Business context and reporting period
Filing identity discrepancy: The supplied filing is Sigma Labs, Inc. (doing business as Sigma Additive Solutions), not Nexttrip, Inc. It is a Form 10-Q for the quarter and six months ended June 30, 2022, filed August 5, 2022. Sigma develops and commercializes manufacturing quality-assurance and process-control technology, including PrintRite3D.
Financial results and position
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Revenue | $236,660; +64.2% year over year | $288,504; -52.1% year over year |
| Gross profit / margin | $43,585 / 18.4% | $55,338 / 19.2% |
| Operating expenses | $2,279,425 | $4,575,123 |
| Operating loss | $(2,235,840) | $(4,519,785) |
| Net loss | $(2,247,170); common-stockholder loss $(2,261,390) | $(4,454,565); common-stockholder loss $(4,483,005) |
| Loss per common share, basic and diluted | $(0.22) | $(0.43) |
Six-month operating cash use was $4.31 million, investing cash use was $0.20 million, and financing cash flow was zero. Cash fell to $6.93 million from $11.45 million at December 31, 2021. Working capital was $7.52 million, versus $11.70 million at year-end. Total liabilities were $624,858; the filing reports no line of credit or other financing arrangement. A $37,728 deferred Social Security tax balance was due by December 31, 2022.
Material changes versus prior comparable periods
- Second-quarter revenue rose 64.2%, mainly from more PrintRite3D unit sales, installation revenue related to prior-year sales, and increased maintenance renewals. First-half revenue fell 52.1%, primarily because perpetual-license sales declined by $401,750 and legacy RTE revenue decreased by $20,000.
- First-half gross margin fell to 19.2% from 59.4% in 2021, as revenue contracted substantially while cost of revenue declined only 4.7%.
- First-half operating expenses increased 15.8%, led by higher salaries and benefits and stock compensation. The six-month common-stockholder loss widened by $1.91 million.
- Prior-year results included a $1.09 million gain from revaluation of a derivative liability; no corresponding gain was recorded in 2022. The 2022 first half included $76,628 of New Mexico state incentives.
- Operating cash use increased 32.1% year over year. The company raised no capital and had no warrant-exercise proceeds in the first half of 2022, unlike 2021.
Outlook, commentary, and risks
Management described a three-year strategy to lower adoption costs through subscription pricing, expand OEM partnerships, and move toward software-only embedded offerings. Subscription arrangements began in January 2022, with stated initial customer costs reduced from over $100,000 to approximately $3,000–$4,000 per month. Management said the business-model transition has weighed on near-term revenue growth but expects it to support broader adoption and more predictable, profitable revenue over time. No quantified revenue or earnings guidance was provided.
Management stated that cash on hand and expected revenue should fund anticipated operating costs and capital expenditures for at least 12 months from the filing date, while cautioning that assumptions may prove incorrect and additional financing may be needed. Risks cited include commercialization and customer demand, possible order delays in a recession, COVID-19 impacts, financing access, competition and technology developments, and potential dilution or senior securities if new capital is raised. Failure to obtain funding could require scaling back or delaying operations. The company reported disclosure controls were effective at a reasonable-assurance level and no material change in internal control over financial reporting.
Unusual or notable items include a shift toward operating-lease subscription revenue, the prior-year derivative-liability gain, and a company-wide conference that contributed $106,413 to first-half office expenses. The July 1, 2022 executive compensation, retention bonus, and change-in-control plans were disclosed as subsequent events.
Important facts for investors to verify
- Confirm the intended issuer: this filing is Sigma Labs, Inc., not Nexttrip, Inc.
- Assess whether subscription and OEM initiatives can offset the sharp first-half decline in perpetual-license revenue and improve gross margins.
- Track cash burn against management’s at-least-12-month liquidity estimate and determine whether additional financing will be required.
- Review potential dilution: 5.50 million common shares under outstanding warrants, options, and preferred stock were excluded from diluted loss per share as anti-dilutive; preferred stock terms include conversion and redemption provisions.
- Check subsequent filings for customer, partnership, revenue, financing, and compensation developments, and review the risk factors incorporated from the 2021 Form 10-K.