NextTrip, Inc 10-Q for FY2024 Q1
NextTrip, Inc. (NTRP)
About this 10-Q
NextTrip, Inc filed this 10-Q on August 14, 2023, covering the quarter ended June 30, 2023 (FY2024 Q1).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $97.04K
- down 59.0% from $236.66K a year earlier
- Net loss
- $1.31M
- compared with a net loss of $2.25M a year earlier
- Diluted EPS
- -$0.12
- compared with -$0.22 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
OR
Commission
file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
| The
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated Filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of August 11, 2023, the issuer had shares of common stock outstanding.
SIGMA ADDITIVE SOLUTIONS, INC.
FORM 10-Q
TABLE OF CONTENTS
| 2 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Sigma Additive Solutions, Inc.
Condensed Balance Sheets
June 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts Receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid Assets | ||||||||
| Total Current Assets | ||||||||
| Other Assets: | ||||||||
| Property and Equipment, net | ||||||||
| Intangible Assets, net | ||||||||
| Total Other Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts Payable | $ | $ | ||||||
| Deferred Revenue | ||||||||
| Accrued Expenses | ||||||||
| Total Current Liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments & Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred Stock, $ par value; shares authorized; and shares issued and outstanding, respectively | ||||||||
| Common Stock, $ par value; shares authorized; and shares issued and outstanding, respectively | ||||||||
| Additional Paid-In Capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to condensed financial statements.
| 3 |
Sigma Additive Solutions, Inc.
Condensed Statements of Operations
(Unaudited)
| Three
Months Ended June 30, | Six
Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| REVENUES | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUE | ||||||||||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Salaries & Benefits | ||||||||||||||||
| Stock-Based Compensation | ||||||||||||||||
| Operations and R&D Costs | ||||||||||||||||
| Investor, Public Relations and Marketing | ||||||||||||||||
| Organization Costs | ||||||||||||||||
| Legal & Professional Service Fees | ||||||||||||||||
| Office Expenses | ||||||||||||||||
| Depreciation & Amortization | ||||||||||||||||
| Other Operating Expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest Income | ||||||||||||||||
| State Incentives | ||||||||||||||||
| Exchange Rate Gain (Loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest Expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income | ||||||||||||||||
| Total Other Income (Expense) | ( | ) | ( | ) | ||||||||||||
| LOSS BEFORE PROVISION FOR INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income Taxes | ||||||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Preferred Dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss Applicable to Common Stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Loss per Common Share – Basic and Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Loss per Common Share – Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Number of Shares Outstanding – Basic and Diluted | ||||||||||||||||
| Weighted Average Number of Shares Outstanding – Basic | ||||||||||||||||
See accompanying notes to condensed financial statements.
| 4 |
Sigma Additive Solutions, Inc.
Statement of Stockholders’ Equity
For the Three Months and Six Months Ended June 30, 2023 and June 30, 2022
(Unaudited)
For the Three Months Ended June 30, 2023 and June 30, 2022
| Preferred Stock | Common Stock | Additional | ||||||||||||||||||||||||||
| Shares Outstanding | Preferred Stock | Shares Outstanding | Common Stock | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balances, March 31, 2023 | ( | ) | ||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Preferred Stock Dividends | - | - | ( | ) | ||||||||||||||||||||||||
| Stock Options Issued to Directors for Services | - | - | ||||||||||||||||||||||||||
| Stock Options Issued to Employees | - | - | ||||||||||||||||||||||||||
| Balances, June 30, 2023 | ( | ) | ||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional | ||||||||||||||||||||||||||
| Shares Outstanding | Preferred Stock | Shares Outstanding | Common Stock | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balances, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Preferred Stock Dividends | - | - | ( | ) | ||||||||||||||||||||||||
| Stock Options Issued for Third Party Services | - | - | ||||||||||||||||||||||||||
| Stock Options Awarded to Directors for Services | - | - | ||||||||||||||||||||||||||
| Stock Options Awarded to Employees | - | - | ||||||||||||||||||||||||||
| Balances, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| 5 |
For the Six Months Ended June 30, 2023 and June 30, 2022
| Preferred Stock | Common Stock | Additional | ||||||||||||||||||||||||||
| Shares Outstanding | Preferred Stock | Shares Outstanding | Common Stock | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balances, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Preferred Stock Dividends | - | ( | ) | |||||||||||||||||||||||||
| Common Shares Issued for Conversion of Preferred Stock | ( | ) | ( | ) | ||||||||||||||||||||||||
| Common Warrant Issued for Conversion of Preferred Stock | - | - | ( | ) | ||||||||||||||||||||||||
| Stock Options Issued to Directors for Services | - | - | ||||||||||||||||||||||||||
| Stock Options Issued for Third Party Services | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock Options Issued to Employees | - | - | ||||||||||||||||||||||||||
| Balances, June 30, 2023 | ( | ) | ||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional | ||||||||||||||||||||||||||
| Shares Outstanding | Preferred Stock | Shares Outstanding | Common Stock | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balances, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Balances | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Preferred Stock Dividends | - | - | ( | ) | ||||||||||||||||||||||||
| Stock Options Issued for Third Party Services | - | - | ||||||||||||||||||||||||||
| Stock Options Awarded to Directors for Services | - | - | ||||||||||||||||||||||||||
| Stock Options Awarded to Employees | - | - | ||||||||||||||||||||||||||
| Balances, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Balances | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
See accompanying notes to condensed financial statements.
| 6 |
Sigma Additive Solutions, Inc.
Condensed Statements of Cash Flows
(Unaudited)
| Six Months Ended | ||||||||
| June 30, 2023 | June 30, 2022 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile Net Loss to Net Cash used in operating activities: | ||||||||
| Noncash Expenses: | ||||||||
| Depreciation and Amortization | ||||||||
| Stock Based Compensation - Employees | ||||||||
| Stock Based Compensation - Third Party Services | ( | ) | ||||||
| Stock Based Compensation - Directors | ||||||||
| Stock Based Compensation | ||||||||
| Change in assets and liabilities: | ||||||||
| Accounts Receivable | ||||||||
| Inventory | ( | ) | ||||||
| Prepaid Assets | ( | ) | ( | ) | ||||
| Accounts Payable | ||||||||
| Deferred Revenue | ( | ) | ||||||
| Accrued Expenses | ( | ) | ( | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of Property and Equipment | ( | ) | ||||||
| Purchase of Intangible Assets | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET CHANGE IN CASH FOR PERIOD | ( | ) | ( | ) | ||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| Supplemental Disclosures: | ||||||||
| Noncash investing and financing activities disclosure: | ||||||||
| Preferred Stock Dividends | $ | $ | ||||||
| Conversion of Preferred Shares to Common Shares | $ | $ | ||||||
| Other noncash operating activities disclosure: | ||||||||
| Issuance of Securities for Services | $ | $ | ||||||
| Disclosure of cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income Taxes | $ | $ | ||||||
See accompanying notes to condensed financial statements.
| 7 |
SIGMA ADDITIVE SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2023
NOTE 1 - Summary of Significant Accounting Policies
Nature of Business - Sigma Additive Solutions, Inc., a Nevada corporation (“Company,” “Sigma,” “we,” “us” and “our”), was founded by a group of scientists, engineers and businessmen to develop and commercialize novel and unique manufacturing and materials technologies. The Company’s core technologies are designed to allow its customers to combine advanced manufacturing quality assurance and process control protocols with novel materials to achieve breakthrough product potential in many industries, including aerospace, defense, oil and gas, bio-medical, and power generation.
Basis of Presentation - The accompanying financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at June 30, 2023 and 2022 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The Company suggests these condensed financial statements be read in conjunction with the December 31, 2022 audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The results of operations for the period ended June 30, 2023 and 2022 are not necessarily indicative of the operating results for the full year.
Going Concern – The Company has sustained losses and had negative cash flows from operating activities since its inception.
As reported in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2023, the Company estimates that it has sufficient cash and working capital to fund its scaled-back operations as described below through August 2023 only. Since June 30, 2023, the Company has reduced its employee headcount to five, discontinued all product development activities and ceased to pursue new customers while continuing to consider a possible reverse merger, sale of the company or all or a portion of its assets, and other alternatives. Except for possible sales of shares of our common stock under the At-The-Market Issuance Sales Agreement described in Note 5- Subsequent Events, we have no agreement or arrangement to obtain any financing. There is no assurance that we will be able to enter into a definitive agreement with respect to a possible transaction or sell the Company or any of its assets or, if so, when or on what terms. If we fail to complete the sale of the Company or its assets or shares of common stock or obtain additional financing, we will be forced to resort to the dissolution and liquidation or bankruptcy of the Company. For these reasons, there is substantial doubt about our ability to continue as a going concern.
Fair Value of Financial Instruments - The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables, accounts payable, and accrued liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.
The Company does not use derivative instruments for hedging market risk or for trading or speculative purposes.
| 8 |
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Warrants | ||||||||
| Stock Options | ||||||||
| Preferred Stock | ||||||||
| Total Underlying Common Shares | ||||||||
Schedule of Computing Loss Per Share
| Three
Months Ended June 30 | Six
Months Ended June 30 | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net Loss per Common Share - Basic and Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Loss per Common Share - Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss Applicable to Common Stockholders (numerator) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Number of Common Shares Outstanding Used in Loss Per Share During the Period (denominator) | ||||||||||||||||
Accounting Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated by management. Significant accounting estimates that may materially change in the near future are impairment of long-lived assets, values of stock compensation awards and stock equivalents granted as offering costs, and allowance for bad debts and inventory obsolescence.
Leases - The Company leases office space from third parties. The Company determines if a contract is a lease at inception. A contract contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The lease term begins on the commencement date, which is the date the Company takes possession of the asset and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Leases are classified as operating or finance leases based on factors such as the lease term, lease payments, and the economic life, fair value and estimated residual value of the asset. Where leases include an option to purchase the leased asset at the end of the lease term, this is assessed as a part of the Company’s lease classification determination. The Company has short-term leases only, cancelable upon 45 days’ notice, and with remaining lease terms of less than one year. Therefore, the Company has elected the short-term lease recognition exemption for all leases, whereby leases are not recorded on the Company’s balance sheet and lease payments are recognized as lease expense on a straight-line basis over the lease term.
| 9 |
Long-Lived
and Intangible Assets – Long-lived assets and certain identifiable definite life intangibles to be held and used by the Company
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company periodically evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated
liquidation value of such long-lived assets and provides for impairment if such undiscounted cash flows are insufficient to recover the
carrying amount of the long-lived assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and
a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values,
discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying
value or estimated net realizable value. No patents were written off in the second quarter of 2023 or in fiscal 2022. Utility patents
are amortized over a
Revenue Recognition – The Company’s revenue is derived primarily from sales of our software and related hardware suite under perpetual licenses and from providing engineering services under contracts. The Company recognizes revenue in accordance with ASC Topic No. 606. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance under prior U.S. GAAP and replaced it with a principles-based approach for determining revenue recognition. The core principle of the standard is the recognition of revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In general, we determine revenue recognition by: (1) identifying the contract, or contracts, with our customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to performance obligations in the contract; and (5) recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.
In January 2022, the Company began offering a subscription option to its customers pursuant to which it leases its PrintRite3D platform for terms of between 12 and 36 months and provide technical support and maintenance for the term of the arrangement, as well as installation and training. The Company has determined these are leases because they relate to discrete pieces of equipment to which customers have the right to substantially all the economic benefit and exclusive use during the term of the arrangement. These leases are classified as operating leases and the Company retains title to the underlying equipment.
The leases may be renewed for successive one-year terms unless notice is given by either party of its intent not to renew at least 30 days before the end of the lease term. For leases with 36-month terms, the lessee may terminate the agreement after the first 18 months upon at least 30 days written notice. Some, but not all, of the leases permit lessees to purchase the equipment at any time at an amount that approximates fair value and are not reasonably certain to be exercised at the inception of the lease. There are no anticipated variable lease payments at the inception of the lease.
There are two non-lease components in the arrangement that consist of technical support and maintenance, and installation and training, respectively. The Company has elected single component practical expedient accounting to combine the technical support and maintenance with the lease as they have the same pattern of transfer. The installation and training component does not have the same pattern of transfer; therefore, this component is not eligible for single component practical expedient accounting. The consideration has been allocated on a relative fair value basis of the underlying lease and non-lease components. The Company has estimated the residual value of the leased equipment based on its useful life, and the ability to refurbish and sell the equipment, as well as the Company’s ability to componentize the hardware and utilize subassemblies in other products.
Revenue
from these operating leases for the three and six months ended June 30, 2023 was $
Accounts
Receivable and Allowance for Doubtful Accounts - Trade accounts receivable are carried at original invoice amount less an estimated
allowance for doubtful accounts. We determine the allowance for doubtful accounts by identifying potential troubled accounts and by using
historical experience and future expectations applied to an aging of accounts. Trade accounts receivable are written off when deemed
uncollectible. Recoveries of trade accounts receivable previously written off are recorded as income when received. As of June 30, 2023
and June 30, 2022, the Company has established an allowance for doubtful accounts of $
| 10 |
Minimum Lease Payments Receivable
Minimum lease payments receivable for the succeeding years ending December 31 are as follows:
Schedule of Minimum Lease Payments Receivable
| Year ending December 31, | Amount | |||
| 2023 (remaining) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total | $ | |||
Equipment Underlying Operating Leases:
Equipment under operating leases as of June 30, 2023 was comprised of the following:
Schedule of Assets underlying Operating Leases
| June 30, 2023 | ||||
| PrintRite3D Hardware | $ | |||
| Accumulated Depreciation | ( | ) | ||
| Net Book Value | $ | |||
The
Company is depreciating the underlying equipment over its useful life of
NOTE 2 – Inventory
At June 30, 2023 and December 31, 2022, the Company’s inventory was comprised of the following:
Schedule of Inventory
| June 30, 2023 | December 31, 2022 | |||||||
| Raw Materials | $ | $ | ||||||
| Work in Process | ||||||||
| Finished Goods | ||||||||
| Total Inventory | $ | $ | ||||||
NOTE 3 – Intangible Assets
The Company’s intangible assets consist of patents and patent applications.
The Company capitalizes costs incurred in connection with acquiring its patents. These costs include registration, documentation, and legal fees associated with the application. Costs incurred with patents that have been previously granted are expensed as incurred.
Provisional patent applications are not amortized until a patent has been granted. Once a patent is granted, the Company will amortize the related costs over the estimated useful life of the patent. If a patent application is denied, then the costs will be expensed at that time.
During
the six months ended June 30, 2023, $
| 11 |
The following is a summary of definite-life intangible assets less accumulated amortization as of June 30, 2023 and December 31, 2022, respectively:
Summary of Definite-life Intangible Assets and Accumulated Amortization
| June
30, 2023 | December
31, 2022 | |||||||
| Provisional Patent Applications | $ | $ | ||||||
| Patents | ||||||||
| Less: Accumulated Amortization | ( | ) | ( | ) | ||||
| Net Intangible Assets | $ | $ | ||||||
Amortization
expense on intangible assets was $
The estimated aggregate amortization expense for years ending December 31 is as follows:
Schedule of Aggregate Amortization Expense
| 2023 (Remaining) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| $ |
NOTE 4 - Stockholders’ Equity
Common Stock
In the second quarter of 2023, the Company did not issue any shares of common stock.
In the first quarter of 2023, the Company issued shares of common stock in exchange for the conversion of shares of Series D Convertible Preferred Stock and shares of common stock as in-kind payment of dividends thereon.
Also in the first quarter of 2023, the Company issued shares of common stock in exchange for the conversion of shares of Series E Convertible Preferred Stock and shares of common stock as in-kind payment of dividends thereon.
Preferred Stock
The Company is authorized to issue shares of preferred stock, $ par value per share, of which and shares were issued and outstanding at June 30, 2023 and December 31, 2022, respectively.
In
January 2020, the Company entered into a Securities Purchase Agreement with certain institutional investors (the “Institutional
Private Placement”), pursuant to which the Company issued and sold shares of the Company’s newly created Series D Convertible
Preferred Stock (the “Series D Preferred Stock”) at an initial stated value of $ per share. Dividends accrue at a rate
of
| 12 |
On January 27, 2023, the holder of the remaining outstanding shares of Series D Preferred Stock elected to convert such shares, which resulted in the issuance of shares of common stock.
At June 30, 2023, there were shares of Series D Preferred Stock outstanding.
Concurrent
with the Institutional Private Placement, the Company entered into a Securities Purchase Agreement pursuant to which the Company issued
and sold to certain of its directors and the Company’s then largest stockholder shares of the Company’s newly created
Series E Convertible Preferred Stock (the “Series E Preferred Stock”) at an initial stated value of $ per share. Dividends
accrue at a dividend rate of
On January 23, 2023, the holder of shares of Series E Preferred Stock elected to convert such shares, which resulted in the issuance of shares of common stock.
At June 30, 2023, shares of Series E Preferred Stock were outstanding, which were convertible into shares of common stock, including in-kind dividends thereon.
Stock Options
The Company’s 2013 Equity Incentive Plan expired on March 15, 2023. As such, there were shares of common stock reserved for future issuance thereunder as of June 30, 2023.
On
January 26, 2023, the Company granted options to its non-employee directors to purchase up to an aggregate of
On
January 26, 2023, the Company granted 19 employees options to purchase up to an aggregate of shares of common stock in connection
with their employment. The options have an exercise price of $
The Company generally grants stock options to employees and directors at exercise prices equal to the fair market value of the Company’s common stock on the grant date, but not less than 100% of the fair market value. Stock options are typically granted throughout the year and generally vest over a period from one to three years of service and expire five years from the grant date, unless otherwise specified. The Company recognizes compensation expense for the fair value of the stock options over the vesting period for each stock option award.
Total stock-based compensation expense included in the statements of operations for the six months ended June 30, 2023 and 2022 was $ and $ respectively, all of which is related to stock options.
Schedule of Share Based Payments Award Stock Options Valuation Assumptions
| 2023 | 2022 | |||||||
| Dividend yield | % | % | ||||||
| Risk-free interest rate | % | - | % | |||||
| Expected volatility | - | % | - | % | ||||
| Expected life (in years) | ||||||||
| 13 |
Schedule of Share Based Compensation Stock Option Activity
| Options | Weighted Average Exercise Price ($) | Weighted Average Remaining Contractual Life (Yrs.) | Aggregate Intrinsic Value ($) | |||||||||||||
| Options outstanding at December 31, 2021 | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | - | |||||||||||||||
| Forfeited or cancelled | ( | ) | - | |||||||||||||
| Options outstanding at December 31, 2022 | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | - | |||||||||||||||
| Forfeited or cancelled | ( | ) | - | |||||||||||||
| Options outstanding at June 30, 2023 | ||||||||||||||||
| Options expected to vest in the future as of June 30, 2023 | ||||||||||||||||
| Options exercisable at June 30, 2023 | ||||||||||||||||
| Options vested, exercisable, and options expected to vest at June 30, 2023 | ||||||||||||||||
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market price of our common stock for those awards that have an exercise price below the market price of our common stock. At June 30, 2023, no option had an exercise price below the $ closing price of our common stock as reported on The Nasdaq Capital Market.
At June 30, 2023, there was $ of unrecognized stock-based compensation expense related to unvested stock options with a weighted average remaining recognition period of years.
Stock Appreciation Rights
On June 23, 2020, the board of directors (the “Board”) of the Company adopted the 2020 Stock Appreciation Rights Plan (the “Plan”). The purposes of the Plan are to: (i) enable the Company to attract and retain the types of employees, consultants, and directors (collectively, “Service Providers”) who will contribute to the Company’s long-range success; (ii) provide incentives that align the interests of Service Providers with those of the stockholders of the Company; and (iii) promote the success of the Company’s business. The Plan provides for incentive awards only in the form of stock appreciation rights payable in cash (“SARs”) and no shares of common stock are reserved or will be issued pursuant to the Plan.
A SAR is the right to receive an amount equal to the Spread with respect to a share of the Company’s common stock (“Share”) upon the exercise of the SAR. The “Spread” is the difference between the exercise price per share specified in a SAR agreement on the date of grant and the fair market value per share on the date of exercise of the SAR. The exercise price per share will not be less than 100% of the fair market value of a share of common stock on the date of grant of the SAR. The administrator of the Plan will have the authority to, among other things, prescribe the terms and conditions of each SAR, including the exercise price and vesting provisions, and to specify the provisions of the SAR Agreement relating to such grant.
The Company did not grant any SAR’s during the six months ended June 30, 2023.
The Company recognizes compensation expense and a corresponding liability for the fair value of the SARs over the vesting period for each SAR award. The SARs are revalued at each reporting date in accordance with ASC 718 “Compensation-Stock Compensation,” and any changes in fair value are reflected in the Statement of Operations as of the applicable reporting date.
| 14 |
Schedule of Share Based Payments Award Stock Options Valuation Assumptions
| 2023 | 2022 | |||||||
| Dividend yield | % | |||||||
| Risk-free interest rate | - | % | ||||||
| Expected volatility | - | % | ||||||
| Expected life (in years) | ||||||||
Schedule of Stock Option Activity
| SARs | Weighted Average Exercise Price ($) | Weighted Average Remaining Contractual Life (Yrs.) | Aggregate Intrinsic Value ($) | |||||||||||||
| SARs outstanding at December 31, 2021 | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | - | |||||||||||||||
| Forfeited or cancelled | ( | ) | - | |||||||||||||
| SARs outstanding at December 31, 2022 | ||||||||||||||||
| Granted | - | |||||||||||||||
| Exercised | - | |||||||||||||||
| Forfeited or cancelled | ( | ) | - | |||||||||||||
| SARs outstanding June 30, 2023 | ||||||||||||||||
| SARs expected to vest in the future as of June 30, 2023 | ||||||||||||||||
| SARs exercisable at June 30, 2023 | ||||||||||||||||
| SARs vested, and exercisable, and SARs expected to vest at June 30, 2023 | ||||||||||||||||
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market price of our common stock for those awards that have an exercise price below the market price of our common stock. At June 30, 2023, no SAR had an exercise price below the $ closing price of our common stock as reported on The Nasdaq Capital Market.
At June 30, 2023, there was $ of unrecognized stock-based compensation expense related to unvested SARs with a weighted average remaining recognition period of years.
| 15 |
Warrants
Warrant activity for the six months ended June 30, 2023 and the year ended December 31, 2022 was as follows:
Schedule of Warranty Activity
| Warrants | Weighted Average Exercise Price ($) | Weighted Average Remaining Contractual Life (Yrs.) | ||||||||||
| Warrants outstanding at December 31, 2021 | ||||||||||||
| Granted | - | |||||||||||
| Exercised | - | |||||||||||
| Forfeited or cancelled | ( | ) | - | |||||||||
| Warrants outstanding at December 31, 2022 | ||||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Forfeited or cancelled | ( | ) | - | |||||||||
| Warrants outstanding at June 30, 2023 | ||||||||||||
NOTE 5 - Subsequent Events
In
July 2023, the Company realized gross proceeds of approximately $
On July 14, 2023, the employment of Stephan Kuehr, General Manager of European Operations, terminated.
On
August 14, 2023, the Company entered into an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with Lake Street
Capital Markets, LLC, or Lake Street, pursuant to which the Company may issue and sell from time to time through Lake Street, as sales
agent, shares of our common stock having an aggregate offering price of up to $
Upon delivery of a placement notice, and subject to the terms and conditions of the Sales Agreement, Lake Street as sales agent may sell shares of common stock by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended. The sales agent is not required to purchase any shares of common stock from the Company or sell any specific number or dollar amount of common stock but will use its commercially reasonable efforts consistent with its normal trading and sales practices as our agent to sell shares of common stock in the Offering as instructed by us.
The Company or Lake Street may suspend or terminate the Offering upon notice to the other and subject to other conditions.
The
Company has agreed to pay Lake Street a commission of
| 16 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-looking statements
This Quarterly Report contains “Forward-Looking Statements.” All statements other than statements of historical fact are “Forward-Looking Statements” including but not limited to, statements regarding a possible strategic transaction, dissolution and liquidation or bankruptcy of the Company. All Forward-Looking Statements included in this Quarterly Report are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any Forward-Looking Statement. In some cases, Forward-Looking Statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the Forward-Looking Statements contained herein are reasonable, there can be no assurance that such expectations or any of the Forward-Looking Statements will prove to be correct, and actual results could differ materially from those projected or assumed in the Forward-Looking Statements. Future financial condition and results of operations, as well as any Forward-Looking Statements are subject to inherent risks and uncertainties, including factors referred to in our press releases and reports filed with the Securities and Exchange Commission (“SEC”). All subsequent Forward-Looking Statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Additional factors that may have a direct bearing on our operating results are described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 and elsewhere in this Quarterly Report.
Corporation Information
We were incorporated as Messidor Limited in Nevada on December 23, 1985 and changed our name to Framewaves Inc. in 2001. On September 27, 2010, we changed our name to Sigma Labs, Inc. We commenced our current business operations in 2010. On May 17, 2022, we began doing business as Sigma Additive Solutions, and on August 9, 2022 changed our name to Sigma Additive Solutions, Inc.
Our principal executive offices are located at 3900 Paseo del Sol, Santa Fe, New Mexico 87507, and our telephone number is (505) 438-2576. Our website address is www.sigmaadditive.com. The Company’s annual reports, quarterly reports, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), and other information related to the Company, are available, free of charge, on our website. The Company’s website and the information contained therein, or connected thereto, are not and are not intended to be incorporated into this Quarterly Report.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported assets, liabilities, sales and expenses in the accompanying financial statements. Critical accounting policies are those that require the most subjective and complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. By their nature, changes in these assumptions and estimates could significantly affect our financial position or results of operations. Significant accounting estimates that may materially change in the near future are revenue recognition, impairment of long-lived assets, values of stock compensation awards and stock equivalents granted as offering costs, and allowance for bad debts and inventory obsolescence. Such critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 1 of the Notes to Financial Statements included in this Quarterly Report. However, we do not believe that there are any alternative methods of accounting for our operations that would have a material effect on our financial statements.
The critical accounting policies and estimates addressed below reflect our most significant judgements and estimates used in the preparation of our financial statements.
| 17 |
Revenue Recognition – The Company’s revenue is derived primarily from sales of our software and related hardware suite under perpetual licenses and from providing engineering services under contracts. The Company recognizes revenue in accordance with ASC Topic No. 606. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance under prior GAAP and replaced it with a principles-based approach for determining revenue recognition. The core principle of the standard is the recognition of revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In general, we determine revenue recognition by: (1) identifying the contract, or contracts, with our customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to performance obligations in the contract; and (5) recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.
In January 2022, the Company began offering a subscription option to its customers, pursuant to which it leases its PrintRite3D platform for terms between 12 and 36 months and provide technical support and maintenance for the term of the arrangement, as well as installation and training. The Company has determined these are leases because they relate to discrete pieces of equipment to which customers have the right to substantially all the economic benefit and exclusive use during the term of the arrangement. These leases are classified as operating leases and the Company retains title to the underlying equipment.
The leases may be renewed for successive one-year terms unless notice is given by either party of its intent not to renew at least 30 days before the end of the lease term. For leases with 36-month terms, the lessee may terminate the agreement after the first 18 months upon at least 30 days written notice. Some, but not all, of the leases permit lessees to purchase the asset at any time at an amount that approximates fair value and are not reasonably certain to be exercised at the inception of the lease. There are no anticipated variable lease payments at the inception of the lease.
There are two non-lease components in the arrangement that consist of technical support and maintenance, and installation and training. The Company has elected single component practical expedient accounting to combine the technical support and maintenance with the lease as they have the same pattern of transfer. The installation and training component does not have the same pattern of transfer; therefore, this component is not eligible for single component practical expedient accounting. The lease consideration is allocated on a relative fair value basis of the underlying lease and non-lease components. The Company has estimated the residual value of the leased equipment based on its useful life, and the ability to refurbish and sell the equipment, as well as the Company’s ability to componentize the hardware and utilize subassemblies in other products.
The Company is depreciating assets over their useful life of 7 years, but certain subassemblies and components may have a longer economic life.
Accounts Receivable and Allowance for Doubtful Accounts - Trade accounts receivable are carried at original invoice amount less an estimated allowance for doubtful accounts. We determine the allowance for doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded as income when received. As of June 30, 2023 and June 30, 2022, the Company has established an allowance for doubtful accounts of $115,600 and $0, respectively.
Inventory Valuation - Inventories consist of raw materials used in the production of customized parts, work-in-process and finished goods components which will be sold to customers. Inventories are valued at the lower of cost or net realizable value, using the first-in, first-out (FIFO) method. Charges for obsolete inventory are based on identification of specific items resulting from regular, on ongoing reviews of our inventory.
| 18 |
Long-Lived and Intangible Assets – Long-lived assets and certain identifiable definite life intangibles to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company periodically evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived assets and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal or external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value. Utility patents are amortized over a 17-year period. Patents which are pending are not amortized.
Stock-Based Compensation – We measure the compensation costs of stock-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the vesting period of the stock-based compensation. Stock-based compensation arrangements may include stock options, grants of shares of common stock with and without restrictions, performance-based awards, and stock appreciation rights, or SARs. Compensation cost is measured on the date of grant at its fair value.
Equity instruments issued to non-employees are recorded on the basis of the grant date fair value of the instruments. In general, the measurement date is either (a) when a performance commitment, as defined, is reached or (b) the earlier of the date that (i) the non-employee performance requirement is complete or (ii) the instruments vest. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant.
The fair value of common stock grants is based upon the closing price of our common stock as reported on The Nasdaq Capital Market on the date of the grant. The grant date fair value of stock options and SARs is calculated using the Black Scholes valuation model, and requires estimates of several inputs to the model, including risk-free interest rates, dividends, and expected volatility of our stock price.
Business Overview
Sigma Additive Solutions, Inc. (“Sigma,” “we,” “us,” “our” and the “Company”) was founded by a group of scientists, engineers and businesspeople to develop and commercialize novel and unique manufacturing and materials technologies. The Company anticipated that its core technologies would allow its customers to combine advanced manufacturing quality assurance and process control protocols with novel materials to achieve breakthrough product potential in many industries, including aerospace, defense, oil and gas, bio-medical, and power generation.
Historically, we generated revenues through sales of our PrintRite3D® technology to customers that seek to improve their manufacturing production processes, and through ongoing annual software upgrades and maintenance fees. In 2022, we began offering our current PrintRite3D integrated hardware and software solution on a subscription basis, which reduced the initial upfront cost to a new user from over $100,000 to approximately $3,000-$5,000 per month. The combination of subscription pricing and the new software-only products that can be embedded into OEM and software partner offerings was intended to make our technology more affordable to acquire and easier to bundle, distribute and support in an effort to become the industry standard. The shift in our business model adversely affected our revenues and near-term revenue growth as we increased our focus on building strategic partnerships, expanding our partner ecosystem, and ensuring the success of our existing customers as they move into production.
On March 1, 2023, we announced that we had retained Lake Street Capital Markets as our financial advisor in connection with our consideration of a range of strategic alternatives, including a possible strategic investment, acquisition, merger, business combination, or similar transaction.
In our Current Report on Form 8-K filed with the SEC on July 20, 2023, we reported that we had received four written, non-binding proposals to purchase assets or acquire the company in a merger or reverse merger and were in talks regarding the respective proposals, as well as possible alternative transactions with other parties that expressed interest in a possible transaction as we worked to formally close our strategic transaction process. We also reported that we had reduced our employee headcount via furloughs and layoffs to five employees, including our President and Chief Executive Officer and Chief Financial Officer and two key employees considered important to a possible sale of the company or all or a portion of its assets and support of current customers, and had discontinued our product development activities and ceased to pursue new customers. See “Liquidity and Capital Resources,” below.
Since the filing of the Current Report, we have received additional written, non-binding proposals as well as revised previous proposals to purchase certain assets of the Company or acquire the Company in a merger or reverse merger. Although we have not yet entered into any definitive agreements, we are continuing to work towards such definitive agreements with interested parties. See “Risk Factors,” below for a discussion of certain risks and uncertainties regarding a possible transaction.
| 19 |
Results of Operations
Three Months Ended June 30, 2023 and June 30, 2022
During the three months ended June 30, 2023, we recognized revenue of $97,043, as compared to $ 236,660 in the same period in 2022, a decrease of $139,617, or 59%. The decrease was due to decreased PrintRite3D sales of $111,200, decreased annual maintenance contract revenue of $7,739, decreased RTE revenue of $5,300 and decreased on-site development and support of 44,044 as compared to the second quarter of 2022. Partially offsetting the decreases were increases in PrintRite3D lease revenue of $3,166 and in PrintRite3D consulting services of $25,500.
Our cost of revenue for the three months ended June 30, 2023 was $36,491, as compared to $193,075 for the same period in 2022, a decrease of $156,584, or 81%. The decrease e was primarily attributable to fewer unit sales and installations in the second quarter of 2023 as compared to the second quarter of 2022.
Our total operating expenses for the three months ended June 30, 2023 were $1,364,571, as compared to $2,279,425 for the same period in 2022, a decrease of $914,854, or 40%. The decrease was primarily attributable to a decrease in salaries and benefits of $630,636, a decrease in investor, public relations, and marketing expense of $94,475, and a decrease in office expense of $209,410 primarily attributable to reduced headcount and travel as further described below.
Salary and benefits costs were $554,182 for the three months ended June 30, 2023, as compared to $ 1,184,818 for the same period in 2022, a decrease of $630,636, or 53%. The decrease was comprised of: (a) decreased salaries of $499,473 attributable to furloughed and terminated employees; (b) a decrease commission and bonus expense of $93,664 due to the reversal of 2022 year-end bonuses; (c) decreased taxes and benefits of $75,835; and (d) decreased severance expense of $2,035. Offsetting these decreases was an increase in stock appreciation rights of $40,371.
Stock-based compensation was $138,489 for the three months ended June 30, 2023, as compared to $167,439 for the same period in 2022, a decrease of $28,950, or 17%. This decrease was primarily a result of forfeiture of options from former employees.
We incurred operations and research and development costs of $105,259 during the three months ended June 30, 2023, as compared to $146,885 in the same period in 2022, a decrease of $41,626, or 28%. The decrease was due to a decrease in operations costs of $14,755, and a decrease in research and development costs of $26,871. The decrease in operations costs related to fewer parts and material purchases in the second quarter of 2023. The decrease in research and development costs was primarily due to suspending consulting work with a third-party software vendor in connection with the development of our software-only product suite.
We incurred investor, public relations, and marketing costs of $57,824 during the three months ended June 30, 2023, as compared to $152,300 during the same period in 2022. The decrease of $94,476, or 62%, was due to a decrease in investor relations consulting costs of $35,212, a decrease in attendance at tradeshows and conferences of $48,094 due to fewer employees, and a decrease in marketing costs of $11,170.
We incurred organization costs of $38,240 during the three months ended June 30, 2023, as compared to $60,817 during the same period in 2022. The decrease of $22,577, or 37%, was primarily attributable to a decrease in non-employee director compensation of $15,926 primarily due to fewer stock options granted in 2023 and a decrease in shareholder services of $5,966.
Legal and professional fees incurred in the three months ended June 30, 2023 were $152,025, as compared to $144,528 incurred during the same period in 2022, an increase of $7,497, or 5%. This increase was a result of legal fees of $64,410 due to employment related matters, and legal and financial advisors engaged to assist in Sigma’s evaluation of a corporate transaction. Partially offsetting the increase was a decrease in consulting expenses from 2022 of $48,929 which were related to a manufacturing consultant, technical accounting support, HR consultant, and advisor to the Board of Directors, a decrease in accounting expenses of $3,555 and a decrease in IT service fees of $4,429 related to new employee setup fees in 2022.
| 20 |
Office expenses for the three months ended June 30, 2023, were $94,190 as compared to $303,600 for the same period in 2022, a decrease of $209,410, or 69%. The decrease resulted from: (a) decreased travel and entertainment expenses of $151,630; (b) decreased office supply expenses of $4,503; (c) decreased dues & subscriptions of $8,990; (d) decreased payroll services expense of $7,223; (e) decreased rent and utilities of $11,534; and (f) decreased training and education expense of $27,705. These decreases were the result of a reduction in the number of employees and no company-wide conference being held in 2023. Partially offsetting these decreases was an increase in postage and shipping expenses of $2,175 due to shipment of a PrintRite3D system to one of our partners in Europe.
Depreciation and amortization expense for the three months ended June 30, 2023 was $21,470, as compared to $29,861 for the same period in 2022, a decrease of $8,391, or 28%. The decrease was primarily the result of the increased life expectancy of our leased and consigned PrintRite3D systems.
Other operating expenses were $202,892 for the three months ended June 30, 2023, as compared to $89,177 for the same period in 2022. The $113,715 increase was primarily due to bad debt expense of $115,600 related to a customer receivable for which collectability is in doubt.
In the three months ended June 30, 2023, we realized net other expense of $4,075, as compared to net other expense of $11,330 in the same period in 2022. The decrease in net other expense of $7,255, was primarily due to lower foreign exchange rate losses in 2023.
Preferred dividends for the three months ended June 30, 2023 were $10,668, as compared to $14,220 for the same period in 2022. The decrease was due to fewer outstanding shares of preferred stock as a result of conversions to common shares.
Our net loss applicable to common stockholders for the three months ended June 30, 2023, was $1,318,782 as compared to $2,261,390 for the same period in 2022, a decrease of $942,608, or 42%. The decrease was primarily due to the decrease in the loss from operations of $931,821, a decrease in preferred dividends of $3,533, and a decrease in total other expenses of $7,255.
Six Months Ended June 30, 2023 and June 30, 2022
During the six months ended June 30, 2023, we recognized revenue of $227,202, as compared to $ 288,504 in the same period in 2022, a decrease of $61,302, or 21%. The decrease was due to decreased PrintRite3D sales of $49,701, decreased annual maintenance contract revenue of $5,829, and decreased on-site development and support of $56,043 as compared to the second quarter of 2022. Partially offsetting the decreases were an increase in PrintRite3D lease revenue of $14,171, an increase in PrintRite3D consulting services of $25,500, and an increase in RTE revenue of $10,600.
Our cost of revenue for the six months ended June 30, 2023 was $100,155, as compared to $ 233,166 for the same period in 2022, a decrease of $133,011, or 57%. The decrease was primarily attributable to fewer unit sales and installations in the second quarter of 2023 as compared to the second quarter of 2022.
Our total operating expenses for the six months ended June 30, 2023 were $3,212,715, as compared to $4,575,123 for the same period in 2022, a decrease of $1,362,408, or 30%. The decrease was primarily attributable to a decrease in salaries and benefits of $991,064, a decrease in investor, public relations, and marketing expense of $133,857, and a decrease in office expense of $260,343 primarily attributable to reduced headcount and travel as further described below.
Salary and benefits costs were $1,485,764 for the six months ended June 30, 2023, as compared to $ 2,476,828 for the same period in 2022, a decrease of $991,064, or 40%. The decrease was comprised of: (a) decreased salaries of $812,160 attributable to furloughed and terminated employees; (b) a decrease commission and bonus expense of $75,958 due to the reversal of 2022 year-end bonuses; (c) decreased taxes and benefits of $126,325; (d) decreased stock appreciation rights expense of $22,331 due to quarterly revaluation at March and June 2023. Partially offsetting these decreases was an increase in severance expense of $45,710.
| 21 |
Stock-based compensation was $363,339 for the six months ended June 30, 2023, as compared to $338,415 for the same period in 2022, a decrease of $24,924, or 7%. This decrease was primarily a result of forfeiture of options from former employees.
We incurred operations and research and development costs of $231,971 during the six months ended June 30, 2023, as compared to $290,303 in the same period in 2022, a decrease of $58,332, or 20%. The decrease was due to a decrease in operations costs of $56,840, and a decrease in research and development costs of $1,492. The decrease in operations costs related to fewer parts and material purchases in the second quarter of 2023. The decrease in research and development costs was primarily due to suspending consulting work with a third-party software vendor in connection with the development of our software-only product suite.
We incurred investor, public relations, and marketing costs of $112,768 during the six months ended June 30, 2023, as compared to $246,626 during the same period in 2022. The decrease of $133,856, or 54%, was primarily due to a decrease in investor relations consulting costs of $70,212, a decrease in attendance at tradeshows and conferences of $50,978 due to fewer employees, and a decrease in marketing costs of $12,666.
We incurred organization costs of $89,438 during the six months ended June 30, 2023, as compared to $119,566 during the same period in 2022. The decrease of $30,128, or 25% was attributable to a decrease in non-employee director compensation of $29,920 primarily due to fewer stock options granted in 2023 and a decrease in shareholder services of $872.
Legal and professional fees incurred in the six months ended June 30, 2023 were $336,276, as compared to $355,944 incurred during the same period in 2022, a decrease of $19,668, or 6%. This decrease was a result of a decrease in consulting expenses from 2022 of $174,434 which were related to a manufacturing consultant, technical accounting support, HR consultant, and an advisor to the Board of Directors, and a decrease in IT service fees of $7,158 related to new employee setup fees in 2022. Partially offsetting these decreases were an increase in legal fees of $155,875 due to employment related matters and legal and financial advisors engaged to assist in Sigma’s evaluation of strategic corporate transactions, and an increase in accounting fees of $6,049.
Office expenses for the six months ended June 30, 2023, were $248,689 as compared to $509,032 for the same period in 2022, a decrease of $260,343, or 51%. The decrease resulted primarily from:(a) decreased travel and entertainment expenses of $176,243; (b) decreased office supply expenses of $20,156; (c) decreased dues & subscriptions of $12,680; (d) decreased payroll services expense of $4,102; (e) decreased rent and utilities of $13,607; and (f) decreased training and education expense of $32,570. These decreases were all the result of a reduction in the number of employees and no company-wide conference being held in 2023.
Depreciation and amortization expense for the six months ended June 30, 2023 was $49,597, as compared to $61,445 for the same period in 2022, a decrease of $11,848, or 19%. The decrease was primarily the result of the increased life expectancy of our leased and consigned PrintRite3D systems.
Other operating expenses were $294,873 for the six months ended June 30, 2023, as compared to $176,964 for the same period in 2022. The $117,909 increase was primarily due to bad debt expense of $115,600 related to a customer receivable for which collectability is in doubt.
In the six months ended June 30, 2023, we realized net other income of $25,874, as compared to net other income of $65,220 in the same period in 2022. The decrease in net other income of $39,346, was primarily due to the New Mexico High Wage Tax credit of $76,628 received in 2022, partially offset by a write-off of accounts payable due to an unclaimed customer deposit in the first quarter of 2023.
Preferred dividends for the six months ended June 30, 2023 were $22,435, as compared to $28,440 for the same period in 2022. The decrease was due to fewer outstanding shares of preferred stock as a result of conversions to common shares.
Our net loss applicable to common stockholders for the six months ended June 30, 2023, was $3,082,229 as compared to $4,483,005 for the same period in 2022, a decrease of $1,400,776, or 31%. The decrease was primarily due to the decrease in the loss from operations of $1,434,117, and a decrease in preferred dividends of $6,005, partially offset by a decrease in total other income of $39,346.
| 22 |
Liquidity and Capital Resources
Due to uncertainties regarding our ability to meet our current and future operating and capital expenses, there is substantial doubt about our ability to continue as a going concern for 12 months from the date of the filing of this Quarterly Report,
As of June 30, 2023, we had $368,443 in cash and working capital of $948,091, as compared with $2,845,931 in cash and working capital of $3,644,522 as of December 31, 2022.
As we reported in our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2023, the Company estimates that it has sufficient cash and working capital to fund its scaled-back operations as described below through August 2023 only. Since June 30, 2023, the Company has reduced its employee headcount to five, discontinued all product development activities and ceased to pursue new customers. We continue to explore a possible reverse merger, sale of the Company or all or a portion of its assets, and other alternatives. There is no assurance, however, that we will be able to enter into a definitive agreement with respect to a possible transaction or sell the company or any of its assets or, if so, when or on what terms. If we fail to complete the sale of the Company or its assets or other strategic transaction in the immediate future, we will be forced to resort to the dissolution and liquidation or bankruptcy of the Company. For these reasons, there is substantial doubt about our ability to continue as a going concern.
Net Cash Used in Operating Activities
Net cash used in operating activities during the six months ended June 30, 2023 was $2,414,881 as compared to $4,314,503 during the same period in 2022, a decrease of $1,899,622, or 44.0%.
During the six months ended June 30, 2023, the net cash used in operating activities was the result of a net loss of $3,059,794 before preferred dividends, partially offset by changes in working capital of $218,943, and non-cash expenses of $425,970 related to depreciation and amortization of $49,597 and stock-based compensation of $376,373. Changes in working capital were driven by a decrease in accounts receivable of $326,166, a decrease in inventory of $10,909, an increase in accounts payable of $23,070, and an increase in deferred revenue of $7,115, partially offset by an increase in prepaid expenses of $31,879 and a decrease in accrued expenses of 116,438, primarily as a result of the reversal of bonus expense accrued in 2022. The decrease in accounts receivable was a result of cash collections from 2022 sales and the establishment of an allowance for doubtful accounts of $115,600, and the increase in prepaid expenses was due to deposits paid for a third-party software developer, legal and accounting advisors, and a tradeshow.
During the six months ended June 30, 2022, the net cash used in operating activities was the result of a net loss of $4,454,565 before preferred dividends and the use of cash for working capital of $327,730, partially offset non-cash expenses of $466,792 related to depreciation and amortization of $61,445 and stock-based compensation of $405,347. Changes in working capital were driven by an increase in inventory of $73,586, an increase in prepaid expenses of $17,197, a decrease in deferred revenue of $18,151, and a decrease in accrued expenses of $372,188 partially offset by a decrease in accounts receivable of $120,434 and an increase in accounts payable of $33,958. The decrease in accrued expenses was largely driven by the payment of incentive bonuses, and the decrease in accounts receivable was a result of cash collections from 2021 sales. Increases in inventory and prepaid expenses resulted from the stocking of long lead-time parts for planned production and payment of our annual Nasdaq listing fee, respectively.
Net Cash Used in Investing Activities
Net cash used in investing activities during the six months ended June 30, 2023 was $62,607, which compares to $199,045 of cash used in investing activities during the same period of 2022, a decrease of $136,438, or 68.6%. The decrease resulted from a decrease in patent costs of $10,074 and a decrease in purchases of property, plant and equipment of $126,364 during the first six months of 2023.
| 23 |
Net Cash Provided by Financing Activities
The Company did not raise any capital nor were there any warrant exercises during the six months ended June 30, 2023 or June 30, 2022.
Our ability to continue to fund our working capital needs will be dependent upon obtaining additional capital from the sale of securities or by borrowing funds from lenders to fulfill our business plans. If we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. On August 14, 2023, the Company entered into an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with Lake Street Capital Markets, LLC, or Lake Street, pursuant to which the Company may issue and sell from time to time through Lake Street, as sales agent, shares of our common stock having an aggregate offering price of up to $1,500,000 (the “Offering”). There is no assurance that we will be successful in obtaining additional funding from this Sales Agreement.
Inflation, changing prices and rising interest rates have had no material effect on our continuing operations over our two most recent fiscal years. However, continued unfavorable trends may affect the prices we pay for materials and other goods and services necessary to our business, thus increasing our use of cash.
We have no off-balance sheet arrangements as defined in Item 303(a) of Regulation S-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of disclosure controls and procedures and changes in internal controls over financial reporting.
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), defines the term “disclosure controls and procedures” as those controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our management, with the participation of our President and Chief Executive Officer, and our Chief Financial Officer and Treasurer, as of the end of the period covered by this quarterly report, our management concluded that our disclosure controls and procedures are effective at a reasonable assurance level in ensuring that information required to be disclosed by us in our reports is recorded, processed, summarized and reported within the required time periods. No change in our “internal control over financial reporting” (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the six months ended June 30, 2023 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 24 |
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 1A. RISK FACTORS.
You should consider the “Risk Factors” included under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 30, 2023, as well as the following updated Risk Factor:
We have ceased all but essential business and operations while we pursue a possible strategic transaction.
We recently reduced our employee headcount via furloughs and layoffs to five employees, including our President and Chief Executive Officer and Chief Financial Officer and two key employees considered important to a possible sale of the company or all or a portion of its assets and support of current customers. We also have discontinued all product development activities and ceased to pursue new customers. As of July 31, 2023, we had cash on hand of approximately $365,489 including $135,000 of proceeds from the recent sale of equipment, which we believe will be sufficient to support our current customers and pay employee costs and other anticipated expenses through August 31, 2023. In the meantime, we continue to explore a possible reverse merger, sale of the company or all or a portion of its assets, and other alternatives.
There is no assurance that we will be able to enter into a definitive agreement with respect to a possible transaction or sell the company or any of its assets or, if so, on what terms, or avoid our dissolution and liquidation or bankruptcy.
We have received several written, non-binding proposals to purchase selected assets of the company or acquire the company in a merger or reverse merger and are in talks regarding the respective proposals. As of this date, we have not entered into a definitive agreement regarding a possible transaction and there is no assurance, that we will be able to enter into a definitive agreement with respect to a possible transaction or sell the company or any of its assets or, if so, when, or on what terms, or avoid our dissolution and liquidation or bankruptcy.
If we are unable to sell the company or its assets through one or more transactions, we will require additional financing to continue our operations, and there is substantial doubt regarding our ability to continue as a going concern.
We believe our cash on hand of approximately $365,489, including $135,000 of proceeds from the recent sale of equipment, and anticipated revenues, each as of July 31, 2023, are sufficient to fund our remaining anticipated operating costs and capital expenditure requirements only through August 31, 2023. If we are unable to sell the company or its assets through one or more transactions, we will need to raise additional financing to fund our operations, maintain compliance with NASDAQ listing requirements and continue our business operations. Except for the sales agreement with the sales agent in connection with our At-the Market offering, we have no current understanding or arrangement to obtain any additional financing. In light of the foregoing, there is substantial doubt our ability to continue as a going concern and the report of our registered independent public accounting firm on our financial statements as of and for the year ended December 31, 2022 contains a going concern qualification.
We may be unable to protect our intellectual property rights.
Our success depends in part on the ability to protect our intellectual property and proprietary technology, and the enforcement of intellectual property rights is subject to considerable uncertainty and can be expensive and time-consuming. For example, we recently notified two companies that we believe their respective products use our patented technology and offered to discuss their licensing of our technology. We have received no constructive response to our offer, however, and no decision has been made with respect to any further action to address these matters.
| 25 |
There is no assurance that we will satisfy NASDAQ’s continued listing requirements, and our common stock could be delisted.
On October 14, 2022, NASDAQ notified us that the closing bid price for our common stock had been below $1.00 per share for 30 consecutive business days, and that the Company therefore is not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). The notice indicated that the Company has 180 calendar days, or until April 12, 2023, to regain compliance with this requirement.
Although our common stock had not regained compliance with the minimum $1.00 bid price per share requirement, on April 13, 2023, NASDAQ notified us that it had granted us an additional 180 days, or until October 9, 2023, to regain compliance with Nasdaq Listing Rule 550(a)(2), based on our meeting the continued listing requirements for market value of publicly held shares and all other applicable requirements for initial listing on NASDAQ, with the exception of the bid price requirement, and our written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. According to NASDAQ’s notice, if at any time during this additional time period the closing bid price of shares of our common stock is at least $1.00 for a minimum of 10 consecutive business days, NASDAQ will provide written confirmation of compliance with its listing requirements, and this matter will be closed.
If we choose to implement a reverse stock split, it must be completed no later than ten business days prior to October 9, 2023 to timely regain compliance with NASDAQ’s listing requirements. If it appears to NASDAQ that we will not be able to cure our non-compliance with its listing standards, or if we are otherwise not eligible for listing on NASDAQ, NASDAQ will notify us that our common stock will be subject to delisting.
Our stockholders’ equity as of June 30, 2023 was below NASDAQ’s $2.5 million minimum stockholders’ equity continued listing standard, and we anticipate receiving notice from NASDAQ to the effect that we will have 45 days to submit a plan for regaining compliance with this continued listing standard. If we are able to submit a plan acceptable to NASDAQ, we expect to be granted additional time to regain compliance with the minimum stockholders’ equity requirement for continued listing.
If we fail to satisfy NASDAQ requirements for continued listing, NASDAQ could provide notice that shares of our common stock will become subject to delisting. In such an event, NASDAQ rules would permit us to appeal the decision to reject our proposed compliance plan or any delisting determination to a NASDAQ Hearings Panel. If our securities are de-listed from NASDAQ, our stockholders could incur material, adverse consequences such as difficulty selling their shares of our common stock and reduced market prices for their shares. De-listing is also likely to have a material, adverse effect on our ability to sell and issue shares of our common stock in order to fund our operations, if any.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS.
* Management contract or compensatory plan or arrangement.
** Filed herewith.
*** Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
| 26 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SIGMA ADDITIVE SOLUTIONS, INC. | ||
| August 14, 2023 | By: | /s/ Jacob Brunsberg |
| Jacob Brunsberg | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| August 14, 2023 | By: | /s/ Frank Orzechowski |
| Frank Orzechowski | ||
| Chief Financial Officer and Treasurer | ||
| (Principal Financial and Accounting Officer) | ||
| 27 |
Exhibit 31.1
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Jacob Brunsberg, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sigma Additive Solutions, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 14, 2023
| By: | /s/ Jacob Brunsberg | |
| Name: | Jacob Brunsberg | |
| Title: | President and Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Frank Orzechowski, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sigma Additive Solutions, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 14 2023
| By: | /s/ Frank Orzechowski | |
| Name: | Frank Orzechowski | |
| Title: |
Chief Financial Officer, Treasurer (Principal Financial and Accounting Officer) |
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Jacob Brunsberg, the Chief Executive Officer, and Frank Orzechowski, the Chief Financial Officer, of Sigma Additive Solutions, Inc. (the “Company”), hereby certify, that, to their knowledge:
1. The Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Jacob Brunsberg | /s/ Frank Orzechowski | |
| Jacob Brunsberg | Frank Orzechowski | |
| President and Chief Executive Officer | Chief Financial Officer, Treasurer | |
| (Principal Executive Officer) | (Principal Financial and Accounting Officer) | |
| August 14, 2023 | August 14, 2023 |