NextTrip Inc (NTRP) 2019 Q4 法說會逐字稿

Good day, and welcome to the Sigma Labs Fourth Quarter and Full Year 2019 Financial Results Conference Call and Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Chris Tyson, Managing Director of MZ North America. Please go ahead, sir.

Thank you, and good afternoon. I would like to thank you all for taking time to join us for Sigma Labs' Fourth Quarter and Full Year 2019 Business Update and Results Conference call. Your hosts today are Mark Ruport, Executive Chairman; John Rice, Chief Executive Officer; and Frank Orzechowski, the company's Chief Financial Officer.

A press release detailing these results crossed the wires this afternoon at 4:01 p.m. Eastern today and is available on the company's website, sigmalabsinc.com.

Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast, including those regarding future financial results and industry prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company's SEC filings for a list of associated risks, and we would also refer you to the company's website for more supporting industry information.

At this time, I would like to turn the call over to Sigma Labs' Executive Chairman, Mark Ruport. Mark, the floor is yours.

Thank you, Chris, and good afternoon, everybody, and thanks for joining us today. It goes without saying these are unprecedented times as the coronavirus is affecting every aspect of both our personal and professional lives. I hope that you and your families are safe and that we begin to see some positive signs this week that the measures that the country is taking are beginning to slow down the spread of the virus and the number of new incidents.

As far as today's call is concerned, we will be concise, specific and relatively brief. John Rice, our Chief Financial Officer, will provide a review of the 2019 highlights. Frank Orzechowski, our CFO, will review the 2019 financials. And I will discuss our path forward. We will conclude the call with a question-and-answer session. John? John?

We were muted. Thank you, Mark.

Okay. You're welcome.

I wanted to echo your comments about the coronavirus and say to you, our shareholders, to our owners, that you are part of our Sigma family. We hope you are well and we hope you are safe, and we hope that you will sense and catch our optimism as we go forward for Sigma.

In 2019, we accomplished several major objectives that laid the foundation for the company to complete a 3-year transition that you've all been following patiently, from an R&D company, into one that has fully commercialized product that is equipped to, and we believe on the verge of, generating significant revenue and increasing valuation for our shareholders as we go into 2020 and on into the future.

In 2019, we designed and executed the RTE program. As many of you know, this was the "try before you buy" program, and it placed our equipment in test evaluation in very large companies. The test in 2019 laid down a platform of a proven product performance off of which we are now launching or selling in 2020 and beyond. In 2019, we completed productized in PrintRite3D when we released version 5.0 last May. 5.0 enhanced our software package with a sophisticated and very user-friendly customer interface tool, and it enables process engineers to go deep into the data analytics of a build or a single part in real-time as the build is taking place or at any other time to mine and evaluate data to better understand the process.

Now when it was released, this important upgrade made our product accessible and usable to both process engineers as well as machine operators on the floor. So we're learning now in the corona age that version 5.0 is even more important because we have process engineers we are talking with daily now who are working remotely and they have found out that they are able to fully use PrintRite3D to continue to monitor their operation in process as if they were beside the machines. And if they did not have PrintRite3D and they received an alert, they would be getting a call from a machine operator miles away asking them to come down to the plant. So this is already a big deal.

In 2019, we enhanced our competitive IP, intellectual property moat with new patents. One of our, as you know, one of our principal strategies is to license our industry's major OEMs to sell PrintRite3D inside their product on the model of Intel Inside. And our growing patent portfolio is our defense against companies seeking to just appropriate our technology. And as our issued patents continue to roll out, including 2 more that we announced yesterday, we think that it is simply easier and wiser now for OEMs to seek a license of our technology rather than risk attacking our patent walls.

We exited the fourth quarter, actually, the whole year, having built strategic relationships with end-user customers like Airbus and Baker Hughes, OEMs like Materialise and Additive Industries and others we cannot mention due to NDAs. And currently, we continue to collaborate with R&D institutes like Fraunhofer -- or such as Fraunhofer and the National Institute of Standards in the U.S. and with universities with additive manufacturing programs as part of our drive to become the industry standard for defining and testing 3D metal quality on any and all brands of laser better than AM equipment.

So all of the above simply means that to us in the company, 2019 was the year in which we completed our transformation into a commercial launching pad, so that this year, 2020, and beyond, we can drive both revenues and cash flow.

And with that, I turn it over to Frank Orzechowski, our Chief Financial Officer.

Thank you, John. Our detailed financial results are contained in our Form 10-K filed with the SEC today, and the press release we issued contains key highlights of our financial results. So for today, I will confine myself to a concise review of our financial results for the fourth quarter and the full year of 2019.

Our revenue for the full year of 2019 totaled $402,000, of which $133,000 or 33% was earned in the fourth quarter of this year. This compares to revenues of $388,000 for the full year of 2018, of which $56,000 was earned in the fourth quarter of last year.

Our gross profit for the full year of 2019 was negative $172,000, of which the fourth quarter contributed negative $105,000. The company's 2019 gross margin is primarily a function of variable additional travel and labor costs associated with the on-site and remote collaboration involved in the company's rapid test and evaluation programs.

Our operating expenses for 2019 were $6.2 million, of which $1.5 million were incurred in the fourth quarter. Total operating expenses for 2018 totaled $5.7 million. The increase in our total operating expenses was primarily driven by a few factors: number one, increases in salaries and benefits of $525,000 and occupancy and related general office expenses of $57,000 related to 6 new hires; increased research and development expenses of $155,000 related to the continued development of our PrintRite3D product suite; and increased travel expenses of $93,000 related to continued outreach to prospective OEMs, service bureaus and end-user customers and our ongoing expansion into the European market. Partially offsetting these increases was a reduction in stock-based compensation expense of $348,000.

Our net loss for the full year of 2019 totaled $6.3 million or $5.37 per share compared to a net loss of $5.6 million or $8.10 per share in 2018, and I will note that all of these numbers are post-split adjusted. Net loss for the fourth quarter of 2019 totaled $1.6 million or $1.17 per share compared to net loss of $1.7 million or $2.01 per share in the fourth quarter of 2018.

Cash totaled $0.1 million at December 31, 2019 as compared to $1.1 million at September 30, 2019 and $1.3 million at December 31, 2018. Cash used in operating activities for the full year ended December 31, 2019 totaled $5.5 million compared to $3.8 million in the full year ended December 31, 2018.

Subsequent to the close of the fourth quarter, the company completed 2 private placements consisting of shares of convertible preferred stock, warrants to purchase additional shares of convertible preferred stock and warrants to purchase shares of our common stock, resulting in net cash proceeds to us of approximately $1.7 million. If all of the remaining warrants to purchase shares of preferred stock and common stock are exercised for cash by the holders, the total potential gross proceeds to us will be approximately $13.8 million.

And with that, I will now turn the call back over to Mark for a look into 2020.

Thanks, Frank. Obviously, it's impossible to know what will happen in the coming days, weeks or months. Our first obligation is to our employees. The State of New Mexico has ordered all nonessential businesses to close. However, we are a component manufacturer, so we can remain open as long as we follow the CDC recommendation and limit gatherings to under 5 people, which we are doing.

Fortunately, as a software company, we are used to working through and supporting our customers remotely. Since we support customers in Asia, Europe as well as United States, we say that Sigma never sleeps. As a company, we are doing everything possible to keep things moving with our engineering teams and our customers. Our hope is that when we begin to return to some state of normalcy, we will be prepared to move forward without losing too much ground.

As you know, we have a special shareholders meeting scheduled for this Friday. There are 2 proposals on the ballot. The first is to prove the issuance of shares for a private placement. And the second is to increase the authorized common stock. The votes are in progress, and we are pleased that ISS has recommended that shareholders vote for both. If you haven't voted, please do so.

As a business, for those of you that are new to Sigma, I would like to give you a brief refresher on what Sigma does, how we are different and why you should care. We develop quality assurance software for the additive manufacturing or 3D printing industry. 3D printing is seen by many to be the next revolution in manufacturing. A few advantages of the 3D metal printing are: designers can create parts that were impossible to make with other fabrication methods; subassemblies that would require multiple parts can be designed and manufactured as one; parts can be created that are lighter, stronger and more durable; and of course, this is extremely important for industries like aerospace and automotive.

Customization on metal parts is easier with 3D printing than the traditional methods. And there is less material waste since the process is additive versus subtractive and the powder is recyclable.

One of the major obstacles holding back the broader use of 3D metal printers is ensuring the quality of the part being manufactured. There are so many variables involved in the process, from metal powder being used, the strength of the lasers, the number of lasers, the manufacturer, the printer, et cetera, that quality assurance is done after the process, often by doing a CT scan of the finished product. This, as you can imagine, is costly and time-consuming and a major limiting factor to the full industrialization of additive manufacturing. Currently, there are a few of any standards for ensuring quality across industries, supply chain or even a manufacturing floor. Our product, PrintRite3D, is the only product that we know of in the market today that works on the majority of 3D metal printers, monitors the manufacturing process layer by layer and is able to detect and identify defects and anomalies real-time, limiting waste and saving time and money.

Our goal, as John had mentioned, is to become the de facto standard for quality assurance for 3D printing and metal parts. And our opportunity is very large. We estimate that the addressable market, to be approximately $2 billion between 2021 and 2027, which translates to approximately $100 million of revenue to Sigma for every 5% of the market that we can claim.

We got off to a very fast start in January due to the success and feedback of the RTEs that John mentioned and the stability and features of PrintRite3D. We have transitioned from selling evaluations, to selling commercially off-the-shelf software systems. If a customer wants to do an evaluation, we will jointly establish a success criteria as part of the contract. We have recently entered into these more typical software agreements with several customers. This, as you can imagine, is a major milestone for the company, in that it streamlines the sale. It actually takes less resource to sell than to do an evaluation. And it's repeatable and scalable. It also allows us to incorporate resellers into our sales model in certain parts of the world that we don't have direct sales, something that we could not do with the RTEs.

We are doing this at the same time as we see a convergence of 3 factors that will drive the growth of the business. First, the industry continues to mature, and it's getting to the point where it's mature enough where end users are making plans to move towards serial production with multiple 3D metal printers from different manufacturers. The second thing that we see happening is clearly that PrintRite3D 5.0 has been proven to work on multiple printers, from different manufacturers, single-, dual- and quad-laser configurations and consistently correlates to CT scans and accurately identifies and classifies defects.

Finally, there is almost universal agreement that the industry needs a third-party in-process quality assurance solution. Sigma's technology is seen as the only viable product that works across machine types and supply chains. Our strategy is to attack all segments of the market and work with standard organizations to position PrintRite3D as that de facto standard. I do not see any major market barriers to us achieving that goal.

Our relationship with Materialise opens up a retrofit market opportunity for us of over 2,500 printers. 10% of that market would translate to millions of dollars of revenue for Sigma. We are actively making progress with several hardware OEMs to certify our technology with their 3D printers. Based on the manufacturers' forecast, each opportunity represents a multimillion-dollar, multiyear revenue stream to Sigma. And we continue to make significant progress with end users as they move towards serial production. Each one of those interactions confirms our value and moves us closer to your -- to our goal.

As you saw from the recent announcements with Mississippi State and Northwestern University, we intend to help educate and influence tomorrow's manufacturing leaders by collaborating with such innovative organizations that focused on additive manufacturing. As you lay these revenue streams on top of each other, the effect is a slow but steady ramp to increasing revenue quarter-over-quarter. In addition, as the revenue mix changes from end user and R&D organizations to software-only OEM, our gross margin shifts dramatically. The question, as you know, and several of you have asked me in the last conference call, has been one of timing. And with today's additional challenges, that becomes impossible to predict. However, based on our ability to continue to develop our software and support and collaborate our customers remotely, I believe that we will see the business recover quickly when the crisis subsides. When that happens, based on what we know today, we're positioned to increase our revenue quarter-over-quarter for the foreseeable future.

I would like to leave you with a couple of additional thoughts about our market opportunity for the coming years. There are 2 very significant factors that are relevant in today's world and I believe will become increasingly important 2 to 3 years out. The first is the movement towards sustainable technologies and processes that are environmentally friendly and socially responsible. The second is the effect of the pandemic and the future of manufacturing.

Regarding the former, 3D printing reduces waste, saves energy from reductions in warehouses and transportation. The powder, as I mentioned earlier, is recyclable. And the process is cleaner than traditional processes. The trends towards sustainability is gaining momentum around the world and will become increasingly important to consumers, companies and investors.

The pandemic that we are experiencing today will change many aspects of our lives going forward. I was watching Tom Friedman of New York Times in an interview the other day. If you recall, he wrote the book, The World Is Flat, which happened to have an influence on my career and strategies when I was running other public and private companies. He was asked, "What will be different when we get through this?" And we will get through this. His first answer was e-learning will explode due to people being exposed as a substitute to going to traditional schools. His second answer to the question was 3D printing will explode. Supply chains are too long and complex, traditional manufacturing processes are too rigid, 3D printing moves the manufacturing process closer to where the end product is needed, greatly enhancing the agility and responsiveness of the supply chain.

So when I sit back and take into account the maturity of the industry, the advances in technology, the functionality and stability of our product today, the increased focus on investing in companies and technologies that are socially responsible and the potential changes in the manufacturing process, I see an industry that is truly ready to take off. And Sigma is positioned to do the same.

PrintRite3D is the only technology that we know of that can provide in-process quality assurance in a heterogeneous serial manufacturing production facility. In version 6, which we are actively working on with several of our customers, we'll enhance the use of our technology in serial production environments and move us closer to a true closed-loop solution. The timing, as I mentioned earlier, is unpredictable, but the trajectory is unquestionable. As a company, we will be ready to embrace and meet the challenge of the opportunity in front of us.

Putting current difficulties aside, which I know is difficult, it is a very exciting time for Sigma and we're anxious to get back to work and see our vision become reality.

Thanks for taking time your today. I know we are all consumed with personal issues. And thank you for your support of Sigma Labs. At this time, we'll open up the call for questions from listeners. Operator?

(Operator Instructions) I -- the first question will be coming from the line of George [Carew] with -- a private investor.

Can you hear me okay?

Yes, I can.

Okay. Mark, as John Rice will tell you, I'm a very long-standing, long shareholder. Obviously, there are many questions. I will try to be brief. And if I have more questions, maybe I can come in later after other callers. A couple of strategic questions and a couple of tactical questions, if I may, Mark and John and everybody.

You mentioned Materialise in your prepared remarks, which excited many of us. And you mentioned some numbers, some revenue numbers. Can you refresh us again? I wasn't clear on that. What is the expected, if any, revenue projection in the immediate or near term from the Materialise deal?

Yes. George, thanks for the question. Let me give you -- let me frame the opportunity in what we're doing with Materialise right now. So as you know, we are integrating PrintRite3D with their MCP, their Control Platform. They are targeting that platform to several markets. The first is the retrofit market from printers that are already out in use. And the second are new OEMs that are coming in on the hardware side. The opportunity that I talked about earlier is on the retrofit side. We estimate that there are 2,500 printers in place today that are -- that provide an opportunity for Materialise and Sigma to come in with our joint solution. If we get 10% of that market, what I mentioned was that meant millions of dollars of revenue to Sigma. So that's what the opportunity is. We don't have a forecast on that yet, but the opportunity is clearly there.

The second opportunity with new OEMs coming into the market, we've already jointly called on a couple of hardware OEMs that are looking at combinations of control platforms and monitoring software. And that yet is another opportunity that we haven't quantified. But as you can imagine, if we become embedded in a new hardware OEM platform, we get revenue for years to come as that hardware OEM ramps up their production.

That's very encouraging, and I appreciate that. Clearly, the 3D AM world has been threatening to go into serial production for a while. We all believe -- let me rephrase, many believe that it's because of the uncertainty of the quality of the output, that it's not yet a ubiquitous serial production and that an in-process QA solution is the tipping point that's required. Now while I appreciate our technology is evolving and we're talking about version 6.0, we are plenty good enough if we -- if it were true that we provide the solution. So yet, we have this huge market opportunity, which will go to the billions in terms of a 3D AM business, the whole industry. We're the gate -- Sigma is the gating factor by all accounts, if we believe you. I believe you. But then I ask myself, the market cap of Sigma is $4 million.

It's difficult to convince somebody that we are the holy grail if our market cap is $4 million, right? I can't -- maybe it was the financing deal that's driven us down here, but even at $10 million or $20 million, our value is way too low for the value for the true value proposition we bring to the table for the 3D AM industry. That is a conundrum I'm struggling to deal with and communicate with some fellow investors. Can you comment on that?

Yes, George. Sure, George. When it comes down to the stock market and our valuation, that's not within our control. I think that the thing within our control is generating revenue, getting the product to be commercially available as we have done so today, beginning to generate revenue in the first quarter and increasing that revenue quarter-over-quarter. And in the end, we have to prove our value. And we expect to do that this year, we expect to do it starting this quarter. And we expect to see the valuation increase with our ability to deliver. So net-net is results count, and this is the year of results for the company. And when you combine that with the maturity of the industry and the things that are pushing the industry forward, I think you are going to see a valuation increase pretty dramatically over time.

Our next question is coming from the line of [Mark Rupe], a private investor.

I recall what these calls used to sound like back in the early days of Sigma Labs, and things sound considerably better nowadays. So I commend you guys on that. I know everybody is working hard. I just wanted to confirm, is it, in fact, the case that PrintRite3D is now capable of in-process quality assurance operations on a printer that is running multiple lasers?

Yes. We're running on a single, a dual, and we're working with one OEM on a quad.

Any indications that, that is going to propel the acceptability of PrintRite3D in the industry? Is that -- I mean we have -- except for a few indirect response or indirect indications that, that was the case, I've seen nothing that specifically touted that. And is that something that you guys are putting out to everybody? And does the metal AM world know that, that is the case now?

Yes. Mark, again, a good question. I put that specifically in my remarks today that we're running on a single, a dual and a quad. And we're also running on multiple manufacturing printers, dual and only one quad, but multiple manufacturing versions of dual and single. And we will continue to highlight that. Part of the RTE 2s for several companies was to run on different platforms, both single and dual laser, which we've completed. And we will make more hay of that as we go forward.

Okay. Back to Materialise and the concept of closed loop. I mean I know from talking to a lot of people that closed loop is a dicey situation, but yes, something very much desired in the industry. Is Sigma Labs' sole closed-loop efforts going to reside entirely with Materialise? Or is closed loop being pursued on your own, in addition to the work that's being done with Materialise?

It will be pursued between ourselves and the hardware manufacturer in the platform control system. So if we work with another -- with a hardware OEM and they don't have Materialise's Control Platform, we will be integrating PrintRite with theirs to the objective and the end result of getting closed loop.

Okay. Perfect. That's what I wanted to know. If an end user was not using a Materialise platform, were you still going to be able to provide closed-loop capabilities to them, was a more precise way for me to ask my question. And what you're saying is, indeed, that is the case, right?

If we're working with the manufacturer of that printer or the main developer of the control platform, the answer is yes.

Okay. So one last question, and again, it's our attempt to get a better feel for how much of the industry is truly leaning toward incorporating Sigma Labs and PrintRite3D. We still only have the marquee names of Airbus and Baker Hughes touted out there. I understand NDAs are an issue. But can you tell us, are there, in fact, more and possibly many more large corporations that are, in fact, looking at PrintRite3D right now or in fact, using PrintRite3D right now?

As there are several more large corporations that have completed RTEs, there are several that we're negotiating with for follow-on contracts, both for end-user systems and as OEMs. And there are several other newer ones that have just recently come into play, where, as I mentioned earlier, we have switched from doing the RTE to moving towards selling the commercial off-the-shelf software. And we have several of those that we've already signed contracts with that are beginning to go through their 90-day evaluation or test phase with our solution.

Your next question is coming from the line of [Lee Alford] with [Hammock Investors].

A couple of questions. One, can you give an estimate of how much of the cost of a product is in the back end of it as far as they are testing to see if the product is working?

I'm not sure I understand the question. Could you state one more time?

Sure. So the way I understand what you all do is that if something is not working, you can stop the print and then they will wind up starting up the new piece. So how much can you save them by doing that?

Yes. That's a good question. And honestly, we don't have a specific answer to the question because we don't have enough data yet. But as our users become more comfortable using our product and set tolerances that they are comfortable with for particular defects on particular parts and particular areas of that part, they will begin to stop those processes earlier. And every time they stop a process as opposed to finishing it and finding out they have a bad result, they save money and time. We don't have a good quantification of what that is yet. That is one of the things that we're working to validate. But what we're seeing is the more they use it, the more comfortable they get, the smaller the tolerances they get and they're able to stop the build more quickly than ever before.

Okay. And you spoke a lot about the patents. Have you had a third party come in and evaluate the estimated value of your patents?

I'm going to ask John that because he has a better hold on the history than I. John, do you want to answer that question?

You bet. No, we have not had a third-party evaluation of the patent conducted. Our sense of their strong value was based on 2 things. One, the firm we have used is Kilpatrick Townsend, that I think is one of the top 5 patent firms in the world. And two, we are aware that we are protecting a technology faster and sooner than competitors seem to have entered our realm. So we are very proud and secure with it.

Well, have you considered bringing a party in to do it? I mean considering what your market value is now, I'm going to assume that your patents are worth more than the market cap of the company now. Would it not be helpful for the world to see?

You're absolutely -- we share your assumption at our point in development, where it is understood that the value of the patents to a third party would be more than the cost value that we report them at. And in the event that there was a discussion of acquisition or some other topic, I'm sure that they would pay a third party. Normally, when a company does this for its own benefit, it is perceived as solving your own mind. So it has not seem to us to be a good investment for us to make.

Okay. And one final one. You're pretty far into the quarter. Do you have any color on what the first quarter revenues or second quarter revenues will be?

No. As you might be aware, we're limited in our ability to disclose nonpublic information and provide specific guidance. So we don't have any comment about the quarter. The only comment that I have made publicly that I repeated today is that you will see revenue generation in the first quarter and it will increase in subsequent quarters because of the pipeline that we're building.

Getting back to the patents, I just wanted to add one more thing because I've had several questions about what the patent means to the company and what they protect. And the first patent is more broad and generally protects their future pathways for advanced metrics design. The second patent is very specific to the way our product works today, and that's very important for us in the protection of that product and also our quest to become the de facto standard.

Mark, if I may, the -- Mark just described the 2 patents that we have published that had been issued this week. And we actually have 11 patents issued, and those are just 2 more big bricks in the wall.

Our next question is from the line of [Steven Lasky], a private investor.

Can you hear me?

Yes, I can.

Yes.

Excellent. So my question, I kind of want to add on to what George was saying and ask more about the financing and actually the votes, and why a yes vote is recommended and why I should feel good about voting yes.

I'm going to ask John to respond to that, if you would, John?

You bet. The yes -- the vote is important to the company because it has 2 specific needs. One is to make us able to comply with the -- or waive the NASDAQ 20% rule. And the other is to increase the number of shares available for issuance. If we were to lose that vote, which, at this point, does not appear to be the case, but if we were to lose the vote, that would, in effect, cripple the company from being able to go forward with the financing that has commenced in January and force the company to be seeking to create new relationships and new financing in the middle of a historically unpredictable negative marketplace as the coronavirus churns around us. So if you don't feel good about voting for it, I can assure you, you would feel pretty terrible if it lost.

Okay. And then one of my other questions was around financing and other avenues because, obviously, I think, like Aegis, Iroquois, I don't know how to describe them nicely, I guess, but I feel like they openly short our stock and we're getting dangerously close to this $1.80 mark at this point, which, to me, as a long-holding shareholder, I feel that's catastrophic, right? So I guess my question is are we going to have some other financing here in the future to kind of get these off our back and move things forward yet?

We're looking at -- go ahead, John.

I would put it this way. The -- we have devolved into a more difficult financing as we were a late-stage start-up, trying to get to the point where we are today, if people were saying we need more tangible results than the company has been delivering in the past 3 years. Because of where we are today, and we have paid to get here, my perception is that our options into the future grow and improve based on the fact that we, going forward, are based in all of our prospect of success on getting -- on selling stuff, on making license agreements, on deploying our product into the market. And when that is your problem rather than getting a test going, the results are more visible to the world. And so we expect that the company will begin to look more like the complete package that we've been building. We expect that with the prospect of -- with the reality of revenues and the prospect of cash flow that our financeability improves, that per George's observation, what the hell is the market cap doing down there.

We think that all of these things change when -- as we fulfill our destiny and taking product into the market and proving the customers will buy it. And with that come the opportunities for strategic investors, more rewarding up around and so on and so forth. We have to succeed our way from here.

All right. Do you feel like we have enough cash at this point? Are we looking at further dilution? Are they going to try to exercise all these options to create the cash for us?

You know that you can never have too much cash, and therefore, you never have enough. And I can't go speculating into where this may go with them. I will say that a lot of the agreements made with micro-cap companies are structured so that the company really does well. It is somewhat uncomplicated for the investors to do well. If the company begins to run into difficulties, the investors have defense mechanisms that you have just referred to and the battle that we have to fight to maintain the high visibility of what we think are good prospects to avoid the adjustments.

The next question is from the line of [Anthony Jaros] with [Symmetry].

For those of us who are a little bit new to the opportunity, would you speak about PrintRite3D becoming the industry standard? Can you review the path you were taking to get there and explain why it's so significant?

Sure. So the way we see the market is that there are 4 segments. You have the hardware manufacturers that are producing the printers; software manufacturers, like Materialise or developers that are developing additive manufacturing software; end users such as Airbus that we've talked about before; and research and development in universities. And underlying those 4 segments, there's a set of standards groups. Our strategy is to go after all 4 of those segments. If we're able to do that, we're able to provide an end user that's using multiple printers from multiple manufacturers, a single view, a single look in evaluation of the quality of the parts being developed. That's a very important thing for the serial manufacturer to have on their production floor. We're the only technology that we know of today that is capable of achieving that, that being in-process, standards-driven and across agnostic to the hardware manufacturer and the software manufacturer.

Given that we're the only one who is capable of becoming a de facto standard today, if we're successful in going after each one of those markets, we believe that companies will then go to us for printers and not look for another solution because none of the manufacturers are going to develop a solution for other manufacturers' printers. Now the software developers are going to develop a solution for -- that will run with other monitoring software. So we become, by definition, the best and the only game in town. And that's good for the hardware manufacturers because it allows them to certify a standard level of quality. It's good for the end users because it simplifies their process of managing quality in their own operations and across their supply chain. And it's good for the whole industry.

Interesting. So you're really Switzerland in some respects. And you're not going to have any exclusive arrangements, most likely, with any particular OEMs then. Is that correct?

That's 100% correct. And Switzerland is a good analogy for us because our goal is to accelerate the adoption of 3D metal printing regardless of manufacturer, regardless of industry, regardless of the software that they're running and to be able to be, again, the single point of quality assurance across all those variables.

I understand. So if, in fact, this is the case where you do become the industry's standard, I mean, you're really, at that point, negotiating from a position of strength with these licensing agreements, I would assume, correct?

That's the case. The first thing is to -- it's a market share ground game. And that's why we're attacking all 4 segments and working with the standard organizations. If we can broaden our footprint and if we can magnify and leverage our footprint through relationships with companies like Materialise or some of the hardware vendors we're working with, we get a one-for-many type of influence into the market. So for one relationship, we get hundreds of customers through those OEM agreements.

So I would think to achieve that goal of being the industry standard, your patent portfolio and intellectual property as it stands right now is absolutely significant to your success. And I don't know, to me, do you have any kind of subjective valuation if you had to take a stab at what you feel the monetary value of that portfolio would be?

We do not. All we know is that we believe it's substantial. And as John said that if we get into a situation where it has to be valued, we will do so. Right now, we're focused on driving results, generating revenue and getting that footprint across all those segments that I mentioned.

The next question is from the line of [Aaron Tilden], a private investor.

John and Mark, I've been a long-time investor, since 2013, and I understand it's been a challenging environment lately. And understanding that -- or what Mark said about the revenue quarter-over-quarter, and I just want to refer to a -- the last year's August letter to the shareholders from John, when he said he was optimistic of a clear line of sight to breakeven operations for early 2020. And given our current environment, is there a new time frame for the breakeven operations anticipated?

Yes. I will answer that. And I'm not quite sure about the -- what John said back then because I wasn't around. But right now, I can tell you, we're focused on 3 things as our goal and our plan. And the first, I have mentioned several times, increasing revenue every quarter, and I believe that we can achieve that. The second is keeping expenses relatively flat for the time being as we introduce our product in the market so we can minimize our cash burn. And that leads us to a plan where we cross over breakeven somewhere in 2021. So that's our current plan today. It's one that I believe is achievable. And I'm not quite sure about the statements that might have been made in the past.

Our next question comes from [Towne Smith], private investor.

I have 2 questions. One, can you share with us the number of RTEs that were entered into and how many of those graduated to Phase 2 and how many expired without any subsequent business?

Yes. Let me take a stab at that, John, and if I miss something, please jump in. So Airbus, which we've talked about, is in process and moving towards Phase 2. Baker Hughes, which we've talked about, is in Phase 2. We have a Japanese hardware manufacturer that we are under NDA with, is in Phase 1. We have a contract manufacturer that's completed Phase 1 and Phase 2 that were very successful. And we have another hardware OEM that's completed both phases that is, right now, in final certification of Phase 2. So those 5 have all moved forward and been successful. And John, am I missing one that we have mentioned on a call in the past?

Actually, yes. The very first RTE where we were prototyping that was Materialise. And they, of course, became the relationship we announced a couple of weeks ago.

Right. So the direct answer to your question is all of our RTEs have proven favorable. All of them have reinforced our belief in our product, and that's why we were transitioning off the RTE to a commercially off-the-shelf product. And as I mentioned earlier, it's much easier to sell a commercially off-the-shelf product than it is to convince somebody to do a test and evaluation of software that they can't validate through reference works as documented.

I understand. One other quick question. On the relationship with Materialise, is PrintRite3D, is that embedded in all of their software? Or is that an option that they offer (inaudible)...

It is not embedded at all. Yes, I'm sorry. It is not embedded. Right now, we have signed a joint sales agreement where we will work -- salesmen will go into an account together, and we will sell the joint solution. So it is not embedded. It is not an option that they offer. It's a joint sales where we go in and sell with them. We hope that the relationship will evolve from there in some shape or form. But right now, it's purely a joint sales.

Our next question comes from George [Carew], a private investor.

It wasn't that long ago that the company was very excited about an RTE with an international OEM manufacturer. You cited they were testing our product in 2 different geographies, Asia and America, for 2 different metal parts from 2 different metal powders. How is that going? Is there still excitement there? Is that still progressing?

Yes. I had mentioned a hardware OEM that's completed the RTE and certifying the second RTE. And it's gone very well, and we hope that we're able to put together a relationship with them in the near future. But it's gone well, but it's still under NDA.

Okay. But it's still progressing though, then? Okay. All right. Can I just ask about Siemens? Siemens on our website, we made on and off references to Siemens over the years. Are they still an active partner or potential customer of ours?

I'll again ask John to answer that because it goes back a little bit before my time.

Yes. Siemens has been a sort of 2-round issue. They were one of our first 2017 technology integration programs. So we really did a lot of testing with them on our -- what was then more of an R&D tool. And it was with their assistance that we helped to define what our product needed to be in the eyes of Siemens and the other big folks we are working with. So in the event, about the same time that we completed the development of TEP, which is our ability to detect signatures and products and so forth, the group we were working with Siemens ran out of budget for that program. And so we went into a hiatus with them. And my hope is that we'll come back and work something out to go back in for another test. The problem is we are no longer in the test and evaluation mode. We've done enough of that successfully. Of that -- for folks like Siemens to come back, they would have to enter a more highly priced program. And when you have helped someone develop a product, you are reluctant sometimes to do that. So we'll see how that works out.

Okay. Very good. I know there's talk about valuing the patents. I know it's very difficult. But certainly, there have been a few sources for the size of the 3D AM industry, in the billions. $20 billion is one source. I think I once saw somewhere $40 billion is the potential market as of 2030, I think. It's certainly huge. Typically, patents are dependent on driving that and we see to be the critical missing link, would be -- would represent 1% of that as a minimum. So that gives our valuations of patents in the hundreds of millions, definitely in the $150 million to $300 million mark.

I'm just shocked at Materialise and say, "Hey, Mark, hey, John, thank you very much. It's $100 million. And I'll buy you an iced beer over lunch." So that's one observation. But one specific question about the deal, can Iroquois -- is there a maximum they can own of the company after this deal that's happening? For example, can they be doing the same?

Yes, George, I'm going to let John answer that question. And I think we're going to cut it off, and I have a couple of closing remarks. So John?

5%.

That's the maximum kind of...

It's 4.99%.

Thank you, John and George. And George, thanks for the questions. As I mentioned earlier, it is a difficult time to be excited given what's going on, but we are excited as a company to make the transition to take our product into a full sales and marketing initiative around the world. And we have many dedicated and hardworking people throughout the company that has made that possible, and a sincere thanks to them from all the management.

Lastly, if you weren't able to answer your question -- or ask a question or if you have a follow-on question, please feel free to contact us or MZ Group, who would be happy to answer them. I know there were some confusion in the past on the last call, and I want to personally make sure that we answer everyone's questions.

So with that, we look forward to speaking with you again at our next conference call. I hope everybody remains safe, and we'll talk to you in about 3 months. Thank you very much.

This concludes today's conference. Thank you for your participation.