NextTrip, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. Sigma Additive Solutions, Inc. Condensed Balance Sheets March 31, 2023 (Unaudited) December 31, 2022 ASSETS Current Assets: Cash $ 1,488,704 $ 2,845,931 Accounts Receivable, net 210,449 371,620 Inventory 944,402 950,943 Prepaid Assets 235,003 105,226 Total Current Assets 2,878,558 4,273,720 Other Assets: Property and Equipment, net 284,193 304,903 Intangible Assets, net 1,165,558 1,125,285 Total Other Assets 1,449,751 1,430,188 TOTAL ASSETS $ 4,328,309 $ 5,703,908 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts Payable $ 400,640 $ 277,492 Deferred Revenue 153,443 120,073 Accrued Expenses 219,126 231,633 Total Current Liabilities 773,209 629,198 TOTAL LIABILITIES 773,209 629,198 Commitments & Contingencies - - Stockholders’ Equity Preferred Stock, $ 0.001 par value; 10,000,000 shares authorized; 316 and 465 shares issued and outstanding, respectively 1 1 Common Stock, $ 0.001 par value; 24,000,000 shares authorized; 10,772,713 and 10,498,802 shares issued and outstanding, respectively 10,773 10,499 Additional Paid-In Capital 54,749,821 54,406,694 Accumulated Deficit ( 51,205,495 ) ( 49,342,484 ) Total Stockholders’ Equity 3,555,100 5,074,710 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 4,328,309 $ 5,703,908 See accompanying notes to condensed financial statements. 3 Sigma Additive Solutions, Inc. Condensed Statements of Operations (Unaudited) 2023 2022 Three Months Ended March 31, 2023 2022 REVENUES $ 130,159 $ 51,844 COST OF REVENUE 63,664 40,091 GROSS PROFIT 66,495 11,753 OPERATING EXPENSES: Salaries & Benefits 931,583 1,292,010 Stock-Based Compensation 224,850 170,976 Operations and R&D Costs 126,712 143,418 Investor, Public Relations and Marketing 54,944 94,326 Organization Costs 51,198 58,749 Legal & Professional Service Fees 184,251 211,416 Office Expenses 154,499 205,432 Depreciation & Amortization 28,127 31,584 Other Operating Expenses 91,980 87,787 Total Operating Expenses 1,848,144 2,295,698 LOSS FROM OPERATIONS ( 1,781,649 ) ( 2,283,945 ) OTHER INCOME (EXPENSE) Interest Income 8 1,571 State Incentives - 76,628 Exchange Rate Loss ( 2,503 ) ( 330 ) Interest Expense ( 3,235 ) ( 1,319 ) Other Income 35,680 - Total Other Income 29,950 76,550 LOSS BEFORE PROVISION FOR INCOME TAXES ( 1,751,699 ) ( 2,207,395 ) Provision for income Taxes - - Net Loss $ ( 1,751,699 ) $ ( 2,207,395 ) Preferred Dividends ( 11,748 ) ( 14,220 ) Net Loss Applicable to Common Stockholders $ ( 1,763,447 ) $ ( 2,221,615 ) Net Loss per Common Share – Basic and Diluted $ ( 0.17 ) $ ( 0.21 ) Weighted Average Number of Shares Outstanding – Basic and Diluted 10,690,677 10,498,802 See accompanying notes to condensed financial statements. 4 Sigma Additive Solutions, Inc. Statement of Stockholders’ Equity (Unaudited) For the Three Months Ended March 31, 2023, and March 31, 2022 Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Preferred Stock Common Stock Additional Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Balances, December 31, 2022 465 $ 1 10,498,802 $ 10,499 $ 54,406,694 $ ( 49,342,484 ) $ 5,074,710 Net Loss - - - - - ( 1,751,699 ) ( 1,751,699 ) Preferred Stock Dividends - - 43,896 44 11,704 ( 11,748 ) - Common Shares Issued for Conversion of Preferred Stock ( 149 ) - 230,015 230 ( 230 ) - - Common Warrant Issued for Conversion of Preferred Stock - - - - 99,564 ( 99,564 ) Stock Options Issued to Directors for Services - - - - 7,728 - 7,728 Stock Options Issued for Third Party Services - - - - ( 489 ) - ( 489 ) Stock Options Issued to Employees - - - - 224,850 - 224,850 Balances, March 31, 2023 316 1 10,772,713 10,773 54,749,821 ( 51,205,495 ) 3,555,100 Preferred Stock Common Stock Additional Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Balances, December 31, 2021 465 $ 1 10,498,802 $ 10,499 $ 53,442,431 $ ( 40,593,180 ) $ 12,859,751 Net Loss - - - - - ( 2,207,395 ) ( 2,207,395 ) Preferred Stock Dividends - - - - 14,220 ( 14,220 ) - Stock Options Issued to Directors for Services - - - - 21,721 - 21,721 Stock Options Issued for Third Party Services - - - - 11,713 - 11,713 Stock Options Issued to Employees - - - - 170,976 - 170,976 Balances, March 31, 2022 465 1 10,498,802 10,499 53,661,061 ( 42,814,795 ) 10,856,766 See accompanying notes to condensed financial statements. 5 Sigma Additive Solutions, Inc. Condensed Statements of Cash Flows (Unaudited) March 31, 2023 March 31, 2022 Three Months Ended March 31, 2023 March 31, 2022 OPERATING ACTIVITIES Net Loss $ ( 1,751,699 ) $ ( 2,207,395 ) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Noncash Expenses: Depreciation and Amortization 28,127 31,584 Stock-Based Compensation - Employees 224,850 170,976 Stock-Based Compensation - Third Party Services ( 489 ) 11,713 Stock-Based Compensation - Directors 7,728 21,721 Stock-Based Compensation - - Change in Assets and Liabilities: Accounts Receivable 161,171 151,170 Inventory 6,541 ( 72,019 ) Prepaid Assets ( 129,777 ) ( 50,996 ) Accounts Payable 123,148 114,105 Deferred Revenue 33,370 11,421 Accrued Expenses ( 12,507 ) ( 209,299 ) NET CASH USED IN OPERATING ACTIVITIES ( 1,309,537 ) ( 2,027,019 ) INVESTING ACTIVITIES Purchase of Property and Equipment - ( 83,248 ) Purchase of Intangible Assets ( 47,690 ) ( 58,851 ) NET CASH USED IN INVESTING ACTIVITIES ( 47,690 ) ( 142,099 ) FINANCING ACTIVITIES NET CASH PROVIDED BY FINANCING ACTIVITIES - - NET CHANGE IN CASH FOR PERIOD ( 1,357,227 ) ( 2,169,118 ) CASH AT BEGINNING OF PERIOD 2,845,931 11,447,047 CASH AT END OF PERIOD $ 1,488,704 $ 9,277,929 Supplemental Disclosures: Noncash Investing and Financing Activities Disclosure: Preferred Stock Dividends $ 11,748 $ 14,220 Conversion of Preferred Shares to Common Shares 188,830 - Other Noncash Operating Activities Disclosure: Issuance of Securities for services $ 7,239 $ 33,434 Disclosure of Cash Paid for: Interest $ 3,235 $ 1,319 Income Taxes $ - $ - See accompanying notes to condensed financial statements. 6 SIGMA ADDITIVE SOLUTIONS, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS March 31, 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. Sigma believes that some of these technologies will fundamentally redefine conventional quality assurance and process control practices by embedding them into the manufacturing processes in real time, enabling process intervention and ultimately leading to closed loop process control. The Company anticipates that its core technologies will 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 March 31, 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. The results of operations for the period ended March 31, 2023 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. Commencing in 2017, the company committed itself to a focused initiative to transition its product and culture from research and development into an enterprise with a commercial industrial product and a business-oriented operation culture. The Company currently has sufficient cash and working capital to fund operations through June 2023 and will require additional funding in the public or private markets in the near-term to be able to continue operations. The Company currently has no understanding or agreement to obtain such funding, and there is no assurance that we will be successful in obtaining additional funding. If we fail to obtain sufficient funding when needed, we will be forced to delay, scale back or eliminate all or a portion of our commercialization efforts and operations. As a result, 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. 7 Loss Per Share – The computation of loss per share is based on the weighted average number of shares outstanding during the period in accordance with ASC Topic No. 260, “Earnings Per Share.” Shares underlying the Company’s outstanding warrants, options and preferred stock were excluded due to the anti-dilutive effect they would have on the computation. At March 31, 2023 and 2022, the Company had the following common shares underlying these instruments: Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share 2023 2022 March 31, 2023 2022 Warrants 5,314,175 3,825,781 Stock Options 2,062,659 1,547,797 Preferred Stock 58,568 148,918 Total Underlying Common Shares 7,435,402 5,522,496 The following table shows the amounts used in computing loss per share and the effect on net loss and the weighted average number of shares of dilutive potential common stock for the periods ended March 31, 2023 and 2022: Schedule of Computing Loss Per Share 2023 2022 Three Months Ended March 31 2023 2022 Net Loss per Common Share - Basic and Diluted $ ( 0.17 ) $ ( 0.21 ) Loss Applicable to Common Stockholders (numerator) $ ( 1,763,447 ) $ ( 2,221,615 ) Weighted Average Number of Common Shares Outstanding Used in Loss Per Share During the Period (denominator) 10,690,677 10,498,802 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. 8 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 first quarter of 2023 or in fiscal 2022. Utility patents are amortized over a 17-year period. Patents which are pending are not amortized. 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 right to 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 months ended March 31, 2023 was $ 17,006 . 9 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) $ 28,343 2024 8,503 2025 - 2026 - Thereafter - Total $ 36,846 Equipment Underlying Operating Leases: Equipment under operating leases as of March 31, 2023 was comprised of the following: Schedule of Assets underlying Operating Leases March 31, 2023 PrintRite 3D Hardware $ 77,208 Accumulated Depreciation ( 9,688 ) Net Book Value $ 67,520 The Company is depreciating the underlying equipment over its useful life of 7 years, but certain subassemblies and components may have a longer economic life. NOTE 2 – Inventory At March 31, 2023 and December 31, 2022, the Company’s inventory was comprised of the following: Schedule of Inventory March 31, 2023 December 31, 2022 Raw Materials $ 303,219 $ 294,194 Work in Process 212,649 140,723 Finished Goods 428,534 516,026 Total Inventory $ 944,402 $ 950,943 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 three months ended March 31, 2023, $ 5,130 of costs related to patents issued to us during 2023 were reclassified from provisional patent application to patents and began to be amortized as of the date of issue. 10 The following is a summary of definite-life intangible assets less accumulated amortization as of March 31, 2023 and December 31, 2022, respectively: Summary of Definite-life Intangible Assets and Accumulated Amortization March 31, 2023 December 31, 2022 Provisional Patent Applications $ 717,812 $ 675,251 Patents 529,880 524,750 Less: Accumulated Amortization ( 82,134 ) ( 74,716 ) Net Intangible Assets $ 1,165,558 $ 1,125,285 Amortization expense on intangible assets was $ 7,418 and $ 4,978 for the three months ended March 31, 2023 and 2022, respectively. The estimated aggregate amortization expense for years ending December 31 is as follows: Schedule of Aggregate Amortization Expense 2023 (Remaining) $ 22,404 2024 29,872 2025 29,872 2026 29,872 Thereafter 335,726 Intangible asset and amortization expense $ 447,746 NOTE 4 - Stockholders’ Equity Common Stock In the first quarter of 2023, the Company issued 227,587 shares of common stock in exchange for the conversion of 132 shares of Series D Convertible Preferred Stock, and 43,241 shares of common stock as in-kind payment of dividends thereon. Also in the first quarter of 2023, the Company issued 2,428 shares of common stock in exchange for the conversion of 17 shares of Series E Convertible Preferred Stock, and 655 shares of common stock as in-kind payment of dividends thereon. Preferred Stock The Company is authorized to issue 10,000,000 shares of preferred stock, $ 0.001 par value per share, of which 316 and 465 shares were issued and outstanding at March 31, 2023 and December 31, 2022. 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 1,640 shares of the Company’s newly created Series D Convertible Preferred Stock (the “Series D Preferred Stock”) at an initial stated value of $ 1,000 per share. Dividends accrue at a rate of 9 % per annum (subject to increase upon the occurrence (and during the continuance) of certain triggering events described therein) and are payable monthly in kind by the increase of the stated value of the Series D Preferred Shares by said amount. The holders of the Series D Preferred Shares have the right at any time to convert all or a portion of the Series D Preferred Shares (including, without limitation, accrued and unpaid dividends and make-whole dividends through the third anniversary of the closing date) into shares of the Company’s Common Stock at the conversion price then in effect, which is $ 0.58 (subject to adjustment for stock splits, dividends, recapitalizations and similar events and full ratchet price protection in the event the Company issues or sells, or is deemed to have issued or sold, shares of Common Stock for a consideration per share less than a price equal to the conversion price then in effect). 11 On January 27, 2023, the holder of the remaining 132 outstanding shares of Series D Preferred Stock elected to convert such shares in their entirety, which resulted in the issuance of 270,828 shares of common stock. At March 31, 2023, there were no 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 333 shares of the Company’s newly created Series E Convertible Preferred Stock (the “Series E Preferred Stock”) at an initial stated value of $ 1,000 per share. Dividends accrue at a dividend rate of 9 % per annum and are payable monthly in kind by the increase of the stated value of the Series E Preferred Stock by said amount. The Series E Preferred Stock is initially convertible into 48,544 shares of common stock (subject to adjustment for stock splits, dividends, recapitalizations and similar events). On January 23, 2023, the holder of 17 shares of Series E Preferred Stock elected to convert such shares in their entirety, which resulted in the issuance of 3,083 shares of common stock. At March 31, 2023, 316 shares of Series E Preferred Stock were outstanding, which if converted as of March 31, 2023, including the make-whole dividends, would result in the issuance of 58,568 shares of common stock. Stock Options The Company’s 2013 Equity Incentive Plan expired on March 15, 2023. As such, there were no shares of common stock reserved for future issuance thereunder as of March 31, 2023. On January 26, 2023, the Company granted options to its non-employee directors to purchase up to an aggregate of 52,380 shares of common stock at an exercise price of $ 0.58 . As of March 31, 2023, 25 % of such grants were fully vested and exercisable, and the remaining 75 % will vest in equal quarterly installments over the remaining three quarters of 2023, subject to the directors remaining in our service through such dates. On January 26, 2023, the Company granted 19 employees options to purchase up to an aggregate of 381,285 shares of common stock in connection with their employment. The options have an exercise price of $ 0.58 and vested as to 50 % on the date of the grant, and will vest as to the remaining 50 % in equal monthly installments over the subsequent 23 months, provided that the employees remain employed by the Company through such dates. 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 three months ended March 31, 2023 and 2022 was $ 224,850 and $ 170,976 respectively, all of which is related to stock options. The fair value of stock-based awards was estimated using the Black-Scholes model with the following weighted average assumptions for the three months ended March 31, 2023 and 2022: Schedule of Share Based Payments Award Stock Options Valuation Assumptions 2023 2022 Dividend yield 0.0 % 0.00 % Risk-free interest rate 4.05 % 0.95 - 1.65 % Expected volatility 100.2 % 106.4 - 110.0 % Expected life (in years) 5 5 12 Option activity for the three months ended March 31, 2023 and the year ended December 31, 2022 was as follows: 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 1,395,882 4.24 3.89 - Granted 487,473 2.50 4.43 - Exercised - - - - Forfeited or cancelled ( 84,302 ) 4.39 - - Options outstanding at December 31, 2022 1,799,053 3.76 3.30 - Granted 433,665 0.58 4.83 - Exercised - - - - Forfeited or cancelled ( 170,059 ) 3.04 - - Options outstanding March 31, 2023 2,062,659 3.15 3.41 - Options expected to vest in the future as of March 31, 2023 555,378 1.99 4.16 - Options exercisable at March 31, 2023 1,507,281 3.58 3.14 - Options vested, exercisable, and options expected to vest at March 31, 2023 2,062,659 3.15 3.41 - 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 March 31, 2023, no option had an exercise price below the $ 0.44 closing price of our common stock as reported on The Nasdaq Capital Market. At March 31, 2023, there was $ 581,865 of unrecognized stock-based compensation expense related to unvested stock options with a weighted average remaining recognition period of 1.59 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. SARs may be granted to any Service Provider. 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, without limitation, 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 three months ended March 31, 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. 13 The fair value of SAR awards was estimated using the Black-Scholes model with the following weighted average assumptions for the three months ended March 31, 2023 and March 31, 2022: Schedule of Share Based Payments Award Stock Options Valuation Assumptions 2023 2022 Dividend yield - 0.00 % Risk-free interest rate - 0.82 - 1.65 % Expected volatility - 108.4 - 119.0 % Expected life (in years) - 5 SARs activity for the three months ended March 31, 2023 and the year ended December 31, 2022 was as follows: Schedule of Stock Option Activity Options Weighted Average Exercise Price ($) Weighted Average Remaining Contractual Life (Yrs.) Aggregate Intrinsic Value ($) SARs outstanding at December 31, 2021 370,624 3.15 4.24 - Granted 814,862 1.81 4.48 - Exercised - - - - Forfeited or cancelled ( 27,699 ) 2.91 - - SARs outstanding at December 31, 2022 1,157,787 2.21 4.11 - Granted - - - - Exercised - - - - Forfeited or cancelled ( 166,156 ) 20.9 - - SARs outstanding March 31, 2023 991,631 2.23 3.86 - SARs expected to vest in the future as of March 31, 2023 688,864 2.01 4.02 - SARs exercisable at March 31, 2023 302,767 2.75 3.49 - SARs vested, exercisable, and SARs expected to vest at March 31, 2023 991,631 2.23 3.86 - 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 March 31, 2023, no SAR had an exercise price below the $ 0.44 closing price of our common stock as reported on The Nasdaq Capital Market. At March 31, 2023, there was $ 665,799 of unrecognized stock-based compensation expense related to unvested SARs with a weighted average remaining recognition period of 1.95 years. 14 Warrants Warrant activity for the three months ended March 31, 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 3,987,931 6.10 2.10 Granted - - - Exercised - - - Forfeited or cancelled ( 164,652 ) - - Warrants outstanding at December 31, 2022 3,823,279 4.66 1.19 Granted 1,490,896 0.58 2.87 Exercised - - - Forfeited or cancelled - - - Warrants outstanding at March 31, 2023 5,314,175 3.19 1.48 NOTE 5 - Subsequent Events On April 13, 2023, The Nasdaq Stock Market (“Nasdaq”) notified us that although the Company’s common stock had not regained compliance with the minimum $1.00 bid price per share requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2), the Nasdaq Staff has granted us an additional 180 calendar days, or until October 9, 2023, to regain compliance based on our meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on The Nasdaq Capital Market, with the exception of the bid price requirement, and 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 our common stock is at least $1 per share for a minimum of 10 consecutive business days, the Staff will provide written confirmation of compliance 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 regain compliance. If it appears to Nasdaq that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq will notify us that our common stock will be subject to delisting. 15