NextTrip, Inc. 10-K

ITEM 1. BUSINESS. The Company: Sigma Additive Solutions, Inc. (the “Company,” “Sigma,” “Sigma Additive,” “we,” “us” and “our”) is a software company that was founded by scientist-engineers composed of physicists and metallurgists then working at Los Alamos National Labs for the purpose of developing sophisticated metallurgical products. Since 2016, the Company’s focus has been on solving the complex and challenging problem of how to best assure the high quality of metal parts manufactured in laser powder bed additive manufacturing, or 3D, printing, machines. Sigma and many others believe that until this problem was solved, 3D manufacturing of metal parts would not be scalable enough to grow past prototyping and mature into a major industry enjoying high quality yields and cost-efficient production runs. The solution that Sigma developed to solve this problem is In-Process-Quality-Assurance (“IPQA®”) software known as PrintRite3D®. In 2018, the Sigma team enhanced and added user features to its PrintRite3D® technology. In 2019, the Company began to productize and test PrintRite3D® on various 3D metal printers at customers’ sites through the Company’s Rapid Test and Evaluation (“RTE”) program. Upon receiving favorable responses from the various RTEs, in 2020 the Company began to market PrintRite3D®. Although the worldwide COVID-19 pandemic adversely affected capital spending within the Company’s targeted industries, the Company moved forward with its plan to market PrintRite3D® to the following industry segments: (1) global manufacturing companies with Additive Manufacturing (“AM”) initiatives; (2) 3D printer Original Equipment Manufacturers (“OEMs”) for purchases of licenses and generating fees and royalties thereafter; (3) additive manufacturing software venders for alliances and licenses for co-sales; and (4) research foundations, standards organizations and universities, all in service of Sigma’s potential for setting the industry standard of measurement by providing data and analytics as a metrics-based quality standard of metal quality for all 3D laser powder bed manufactured parts, notwithstanding the design, metal, or brand of equipment upon which parts are manufactured. In 2022, we shifted our business model from selling perpetual licenses of our combined hardware and software solution to subscription-based licenses and began the development of a suite of software-only product offerings, which we believe will transform our business by providing a scalable, cost-effective solution to our customers that can be more broadly connected to OEM’s, hardware, and software partners. With the change to our business model, and the desire to connect more fully to the full digital quality landscape, the business began to explore potential strategic investments and mergers and acquisitions. This is a major focus in 2023, as management seeks capital for operations, and to provide runway to future options, and to take Sigma to the next phase of our business. 3 Additive Metal Manufacturing and the role and need for Sigma’s technology: The use of 3D printing technology dates to the 1980s for polymer applications, but the ability to print functional parts from metal alloys has spurred significant interest and investment in AM in recent years. AM is now reshaping the product design process, entire supply chains, and the vast landscape of manufacturing. Engineers are embracing new design freedoms to realize valuable product performance improvements and cost efficiencies with lighter weight, better thermal management capability, better fluid mixing, customization, and the ability to make different structures and textures that yield better part integration. We believe that there are several significant hurdles to be overcome for broader adoption of additive technologies for the production of industrial metal and polymer parts. Among these are lack of quality, consistency, and industry standards along with cost. The Company believes PrintRite3D® has the potential to contribute to widespread industrialization of 3D metal and polymer printing. Additionally, the disruption in complex and rigid supply chains caused by COVID-19 exposed the country’s vulnerability to shortages in times of crisis. In response, manufacturers are devising strategies to be able to be more agile, increase their ability to manufacture mission critical parts on demand, with more customization, and closer to where the end part will be needed, and we believe quality systems to ensure consistency will play a critical role. Additionally, we believe that in-process data will play an important role in connecting the full digital quality landscape from raw materials to final part. PrintRite3D® Technology and Product Family The current version of PrintRite3D® is an integrated hardware and software edge computing platform, or in-process quality assurance system, that combines inspection, feedback, data collection and critical analysis. It is a 3D printer platform-independent solution that can be installed as a retrofit to an existing 3D printer or requested as a factory option from select 3D printer OEMs. PrintRite3D® provides a high-fidelity, accurate system that can confidently scale to multi-laser 3D metal and polymer printers. The PrintRite3D® system detects potential anomalies in real-time and incorporates machine learning in conjunction with developed metrics to map those metrics to live post-process data. This provides the ability to reduce manufacturing costs by identifying problems before post-production testing, while creating a certification framework that serves the needs of end-users, printer manufacturers, and standards organizations. PrintRite3D was initially developed to work with industrial 3D metal printers using the Powder Bed Fusion (“PBF”) process, which is the most widely used process for industrial metal applications. In 2020, we announced PrintRite3D for Direct Energy Deposition, or DED, for metal parts. PrintRite3D DED opened another segment of the industrial metal market for Sigma to sell and distribute our technology. In 2021, the Company introduced PrintRite3D Selective Laser Sintering, or SLS, for polymer materials. The polymer market is larger and more advanced than the metal market. There is an increasing need for quality and standards within the polymer market to support mission critical parts such as those being used in aerospace, space exploration, and defense. The Company’s entry into this market was customer driven by a supplier of critical equipment to the space exploration market. The Company believes that PrintRite3D’s ability to work across a different 3D printers, processes and materials gives it a competitive advantage and will help accelerate the adoption of 3D printing for industrial applications. In 2022, we began the development of a new suite of software-only products, which we believe will allow us to scale into production across enterprises with large installations of production printers. These machine-health, process health, and part-health modules will be built into the PrintRite3D suite. These products will combine streaming health data from major OEM’s and off-axis camera data, and thermal on-access melt pool technology to provide a centralized home for in-process quality solutions and reporting that can be connected to the broader digital quality ecosystem. We believe the connected and open data we are creating will allow users to simplify their quality operations, identify gross defects, utilize machine-learning and artificial intelligence platforms, and significantly improve production quality while lowering the cost of development. Distribution Methods Sigma employs a multi-channel distribution model for its IPQA products, including a direct sales force, value added resellers (“VARs”) software and hardware partners, and 3D printer OEMs. In 2022, the majority of the Company’s revenue was generated by direct sales in North America and Europe and through OEM relationships. VARs are currently used in Japan and India. The Company plans to extend its VAR channel outside of North America and Europe. Since 2020, the Company has moved to establish and extend relationships with 3D printer OEMs, software partners, and integrated hardware partners to expand our footprint and ability to scale our business. The Company markets its products through webinars, email and social media campaigns, and participation, both in person and virtually, in industry events and tradeshows. In addition, the Company collaborates with international standards organizations in the establishment of standards for AM. 4 Sources and Availability of Parts and Materials We have important relationships with several suppliers for critical components of our PrintRite3D® systems, in particular optics and data acquisition components, and development of our user interface. To-date, we have not experienced shortages of components; however, in some cases COVID-19 has resulted in increased lead times and cost for certain parts. We manage the risk of component shortages by sourcing backup suppliers, and in the case of our user interface, hiring engineers in-house and contractors to support the ongoing development and maintenance. Dependence on a Few Major Customers and Partners The Company has established agreements with several international 3D printer OEMs, software, and integrated hardware companies. The Company supports the OEM, software, and hardware relationships with joint marketing programs, field sales and technical support personnel to assist in the sale of its technology. It is the Company’s intent and focus to expand our OEM and software channels through distribution relationships with existing and additional 3D printer OEMs, hardware, and software relationships in the future. Competition PrintRite3D® is a third-party, agnostic In-Process Quality Assurance system designed to provide a consistent, standards-based measurement and prediction of quality across a heterogeneous collection of 3D printers. Competition historically has been viewed as printer OEMs with their own monitoring system, usually as a separately priced option to its printers. However, with the move to software-only solutions and API connection options to machines, Sigma believes it can provide machine agnostic analytics and reporting software tools that help standardize digital quality in the industry. Additionally, we plan to work with OEMs to reduce costs of hardware, grow and expand their quality monitoring as a standard machine option, and provide a standard language for quality. We believe that the future of AM will consist of factories with various generations of printers from various manufacturers. The primary reasons that global manufacturers will have machines from various vendors is that certain machines and technologies are better suited for different applications than others. Additionally, as the industry progresses, innovation will accelerate, and new leaders will emerge. Finally, many believe that there will be a consolidation of 3D metal manufacturers and the number of vendors will decrease over the next decade from approximately 50 at present. Although standards for monitoring are slowly being set by various international standards organizations, it is highly unlikely that printer OEMs will modify their monitoring systems to work with other OEMs machines. Therefore, we believe that the best way to produce parts with a consistent level of quality is with a third-party, agnostic, standards based IPQA system, such as PrintRite3D®. Over the past year or so, new competitors have entered the market with monitoring technology that follows Sigma’s lead as a third-party agnostic system capable of working across 3D printer machine types. However, most of these solutions are point solutions addressing one specific item of quality. These have value, but do not provide the end user the full quality picture for regulators or customer needs. Sigma has expanded its quality footprint to be a home for holistic in-process quality data. We see a path to integrate with other point solutions if customers find interest in them, while still ensuring holistic quality for our end customers. Point solutions are useful; however, they fall short of determining root cause, and unlike PrintRite3D, are not capable of instructing the printer, through closed-loop control, to vary certain machine variables such as laser power to avoid creating the defects in the first place. Intellectual Property We regard our patents, trademarks, domain names, trade secrets, know-how, and other intellectual property as critical to our success. We rely on a combination of patent, trademark, trade secret, other intellectual property law, confidentiality procedures, and contractual provisions with employees, partners, and others to protect the technology and other proprietary rights, information and know-how that comprise the core of our business. The tables below summarize our issued patents. We are currently prosecuting foreign and U.S. patent applications related to our IPQA® technology and rapid qualification of additive manufacturing for metal parts. There is no guarantee, however, that the patent applications will result in issued patents or that if issued, any patents will offer adequate protection under applicable law. Sigma Additive Solutions, Inc. Patent Portfolio as of December 31, 2022 Jurisdiction Granted In Process Total US 20 17 37 PCT - 2 2 EP - 4 4 Germany 3 9 12 China 4 4 8 Japan 1 4 5 Korea 1 - 1 Total 29 40 69 5 The Company believes that its patented PrintRite3D® technology is a significant barrier to entry to competitors attempting to replicate the Company’s strategy. Title Type Patent No. or Application No. Expiration Date Optical Manufacturing Process Sensing and Status Indication System US Utility 10,317,294 5/2/2035 Optical Manufacturing Process Sensing and Status Indication System US Utility 10,520,372 3/25/2035 Optical Manufacturing Process Sensing and Status Indication System US Utility 11,073,431 3/25/2035 Method And System for Monitoring Additive Manufacturing Processes US Utility 9,999,924 5/11/2036 Method And System for Monitoring Additive Manufacturing Processes US Utility 11,135,654 8/21/2035 Multi-Sensor Quality Inference and Control For Additive Manufacturing Processes US Utility 10,786,948 4/24/2037 Multi-Sensor Quality Inference and Control For Additive Manufacturing Processes US Utility 11,478,854 11/18/2035 Material Qualification System and Methodology US Utility 10,226,817 4/26/2037 Material Qualification System and Methodology China Utility ZL201680010333.X 1/13/2036 Material Qualification System and Methodology US Utility 11,267,047 1/13/2036 Systems And Methods for Additive Manufacturing Operations US Utility 10,207,489 6/20/2037 Systems And Methods for Additive Manufacturing Operations US Utility 10,717,264 12/28/2038 Layer-Based Defect Detection Using Normalized Sensor Data US Utility 11,072,043 1/26/2040 System And Method for Additive Manufacturing China Utility ZL201980027059.0 2/21/2039 Photodetector Array for Additive Manufacturing Operations German Utility 112,019,000,521 2/21/2039 Photodetector Array for Additive Manufacturing Operations US Utility 10,786,850 2/21/2039 Photodetector Array for Additive Manufacturing Operations US Utility 11,260,456 2/21/2039 Correction of Non-Imaging Thermal Measurement Devices US Utility 11,260,454 3/11/2040 Systems And Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation China Utility ZL201880064101.1 8/1/2038 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation German Utility 112,018,001,597 8/1/2038 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation Japan Utility 7,024,981 8/1/2038 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation Korea Utility 10-2340573 8/1/2038 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation US Utility 10,479,020 8/1/2038 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation US Utility 11,390,035 8/1/2028 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation China Utility ZL201980027181.8 2/21/2039 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation German Utility 112,019,000,498 2/21/2039 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation US Utility 10,639,745 2/21/2039 Methods and Systems for Quality Inference and Control for Additive Manufacturing Processes US Utility 11,517,984 4/30/2041 Defect Identification Using Machine Learning in an Additive Manufacturing System US Utility 11,536,671 7/30/2041 6 Government Regulations Any contracts that we enter into with governmental agencies will be subject to a variety of federal, state and local laws and regulations. These regulations are aimed at preventing the inadvertent disclosure of munitions related data or the export of technical knowledge to foreign countries. The work we do with governmental units may also be subject to laws respecting the confidentiality of any classified or national security information we receive during the course of our activities under any government contract. Additionally, our sales to U. S. government agencies are driven by pricing based on costs incurred to produce products or perform services. U.S. government contracts generally are subject to Federal Acquisition Regulations (“FAR”), agency-specific regulations that implement or supplement FAR, such as the se Defense Federal Acquisition Regulations and other applicable laws and regulations. These regulations impose a broad range of requirements, many of which are unique to government contracting, including various procurement, import and export, security, contract pricing and cost, contract termination and adjustment, and audit requirements. Our failure to comply with these regulations and requirements could result in reductions of the value of contracts, contract modifications or termination, and the assessment of penalties and fines and could lead to temporary or permanent suspension or debarment from government contracting or subcontracting. In addition, government contractors are subject to routine audits and investigations by U.S. government agencies such as the Defense Contract Audit Agency (“DCAA”). These agencies review a contractor’s performance, cost structure, and compliance with applicable laws, regulations, and standards. The DCAA also reviews the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation, and information systems. As of March 29, 2023, we have several active contracts with government agencies, and, funding permitting, we plan to seek to increase government contracting in the future. Human Capital As of December 31, 2022, we had 25 full-time employees. We continue to balance a search for additional, qualified personnel to support our targeted growth in the area of IPQA® for AM, while ensuring that our operations are aligned towards our software focus and corresponding cost structure. We believe that our future success will depend, in part, upon our ability to attract and retain highly skilled employees and management and technical personnel. Employee engagement is important to us, and we strive to continuously enhance our corporate culture and further the growth and development of our employees. All employees are responsible for upholding the Sigma Code of Ethics and Business Conduct, which is important in delivering on our strategy. We maintain a compliance hotline for the confidential reporting of any suspected policy violations or unethical business conduct on the part of our businesses, employees, officers, directors, suppliers, or customers. Compensation and Benefits We strive to provide competitive compensation and benefits to our employees. Our benefit programs include bonuses, stock-based compensation awards, a 401(k) plan with employer matching, healthcare and insurance benefits, flexible paid time off and other employee assistance programs. COVID-19 Pandemic The health and wellness of our employees is important to our success. We continue to follow guidance from health officials, and while COVID-19 restrictions have been relaxed in the U.S. and Europe, we have maintained a number of health-related measures including, but not limited to, a flexible work-from-home policy. There continue to be isolated COVID-19 outbreaks in certain regions of the world, but these outbreaks have not had a significant impact on our operations. The extent to which the COVID-19 epidemic may impact our business, operations, financial condition, liquidity and results of operations in 2023 and beyond remains uncertain and unpredictable. Russia - Ukraine Conflict In February 2022, Russian forces invaded Ukraine. In response, the U.S., the European Union (“EU”), and several other countries imposed economic and trade sanctions and other restrictions (collectively, “global sanctions”) targeting Russia and Belarus. Russia then imposed retaliatory economic measures against the U.S., the EU, and several other countries. We have no sales to Russia or Ukraine, nor do we have any assets, employees or third-party contractors in Russia or Ukraine. The duration of the conflict and further sanctions could have further impact on the global economy, financial markets and inflation. Due to the uncertainty around the duration or outcome of the conflict, we cannot predict its effect on our business. Corporate 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., and on August 9, 2022, we 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 current telephone number at that address 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, as amended (the “Exchange Act”), and other information related to the Company, are available, free of charge, on that website as soon as we electronically file those documents with, or otherwise furnish them to, the SEC. The Company’s website and the information contained therein, or connected thereto, are not and are not intended to be incorporated into this Report. 7 Recent Developments On March 20, 2023, we announced the expansion of our collaboration with Materialise, a global leader in 3D printing software and service solutions, to provide additive manufacturing (AM) users automated quality control by integrating the PrintRite3D® quality assurance solution into the new software solution Materialise Process Control. Combining multiple complementary data sources and analytic methods allows businesses to make faster, data-driven decisions, improving operational efficiency and driving revenue growth. Materialise Process Control allows manufacturers to analyze and correlate layer data from the 3D printing process. Sigma and Materialise collaborated to integrate PrintRite3D® into Process Control and to make it available in CO-AM, Materialise’s end-to-end software platform for 3D printing. Sigma’s PrintRite3D® suite provides in-process data, including thermal data from the melt pool, yielding layer data that can enable users to find the root cause of defects faster. On March 6, 2023, we announced that we will partner with DyeMansion, the global leader in connected and integrated post-processing solutions for industrial polymer 3D-printing, to add an integrated hardware/software solution option that offers extra quality assurance for DyeMansion’s post-processing solutions: DM60, Powershot Performance and Powerfuse S. DyeMansion’s comprehensive solution, the Print-to-Product workflow and all components are applicable for Industry 4.0 and can be integrated seamlessly into various production processes. The real-time monitoring and data analytics from Sigma’s Machine Health module will complement DyeMansion’s systems by offering reduced cost per part, unmatched quality, and high sustainability. On March 1, 2023, we announced that we had retained Lake Street Capital Markets as the Company’s financial advisor in connection with our consideration of a range of strategic alternatives designed to enhance shareholder value, including a possible strategic investment, acquisition, merger, business combination, or similar transaction.