Filing summary
Entity mismatch: The request identifies Nexttrip, Inc., but the supplied Form 10-Q is for Sigma Labs, Inc. (Nasdaq: SGLB, SGLBW). This summary reflects the filing text, not Nexttrip.
Business context and reporting period
Sigma Labs develops and commercializes manufacturing quality-assurance and process-control technologies, including PrintRite3D for additive manufacturing. This unaudited report covers the quarter and six months ended June 30, 2020; it was signed July 23, 2020.
Financial performance and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $167,688 | $33,582 | $389,418 | $98,032 |
| Gross profit (loss) | $110,004 | $(27,043) | $87,031 | $(59,148) |
| Gross margin | 65.6% | (80.5%) | 22.4% | (60.3%) |
| Operating loss | $(1,416,550) | $(1,596,107) | $(2,999,164) | $(3,135,310) |
| Net loss | $(909,638) | $(1,593,491) | $(2,493,223) | $(3,077,603) |
| Net loss applicable to common stockholders | $(1,601,518) | $(1,593,491) | $(3,500,350) | $(3,077,603) |
Revenue increased substantially year over year, principally from PrintRite3D unit sales and revenue under legacy and in-house Rapid Test and Evaluation programs. Q2 gross profit turned positive; first-half gross profit also improved from a loss. Operating expenses were nearly flat year over year in both comparison periods. Preferred dividends of $691,880 in Q2 and $1,007,127 in the first half increased the loss attributable to common stockholders.
For the six months, operating cash outflow was $2,435,387, versus $2,737,650 a year earlier; investing cash outflow was $98,710, versus $115,920; and financing provided $4,892,944, versus $2,270,178. Cash increased to $2,445,766 at June 30 from $86,919 at year-end 2019. Working capital was $2,768,591, compared with a deficit of $98,315 at year-end. Total liabilities were $689,322, including $22,072 of deferred payroll taxes; the company reported no notes payable at June 30.
Material changes and unusual items
- Revenue rose 399% in Q2 and 297% for the first half, from a low prior-year base. Management attributed the first-half increase mainly to PrintRite3D sales and RTE revenue.
- Other income included $361,700 from a Paycheck Protection Program loan recognized as a government grant and $151,657 of New Mexico state job-incentive credits in both Q2 and first-half results. These items materially reduced reported net loss.
- Financing included January preferred-stock placements, an April public offering, and warrant exercises. Six-month financing cash flow included $5.741 million of gross proceeds from offerings and preferred-warrant exercises, offset by $820,228 of offering costs and repayment of the remaining convertible note balance.
- Common shares outstanding increased to 3,926,362 at June 30 from 1,403,759 at December 31, 2019. Preferred conversions and in-kind dividends, equity offerings, and warrant activity contributed to share issuance. The filing lists 4,541,370 potential common shares underlying warrants, preferred securities, and options, subject to applicable terms and dilution.
- The company implemented a 15% employee salary deferral through September 30, 2020 and deferred directors’ cash compensation for the first half. It expected to repay employee deferrals in October.
Outlook, risks, and contingencies
Management expected short-term revenue to be lower than anticipated because of COVID-19-related delays in customer purchase orders, reduced demand in aerospace and oil and gas, and delayed university and research-institute orders. It said order timing was uncertain, while noting that supply-chain needs could potentially accelerate 3D-printing adoption. The company planned to continue commercialization, development, and marketing of PrintRite3D, including version 6.0, without a material increase in cash burn during the remainder of 2020.
Management cautioned that additional financing may be needed depending on revenue and warrant exercises. There is no assurance financing will be available; future equity financing could dilute shareholders, and debt could impose burdensome covenants and repayment obligations. If funding is insufficient, Sigma Labs may have to delay or scale back operations and could lose its Nasdaq listing. It had no credit line as of July 23, 2020.
The company believed the PPP amount would be forgiven because proceeds were used for eligible payroll costs, but any unforgiven portion would be repayable over two to five years at 1% interest. The filing describes the forgiveness period inconsistently: the note states 24 weeks, while the MD&A also refers to an eight-week period. The filing reports no material subsequent events and no legal proceedings.
Important facts for investors to verify
- Confirm the correct issuer: the provided filing is Sigma Labs, not Nexttrip.
- Verify PPP loan forgiveness status and reconcile the filing’s differing descriptions of the applicable period and conditions.
- Assess how much of the reported income and reduced net loss came from the PPP grant and state incentives, rather than recurring operations.
- Review the terms, conversion features, exercise activity, and potential dilution associated with preferred securities and outstanding warrants.
- Monitor customer-order delays, revenue conversion, cash burn, and the need and availability of additional financing.