Business context and reporting period
The supplied filing is Sigma Labs, Inc.’s Form 10-Q for the quarter ended June 30, 2015; it does not identify Nexttrip, Inc. Sigma Labs develops manufacturing and materials technologies, particularly real-time quality assurance for additive manufacturing, and also earns revenue from engineering consulting. Results are unaudited.
Financial performance and liquidity
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $196,263 | $114,813 | $381,949 | $229,642 |
| Gross profit | $108,001 | $30,074 | $268,820 | $89,014 |
| Net loss | $(440,367) | $(1,795,909) | $(812,248) | $(2,262,815) |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $(718,286) | $(463,463) |
Q2 revenue rose about 71% year over year; six-month revenue rose about 66%. Gross margin was approximately 55% for Q2 and 70% for the first half, versus approximately 26% and 39%, respectively, in 2014. Net loss narrowed substantially, primarily because 2014 included a nonrecurring $1.28 million warrant-extension expense.
At June 30, cash was $2.22 million, down from $2.96 million at year-end 2014. Working capital was $2.34 million, compared with $2.81 million at year-end. Total liabilities were $144,902, all current; the filing reports no interest expense or credit facility. Equity was $3.27 million. Six-month investing cash outflow was $19,465, and there was no financing cash inflow.
Changes, outlook, and risks
- Revenue growth reflected work under additional contracts. Management cited consulting work as the primary source of first-half revenue; technology sales remained limited.
- General and administrative expense increased to $326,075 for Q2 and $593,778 for the first half, attributed chiefly to investor-relations spending and consultant services. Management expected overhead, payroll, and noncash compensation to rise as commercialization and marketing efforts expanded.
- The company reported three active consulting contracts expected to generate up to approximately $450,000 in revenue in the remainder of 2015, subject to performance milestones. A GE Aviation-led contract began later than expected, delaying some revenue into Q1 2016. Fixed-price contracts create cost-estimation and execution risk.
- Management expected available funds, contract proceeds, and anticipated stock-sale proceeds to cover operating and administrative expenses through 2016. This outlook depends on contract performance, future revenue, and securities sales; the company had no committed outside capital and warned that additional funding might be needed, potentially diluting shareholders.
- A 50%-owned Arete-Sigma joint venture was formed to pursue additive-manufacturing opportunities; it had generated no revenue as of the report. The company anticipated commercialization of PrintRite3D-related technology in the remainder of 2015 and 2016, but gave no quantified revenue or earnings guidance.
- The company said it believed it had adequate resources through the remainder of 2015, while also noting ongoing operating losses and negative operating cash flows since inception. Its Form S-3 and associated at-the-market program had produced no sales by June 30; it was then ineligible to use the registration statement because nonaffiliate market value was below the stated $75 million threshold.
- Controls were deemed effective at a reasonable-assurance level. The filing listed no legal proceedings or additional risk factors in Part II; it refers readers to the 2014 Form 10-K for risk factors.
Important facts for investors to verify
- Confirm the issuer: this filing is for Sigma Labs, Inc., not Nexttrip, Inc.
- Check progress and milestone completion for the consulting contracts, including the delayed GE Aviation work and the stated remainder-of-2015 revenue potential.
- Assess cash use and funding needs against the company’s runway assumptions, especially given negative operating cash flow and no committed financing.
- Verify the status of PrintRite3D commercialization, the EOS M290 manufacturing business, and the Arete-Sigma joint venture; anticipated opportunities were not yet established revenue sources.
- Review potential dilution and share-count disclosures: the balance sheet reports 617,292,949 common shares outstanding at June 30, while the cover reports 623,344,835 shares issued and outstanding as of August 7. The company also had 16,759,259 warrants outstanding at June 30.