Business context and reporting period
This is Sigma Labs, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2021—not a filing identified as Nexttrip, Inc. Sigma Labs develops and commercializes PrintRite3D manufacturing quality-assurance technology and also earns revenue from metal additive-manufacturing contract work, software, and related services.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 or comparison |
|---|---|---|
| Revenue | $458,140 | $221,730; up $236,410 (107%) |
| Gross profit (loss) | $329,809 | $(22,973) |
| Gross margin | 72.0% | Negative |
| Operating expenses | $1,781,404 | $1,559,641 |
| Loss from operations | $(1,451,595) | $(1,582,614) |
| Net loss | $(650,659) | $(1,583,585) |
| Net loss applicable to common stockholders | $(711,567), or $(0.09) per share | $(1,898,832), or $(1.30) per share |
| Net cash used in operating activities | $(1,240,586) | $(1,525,696) |
| Cash at quarter end | $16,843,201 | $3,700,814 at Dec. 31, 2020 |
| Working capital | $12,634,299 | $4,332,053 at Dec. 31, 2020 |
Financing activities provided $14.4 million in cash, principally from January and March equity offerings and warrant exercises. Investing activities used $21,969. Total liabilities were $5.6 million, including a $4.9 million warrant derivative liability; the filing reports no credit lines and no off-balance-sheet arrangements.
Material changes versus the prior comparable period
- Revenue more than doubled, primarily due to a $277,300 increase in PrintRite3D unit sales, partly offset by $52,200 lower revenue from the Rapid Test and Evaluation program.
- Cost of revenue fell by $116,372, aided by a customer-exchange credit, lower unit build costs, and reduced support costs for legacy programs. Gross profit consequently improved from a loss to $329,809.
- Operating expenses rose $221,763. Salaries and benefits increased $194,974, including the impact of nine additional full-time-equivalent employees; operating and R&D costs rose $142,651, partly offset by lower investor and public-relations costs.
- The reported net loss improved substantially, but results included an $802,285 noncash gain from remeasuring warrants. Net loss from operations remained $1.45 million.
- Shares outstanding increased to 10,493,598 from 5,995,320 at year-end, principally reflecting offerings and warrant exercises.
Outlook, risks, contingencies, and unusual items
- Management said existing cash was expected to fund anticipated operating costs and capital expenditures through 2022, based on assumptions that could prove incorrect. The company expects to fund 2021 operations and commercialization with cash reserves and revenue, while continuing PrintRite3D development and marketing.
- The March 2021 financing included warrants to purchase 2.19 million shares at $4.32. They become exercisable only after stockholders approve increasing authorized common shares from 12 million to 24 million. The company scheduled a May 24, 2021 special meeting; without approval, the warrants remain liabilities and the company must seek approval at meetings every 75 days under its purchase agreement.
- The warrant liability is valued using Level 3 inputs and a Black-Scholes model. Changes in share price, volatility, and interest rates could materially affect future remeasurement and reported earnings.
- COVID-19 had not materially adversely affected operations to the filing date, but some customer purchase orders were delayed and timing remained uncertain. Management viewed supply-chain flexibility and possible greater adoption of 3D printing as a potential long-term benefit.
- Future funding depends on revenue growth, follow-on contracts, partnerships, or additional financing. Additional securities could dilute existing holders; the filing cautions that funding may not be available when needed and operations could be curtailed if capital is insufficient.
- Series D preferred stock carries 9% dividends and conversion features; specified defaults can give holders redemption rights at a 125% premium to underlying value. CARES Act payroll tax deferrals totaled $75,455, with payments due in equal installments in December 2021 and December 2022.
- The filing reports no material subsequent events through its filing date, no applicable legal proceedings, and no material change in internal control over financial reporting. Management concluded disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is for Sigma Labs, Inc. (NASDAQ: SGLB; warrants: SGLBW), not Nexttrip, Inc.
- Check the outcome of the stockholder vote on authorized shares and whether the 2.19 million warrants were reclassified from liability to equity.
- Assess underlying operating performance separately from the noncash $802,285 warrant revaluation gain and review ongoing cash burn against management’s runway estimate.
- Review subsequent revenue, customer order timing, PrintRite3D commercialization, and whether offerings or exercises further affected share count and dilution.
- Review the 2020 Form 10-K risk factors and the terms and potential conversion or redemption effects of preferred shares and outstanding warrants.