Business context and reporting period
This is Sigma Labs, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2021. The supplied request metadata names Nexttrip, Inc., but the filing itself identifies Sigma Labs (Nasdaq: SGLB, SGLBW); verify the intended company. Sigma develops and sells PrintRite3D hardware and software for manufacturing quality assurance and process control, with related licensing, upgrades, maintenance, and engineering services.
Financial performance and position
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | 2021: $700,237; 2020: $248,526 | 2021: $1,302,525; 2020: $637,944 |
| Gross profit (margin) | 2021: $535,471 (76.5%); 2020: $150,741 (60.7%) | 2021: $893,032 (68.6%); 2020: $237,772 (37.3%) |
| Operating expenses | 2021: $3,026,888; 2020: $1,362,513 | 2021: $6,976,944; 2020: $4,448,708 |
| Net loss attributable to common stockholders | 2021: $2,505,198; 2020: $1,955,357 | 2021: $5,076,532; 2020: $5,455,707 |
| Net loss per common share, basic and diluted | 2021: $0.24; 2020: $0.42 | 2021: $0.53; 2020: $1.74 |
- At September 30, 2021, cash was $13.06 million, working capital was $13.98 million, total assets were $15.79 million, and total liabilities were $0.87 million. Cash and working capital were $3.70 million and $4.33 million, respectively, at December 31, 2020.
- For the first nine months of 2021, operating cash use was $4.79 million, investing cash use was $0.25 million, and financing provided $14.40 million. Cash increased by $9.36 million.
- The company reported no credit lines. Current liabilities were $0.74 million; long-term liabilities included $93,525 for stock appreciation rights and $37,728 for deferred payroll taxes. No significant conventional debt balance is reported.
Material changes versus the prior comparable period
- Third-quarter revenue rose about 182%, mainly from increased PrintRite3D sales, including the company’s first multi-unit sale to a U.S. Department of Energy contractor and a sale to a U.S. National Laboratory. A $72,000 return from a first-quarter sale partly offset revenue.
- Nine-month revenue more than doubled, while gross margin rose to 68.6% from 37.3%. The filing attributes the revenue increase mainly to PrintRite3D unit sales; lower RTE program revenue and the $72,000 return partly offset it.
- Operating expenses increased 56.8% for the nine-month period, reflecting higher payroll and headcount, stock compensation, research and development, organization costs, and office costs. The nine-month operating loss widened to $6.08 million from $4.21 million.
- Nine-month net loss attributable to common stockholders declined despite the higher operating loss, aided by lower preferred dividends and higher other income. Other income included a $1.09 million noncash gain from remeasuring March 2021 warrants before they were reclassified to equity; 2020 included state incentives and forgiveness of a PPP loan.
- Cash growth was principally financed by January and March 2021 securities offerings and warrant exercises. Common shares outstanding increased from 5,995,320 at December 31, 2020 to 10,498,802 at September 30, 2021.
Outlook, commentary, risks and unusual items
- Management said existing cash was expected to fund anticipated operating costs and capital expenditures through 2022, based on assumptions about revenue and cash burn that may prove incorrect. The company expected to fund operations and commercialization with cash reserves and PrintRite3D revenue.
- Management expected further commercialization from PrintRite3D enhancements, including version 7.0, released in May 2021. The filing provides no quantified revenue or earnings guidance.
- COVID-19 continued to weigh on demand in aerospace, oil and gas, customer capital spending, and access to customer sites; management said the duration and effects were uncertain. It also suggested supply-chain needs could eventually support adoption of 3D printing.
- Future funding may be needed if revenue or cash usage differs from expectations. Additional equity could dilute shareholders; debt could impose restrictive covenants and repayment obligations. Failure to obtain financing could force delays or reductions in commercialization and operations.
- At September 30, 2021, 3,987,931 warrants, 1,400,407 options, and preferred shares convertible into approximately 124,483 common shares were excluded from diluted loss-per-share calculations as anti-dilutive. Stock appreciation rights are cash-settled. These instruments may affect future dilution or cash needs.
- The Series D preferred stock carries a 9% dividend and includes conversion and potential redemption provisions upon specified triggering events. The company also disclosed deferred CARES Act payroll taxes of $75,455 in total, payable in two equal installments due December 31, 2021 and December 31, 2022.
- Management reported effective disclosure controls at a reasonable-assurance level and no material change in internal control over financial reporting during the quarter. No material subsequent events or legal proceedings were reported.
Most important facts for investors to verify
- Confirm that Sigma Labs, rather than Nexttrip, is the intended issuer for this summary.
- Assess whether PrintRite3D sales and the reported margin improvement are repeatable, given the small revenue base, customer concentration signals, and first-quarter sale return.
- Compare the stated cash runway through 2022 with operating cash use, subsequent results, and actual commercialization progress.
- Review the impact of equity issuance, warrants, options, preferred conversion rights, and cash-settled SARs on dilution and liquidity.
- Reconcile the CARES Act payroll-tax liability reported on the balance sheet with the $75,455 total disclosed in the notes and the stated payment schedule.