NextTrip, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. Sigma Additive Solutions, Inc. Condensed Balance Sheets June 30, 2023 December 31, 2022 (Unaudited) ASSETS Current Assets: Cash $ 368,443 $ 2,845,931 Accounts Receivable, net 45,454 371,620 Inventory 940,034 950,943 Prepaid Assets 137,105 105,226 Total Current Assets 1,491,036 4,273,720 Other Assets: Property and Equipment, net 227,787 304,903 Intangible Assets, net 1,215,411 1,125,285 Total Other Assets 1,443,198 1,430,188 TOTAL ASSETS $ 2,934,234 $ 5,703,908 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts Payable $ 300,562 $ 277,492 Deferred Revenue 127,188 120,073 Accrued Expenses 115,195 231,633 Total Current Liabilities 542,945 629,198 TOTAL LIABILITIES 542,945 629,198 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 54,904,792 54,406,694 Accumulated Deficit ( 52,524,277 ) ( 49,342,484 ) Total Stockholders’ Equity 2,391,289 5,074,710 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,934,234 $ 5,703,908 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 $ 97,043 $ 236,660 $ 227,202 $ 288,504 COST OF REVENUE 36,491 193,075 100,155 233,166 GROSS PROFIT 60,552 43,585 127,047 55,338 OPERATING EXPENSES: Salaries & Benefits 554,182 1,184,818 1,485,764 2,476,828 Stock-Based Compensation 138,489 167,439 363,339 338,415 Operations and R&D Costs 105,259 146,885 231,971 290,303 Investor, Public Relations and Marketing 57,824 152,300 112,768 246,626 Organization Costs 38,240 60,817 89,438 119,566 Legal & Professional Service Fees 152,025 144,528 336,276 355,944 Office Expenses 94,190 303,600 248,689 509,032 Depreciation & Amortization 21,470 29,861 49,597 61,445 Other Operating Expenses 202,892 89,177 294,873 176,964 Total Operating Expenses 1,364,571 2,279,425 3,212,715 4,575,123 LOSS FROM OPERATIONS ( 1,304,019 ) ( 2,235,840 ) ( 3,085,668 ) ( 4,519,785 ) OTHER INCOME (EXPENSE) Interest Income 9 1,176 17 2,747 State Incentives - - - 76,628 Exchange Rate Gain (Loss) ( 849 ) ( 10,436 ) ( 3,352 ) ( 10,766 ) Interest Expense ( 3,235 ) ( 2,070 ) ( 6,471 ) ( 3,389 ) Other Income - - 35,680 - Total Other Income (Expense) ( 4,075 ) ( 11,330 ) 25,874 65,220 LOSS BEFORE PROVISION FOR INCOME TAXES ( 1,308,094 ) ( 2,247,170 ) ( 3,059,794 ) ( 4,454,565 ) Provision for income Taxes - - - - Net Loss $ ( 1,308,094 ) $ ( 2,247,170 ) $ ( 3,059,794 ) $ ( 4,454,565 ) Preferred Dividends ( 10,688 ) ( 14,220 ) ( 22,435 ) ( 28,440 ) Net Loss Applicable to Common Stockholders $ ( 1,318,782 ) $ ( 2,261,390 ) $ ( 3,082,229 ) $ ( 4,483,005 ) Net Loss per Common Share – Basic and Diluted $ ( 0.12 ) $ ( 0.22 ) $ ( 0.29 ) $ ( 0.43 ) Net Loss per Common Share – Basic $ ( 0.12 ) $ ( 0.22 ) $ ( 0.29 ) $ ( 0.43 ) Weighted Average Number of Shares Outstanding – Basic and Diluted 10,772,713 10,498,802 10,731,922 10,498,802 Weighted Average Number of Shares Outstanding – Basic 10,772,713 10,498,802 10,731,922 10,498,802 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 316 1 10,772,713 10,773 54,749,821 ( 51,205,495 ) 3,555,100 Net Loss - - - - - ( 1,308,094 ) ( 1,308,094 ) Preferred Stock Dividends - - - - 10,688 ( 10,688 ) - Stock Options Issued to Directors for Services - - - - 5,794 - 5,794 Stock Options Issued to Employees - - - - 138,489 - 138,489 Balances, June 30, 2023 316 1 10,772,713 10,773 54,904,792 ( 52,524,277 ) 2,391,289 Preferred Stock Common Stock Additional Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Balances, March 31, 2022 465 $ 1 10,498,802 $ 10,499 $ 53,661,061 $ ( 42,814,795 ) $ 10,856,766 Net Loss - - - - - ( 2,247,170 ) ( 2,247,170 ) Preferred Stock Dividends - - - - 14,220 ( 14,220 ) - Stock Options Issued for Third Party Services - - - - 11,777 - 11,777 Stock Options Awarded to Directors for Services - - - - 21,721 - 21,721 Stock Options Awarded to Employees - - - - 167,439 - 167,439 Balances, June 30, 2022 465 $ 1 10,498,802 $ 10,499 $ 53,876,218 $ ( 45,076,185 ) $ 8,810,533 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 465 $ 1 10,498,802 $ 10,499 $ 54,406,694 $ ( 49,342,484 ) $ 5,074,710 Net Loss - - - - - ( 3,059,794 ) ( 3,059,794 ) Preferred Stock Dividends - - 43,896 44 22,391 ( 22,435 ) - 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 - - - - 13,523 - 13,523 Stock Options Issued for Third Party Services - - - - ( 489 ) - ( 489 ) Stock Options Issued to Employees - - - - 363,339 - 363,339 Balances, June 30, 2023 316 1 10,772,713 10,773 54,904,792 ( 52,524,277 ) 2,391,289 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 Balances 465 $ 1 10,498,802 $ 10,499 $ 53,442,431 $ ( 40,593,180 ) $ 12,859,751 Net Loss - - - - - ( 4,454,565 ) ( 4,454,565 ) Preferred Stock Dividends - - - - 28,440 ( 28,440 ) - Stock Options Issued for Third Party Services - - - - 23,490 - 23,490 Stock Options Awarded to Directors for Services - - - - 43,442 - 43,442 Stock Options Awarded to Employees - - - - 338,415 - 338,415 Balances, June 30, 2022 465 $ 1 10,498,802 $ 10,499 $ 53,876,218 $ ( 45,076,185 ) $ 8,810,533 Balances 465 $ 1 10,498,802 $ 10,499 $ 53,876,218 $ ( 45,076,185 ) $ 8,810,533 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 $ ( 3,059,794 ) $ ( 4,454,565 ) Adjustments to reconcile Net Loss to Net Cash used in operating activities: Noncash Expenses: Depreciation and Amortization 49,597 61,445 Stock Based Compensation - Employees 363,339 338,415 Stock Based Compensation - Third Party Services ( 489 ) 23,490 Stock Based Compensation - Directors 13,523 43,442 Stock Based Compensation 13,523 43,442 Change in assets and liabilities: Accounts Receivable 326,166 120,434 Inventory 10,909 ( 73,586 ) Prepaid Assets ( 31,879 ) ( 17,197 ) Accounts Payable 23,070 33,958 Deferred Revenue 7,115 ( 18,151 ) Accrued Expenses ( 116,438 ) ( 372,188 ) NET CASH USED IN OPERATING ACTIVITIES ( 2,414,881 ) ( 4,314,503 ) INVESTING ACTIVITIES Purchase of Property and Equipment 42,516 ( 83,848 ) Purchase of Intangible Assets ( 105,123 ) ( 115,197 ) NET CASH USED IN INVESTING ACTIVITIES ( 62,607 ) ( 199,045 ) FINANCING ACTIVITIES NET CASH PROVIDED BY FINANCING ACTIVITIES - - NET CHANGE IN CASH FOR PERIOD ( 2,477,488 ) ( 4,513,548 ) CASH AT BEGINNING OF PERIOD 2,845,931 11,447,047 CASH AT END OF PERIOD $ 368,443 $ 6,933,499 Supplemental Disclosures: Noncash investing and financing activities disclosure: Preferred Stock Dividends $ 22,435 $ 28,440 Conversion of Preferred Shares to Common Shares $ 188,830 $ - Other noncash operating activities disclosure: Issuance of Securities for Services $ 13,034 $ 66,932 Disclosure of cash paid for: Interest $ 6,471 $ 3,389 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 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 June 30, 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 June 30, 2023 2022 Warrants 2,902,089 3,825,781 Stock Options 1,897,659 1,528,637 Preferred Stock 60,332 148,918 Total Underlying Common Shares 4,860,080 5,503,336 The following table shows the amounts used in computing loss per share and the effect on net loss and the weighted average number of potentially dilutive shares for the periods shown: 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 $ ( 0.12 ) $ ( 0.22 ) $ ( 0.29 ) $ ( 0.43 ) Net Loss per Common Share - Basic $ ( 0.12 ) $ ( 0.22 ) $ ( 0.29 ) $ ( 0.43 ) Loss Applicable to Common Stockholders (numerator) $ ( 1,318,782 ) $ ( 2,261,390 ) $ ( 3,082,229 ) $ ( 4,483,005 ) Weighted Average Number of Common Shares Outstanding Used in Loss Per Share During the Period (denominator) 10,772,713 10,498,802 10,731,922 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. 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 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 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 $ 11,337 and $ 28,343 . 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. 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) $ 17,006 2024 8,503 2025 - 2026 - Thereafter - Total $ 25,509 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 $ 77,208 Accumulated Depreciation ( 12,445 ) Net Book Value $ 64,763 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 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 $ 257,714 $ 294,194 Work in Process 165,777 140,723 Finished Goods 516,543 516,026 Total Inventory $ 940,034 $ 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 six months ended June 30, 2023, $ 27,571 of costs related to patents issued during the quarter were reclassified from provisional patent application to patents and began to be amortized as of the date of issue. 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 $ 752,802 $ 675,251 Patents 552,321 524,750 Less: Accumulated Amortization ( 89,712 ) ( 74,716 ) Net Intangible Assets $ 1,215,411 $ 1,125,285 Amortization expense on intangible assets was $ 14,996 and $ 10,993 for the six months ended June 30, 2023 and 2022, respectively. The estimated aggregate amortization expense for years ending December 31 is as follows: Schedule of Aggregate Amortization Expense 2023 (Remaining) $ 15,596 2024 31,192 2025 31,192 2026 31,192 Thereafter 353,437 Intangible asset and amortization expense $ 462,609 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 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 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 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). 12 On January 27, 2023, the holder of the remaining 132 outstanding shares of Series D Preferred Stock elected to convert such shares, which resulted in the issuance of 270,828 shares of common stock. At June 30, 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, which resulted in the issuance of 3,083 shares of common stock. At June 30, 2023, 316 shares of Series E Preferred Stock were outstanding, which were convertible into 60,332 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 no 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 52,380 shares of common stock at an exercise price of $ 0.58 . As of June 30, 2023, 50 % of such grants were fully vested and exercisable, and the remaining 50 % will vest in equal quarterly installments over the remaining two 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 six months ended June 30, 2023 and 2022 was $ 363,339 and $ 338,415 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 six months ended June 30, 2023, and 2022: Schedule of Share Based Payments Award Stock Options Valuation Assumptions 2023 2022 Dividend yield 0.00 % 0.00 % Risk-free interest rate 4.05 % 0.95 - 1.65 % Expected volatility 100.23 - 100.25 % 106.4 - 110.0 % Expected life (in years) 5 5 13 Option activity for the six months ended June 30, 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 4.58 - Exercised - - - - Forfeited or cancelled ( 335,059 ) 3.60 - - Options outstanding at June 30, 2023 1,897,659 3.07 3.21 - Options expected to vest in the future as of June 30, 2023 409,974 1.93 4.03 - Options exercisable at June 30, 2023 1,487,685 3.38 2.98 - Options vested, exercisable, and options expected to vest at June 30, 2023 1,897,659 3.07 3.21 - 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 $ 0.35 closing price of our common stock as reported on The Nasdaq Capital Market. At June 30, 2023, there was $ 387,351 of unrecognized stock-based compensation expense related to unvested stock options with a weighted average remaining recognition period of 1.42 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 The fair value of SAR awards was estimated using the Black-Scholes model with the following weighted average assumptions for the six months ended June 30, 2023 and the year ended December 31, 2022: Schedule of Share Based Payments Award Stock Options Valuation Assumptions 2023 2022 Dividend yield - 0.00 % Risk-free interest rate - 0.82 - 2.79 % Expected volatility - 108.0 - 119.0 % Expected life (in years) - 5 SARs activity for the six months ended June 30, 2023 and the year ended December 31, 2022 was as follows: 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 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 ( 328,822 ) 2.10 - - SARs outstanding June 30, 2023 828,965 2.26 3.63 - SARs expected to vest in the future as of June 30, 2023 530,678 2.02 3.85 - SARs exercisable at June 30, 2023 298,287 2.68 3.24 - SARs vested, and exercisable, and SARs expected to vest at June 30, 2023 828,965 2.26 3.63 - 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 $ 0.35 closing price of our common stock as reported on The Nasdaq Capital Market. At June 30, 2023, there was $ 474,228 of unrecognized stock-based compensation expense related to unvested SARs with a weighted average remaining recognition period of 1.75 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 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 2.62 Exercised - - - Forfeited or cancelled ( 2,412,086 ) 4.54 - Warrants outstanding at June 30, 2023 2,902,089 2.08 2.34 NOTE 5 - Subsequent Events In July 2023, the Company realized gross proceeds of approximately $ 135,000 from the sale of equipment. 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 $ 1,500,000 (the “Offering”). The Offering is being made pursuant to a prospectus supplement filed with the Securities and Exchange Commission in connection with the Offering under its Registration Statement on Form S-3 (File No. 333-257054), which became effective on June 29, 2021, and the base prospectus contained therein. 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 3.0 % of gross proceeds from the Offering and to reimburse Lake Street for certain expenses. The Company has also agreed to afford Lake Street customary indemnification and contribution rights. 16