Filing identity and reporting period
The supplied filing is Sigma Labs, Inc.’s Form 10-K for the fiscal year ended December 31, 2020, filed March 24, 2021. It does not appear to be a filing for Nexttrip, Inc.; the company and period in the request metadata do not match the filing. Results are for the full fiscal year, not a standalone fourth quarter. Share and per-share figures reflect the February 2020 1-for-10 reverse stock split.
Business context
Sigma develops and commercializes PrintRite3D, in-process quality-assurance software and related hardware for metal additive manufacturing. It sells systems, software licenses, maintenance and engineering services, and also performs contract manufacturing. The company was moving from product development and customer evaluations toward commercialization. COVID-19 reduced or delayed capital spending among targeted customers.
Financial highlights
| Metric | FY 2020 | FY 2019 |
|---|---|---|
| Revenue | $807,488 | $402,446 |
| Cost of revenue | $591,957 | $574,301 |
| Gross profit (loss) | $215,531 | ($171,855) |
| Gross margin | 26.7% | (42.7%) |
| Operating expenses | $5,914,299 | $6,211,830 |
| Operating loss | ($5,698,768) | ($6,383,685) |
| Net loss before preferred dividends | ($5,200,139) | ($6,320,849) |
| Preferred dividends | $1,809,275 | $0 |
| Net loss applicable to common stockholders | ($7,009,414) | ($6,320,849) |
| Basic and diluted loss per share | ($1.83) | ($5.37) |
| Net cash used in operating activities | ($4,809,868) | ($5,514,805) |
| Cash at year-end | $3,700,814 | $86,919 |
| Working capital | $4,332,053 | Deficit of $98,315 |
Revenue rose about 101%, mainly from increased PrintRite3D 6.0 system sales. The company moved from a gross loss to a gross profit, while operating expenses declined about 4.8%. Net loss before preferred dividends narrowed, but the loss attributable to common stockholders increased because of $1.81 million in preferred dividends. The filing reports no income tax provision.
Investing activities used $298,359; financing activities provided $8,722,122, principally from securities offerings and Series D preferred warrant exercises. Year-end total liabilities were $536,778, including $450,709 of current liabilities and $86,069 of long-term liabilities. The company reported no credit line. Its $50,000 note payable was paid off in January 2020.
Material changes and financing
- Cash increased from $86,919 at year-end 2019 to $3.70 million at year-end 2020, supported by equity financing and warrant exercises; operating cash flow remained substantially negative.
- Common shares outstanding increased from 1,403,759 at year-end 2019 to 5,995,320 at year-end 2020. The filing reports 8,302,098 shares outstanding as of March 23, 2021, following subsequent issuances.
- In January 2021, the company completed a public offering of 1,711,783 shares, with approximately $4.53 million in net proceeds. It also received approximately $1.14 million from warrant exercises in February and March 2021.
- Series D and E preferred stock carry 9% dividends payable in kind. Series D terms include conversion-price protections and potential redemption at a 125% premium upon specified triggering events, including certain defaults or failure to maintain Nasdaq listing.
Outlook, commentary and risks
Management said existing cash was expected to fund anticipated operating costs and capital expenditures through 2021, while acknowledging that estimates could prove wrong and that further financing would be needed to support the business plan and operations beyond that period. The company planned to continue commercialization, product development, licensing and field support. It provided no quantitative revenue or earnings guidance.
Commercial developments included a December 2020 announcement that DMG MORI selected PrintRite3D as its preferred melt-pool monitoring system for LASERTEC SLM machines, and a March 2021 initial-system contract with Lockheed Martin Space for evaluation. These are developments, not evidence of material recurring revenue. The company also announced PrintRite3D for Direct Energy Deposition in late 2020.
- The company has never been profitable, has an accumulated deficit of $33.1 million, and says current revenue is insufficient to fund operations.
- COVID-19 delayed certain customer purchase orders and constrained spending and potentially access to capital; timing of delayed orders was uncertain.
- Revenue and receivables were concentrated: five customers each represented more than 10% of FY 2020 revenue, and three customers accounted for approximately 94% of year-end receivables.
- Substantial future equity financing could dilute shareholders. Outstanding warrants, options and preferred securities also create potential dilution.
- Nasdaq continued-listing compliance was a stated risk; the company disclosed it had previously failed to meet the minimum stockholders’ equity requirement.
- The $361,700 Paycheck Protection Program loan was recognized as other income in 2020 and was fully forgiven in January 2021. The company deferred $75,455 of payroll taxes, with half due in 2021 and half in 2022.
- Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2020. The auditor did not attest to internal control effectiveness; it issued an unmodified opinion on the financial statements and identified revenue recognition for contracts with multiple deliverables as a critical audit matter.
Investor verification priorities
- Confirm the intended issuer: this filing is Sigma Labs, Inc. (SGLB), not Nexttrip, Inc.
- Verify customer concentration, receivable collectability, and whether delayed COVID-related orders converted into paid contracts.
- Assess cash burn against management’s stated runway and the need for additional capital after 2021.
- Review dilution and preferred-stock terms, including conversion protections, dividends, warrant exercises and redemption triggers.
- Track whether the DMG MORI and Lockheed Martin engagements lead to material purchases, follow-on contracts or recurring revenue.