NextTrip, Inc. (NTRP) Q3 2018 Earnings Report, Transcript and Summary

Good day and welcome to the Sigma Labs Earnings Conference Call for the Third Quarter Ended September 30, 2018. All participants will be in 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 of the call will be available approximately one hour after the end of the call through December 16, 2018. I would now like to turn the conference over to Scott Gordon, Co-Founder and President of CORE IR, and the Company’s Investor Relations firm. Please go ahead, sir.

Thank you, Andrew, and thank you all for joining today’s conference call to discuss Sigma Labs’ corporate developments and financial results for the third quarter ended September 30, 2018. With us today are John Rice, the Company’s CEO and Nannette Toups, the Company’s CFO. At 4:30 p.m. Eastern Time on Wednesday November 14, 2018, Sigma Labs released financial results for the third 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 yesterday’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, CEO of Sigma Labs. John?

Good afternoon. This is John Rice and welcome to shareholders, and other parties interested in Sigma Labs. The purpose of this call is to report on the Company’s results and developments for the third quarter and also the year-to-date for 2018. Today, I am reporting to you from Frankfurt, Germany, where the annual formnext conference is now wrapping up. formnext is the additive metal manufacturing industry’s largest and most important conference. And for us, it’s been a great marketplace. It permits companies to promote their products, to assess their competitors’ latest products, and that’s a very useful context for deal-making for most of the people who arrive here. I am happy to say that for Sigma, we’ve been well welcome here. Our product has received very gratifying interest to potential customers, the sales folks on our team who have been attending these conferences over the years, feel that the serious label of major OEM companies’ interest this year indicates additional maturity in the industry, and that’s a very good context for us. Along with a gratifying show, I think that we have met some of our competitors who’ve come in to see what we’ve got, and that has left us in a confident mode in our interchanges with them. For me individually, this is a very useful place to be working this week, on our announced goal of working on OEM licensing deals. This has been a place we’re in the same building; virtually anyone who you would be talking with on those topics is down the hall. My sense has therefore been that we are really in the right place at the right time with the right product and really pleased about this. You never know what is going to come out of the counters in a situation like this, but it has been great and constructive for Sigma to be in such an opportunity-risk setting. So, I’m very pleased to be able to report on. I want to follow-up now on my report to you from August earnings call. It’s interesting, with these quarterly reports, those of you who are regulars, like David, have the opportunity to see us inch our way towards the go-live. So, in the course of the third quarter of 2018, Sigma completed important internal product development milestones that have been formulated well over the past year. And it has led to the Company announcing on October 25th, the rollout of the combination of new products for this formnext show that I’m reporting from. Sigma thinks that the combination of our advanced new hardware and our advanced software with version 4.0 completes the really the essential evolution of the product itself form well stressed and tested routes in R&D in R&D into what now really as a compact, a more compact and our hardened commercial, industrial product that’s user friendly and can be deployed into demanding serial production situations. Remember that in the competitive setting, our competition is delivering in-process quality monitoring tools which we perceive to generally deliver data without meaning of the data, which puts the customer in the position of receiving the information that is not useful. We’ve been commercializing PrintRite3D both hardware and software with an emphasis to prospective customers and delivering a product which provides in-process quality assurance, not monitoring. And so, we are here not only gathering and analyzing information for customers, but when we deploy on their equipment, giving them actionable improvements and improve their quality. So, it’s been very -- in the context of this show and in the context of our product and competing with others, I’m happy to be able to report what’s here. So, at the moment, we were fielding a product that -- and detect and notify users and machines of their discontinuities and help them and adjust them upfront to reduce machine quality deficiencies, and we are reporting here and able to deliver to a machine today a product that in real time can also detect growing library of randomly occurring quality deficiencies, identify the signature of these trades, and provide warnings and options to operators to adjust and improve the quality that way. On May 30, we announced successful demonstration of proof-of-concept of closed-loop feedback control. Meaning of that is we are able detect a problem in the machine, understand what the problem was, send a signal to a control system that we grafted onto the machine, so that the machine was able to fix that problem before that would have been a rejected part. Keep in mind that this is a step towards what we in Sigma have come to believe after doing a lot of root cause analysis of the quality issues in AM machines. This is going to lead us to the fact that additive manufacturing machines must and will be self-driving, like self-driving cars. They will have a control system based on sensors that keeps the car on the road or in our case, keeps the quality sustaining at high level. And I think that all of this synthesizes this way. We think that hardware and software package that we are delivering now is a significant advance in leading to the realization of our future, and we think that our ability already to do some closed-loop control means the signal is well-positioned to help this industry get there. That is -- the self-driving AM machine is not a 2019 development, but I would hope it would be a late 2020 possibility. Switching gears, concurrent with the above mentioned product development milestones, we have been testing a new proof-of-concept sales program, which was made possible, that’s made practicable by the attainment of the above mentioned product development milestones. So, beta tests have demonstrated that we can now install and commence manufacturing test runs on many AM machines in a 24-hour period and that a proof-of-concept test and evaluation analysis can be accomplished in a matter of weeks, subject to customers and third party laboratories then committing the resources to deliver their analyses and reports back themselves. So, this could -- in a motivated customer setting, this could be a five-week process, and as sluggish that it could be, double that. An example, this program by the way just occurred this week when we announced a test and evaluation contract with a large oil and gas company, and upon completion of the test and evaluation, this program could lead to Sigma’s first commercial production order from a very large industry that we have not previously been working with at all. People often use the metaphor of turning a big ship to describe the process of turning and redirecting a company. As my comments above suggest, we and management think we have successfully now brought Sigma around into the technology commercialization world that we have been trying to morph ourselves into for 14 months. And we are really out of the more freeform R&D world, and it’s more into our culture. The markets we serve and the markets that we pursue are still actually very early stage themselves. But that does not mean that they can afford or they are willing to buy or deploy an early stage product into their quality system. So, as we head into 2019, I am pleased that we do so with an advanced product that has proven and positioned to render real value to an industry that needs it. And based on what I’ve seen in the past week is beginning to understand that it needs some urgency. So, Sigma’s outcomes for the coming year are yet to be proven, least the value of what we are selling is proven. This concludes my remarks. And I’m going to pass the call to the Nannette and then we will come back for questions. Nannette, take it away.

Thank you, John, and welcome, everyone. I will now discuss the financial results for the third quarter of 2018. In the third quarter of 2018, we recognized revenue of $128,593, which compares to $78,046 during the same period of 2017. That’s an increase of $50,547. This 64% increase quarter-over-quarter resulted from an increase of $69,000 in commercial sales and $22,472 in contract AM service revenue. This was offset by a decrease in revenue from government programs between the two quarters of $37,903. Our cost of revenue for the third quarter of 2018 was $56,309 as compared to $81,214 during the same period of 2017, a decrease of $24,905. This 30% decrease in cost of revenue despite a 64% increase in revenue was primarily due to $53,319 of non-recurring costs associated with implementation of our early adopter program and original equipment manufacturer partner program in the third quarter of 2017. Those costs are non-recurring. Sigma’s total operating expenses for the third quarter of 2018 were $1,401,087, this compares to a $1,095,206 for the same period of 2017, a $305,881 increase. Our operating expenses are comprised of internal operating and sales expenses, outside service fees, research and development costs, and depreciation and amortization. Personnel costs, comprised of payroll and stock-based compensation expense, consistently account for slightly more than half of Sigma’s total operating costs. In the third quarter of 2018, payroll costs were $524,508 compared to $335,495 for the same period in 2017. The $189,013 increase resulted primarily from the strategic addition of six employees since the third quarter of 2017, three in the third quarter of 2017’s realignment and three in the second quarter of 2018, as we continue the concentrated acceleration of technology development and our expansion into the European 3D manufacturing market. Stock-based compensation for the third quarter of 2018 was $198,578 compared to $199,225 for the same period in 2017, a decrease of $647. During the three months ended September 30, 2018, Sigma incurred research and development expenditures of $139,000 compared to $68,543 in the same period of 2017. The $70,547 increase in these expenditures resulted primarily from an increase in software and algorithm consulting costs and an increase in purchases of component parts, upgraded servers and specialized equipment directly related to the development of our PrintRite3D 4.0 product suite that we’ve launched at the formnext AM trade fair this week. As a result, Sigma’s total net loss for the third quarter of 2018 was $1,320,825 as compared to $1,116,910 for the third quarter of 2017. A $203,915 increase with operating income contributing $230,429 to the increased loss and increased other income expense offsetting it by $26,517. Turning to our nine-month results. During the nine months ended September 30, 2018, Sigma recognized revenue of $330,671 compared to $431,122 of revenue recognized during the same period of 2017. The primary contributors to the $152,450 reduction were revenue decreases of $174,726 from government program work and $57,227 in new system sales. This was partially offset by increased contact AM service sales in 2018 of $79,503. Our cost of revenue for the nine months ended September 30, 2018 was $198,672 compared to $267,160 during the same period in 2017. This is a decrease of $68,488. Reduced direct labor and material costs associated with the decline in government and commercial sales is what primarily contributed to that decrease. Our total operating expenses for the nine months ended September 30, 2018 were $4,000,728 compared to $3,209,923 for the same period in 2017. That’s a $790,806 increase. Payroll costs for the nine months ended September 30 were $1,349,214 compared to $1,120,699 for the same period in 2017. The $228,515 increase results primarily from the earlier mentioned addition of six employees beginning in the third quarter of 2017. Stock-based compensation for the nine months ended September 30, 2018 was $783,167 compared to $505,630 for the same period in 2017. This $278,184 increase was comprised primarily of $156,712 in vesting expense recognized on 140,000 stock options granted to our Chief Executive Officer in the second and third quarter of 2018 and the amortization of $92,371 of stock compensation paid to non-employee directors over the nine-month period ended September 30, 2018. During the nine months ended September 30, 2018, Sigma incurred research and development expenditures of $356,112 compared to $254,956 in the same period of 2017. The $101,156 increase resulted primarily from the increase in software and algorithm consulting costs and a $52,219 increase in purchases of the component parts, upgraded servers and the specialized equipment we’re using in our continuing concentrated acceleration of technology development, along with the development in the most recent quarter of our PrintRite3D 4.0 product suite. Sigma’s net loss for the nine months ended September 30, 2018 totaled $3,880,505 as compared to $2,932,283 for the same period of 2017. This is a $948,222 increase in the loss with operating income contributing $874,768 of that loss and other income and expense contributing $73,454 of this. Turning now to our balance sheet. As of September 30, 2018, we had $2,228,547 in cash and a working capital surplus of $2,208,620 as compared with, $1,515,674 million 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.

So, should I hold this so far I think so good, we have been intense engagement of accelerating our speed to market, one of the works that I’ve done in other companies in the past is in turnaround work. And there, you manage to success very often by making substantial cuts. In late-stage startup like Sigma, that is not a formula for success when you have to drive into a new market and try to do it with an advanced technology. So, we did an assessment over the past week of comparing what are the facts today that differ from what they were a year ago today, and what does that picture look like. And today, we are able to deliver an industrial product that compares with an R&D product that could not be placed in a manufacturing setting a year ago. Today, we are in a position to have a new channel to market available through our early adopter -- or no longer an early adopter program but rather a proof of concept program, where we can go in and in effect let a customer at a reasonable expense of time and money test drive the vehicle. So, the position we were in a year ago, had steeper obstacles to growth than what we perceive today. And that makes us confident about what’s coming next. With that, operator, let’s go to questions.

Good morning. I hope you’re enjoying your trip there, John. First question, and kind of a detail question is on the revenue composition, Nannette gave the amount of the changes, but what I’m looking for, if you can provide it, is the breakdown of the $128,593. I know contract was zero a year-ago, the increase is $22,472, so contract is $22,472, on a follow-up on contract. That’s a good way to cut your cash burn rate, if you can utilize your existing 3D printer more for contract work. I know that’s not the core of the business. And then, when we see that, what kind of margins should we expect on contract?

It’s interesting. We were doing an assessment last night as to whether we should be bringing another machine in, consigned signed by a prospective manufacturer, because so much of the capacity of our machine has been dedicated into internal R&D, proving what we’re testing, testing what we’re doing. And we’re trying to figure out how much revenue we could generate off our machine, given that pressure of schedule. The bottom line is that since the most revenue we can probably generate from our existing machine without infringing ongoing product proof development is a magnitude of about $0.25 million. We do not have a person -- we don’t yet have either the goal or the people on staff to actually sell into that space. And if we were to get a consigned piece of equipment, that would create enough revenue potentials to justify a person servicing and selling that market. So, that’s under consideration, and it is not done.

250 per year or per quarter?

Per year. That’s not the capacity of the machine, that’s the capacity remaining after we do -- after we continue to do the proof and R&D work that we’re using it for. Other questions?

The next question comes from Bill McElroy [ph] of Chardan Capital. Please go ahead. Mr. McElroy, your line is open please go ahead with your question.

John, earlier in the call you talked about a motivated versus non-motivated customer. And I was wondering if you can characterize what that difference is. And maybe more importantly, how do you -- when you’re out there trying to get a customer, how do you feel filter out the non-motivated ones? How do you identify the motivated customers?

So, essentially, we have two target markets. One is, the original equipment manufacturers and the other is end users, which for the sake of this conversation, in which I’ll include service bureaus. So, an end-user could be someone like Siemens who has their own factory and they’re making stuff or it could be a subcontractor like Incodema to someone like Pratt & Whitney. Essentially, going from the -- starting with the OEMs, the OEM market is in all cases, of people we have been working with, motivated in the sense that they have come under pressure to have their machines but behave at a higher level. Most of them concurrently are competition as well as are a market -- but all of them feel a pressure inside to try to develop their own solutions. But you heard me characterize them earlier in this conversation as saying most of them seem to be delivering data without meaning. In other words, they aren’t yet field in products that make their equipment better. They’re telling their customers you have in-process quality monitoring and the customer is learning that that doesn’t improve their quality. They are motivated this week in a way I haven’t seen before to move on to, we got to fix this quality problem, a quick anecdote on that. Two weeks ago, or I guess three weeks ago at the M2 conference in Munich. We heard presentations by a lot of the major European users on the equipment. And two of them were asked this more or less the same question as one after another spoke, which was essentially when are you going to be able to produce for production quantities and quality? And the answer from the person at BMW was we need better machines. And the answer from the person at Airbus was well, the quality problem is still of concern to us. Our technicians have given each machine a different name as an expression of how different their personalities and behaviors are from each other. And that is the local perception of the quality problem that’s seen through European eyes couple of weeks ago. And we are the people who still in our opinion, and if by all appearances, are more advanced along the line of been able to actually cure or avoid quality problems. And so, the current group of OEMs with whom we have been talking, have already shown motivation. On the other hand, some of the newer manufacturers do not yet have in-process quality monitoring equipments. And we are now suddenly hearing from them that they think maybe they need to fix that. In the other segment of the market, when we talk with particularly service providers, there’s a key sentence which they’ll utter which is, nobody has asked me for this yet. And one of the -- and so, that’s the dividing line. When a service bureau has been asked or required by a customer to address the quality issue with some type of certification or whatnot, they are interested in finding a way to get it. They have been passive so far about leaning forward and creating this capability within process quality assurance. Until more or less recently when we are hearing some folks who have built shops on specification and are looking for orders, they are realizing, if they don’t put our product in place, how are they going to get a serial production order from a company that’s afraid -- has been afraid to do it because of the quality. So, bottom line is, the people who have been least motivated on the service bureaus side, are manufacturing prototypes not for production, so they don’t have a margin problem and they’re not willing to spend the money until somebody asks them for it. The service bureaus who are trying to enter a serial production have become motivated, in our experience in the last year in a way that they have not previously been. Other questions?

The next question comes from Paul, [ph] a private investor. Please go ahead.

Good morning or afternoon, John. My question really goes to the threshold for serial production. It’s my impression that multi-laser machines are going to increase the speed of production, which is quite a problem as we sit today. What kind of progress has been made in adapting PrintRite towards multi laser machines? And venturing into the forward-looking statements, when might we see a beta version release for testing?

We are engaged with one of the first multi-laser -- one of the companies that first offered multi-lasers. And I expect that I’m not going to give you a beta date, but that’s an in-process activity that we expect to result on, in the course of the next several months.

So, in the next few quarters?

It could be, yes. We’re in it, we’re on it. And I’m not aware of anything yet. Murphy hasn’t spoken yet as to not aware of anything going wrong.

Okay. And what is the current headcount of employees at this point?

18.

Thank you very much.

You bet. Next question?

[Operator instructions] And this concludes our question-and-answer session. Excuse me. I see that we have a follow-up from Paul, [ph] a private investor. Please go ahead.

If there is no one else asking questions, I’d go more than the one. Why are the conditions that that you see that have not really been met that are going to lower the threshold for these companies to actually go ahead and pony up the money to buy? And what are we looking for happening that is not existent as of today?

There are two channels sort of to look at that question. The first is, obviously, what are the barriers to entry or to purchase of power products. Those barriers to entry, as I actually said earlier a year ago were that we had an R&D project -- product that people really felt uncomfortable putting in a production setting. So, I believe we have overcome that as a barrier to entry. The second barrier to entry is using the car metaphor. Before I buy an expensive car, I really want to drive this. And we have reduced that barrier to entry by now being able to deploy the product so cleanly and rapidly in a proof of concept program that customer resistance is dramatically reduced. Speed, for example with which the oil and gas company transaction was able to be structured was unprecedently quickly for the company. So, the bottom line is, we really have reduced those barriers materially. And which is why when I said, we really have a new channel available to market through the proof of concept program, it’s for those two reasons. So, I think the companies over the next year, the company is in a market in which resistance to our pricing and product I think are much lower than has been in the past up until very recently. So, we’re very pleased about that. The second channel is, the industry itself. One of the things that restricts the growth of additive metal manufacturing is it actually is such a disruptive technology that you can’t adopt it by just dropping it into a classic machine shop setting. It doesn’t work that way. You’re really looking at trying to set up a so called factory of the future. And so, the capital investment required for a company to jump to serial production is substantial. And if you were a CEO, turning to your CFO and sort of say, how’s this $100 million project looking for us? The obstacles to them to market entry are do -- are we going to get enough customer commitments from say a major aerospace company to fill this factory, one; two, are we -- what will our yields be. And if you had a say EOS M 400, four-laser unit that costs you $1.4 million, you might have potential to have $10 million of revenue a year off of that machine. If your yields -- and you could -- and all [indiscernible] make them real though on that machine at that revenue level. On the other -- until you get to the question of quality yield. If your yield is in the high -- in that 90% area, you’ve got 9 to $10 million in revenues upon which to cover costs. If your yields are 50% to 60%, your CFO is going to say it’s too early, Paul, you got to wait. So, bottom line is that the capital costs and the complexity costs of large companies setting up large production facilities are substantial. And a material piece of their threshold and their resistance is the quality issue does -- they really do need satisfaction that they will have high enough yields for these things to pay for themselves.

John, in the past, you seem to indicate that the R&D focus with the placement of machines as early adopter was sort of open ended in terms of timeframe and that you were wanting to tighten up that timeframe for people to evaluate and then either commit or one way or the other. How might that thinking apply to this recent contract that you received?

Thank you for keying the question up. The proof of concept program means that -- this customer announced this week that they have the -- we have the ability to provide them data within three weeks of having installed the machines that we’re done. We’ve exceeded in our demonstration of different things. And then as long as they commit to be sure that the laboratories return the samples, all cut up and measured as compared to the results we gave, to compare the CAT scan results to our results. Whatever amount of time that can take place in, whether it’s another 30 days or another 15 days or another 60, is to control. So, the bottom line is, if the program really goes well, they can know in a month; if it does go slowly, they can know in two months. We have never been in that position before.

And we have a question from David Robinson, [ph] a private investor. Please go ahead.

Hey John, how’re you doing?

Hi. I wondered if you were going to way in. I was surprised not to hear you before.

Better late than never, right? So, listening to -- in my time listening to others there, so looking at my notes here -- I’m not wanting to re-chat over material that’s already been discussed. But, you touched on -- the question was asked about timeline for multi-laser capability. And you introduced to the discussion and update about closed loop and helpful goal of late 2020 for Sigma, if I heard you correctly, regarding closed loop capability. And question is, when you’re sitting down as you have been there quite recently with potential customers, and there is an understanding that there are significant improvements in the pipeline, but that are sometime now. What is the model and what is your pitch as far as incorporating those changes, once they hopefully come to fruition, and to what customer would hopefully buy today, tomorrow, next week or next month? So, in order to answer the question for the customer, why shouldn’t we wait three months, six months next year, why should we make this commitment soon?

That’s well asked question, because you’ve identified the reality that there are number of factors coming to bear. But, I’m going to answer it in a very simple way. Our proposition talking with a customer today, you really ought to order our stuff and implement it right now. And because -- if it’s an average customer setting where they are doing some production but -- and they solved a lot of problems by having very low yield for a long time, which they slowly try to figure out how to adjust their machine, so, they’ve got their quality up to say 60% yield, which means they’re scrapping 40% of what they made. And our comments have been, look, you shouldn’t be waiting until every technical nuance has been accomplished. You should order our equipment today, because our ted metrics will allow you to set your machine up in a fashion that we recognize and we help you compensate for by resetting the controls on the machine, so that the machine behaves consistently across the whole bill play. When you do that, I mean that -- using our tool and adjusting their equipment based on what we can see and others cannot, that frankly immediately improves their quality significantly. And, so that even gets that now. And to be clear, it’s my opinion that for anybody but the most ultra-sophisticated long-term in the business, a company like someone GE where they did so much product rejection and what not that they actually have gotten themselves finally on the fuel nozzle, the higher yield rates. Everybody else, the greatest improvement they’re going to get in their quality as a percentage of improvement is probably our existing ted metric right now. The second thing they can get right now is the ability of our equipment to discern a developing product -- excuse me a developing quality problem before it is actually a part that needs to be rejected. And the competing technologies are using cameras, and by the time you can see it on a camera, what you have is a picture of the part you’re going to have to reject. So, once again, Sigma is in front of the market. As best we can tell, we’re not aware of anyone else who can do it what we’re doing and how we’re doing it. We can cure a number of what I would call random non-recurring quality issues that come up with that tool. So, anybody who is serious about this as a quality issue now really ought to order our stuff now. It’s also true that -- let me just finish out that. It’s also true as you heard, our in-process -- excuse me, our closed loop control feature, I think we probably in late to 2019 can have some -- be working with some manufacturers to incorporate that into their control systems. And from there that -- once that has occurred, you are then evolving our signature recognition software with our evaluation of what’s the solution for a growing number of problems. And that evolves sort of piece by piece into the self-driving car metaphor through 2020 and onward, however long that takes. But to wait for that would make no sense. There’s certainly a lot of stuff.

But, in terms of incorporating what’s to come, say of the improvement to capability to be able to handle multi-laser capability that you’re indicating as I understand is quite a bit sooner in time than closed loop. So, not so much that quite you just addressed the question of why now rather than later, but how later is then incorporate -- if a company signs on for the product as it stands today, which has the same laser capability, and then in three months or six months you’ve got the multi-laser capability in play, they’re entitled to -- for some sort of -- presumably some sort of predetermined up-charge to the improved version, they’re not setting aside what they buy today and having to buy freshly tomorrow, in other words?

Remember, our product, I mean, we sell hardware because we’re more advanced in some elements of it than the market. But, we’re not hardware people and the OEMs will take over that. And we will continue as software folks. And the routine software packages, you get some level of free updates, upgrades and then there are new release charge -- when there is a major new release, you get charge for that. And so, our product with new features will grow out that way. You may recall, I haven’t talked about it for a long time, but the -- I think, the next major new feature that we come to market with will be the CONTOUR module which will determined, which will show whether or not a product as it is been made is in dimensional spec. In this technology, that’s a big deal, because one of the exciting things about this technology is your ability to have channels and pipelines running through the parts that once the parts made, you can’t see anyone and are very hard to measure it. And so, when that module comes out, anyone who has bought our stuff today will have the opportunity to have that grafted into their system. They will pay for that as a new module but there won’t be any technological -- that we won’t do to them what Apple has done to me several times, which is change all of the way things put together.

Okay. On another score here, you went over and made reference to the continuation of the status of OEMs as competitors as well as partners. And which is kind of an interesting circumstance. And as competitors -- the monitoring technology that they’re employing makes use of cameras you said, right. So, I heard you say in your opening remarks, make reference to being pleased and seeing kind of their latest efforts and finding the status of Sigma’s technology is clearly continuing to be over and above and beyond, as far as enabling, knowing what to do with the information rather than just data without knowing what to do with it. But, from a competitive standpoint, in addition to being pleased that Sigma appears to be that much -- continue to be that much further ahead, from an IP standpoint, if they are OEMs who really put going to override trying to better their technology and learn what to do with their data to make their data actionable, you continue to believe that your IP portfolio is broad and protective enough that it’s not just only a matter of they are being behind but also a matter of having -- should you be granted I understand some of these patents have been allowed, I think three of them now, others are still in prosecution, but should others of these patents that have been applied for, be allowed, do you feel that your protection is truly broad and adequate?

Yes. I mean, you always have to qualify your confidence in a patent portfolio by several factors. One is, who did the patent work? And in this case, the people who have done the patent work, Kilpatrick Townsend, I really think they’re one of the top five patent firms in the world. So, the quality of coverage and the analysis of how broad the claims can be and so on and so forth, all of the professionalism with which all of this is prepared I think is really at the highest level. That’s really terrific. So, that makes me very confident. The fact that Sigma began its work as early as it did, meant that if Sigma was patenting into the states, had of before many of the OEM people who are now active in it, work. So, even though they are larger companies they probably don’t have a larger development group than Sigma does. And they are a couple years more depending upon which company they are behind us. So, to the extent that the technology stays more or less the same, Sigma is going to be very hard to impeach with its patent portfolio. And the part of the discussion that we have with OEMs goes like this. We have 18 patents applied for, two or three have issued, meaning that our success rate so far is three to three. And we are confident that these patents which will -- was issued to run on in the future, will provide you as a licensee of our company, real protection against your other major folks who do not choose to license our technology. By the way, remember that if you do not elect to license our technology that you might find yourself in the position of violating our patents and having the competitor you load the most, enforce our patents against you because they are license. So, there will be a moat established by our partners in this market space. It’s probably a better risk reward computation for you as an OEM to be protected by our moat rather than blocked by it.

And due to time constraints, we have time for a final question, and that is a follow-up from Barry Sine of Dawson James. Please go ahead.

John, I want to continue on the same topic if I might, which the closed loop system. So, you talked about a late 2020 implementation for that. I wanted to understand what needs to happen between now and then, why is the process so long. Presumably, you need access to each 3D printer manufacturers’ operating software and you need some physical connection into their machines, cabling and so on, so that you can modify their software during a production run. So, could you talk about what we need to see? You’ve already talked about you believe that the product is sellable without that closed loop. But, what do we need to see in the interim, and why is that taking so long? And then, also upgradability, you talked about upgradability, but presumably this is going to require an additional physical aspect of the product, so you can plug in to the 3D printer and modify the software during a production run. So, presumably you need to buy some additional hardware if you’re an existing Sigma customer. Thank you.

Sure. That’s a useful question. Thanks a lot for that. So, here what I think, here’s the situation. What we have -- our proof of closed loop control was among other things what we learned is -- it’s not very hard to do. In other words, we had to create an interface to our control system in order to deliver the signal and to tell the machine what -- how long to do it and how much to do it. It isn’t really frankly very difficult to do. The key to this is understanding what you’re seeing and when to intervene and how to intervene given -- the additive machines behave in somewhat complex manners in a sense -- the lasers follow what is called the hatch pattern. And each manufacturer seems to be very -- each additive manufacturing machine manufacturer seems to be very proud of their hatch pattern, which means that the laser doesn’t just go back and forth, back and forth. It follows very specific pattern, so that you are building the metal, keep and think of it is like weaving. So, that you are building a metal and rose that -- or layers that cross each other and are not always beaten on top of each other, like making a pot. So, each manufacturer, when they get to the question of how to implement our simple closed loop control idea is going to have to have through their own complex, software analysis of okay, do we need to change our hatch pattern to focus on that problem area or can we leave it alone. So, there are interface questions factors that the manufacturers will have that I believe that they will take some real time to accomplish. So, our bottom line is, I think we can deliver the materials to the marketplace in 2019 to enable a company, a manufacturing company or a controlled company to do closed loop solution on their machine. But I think it’s going to take them a year to implement that and to bring it to market. So, what we can do by the end of I think 2019, it’s going to take the market another year or so to implement, I suspect.

And I understand we have time for a final question from David Robinson, a Private Investor. Please go ahead.

Hey, John, one more please. When there is a need for additional financing, if you find yourselves -- and we hope this isn’t the case, if you find yourselves not having made -- not having contracts for the first traditional commercial sales yet, in order to -- in order not to potentially bruise the stock price again with a significant follow-on offering, is consideration being given to some at the market offerings, smaller numbers of shares over time as opposed to the risks incurred with follow-on offerings to the stock price?

The simple answer is yes. And the broader answer is, I’m really -- I’m anxious to avoid the continuing dilution to the extent that that’s possible, which means trying to grow past discounted offerings heavily weighted with warrants and so forth. So, the Board is looking at sort of creating -- we’re looking at the à la carte menu of our options try to best protect our existing shareholder base, even while we might be trying to attract some additions to it. It’s a proper question about an issue that I am very sensitive to.

This concludes our question-and-answer session. I would like to turn the conference back over to John Rice for any closing comments.

Thank you. Thank you all for your patience with this call and thank you for your patience with Sigma as we drive to market. I look forward to talking with you next year.

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