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No, I trust them to make decisions that are 100% beneficial to management and themselves. If these decisions happen to coincide with shareholder interests that's great. I want a board that is focused on doing what is most beneficial to shareholders without regard to what may benefit management. This may even include at some point in the future modifications to the current management structure.
Tom O'Mara is the only independent board member at this time. While this is a consideration for upgrading it is of far more concern to me as to how this affects the decisons made by the current board. A "insiders board" is loyal to management while an independent board has stockholders interests at heart. I'm encouraged by SGLB's progress toward comercialization and the potential for revenue generating contracts, but will not touch the stock with a ten foot pole until I see a majority of board members classified as independent. There will be zero institutional or fund investments until this situation is rectified.
"From what I gather (someone correct me if I am mistaken), they have filed a "base" prospectus for $100,000,000, and filed a supplement for $25,000,000 to be offered as an "at-the-market" (ATM) offering. The $25M is included in the $100M, so the entire offering is for $100M, with $25M being filed as ATM, the remaining $75M will await a future supplement if needed."
This is the way I understand the prospectus as well. It is difficult for me to understand the reasons behind taking this action however. In my opinion the prospectus has nothing to do with their ability to upgrade to a major exchange. They have several more bridges to cross before that is even a remote possibility. The reasons stated in the prospectus for the offering are puzzling as well:
1. Reducing indebtedness: To my knowledge there is no indebtedness.
2. Aquiring another business: Certainly a possibility, but no obvious candidate in sight.
3. Repurchase common stock. Companies normally repurchase their stock when they consider it to be undervalued by the market. I don't understand the logic of selling stock to later repurchase it. Perhaps someone could help me out here.
4. Working capital. This one does make sense. If sales are still sometime in the future they will need funds to operate in the interim.
When fully implemented the 25 million dollar offering will dilute current shareholders by 38.5% at 10.9 cents per share. Mark, Vivek, and several board members are significant shareholders and their holdings will be diluted as well. I'm having a hard time understanding why a line of credit or debt issuance (even at a high interest rate) would not have been a better option to provide interim working capital. This would have avoided the dilution and would seem to have been a better solution for short term financing.
There is the possibility, as others have suggested, that SGLB is expecting a significant surge in it's share price due to upcoming announced contracts or forecasted revenues and would capitalize on the boost in share prices to sell shares. If this were the case however it still would have made more sense to do a line of credit or issue debt so that a positive revenue announcement would have not been affected by share dilution.
The market does not seem to be affected this morning one way or the other by managements actions (which admittedly surprises me). Shareholders as a whole obviously view this offering in a more positive light than I do.
My read is that they now have the right to issue these additional shares when they feel it is to their advantage to do so (the market price is right or they need the funds or both). I don't see anything that says this will happen immediately. No time frame is given that I can find.
THE OFFERING
Common stock offered by us
Shares of our common stock having an aggregate offering price of up to $25,000,000.
Common stock to be outstanding after this offering
Assuming that all $25,000,000 of our common stock is sold pursuant to this at-the-market offering prospectus at an assumed offering price of $0.109 per share, which was the last reported sale price of our common stock on the OTCQB on September 18, 2014, we would have 847,598,859 shares of common stock outstanding.
Manner of offering
“At-the-market” offering that may be made from time to time through our sales agent, Ascendiant. See “Plan of Distribution” beginning on page S-9 of this at-the-market offering prospectus.
Use of proceeds
We intend to use the net proceeds from the sale of the common stock described in this at-the-market offering prospectus for general corporate purposes which may include, among other things, reducing indebtedness, acquiring other businesses (although we currently have no agreement to acquire any business), repurchasing our common stock and making capital expenditures, as well as for working capital. See “Use of Proceeds” on page S-6 of this at-the-market offering prospectus.
Risk factors
Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page S-4 of this at-the-market offering prospectus.
OTCQB symbol
SGLB
The number of shares of our common stock to be issued and outstanding immediately after this offering as shown above is based on 612,241,061 shares issued and outstanding as of June 30, 2014, and excludes as of that date:
· 18,796,296 shares of common stock issuable upon the exercise of outstanding warrants having a weighted average exercise price of $0.141 per share;
· an aggregate of 30,150,000 shares of common stock reserved for future issuance under our equity incentive plans.
Driftin:
Exactly right.
We won't know what the PE will be until there are actually profits to compute against sales but I'm sticking with my 15% estimate (at best). Average software net PE ratios are 20%. SGLB has a backlog of expenses with no sales so I expect the earliest PE's to be below the average. We simply don't have sufficient information to make accurate projections at this point. We are both making broad assumptions here. It will be interesting to see what the real percentage ratio turns out to be.
Pretty puny whales out there. Seems there are more minnows than they can swallow.
Or perhaps the bigger question is…...why after commercialization has been announced are not the 99+% of the shareholders who are currently sitting on the sidelines gobbling up shares? How much longer is the argument that the MM and shorts are "manipulating the share price" going to hold water? Is it even remotely possible that the lack of revenue in a down market has caused some earlier investors to move on? Or, is the stock movement a plot by a significant investor or two to accumulate shares on the cheap? Not sure we will ever know the answers but the downward trend in share price seems to be firmly in place until we hear news of contracts/revenue.
Seems I heard similar pronouncements when the PPS was at .15/.16. There will be no relief until orders are booked. I readily admit that even I am surprised. I had thought that the big stumbling block was commercialization. Now there is a "releasable product" and no orders or contracts. I would have assumed that if GE/Honeywell,et.al. were chomping at the bit to utilize the technology they would have had orders waiting in the wings for the release of the technology. I understand that the wheels of commerce often move slowly so the "wheels may be turning" but until they do the stock PPS stays in the current trading range or lower.
Driftin:
Can't disagree with any of the three points you made. All are valid and all are important. I would add however:
1. Mark and Vivek are stretched incredibly thin. They are wrapping up an extremely complex product development cycle. Attempting to maintain important industry contacts. All the while shopping for contracts and orders.
2. While their scientific knowledge and experience is exceptional, their business knowledge (and unfortunately that of the Board) is clearly not up to par. The whole team is simply unbalanced with only a single recruit slated for market development activities (and by the way is this person even on board yet).
3. A skeleton staff of less than a half dozen scientists is not partic;arly appealing to the likes of a GE or Honeywell that may be considering investing many millions of dollars in their software. Who will maintain the software? Who will do the training? Who will maintain the documentation? These are all real questions for a commercial software release. These issues become even more significant when new customers (Ford, GM, Toyota, etc. ) are considering major purchases. They have not had the luxury of tinkering with prototypes and I believe are going to be reluctant to make a major financial commitment until SGLB is a far more mature and well rounded company. Just my opinions, but I've been involved in marketing high technology my whole career and I think I understand what it takes to swing contract commitments from major players. I simply do not believe the ram- up in sales is going to be anything like what is currently being discussed.
Driftin:
This is just one more reason why I feel so strongly that more independent board members are needed. Shareholders need board members with no personal ties and/or allegiance to management. Board members should be asking the hard questions asked here and demanding a more open flow of communication to shareholders regarding the answers received. I see this as the single greatest weakness in achieving SGLB's full potential and any shareholders attending the annual meeting should insist that the Board be expanded to include more independent views.
SGLB has traded in a fairly tight band between .11 and .12+ for well over a month now. Yet the Board discussions never changes: The stock is consolidating; it's under accumulation; there is one big buyer scooping up shares from all the weak hands; the shorts are going to have to cover; the shorts are going to get burned; there is a short squeeze coming, etc, etc. The simple truth is that until there are contracts announced and/or revenue booked nothing is going to change. The so-called weak hands that sold at .15 or .16 (when most here were touting the bargain prices) are 25-30% better off if they choose to get back in. The dots can be connected until the cows come home but that is not going to change the share price. The longer SGLB goes without revenue or contract announcements the more pressure there will be on the share price. It makes little difference how many products are released….it's how many are sold.
Must be those terrible shorts at work. What happened to all the predictions that on any kind of good news the stock price would run away so fast that it would be impossible to buy shares? Contracts and revenue. Enough said.
A question that I believe needs answering is exactly how Mark defines "commercialization". We all have our own internal definition of what commercialization means but when you start researching the business definition you get quite different interpretations of the meaning. One definition talks about "managing a business for profit". If Mark is using the term in this sense it would mean that in his mind commercialization occurs when sales are made and revenues accrued. Another definition of commercialization is the "stage in product development where the decision to order full scale production and launch are made". This definition is pre-sales. Another definition talks about commercialization occuring when a product is "offered for sale." Each definition has different implications for the PR3d timeline and it would be helpful to know the context in which Mark uses the term.
I was simply feeding back to Crook the examples he cited just the day before with significantly lower net margins which of course would require greater sales to generate the kinds of stock prices he was citing. I agree however that this sort of exercise is useless because we simply don't have enough information. I have my own ideas which are never popular here so I've simply made a note and will wait to see how close I come.
Crook:
Just yesterday you cited four companies that you thought could be somewhat comparable to SGLB. If you take their net profit percentages you get dramatically different results. I think exercises like this are meaningless in projecting share prices. We really have no idea what the net profit percentages are going to be and if they start to generate sales this year or well into next year don't forget that all the expenses up to and including the date of sale has to be incorporated in the calculation. Run your scenario again using your yesterday examples. You will find it a bit more sobering:
3D Systems 8.59% Net Profdit
Autodesk 10.06 Net Profit
Materialise 4.96 Net Profit
Arcam .87 Net Profit
Crook:
By the same token look at the net profit margin of these same companies. If you consider these to be somewhat comparable then SGLB's sales are going to have to be much higher to generate a 5-10 million dollar net.
3D Systems Net Margin 8.59% (http://www.marketwatch.com/investing/stock/ddd/profile)
Autodesk Net Margin 10.06% ( http://www.google.com/finance?cid=30085)
Materealise Net Margin 4.96% ( http://www.google.com/finance?q=materialise&ei=G84EVJjUC4qjqQHzwIGACw)
Arcam Net Margin .87% (http://www.gurufocus.com/term/netmargin/AMAVF/Net%2BMargin/Arcam%2BB)
Questionable Margins.
I think the projected margin numbers being tossed around on the Board are wishful thinking in the extreme. Of 273 software firms surveyed net margins averaged 20.47% (see http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html) Operating and gross margins are of course higher but net margins (after tax) average just over 20%. If we are highly generous and assign an expected net margin of 30% to SGLB that means that to generate .016 cents per share in net margin ( 10 million net margin) they would have to have gross sales of better than $33,000,000. If you give a P/E ratio of 50 to those earnings you would realize about an .80 share price. I know others will differ but I don't see 33 million dollars in sales on the near term horizon.
Driftin:
In my mind the "line between investing and gambling" moves based upon the uncertainties associated with a return on your investment. The greater the uncertainties the greater the "gamble". The future of SGLB in my opinion (as opposed to your own) holds almost no certainties. There are simply too many unknowns over too long a period of time. This will correct itself as time passes and the future becomes clearer. As the future becomes more certain the cost of investing/gambling in SGLB will change as well.
Driftin:
Projecting what is going to happen with a start-up penny stock company in an emerging technology 2-5 years in the future is more akin to gambling than investing. You stated yourself how quickly the technology and it's applications are changing. Two to five years in the future the economy, the competition, the applications, and the user base will all have changed. All of these factors are independent of what SGLB is able to achieve or not in that timeframe. It is a pretty far reach to make the assumptions you have made without the benefit of a crystal ball. I wish you every success but I can pretty much assure you that the future will be different (perhaps more or less favorable to SGLB) than your current outlook.
Driftin:
Your scenario sounds much more like a mature company with secure finances, a large staff, and an existing track record as a profitable concern could accomplish rther than less than a half dozen employees operating out of a two room office in a business incubator park. While your projections may eventually come to pass don't bet your lunch money that anything on this scale is going to happen in the next 24 months.
I would agree that this is what seems to be happening. I guess the term "accumulation" implies to me that there is a base being built under the share price leading to a higher price per share. At what point do you stop referring to what's happening as "accumulation"? When the share price reaches .10, .09? Surely there is an "end point" to what would generally be considered accumulation.
Would one of you "accumulation theorists" enlighten me on your thinking please. It would seem to me that if the stock was under accumulation at the very worst you would have a firm price and more likely a rising price. SGLB has been in a consistent down-draft for well over a month now. If someone were accumulating shares (at least in any number) I simply don't understand how the stock could continue to fall so consistently. I remain convinced the drop is caused by small retail holders tiring of the lack of progress and throwing in the towel. I don't know how to test either theory, if someone else does I'd certainly be interested.
I agree that there is little shorting occurring. I don't agree that the stock is under accumulation. Not all shareholders are as certain as those who post regularly on this board that SGLB is all but a sure thing. They have watched their investment lose value over the past month while the overall market continues to climb. They are simply redeploying funds into more profitable options. Until we see significant contracts and real revenue the downward pressure will continue. This could be three months or three days it's anybody's guess.
Thank you. I see the next little while much as you do. My only difference of opinion is that I think that SGLB will experience some smaller contracts/agreements early that will signal a brighter future and there will be ample time to enter below recent highs. As you say, all conjecture.
r0und3r:
You have been clear on your outlook for SGLB longer term, but how do you see the PPS behaving over the next 60-75 days assuming no major revenue / contract announcements?
Duffy: If you have exhausted your tirade about MBA's I can point you to an equal (or greater) number of geeks whose IQ's were in the stratosphere and had the common sense of a three year old. My point was not that Mark and the Board are incompetent but that they have chosen to start a business with a team that is unbalanced in terms of skill sets. If you have an opportunity pick up a copy of todays Wall Street Journal. They have an entire "Small Business" section devoted to "Start-Ups". After interviewing hundreds of startup executiives they report that the biggest gaps they had in experience was "Lack of Sales Experience" followed in a tie for second "Lack of Management Experience". Mark has chosen to surround himself with the folks that he is most comfortable with: other scientists and colleagues that he has worked with in the past. There is a single Board member who is an "outsider" with a business background representing your interests as opposed to management's interests. If you are comfortable with that situation, so be it. I am not.
Driftin:
Thanks for the clarification and my apologies for perhaps reading too much into your response. I can see now that we have very different perspectives on what the status quo is and what is/is not needed going forward. That's what makes a market and time will be the ultimate judge of whose viewpoint was closest to the mark. For shareholders sake I certainly hope your perspective is correct.
Chef:
I sold all my SGLB shares sometime ago. I continue to have a strong interest in the company because I have many close friends who are current or retired employees at the Lab and I know the quality of R&D
that goes on there. I also attended the last Board meeting and was extremely impressed with Mark and with the Board members. There were only a very few of us in attendance at the meeting and we had an extended opportunity to interact. I made as strong a case as I could at that time about the need to bring on additional outside Board members with strong startup credentials. They did bring on O'Mara very shortly after that but that is clearly not enough to change things around. Right now I see SGLB as a very insular self-contained organization that does not feel that they have to answer to anyone. This is evident in the lack of shareholder communications, the repeated miss on self announced commitments, and some (what I consider to be ) bonehead moves like the outright purchase of a 3/4 million dollar printer (that has yet to be delivered). It is extremely hard for me to understand why time could not be leased on a close by printer, or at worst enter into a lease instead of a purchase agreement on the printer they acquired. The excuse that it was going to be a revenue generator for custom made parts was simply laughable.
I'm watching the share price closely now and while I'm still uncomfortable with the current risk/reward the share price is getting closer to where i will be a buyer once more. If I buy in before the Board meeting, I will almost definitely attend, if not of course I will not attend.
Driftin:
It seems we agree on the problem I guess I see it as more serious than you do. For all the talents I imagine and hope Tom O'Mara to have he is but a single Board member on a Board that meets quarterly. I think it is a lot to expect that he is going to single handedly infuse a sense of urgency along with the skills to get products to market. I have spent my entire career in the high tech industry and while my background is in software and computer hardware I can't help but see a great deal of similarities. I don't question for a moment that Mark and the Board want to get products to market and see revenue begin to flow. It's just that they want to do a lot of other things at the same time that represent the reward system in the climate that they came from: publishing of scientific papers, attendance and speaking at conferences, recognition by their scientific peers for the work they do, etc. Deadlines, contracts, revenue generation are all in the mix but they are not the focus. The Board is made up of retired scientists (all in their mid seventies and older). How do you think their priorities and urgency to get a revenue generating product to market compares to the 30 something shareholder on this board who has (perhaps somewhat foolishly) devoted fifty percent of his investment funds to this stock with the conviction it is going to fund his childerns education and make for a comfortable retirement? I believe the two are quite different.
Put another way (perhaps somewhat inperfectly) expecting a scientist to have the skill sets and focus of an experienced entrepreneurial MBA is a bit like asking a carpenter to install the plumbing in your house. It is likely going to get done but not with the efficiency or elegance, or cost savings that the experienced plumber would bring to the job.
In life we all tend to gravitate toward what we are good at. It's certainly clear that Mark and Vivak are good at science. The SGLB Board is very good at science as well. They all come from a scientific environment that is clearly world -class. What is also becoming increasingly clear is that none of them are very good business people. The drive to get a product to market and get a return seems to be non-existent. What seems to be missing is a business visionary (or a Board) who knows enough of the science to understand the market and has the business smarts to enforce development schedules, negotiate contracts and get a deliverable product that generates revenue into the market. At Apple, that individual was Steve Jobs, A first class SOB in anybodys' book that ever worked for him, but a take-no-prisoners manager who accepted no excuses for not turning out exceptional profitable products on time. The Steve Jobs of the world are hard to come by but I see the lack of business know-how in both the officers and Board of SGLB as a significant deterrent to capitalizing on the amazing potential of their products. Unfortunately, I don't think that either Mark or the Board recognize this shortcoming in themselves….it is simply out of their comfort zone. Until this situation changes I envision more floundering on the way to market and a long term inability to truly capitalize on what they have worked so hard to develop. Hopefully, they will recognize this need before it severely shortchanges the potential that they have all worked so hard to create.
The jury is still out as to whether exiting hands are weak or clairvoyant. The longer this drags out the smarter they may seem.
Alignment of Interests. I gave some serious thought last evening about SGLB and why they seem to have difficulty getting to the point of self-sustaining profitability. SGLB has struggled to commercialize a product that would provide a revenue stream to support on-going business operations. As outlined in the Nanalyze piece projections for commercialization have been made in May, August, and November of 2012 and again in May and August of 2013 yet to date shareholders are still waiting. I got to thinking how could this happen repeatedly with no consequences to management (except for a generous bonus for Mark Cola). I believe the answer lies in the composition of the Board of Directors and the fact that with exception of the recent addition of Tom O’Mara within the past year all of the directors are considered inside directors (either officers in the company, previous employees, or close associates of SGLB). The company officers as well as most Board members with the exception of O’Mara are previous employees of Los Alamos Labs employed as senior research scientists. O’Mara is the only “outside director” who is truly independent and has a strong incentive to protect shareholder interests as opposed to management interests. Coming from the Lab environment, where all activities were government funded and the emphasis was on scientific research and not on profitability, I don’t believe the current board of directors has been an adequate independent voice in representing shareholder interests. Scientists are often more interested in peer recognition, the publishing of scientific journals, association and collaboration with like-minded scientists, etc. than they are in bottom line profitability. When I attended the last Board meeting I made an appeal to bring additional independent directors on board, specifically those with a broad business background. O’Mara, who owns his own management consulting firm and has a long and distinguished management background was brought on late last fall. He was an excellent choice , but in my opinion we need about six more Board members just like him to truly make a difference. Until we have a board of directors who is firmly and unwaveringly focused on achieving commercialization and who will hold management accountable for achieving that goal we are going to continue to struggle.
Independent directors who are not involved in the day to day operation of the business but who have backgrounds and experiences that can contribute to the setting of goals and objectives for management will be critical to SGLB’s long term success. Independent directors need to regularly evaluate the performance of management in meeting previously agreed upon goals and milestones and reward or replace management as necessary.
In my humble opinion, while Mark Cola is unquestionably a brilliant scientist, he may not be the best choice to lead the company into profitability. A senior manager with significant management background, and a proven track record in bringing start-ups to profitability would be a better choice. Mark could make a significant contribution as the Chief Scientist or Technology Officer and would allow him to focus on what he does best.
The upcoming Board meeting will be the very best opportunity you will have to make your opinions heard. Independent Board members whose interests are 100% alligned with shareholders will be critical to SGLB’s future success.
From the IHUB Site Administrators Handbook: " Posts about or focusing on other Members or groups of people and their reasons for posting on the board (i.e. "XYZDownDaDrain" is just a basher, ignore him", "XYZToDaMoon" is a pumper", "the naysayers are very loud today", "c'mon, where did all the cheerleaders go?"). The post does not have to be addressed to a specific person. If the post is about other Users then it should be removed." Just a caution to make your point without referring to another member of rhe Board.
There has been considerable criticism of the Nanalyze report on the Board today. It is certainly true that while the facts they selected were accurate (to the best of my knowledge) they were "cherry-picked" and did not present a full and unbiased assessment of SGLB's future potential. They conveniently left out a number of positives while stressing management's dismal commercialization forecasting abilities. Never-the-less their report was not much different than the equally positive bias that is presented daily on this Board. Having a number of very large shareholders here one would have thought that the seeming inability of SGLB's management to accurately predict when commercialization will occur would be a topic of considerable concern. Their past record put's their current projections for commercialization into some doubt and is going to weigh heavily on the stock price until they actually do produce. I think that Nanalyze's suggestion to show up at the October Board meeting and stress the importance of shareholders receiving accurate and timely progress projections is a very high priority. These Board meetings are very thinly attended (there were less than a half dozen in attendance at the last meeting) and you will have ample opportunity to make yourself heard. A few hundred dollars invested in an airplane ticket would be money well spent in my opinion.
Great post Silversmith:
I think you just delivered a sense of reality for what we can look for in the near to medium term. SGLB may very well have great success in the longer term but the next few months are going to be downright ugly unless there is some unexpected good news
I live in Albuquerque and will make it a point to drive by next time I am in Santa Fe. The last board meeting was held in the incubator facilities and the last time I was by (about two months ago) they had not moved. I'll check and report what I find.
Risk, uncertainty, recent share price trend, lack of management communication….just to name a few.