Business context and reporting period
The supplied filing is Sigma Labs, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2017—not a filing for Nexttrip, Inc. Verify the issuer before relying on this summary. Sigma Labs develops PrintRite3D quality-assurance software and related services for additive manufacturing, and also provides engineering consulting and contract metal 3D-printing services.
Financial results and liquidity
| Metric | Three months ended June 30, 2017 | Prior-year quarter | Six months ended June 30, 2017 | Prior-year six months |
|---|---|---|---|---|
| Revenue | $290,553 | $93,824 | $440,756 | $452,279 |
| Gross profit | $179,141 | $62,920 | $254,810 | $313,794 |
| Gross margin | 61.7% | 67.1% | 57.8% | 69.4% |
| Net loss | $988,741 | $741,846 | $1,932,706 | $1,212,513 |
| Loss per share, basic and diluted | $0.24 | $0.24 | $0.46 | $0.38 |
At June 30, cash was $3.384 million, working capital was $3.374 million, and total assets were $5.492 million. Current liabilities were $1.273 million, including notes payable of $969,703 net of discount. The company says the effective note payoff amount was $1 million, plus accrued interest and a 15% prepayment penalty; the notes mature October 17, 2017. No long-term liabilities were reported.
For the six months, operating cash use was $1.444 million and investing cash use was $795,468, including $762,034 in loans to strategic partners. Financing provided $5.226 million, primarily from the February public offering. Cash increased from $398,391 at year-end 2016 to $3.384 million.
Material changes versus prior periods
- Quarterly revenue rose year over year, but six-month revenue fell slightly, mainly because the GEA America Makes program generated revenue in 2016 but not in 2017.
- Six-month gross margin declined, which management attributed to a greater share of lower-margin commercial revenue versus higher-margin program and engineering work.
- Six-month operating expenses increased: general and administrative expense was $1.238 million (from $876,185), payroll was $677,282 (from $468,484), stock-based compensation was $306,405 (from $130,913), and R&D was $167,615 (from $50,978). Management cited offering and strategic-partner costs, increased staffing, and continued product development.
- The six-month net loss widened by approximately $720,000. Reported other income included $152,068 of other income, a $93,206 gain from a decrease in derivative-liability fair value, and $56,441 of debt-discount amortization expense.
- The February 2017 public offering generated approximately $5.25 million net proceeds. Common shares outstanding increased; the company also had 1,701,500 warrants outstanding at June 30, with exercise prices of $4.00 or $4.13, creating potential dilution.
Outlook, commentary, risks, and unusual items
Management expected available funds and anticipated receipts to cover operating and administrative expenses through 2017, but also said additional capital would be needed to fulfill its business plans until significant licensing and contract-manufacturing revenue develops. It warned that 2017 licensing revenue was not expected to increase significantly, cash use could rise, and additional financing might be dilutive or carry onerous terms; if funding is unavailable, operations or commercialization could be delayed, reduced, or curtailed. The filing also notes continuing historical losses and negative operating cash flow.
Growth plans rely on commercializing PrintRite3D, engineering contracts, and orders using the EOS M290 metal printer. Recent developments included a Solar Turbines contract, a Honeywell installation, new Asia-Pacific sales agents, and a technology-development agreement with OXYS. Management cautioned that fixed-price consulting work requires accurate cost estimates and that underestimation can reduce profitability. The company also made secured convertible loans at 7% to Morf3D ($500,000) and Jaguar Precision Machine ($250,000), each due in 2018 and potentially convertible into 10% ownership, subject to borrower repayment rights.
After quarter-end, John Rice became interim CEO, replacing Mark Cola, who became CTO; the filing also disclosed a new director appointment. Management reported disclosure controls effective at a reasonable-assurance level and no material change in internal control over financial reporting during the quarter. Legal proceedings and risk factors were marked not applicable in this filing, though the company’s liquidity and financing risks are described in MD&A.
Important facts for investors to verify
- Confirm the issuer: the request names Nexttrip, Inc., while this filing identifies Sigma Labs, Inc. (SGLB).
- Review the composition and expected collectability of the $762,034 in notes receivable, including collateral, repayment rights, and conversion provisions.
- Confirm the October 2017 note maturity, total payoff obligations, and any subsequent repayment, conversion, or refinancing.
- Assess whether cash burn, commercial revenue, contract awards, and financing availability support the stated through-2017 liquidity outlook.
- Reconcile management’s cash-flow discussion: the cash-flow statement reports six-month operating cash use of $1.444 million, while MD&A refers to cash use with inconsistent period wording.
- Evaluate potential dilution from outstanding warrants, convertible notes, and equity compensation, and track whether strategic partnerships and product announcements convert into material revenue.