Filing Summary
Entity discrepancy: The request identifies Nexttrip, Inc., but the supplied Form 10-Q is for Sigma Labs, Inc. This summary covers the filing provided, for the quarter ended September 30, 2018. The financial statements are unaudited.
Business context and reporting period
Sigma develops and commercializes manufacturing quality-assurance and process-control technology for metal additive manufacturing (AM), including its PrintRite3D product line. Management said it had shifted away from research-and-development application sales toward customers manufacturing 3D metal parts, contributing to lower revenue while it pursues production-oriented commercialization.
Financial results and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue, 2018 | $128,593 | $330,671 |
| Revenue, 2017 | $78,046 | $483,122 |
| Gross profit (loss), 2018 | $72,284 | $131,999 |
| Gross profit (loss), 2017 | $(3,168) | $215,962 |
| Net loss, 2018 | $(1,320,825) | $(3,880,505) |
| Net loss, 2017 | $(1,116,910) | $(2,932,283) |
| Basic and diluted loss per share, 2018 | $(0.16) | $(0.62) |
Gross margin was approximately 56.2% for Q3 2018, versus negative 4.1% in Q3 2017; for the first nine months it was approximately 39.9%, versus 44.7% in 2017. Operating expenses rose 28% in Q3 to $1.40 million and 25% for the nine months to $4.00 million. The nine-month operating loss was $3.87 million.
For the first nine months, operating cash use was $2.70 million, compared with $1.95 million in 2017. Investing activities provided $469,898, primarily reflecting note-receivable collections; financing provided $2.94 million, principally from securities offerings. Cash was $2.23 million at September 30, up from $1.52 million at December 31, 2017. Current assets were $2.78 million and current liabilities $569,401, for working capital of $2.21 million. The company reported $50,000 of notes payable at September 30; the note was subsequently extended to April 18, 2019. It also reported a $120,149 note receivable, largely due from Jaguar Precision Machine.
Material changes versus the prior comparable period
- Q3 revenue increased 65% year over year, with commercial sales up $69,000 and $22,472 of contract AM service revenue; government-program revenue declined $37,903.
- Nine-month revenue fell 32%, primarily due to lower government-program work and system sales, partly offset by increased contract AM services.
- Q3 net loss widened by $203,915; nine-month net loss widened by $948,222. Higher personnel, research and development, and other operating costs were key contributors.
- Nine-month salaries and benefits increased to $1.35 million, and stock-based compensation increased to $783,167. Research and development expense rose to $356,112.
- Shares outstanding increased from 4,978,929 at December 31, 2017 to 8,348,729 at September 30, 2018; the filing reports 8,700,204 outstanding as of November 8, 2018.
Outlook, risks and unusual items
- Management expected cash to fund operations through at least the first quarter of 2019, assuming expected proof-of-concept revenue and contract AM work. It anticipated a smaller Q4 2018 loss, while noting higher salaries and related expenses.
- Management planned to launch PrintRite3D Version 4.0 and new hardware at a November 2018 trade show and pursue proof-of-concept engagements and 2019 commercialization. These are forward-looking expectations, not guaranteed results.
- The company has incurred recurring losses and negative operating cash flows, has no credit line, and may need additional securities sales or borrowing. Management cautioned that funding may not be available and that failure to obtain it could require scaling back or delaying operations; further securities issuance could dilute shareholders.
- Jaguar had made no payment on the remaining note since June 15, 2018; the borrower committed to pay principal and accumulated interest by December 31, 2018. Collection timing and recoverability are important uncertainties.
- The company recorded a $36,733 write-off of patent and patent-application costs in the nine-month period. It reported no legal proceedings and no off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is for Sigma Labs, Inc., not Nexttrip, Inc.
- Track whether proof-of-concept engagements convert into production or follow-on contracts and generate revenue and cash.
- Verify the collection of the Jaguar note and the company’s actual liquidity and operating cash use after September 30, 2018.
- Reconcile offering proceeds: the filing gives differing net-proceeds figures for the April private placement and June public offering in different sections.
- Assess dilution from the increased share count and outstanding warrants, options, and convertible instruments.