Filing summary
Entity mismatch: The request identifies Nexttrip, Inc., but the supplied Form 10-Q is for Sigma Labs, Inc. (NASDAQ: SGLB/SGLBW). This summary reflects the filing provided, not Nexttrip.
Business context and reporting period
The unaudited report covers the three months ended March 31, 2019, compared with the three months ended March 31, 2018. Sigma develops and commercializes manufacturing quality-assurance and process-control technologies, including its PrintRite3D platform, for additive manufacturing.
Financial performance and liquidity
- Revenue: $64,450, down 37.7% from $103,415. Management attributed much of the decline to no government program work and use of its printer for internal R&D.
- Gross profit (loss): $(32,105), versus $29,620; gross margin was approximately negative 49.8%, versus positive 28.6%.
- Operating expenses and loss: Operating expenses were $1.51 million, versus $1.18 million. Operating loss was $1.54 million, versus $1.15 million; net loss was $1.48 million, versus $1.17 million. Basic and diluted loss per share was $0.16, versus $0.23.
- Cash flow: Operating cash use was $1.07 million, compared with $612,249. Investing activities used $60,829, while providing $443,894 in the prior-year quarter. Financing provided $1.76 million, primarily from the March equity offering and warrant exercises. Cash increased $627,580 during the quarter.
- Liquidity: Cash was $1.91 million at March 31, versus $1.28 million at December 31, 2018; working capital was $1.55 million, versus $1.05 million. Current liabilities were $927,255.
- Debt: The company reported a $50,000 convertible note. Its April 18, 2019 maturity was extended to October 18, 2019; accrued interest was paid in April. No credit line was in place.
Material changes and unusual items
- Revenue fell while cost of revenue rose to $96,555 from $73,795, producing a gross loss. Management cited additional travel and labor for Rapid Test and Evaluation programs.
- Higher salaries, stock-based compensation, R&D, and office costs contributed to increased expenses. The company recognized a $51,877 New Mexico job incentive credit, which supported other income; prior-year other expense included a $36,733 asset write-off.
- A March public offering of 1,400,800 shares and warrants generated net proceeds of approximately $1.68 million. A separate May 7 private placement generated approximately $515,000 net, after quarter-end.
- Common shares outstanding were 10,537,590 at March 31; the cover page reports 10,937,590 as of May 14. Stock-based compensation was $254,206 for the quarter, and the filing reports 3,400,610 warrants and 1,036,223 options outstanding at March 31.
Outlook, risks, and contingencies
Management expected continued losses in 2019 and said it believed available funds and anticipated receipts could cover operating and administrative expenses through year-end. That assessment depends on commercialization, customer engagements and follow-on contracts, contract manufacturing, loan repayments, and potentially additional securities sales or borrowing. Management cautioned that additional financing may not be available and that failure to obtain funds could require delaying or scaling back operations; equity financing could dilute existing holders. The company cited PrintRite3D commercialization and customers’ progression from metal additive-manufacturing prototyping to production as important to future revenue. It announced a planned Version 5.0 launch in May 2019. No legal proceedings or new risk factors were reported in the supplied filing text.
Important facts to verify
- Confirm that the intended filing is Sigma Labs’ 2019 Q1 Form 10-Q, not a Nexttrip filing.
- Reconcile MD&A figures with the financial statements: the stated increase in operating expenses ($391,692) does not match the reported figures ($329,968), and the stated cost-of-revenue increase ($24,685) does not match the reported figures ($22,760).
- Check the weighted-average share count: the statements report 9,334,757, while a note reports 9,344,757 for Q1 2019.
- Assess cash runway against actual customer receipts, spending, and financing after March 31, and review the May placement and potential dilution from outstanding warrants and options.
- Track collection of the Jaguar Precision Machine note; the filing states the remaining principal and interest were expected by July 31, 2019.