NextTrip, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. Sigma Additive Solutions, Inc. Condensed Balance Sheets September 30, 2023 December 31, 2022 (Unaudited) ASSETS Current Assets: Cash $ 556,087 $ 2,845,931 Accounts Receivable, net 59,000 371,620 Inventory 775,066 950,943 Prepaid Assets 37,833 105,226 Total Current Assets 1,427,986 4,273,720 Other Assets: Property and Equipment, net 161,971 304,903 Intangible Assets, net 1,247,697 1,125,285 Total Other Assets 1,409,668 1,430,188 TOTAL ASSETS $ 2,837,654 $ 5,703,908 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts Payable $ 607,212 $ 277,492 Deferred Revenue 111,082 120,073 Accrued Expenses 145,306 231,633 Total Current Liabilities 863,600 629,198 TOTAL LIABILITIES 863,600 629,198 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; 1,200,000 shares authorized; 651,536 and 524,940 shares issued and outstanding, respectively 652 525 Additional Paid-In Capital 55,380,026 54,416,668 Accumulated Deficit ( 53,406,625 ) ( 49,342,484 ) Total Stockholders’ Equity 1,974,054 5,074,710 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,837,654 $ 5,703,908 See accompanying notes to condensed financial statements. 3 Sigma Additive Solutions, Inc. Condensed Statements of Operations (Unaudited) 2023 2022 2023 2022 Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 REVENUES $ 141,988 $ 188,245 $ 369,188 $ 476,749 COST OF REVENUE 176,116 79,713 276,270 312,879 GROSS PROFIT ( 34,128 ) 108,532 92,918 163,870 OPERATING EXPENSES: Salaries & Benefits 288,894 1,227,805 1,774,658 3,704,633 Stock-Based Compensation 84,078 275,418 447,417 613,833 Operations and R&D Costs 245 152,245 232,216 442,548 Investor, Public Relations and Marketing 15,797 46,832 128,565 293,458 Organization Costs 47,580 140,522 137,017 260,088 Legal & Professional Service Fees 251,265 252,886 587,541 608,830 Office Expenses 61,077 183,608 309,765 692,640 Depreciation & Amortization 24,554 26,857 74,151 88,302 Other Operating Expenses 92,709 86,783 387,582 263,747 Total Operating Expenses 866,199 2,392,956 4,078,912 6,968,079 LOSS FROM OPERATIONS ( 900,327 ) ( 2,284,424 ) ( 3,985,994 ) ( 6,804,209 ) OTHER INCOME (EXPENSE) Interest Income - 278 17 3,025 State Incentives - - - 76,628 Exchange Rate Gain (Loss) ( 4 ) ( 6,184 ) ( 3,356 ) ( 16,950 ) Interest Expense ( 3,235 ) ( 1,978 ) ( 9,706 ) ( 5,367 ) Other Income 31,905 - 67,584 - Total Other Income (Expense) 28,666 ( 7,884 ) 54,539 57,336 LOSS BEFORE PROVISION FOR INCOME TAXES ( 871,661 ) ( 2,292,308 ) ( 3,931,455 ) ( 6,746,873 ) Provision for income Taxes - - - - Net Loss $ ( 871,661 ) $ ( 2,292,308 ) $ ( 3,931,455 ) $ ( 6,746,873 ) Preferred Dividends ( 10,687 ) ( 14,220 ) ( 33,122 ) ( 42,660 ) Net Loss Applicable to Common Stockholders $ ( 882,348 ) $ ( 2,306,528 ) $ ( 3,964,577 ) $ ( 6,789,533 ) Net Loss per Common Share – Basic and Diluted $ ( 1.57 ) $ ( 4.39 ) $ ( 7.28 ) $ ( 12.93 ) Weighted Average Number of Shares Outstanding – Basic and Diluted 560,310 524,940 544,587 524,940 See accompanying notes to condensed financial statements. 4 Sigma Additive Solutions, Inc. Statement of Stockholders’ Equity For the Three Months and Nine Months Ended September 30, 2023 and September 30, 2022 (Unaudited) For the Three Months Ended September 30, 2023 and September 30, 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, June 30 , 2023 316 1 538,636 539 54,915,026 ( 52,524,277 ) 2,391,289 Net Loss - - - - - ( 871,661 ) ( 871,661 ) Common Shares Sold in Public Offering - - 72,721 73 453,562 - 453,635 Offering Costs - - - - ( 89,080 ) - ( 89,080 ) Round-Up Shares Issued in Connection with Reverse Split 40,179 40 ( 40 ) - - Preferred Stock Dividends - - - - 10,687 ( 10,687 ) - Stock Options Issued to Directors for Services - - - - 5,793 - 5,793 Stock Options Issued to Employees - - - - 84,078 - 84,078 Balances, September 30, 2023 316 1 651,536 652 55,380,026 ( 53,406,625 ) 1,974,054 Preferred Stock Common Stock Additional Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Balances, June 30, 2022 465 $ 1 524,940 $ 525 $ 53,886,192 $ ( 45,076,185 ) $ 8,810,533 Net Loss - - - - - ( 2,292,308 ) ( 2,292,308 ) Preferred Stock Dividends - - - - 14,220 ( 14,220 ) - Stock Options Issued for Third Party Services - - - - 973 - 973 Stock Options Awarded to Directors for Services - - - - 27,152 - 27,152 Stock Options Awarded to Employees - - - - 275,418 - 275,418 Balances September 30, 2022 465 $ 1 524,940 $ 525 $ 54,203,955 $ ( 47,382,713 ) $ 6,821,768 5 For the Nine Months Ended September 30, 2023 and September 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 $ 1 524,940 $ 525 $ 54,416,668 $ ( 49,342,484 ) $ 5,074,710 Net Loss - - - - - ( 3,931,455 ) ( 3,931,455 ) Common Shares Sold in Public Offering - - 72,721 73 453,562 - 453,635 Offering Costs - - - - ( 89,080 ) - ( 89,080 ) Round-Up Shares Issued in Connection with Reverse Split - - 40,179 40 ( 40 ) - - Preferred Stock Dividends - - 2,195 2 33,120 ( 33,122 ) - Common Shares Issued for Conversion of Preferred Stock ( 149 ) - 11,501 12 ( 12 ) - - Common Warrant Issued for Conversion of Preferred Stock - - - - 99,564 ( 99,564 ) - Stock Options Issued to Directors for Services - - - - 19,316 - 19,316 Stock Options Issued for Third Party Services - - - - ( 489 ) - ( 489 ) Stock Options Issued to Employees - - - - 447,417 - 447,417 Balances, September 30, 2023 316 1 651,536 652 55,380,026 ( 53,406,625 ) 1,974,054 Preferred Stock Common Stock Additional Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Balances, December 31, 2021 465 $ 1 524,940 $ 525 $ 53,452,405 $ ( 40,593,180 ) $ 12,859,751 Balances 465 $ 1 524,940 $ 525 $ 53,452,405 $ ( 40,593,180 ) $ 12,859,751 Net Loss - - - - - ( 6,746,873 ) ( 6,746,873 ) Preferred Stock Dividends - - - - 42,660 ( 42,660 ) - Stock Options Issued to Directors for Services - - - - 70,594 - 70,594 Stock Options Issued for Third Party Services - - - - 24,463 - 24,463 Stock Options Issued to Employees - - - - 613,833 - 613,833 Balances, September 30, 2022 465 $ 1 524,940 $ 525 $ 54,203,955 $ ( 47,382,713 ) $ 6,821,768 Balances 465 $ 1 524,940 $ 525 $ 54,203,955 $ ( 47,382,713 ) $ 6,821,768 See accompanying notes to condensed financial statements. 6 Sigma Additive Solutions, Inc. Condensed Statements of Cash Flows (Unaudited) September 30, 2023 September 30, 2022 Nine Months Ended September 30, 2023 September 30, 2022 OPERATING ACTIVITIES Net Loss $ ( 3,931,455 ) $ ( 6,746,873 ) Adjustments to reconcile Net Loss to Net Cash used in operating activities: Noncash Expenses: Depreciation and Amortization 74,151 88,302 Stock Based Compensation - Employees 447,417 613,833 Stock Based Compensation - Third Party Services ( 489 ) 24,463 Stock Based Compensation - Directors 19,316 70,594 Stock Based Compensation 19,316 70,594 Gain on Sale of Property and Equipment ( 28,632 ) - Change in assets and liabilities: Accounts Receivable 312,620 44,422 Inventory 175,877 ( 257,352 ) Prepaid Assets 67,393 ( 63,446 ) Accounts Payable 372,236 197,105 Deferred Revenue ( 8,991 ) ( 19,166 ) Accrued Expenses ( 86,327 ) ( 338,297 ) NET CASH USED IN OPERATING ACTIVITIES ( 2,586,884 ) ( 6,386,415 ) INVESTING ACTIVITIES Purchase of Property and Equipment - ( 83,848 ) Proceeds from Sale of Property and Equipment 78,000 - Purchase of Intangible Assets ( 145,515 ) ( 176,104 ) NET CASH USED IN INVESTING ACTIVITIES ( 67,515 ) ( 259,952 ) FINANCING ACTIVITIES Gross Proceeds from Public Issuance of Comon Stock 453,635 - Offering Costs ( 89,080 ) - NET CASH PROVIDED BY FINANCING ACTIVITIES 364,555 - NET CHANGE IN CASH FOR PERIOD ( 2,289,844 ) ( 6,646,367 ) CASH AT BEGINNING OF PERIOD 2,845,931 11,447,047 CASH AT END OF PERIOD $ 556,087 $ 4,800,680 Supplemental Disclosures: Noncash investing and financing activities disclosure: Preferred Stock Dividends $ 33,122 $ 42,660 Conversion of Preferred Shares to Common Shares $ 188,830 $ - Other noncash operating activities disclosure: Issuance of Securities for Services $ 18,827 $ 95,057 Disclosure of cash paid for: Interest $ 9,706 $ 5,367 Income Taxes $ - $ - See accompanying notes to condensed financial statements. 7 SIGMA ADDITIVE SOLUTIONS, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS September 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. Reverse Stock Split - Effective September 22, 2023, we effected a 1-for-20 reverse stock split of the outstanding shares of our common stock and a corresponding decrease in the number of shares of our common stock that we are authorized to issue. The effects of the reverse stock split have been retroactively reflected in all periods presented. 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 September 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. These condensed financial statements should 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 September 30, 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. On September 7, 2023, we raised $ 364,555 in net proceeds pursuant to our At-The-Market Issuance Sales Agreement, or ATM Agreement, and on October 13, 2023, we raised an additional $ 772,468 in net proceeds. With these additional proceeds, the Company estimates that it has sufficient cash and working capital to fund its scaled-back operations as described below pending the completion of our acquisition of NextTrip Holdings, Inc. and sale of assets to Divergent Technologies, Inc., or through March 2024. The Company reduced its employee headcount, and discontinued product development activities for the time being to ensure lowered expenses. The Company is continuing to operate and support its existing customers who have maintenance agreements and leases in place, supporting new installations in the field, and actively seeking potential sales of the PrintRite3D systems and software to customers who have lease agreements in place, systems on consignment, or otherwise express interest in Sigma’s products available for sale. The Company completed two such sales in the quarter ended September 30, 2023, and believes additional sales are achievable going forward as we progress towards closing the pending transactions. There is no assurance, however, that we will be able to close either transaction. If we fail to complete the acquisition of NextTrip Holdings, Inc., we intend to proceed with the sale of assets to Divergent Technologies, Inc. and may seek to undertake another strategic transaction, if possible, or the dissolution and liquidation or the 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 September 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 2023 2022 September 30, 2023 2022 Warrants 222,043 191,164 Stock Options 90,727 89,247 Preferred Stock 3,069 7,446 Total Underlying Common Shares 315,839 287,857 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 2023 2022 2023 2022 Three Months Ended September 30 Nine Months Ended September 30 2023 2022 2023 2022 Net Loss Per Common Share – Basic and Diluted $ ( 1.57 ) $ ( 4.39 ) $ ( 7.28 ) $ ( 12.93 ) Loss Applicable to Common Stockholders (numerator) $ ( 882,348 ) $ ( 2,306,528 ) $ ( 3,964,577 ) $ ( 6,789,533 ) Weighted Average Number of Common. Shares Outstanding Used in Loss Per Share During the Period (denominator) 560,310 524,940 544,587 524,940 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 month-to-month leases only, cancellable upon 45 days’ notice. 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 third 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 nine months ended September 30, 2023 was $ 8,503 and $ 36,846 , respectively. 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 September 30, 2023 and September 30, 2022, the Company had 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) $ 8,503 2024 8,503 2025 - 2026 - Thereafter - Total $ 17,006 Equipment Underlying Operating Leases: Equipment under operating leases as of September 30, 2023 was comprised of the following: Schedule of Assets underlying Operating Leases September 30, 2023 PrintRite3D Hardware $ 77,208 Accumulated Depreciation ( 15,203 ) Net Book Value $ 62,005 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 September 30, 2023 and December 31, 2022, the Company’s inventory comprised the following: Schedule of Inventory September 30, 2023 December 31, 2022 Raw Materials $ 283,401 $ 294,194 Work in Process 108,776 140,723 Finished Goods 382,889 516,026 Total Inventory $ 775,066 $ 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 nine months ended September 30, 2023, $ 43,530 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 September 30, 2023 and December 31, 2022, respectively: Summary of Definite-life Intangible Assets and Accumulated Amortization September 30, 2023 December 31, 2022 Provisional Patent Applications $ 777,235 $ 675,251 Patents 568,280 524,750 Intangible Assets, Gross 568,280 524,750 Less: Accumulated Amortization ( 97,818 ) ( 74,716 ) Net Intangible Assets $ 1,247,697 $ 1,125,285 Amortization expense on intangible assets was $ 23,102 and $ 17,010 for the nine months ended September 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) $ 8,033 2024 32,131 2025 32,131 2026 32,131 Thereafter 366,036 Amortization expense $ 470,462 NOTE 4 – Stockholders’ Equity Common Stock Effective September 22, 2023, we effected a 1-for-20 reverse stock split of the outstanding shares of our common stock and a corresponding decrease in the number of shares of our common stock that we are authorized to issue. In connection with the reverse split, we issued 40,197 common shares to round-up fractional shares to the nearest whole share. The effects of the reverse stock split have been retroactively reflected in all periods presented. In the third quarter of 2023, the Company sold 72,721 shares of common stock through our ATM Agreement, resulting in net proceeds of $ 364,555 . In the first quarter of 2023, the Company issued 11,380 shares of common stock in exchange for the conversion of 132 shares of Series D Convertible Preferred Stock and 2,161 shares of common stock as in-kind payment of dividends thereon. Also in the first quarter of 2023, the Company issued 122 shares of common stock in exchange for the conversion of 17 shares of Series E Convertible Preferred Stock and 33 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 September 30, 2023 and December 31, 2022, respectively. 12 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 was $ 6.00 as of September 30, 2023 (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). 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 13,541 shares of common stock. At September 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 2,428 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 155 shares of common stock. At September 30, 2023, 316 shares of Series E Preferred Stock were outstanding, which were convertible into 3,069 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 September 30, 2023. On January 26, 2023, the Company granted options to its non-employee directors to purchase up to an aggregate of 2,620 shares of common stock at an exercise price of $ 11.60 . As of September 30, 2023, 75 % of such grants were fully vested and exercisable, and the remaining 25 % will vest on December 31, 2023, subject to the directors remaining in our service through such date. On January 26, 2023, the Company granted 19 employees options to purchase up to an aggregate of 19,065 shares of common stock in connection with their employment. The options have an exercise price of $ 11.60 , 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 nine months ended September 30, 2023 and 2022 was $ 447,417 and $ 613,833 respectively, all of which is related to stock options. 13 The fair value of stock-based awards was estimated using the Black-Scholes model with the following weighted average assumptions for the nine months ended September 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 - 3.23 % Expected volatility 100.23 - 100.25 % 106.40 - 109.97 % Expected life (in years) 5 5 Option activity for the nine months ended September 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 69,795 84.80 3.89 - Granted 24,374 50.00 4.43 - Exercised - - - - Forfeited or cancelled ( 4,216 ) 87.80 - - Options outstanding at December 31, 2022 89,953 75.20 3.30 - Granted 21,704 11.60 4.32 - Exercised - - - - Forfeited or cancelled ( 20,930 ) 68.59 - - Options outstanding at September 30, 2023 90,727 61.58 2.96 - Options unvested at September 30, 2023 15,876 37.11 3.83 - Options vested at September 30, 2023 74,851 66.76 2.78 - Options outstanding at September 30, 2023 90,727 61.58 2.96 - 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 September 30, 2023, no option had an exercise price below the $ 3.06 closing price of our common stock as reported on The Nasdaq Capital Market. At September 30, 2023, there was $ 278,132 of unrecognized stock-based compensation expense related to unvested stock options with a weighted average remaining recognition period of 1.26 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. 14 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 nine months ended September 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. The fair value of SAR awards was estimated using the Black-Scholes model with the following weighted average assumptions for the nine months ended September 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 nine months ended September 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 18,532 63.00 4.24 - Granted 40,743 36.20 4.48 - Exercised - - - - Forfeited or cancelled ( 1,386 ) 58.20 - - SARs outstanding at December 31, 2022 57,889 44.20 4.11 - Granted - - - - Exercised - - - - Forfeited or cancelled ( 17,432 ) 43.03 - - - SARs outstanding September 30, 2023 40,457 44.75 3.40 - SARs unvested at September 30, 2023 17,051 54.92 3.04 - SARs vested at September 30, 2023 23,406 37.35 3.66 - SARs outstanding at September 30, 2023 40,457 44.75 3.40 - 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 September 30, 2023, no SAR had an exercise price below the $ 3.06 closing price of our common stock as reported on The Nasdaq Capital Market. At September 30, 2023, there was $ 396,579 of unrecognized stock-based compensation expense related to unvested SARs with a weighted average remaining recognition period of 1.51 years. 15 Warrants Warrant activity for the nine months ended September 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 199,397 122.00 2.10 Granted - - - Exercised - - - Forfeited or cancelled ( 8,233 ) - - Warrants outstanding at December 31, 2022 191,164 93.24 1.19 Granted 151,483 6.42 2.19 Exercised - - - Forfeited or cancelled ( 120,604 ) 90.72 - Warrants outstanding at September 30, 2023 222,043 26.48 2.07 NOTE 5 - Subsequent Events On October 13, 2023, the Company raised $ 772,468 in net proceeds by selling 128,887 common shares pursuant to its ATM Agreement. On October 6, 2023, the Company entered into a definitive asset purchase agreement (“APA”) with Divergent Technologies, Inc., or Divergent, pursuant to which have agreed to sell to Divergent, and Divergent has agreed to purchase from us, certain assets consisting primarily of patents, software code and other intellectual property for a purchase price of $ 1,626,242 , including a $ 37,000 earnest-money deposit previously paid to us by Divergent. The parties’ respective obligations to close are subject to the accuracy of the parties’ respective representations and warranties and performance of their respective covenants and satisfaction or waiver of other customary conditions specified in the Asset Purchase Agreement. The Asset Purchase Agreement contains customary representations and warranties which will survive for one year following the closing. The Asset Purchase Agreement also contains restrictive covenants regarding the conduct of our business pending the closing. In the interim, between the signing date and closing date or termination of the Asset Purchase Agreement, we have granted Divergent a non-exclusive, non-transferable, non-sublicensable (except to Divergent customers and affiliates), limited, irrevocable (except in connection with the termination of the Asset Purchase Agreement in certain circumstances), worldwide, royalty-free license to the “Licensed IP” (as defined) for testing, evaluation, and commercialization purposes. On October 12, 2023, the Company entered into a definitive Share Exchange Agreement for the acquisition of NextTrip Holdings, Inc., a travel technology company based in Sunrise, Florida (“NextTrip”). Pursuant to the terms and conditions of the Agreement, Sigma will acquire 100 % of the capital stock of NextTrip in exchange for shares of Sigma common stock constituting 19.99 % of its outstanding common stock plus additional contingent shares of Sigma common stock upon the achievement of post-closing milestones tied to the business performance of NextTrip. Assuming all business milestones are achieved, the equity owners of NextTrip will receive a total of 6 million shares of our common stock, resulting in existing Sigma holders retaining, on a pro forma basis, approximately 9.8 % of the total outstanding shares immediately following the issuance of such shares. The parties’ respective obligations to close the Acquisition are subject to the satisfaction or waiver of various conditions specified in the Share Exchange Agreement. The conditions include approval by Sigma shareholders of the issuance of the Exchange Shares as required by applicable listing standards of The Nasdaq Capital Market, or Nasdaq, amendments to our amended and restated articles of incorporation to change our name and to increase our authorized common stock, and the continued listing or our common stock on Nasdaq, as well as customary other closing conditions. 16 The Share Exchange Agreement contains representations and warranties and covenants of the parties customary for a transaction of this nature which will not survive the closing of the Acquisition. The Share Exchange Agreement also contains customary covenants regarding the conduct of the respective businesses of Sigma and NextTrip pending the closing of the Acquisition. The Share Exchange Agreement permits us to sell our quality assurance software assets at or after the closing of the Acquisition as contemplated by our Asset Purchase Agreement with Divergent Technologies, Inc. Both transactions are expected to be completed in the fourth quarter of 2023, subject to shareholder approvals and other customary closing conditions. On October 6, 2023, Nasdaq Listing Qualifications (“Nasdaq”) notified the Company that it had regained compliance with the minimum bid price Listing Rule 5550(a)(2) as the Company’s closing bid price of its common stock had been at or greater than $1.00 per share for ten consecutive business days following the effective date of the Company’s reverse stock split. Nasdaq further notified the Company that the matter is closed. On August 17, 2023, the Company received notice from Nasdaq that because our stockholders’ equity as of June 30, 2023 was $ 2,391,289 , we no longer comply with Nasdaq Listing Rule 5550(b)(1), which requires companies listed on the Nasdaq Capital Market to maintain minimum stockholders’ equity of $ 2,500,000 , and do not meet the alternatives of market value of listed securities or net income from continuing operations. The notice stated that under Nasdaq Rules, we have 45 calendar days to submit a plan to regain compliance and that if our plan is accepted, Nasdaq can grant us an extension of up to 180 calendar days from the date of the notice to evidence compliance. On October 2, 2023, the Company submitted its plan to regain compliance to Nasdaq and requested an extension to February 13, 2024 to evidence compliance with the Rule and all other applicable criteria for continued listing on Nasdaq. On October 23, 2023, Nasdaq informed the Company that based on the submission, it had granted the requested extension until February 13, 2024 to demonstrate compliance with the Rule. Nasdaq further informed the Company that if the Company fails to evidence compliance upon filing its periodic report for the quarter ended March 31, 2024 with the SEC and Nasdaq, the Company may be subject to delisting. 17