Business context and reporting period
Filing identity discrepancy: The request identifies Nexttrip, Inc., but the supplied Form 10-Q is for Sigma Labs, Inc. (NASDAQ: SGLB; warrants: SGLBW), for the quarter ended September 30, 2020. The summary below reflects the filing text, not the company named in the request. Financial statements are unaudited.
Sigma develops and commercializes PrintRite3D in-process quality-assurance software and related systems for metal additive manufacturing, with services and consulting also contributing to revenue.
Financial results and liquidity
- Third-quarter revenue: $248,526, up 45% from $171,003 a year earlier, primarily from higher system sales, including the first PrintRite3D Lite sale. Gross profit was $150,741 versus a $7,757 gross loss; gross margin was approximately 61% versus negative 5%.
- Nine-month revenue: $637,944, up 137% from $269,035. Management attributed the increase mainly to PrintRite3D system sales and $62,064 of Rapid Test and Evaluation revenue. Gross profit was $237,772 versus a $66,904 gross loss; gross margin was approximately 37% versus negative 25%.
- Operating results: Operating expenses were $1.36 million for Q3, down 15%, and $4.45 million for nine months, down 5%. Operating losses were $1.21 million and $4.21 million, respectively. Net loss was $1.22 million for Q3 and $3.71 million for nine months. Preferred dividends of $737,344 for Q3 and $1.74 million for nine months increased losses applicable to common stockholders to $1.96 million and $5.46 million. Basic and diluted loss per share was $0.42 for Q3 and $1.74 for nine months.
- Cash flow: Nine-month operating cash use was $3.68 million, compared with $4.50 million in 2019. Investing cash use was $249,452. Financing provided $8.35 million, chiefly from securities offerings and preferred-warrant exercises. Cash increased by $4.42 million to $4.51 million.
- Liquidity and debt: At September 30, cash was $4.51 million and working capital was $5.21 million, versus a $98,315 working-capital deficit at year-end 2019. Current liabilities were $505,644. The company reported no notes payable at quarter-end; it had repaid its convertible note in January. A $53,545 CARES Act payroll-tax deferral was recorded as a long-term liability, due in installments in 2021 and 2022. The company reported no credit lines.
Material changes and notable items
- Revenue and gross margin improved substantially year over year, while operating expenses declined. Q3 cost of revenue fell to $97,785 from $178,760; management cited lower material and travel costs and inventory reclassification.
- COVID-19 reduced travel and other spending, but also delayed customer purchasing. The company reported approximately $500,000 of delayed orders, not cancelled, with uncertain timing, and expected lower near-term revenue.
- The company recognized the full $361,700 Paycheck Protection Program loan as other income, treating it as a government grant because it believed it had met forgiveness conditions. Forgiveness was not reported as confirmed.
- Nine-month other income included $151,657 of state incentives and the $361,700 PPP grant. These items helped reduce the reported net loss but were not recurring product revenue.
- Financing and warrant activity materially increased capital and potential dilution. The filing reports 5,833,245 common shares outstanding at September 30, alongside preferred shares, warrants, options, and cash-settled stock appreciation rights. Series D preferred stock carries a 9% dividend and conversion and redemption provisions; preferred dividends were paid in common shares.
Outlook, management commentary, and risks
Management gave no quantified revenue or earnings guidance. It expected to sustain operations and commercialization efforts through the remainder of 2020 without a material increase in cash burn, while continuing to fund development, marketing, licensing, field services, consulting, and operations through revenue and securities financing. It also expected continued commercialization of PrintRite3D, including version 6.0 and expanded machine compatibility.
Management cited customer order delays, pandemic-related weakness in aerospace and oil and gas, and delayed university and research-institute orders as near-term risks. It cautioned that additional capital may be required; future financing may be unavailable or dilutive, and a funding shortfall could force the company to scale back operations or risk Nasdaq listing compliance. Management viewed potential acceleration in 3D-printing adoption as a possible offset, but noted uncertainty around its timing.
Commercial developments included announced contracts or partnerships with Baker Hughes, Mitsubishi Heavy Industries, Additive Industries, Coherent, IN4.OS, and Northwestern University. Several announcements occurred in October 2020, after the reporting period; they are not evidence of recognized third-quarter revenue. Management reported effective disclosure controls at a reasonable-assurance level and no material change in internal control during the quarter. No legal proceedings or material subsequent events were reported.
Important facts for investors to verify
- Confirm that this Sigma Labs filing, rather than a Nexttrip filing, is the intended document.
- Check whether the PPP loan was ultimately forgiven and whether any repayment obligation arose.
- Track the timing and conversion of the approximately $500,000 in delayed customer orders, and whether announced contracts generate recurring revenue.
- Assess operating cash burn, available financing, Nasdaq compliance, and the dilution or redemption implications of preferred stock, warrants, and options.
- Separate recurring product and service performance from grant income, state incentives, and other non-operating items when evaluating losses.