Business context and reporting period
The supplied filing is Sigma Labs, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2017—not a filing for Nexttrip, Inc. The filing describes Sigma Labs as a software and advanced-manufacturing company developing PrintRite3D in-process quality-assurance technology for metal additive manufacturing, alongside engineering consulting and contract manufacturing services.
Financial performance and position
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | 2017: $78,046; 2016: $189,952 | 2017: $518,802; 2016: $642,230 |
| Gross profit (loss) | 2017: $(3,168); 2016: $120,693 | 2017: $251,642; 2016: $434,486 |
| Net loss | 2017: $(1,116,910); 2016: $(719,320) | 2017: $(3,049,616); 2016: $(1,931,833) |
| Loss per share, basic and diluted | 2017: $(0.24); 2016: $(0.23) | 2017: $(0.70); 2016: $(0.62) |
- Revenue declined approximately 59% for the quarter and 19% for the nine-month period. Gross margin was negative for the quarter (about -4%) and approximately 48% for the nine months, versus about 64% and 68%, respectively, in 2016.
- Cash used in operating activities was $1.80 million for the nine months, compared with $1.32 million in 2016. Investing activities used $829,146, including $775,267 in notes receivable; financing provided $4.92 million.
- At September 30, cash was $2.69 million, working capital surplus $2.48 million, total assets $4.57 million, and total liabilities $1.33 million. Current notes payable were $994,909; there was no reported long-term liability at quarter-end.
- Shares outstanding were 4,577,651 at September 30 and 4,718,651 as of November 10, 2017.
Material changes and notable items
- Management attributed lower revenue to reduced programmatic sales, only partly replaced by Early Adopter and OEM Partner program sales, which carried incentivized pricing. Higher costs and lower revenue drove the larger net loss.
- Operating expenses rose, including general and administrative expense, payroll, stock-based compensation, and research and development. Management cited public-offering and strategic-investment costs, additional software-development staff, and product development.
- The February 2017 public offering generated approximately $5.23 million net proceeds. The company also made secured convertible loans with stated principal of $500,000 to Morf3D and $250,000 to Jaguar Precision Machine; both bear 7% interest and mature in 2018.
- Other income for the nine months included $154,568 of state incentives and a $93,206 gain from a decrease in derivative-liability fair value; debt-discount amortization was reported as a $56,441 expense.
Outlook, risks, and contingencies
- Management expected revenue to grow from commercialization, consulting work, and contract additive-manufacturing orders, but said licensing revenue was not expected to increase significantly during 2017. It expected operating costs and cash use to rise as commercialization and marketing expanded.
- Management said available funds and expected receipts were sufficient to cover administrative and operating expenses through 2017, while also stating additional capital would be needed to fulfill business plans. It warned that financing might not be available, could dilute shareholders or impose onerous terms, and that a funding shortfall could force reduced or discontinued operations.
- Under amendments to its secured notes and warrants, the company paid noteholders $500,000 plus accrued interest on October 2, 2017, reducing the remaining principal to $500,000. The remaining principal was extended to the earlier of May 18, 2018 or a qualifying underwritten offering closing.
- Fixed-price consulting contracts expose the company to cost overruns if performance costs are underestimated. Management reported no material changes to previously disclosed risk factors, no material capital-expenditure commitments for the next 12 months, and no off-balance-sheet arrangements.
- Management reported disclosure controls effective at a reasonable-assurance level and no material change in internal control over financial reporting during the quarter. No legal proceedings were reported as applicable.
Important facts for investors to verify
- Confirm the issuer identity: the supplied document is Sigma Labs, Inc. (ticker SGLB), not Nexttrip, Inc.
- Assess the company’s ability to convert product installations, partnerships, and consulting activity into recurring revenue and positive gross margins.
- Verify cash runway and financing needs, including the remaining $500,000 note principal, accrued interest, and any future securities issuance.
- Review the collectability, collateral, repayment terms, and possible conversion outcomes for the Morf3D and Jaguar loans.
- Track whether subsequent product launches, customer deployments, and contract manufacturing orders deliver the revenue growth management anticipated.