Filing and reporting period
Entity discrepancy: The request identifies Nexttrip, Inc., but the supplied Form 10-Q is for Sigma Labs, Inc. This summary reflects the filing text provided, not a Nexttrip filing. The report covers the three months ended March 31, 2017; financial statements are unaudited.
Sigma Labs develops PrintRite3D quality-assurance software and related services for metal additive manufacturing, including software licensing, engineering consulting, and contract manufacturing.
Key financial results
| Metric | Q1 2017 | Q1 2016 / comparison |
|---|---|---|
| Revenue | $150,203 | $358,455; down 58% |
| Gross profit / margin | $75,669 / 50.4% | $250,874 / 70.0% |
| Operating expenses | $1,208,810 | $721,699 |
| Net loss | $943,965 | $470,667 |
| Basic and diluted loss per share | $0.25 | $0.08 |
| Cash used in operating activities | $440,553 | $393,028 |
| Cash and cash equivalents at period end | $4,633,046 | $398,391 at December 31, 2016 |
| Working capital | $4,133,817 | $110,799 at March 31, 2016, per MD&A |
| Total liabilities | $1,386,573 | $892,331 at December 31, 2016 |
Investing cash outflow was $550,441, including the $500,000 Morf3D loan. Financing provided $5,225,649, primarily from the February public offering. Cash increased by $4,234,655 during the quarter.
Material changes and notable items
- Revenue fell primarily because the GEA America Makes and DARPA Phase II programs had concluded, leaving no comparable Q1 2017 revenue from those projects.
- Operating expenses increased, with the filing attributing increases to offering-related and other administrative costs, additional software-development staff, continued R&D, and stock-based compensation.
- The February 2017 offering of 1,410,000 units, plus the underwriter’s warrant over-allotment, generated approximately $5.8 million gross and $5.25 million net. Shares outstanding were 4,570,199 at March 31; the filing reports 4,570,199 as of May 15.
- Other income included a $93,206 gain from a decrease in derivative-liability fair value and $152,068 of “Other Income”; the filing text does not clearly explain the latter amount.
- At March 31, cash was $4.63 million and notes payable were reported at $944,772 net of discount. The company says the effective payoff balance was $1 million, plus accrued interest and a 15% prepayment penalty. The secured notes carry 10% interest and mature October 17, 2017.
- The company loaned Morf3D $500,000 at 7%, secured and due March 27, 2018, with a conversion option. A proposed Morf3D merger was under non-binding LOI and remained subject to definitive documentation and closing conditions.
- Subsequent to quarter-end, Sigma funded a $250,000 secured convertible loan to Jaguar Precision Machine at 7%, due May 1, 2018.
Outlook, risks, and controls
Management expected sufficient working capital to fund operations through 2017, citing the offering proceeds and anticipated consulting, licensing, and contract-manufacturing revenue. It also anticipated increased cash use as commercialization and marketing efforts expanded, and stated that additional capital would be needed to fulfill its business plans. The filing cautions that financing may not be available and could involve substantial dilution or burdensome debt terms; insufficient funds could force delays or reductions in operations.
Management expected revenue growth from commercialization, new contracts, and manufacturing services, but these expectations are forward-looking and not assured. Fixed-price consulting contracts carry cost-estimation and execution risk. No material capital-expenditure commitments were reported for the next 12 months. Management reported disclosure controls effective at a reasonable assurance level and no material change in internal control during the quarter. No legal proceedings were reported; the annual shareholder meeting was postponed, with a new date not yet determined.
Most important facts to verify
- Confirm the issuer: the supplied filing is Sigma Labs, Inc., not Nexttrip, Inc.
- Reconcile expense disclosures: the statements report payroll expense of $376,621 and R&D of $48,762, while MD&A gives payroll of $290,188 and R&D of $135,195. The stock-compensation comparison also differs between MD&A and the statements.
- Review the nature and recurrence of the $152,068 “Other Income” and the $93,206 derivative-liability revaluation gain.
- Assess liquidity after the October 2017 secured-note maturity, continuing operating cash use, and the planned $250,000 post-quarter Jaguar loan.
- Track whether announced agreements and proposed partnerships translate into material revenue, and whether the Morf3D merger proceeds beyond a non-binding LOI.