Business context and reporting period
The supplied filing is Sigma Labs, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2016, not a filing identified as Nexttrip, Inc. Sigma Labs develops manufacturing quality-control technologies, with a focus on additive manufacturing and its PrintRite3D products, alongside engineering consulting and metal 3D-printing services.
Financial results and liquidity
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Revenue | $358,455 | $185,686; up about 93% |
| Gross profit and margin | $250,874; about 70.0% | $160,819; about 86.6% |
| Operating expenses | $721,699 | $533,260 |
| Net loss | $470,667; $0.08 per share | $371,881; $0.06 per share |
| Operating cash flow | $(393,028) | $(463,705) |
| Cash | $1,086,363 at March 31 | $1,539,809 at December 31, 2015 |
| Working capital | $1,374,064 surplus | $1,785,728 surplus at December 31, 2015 |
| Total liabilities | $226,656 | $109,916 at December 31, 2015 |
Gross margin declined as cost of service revenue increased to $107,581 from $24,867. The company reported no financing cash flows and no credit facility; the filing shows no debt. Cash used in investing activities was $60,418, mainly for equipment and intangible assets.
Changes and management commentary
Revenue growth was attributed primarily to additional contract work, especially engineering consulting. General and administrative expense rose to $395,488 from $267,703, and payroll expense increased to $215,589 from $72,660, reflecting higher business activity and six hires since June 2015. Research and development expense fell to $39,071 from $70,147 as operations shifted toward production. Management said the increased expenses more than offset revenue growth, widening the quarterly net loss.
Management expected commercialization of PrintRite3D for the metal additive-manufacturing market in the remainder of 2016 and 2017. As of May 12, 2016, four active contracts were expected to generate up to approximately $160,000 in revenue during the rest of 2016, subject to milestones and clients not terminating the contracts. Management said it believed available funds and expected receipts would cover expenses through 2016, but also stated that additional capital would be needed to fulfill business plans and that no third-party funding commitments existed.
Risks, contingencies, and unusual items
- The company has incurred losses and negative operating cash flows since inception. If it cannot secure additional funding, it may have to delay, reduce, or halt commercialization and operations; equity financing could dilute shareholders.
- Fixed-price consulting contracts expose the company to cost-estimation and performance risk. The projected contract revenue is conditional, and one contract’s scope reduction lowered expected revenue by approximately $170,000.
- On March 17, 2016, the company effected a 1-for-100 reverse stock split and reduced authorized common shares to 7.5 million. Subsequent to quarter-end, shareholders approved increasing authorized common shares to 15 million and increasing the 2013 equity-plan reserve.
- The 50%-owned Arete-Sigma joint venture had no activity during the quarter; the company was evaluating whether to continue it.
- Management reported disclosure controls effective at a reasonable assurance level and no material change in internal control during the quarter. Legal proceedings and market-risk disclosures were reported as not applicable.
Important facts for investors to verify
- Confirm the issuer: the provided filing names Sigma Labs, Inc., not Nexttrip, Inc.
- Verify the timing and expected cash receipts from the active contracts, including milestone conditions and termination provisions.
- Assess cash burn, funding needs, and the feasibility and timing of PrintRite3D commercialization and contract-manufacturing growth.
- Review the effects of the reverse split and subsequent increases in authorized shares and equity-plan capacity on potential dilution.