Filing summary
Entity and period: The request identifies Nexttrip, Inc., but the supplied filing is Sigma Labs, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2020. The summary below reflects the supplied filing; verify the company identity before relying on it.
Business context and financial results
Sigma Labs develops and commercializes manufacturing quality-assurance and process-control technologies, including PrintRite3D for additive manufacturing. Management says revenue depends on further commercialization and adoption by customers moving from metal additive-manufacturing prototyping to production.
| Metric | Q1 2020 | Q1 2019 / comparator |
|---|---|---|
| Revenue | $221,730 | $64,450; up $157,280 (244%) |
| Cost of revenue | $244,703 | $96,555 |
| Gross profit (loss) | $(22,973); gross margin approximately -10% | $(32,105); approximately -50% |
| Operating expenses | $1,559,642 | $1,507,098 |
| Operating loss | $(1,582,615) | $(1,539,203) |
| Net loss | $(1,583,585) | $(1,484,112) |
| Net loss applicable to common stockholders | $(1,898,832), including $315,247 preferred dividends | $(1,484,112) |
| Basic and diluted loss per share | $(1.30) | $(1.60) |
| Cash from (used in) operations | $(1,525,696) | $(1,066,769) |
Revenue growth was attributed to PrintRite3D sales to two research universities and revenue from legacy Rapid Test and Evaluation programs. Cost of revenue rose with support for legacy programs, including equipment upgrades, travel and labor. Cash and cash equivalents were $631,018 at quarter-end, versus $86,919 at December 31, 2019. Working capital was $649,695, compared with a $98,315 deficit at year-end; the current ratio was approximately 1.87 versus 0.91. Financing activities provided $2,120,324, primarily from securities issuances and warrant exercises. Investing activities used $50,529.
Changes, financing and capital structure
- Operating expenses increased $52,544 year over year. Salaries and benefits rose $139,637, partly offset by lower stock-based compensation and R&D costs. Investor relations and professional fees also increased.
- Other income and expense shifted from $55,091 of net income in Q1 2019 to $971 of net expense in Q1 2020, principally because the prior-year period included a $51,877 New Mexico incentive credit.
- The company repaid its secured convertible note in January 2020; no notes payable remained at March 31. The filing reports payment of $56,458 including interest and a late fee.
- January private placements of Series D and Series E preferred stock and related instruments generated approximately $1.7 million in net cash proceeds, according to MD&A. The Series D and E preferred stock accrue dividends at 9% annually, payable in kind. Series D conversion terms include an alternative price formula and full-ratchet protection; specified triggering events may permit redemption at a 125% premium.
- At March 31, 1,045 Series D and 333 Series E preferred shares were outstanding. The filing estimates conversion, including make-whole dividends, would yield 562,762 and 61,651 common shares, respectively. It also reports 1,244,712 common-stock warrants outstanding and 5,025,474 total common shares underlying warrants, preferred instruments and options. These instruments may materially dilute common shareholders.
- A 1-for-10 reverse stock split took effect in February 2020, and authorized common shares were increased to 8 million in March. The filing reports 1,817,834 common shares outstanding at March 31 and 3,086,151 as of May 13.
Outlook, risks and subsequent events
Management expected to sustain operations and commercialization efforts in 2020 without a material increase in cash burn, and planned to fund operations through product licensing, services and securities proceeds. The filing does not provide numerical revenue or earnings guidance. Management cautioned that additional financing may be needed; availability and terms are uncertain, and a financing shortfall could force the company to reduce or halt operations or risk losing its Nasdaq listing.
COVID-19 had already led one customer to withdraw two purchase orders. Management also cited reduced demand from aerospace and oil-and-gas customers, restrictions on onsite work, and uncertainty about the duration of customer spending constraints and access to financing. It noted that wider supply-chain flexibility and additive manufacturing could benefit the business over time. Management said remote instruction for maintenance was helping reduce travel expenses.
- On April 6, the company completed an equity offering with approximately $1.23 million in net proceeds.
- On April 14, it received a $361,700 Paycheck Protection Program loan at 1% interest. Forgiveness depends on meeting program requirements; the company anticipated that a majority would be forgiven but gave no assurance.
- During April, 762,964 common shares were issued through Series D preferred conversions. A further 200 preferred warrants were exercised on April 20, producing $179,400 net proceeds.
- Mark K. Ruport became CEO on April 30; John Rice remained board chair and later entered a consulting agreement with the company.
- The filing reports no legal proceedings, no off-balance-sheet arrangements and no credit line. Management concluded disclosure controls were effective at a reasonable assurance level.
Key facts for investors to verify
- Confirm the issuer: the supplied filing is for Sigma Labs, Inc., not Nexttrip, Inc.
- Review current cash runway, operating cash burn, financing needs and the status of the April offering and PPP loan forgiveness.
- Verify preferred-stock conversion, redemption and warrant terms, as well as subsequent share issuances and potential dilution.
- Assess the impact of canceled purchase orders, COVID-related customer delays and commercialization progress on revenue and gross margins.
- Reconcile the filing’s share counts and financing descriptions with subsequent SEC filings and current capitalization data.