Carl Schwartz’s position as a very significant shareholder in the company with over 1 million shares and I note that he is CEO of Precision, I was just wondering if there is any business relationship there?

No, there isn’t, but we love having Carl as a stout shareholder, but now it is not a business to business relationship.

Okay, thank you ever so much. What’s the headcount now?

18.

18. Thank you.

Our next question will come from David Furman, a Private Investor. Please go ahead.

Hi, John. Just one question really and these number, it is tough to listen to in here, but what leads you to believe that the later half of 2018 where in mid-August and 2019 will be the timeframe when we do start selling product?

Well, the process and we are now in the domain of the forward-looking statement we both understand. The process that the company entered a year ago September actually was to pull away from sales that are relatively easy to make to an R&D and to begin to invest our efforts directly and pointedly at large companies that are already buying a lot of AM parts or making a lot of AM parts themselves. And their process for integrating something into the heart of their quality system, it’s about the same process the people who invented the heart pacemaker had to go through. So, it’s been careful exhaustive repetitive subject to frequent delays, but we have been working with very large companies who if they are going to order could not have done so sooner than now. And if they elect to automate would logically be expected to do so in the next 6 months. Makes sense.

Yes. And then just one other question you mentioned in your letter and what you read to us that Murphy’s Law and bugs and whatnot so how is the product looking now, I know you have mentioned a little bit. And I mean is there – are you heavily invested in QA, so we can knock out and identify and work through a lot of these bugs or does it depend on as a lot of it to do with their specific setup, customer-specific setups?

I am not sure I understand your question. Can you clarify that please?

Yes. So, you mentioned bugs and Murphy’s Law I believe in the letter, right, in dealing with customers and patients and then fixing a lot of those bugs. So, I assume a lot of those bugs have been fixed, but are those bugs only being identified at the customer sites? And if so are there plans to kind of ramp up the QA, the quality assurance within the company itself? So lot of those can be kind of discovered and fixed without needing to identify the customer site?

Great question. So I have been using Microsoft products for years and I felt that they should have sent me a check for the number of things that I felt my use of their products that showed them they had. And in the same spirit, my letter was just want to being open about it, the process of rapid commercialization and hardening an R&D product into a reliable commercial product does have a lot of bumps in the road. Our quality system went from good to what I would characterize today as very good. And as you know, our product is composed of both hardware and software and so we really worked hard to develop methods of pre-testing, pre-checking and so on and so forth, but some stuff, it still get through, that wasn’t a major announcement that was an admission of the process. This is the process that all of us go through in a late stage startup. As we talk today, I am really pleased with what the product is, where it is and its deployability, it’s a very strong product.

Okay, thanks. That’s all I had.

You bet.

[Operator Instructions] Our next question will come from Doug Rob, a Private Investor. Please go ahead.

Yes, hello, Mr. Rice.

Hi.

Yes, thanks for hosting the call. I appreciate the opportunity to ask some questions. I a long-term investor and have been watching this pretty closely for a number of years, pretty much been hard to watch [indiscernible]. So it looks like and especially in the last 1 year and 1.5 years, there have been especially talks, lots of those revenues down. And the interesting thing I noticed is compensation [indiscernible], noticed you guys really made congratulations on that. And in the meantime I have lost over 80% of mine investment and increasing year-over-year losses etcetera, how do you justify the increased compensations?

Well, most of the increased compensation is for new employees. In my case what I would normally be compensated for is a great deal more than the cash that I take out of the company. And so as you may have noticed the lion’s share of my compensation is actually in the form of stock options, not in the form of cash. But let me go to – I mean, the real point at issue is your loss, I hope to make a temporary loss. We feel that the company is substantially undervalued, we worry that maybe we have got short-sellers we don’t know, always how aggressive they are or are going to be. We do believe that if we are able to complete the year on the tracks that we are on, that you may have – you may find yourself recovering and over time I hope that you will find that this investment is very successful for you. If it is not, then I will share your pain, because the majority of my compensation will be stock that will not be valuable to me either, so….

I guess the other big concern is there really any reason to think that SGLB won’t be de-listed at this point? It seems pretty kind of like close.

Watching NASDAQ companies at this stage can be very difficult.

After the money spent bringing it to the NASDAQ, it would be especially difficult to see with regards to the OTC.

That would be. We would have to – if we were to be de-listed, our first priority would to become re-listed. We are working hard to find a means to avoid that.

How much time you got?

What’s that?

How much time you got? Like what are the imminent steps?

Right. We think that our actions – we think over the next 90 days we have got to have sorted out all of our NASDAQ questions. So, that’s our goal and that’s what our actions are aimed at.

So there is lot of kind of question and confusion about like the version, so I think you said we are in version 3.2 that’s coming out, right?

That’s correct.

But yet it seems we are like still in beta and we are talking about proof-of-concept and I guess the question is do we have least product going to sell?

Boy, that’s a helpful question, because I accidentally confused it. I have used proof-of-concept in two ways in the conversations of this call. We demonstrated proof-of-concept on Closed Loop Control, which means that we have a beta product that we will be deploying later. The other way I used it though is what we have done. Our product now is so well-developed, PrintRite3D that what we are doing effective August 1 is going out on a sales program to people and same we can give you a proof of concept by installing our product on your equipment and saying we can give you a proof-of-concept by installing our product on your equipment and showing you what we do and it can be fast and it doesn’t have to be expensive. And when you see what it does, we think you will want to buy it. So, that’s a proof-of-concept of a proven product as a marketing strategy, not a beta thing.

So, it sounds like just kind of another form of EAP then?

It’s an EAP.

It’s not really revenue. You stand it out you work with them to get it ready for you some, I am just trying to get a feel for, is there any cushion like somebody install it right now and use it in a production like environment, a massive amount of hands on from Sigma?

No, it is now an installable production product.

Alright. Thank you.

That’s my basis of my optimism.

That’s a good thing.

Any other questions?

[Operator Instructions] Pardon me, we do have a question that came in. We have a question from David Weinstein of Dawson James Securities. Please go ahead with your question.

Yes, John. What date was I believe you announced in am 8-K a de-listing notification they gave you 180 days when was that received?

Yes, about 7 to 10 days. Call it 2 weeks.

Okay. So just to be clear then for the previous caller, that’s to the end of the year. Second question is with the cash on hand and so the gating issue then I believe the letter what says that you have to be over $1 to remain listed before you get another letter, is that right?

That’s correct.

Right. So, the answer is that the stock was over $1 you are good to go till 2019.

That’s correct.

So the next question is for Nanette. Nanette, what is the current burn rate, how long will the money on hand take the company?

Late March, early April of 2019.

If there are no sales.

If that was going to be zero sales.

Right. And then John, could you just reiterate or underscore what potential milestone events we might see in the calendar year 2018, which would indeed take the stock likely move the stock into a much higher platform and potentially get a warrant exercise?

Well, we have been open with the marketplace for sometime about the strategy we have of working with some high-profile customers such as Siemens, such as Woodward, such as Aerojet Rocketdyne such as Solar America. And so yes, we would love to see one or more of customers of that sort come in and give us significant order and if they did so I suspect that would move the needle.

And what about a potential licensing deal?

Thank you. As I mentioned earlier, we are well engaged business to business on licensing as a topic and I am optimistic about it simply because we can do stuff they can’t and that’s the good reason to buy a license from a person.

Right. And then I just have one of the question and it really is driven from that answer, which is in my impression is that unless you are making parts for yourself like perhaps GE might be doing, wouldn’t they have to license from you without violating their patent if they want to do in-process quality control given that you have now received that patent?

Technically, yes. I mean, I have seen a lot of companies do things notwithstanding the fact that other people have had, but the risk from the point of view of potential OEM licensee of Sigma, once they know what we can do and they learned that in these engagement which we have going, they also learned about our patent protection and therefore they also learned that it would be risky to violate company that has over 18 patents filed for and about 17 of them are pending. So, it is a big protective net that you don’t want to violate that could be bad. And your fear as if you are a very large company in the space would be if you don’t license from Sigma and your major competitor does, then Sigma would routinely give a major licensee, the to defend the patents. So if you have two really large companies with whom we were speaking and each one would have to consider the fear that if they don’t license our technology and the other company does, the other company gets to use our patents against them. So, that is a big business deal from my point of view.

Right. Well, it makes sense to me I mean alternatively someone could step in and buy you and then basically knock the competitors out of the industry if they want to get aggressive?

That would be their – if the effective is that their competitor picks up the patents, the second fear is or they pickup Sigma.

Right, right. At this valuation, I mean, I don’t what decision they would make, but okay, well, I just wanted to get those answers, because I think when I read through the Q, a lot of the burn rate was in stock compensation, the actual cash burn was pretty much minimized and you have got quite a runway here. So, I just wanted to clarify that. Okay, that’s all I have got to ask.

Great. Thanks for helping us get the facts out. Any other questions?

We have a question at this time from David Robertson, a Private Investor. Please go ahead.

Hey, John. How are you doing?

Hey, David. I was wondering why I hadn’t heard from you yet.

Late, but here I am. There was indication that Thomson Reuters has begun to initiated coverage Sigma with a hold rating, is that misinformation or is that accurate information?

Yes, I am embarrassed to say, I don’t know. I haven’t heard it.

Okay, okay. And then also noted that in the last call, in the Q1 call, the fellow from Maxim Group, the analyst Nehal Chokshi was involved in the call, is there a thought that their coverage maybe soon forthcoming?

I don’t know. They approach us from time-to-time. They clearly have a real interest in us. They are nice folks. I don’t know where that ends up though.

Also wanted to ask you about the wind up of DARPA and whether you have a sense of when the final report coming out of DARPA is likely to be issued?

I don’t think I will ever make a forecast of what a government report will be issued of, you never know. By the way that has turned out to be an interesting and helpful group of people to us, they are pretty good and I am really pleased with it.

And that is a Honeywell led initiative, right?

I would say hosted is probably a better word, but yes.

So, with Honeywell is in the host position would be correct in assuming that someone from Honeywell who will be writing that or at least contributing substantially to that final report?

That’s logical, but I don’t know that it’s correct. Good, because there are number of other folks involved. Some of the guys in the government side have been really strong. I don’t know who the authors will be.

And is there any overlap between you talked about some of the patient OEMs and partners who have helped to work through some of the debugging process of late. Is there any overlap between those folks, those engineers and the DARPA entities?

No, there isn’t.

So, without any assurance, do you think that would you be surprised if there weren’t a favorable final report whoever exactly is involved in writing it, where I am coming from here is do you think there is pretty good reason to believe that we are going to see something more support of them. Of course we hope – we all hope that is your expectations that when that report sooner or later is issued that we will see something meaningfully more support of than what we got from GE out of America make.

Yes. I would say it will definitely be better than GE. The sophistication of our product has accelerated a lot. I mean, it’s – we know stuff today that we didn’t know as well 6 months ago and it’s really pretty startling. So, the question in the DARPA report will be when they actually cutoff their analysis and their work. And I am not sure because we are still in real communication to them, I haven’t – I am not aware at the moment of which iteration of our product they have. I know they don’t have 3.2. So, I would expect it to be significantly better than the GE report and perhaps not as current as we wish it could be to reflect where we are today. So it could be good, but not the very good to excellent that we think we are now.

Is there perhaps an opportunity for them to take some sort of a look see it’s the latest version takes something into account?

Yes.

It would obviously be critically unfortunate if another – even if it approached the sort of negativity that we saw out of America, would seemingly go an unfortunate distance towards undermining what sounds like a lot of hard work you are doing on other fronts to improve upon your technology?

Well, I think that the – by the time DARPA issues, I think you are going – my hope is that you will see some major companies that have brought us into their production system. And I think that it almost make any subsequent report irrelevant.

One of the other things that I am hearing on a lot of earnings calls – earnings calls I have listened in on larger corporations, large corporations, Allegheny Technologies, Stratasys, AmTrust companies that have some related lines with business still hearing in a general sense, the general impression. Still hearing things that make sound as if series production on the metal end, particularly in the aerospace area is still away, I don’t know that I can paraphrase specific as time estimates, but just that it’s a fairly strong general impression across a series of calls, larger companies recent this quarter’s calls, particularly in the aerospace area as I said metal printing is still at the series level is still into the future somewhat. Are there – if that is the case are among the companies that you are presenting to that we are involved with in the debugging and that are seriously considering buying our technology. Are there some non-aerospace companies in that through?

Yes, there are. I think there is couple of points. One, we know that the aerospace move to production has to be delayed, because their needs – once they commit, it gives you an example, one part from a 737 committed to AM production could soak up all of the capacity of AM metal machines in the United States. So for aerospace to commit to in a major way being said that they either have to invest substantially themselves as GE did or cause somebody else to do it. To put together a production facility these days would be a matter of, for example, deciding you wanted to put 40 ELS 400 machines. That would cost you in the vicinity of $50 million then you need to put that in a factory setting that cost you another 15. And then you need to hire and train people and get yourself to a production level. So, it could cost you over $100 million to start a major factory. And you are not going to do that until the aerospace company will give you a whale of a strong contract and you are not going to do that until you are convinced that the quality issues of this AM equipment are acceptable to you. So before airline or aircraft accounting an awful lot of the stuff, a lot of money has to be spent and that will little take some time. The answer to your question therefore, so are you dealing with other people? Yes, for example, the Siemens Group we are dealing with is refurbishing our manufacturing burner nozzles for big gas turbines. The solar company, the division of Caterpillar is making solar stuff. Aerojet Rocketdyne is sort of in the aerospace setting and so forth. So the group, we are focusing on most are not pure aerospace. And what we are finding in addition to that is the number of companies sort of on the periphery. There are companies that have 20 to 40 machines, 3 major customers and in part in serial production.

Would those be service bureaus or OEMs?

Service bureaus. So, there is the tradition of many aircraft companies take the view we are assemblers, not manufacturers and you have heard about the $400 door handles and stuff like that. So to avoid that trap, a lot of them prefer to buy and that habit is spread into some other industries too.

So, company is not unlike Morf3D just for…

Yes, bigger than Morf, but same idea.

I wanted to ask you, I know someone touched on Carl Schwartz, was he someone who was introduced to the company through the investment bank through Dawson James or was that who it was their connection existed with him and someone there at Sigma?

In fairness, I can’t really comment on other shareholders other than to say, I am really glad to have him.

Okay. And ladies and gentlemen, at this time we have reached out allotted time for questions. So this will conclude our question-and-answer session. At this time, I’d like to turn the conference back over to John Rice for closing remarks.

Well, thank you all very much for your patience, your time and your attention. Stay with us and I hope that with each additional earnings call, there is more cause for celebration. Thank you for being with us.

Ladies and gentlemen, the conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.