What changed in NextTrip, Inc.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of NextTrip, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+228 added−177 removedSource: 10-K (2023-03-30) vs 10-K (2022-03-24)
Top changes in NextTrip, Inc.'s 2023 10-K
228 paragraphs added · 177 removed · 117 edited across 6 sections
- Item 7. Management's Discussion & Analysis+99 / −64 · 29 edited
- Item 1. Business+56 / −52 · 36 edited
- Item 1A. Risk Factors+67 / −52 · 47 edited
- Item 5. Market for Registrant's Common Equity+3 / −6 · 3 edited
- Item 2. Properties+2 / −2 · 1 edited
Item 1. Business
Business — how the company describes what it does
36 edited+20 added−16 removed9 unchanged
Item 1. Business
Business — how the company describes what it does
36 edited+20 added−16 removed9 unchanged
2022 filing
2023 filing
Biggest changeExpiration Date Methods and Systems for Monitoring Additive Manufacturing Processes US Utility 9,999,924 5/11/36 Systems and Methods for Additive Manufacturing Operations US Utility 10,207,489 6/20/37 Material Qualification System and Methodology US Utility 10,226,817 4/26/37 Material Qualification System and Methodology China Utility ZL201680010333.X 1/13/26 Optical Manufacturing Process Sensing and Status Indication System US Utility 10,317,294 5/2/35 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation US Utility 10,479,020 8/1/38 Optical Manufacturing Process Sensing and Status Indication System US Utility 10,520,372 3/25/35 Systems and Methods for Additive Manufacturing Operations US Utility 10,717,264 12/28/38 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation US Utility 10,639,745 2/21/39 Photodetector Array for Additive Manufacturing Operations US Utility 10,786,850 2/21/39 Multi-Sensor Quality Inference and Control for Additive Manufacturing Processes US Utility 10,786,948 4/24/37 Optical Manufacturing Process Sensing and Status Indication System US Utility 11,073,431 3/25/35 Method and System for Monitoring Additive Manufacturing Process US Utility 11,135,654 8/11/35 Layer-Based Defect Detection Using Normalized Sensor Data US Utility 11,072,043 1/26/40 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation Germany Utility 112,018,001,597 8/1/38 Government Regulation Any contracts that we enter into with governmental agencies will be subject to a variety of federal, state and local laws and regulations.
Biggest changeExpiration Date Optical Manufacturing Process Sensing and Status Indication System US Utility 10,317,294 5/2/2035 Optical Manufacturing Process Sensing and Status Indication System US Utility 10,520,372 3/25/2035 Optical Manufacturing Process Sensing and Status Indication System US Utility 11,073,431 3/25/2035 Method And System for Monitoring Additive Manufacturing Processes US Utility 9,999,924 5/11/2036 Method And System for Monitoring Additive Manufacturing Processes US Utility 11,135,654 8/21/2035 Multi-Sensor Quality Inference and Control For Additive Manufacturing Processes US Utility 10,786,948 4/24/2037 Multi-Sensor Quality Inference and Control For Additive Manufacturing Processes US Utility 11,478,854 11/18/2035 Material Qualification System and Methodology US Utility 10,226,817 4/26/2037 Material Qualification System and Methodology China Utility ZL201680010333.X 1/13/2036 Material Qualification System and Methodology US Utility 11,267,047 1/13/2036 Systems And Methods for Additive Manufacturing Operations US Utility 10,207,489 6/20/2037 Systems And Methods for Additive Manufacturing Operations US Utility 10,717,264 12/28/2038 Layer-Based Defect Detection Using Normalized Sensor Data US Utility 11,072,043 1/26/2040 System And Method for Additive Manufacturing China Utility ZL201980027059.0 2/21/2039 Photodetector Array for Additive Manufacturing Operations German Utility 112,019,000,521 2/21/2039 Photodetector Array for Additive Manufacturing Operations US Utility 10,786,850 2/21/2039 Photodetector Array for Additive Manufacturing Operations US Utility 11,260,456 2/21/2039 Correction of Non-Imaging Thermal Measurement Devices US Utility 11,260,454 3/11/2040 Systems And Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation China Utility ZL201880064101.1 8/1/2038 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation German Utility 112,018,001,597 8/1/2038 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation Japan Utility 7,024,981 8/1/2038 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation Korea Utility 10-2340573 8/1/2038 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation US Utility 10,479,020 8/1/2038 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation US Utility 11,390,035 8/1/2028 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation China Utility ZL201980027181.8 2/21/2039 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation German Utility 112,019,000,498 2/21/2039 Systems and Methods for Measuring Radiated Thermal Energy During an Additive Manufacturing Operation US Utility 10,639,745 2/21/2039 Methods and Systems for Quality Inference and Control for Additive Manufacturing Processes US Utility 11,517,984 4/30/2041 Defect Identification Using Machine Learning in an Additive Manufacturing System US Utility 11,536,671 7/30/2041 6 Government Regulations Any contracts that we enter into with governmental agencies will be subject to a variety of federal, state and local laws and regulations.
AM is now reshaping the product design process, entire supply chains, and the vast landscape of manufacturing. Engineers are embracing new design freedoms to realize valuable product performance improvements and cost efficiencies with lighter weight, better thermal management capability, better fluid mixing, customization, and/or the ability to make different structures and textures that yield better part integration.
AM is now reshaping the product design process, entire supply chains, and the vast landscape of manufacturing. Engineers are embracing new design freedoms to realize valuable product performance improvements and cost efficiencies with lighter weight, better thermal management capability, better fluid mixing, customization, and the ability to make different structures and textures that yield better part integration.
We believe that there are several significant hurdles to be overcome for broader adoption of additive technologies for the production of industrial metal parts. Among these are lack of quality, consistency, and industry standards along with cost. The Company believes PrintRite3D® has the potential to contribute to widespread industrialization of 3D metal printing.
We believe that there are several significant hurdles to be overcome for broader adoption of additive technologies for the production of industrial metal and polymer parts. Among these are lack of quality, consistency, and industry standards along with cost. The Company believes PrintRite3D® has the potential to contribute to widespread industrialization of 3D metal and polymer printing.
In 2018, the Sigma team enhanced and added user features to its PrintRite3D® technology. In 2019, the Company began to productize and test PrintRite3D® on various 3D metal printers at customers’ sites through the Company’s Rapid Test and Evaluation (“RTE”) program. Upon receiving favorable responses from the various RTEs, in 2020 the Company began to aggressively market PrintRite3D®.
In 2018, the Sigma team enhanced and added user features to its PrintRite3D® technology. In 2019, the Company began to productize and test PrintRite3D® on various 3D metal printers at customers’ sites through the Company’s Rapid Test and Evaluation (“RTE”) program. Upon receiving favorable responses from the various RTEs, in 2020 the Company began to market PrintRite3D®.
In addition, government contractors are also subject to routine audits and investigations by U.S. government agencies such as the Defense Contract Audit Agency (“DCAA”). These agencies review a contractor’s performance, cost structure, and compliance with applicable laws, regulations, and standards.
In addition, government contractors are subject to routine audits and investigations by U.S. government agencies such as the Defense Contract Audit Agency (“DCAA”). These agencies review a contractor’s performance, cost structure, and compliance with applicable laws, regulations, and standards.
It is a 3D printer platform-independent solution that can be installed as a retrofit to an existing 3D printer or requested as a factory option from select 3D printer OEMs. PrintRite3D® provides a high-fidelity, accurate system that can confidently scale to multi-laser 3D metal printers.
It is a 3D printer platform-independent solution that can be installed as a retrofit to an existing 3D printer or requested as a factory option from select 3D printer OEMs. PrintRite3D® provides a high-fidelity, accurate system that can confidently scale to multi-laser 3D metal and polymer printers.
PrintRite3D was initially developed to work with industrial 3D metal printers using the Powder Bed Fusion (PBF) process, which is the most widely used process for industrial metal applications. In 2020, we announced PrintRite3D for Direct Energy Deposition, or DED, for metal parts.
PrintRite3D was initially developed to work with industrial 3D metal printers using the Powder Bed Fusion (“PBF”) process, which is the most widely used process for industrial metal applications. In 2020, we announced PrintRite3D for Direct Energy Deposition, or DED, for metal parts.
PrintRite3D DED opens up another segment of the industrial metal market for Sigma to sell and distribute our technology. In 2021, the Company introduced PrintRite3D Selective Laser Sintering, or (SLS) for polymer materials. The polymer market is larger and more advanced than the metal market.
PrintRite3D DED opened another segment of the industrial metal market for Sigma to sell and distribute our technology. In 2021, the Company introduced PrintRite3D Selective Laser Sintering, or SLS, for polymer materials. The polymer market is larger and more advanced than the metal market.
We rely on a combination of patent, trademark, trade secret, other intellectual property law, confidentiality procedures, and contractual provisions with employees, partners, and others to protect the technology and other proprietary rights, information and know-how that comprise the core of our business. The chart below summarizes our issued patents.
We rely on a combination of patent, trademark, trade secret, other intellectual property law, confidentiality procedures, and contractual provisions with employees, partners, and others to protect the technology and other proprietary rights, information and know-how that comprise the core of our business. The tables below summarize our issued patents.
Despite the pandemic, the Company moved forward with its plan to market PrintRite3D® to the following industry segments: (1) global manufacturing companies with Additive Manufacturing (“AM”) initiatives; (2) 3D printer Original Equipment Manufacturers (“OEMs”) for purchases of licenses and generating fees and royalties thereafter; (3) additive manufacturing software venders for alliances and licenses for co-sales; and (4) research foundations, standards organizations and universities, all in service of Sigma’s potential for setting the industry standard of measurement by providing data and analytics as a metrics-based quality standard of metal quality for all 3D laser powder bed manufactured parts, notwithstanding the design, metal, or brand of equipment upon which parts are manufactured.
Although the worldwide COVID-19 pandemic adversely affected capital spending within the Company’s targeted industries, the Company moved forward with its plan to market PrintRite3D® to the following industry segments: (1) global manufacturing companies with Additive Manufacturing (“AM”) initiatives; (2) 3D printer Original Equipment Manufacturers (“OEMs”) for purchases of licenses and generating fees and royalties thereafter; (3) additive manufacturing software venders for alliances and licenses for co-sales; and (4) research foundations, standards organizations and universities, all in service of Sigma’s potential for setting the industry standard of measurement by providing data and analytics as a metrics-based quality standard of metal quality for all 3D laser powder bed manufactured parts, notwithstanding the design, metal, or brand of equipment upon which parts are manufactured.
The PrintRite3D® system detects potential anomalies and incorporates machine learning in conjunction with developed metrics to map those metrics to the post-process data. This provides the ability to reduce post-production testing and costs, while creating a certification framework that serves the needs of end-users, printer manufacturers, and standards organizations.
The PrintRite3D® system detects potential anomalies in real-time and incorporates machine learning in conjunction with developed metrics to map those metrics to live post-process data. This provides the ability to reduce manufacturing costs by identifying problems before post-production testing, while creating a certification framework that serves the needs of end-users, printer manufacturers, and standards organizations.
Our benefit programs include bonuses, stock-based compensation awards, a 401(k) plan with employer matching, healthcare and insurance benefits, flexible paid time off and other employee assistance programs. 7 COVID-19 Pandemic The health and wellness of our employees is also critical to our success.
Compensation and Benefits We strive to provide competitive compensation and benefits to our employees. Our benefit programs include bonuses, stock-based compensation awards, a 401(k) plan with employer matching, healthcare and insurance benefits, flexible paid time off and other employee assistance programs. COVID-19 Pandemic The health and wellness of our employees is important to our success.
A contractor’s failure to comply with these regulations and requirements could result in reductions of the value of contracts, contract modifications or termination, and the assessment of penalties and fines and could lead to suspension or debarment from government contracting or subcontracting for a period of time.
Our failure to comply with these regulations and requirements could result in reductions of the value of contracts, contract modifications or termination, and the assessment of penalties and fines and could lead to temporary or permanent suspension or debarment from government contracting or subcontracting.
We are currently prosecuting foreign and U.S. patent applications related to our IPQA® technology and rapid qualification of additive manufacturing for metal parts. There is no guarantee that the patent applications we have submitted will issue or that if issued, they will offer adequate protection under applicable law. Sigma Labs, Inc.
We are currently prosecuting foreign and U.S. patent applications related to our IPQA® technology and rapid qualification of additive manufacturing for metal parts. There is no guarantee, however, that the patent applications will result in issued patents or that if issued, any patents will offer adequate protection under applicable law. Sigma Additive Solutions, Inc.
ITEM 1. BUSINESS. The Company: Sigma is a software company that was founded by scientist-engineers composed of physicists and metallurgists then working at Los Alamos National Labs for the entrepreneurial purpose of developing sophisticated metallurgical products.
ITEM 1. BUSINESS. The Company: Sigma Additive Solutions, Inc. (the “Company,” “Sigma,” “Sigma Additive,” “we,” “us” and “our”) is a software company that was founded by scientist-engineers composed of physicists and metallurgists then working at Los Alamos National Labs for the purpose of developing sophisticated metallurgical products.
It is the Company’s intent to continue to build the OEM channel through distribution relationships with other 3D printer OEMs in the future. Competition PrintRite3D® is a third-party, agnostic In-Process Quality Assurance system designed to provide a consistent, standards-based measurement and prediction of quality across a heterogeneous collection of 3D printers.
It is the Company’s intent and focus to expand our OEM and software channels through distribution relationships with existing and additional 3D printer OEMs, hardware, and software relationships in the future. Competition PrintRite3D® is a third-party, agnostic In-Process Quality Assurance system designed to provide a consistent, standards-based measurement and prediction of quality across a heterogeneous collection of 3D printers.
Distribution Methods Sigma Labs employs a multi-channel distribution model for its IPQA products including a direct sales force, value added resellers (“VARs”) and 3D printer Original Equipment Manufacturers (“OEMs”). In 2021, the majority of the Company’s revenue was generated by direct sales in North America and Europe. VARs are currently used in Japan and India.
Distribution Methods Sigma employs a multi-channel distribution model for its IPQA products, including a direct sales force, value added resellers (“VARs”) software and hardware partners, and 3D printer OEMs. In 2022, the majority of the Company’s revenue was generated by direct sales in North America and Europe and through OEM relationships. VARs are currently used in Japan and India.
The DCAA also reviews the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation, and information systems. As of March 23, 2022, we have several active contracts with government agencies.
The DCAA also reviews the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation, and information systems. As of March 29, 2023, we have several active contracts with government agencies, and, funding permitting, we plan to seek to increase government contracting in the future.
Patent Portfolio as of December 31, 2021 Jurisdiction Granted In Process Total US 13 16 29 PCT - 3 3 EP - 4 4 Germany 1 7 8 China 1 4 5 Japan - 2 2 Korea - 1 1 Total 15 37 52 The Company believes that its patented PrintRite3D® technology is a significant barrier to entry to competitors attempting to replicate the Company’s strategy. 6 Title Type Patent No. or Application No.
Patent Portfolio as of December 31, 2022 Jurisdiction Granted In Process Total US 20 17 37 PCT - 2 2 EP - 4 4 Germany 3 9 12 China 4 4 8 Japan 1 4 5 Korea 1 - 1 Total 29 40 69 5 The Company believes that its patented PrintRite3D® technology is a significant barrier to entry to competitors attempting to replicate the Company’s strategy.
We believe that our future success depends, in part, upon our continued ability to attract and retain highly skilled employees and management and technical personnel. Employee engagement is important to us and we focus on continuously enhancing our corporate culture. Compensation and Benefits We strive to provide robust and competitive compensation and benefits to our employees.
We believe that our future success will depend, in part, upon our ability to attract and retain highly skilled employees and management and technical personnel. Employee engagement is important to us, and we strive to continuously enhance our corporate culture and further the growth and development of our employees.
Our principal executive offices are located at 3900 Paseo del Sol, Santa Fe, New Mexico 87507, and our current telephone number at that address is (505) 438-2576. Our website address is www.sigmalabsinc.com.
On September 27, 2010, we changed our name to Sigma Labs, Inc., and on August 9, 2022, we changed our name to Sigma Additive Solutions, Inc. Our principal executive offices are located at 3900 Paseo del Sol, Santa Fe, New Mexico 87507, and our current telephone number at that address is (505) 438-2576. Our website address is www.sigmaadditive.com.
These solutions are useful; however, they fall short of determining root cause, and unlike PrintRite3D, are not capable of instructing the printer, through closed-loop control, to vary certain machine variables such as laser power to avoid creating the defects. 5 Intellectual Property We regard our patents, trademarks, domain names, trade secrets, know-how, and other intellectual property as critical to our success.
Point solutions are useful; however, they fall short of determining root cause, and unlike PrintRite3D, are not capable of instructing the printer, through closed-loop control, to vary certain machine variables such as laser power to avoid creating the defects in the first place.
U.S. government contracts generally are subject to Federal Acquisition Regulations (“FAR”), agency-specific regulations that implement or supplement FAR, such as the DoD’s Defense Federal Acquisition Regulations and other applicable laws and regulations.
Additionally, our sales to U. S. government agencies are driven by pricing based on costs incurred to produce products or perform services. U.S. government contracts generally are subject to Federal Acquisition Regulations (“FAR”), agency-specific regulations that implement or supplement FAR, such as the se Defense Federal Acquisition Regulations and other applicable laws and regulations.
The Company plans to extend its VAR channel outside of North America and Europe. Since 2020, the Company has moved aggressively to establish and extend relationships with 3D printer OEMs and began to generate revenue from this channel.
The Company plans to extend its VAR channel outside of North America and Europe. Since 2020, the Company has moved to establish and extend relationships with 3D printer OEMs, software partners, and integrated hardware partners to expand our footprint and ability to scale our business.
Additive Metal Manufacturing and the role and need for Sigma’s technology: The use of 3D printing technology dates back to the 1980s for polymer applications, but the ability to print functional parts from metal alloys has spurred significant interest and investment into AM over recent years.
This is a major focus in 2023, as management seeks capital for operations, and to provide runway to future options, and to take Sigma to the next phase of our business. 3 Additive Metal Manufacturing and the role and need for Sigma’s technology: The use of 3D printing technology dates to the 1980s for polymer applications, but the ability to print functional parts from metal alloys has spurred significant interest and investment in AM in recent years.
Over the past year or so, new competitors have entered the market with monitoring technology that follows Sigma’s lead as a 3rd party agnostic system capable of working across 3D printer machine types. These systems use camera-based technology and machine learning to identify gross defects during the printing process.
Therefore, we believe that the best way to produce parts with a consistent level of quality is with a third-party, agnostic, standards based IPQA system, such as PrintRite3D®. Over the past year or so, new competitors have entered the market with monitoring technology that follows Sigma’s lead as a third-party agnostic system capable of working across 3D printer machine types.
Sources and Availability of Parts and Materials We have important relationships with several suppliers for critical components of our PrintRite3D® systems, in particular optics and data acquisition components, and development of our user interface. To-date, we have not experienced shortages of components, however, in some cases COVID-19 has resulted in increased lead times and cost for certain parts.
To-date, we have not experienced shortages of components; however, in some cases COVID-19 has resulted in increased lead times and cost for certain parts. We manage the risk of component shortages by sourcing backup suppliers, and in the case of our user interface, hiring engineers in-house and contractors to support the ongoing development and maintenance.
Corporate Information We incorporated as Messidor Limited in Nevada on December 23, 1985 and changed our name to Framewaves Inc. in 2001. On September 27, 2010, we changed our name from Framewaves Inc. to Sigma Labs, Inc.
Due to the uncertainty around the duration or outcome of the conflict, we cannot predict its effect on our business. Corporate Information We were incorporated as Messidor Limited in Nevada on December 23, 1985 and changed our name to Framewaves Inc. in 2001.
In response, manufacturers are devising strategies to be able to be more agile, increase their ability to manufacture mission critical parts on demand, with more customization, and closer to where the end part will be needed. 4 PrintRite3D® Technology and Product Family PrintRite3D® is an integrated hardware and software edge computing platform, or in-process quality assurance system that combines inspection, feedback, data collection and critical analysis.
In response, manufacturers are devising strategies to be able to be more agile, increase their ability to manufacture mission critical parts on demand, with more customization, and closer to where the end part will be needed, and we believe quality systems to ensure consistency will play a critical role.
We expect that the percentage of the Company’s revenue coming from OEMs will increase in 2022 and beyond. The Company markets its products through webinars, email and social media campaigns, and participation, both in person and virtually, in industry events and tradeshows. In addition, the Company collaborates with international standards organizations in the establishment of standards for AM.
The Company markets its products through webinars, email and social media campaigns, and participation, both in person and virtually, in industry events and tradeshows.
Finally, many believe that there will be a consolidation of 3D metal manufacturers and the number of vendors will decrease from approximately 50 to a much small number over the next decade.
Finally, many believe that there will be a consolidation of 3D metal manufacturers and the number of vendors will decrease over the next decade from approximately 50 at present. Although standards for monitoring are slowly being set by various international standards organizations, it is highly unlikely that printer OEMs will modify their monitoring systems to work with other OEMs machines.
During fiscal year 2021, we entered into two contracts with government agencies, and we plan to increase this activity in the future. Human Capital As of December 31, 2021, we had 33 full-time employees. We continue to search for additional, qualified personnel, to support our expanding operations in the area of IPQA® for AM.
Human Capital As of December 31, 2022, we had 25 full-time employees. We continue to balance a search for additional, qualified personnel to support our targeted growth in the area of IPQA® for AM, while ensuring that our operations are aligned towards our software focus and corresponding cost structure.
In an effort to keep our employees safe during the COVID-19 pandemic, we have implemented a number of health-related measures including, but not limited to, protocols governing the use of face-masks while on company property, temperature taking protocols, a flexible work-from-home policy, cleaning procedures at our offices, and social-distancing protocols, which measures we will continue to monitor.
We continue to follow guidance from health officials, and while COVID-19 restrictions have been relaxed in the U.S. and Europe, we have maintained a number of health-related measures including, but not limited to, a flexible work-from-home policy.
Competition has been primarily from the printer OEMs who offer their own monitoring system, usually as a separately priced option to its printers. Sigma believes that the future of AM will consist of factories with various generations of printers from various manufacturers.
Additionally, we plan to work with OEMs to reduce costs of hardware, grow and expand their quality monitoring as a standard machine option, and provide a standard language for quality. We believe that the future of AM will consist of factories with various generations of printers from various manufacturers.
We manage the risk of component shortages by sourcing backup suppliers, and in the case of our user interface, hiring engineers in-house to support the ongoing development and maintenance. Dependence on a Few Major Customers and Partners The Company has established distribution agreements with two international 3D printer OEMs.
Dependence on a Few Major Customers and Partners The Company has established agreements with several international 3D printer OEMs, software, and integrated hardware companies. The Company supports the OEM, software, and hardware relationships with joint marketing programs, field sales and technical support personnel to assist in the sale of its technology.
The Company’s website and the information contained therein, or connected thereto, are not and are not intended to be incorporated into this report. Recent Developments On February 17, 2022, we announced that Jacob Brunsberg was appointed as President and Chief Operating Officer of the Company . In this position, Mr.
The Company’s website and the information contained therein, or connected thereto, are not and are not intended to be incorporated into this Report. 7 Recent Developments On March 20, 2023, we announced the expansion of our collaboration with Materialise, a global leader in 3D printing software and service solutions, to provide additive manufacturing (AM) users automated quality control by integrating the PrintRite3D® quality assurance solution into the new software solution Materialise Process Control.
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However, the worldwide COVID-19 pandemic caused a reduction, and in some cases a freeze, in capital spending within the Company’s targeted industries and had what the Company believes to be a short-term negative impact on the Company’s expected timing of generating meaningful revenue.
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In 2022, we shifted our business model from selling perpetual licenses of our combined hardware and software solution to subscription-based licenses and began the development of a suite of software-only product offerings, which we believe will transform our business by providing a scalable, cost-effective solution to our customers that can be more broadly connected to OEM’s, hardware, and software partners.
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The revenue generated by the OEMs in 2021 did not meet the Company’s projections due to several reasons, including but not limited to: (1) the ramp up time for the OEM’s sales force, (2) the ongoing impact of COVID on our European based OEM partners, and (3) the lack of OEM sales into select vertical markets (e.g., aerospace and space exploration) that require that parts conform to specific quality standards.
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With the change to our business model, and the desire to connect more fully to the full digital quality landscape, the business began to explore potential strategic investments and mergers and acquisitions.
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We expected each to contribute a significant percentage of our 2021 revenue, however due to the previously discussed reasons, revenue in the first year of the relationship did not meet either company’s expectations. The Company supports the OEMs with joint marketing programs, field sales and technical support personnel to assist in the sale of its technology.
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Additionally, we believe that in-process data will play an important role in connecting the full digital quality landscape from raw materials to final part. PrintRite3D® Technology and Product Family The current version of PrintRite3D® is an integrated hardware and software edge computing platform, or in-process quality assurance system, that combines inspection, feedback, data collection and critical analysis.
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Although standards for monitoring are slowly being set by various international standards organizations, it is highly unlikely that printer OEMs will modify their monitoring systems to work with other OEMs machines. Therefore, we believe that the only way to produce parts with a consistent level of quality is with a third-party, agnostic, standards based IPQA system, such as PrintRite3D®.
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In 2022, we began the development of a new suite of software-only products, which we believe will allow us to scale into production across enterprises with large installations of production printers. These machine-health, process health, and part-health modules will be built into the PrintRite3D suite.
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Additionally, with respect to our work with government agencies, our sales are driven by pricing based on costs incurred to produce products or perform services under contracts with the U.S. government.
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These products will combine streaming health data from major OEM’s and off-axis camera data, and thermal on-access melt pool technology to provide a centralized home for in-process quality solutions and reporting that can be connected to the broader digital quality ecosystem.
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Brunsberg will have responsibility for product direction, strategic relationships, sales, marketing, and engineering. As President and Chief Operating Officer, he will report to Mark K. Ruport, Sigma’s Chief Executive Officer. Mr.
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We believe the connected and open data we are creating will allow users to simplify their quality operations, identify gross defects, utilize machine-learning and artificial intelligence platforms, and significantly improve production quality while lowering the cost of development.
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Brunsberg will oversee several strategic initiatives designed to accelerate the growth and performance of the company, including the transition to a software only offering, initiating and implementing a comprehensive OEM integration program, building strategic partnerships, and implementing a new subscription-based pricing model as an option to our existing perpetual pricing model.
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In addition, the Company collaborates with international standards organizations in the establishment of standards for AM. 4 Sources and Availability of Parts and Materials We have important relationships with several suppliers for critical components of our PrintRite3D® systems, in particular optics and data acquisition components, and development of our user interface.
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Each of these key initiatives is integral to lowering the additive manufacturing (“AM”) industry’s technology adoption barriers and easing entry and expansion for manufacturers and OEM partners.
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Competition historically has been viewed as printer OEMs with their own monitoring system, usually as a separately priced option to its printers. However, with the move to software-only solutions and API connection options to machines, Sigma believes it can provide machine agnostic analytics and reporting software tools that help standardize digital quality in the industry.
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On January 26, 2022, we announced that together with Materialise, a leading provider of additive manufacturing (AM) software and services, we had developed a breakthrough technology to enhance the scalability of metal AM applications. The new platform combines the Materialise Control Platform and Sigma Labs’ PrintRite3D® sensor technology to allow users to identify and correct metal build issues in real-time.
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However, most of these solutions are point solutions addressing one specific item of quality. These have value, but do not provide the end user the full quality picture for regulators or customer needs. Sigma has expanded its quality footprint to be a home for holistic in-process quality data.
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With added control over their unique processes, manufacturers can optimize metal AM processes for consistency and repeatability, key factors in scaling AM operations for serial production. On January 25, 2022, we announced that our PrintRite3D® in-process quality assurance solution had been purchased by Auburn University, based in Auburn, Alabama.
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We see a path to integrate with other point solutions if customers find interest in them, while still ensuring holistic quality for our end customers.
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The PrintRite3D solution will be installed on the university’s EOS M290 machine and is the start of an academic and industrial collaboration between the university and Sigma Labs, and we will deploy the system under a commercial lease/purchase program that provides more flexible and acceptable terms for academic institutions and early adopters.
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Intellectual Property We regard our patents, trademarks, domain names, trade secrets, know-how, and other intellectual property as critical to our success.
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PrintRite3D will be implemented to support several projects at the Auburn University National Center for Additive Manufacturing Excellence (NCAME) to utilize 3D printed (additively manufactured) components to improve commercial air and space travel. As reported by the Auburn University Samuel Ginn College of Engineering, NCAME is funded by a $3 million grant from the Federal Aviation Administration (FAA).
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All employees are responsible for upholding the Sigma Code of Ethics and Business Conduct, which is important in delivering on our strategy. We maintain a compliance hotline for the confidential reporting of any suspected policy violations or unethical business conduct on the part of our businesses, employees, officers, directors, suppliers, or customers.
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The objective is to address issues related to the variability in additive manufacturing machines, as well as generate an understanding of how microscopic anomalies in the 3D-printed metals affect overall fatigue and fracture properties.
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There continue to be isolated COVID-19 outbreaks in certain regions of the world, but these outbreaks have not had a significant impact on our operations. The extent to which the COVID-19 epidemic may impact our business, operations, financial condition, liquidity and results of operations in 2023 and beyond remains uncertain and unpredictable.
Removed
On January 20, 2022, we announced that our PrintRite3D® in-process quality assurance solution will be certified to work with Aconity3D’s line of 3D metal printers and available as a standard option via Aconity3D’s online configurator. Aconity3D will designate their printers as ‘PrintRite3D Ready™’.
Added
Russia - Ukraine Conflict In February 2022, Russian forces invaded Ukraine. In response, the U.S., the European Union (“EU”), and several other countries imposed economic and trade sanctions and other restrictions (collectively, “global sanctions”) targeting Russia and Belarus. Russia then imposed retaliatory economic measures against the U.S., the EU, and several other countries.
Removed
As an original equipment manufacturer (OEM) Aconity3D will sell, install and support PrintRite3D as an integrated solution to its customers. Aconity3D is a machine manufacturer for laser-based 3D printing of metals, with a focus on the buildup of customer specific systems for Laser Powder Bed Fusion (LPBF), in which metal particles are fused layer upon layer by a laser.
Added
We have no sales to Russia or Ukraine, nor do we have any assets, employees or third-party contractors in Russia or Ukraine. The duration of the conflict and further sanctions could have further impact on the global economy, financial markets and inflation.
Removed
The Aconity System Framework allows full customization of each machine for customers’ specific applications. Aconity3D’s customers and partners include leading industrial, aviation and automotive companies, and world-renowned institutes and universities at the forefront of the additive manufacturing (AM) landscape. 8
Added
Combining multiple complementary data sources and analytic methods allows businesses to make faster, data-driven decisions, improving operational efficiency and driving revenue growth. Materialise Process Control allows manufacturers to analyze and correlate layer data from the 3D printing process.
Added
Sigma and Materialise collaborated to integrate PrintRite3D® into Process Control and to make it available in CO-AM, Materialise’s end-to-end software platform for 3D printing. Sigma’s PrintRite3D® suite provides in-process data, including thermal data from the melt pool, yielding layer data that can enable users to find the root cause of defects faster.
Added
On March 6, 2023, we announced that we will partner with DyeMansion, the global leader in connected and integrated post-processing solutions for industrial polymer 3D-printing, to add an integrated hardware/software solution option that offers extra quality assurance for DyeMansion’s post-processing solutions: DM60, Powershot Performance and Powerfuse S.
Added
DyeMansion’s comprehensive solution, the Print-to-Product workflow and all components are applicable for Industry 4.0 and can be integrated seamlessly into various production processes. The real-time monitoring and data analytics from Sigma’s Machine Health module will complement DyeMansion’s systems by offering reduced cost per part, unmatched quality, and high sustainability.
Added
On March 1, 2023, we announced that we had retained Lake Street Capital Markets as the Company’s financial advisor in connection with our consideration of a range of strategic alternatives designed to enhance shareholder value, including a possible strategic investment, acquisition, merger, business combination, or similar transaction.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
47 edited+20 added−5 removed48 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
47 edited+20 added−5 removed48 unchanged
2022 filing
2023 filing
Biggest changeThese provisions include the following: ● a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; ● no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; ● the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; ● the ability of our board of directors to authorize the issuance of additional shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could adversely affect the rights of our common stockholders or be used to deter a possible acquisition of our company; ● the ability of our board of directors to alter our bylaws without obtaining stockholder approval; ● the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal the provisions of our articles of incorporation and bylaws regarding the election and removal of directors; ● a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; ● the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer, the president (in the absence of a chief executive officer) or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and ● advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us. ● the ability of our directors to issue one or more series of preferred stock with dividend, liquidation, conversion, voting or other rights which would dilute the interest of or impair the voting power of our common stockholders.
Biggest changeThese provisions include the following: ● a classified Board of Directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our Board of Directors; ● no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; ● the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors; ● the ability of our Board of Directors to alter our bylaws without obtaining stockholder approval; ● the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal the provisions of our articles of incorporation and bylaws regarding the election and removal of directors; ● a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; ● the requirement that a special meeting of stockholders may be called only by the chairman of the Board of Directors, the chief executive officer, the president (in the absence of a chief executive officer) or the Board of Directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and ● advance notice procedures that stockholders must comply with in order to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
These factors include those discussed previously in this “Risk Factors” section and others, such as: ● delays or failures in the commercialization of our current or future products and services; ● quarterly variations in our results of operations or those of our competitors; ● changes in our earnings estimates or recommendations by securities analysts or adverse publicity about us or our products or services; ● announcements by us or our competitors of new products and services, significant contracts, commercial relationships, acquisitions or capital commitments; ● adverse developments with respect to our intellectual property rights; ● commencement of litigation involving us or our competitors; ● any major changes in our board of directors or management; ● market conditions in our industry; and ● general economic conditions in the United States and abroad.
These factors include those discussed previously in this “Risk Factors” section and others, such as: ● delays or failures in the commercialization of our current or future products and services; ● quarterly variations in our results of operations or those of our competitors; 12 ● changes in our earnings estimates or recommendations by securities analysts or adverse publicity about us or our products or services; ● announcements by us or our competitors of new products and services, significant contracts, commercial relationships, acquisitions or capital commitments; ● adverse developments with respect to our intellectual property rights; ● commencement of litigation involving us or our competitors; ● any major changes in our Board of Directors or management; ● market conditions in our industry; and ● general economic conditions in the United States and abroad.
A number of factors may cause our revenues, cash flow and operating results to vary from quarter to quarter, including the following: ● the progression of contracts; ● the rate of customer adoption of our new subscription pricing program; 11 ● the commencement, completion or termination of contracts during any particular quarter; ● the schedules of government agencies and large multinational corporations for awarding contracts; ● the failure of our customers to fulfill their obligations under contracts with us; and ● the term of awarded contracts and potential acquisitions.
A number of factors may cause our revenues, cash flow and operating results to vary from quarter to quarter, including the following: ● the progression of contracts; ● the rate of customer adoption of our new subscription pricing program; ● the commencement, completion or termination of contracts during any particular quarter; ● the schedules of government agencies and large multinational corporations for awarding contracts; ● the failure of our customers to fulfill their obligations under contracts with us; and ● the term of awarded contracts and potential acquisitions.
If revenue shortfalls occur and are not offset by corresponding reductions in expenses, our business could be adversely affected. We cannot anticipate if, when or to what extent a client might terminate its contracts with us. 10 We may not be able to effectively control and manage our growth, which would negatively impact our operations.
If revenue shortfalls occur and are not offset by corresponding reductions in expenses, our business could be adversely affected. We cannot anticipate if, when or to what extent a client might terminate its contracts with us. We may not be able to effectively control and manage our growth, which would negatively impact our operations.
We also could be subject to damages claims if we are found to be at fault in connection with a decline in our market price of our securities. 14 Historically, there has been a limited trading market in our common stock, and you may therefore have difficulty selling your securities at a price that you determine is satisfactory.
We also could be subject to damages claims if we are found to be at fault in connection with a decline in our market price of our securities. Historically, there has been a limited trading market in our common stock, and you may therefore have difficulty selling your securities at a price that you determine is satisfactory.
Claims or losses in excess of any insurance coverage we may obtain, or the lack of insurance coverage, could put us at risk of loss for any uninsured loss, which would have a material adverse effect on our business and financial condition. We are dependent on key personnel, and the loss of any of these individuals could harm our business.
Claims or losses in excess of any insurance coverage we may obtain, or the lack of insurance coverage, could put us at risk of uninsured loss, which would have a material adverse effect on our business and financial condition. We are dependent on key personnel, and the loss of any of these individuals could harm our business.
Any or all of our statements in this annual report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. The factors mentioned in the discussion below will be important in determining future results.
Any or all of our statements in this Report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. The factors mentioned in the discussion below will be important in determining future results.
As a result, it may be difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. If we fail to maintain effective internal control over financial reporting, the market price of our securities may be adversely affected.
As a result, it may be difficult for us to attract and retain qualified individuals to serve on our Board of Directors or as executive officers. 14 If we fail to maintain effective internal control over financial reporting, the market price of our securities may be adversely affected.
We have operated our current line of business for approximately eleven years, and we expect to grow in the near future as our business develops and becomes further established. If our business grows as we anticipate, it will be necessary for us to manage our expansion in an orderly fashion.
We have operated our current line of business for approximately eleven years, and we expect to grow in the future as our business develops and becomes further established. If our business grows as we anticipate, it will be necessary for us to manage our expansion in an orderly fashion.
These applicable rules and regulations also make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
These rules and regulations may also make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
These provisions could inhibit or prevent possible transactions that some stockholders may consider attractive. We could issue one or more additional series of shares of preferred stock with the effect of diluting existing stockholders and impairing their voting and other rights.
These provisions could inhibit or prevent possible transactions that some stockholders may consider attractive. 15 We could issue one or more additional series of shares of preferred stock with the effect of diluting existing stockholders and impairing their voting and other rights.
Future sales of a large number of our shares or upon exercise of our outstanding warrants and stock options, or the perception that a large number of shares may be sold, could have a material adverse effect on the trading price of our common stock.
Future sales of a large number of our shares or shares issuable upon exercise of our outstanding warrants and stock options, or the perception that a large number of shares may be sold, could have a material adverse effect on the trading price of our common stock.
In addition to the possible negative effect on the market price of our common shares resulting from the public sale or perceived sale of common shares issuable upon conversion or exercise of these securities, the Certificate of Designations for the Series D Preferred Stock provides that upon occurrence of certain triggering events described in the Certificate, including but not limited to, payment defaults, breaches of the transaction documents pertaining to the Series D Preferred Stock and failure to maintain listing on the NASDAQ Capital Market, the Series D Preferred Shares would become subject to redemption, at the option of the holder, at a 125% premium to the underlying value of the Series D Shares being redeemed. 17 ITEM 1B.
In addition to the possible negative effect on the market price of our common shares resulting from the public sale or perceived sale of common shares issuable upon conversion or exercise of these securities, the Certificate of Designations for the Series D Preferred Stock provides that upon occurrence of certain triggering events described in the Certificate, including but not limited to, payment defaults, breaches of the transaction documents pertaining to the Series D Preferred Stock and failure to maintain listing on The Nasdaq Capital Market, the Series D Preferred Shares would become subject to redemption, at the option of the holder, at a 125% premium to the underlying value of the Series D Shares being redeemed.
In addition to general economic conditions, market fluctuations and international risks, significant increases in operating, development and implementation costs could adversely affect us due to numerous factors, many of which are beyond our control. 13 A cyber incident could result in information theft, data corruption, operational disruption and/or financial loss.
In addition to general economic conditions, market fluctuations and international risks, significant increases in operating, development and implementation costs could adversely affect us due to numerous factors, many of which are beyond our control. 11 A cyber incident could result in information theft, data corruption, operational disruption and/or financial loss.
Many of our activities involve developing products or processes that are based upon new, rapidly evolving technologies. The ability to commercialize or further develop these technologies could fail for a variety of reasons, both within and outside of our control. 12 We may be unable to protect our intellectual property rights.
Many of our activities involve developing products or processes that are based upon new, rapidly evolving technologies. The ability to commercialize or further develop these technologies could fail for a variety of reasons, both within and outside of our control. 10 We may be unable to protect our intellectual property rights.
Although we do have liability insurance, the policy limits may not be adequate to provide protection against all such potential liabilities. Some of our clients may terminate our contracts prior to completion, which could result in revenue shortfalls and reduce profitability or cause losses on contracts.
Although we maintain liability insurance, the policy limits may not be adequate to provide protection against all such potential liabilities. Some of our clients may terminate our contracts prior to completion, which could result in revenue shortfalls and reduce profitability or cause losses on contracts.
Consequently, actual future results may vary materially from those anticipated in this annual report or our other public statements. The occurrence of any of the events or developments described below could harm our financial condition, results of operations, business and prospects. In such an event, the market price of our common stock could decline.
Consequently, actual future results may vary materially from those anticipated in this Report or our other public statements. The occurrence of any of the events or developments described below could harm our financial condition, results of operations, business and prospects. In such an event, the market price of our securities could decline.
As of December 31, 2021, 465 shares of our preferred stock are outstanding, consisting of 132 shares of Series D Preferred Stock and 333 shares of Series E Preferred Stock.
As of December 31, 2022, 465 shares of our preferred stock are outstanding, consisting of 132 shares of Series D Preferred Stock and 333 shares of Series E Preferred Stock.
We may be unable to manage businesses that we have acquired or to integrate them successfully without incurring substantial expenses, delays or other problems that could negatively impact our results of operations.
We may be unable to manage businesses that we acquire or to integrate them successfully without incurring substantial expenses, delays or other problems that could negatively impact our results of operations.
We will incur significant costs to ensure compliance with U.S. and Nasdaq reporting and corporate governance requirements. We incur significant costs associated with our public company reporting requirements and with applicable U.S. and Nasdaq corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the SEC and Nasdaq.
We will incur significant costs to ensure compliance with U.S. and Nasdaq reporting and corporate governance requirements. We incur significant costs associated with compliance with our SEC public company reporting requirements and with applicable U.S. and Nasdaq corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002.
If we are not effective in addressing these risks, we will not be able to operate profitably in the future, and we may not have adequate working capital to meet our obligations as they become due. Our business may be adversely affected by a global economic downturn.
If we are not effective in addressing these risks, we will not be able to achieve profitability in the future, and we may not have adequate working capital to meet our obligations as they become due. 8 Our business may be adversely affected by a global economic downturn.
The failure by management to apply funds effectively could result in financial losses that could have a material and adverse effect on our business and cause the market price of our securities to decline.
The failure by management to apply funds effectively could result in financial losses that could have a material and adverse effect on our business and cause the market price of our securities to decline. Our outstanding warrants may result in further dilution to our stockholders.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. Our bylaws contain provisions indemnifying our officers and directors against all costs, charges, and expenses incurred by them.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. Our bylaws contain provisions for indemnifying our officers and directors.
Since we do not intend to pay dividends, your ability to receive a return on your investment will depend on any future appreciation in the market price of our securities.
Since we do not intend to pay dividends, your ability to receive a return on your investment will depend on any future appreciation in the market price of our securities. There is no assurance that our securities will appreciate in price.
Between January 1, 2021 and December 31, 2021, the trading price of our common stock has ranged from a low of $1.77 to a high of $7.64 and could be subject to wide fluctuations in the future in response to various factors, some of which are beyond our control.
Between January 1, 2022 and December 31, 2022, the trading price of our common stock has ranged from a low of $0.40 to a high of $2.42 and could be subject to wide fluctuations in the future in response to various factors, some of which are beyond our control.
There is no assurance that any revenues we generate will be sufficient for us to become profitable or to maintain profitability. Our revenues for the years ended December 31, 2021 and December 31, 2020 were $1,651,765 and $807,488, respectively, and our operating expenses for those periods were $9,571,185 and $5,914,299, respectively.
There is no assurance that any revenues we generate will be sufficient for us to become profitable or to maintain profitability. Our revenues for the years ended December 31, 2022 and December 31, 2021 were $630,428 and $1,651,765, respectively, and our operating expenses for those periods were $9,029,502 and $9,571,185, respectively.
There is no assurance that our securities will appreciate in price. 15 If securities or industry analysts do not publish research or reports about us, or if they issue adverse or misleading opinions regarding us or our securities, the market price of our securities and their trading volume could decline.
If securities or industry analysts do not publish research or reports about us, or if they issue adverse or misleading opinions regarding us or our securities, the market price of our securities and their trading volume could decline.
We have broad discretion in the use of the net proceeds of our securities offerings and may not use them effectively. We intend to use our cash for the development of our products and services.
We have broad discretion in the use of the net proceeds of our securities offerings and may not use them effectively. We intend to use our cash for the development of our products and services, and to pursue a possible strategic investment or other transaction.
We have incurred losses in every reporting period since we commenced business operations in 2010 and expect to continue to incur significant losses for the foreseeable future. Our net loss applicable to common stockholders for the years ended December 31, 2021 and 2020 were $7,488,172 and $7,009,414, respectively. As of December 31, 2021, our accumulated deficit was $40,593,180.
We have incurred losses in every reporting period since we commenced business operations in 2010 and expect to continue to incur significant losses for the foreseeable future. Our net loss applicable to common stockholders for the years ended December 31, 2022 and 2021 was $8,749,304 and $7,488,172, respectively. As of December 31, 2022, our accumulated deficit was $49,342,484.
The success of our business will require that we attract, develop, motivate and retain: ● experienced and innovative executive officers; ● senior managers who have successfully managed or designed programs in the public sector; and ● information technology professionals who have designed or implemented complex information technology projects.
The success of our business will require that we attract, develop, motivate and retain: ● experienced and innovative executive officers; ● senior managers who have successfully managed or designed programs in the public sector; and ● information technology professionals who have designed or implemented complex information technology projects. 9 Innovative, experienced and technically proficient individuals are in great demand and are likely to remain a limited resource.
Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting (including those weaknesses identified in our periodic reports), or disclosure of management’s assessment of our internal control over financial reporting may have an adverse impact on the price of our securities. 16 Provisions in our articles of incorporation and bylaws could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.
Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting (including those weaknesses identified in our periodic reports), or disclosure of management’s assessment of our internal control over financial reporting may have an adverse impact on the price of our securities.
Our ability to implement a successful business plan remains unproven, and there is no assurance that we will ever generate sufficient revenues to sustain our business.
Our operating history makes evaluation of our business difficult. We are continuing to develop our technologies and to implement our business plan. Our ability to implement a successful business plan remains unproven, and there is no assurance that we will ever generate sufficient revenues to sustain our business.
Our articles of incorporation and bylaws contain provisions that could delay or prevent changes in control or changes in our management without the consent of our board of directors.
Provisions in our articles of incorporation and bylaws could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management. Our articles of incorporation and bylaws contain provisions that could delay or prevent changes in control or changes in our management without the consent of our Board of Directors.
To the extent that funds are not available to us, we may be required to delay, limit or terminate our business operations and may lose our NASDAQ listing. Our operating history makes evaluation of our business difficult. We are continuing to develop our technologies and to implement our business plan.
To the extent that funds are not available to us, we may be required to delay, limit, or terminate our business operations and may lose our NASDAQ listing.
Our operating history, together with the other risks discussed in this “Risk Factors” section, may make it difficult for you to evaluate our business in connection with making a decision about whether to invest in our securities. 9 We face the risks normally associated with a new business.
Our operating history, together with the other risks discussed in this “Risk Factors” section, may make it difficult for prospective investors and others to evaluate our business. We face the risks normally associated with a new business.
You may experience additional dilution as a result of future equity offerings. In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock.
In order to raise additional capital, we may sell additional shares of our common stock or other securities convertible into or exchangeable for our common stock.
Our inability to hire sufficient personnel on a timely basis or the loss of significant numbers of executive officers and senior managers could adversely affect our business. We may be dependent on cash flow and payments from customers in order to meet our expense obligations.
We may be unable to continue to attract and retain desirable executive officers, senior managers, and technology professionals. Our inability to hire sufficient personnel on a timely basis or the loss of significant numbers of executive officers and senior managers could adversely affect our business.
These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. As of December 31, 2021, we had 10,498,802 outstanding shares of common stock.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall. As of December 31, 2022, we had 10,498,802 outstanding shares of common stock.
We face all of the risks inherent in a new business, including the expenses, difficulties, complications and delays frequently encountered in connection with conducting new operations and efforts to develop and commercialize technologies. These uncertainties include developing our technologies and our brand name, raising capital to meet our working capital requirements and developing a customer base, among others.
We face all of the risks inherent in a business based upon emerging technologies, including the expenses, difficulties, complications and delays frequently encountered in connection with conducting new operations and efforts to develop and commercialize technologies.
Such financing, if in the form of equity, may be highly dilutive to our existing stockholders and may otherwise include onerous terms. If in the form of debt, such financing may include covenants and repayment obligations which may be difficult to meet and that could adversely affect our business operations.
If in the form of debt, such financing may include covenants and repayment obligations which may be difficult to meet and that could adversely affect our business operations. We have no current understanding or arrangement to obtain any additional financing.
Additionally, the coronavirus may result in disruption of financial markets, which may reduce our ability to access capital either at all or on favorable terms. Risks Related to Our Securities The price of our securities is subject to volatility related or unrelated to our operations, which could result in substantial losses for our stockholders.
Risks Related to Our Securities The price of our securities is subject to volatility related or unrelated to our operations, which could result in substantial losses for our stockholders.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may have similar adverse effects on us. Risks Related to Our Business We are not currently profitable and may never become profitable.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may have similar adverse effects on us. Risks Related to Our Business We will require additional financing to continue our operations, and there is substantial doubt regarding our ability to continue as a going concern.
Our results of operations may be negatively impacted by the COVID-19 pandemic. The spread of the coronavirus, which has caused a broad impact globally, including restrictions on travel and quarantine policies put in place by businesses and governments, may have a material economic effect on our business.
The potential reemergence of the coronavirus, which has caused a broad impact globally, including restrictions on travel and quarantine policies put in place by businesses and governments, may have a material economic effect on our business. Additionally, the coronavirus may result in disruption of financial markets, which may reduce our ability to access capital on favorable terms or at all.
Although to-date we have not experienced any losses relating to cyber-attacks, there is no assurance that we will not suffer such losses in the future. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. Our results of operations may be negatively impacted by the COVID-19 epidemic.
If our securities are de-listed from The Nasdaq Capital Market, our stockholders could incur material adverse consequences such as reduced liquidity for their securities and reduced market prices for their securities. Following such de-listing, we could encounter increased difficulty in issuing additional securities at an attractive price, or at all, in order to fund our operations.
Following such de-listing, we could encounter increased difficulty in issuing additional securities at an attractive price, or at all, in order to fund our operations. You may experience additional dilution as a result of future equity offerings.
If we fail to satisfy a Nasdaq requirement for continued listing, Nasdaq could provide notice that our common stock will become subject to delisting. In such event, Nasdaq rules would permit us to appeal the decision to reject our proposed compliance plan or any delisting determination to a Nasdaq Hearings Panel.
In such event, Nasdaq rules would permit us to appeal the decision to reject our proposed compliance plan or any delisting determination to a Nasdaq Hearings Panel. If our securities are de-listed from The Nasdaq Capital Market, our stockholders could incur material adverse consequences such as reduced liquidity for their securities and reduced market prices for their securities.
We will need to raise additional financings to fund our operations, maintain compliance with the NASDAQ listing requirements and implement our business plan. There is no assurance as to the amount and availability of any required future financing or the terms thereof.
As of December 31, 2022, we had cash of $2,845,931. Our existing cash on hand and anticipated revenues are sufficient to fund our remaining anticipated operating costs and capital expenditure requirements only through May 2023. We will need to raise additional financings to fund our operations, maintain compliance with the NASDAQ listing requirements and implement our business plan.
Removed
We will require additional financing to continue our operations, and there is no assurance that we will be able to obtain such financing on acceptable terms, or at all. As of December 31, 2021, we had cash of $11,447,047.
Added
There is no assurance as to the amount and availability of any required future financing or the terms thereof. Such financing, if in the form of equity, may be highly dilutive to our existing stockholders and may otherwise include onerous terms.
Removed
Innovative, experienced and technically proficient individuals are in great demand and are likely to remain a limited resource. We may be unable to continue to attract and retain desirable executive officers, senior managers, and technology professionals.
Added
In light of the foregoing, there is substantial doubt our ability to continue as a going concern, and the report of our registered independent public accounting firm on our financial statements as of and for the year ended December 31, 2022 contains a going concern qualification. We are not profitable and may never become profitable.
Removed
We cannot assure you that we will be able to continue to satisfy the continued listing requirements of The Nasdaq Capital Market.
Added
These uncertainties include developing our technologies and our brand name, raising capital to meet our working capital requirements, and expanding our customer base, among others.
Removed
For example, there is no assurance that our common stock will continue to have a bid price of at least $1.00 per share, which is the minimum bid price under such continued listing requirements, or that we will be able to satisfy other quantitative continued listing requirements, including the minimum stockholders’ equity requirement of at least $2,500,000 for continued listing on The Nasdaq Capital Market, which we have previously failed to satisfy.
Added
We may be dependent on cash flow and payments from customers in order to meet our expense obligations.
Removed
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall. Sales of a substantial number of shares of our common stock in the public market could occur at any time.
Added
The consequences of such loss, possible misuse of our proprietary and confidential information, or operational disruptions could include, among other things, unfavorable publicity, damage to our reputation, difficulty marketing our products, customer allegations of breach-of-contract, claims and litigation by affected parties, investigations by and other proceedings involving governmental authorities and possible financial liabilities for damages, any of which could materially adversely affect our business, financial condition, reputation and relationships with customers and partners.
Added
We also rely on a number of third-party service providers to host, store or otherwise process information for us, or to provide other facilities or infrastructure that we make use of, including “cloud-based” providers of corporate infrastructure services relating to, among other things, human resources, electronic communication services and some financial functions, and we are therefore dependent on the security systems of these providers.
Added
Any security breaches or incidents or other unauthorized access to, or disruptions of, our service-providers’ systems or viruses, loggers, ransomware or other malfeasant code in their data or software, or unauthorized access to or acquisition of any data they process or otherwise maintain for us could expose us to information loss, corruption and unavailability, operational disruptions, and misappropriation of confidential information, and could have similar consequences to us as any incidents affecting our own systems or the data we process or maintain.
Added
We and our third parties face these threats from a variety of sources, including attacks from hackers, phishing and other forms of social engineering, and human error or employee or contractor malfeasance.
Added
Because the techniques used to obtain unauthorized access to or sabotage security systems change frequently and are often not recognized until after an attack, we and our third-party service providers may be unable to anticipate the techniques or implement adequate preventative measures, thereby exposing us to material adverse effects on our business, financial condition, results of operations and growth prospects.
Added
A security breach or other security incident impacting us or our third-party service providers could require a substantial level of financial resources to rectify and otherwise respond to, may be difficult to identify or address in a timely manner, and could result in claims, investigations, and inquires by private parties or governmental entities that may divert management’s attention and require the expenditure of significant time and resources, and which may cause us to incur substantial fines, penalties, or other liability and related legal and other costs.
Added
Any actual or perceived security breach or other security incident may also harm our reputation and market position. Any of the foregoing matters could harm our operating results and financial condition. Although to-date we have not experienced any losses relating to cyber-attacks, there is no assurance that we will not suffer such losses in the future.
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On October 14, 2022, Nasdaq notified us that the closing bid price for our common stock had been below $1.00 per share for 30 consecutive business days, and that the Company therefore is not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2).
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The notice indicates that the Company has 180 calendar days, or until April 12, 2023, to regain compliance with this requirement. The Company can regain compliance with the $1.00 minimum bid price requirement if the closing bid price of the Company’s common stock is at least $1.00 for a minimum of ten consecutive business days during the 180-day compliance period.
Added
If the Company does not regain compliance during the initial compliance period, the Company may be eligible for additional time to regain compliance.
Added
To qualify, the Company will be required to meet the continued listing requirement for market value of its publicly held shares and all other Nasdaq initial listing standards, except the bid price requirement, and will need to provide written notice to Nasdaq of the Company’s intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
Added
If the Company meets these requirements, we expect that Nasdaq will grant the Company the additional 180 calendar days to regain compliance with the minimum bid price requirement. 13 If we fail to satisfy a Nasdaq requirement for continued listing, Nasdaq could provide notice that our common stock will become subject to delisting.
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Certain of our outstanding warrants to purchase a total of up to approximately 898,806 shares of our common stock contain so-called full-ratchet anti-dilution adjustments in the event we sell or issue shares of common stock or common stock equivalents at an effective price less than the exercise price of such warrants, subject to certain exceptions.
Added
Of these warrants, warrants with an aggregate exercise price of $956,015 also provide for a ratable increase in the number of shares purchasable upon exercise of the warrants in the event the exercise price per share of the warrants is reduced.
Added
These anti-dilution adjustments resulted in a reduction in the exercise price of such warrants to $0.58 per share and an increase of 1,265,896 shares in the number of underlying warrant shares due to the grant of stock options to our directors and officers in January 2023.
Added
The anti-dilution adjustments of our outstanding warrants would be triggered by future issuances of shares of our common stock at a price per share below the then-exercise price of such warrants, which adjustments would have a further dilutive effect on our stockholders.
Item 2. Properties
Properties — owned and leased real estate
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Item 2. Properties
Properties — owned and leased real estate
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2022 filing
2023 filing
Biggest changeITEM 2. PROPERTIES. We lease approximately 3,700 square feet of space at 3900 Paseo del Sol, Santa Fe, New Mexico 87507, including 1,772 square feet of office space and 1,928 square feet of warehouse / production space for a monthly rent expense of approximately $6,115. The leases expire on July 31, 2022.
Biggest changeITEM 2. PROPERTIES. We lease approximately 3,300 square feet of space at 3900 Paseo del Sol, Santa Fe, New Mexico 87507, including 1,376 square feet of office space and 1,928 square feet of warehouse and production space, for a monthly rent expense of approximately $5,315.
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In addition, we lease one office at a Regus Business Center at One Sun Plaza, Albuquerque, New Mexico 87109 at a monthly rent expense of $1,115. The lease expires on January 31, 2023. We believe that our facilities are suitable for our current needs, but we are evaluating the need for a larger space as we grow.
Added
The leases expire on July 31, 2023, and are cancelable at any time upon 45 days written notice. We believe that our facilities are suitable for our current needs.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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2022 filing
2023 filing
Biggest changeITEM 3. LEGAL PROCEEDINGS. We are not currently a party to any legal proceedings. However, we may become subject to legal proceedings and claims that arise in the ordinary course of our business. ITEM 4. MINE SAFETY DISCLOSURES. Not Applicable. PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS. We are not currently a party to any legal proceedings. However, we may become subject to legal proceedings and claims that arise in the ordinary course of our business. ITEM 4. MINE SAFETY DISCLOSURES. Not Applicable. 16 PART II
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
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Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
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2022 filing
2023 filing
Biggest changeThe Certificate of Designations of our Series D Preferred Stock prohibits us from declaring or paying any cash dividend or distribution on any of its capital stock, other than as required by the Certificate of Designations. 18 Recent Sales of Unregistered Securities In March 2021, the Company issued 1,500 shares of common stock valued at $4.99 per share to an investor relations firm as partial compensation for services previously rendered.
Biggest changeThe Certificate of Designations of our Series D Preferred Stock prohibits us from declaring or paying any cash dividend or distribution on any of our capital stock, other than as required by the Certificate of Designations. ITEM 6. RESERVED
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock trades on The NASDAQ Capital Market under the symbol “SGLB.” Shareholders As of March 23, 2022, there were approximately 568 holders of record of our common stock based on information provided by our transfer agent.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock trades on The NASDAQ Capital Market under the symbol “SASI.” Shareholders As of March 27, 2023, there were approximately 566 holders of record of our common stock based on information provided by our transfer agent.
Any payment of cash dividends on our common stock in the future will be dependent upon the amount of funds legally available, our earnings, if any, our financial condition, our anticipated capital requirements and other factors that the board of directors may think are relevant.
Any payment of cash dividends on our common stock in the future will be dependent upon the amount of funds legally available, our earnings, if any, our financial condition, restrictive covenants under outstanding preferred stock, our anticipated capital requirements, and other factors that our Board of Directors deem relevant.
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The shares were issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption from registration under Section 4(2) of the Securities Act for transactions not involving a public offering.
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Repurchase of Shares During fiscal 2021, we purchased 5,204 shares of our common stock at a price of $3.47 per share, the average of the Company’s opening and closing stock price on the date of purchase, upon the exercise of our right of first refusal in connection with an employee’s exercise of an option to purchase such shares.
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Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number or approximate dollar value of shares that may yet be purchased under the plans or programs August 15 – August 31, 2021 5,204 $ 3.47 - - Total 5,204 $ 3.47 - - ITEM 6.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
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Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
29 edited+70 added−35 removed20 unchanged
2022 filing
2023 filing
Biggest changeTo support the commercialization of our PrintRite3D® technology, we plan to continue funding our development activities and operating expenses by licensing our PrintRite3D® systems and supporting field services, as applicable, and providing PrintRite3D®-enabled engineering consulting services concerning our areas of expertise (materials and manufacturing quality assurance and process control technologies) and through the use of proceeds from sales of our securities and potential exercises of our outstanding warrants.
Biggest changeShould we be able to secure such funding, we plan to seek to continue funding our development activities and operating expenses by licensing our PrintRite3D® systems and supporting field services, as applicable, and providing PrintRite3D®-enabled engineering consulting services concerning our areas of expertise (materials and manufacturing quality assurance and process control technologies) and through the use of proceeds from sales of our securities and potential exercises of our outstanding warrants. 23 Net Cash Used in Operating Activities During fiscal 2022, net cash used in operating activities was $8,212,154, which was the result of a net loss of $8,692,424 before preferred dividends and the use of cash for working capital of $543,280, partially offset by non-cash expenses of $1,023,550 related to depreciation and amortization of $116,167, and stock-based compensation of $907,383.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview Sigma is a leading provider of in-process quality assurance (IPQA®) software to the additive manufacturing industry. Sigma specializes in the development and commercialization of real-time monitoring solutions known as PrintRite3D® for 3D metal advanced manufacturing technologies.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview Sigma is a leading provider of in-process quality assurance (IPQA®) software to the additive manufacturing industry. Sigma specializes in the development and commercialization of real-time monitoring solutions known as PrintRite3D® for 3D metal and polymer advanced manufacturing technologies.
Share based compensation arrangements may include stock options, grants of shares of common stock with and without restrictions, performance-based awards, share appreciation rights and employee share purchase plans. Compensation cost is measured on the date of grant at its fair value. Equity instruments issued to non-employees are recorded on the basis of the grant date fair value of the instruments.
Stock-based compensation arrangements may include stock options, grants of shares of common stock with and without restrictions, performance-based awards, share appreciation rights and employee share purchase plans. Stock-based compensation is measured on the date of grant at its fair value. Equity instruments issued to non-employees are recorded on the basis of the grant date fair value of the instruments.
Stock Based Compensation – We measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services.
Stock-Based Compensation – We measure the compensation costs of stock-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services.
Further, the future impact of the outbreak, including variations of the virus, is highly uncertain so that no assurance can be given that the outbreak will not have a material adverse impact on the future results of the Company.
The future impact of the outbreak, including variations of the virus, is highly uncertain so that no assurance can be given that the outbreak will not have a material adverse impact on the future results of the Company.
In January 2021, the Company closed a public offering of 1,711,783 shares of common stock at $3.00 per share, resulting in net proceeds of approximately $4,532,444 after deducting underwriting discounts and commissions and other offering expenses payable by the Company.
In 2022, we did not raise any funds. In January 2021, the Company closed a public offering of 1,711,783 shares of common stock at $3.00 per share, resulting in net proceeds of approximately $4,532,444 after deducting underwriting discounts and commissions and other offering expenses payable by the Company.
Significant estimates and judgements for determining revenue recognition include: (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 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.
Generally, revenue is recognized 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.
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.
The combination of subscription pricing and the software-only embedded OEM offerings are intended to make our technology more affordable to acquire and easier for OEM’s to bundle, distribute and support in an effort to become the industry standard.
The combination of subscription pricing and the new software-only products that can be embedded into OEM and software partner offerings are intended to make our technology more affordable to acquire and easier to bundle, distribute and support in an effort to become the industry standard.
Recoveries of trade accounts receivable previously written off are recorded as income when received. Inventory Valuation - Inventories consist of raw materials used in the production of customized parts, work-in-process and finished goods components which will be sold to customers. Inventories are valued at the lower of cost or net realizable value, using the first-in, first-out (FIFO) method.
Inventory Valuation - Inventories consist of raw materials used in the production of customized parts, work-in-process and finished goods components which will be sold to customers. Inventories are valued at the lower of cost or net realizable value, using the first-in, first-out (FIFO) method.
The warrants entitle the holders to purchase one share of our common stock at an exercise price equal to $4.32 per share commencing on May 24, 2021 and will expire two years from such date.
The warrants entitle the holders to purchase one share of our common stock at an exercise price equal to $4.32 per share commencing on May 24, 2021 and will expire two years from such date. We will need to raise additional amounts to fund our operations, maintain compliance with the NASDAQ listing requirements and implement our business plan.
However, we do not believe that there are any alternative methods of accounting for our operations that would have a material effect on our financial statements. 19 The critical accounting policies and estimates addressed below reflect our most significant judgements and estimates used in the preparation of our financial statements Revenue Recognition - The Company’s revenue is derived primarily from sales of our software and related hardware suite and from providing engineering services under contracts.
The critical accounting policies and estimates addressed below reflect our most significant judgements and estimates used in the preparation of our financial statements. 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.
In order to expand the number of OEMs distributing our technology, we recently launched a three-tiered OEM program directed to: (1) new OEMs without their own quality assurance or monitoring solution; (2) established OEMs with a quality monitoring offering, but who have customers with multiple printers from multiple OEMs and want a single 3rd party quality and analytics solution with consistent quality metrics across printers, processes and materials; and (3) OEMs building open APIs to integrate components of Sigma’s proprietary technology with their current offerings.
Our customers require specific data for qualification and certification of parts and need a holistic approach to production quality, and further, require a way to simplify quality from 8-12 disparate software licenses and several manual spreadsheets to one user experience that is integrated into their production workflow. 17 In order to expand the number of OEMs distributing our technology, we launched a three-tiered OEM program directed to: (1) new OEMs without their own quality assurance or monitoring solution; (2) established OEMs with a quality monitoring offering, but who have customers with multiple printers from multiple OEMs and want a single third party quality and analytics solution with consistent quality metrics across printers, processes and materials; and (3) OEMs building open application programming interfaces, or APIs, to integrate components of Sigma’s proprietary technology with their current offerings.
The grant date fair value of stock based and other equity instruments is calculated using the Black Scholes valuation model, and requires estimates of several inputs to the model, including risk-free interest rates, dividends, and expected volatility of our stock price. Results of Operations Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020.
The grant date fair value of stock-based compensation and other equity instruments is calculated using the Black Scholes valuation model, and requires estimates of several inputs to the model, including risk-free interest rates, dividends, and expected volatility of our stock price. 20 Results of Operations Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 We generate revenues through hardware and software licensing of our PrintRite3D® technology to customers that seek to improve their manufacturing production processes, and through ongoing annual software upgrades and maintenance fees.
We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with the research, development, and commercialization of our products, we are unable to estimate the exact amount of our working capital requirements.
Because of the numerous risks and uncertainties associated with the research, development, and commercialization of our products, we are unable to estimate the exact amount of our working capital requirements.
Our ability to generate revenues in the future will depend on our ability to further commercialize and increase market presence of our PrintRite3D® technologies, and it will depend on whether key prospective customers continue to move from AM metal prototyping to production. 20 During fiscal 2021, we made a significant investment in both our employees and our infrastructure, adding resources to be in a position to grow our business.
Additionally, we generate revenues from development work utilizing our metal AM equipment and engineering team. Our ability to generate revenues in the future will depend on our ability to further commercialize and increase market presence of our PrintRite3D® technologies, and it will depend on whether key prospective customers continue to move from AM metal prototyping to production.
PrintRite3D detects and classifies defects and anomalies real-time during the manufacturing process, enabling significant cost-savings and production efficiencies. We are dedicated to setting the quality standard for Additive Manufacturing and accelerating the worldwide adoption of 3D metal printing. We work closely with international standards organizations, renowned universities, research organizations, advanced manufacturers, and leading design and simulation software companies.
PrintRite3D detects and classifies defects and anomalies real-time during the manufacturing process, enabling significant cost-savings and production efficiencies. We work closely with international standards organizations, renowned universities, research organizations, advanced manufacturers, OEMs, and leading software companies. PrintRite3D is printer agnostic and works with most of the leading 3D metal printers, as well as a growing base of polymer printers.
We expect that continued enhancements of our IPQA®-enabled PrintRite3D® technology will enable us to further commercialize this technology into the AM metal market in 2022.
While we expect that continued enhancements of our IPQA®-enabled PrintRite3D® technology, together with transitioning to a subscription-based, software-only product offering will enable us to further commercialize this technology into the AM metal market in 2023, we will be unable to do so without additional funding.
Charges for obsolete inventory are based on specific identification of inventory items resulting from regular, on ongoing reviews of our build of materials.
Charges for obsolete inventory are based on specific identification of inventory items resulting from regular, on ongoing reviews of our build of materials. Leases - The Company primarily leases office space from third parties. The Company determines if a contract is a lease at inception.
Such critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 1 to the Financial Statements included in this Annual Report.
Such critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 1 to the Financial Statements included in this Annual Report. However, we do not believe that there are any alternative methods of accounting for our operations that would have a material effect on our financial statements.
If in the form of debt, such financing may include covenants and repayment obligations which may be difficult to meet and that could adversely affect our business operations. There is also significant uncertainty from the affect that the novel coronavirus may have on the availability and type of financing.
If in the form of debt, such financing may include covenants and repayment obligations which may be difficult to meet and that could adversely affect our business and operations. To the extent that funds are not available to us, we may be required to delay, limit, or terminate our business and operations and lose our NASDAQ listing.
Revenue and Cost of Revenue During the fiscal year ended December 31, 2021 (“fiscal 2021”), we generated an aggregate of $1,651,765 in revenues, as compared to an aggregate of $807,488 in revenues generated by us in the fiscal year ended December 31, 2020 (“fiscal 2020”).
Revenue and Cost of Revenue During the fiscal year ended December 31, 2022 (“fiscal 2022”), we generated $630,428 in revenues, as compared to $1,651,765 in the fiscal year ended December 31, 2021 (“fiscal 2021”). The decrease was due to a decrease in perpetual license sales of our PrintRite3D® units of $1,141,323 and decreased contract additive manufacturing revenue of $11,189.
Net Cash Provided by Financing Activities Cash provided by financing activities during fiscal 2021 increased to $14,404,942 from $8,722,122 during the same period in 2020, an increase of $5,682,820 primarily as a result of higher net proceeds from our 2021 financings as compared to 2020 of $10,489,160, partially offset by lower proceeds from exercise of warrants in 2021 of $4,856,340. 24 We have no off-balance sheet arrangements as defined in Item 303(a) of Regulation S-K.
In fiscal 2021, cash provided by financing activities was $14,404,942, consisting of net proceeds of $13,268,932 from financings and $1,136,010 in proceeds from the exercise of warrants. We have no off-balance sheet arrangements as defined in Item 303(a) of Regulation S-K. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable.
The 2021 net operating loss component of the overall loss being $2,768,405 higher than in 2020 and the other income component being a $596,151 higher. Preferred stock dividends were $103,567 in fiscal 2021 and $1,809,275 in fiscal 2020.
Net loss applicable to common stockholders for fiscal 2022 was $8,749,304, as compared to $7,488,172 for fiscal 2021. The fiscal 2022 net operating loss component of the overall loss was $269,619 higher than in fiscal 2021 and the other income component was $1,038,200 lower. Preferred stock dividends were $56,880 in fiscal 2022 and $103,567 in fiscal 2021.
The impact of the change will reduce the initial upfront cost to a new user from over $100,000 to approximately $3,000-$4,000 per month. In addition, the subscription model will smooth out the Company’s revenue and cash receipts while making them more predictable.
Among other things, the change reduced the initial upfront cost to a new user from over $100,000 to approximately $3,000-$5,000 per month.
Sigma’s net loss before preferred dividends for fiscal 2021 increased by $2,184,466 and totaled $7,384,605, as compared to a net loss before preferred dividends of $5,200,139 for fiscal 2020. Net loss applicable to common stockholders for fiscal 2021 was $7,488,172, as compared to $7,009,414 for fiscal 2020.
Partially offsetting these decreases was an increase of $76,628 in New Mexico state incentives in fiscal 2022. 22 Sigma’s net loss before preferred dividends for fiscal 2022 increased by $1,307,819 and totaled $8,692,424, as compared to a net loss before preferred dividends of $7,384,605 for fiscal 2021.
Covid-19 Business Update The worldwide COVID-19 pandemic caused a reduction, and in some cases a freeze, in capital spending within the Company’s targeted industries and had what the Company believes to be a short-term negative impact on the Company’s expected timing of generating meaningful revenue.
We have recently begun exploring an intellectual property licensing program, which we believe may facilitate a strategic transaction. 18 Covid-19 Business Update The worldwide COVID-19 pandemic caused a reduction, and in some cases a freeze, in capital spending within the Company’s targeted industries, which negatively affected our revenue in 2021.
Partially offsetting these increases was a decrease in stock appreciation rights expense of $12,355 due to the year-end revaluation of the compensation liability. Stock-based compensation for fiscal 2021 was $1,066,455 compared to $596,842 for the same period in fiscal 2020.
Partially offsetting these increases were: (1) a decrease in commissions of $24,815; (2) a decrease in incentive bonuses of 215,490; and (3) a decrease in stock appreciation rights expense of $94,494 due to the revaluation of the compensation liability as a result of the decrease in our stock price in fiscal 2022.
Liquidity and Capital Resources As of December 31, 2021, we had $11,447,047 in cash and working capital of $11,702,358, as compared to $3,700,814 in cash and working capital of $4,332,053 as of December 31, 2020. We believe that our existing cash on hand will be sufficient to fund our anticipated operating costs and capital expenditure requirements through 2022.
As of December 31, 2022, we had $2,845,931 in cash and working capital of $3,644,522, as compared to $11,447,047 in cash and working capital of $ 11,702,358 as of December 31, 2021. We currently have no arrangement to obtain any additional financing.
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PrintRite3D is printer agnostic and works with most of the leading 3D metal printers. Long-Term Strategic Direction In January 2022, we announced the foundational elements of a three-year plan that we believe will increase the Company’s ability to achieve its mission of setting the quality standard for additive manufacturing.
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Strategic Direction 2022 was a year of significant change for our Company, from our symbolic name change to the execution of a new approach to the market.
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The combined strategies are geared at making our technology more consumable in terms of ease of use and cost by end users, both for initial purchases and expansion opportunities, making it easier for original equipment manufacturers (“OEMs”) to embed our technology and generate attractive revenue streams for the OEM, and finally increasing the Company’s gross margins by moving towards a software-only solution.
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We have a mission to accelerate the adoption of additive manufacturing by setting the industry standard for quality, and we have charted our path to deliver the first holistic digital quality experience for the additive industry with the following objectives: ● Simplifying the quality experience from up to twelve disparate software licenses and multiple manual spreadsheets, to a single user experience that is holistic and integrated with production workflow. ● Building strategic partnerships, expanding our partner ecosystem, and best ensuring success of existing customers as they move into production. ● Offering products that are easier to use and less expensive, both for initial purchases and as expansion opportunities. ● Attracting a strategic corporate investment partner with clear product, customer, and financial synergies.
Removed
To lower the barrier for initial users and for expansion opportunities within end users with a large number of printers, the Company announced that it will be offering its current PrintRite3D integrated hardware and software solution on a subscription basis.
Added
A holistic digital quality experience connects in-process data upstream to CAD/CAM through the downstream inspection and material data. This digital quality journey begins by creating a new qualification framework for in-process data. The path to qualified parts and continued production relies on more than just melt pool monitoring; it also covers machine health, process health, and part health.
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In 2019, Sigma entered the market with a productized integrated hardware/software solution to address the retrofit market, i.e., end users that had purchased a printer, and wanted a 3rd party quality and analytics solution.
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To further augment this initiative, we have also begun integrating with industry wide hardware providers, such as our recently announced relationship with a laser scanner provider. We began offering our current PrintRite3D integrated hardware and software solution on a subscription basis in 2022.
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Subsequently, the Company was successful in creating initial partnerships with OEMs such as Additive Industries and DMG Mori to offer PrintRite3D as an integrated hardware/software edge computing solution.
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The shift in our business model adversely affected our revenues and near-term revenue growth as we increased our focus on building strategic partnerships, expanding our partner ecosystem, and ensuring the success of our existing customers as they move into production. In 2022, we relied primarily on retrofit work while the software only products were still under development .
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We generate revenues through hardware and software licensing of our PrintRite3D® technology to customers that seek to improve their manufacturing production processes, and through ongoing annual software upgrades and maintenance fees. Additionally, we generate revenues from our contract manufacturing activities in metal AM.
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We expect that the percentage of the Company’s revenue coming from OEMs will increase in 2023 and beyond, especially with the availability of a software-only product as we work to integrate into existing hardware, such as laser scanner technology and OEM’s upstream designs for next generation systems.
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Employees and Headcount We added 13 full-time employees in 2021. We increased our sales team from two at the beginning of the year to seven in an effort to expand our business.
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Our ability to generate revenues in the future will depend on our ability to further commercialize and increase market presence of our traditional PrintRite3D® technology, along with our new software-only offerings that start to link industry quality together.
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Specifically, we hired a senior director of sales in the US Western region, an area sales manager for the European, Middle East and Africa (EMEA ) region, and three technical sales engineers, one of whom is in Europe, to support our business development and sales efforts.
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Additionally, it will depend on whether key prospective customers continue to move from additive manufacturing prototyping to production, which our products are intended to accelerate. However, we believe these changes to our business model will contribute to faster adoption of our product by end users and will result in more predictable and profitable revenues over the longer term.
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We also added a total of seven engineers including three software engineers and four applications engineers, who will be furthering our machine learning and artificial intelligence (“AI”) initiatives, as well as increasing our manufacturing capacity and ability to perform customer installations and field support. Finally, in September 2021, we hired a Senior VP of Product Management and Strategic Relationships.
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Over the past twelve years, Sigma has invested its resources to solve the problem of in-process AM quality: melt pool analytics for the “part”, which originated as a retrofit lab solution. Our prior product offering met the needs of materials scientists, but overlooked the production needs of shop floor technicians, process engineers, and operations teams.
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Gross Margin In fiscal year 2021, we increased our gross margin to 66% from 27% in 2020.
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The addition of our “machine” and “process” software products for additive manufacturing will provide a holistic in-process quality base for us to connect to the broader digital quality ecosystem.
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The primary reasons for the 39% improvement are: (1) sourcing components from multiple vendors has enabled us to secure alternative supply sources as well as lower material costs; (2) engineering enhancements, particularly around optics redesigns and computing power and storage, have lowered costs while improving unit performance; (3) we have become more efficient in our customer installations, through the use of virtual technology; (4) changes to our Rapid Test and Evaluation (“RTE”) program making them shorter in duration, with clearly defined objectives and more certain outcomes in terms of ultimately leading to unit sales; and (5) adopting lean manufacturing principles which has improved controls, lowered costs, and improved efficiency.
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As part of our vision to build the future of connected digital quality and enhance shareholder value, we have undertaken an initiative to evaluate a range of strategic alternatives, including possible strategic investment, acquisition, merger, business combination, or similar transaction with clear product, customer, and financial synergies to Sigma.
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The contributors to the $844,277 increase were: (1) increased new PrintRite3D® system sales of $888,954; (2) increased on-site engineering and installation revenues of $26,200; and (3) increased annual maintenance revenues of $12,402, partially offset by (1) a decrease in revenues from our Rapid Test and Evaluation (“RTE”) program of $82,064; and (2) decreased revenue from contract AM jobs of $1,215.
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This work is focused on identified companies that connect to our long-term quality vision. This strategic initiative is focused on synergies and potential product integration to accelerate market visibility and customer adoption.
Removed
Our cost of revenue for fiscal 2021 was $559,965 compared to $591,957 during the same period in 2020, a decrease of $31,992.
Added
To execute Sigma’s vision and realize our potential, we will need to raise additional capital, or execute a strategic transaction, which may include, a possible strategic investment, acquisition, merger, business combination, or similar transaction. We believe the industry is evolving. Application Programming Interfaces, or APIs, are opening up as some of our relationships with OEMs have become public.
Removed
The decrease is primarily due to a decrease in RTE program expenses and a decrease in the cost of manufacturing PrintRite 3D units through the aforementioned combination of lower component costs, engineering redesign and increased manufacturing efficiency, partially offset by increase in the cost of revenues due to increased sales volume in 2021.
Added
There is also a trend toward consolidation in additive manufacturing as companies align for profitability. Sigma has made demonstrable progress in 2022 connecting to other products in the AM digital quality stream, and a connection to a strategic partner paired with near term execution can augment our ability to scale, support the market, and create value.
Removed
The Company sold 11 PrintRite3D units in 2021 as compared to 6 units in 2020. 21 Operating Expenses Sigma’s operating expenses for fiscal 2021 were $9,571,185 as compared to $5,914,299 for fiscal 2020, a $3,656,886 increase. In fiscal 2021, salaries and benefits costs were $4,286,368 as compared to $2,622,162 for the same period in fiscal 2020.
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Further, alignment with a strategic investor or acquirer allows for common growth, vision, and funding of the Company to achieve its mission, but also provides an opportunity for other strategic relationships, including potential acquisitions that can further accelerate the execution of our digital quality vision.
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The $1,664,206 increase is comprised of: (a) $657,298 related to the hire of 13 additional employees; (b) $486,168 related to salary increases for existing employees; (c) increased incentive bonuses of $179,250; (d) increased commissions of $57,580 as a result of increased sales in 2021; (e) increased taxes and benefits of $244,977; and (f) increased severance of $50,793.
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To facilitate our ability to execute our strategic initiatives on the product, pricing, and partner fronts, we have taken several steps to conserve our cash by reducing our operating expenses. Compensation and benefits are our single largest expense, comprising approximately 53% of our total operating expenses for 2022.
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This $469,613 increase resulted primarily from options granted to our new Senior Vice President of Product Management and Strategic Relationships of $264,352, initial options granted to 13 new employees totaling $56,123, and annual option grants to existing employees totaling $149,138. During fiscal 2021 and 2020, Sigma incurred operations and research and development expenditures of $890,553 and $351,404 respectively.
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We reduced our total full-time headcount by a net of eight employees in 2022 and experienced a further reduction of six employees in 2023 as a result of furloughs and departures from the Company. As of March 29, 2023, our full-time employee headcount was 19.
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Of the total expense in 2021, $417,744 related to research and development and $472,809 related to operations expenses. Of the total expense in 2020, $126,292 related to research and development and $225,112 related to operations expenses.
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In addition to headcount reductions, we have reduced our spend on advertising, marketing and investor relations, consultants, and employee travel. We continue to evaluate our expenses and will consider further reductions as appropriate. Lastly, Sigma has developed a deep patent portfolio which we believe is widely applicable to the 3D printing industry.
Removed
The increase of $291,452 in research and development costs in 2021 is primarily related to: (a) costs incurred in connection with PrintRite3D version 7.0 of $89,798 and $20,977 for PrintRite3D 8.0; (b) an increase in CT scans conducted for new development work and a simulation project totaling $87,988; (c) increased consulting expense related to our optics redesign of $67,189; and (d) $25,500 of expenses related to upgrading the date acquisition component of the PrintRite3D unit (“DAQ”).
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Additionally, this slowed the development of our technology based on prolonged budget reductions and delays at development partner sites. With slowed customer interaction, Sigma experienced some slowing of planned integrations and qualification into 2022.
Removed
Operations expenses in fiscal year 2021 increased $247,698 from 2020, primarily due to: (a) increased purchases of lab supplies and equipment of $129,617; (b) write offs of three returned RTE systems with unusable parts of $34,273; and (c) write-off of metal powder and obsolete inventory of $111,158.
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With the relaxing of COVID-19 restrictions in the U.S. and Europe in 2022, business activity began to return to near pre-pandemic levels, and we have resumed qualification and integration of our technology with partners and customers who experienced such prior delays. Regarding our supply chain, however, the Company continues to experience increased lead times for certain hardware components of PrintRite3D.
Removed
These increases were partially offset by a decrease in consulting costs of $27,350 due to the full time hire of a consultant in 2021 Sigma’s investor and public relation fees incurred in fiscal 2021 were $503,823, compared to $408,717 in fiscal 2020.
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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 .
Removed
The $95,106 increase in the comparative expenditures results primarily from an increase in IR consulting costs of $48,847, and increased tradeshow and conference expenses of $90,548 based on increased attendance due to reduced COVID restrictions, partially offset by decreased advertising expenses of $44,316 due to discontinuation of our public relations firm and Network Newswire services.
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ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance under prior GAAP and replaced it with a principles-based approach for determining revenue recognition.
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Organizational costs for fiscal 2021 were $726,147, compared to $451,982 for the same period in fiscal 2020. The increase of $274,165 is primarily attributable to increased directors compensation, consisting of stock options expense of $298,706 partially offset by lower cash compensation of $22,717. Legal and professional service fees in fiscal 2021 were $915,530 compared to $676,142 in fiscal 2020.
Added
In January 2022, the Company began offering a subscription option to its customers pursuant to which we lease our PrintRite3D platform for terms between 12 and 36 months and provide technical support and maintenance for the term of the arrangement, as well as installation and training.
Removed
The increase of $239,388 is primarily attributable to an increase in recruiting fees of $169,978 related to 9 of our 13 new hires, an increase in IT services fees of $10,814, and an increase in consulting fees of $64,494 due to the engagement of external HR, accounting, and manufacturing consultants as well as increased compensation for a consultant to our CEO of $72,000.
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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.
Removed
These amounts were partially offset by reduced legal fees of $83,669 due to non-recurring expenses incurred in 2020, including expenses related to Nasdaq compliance, our reverse stock split, and an abandoned financing. During fiscal 2021, Sigma’s office expenses were $734,386 compared to $416,580 in the same period of fiscal 2020.
Added
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 with 30-days written notice.
Removed
The $317,806 increase in these expenditures resulted primarily from: (a) increased payroll service fees of $18,314 due to 4 months of free service in 2020; (b) increased postage of $45,644 due to RTE returns, shipping PrintRite3D units to trade shows, and expedited shipping of parts and materials due to increased lead times; (c) an increase in computer hardware and office supplies of $40,171 due to the purchase of computers for new hires, promotional items, and cleaning, sanitary and safety supplies related to COVID pandemic; (d) an increase in dues and subscriptions expense of $50,330 for new customer relationship management, product lifecycle management, and project management software; (e) increased travel expenses of $148,507 due to virtually no travel in 2020 as a result of COVID 19 restrictions; and (f) an increase in training and education expense of $15,059 for cable manufacturing certification and employee team building exercises. 22 Other operating expenses for fiscal 2021 totaled $353,818, compared to $285,295 for fiscal 2020.
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