Sigma Labs, Inc. (Nexttrip, Inc.) 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2010. The registrant, formerly Framewaves, Inc., underwent a reverse acquisition of B6 Sigma, Inc. on September 13, 2010, and subsequently changed its name to Sigma Labs, Inc. The company provides consulting services for commercial and government-sponsored research and development programs, focusing on manufacturing quality assurance (IPQA) and materials science. Prior to the acquisition, the registrant was a shell company with no operations.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2010 | Nine Months Ended Sep 30, 2010 |
|---|---|---|
| Revenues | $243,936 | $276,436 |
| Gross Profit | $127,842 | $160,342 |
| Gross Margin | 52.4% | 58.0% |
| Net Loss | $(66,807) | $(305,089) |
| Cash and Equivalents (Sep 30, 2010) | $557,861 | |
| Total Assets (Sep 30, 2010) | $652,866 | |
| Total Liabilities (Sep 30, 2010) | $105,651 | |
| Working Capital (Sep 30, 2010) | $474,433 |
Debt and Liquidity: The company holds a $15,000 note payable to a shareholder. Cash flow from financing activities provided $852,304, primarily from the sale of common stock ($1,047,304) offset by reorganization costs ($195,000). Operating activities used $212,643 in cash.
Material Changes vs. Prior Period
Comparison to the prior year periods (2009) is not meaningful as the registrant was a shell company with no operations prior to the September 2010 acquisition of B6 Sigma, Inc.
- Revenue: Increased from $0 in 2009 to $276,436 for the nine months ended September 30, 2010.
- Expenses: General and Administrative expenses rose from $7,481 in 2009 to $453,431 in 2010, reflecting the commencement of active business operations.
- Capital Structure: The company ceased to be a shell company following the share exchange and a 150-for-1 forward stock split (retroactively applied).
Outlook, Risks, and Management Commentary
Management Commentary: Management anticipates that the initial private placement funding ($1,000,000) and accounts receivable will sustain operations for approximately six months. An additional $1,500,000 is required to meet planned future cash needs for aggressive client expansion. The company is continuing to attempt to raise additional funds through common stock sales, though there are no assurances of success.
Risks and Contingencies:
- Going Concern: The company has not yet achieved profitable operations, and its ability to continue as a going concern is dependent on expanding income opportunities and securing additional funding.
- Revenue Volatility: Revenue flow varies significantly as work is often project-specific and does not necessarily recur monthly or quarterly.
- Tax Carryforwards: The company has unused operating loss carryforwards of approximately $234,607, but a full valuation allowance has been established due to uncertainty regarding realization.
Investor Verification Checklist
- Verify the status of the $1,500,000 funding requirement and any subsequent capital raises post-September 30, 2010.
- Confirm the collectibility of the $22,223 in accounts receivable, which represents a significant portion of current assets.
- Review the specific terms of the $15,000 shareholder note payable.
- Assess the progress of the "InProcess Quality Assurance" (IPQA) technology commercialization and new contract acquisitions.
- Monitor the company's ability to maintain positive working capital given the burn rate indicated by the $305,089 net loss for the nine-month period.