SEC filing summary
Entity note: The supplied filing is Sigma Labs, Inc.’s Form 10-Q, not a filing for Nexttrip, Inc. It covers the quarter ended September 30, 2016; financial comparisons are against 2015 and December 31, 2015, as applicable.
Business context and reporting period
Sigma Labs develops PrintRite3D quality-assurance software and related sensors for metal additive manufacturing, and also earns revenue from engineering consulting and contract manufacturing. The company described its business as early-stage, with limited sales and an ongoing need to commercialize and expand its products and services.
Financial performance and liquidity
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | $189,951 | $266,566 | $642,230 | $648,515 |
| Gross profit | $120,693 | $241,316 | $434,486 | $510,136 |
| Gross margin | 63.5% | 90.5% | 67.7% | 78.7% |
| Net loss | $(719,320) | $(587,130) | $(1,931,833) | $(1,399,378) |
| Loss per share, basic and diluted | $(0.11) | $(0.09) | $(0.31) | $(0.22) |
| Cash used in operating activities | Not provided by quarter | $(1,322,366) | $(1,038,993) |
At September 30, 2016, cash was $137,702, current assets $376,057, current liabilities $239,539, and working capital $136,518. Cash had fallen from $1,539,809 at December 31, 2015. Total liabilities were $239,539, with no debt reported on the September 30 balance sheet. The company reported no cash interest or income tax payments during the first nine months.
Material changes versus comparable periods
- Q3 revenue declined about 29% year over year; nine-month revenue was down about 1%. Management attributed the decrease primarily to reduced work under contracts.
- Gross margin fell in both comparisons, as cost of service revenue rose to $69,259 in Q3 and $207,744 for nine months.
- Nine-month net loss widened by $532,455. General and administrative expense and payroll increased; research and development and stock-based compensation expense decreased.
- Operating cash use increased by $283,373 year over year. Cash and working capital also decreased substantially from year-end 2015.
Outlook, commentary, and risks
- Management expected commercialization, consulting work, product sales/licensing, and contract manufacturing to support future revenue. It reported nine active contracts expected to generate up to approximately $204,000 during the remainder of 2016, conditional on milestones and contracts remaining in force.
- Management said it believed funds available as of November 11, together with anticipated receipts and securities offerings, would cover administrative and other operating expenses through 2017. It also stated that additional capital would be needed to fulfill business plans and that financing was not assured.
- On October 19, 2016, after quarter-end, the company closed a financing with $1,000,000 aggregate principal amount of secured convertible notes for $900,000 gross proceeds before expenses, plus warrants for up to 160,000 shares. Notes bear 10% annual interest and mature 12 months after issuance. The notes are secured by company assets.
- The company had filed a registration statement for a proposed offering of up to $10 million, but reported no assurance it would succeed. It had no credit facilities or committed third-party capital.
- Management anticipated higher operating expenses as it expanded commercialization and staffing. Fixed-price consulting contracts pose a risk if actual completion costs exceed estimates. Failure to secure sufficient revenue or financing could require the company to delay, reduce, or terminate operations.
- Other developments included a September Honeywell Aerospace contract under an additive-manufacturing research program, a Siemens evaluation agreement announced in November, and a 1-for-100 reverse stock split effective March 17, 2016. Management reported effective disclosure controls at a reasonable-assurance level; no material control change was reported.
Important facts for investors to verify
- Confirm the issuer identity: this document names Sigma Labs, Inc., despite the request metadata naming Nexttrip, Inc.
- Review the secured note and warrant documents for conversion terms, repayment provisions, collateral rights, and potential dilution; the filing text here does not provide a clear conversion price.
- Verify whether the projected contract revenue and management’s cash-through-2017 estimate were achieved, given milestone conditions, continuing cash burn, and limited September cash.
- Assess whether PrintRite3D commercialization and contract manufacturing can scale enough to offset operating costs and reduce reliance on securities financing.